RAILWORKS CORP, S-4/A, 1999-06-29

RAILWORKS CORP
S-4/A, 1999-06-29
ARRANGEMENT OF TRANSPORTATION OF FREIGHT & CARGO

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 1999

REGISTRATION NO. 333-79649

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------

AMENDMENT NO. 1

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------

RAILWORKS CORPORATION
(Exact name of co registrant as specified in its charter)
---------------------

<TABLE>
<CAPTION>
DELAWARE 4789 58-2382378
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

---------------------
FOR INFORMATION REGARDING ADDITIONAL REGISTRANTS, SEE "TABLE OF ADDITIONAL
REGISTRANTS".
---------------------
1104 KENILWORTH DRIVE
SUITE 301
BALTIMORE, MARYLAND 21204
(410) 512-0500
(Address, including zip code, and telephone number, including area code,
of registrants' principal executive offices)

JOHN G. LARKIN
CHIEF EXECUTIVE OFFICER
RAILWORKS CORPORATION
1104 KENILWORTH DRIVE, SUITE 301
BALTIMORE, MARYLAND 33807
(410) 512-0500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

WITH A COPY TO:

MARY A. BERNARD, ESQ.
KING & SPALDING
1185 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036-4003
(212) 556-2100
---------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED EXCHANGE OFFER: As soon as
practicable after the effective date of this Registration Statement.

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. [ ]
---------------------

THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

TABLE OF ADDITIONAL REGISTRANTS

<TABLE>
<CAPTION>
PRIMARY
STATE OR OTHER STANDARD
JURISDICTION OR INDUSTRIAL
INCORPORATION CLASSIFICATION I.R.S. EMPLOYER
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER OR ORGANIZATION CODE NUMBER IDENTIFICATION NO.
- ---------------------------------------------------- --------------- -------------- ------------------
<S> <C> <C> <C>
Alpha Keystone Engineering, Inc.................. PA 8711 25-1784777
Armcore Acquisition Corp......................... DE Holding Co. 52-2128915
Armcore Railroad Contractors, Inc................ IL 1629 37-1046831
Annex Railroad Builders, Inc..................... IN 1629 35-1075159
Birmingham Wood, Inc............................. AL 2491 63-1003823
Comstock Holdings, Inc........................... DE Holding Co. 13-3928343
L.K. Comstock & Company, Inc..................... NY 1731 13-0594190
Comtrak Construction, Inc........................ GA 1629 58-1894467
Condon Brothers, Inc............................. WA 1629 91-1360907
CPI Concrete Products Incorporated............... TN 3272 62-0913636
Earl Campbell Construction Company, Inc.......... TX 1629 76-0023665
FCM Rail, Ltd.................................... MI 6159 38-2343435
F&V Metro RW, Inc................................ DE Holding Co. Pending
F&V Metro Contracting Corp....................... NY 1731 11-2626106
Impulse Enterprises of New York, Inc............. NY 1731 11-3121948
V&R Electrical Contractors, Inc.................. NY 1731 11-2843830
Gantrex RW, Inc.................................. DE Holding Co. Pending
Gantrex Corporation.............................. PA 3469 Pending
Gantrex Systems, Inc. R.W., Inc.................. OE 3469 Pending
H.P. McGinley Inc................................ PA 2491 23-1921197
Kennedy Railroad Builders, Inc................... PA 1629 23-1685297
M-Track Enterprises, Inc......................... NY 1629 06-1093474
McCord Treated Wood, Inc......................... AL 2491 63-1115907
Merit Railroad Contractors, Inc.................. MO 1629 43-1426110
Midwest Construction Services, Inc............... IN 1629 35-1549700
Mid West RW, Inc................................. DE Holding Co. Pending
Mid West Railroad Construction & Maintenance
Corporation of Wyoming......................... WY 1629 83-0287238
Minnesota Railroad Service, Inc.................. TN 1629 41-1519121
Neosho Asia, Inc................................. KS 1629 48-1197426
Neosho Central America, Inc...................... KS 1629 48-1212618
Neosho Construction Company, Inc................. KS 1629 48-1090375
Neosho Contractors, Inc.......................... WY 1629 74-2073664
Neosho Incorporated.............................. KS 1629 48-0673656
Neosho International, Inc........................ KS 1629 48-1194483
New England Railroad Service, Inc................ CT 1629 06-0996497
Northern Rail Service and Supply Company, Inc.... MI 1629 38-2974642
Parsons Railway Shops, Inc....................... KS 1629 48-1065603
R.&M.B. Rail Co., Inc. (d/b/a Mize Construction
Company)....................................... IN 1629 35-1580762
Railcorp, Inc.................................... OH 1629 34-1546698
Railroad Service, Inc............................ TN 1629 41-1522172
Railroad Specialties, Inc........................ IN 1629 35-1855813
Railworks Canada, Inc............................ DE 1629 Pending
Sheldon Electric, Inc............................ DE 1731 52-2128782
Southern Indiana Wood Preserving Co., Inc........ IN 2491 35-1694417
</TABLE>

i
<PAGE> 3

The address, including zip code, and telephone number, including area code,
of the principal executive offices of each of the additional registrants is the
same as for RailWorks Corporation as set forth on the facing page of this
registration statement.

The name, address, including zip code, and telephone number, including area
code of the agent for service for each of the additional registrants is the same
as for RailWorks Corporation as set forth on the facing page of this
registration statement. Copies of communications to any additional registrant
should be sent to Mary A. Bernard, King & Spalding, 1185 Avenue of the Americas,
New York, New York 10036 (telephone number (212) 556-2100).

ii
<PAGE> 4

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT OFFER THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED JUNE 29, 1999

(RAILWORKS LOGO)

OFFER TO EXCHANGE

11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR
ALL OUTSTANDING UNREGISTERED 11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
------------------

THE REGISTERED NOTES

- The terms of the new notes are substantially identical to the outstanding
notes, except that the new notes will be freely tradable.

- Interest is payable on April 15 and October 15, commencing October 15,
1999.

- We may redeem the notes at any time on or after April 2004.

- In addition, until April 15, 2002, we may redeem up to 35% of the notes
with the net proceeds of certain equity offerings.

- If we undergo a change of control or sell certain of our assets, we may
be required to offer to purchase the notes from you.

- The notes are unsecured and subordinated to all of our existing and
future senior debt, including our obligations under our credit facility.

- Our existing domestic subsidiaries have guaranteed the notes on senior
subordinated basis.

THE EXCHANGE OFFER

- The exchange offer will expire at 5:00 p.m. New York City time, on July
30, 1999, unless extended.

- The exchange offer is not subject to any conditions other than that the
exchange offer not violate applicable law or any applicable
interpretation of the staff of the SEC

- All old notes that are validly tendered and not withdrawn will be
exchanged.

- Tenders of old notes may be withdrawn at any time prior to the expiration
of the exchange offer.

- We will not receive any proceeds from the exchange offer.
------------------

INVESTING IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 10.

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.

NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE
OR COMPLETE OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE DATE OF THIS PROSPECTUS IS , 1999

<PAGE> 5

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors................................................ 10
Use of Proceeds............................................. 18
Capitalization.............................................. 19
Pro Forma Financial Statements.............................. 20
Selected Historical Consolidated Financial Data............. 27
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 29
Business.................................................... 38
The Exchange Offer.......................................... 52
Management.................................................. 62
Certain Relationships and Related Party Transactions........ 67
Principal Stockholders...................................... 70
Description of Capital Stock................................ 71
Description of Credit Facility.............................. 72
Description of the New Notes................................ 72
Exchange Offer; Registration Rights......................... 108
Book-Entry; Delivery and Form............................... 112
Plan of Distribution........................................ 113
Certain United States Federal Income Tax Considerations..... 115
Legal Matters............................................... 115
Experts..................................................... 115
Where You Can Find More Information......................... 116
Special Note Regarding Forward-Looking Statements........... 116
Index to Financial Statements............................... F-1
</TABLE>

<PAGE> 6

PROSPECTUS SUMMARY

The following summary contains basic information about RailWorks, the notes
and the exchange offer. It likely does not contain all the information that is
important to you. For a more complete understanding of the notes and the
exchange offer, we encourage you to read this entire document and the documents
to which we have referred you.

As used in this prospectus, unless the context otherwise requires,"we,"
"us," "our," or "RailWorks" refers to the business of RailWorks Corporation and
its subsidiaries. The term "rail systems" means transit systems, regional and
shortline railroads, Class I railroads and commercial and on-site rail
infrastructure of industrial companies. Unless the context otherwise requires,
"pro forma" information gives effect to (1) all acquisitions that we have
completed prior to March 31, 1999 as if we had completed these acquisitions on
January 1, 1998 and (2) the sale of the old notes to the initial purchasers and
the application of the net proceeds from that sale.

RAILWORKS CORPORATION

We are a leading provider of integrated rail system services and products
to a diverse base of customers throughout the United States. We believe we are
positioned to grow significantly due to our ability to comprehensively design,
supply, construct and maintain rail systems. Our strategy is based on providing
a full range of rail-related services and products on a "turnkey" basis
throughout North America and offering rail system solutions under the
"RailWorks" brand. We provide track construction, rehabilitation, repair and
maintenance; rail electrification and installation of communication and
signaling systems; and related products and supplies. We offer these services to
a wide variety of customers, including Class I and shortline railroads, publicly
funded transit authorities and commercial and industrial companies. We also
provide non-rail products and services such as electrical contracting, bridge
and highway support structures, and related concrete products. For the year
ended December 31, 1998, we had pro forma revenue of $350.9 million and pro
forma EBITDA of $37.1 million. For the three months ended March 31, 1999, we had
pro forma revenue of $77.4 million and pro forma EBITDA of $5.6 million.

COMPANY HISTORY

RailWorks Corporation was formed in March 1998 to become a leading
nationwide provider of rail system services, including construction and
rehabilitation, repair and maintenance, and related products. We currently have
25 operating companies that have been in the rail systems business for an
average of 29 years. We have acquired the operating companies through the
following transactions:

- In August 1998, we acquired in separate concurrent transactions 14 groups
of companies engaged principally in the rail system services and products
business and we consummated our initial public offering (the "IPO"). We
refer to these groups of companies as the "Founding Companies."

- In November 1998, we acquired two companies. We refer to these companies
as the "1998 Acquired Companies."

- In the first quarter of 1999, we acquired four companies. We refer to
these companies as the "1999 Acquired Companies." We refer to the 1998
Acquired Companies and the 1999 Acquired Companies together as the
"Acquired Companies." The Acquired Companies had combined fiscal 1998
revenue of $83.2 million.

- Since March 31, 1999, we have acquired five additional operating
companies, which had aggregate revenue of $133.3 million for their most
recent fiscal year-end dates. We have also entered into letters of intent
to acquire another two companies.

1
<PAGE> 7

THE EXCHANGE OFFER

The Exchange Offer......... We are offering to exchange:

- $1,000 principal amount of our registered 11 1/2%
senior subordinated notes due April 15, 2009,
which we refer to as new notes,

for

- each $1,000 principal amount of our unregistered
11 1/2% senior subordinated notes due April 15,
2009, which we refer to as old notes

We sometimes will refer to the new notes and the
old notes together as the notes. Currently,
$125,000,000 aggregate principal amount of old
notes are outstanding.

Expiration date............ The exchange offer will expire at 5:00 p.m., New
York City time, on July 30, 1999, unless we extend
it. In that case the phrase "expiration date" will
mean the latest date and time to which we extend
the exchange offer. We will issue new notes as soon
as practicable after that date.

Conditions to the exchange
offer.................... The exchange offer is subject to customary
conditions. We may assert or waive these conditions
in our sole discretion. If we materially change the
terms of the exchange offer, we will resolicit
tenders of the old notes. Please read the section
"The Exchange Offer -- Conditions of the Exchange
Offer" of this prospectus for more information
regarding conditions to the exchange offer.

Procedures for
participating in the
exchange offer........... If you wish to participate in the exchange offer,
you must complete, sign and date an original or
faxed letter of transmittal in accordance with the
instructions contained in the letter of transmittal
accompanying this prospectus. Then you must mail,
fax or deliver the completed letter of transmittal,
together with the notes you wish to exchange and
any other required documentation to First Union
National Bank, which is acting as exchange agent.
Its address appears on the letter of transmittal.
By signing the letter of transmittal, you will
represent to and agree with RailWorks that

- you are acquiring the new notes in the ordinary
course of your business,

- you have no arrangement or understanding with
anyone to participate in a distribution of the
new notes, and

- you are not an "affiliate," as defined in Rule
405 under the Securities Act, of RailWorks

If you are a broker-dealer that will receive new
notes for your own account in exchange for old
notes that you acquired as a result of your
market-making or other trading activities, you will
be required to acknowledge in the letter of
transmittal that you

2
<PAGE> 8

will deliver a prospectus in connection with any
resale of the new notes.

Resale of exchange notes... We believe that you can resell and transfer your
exchange notes without registering them under the
Securities Act and delivering a prospectus, if you
can make the same three representations that appear
above under the heading "Procedures for
participating in the exchange offer." But, our
belief is based on interpretations of the SEC for
other exchange offers that the SEC expressed in
some SEC no-action letters to other issuers in
exchange offers like ours.

We cannot guarantee that the SEC would make a
similar decision about this exchange offer. If our
belief is wrong, or if you cannot truthfully make
the representations mentioned above, and you
transfer any new note issued to you in the exchange
offer without meeting the registration and
prospectus delivery requirements of the Securities
Act, or without an exemption from such
requirements, you could incur liability under the
Securities Act. We are not indemnifying you for any
such liability.

A broker-dealer can only resell or transfer new
notes if it will deliver a prospectus.

Special procedures for
beneficial owners........ If your old notes are held through a broker,
dealer, commercial bank, trust company or other
nominee and you wish to surrender such notes, you
should contact your intermediary promptly and
instruct it to surrender your notes on your behalf.

Guaranteed delivery
procedures............... If you cannot meet the expiration date deadline, or
you cannot deliver your old notes, the letter of
transmittal or any other documentation on time,
then you must surrender your old notes according to
the guaranteed delivery procedures appearing below
under "The Exchange Offer -- Guaranteed Delivery
Procedures."

Acceptance of your old
notes and delivery of the
new notes................ We will accept for exchange any and all old notes
that are surrendered in the exchange offer prior to
the expiration date if you comply with the
procedures of the offer. The new notes will be
delivered as soon as practicable after the
expiration date.

Withdrawal rights.......... You may withdraw the surrender of your old notes at
any time prior to the expiration date.

Certain federal income tax
considerations........... You will not have to pay federal income tax as a
result of your participation in the exchange offer.

Exchange agent............. First Union National Bank is serving as the
exchange agent in connection with the exchange
offer. First Union National Bank also serves as
trustee under the indenture for the notes.

3
<PAGE> 9

Failure to exchange old
notes will adversely
affect you............... If you are eligible to participate in this exchange
offer and you do not surrender your old notes as
described in this prospectus, you will not have any
further registration or exchange rights. In that
case your old notes will continue to be subject to
restrictions on transfer. As a result of such
restrictions and the availability of registered new
notes, the old notes are likely to be a much less
liquid security than before.

Neither the Delaware General Corporation Law nor
the indenture relating to the notes, gives you any
appraisal or dissenters' rights or any other right
to seek monetary damages in court if you do not
participate in the exchange offer.

THE NEW NOTES

The new notes have the same financial terms and covenants as the old notes,
which are as follows:

Issuer..................... RailWorks Corporation.

Securities offered......... $125,000,000 principal amount of 11 1/2% senior
subordinated notes due 2009.

Maturity................... April 15, 2009.

Interest rate.............. 11 1/2% per year (calculated using a 360-day year).

Interest payment dates..... April 15 and October 15, beginning on October 15,
1999. Interest began accruing on April 7, 1999,
when we first issued the old notes.

Ranking.................... The new notes will be unsecured senior subordinated
obligations of RailWorks and they will rank junior
to our existing and future senior debt, including
our obligations under our credit facility. The
guarantees of the new notes by our subsidiaries
will be subordinated to existing and future senior
debt of such subsidiaries. On a pro forma basis, as
of March 31, 1999, we would have had no senior debt
outstanding and approximately $75 million that we
expect to have available to borrow under our credit
facility.

Guarantees................. Our domestic subsidiaries will unconditionally
guarantee the new notes. If we create or acquire a
new domestic subsidiary, it will guarantee the
notes unless we designate the subsidiary as an
"unrestricted subsidiary" under the indenture or
the subsidiary does not have significant assets.

Optional redemption........ We cannot redeem the new notes until April 15,
2004. After April 15, 2004, we may redeem some or
all of the notes at the redemption prices listed
under the heading "Description of the Exchange
Notes" section under the heading "Optional
Redemption," plus accrued and unpaid interest.

Optional redemption after
equity offerings......... At any time, which may be more than once, before
April 15, 2002, we may elect to redeem up to 35% of
the outstanding

4
<PAGE> 10

notes with funds that we raise in one or more
equity offerings as long as:

- we pay 111.500% of the face amount of the notes,
plus interest;

- we redeem the notes within 120 days of completing
the equity offering;

- at least 65% of the aggregate principal amount of
notes issued remains outstanding.

Change of control offer.... If a change in control of RailWorks occurs, we must
give holders of the new notes the opportunity to
sell their new notes to us, at 101% of their face
amount, plus accrued and unpaid interest.

We might be unable to pay you the required price
for new notes you present to us at the time of a
change of control, because:

- we might not have enough cash at that time; or

- the terms of our senior debt may prevent us from
paying.

Asset sale proceeds........ If we or our subsidiaries engage in asset sales, we
cannot freely use the proceeds of those sales.
Generally, we must either invest the net cash
proceeds from such sales in our business within a
specified period of time, repay senior debt or make
an offer to purchase a principal amount of old
notes and new notes equal to the excess net cash
proceeds. The purchase price for the notes would be
100% of their principal amount, plus accrued and
unpaid interest.

Certain additional
indenture provisions..... The indenture governing the notes contains
covenants limiting our (and most or all of our
subsidiaries') ability to:

- incur additional debt or enter into sale and
leaseback transactions;

- pay dividends or distributions on our capital
stock or repurchase our capital stock;

- issue stock of subsidiaries;

- make certain investments;

- create liens on our assets to secure debt;

- enter into transactions with affiliates;

- merge or consolidate with another company; and

- transfer and sell assets.

These covenants are subject to a number of
important limitations and exceptions.

5
<PAGE> 11

Use of proceeds............ We will not receive any proceeds from the exchange
offer. See "Use of Proceeds." We have agreed to
bear the expenses of the exchange offer. No
underwriter has been retained to carry out the
exchange offer. For a description of how we used
the proceeds from the sale of old notes, see
"-- RailWorks Corporation -- Recent
Developments -- Offering of Old Notes."

For additional information regarding the new notes, see "Description of the
New Notes."

6
<PAGE> 12

SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

RailWorks acquired the Founding Companies concurrently with the
consummation of the IPO on August 4, 1998. For accounting and financial
statement purposes, Comstock Holdings, Inc. (one of the Founding Companies) was
identified as the "accounting acquirer" consistent with the requirements of
Staff Accounting Bulletin No. 97 of the SEC. All other acquisitions have been
accounted for as purchases in accordance with Accounting Principles Board No.
16.

The summary unaudited pro forma consolidated financial data presented below
are derived from unaudited pro forma consolidated financial data contained
elsewhere in this prospectus. This pro forma information is not necessarily
indicative of (1) the results that would have occurred had our acquisitions been
completed on the dates indicated or (2) our actual or future results or
financial position. The information presented below should be read together with
the Unaudited Pro Forma Consolidated Financial Statements and related notes, our
Consolidated Financial Statements and related notes and the Management's
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere in this prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 THREE MONTHS ENDED MARCH 31, 1999
---------------------------------------- -----------------------------------------
PRO PRO FORMA PRO FORMA
ACTUAL(1) FORMA(2) AS ADJUSTED(3) ACTUAL(4) PRO FORMA(5) AS ADJUSTED(6)
--------- --------- -------------- --------- ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue.................... $212,533 $350,865 $350,865 $72,673 $77,446 $77,446
Cost of revenue............ 182,817 289,800 289,800 59,111 63,219 63,219
-------- -------- -------- ------- ------- -------
Gross profit............... 29,716 61,065 61,065 13,562 14,227 14,227
Selling, general and
administrative
expenses................. 17,040 23,916 23,916 7,773 8,593 8,593
Non-recurring expenses..... 19,965(7) -- -- -- -- --
Transaction fees........... 1,281(8) -- -- -- -- --
Depreciation and
amortization............. 2,105 9,052 9,052 1,954 2,103 2,103
-------- -------- -------- ------- ------- -------
Operating (loss) income.... (10,675) 28,097 28,097 3,835 3,531 3,531
Interest expense........... 2,334 4,027 15,477 1,613 1,677 3,869
Interest and other
income................... 1,634 1,165 1,165 400 380 380
-------- -------- -------- ------- ------- -------
Income (loss) before income
taxes.................... (11,375) 25,235 13,785 2,622 2,234 42
-------- -------- -------- ------- ------- -------
Net (loss) income.......... $(12,847) $ 14,223 $ 7,239 $ 1,636 $ 1,318 $ (358)
======== ======== ======== ======= ======= =======
OTHER DATA:
EBITDA(9).................. $ 37,149 $ 5,634
EBITDA margin(10).......... 10.6% 7.3%
Capital expenditures....... $ 4,786 $ 1,031
Ratio of EBITDA to cash
interest expense......... 2.4x 1.5x
Ratio of net debt to
EBITDA................... 2.9x 20.0x
Ratio of earnings to fixed
charges(11).............. 1.9x 1.0x
</TABLE>

7
<PAGE> 13

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998 AS OF MARCH 31, 1999
--------------------------------------- --------------------------------------
PRO PRO FORMA PRO PRO FORMA
ACTUAL(1) FORMA(12) AS ADJUSTED(13) ACTUAL(4) FORMA(5) AS ADJUSTED(14)
--------- --------- --------------- --------- -------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.......................... $ 2,846 $ -- $ 24,591 $ 3,073 $ 3,073 $ 25,692
Total assets.................. 228,636 309,729 339,070 305,747 305,747 333,116
Total debt.................... 51,504 104,492 133,833 110,781 110,781 138,150
Stockholders' equity.......... 110,008 111,008 111,008 112,658 112,658 112,658
</TABLE>

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

(1) The summary historical consolidated financial data as of and for the year
ended December 31, 1998 are derived from our Consolidated Financial
Statements, which are comprised of financial data of:

- Comstock Holdings, Inc., the accounting acquirer, for the year ended
December 31, 1998;

- the Founding Companies, other than Comstock Holdings, Inc., for the
period from August 1, 1998 through December 31, 1998; and

- the 1998 Acquired Companies for the period from November 4, 1998 through
December 31, 1998.
(2) Reflects the acquisitions of the Founding Companies and the Acquired
Companies as if they each had occurred on January 1, 1998.
(3) Reflects the acquisitions of the Founding Companies and the Acquired
Companies and as adjusted to give effect to sale of the old notes and the
application of the net proceeds as if they each had occurred on January 1,
1998.
(4) The summary historical consolidated financial data as of and for the three
months ended March 31, 1999 are derived from our Consolidated Financial
Statements, which are comprised of financial data of:
-- Founding Companies and 1998 Acquired Companies for the entire
period
-- the 1999 Acquired Companies from their date of acquisition.
(5) Reflects the acquisitions of the 1999 Acquired Companies as if they each
had occurred on January 1, 1999.
(6) Reflects the acquisitions of the 1999 Acquired Companies and as adjusted to
give effect to sale of the old notes and the application of the net
proceeds as if they each had occurred on January 1, 1999.
(7) Consists of $14.5 million in restricted common stock granted to the
officers of RailWorks, $2.9 million related to settlement of employee
benefit obligations of one of the operating companies and corporate
relocation costs, $2.2 million in estimated legal and settlement costs in
connection with former operations of one of the operating companies and
$400,000 in transfers of common stock made by certain operating company
managers to other employees of such operating companies.
(8) Represents expenses incurred in connection with the initial public offering
of common stock of RailWorks.
(9) EBITDA is the sum of earnings before interest, income taxes, depreciation
and amortization expense. Included in EBITDA is income earned on contract
retainages pursuant to contractual agreements with certain customers.
EBITDA is presented because we believe that it is a widely accepted
financial indicator of a company's ability to service indebtedness.
However, EBITDA does not represent net income or cash flow from operations
as defined by generally accepted accounting principles, is not necessarily
indicative of cash available to fund all cash flow needs, should not be
considered as an alternative to net income or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of a company's
operating performance or as a measure of liquidity. EBITDA is not
necessarily comparable with similarly-titled measures presented by other
companies.
(10) Represents EBITDA as a percentage of revenue.

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<PAGE> 14

(11) The ratio of earnings to fixed charges is calculated by dividing the fixed
charges into net income before taxes and minority interests plus fixed
charges. Fixed charges consist of interest expense, amortization of
deferred debt issuance costs and the estimated interest component of rent
expense.
(12) Reflects the acquisitions of the 1999 Acquired Companies as if they each
had occurred on December 31, 1998.
(13) Reflects the acquisitions of the 1999 Acquired Companies and as adjusted to
give effect to the sale of old notes and the application of the net
proceeds, as if each had occurred on December 31, 1998.
(14) Reflects the acquisitions of the 1999 Acquired Companies and as adjusted to
give effect to the sale of old notes and the application of net proceeds,
as if each had occurred on March 31, 1999.

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RISK FACTORS

You should carefully consider the information below as well as the other
information in this prospectus before deciding to tender your old notes in
exchange for new notes pursuant to the exchange offer. These risks apply to both
the old notes and the new notes.

RISKS RELATING TO THE NEW NOTES

There Could Be Adverse Consequences of Failure to Exchange Your Old Notes
for New Notes. The old notes were not registered under the Securities Act or
under the securities laws of any state and may not be resold, offered for resale
or otherwise transferred unless they are subsequently registered or resold
pursuant to an exemption from the registration requirements of the Securities
Act and applicable state securities laws. If you do not exchange your old notes
for new notes pursuant to the exchange offer, you will not be able to resell,
offer to resell or otherwise transfer the old notes unless they are registered
under the Securities Act or unless you resell them, offer to resell or otherwise
transfer them under an exemption from the registration requirements of, or in a
transaction not subject to, the Securities Act. In addition, we will no longer
be under an obligation to register the old notes under the Securities Act except
in the limited circumstances provided under the registration rights agreement.
In addition, to the extent that old notes are tendered for exchange and accepted
in the exchange offer, the trading market for the untendered and tendered but
unaccepted old notes could be adversely affected. Please refer to the section
captioned "Risk Factors -- No Assurance of Active Trading Market for the Notes."

Substantial Leverage and Debt Service Requirements Could Limit Our Ability
to Pay Principal and Interest on the Notes and Could Adversely Affect Our
Operations. Our substantial indebtedness could adversely affect our financial
health and could prevent us from fulfilling our obligations under the notes. On
a pro forma basis as of March 31, 1999, we had outstanding total debt of $138.2
million, ratio of earnings to fixed charges of 1.0x and stockholders' equity of
$112.7 million.

We May Make Additional Borrowings. Despite current indebtedness levels, we
and our subsidiaries will also be permitted to incur substantial additional debt
in the future. On a pro forma basis as of March 31, 1999, $75 million would have
been available for additional borrowing under our credit facility, subject to
customary borrowing conditions. If new debt is added to our and our
subsidiaries' current debt levels, the related risks that we and they now face
could intensify. See "Capitalization", "Selected Historical Consolidated
Financial Data" and "Description of the Notes -- Certain Covenants -- Limitation
on Incurrence of Additional Indebtedness".

Our substantial amount of debt could have important consequences for you.
For example, it could:

- make it more difficult for us to satisfy our obligations with respect to
the notes;

- limit our ability to obtain additional financing, if we need it, for
working capital, capital expenditures, acquisitions, debt service
requirements or other purposes;

- increase our vulnerability to adverse economic and industry conditions;

- require us to dedicate a substantial portion of our cash flow from
operations to payments on our debt, thereby reducing funds available for
operations, future business opportunities or other purposes;

- limit our flexibility in planning for, or reacting to, changes in our
business and in the industries where we compete; and

- place us at a competitive disadvantage compared to our competitors that
have less debt.

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We may be Unable to Service Debt. To service our indebtedness, we will
require a significant amount of cash. Our ability to make payments on our debt,
including the notes, and to fund planned capital expenditures and acquisitions
will depend on our future operating performance and on our ability to
successfully implement our business strategy. Prevailing general economic
conditions and financial, business, regulatory and other factors, many of which
are beyond our control, will affect our ability to make these payments. Based on
our current level of operations, we believe that our cash flow from operations,
available cash and available borrowings under our credit facility will be
adequate to meet our liquidity needs for the foreseeable future.

We cannot assure you, however, that we will realize anticipated financial
results or be successful in implementing our business strategy. If future cash
flow is not sufficient to make scheduled payments on our debt, including the
notes, we will need to refinance all or a portion of our debt, including the
notes, before maturity, obtain additional financing, delay planned acquisitions
and capital expenditures, or sell assets. We cannot guarantee that we will be
able to refinance any of our debt, including debt outstanding under our credit
facility and the notes, on commercially reasonable terms. We also cannot assure
you that we would be able to make an asset sale on a timely basis for proceeds
sufficient to cover our debt service requirements. The terms of our credit
facility and the indenture governing the notes restrict our ability to sell
assets.

If we are unable to meet our debt service obligations for any reason, we
would be in default under the terms of our credit facility. If such a default
were to occur, the lenders under our credit facility could elect to declare all
of our debt under the facility immediately due and payable, including accrued
and unpaid interest, and the lenders would not be obligated to continue to
advance funds under the facility. If the amounts outstanding under the credit
facility are accelerated, we cannot assure you that our assets will be
sufficient to repay in full the money owed to the banks or to our other debt
holders.

The Notes Rank Behind Our Other Indebtedness. The notes and the guarantees
rank behind all of our and the guarantors' existing and future senior debt,
including debt under our credit facility. On a pro forma basis as of March 31,
1999, we and the guarantors would have had no senior debt outstanding and we
would have had $75 million available to borrow under our credit facility, all of
which would be senior debt. In the event of our or any of the guarantors'
bankruptcy, liquidation or reorganization, our and the guarantors' assets will
be available to pay our obligations on the notes only after we have repaid all
of our and the guarantors' senior debt in full. We cannot assure you that
sufficient assets will remain to make full payment on the notes after such
payments are made.

In the event of bankruptcy, liquidation or reorganization or any similar
proceeding relating to RailWorks or the guarantors, holders of the notes will
participate with trade creditors and all other holders of our and the
guarantors' subordinated indebtedness in the assets remaining after we and such
guarantors have repaid all of our senior debt in full. In addition, the
subordination provisions of the indenture provide that we cannot make cash
payments on the notes while a payment default is continuing under certain of our
senior debt.

Restrictions in Existing Agreements May Limit Our Ability to Finance Future
Operations, Engage in Certain Business Transactions or Make Principal and
Interest Payments on the Notes. Our credit facility and the indenture governing
the notes contain a number of significant covenants that, among other things,
restrict our ability to dispose of assets, incur additional indebtedness, repay
other indebtedness, pay dividends, make certain investments or acquisitions,
repurchase or redeem capital stock, engage in mergers or consolidations, or
engage in certain transactions with subsidiaries and affiliates and otherwise
restrict corporate activities. We cannot assure you that such restrictions will
not adversely affect our ability to finance future operations or capital needs
or engage in other business activities that may be in the our best interest.

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<PAGE> 17

In addition, our credit facility requires us to maintain compliance with
certain financial ratios. Our ability to comply with these ratios may be
affected by events beyond our control. We have granted the lenders under the
credit facility a first lien on all of the capital stock of our subsidiaries and
on all our accounts receivable and the accounts receivable of our subsidiaries.
In the event of a default under the credit facility, the lenders under the
credit facility could foreclose upon the assets pledged to them and the holders
of the notes might not be able to receive any payments until any payment default
was cured or waived, any acceleration was rescinded, or the indebtedness
outstanding under the credit facility was repaid. See "Description of Credit
Facility".

A breach of any of the covenants contained in our credit facility or our
inability to comply with the required financial ratios could result in an event
of default, which would allow the lenders under the credit facility to declare
all borrowings outstanding to be due and payable. In addition, our lenders could
compel us to apply all of our available cash to repay our borrowings or they
could prevent us from making debt service payments on the notes. If the amounts
outstanding under the credit facility or the notes were to be accelerated, we
cannot assure you that our assets would be sufficient to repay in full the money
owed to the banks or to our other debt holders, including you as a noteholder.

Fraudulent Conveyance Laws Permit Courts to Void Notes in Specific
Circumstances. Federal and state statutes allow courts, under specific
circumstances, to void the notes and the guarantees and require noteholders to
return payments received from RailWorks or the guarantors in the event of the
bankruptcy or other financial difficulty of RailWorks or any of the guarantors.
Under the federal bankruptcy law and comparable provisions of state fraudulent
transfer laws, a guarantee of the notes could be voided, or claims in respect of
a guarantee could be subordinated to all other indebtedness of any subsidiary
that is the guarantor if, among other things, at the time the guarantor incurred
the debt evidenced by its guarantee, the guarantor:

- received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee;

- was insolvent or was rendered insolvent by reason of such incurrence;

- was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or

- intended to incur, or believed (or reasonably should have believed) that
it would incur, debts beyond its ability to pay such debts as they
mature.

In addition, any payment by that guarantor pursuant to its guarantee could
be voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.

The measure of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor of the notes
would be considered insolvent if:

- the sum of its debts, including contingent liabilities, was greater than
the fair saleable value of all of its assets;

- if the present fair saleable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
matured; or

- it could not pay its debts as they become due.

A court is likely to find that a guarantor of the notes did not receive
fair consideration or reasonably equivalent value for its guarantee to the
extent that its liability under the guarantee is greater than the direct benefit
it received from the issuance of notes. By its terms, each guarantee
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<PAGE> 18

of the notes will limit the liability of the guarantor to the maximum amount
that it can pay without the guarantee being deemed a fraudulent transfer. A
court may not give effect to this limitation on liability. In that event, a
court may find that the issuance of the guarantee rendered the subsidiary
guarantor insolvent. If a court voids the guarantee or holds it unenforceable,
you will cease to have a claim against the subsidiary guarantor and will be
solely a creditor of RailWorks. If the limitation on liability is effective, the
amount that the guarantor is found to have guaranteed might be so low that there
will not be sufficient funds to pay the notes in full.

On the basis of historical financial information, recent operating results
and other factors, the Company and each guarantor believes that, after giving
effect to the indebtedness incurred in connection with this offering and the
credit facility, it will not be insolvent, will not have unreasonably small
capital for the business in which it operates and will not have incurred debts
beyond its ability to pay such debts as they mature. We cannot assure you,
however, as to what standard a court would apply in making such determinations
or that a court would agree with our or the guarantors' conclusions in this
regard.

We May Not Have Sufficient Cash to Purchase the New Notes Upon a Change of
Control. Upon the occurrence of certain specific kinds of change of control
events, we must offer to repurchase all outstanding notes. However, it is
possible that we will not have sufficient funds at the time of the change of
control to make the required repurchase of notes or that restrictions in our
credit facility will not allow such repurchases. In addition, certain important
corporate events, such as leveraged recapitalizations that would increase the
level of our indebtedness, would not constitute a "Change of Control" under the
indenture and in such a circumstance, we would not have to make an offer to
repurchase the notes.

There is No Public Market for the New Notes. The new notes are new
securities for which there is currently no trading market. We do not intend to
list the new notes on any securities exchange. Although we expect the new notes
to be eligible for trading in the PORTAL market, we cannot assure you that an
active trading market for the new notes will develop.

If a market for the new notes does develop, any such market may cease to
exist at any time, in addition, in any such market, the new notes could trade at
prices that may be higher or lower than their principal amount.

The liquidity of any market for the new notes will depend upon various
factors, including:

- the number of holders of the notes;

- prevailing interest rates;

- the interest of securities dealers in making a market for the notes;

- the overall market for high-yield securities;

- our financial performance and prospects; and

- the prospects for companies in our industry generally.

Historically, the market for non-investment-grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the new notes. We cannot assure you that the market for the new
notes, if any, will not be subject to similar disruptions. Any such disruptions
may adversely affect you as a holder of the new notes.

In addition, to the extent that old notes are surrendered and accepted in
the exchange offer, the trading market for unsurrendered old notes and for
surrendered-but-unaccepted old notes could be adversely affected due to the
limited amount of old notes that are expected to remain outstanding following
the exchange offer. Generally, when there are fewer outstanding securities of a
given issue, there is less demand to purchase such security, which results in a
lower price for such security. Conversely, if many old notes are not
surrendered, or are surrendered-but-

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unaccepted, the trading market for the new notes could be adversely affected.
See "Plan of Distribution" and "The Exchange Offer" for further information
regarding the distribution of the new notes and the consequences of failure to
participate in the exchange offer.

RISKS RELATING TO RAILWORKS

The Operating Companies Do Not Have a Combined Operating History; We May be
Unsuccessful Integrating Their Decentralized Operations. RailWorks was founded
in March 1998 but conducted no operations and generated no revenue until we
completed the initial public offering, or "IPO", of our common stock in August
1998. We acquired the Founding Companies concurrently with the completion of our
IPO, and acquired six additional operating companies through March 31, 1999.
Subsequent to that date, we have acquired three additional operating companies
and have entered into letters of intent to acquire another three companies. Our
operating companies were separate independent entities before we acquired them
and to a certain extent they continue to operate as independent entities because
we conduct our operations on a decentralized basis. The integration of our
operating companies, while allowing them to retain decentralized operations and
management, is important to our operating and growth strategies and the
achievement of efficiencies in the combined operations. We may not be able to
integrate the operations or the necessary systems and procedures, including
accounting and financial reporting systems and project management systems, to
manage effectively the combined enterprise. Certain members of our management
group have only recently joined RailWorks and there can be no assurance that the
management group will be able to implement our acquisition and operating
strategies. We cannot assure you that we will be able to establish, maintain or
increase the profitability of the operating companies. Our pro forma financial
statements include results of operations for certain operating companies when
they were not under common control or management. As a result, our pro forma
financial statements may not be indicative of our future results of operations.
Any failure by our management group to implement our strategies, integrate the
operating companies without substantial costs, delays or other operational or
financial difficulties, or effectively oversee the combined entity could have a
material adverse effect on our business, financial condition and results of
operations.

We May be Unable to Complete and Finance Acquisitions. We have completed
nine acquisitions since the IPO and we intend to grow significantly through the
acquisition of additional businesses. See "Business -- Strategy." Our
acquisition strategy entails reviewing acquired business operations, corporate
infrastructure and systems and financial controls. Unforeseen expenses,
difficulties, complications and delays frequently encountered in connection with
the rapid expansion of operations could inhibit our growth or adversely affect
our financial performance.

We cannot assure you that we will maintain or accelerate our growth or
anticipate all of the changing demands that expanding operations will impose on
our management, personnel, operational and management information systems and
financial systems. We may not be able to identify, acquire or manage profitably
additional businesses or to integrate successfully any acquired businesses
without substantial costs, delays or other operational or financial
difficulties. Any of these occurrences could have a material adverse effect on
our business, financial condition and results of operations.

We cannot predict the timing, size and success of our acquisition efforts
and any associated capital commitments. We currently intend to finance future
acquisitions with bank borrowings, shares of our common stock, internally
generated funds or a combination of common stock and cash. If our common stock
does not maintain a sufficient market value, or if potential acquisition
candidates are otherwise unwilling to accept common stock as part of the
consideration for the sale of their businesses, we may be required to utilize
more of our cash resources or borrowings to maintain our acquisition program. In
addition, our acquisitions typically provide for the sellers to receive
contingent consideration, which is only paid if the acquired companies achieve
certain
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operating results. These payments could be substantial. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources."

We May be Unable to Generate Internal Growth. Our ability to grow will be
affected by various factors, including demand for rail system services and
products, our success in bidding on new projects, the success of our
cross-selling efforts and our ability to develop a national accounts program.
Our growth may also depend on increased outsourcing by rail system operators.
Many of these factors are beyond our control. Our strategies may not be
successful or we may be unable to generate cash flow adequate for combined
operations and to support internal growth. The senior managers of the operating
companies retain responsibility for day-to-day operations. If proper business
controls are not implemented and maintained, this decentralized operating
strategy could result in inconsistent operating and financial practices of the
operating companies, which could have a material adverse effect on our business,
financial condition and results of operations. See "Business -- Strategy."

We Have Been Dependent on Certain Customers. We derived approximately
43.7% of our pro forma revenue for the year ended December 31, 1998 from our top
ten customers. Approximately 21.1% of our 1998 pro forma revenue was derived
from projects undertaken for the New York City Transit Authority, which we refer
to as "NYCTA" in this prospectus. These projects were undertaken under a number
of separate contracts. If the NYCTA were to significantly reduce the amount of
business that it does with us or determine not to do business with us in the
future, it would have a material adverse effect on our business, financial
condition and results of operations. See "Business -- Customers."

Certain Operating Companies Have a History of Losses. From time to time,
primarily due to industry cyclicality and uncertainties inherent in the
competitive bidding process, certain of our operating companies have experienced
net losses. See "-- Our Fixed Price Contracts Expose us to Significant Risks"
below. We cannot assure you that we or our operating companies will be
profitable in the future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

We May Face Intense Competition. The rail system services and products
industry is highly competitive. Numerous companies provide services to transit
authorities, construct and repair rail systems or sell related products or
supplies, and some of these companies operate in more than one of these lines of
business. Some of our competitors have greater resources than we have, may also
provide a broad range of services and products, and may have sufficient bonding
capacity and other resources to undertake large projects. Any inability to
compete successfully against our existing and future competitors would have a
material adverse effect on our business, financial condition and results of
operations. Certain of our operating companies also provide electrical
contracting services to non-rail industrial and commercial customers. While we
believe that we currently compete effectively in the non-rail electrical
contracting business, this industry is highly competitive and is served by
small, owner-operated private companies, public companies and several large
regional companies. Additionally, we could face competition in the future from
other competitors entering our markets. See "Business -- Competition."

We are Dependent on Public Sector Contracts and Funding. The rail system
services and products business involves contracts that are supported by funding
from federal, state and local governmental agencies, as well as contracts with
such agencies, which we refer to as "public sector contracts". Public sector
contracts are subject to detailed regulatory requirements and public policies,
as well as funding priorities. These contracts may be conditioned upon the
continuing availability of public funds; the availability of public funds
depends upon lengthy and complex budgetary procedures. These contracts may also
be subject to significant pricing constraints. Moreover, public sector contracts
may generally be terminated for reasons beyond the control of the contractor,
including when such termination is in the best interests of the governmental
agency. We cannot assure you that these factors or others unique to public
sector

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contracts will not have a material adverse effect on our business, financial
condition and results of operations. See "Business -- Government Regulation."

Our Fixed Price Contracts Expose us to Significant Risks. Fixed price
contracts are typically awarded in the rail system services industry pursuant to
a competitive bidding process. In compiling our bid on a particular project, we
must estimate the time it will take to complete the project, along with the
project's labor and supply costs. These costs may be affected by a variety of
factors, some of which may be beyond our control. If we cannot accurately
predict the costs of fixed price contracts, certain projects could have lower
margins than anticipated or we could suffer losses on the projects. Lower
margins and losses could have a material adverse effect on our business,
financial condition and results of operations.

We Rely on Subcontractors and Suppliers. We generally perform electrical
contracting services for transit signaling and communication systems as a
subcontractor to companies that design the systems and manufacture or purchase
the necessary equipment. In other instances, we act as the prime contractor and
subcontract the design of the signal or communication system and necessary
equipment. When we are a prime contractor for such projects, we generally
require subcontractors to post performance bonds. We may not require a
subcontractor to post a performance bond in situations where (1) the
subcontractor has strong experience with a specific type of project and
demonstrates financial stability and (2) the customer does not require bonds
from us as prime contractor. We sometimes depend upon the subcontractor to
perform design and other services and provide equipment. For certain projects
only a limited number of companies can perform the subcontract if the initial
subcontractor defaults. As a result, we depend upon our subcontractors to
perform under the subcontracts. Further, the major components of signaling and
communication systems for transit authorities are manufactured to specifications
and require long lead times for production. If a subcontractor or supplier
defaults, or if a supplier refuses or cannot do business with us, it could have
a material adverse effect on our business, financial condition and results of
operations.

The Rail System Industry is Cyclical. We derive a substantial portion of
our revenue from public contracts, which we expect will constitute a relatively
stable source of business due to funding provided by TEA 21. However, demand for
rail system services and products could fluctuate in conjunction with overall
economic conditions. In economic downturns, rail system operators may defer
certain construction and rehabilitation projects and purchases of related
products to conserve cash in the short term. Reductions in freight traffic due
to economic downturns or other factors may also reduce demand for our
construction and rehabilitation services and related products. In economic
upturns, railroads, particularly Class I railroads, experience heavier traffic
demands that can cause problems associated with congestion. The operational
problems related to congestion have an unpredictable impact on railroad
expenditures for construction and rehabilitation services and related products,
including those we provide. During periods of peak usage, rail system owners may
defer certain expenditures because they may need to address operational
challenges these conditions cause. Other issues, such as the possibility of
heightened government regulation during periods of congestion and the internal
challenges of managing railroad operations as the Class I railroads continue to
consolidate, may exacerbate the effects of these uncertainties.

We are Exposed to Downturns in Commercial Construction. We derived
approximately 16.2% of our pro forma revenue for the year ended December 31,
1998 from installation of electrical systems in newly constructed or renovated
commercial buildings and power and industrial plants. The demand for electrical
installation services is affected by fluctuations in the level of new
construction and renovation of commercial buildings. These fluctuations reflect
the cyclical nature of the construction industry and depend upon general
economic conditions, changes in interest rates and other related factors.
Downturns in levels of commercial construction and renovation could have a
material adverse effect on our business, financial condition and results of
operations. Further, our electrical installation business is focused in the
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northeastern United States and is therefore particularly susceptible to economic
downturns in that region. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Our Workforce is Unionized. As of December 31, 1998, approximately 66.9%
of our employees were covered under collective bargaining agreements. In June
1994, one of our operating companies was affected by a one-week work stoppage by
the United Brotherhood of Teamsters. We cannot assure you that future work
stoppages will not affect us. In addition, labor agreements are generally
negotiated on an industry-wide basis and the terms and conditions of future
labor agreements could be beyond our control. We may be subject to terms and
conditions in future labor agreements that could have a material adverse effect
on our business, financial condition and results of operations. See
"Business -- Employees."

We are Subject to Extensive Environmental and Government Regulation. Our
operations are subject to extensive federal, state and local regulation under
environmental laws and regulations. Among other things, these laws and
regulations cover emissions to the air, discharges to waters and the generation,
handling, storage, transportation, treatment and disposal of waste, underground
and aboveground storage tanks and remediation of soil and groundwater
contamination. Environmental liability can extend to previously owned or
operated properties, leased properties and properties owned by third parties, as
well as to properties currently owned and used by us. Environmental liabilities
may also arise from claims asserted by adjacent landowners or other third
parties in toxic tort litigation. We could incur significant ongoing costs
associated with environmental regulatory compliance. Further, we sometimes use
hazardous materials in connection with our operations. Although we believe that
we materially comply with all of the various environmental regulations
applicable to our business, we cannot assure you that requirements will not
change in the future or that we will not incur significant costs to comply with
such requirements.

In addition to safety, health and other regulations of general
applicability, our operations may be significantly affected by regulations of
the Surface Transportation Board, the Federal Railroad Administration, the
Occupational Safety and Health Administration, state departments of
transportation and other state and local regulatory agencies. Changes in
regulation of the rail and transit industries through legislative,
administrative, judicial or other action could have a material adverse effect on
our business, financial condition and results of operations. See "Business --
Government Regulation."

We are Dependent on Key Personnel. Our success depends to a significant
extent upon the efforts and abilities of John G. Larkin, Chairman of the Board
and Chief Executive Officer, and Michael R. Azarela, Executive Vice President
and Chief Financial Officer. We also rely on senior management of our operating
companies. While we have entered into employment agreements with Messrs. Larkin
and Azarela and certain senior managers of the operating companies, we cannot be
sure that such individuals will remain with us throughout the terms of their
agreements, or thereafter. Further, we likely will depend on the senior
management of any significant businesses we acquire in the future. The loss of
the services of one or more of these key employees before we are able to attract
and retain qualified replacement personnel could have a material adverse effect
on our business, financial condition and results of operation. See "Management."

Our Systems May Not be Year 2000 Compliant. We have identified potential
deficiencies related to the Year 2000 in our information systems, and we are in
the process of addressing them through upgrades and other remediation. We expect
to complete remediation and testing of our internal systems in the summer of
1999. With respect to other equipment with date-sensitive operating controls,
such as manufacturing equipment, HVAC, security and other similar systems, we
are in the process of identifying those items that may require remediation or
replacement. We expect to complete remediation or replacement and testing of
these in the summer of 1999. We

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are in the process of identifying and contacting suppliers, both inventory and
non-inventory, and customers to determine the state of their year 2000
readiness.

Based upon our current estimates, incremental out-of-pocket costs of our
Year 2000 program are expected to be approximately $250,000. As of March 31,
1999, none of these funds had been spent. These costs include third party
consultants, remediation of existing computer software and replacement and
remediation of embedded chips. These costs do not include internal management
time and the deferral of other projects, the effects of which we do not expect
to be material to our results of operations or financial condition.

At this stage of the process, we believe that it is difficult to
specifically identify the most reasonably likely worst case Year 2000 scenario.
As with all service providers and manufacturers, a reasonably likely worst case
scenario would be the result of failures of third parties (including, without
limitation, governmental entities and entities with which we have no direct
involvement) that continue for more than several days in various geographic
areas where we provide services, manufacture our products or from which we
source our materials and components. In connection with our manufacturing and
supply of raw materials and components, we are considering various contingency
plans. Any such plans would necessarily be limited to matters that we can
reasonably control.

Our Year 2000 efforts are ongoing and our overall plan, as well as the
consideration of contingency plans, will continue to evolve as new information
becomes available. While we anticipate continuity of our business activities,
that continuity will be dependent upon our ability, and the ability of third
parties upon whom we rely directly or indirectly, to be Year 2000 compliant. You
are cautioned that you should read forward-looking statements regarding Year
2000 issues in conjunction with the "Special Note Regarding Forward-Looking
Statements."

USE OF PROCEEDS

This exchange offer is intended to satisfy our obligations under our
registration rights agreement. We will not receive any proceeds from the
exchange offer. You will receive, in exchange for old notes tendered by you in
the exchange offer, new notes in like principal amount. The old notes
surrendered in exchange for the new notes will be retired and cancelled and
cannot be reissued. Accordingly, the issuance of the new notes will not result
in any increase of our outstanding debt.

18
<PAGE> 24

CAPITALIZATION

The following table describes our capitalization as of March 31, 1999 (1)
on an actual basis, (2) on a pro forma basis to reflect the 1999 Acquired
Companies and (3) on a pro forma basis as adjusted to reflect the sale of the
old notes and the application of the net proceeds. You should read this table in
conjunction with Pro Forma Financial Statements, the "Description of the Notes,"
and the Company's Consolidated Financial Statements and the related notes.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents............................... $ 3,073 $ 3,073 $ 25,692
======== ======== ========
Total debt (including current maturities):
Credit facilities(1).................................... $ 87,383 $ 87,383 $ --
Other notes payable(2).................................. 14,398 14,398 4,150
Seller promissory notes(3).............................. 9,000 9,000 9,000
Notes offered hereby.................................... -- -- 125,000
-------- -------- --------
Total debt.................................... 110,781 110,781 138,150
Stockholders' equity.................................... 112,658 112,658 112,658
-------- -------- --------
Total capitalization.......................... $223,439 $223,439 $250,808
======== ======== ========
</TABLE>

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

(1) We have two credit facilities; one that provides for borrowings of up to $75
million, and a $25 million, non-revolving bridge term facility. See
"Description of Credit Facility."
(2) Represents assumed indebtedness of the Acquired Companies and fixed asset
notes related to equipment.
(3) Issued to owners of certain of the Acquired Companies in connection with the
acquisitions. These notes generally bear interest at 5.0% per annum and
become due between January 2000 and March 2001.

19
<PAGE> 25

PRO FORMA FINANCIAL STATEMENTS

The following unaudited pro forma financial statements give effect to (1)
the acquisitions by RailWorks of the Founding Companies and the Acquired
Companies and (2) the sale of the old notes and the application of the net
proceeds. The unaudited pro forma balance sheet reflects the acquisition of the
1999 Acquired Companies and the sales of the old notes and the application of
the net proceeds as if each had occurred on March 31, 1999. The unaudited pro
forma statement of operations for the year ended December 31, 1998 presents our
statement of operations data from our Consolidated Financial Statements for that
period combined with (1) the results of operations for the Founding
Companies -- other than Comstock Holdings, Inc. -- from January 1, 1998 through
July 31, 1998, (2) the results of operations of Armcore Railroad Contractors,
Inc. from January 1, 1998 through November 4, 1998, two of the 1999 Acquired
Companies from January 1, 1998 through December 31, 1998, two of the 1999
Acquired Companies from December 1, 1997 through November 30, 1998 and (3) the
sales of the old notes and the application of the net proceeds and give effect
to the pro forma adjustments related to these transactions all as if each had
occurred on January 1, 1998. The unaudited pro forma statement of operations for
the three months ended March 31, 1999 presents our statement of operations data
for that period from our Consolidated Financial Statements combined with the
results of operations of FCM Rail, Ltd., F&V Metro Contracting Corp. and
affiliates and Gantrex Group, from January 1, 1999 through January 31, 1999.

We have analyzed the savings we expect to realize from reductions in
salaries, bonuses and certain benefits to the owners of the Founding Companies
and the Acquired Companies. To the extent the owners of the Founding Companies
and the Acquired Companies have contractually agreed to changes in salaries,
bonuses, benefits and lease payments, these changes have been reflected in the
unaudited pro forma statements of operations.

Certain pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that management deems appropriate and may be
revised as additional information becomes available. The pro forma financial
data do not purport to represent what our combined financial position or results
of operations would actually have been if such transactions had in fact occurred
on those dates and are not necessarily representative of our combined financial
position or results of operations for any future period. Since the acquired
entities were not under common control or management prior to our acquisition of
them, historical combined results may not be comparable to, or indicative of,
future performance. The unaudited pro forma combined financial statements should
be read in conjunction with our historical consolidated financial statements and
the notes relating to those financial statements that are included in this
prospectus.

20
<PAGE> 26

RAILWORKS CORPORATION

UNAUDITED PRO FORMA AS ADJUSTED BALANCE SHEET
AS OF MARCH 31, 1999
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
RAILWORKS
CORPORATION
HISTORICAL
FINANCIAL OFFERING PRO FORMA
STATEMENTS ADJUSTMENTS AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash............................................... $ 3,073 $ 120,250(a) $ 25,692
(97,631)(b)
Accounts receivable................................ 82,215 82,215
Marketable securities.............................. 6,096 6,096
Lease receivables.................................. 121 121
Costs and estimated earnings in excess of billings
on uncompleted contracts........................ 31,328 31,328
Inventories........................................ 13,574 13,574
Prepaid expenses and other current assets.......... 7,006 7,006
-------- --------- --------
Total current assets....................... 143,413 22,619 166,032
Property, plant and equipment, net................... 27,690 27,690
Other assets:
Investments........................................ 30 30
Goodwill........................................... 131,842 131,842
Other assets....................................... 2,772 4,750(a) 7,522
-------- --------- --------
$305,747 $ 27,369 $333,116
======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt............... $ 39,131 $ (32,131)(b) $ 7,000
Accounts payable................................... 38,309 38,309
Accrued salaries and wages......................... 5,162 5,162
Billings in excess of costs and estimated earnings
on uncompleted contracts........................ 14,158 14,158
Accrued expenses................................... 4,936 4,936
-------- --------- --------
Total current liabilities.................. 101,696 (32,131) 69,565
-------- --------- --------
Long-Term Liabilities:
Other liabilities.................................. 11,138 11,138
Excess of acquired assets over cost, net of
amortization.................................... 8,605 8,605
Senior subordinated debt........................... 125,000(a) 125,000
Promissory notes................................... 4,000 4,000
Long-term debt..................................... 67,650 (65,500)(b) 2,150
-------- --------- --------
Total long-term liabilities................ 91,393 59,500 150,893
-------- --------- --------
Total liabilities.......................... 193,089 27,369 220,458
-------- --------- --------
Stockholders' Equity:
Preferred stock.................................... 14 14
Common stock....................................... 138 138
Additional paid-in capital......................... 122,309 122,309
Retained earnings (deficit)........................ (9,803) (9,803)
-------- --------- --------
Total stockholders' equity................. 112,658 0 112,658
-------- --------- --------
$305,747 $ 27,369 $333,116
======== ========= ========
</TABLE>

See Notes to Unaudited Pro Forma Balance Sheet

21
<PAGE> 27

RAILWORKS CORPORATION

NOTES TO UNAUDITED PRO FORMA BALANCE SHEET

a. To record the issuance of the notes, net of estimated issuance cost and
discounts of $4,750,000.

b. To record repayment of the Credit Facilities and other debt with
proceeds from the sale of the notes.

The adjustments related to the 1999 Acquired Companies are based on
preliminary estimates of the allocation of the purchase price and are subject to
revision.

22
<PAGE> 28

RAILWORKS CORPORATION

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
FOR
FOUNDING PRO FOUNDING
COMPANIES FORMA COMPANIES
RAILWORKS (THROUGH FOR AND
CORPORATION JULY 31, PRO FORMA FOUNDING ACQUIRED PRO FORMA ACQUIRED
HISTORICAL 1998) ADJUSTMENTS COMPANIES COMPANIES(1) ADJUSTMENTS COMPANIES
----------- --------- ----------- --------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................ $212,533 $56,965 $ -- $269,498 $81,367 $ -- $350,865
Cost of revenue........ 182,817 45,892 (800)(2) 227,052 63,191 (443)(2) 289,800
(857)(3)
-------- ------- -------- -------- ------- ------- --------
Gross profit........... 29,716 11,073 1,657 42,446 18,176 443 61,065
Selling, general and
administrative
expenses............. 17,040 9,033 (2,379)(3) 19,317 9,949 (3,480)(3) 23,916
(785)(4) (231)(2)
(2,000)(2) (1,639)(5)
(1,592)(5)
Non-recurring
expenses............. 19,965 400 (14,470)(6) -- -- -- --
(803)(7)
(5,092)(8)
Transaction fees....... 1,281 -- (1,281)(9) -- -- -- --
Loss guarantee......... -- -- -- -- 1,491 (1,491)(10) --
Depreciation and
amortization......... 2,105 1,595 1,689(11) 5,389 2,928 735(11) 9,052
-------- ------- -------- -------- ------- ------- --------
Operating (loss)
income............... (10,675) 45 28,370 17,740 3,808 6,549 28,097
Other income (expense):
Interest income/other
expense............ 1,634 108 -- 1,742 (777) 200 1,165
Interest expense..... (2,334) (378) 137(13) (2,575) (1,631) 179(13) (4,027)
-------- ------- -------- -------- ------- ------- --------
(Loss) income before
income taxes......... (11,375) (225) 28,507 16,907 1,400 6,928 25,235
Provision (benefit) for
income taxes......... 1,472 453 6,170(14) 8,095 275 2,642(14) 11,012
-------- ------- -------- -------- ------- ------- --------
Net (loss) income...... $(12,847) $ (678) $ 22,337 $ 8,812 $ 1,125 $ 4,286 $ 14,223
======== ======= ======== ======== ======= ======= ========

EBITDA(15)............. $ (8,570) $ 1,640 $ 30,059 $ 23,129 $ 6,736 $ 7,284 $ 37,149
======== ======= ======== ======== ======= ======= ========

PRO FORMA
OFFERING AS
ADJUSTMENTS ADJUSTED
----------- ------------
<S> <C> <C>
Revenue................ $ -- $350,865
Cost of revenue........ -- 289,800
-------- --------
Gross profit........... -- 61,065
Selling, general and
administrative
expenses............. -- 23,916
Non-recurring
expenses............. -- --
Transaction fees....... -- --
Loss guarantee......... -- --
Depreciation and
amortization......... -- 9,052
-------- --------
Operating (loss)
income............... -- 28,097
Other income (expense):
Interest income/other
expense............ -- 1,165
Interest expense..... (10,975)(12) (15,477)
(475)(12)
-------- --------
(Loss) income before
income taxes......... (11,450) 13,785
Provision (benefit) for
income taxes......... (4,466)(14) 6,546
-------- --------
Net (loss) income...... $ (6,984) $ 7,239
======== ========
EBITDA(15)............. $ -- $ 37,149
======== ========
</TABLE>

See Notes to Unaudited Pro Forma Statement of Operations.

23
<PAGE> 29

RAILWORKS CORPORATION

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA FOR
RAILWORKS RAILWORKS PRO FORMA
CORPORATION ACQUIRED PRO FORMA AND ACQUIRED OFFERING AS
HISTORICAL COMPANIES(16) ADJUSTMENTS COMPANIES ADJUSTMENTS ADJUSTED
----------- ------------- ----------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue................... $72,673 $ 4,773 $ -- $77,446 $ -- $77,446
Cost of revenue........... 59,111 4,108 -- 63,219 -- 63,219
------- ------- ------- ------- ------- -------
Gross profit.............. 13,562 665 -- 14,227 -- 14,227
Selling, general and
administrative
expenses................ 7,773 820 -- 8,593 -- 8,593
Depreciation and
amortization............ 1,954 149 -- 2,103 -- 2,103
------- ------- ------- ------- ------- -------
Operating (loss) income... 3,835 (304) -- 3,531 -- 3,531
Other income (expense):
Interest income/other
expense............... 400 (20) -- 380 -- 380
Interest expense........ (1,613) (64) -- (1,677) (2,073)(12) (3,869)
(119)(12)
------- ------- ------- ------- ------- -------
(Loss) income before
income taxes............ 2,622 (388) -- 2,234 (2,192) 42
Provision (benefit) for
income taxes............ 986 (70) -- 916 (516)(14) 400
------- ------- ------- ------- ------- -------
Net (loss) income......... $ 1,636 $ (318) $ -- $ 1,318 $(1,676) $ (358)
======= ======= ======= ======= ======= =======
EBITDA(15)................ $ 5,789 $ (155) $ -- $ 5,634 $ -- $ 5,634
======= ======= ======= ======= ======= =======
</TABLE>

See Notes to Unaudited Pro Forma Statement of Operations.

24
<PAGE> 30

RAILWORKS CORPORATION

NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

1. Excludes results of operations of the 1998 Acquired Companies from
November 4, 1998 to December 31, 1998 because they are included in the
Consolidated Financial Statements of RailWorks for the year ended December 31,
1998.

2. To reflect the reduction of insurance and employee benefit costs
realized by Railworks compared to the combined historical cost incurred by the
Founding Companies and the Acquired Companies.

3. To reduce compensation expense to the level the owners of the Founding
Companies and the Acquired Companies have contractually agreed to receive
subsequent to the acquisition of their companies. The employment agreements are
generally for three years. This amount is net of incremental corporate expenses
of $1.2 million.

4. To reflect the savings realized on a lease renewal by Comstock and a
reduction of compensation expense related to personnel of Comstock's former
parent.

5. To eliminate acquisition-related costs incurred by the Founding
Companies and certain professional and other costs incurred by the Acquired
Companies in anticipation of their acquisition by RailWorks.

6. To record the issuance of 1,205,872 shares of restricted common stock
(with no cash impact to Railworks) to management, based on the IPO price of
$12.00 per share.

7. To eliminate non-cash compensation expense recorded as a result of the
transfer of common stock from certain operating company managers to other
employees of such operating companies at the price per share in effect on the
date of transfer.

8. To eliminate non-recurring expenses of RailWorks consisting of $2.9
million related to settlement of employee benefit obligations of one of the
operating companies and corporate relocation costs and $2.2 million in estimated
legal and settlement costs in connection with former operations of one of the
operating companies.

9. To eliminate offering expenses incurred in connection with the IPO.

10. To eliminate the loss related to the specific contract performance of
an unrelated venture which was guaranteed by one of the acquired companies.

11. To record goodwill amortization expense using a 40-year estimated life,
other intangible assets amortization using a 10-year estimated life and loan
origination costs amortization using a 3-year estimated life.

12. To reflect incremental interest expense related to the sale of the old
notes, amortization of related transaction fees of $4.75 million over ten years,
and interest on seller notes.

13. To reduce interest expense to reflect debt at the rates that would have
been in effect for RailWorks in 1998.

14. To record the incremental provision (benefit) for federal and state
income taxes at an assumed 39.0% effective tax rate increased by the effect of
goodwill amortization which is not deductible for income tax purposes.

15. EBITDA is the sum of earnings before interest, income taxes,
depreciation and amortization expense. Included in EBITDA is income earned on
contract retainages pursuant to contractual agreements with certain customers.
EBITDA is presented because management believes that it is a widely accepted
financial indicator of a company's ability to service indebtedness. However,
EBITDA does not represent net income or cash flow from operations as defined by
generally accepted accounting principles, is not necessarily indicative of cash
25
<PAGE> 31
RAILWORKS CORPORATION

NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS -- (CONTINUED)

available to fund all cash flow needs, should not be considered as an
alternative to net income or to cash flows from operating activities (as
determined in accordance with generally accepted accounting principles) and
should not be construed as an indication of a company's operating performance or
as a measure of liquidity. EBITDA is not necessarily comparable with similarly-
titled measures presented by other companies.

16. Includes results of operations of FCM Rail, Ltd., F&V Metro Contracting
Corp. and affiliates, and Gantrex Group from January 1, 1999 to January 31,
1999.

The adjustments related to the 1999 Acquired Companies are based on
preliminary estimates of the allocation of the purchase price and are subject to
revision.

26
<PAGE> 32

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

RailWorks acquired the Founding Companies concurrently with the
consummation of the IPO on August 4, 1998. For accounting and financial
statement purposes, Comstock Holdings, Inc., one of the Founding Companies, was
identified as the "accounting acquirer" consistent with the requirements of
Staff Accounting Bulletin No. 97 of the SEC. All other acquisitions have been
accounted for as purchases in accordance with Accounting Principles Board No.
16.

<TABLE>
<CAPTION>
RAILWORKS
-------------------------------
PREDECESSOR COMPANY THREE MONTHS
----------------------------------------- ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -----------------
1994(1) 1995(1) 1996(1) 1997(1) 1998(2) 1998(1) 1999(3)
-------- -------- -------- -------- --------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................. $157,749 $181,616 $188,767 $153,610 $ 212,533 $41,628 $72,673
Cost of revenue......................... 137,607 164,777 169,303 136,678 182,817 37,205 60,074
-------- -------- -------- -------- --------- ------- -------
Gross profit............................ 20,142 16,839 19,464 16,932 29,716 4,423 12,599
Selling, general and administrative
expenses.............................. 16,963 15,624 15,053 13,733 17,040 3,224 7,773
Non-recurring expenses.................. -- -- -- -- 19,965(4) -- --
Transaction fees........................ -- -- -- -- 1,281(5) -- --
Depreciation and amortization........... 1,447 1,263 1,365 (213) 2,105 (39) 991
-------- -------- -------- -------- --------- ------- -------
Operating income (loss)................. 1,732 (48) 3,046 3,412 (10,675) 1,238 3,835
Interest expense........................ (38) (871) (2,023) (1,761) (2,334) (420) (1,613)
Interest and other income............... 2,401 2,115 476 975 1,634 292 400
Income (loss) before income taxes....... 3,134 (19,822) 558 2,626 (11,375) 1,110 2,622
Net income (loss)....................... 2,782 (19,972) 58 1,428 (12,847) 666 1,636
Ratio of earnings to fixed charges(6)... 4.5x *(7) 1.2x 2.1x *(7) 2.9x 2.3x
</TABLE>

<TABLE>
<CAPTION>
PREDECESSOR COMPANY RAILWORKS
--------------------------------------- -----------------------------
AS OF DECEMBER 31, AS OF MARCH 31,
---------------------------------------------------- ------------------
1994(1) 1995(1) 1996(1) 1997(1) 1998(2) 1998(1) 1999(3)
------- ------- ------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(8)....................... $30,456 $31,915 $19,257 $26,500 $ 67,391 $25,612 $ 41,717
Total assets............................. 89,168 86,108 84,344 68,352 228,636 64,417 305,747
Total debt............................... -- 19,241 24,890 15,004 51,504 13,418 110,781
Stockholders' equity..................... 56,329 20,567 16,990 1,438 110,008 2,104 112,658
</TABLE>

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

(1) The selected historical consolidated financial data as of and for the fiscal
years ended December 31, 1994, 1995, 1996 and 1997, and for the three months
ended March 31, 1998 are derived from the financial statements of Comstock
Holdings, Inc., the accounting acquirer, and its predecessor, L.K. Comstock
& Company, Inc., for the respective periods.
(2) The selected historical consolidated financial data for the fiscal year
ended and as of December 31, 1998 are derived from the Company's
Consolidated Financial Statements, which are comprised of financial data of:
- Comstock Holdings, Inc., the accounting acquirer, for the year ended
December 31, 1998;
- the Founding Companies, other than Comstock Holdings, Inc., for the
period from August 1, 1998 through December 31, 1998; and
- the 1998 Acquired Companies for the period from November 4, 1998 through
December 31, 1998.
(3) The selected historical consolidated financial data as of and for the three
months ended March 31, 1999 are derived from the consolidated financial
statements of Railworks, which are comprised of financial data of:
- the Founding Companies and 1998 Acquired Companies for the entire period,
and
- the 1999 Acquired Companies from their dates of acquisition.
(4) Consists of $14.5 million in restricted common stock granted to Railworks
officers, $2.9 million related to settlement of employee benefit obligations
of one of the operating

27
<PAGE> 33

companies and corporate relocation costs, $2.2 million in estimated legal
and settlement costs in connection with former operations of one of the
operating companies and $400,000 in common stock gifts made by certain
employees of an operating company to other employees of that operating
company.
(5) Represents offering expenses incurred in connection with the IPO.
(6) The ratio of earnings to fixed charges is calculated by dividing the fixed
charges into net income before taxes and minority interests plus fixed
charges. Fixed charges consist of interest expense, amortization of deferred
debt issuance costs and the estimated interest component of rent expense.
(7) Earnings were inadequate to cover fixed charges by $19,822 in 1995 and
$11,375 in 1998.
(8) Working capital is the sum of cash, accounts receivable, costs and estimated
earnings in excess of billings on uncompleted contracts, inventories,
deferred tax asset and other current assets, less the sum of current
maturities of long-term debt, accounts payable and accrued liabilities,
accrued payroll and related withholdings, billings in excess of costs and
estimated earnings on uncompleted contracts and other current liabilities.

28
<PAGE> 34

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and the related notes that appear elsewhere in this prospectus.

This discussion contains forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995
that involve risks and uncertainties. Our actual results may differ from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to those differences include, without limitation, those discussed in
this prospectus under "Business" and this "Management's Discussion and Analysis
of Financial Condition and Results of Operations", as well as those discussed
elsewhere in this prospectus.

GENERAL

RailWorks Corporation was formed in March 1998 to become a leading
nationwide provider of rail system services, including construction and
rehabilitation, repair and maintenance, and related products. We primarily
perform services pursuant to contracts for the completion of specific projects,
some of which take up to five years to complete. On most projects, we contract
directly with rail system operators, while on other projects we act as a
subcontractor.

In August 1998, we acquired in separate concurrent transactions 14 Founding
Companies engaged principally in the rail system services and products business
and we consummated our IPO. In November 1998, we acquired the two 1998 Acquired
Companies and, in the first quarter of 1999, we acquired the four 1999 Acquired
Companies. Except for the acquisition of Comstock Holdings, Inc., referred to as
"Comstock", a Founding Company, all of the acquisitions have been accounted for
as purchases in accordance with Accounting Principles Board No. 16.

For accounting and financial statement purposes, Comstock has been
identified as the accounting acquirer consistent with the SEC's Staff Accounting
Bulletin No. 97 because its owners received the largest portion, 34.6%, of the
shares of common stock issued to the owners of the Founding Companies at the
time of acquisition. The historical financial statements prior to August 4, 1998
are those of Comstock.

Our consolidated balance sheet as of March 31, 1999, includes the Founding
Companies, the 1998 Acquired Companies and the 1999 Acquired Companies. Our
consolidated balance sheet as of December 31, 1998 includes the Founding
Companies and the 1998 Acquired Companies. Our results of operations and cash
flows for the three months ended March 31, 1999 include the results of
operations and cash flows of the Founding Companies and 1998 Acquired Companies
for the entire period and the 1999 Acquired Companies from their date of
acquisition. Our results of operations and cash flows for the year ended
December 31, 1998 include the results of operations and cash flows of Comstock
for the entire period, the results of operations and cash flows of the Founding
Companies from August 1, 1998 and the results of operations and cash flows of
the 1998 Acquired Companies from November 4, 1998. RailWorks conducted no
operations prior to the consummation of its IPO other than the acquisitions of
the Founding Companies and related financing activities, including the IPO, and
we had no revenue or operating expenses prior to August 1, 1998. Consequently,
management believes that RailWorks, individual Founding Company or Acquired
Company financial comparisons as discussed below may not be meaningful.

The Founding Companies and the Acquired Companies have operated
historically under varying tax structures, including both S and C corporations,
which have influenced the historical level of owners' compensation. Certain
executive officers of each of the Founding Companies and the Acquired Companies
have entered into employment agreements with RailWorks. The

29
<PAGE> 35

aggregate compensation paid to the executive officers has been reduced as
reflected in the Unaudited Pro Forma Statement of Operations included elsewhere
in this prospectus. Following the initial two-year term of the employment
agreements, we will reevaluate our compensation structure after examining
operating results and the value of the services those individuals provide us.

Prior to their affiliation with RailWorks, the Founding Companies and the
Acquired Companies were privately owned and managed as separate entities.
Operating performance and management compensation depended on regional market
conditions and the priorities and strategies of individual owners. For example,
under private ownership these companies experienced limitations on project
bonding capacity, access to capital and human resources. In addition, many of
these companies operated under an S corporation tax structure. In many
instances, management and employee compensation was not necessarily directed
toward the achievement of growth in profitability. As part of RailWorks, these
businesses have access to significantly more resources, including higher bonding
capacity, lower input costs through greater purchasing power, access to lower
cost capital and cross-selling opportunities.

REVENUE AND COSTS

RailWorks recognizes revenue from fixed price contracts using the
percentage-of-completion method, measured by the percentage of costs incurred to
date to management's estimate of total cost for each contract. Changes in job
performance, job conditions and estimated profitability may result in revisions
to cost and income, which are recognized in the period in which the revisions
are determined. Revenue from time-and-material contracts are recognized
currently as the work is performed.

Contract costs consist principally of wages and benefits of employees,
subcontracted services, materials, parts and supplies, depreciation and other
vehicle expenses and equipment rental, as well as indirect costs related to
contract performance. Contract costs are charged to expense as incurred.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses are determined.

In the case of product sales, RailWorks recognizes revenue when products
are delivered to customers pursuant to shipping agreements. Cost of goods sold
includes raw materials cost and production cost.

RESULTS OF OPERATIONS

Historical Three Months ended March 31, 1999 Compared to Three Months ended
March 31, 1998

Revenue. Revenue increased $31.1 million, or 74.8%, from $41.6 million for
the three months ended March 31, 1998 to $72.7 million for the three months
ended March 31, 1999. The increase was due to the fact that revenue for the
three months ended March 31, 1998 includes only the 1998 data is that of
Comstock. Revenue for the three months ended March 31, 1999 includes Comstock as
well as the other nineteen companies that now comprise RailWorks.

Gross Profit. Gross profit increased $8.2 million or 186.4%, from $4.4
million for the three months ended March 31, 1998 to $12.6 million for the three
months ended March 31, 1999. The increase was due to the fact that gross profit
for the three months ended March 31, 1998 is that of Comstock alone. The gross
profit for the three months ended March 31, 1999 data includes Comstock as well
as the other nineteen companies that now comprise RailWorks. The gross profit
percentage increased 6.7%, from 10.6% for the three months ended March 31, 1998
to 17.3% for the three months ended March 31, 1999. This increase was the result
of higher profitability associated with the mix and type of work performed
during the first quarter of 1999 by the consolidated group as compared to
historical Comstock margins.

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<PAGE> 36

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $4.5 million or 141.1%, from $3.2 million for
the three months ended March 31, 1998 to $7.8 million for the three months ended
March 31, 1999. The increase is due to the fact that gross profit for the three
months ended March 31, 1998 is that of Comstock alone. The gross profit for the
three months ended March 31, 1999 includes Comstock as well as the nineteen
other companies that now comprise RailWorks. As a percentage of revenue,
selling, general and administrative expenses increased from 7.7% for the three
months ended March 31, 1998 to 10.7% for the three months ended March 31, 1999.
This percentage increase was a result of acquired companies having higher
overhead selling, general and administrative cost structures than Comstock.

Net Income. Net income increased $1.0 million, or 145.6%, from $666,000
for the three months ended March 31, 1998 to $1.6 million for the three months
ended March 31, 1999, as a result of the items mentioned above.

Historical -- Year Ended December 31, 1998

Revenue was $212.5 million for the year ended December 31, 1998. Cost of
revenue was $182.8 million. Gross profit for the year ended December 31, 1998
was $29.7 million. Selling, general and administrative expenses were $38.3
million, including non-recurring expenses of $20.0 million and transaction fees
of $1.3 million recorded during the third quarter related to the IPO. The $20.0
million of non-recurring expenses consists of a non-cash compensation charge of
$14.9 million for stock grants issued to management resulting from the
consummation of the IPO, $2.9 million related to the settlement of certain
employee benefit obligations and relocation expenses and $2.2 million for
estimated legal and settlement costs in connection with certain claims and
litigation associated with our former west coast operations. Included in other
income in the fourth quarter was a gain of $861,000 on the disposition of our
Longview, Washington industrial electrical contracting division. This
divestiture was in conjunction with Comstock's change in strategic focus to
rail-based transit projects. The net loss for the year ended December 31, 1998
was $12.8 million.

Pro Forma Founding Companies -- Year Ended December 31, 1998 Compared to the
Year Ended December 31, 1997

The presentation below provides the pro forma results of operations of the
Founding Companies as if the Founding Companies had been acquired on January 1,
1997. The presentation only includes the results of the 1998 Acquired Companies
from November 4, 1998 to December 31, 1998. Acquired Companies are otherwise
excluded. The presentation includes pro forma results of the Founding Companies
and the Acquired Companies on a combined basis, see Pro Forma Financial
Statements.

The pro forma results of operations of RailWorks for the periods presented
may not be comparable to, and may not be indicative of, our actual results of
operations because (1) the Founding Companies and the Acquired Companies were
not under common control or management during the periods presented and (2) the
pro forma data do not reflect all of the potential benefits and cost savings
RailWorks expects to realize as a result of operating as a combined entity. The
following discussion should be read in conjunction with the Unaudited Pro Forma
Financial Statements and the related notes appearing elsewhere in this
prospectus.

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<PAGE> 37

The following table sets forth selected pro forma financial data for the
periods indicated.

<TABLE>
<CAPTION>
UNAUDITED PRO FORMA
RESULTS OF OPERATIONS
-----------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1998
---------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue.................................................. $256,508 100.0% $269,498 100.0%
Cost of revenue.......................................... 219,400 85.5 227,052 84.2
-------- ----- -------- -----
Gross profit............................................. 37,108 14.5 42,446 15.8
Selling, general and administrative expenses............. 20,848 8.1 19,317 7.2
Depreciation and amortization............................ 5,038 2.0 5,389 2.0
-------- ----- -------- -----
Operating income......................................... 11,222 4.4 17,740 6.6
Interest and other income (expenses), net................ (1,063) (0.4) (833) (0.3)
-------- ----- -------- -----
Income before income taxes............................... 10,159 4.0 16,907 6.3
Net income............................................... 5,438 2.1 8,812 3.3
</TABLE>

Revenue. Revenue increased $13.0 million, or 5.1%, from $256.5 million for
the year ended December 31, 1997 to $269.5 million for the year ended December
31, 1998. The increase was primarily due to growth of the Company's transit
services segment, which grew at 7.1% and represented $11.0 million in additional
revenue.

Gross Profit. Gross profit increased $5.3 million, or 14.4%, from $37.1
million for the year ended December 31, 1997 to $42.4 million for the year ended
December 31, 1998. As a percentage of revenue, gross profit increased to 15.8%
for the year ended December 31, 1998 from 14.5% for the year ended December 31,
1997. The increase in gross profit was due to the higher revenue base and
improved revenue mix as a result of higher margin contracts.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $1.5 million, or 7.3%, from $20.8 million for
the year ended December 31, 1997 to $19.3 million for the year ended December
31, 1998. As a percentage of revenue, selling, general and administrative
expenses decreased from 8.1% for the year ended December 31, 1997 to 7.2% for
the year ended December 31, 1998. The decrease in selling, general and
administrative expenses was the result of decreased salaries and wages during
1998.

Net Income. Net income increased to $8.8 million for the year ended
December 31, 1998 from $5.4 million for the year ended December 31, 1997, an
increase of $3.4 million, or 62.0%. As a percentage of revenue, net income
increased to 3.3% for the year ended December 31, 1998 from 2.1% for the year
ended December 31, 1997. The increase was the result of the increase in revenue
and profitability discussed above.

Historical -- December 31, 1997 Compared to December 31, 1996 -- Comstock
Holdings, Inc.

Founded in 1904, L.K. Comstock & Co., Inc. ("L.K. Comstock"), a
wholly-owned subsidiary of Comstock, is one of the largest electrical
contractors in the United States based on revenue. L.K. Comstock specializes in
power, communication and signaling installations for rail-based transit systems
and also provides electrical contracting services for commercial buildings,
heavy industrial and manufacturing plants and power plants. Through incremental
investments from 1986 through 1989, L.K. Comstock's former parent company,
Comstock Group, Inc. ("CGI"), was acquired by Spie Enertrans S.A. ("Spie"), a
multinational electrical engineering firm headquartered in Paris, France. During
Spie's ownership, L.K. Comstock sought to increase revenue by expanding its
non-transit operations in California and entering into joint ventures to design
and build large power and industrial projects in other locations. Effective
January 1, 1997, L.K. Comstock was acquired (the "Comstock Acquisition") from
Spie by Comstock, a corporation owned by certain employees of L.K. Comstock.

Following the Comstock Acquisition, Comstock's management instituted a plan
to reduce Comstock's costs and improve profitability. As a result of this plan,
Comstock has reduced general

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<PAGE> 38

and administrative expenses by eliminating certain management positions,
including those of several French expatriates, and reducing its Los
Angeles-based staff. Comstock also improved gross profit margins through (1)
improved control over contract costs by consolidating transit project estimating
and bidding functions and (2) exiting unprofitable, risky operations which had
been expanded under Spie's ownership, such as electrical projects for traffic
systems, non-rail projects in California and large joint ventures for the design
and construction of power and industrial plants. Under joint ventures with
general construction contractors, as preferred by Spie, Comstock had limited
management control and was subject to increased costs due to general contract
conditions. Following the Comstock Acquisition, management focused the business
to benefit from its core competencies, including rail-based transit projects.
However, Comstock's electricians and supervisors are capable of performing
services on rail and non-rail projects, thus enabling the efficient use of
experienced labor on projects in response to demand. Additionally, its
accounting and management systems are designed to provide necessary information
for both rail and non-rail projects. In 1997, Comstock derived 56.7% of its
revenue and 58.6% of its gross profit from rail-related projects as compared to
48.1% and 48.5%, respectively, in 1996.

Revenue. Revenue decreased to $153.6 million for the year ended December
31, 1997 from $188.8 million for the year ended December 31, 1996, a decrease of
$35.2 million, or 18.6%. This decrease was due to a decrease in revenue from
Comstock's power and industrial operations attributable to the completion of
certain large projects in 1996 and early 1997 that were not immediately
replaced, as well as a decrease in revenue from Comstock's traffic operations,
offset in part by an increase in revenue from Comstock's commercial operations.
The decrease in revenue from traffic operations, as well as a portion of the
decrease in revenue from power and industrial operations, were due to the change
in strategic focus discussed above and it is unlikely that such projects will be
replaced. Rail-related revenue did not change significantly from 1996 to 1997
due to limited bonding capacity.

Gross Profit. Gross profit decreased to $16.9 million for the year ended
December 31, 1997 from $19.5 million for the year ended December 31, 1996, a
decrease of $2.5 million, or 13.0%. As a percentage of revenue, gross profit
increased to 11.0% for the year ended December 31, 1997 from 10.3% for the year
ended December 31, 1996. Gross profit decreased as a result of the decline in
revenue, offset in part by tighter cost controls implemented by management and a
reduction in the amount of activity in traffic and Los Angeles-based non-rail
projects which had significantly lower margins. Additionally, 1996 gross profit
benefitted from a reduction in contract reserves of approximately $3.0 million
related to the settlement of outstanding project contingencies.

General and Administrative Expenses. General and administrative expenses
decreased to $13.7 million for the year ended December 31, 1997 from $15.1
million for the year ended December 31, 1996, a decrease of $1.3 million, or
8.8%. This decrease was a result of the tighter cost controls implemented by
management, including reductions in executive and administrative staff in the
power, industrial and Los Angeles-based non-rail operations. As a percentage of
revenue, general and administrative expenses increased to 8.9% for the year
ended December 31, 1997 from 8.0% for the year ended December 31, 1996. This
increase was the result of the decrease in revenue.

Net Income. Net income increased to $1.4 million for the year ended
December 31, 1997 from $58,000 for the year ended December 31, 1996, an increase
of $1.3 million. For each period, net income as a percentage of revenue was less
than 1%. The increase in net income was partially due to the reduction of
general and administrative expenses discussed above and the elimination of
management expenses of $941,000 paid to Spie and related entities in 1996. In
addition, as a result of the Comstock Acquisition and the related purchase
accounting, approximately $1.6 million of depreciation and amortization were
eliminated in 1997 as compared to 1996. These factors were partially offset by
the decrease in gross profit due to the factors discussed above.
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<PAGE> 39

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

RailWorks is subject to market risk associated principally with changes in
interest rates. Interest rate exposure has been principally limited to the $61.8
million of long-term debt under RailWorks's revolving credit agreement
outstanding at March 31, 1999. Approximately 84% of that debt is priced at
interest rates that float with the market. A 50 basis point movement in the
interest rate on the floating rate debt would have resulted in an approximate
$260,000 annualized increase or decrease in interest expense and cash flows. The
remaining debt is either fixed rate debt or debt that has been essentially fixed
through the use of interest rate swaps. RailWorks will from time to time enter
into interest rate swaps on its debt, when it believes there is a clear
financial advantage for doing so. RailWorks does not use derivative financial or
commodity instruments for trading purposes and the use of such instrument is
subject to strict approval levels by senior officers. Typically, the use of such
derivative instruments is, in the aggregate, not material to our financial
position, results of operations and cash flows.

In March 1999, RailWorks entered into a hedge instrument with First Union
National Bank known as a "swaption," or a collared swap for a notional amount of
$50.0 million. This agreement, which carries no premium, allows RailWorks to
"swap" into a fixed interest rate beginning March 31, 1999, at no lower than
5.73% and no higher than 6.23% against the current swap rate, which was 5.93% at
the time of trade. This instrument protects RailWorks against dramatic swings in
interest rates.

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

The Founding Companies and the Acquired Companies have in the past
experienced quarterly variations in revenue, operating income (including
operating losses), net income (including net losses) and cash flows (including
operating cash flow deficits) as a result of various factors, including projects
commenced and completed during a quarter, the number of business days in a
quarter and the size and scope of projects. A variation in the number of
projects, progress on projects or the timing of the initiation or completion of
projects can cause periods in which certain operating resources are not
generating revenue and can cause significant variations in operating results
between reporting periods. Negative fluctuations have been particularly
pronounced, and net losses have been incurred, in the first and fourth calendar
quarters, generally due to adverse weather conditions. We expect to continue to
experience such quarterly fluctuations in operating results, including possible
net losses. See "Risk Factors -- Risks Relating to RailWorks -- Certain
Operating Companies Have a History of Losses" and "-- The Rail System Industry
is Cyclical."

LIQUIDITY AND CAPITAL RESOURCES

On August 4, 1998, we completed the IPO of 5.0 million shares of our common
stock at a price of $12.00 per share. We raised approximately $52.5 million, net
of underwriting discounts and other offering expenses of capital, of which we
used approximately $51.1 million for the cash portion of our acquisitions of the
Founding Companies and approximately $1.4 million for the repayment of debt.

At March 31, 1999, we had working capital of approximately $41.7 million, a
$25.7 million decrease from December 31, 1998 when working capital was $67.4
million. A majority of this decrease is attributable to the issuance of a $25
million short-term bridge term facility. Net cash provided by operating
activities was approximately $2.0 million for the three months ended March 31,
1999. Net cash used in investing activities was approximately $33.7 million for
the three months ended March 31, 1999, which consisted of $34.1 million of cash
for acquisitions. Net cash provided by financing activities for the three months
ended March 31, 1999 was approximately $31.9 million, which included $63.5
million from the issuance of long-term borrowings, offset by debt repayment of
approximately $31.6 million.

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<PAGE> 40

At December 31, 1998, we had working capital of approximately $67.4
million. Net cash used in operating activities for the year ended December 31,
1998, was approximately $13.9 million. Net cash used in investing activities for
the year ended December 31, 1998 was approximately $54.4 million which consisted
of $52.5 million of cash for acquisitions (including $49.5 million for the
Founding Companies) and $1.3 million for purchase of equipment and leasehold
improvements. Net cash provided by financing activities for the year ended
December 31, 1998 was approximately $70.0 million, which included $52.5 million
from the issuance of common stock relating to the IPO and borrowings of
approximately $61.3 million, offset by debt repayment of approximately $41.2
million.

Capital expenditures were $1.0 million, $1.3 million, $448,000 and $690,000
during the three months ended March 31, 1999, and the years ended December 31,
1998, 1997 and 1996, respectively. Historically, capital expenditures have been,
and future expenditures are anticipated to be, primarily to support expansion of
our operations, including our management information systems. Our capital
expenditures over the next several years, as a percentage of its revenues, are
expected to decrease compared to those of the past three fiscal years.

We anticipate capital expenditures of approximately $4.0 million for
equipment and leasehold improvements during the balance of 1999. This
investment, which we expect to finance primarily by working capital and vendor
financing, relates to the anticipated facility consolidations of the operating
companies, the installation of a comprehensive financial reporting computer
system and the purchase of supplemental machinery and equipment needed to meet
operational demands. We have no other significant commitments for future capital
expenditures, although it is likely that cash outflows for business acquisitions
and equipment leases will continue.

We finance cash for acquisitions and working capital by funds generated
from operations, together with borrowings under our $75 million senior revolving
was credit facility with NationsBank, N.A. (the "Credit Facility"). As of May 6,
1999, $66.2 million is available for borrowing.

Included in the Credit Facility is a $2.0 million Swingline revolving
facility (the "Swingline"). The Swingline allows for borrowings and repayments
within RailWorks existing Credit Facility in increments of $1.0 with NationsBank
directly. The Credit Facility and the Swingline expire on August 4, 2001,
however RailWorks may request NationsBank to extend the agreement for two,
one-year periods. The proceeds of the Credit Facility, including the Swingline
are to be utilized for working capital, future acquisitions and letters of
credit. The aggregate amount of letter of credit obligations that can be drawn
against the Credit Facility shall not exceed $20.0 million.

Interest on loans, commitment fees, and letter of credit fees are based
upon consolidated leverage ratios in a pricing matrix. A facility fee of 2% was
paid on the total Credit Facility and a $250 monthly fee is charged on the
Swingline.

In the first quarter of 1999, we obtained a bridge term facility (the
"Bridge"), a non-revolving, $25.0 million term commitment, issued on February 2,
1999, with a June 30, 1999 maturity date. The facility was an amendment to our
Revolving Credit Facility issued on August 4, 1998, including consistent
pricing, terms and conditions. We borrowed $25.0 million under the Bridge during
the first quarter of 1999. The interest rate during the quarter was 9.00% and
8.50% for the remainder of the term. The full principal amount of $25.0 million
was repaid on April 8, 1999. A 1.7% facility fee was paid on the Bridge.

The credit facilities are secured by a first lien on all of the capital
stock of our subsidiaries and on all our accounts receivable and the accounts
receivable of our subsidiaries.

The credit facilities contain a negative pledge on all our other assets and
the assets of our subsidiaries and other usual and customary covenants and
events of default for transactions of the type contemplated by the credit
facilities. Borrowings under the credit facilities bear interest, at

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<PAGE> 41

our option, at an interest rate equal to (1) LIBOR plus the applicable margin
for LIBOR loans, which ranges from 125 basis points to 250 basis points based on
the ratio of "Funded Debt" to "EBITDA", as such terms are defined in the credit
facility, or (2) the "Alternate Base Rate", defined as the higher of (a) the
NationsBank prime rate and (b) the Federal Funds rate plus 50 basis points, plus
up to 125 basis points based on the ratio of Funded Debt to EBITDA. We may also
finance future acquisitions with shares of common stock and contingent
consideration.

In connection with certain acquisitions, we have agreed, and in the future
may agree, to pay additional consideration based on operating results of the
acquired entity. The payment of any such earnouts could result in an increase in
the purchase prices of such acquisitions and, as a result, additional goodwill.

We believe that funds generated from operations, together with existing
cash, the net proceeds from the sale of the old notes and borrowings under the
$75 million credit facility, will be sufficient to finance our current
operations, planned capital expenditures, pending acquisitions and internal
growth for at least the next several years. If we were to make a significant
acquisition for cash, it may be necessary for us to obtain additional debt or
equity financing.

INFLATION

We do not believe that inflation has had a material effect on our results
of operations in recent years. However, we cannot assure you that our business
will not be affected by inflation in the future.

YEAR 2000

We have developed a plan to address Year 2000 issues. The plan addresses
three main areas: (a) information systems; (b) embedded chips; and (c) supply
chain readiness, including customers as well as inventory and non-inventory
suppliers. To oversee the process, we have established a committee comprised of
accounting and information systems personnel who are reporting regularly to the
board of directors and the audit committee.

We have identified potential deficiencies related to Year 2000 in our
information systems and we are in the process of addressing them through
upgrades and other remediation. We expect to complete remediation and testing of
our internal systems in the summer of 1999. With respect to other equipment with
date-sensitive operating controls, such as manufacturing equipment, HVAC,
security and other similar systems, we are in the process of identifying those
items that may require remediation or replacement. We expect to complete
remediation or replacement and testing of these internal systems in the summer
of 1999. We are in the process of identifying and contacting suppliers -- both
inventory and non-inventory -- and customers to determine the state of their
Year 2000 readiness.

Based upon our current estimates, incremental out-of-pocket costs of our
Year 2000 program are expected to be approximately $250,000. As of March 31,
1999, none of these funds had been spent. These costs are expected to include
third-party consultants, remediation of existing computer software, and
replacement and remediation of embedded chips. These costs do not include
internal management time and the deferral of other projects, the effects of
which we do not expect to be material to our results of operations or financial
condition.

At this stage of the process, we believe that it is difficult to
specifically identify the most reasonably likely worst case Year 2000 scenario.
As with all service providers and manufacturers, a reasonably likely worst case
scenario would be the result of failures of third parties -- including, without
limitation, governmental entitles and entities with which we have no direct
involvement -- that continue for more than several days in various geographic
areas where we provide services, our products are manufactured or from which we
source raw materials and components. In connection with our manufacturing and
supply of raw materials and components,

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<PAGE> 42

we are considering various contingency plans. Any such plans would necessarily
be limited to matters that we can reasonably control.

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<PAGE> 43

BUSINESS

OVERVIEW

RailWorks Corporation is a leading provider of integrated rail system
services and products to a diverse base of customers throughout the United
States. We believe RailWorks is positioned to grow significantly due to its
ability to comprehensively design, supply, construct and maintain rail systems.
Our strategy is based on providing a full range of rail-related services and
products on a "turnkey" basis throughout North America and offering rail system
solutions under the "RailWorks" brand. We provide track construction,
rehabilitation, repair, maintenance and operations; rail electrification and
installation of communication and signaling systems; and related products and
supplies. We offer these services to a wide variety of customers, including
Class I and shortline railroads, publicly funded transit authorities and
commercial and industrial companies. We also provide non-rail products and
services such as electrical contracting, bridge and highway support structures,
and related concrete products.

INDUSTRY OVERVIEW

The rail passenger and freight industries have undergone significant
changes in recent years. Changes in the industry have affected Class I
railroads, shortline and regional railroads, passenger railroads and transit
systems. In addition, industrial and other commercial companies that own and
maintain their own rail systems have become more focused on transportation
logistics and achieving cost efficiencies. These changes have resulted in an
ongoing reconfiguration of the country's rail infrastructure, significant new
construction projects and emerging demand for outsourced construction,
rehabilitation, repair and maintenance services.

Total Expenditures. Based on information published by the Association of
American Railroads (the "AAR") and the American Public Transit Association
("APTA"), management estimates that expenditures by rail system operators for
domestic new construction, rehabilitation, repair and maintenance were
approximately $16 billion in 1998. Management estimates that the breakdown of
expenditures was as follows:
(EXPENDITURES PIE CHART)

We also believe that expenditures for these services outside the United
States have increased significantly in recent years as a result of
infrastructure construction and modernization programs, as well as privatization
of large rail systems. In many instances, foreign governments and companies have
sought the expertise of designers, engineers and construction managers in the
United States.

Class I Railroads. According to the AAR, Class I track usage, defined as
tons shipped per track mile, has increased significantly from 4.7 million in
1988 to 7.8 million in 1997, representing a 5.9% compound annual growth rate. As
a result of industry consolidation, there

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<PAGE> 44

are only eight "Class I railroads", as defined by the Surface Transportation
Board, operating in the United States today, compared to 27 in 1980. These
railroads are Burlington Northern Sante Fe Railway, CSX Transportation, Kansas
City Southern Lines, Norfolk Southern Railway Company, Union Pacific Railroad,
Canadian National, Canadian Pacific and Consolidated Rail Corporation. According
to the AAR, these railroads accounted for 71% of the rail mileage operated in
the United States and 91% of railroad revenue in 1997. In recent years, the
Class I railroads have sought to rationalize their systems, for example by
"double-tracking" certain high traffic main lines and abandoning portions of
their systems that generate lower volumes of traffic. Mergers of Class I systems
have also created significant construction projects as the systems are
reconfigured and integrated. Historically, the major railroads have been
vertical organizations that sought to perform their own construction and
maintenance by utilizing specialized workforces and equipment for these
functions. Management believes that as Class I railroads seek to continue to
improve their cost structures, they will increasingly continue to outsource
certain construction and maintenance functions to independent contractors.

Shortline and Regional Railroads. In recent years, the number and coverage
of shortline and regional railroads, i.e., those railroads that are not Class I
railroads, have increased significantly. The Staggers Rail Act of 1980 provided
for partial deregulation of the railroad industry and created mechanisms by
which larger railroads could more easily dispose of portions of rail line. Since
that time, the larger railroad systems in the United States have streamlined
their operations by disposing of portions of their systems that generate lower
volumes of traffic and other companies have acquired portfolios of shortline
railroads. According to the AAR, there are approximately 550 shortline and
regional railroads, which in the aggregate generated approximately 9% of all
railroad revenue in 1997. The percentage of total track miles operated by
shortline and regional railroads in the United States increased to 29% in 1997
from approximately 17% in 1986. Shortline and regional railroads spend a
relatively large portion of their capital and operating budgets on maintenance
of their track assets, because these assets are often in poor condition when
they are acquired. These railroads typically utilize independent contractors for
their maintenance and construction programs, because they do not have systems
large enough to support the purchases of equipment and development of workforces
that would be required for these functions.

Passenger Rail Transit Services. The growth of major metropolitan areas
and the aging of existing rail systems have resulted in significant developments
in passenger rail transit services. Heavy rail, commuter rail -- service between
metropolitan and suburban areas -- and light rail -- typically, short trains
operating on rights-of-way that are not separated from other traffic -- have
emerged as attractive alternatives to bus or automobile transit and older
commuter rail systems have been rehabilitated and extended to handle increased
ridership. Many older urban systems, such as the New York City subway system,
are undergoing significant rehabilitation and/or modernization, while major
heavy rail systems built in the 1970s, such as the systems in San Francisco and
Atlanta, are being extended and upgraded. Additionally, there have been several
recent initiatives to develop high-speed rail transit networks between major
urban areas, for example, in Florida and the Northeast corridor. According to
APTA, there are now 18 commuter rail agencies in 14 urban areas, 14 heavy rail
agencies in 11 urban areas and 23 light rail agencies nationwide. According to
APTA, commuter and light rail ridership has increased 30% and 99%, respectively,
from 1985 to 1997. Since 1979, approximately 16 cities have constructed new
light rail-based transit systems and other cities have either extended or
refurbished their existing systems, with ridership increasing by approximately
150% over the period from 1978 through 1996. In June 1998, the President signed
the Transportation Equity Act for the 21st Century ("TEA 21"), which is expected
to provide $42 billion of funds for transit projects through 2003. See
"Government Regulation -- TEA 21" on page . This represents more than a 50%
increase of funding from the previous six-year period. The APTA reports that, in
1997, 53.7% of transit spending derived from federal funding and the balance
derived from state and local sources. Accordingly, opportunities to provide
rail-related signaling, communication, electrical and track
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<PAGE> 45

system construction, rehabilitation, repair and maintenance services for transit
systems have increased and are expected to continue to increase significantly.

Industrial Companies. Companies install trackwork in their plants to
transport raw materials, equipment and finished goods. This trackwork consists
of connector lines that provide access to Class I or shortline railroads and
railyards to coordinate the shipment and delivery of cargo to and from their
plants. Companies are responsible for maintaining their own track and typically
construct and reconfigure trackage as part of plant construction and expansion.
Companies seek to optimize their track infrastructure in order to (1) reduce the
risk of accidents that can cause delays, property damage, and environmental
spills, (2) gain access to competing railroads to drive down costs and (3)
reduce transportation costs by minimizing the switching of railcars which is
time consuming and expensive. These companies generally do not have the internal
resources to perform these services and typically use independent contractors to
design, construct and maintain these rail lines.

COMPETITIVE STRENGTHS

Breadth of Services and Products. Management believes that RailWorks
offers a broader range of services and products than most industry participants.
We believe that larger rail system operators are seeking to establish
relationships with contractors that specialize in rail system services and
products and that can provide efficient, integrated solutions over the entire
life cycle of their assets. We further believe that rail system operators and
industrial companies increasingly seek to enter into arrangements with a smaller
number of companies that can provide integrated services on a national or
regional basis, in order to ensure centralized management of their rail assets,
adherence to uniform quality standards and more cost-effective procurement
practices. We cross-sell our services and products by combining the strengths of
the operating companies to provide our customers with integrated rail system
solutions. For example, we combine our design and engineering services with
track construction to offer a turnkey approach to track construction projects.
Our ability to bundle services, including construction, rehabilitation and
maintenance, under a single contract has allowed us to compete more effectively
against companies that provide a more limited range of services.

Expansive Geographic Coverage. Our 37 operating facilities provide us with
expansive geographic coverage that enables us to reach customers throughout
North America. These multiple facilities enable us to undertake projects more
cost effectively than we could without these local facilities. RailWorks can
perform projects at multiple locations for our national account customers,
enabling these customers to use a single company for rail system projects
throughout the United States and Canada. We also can allocate equipment and
technical specialists throughout the United States and Canada to maximize asset
utilization, satisfy regional demand and complete projects in remote locations.
We believe our broad geographic presence reduces the impact of local and
regional economic cycles, and weather-related or seasonal variations on our
business.

Significant Market Presence. In an industry that has traditionally been
comprised of regional competitors, we believe our size gives us a competitive
advantage. Our substantial contract bonding capacity allows us to bid on
additional projects and more substantial projects to which smaller companies may
not have access. Our ability to bid on these additional projects has allowed us
to significantly increase our project backlog since August 1998. In addition,
size provides significant economies of scale in terms of materials purchasing,
capital expenditures and administrative costs.

Diverse Sources of Revenue. We derive a significant portion of our revenue
from public transit authorities whose funding is appropriated from federal,
state and local sources which makes those funds less sensitive to economic
cycles. In addition, a portion of our work is related to government-mandated
safety standards and we cannot postpone it. We sell our services

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<PAGE> 46

through a large number of individual contracts. No contract accounted for more
than 5.4% of our pro forma revenue for the year ended December 31, 1998. More
than half of our contracts have a duration in excess of one year, providing us
with a significant source of future revenue. The Company has strong
relationships with a wide variety of customers, including:

Class I railroads which have utilized RailWorks for repair and maintenance,
construction or engineering and supply:

- CSX Transportation

- Union Pacific Railroad

- Burlington Northern Santa Fe Railway

- Canadian National Railway

Shortline and regional railroads, which have contracted with RailWorks for
track construction and maintenance work or product supply:

- Alaska Railroad Corp.

- Louisville & Indiana Railroad

- Indiana Southern Railroad Company

- Indiana & Ohio Rail Systems

Publicly funded transit authorities, which have contracted with RailWorks
for electrical installations, signaling, communications and station projects:

- New York City Transit Authority

- New York Department of Transportation

- Los Angeles Metropolitan Transit Authority

- Connecticut Department of Transportation Rail Division

Commercial and industrial companies, which have contracted with RailWorks
for track construction and maintenance and non-rail electrical contracting work:

- United States Steel

- Bethlehem Steel

- Morse Diesel

- Babcock & Wilcox

Experienced Management. Our senior operating managers have an average of
26 years of experience in the rail services and products industry, and many of
them are or have previously served as leaders of industry trade groups. We use a
corporate management structure that allows these senior managers to focus on
marketing and growing their operations instead of administrative
responsibilities. Management has created a culture of cooperation and teamwork
among the operating companies that emphasizes dissemination of best practices
among our regional and local management teams. For example, management believes
that RailWorks can successfully implement best practices in the areas of 24-hour
emergency rerailment services, annual maintenance contracts and efficient
inventory management. As of May 31, 1999, the RailWorks directors and executive
officers and the senior managers of the operating companies beneficially owned
an aggregate of 36.9% of the RailWorks outstanding common stock.

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<PAGE> 47

STRATEGY

Key elements of our strategy include the following:

Capitalize on Scale and Geographic Coverage. By combining the operations
of the Founding Companies and the Acquired Companies, we have achieved greater
size and scope than regional and local contractors. We believe that we will be
able to achieve continued internal growth by building our national accounts
program to serve rail customers with multiple sites and by enhancing our sales
and marketing programs. Management expects to leverage our geographic network
and greater bonding capacity to increase our business. We currently have very
limited international operations but over time we may increase our activity in
international markets, where privatizations of railroads and large transit
projects are creating increased demand for sophisticated design and construction
management services. We also share equipment and labor while managing multiple
work sites. We believe that this process of sharing resources and our
comprehensive bidding capabilities enable us to compete more effectively.

Utilize Cross-selling. The Founding Companies and the Acquired Companies
have provided RailWorks with a broad range of rail-related services and
products. We intend to leverage our existing customer base to "cross-sell" these
services and products. For example, we will seek to provide additional track
construction and maintenance services to Class I railroads who are already
significant buyers of our track supplies. We also intend to continue to
emphasize the marketing of rail maintenance programs, which provide recurring
revenue and strengthen customer relationships. We have been successful in
leveraging our maintenance relationships to obtain new rail system installation
projects. In addition, by placing a stronger emphasis on our design and
engineering services we expect to gain access to more track construction
opportunities.

Expand Through Acquisitions. Management believes RailWorks is
well-positioned to capitalize on the consolidation of the rail system services
and products industry on a regional and nationwide basis. We have created an
efficient operating platform that management expects will facilitate the
integration of future acquisitions. Our acquisition program includes expanding
geographic coverage throughout North America, broadening our lines of services
and products, and adding density and operating leverage within our current
markets. Management believes that the experience and industry reputations of the
senior managers of the operating companies and senior corporate management of
RailWorks provide RailWorks with a competitive advantage in identifying,
completing and integrating acquisitions. Since we completed our IPO in August
1998 through March 31, 1999, we have acquired six companies with aggregate
revenue of $83.2 million for fiscal 1998. Subsequent to March 31, 1999, we have
acquired five additional operating companies and have entered into letters of
intent to acquire another two companies. We expect to execute definitive
purchase agreements, which will have customary closing conditions, including
completion of due diligence, during the third quarter of 1999. However, we
cannot guarantee that we will consummate either or both of those acquisitions.
Our acquisition strategy includes the following elements:

- Enter New Geographic Markets. Management intends to expand into
geographic markets that we do not currently serve by acquiring
well-established contractors and related supply companies that are
leaders in their regional or local markets. In addition, after an initial
emphasis on acquisitions within the United States and Canada, management
may pursue international acquisition opportunities.

- Enter Complementary Services and Product Markets. Management intends to
continue acquiring companies offering complementary services and products
to those currently offered by the operating companies. Specifically,
management believes that attractive acquisition opportunities will
continue to exist with respect to design and engineering firms, designers
and manufacturers of signaling and communication systems and suppliers of
electrical equipment, rail, switches and panels, and concrete and steel
ties.
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<PAGE> 48

- Expand Within Existing Geographic Markets. Management plans to acquire
additional companies in many of the regions in which we currently
operates in order to expand the volume and scope of our operations in a
particular market. Management will continue to pursue acquisitions of
smaller companies to increase utilization of our existing fixed assets
and equipment or to gain access to new customers. Management believes
these types of acquisitions will improve operating efficiencies and more
effectively use our capital resources without a proportionate increase in
administrative costs.

Reduce Operating Costs. Key areas in which management has achieved and
expects to continue to achieve cost savings include (1) purchasing of equipment
and supplies, (2) insurance expenses and (3) financing costs. We have also
established an operating platform to achieve optimal utilization of equipment,
inventory and our workforce. We expect to continue to reduce administrative
expenses through the integration of certain accounting, financing, human
resources and other functions.

SERVICES AND PRODUCTS

We operate in three business lines: (1) transit services; (2) rail
construction services; and (3) rail products and supplies. The following chart
sets forth the percentage of 1998 pro forma revenue that was represented by each
business line.
SERVICES AND PRODUCTS CHART

Transit Services

Our transit services business includes all products and services that we
provide to rail-based public transit agencies and authorities in various
metropolitan markets. We typically contract with these agencies to install (1)
electric train traction power systems by means of third rail or overhead
catenary wiring, (2) train control signal systems, (3) train, station and
command station communications systems, (4) general electrical installations for
lighting and other applications and (5) tunnel and station track. We can perform
major new projects that involve track installation including excavation,
grading, paving and drainage improvements as well as minor rehabilitation
projects. Projects for new public transit lines generally include the
installation of all of these systems, giving us a competitive advantage.

In addition, we leverage our knowledge of transit systems to efficiently
provide mechanical services, including installations of heating and air
conditioning systems, ventilating and pump rooms, fan chambers, elevators and
escalators. We have experience with rubber tired vehicular people mover systems,
installing concrete guided trackway, power guide beam, central guidance rail,
walkway and handrails.

The duration and size of our transit contracts vary greatly depending on
the scope of the project. Large scale transit projects have had a term of up to
four years and have a total contract

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<PAGE> 49

size of up to $100 million. We have performed installations for most of the
country's transit authorities, including those in Atlanta, Boston, Chicago, Los
Angeles, New York, Philadelphia, Portland, San Diego, San Francisco, St. Louis
and Washington, D.C. We generally perform our services as either a prime
contractor directly to the transit agencies or as a subcontractor to large civil
engineering contractors or equipment manufacturers. Transit authorities award
contracts through competitive bidding and award contracts on a fixed price
basis, generally to the lowest bidder. As a result, we focus our business to (1)
provide accurate bid estimating to both win contracts and ensure a profit and
(2) monitor construction costs to ensure that projects are completed on time and
within budget. Our bidding process is highly involved and draws on the expertise
of many individuals within RailWorks. We carefully consider a variety of
factors, including material prices, local labor rates and practices, our
knowledge of the work site and contracting practices of the transit authorities.
We have a rigorous project review process that continually monitors the incurred
labor and material costs against an initial plan to avoid overruns. We believe
that these methods provide us with a competitive advantage.

As an outgrowth of its transit-related business, we also perform commercial
real estate electrical installations, primarily in the New York City
metropolitan area and industrial electrical installations throughout the United
States. We contract for these projects on an opportunistic basis, that is, when
we have resources available and can realize attractive returns. We do not intend
to grow our non-rail-related businesses beyond the current scope.

Rail Construction Services

Our rail construction services business consists of providing rail design,
construction and maintenance services to Class I and shortline railroads and
industrial companies with on-site rail infrastructure. Rail design is a highly
specialized discipline and there are a limited number of companies that can
provide these services. We utilize our rail design capabilities to facilitate
access to rail construction projects. By having the ability to provide
integrated design-build services, we have had success in increasing our project
flow. Our rail construction efforts primarily involve the construction of main
line segments, passing sidings, rail yards, connector segments between railroads
and industrial sites, turnouts and track and road intersections. With respect to
track maintenance, we enter into multi-year contracts with several customers to
provide ongoing maintenance of on-site rail infrastructure. Maintenance
contracts allow us to obtain recurring revenues and gain access to additional
new construction projects from the same customer. Additional rail contracting
services also include the removal of tracks which are no longer in use.

Rail construction and maintenance are highly complex processes that usually
involve numerous separate parties that design, supply and construct the
different elements of the track. Following the design stage, construction
entails (1) site preparation and grading, (2) the laying of ballast (gravel) to
provide a solid track fixation medium, (3) the positioning of cross ties, (4)
securing rail with high precision using metal plates, spikes and clamps, (5)
installing complex track crossings and turnouts and (6) installing other track
related systems such as signal, communications and automatic train control and
safety devices. Management believes that our ability to bundle these services on
a turnkey basis provides RailWorks with a significant competitive advantage.

We provide our rail services on a nationwide basis. Since it is generally
not economical to work on contracts outside of a 300 mile radius of an operating
facility, this broad footprint facilitates servicing customers with multiple
sites across regions. Most of our competitors in this market are regionally
focused. Management believes RailWorks has a competitive advantage due to its
ability to direct equipment and labor resources to regions with higher demand
due to economic or seasonal fluctuations. We also maintain track and track
material inventory at each location. By coordinating information across our
network, we can maximize inventory utilization and improve supply for projects
in different regions.
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<PAGE> 50

Rail Products and Supplies

We manufacture wooden and concrete products and rail fastening systems out
of four facilities. Our wooden products include cross ties and switch and bridge
timbers. Our wood treating operations consist of pressure-treating pre-cut beams
of hardwood to provide weather-proofing. These treated cross ties are used for
securing rail for tracks or assembled to construct bridge support structures.
Concrete products consist primarily of pre-cast structural components for
bridges and other support structures. Our concrete operations consist of pouring
mixed concrete into large molds to create specialized structural support
components. We also design and manufacture rail fastening systems, which are
primarily used in overhead and portal crane rail applications.

Our rail construction operations source rail and other track materials
(primarily metal components such as plates and spikes) from (1) the reclamation
of existing track that is no longer in use, (2) track materials brokers and (3)
manufacturers. We sell our rail products and supplies directly to contractors,
including our own subsidiaries, and to Class I and shortline railroads that
perform their own track construction and maintenance. Some of our products are
used in non-rail applications such as highway construction and decorative
landscaping.

Our product capabilities provide us with an advantage in supplying our
track construction and maintenance operations. This is particularly important in
the context of wooden cross ties as the market has experienced shortages in the
past. There are a limited number of cross tie manufacturing facilities in North
America due to stringent regulations. We enhance our competitive advantage by
having uninterrupted access to cross ties and other track products. We have also
developed strong customer relationships through products sales, particularly
with Class I and shortline railroads. Additionally, we lease track construction
and maintenance equipment. By offering operating leases for such equipment, we
have formed additional industry relationships, created an additional revenue
source and established an avenue to fully utilize the operating life of our
equipment. As part of our growth strategy, we intend to leverage these
relationships to cross-sell other services, particularly design and engineering
as well as track construction and maintenance.

ACQUISITION PROGRAM

Management believes the combination of management's acquisition expertise
and the highly fragmented nature of the rail services and products industry
provides RailWorks with significant acquisition opportunities. RailWorks
identifies acquisition candidates by leveraging the relationships of its
experienced operational managers and utilizing its dedicated acquisitions team.
We focus on acquiring companies that have a strategic fit, provide us with cost
synergies, complement our geographic presence, and demonstrate a willingness to
learn and share best practices through open communications. After an initial
screening, management evaluates each acquisition candidate through its due
diligence process, which includes detailed financial and operational reviews.
During the due diligence process, we often identify a number of areas in which
we expect to realize efficiencies during the integration process. We offer
acquisition candidates several benefits, including:

- expertise to expand in specialized markets;

- enhanced productivity through the reduction of administrative burdens;

- national name recognition;

- increased bonding capacity;

- access to public capital markets; and

- the opportunity for a continued role in management.

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<PAGE> 51

Other key elements of our acquisition program include:

Retain and Provide Incentives to Existing Management. We seek acquisitions
of successful companies whose senior managers will remain as employees of
RailWorks and continue to operate their respective businesses on a local level.
We motivate these managers and align their interests with those of RailWorks
through (1) employment agreements, (2) shares of common stock as a portion of
the acquisition consideration and (3) a structured earnout program which is tied
to the acquired entity meeting specific earnings targets.

Leverage Industry Reputation and Contacts. We utilize existing industry
relationships established by the operating companies and RailWorks management to
develop a broad base of potential acquisitions. We intend to remain actively
involved in industry organizations on local and national levels, working with
independent companies to support issues of interest to RailWorks.

Acquisition Consideration. In the course of implementing our acquisition
strategy, we have typically used cash and performance-based earnouts as
consideration for the acquired businesses. In the future, we expect to use a
combination of cash, common stock, promissory notes and performance-based
earnouts as consideration for acquired businesses. See "Risk Factors -- Risks
Relating to the Company -- We May Be Unable to Complete and Finance
Acquisitions."

Since completion of the IPO, RailWorks has acquired the following
companies:

<TABLE>
<CAPTION>
ACQUISITION NAME OF FISCAL 1998
DATE ACQUIRED COMPANY REVENUE HEADQUARTERS BUSINESS LINE
- ------------- ---------------- ------------- -------------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
November 1998 Armcore Railroad $ 3.8 Frankfort, IN Rail construction
Contractors, Inc services
November 1998 Sheldon Electric Co., 1.4(1) Long Island City, NY Transit services
Inc
January 1999 Gantrex Group 13.9 Ajax, Ontario, Rail products and
Canada supplies
January 1999 Mid West Railroad 13.2 Salt Lake City, UT Rail construction
Construction and services
Maintenance
Corporation of
Wyoming
January 1999 FCM Rail, Ltd 4.9 Grand Blanc, MI Rail products and
supplies
March 1999 F&V Metro Contracting 46.0 Farmingdale, NY Transit services
Corp. and Affiliates
April 1999 M-Track Enterprises, 12.7 Bronx, NY Rail construction
Inc. services
April 1999 McCord Treated Wood, 11.1 Warrior, AL Wooden tie
Inc./ Birmingham suppliers
Wood, Inc.
April 1999 Pacific Northern Rail 17.5 Abbotsford, British Rail construction
Contractors Columbia, Canada services
June 1999 Neosho Incorporated 84.6 Topeka, Kansas Rail construction
and Affiliates services
June 1999 Earl Campbell 7.4 Houston, Texas Rail construction
Construction Company, services
Inc.
</TABLE>

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

(1) RailWorks acquired certain assets and ongoing contracts of Sheldon Electric
Co., Inc. Therefore, only revenue since the date of acquisition, $1.4
million since November 4, 1998, has been included above.

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<PAGE> 52

SOURCES OF SUPPLY

We purchase new rail from a limited number of suppliers. New rail is
generally installed only on main lines, where the track may carry high volumes
of heavy traffic at high speeds. Over time, rail is removed, inspected and, if
in the appropriate condition, refurbished for sale as "relay" rail. Relay rail
is typically installed on secondary -- non-main line -- tracks, as well as yard
or branch tracks. Total rail life before scrapping may be as long as 60 years.
We also purchase a large volume of relay rail that third parties refurbish and
resell.

Similarly, we regularly purchase entire sections of track that we remove
and subsequently disassemble at our facilities. We inspect the various track
components -- rail, ties, and accessories -- and items are placed into our
inventory, either in their "as removed" condition or after being refurbished by
third parties, or sold for scrap. Additionally, in connection with certain
repair and rehabilitation projects, we acquire removed trackwork. Management
believes the RailWorks network of contractors enables it to acquire previously
used track on comparatively advantageous terms.

For installing electrical signaling and communication systems for transit
authorities, we purchase equipment from a limited number of suppliers. See "Risk
Factors -- Risks Relating to the Company -- We Rely on Subcontractors and
Suppliers" beginning on page .

Certain of our operating companies process creosote-treated wooden ties.
Their operations include the purchase of raw lumber, trimming the lumber to
specified sizes, pressurized impregnation of the lumber with creosote
preservative and finishing of the ties, which would include the pre-drilling of
spike holes and the attachment of plates, as specified by the customer. The
service life of pressure treated ties has been extended to a range of 25 to 40
years.

Management believes RailWorks can purchase materials in sufficient
quantities to permit it to realize purchasing economies and discounts from its
suppliers. Historically, the cost of the lumber used to produce wooden ties,
steel used to produce rail, and copper used to produce electrical wiring has
fluctuated significantly due to market and industry conditions. Increasing
demand for these raw materials may result in cost increases. We cannot guarantee
that we will be able to recoup any of those increases by increasing the prices
of our products. Further, a reduction in supply of lumber, steel or copper due
to increased demand or other factors could have an adverse effect on our
business, financial condition and results of operations.

SALES AND MARKETING

We maintain a targeted national sales program to further develop the
business of each of the operating companies. This initiative focuses on the
Class I railroads and other large industrial companies with facilities in
multiple areas. Prior to their acquisition by RailWorks, the individual
operating companies had been unable to serve such customers on a comprehensive,
nationwide basis. In addition, our ability to offer electrical installation
services together with rail construction, rehabilitation, repair and maintenance
services and related products provides us with opportunities to cross-sell our
services to large industrial companies. Management believes that RailWorks has
an advantage over its competitors since it can offer consistent, high-quality
service and products throughout the United States. Our expansive geographic
coverage enables customers to use our services and products in multiple
locations rather than dealing with numerous regional or local companies.

We have achieved significant synergies in our marketing programs.
Management also believes that RailWorks has developed and will continue to
refine cross-selling programs under which:

a) our design and engineering groups provide timely leads to its
construction, product supply and electrical installation companies,

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<PAGE> 53

b) our electrical signaling and communications companies, which have
previously utilized third parties for track engineering and construction,
utilize other operating companies for these projects, and

c) our track construction companies contract with other operating
companies for signaling, communication and electrical installation
services.

Similarly, our product supply companies have, over the years, developed
long-term relationships with the Class I railroads and large industrial
companies, and management believes that these relationships provide an
attractive basis for marketing our construction and maintenance services.

BIDDING AND CONTRACTS

A majority of our pro forma revenue for the year ended December 31, 1998
was derived from contracts entered into through a competitive bidding process.
Public agencies, including the NYCTA, that solicit bids are generally required
to accept the lowest cost proposal. In some cases, the party that submitted the
low bid must first pass a technical qualification before being awarded a
project. Following the acceptance of a bid, we typically enter into a contract
with the customer. Our track construction and repair projects generally do not
involve long-term contracts.

Many projects that are competitively bid require the company that is
awarded the project to post a bond, which varies according to the size of the
project. Each company has a bonding limit, which is based on the company's
working capital and work in progress. The bond provides the customer with
insurance in the event that the company is unable to complete the project.
Accordingly, the ability of each of the operating companies to bid on larger
projects had, prior to their acquisition by RailWorks, had been limited by their
ability to obtain the required bonding. The size of RailWorks, as compared to
the size of the individual operating companies, facilitated increases in the
bonding limits for each operating company thereby better positioning them to bid
on and undertake significantly larger construction and maintenance projects.
Management believes that the increased bonding capacity permits us to bid on and
undertake more projects than could smaller companies. See "Risk Factors -- Risks
Relating to the Company -- Our Fixed Price Contracts Expose us to Significant
Risks."

CUSTOMERS

The following table lists our top four customers in each category on a pro
forma basis giving effect to the acquisitions of the Founding Companies and the
Acquired Companies as if they had occurred on January 1, 1998:

<TABLE>
<CAPTION>
CLASS I RAILROADS SHORTLINE AND REGIONAL RAILROADS
- -------------------------------------------- --------------------------------------------
<S> <C>
CSX Transportation Alaska Railroad Corporation
Union Pacific Railroad Louisville & Indiana Railroad
Burlington Northern Santa Fe Indiana Southern Railroad Company
Canadian National Railway Indiana & Ohio Rail Systems
</TABLE>

<TABLE>
<CAPTION>
TRANSIT AUTHORITIES AND INDUSTRIAL COMPANIES AND
COMMUTER RAILROADS COMMERCIAL ENTERPRISES
- -------------------------------------------- --------------------------------------------
<S> <C>
NYCTA (New York) United States Steel
NYDOT (New York) Bethlehem Steel
LAMTA (Los Angeles) Morse Diesel
CDOT Rail Division (Connecticut) Babcock & Wilcox
</TABLE>

COMPETITION

The rail system services and products industry is competitive, and projects
are often awarded through competitive bidding. We compete with other rail system
construction, rehabilitation and
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<PAGE> 54

maintenance companies, electrical contractors and suppliers of products. Some of
our competitors have significantly greater resources than we have, may provide a
broad range of services and products, and may have sufficient bonding capacity
to undertake large projects. We compete on the basis of our breadth of services
and products, ability to take on large projects and nationwide presence. Any
inability of RailWorks to compete successfully against existing and future
competitors would have a material adverse effect on our business, results of
operations and financial condition. Moreover, we may depend in part upon
opportunities for consolidation in the rail system services and products
industry in order to execute effectively our acquisition and vertical
integration strategy. If our customers do not receive our vertical integration
strategy favorably, these customers have numerous alternative sources of
services and supply.

RISK MANAGEMENT AND SAFETY

Because our business is labor intensive, workers' compensation is a
significant operating expense for us. We could be exposed to liability for the
acts or negligence of our employees who cause personal injury or damage while on
assignment, as well as claims of misuse of customer proprietary information or
theft of client property. We have adopted policies and procedures intended to
reduce our exposure to these risks.

We maintain insurance against these risks with policy limits we consider
sufficient and consistent with industry standards. We have retained a risk
management professional who is responsible for claims management and the
establishment of appropriate reserves for the deductible portion of claims. We
hold regular meetings with the presidents of the operating companies at which we
discuss safety issues. We also conduct routine safety inspections of local work
sites.

EQUIPMENT AND FACILITIES

We own and maintain specialized equipment used in rail construction,
rehabilitation, repair and maintenance. This equipment may be moved between job
sites and, consequently, we are seeking to increase the sharing of equipment
between the operating companies where it is appropriate and cost effective. For
example, during the winter months, the operating companies located in the
Northern United States could relocate their equipment to the operating companies
located in the South. Each of the operating companies generally performs its own
equipment maintenance. We intend to manage our equipment through our equipment
leasing subsidiary, which will maintain a comprehensive database that tracks the
use of all of our equipment.

Our corporate offices are in approximately 3,000 square feet of leased
space in a suburb of Baltimore, Maryland. In addition to the corporate offices,
we lease 27 and own 10 operating facilities. These facilities consist of local
offices, storage yards, distribution facilities, warehouses and wood processing
plants.

GOVERNMENT REGULATION

Overview. In addition to the environmental, safety and other regulations
generally applicable to all businesses, regulations that are administered by the
Surface Transportation Board, the successor to the Interstate Commerce
Commission ("ICC"), the FRA and by regulatory agencies impact our business in
the various states where we and our customers do business. Since 1980, there has
been a significant relaxation in regulations governing the sale, leasing or
other transfer of railroad properties, and this change has favorably affected
the operations of many of our customers. Various interests in the United States
have sought and continue to seek reimposition of government controls on the
railroad industry in areas deregulated in whole or in part since 1980, including
stricter rate regulation and more onerous labor protection conditions for rail
line transfers.

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<PAGE> 55

Railroad Regulations. The ICC Termination Act, enacted on December 29,
1995, eliminated the ICC as an independent agency and created the STB, a new
agency within the Department of Transportation which began functioning on
January 1, 1996. The ICC Termination Act changed the procedure and timing for
federal approval of rail projects, including abandonments, line sales, mergers,
rates and tariffs, simplifying and streamlining the abandonment process. The FRA
regulates railroad safety and equipment standards, including track maintenance
and train speed standards, special procedures for handling hazardous shipments,
locomotive and railcar inspection and repair requirements, operating practices
and crew qualifications. The Roadway Worker Protection Rules, promulgated by the
FRA, apply to rail contractors and establish certain safety criteria that must
be complied with on rail projects.

TEA 21. On June 9, 1998, the President signed TEA 21, the six-year surface
transportation program that represents a significant development in the federal
transit program. TEA 21, the largest infrastructure funding bill in U.S.
history, authorizes funding for transit in the amount of $42 billion through
2003. TEA 21 authorizes over 50 percent more than the 1991 Intermodal Surface
Transportation Efficiency Act, whose funding has expired.

State Regulatory Agencies. State regulatory agencies no longer have
authority to engage in economic regulation of railroads that are part of the
intrastate network. State and local governments generally retain jurisdiction
over local rail safety matters, such as the installation of grade crossings and
grade crossing warnings devices.

ENVIRONMENTAL MATTERS

Our operations and properties are subject to environmental laws and
regulations relating to pollution and protection of the environment and public
and employee health and safety. The principal environmental regulatory
requirements applicable to our operations relate to the use of creosote to treat
lumber, and the generation, storage, transportation, treatment and disposal of
solid and hazardous wastes. We believe that our operations have all required
environmental permits and currently comply, in all material respects, with
applicable regulatory requirements.

We have had environmental assessments performed for recent acquisitions.
Based on these reports and available information, we are not aware of any
significant environmental exposures or claims against us. However, the
historical and current uses of our facilities may have resulted in spills or
releases of various hazardous materials, which now, or in the future, could
require remediation. We also may be subject to requirements related to
remediation of hazardous materials that have been released into the environment
at properties that we own or operate, or that we owned or operated in the past
or at properties to which we send, or may have sent, hazardous materials for
treatment or disposal. Such remediation requirements generally are imposed
without regard to fault, and liability for any required environmental
remediation can be substantial.

EMPLOYEES

As of May 31, 1999, we employed approximately 3,000 employees. We believe
that we have good relations with our employees.

Approximately 66.9% of our employees are members of certain labor unions
and are employed pursuant to collective bargaining agreements. Some of the
operating companies are parties to collective bargaining agreements with the
International Brotherhood of Electrical Workers, Laborers' International Union
of North America, the International Union of Operating Engineers, United
Brotherhood of Carpenters and Joiners of America and the United Brotherhood of
Teamsters. Some of our customers hire only unionized labor. Our largest
collective bargaining agreement, covering 1,054 employees, expires in June 2001.
Except for a one-week work stoppage in Connecticut by the United Brotherhood of
Teamsters in June 1994, we have not experienced any work stoppages in the past
five years.
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INFORMATION TECHNOLOGY SYSTEMS

We are in the process of implementing integrated information technology
systems that will be utilized by each of the operating companies. These
information technology systems will be used for a variety of purposes, including
monitoring inventory levels, tracking the progress of construction projects and
integrating our financial, general ledger, payables and receivables functions.
In addition, we will network our corporate offices to the offices of our
operating companies and will have e-mail capability at all offices. We expect
that the required systems will be purchased and installed in 1999 and that our
expenditures for these systems will not be material to us. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." All of the new systems will be
Year 2000 compatible. Until these new systems are fully operational, each of the
operating companies will continue using the information systems that they
currently use.

LEGAL PROCEEDINGS

From time to time, we may be involved in routine legal proceedings
incidental to the conduct of our business. In the opinion of management, the
litigation, individually or in the aggregate, to which we are currently a party,
is not likely to have a material adverse effect on our business, financial
condition and results of operations.

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THE EXCHANGE OFFER

PURPOSE AND EFFECT OF THE EXCHANGE OFFER

We sold the old notes on April 7, 1999 to BT Alex. Brown, NationsBanc
Montgomery Securities LLC and First Union Capital Markets pursuant to a purchase
agreement. These initial purchasers subsequently sold the old notes to:

- "qualified institutional buyers" ("QIBs"), as defined in Rule 144A under
the Securities Act, in reliance on Rule 144A, and to

- persons in offshore transactions in reliance on Regulation S under the
Securities Act.

As a condition to the initial sale of the old notes, RailWorks and the
initial purchasers entered into a registration rights agreement. Pursuant to the
registration rights agreement, we agreed to

- file a registration statement under the Securities Act with respect to
the exchange notes with the SEC by June 7, 1999 and

- use our reasonable best efforts to cause the registration statement to
become effective under the Securities Act on or before September 6, 1999.

We agreed to issue and exchange the new notes for all old notes validly
tendered and not validly withdrawn prior to the expiration of the exchange
offer. A copy of the registration rights agreement has been filed as an exhibit
to the registration statement which includes this prospectus. The registration
statement is intended to satisfy some of our obligations under the registration
rights agreement and the purchase agreement.

The term "holder" with respect to the exchange offer means any person in
whose name old notes are registered on the trustee's books or any other person
who has obtained a properly completed bond power from the registered holder, or
any person whose old notes are held of record by The Depository Trust Company
(the "Depositary" or "DTC") who desires to deliver such old note, by book-entry
transfer at DTC.

RESALE OF THE NEW NOTES

We believe that you will be allowed to resell the new notes to the public
without registration under the Securities Act, and without delivering a
prospectus that satisfies the requirements of Section 10 of the Securities Act
if you can make the representations set forth above under "Prospectus
Summary -- The Exchange Offer -- Procedures for participating in the exchange
offer." However, if you intend to participate in a distribution of the new
notes, or you are an "affiliate" of RailWorks as defined under Rule 405 of the
Securities Act, you must comply with the registration requirements of the
Securities Act and deliver a prospectus, unless an exemption from registration
is otherwise available. You have to represent to RailWorks in the letter of
transmittal accompanying this prospectus that you meet these conditions
exempting you from the registration requirements.

We base our view on interpretations by the staff of the SEC in no-action
letters issued to other issuers in exchange offers like ours. However, we have
not asked the SEC to consider this particular exchange offer in the context of a
no-action letter. Therefore, you cannot be sure that the SEC will treat it in
the same way it has treated other exchange offers in the past.

A broker-dealer that has bought old notes for market-making or other
trading activities has to deliver a prospectus in order to resell any old notes
it has received for its own account in the exchange. This prospectus may be used
by a broker-dealer to resell any of its old notes. We have agreed in the
registration rights agreement to send this prospectus to any broker-dealer that
requests copies in the letter of transmittal for a period of up to 180 days
after the SEC declares

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<PAGE> 58

the registration statement relating to this exchange offer effective. See "Plan
of Distribution" for more information regarding broker-dealers.

The exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of old notes in any jurisdiction in which this exchange
offer or the acceptance thereof would not be in compliance with the securities
or blue sky laws.

TERMS OF THE EXCHANGE OFFER

General. Based on the terms and conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all old notes validly
tendered and not validly withdrawn prior to 5:00 p.m., New York City time, on
the expiration date.

Subject to the minimum denomination requirements of the new notes, we will
issue $1,000 principal amount of new notes in exchange for each $1,000 principal
amount of outstanding old notes validly tendered pursuant to the exchange offer
and not validly withdrawn prior to the expiration date. Holders may tender some
or all of their old notes pursuant to the exchange offer. However, old notes may
be tendered only in amounts that are integral multiples of $1,000 principal
amount.

The form and terms of the new notes are the same as the form and terms of
the old notes except that:

- the new notes will be registered under the Securities Act and, therefore,
the new notes will not bear legends restricting the transfer the new
notes,

- the new notes shall not contain provisions for additional interest and

- holders of the new notes will not be entitled to any of the registration
rights of holders of old notes under the registration rights agreement,
which rights will terminate upon the consummation of the exchange offer.

The new notes will evidence the same indebtedness as the old notes, which
they replace, and will be issued under, and be entitled to the benefits of, the
same indenture that authorized the issuance of the old notes. As a result, both
the new notes and the old notes will be treated as a single class of debt
securities under the indenture. The exchange offer does not depend upon any
minimum aggregate principal amount of old notes being surrendered for exchange.

As of the date of this prospectus, $125,000,000 in aggregate principal
amount of the old notes is outstanding, all of which is registered in the name
of Cede & Co., as nominee for DTC. Solely for reasons of administration, we have
fixed the close of business on June 25, 1999 as the record date for the exchange
offer for purposes of determining the persons to whom this prospectus and the
letter of transmittal will be initially mailed. There will be no fixed record
date for determining holder of the old notes entitled to participate in this
exchange offer.

As a holder of old notes, you do not have any appraisal or dissenters'
rights, or any other right to seek monetary damages in court under the Delaware
General Corporation Law or the indenture governing the notes. We intend to
conduct the exchange offer in accordance with the provisions of the registration
rights agreement and the applicable requirements of the Exchange Act and the
related rules and regulations of the SEC. Old notes that are not surrendered for
exchange in the exchange offer will remain outstanding and interest thereon will
continue to accrue.

We will be deemed to have accepted validly surrendered old notes if and
when we give oral or written notice of our acceptance to the exchange agent. The
exchange agent will act as agent for the tendering holders of old notes for the
purpose of receiving the new notes from us.

If you surrender old notes in the exchange offer, you will not be required
to pay brokerage commissions or fees. In addition, subject to the instructions
in the letter of transmittal, you will
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<PAGE> 59

not have to pay transfer taxes for the exchange of old notes. We will pay all
charges and expenses in connection with the exchange offer, other than certain
applicable taxes described under "-- Fees and Expenses."

EXPIRATION DATE; EXTENSIONS; AMENDMENTS

The "expiration date" is 5:00 p.m., New York City time, on July 30, 1999,
unless we extend the exchange offer, in which case the expiration date is the
latest date and time to which we extend the exchange offer.

In order to extend the exchange offer, we will:

- notify the exchange agent of any extension by oral or written
communication;

- issue a press release or other public announcement, which will report the
approximate number of old notes deposited; such press release or
announcement would be issued prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
During any extension of the exchange offer, all old notes previously
surrendered and not withdrawn will remain subject to the exchange offer.

We reserve the right:

- to delay accepting any old notes,

- to amend the terms of the exchange offer in any manner,

- to extend the exchange offer, or

- if, in the opinion of our counsel, the consummation of the exchange offer
would violate any law or interpretation of the staff of the SEC, to
terminate or amend the exchange offer by giving oral or written notice to
the exchange agent.

Any delay in acceptance, extension, termination or amendment will be
followed as soon as practicable by a press release or other public announcement.
If we amend the exchange offer in a manner that we determine constitutes a
material change, we will promptly disclose that amendment by means of a
prospectus supplement that will be distributed to the holders, and we will
extend the exchange offer for a period of time, depending upon the significance
of the amendment and the manner of disclosure to the holders, if the exchange
offer would otherwise expire during that period.

We will have no obligation to publish, advertise, or otherwise communicate
any public announcement that we may choose to make, other than by making a
timely release to an appropriate news agency.

In all cases, issuance of the new notes for old notes that are accepted for
exchange will be made only after timely receipt by the exchange agent of a
properly completed and duly executed letter of transmittal and all other
required documents. However, we reserve the absolute right to waive any
conditions of the exchange offer or any defects or irregularities in the
surrender of old notes. If we do not accept any surrendered old notes for any
reason set forth in the terms and conditions of the exchange offer or if you
submit old notes for a greater principal amount than you want to exchange, we
will return certificates for the unaccepted or non-exchanged old notes, or
substitute old notes evidencing the unaccepted portion, as appropriate, to you.
See "--Return of Old Notes."

INTEREST ON THE NEW NOTES

The new notes will accrue cash interest on the same terms as the old notes,
i.e., at the rate of 11 1/2% per year (using a 360-day year) from April 7, 1999,
payable semi-annually in arrears on April 15 and October 15 of each year,
beginning on October 15, 1999. Old notes accepted for

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<PAGE> 60

exchange will not receive accrued interest thereon at the time of exchange.
However, each new note will bear interest from the most recent date to which
interest has been paid on the old notes or new notes, or if no interest has been
paid on the old notes or new notes, from April 7, 1999.

PROCEDURES FOR TENDERING OLD NOTES

If you wish to surrender old notes you must:

- complete and sign the letter of transmittal or a facsimile thereof,

- have the signatures thereon guaranteed if required by the letter of
transmittal, and

- mail or deliver the letter of transmittal or facsimile, together with any
corresponding certificate or certificates representing the old notes
being surrendered -- or confirmation of a book-entry transfer of such old
notes into the exchange agent's account at DTC pursuant to the book-entry
procedures described below -- to the exchange agent at its address set
forth in the letter of transmittal for receipt prior to the expiration
date. If the certificate representing the old notes being tendered -- or
the confirmation of a book-entry transfer, if applicable -- is not
delivered to the exchange agent with the letter of transmittal, you must
comply with the guaranteed delivery procedures described below. DELIVERY
OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH ITS
PROCEDURE DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.

If you do not withdraw your surrender of old notes prior to the expiration
date, it will indicate an agreement between you and RailWorks that you have
agreed to surrender the old notes, in accordance with the terms and conditions
in the letter of transmittal.

THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK.
INSTEAD OF DELIVERY BY MAIL, YOU SHOULD USE AN OVERNIGHT OR HAND DELIVERY
SERVICE, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, YOU
SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. DO NOT SEND ANY LETTER OF TRANSMITTAL OR OLD NOTES TO US. YOU
MAY REQUEST THAT YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE
EFFECT THE ABOVE TRANSACTIONS FOR YOU.

If you are a beneficial owner of the old notes and your old notes and hold
those notes through a broker, dealer, commercial bank, trust company or other
nominee and you want to surrender your old notes, you should contact that
intermediary promptly and instruct it to surrender the old notes on your behalf.

Generally, an eligible institution must guarantee signatures on a letter of
transmittal or a notice of withdrawal described below under "-- Withdrawal of
Tenders of Old Notes" unless

- you tender your old notes as the registered holder, which term includes
any participant in DTC whose name appears on a security listing as the
owner of old notes,

- you sign the letter of transmittal, and the new notes issued in exchange
for your old notes to be issued in your name, or

- you surrender your old notes for the account of an eligible institution.

In any other case, the surrendered old notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to us and
duly executed by the registered holder. If the new notes or unexchanged old
notes are to be delivered to an address other than that of the registered holder
appearing on the security register for the old notes, an eligible institution
must guarantee the signature in the letter of transmittal. In the event that
signatures on a letter of

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<PAGE> 61

transmittal or a notice of withdrawal are required to be guaranteed, such
guarantee must be made by:

- a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.,

- a commercial bank or trust company having an office or correspondent in
the United States, or an "eligible guarantor institution" as defined by
Rule 17Ad-15 under the Exchange Act that is a member of one of the
recognized signature guarantee programs identified in the letter of
transmittal.

Your surrender will be deemed to have been received as of the date when:

- the exchange agent receives a properly completed and signed letter of
transmittal accompanied by the old notes, or a confirmation of book-entry
transfer of such old notes into the exchange agent's account at DTC, or

- the exchange agent receives a notice of guaranteed delivery from an
eligible institution. Issuances of new notes in exchange for old notes
surrendered pursuant to a notice of guaranteed delivery or letter,
telegram or facsimile transmission to similar effect by an eligible
institution will be made only against submission of a duly signed letter
of transmittal, and any other required documents, and deposit of the
surrendered old notes, or confirmation of a book-entry transfer of such
old notes into the exchange agent's account at DTC pursuant to the
book-entry procedures described below.

We will make the determination regarding all questions relating to the
validity, form, eligibility, including time of receipt, acceptance and
withdrawal of surrendered old notes, and our determination will be final and
binding on all parties.

We reserve the absolute right to reject any and all old notes improperly
surrendered. We will not accept any old notes if our acceptance of them would,
in the opinion of our counsel, be unlawful. We also reserve the absolute right
to waive any defects, irregularities, or conditions of surrender as to any
particular old notes. Our interpretation of the terms and conditions of the
exchange offer, including the instructions in the letter of transmittal, will be
final and binding on all parties. Unless waived, you must cure any defects or
irregularities in connection with surrenders of old notes within the time we
will determine. Although we intend to notify holders of defects or
irregularities in connection with surrenders of old notes, neither we, the
exchange agent nor anyone else will incur any liability for failure to give such
notice. Surrenders of old notes will not be deemed to have been made until any
defects or irregularities have been cured or waived.

We have no current plan to acquire any old notes that are not surrendered
in the exchange offer or to file a registration statement to permit resales of
any old notes that are not surrendered pursuant to the exchange offer. We
reserve the right in our sole discretion to purchase or make offers for any old
notes that remain outstanding after the expiration date. To the extent permitted
by law, we also reserve the right to purchase old notes in the open market, in
privately negotiated transactions or otherwise. The terms of any future
purchases or offers could differ from the terms of the exchange offer.

Pursuant to the letter of transmittal, if you elect to surrender old notes
in exchange for new notes, you must exchange, assign and transfer the old notes
to us and irrevocably constitute and appoint the exchange agent as your true and
lawful agent and attorney-in-fact with respect to such surrendered old notes,
with full power of substitution, among other things, to cause the old notes to
be assigned, transferred and exchanged. By executing the letter of transmittal,
you make the representations and warranties set forth above under the heading
"Prospectus Summary -- The Exchange Offer -- Procedures for participating in the
exchange offer" to us. By executing the letter of transmittal you also promise
to, upon request, execute and deliver any additional

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documents that we consider necessary to complete the transactions described in
the letter of transmittal.

By surrendering old notes in the exchange offer, you will be telling us
that, among other things,

- you have full power and authority to tender, sell, assign and transfer
the old notes surrendered,

- we will acquire good title to the old notes being surrendered, free and
clear of all security interests, liens, restrictions, charges,
encumbrances, conditional sale agreements or other obligations relating
to their sale or transfer, and not subject to any adverse claim when we
accept the old notes,

- you are acquiring the new notes in the ordinary course of your business,

- you are not engaging and do not intend to engage in a distribution of the
new notes,

- you have no arrangement or understanding with any person to participate
in the distribution of the new notes,

- you acknowledge and agree that if you are a broker-dealer registered
under the Exchange Act or you are participating in the exchange offer for
the purpose of distributing the new notes, you must comply with the
registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale of the new notes, and that you
cannot rely on the position of the SEC's staff set forth in their
no-action letters,

- you understand that a secondary resale transaction described above and
any resales of new notes obtained by you in exchange for old notes
acquired by you directly from us should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or 508, as applicable, of Regulation S-K of the SEC,
and

- you are not an "affiliate", as defined in Rule 405 under the Securities
Act, of RailWorks or any subsidiary guarantor, or, if you are an
"affiliate," that you will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.

If you are a broker-dealer and you will receive new notes for your own
account in exchange for old notes that were acquired as a result of
market-making activities or other trading activities, you will be required to
acknowledge in the letter of transmittal that you will deliver a prospectus in
connection with any resale of such old notes.

Participation in the exchange offer is voluntary. You are urged to consult
your financial and tax advisors in making your decision on whether to
participate in the exchange offer.

RETURN OF OLD NOTES

If any old notes are not accepted for any reason described here, or if old
notes are withdrawn or are submitted for a greater principal amount than you
want to exchange, the exchange agent will return those unaccepted or
non-exchanged old notes to the surrendering holder, or, in the case of old notes
surrendered by book-entry transfer, into the exchange agent's account at DTC,
unless otherwise provided in the letter of transmittal. The old notes will be
credited to an account maintained with DTC as promptly as practicable.

BOOK ENTRY TRANSFER

The exchange agent will make a request to establish an account with respect
to the old notes at DTC for purposes of the exchange offer promptly after the
date of this prospectus. Any financial institution that is a participant in
DTC's system may make book-entry delivery of old

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notes by causing DTC to transfer such old notes into the exchange agent's
account at DTC in accordance with DTC's procedures for transfer. However,
although delivery of old notes may be effected through book-entry transfer at
DTC, you have to deliver the letter of transmittal, or a facsimile thereof, with
any required signature guarantees and any other required documents to the
exchange agent at the address set forth in the letter of transmittal for its
receipt on or prior to the expiration date or pursuant to the guaranteed
delivery procedures described below.

GUARANTEED DELIVERY PROCEDURES

If you wish to surrender your old notes and (i) your old notes are not
immediately available so that you can meet the expiration date deadline, (ii)
you cannot deliver your old notes or other required documents to the exchange
agent prior to the expiration date, or (iii) the procedure for book-entry
transfer cannot be completed on a timely basis, you may nonetheless participate
in the exchange offer if:

- you surrender your notes through an eligible institution;

- prior to the expiration date, the exchange agent receives from the
eligible institution a properly completed and duly executed notice of
guaranteed delivery substantially in the form provided by us, by
telegram, telex, facsimile transmission, mail or hand delivery, showing
the name and address of the holder, the name(s) in which the old notes
are registered, the certificate number(s) of the old notes, if
applicable, and the principal amount of old notes surrendered; the notice
of guaranteed delivery must state that the surrender is being made by the
notice of guaranteed delivery and guaranteeing that, within three Nasdaq
National Market trading days after the expiration date, the letter of
transmittal, or facsimile thereof, together with the certificate(s)
representing such old notes, in proper form for transfer or a book-entry
confirmation, and any other required documents, will be delivered by such
eligible institution to the exchange agent, and

- the properly executed letter of transmittal, as well as the
certificate(s) representing all surrendered old notes, in proper form for
transfer, or a book-entry confirmation, as the case may be, and all other
documents required by the Letter of Transmittal are received by the
exchange agent within three Nasdaq National Market trading days after the
expiration date.

Unless old notes are surrendered by the above-described method and
deposited with the exchange agent within the time period set forth above, we
may, at our option, reject the surrender. The exchange agent will send you a
notice of guaranteed delivery upon your request if you want to surrender your
old notes according to the guaranteed delivery procedures described above.

WITHDRAWAL OF TENDERS OF OLD NOTES

Except as otherwise provided in this prospectus, you may withdraw your
surrender of old notes at any time prior to 5:00 p.m., New York City time, on
the expiration date.

To withdraw a surrender of old notes in the exchange offer, the exchange
agent must receive a written or facsimile transmission notice of withdrawal at
its address set forth herein prior to 5:00 p.m., New York City time, on the
expiration date. Any notice of withdrawal must:

- specify the name of the person having deposited the old notes to be
withdrawn,

- identify the old notes to be withdrawn, including the certificate number
or numbers, if applicable, and principal amount of the old notes,

- contain a statement that you are withdrawing your election to have such
old notes exchanged,

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- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the old notes were surrendered, and

- specify the name in which any old notes are to be registered, if
different from that of the person depositing the old notes. If old notes
have been surrendered pursuant to the procedure for book-entry transfer,
any notice of withdrawal must specify the name and number of the account
at DTC.

We, in our sole discretion, will make the final determination on all
questions regarding the validity, form, eligibility and time of receipt of
notices, and our determination shall bind all parties. Any old notes withdrawn
will be deemed not to have been validly surrendered for purposes of the exchange
offer and no new notes will be issued unless the old notes so withdrawn are
validly resurrendered. Properly withdrawn old notes may be resurrendered by
following one of the procedures described above under "-- Procedures for
Tendering Old Notes" at any time prior to the business day prior to the
expiration date. Any old notes that are not accepted for exchange will be
returned at no cost to the holder or, in the case of old notes surrendered by
book-entry transfer, into the exchange agent's account at DTC pursuant to the
book- entry transfer procedures described above, as soon as practicable after
withdrawal, rejection of surrender or termination of the exchange offer.

TERMINATION OF CERTAIN RIGHTS

All registration rights under the registration rights agreement that
benefit the holders of the old notes will terminate when we consummate the
exchange offer. That includes all rights to receive additional interest in the
event of a registration default under the registration rights agreement. In any
event, we are under a continuing obligation, for a period of up to 180 days
after the SEC declares the registration statement effective, to keep the
registration statement effective and to provide copies of the latest version of
the prospectus to any broker-dealer that requests copies in the letter of
transmittal for use in a resale.

CONDITIONS OF THE EXCHANGE OFFER

Notwithstanding any other term of the exchange offer, or any extension of
the exchange offer, we do not have to accept for exchange, or exchange new notes
for, any old notes, and we may terminate the exchange offer before acceptance of
the old notes, if:

(a) any statute, rule or regulation has been enacted, or any action
has been taken by any court or governmental authority that, in our
reasonable judgment, seeks to or would prohibit, restrict or otherwise
render consummation of the exchange offer illegal; or

(b) any change, or any development that would cause a change, in our
business or financial affairs has occurred that, in our sole judgment,
might materially impair our ability to proceed with the exchange offer or a
change that would materially impair the contemplated benefits to us of the
exchange offer; or

(c) a change occurs in the current interpretations by the staff of the
SEC that, in our reasonable judgment, might materially impair our ability
to proceed with the exchange offer.

If we, in our sole discretion, determine that any of the above conditions
is not satisfied, we may:

- refuse to accept any old notes and return all surrendered old notes to
the surrendering holders,

- extend the exchange offer and retain all old notes surrendered prior to
the expiration date, subject to the holders' right to withdraw the
surrender of the old notes, or

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- waive any unsatisfied conditions regarding the exchange offer and accept
all properly surrendered old notes that have not been withdrawn. If this
waiver constitutes a material change to the exchange offer, we will
promptly disclose the waiver by means of a prospectus supplement that
will be distributed to the registered holders, and we will extend the
exchange offer for a period of time that we will determine, depending
upon the significance of the waiver and the manner of disclosure to the
registered holders, if the exchange offer would otherwise expire during
that period of time.

EXCHANGE AGENT

We have appointed First Union National Bank as exchange agent for the
exchange offer. Questions and requests for assistance, requests for additional
copies of this prospectus or of the letter of transmittal and requests for
notices of guaranteed delivery should be directed to the exchange agent at the
following address:

<TABLE>
<S> <C>
By Hand or Overnight Courier: By Registered or Certified Mail:

First Union National Bank First Union National Bank
First Union Customer Information Center First Union Customer Information Center
Corporate Trust Operations -- NC1153 Corporate Trust Operations -- NC1153
1525 West W. T. Harris Boulevard -- 3C3 1525 West W. T. Harris Boulevard -- 3C3
Charlotte, NC 28288 Charlotte, NC 28288

Attn: Mike Klotz Attn: Mike Klotz
</TABLE>

By Facsimile Transmission (for Eligible Institutions only):

(704) 590-7628

Confirm by Telephone:

(704) 590-7408

For information with respect to the Exchange Offer, call

Mike Klotz of the Exchange Agent:

(704) 590-7408

FEES AND EXPENSES

We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, additional solicitation may be made by telecopy,
telephone or in person by our officers and regular employees or by officers and
employees of our affiliates. No additional compensation will be paid to any such
officers and employees who engage in soliciting tenders.

We have not retained any dealer-manager or other soliciting agent for the
exchange offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the exchange offer. We will, however, pay the exchange
agent reasonable and customary fees for its services and will reimburse it for
related, reasonable out-of-pocket expenses. We may also reimburse brokerage
houses and other custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses they incur in forwarding copies of this prospectus, the
letter of transmittal and related documents.

We will pay any expenses you will incur in connection with the exchange
offer, including registration fees, fees and expenses of the exchange agent, the
transfer agent and registrar, accounting and legal fees and printing costs,
among others.

We will pay all transfer taxes, if any, applicable to the exchange of the
old notes. If, however, new notes, or old notes for principal amounts not
surrendered or accepted for exchange, are to

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be delivered to, or are to be issued in the name of, any person other than the
registered holder of the old notes surrendered, or if a transfer tax is imposed
for any reason other than the exchange, then the amount of any transfer taxes
will be payable by the person surrendering the notes. If you do not submit
satisfactory evidence of payment of such taxes or exemption with the letter of
transmittal, the amount of those transfer taxes will be billed directly to you.

CONSEQUENCES OF FAILURE TO EXCHANGE

Old notes that are not exchanged will remain "restricted securities" within
the meaning of Rule 144(a)(3) of the Securities Act. Accordingly, they may not
be offered, sold, pledged or otherwise transferred except:

- to us or to any of our subsidiaries,

- inside the United States to a qualified institutional buyer in compliance
with Rule 144A,

- inside the United States to an institutional accredited investor that,
prior to such transfer, furnishes to the trustee a signed letter
containing certain representations and agreements relating to the
restrictions on transfer of the old notes, the form of which you can
obtain from the trustee and, if such transfer is in respect of an
aggregate principal amount of old notes at the time of transfer of less
than $100,000, an opinion of counsel acceptable to us that the transfer
complies with the Securities Act,

- outside the United States in compliance with Rule 904 under the
Securities Act,

- pursuant to the exemption from registration provided by Rule 144 under
the Securities Act, if available, or

- pursuant to an effective registration statement under the Securities Act.

The liquidity of the old notes could be adversely affected by the exchange
offer.

ACCOUNTING TREATMENT

For accounting purposes, we will recognize no gain or loss as a result of
the exchange offer. We will amortize the expenses of the exchange offer and the
unamortized expenses related to the issuance of the old notes over the remaining
term of the notes.

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<PAGE> 67

MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

The following table sets forth certain information concerning each of the
executive officers, directors and key employees of RailWorks:

<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND DIRECTORS: AGE POSITION
- --------------------------------- --- --------
<S> <C> <C>
John G. Larkin.................................... 43 Chairman of the Board, Chief Executive
Officer and Director
Michael R. Azarela................................ 41 Executive Vice President, Chief Financial
Officer and Director
Kenneth R. Burk................................... 39 Executive Vice President and Chief
Operating Officer
John Kennedy...................................... 60 Vice President, Chief Operating
Officer-- Track Contractors and Director
Peter Alan Pasch.................................. 48 Vice President, Chief Operating
Officer -- Transit Operations and
Director
Scott D. Brace.................................... 43 President of Railroad Service and
Director
Steve C. Goggin................................... 52 President of Merit and Director
Lambertus L. Tameling............................. 62 President of U.S. Trackworks and Director
Ronald W. Drucker................................. 57 Director
R.C. Matney....................................... 61 Director
KEY EMPLOYEES:
Gene J. Cellini................................... 41 Vice President, Tax
William R. Donley................................. 43 Vice President and Chief Operating
Officer -- Manufacturing and Supply
Harold C. Kropp, Jr............................... 42 Vice President and Chief Accounting
Officer
John P. Nuzzo..................................... 51 Vice President, Risk Management
Robert D. Wolff................................... 56 Vice President -- Western Track
Construction & Maintenance
</TABLE>

John G. Larkin has been the Chairman of the Board and Chief Executive
Officer and a director of RailWorks since its inception in March 1998. For the
past 21 years, Mr. Larkin has worked in the transportation industry. From
December 1994 to February 1998, Mr. Larkin was a managing director of BT Alex.
Brown Incorporated, where he focused on the transportation industry. Prior
thereto, he served in various capacities at BT Alex. Brown Incorporated since
1987, including as an equity research analyst, focused exclusively on the
transportation industry. From 1986 to 1987, Mr. Larkin was Assistant Vice
President of CSX Transportation, Inc., where he was responsible for strategic
planning and analysis. From 1985 to 1986, Mr. Larkin was Director of Strategic
Planning of Seaboard System Railroad, Inc. From January 1979 through July of
1982, Mr. Larkin served as an engineering project coordinator for Day &
Zimmermann, Inc., an engineering and construction management firm. During this
period, Mr. Larkin was focused exclusively on railroad and rail transit design
and valuation projects. Mr. Larkin has a Master of Business Administration from
Harvard University and a Master of Science in Civil Engineering from the
University of Texas.

Michael R. Azarela has served as the Executive Vice President, Chief
Financial Officer and a director of RailWorks since May 1998. Mr. Azarela was
Chief Executive Officer of L.K. Comstock from February 1998 to August 1998 and
Senior Vice President and Chief Financial Officer of CGI

62
<PAGE> 68

and Spie from May 1994 to February 1998, Chairman of the Board of Comstock
Holdings, Inc. since November 1996 and Vice President and Treasurer of L.K.
Comstock from September 1992 to April 1994 and in various other positions at
Comstock since June 1983. Mr. Azarela is a certified public accountant and has a
Master of Business Administration from Iona College.

Kenneth R. Burk joined RailWorks in May 1999 to serve as Executive Vice
President and Chief Operating Officer. For the past 17 years, Mr. Burk has
worked in the construction industry with significant emphasis on the
transportation market. Prior to joining RailWorks, Mr. Burk served as Senior
Vice President and Chief Financial Officer at Dick Corporation since June 1994.
At Dick Corporation, Mr. Burk was a member of the executive committee and had
overall responsibility for finance and administration and was the Chairman of
corporate marketing, strategic planning and merger and acquisition teams. Mr.
Burk served as Vice President and Chief Financial Officer with Tutor-Saliba
Corporation from April 1989 to June 1994 and held significant positions with
Blount, Inc. from January 1983 to April 1989. Mr. Burk has a Master of Business
Administration degree from Pepperdine University.

John Kennedy has served as Vice President and a director of RailWorks since
its inception in March 1998, and Chief Operating Officer -- Track Contractors
since January 1999. From March 1998 to January 1999, he was Chief Operating
Officer of RailWorks. Mr. Kennedy has served as President of Kennedy Railroad, a
Founding Company, from June 1965 to February 1998, as President of Railcorp,
Inc. from April 1986 to February 1998 and as Principal of Alpha-Keystone from
January 1996 to February 1998. From 1980 to 1988, Mr. Kennedy served as an
Elected Member of the Pennsylvania House of Representatives.

Peter Alan Pasch has served as a director of RailWorks since the IPO and as
Vice President and Chief Operating Officer -- Transit Operations since January
1999. From August 1998 to January 1999, Mr. Pasch served as Chief Executive
Officer of Comstock and from April 1997 to August 1998 he served as President
and Chief Operating Officer of Comstock. From October 1995 to April 1997, Mr.
Pasch served as Executive Vice President of Comstock in charge of operations
outside the New York Metropolitan area. Mr. Pasch served as Executive Vice
President of Comstock from October 1987 to September 1995. Mr. Pasch joined
Comstock in 1973 after receiving his Master of Engineering Degrees from
Rensselaer Polytechnic Institute. Mr. Pasch is a Registered Professional
Engineer in 45 states, a Master Electrician in 18 states and is a member of the
International Brotherhood of Electrical Workers.

Scott D. Brace has served as a director of RailWorks and President of
Railroad Service since the IPO. Mr. Brace has served as Vice President of
Railroad Service since May 1989 and as President of Minnesota Railroad Service,
Inc. since May 1989. Mr. Brace is President-elect of the NRCMA.

Steve C. Goggin has served as a director of RailWorks since the IPO and as
President of Merit since October 1986. Mr. Goggin is a past President of the
NRCMA.

Lambertus L. Tameling has served as a director of RailWorks since the IPO,
as President of U.S. Trackworks since April 1986 and as President of Northern
Rail since February 1992. Mr. Tameling is a past President of the NRCMA.

Ronald W. Drucker has been a director of RailWorks since June 1998. Mr.
Drucker has been an independent consultant on transportation and technology
issues since May 1992. From September 1966 to April 1992, Mr. Drucker served in
various capacities for CSX Corporation and certain of its subsidiaries,
including Chief Engineer, Senior Vice President for Transportation and President
and Chief Executive Officer of CSX Rail Transport. Additionally, from December
1989 to October 1997, he was the Chairman of the Board of Encompass, a global
logistics information partnership. Mr. Drucker also serves on the Board of
Directors of SunTrust Bank, North Florida, N.A., Landstar System, Inc.,
Jacksonville University, the National Defense Transportation Association and the
New World Symphony Orchestra.

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<PAGE> 69

R.C. Matney has been a director of RailWorks since June 1998. Mr. Matney
has been President, Chairman of the Board of Directors and Chief Executive
Officer of Mark VII Transportation Company, Inc., since he founded the Company
in August 1987. From March 1985 to December 1988, he served as President of
American President Distribution Services, Inc. Prior thereto, Mr. Matney was the
President of the Surface Transportation Group of Brae Corporation from October
1980 to March 1985. Mr. Matney is a former member of the Intermodal Freight
Committee of the National Transportation Research Board.

Gene J. Cellini has served as Vice President, Tax of RailWorks since the
IPO. Prior thereto, Mr. Cellini was Vice President, Tax of Comstock and its
predecessor, Spie Group, Inc. and subsidiaries, from January 1985. Before
joining Comstock, Mr. Cellini served in various capacities for two international
public accounting firms, most recently as tax manager in public accounting.

William R. Donley has served as Vice President -- Manufacturing and Supply
since April 1999. For the past 20 years, Mr. Donley has worked in the wood
treating industry serving the railroad, construction, and utility industries.
Before joining RailWorks, Mr. Donley worked for Koppers Industries Inc. in
various capacities including sales and marketing, distribution, operations and
procurement, general management, and most recently as Vice President--Total
Quality, Productivity, and Strategic Planning. Koppers Industries is the largest
supplier of treated wood products, such as railroad crossties, to the railroad
industry. Mr. Donley has been a member of the American Wood Preservers
Association and the American Wood Preservers Institute. He served the American
Wood Preservers Institute as Chairman, Vice Chairman, and a member of their
Governmental Affairs Committee. Mr. Donley has a Bachelor of Science from
Pennsylvania State University and a Master of Business Administration from the
University of Pittsburgh Katz School of Business.

Harold C. Kropp, Jr. has served as the Vice President and Chief Accounting
Officer of RailWorks since its inception in March 1998. Prior thereto, Mr. Kropp
was a valuation specialist at Larson, Kellett & Associates, P.C. from May 1996
to March 1998. Prior thereto, he was the Controller of Eck Realty Co. from
September 1994 to May 1996 and the Chief Financial Officer of Dame Media, Inc.
from April 1993 to September 1994. Mr. Kropp was employed by a large regional
certified public accounting firm from January 1983 to April 1993 where he
achieved the level of partner. Mr. Kropp is a certified public accountant
accredited in business valuation, a certified valuation analyst and a certified
management accountant.

John P. Nuzzo has served as Vice President, Risk Management of RailWorks
since the IPO. Prior thereto, Mr. Nuzzo was Vice President Administration of
Comstock from 1992, where he was responsible for risk management.

Robert D. Wolff has served as Vice President -- Western Track Construction
and Maintenance of RailWorks since January 1999. From 1977 to January 1999, Mr.
Wolff was the Chief Executive Officer of Mid West Railroad Construction &
Maintenance Corp. Mr. Wolff is a past President of the National Railroad
Construction and Maintenance Association, Inc.

There are currently nine members of the board of directors. Two of the
directors, Messrs. Drucker and Matney, are non-employee, independent directors
of RailWorks. The members of the RailWorks board of directors serve staggered
terms as follows: the terms of Messrs. Kennedy, Pasch and Drucker expire at the
1999 Annual Meeting of Stockholders; the terms of Messrs. Azarela, Goggin and
Tameling expire at the 2000 Annual Meeting of Stockholders; and the terms of
Messrs. Larkin, Brace and Matney expire at the 2001 Annual Meeting of
Stockholders. The RailWorks board of directors has an audit committee and a
compensation committee that each consist of Messrs. Drucker and Matney, the
Company's two independent directors.

DIRECTOR COMPENSATION

Directors who are not currently receiving compensation as officers,
employees or consultants of RailWorks are entitled to receive fees of $2,000 per
board meeting attended and $1,000 per

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<PAGE> 70

committee meeting attended, plus reimbursement of expenses for each meeting of
the board of directors and each committee meeting that they attend in person. In
addition, each non-employee director was granted options to purchase 10,000
shares of common stock upon consummation of the IPO. See "-- 1998 Stock
Incentive Plan."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee are Messrs. Drucker and Matney,
the Company's two independent directors. During 1998, neither member of the
Compensation Committee engaged in any transactions with RailWorks.

EXECUTIVE COMPENSATION

The following table sets forth the aggregate compensation earned by the
Chief Executive Officer and the executive officers (collectively, the "Named
Executive Officers") for services rendered in all capacities to RailWorks during
the year ended December 31, 1998.

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION ------------
----------------- RESTRICTED ALL OTHER
NAME POSITION SALARY BONUS STOCK AWARDS COMPENSATION
- ---- -------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John G. Larkin........ Chief Executive $275,000 -- 678,299 --
Officer
Michael R. Azarela.... Executive Vice 200,000 $23,000 150,735 $85,001(1)
President, Chief
Financial Officer
Kenneth R. Burk(2).... Executive Vice -- -- -- --
President and Chief
Operating Officer
John Kennedy.......... Vice President, Chief 100,000 -- 150,735 --
Operating Officer --
Track Contractors
Peter Alan Pasch...... Vice President, Chief 200,000 23,000 -- 21,200(3)
Operating Officer --
Transit
</TABLE>

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

(1) Represents $39,801 in moving expenses that were paid by RailWorks, $2,000 in
automobile allowance, $1,000 in life insurance premiums, $34,000 in FICA and
$8,200 in 401(k) contributions.

(2) Mr. Burk was not employed by RailWorks during the year ended December 31,
1998; however, he is expected to be a Named Executive Officer during the
year ending December 31, 1999.

(3) Represents $3,000 in automobile allowance, $2,000 in life insurance
premiums, $8,000 in FICA and $8,200 in 401(k) contributions.

EMPLOYMENT AGREEMENTS

RailWorks has employment agreements with each of Messrs. Larkin, Azarela
and Kennedy. The agreements expire on December 31, 2001, for each such contract,
that date is the "Expiration Date," and will continue on a year-to-year basis,
unless terminated by either party. Each agreement is terminable by RailWorks
with or without cause or upon the employee's death or inability to perform his
duties on account of a disability for a period of six months during any
consecutive 12 month period or by the employee. The agreements provide for
annual base salaries of $275,000, $200,000 and $100,000 for Messrs. Larkin,
Azarela and Kennedy, respectively, and provide that these executive officers
will receive 5%, 2% and 1.5% respectively, of RailWorks's first bonus pool,
called the "First Bonus Pool," and 33.3%, 13.3% and 10.0%,

65
<PAGE> 71

respectively, of RailWorks's second bonus pool, called the "Second Bonus Pool".
The First Bonus Pool consists of 10% of RailWorks's pre-tax profits, and the
Second Bonus Pool consists of 15% of the amount by which RailWorks's net income
exceeds some predetermined benchmarks. In addition, the agreements provide for
the grant of shares of restricted stock and options to purchase common stock, as
described under the heading "-- Executive Compensation." The agreements provide
further that the employee may request a loan from RailWorks in the amount of the
income taxes due on stock granted to the employee under his employment
agreement. These loans are collateralized only by the stock granted and the
employee otherwise has no personal obligation to repay the loan. The term of
these loans are five years, requiring annual interest payments; however, the
term is accelerated following termination of employment. Each agreement also
contains noncompetition, nonsolicitation and confidential information
provisions.

RailWorks also has an employment agreement with Mr. Burk. The agreement
expires on May 10, 2002 and will continue on a year-to-year basis, unless
terminated by either party. The agreement is terminable by RailWorks with or
without cause or upon the employee's death or inability to perform his duties on
account of a disability for a period of six months during any consecutive
twelve-month period, or by the employee. The agreement provides for an annual
base salary of $275,000 and provides that he will receive, as a bonus for each
fiscal year during which the agreement is in force, .3% of the net income of
RailWorks before income taxes and bonuses (or, for the year ending December 31,
1999, $100,000, if .3% of such net income is less than $100,000), and for the
grant of options to purchase common stock. The agreement also contains
noncompetition, nonsolicitation and confidential information provisions.

Mr. Pasch has an employment agreement with a subsidiary of RailWorks. The
agreement expires on August 9, 2000 and will continue on a year-to-year basis,
unless terminated by either party. The agreement is terminable by the RailWorks
subsidiary with or without cause or upon the employee's death or inability to
perform his duties on account of a disability for a period of six months during
any consecutive twelve-month period, or by the employee. The agreement provides
for an annual base salary of $200,000 and provides that he will receive a
portion of the first bonus pool and the second bonus pool, each such portion as
determined by the RailWorks board of directors, as a bonus for each fiscal year
during which the agreement is in force. Mr. Pasch's employment agreement also
contains noncompetition, nonsolicitation and confidential information
provisions.

RailWorks has also entered into employment agreements with the key
employees and certain employees of each Founding Company and Acquired Company.
The agreements generally expire on the second anniversary of the closing of our
acquisition of the employee's company. On and after such date, the agreements
automatically renew for successive one-year terms until either party gives 90
days written notice of termination of the agreement, each termination date is
called the "Expiration Date". Each agreement is terminable by RailWorks with or
without cause or upon the employee's death or inability to perform his duties on
account of a disability for a period of six months during any consecutive
12-month period or by the employee. Each agreement provides for an annual base
salary and provides that the salary will be adjusted after the initial term of
the agreement to reflect the employee's duties and responsibilities. Further,
each employee is entitled to a portion of the First Bonus Pool and the Second
Bonus Pool. As a group, the owners of the Founding Companies and Acquired
Companies are entitled to an aggregate of 40% of the First Bonus Pool and 33.3%
of the Second Bonus Pool.

1998 STOCK INCENTIVE PLAN

The RailWorks board of directors has adopted, and our stockholders have
approved, the RailWorks Incentive Plan. There are 2,000,000 shares of common
stock reserved for issuance under the Incentive Plan and, as of May 1, 1999,
there were 80,000 options outstanding under the Incentive Plan. The purpose of
the Incentive Plan is to provide executive officers, directors and key employees
with additional incentives by enabling such persons to increase their ownership
interests in RailWorks. Individual awards under the Incentive Plan may take the
form

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<PAGE> 72

of one or more of: (1) either incentive stock options, called "ISOs" or
non-qualified stock options, called "NQSOs," and together with ISOs, called
"Options"; (2) stock appreciation rights, called "SARs"; (3) restricted or
deferred stock; (4) dividend equivalents; (5) bonus shares and awards in lieu of
RailWorks obligations to pay cash compensation; and (6) other awards the value
of which is based in whole or in part upon the value of the common stock. Upon a
change of control of RailWorks, as defined in the Incentive Plan, some of the
conditions and restrictions relating to an award with respect to the
exercisability or settlement of such award will lapse.

The Compensation Committee administers the Incentive Plan and generally
selects the individuals who receive awards. In addition, the Audit Committee
determines the type and number of awards and the terms and conditions of those
awards (including exercise prices, vesting and forfeiture conditions,
performance conditions and periods during which awards will remain outstanding).
The Incentive Plan also provides that no participant may be granted in any
calendar year awards which may be settled by delivery of more than 100,000
shares and limits payments under cash-settled awards in any calendar year to an
amount equal to the fair market value of that number of shares.

RailWorks generally will be entitled to a tax deduction equal to the amount
of compensation realized by a participant through awards under the Incentive
Plan, except that (1) no deduction is permitted in connection with ISOs if the
participant holds the shares acquired upon exercise for the required holding
periods, and (2) deductions for some awards could be limited under the $1.0
million deductibility cap of Section 162(m) of the Internal Revenue Code of
1986, as amended, referred to in this prospectus as the "Code". This limitation,
however, should not apply to awards granted under a plan during a grace period
that expires in August 2001, and should not apply to certain options, SARs and
performance-based awards granted thereafter if RailWorks complies with the
applicable requirements under Section 162(m) of the Code.

The Incentive Plan will remain in effect until terminated by the board of
directors. The Incentive Plan may be amended by the board of directors without
the consent of the RailWorks stockholders, except that any amendment, although
effective when made, will be subject to stockholder approval if required by any
federal or state law or regulation or by the rules of any stock exchange or
automated quotation system on which the common stock may then be listed or
quoted.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Set forth below is a description of certain transactions and relationships
between RailWorks and some of its officers, directors and principal
stockholders. In addition, the table below shows some information regarding
transactions and relationships prior to the IPO between some of the Founding
Companies and their respective officers, directors and principal stockholders.

GENERAL

Prior to the IPO, some of the Founding Companies engaged in transactions
with companies that are under common ownership, which transactions are described
below. Since the IPO, transactions between RailWorks and its officers, directors
or principal stockholders must be approved by a majority of the disinterested
members of the board of directors.

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<PAGE> 73

ACQUISITION OF CERTAIN FOUNDING COMPANIES

On August 4, 1998, concurrently with the consummation of the IPO, RailWorks
acquired all of the outstanding stock of the Founding Companies. Some of the
directors and executive officers of RailWorks were owners of some of the
Founding Companies. These companies, and the consideration their owners received
in the acquisitions, are set forth below:

<TABLE>
<CAPTION>
CONSIDERATION
----------------------------
SHARES OF
FOUNDING COMPANY CASH COMMON STOCK
- ---------------- ------------- ------------
<S> <C> <C>
Comstock Holdings, Inc................................. $13.1 million 2,959,291
Kennedy Railroad Builders, Inc......................... 2.8 million 386,795
Merit Railroad Contractors, Inc........................ 2.0 million 292,456
Railroad Service, Inc.................................. 3.5 million 454,680
U.S. Trackworks, Inc................................... 1.3 million 305,609
</TABLE>

Michael R. Azarela, former Chief Executive Officer of Comstock, is
Executive Vice President and Chief Financial Officer of RailWorks. Upon
completion of the IPO, Peter Alan Pasch, then President and Chief Operating
Officer of Comstock became a director of RailWorks. John Kennedy, then President
of Kennedy, is the Vice President and Chief Operating Officer -- Track
Contractors and a director of RailWorks. Upon completion of the IPO, Steve C.
Goggin, President of Merit, Scott D. Brace, President of Railroad Service, and
Lambertus L. Tameling, President of U.S. Trackworks, became directors of
RailWorks. Each of Messrs. Azarela, Pasch, Kennedy, Goggin, Brace and Tameling
entered into a two-year employment agreement with RailWorks in connection with
the acquisition of the Founding Companies.

COMSTOCK

Effective January 1, 1997, Comstock acquired all of the outstanding stock
of L.K. Comstock from Spie for $5.0 million plus a contingent payment of up to
$5.0 million based on 1997, 1998 and 1999 pre-tax income. In May 1998, Comstock
agreed to pay Spie $1.6 million in lieu of such contingent payment, which amount
was paid by RailWorks on September 8, 1998.

In connection with the Comstock Acquisition, Comstock, L.K. Comstock, Spie
and CGI entered into an Indemnity and Cooperation Agreement pursuant to which
L.K. Comstock issued a contingent promissory note to Spie in the amount of
approximately $14.9 million, called the "Contingent Note," collateralized by any
proceeds derived from three projects, called the "Spie Projects," for which
Comstock had not been fully paid. Each of these projects is the subject of a
lawsuit in which L.K. Comstock seeks payment of a portion of the contract price.
In each proceeding, the defendant has filed a counterclaim against L.K. Comstock
for breach of contract. Spie is obligated to indemnify L.K. Comstock for all
losses and expenses incurred with respect to these lawsuits. The Contingent Note
is payable only from amounts collected by L.K. Comstock with respect to the Spie
Projects prior to April 3, 2007, at which time the Contingent Note will be
cancelled. As such, Spie and any successor or creditor may not look to any other
assets of L.K. Comstock or RailWorks to satisfy the Contingent Note. Because
there is a right of offset for any gains or losses incurred in connection with
the Spie Projects, neither the Contingent Note nor the right to receive proceeds
from the Spie Projects is reflected in Comstock's financial statements, the
RailWorks Consolidated Financial Statements or the RailWorks Pro Forma Financial
Statements.

RELATED PARTY LEASES

During 1998, companies controlled by Mr. Goggin and his spouse leased some
property and equipment to one of the operating companies. Property lease
payments made by that operating company totaled approximately $81,000 in 1998.
Equipment lease payments made by that operating company totalled approximately
$250,000 in 1998.

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<PAGE> 74

LOANS TO OFFICERS

Pursuant to the employment agreements, RailWorks made loans to some of its
executive officers to cover income taxes due with respect to grants of
restricted common stock. These loans, which are due in full on August 4, 2003,
were in the following principal amounts: John G. Larkin -- $609,000; Michael R.
Azarela -- $126,000; and John Kennedy -- $95,000.

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<PAGE> 75

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the common stock as of June 1, 1999 by: (1) each Named Executive
Officer of RailWorks; (2) each director of RailWorks; and (3) all directors and
executive officers of RailWorks as a group. Unless otherwise provided, each
listed person's address is c/o RailWorks Corporation, 1104 Kenilworth Drive,
Suite 301, Baltimore, Maryland 33807, and each person listed has sole voting and
investment power with respect to his or her shares unless otherwise indicated.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
-----------------------
BENEFICIAL OWNER NUMBER PERCENT(1)
---------------- ---------- ----------
<S> <C> <C>
John G. Larkin.............................................. 828,309 6.0%
BT Alex. Brown(2)........................................... 2,003,385 14.4
Michael R. Azarela.......................................... 551,747 4.0
Kenneth R. Burk(3).......................................... 50,000 *
John Kennedy................................................ 404,021 2.9
Peter Alan Pasch(4)......................................... 421,012 3.0
Scott D. Brace.............................................. 200,093 1.4
Steve C. Goggin............................................. 292,456 2.1
Lambertus L. Tameling....................................... 72,587 *
Ronald W. Drucker(5)........................................ 5,500 *
R.C. Matney(6).............................................. 4,500 *
All executive officers and directors as a group (10
persons).................................................. 2,830,225(7) 20.3
</TABLE>

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

* Less than one percent.

(1) Based on an aggregate of 13,889,880 shares of common stock issued and
outstanding as of June 1, 1999 plus, for each person, (i) the number of
shares of common stock issuable upon conversion of shares of Series A
convertible preferred stock beneficially owned by such person, and (ii) the
number of shares of common stock issuable upon exercise of outstanding stock
options that are or will become exercisable prior to August 28, 1999.

(2) Represents (i) 633,385 shares of common stock of RailWorks and (ii) 13,700
shares of Series A convertible preferred stock. Each share of Series A
convertible preferred stock is convertible at any time into 100 shares of
common stock, subject to some exceptions. Conversion is prohibited if, after
the conversion, BT Alex. Brown Incorporated would own 5% or more of the
RailWorks common stock. The address of BT Alex. Brown Incorporated is 130
Liberty Street, New York, New York 10006.

(3) Represents 50,000 shares issuable upon exercise of outstanding options.
(4) Includes 20,000 shares issuable upon exercise of outstanding options.

(5) Includes 2,500 shares issuable upon exercise of outstanding options.

(6) Includes 2,500 shares issuable upon exercise of outstanding options.

(7) Represents (i) 2,755,225 shares beneficially owned by such directors and
executive officers, and (ii) 75,000 shares issuable upon exercise of
outstanding stock options that are or will become exercisable prior to
August 28, 1999.

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<PAGE> 76

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of RailWorks consists of 100,000,000 shares of
common stock, par value $.01 per share and 10,000,000 shares of preferred stock,
par value $1.00 per share. The following description of the capital stock of
RailWorks is a summary only and is subject to the detailed provisions of, and
qualified in its entirety by reference to, the Certificate of Incorporation and
Bylaws of RailWorks, copies of which are available from RailWorks by writing or
calling our principal executive offices, and to the applicable provisions of the
Delaware General Corporation Law ("DGCL").

COMMON STOCK

The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to the
rights of any holders of preferred stock, holders of common stock are entitled
to receive ratably such dividends as may be declared by the board of directors
out of funds legally available. In the event of a liquidation, dissolution or
winding up of RailWorks, holders of the common stock are entitled to share
ratably in the distribution of all assets remaining after payment of
liabilities, subject to the rights of any holders of preferred stock of
RailWorks. The holders of common stock have no preemptive rights to subscribe
for additional shares of RailWorks and no right to convert their common stock
into any other securities. In addition, there are no redemption or sinking fund
provisions applicable to the common stock. All of the outstanding shares of
common stock are fully paid and nonassessable.

PREFERRED STOCK

RailWorks has 10,000,000 shares of authorized preferred stock. On October
8, 1998, RailWorks issued 13,700 shares of preferred stock, designated Series A
convertible preferred stock, to BT Alex. Brown Incorporated, in exchange for
1,370,000 shares of common stock. The stock exchange reduced BT Alex. Brown
Incorporated's common stock holdings to satisfy the Bank Holding Company Act
(the "BHCA"). The BHCA requires that a bank holding company own less than 5% of
the voting stock of a publicly-traded corporation. Each share of Series A
convertible preferred stock is convertible into 100 shares of common stock;
however, subject to certain exceptions allowed by the BHCA, conversion is
prohibited if, after the conversion, BT Alex. Brown Incorporated would own 5% or
more of the common stock. Shares of Series A convertible preferred stock carry
no voting rights, share ratably with shares of common stock as to dividend
distributions as if shares of Series A convertible preferred stock had been
converted to shares of common stock and have a liquidation preference over
shares of common stock.

The board of directors is authorized to provide for the issuance of
additional classes and series of preferred stock out of remaining undesignated
shares, and the board of directors may establish the voting powers,
designations, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions of any such additional
class or series of preferred stock, including the dividend rights, dividend
rate, terms of redemption, redemption price or prices, conversion rights and
liquidation preferences of the shares constituting any series, without any
further vote or action by the stockholders of RailWorks. The issuance of
preferred stock by the board of directors could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of RailWorks, thereby delaying, deferring or preventing a change in
control of RailWorks.

CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BYLAWS

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, or "DGCL". Section 203 prohibits a publicly held Delaware
corporation from engaging in a

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"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder. Subject to
certain exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns or within three years prior to the proposed
business combination has owned 15% or more of the corporation's voting stock.

Our Certificate of Incorporation eliminates liability of directors of
RailWorks to the fullest extent permitted under Section 102(b)(7) of the DGCL.
As a result, no director of RailWorks will be liable to RailWorks or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability: (i) for any breach of the director's duty of loyalty to
RailWorks or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) for
any willful or negligent payment of an unlawful dividend, stock purchase or
redemption; or (iv) for any transaction from which the director derived an
improper personal benefit.

Our Bylaws provide that the board of directors be elected to staggered
one-, two- and three-year terms and, thereafter, for successive three-year
terms. In addition, directors may be removed from office only for cause. These
provisions of the Bylaws could discourage potential acquisition proposals and
could delay or prevent a change in control of RailWorks.

DESCRIPTION OF CREDIT FACILITY

Since the IPO, we have financed cash for acquisitions and working capital
from funds generated from operations, together with borrowings under our
three-year, $75 million senior secured revolving credit facility with
NationsBank, N.A. The credit facility matures on August 4, 2001, subject to
acceleration upon the occurrence of an event of default or a change in control.
Borrowings under the credit facility bear interest, at our RailWorks option, at
an interest rate equal to (1) LIBOR plus the applicable margin for LIBOR loans,
which ranges from 125 basis points to 250 basis points based on the ratio of
"Funded Debt" to "EBITDA", each as defined in the credit facility, or (2) the
"Base Rate", defined as the higher of (a) the NationsBank prime rate and (b) the
Federal Funds rate plus 50 basis points, plus up to 125 basis points based on
the ratio of Funded Debt to EBITDA. As of May 1, 1999, borrowings under the
credit facility bore interest at a weighted average interest rate of 8.50%.

Borrowings under the credit facility are secured by a first lien on all of
the capital stock of our subsidiaries and on all accounts receivable of
RailWorks and the RailWorks subsidiaries and repayment is guaranteed by
RailWorks and RailWorks's subsidiaries. The credit facility contains usual and
customary events of default and financial covenants regarding, among other
things, debt coverage, net worth and earnings. The credit facility also contains
covenants and provisions that restrict, among other things, our ability and the
ability of our subsidiaries to: (1) incur additional indebtedness and liens on
property, (2) merge or consolidate with or acquire another person or engage in
other fundamental changes, (3) make acquisitions and investments, (4) make
dividend and other payments and (5) engage in defined types of sales,
sale-leasebacks and dispositions of property. As of the date of this prospectus,
we comply with all covenants under the credit facility.

DESCRIPTION OF THE NEW NOTES

The form and terms of the new notes and the old notes are identical in all
material respects, except that transfer restrictions and registration rights
applicable to the old notes do not apply to the new notes.

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The old notes were, and the new notes will be, issued under the indenture
dated as of April 7, 1999, among RailWorks, the Subsidiary Guarantors and First
Union National Bank, as trustee. The following description of the material
provisions of the indenture is a summary only. It does not include all of the
provisions of the indenture. We urge you to read the indenture because it
defines your rights. The terms of the notes include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939, which will govern the indenture upon effectiveness of the
registration statement that includes this prospectus. A copy of the indenture
may be obtained from RailWorks upon request. You can find definitions of certain
capitalized terms used in this description under "-- Certain Definitions." For
purposes of this section, references to "we," "our," "us" and "RailWorks"
include only RailWorks Corporation and not its subsidiaries. References in this
section to the "notes" are references to both the old notes and the new notes.

The notes are general unsecured obligations of RailWorks, and rank
subordinate in right of payment to all Senior Debt of RailWorks.

We will issue the new notes in fully registered form in denominations of
$1,000 and integral multiples. The trustee will initially act as paying agent
and registrar for the new notes. The new notes may be presented for registration
or transfer and exchange at the offices of the registrar. We may change any
paying agent and registrar without notice to note holders. We will pay
principal, and premium, if any, on the notes at the trustee's corporate office
in New York, New York. At our option, interest may be paid at the trustee's
corporate trust office or by check mailed to the registered address of holders.
Any notes that remain outstanding after the completion of the exchange offer,
together with the new notes issued in connection with the exchange offer, will
be treated as a single class of securities under the indenture.

PRINCIPAL, MATURITY AND INTEREST

The notes are limited in aggregate principal amount to $250.0 million, of
which $125.0 million in aggregate principal amount was issued on April 7, 1999.
The notes mature on April 15, 2009. Additional notes may be issued from time to
time, subject to the limitations set forth under "-- Certain
Covenants -- Limitation on Incurrence of Additional Indebtedness" and
restrictions contained in the Credit Agreement. Any additional notes will be
part of the same issue as the old and new notes and will vote on all matters
with the old and new notes. Unless otherwise indicated, references herein to the
notes do not include the additional notes. No offering of any such additional
notes is being or shall be deemed to be made by this prospectus. In addition,
there can be no assurance as to when or whether RailWorks will issue any such
additional notes or as to the aggregate principal amount of any such additional
notes.

Interest on the notes accrues at the annual rate of 11 1/2% and is payable
semi-annually in cash on each April 15 and October 15 commencing on October 15,
1999, to the persons who are registered holders at the close of business on the
April 1 and October 1 immediately preceding the applicable interest payment
date. Interest on the notes accrues from the most recent date to which interest
has been paid or, if no interest has been paid, from and including April 7,
1999. Interest is computed on the basis of a 360-day year comprised of twelve
30-day months.

The notes are not be entitled to the benefit of any mandatory sinking fund.

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REDEMPTION

Optional Redemption. Except as described below, the notes are not
redeemable before April 15, 2004. After April 15, 2004, we may redeem the notes
at our option, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices expressed as percentages of the principal
amount as described in the following table, plus accrued and unpaid interest to
the redemption date, if redeemed during the twelve-month period beginning on
April 15 of the years indicated in the table below:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2004........................................................ 105.750%
2005........................................................ 103.833%
2006........................................................ 101.917%
2007 and thereafter......................................... 100.000%
</TABLE>

In addition, we must pay accrued and unpaid interest on the notes we
redeem.

Optional Redemption upon Equity Offerings. At any time, which may be more
than once, on or prior to April 15, 2002, we may, at our option, use the net
cash proceeds of one or more Equity Offerings to redeem up to 35% of the
principal amount of the notes issued under the indenture at a redemption price
of 111.500% of the principal amount of such notes plus accrued and unpaid
interest, if any, to the redemption date; provided that:

(1) at least 65% of the principal amount of notes issued under the
indenture remains outstanding immediately after any such redemption; and

(2) we make such redemption not more than 120 days after the
consummation of any such Equity Offering.

"Equity Offering" means public or private offering of our Qualified Capital
Stock; provided that, in the event such equity offering is not in the form of an
underwritten public offering registered under the Securities Act, the proceeds
we directly or indirectly receive from such offering are not less than $10.0
million.

SELECTION AND NOTICE OF REDEMPTION

In the event that we choose to redeem less than all of the notes, the
trustee will select notes for redemption either:

(1) in compliance with the requirements of the principal national
securities exchange, if any, on which the notes are listed; or,

(2) on a pro rata basis, by lot or by such method as the trustee shall
deem fair and appropriate.

No notes of a principal amount of $1,000 or less shall be redeemed in part.
If a partial redemption is made with the proceeds of an Equity Offering, the
trustee will select the notes only on a pro rata basis or on as nearly a pro
rata basis as is practicable, subject to DTC procedures, unless such method is
otherwise prohibited. Notice of redemption will be mailed by first-class mail at
least 30 but not more than 60 days before the redemption date to each holder of
notes to be redeemed at the holder's registered address. On and after the
redemption date, interest will cease to accrue on notes or portions thereof
called for redemption as long as we have deposited with the paying agent funds
in satisfaction of the applicable redemption price.

SUBORDINATION

The payment of all Obligations on the notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt of RailWorks.

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The holders of Senior Debt are entitled to receive payment in full in cash
or Cash Equivalents of all Obligations due in respect of Senior Debt. The
payment includes any interest accruing subsequent to a bankruptcy or other
similar proceeding, whether or not such interest is an allowed claim enforceable
against RailWorks in a bankruptcy case, before the holders of notes will be
entitled to receive any payment with respect to the notes, or any note is
acquired for cash or property or otherwise, in the event of any distribution to
our creditors:

(1) in a liquidation or dissolution of RailWorks;

(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to RailWorks or its property;

(3) in an assignment for the benefit of creditors; or

(4) in any marshaling of RailWorks's assets and liabilities.

We also may not make any payment in respect of the notes, or acquire any
notes for cash or property or otherwise, if:

(1) a payment default on Designated Senior Debt occurs and is
continuing; or

(2) any other default occurs and is continuing on Designated Senior
Debt (as such event of default is defined in the instrument creating or
evidencing such Designated Senior Debt) that permits holders of the
Designated Senior Debt to accelerate its maturity and the trustee receives
a notice of such default (a "Payment Blockage Notice") from the
Representative of any Designated Senior Debt.

Payments on the notes may and shall be resumed:

(1) in the case of a payment default, upon the date on which such
default is cured or waived; and

(2) in case of a nonpayment default, the earliest of the date on which
such nonpayment default is cured or waived or ceases to exist or such
Designated Senior Debt is paid in full (so long as no other event of
default exists), or the trustee receives notice from the Representative for
the respective issue of Designated Senior Debt terminating the Blockage
Period, or 180 days after the date on which the applicable Payment Blockage
Notice is received, unless the maturity of any Designated Senior Debt has
been accelerated.

No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the initial effective date of the immediately prior Payment
Blockage Notice.

No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 90 days.

We must promptly notify holders of Senior Debt if payment of the notes is
accelerated because of an Event of Default.

As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of RailWorks, holders of the new
notes may recover less ratably than creditors of RailWorks who are holders of
Senior Debt. See "Risk Factors -- Risks Relating to the Notes -- The Notes Rank
Behind Other Indebtedness."

Pro forma for the 1999 Acquisitions and the sale of the old notes and the
application of the net proceeds, at March 31, 1999, there would have been no
senior debt outstanding, and we would have had $75 million available for
borrowing under the credit facility.

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GUARANTEES

The Guarantors, which will initially include all of our domestic Restricted
Subsidiaries existing on April 7, 1999, will jointly and severally fully and
unconditionally guarantee, on an unsecured senior subordinated basis, our
obligations under the indenture and the notes. Each Guarantee will be
subordinated to Guarantor Senior Debt on the same basis as the notes are
subordinated to Senior Debt. For purposes hereof, the trustee and the holders
shall have the right to receive and/or retain payments by any of the Guarantors
only at such times as they may receive and/or retain payments from RailWorks in
respect of the notes pursuant to the indenture. The obligations of each
Guarantor under its Guarantee will be limited as necessary to prevent the
Guarantee from constituting a fraudulent conveyance or fraudulent transfer under
applicable law.

Each Guarantor may consolidate with or merge into or sell its assets to
RailWorks or another Guarantor that is a Wholly Owned Restricted Subsidiary of
RailWorks without limitation, or with other Persons upon the terms and
conditions set forth in the Indenture. See "-- Certain Covenants -- Merger,
Consolidation and Sale of Assets." In the event all or substantially all of the
assets or all of the Capital Stock of a Guarantor is sold by RailWorks and the
sale complies with the provisions set forth in "-- Certain
Covenants -- Limitation on Asset Sales," the Guarantor's Guarantee will be
automatically and unconditionally discharged and released.

Separate financial statements of the Guarantors are not included herein
because the Guarantors are jointly and severally liable for our obligations
pursuant to the notes, and the aggregate net assets, earnings and equity of the
Guarantors and RailWorks are substantially equivalent to the net assets,
earnings and equity of RailWorks on a consolidated basis.

HOLDING COMPANY STRUCTURE

RailWorks is a holding company. We have no material operations of our own
and only limited assets. Accordingly, we depend upon the distribution of the
earnings of our subsidiaries, whether in the form of dividends, advances or
payments on account of intercompany obligations, to service our debt
obligations. We cannot assure you that, after providing for all prior claims,
there would be sufficient assets available from RailWorks and our subsidiary to
satisfy the claims of the holders of our new notes.

CHANGE OF CONTROL

In the event of a Change of Control, each holder will have the right to
require that we purchase all or a portion of such holder's new notes pursuant to
the offer described below, the "Change of Control Offer", at a purchase price
equal to 101% of the principal amount of the new notes plus accrued and unpaid
interest, if any, to the date of purchase.

Within 30 days following the date upon which the Change of Control
occurred, we must send, by first class mail, a notice to each holder, with a
copy to the trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 60 days from the date such
notice is mailed, other than as may be required by law, the date of such
purchase being the "Change of Control Payment Date". Holders electing to have a
note purchased pursuant to a Change of Control Offer will be required to
surrender the note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the note completed, to the paying agent at the address
specified in the notice prior to the close of business on the third business day
prior to the Change of Control Payment Date.

If we make a Change of Control Offer, we cannot guarantee that we will have
available funds sufficient to pay the Change of Control purchase price for all
the notes that might be delivered by holders seeking to accept the Change of
Control Offer. In the event we are required to purchase outstanding notes
pursuant to a Change of Control Offer, we expect that we would seek third-

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party financing to the extent we do not have available funds to meet our
purchase obligations. However, we cannot guarantee that we would be able to
obtain the necessary financing.

In addition, we cannot guarantee that our debt instruments will permit us
to make a Change of Control Offer. Our credit facility does not permit us to
make a Change of Control Offer and, in order to make such offer, we would be
required to pay off the credit facility in full or seek a waiver from the
lenders under the credit facility in order to make the Change of Control Offer.
A Change of Control is an event of default under the credit facility and would
entitle the lenders to accelerate all amounts owing under the credit facility.
Any future credit agreements or other agreements relating to Senior Debt to
which we become a party may contain similar restrictions and provisions.
Moreover, the exercise by the holders of their rights to require us to
repurchase the notes could cause a default under such indebtedness, even if the
Change of Control itself does not, due to the financial effect of such
repurchase on RailWorks. Failure to make a Change of Control Offer, even if
prohibited by our debt instruments, would constitute a default under the
indenture. See "Risk Factors -- Risks Relating to the Notes -- We May be Unable
to Finance a Change of Control Offer."

We are not required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in compliance with
the requirements applicable to a Change of Control Offer made by RailWorks and
purchases all notes validly tendered and not withdrawn under such Change of
Control Offer.

Neither the board of directors of RailWorks nor the trustee may waive the
covenant relating to a holder's right to redemption when a Change of Control
occurs. Each holder's right to require us to purchase that holder's notes upon a
Change of Control, and the restrictions in the indenture described in this
prospectus on the ability of RailWorks and its Restricted Subsidiaries to incur
additional Indebtedness, to grant liens on their property, to make Restricted
Payments and to make asset sales, may also make a takeover of RailWorks more
difficult or discourage it, whether favored or opposed by our management.
Carrying out Change of Control Offers may sometimes require redemption or
repurchase of the notes, and we cannot guarantee that we or the acquiring party
will have sufficient financial resources to do so. These restrictions and the
restrictions on transactions with affiliates may, in certain circumstances, make
more difficult or discourage any leveraged buyout of RailWorks or any of its
subsidiaries by our management. While the restrictions cover a wide variety of
arrangements that have traditionally been used to effect highly leveraged
transactions, the indenture may not afford the holders of new notes protection
in all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.

We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations in connection with the repurchase
of notes pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Change of
Control" provisions of the indenture, we will comply with the applicable
securities laws and regulations and will not be deemed to have breached our
obligations under the "Change of Control" provisions of the indenture.

COVENANTS

Limitation on Incurrence of Additional Indebtedness. We will not, and will
not permit any of our Restricted Subsidiaries to, directly or indirectly,
create, incur, assume, guarantee, acquire, become liable, contingently or
otherwise, with respect to, or otherwise become responsible for payment of
(collectively, "incur") any Indebtedness, other than Permitted Indebtedness;
provided, however, that if no Default or Event of Default shall have occurred
and be continuing at the time of or as a consequence of the incurrence of any
such Indebtedness, RailWorks or any of its Restricted Subsidiaries that is or,
upon such incurrence, becomes a Guarantor may incur Indebtedness (including,
without limitation, Acquired Indebtedness) and Restricted Subsidiaries

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of RailWorks that are not Guarantors may incur Acquired Indebtedness, in each
case if on the date of the incurrence of such Indebtedness, after giving effect
to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the
Company is greater than (x) 2.0 to 1.0 if the date of such occurrence is on or
prior to April 1, 2001, or (y) 2.25 to 1.0 if the date of such occurrence is on
or after April 1, 2001 and prior to April 1, 2004, or (z) 2.5 to 1.0 if the date
of such occurrence is on or after April 1, 2004.

Limitation on Restricted Payments. We will not, and will not cause or
permit any of our Restricted Subsidiaries to, directly or indirectly:

(1) declare or pay any dividend or make any distribution, other than
dividends or distributions payable in Qualified Capital Stock of RailWorks
or in options, warrants or other rights to purchase Qualified Capital Stock
of RailWorks, on or in respect of shares of the RailWorks Capital Stock to
holders of such Capital Stock;

(2) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of RailWorks or any warrants, rights or options to purchase
or acquire shares of any class of RailWorks Capital Stock, other than in
either case any RailWork's Capital Stock or other securities owned by
RailWorks or any of its Restricted Subsidiaries;

(3) make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any scheduled
final maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness of RailWorks that is subordinate or junior in right of payment
to the notes (i) other than any such subordinated Indebtedness owed to
RailWorks or any of its Restricted Subsidiaries and (ii) except the
prepayment, purchase, repurchase or other acquisition or retirement of
Indebtedness in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year
of the date of prepayment, purchase, repurchase or other acquisition or
retirement; or

(4) make any Investment except a Permitted Investment (each of the
actions in clauses (1), (2), (3) and (4) are referred to as a "Restricted
Payment"), if;

if at the time of such Restricted Payment or immediately after giving
effect to it,

(i) a Default or an Event of Default shall have occurred and be
continuing, or

(ii) we are not able to incur at least $1.00 of additional
Indebtedness, other than Permitted Indebtedness, in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant; or

(iii) the aggregate amount of Restricted Payments, including such
proposed Restricted Payment made subsequent to April 7, 1999 exceeds the
sum of:

(w) 50% of the cumulative Consolidated Net Income, or if
cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss, of RailWorks earned subsequent to April 7, 1999 and on or
prior to the date the Restricted Payment occurs (the "Reference
Date"), and treating such period as a single accounting period; plus

(x) 100% of the aggregate net cash proceeds received by
RailWorks from any Person, other than a Restricted Subsidiary, from
the issuance and sale subsequent to April 7, 1999 and on or prior to
the Reference Date of (i) Qualified Capital Stock of RailWorks and
(ii) Indebtedness or Disqualified Capital Stock that has been
converted into or exchanged for Qualified Capital Stock together with
the aggregate net cash proceeds received by RailWorks or any
Restricted Subsidiary at the time of such conversion or exchange;
plus

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(y) without duplication of any amounts included in clause
(iii)(x) above, 100% of the aggregate net cash proceeds of any equity
contribution received by RailWorks from a holder of RailWorks's
Capital Stock, excluding, in the case of clauses (iii)(x) and (y),
any net cash proceeds from an Equity Offering to the extent used to
redeem the notes in compliance with the provisions set forth under
"Redemption -- Optional Redemption upon Equity Offerings"; plus

(z) without duplication, the sum of:

(1) the aggregate amount returned in cash on or with respect
to Investments, except for Permitted Investments, made subsequent
to April 7, 1999 whether through interest payments, principal
payments, dividends or other distributions or payments;

(2) the net cash proceeds received by RailWorks or any of
its Restricted Subsidiaries from the disposition of all or any
portion of such Investments, other than to a Restricted
Subsidiary of RailWorks; and

(3) upon redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, the fair market value of such Subsidiary;
provided, however, that the sum of clauses (1), (2) and (3) above
shall not exceed the aggregate amount of all such Investments
made subsequent to April 7, 1999.

The foregoing provisions do not prohibit:

(1) the payment of any dividend within 60 days after the date of its
declaration if the dividend would have been permitted on the date of
declaration;

(2) the acquisition of any shares of Capital Stock of RailWorks,
either (i) solely in exchange for shares of Qualified Capital Stock of
RailWorks or (ii) through the application of net proceeds of a
substantially concurrent sale for cash, other than to a Restricted
Subsidiary, of shares of Qualified Capital Stock;

(3) the acquisition of any Indebtedness of RailWorks that is
subordinate or junior in right of payment to the notes either (i) solely in
exchange for shares of Qualified Capital Stock of RailWorks, or (ii)
through the application of net proceeds of a substantially concurrent sale
for cash, other than to a Restricted Subsidiary of RailWorks of (a) shares
of Qualified Capital Stock of RailWorks or (b) Refinancing Indebtedness;

(4) so long as no Default or Event of Default shall have occurred and
be continuing, repurchases by RailWorks of its Capital Stock from
employees, former employees, directors or former directors of RailWorks or
any of its Subsidiaries or their authorized representatives upon the death,
disability or termination of employment of such employees or former
employees, or termination of the term of such director or former director,
in an aggregate amount not to exceed $1.0 million in any calendar year;

(5) loans and advances made to officers or other employees to make tax
payments associated with stock grants and/or the grant or exercise of stock
options (i) pursuant to existing employment agreements in an amount not to
exceed $6.5 million within six months after April 7, 1999 and (ii) in an
amount not to exceed $1.0 million in any calendar year thereafter;

(6) loans and advances to officers and other employees of RailWorks or
any of its Restricted Subsidiaries for the exercise of stock options in an
amount not to exceed $1.0 million at any one time outstanding;

(7) the repurchase of any subordinated Indebtedness at a purchase
price not greater than 101% of the principal amount of such subordinated
Indebtedness in the event of a "change of control" in accordance with
provisions similar to the "Change of Control"
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covenant; provided that, prior to or simultaneously with such repurchase,
RailWorks has made the Change of Control Offer as provided in such covenant
with respect to the notes and has repurchased all notes validly tendered
for payment in connection with such Change of Control Offer;

(8) payments or distributions to stockholders pursuant to appraisal
rights in respect of up to 10% of Capital Stock of RailWorks or any
Restricted Subsidiary required by law in connection with a consolidation,
merger or transfer of assets that complies with the covenant described
under "-- Merger, Consolidation and Sale of Assets"; and

(9) other Restricted Payments in an aggregate amount since April 7,
1999 not to exceed $1.0 million.

In determining the aggregate amount of Restricted Payments made subsequent
to April 7, 1999 in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2) (ii), (4), (5), (6),
(7) and (9) shall be included in such calculation.

Not later than the date of making any Restricted Payment, we will deliver
to the trustee an officers' certificate stating that such Restricted Payment
complies with the indenture and setting forth in reasonable detail the basis
upon which we computed the required calculations, which calculations may be
based upon our latest available internal quarterly financial statements.

Limitation on Asset Sales. We will not, and will not permit any of our
Restricted Subsidiaries to, consummate an Asset Sale unless:

(1) RailWorks or the applicable Restricted Subsidiary receives
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets sold or otherwise disposed of, as determined in
good faith by our board of directors;

(2) at least 75% of the consideration received by RailWorks or the
Restricted Subsidiary, as the case may be, from such Asset Sale is in the
form of cash or Cash Equivalents and is received at the time of such
disposition; provided that the amount of (x) any liabilities of RailWorks
or any of its Restricted Subsidiaries (as shown on the most recent balance
sheet of RailWorks or such Restricted Subsidiary), other than liabilities
that are by their terms subordinated to the notes or any Guarantee, as the
case may be, that are assumed by the transferee of any such assets pursuant
to a customary novation agreement that releases RailWorks or such
Restricted Subsidiary from further liability and (y) any securities, notes
or other obligations received by RailWorks or any such Restricted
Subsidiary from such transferee that are converted by RailWorks or such
Restricted Subsidiary into cash, to the extent of the cash received, within
180 days after receipt, shall be deemed to be cash for the purposes of this
clause (2); and

(3) upon the consummation of an Asset Sale, RailWorks shall apply, or
cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating
to such Asset Sale within 360 days of receipt thereof either:

(a) to prepay any Senior Debt and, in the case of any Senior Debt
under any revolving credit facility, effect a permanent reduction in the
availability under such revolving credit facility;

(b) to make an investment in properties and assets that replace the
properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in the business of RailWorks and
its Restricted Subsidiaries as existing on April 7, 1999 or in
businesses reasonably related or ancillary thereto, such assets being
referred to as "Replacement Assets"; or

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On the 361st day after an Asset Sale or such earlier date, if any, as the
Board of Directors of RailWorks or of such Restricted Subsidiary determines not
to apply the Net Cash Proceeds relating to such Asset Sale as set forth in
clauses (3)(a), (3)(b) and (3)(c) of the preceding paragraph, each such date a
"Net Proceeds Offer Trigger Date", subject to the immediately succeeding
paragraph, such aggregate amount of Net Cash Proceeds that have not been applied
on or before such Net Proceeds Offer Trigger Date as permitted in clauses
(3)(a), (3)(b) and (3)(c) of the preceding paragraph, such aggregate amount of
net cash being referred to as a "Net Proceeds Offer Amount", shall be applied by
RailWorks or such Restricted Subsidiary to make an offer to purchase, such offer
being the "Net Proceeds Offer", on a date, the "Net Proceeds Offer Payment
Date", not less than 30 nor more than 60 days following the applicable Net
Proceeds Offer Trigger Date, from all holders on a pro rata basis, that amount
of notes equal to the Net Proceeds Offer Amount at a price equal to 100% of the
principal amount of the notes to be purchased, plus accrued and unpaid interest
thereon, if any, to the date of purchase.

We may defer the Net Proceeds Offer until there is an aggregate unutilized
Net Proceeds Offer Amount equal to or in excess of $10.0 million resulting from
one or more Asset Sales, at which time, the entire unutilized Net Proceeds Offer
Amount, and not just the amount in excess of $10.0 million, shall be applied as
required pursuant to this paragraph. Upon completion of a Net Proceeds Offer,
the amount of Net Cash Proceeds and the aggregate unutilized Net Proceeds Offer
Amount will be reset to zero. Accordingly, to the extent that any Net Proceeds
remain after consummation of a Net Proceeds Offer, we may use such Net Proceeds
for any purpose not prohibited by the indenture.

Notwithstanding the first two paragraphs of this covenant, RailWorks and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent that:

(1) at least 75% of the consideration for such Asset Sale constitutes
Replacement Assets; and

(2) such Asset Sale is for fair market value; provided that any
consideration not constituting Replacement Assets received by RailWorks or
any of its Restricted Subsidiaries in connection with any Asset Sale
permitted to be consummated under this paragraph shall constitute Net Cash
Proceeds subject to the provisions of the first two paragraphs of this
covenant.

Each Net Proceeds Offer will be mailed to the record holders as shown on
the register of holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the trustee, and shall comply with the procedures set forth
in the indenture. Upon receiving notice of the Net Proceeds Offer, holders may
elect to tender their notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent holders properly tender notes in an amount
exceeding the Net Proceeds Offer Amount, notes of tendering holders will be
purchased on a pro rata basis. A Net Proceeds Offer will remain open for a
period of 20 business days or such longer period as may be required by law.

We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of notes
pursuant to a Net Proceeds Offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Asset Sale" provisions of the
indenture, we will comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under the "Asset Sale"
provisions of the indenture by doing so.

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Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. We will not, and will not permit any of our Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:

(1) pay dividends or make any other distributions on or in respect of
its Capital Stock;

(2) make loans or advances or to pay any Indebtedness owed to
RailWorks or any of its Restricted Subsidiaries; or

(3) transfer any of its property or assets to RailWorks or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of:

(a) applicable law;

(b) the indenture, the Guarantees and the notes;

(c) customary non-assignment provisions of any contract or any
lease governing a leasehold interest of any of our Restricted
Subsidiaries;

(d) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person or the
properties or assets of the Person so acquired;

(e) the Credit Agreement and any other agreements in effect on
April 7, 1999;

(f) an agreement entered into for the sale or disposition of
Capital Stock or assets of a Restricted Subsidiary or an agreement
entered into for the sale of specified assets, in either case, so long
as such encumbrance or restriction, by its terms, terminates upon
consummation of such sale or termination of such agreements;

(g) any agreement or instrument governing Indebtedness or Capital
Stock of any Person in effect at the time it is acquired by RailWorks or
any of its Restricted Subsidiaries;

(h) purchase money obligations for assets acquired in the ordinary
course of business that impose restrictions of the nature described in
(3) above on the property so acquired;

(i) customary provisions with respect to the disposition or
distribution of assets in joint venture agreements and other similar
agreements;

(j) customary restrictions on transfers of property subject to a
Lien permitted under the indenture imposed by the holder of such Lien;
or

(k) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement
permitted above; provided, however, that the provisions relating to such
encumbrance or restriction contained in any such Indebtedness are no
less favorable to RailWorks in any material respect as determined by the
RailWorks board of directors in their reasonable and good faith judgment
than the provisions relating to such encumbrance or restriction
contained in agreements referred to above.

Limitation on Preferred Stock of Restricted Subsidiaries. We will not
permit any of our Restricted Subsidiaries that are not Guarantors to issue any
Preferred Stock (other than to or to a Wholly Owned Restricted Subsidiary of
RailWorks) or permit any Person (other than RailWorks or a Wholly Owned
Restricted Subsidiary of RailWorks) to own any Preferred Stock of any Restricted
Subsidiary that is not a Guarantor. Notwithstanding the foregoing, nothing in
such covenant will prohibit Preferred Stock issued by a Person prior to the time
(A) such Person becomes a Restricted Subsidiary of RailWorks, (B) such Person
merges with or into a Restricted

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Subsidiary of RailWorks or (C) a Restricted Subsidiary of RailWorks merges with
or into such Person; provided that such Preferred Stock was not issued or
incurred by such Person in anticipation of a transaction contemplated by
subclause (A), (B) or (C) above.

Limitation on Liens. We will not, and will not permit any of our
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of ours or of any of our Restricted Subsidiaries whether owned on, or
acquired after April 7, 1999, or any proceeds therefrom, or assign or otherwise
convey any right to receive income or profits therefrom unless:

(1) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the notes, the notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens; and

(2) in all other cases, the notes are equally and ratably secured,
except for:

(a) Liens existing as of April 7, 1999 to the extent and in the
manner such Liens are in effect on April 7, 1999;

(b) Liens securing Senior Debt and Liens securing Guarantor Senior
Debt;

(d) Liens of RailWorks or a Wholly Owned Restricted Subsidiary of
RailWorks on assets of any Restricted Subsidiary of RailWorks;

(e) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness which has been secured by a Lien permitted
under the indenture and which has been incurred in accordance with the
provisions of the indenture; provided, however, that such Liens: (i) are
no less favorable to the holders and are not more favorable to the
lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being Refinanced; and (ii) do not extend to or cover any
property or assets of RailWorks or any of its Restricted Subsidiaries
not securing the Indebtedness so Refinanced; and

(f) Permitted Liens.

Prohibition on Incurrence of Senior Subordinated Debt. We will not, and
will not permit any Restricted Subsidiary that is a Guarantor to, incur or
suffer to exist Indebtedness that is senior in right of payment to the notes or
such Guarantor's Guarantee, as the case may be, and subordinate in right of
payment to any other Indebtedness of RailWorks or such Guarantor, as the case
may be.

Merger, Consolidation and Sale of Assets. We will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of, or
permit any of our Restricted Subsidiaries to sell, assign, transfer, lease,
convey or otherwise dispose of, all or substantially all of our assets
(determined

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on a consolidated basis for RailWorks and its Restricted Subsidiaries), whether
as an entirety or substantially as an entirety to any Person unless:

(1) either:

(a) RailWorks shall be the surviving or continuing corporation; or

(b) the Person, if other than RailWorks, formed by such
consolidation or into which RailWorks is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of RailWorks and of its Restricted
Subsidiaries substantially as an entirety, such Person being referred to
as the "Surviving Entity":

(x) shall be a corporation organized and validly existing under
the laws of the United States or any State thereof or the District of
Columbia; and

(y) shall expressly assume, by supplemental indenture (in form
and substance reasonably satisfactory to the trustee), executed and
delivered to the trustee, the due and punctual payment of the
principal of (and premium, if any) and interest on all of the notes
and the performance of every covenant of the notes, the indenture and
the registration rights agreement to be performed or observed by
RailWorks;

(2) immediately after giving effect to such transaction and the
assumption contemplated by clause (1)(b)(y) above (including giving effect
to any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), RailWorks
or such Surviving Entity, as the case may be, (a) shall have a Consolidated
Net Worth equal to or greater than the Consolidated Net Worth of RailWorks
immediately prior to such transaction and (b) shall be able to incur at
least $1.00 of additional Indebtedness, not including Permitted
Indebtedness, pursuant to the "-- Limitation on Incurrence of Additional
Indebtedness" covenant;

(3) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (1)(b)(y) above,
including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction, no Default or
Event of Default shall have occurred or be continuing; and

(4) RailWorks or the Surviving Entity shall have delivered to the
trustee an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture
comply with the applicable provisions of the indenture and that all
conditions precedent in the indenture relating to such transaction have
been satisfied.

Notwithstanding the foregoing clauses (2), (3) and (4), (a) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
property and assets to RailWorks or any other Restricted Subsidiary and (b)
RailWorks may merge with an Affiliate incorporated solely for the purpose of
reincorporating RailWorks in another jurisdiction in the United States.

For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more of our Restricted
Subsidiaries, the Capital Stock of which constitutes all or substantially all of
the properties and assets of RailWorks, shall be deemed to be the transfer of
all or substantially all of the properties and assets of RailWorks.

The indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of RailWorks in
accordance with the foregoing, in which RailWorks is not the Surviving Entity,
the Surviving Entity shall succeed to, and be substituted

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for, and may exercise every right and power of, RailWorks under the indenture
and the notes with the same effect as if such surviving entity had been named as
such.

Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the Indenture in connection
with any transaction complying with the provisions of "-- Limitation on Asset
Sales") will not, and we will not cause or permit any Guarantor to, consolidate
with or merge with or into any Person other than RailWorks or any other
Guarantor unless:

(1) the entity formed by or surviving any such consolidation or merger
(if other than the Guarantor) or to which such sale, lease, conveyance or
other disposition shall have been made is a corporation organized and
existing under the laws of the United States or any State thereof or the
District of Columbia;

(2) such entity assumes by supplemental indenture all of the
obligations of the Guarantor on the Guarantee;

(3) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; and

(4) immediately after giving effect to such transaction and the use of
any net proceeds therefrom on a pro forma basis, RailWorks could satisfy
the provisions of clause (2) of the first paragraph of this covenant.

Any merger or consolidation of a Guarantor with and into RailWorks (with
RailWorks being the surviving entity) or another Guarantor that is a Wholly
Owned Restricted Subsidiary of RailWorks need only comply with clause (4) of the
first paragraph of this covenant.

Limitations on Transactions with Affiliates. (a) We will not, and will not
permit any of our Restricted Subsidiaries to, directly or indirectly, enter into
or permit to exist any transaction or series of related transactions (including,
without limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of our Affiliates,
each such transaction is referred to as an "Affiliate Transaction", other than
(x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate
Transactions on terms that are no less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate of RailWorks or such
Restricted Subsidiary.

All Affiliate Transactions, and each series of related Affiliate
Transactions which are similar or part of a common plan, involving aggregate
payments or other property with a fair market value in excess of $2.0 million
shall be approved by the board of directors of RailWorks or such Restricted
Subsidiary, as the case may be, such approval to be evidenced by a Board
Resolution stating that such board of directors has determined that the
transaction complies with the foregoing provisions. If RailWorks or any of its
Restricted Subsidiaries enters into an Affiliate Transaction, or a series of
related Affiliate Transactions related to a common plan, that involves an
aggregate fair market value of more than $5.0 million, RailWorks or such
Restricted Subsidiary, as the case may be, will, prior to the consummation of
the transaction, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to RailWorks or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view, from
an Independent Financial Advisor and file the same with the trustee.

(b) The restrictions set forth in the first paragraph of this covenant
shall not apply to:

(1) reasonable fees and compensation, including severance payments and
compensation in the form of securities, and customary expense reimbursement
paid to and indemnity and reimbursement provided on behalf of, officers,
directors, employees or consultants of RailWorks or any of its RailWorks
Restricted Subsidiaries as determined in good faith by RailWorks's board of
directors or senior management;
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(2) transactions exclusively between or among RailWorks and any of its
Restricted Subsidiaries or exclusively between or among such Restricted
Subsidiaries, provided such transactions are not otherwise prohibited by
the indenture;

(3) transactions pursuant to or contemplated by any agreement as in
effect as of April 7, 1999 or any amendment thereto or any replacement
agreement so long as any such amendment or replacement agreement is not
more disadvantageous to the holders in any material respect than the
original agreement as in effect on April 7, 1999;

(4) loans and advances to employees or officers of RailWorks and its
Restricted Subsidiaries permitted by clause (4) of the definition of
"Permitted Investments;"

(5) Restricted Payments permitted by the indenture; and

(6) contingent and "earn out" payments incurred in connection with any
Asset Acquisition or otherwise, which are contingent on the performance of
the assets or properties acquired.

Additional Subsidiary Guarantees. If RailWorks or any of its Restricted
Subsidiaries transfers or causes to be transferred, in one transaction or a
series of related transactions, any property to any domestic Restricted
Subsidiary that is not a Guarantor, or if RailWorks or any of its Restricted
Subsidiaries organizes, acquires or otherwise invests in another domestic
Restricted Subsidiary having total assets with a book value in excess of
$500,000, then such transferee or acquired or other Restricted Subsidiary shall:

(1) execute and deliver to the trustee a supplemental indenture in
form reasonably satisfactory to the trustee pursuant to which such
Restricted Subsidiary unconditionally guarantees on a senior subordinated
basis all of the RailWorks obligations under the notes and the indenture on
the terms set forth in the indenture; and

(2) deliver to the trustee an opinion of counsel that such
supplemental indenture has been duly authorized, executed and delivered by
such Restricted Subsidiary and constitutes a legal, valid, binding and
enforceable obligation of such Restricted Subsidiary. Thereafter, such
Restricted Subsidiary shall be a Guarantor for all purposes of the
indenture.

Conduct of Business. RailWorks and its Restricted Subsidiaries will not
engage in any businesses which are not the same, similar or reasonably related
or ancillary to the businesses in which RailWorks and its Restricted
Subsidiaries are engaged on April 7, 1999, except to such extent as would not be
material to RailWorks and its Restricted Subsidiaries taken as a whole.

Reports to Holders. The indenture will provide that, whether or not
required by the rules and regulations of the SEC, so long as any notes are
outstanding, RailWorks will furnish the holders of notes:

(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
RailWorks were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
that describes the financial condition and results of operations of
RailWorks and its consolidated Subsidiaries, showing in reasonable detail,
either on the face of the financial statements or in the footnotes thereto
and in Management's Discussion and Analysis of Financial Condition and
Results of Operations, the financial condition and results of operations of
RailWorks and its Restricted Subsidiaries separate from the financial
condition and results of operations of the Unrestricted Subsidiaries of
RailWorks, if any, and, with respect to the annual information only, a
report thereon by RailWorks's certified independent accounts; and

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(2) all current reports that would be required to be filed with SEC on
Form 8-K if RailWorks were required to file such reports, in each case
within the time periods specified in the SEC's rules and regulations.

In addition, following the consummation of the exchange offer contemplated
by the registration rights agreement, whether or not required by the rules and
regulations of the SEC, we will file a copy of all such information and reports
with the SEC for public availability within the time periods specified in the
SEC's rules and regulations, unless the SEC will not accept such a filing, and
make such information available to securities analysts and prospective investors
upon request. In addition, we have agreed that, for so long as any notes remain
outstanding, we will furnish to the holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.

EVENTS OF DEFAULT

The following events are defined in the indenture as "Events of Default":

(1) the failure to pay interest on any notes when they become due and
payable and the default continues for a period of 30 days, whether or not
such payment is prohibited by the subordination provisions of the
indenture;

(2) the failure to pay the principal on any notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise,
including the failure to make a payment to purchase notes tendered pursuant
to a Change of Control Offer or a Net Proceeds Offer, whether or not such
payment is prohibited by the subordination provisions of the indenture;

(3) a default in the observance or performance of any other covenant
or agreement contained in the indenture which default continues for a
period of 60 days after RailWorks receives written notice specifying the
default, and demanding that such default be remedied, from the trustee or
the holders of at least 25% of the outstanding principal amount of the
notes (except in the case of a default with respect to the "Merger,
Consolidation and Sale of Assets" covenant, which will constitute an Event
of Default with such notice requirement but without such passage of time
requirement);

(4) the failure to pay at final maturity, after giving effect to any
applicable grace periods and any extensions thereof, the principal amount
of any Indebtedness of RailWorks or any of its Restricted Subsidiaries and
such failure continues for a period of 20 days or more, or the acceleration
of the final stated maturity of any such Indebtedness, which acceleration
is not rescinded, annulled or otherwise cured within 20 days of receipt by
RailWorks or such Restricted Subsidiary of notice of any such acceleration,
if the aggregate principal amount of such Indebtedness, whether outstanding
under one or more agreements, together with the principal amount of any
other such Indebtedness in default for failure to pay principal at final
maturity or which has been accelerated, aggregates $10.0 million or more at
any time;

(5) one or more judgments in an aggregate amount in excess of $10.0
million shall have been rendered against RailWorks or any of its Restricted
Subsidiaries and such judgments remain undischarged, unpaid or unstayed for
a period of 60 days after such judgment or judgments become final and
non-appealable;

(6) certain events of bankruptcy affecting RailWorks or any of its
Significant Subsidiaries; or

(7) any Guarantee of a Significant Subsidiary ceases to be in full
force and effect or any Guarantee of a Significant Subsidiary is declared
to be null and void and unenforceable or any Guarantee of a Significant
Subsidiary is found to be invalid or any Guarantor that is a Significant
Subsidiary denies its liability under its Guarantee (other than by reason
of release of a Guarantor in accordance with the terms of the Indenture)
and such condition has

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continued for a period of 30 days after written notice of such failure
requiring the Guarantor and RailWorks to remedy the same has been given (x)
to RailWorks by the trustee or (y) to RailWorks and the trustee by the
holders of 25% in aggregate principal amount of the notes then outstanding.

If an Event of Default, other than an Event of Default specified in clause
(6) above with respect to RailWorks, shall occur and be continuing, the trustee
or the holders of at least 25% in principal amount of outstanding notes may
declare the principal of and accrued interest on all the notes to be due and
payable by notice in writing to RailWorks and the trustee specifying the
respective Event of Default and that it is a "notice of acceleration," such
notice being an "Acceleration Notice", and the same:

(1) shall become immediately due and payable; or

(2) if there are any amounts outstanding under the Credit Agreement,
shall become immediately due and payable upon the first to occur of an
acceleration under the Credit Agreement or 5 business days after receipt by
RailWorks and the Representative under the Credit Agreement of such
Acceleration Notice but only if such Event of Default is then continuing.
If an Event of Default specified in clause (6) above with respect to
RailWorks occurs and is continuing, then all unpaid principal of, and
premium, if any, and accrued and unpaid interest on all of the outstanding
notes shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the trustee or any holder.

The indenture provides that, at any time after a declaration of
acceleration with respect to the notes as described in the preceding paragraph,
the holders of a majority in principal amount of the notes may rescind and
cancel such declaration and its consequences:

(1) if the rescission would not conflict with any judgment or decree;

(2) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
the acceleration;

(3) to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal, which has become
due otherwise than by such declaration of acceleration, has been paid;

(4) if RailWorks has paid the trustee its reasonable compensation and
reimbursed the trustee for its expenses, disbursements and advances; and

(5) in the event of the cure or waiver of an Event of Default of the
type described in clause (6) of the description above of Events of Default,
the trustee shall have received an officers' certificate and an opinion of
counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent Default or impair any right
consequent to a Default.

The holders of not less than a majority in principal amount of the notes
may waive any existing Default or Event of Default under the indenture, and its
consequences, except a default in the payment of the principal of or interest on
any notes.

Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture and under the Trust Indenture Act. Subject to the
provisions of the indenture relating to the duties of the trustee, the trustee
is under no obligation to exercise any of its rights or powers under the
indenture at the request, order or direction of any of the holders, unless such
holders have offered reasonable indemnity to the trustee. Subject to all
provisions of the indenture and applicable law, the holders of a majority in
aggregate principal amount of the then outstanding notes have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or exercising any trust or power conferred on the
trustee.

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Under the indenture, we are required to provide an officers' certificate to
the trustee promptly upon any officer's obtaining knowledge of any Default or
Event of Default, provided that such officers shall provide such certification
at least annually as to whether or not they know of any Default or Event of
Default, that has occurred and, if applicable, describe such Default or Event of
Default and the status thereof.

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

We may, at our option and at any time, elect to have our obligations and
the obligations of the Guarantors discharged with respect to the outstanding
notes, such discharge is called "Legal Defeasance". Legal Defeasance means that
RailWorks and, if it so elects, the Guarantors, shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding notes, except
for:

(1) the rights of holders to receive payments in respect of the
principal of, premium, if any, and interest on the notes when those
payments are due;

(2) our obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payments;

(3) the rights, powers, trust, duties and immunities of the trustee
and our related obligations; and

(4) the Legal Defeasance provisions of the indenture.

In addition, we may, at our option and at any time, elect to have our
obligations and the obligations of the Guarantors released with respect to
certain covenants that are described in the indenture, such release is called
"Covenant Defeasance", and thereafter any omission to comply with those
obligations shall not constitute a Default or Event of Default with respect to
the notes. In the event Covenant Defeasance occurs, certain events, described
under "Events of Default" but not including non-payment, bankruptcy,
receivership, reorganization and insolvency events, will no longer constitute an
Event of Default with respect to the notes. Concurrently with any Legal
Defeasance or Covenant Defeasance, we may, at our further option, cause to be
terminated, as of the date on which such Legal Defeasance or Covenant Defeasance
occurs, all of the obligations under any or all of the Guarantees, if any, then
existing. In order to exercise such option regarding a Guarantee, we will
provide the trustee with written notice of our desire to terminate that
Guarantee prior to the delivery of the opinion of counsel referred to in clause
(2) or (3), as applicable, of the next succeeding paragraph.

In order to exercise either Legal Defeasance or Covenant Defeasance:

(1) we must irrevocably deposit with the trustee, in trust, for the
benefit of the holders, cash in U.S. dollars, non-callable U.S. government
obligations, or a combination thereof, in amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
notes on the stated date for their payment or on the applicable redemption
date, as the case may be;

(2) in the case of Legal Defeasance, we must deliver to the trustee an
opinion of counsel in the United States reasonably acceptable to the
trustee confirming that:

(a) we have received from, or there has been published by, the
Internal Revenue Service a ruling; or

(b) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon such opinion of counsel shall confirm that, the
holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to

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federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred;

(3) in the case of Covenant Defeasance, we must deliver to the trustee
an opinion of counsel in the United States reasonably acceptable to the
trustee confirming that the holders will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;

(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or an Event of
Default resulting from the borrowing of funds to be applied to such deposit
and the grant of any Lien securing such borrowing) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in
the period ending on the 91st day after the date of deposit;

(5) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the indenture (other
than a Default or an Event of Default resulting from the borrowing of funds
to be applied to such deposit and the grant of any Lien securing such
borrowing) or any other material agreement or instrument to which we or any
of our subsidiaries is a party or by which we or any of our subsidiaries is
bound;

(6) we must deliver to the trustee an officers' certificate stating
that we did not make the deposit with the intent of preferring the holders
over any of our other creditors or with the intent of defeating, hindering,
delaying or defrauding any of our other creditors or others;

(7) we must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent provided for
or relating to the Legal Defeasance or the Covenant Defeasance have been
complied with;

(8) we must deliver to the trustee an opinion of counsel to the effect
that, subject to customary assumptions and exclusions:

(a) the trust funds will not be subject to any rights of holders of
Senior Debt, including, without limitation, those arising under the
indenture; and

(b) assuming no intervening bankruptcy of RailWorks between the
date of deposit and the 91st day following the date of deposit and that
no holder is an insider of RailWorks, after the 91st day following the
date of deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; and

(9) certain other customary conditions precedent are satisfied.

Despite the above, the opinion of counsel required by clause (2) above with
respect to a Legal Defeasance need not be delivered if all notes not theretofore
delivered to the trustee for cancellation (1) have become due and payable, (2)
will become due and payable on the maturity date within one year or (3) are to
be called for redemption within one year under arrangements satisfactory to the
trustee for the giving of notice of redemption by the trustee in our name, and
at our expense.

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SATISFACTION AND DISCHARGE

The indenture, the notes and the Guarantees will be discharged and will
cease to be of further effect, except as to surviving rights or registration of
transfer or exchange of the notes, as expressly provided for in the indenture,
as to all outstanding notes when:

(1) either:

(a) all the notes previously authenticated and delivered, except
lost, stolen or destroyed notes which have been replaced or paid and
notes for whose payment money has previously been deposited in trust or
segregated and held in trust by us and afterwards repaid to us or
discharged from such trust, have been delivered to the trustee for
cancellation; or

(b) all notes not previously delivered to the trustee for
cancellation have become due and payable and we have irrevocably
deposited or caused to be deposited with the trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the notes not
previously delivered to the trustee for cancellation, for principal of,
premium, if any, and interest on the notes to the date of deposit
together with irrevocable instructions from us directing the trustee to
apply the funds to the payment at maturity or redemption;

(2) we have paid all other sums payable under the indenture by us; and

(3) we have delivered to the trustee an officers' certificate and an
opinion of counsel stating that all conditions precedent under the
indenture relating to the satisfaction and discharge of the indenture have
been complied with.

MODIFICATION OF THE INDENTURE

From time to time, we, the Guarantors and the trustee, without the consent
of the holders, may amend the indenture for certain specified purposes,
including:

(1) to evidence the succession of another person to RailWorks or any
Guarantor and the assumption by any such succession of the covenants of
RailWorks or any Guarantor in the indenture and in the notes;

(2) to add to the covenants of RailWorks or any Guarantor for the
benefit of the holders, or to surrender any right or power herein conferred
upon RailWorks or any Guarantor; or

(3) to add additional Events of Default; or

(4) to provide for uncertificated notes in addition to or in place of
the certificated notes; or

(5) to evidence and provide for the acceptance of appointment under
the indenture by a successor trustee; or

(6) to secure the notes or any Guarantee; or

(7) to cure any ambiguity or inconsistencies or to correct or
supplement any provision in the indenture that may be defective or
inconsistent with any other provisions in the indenture or to make any
other provisions with respect to matters or questions arising under the
indenture so long as such change does not adversely affect the rights of
the holders in any material respect; or

(8) to comply with any requirements of the SEC in order to effect and
maintain the qualification of the indenture under the Trust Indenture Act,
if applicable; or

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(9) to release any Guarantor from its Guarantee in accordance with the
provisions of the indenture, including in connection with a sale of all of
the Capital Stock or all or substantially all of the assets of the
Guarantor.

Other modifications and amendments of the indenture may be made with the
consent of the holders of a majority in principal amount of the then outstanding
notes issued under the indenture, including without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, notes, except that, without the consent of each holder affected thereby, no
amendment may:

(1) reduce the amount of notes whose holders must consent to an
amendment;

(2) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any notes;

(3) reduce the principal of or change or have the effect of changing
the fixed maturity of any notes, or change the date on which any notes may
be subject to redemption or reduce the redemption price therefor;

(4) make any notes payable in money other than that stated in the
notes;

(5) make any change in provisions of the indenture protecting the
right of each holder to receive payment of principal of and interest on
such note on or after the due date thereof or to bring suit to enforce such
payment, or permitting holders of a majority in principal amount of notes
to waive Defaults or Events of Default;

(6) after our obligation to purchase notes arises under the indenture,
amend, change or modify in any material respect our obligation to make and
consummate a Change of Control Offer in the event of a Change of Control or
make and consummate a Net Proceeds Offer with respect to any Asset Sale
that has been consummated or, after such Change of Control has occurred or
such Asset Sale has been consummated, modify any of the related provisions
or definitions;

(7) modify or change any provision of the indenture or the related
definitions affecting the subordination or ranking of the notes or any
Guarantee in a manner materially adverse to the holders; or

(8) release any Guarantor that is a Significant Subsidiary from any of
its obligations under its Guarantee or the indenture otherwise than in
accordance with the terms of the indenture.

GOVERNING LAW

The indenture provides that it, the notes and the Guarantees are governed
by, and construed in accordance with, the laws of the State of New York but
without giving effect to applicable principles of conflicts of law to the extent
that the application of the law of another jurisdiction would be required by New
York State law.

THE TRUSTEE

The indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only such duties as are specifically set forth
in the indenture. During the existence of an Event of Default, the trustee will
exercise such rights and powers vested in it by the indenture, and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's own affairs.

The indenture and the provisions of the Trust Indenture Act contains some
limitations on the rights of the trustee, should it become a creditor of
RailWorks, to obtain payments of claims in some cases or to realize on some
property received in respect of any claim as security or
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otherwise. Subject to the Trust Indenture Act, the trustee will be permitted to
engage in other transactions; provided that if the trustee acquires any
conflicting interest as described in the Trust Indenture Act, it must eliminate
such conflict or resign.

CERTAIN DEFINITIONS

Set forth below is a summary of certain of the defined terms used in the
indenture. We refer you to the indenture for the full definition of all these
terms, as well as any other terms used in this prospectus for which no
definition is provided.

"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
RailWorks or at the time it merges or consolidates with RailWorks or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and in each case whether or not incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of RailWorks or such acquisition, merger or consolidation, provided
that any Indebtedness of such Person that is redeemed, defeased, retried or
otherwise repaid at the time of or immediately upon consummation of the
transaction by which such Person is merged with or into RailWorks, becomes a
Restricted Subsidiary or such assets are acquired from such Person will not be
Acquired Indebtedness.

"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.

"Asset Acquisition" means (1) an Investment by RailWorks or any Restricted
Subsidiary of RailWorks in any other Person pursuant to which such Person shall
become a Restricted Subsidiary of RailWorks or any Restricted Subsidiary of
RailWorks, or shall be merged with or into RailWorks or any Restricted
Subsidiary of RailWorks, or (2) the acquisition by RailWorks or any Restricted
Subsidiary of RailWorks of the assets of any Person, other than a Restricted
Subsidiary of RailWorks, which constitute all or substantially all of the assets
of such Person or comprises any division or line of business of such Person or
any other properties or assets of such Person other than in the ordinary course
of business.

"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by RailWorks or any of its
Restricted Subsidiaries, including any Sale and Leaseback Transaction, to any
Person other than RailWorks or a Restricted Subsidiary of RailWorks of: (1) any
Capital Stock of any Restricted Subsidiary of RailWorks; or (2) any other
property or assets of RailWorks or any Restricted Subsidiary of RailWorks other
than in the ordinary course of business; provided, however, that asset sales or
other dispositions shall not include: (a) a transaction or series of related
transactions for which RailWorks or its Restricted Subsidiaries receive
aggregate consideration of less than $1.0 million; (b) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of RailWorks as permitted under "Merger, Consolidation and Sale of
Assets"; (c) a transaction constituting a Restricted Payment permitted under
"-- Restricted Payments" above; (d) sales of obsolete, worn out, damaged or used
equipment in the ordinary course of business; (e) sales of equipment or
inventory in the ordinary course of business; (f) any Permitted Investment; and
(g) granting of Liens as permitted under "Limitation on Liens" above.

"Borrowing Base" means the sum of (i) 85% of the net book value (after
allowance for doubtful accounts) of accounts receivable (other than intercompany
receivables) of RailWorks and the Restricted Subsidiaries arising in the
ordinary course of business from the sale of
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products sold by RailWorks and the Restricted Subsidiaries or the provision of
services by RailWorks and the Restricted Subsidiaries and (ii) 60% of the net
book value (after appropriate write-downs of obsolescence, quality problems and
the like) of inventories of RailWorks and the Restricted Subsidiaries held in
the ordinary course of business, calculated in each case on a consolidated basis
with the Restricted Subsidiaries in accordance with GAAP.

"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the board of directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.

"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.

"Capital Stock" means:

(1) with respect to any Person that is a corporation, any and all
shares, interests, participations or other equivalents (however designated
and whether or not voting) of corporate stock, including each class of
Common Stock and Preferred Stock of such Person; and

(2) with respect to any Person that is not a corporation, any and all
partnership, membership or other equity interests of such Person.

"Cash Equivalents" means:

(1) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;

(2) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Ratings Group,
called "S&P", or Moody's Investors Service, Inc., called "Moody's";

(3) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;

(4) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000;

(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (4)
above; and

(6) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (1) through
(5) above.

"Change of Control" means the occurrence of one or more of the following
events:

(1) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets
of RailWorks to any Person or group of
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related Persons for purposes of Section 13(d) of the Exchange Act, called a
"Group", together with any Affiliates thereof, whether or not otherwise in
compliance with the provisions of the indenture;

(2) the approval by the holders of Capital Stock of RailWorks of any
plan or proposal for the liquidation or dissolution of RailWorks, whether
or not otherwise in compliance with the provisions of the indenture;

(3) any Person or Group shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 50%
of the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of RailWorks; or

(4) the replacement of a majority of the RailWorks board of directors
over any consecutive two-year period from the directors who constituted the
RailWorks board of directors at the beginning of such period, and such
replacement shall not have been approved by a vote of at least a majority
of the RailWorks board of directors then still in office who either were
members of the RailWorks board of directors at the beginning of the period
or whose election as a member of the RailWorks board of directors was
previously approved.

"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents, however designated and whether voting
or non-voting, of such Person's common stock, whether outstanding on April 7,
1999 or issued after April 7, 1999, and includes, without limitation, all series
and classes of such common stock.

"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of:

(1) Consolidated Net Income; and

(2) to the extent Consolidated Net Income has been reduced thereby,

(a) all income taxes of such Person and its Restricted Subsidiaries
paid or accrued in accordance with GAAP for such period (other than
income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses or taxes attributable to sales or dispositions outside
the ordinary course of business);

(b) Consolidated Interest Expense; and

(c) Consolidated Non-cash Charges less any non-cash items
increasing Consolidated Net Income for such period, all as determined on
a consolidated basis for such Person and its Restricted Subsidiaries in
accordance with GAAP.

"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of (a) Consolidated EBITDA of such Person during the four full
fiscal quarters, called the "Four Quarter Period", ending prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio for which financial statements are available, that date
being the "Transaction Date", to (b) Consolidated Fixed Charges of such Person
for the Four Quarter Period. In addition to and without limitation of the
foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to:

(1) the incurrence, repayment or retirement of any Indebtedness of
such Person or any of its Restricted Subsidiaries (and the application of
the proceeds thereof) giving rise to the need to make such calculation and
any incurrence or repayment of other Indebtedness (and the application of
the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital
purposes pursuant to any revolving Credit Agreement, occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction
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Date, as if such incurrence, repayment or retirement, as the case may be
(and the application of the proceeds thereof), occurred on the first day of
the Four Quarter Period; and

(2) any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being
liable for Acquired Indebtedness and also including any Consolidated EBITDA
(including any pro forma expense and cost reductions calculated on a basis
consistent with Regulation S-X of the Exchange Act) attributable to the
assets which are the subject of the Asset Acquisition or asset sale or
other disposition during the Four Quarter Period) occurring during the Four
Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset
Sale or Asset Acquisition, including the incurrence, assumption or
liability for any such Acquired Indebtedness, occurred on the first day of
the Four Quarter Period. If such Person or any of its Restricted
Subsidiaries directly or indirectly guarantees Indebtedness of a third
Person, the preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if such Person or any Restricted Subsidiary of
such Person had directly incurred or otherwise assumed such guaranteed
Indebtedness. For purposes of calculating the Consolidated Fixed Charge
Coverage Ratio only, clause (c) of the definition of Asset Sale shall not
be given effect to the extent it relates to a dividend or distribution in
respect of shares of the RailWork's Capital Stock consisting of shares of
Capital Stock of a Restricted Subsidiary of RailWorks.

Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio":

(1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness in effect on the
Transaction Date;

(2) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered
by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation
of such agreements; and

(3) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined at an interest rate based
upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate; or other rates, then the interest rate in effect on the Transaction
Date will be deemed to have been in effect during the Four Quarter Period.

"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of:

(1) Consolidated Interest Expense; plus

(2) the product of (x) the amount of all dividend payments on any
series of Preferred Stock of such Person and, to the extent permitted under
the Indenture, its Restricted Subsidiaries (other than dividends paid in
Qualified Capital Stock) paid or accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal, provided that Consolidated
Fixed Charges shall not include (x) gain or loss from the extinguishment of
debt, including, without limitation, write-off of debt issuance costs,
commissions, fees and expenses, (y) amortization of customary debt issuance
costs, commissions, fees and expenses or (z) customary commitment,
administrative and transaction fees or charges.

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"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication:

(1) the aggregate of the interest expense of such Person and its
Restricted Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP, including without limitation: (a) any amortization
of debt discount and amortization or write-off deferred financing costs;
(b) the net costs under Interest Swap Obligations; (c) all capitalized
interest; and (d) the interest portion of any deferred payment obligation;
and

(2) the interest component of Capitalized Lease Obligations paid or
accrued by such Person and its Restricted Subsidiaries during such period
as determined on a consolidated basis in accordance with GAAP.

"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom:

(1) after-tax gains or losses (to the extent such losses are non-cash
losses) from Asset Sales (without regard to the $1,000,000 limitation set
forth in the definition thereof) or abandonments or reserves relating
thereto;

(2) after-tax items classified as extraordinary or nonrecurring gains
or losses (to the extent such losses are non-cash losses);

(3) solely for purposes of calculating Consolidated Net Income for the
covenant described under "Limitation on Restricted Payments," the net
income of any Person acquired in a "pooling of interests" transaction
accrued prior to the date it becomes a Restricted Subsidiary of the
referent Person or is merged or consolidated with the referent Person or
any Restricted Subsidiary of the referent Person;

(4) the net income (but not loss) of any Restricted Subsidiary of the
referent Person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by
a contract, operation of law or otherwise, except to the extent that such
net income is actually paid to RailWorks or one of its Restricted
Subsidiaries through dividends, loans or otherwise;

(5) the net income of any Person, other than a Restricted Subsidiary
of the referent Person, except to the extent of cash dividends or
distributions paid to the referent Person or to a Wholly Owned Restricted
Subsidiary of the referent Person by such Person;

(6) any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of Consolidated Net
Income accrued at any time following the Issue Date;

(7) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or
not such operations were classified as discontinued); and

(8) in the case of a successor to the referent Person by consolidation
or merger or as a transferee of the referent Person's assets, any earnings
of the successor corporation prior to such consolidation, merger or
transfer of assets.

"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.

"Consolidated Non-Cash Charges" means, with respect to any Person, for any
period, (a) the sum of (i) the aggregate depreciation, amortization (including
amortization of goodwill and

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other intangibles) and other non-cash expenses of such Person and its Restricted
Subsidiaries reducing Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period, (ii) expenses and charges relating to any equity
offering or incurrence of Indebtedness permitted to be incurred by the
Indenture, (iii) the amount of any restructuring charge or reserve, (iv)
unrealized gains and losses from hedging, foreign currency or commodities
translations and transactions, and (v) the amount of any reduction representing
a minority interest in Guarantors, minus (b) any cash payment with respect to
which a charge or reserve referred to in clause (a) was taken in a prior period,
in each case, determined on a consolidated basis in accordance with GAAP
(excluding any such charges constituting an extraordinary item or loss or any
such charge which requires an accrual of or a reserve for cash payments for any
future period).

"Credit Agreement" means the Credit Agreement, dated as of August 4, 1998,
as amended, among RailWorks, the lenders party to the Credit Agreement in their
capacities as lenders under the Credit Agreement and NationsBank N.A., as agent,
together with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including, any amendment and restatement thereof), supplemented
or otherwise modified in any manner from time to time, including any agreement
extending the maturity of, refinancing, replacing, extending the maturity of or
restructuring (including increasing the amount of available borrowings
thereunder or adding Restricted Subsidiaries of RailWorks as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.

"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect
RailWorks or any Restricted Subsidiary of RailWorks against fluctuations in
currency values.

"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.

"Designated Senior Debt" means (1) Indebtedness under or in respect of the
Credit Agreement and (2) any other Indebtedness constituting Senior Debt which,
at the time of determination, has an aggregate principal amount of at least
$25.0 million and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by RailWorks.

"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event (other than an event which would constitute a Change of
Control), matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (except, in each case, upon the occurrence of a Change of Control) on or
prior to the final maturity date of the notes.

"Fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the RailWorks board of directors acting reasonably and in
good faith and shall be evidenced by a Board Resolution of the RailWorks board
of directors delivered to the trustee.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of April 7, 1999.

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"Guarantee" means the guarantee of the Obligations of RailWorks with
respect to the notes by each Guarantor pursuant to the terms of the indenture.

"Guarantor" means: (1) each of the domestic Restricted Subsidiaries of
RailWorks as of April 7, 1999 and (2) each of the domestic Restricted
Subsidiaries of RailWorks that in the future executes a supplemental indenture
in which the Restricted Subsidiary agrees to be bound by the terms of the
indenture as a Guarantor; provided that any Person constituting a Guarantor as
described above shall cease to constitute a Guarantor when its respective
Guarantee is released in accordance with the terms of the indenture.

"Guarantor Senior Debt" means, with respect to any Guarantor: the principal
of, premium, if any, and interest, including any interest accruing subsequent to
the filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law, on any Indebtedness of a Guarantor, whether
outstanding on April 7, 1999 or thereafter created, incurred or assumed, unless,
in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Guarantee of such Guarantor. Without limiting the generality of the foregoing,
"Guarantor Senior Debt" shall also include the principal of, premium, if any,
interest, including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable law,
on, and all other amounts owing in respect of:

(x) all monetary obligations of every nature of such Guarantor under the
Credit Agreement, including, without limitation, obligations to pay principal
and interest, reimbursement obligations under letters of credit, fees, expenses
and indemnities;

(y) all Interest Swap Obligations; and

(z) all obligations under Currency Agreements;

in each case whether outstanding on April 7, 1999 or thereafter incurred.

Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include:

(1) any Indebtedness of such Guarantor to a Restricted Subsidiary of
such Guarantor or an Affiliate of such Guarantor or any of such Affiliate's
subsidiaries;

(2) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of such Guarantor or any Subsidiary of such
Guarantor (including, without limitation, amounts owed for compensation);

(3) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services;

(4) Indebtedness represented by Disqualified Capital Stock;

(5) any liability for federal, state, local or other taxes owed or
owing by such Guarantor;

(6) that portion of any Indebtedness incurred in violation of the
indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness," but, as to any such obligation, no such violation
shall be deemed to exist for purposes of this clause (6) if the holder(s)
of such obligation or their representative and the trustee shall have
received an officers' certificate from RailWorks to the effect that the
incurrence of such Indebtedness does not, or, in the case of revolving
credit indebtedness, that the incurrence of the entire committed amount
thereof at the date on which the initial borrowing thereunder is made would
not, violate such provisions of the indenture;

(7) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to RailWorks; and
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(8) any Indebtedness which is, by its express terms, subordinated in
right of payment to any other Indebtedness of such Guarantor.

"Indebtedness" means with respect to any Person, without duplication:

(1) all Obligations of such Person for borrowed money;

(2) all Obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;

(3) all Capitalized Lease Obligations of such Person;

(4) all Obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
Obligations under any title retention agreement (but excluding trade
accounts payable and other accrued liabilities arising in the ordinary
course of business);

(5) all Obligations for the reimbursement of any obligor on any letter
of credit, banker's acceptance or similar credit transaction;

(6) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (1) through (5) above and clause (8)
below;

(7) all Obligations of any other Person of the type referred to in
clauses (1) through (6) which are secured by any lien on any property or
asset of such Person, the amount of such Obligation being deemed to be the
lesser of the fair market value of such property or asset or the amount of
the Obligation so secured;

(8) all Obligations under Currency Agreements and Interest Swap
Agreements of such Person; and

(9) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference
and its maximum fixed repurchase price, but excluding accrued dividends, if
any.

For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the board of directors of the issuer of such Disqualified Capital
Stock.

Notwithstanding the foregoing, "Indebtedness" shall not include (i) any
holdback or escrow of the purchase price for any assets or properties of any
Person, (ii) any contingent payment obligations incurred in connection with any
Asset Acquisition or otherwise, which are contingent on the performance of the
assets or properties acquired or (iii) obligations in the ordinary course of
business with respect to performance bonds, surety bonds, appeal bonds, security
deposits or similar obligations.

"Independent Financial Advisor" means a firm: (1) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company; and (2) which, in the judgment of
the board of directors of RailWorks, is otherwise independent and qualified to
perform the task for which it is to be engaged.

"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such
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other Person calculated by applying a fixed or a floating rate of interest on
the same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements.

"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by
RailWorks and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of RailWorks or such Restricted
Subsidiary, as the case may be. If RailWorks or any Restricted Subsidiary of
RailWorks sells or otherwise disposes of any Common Stock of any direct or
indirect Restricted Subsidiary of RailWorks such that, after giving effect to
any such sale or disposition, RailWorks no longer owns, directly or indirectly,
100% of the outstanding Common Stock of such Restricted Subsidiary, RailWorks
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Common Stock of such
Restricted Subsidiary not sold or disposed of.

"Joint Venture" means any partnership, corporation or other entity, in
which up to and including 50% of the partnership interests, outstanding voting
stock or other equity interests is owned, directly or indirectly, by RailWorks
and/or one or more of its Restricted Subsidiaries.

"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).

"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
RailWorks or any of its Restricted Subsidiaries from such Asset Sale net of:

(1) reasonable out-of-pocket expenses and fees relating to such Asset
Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions);

(2) taxes paid or required to be accrued in accordance with GAAP after
taking into account any reduction in consolidated tax liability due to
available tax credits or deductions and any tax sharing arrangements;

(3) repayment of Indebtedness that is required to be repaid in
connection with such Asset Sale; and

(4) appropriate amounts to be provided by RailWorks or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP,
against any liabilities associated with such Asset Sale and retained by
RailWorks or any Restricted Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other postemployment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such
Asset Sale.

"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnification, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.

"Permitted Indebtedness" means, without duplication, each of the following:

(1) Indebtedness under the notes issued on April 7, 1999 in an
aggregate principal amount not to exceed $125.0 million and the Guarantees;

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(2) Indebtedness incurred pursuant to the Credit Agreement or one or
more other credit agreements in an aggregate principal amount at any time
outstanding not to exceed the greater of (A) $100.0 million or (B) the
Borrowing Base reduced, in either case, by any required permanent
repayments under the Credit Agreement or any such other credit agreement
actually made with the proceeds from Asset Sales, which in the case of a
revolving Credit Agreement are accompanied by a corresponding permanent
commitment reduction, thereunder;

(3) other Indebtedness of RailWorks and its Restricted Subsidiaries
outstanding on April 7, 1999 reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;

(4) Interest Swap Obligations of RailWorks covering Indebtedness of
RailWorks or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of RailWorks covering Indebtedness
of such Restricted Subsidiary; provided, however, that such Interest Swap
Obligations are entered into to protect RailWorks and its Restricted
Subsidiaries from fluctuations in interest rates on Indebtedness incurred
in accordance with the indenture to the extent the notional principal
amount of such Interest Swap Obligation does not exceed the principal
amount of the Indebtedness to which such Interest Swap Obligation relates;

(5) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of RailWorks and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;

(6) Indebtedness of a Wholly Owned Restricted Subsidiary of RailWorks
to RailWorks or to a Wholly Owned Restricted Subsidiary of RailWorks for so
long as such Indebtedness is held by RailWorks or a Wholly Owned Restricted
Subsidiary of RailWorks, in each case subject to no Lien held by a Person
other than RailWorks or a Wholly Owned Restricted Subsidiary of RailWorks;
provided that if as of any date any Person other than RailWorks or a Wholly
Owned Restricted Subsidiary of RailWorks owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, such date
shall be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness;

(7) Indebtedness of RailWorks to a Wholly Owned Restricted Subsidiary
of RailWorks for so long as such Indebtedness is held by a Wholly Owned
Restricted Subsidiary of RailWorks, in each case subject to no Lien held by
a Person other than a Wholly Owned Restricted Subsidiary; provided that (a)
any Indebtedness of RailWorks to any Wholly Owned Restricted Subsidiary of
RailWorks that is not a Guarantor is unsecured and subordinated, pursuant
to a written agreement, to RailWorks's obligations under the indenture and
the notes and (b) if as of any date any Person other than a Wholly Owned
Restricted Subsidiary of RailWorks owns or holds any such Indebtedness or
Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by
RailWorks;

(8) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within five business days of incurrence;

(9) Indebtedness of RailWorks or any of its Restricted Subsidiaries
represented by letters of credit for the account of RailWorks or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;

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(10) Indebtedness represented by Capitalized Lease Obligations and
Purchase Money Indebtedness of RailWorks and its Restricted Subsidiaries
incurred in the ordinary course of business not to exceed at any one time
outstanding the greater of (a) $5.0 million or (b) 5% of the Consolidated
Net Worth of RailWorks and its Restricted Subsidiaries;

(11) Indebtedness in respect of financed insurance premium obligations
incurred in the ordinary course of business;

(12) Refinancing Indebtedness;

(13) Guarantees by RailWorks or a Guarantor of Indebtedness that was
permitted to be incurred under the indenture; and

(14) additional Indebtedness of RailWorks and its Restricted
Subsidiaries in an aggregate principal amount not to exceed at any one time
outstanding the greater of (a) $10.0 million or (b) 5% of the Consolidated
Net Worth of RailWorks and its Restricted Subsidiaries.

For purposes of determining compliance with the "Limitation on Incurrence
of Additional Indebtedness" covenant, in the event that an item of Indebtedness
meets the criteria of more than one of the categories of Permitted Indebtedness
described in clauses (1) through (14) above or is entitled to be incurred
pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of such
covenant, Railworks shall, in its sole discretion, classify -- or later
reclassify -- such item of Indebtedness in any manner that complies with this
covenant. Accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms, and the payment of dividends on Disqualified
Capital Stock in the form of additional shares of the same class of Disqualified
Capital Stock will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Capital Stock for purposes of the "Limitations on
Incurrence of Additional Indebtedness" covenant.

"Permitted Investments" means:

(1) Investments by RailWorks or any Restricted Subsidiary of RailWorks
in any Person that is or will become immediately after such Investment a
Wholly Owned Restricted Subsidiary of RailWorks or that will merge or
consolidate into RailWorks or a Wholly Owned Restricted Subsidiary of
RailWorks;

(2) Investments in RailWorks by any Restricted Subsidiary of
RailWorks; provided that any Indebtedness evidencing such Investment to the
extent held by a Restricted Subsidiary that is not a Guarantor is unsecured
and subordinated, pursuant to a written agreement, to the obligations of
RailWorks under the notes and the indenture;

(3) Investments in cash and Cash Equivalents;

(4) loans and advances to employees and officers of RailWorks and its
Restricted Subsidiaries (A) in the ordinary course of business for bona
fide business purposes not in excess of $1.0 million at any one time
outstanding, (B) for reasonable travel and business expenses in the
ordinary course of business for bona fide business purposes and (C) for
reasonable relocation expenses in the ordinary course of business not in
excess of $1.0 million at any one time outstanding;

(5) Currency Agreements and Interest Swap Obligations entered into in
the ordinary course of business of RailWorks or any of its Restricted
Subsidiaries and otherwise in compliance with the indenture;

(6) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers;
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(7) Investments made by RailWorks or its Restricted Subsidiaries as a
result of consideration received in connection with an Asset Sale made in
compliance with the "Limitation on Asset Sales" covenant;

(8) Guarantees of Indebtedness otherwise permitted under the
indenture;

(9) Investments in Joint Ventures in an aggregate amount not to exceed
$5.0 million at any one time outstanding; and

(10) additional Investments not to exceed $5.0 million at any one time
outstanding.

"Permitted Liens" means the following types of Liens:

(1) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which RailWorks or its Restricted Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to
GAAP;

(2) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;

(3) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);

(4) judgment Liens not giving rise to an Event of Default;

(5) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of RailWorks or
any of its Restricted Subsidiaries;

(6) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;

(7) purchase money Liens to finance property or assets of RailWorks or
any Restricted Subsidiary of RailWorks acquired in the ordinary course of
business; provided, however, that (a) the related purchase money
Indebtedness shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of RailWorks or any Restricted
Subsidiary of RailWorks other than the property and assets so acquired and
(b) the Lien securing such Indebtedness shall be created within 90 days of
such acquisition;

(8) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;

(9) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;

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(10) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of
RailWorks or any of its Restricted Subsidiaries, including rights of offset
and set-off;

(11) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;

(12) Liens securing Capitalized Lease Obligations and Purchase Money
Indebtedness permitted pursuant to clause (10) of the definition of
"Permitted Indebtedness"; provided, however, that in the case of Purchase
Money Indebtedness (a) the Indebtedness shall not exceed the cost of such
property or assets and shall not be secured by any property or assets of
RailWorks or any Restricted Subsidiary of RailWorks other than the property
and assets so acquired or constructed and (b) the Lien securing such
Indebtedness shall be created within 180 days of such acquisition or
construction or, in the case of a refinancing of any Purchase Money
Indebtedness, within 180 days of such refinancing;

(13) Liens securing Indebtedness under Currency Agreements;

(14) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that:

(a) such Liens secured such Acquired Indebtedness at the time of
and prior to the incurrence of such Acquired Indebtedness by RailWorks
or a Restricted Subsidiary of RailWorks and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by RailWorks or a Restricted Subsidiary of RailWorks; and

(b) such Liens do not extend to or cover any property or assets of
RailWorks or of any of its Restricted Subsidiaries other than the
property or assets that secured the Acquired Indebtedness prior to the
time such Indebtedness became Acquired Indebtedness of RailWorks or a
Restricted Subsidiary of RailWorks and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by RailWorks or a Restricted
Subsidiary of RailWorks; and

(15) Liens not permitted by clauses (1) through (14) that are incurred
in the ordinary course of business of RailWorks or any Restricted
Subsidiary of RailWorks with respect to obligations that do not exceed $5.0
million at any one time outstanding.

"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.

"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.

"Purchase Money Indebtedness" means Indebtedness of RailWorks and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property or equipment.

"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.

"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.

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"Refinancing Indebtedness" means any Refinancing by RailWorks or any
Restricted Subsidiary of RailWorks of Indebtedness incurred in accordance with
the ratio under the "Limitation on Incurrence of Additional Indebtedness"
covenant or pursuant to clause (1), (3), or (11) of the definition of Permitted
Indebtedness), in each case that does not:

(1) result in an increase in the aggregate principal amount of the
Indebtedness of such Person being Refinanced (plus the amount of any
premium required to be paid under the terms of the instrument governing
such Indebtedness and plus the amount of reasonable expenses incurred by
RailWorks in connection with such Refinancing); or

(2) create Indebtedness with: (a) a Weighted Average Life to Maturity
that is less than the Weighted Average Life to Maturity of the Indebtedness
being Refinanced; or (b) a final maturity earlier than the final maturity
of the Indebtedness being Refinanced; provided that (x) if such
Indebtedness being Refinanced is Indebtedness of RailWorks, then such
Refinancing Indebtedness shall be Indebtedness of RailWorks or any
Restricted Subsidiary that is a Guarantor and (y) if such Indebtedness
being Refinanced is subordinate or junior to the notes, then such
Refinancing Indebtedness shall be subordinate to the notes at least to the
same extent and in the same manner as the Indebtedness being Refinanced.

"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.

"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.

"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to RailWorks or a Restricted Subsidiary of any property, whether owned
by RailWorks or any Restricted Subsidiary at April 7, 1999 or later acquired,
which has been or is to be sold or transferred by RailWorks or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.

"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of RailWorks, whether outstanding on April 7, 1999 or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the notes. Without limiting the generality
of the foregoing, "Senior Debt" shall also include the principal of, premium, if
any, interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of:

(1) all monetary obligations of every nature of RailWorks under the
Credit Agreement, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit,
fees, expenses and indemnities;

(2) all Interest Swap Obligations; and

(3) all obligations under Currency Agreements, in each case whether
outstanding on April 7, 1999 or thereafter incurred.

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Notwithstanding the foregoing, "Senior Debt" shall not include:

(1) any Indebtedness of RailWorks to a Restricted Subsidiary of
RailWorks or any Affiliate of RailWorks or any of such Affiliate's
Subsidiaries;

(2) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of RailWorks or any Subsidiary of RailWorks
(including, without limitation, amounts owed for compensation);

(3) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services;

(4) Indebtedness represented by Disqualified Capital Stock;

(5) any liability for federal, state, local or other taxes owed or
owing by RailWorks;

(6) that portion of any Indebtedness incurred in violation of the
indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness" (but, as to any such obligation, no such violation
shall be deemed to exist for purposes of this clause (6) if the holder(s)
of such obligation or their representative and the trustee shall have
received an officers' certificate of RailWorks to the effect that the
incurrence of such Indebtedness does not (or, in the case of revolving
credit indebtedness, that the incurrence of the entire committed amount
thereof at the date on which the initial borrowing thereunder is made would
not) violate such provisions of the indenture);

(7) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to RailWorks; and

(8) any Indebtedness which is, by its express terms, subordinated in
right of payment to any other Indebtedness of RailWorks.

"Significant Subsidiary", with respect to any Person, means any Restricted
Subsidiary of such Person that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities
Act.

"Subsidiary", with respect to any Person, means:

(1) any corporation of which the outstanding Capital Stock having at
least a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned, directly
or indirectly, by such Person; or

(2) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person.

"Unrestricted Subsidiary" of any Person means:

(1) any Subsidiary of such Person that at the time of determination
shall be or continue to be designated an Unrestricted Subsidiary by the
board of directors of such Person in the manner provided below; and

(2) any Subsidiary of an Unrestricted Subsidiary.

The RailWorks board of directors may designate any Subsidiary (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, RailWorks or any other Subsidiary of RailWorks that is not a
Subsidiary of the Subsidiary to be so designated; provided that:

(1) RailWorks certifies to the trustee that such designation complies
with the "Limitation on Restricted Payments" covenant; and

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(2) each Subsidiary to be so designated and each of its Subsidiaries
has not at the time of designation, and does not thereafter, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable
with respect to any Indebtedness pursuant to which the lender has recourse
to any of the assets of RailWorks or any of its Restricted Subsidiaries.

The RailWorks board of directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if:

(1) immediately after giving effect to such designation, RailWorks is
able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with the "Limitation on Incurrence of
Additional Indebtedness" covenant; and

(2) immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the board of directors shall be
evidenced to the trustee by promptly filing with the trustee a copy of the
board resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the foregoing
provisions.

"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.

"Wholly Owned Restricted Subsidiary" of any Person means any Wholly Owned
Subsidiary of such Person which at the time of determination is a Restricted
Subsidiary of such Person.

"Wholly Owned Subsidiary" of any Person means any Subsidiary of such Person
of which all the outstanding voting securities (other than in the case of a
foreign Subsidiary, directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable law) are
owned by such Person or any Wholly Owned Subsidiary of such Person.

EXCHANGE OFFER; REGISTRATION RIGHTS

As part of the sale of the old notes to BT Alex. Brown, NationsBanc
Montgomery Securities LLC and First Union Capital Markets pursuant to the
purchase agreement, dated April 1, 1999, among RailWorks and those initial
purchasers, the holder of the old notes became entitled to the benefits of the
registration rights agreement, dated as of April 7, 1999 by and among RailWorks
and the initial purchasers.

Under the registration rights agreement, we have agreed:

- to file a registration statement with the SEC with respect to a
registered offer to exchange the old notes for new 11 1/2% Senior
Subordinated Notes due 2009, having terms substantially identical in all
material respects to the old nots, except that the new notes will not
contain transfer restrictions, by June 7, 1999;

- to use our reasonable best efforts to cause the registration statement to
become effective under the Securities Act by September 7, 1999;

- to offer the new notes and the related guarantees in exchange for
surrender of the old notes following the effective date of the
registration statement; and

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- to use our reasonable best efforts to keep the exchange offer open for at
least 30 days, or longer if required by applicable law, after the date
that the notice of the exchange offer is mailed to the holders of the old
notes.

The exchange offer being made hereby, if consummated within the required
time periods, will satisfy our obligations under the registration rights
agreement. We understand that there are approximately twenty-seven record
holders of old notes. For each old note validly surrendered to us pursuant to
the exchange offer and not validly withdrawn, the holder will receive a new note
having a principal amount equal to that of the surrendered old note. Interest on
each old note will accrue (i) from the later of (A) the last interest payment
date on which interest was paid on the old note surrendered in exchange for the
new note or, (B) if the old note is surrendered for exchange on a date in a
period that includes the record date for an interest payment date to occur on or
after the date of the exchange and as to which interest will be paid, the date
of such interest payment date, or (ii) if no interest has been paid on the old
note, from April 7, 1999.

Under existing interpretations of the SEC contained in several no-action
letters to third parties, we believe that the new notes and the related
guarantees will be freely transferable by the holders, other than affiliates of
RailWorks, after the exchange offer without further registration under the
Securities Act; provided, however, that if you want to exchange your old notes
for new notes, you will be required to represent:

(1) you have full power and authority to tender, sell, assign and
transfer the old notes surrendered;

(2) we will acquire good title to the old notes being surrendered,
free and clear of all security interests, liens, restrictions, charges,
encumbrances, conditional sale agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim when we accept
the old notes;

(3) you are acquiring the new notes in the ordinary course of your
business;

(4) you are not engaging and do not intend to engage in a distribution
of the new notes;

(5) you have no arrangement or understanding with any person to
participate in the distribution of the new notes;

(6) you acknowledge and agree that if you are a broker-dealer
registered under the Exchange Act or you are participating in the exchange
offer for the purpose of distributing the new notes, you must comply with
the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale of the new notes, and that you cannot
rely on the position of the SEC's staff set forth in their no-action
letters;

(7) you understand that a secondary resale transaction described above
and any resales of new notes obtained by you in exchange for old notes
acquired by you directly from us should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or 508, as applicable, of Regulation S-K of the SEC;
and

(8) you are not an "affiliate", as defined in Rule 405 under the
Securities Act, of RailWorks or any subsidiary guarantor, or, if you are an
"affiliate," that you will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.

We agree to make available, during the period required by the Securities
Act, a prospectus meeting the requirements of the Securities Act for use by
Participating Broker-Dealers and other

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persons, if any, with similar prospectus delivery requirements for use in
connection with any resale of new notes.

If (1) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, we are not permitted to effect an
exchange offer, (2) we do not complete the exchange offer by October 11, 1999,
(3) under certain circumstances, some holders of unregistered new notes so
request, or (4) in the case of any holder that participates in the exchange
offer, that holder does not receive new notes on the date of the exchange that
may be sold without restriction under state and federal securities laws, other
than due solely to the status of that holder as an affiliate of RailWorks or
within the meaning of the Securities Act, then in each case, we will

- promptly deliver to the holders and the trustee written notice of one of
these changes and

- at our sole expense, file a shelf registration statement covering resales
of the old notes;

- use our reasonable best efforts to keep the shelf registration statement
effective until the earlier of April 7, 2001 or such time as all of the
applicable old notes have been sold under the shelf registration
statement.

In the event that we file a shelf registration statement, we will provide
each holder with copies of the prospectus that is a part of the shelf
registration statement, notify each holder when the shelf registration statement
for the notes has become effective, and take some other actions that are
required to permit unrestricted resales of the notes. A holder that sells notes
pursuant to the shelf registration statement will be required to be named as a
selling security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
Securities Act in connection with such sales and will be bound by the provisions
of the registration rights agreement that are applicable to that kind of holder,
including certain indemnification rights and obligations.

If we fail to comply with the above provisions or if the exchange offer
registration statement or the shelf registration statement fails to become
effective, then, as liquidated damages, we will pay "additional interest" on the
notes as follows:

(1) if (A) neither the exchange offer registration statement nor the
shelf registration statement is filed with the SEC on or prior to the
applicable filing date or (B) despite the fact that we have consummated or
will consummate an exchange offer, we are required to file a shelf
registration statement and we do not file the shelf registration statement
on or prior to the date required by the registration rights agreement, then
commencing on the day after either such required filing date, additional
interest will accrue on the principal amount of the notes at a yearly rate
of 0.25% for the first 90 days immediately following each such filing date;
the additional interest rate will increase by an additional 0.25% per annum
at the beginning of each subsequent 90-day period; or

(2) if (A) neither the exchange offer registration statement nor a
shelf registration statement is declared effective by the SEC on or prior
to 150 days after the applicable filing date set forth in the registration
rights agreement or (B) despite the fact that we have consummated or will
consummate an exchange offer, we are required to file a shelf registration
statement and the SEC does not declare the shelf registration statement
effective on or prior to the 150th day following the date the shelf
registration statement was filed, then, commencing on the day after either
required effective date, additional interest will accrue on the principal
amount of the note at a yearly rate of 0.25% for the first 90 days
immediately following that required effective date; the additional interest
rate will increase by an additional 0.25% per annum at the beginning of
each subsequent 90-day period; or

(3) if (A) we have not exchanged new notes for all old notes validly
surrendered in accordance with the terms of the exchange offer on or prior
to October 11, 1999, or (B) if

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applicable, the shelf registration statement has been declared effective
and the shelf registration statement ceases to be effective at any time
prior to April 7, 2001, other than after such time as all notes have been
disposed of under the shelf registration statement, then additional
interest will accrue on the principal amount of the notes at a yearly rate
of 0.25% for the first 90 days commencing on (x) the 36th day after the
effective date, in the case of (A) above, or (y) the day the shelf
registration statement ceases to be effective, in the case of (B) above;
the additional interest rate will increase by an additional 0.25% per annum
at the beginning of each subsequent 90-day period;

provided, however, that the additional interest rate on the notes may not accrue
under more than one of the foregoing clauses (1) -- (3) at any one time and at
no time shall the aggregate amount of additional interest accruing exceed in the
aggregate 1.5% per year; provided, further, however, that (c) upon the filing of
the exchange offer registration statement or a shelf registration statement, in
the case of clause (1) above, (d) upon the effectiveness of the exchange offer
registration statement or a shelf registration statement, in the case of clause
(2) above, or (e) upon the exchange of new notes for all old notes surrendered,
in the case of clause (3)(A) above, or upon the effectiveness of the shelf
registration statement that had ceased to remain effective, in the case of
clause (3)(B) above, additional interest on the notes as a result of such
clause, or the relevant subclause of that clause, as the case may be, shall
cease to accrue.

Any amounts of additional interest due pursuant to clause (1), (2) or (3)
above will be payable in cash on the same original interest payment dates as the
notes.

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BOOK-ENTRY; DELIVERY AND FORM

The exchange notes initially will be represented by one or more permanent
global certificates in definitive, fully registered form (the "Global notes").
The Global notes will be deposited upon issuance with DTC and registered in the
name of a nominee of DTC.

THE GLOBAL NOTE

We expect that pursuant to procedures established by DTC (1) upon the
issuance of the Global notes, DTC or its custodian will credit, on its internal
system, the principal amount at maturity of the individual beneficial interests
represented by such Global notes to the respective accounts of persons who have
accounts with such depositary and (2) ownership of beneficial interests in the
Global notes will be shown on, and the transfer of such ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants). Ownership of beneficial interests
in the Global notes will be limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants. Holders may
hold their interests in the Global notes directly through DTC if they are
participants in DTC's system, or indirectly through organizations that are
participants in such system.

So long as DTC, or its nominee, is the registered owner or holder of the
new notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the new notes represented by such Global notes for all
purposes under the indenture. No beneficial owner of an interest in the Global
notes will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the indenture with respect
to the new notes.

Payments of the principal of, premium, if any, interest, including
additional interest, on, the Global notes will be made to DTC or its nominee as
the registered owner of the Global notes. None of RailWorks, the trustee or any
paying agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global notes or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interest.

We expect that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, interest, including additional interest, on the
Global notes, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global notes as shown on the records of DTC or its nominee. We also
expect that payments by participants to owners of beneficial interests in the
Global notes held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.

Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
certificated security for any reason, including to sell new notes to persons in
states that require physical delivery of the new notes, or to pledge such
securities, such holder must transfer its interest in a Global note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the indenture.

DTC has advised us that it will take any action permitted to be taken by a
holder of new notes, including the presentation of new notes for exchange as
described below, only at the direction of one or more participants to whose
account the DTC interests in the Global notes are credited and only in respect
of such portion of the aggregate principal amount of notes as to which such
participant or participants has or have given such direction. However, if there
is an

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Event of Default under the Indenture, DTC will exchange the Global notes for
certificated securities, which it will distribute to its participants.

DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.

Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither RailWorks nor the trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.

CERTIFICATED SECURITIES

Certificated securities will be issued in exchange for beneficial interests
in the Global notes (1) if requested by a holder of such interests or (2) if DTC
is at any time unwilling or unable to continue as a depositary for the Global
notes and a successor depositary is not appointed by RailWorks within 90 days.

PLAN OF DISTRIBUTION

We are not using any underwriters for this exchange offer. We are also
bearing the expenses of the exchange.

This prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of any new notes
received in exchange for old notes acquired by such broker-dealer as a result of
market-making or other trading activities. Each such broker-dealer that receives
new notes for its own account in exchange for such old notes pursuant to the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. We have agreed that for a period of up to 180
days after the registration statement is declared effective, we will make this
prospectus, as amended or supplemented, available to any such broker-dealer that
requests copies of this prospectus in the letter of transmittal for use in
connection with any such resale.

We will not receive any proceeds from any sale of new notes by
broker-dealers or any other persons. New notes received by broker-dealers for
their own account pursuant to the exchange offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions or through the writing of options on the exchange notes, or a
combination of such methods of resale, at market prices prevailing at the time
of resale or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such exchange notes. Any broker-dealer that resells new notes
that were received by it for its own account pursuant to the exchange offer in
exchange for old notes acquired by such broker-dealer as a result of
market-making or other trading activities and any broker-dealer that
participates in a distribution of such new notes may

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be deemed to be an "underwriter" within the meaning of the Securities Act. Any
profit on these resales of new notes and any commissions or concessions received
by any persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.

We have agreed to pay all expenses incident to our performance of, or
compliance with, the registration rights agreement and will indemnify the
holders of old notes, including any broker-dealers, and certain parties related
to these holders, against various liabilities, including liabilities under the
Securities Act.

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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS

THIS SUMMARY IS OF A GENERAL NATURE AND IS INCLUDED HEREIN SOLELY FOR
INFORMATIONAL PURPOSES. IT IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED AS
BEING, LEGAL OR TAX ADVICE. WE MAKE NO REPRESENTATION WITH RESPECT TO THE
CONSEQUENCES TO ANY HOLDER OF THE NOTES. YOU SHOULD CONSULT YOUR OWN TAX
ADVISORS WITH RESPECT TO YOUR PARTICULAR CIRCUMSTANCES.

The following discussion is a summary of certain United States federal
income tax considerations relevant to the exchange of old notes for new notes
pursuant to the exchange offer. The summary is based upon current provisions of
the Internal Revenue Code of 1986, as amended, judicial decisions, and
administrative interpretations, all of which are subject to change at any time
by legislative, judicial or administrative action. Any such changes may be
applied retroactively in a manner that could adversely affect a holder of the
notes. There can be no complete assurance that the Internal Revenue Service will
not challenge the conclusions stated below, and no ruling from the Internal
Revenue Service has been or will be sought on any of the matters discussed
below.

The following discussion does not purport to be a complete analysis of all
the potential federal income tax consequences of exchanging old notes for new
notes, and, without limiting the generality of the foregoing, this summary does
not address the effect of any special rules applicable to certain types of
holders, including dealers in securities, insurance companies, financial
institutions, tax-exempt entities, persons owning notes through partnerships or
other pass-through entities, former citizens or residents of the United States
and persons who hold notes as part of a straddle, hedge, or conversion
transaction. In addition, this discussion is limited to holders who hold the
notes as capital assets within the meaning of Section 1221 of the Internal
Revenue Code. This discussion does not address the effect of any state, local,
or foreign tax laws.

The exchange of old notes for new notes pursuant to the exchange offer will
not be treated as an "exchange" for federal income tax purposes because the new
notes do not differ materially in kind or extent from the old notes.
Accordingly, (i) holders will not recognize taxable gain or loss upon the
receipt of new notes in exchange for old notes in the exchange offer, (ii) the
holding period for a new note received in the exchange offer will include the
holding period of the old note surrendered in exchange for the new note, and
(iii) the adjusted tax basis of a new note immediately after the exchange will
be the same as the adjusted tax basis of the old note surrendered in exchange
for the new note.

We recommend that you consult your own tax advisor as to the particular
consequences of exchanging your old notes for new notes, including the
applicability and effect of any state, local or foreign tax laws.

LEGAL MATTERS

The validity of the new notes will be passed upon for us by King &
Spalding, New York, New York.

EXPERTS

The financial statements of RailWorks Corporation and Subsidiaries, Mid
West Railroad Construction and Maintenance Corporation of Wyoming and F&V Metro
Contracting Corp. and Affiliates included in this prospectus and elsewhere in
the registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.

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The financial statements of Gantrex Group included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent chartered accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said report.

WHERE YOU CAN FIND MORE INFORMATION

RailWorks Corporation files annual, quarterly and other reports, proxy
statements and other information with the SEC. Our current SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms.

Because our common stock is listed on The Nasdaq National Market, our
reports, proxy statements and other information can be reviewed and copied at
the offices of The Nasdaq Stock Market, Inc. at 1735 K Street, N.W. Washington,
D.C. 20006-1506.

We recommend that you review our Annual Report on Form 10-K for the year
ended December 31, 1998, which we filed with the SEC on March \29, 1999, and our
Quarterly Report on Form 10-Q for the three months ended March 31, 1999, which
we filed with the SEC on May 14, 1999. You may request a copy of our SEC filings
(without exhibits) at no cost, by writing or telephoning us at the following
address:

RailWorks Corporation
1104 Kenilworth Drive, Suite 301
Baltimore, Maryland 21204
(410) 512-0500

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933. You can find discussions containing
forward-looking statements in the "Prospectus Summary," the "Management's
Discussion and Analysis of Financial Condition and Results of Operation,"
"Business -- Competitive Strengths," "Business -- Strategy" and
"Business -- Competition" sections, as well as within this prospectus generally.
We use the words "believes," "anticipates," "expects," "estimates," "plans,"
"intends" and similar expressions so as to identify forward-looking statements.
All forward-looking statements involve substantial risks and uncertainties.
There may be events in the future that we are not accurately able to predict, or
over which we have no control. Some factors that may cause actual results to
differ from projected results are:

- absence of a combined operating history of the operating companies and
difficulties in integrating their operations;

- unanticipated difficulties or delays in implementing our acquisition
program;

- cyclicality in the demand for rail system services and products;

- availability of capital, including our ability to service or refinance
indebtedness;

- an unanticipated decrease in public sector contracts and funding;

- changes in our relationships with major customers;

- effects of changes in general economic conditions;

- actions by competitors;

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- ability to retain qualified personnel; and

- unanticipated costs, difficulties or delays in implementing our Year 2000
compliance program.

Forward-looking statements include, without limitation, our expectations
and estimates as to development of our services and products and expansion of
our customer base, future financial performance, including growth in revenues
and earnings and the effect on our finances of new acquisitions, cash flows from
operations, acquisitions, capital expenditures, the availability of funds from
credit facilities, the sale of securities and the cost and timely implementation
of our Year 2000 compliance modifications.

Consequently, you should regard forward-looking statements only as our
current plans, estimates and beliefs. We do not promise to notify you if we
learn that our assumptions or projections are wrong for any reason. Before you
decide to exchange your notes, you should be aware that the factors we discuss
in the "Risk Factors" section and elsewhere in this prospectus could cause our
actual results to differ from what we have stated in any forward-looking
statements.
------------------

Our principal executive offices are located at 1104 Kenilworth Drive, Suite
301, Baltimore, Maryland 21204. The telephone number at that address is (410)
512-0500.

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INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RAILWORKS CORPORATION AND SUBSIDIARIES
Audited Financials:
Report of Independent Public Accountants.................. F-2
Consolidated Balance Sheets as of December 31, 1998 and
1997................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996....................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996........... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996....................... F-6
Notes to Consolidated Financial Statements................ F-7
Unaudited Financials:
Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998...................................... F-24
Consolidated Statements of Income for the Three Months
Ended March 31, 1999 and 1998.......................... F-25
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998.......................... F-26
Notes to Consolidated Financial Statements.................. F-27
GANTREX GROUP
Report of Independent Chartered Accountants............... F-32
Combined Balance Sheet as of December 31, 1998............ F-33
Combined Statements of Income and Retained Earnings for
the Year Ended December 31, 1998....................... F-34
Combined Statement of Cash Flows for the Year Ended
December 31, 1998...................................... F-35
Notes to Combined Financial Statements.................... F-36
MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION
OF WYOMING
Report of Independent Public Accountants.................. F-40
Balance Sheet as of December 31, 1998..................... F-41
Statement of Operations and Retained Earnings for the Year
Ended December 31, 1998................................ F-42
Statement of Cash Flows for the Year Ended December 31,
1998................................................... F-43
Notes to Financial Statements............................. F-44
F&V METRO CONTRACTING CORP. AND AFFILIATES
Report of Independent Public Accountants.................. F-48
Combined Statement of Net Liabilities as of November 30,
1998................................................... F-49
Combined Statement of Operations for the Year Ended
November 30, 1998...................................... F-50
Combined Statement of Cash Flows for the Year Ended
November 30, 1998...................................... F-51
Notes to Combined Financial Statements.................... F-52
</TABLE>

F-1
<PAGE> 124

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To RailWorks Corporation:

We have audited the accompanying consolidated balance sheets of RailWorks
Corporation (a Delaware corporation) and Subsidiaries and its predecessor entity
(the "Company"), as of December 31, 1998 and 1997 and the related consolidated
statements of operations, stockholders' equity and cash flows for the three
years in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and the disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1998 and 1997 and the results of its operations and its cash
flows for the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.

Arthur Andersen LLP

Stamford, Connecticut
February 8, 1999

F-2
<PAGE> 125

RAILWORKS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 2,846 $ 1,120
Accounts receivable, net of allowance for doubtful
accounts of $442 and $58................................ 77,181 46,436
Costs and estimated earnings in excess of billings on
uncompleted contracts................................... 24,792 17,149
Inventories:
Raw materials........................................... 7,535 1,240
Finished goods.......................................... 1,550 --
Deferred tax asset........................................ 870 1,020
Other current assets...................................... 3,401 977
-------- -------
Total current assets............................... 118,175 67,942
-------- -------
PROPERTY, PLANT AND EQUIPMENT............................... 14,514 448
LESS ACCUMULATED DEPRECIATION AND
AMORTIZATION.............................................. 1,122 56
-------- -------
PROPERTY, PLANT AND EQUIPMENT, NET.......................... 13,392 392
-------- -------
OTHER ASSETS:
Excess of cost over net assets acquired, net of
amortization............................................ 93,845 --
Deferred tax asset........................................ 85 --
Loans to officers......................................... 959 --
Other..................................................... 2,180 18
-------- -------
Total other assets................................. 97,069 18
-------- -------
$228,636 $68,352
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt...................... $ 931 $ 2,555
Accounts payable and accrued liabilities.................. 35,436 22,547
Accrued payroll and related withholdings.................. 3,777 4,711
Billings in excess of costs and estimated earnings on
uncompleted contracts................................... 5,958 8,510
Other current liabilities................................. 4,682 3,119
-------- -------
Total current liabilities.......................... 50,784 41,442
-------- -------
Long-term debt............................................ 50,573 12,449
Excess of acquired net assets over cost, net of
amortization............................................ 8,662 10,210
Other liabilities......................................... 8,609 2,813
-------- -------
Total long-term liabilities........................ 67,844 25,472
-------- -------
Total liabilities.................................. 118,628 66,914
-------- -------
Stockholders' Equity:
Series A, convertible preferred stock, $1.00 par value,
authorized 10,000,000 shares, 13,700 shares issued and
outstanding............................................. 14 --
Common stock, $0.01 par value, authorized 100,000,000
shares, 13,703,530 shares issued and outstanding in
1998, 2,959,291 issued and outstanding in 1997.......... 137 30
Additional paid-in capital................................ 121,296 --
Retained earnings (deficit)............................... (11,439) 1,408
-------- -------
Total stockholders' equity......................... 110,008 1,438
-------- -------
$228,636 $68,352
======== =======
</TABLE>

See Notes to Consolidated Financial Statements.

F-3
<PAGE> 126

RAILWORKS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Revenue................................................ $ 212,533 $ 153,610 $188,767
Cost of revenue........................................ 182,817 136,678 169,303
---------- ---------- --------
Gross profit........................................... 29,716 16,932 19,464
Selling, general and administrative expenses........... 17,040 13,733 15,053
Non-recurring expenses................................. 19,965 -- --
Transaction fees....................................... 1,281 -- --
Depreciation and amortization expense.................. 2,105 (213) 1,365
---------- ---------- --------
Operating (loss) income................................ (10,675) 3,412 3,046
---------- ---------- --------
Other income(expense):
Interest expense..................................... (2,334) (1,761) (2,023)
Interest and other income............................ 1,634 975 476
Management fee to former parent...................... -- -- (941)
---------- ---------- --------
Other expense, net................................... (700) (786) (2,488)
---------- ---------- --------
(Loss) income before income taxes...................... (11,375) 2,626 558
Provision for income taxes............................. 1,472 1,198 500
---------- ---------- --------
Net (loss) income...................................... $ (12,847) $ 1,428 $ 58
========== ========== ========
Basic and diluted (loss) earnings per share............ $ (1.67) $ .48
========== ==========
Weight average shares used in computing (loss) earnings
per share............................................ 7,694,267 2,959,291
========== ==========
</TABLE>

See Notes to Consolidated Financial Statements.

F-4
<PAGE> 127

RAILWORKS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
--------------- --------------- ADDITIONAL RETAINED EARNINGS
SHARES AMOUNT SHARES AMOUNT PAID-IN CAPITAL (DEFICIT) TOTAL
------ ------ ------ ------ --------------- ----------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY
BALANCE, DECEMBER 31, 1995.......... 1,200 $ -- -- $-- $ 22,114 $ (1,547) $ 20,567
Capital contribution.............. -- -- -- -- 1,110 -- 1,110
Transfer of note receivable....... -- -- -- -- (4,745) -- (4,745)
Net income........................ -- -- -- -- -- 58 58
------ ---- -- --- -------- -------- --------
BALANCE DECEMBER 31, 1996........... 1,200 $ -- -- $-- $ 18,479 $ (1,489) $ 16,990
====== ==== == === ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------

BALANCE JANUARY 1, 1997............. -- $ -- -- $-- $ -- $ -- $ --
Capital contribution.............. 111 1 -- -- 9 -- 10
Recapitalization.................. 2,849 29 -- -- (9) (20) --
Net income........................ -- -- -- -- -- 1,428 1,428
------ ---- -- --- -------- -------- --------
BALANCE DECEMBER 31, 1997........... 2,960 30 -- -- -- 1,408 1,438
Issuance of common stock.......... 5,908 59 -- -- 54,023 -- 54,082
Non-cash compensation charge...... 1,206 12 -- -- 14,861 -- 14,873
Initial public offering, net of
underwriting discount and
offering expenses............... 5,000 50 -- -- 52,412 -- 52,462
Issuance of preferred stock....... (1,370) (14) 14 14 -- -- --
Net loss.......................... -- -- -- -- -- (12,847) (12,847)
------ ---- -- --- -------- -------- --------
BALANCE, DECEMBER 31, 1998.......... 13,704 $137 14 $14 $121,296 $(11,439) $110,008
====== ==== == === ======== ======== ========
</TABLE>

See Notes to Consolidated Financial Statements.

F-5
<PAGE> 128

RAILWORKS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
1998 1997 1996
-------- -------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income........................................... $(12,847) $ 1,428 $ 58
Adjustments to reconcile net (loss) income to net cash used
in operating activities:
Depreciation and amortization............................. 2,105 (213) 1,365
Non-cash compensation charge.............................. 14,873 -- --
Deferred taxes............................................ 65 664 --
Gain on sale of division.................................. (861) -- --
Gain on sale of equipment................................. (3) (194) (39)
Change in contract reserves............................... -- -- (3,000)
Change in operating assets and liabilities:
Accounts receivable and costs and estimated earnings in
excess of billings on uncompleted contracts........... (15,236) (8,176) (6,231)
Inventory............................................... (274) 296 (947)
Other current assets.................................... (1,066) (271) (4,209)
Accounts payable and accrued liabilities................ 2,726 (1,159) (1,772)
Accrued payroll and related withholdings................ (1,269) 549 365
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. (4,458) 3,320 2,307
Other current liabilities............................... (1,252) 909 (103)
Other assets............................................ (1,145) (18) (3)
Other liabilities....................................... 4,713 (336) 257
-------- -------- --------
Net cash used in operating activities............... (13,929) (3,201) (11,952)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of division............................ 1,000 -- --
Proceeds from sale of equipment........................... 32 194 130
Purchase of equipment and leasehold improvements.......... (1,280) (448) (690)
Acquisition of subsidiaries, net of cash acquired......... (52,535) -- --
Contingent earnout payment................................ (1,600) -- --
-------- -------- --------
Net cash used in investing activities............... (54,383) (254) (560)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of loan origination fee........................... (1,615) -- --
Proceeds from issuance of common stock, net............... 52,462 -- 1,110
Proceeds from contingent promissory notes................. -- 14,608 --
Repayment of contingent promissory notes.................. -- (157) --
Loans to officers......................................... (959) -- --
Proceeds from note payable................................ -- 4,000 --
Repayments of note payable................................ -- (4,000) --
Proceeds from long-term borrowing......................... 61,325 16,937 7,961
Repayment of long-term borrowing.......................... (41,175) (26,823) (2,312)
-------- -------- --------
Net cash provided by financing activities........... 70,038 4,565 6,759
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 1,726 1,110 (5,753)
CASH AND CASH EQUIVALENTS, beginning of year................ 1,120 10 9,924
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of year...................... $ 2,846 $ 1,120 $ 4,171
======== ======== ========
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest.................... $ 2,107 $ 1,478 $ 1,305
======== ======== ========
Cash paid during the year for income taxes................ $ 392 $ 188 $ 57
======== ======== ========
</TABLE>

NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES:

The Company issued 8,867,648 shares of common stock in exchange for 100% of
the outstanding common stock of the Subsidiaries.

See Notes to Consolidated Financial Statements.

F-6
<PAGE> 129

RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

RailWorks Corporation, a Delaware corporation, ("RailWorks" or the
"Company"), was formed in March 1998 to acquire, integrate and facilitate the
growth of similar and complementary companies in the rail system services and
products industry.

On July 29, 1998, RailWorks announced the initial public offering ("IPO")
of 5,000,000 shares of its common stock at a price of $12.00 per share. The
initial public offering was consummated on August 4, 1998. The capital raised by
this offering was $55,800,000 net of underwriting discounts.

Concurrent with the consummation of the IPO, the Company acquired 14 groups
of companies (the "Founding Companies") in the rail system services and related
products industry. The aggregate consideration paid by the Company to acquire
these companies was approximately $51,100,000 in cash and 8,867,648 shares of
RailWorks common stock.

For accounting and financial statement purposes, Comstock Holdings, Inc.
(one of the Founding Companies) ("Comstock" or the "Accounting Acquirer") has
been identified as the accounting acquirer consistent with Staff Accounting
Bulletin ("SAB") No. 97 of the Securities and Exchange Commission. The
acquisitions of the remaining Founding Companies were accounted for using the
purchase method of accounting and accordingly, the purchase price has been
allocated to the assets acquired and the liabilities assumed based upon the fair
values at the date of acquisition. The acquisitions of the Founding Companies
resulted in the recording of goodwill of approximately $94,817,000, which is
being amortized over 40 years.

On November 4, 1998, the Company acquired substantially all of the net
assets of Sheldon Electric, Inc. ("Sheldon"). Also, on November 4, 1998, the
Company acquired the stock of Armcore Railroad Contractors, Inc. ("Armcore"), an
Indiana corporation located in Frankfurt, Indiana. The aggregate price paid for
these acquisitions was approximately $3,100,000 in cash. The acquisitions of
Sheldon and Armcore were accounted for using the purchase method of accounting.
The estimated goodwill associated with these acquisitions aggregated
approximately $2,449,000.

Comstock was incorporated on November 20,1996 as a Delaware corporation for
the purpose of acquiring L.K. Comstock & Company, Inc. (the "Predecessor
Company"). Comstock had no operations from incorporation through January 1,
1997.

Effective January 1, 1997, Comstock purchased the stock of the Predecessor
Company. The financial statements, including those of the Predecessor Company
prior to its acquisition, have been prepared by Comstock management and present
the financial position and results of operations of Comstock as of and for the
year ended December 31, 1997 and of the Predecessor Company for the periods
prior to January 1, 1997. Accordingly, the financial information for periods
prior to 1997 do not reflect the significant impact of the Predecessor Company
acquisition or of the purchase accounting adjustments on the financial position
and results of operations of Comstock.

The Predecessor Company was acquired by Comstock through various agreements
(the "Agreements") entered into with Comstock Group, Inc. ("Group", the
Predecessor Company's former parent), Spie Group Inc. ("Spie", the parent of
Group), Spie Enertrans SA ("Enertrans", the former parent of Spie) and Schneider
Electric Holdings Inc. ("Schneider", parent of Spie). The Agreements principally
called for: (1) the sale of the common stock of the Predecessor Company to
Comstock (the "Sale"), (2) the issuance of various contingent promissory notes
by Comstock to Enertrans and Group in exchange for approximately $18,903,000,
(3) the transfer of

F-7
<PAGE> 130
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

various intangible assets of Spie to Comstock, (4) the provision for various
income tax elections and indemnifications, and (5) certain other
indemnifications and cooperative understandings. The effects of the Agreements
have been accounted for as a purchase in the accompanying financial statements
as of and for the year ended December 31, 1997. In connection with the IPO of
RailWorks, Group agreed to accept a one-time payment of $1,600,000 to satisfy
all potential contingent payments owed in connection with the Agreements. Such
payment was made by RailWorks on September 8, 1998.

As part of the Agreements, certain intangible assets (recorded at no value)
were assigned to Comstock. In addition, Comstock issued a promissory note (the
"Contingent Promissory Note"), collateralized by certain investments related to
customer contracts involving claims and an investment in a joint venture (the
"Investments"). The remaining balance of the Contingent Promissory Note of
$12,240,000 at December 31, 1998 is payable only from amounts collected by
Comstock relating to the Investments until April 3, 2007, at which time the note
is cancelled. As such, Enertrans and any successor to it or creditor may not
look to any other Comstock assets to satisfy this indebtedness. Accordingly,
management believes a right of offset exists for financial reporting purposes
and the Investments and the Contingent Promissory Note have been offset in the
accompanying balance sheets at December 31, 1998 and 1997 in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 125 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."

In connection with the Sale, $5,095,000 of cash from the Predecessor
Company was used by Comstock to fund its acquisition of the Predecessor Company.
Accordingly, and as a result of the purchase price adjustments, the fair value
of the net assets acquired exceeds the purchase price funded solely by Comstock.
In accordance with Accounting Principles Board Opinion No. 16 "Business
Combinations", the excess of the cost of net assets acquired first reduced the
non current assets to zero with the remainder allocated to "Excess of Acquired
Net Assets Over Cost", (negative goodwill) which amount is being amortized over
40 years.

2. NATURE OF BUSINESS

RailWorks was formed to become a leading nationwide provider of rail system
services, including construction and rehabilitation, repair and maintenance, and
related products. The Company provides contracting services and rail related
products to a broad range of customers including Class I railroads, transit
authorities and commuter railroads, municipalities, industrial companies and
commercial enterprises. RailWorks operates principally in the United States.

During 1998, the Company adopted SFAS No. 131 "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS No. 131"). In accordance with
SFAS No. 131, the Company has three reportable segments: (1) transit services,
(2) rail construction, rehabilitation, repair and maintenance services and (3)
rail products and supplies. The transit services segment provides transit
construction and rehabilitation services, as well as installation of signaling,
communications and electrical systems. The rail construction services segment
provides design, engineering, construction, rehabilitation and repair and
maintenance of track systems. The rail products and supplies segment provides a
broad range of rail related products, including treated wood ties. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies. RailWorks evaluates performance
based on profit or loss from operations before income taxes, interest income and
expense, and non-recurring gains and losses.

F-8
<PAGE> 131
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated.

The Company accounts for intersegment sales and transfers as if the sales
or transfers were to third parties, utilizing current market prices and arms
length terms and conditions.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

REVENUE RECOGNITION

The Company recognizes revenues from fixed-fee contracts using the
percentage-of-completion method, measured by the percentage of cost incurred to
date to management's estimated total cost for each contract. This method is used
because management considers total cost to be the best available measure of
progress on the contracts. Changes in job performance, job conditions and
estimated profitability may result in revisions to cost and income, which are
recognized in the period in which the revisions are determined. Revenues from
time-and-material contracts are recognized currently as the work is performed.

Contract costs include all direct material, labor and equipment costs and
those indirect costs related to contract performance and are charged to cost of
revenues as incurred. Provisions for estimated losses on uncompleted contracts
are made in the period in which such losses are determined.

The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.

With regard to the rail products segment, the Company recognizes revenue
when products are delivered to customers pursuant to shipping agreements. Cost
of goods sold includes the raw materials cost, labor and overhead costs of
producing the product.

In accordance with industry practice, the Company classifies as current all
assets and liabilities related to the performance of long-term contracts. The
contracting cycle for certain long-term contracts may extend beyond one year
and, accordingly, collection or payment of amounts related to these contracts
may extend beyond one year.

CASH AND CASH EQUIVALENTS

The Company considers cash and cash equivalents to include cash on hand and
temporary cash investments purchased with an original maturity of three months
or less.

F-9
<PAGE> 132
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out (FIFO) method. Inventory consists of stored materials
and parts to be used in long-term construction contracts and raw materials and
finished goods produced by the rail products segment companies.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost. Included in machinery
and equipment is specialty construction tools and other equipment which,
although purchased in connection with a particular contract, is expected to be
used in future contracts. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets as follows:

<TABLE>
<S> <C>
Building and improvements................................... 15 - 30 years
Machinery and equipment..................................... 3 - 7 years
Office furniture and equipment.............................. 5 - 7 years
Transportation equipment.................................... 5 - 7 years
</TABLE>

Leasehold improvements are capitalized and amortized over the shorter of
the estimated useful lives of the assets or the terms of the related leases.

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.

INCOME TAXES

The Company follows the liability method of accounting for income taxes in
accordance with SFAS No. 109. Under this method, deferred income taxes are
recorded based upon differences between the financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the underlying assets or liabilities are received or
settled. Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized.

F-10
<PAGE> 133
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EARNINGS PER SHARE

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share". This statement supersedes APB Opinion No. 15,
"Earnings per Share" and simplifies the computation of earnings per share
("EPS"). Primary EPS is replaced with a presentation of basic EPS. Basic EPS
includes no dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Fully diluted EPS is replaced with diluted EPS. Diluted EPS reflects the
potential dilution if certain securities are converted and also includes certain
shares that are contingently issuable. The following is the computation of
earnings per share (in thousands, except per share data):

<TABLE>
<CAPTION>
1998 1997
-------- ------
<S> <C> <C>
Net (loss) income........................................... $(12,847) $1,428
======== ======
Shares used for determining basic EPS....................... 7,694 2,960
Dilutive effect of:
Stock options............................................. * --
Convertible preferred shares.............................. * --
-------- ------
Shares used for determining diluted EPS..................... 7,694 2,960
======== ======
Basic EPS................................................... $ (1.67) $ .48
======== ======
Diluted EPS................................................. $ (1.67) $ .48
======== ======
</TABLE>

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

* Outstanding stock options and convertible preferred shares would be
antidilutive in 1998 and therefore were excluded.

No stock options or convertible preferred shares were outstanding in 1997.

INTANGIBLE ASSETS

Intangible assets consist primarily of excess purchase price over net
assets acquired (goodwill), which is being amortized over its estimated useful
life of 40 years. In conformance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
the Company's management regularly evaluates whether events and circumstances
indicate that the remaining balance of intangibles or other long-lived assets
may not be recoverable.

The Excess of Acquired Net Assets Over Cost (negative goodwill) was
generated from the acquisition of the Predecessor Company. The amortization
period of the negative goodwill is 40 years. During 1998, the negative goodwill
was reduced by the additional $1,600,000 purchase price paid to Group.

Amortization expense, including negative amortization of $252,000 in 1998
and $269,000 in 1997, of the years ended December 31, 1998, 1997 and 1996
amounted to $965,000, $(269,000) and $16,000, respectively.

F-11
<PAGE> 134
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. ACCOUNTS RECEIVABLE AND CONTRACTS IN PROGRESS

Accounts receivable at December 31, 1998 and 1997 consisted of the
following (in thousands):

<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Billed...................................................... $58,702 $31,400
Retainages.................................................. 18,479 15,036
------- -------
$77,181 $46,436
======= =======
</TABLE>

Retainages of approximately $5,783,000 and $4,388,000 at December 31, 1998
and 1997 are invested in U.S. government obligations and municipal bonds. The
Company anticipates that 47% of all retainages at December 31, 1998 will be
collected within one year.

Costs and estimated earnings in excess of billings on uncompleted contracts
arise when revenues have been recorded but the amounts cannot be billed
currently under the terms of the contracts. Such amounts are recoverable from
customers upon various measures of performance, including achievement of certain
milestones, completion of specified units or completion of the contract. The
Company anticipates that substantially all amounts, other than unanticipated
additional contract costs (see below), will be billed and collected within one
year.

The Company has recorded as costs and estimated earnings in excess in
billings on uncompleted contracts amounts that it seeks or will seek to collect
from customers or others for error or changes in contract specifications or
design, contract change orders in dispute or unapproved as to both scope and
price, or other customer-related causes of unanticipated additional contract
costs (pending change orders or claims). These amounts are recorded at their
estimated net realizable value when realization is probable and can be
reasonably estimated. No profit is recognized on the construction costs incurred
in connection with these amounts. Pending change orders and claims involve the
use of estimates and it is reasonably possible that revisions to the estimated
recoverable amounts of recorded pending change orders and claims may be made in
the near-term. Claims made by the Company involve negotiation and, in certain
cases litigation. The Company expenses such costs as incurred, although it may
seek to recover these costs as part of the claim. The Company believes that it
has established legal bases for pursuing recovery of recorded claims and it is
management's intention to pursue and litigate these claims, if necessary, until
a decision or settlement is reached.

The Company is pursuing unanticipated additional contract costs on certain
completed contracts. Costs and estimated earnings in excess of billings on
uncompleted contracts includes unbilled revenues of approximately $11,054,000
and $3,915,000 at December 31, 1998 and 1997, respectively, related to these
contracts. In addition, billed accounts receivable and retainages include
contractually billed amounts related to these contracts of approximately
$3,105,000 and $2,257,000 at December 31, 1998 and 1997, respectively. Certain
contractually billed amounts related to these contracts may not be paid by the
customer to the Company until final resolution of the contract. At December 31,
1998 and 1997, the Company had reserves of approximately $4,500,00 and
$2,285,000, respectively, related to unbilled revenue and estimated legal costs
to settle.

F-12
<PAGE> 135
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Costs and estimated earnings at December 31, 1998 and 1997, on uncompleted
contracts and related amounts billed are as follows (in thousands):

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Costs....................................................... $429,114 $363,561
Estimated earnings.......................................... 47,575 46,027
-------- --------
476,689 409,588
Billings.................................................... 457,855 400,949
-------- --------
$ 18,834 $ 8,639
======== ========
</TABLE>

Such amounts are included in the accompanying consolidated balance sheets
under the following captions (in thousands):

<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... $24,792 $17,149
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (5,958) (8,510)
------- -------
$18,834 $ 8,639
======= =======
</TABLE>

At December 31, 1998, 1997 and 1996, earned revenues from government
related funding sources were 40%, 66% and 61%, respectively, of total earned
revenues. Approximately 27%, 30% and 27% of total earned revenues for 1998, 1997
and 1996, respectively, were from a single government customer.

5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following at December 31,
1998 and 1997 (in thousands):

<TABLE>
<CAPTION>
1998 1997
------- ----
<S> <C> <C>
Land and buildings.......................................... $ 1,780 $ --
Transportation equipment.................................... 2,121 --
Machinery and equipment..................................... 10,038 448
Office furniture and equipment.............................. 326 --
Leasehold improvements...................................... 249 --
------- ----
14,514 448
Less accumulated depreciation and amortization.............. 1,122 56
------- ----
Property, plant and equipment, net.......................... $13,392 $392
======= ====
</TABLE>

Depreciation and amortization expense on property, plant and equipment
charged to operations for the years ended December 31, 1998, 1997 and 1996 was
approximately $1,140,000, $56,000 and $1,349,000, respectively.

F-13
<PAGE> 136
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. LONG-TERM DEBT

Long-term debt consists of the following at December 31, 1998 and 1997 (in
thousands):

<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Revolving credit agreement(a)............................... $49,300 $ --
Revolving credit agreement(b)............................... -- 12,057
Temporary revolver(c)....................................... -- 550
Promissory note(d).......................................... -- 1,700
Fixed asset notes........................................... 2,204 697
------- -------
51,504 15,004
Less current portion........................................ 931 2,555
------- -------
$50,573 $12,449
======= =======
</TABLE>

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

(a) On August 4, 1998, the Company entered into a secured $75,000,000 revolving
credit agreement with NationsBank, N.A. (the "Credit Facility"). The Credit
Facility expires on August 4, 2001; however, the Company may request the
bank to extend the agreement for two, one-year periods. The proceeds of the
Credit Facility are to be utilized for working capital, future acquisitions
and letters of credit. The aggregate amount of letter of credit obligations
that can be drawn against the Credit Facility shall not exceed $20,000,000.
There were no letters of credit outstanding at December 31, 1998. Interest
on loans, commitment fees, and letter of credit fees are based upon
consolidated leverage ratios in a pricing matrix which may be based on
prime or LIBOR. The annual interest rates in effect at December 31, 1998,
for prime and LIBOR borrowings were 8.5% and 7.26%, respectively. A one
time facility fee of 2% was paid on the total Credit Facility.

(b) On April 4, 1997, the Company entered into a secured revolving credit
agreement (the "Revolver") with a maximum aggregate principal amount of
$15,000,000 (the "Commitment"). Interest on Base Rate loans was at a rate
of 1% plus the Base Rate, as defined (approximately prime rate); interest
on Eurodollar loans was at 3.25% plus the Eurodollar Rate, as defined
(approximately LIBOR). An annual facility fee of 1% and a commitment fee of
1/2 of 1% were payable on the total Commitment and the total unused
Commitment, respectively. Up to $10,000,000 of letters of credit could be
drawn against the Commitment, $2,911,655 of which was drawn at December 31,
1997. This obligation was repaid in its entirety on August 4, 1998.

(c) On December 11, 1997, the Company entered into a short-term secured
revolving credit agreement (the "Temporary Revolver") with a maximum
principal amount of $2,000,000. Interest on the unpaid principal was at a
rate of 2% plus the Base Rate (approximately prime rate). The Temporary
Revolver was extended from its original maturity and was repaid in its
entirety on August 4, 1998.

(d) Interest on this agreement was payable semi-annually at a rate of 8.5%.
This obligation was repaid in its entirety on August 4, 1998.

The Credit Facility is secured by a first lien on all of the capital stock
of the Company's subsidiaries and on all accounts receivable of the Company and
its subsidiaries. In addition, the Credit Facility contains a negative pledge on
all other assets of the Company and its subsidiaries. The Credit Facility
contains restrictive covenants that, among other things impose limitations on
the Company with respect to its ability to incur additional indebtedness, make
certain investments, sell assets or pay dividends. The Credit Facility also
contains various financial

F-14
<PAGE> 137
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

covenants which require the Company to meet certain targets including, but not
limited to, the maintenance of net worth, earnings before interest, taxes,
depreciation and amortization (EBITDA) to debt ratio and fixed charge coverage
ratio.

7. INCOME TAXES

The Company files a consolidated federal income tax return. The Predecessor
Company's results were included in the consolidated federal income tax return of
Spie.

The income tax provision in the accompanying consolidated statements of
operations for the years ended December 31, 1998, 1997 and 1996 consists of (in
thousands):

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
1998 1997 1996
------ ------ -----------
<S> <C> <C> <C>
Current:
Federal............................................... $ -- $ -- $150
State................................................. 895 132 268
------ ------ ----
895 132 418
------ ------ ----
Deferred:
Federal............................................... 503 941 70
State................................................. 74 125 12
------ ------ ----
577 1,066 82
------ ------ ----
$1,472 $1,198 $500
====== ====== ====
</TABLE>

Factors accounting for the variation from U.S. statutory income tax rates
relating to continuing operations for the years ended December 31, 1998, 1997
and 1996 are as follows (in thousands):

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
1998 1997 1996
------- ------ -----------
<S> <C> <C> <C>
Federal income taxes at the statutory rate............. $(3,981) $ 893 $189
Benefit of NOL......................................... -- -- (189)
Federal alternative minimum tax........................ -- -- 150
State and local taxes.................................. (680) 206 242
Other.................................................. 229 99 108
Valuation allowance.................................... 5,904 -- --
------- ------ ----
$ 1,472 $1,198 $500
======= ====== ====
</TABLE>

F-15
<PAGE> 138
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the net deferred income tax asset in the accompanying
consolidated balance sheets at December 31, 1998 and 1997 are as follows (in
thousands):

<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward........................... $ 3,005 $ 317
Excess of amounts expensed for financial statement
purposes over amounts deducted for income tax
purposes............................................... 4,097 1,451
State and local income taxes, net of federal tax
benefits............................................... 915 481
------- ------
Total deferred tax asset.................................... 8,017 2,249
------- ------
Deferred tax liability,
Costs capitalized for financial statement purposes and
deducted for income tax purposes....................... 1,158 1,229
------- ------
Total deferred tax liability................................ 1,158 1,229
------- ------
Net deferred tax asset before valuation allowance........... 6,859 1,020
Valuation allowance for net deferred tax asset.............. (5,904) --
------- ------
$ 955 $1,020
======= ======
</TABLE>

8. PREFERRED STOCK

The Company has authorized 10,000,000 shares of Series A convertible
preferred stock. The stock has no voting rights, shares dividends ratably with
the common stock, is non-cumulative and has a liquidation preference over shares
of common stock. Each share of preferred stock is convertible into 100 shares of
the Company's common stock.

On October 8, 1998, the Company issued 13,700 shares of its nonvoting
Series A convertible preferred stock in exchange for 1,370,000 shares of common
stock. Each share of Series A convertible preferred stock is convertible to 100
shares of common stock upon five days prior written notice from the holder,
subject to certain conditions.

9. STOCK OPTION PLAN

On August 13, 1998, the Company approved the 1998 Stock Incentive Plan (the
"Plan") which provides for the granting or awarding of stock options and stock
appreciation rights to non-employee directors, officers and other key employees
(including officers of the Subsidiaries) and consultants. The Plan reserves for
issuance 2,000,000 shares of common stock. In general, the terms of the option
awards (including vesting schedules) will be established by the Compensation
Committee of the Company's board of directors.

During 1998 options covering an aggregate of 30,000 shares of common stock
were issued under the Plan. Two non-employee directors were each issued options
to purchase 10,000 shares of common stock at the IPO price. Options to purchase
10,000 shares were also issued to a President of one of the Subsidiaries at the
price of the common stock on the date of the grant. The options expire ten years
after the date of grant.

F-16
<PAGE> 139
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1998, 30,000 options were outstanding:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
------ ----------------
<S> <C> <C>
Balance at inception....................................... -- $ --
Granted.................................................... 30,000 10.02
Exercised.................................................. -- --
------ ------
Balance, December 31, 1998................................. 30,000 $10.02
====== ======
Exercisable, December 31, 1998............................. -- $ --
====== ======
</TABLE>

The weighted average fair value of options granted in 1998 at market value
was $4.79.

The fair value of each stock option grant is estimated as of the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions:

<TABLE>
<S> <C>
Risk-free interest rate at date of grants................... 5.25 - 5.79%
Expected lives.............................................. 3 to 6 years
Expected volatility......................................... 44.0%
Expected dividend yield..................................... 0%
</TABLE>

The following table summarizes information about stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>
NUMBER OF
OPTIONS WEIGHTED WEIGHTED
OUTSTANDING AT AVERAGE REMAINING AVERAGE
EXERCISE PRICE DECEMBER 31, 1998 CONTRACTUAL LIFE EXERCISE PRICE
- -------------- ----------------- ----------------- --------------
<S> <C> <C> <C>
$6.06 to 12.00..................... 30,000 9.59 $10.02
====== ==== ======
</TABLE>

The Company applies APB No. 25 and related interpretations in accounting
for its stock option plans. Accordingly, no compensation cost has been
recognized in the accompanying consolidated statements of operations for the
year ended December 31, 1998 for options granted during that year. Had
compensation expense for all stock options granted in 1998 been determined
consistent with SFAS No. 123, the Company's net income per share would have been
as follows:

<TABLE>
<S> <C>
Net loss:
As Reported............................................... $(12,847)
========
Pro Forma................................................. $(12,864)
========
Net loss per share:
As Reported -- basic and diluted.......................... $ (1.67)
========
Pro Forma -- basic and diluted............................ $ (1.67)
========
</TABLE>

The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts and additional awards in future years are
anticipated.

10. EMPLOYEE BENEFIT PLANS

Certain of the acquired companies have qualified defined contribution
employee benefit plans (the "Plans"), the majority of which allowed for
voluntary pretax contributions by employees. The Subsidiaries paid all general
and administrative expenses of the Plans and in some cases, the Subsidiaries
made matching and discretionary contributions to the Plans. The

F-17
<PAGE> 140
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Subsidiaries currently offer no post-employment or post-retirement benefits. The
expense incurred related to the Plans by the Company was approximately $367,000,
$321,000 and $337,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.

Prior to 1997, Comstock was generally self insured for its automobile and
general liability insurance and, to a lesser extent, for workers' compensation.
Included primarily in accrued payroll and related withholdings, and other
liabilities at December 31, 1998 and 1997 are reserves of $2,348,000 and
$3,574,000, respectively, relating to these insurance liabilities. The Company,
including Comstock, currently participates in a paid indemnity plan for these
insurance coverages.

Comstock sponsored an unfunded, fully insured postretirement medical plan
covering eligible retirees and their dependents which it elected to terminate
effective December 31, 1997. In 1996 Comstock offered, at group rates,
comprehensive medical care benefits to retirees and their covered dependents.
Comstock contributed approximately one-half of the total premium medical cost.
Under the plan, employees were eligible to enroll on the first day of the month
following retirement from Comstock after age 55 and ten years of service. Upon
adoption of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
other than Pensions" the accumulated postretirement benefit obligation was
$943,000. This amount was amortized over 20 years.

The postretirement benefit cost for 1996 included the following items (in
thousands):

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
1996
-----------
<S> <C>
Service cost................................................ $ 42
Interest cost............................................... 81
Transition amortization..................................... 47
----
$170
====
</TABLE>

The assumed discount rate used to measure the accumulated postretirement
benefit obligation was 7.25% in 1996. The assumed health care cost trend rate
was 9.5% in December 31, 1996, gradually decreasing to an ultimate rate of 5% in
2004 for participants under age 65. For those above age 65, a rate of 7.5% was
used in 1996, gradually decreasing to an ultimate rate of 5% in 2004. A one
percent increase in the assumed health care cost trend rate would increase costs
by $25,000 in 1996. This plan was discontinued in 1997.

The Company also has nonqualified defined benefit plans covering certain
current and former employees of one of the Subsidiaries which provide benefits
based on years of service and compensation. In aggregate, at December 31, 1998
and 1997 approximately $3,007,000 and $1,518,000, respectively relating to these
programs is included in the accompanying balance sheets.

The Company's self-insurance programs and certain employee benefit plan
liabilities are estimated using actuarial estimates and management assumptions.
These estimates are based on historical information, along with certain
assumptions about future events. Changes in assumptions, as well as changes in
actual experience could cause these estimates to change.

The Company has established two bonus incentive plans (the "Plans")
covering certain employees. The first bonus pool consists of 10% of the
Company's pre-tax profits and the second bonus pool consists of 15% of the
amount by which the Company's net income exceeds certain benchmarks. No benefits
were earned or paid under either of the Plans during 1998.

F-18
<PAGE> 141
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. LEASE COMMITMENTS

The Company and its subsidiaries lease various office buildings, machinery,
equipment, and vehicles under operating leases expiring at various dates through
2004. Most of the real property leases have escalation clauses related to
increases in real property taxes. Future minimum lease payments under operating
leases are as follows (in thousands):

<TABLE>
<S> <C>
Years Ending December 31
1999...................................................... $2,163
2000...................................................... 1,252
2001...................................................... 1,070
2002...................................................... 1,046
2003...................................................... 930
</TABLE>

Rent expense for all operating leases, including amounts charged to cost of
revenues, for the year ended December 31, 1998, 1997 and 1996 was approximately
$3,047,000, $2,685,000 and $3,527,000, respectively.

12. RELATED-PARTY TRANSACTIONS

LEASING TRANSACTIONS

Certain of the subsidiaries lease their operating facilities from former
Founding Company owners who remained employees or directors of the Company.
Total rent paid to related parties for 1998 was $330,000. The Company believes
the rents to be the fair market rental value of the property.

13. COMMITMENTS AND CONTINGENCIES

PERFORMANCE BONDS

The Company's performance under certain construction contracts is secured
by performance bonds for which the Company pays a separate fee.

EMPLOYMENT CONTRACTS

Certain executives of the Company have entered into employment agreements
with the Company. In general, the employment agreements provide that, in the
event of a termination of employment by the Company without cause, such employee
will be entitled to receive from the Company an amount in cash equal to the
employee's then current annual base salary for the remainder of the term.

CONTINGENT PURCHASE PRICE FOR ACQUISITIONS

The sellers of Sheldon and Armcore are eligible to receive additional cash
amounts ("earnouts"), consisting of cash, as adjustments to the purchase prices
paid for those companies. Such cash payments are contingent upon the achievement
of earnings targets for 1999, 2000 and 2001.

ENVIRONMENTAL

The Company's operations are subject to extensive federal, state and local
regulations under environmental laws and regulations concerning, among other
things, emissions to the air, discharges to waters and the generation, handling,
storage, transportation, treatment and disposal of waste, hazardous substances,
underground and aboveground storage tanks and soil and
F-19
<PAGE> 142
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

groundwater contamination. The Company is also subject to certain Federal, state
and local environmental laws and regulations relating to the use of creosote.
Creosote is used in certain of the Company's manufacturing processes to treat
wood railroad ties so that they can withstand exposure to outside elements.
Creosote, a coal tar treated derivative, has been recognized by the
environmental regulating agencies as a hazardous material. The Company believes
that it is in material compliance with all of the various regulations applicable
to their businesses and has not been notified of any violations by regulatory
agencies.

LITIGATION

The Company is involved in legal proceedings and claims, asserted by and
against the Company, which have arisen in the ordinary course of business. The
Company believes it has a number of valid defenses to these actions and the
Company intends to vigorously defend or assert these claims. Management
believes, upon advice of outside counsel, that none of these actions will have a
material adverse effect on the financial position or results of operations of
the Company.

14. LOANS TO OFFICERS

Pursuant to their employment agreements, certain officers of the Company
have been granted loans for the payment of income taxes related to stock grants.
These loans have a term of five years, are interest bearing and are
collateralized by the stock granted.

15. FINANCIAL INSTRUMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133 establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or a
liability measured at its fair value. SFAS 133 requires that changes in each
derivative's fair value be recognized into earnings unless specific hedge
accounting criteria are met. The Company does not anticipate that SFAS 133 will
have a material impact upon its operations.

INTEREST RATE SWAPS

The Company has entered into an interest rate swap agreement to manage
exposure to interest rate fluctuations. The outstanding agreement involves the
exchange of floating rate interest payments for fixed rate interest payments
over a specified time period without the exchange of any underlying principal
amounts. The Company's credit exposure is limited to the fair value of the
agreements, and the Company only enters into agreements with highly rated
counterparties. The Company does not enter into interest rate swap agreements
for trading or speculative purposes and matches the terms and contract notional
amounts to existing debt. The net amounts paid or received under interest rate
swap agreements are recognized as an adjustment to interest expense.

At December 31, 1998, the Company had an interest rate swap agreement with
a total notional value of $10,000,000, expiring December 7, 2001 or December 7,
2000 at the counterparties' option. The agreements effectively convert floating
rate obligations to a fixed rate of 4.85 percent. If the Company were to
terminate its existing interest rate swap agreements, any resulting gain or loss
would be deferred and recognized over the remaining life of the related debt.

F-20
<PAGE> 143
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RailWorks uses the following methods and assumptions in estimating the fair
value of its financial instruments:

Cash and Cash Equivalents -- The carrying amount is equal to fair
market value due to their short-term nature.

U.S. Government and Municipal Bonds -- These securities are classified
as held to maturity and are valued at cost which approximates market value.

Debt -- The Company's bank loans and floating rate debt approximate
fair value. The fair value of fixed rate long-term debt is based upon
quoted market prices for these or similar issues, or rates currently
available to the Company for debt with similar terms and maturities.

Interest Rate Swap Agreements -- The fair value of interest rate swap
agreements is based upon the estimated cost to terminate the agreements,
taking into account current interest rates and creditworthiness of the
counterparties. The fair value at December 31, 1998 was approximately
$10,500.

16. SEGMENT REPORTING

Comstock and the Predecessor Company operated in one reportable segment:
transit services. Accordingly, no additional disclosures are required under SFAS
No. 131. The following matrix presents operational and financial condition data
as of and for the year ended December 31, 1998 for analysis by reportable
segment (in thousands):

<TABLE>
<CAPTION>
TRANSIT RAIL PRODUCTS RAIL OTHER/
SERVICES AND SUPPLIES CONSTRUCTION CORPORATE TOTAL
-------- ------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers................ $165,989 $11,195 $37,184 $ -- $214,368
Intersegmental revenue..... -- 952 883 -- 1,835
Depreciation/amortization... (17) 192 709 1,221 2,105
Segment operating profit
(loss)................... 6,084 1,683 4,596 (23,038) (10,675)
Costs and estimated
earnings in excess of
billings on uncompleted
contracts................ 22,897 -- 1,895 -- 24,792
Segment assets............. 58,224 8,299 26,676 159,677 252,876
Capital Expenditures....... 676 29 490 85 1,280
</TABLE>

F-21
<PAGE> 144
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's reconciliation of segment totals to enterprise values are as
follows (in thousands):

<TABLE>
<S> <C>
REVENUES:
Total revenues for reportable segments.................... $214,368
Elimination of intersegment revenues...................... (1,835)
--------
Consolidated revenues..................................... $212,533
========
OPERATING PROFIT OR LOSS:
Total profit or loss for reportable segments.............. $(10,675)
========
ASSETS:
Total assets for reportable segments...................... $252,876
Elimination of intercompany receivables/payables.......... (826)
Elimination of investments in subsidiaries................ (23,414)
--------
Consolidated assets....................................... $228,636
========
</TABLE>

17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

Quarterly financial information for the years ended December 31, 1998 and
1997 are summarized as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues....................................... $41,628 $44,752 $53,077 $73,076
Operating income (loss)........................ 1,237 1,172 (18,404) 5,320
Net income (loss).............................. 666 456 (19,036) 5,067
Basic EPS...................................... .23 .15 (1.72) .37
Diluted EPS.................................... .23 .15 (1.72) .34
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues....................................... $32,401 $34,739 $41,197 $45,273
Operating income............................... 604 1,105 992 711
Net income..................................... 440 418 467 103
Basic EPS...................................... .15 .14 .16 .03
Diluted EPS.................................... .15 .14 .16 .03
</TABLE>

18. SUBSEQUENT EVENTS (UNAUDITED)

On January 7, 1999, the Company acquired all the stock of Mid West Railroad
Construction Maintenance Corporation of Wyoming (Mid West) which specializes in
construction, repair and maintenance of railroad tracks in various western
states. On January 26, 1999, the Company acquired all the stock of Gantrex Group
(Gantrex) which manufactures and supplies crane rail fastening systems including
pad manufacturing, extrusion and continuous vulcanizing capabilities. On January
29, 1999, the Company acquired all the stock of FCM Rail, Ltd. (FCM) which
provides customized leasing services to users of on track rail equipment. On
February 1, 1999, the Company acquired all of the stock of F & V Metro
Contracting Corp. and Affiliates (F & V) which performs electrical and
mechanical installations for transit and transportation agencies in the
metropolitan New York City area. The acquisitions were accounted for using the
purchase

F-22
<PAGE> 145
RAILWORKS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

method of accounting and accordingly, the purchase price has been allocated to
the assets acquired and the liabilities assumed based upon the fair values at
the date of acquisition. The combined purchase price was $26,000,000 in cash,
$8,833,000 of promissory notes payable and 100,000 shares of Common Stock, plus
the potential to receive earnouts if targeted revenue and profit goals are
achieved over the next 5 years. The estimated fair market value of assets
purchased was approximately $6,300,000 and the estimated goodwill was
$29,500,000. Any additional purchase price paid will increase the goodwill
reported. The estimated fair market values reflected above are based on
preliminary estimates and assumptions and are subject to revision.

F-23
<PAGE> 146

RAILWORKS CORPORATION

CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash...................................................... $ 3,073 $ 2,846
Accounts receivable, net of allowance for doubtful
accounts of $451 and $442 at March 31, 1999 and December
31, 1998, respectively.................................. 88,432 77,181
Costs and estimated earnings in excess of billings on
uncompleted contracts................................... 31,328 24,792
Inventories:
Raw materials........................................... 9,998 7,535
Finished goods.......................................... 3,576 1,550
Deferred tax asset........................................ 951 870
Other current assets...................................... 6,055 3,401
-------- --------
Total current assets............................... 143,413 118,175
-------- --------
PROPERTY, PLANT AND EQUIPMENT............................... 29,880 14,514
LESS -- ACCUMULATED DEPRECIATION AND AMORTIZATION........... 2,190 1,122
-------- --------
PROPERTY, PLANT AND EQUIPMENT, Net.......................... 27,690 13,392
-------- --------
OTHER ASSETS:
Excess of cost over acquired net assets, net of
amortization............................................ 131,842 93,845
Deferred tax asset........................................ 85 85
Loans to officers......................................... 959 959
Other..................................................... 1,758 2,180
-------- --------
Total other assets................................. 134,644 97,069
-------- --------
Total.............................................. $305,747 $228,636
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt...................... $ 39,131 $ 931
Accounts payable and accrued liabilities.................. 38,309 35,436
Accrued payroll and related withholdings.................. 5,162 3,777
Billings in excess of costs and estimated earnings on
uncompleted contracts................................... 14,158 5,958
Other current liabilities................................. 4,936 4,682
-------- --------
Total current liabilities.......................... 101,696 50,784
-------- --------
Long-term debt.............................................. 71,650 50,573
Excess of acquired net assets over cost, net of
amortization.............................................. 8,605 8,662
Other liabilities........................................... 11,138 8,609
-------- --------
Total long-term liabilities........................ 91,393 67,844
-------- --------
Total liabilities.................................. 193,089 118,628
-------- --------
Stockholders' Equity:
Series A, convertible preferred stock, $1.00 par value,
authorized 10,000,000 shares, 13,700 shares issued and
outstanding............................................. 14 14
Common stock, $0.01 par value, authorized 100,000,000
shares, 13,803,530 issued and outstanding at March 31,
1999, 13,703,530 issued and outstanding at December 31,
1998.................................................... 138 137
Additional paid-in capital................................ 122,309 121,296
Retained earnings (deficit)............................... (9,803) (11,439)
-------- --------
Total stockholders' equity......................... 112,658 110,008
-------- --------
Total.............................................. $305,747 $228,636
======== ========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-24
<PAGE> 147

RAILWORKS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1999 1998
----------- ----------
<S> <C> <C>
Revenues.................................................... $ 72,673 $ 41,628
Contract costs.............................................. 60,074 37,205
----------- ----------
Gross profit................................................ 12,599 4,423
Selling, general and administrative expenses................ 7,773 3,224
Depreciation and amortization expense....................... 991 (39)
Interest expense............................................ 1,613 420
Interest and other income................................... (400) (292)
----------- ----------
Income before income taxes.................................. 2,622 1,110
Provision for income taxes.................................. 986 444
----------- ----------
Net income........................................ $ 1,636 $ 666
=========== ==========
Basic earnings per share.................................... $ .12 $ .23
=========== ==========
Diluted earnings per share.................................. $ .11 $ .23
=========== ==========
Weighted average shares used in computing basic earnings per
share..................................................... 13,775,752 2,959,291
=========== ==========
Weighted average shares used in computing diluted earnings
per share................................................. 15,149,047 2,959,291
=========== ==========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-25
<PAGE> 148

RAILWORKS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------
1999 1998
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 1,636 $ 666
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 1,954 (39)
Deferred taxes............................................ (81) 424
Gain on sale of equipment................................. (32) (8)
Change in assets and liabilities:
Accounts receivable and costs and estimated earnings in
excess of billings on uncompleted contracts........... 10,048 (105)
Inventory.............................................. (164) 990
Other current assets................................... 366 70
Accounts payable and accrued liabilities............... (9,174) 1,722
Accrued payroll and related withholdings............... 1,157 469
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. (2,228) (3,107)
Other current liabilities.............................. (1,813) 418
Other assets........................................... 2,751 (21)
Other liabilities...................................... (2,380) (11)
-------- -------
Net cash provided by operating activities......... 2,040 1,468
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment........................... 1,416 8
Purchase of equipment and leasehold improvements.......... (1,031) (65)
Acquisition of subsidiaries, net of cash acquired......... (34,130) --
-------- -------
Net cash used in investing activities............. (33,745) (57)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings........................ 63,519 2,019
Repayment of long-term borrowings......................... (31,587) (3,605)
-------- -------
Net cash provided by (used in) financing
activities....................................... 31,932 (1,586)
-------- -------
NET INCREASE (DECREASE) IN CASH............................. 227 (175)
CASH, beginning of period................................... 2,846 1,120
-------- -------
CASH, end of period......................................... $ 3,073 $ 945
======== =======
SUPPLEMENTARY DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for interest.................. $ 1,350 $ 355
======== =======
Cash paid during the period for income taxes.............. $ 564 $ 66
======== =======
</TABLE>

NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES:

In January 1999, the Company issued 100,000 shares of common stock as
partial consideration for 100% of the outstanding common stock in the FCM Rail,
Ltd. acquisition.

The Company also issued an aggregate amount of $9,000,000 in promissory
notes as partial consideration for the Midwest Railroad Construction &
Maintenance Corporation of Wyoming, FCM Rail, Ltd., F&V Metro Contracting Corp.
and Affiliates and Gantrex Group acquisitions.

See Accompanying Notes to Consolidated Financial Statements.

F-26
<PAGE> 149

RAILWORKS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included in the accompanying unaudited consolidated financial
statements. Operating results for the three months ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999.

2. ORGANIZATION

RailWorks Corporation ("RailWorks" or the "Company") was incorporated in
Delaware on March 20, 1998 and was initially capitalized on such date through
the sale of 10 shares of Common Stock for an aggregate purchase price of $100.
RailWorks seeks to become a leading nationwide provider of rail system services,
including construction and rehabilitation, repair and maintenance, and related
products. RailWorks' strategy is to provide a full range of rail related
services and products on a national basis and offer integrated rail system
solutions. To accomplish this objective, RailWorks acquired, effective August 4,
1998, (the "Acquisitions") fourteen U.S. businesses (the "Founding Companies"),
completed an initial public offering (the "Offering") of five million shares of
its Common Stock on the same date (taken together "the Consolidation") and,
subsequent to the Consolidation, acquired, through merger or purchase similar
companies to expand its operations. RailWorks and the Founding Companies merged
together upon consummation of the Offering.

On January 7, 1999, the company acquired all the stock of MidWest Railroad
Construction & Maintenance Corporation of Wyoming ("MidWest") which specializes
in construction repair and maintenance of railroad tracks in various western
states. On January 26, 1999, the Company acquired all the stock of Gantrex Group
(Gantrex) which manufactures and supplies crane rail fastening systems including
pad manufacturing, extrusion and continuous vulcanizing capabilities. On January
29, 1999, the Company acquired all the stock of FCM Rail, Ltd. ("FCM") which
provides customized leasing services to users of on track rail equipment. In
March 1999, the Company acquired all of the stock of F&V Metro Contracting Corp.
and Affiliates ("F&V") which performs electrical and mechanical installations
for transit and transportation agencies in the metropolitan New York City area.
The combined purchase price for these first quarter 1999 acquisitions was
$33,649,000 in cash, $9,000,000 of promissory notes payable and 100,000 shares
of RailWorks Common Stock at an aggregate value of $1,000,000, plus the
potential to receive earnouts if targeted revenue and profit goals are achieved
over the next five years. The fair market value of assets purchased was
$9,704,000 and the preliminary goodwill was approximately $33,945,000. The
estimated fair market values are based upon preliminary estimates and
assumptions and are subject to revision. Any additional purchase price paid will
increase the goodwill reported.

F-27
<PAGE> 150
RAILWORKS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

For accounting and financial statement purposes, Comstock Holdings, Inc.
(one of the Founding Companies) ("Comstock" or the "Accounting Acquirer") has
been identified as the accounting acquirer consistent with Staff Accounting
Bulletin ("SAB") No. 97 of the Securities and Exchange Commission. The
historical financial statements of RailWorks prior to August 4, 1998, are those
of Comstock. The acquisitions of the remaining Founding Companies and subsequent
acquired companies have been accounted for as purchases in accordance with
Accounting Principles Board ("APB") Statement No. 16 "Business Combinations".
Each purchase price has been allocated to the assets and the liabilities assumed
based upon the fair values at the date of acquisition.

3. CREDIT FACILITIES

In the first quarter of 1999, RailWorks Corporation obtained two new credit
facilities; a Bridge Term Facility and a Swingline Revolving Facility.

The Bridge Term Facility (the "Bridge") is a non-revolving, $25,000,000
term commitment, issued on February 2, 1999, with a June 30, 1999 maturity date.
The facility was an amendment to the Company's Revolving Credit Facility issued
on August 4, 1998, including consistent pricing, terms and conditions. The
Company borrowed $25,000,000 on the Bridge during the first quarter of 1999. The
interest rate during the quarter was 9.00% and 8.5% for the remainder of the
term. The full principal amount of $25,000,000 was repaid on April 8, 1999, see
Note 8. A 1.7% facility fee was paid on the Bridge.

The Swingline Revolving Facility (the "Swingline") is a revolving
commitment of $2,000,000 issued on January 5, 1999. The Swingline, which expires
on August 4, 2001, was executed as an amendment to the Company's existing
Revolving Credit Facility. The Swingline allows for borrowings and repayments
within the Company's Revolving Credit Facility in increments of $1 directly with
NationsBank, the agent under the Revolving Credit Facility. Interest is based
upon consolidated leverage ratios in a pricing matrix which may be based upon
prime or LIBOR. RailWorks borrowed against the Swingline during the first
quarter and the balance outstanding as of March 31, 1999 was $583,387. The
monthly fee for the facility is $250.

A $2,150,000 letter of credit on the Company's Revolving Credit Facility
was issued on February 26, 1999, related to the acquisition of Gantrex Group.

4. EARNINGS PER SHARE

F-28
<PAGE> 151
RAILWORKS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

if certain securities are converted and also includes certain shares that are
contingently issuable. The following is the computation of earnings per share as
of March 31, 1999 and 1998:

<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Net income................................................ $ 1,636,000 $ 666,000
=========== ==========
Shares used for calculating basic EPS..................... 13,775,752 2,959,291
Dilutive effect of:
Stock options........................................... 3,295 *
Convertible preferred shares............................ 1,370,000 *
----------- ----------
Shares used for calculating diluted EPS................... 15,149,047 2,959,291
=========== ==========
Basic EPS................................................. $ .12 $ .23
=========== ==========
Diluted EPS............................................... $ .11 $ .23
=========== ==========
</TABLE>

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

* There were no stock options and convertible preferred shares issued and
outstanding during the three months ended March 31, 1998.

5. FINANCIAL INSTRUMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133").
SFAS No. 133 establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or a
liability measured at its fair value. SFAS No. 133 requires that changes in each
derivative's fair value be recognized into earnings unless specific hedge
accounting criteria are met. The Company does not anticipate that SFAS No. 133
will have a material impact upon its operations.

INTEREST RATE SWAPS

RailWorks entered into an interest rate collar on March 11, 1999, to hedge
against significant interest rate changes. The transaction was comprised of two
offsetting $50,000,000 interest rate swap options, which expired on March 31,
1999. In effect, the transactions provided RailWorks with a collar on the rate
of the 10-year Treasury Swap at a floor of 5.73% and a ceiling of 6.23%. The
rate did not vary outside of the collar and the options were not executed. There
was no fee for this transaction.

On April 4, 1999, RailWorks negotiated the termination of the previously
disclosed $10,000,000 interest rate swap with First Union Bank. The bank agreed
to pay a Termination Fee
F-29
<PAGE> 152
RAILWORKS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of $32,100 to RailWorks Corporation, to be recorded as a reduction in interest
expense and which nullified the swap transaction.

6. SEGMENT REPORTING

During 1998, the Company adopted SFAS No. 131 "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS No. 131"). In accordance with
SFAS No. 131, the Company has three reportable segments: (1) transit services,
(2) rail construction, rehabilitation, repair and maintenance services and (3)
rail products and supplies. The transit services segment provides transit
construction and rehabilitation services, as well as installation of signaling,
communications and electrical systems. The rail construction services segment
provides design, engineering, construction, rehabilitation and repair and
maintenance of track systems. The rail products and supplies segment provides a
broad range of rail related products, including treated wood ties. RailWorks
evaluates performance based on profit or loss from operations before income
taxes, interest income and expense, and non-recurring gains and losses. Each of
the segments follow a uniform set of accounting policies.

The following matrix presents operational and financial condition data as
of and for the three months ended March 31, 1999 for analysis by reportable
segment (in thousands). For the three months ended March 31, 1998, Comstock
operated in one reportable segment: Transit Services. Accordingly, no additional
disclosures are required under SFAS No. 131.

<TABLE>
<CAPTION>
TRANSIT RAIL PRODUCTS RAIL OTHER/
SERVICES AND SUPPLIES CONSTRUCTION CORPORATE TOTAL
-------- ------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C>
Revenues from external customers.... $48,758 $ 8,241 $16,326 $ -- $ 73,325
Intersegmental revenue.............. -- 334 318 -- 652
Depreciation/amortization........... 32 429 565 928 1,954
Segment operating profit (loss)..... 1,806 1,508 1,187 (666) 3,835
Costs and estimated earnings in
excess of billings on uncompleted
contracts......................... 28,673 -- 2,655 -- 31,328
Segment assets...................... 75,554 27,916 27,097 210,249 340,816
Capital expenditures................ 73 234 692 32 1,031
</TABLE>

The Company's reconciliation of segment totals to enterprise values are as
follows (in thousands):

<TABLE>
<S> <C>
REVENUES:
Total revenues for reportable segments.................... $ 73,325
Elimination of intersegment revenues...................... (652)
--------
Consolidated revenues..................................... $ 72,673
========
OPERATING PROFIT OR LOSS:
Total profit or loss for reportable segments.............. $ 3,835
========
ASSETS:
Total assets for reportable segments...................... $340,816
Elimination of intercompany receivables/payables.......... (551)
Elimination of investments in subsidiaries................ (34,518)
--------
Consolidated assets....................................... $305,747
========
</TABLE>

F-30
<PAGE> 153
RAILWORKS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. CAPITAL STOCK AND STOCK OPTIONS

The Company issued 100,000 shares of common stock as partial consideration
for the acquisition of the outstanding stock of FCM Rail, Ltd.

Under the terms of the Plan, the Company issued options to purchase 200,000
shares of common stock to a president and certain employees at one of the
companies that RailWorks acquired during the first quarter of 1999. The exercise
price of the options was the market price of the stock on the date of grant. The
options expire ten years after the date of grant. Also under the Plan, the
Company issued options to purchase 50,000 shares of common stock to an employee
of RailWorks. The exercise price of the options was the market price of the
stock on the date of grant. The options expire five years after the date of
grant.

In connection with acquisition of a subsidiary, the Company granted 10,000
options to purchase common stock to a non-employee as a finders fee. The value
of the options has been included in the cost of the acquisition.

8. SUBSEQUENT EVENTS

DEBT ISSUANCE

On April 1, 1999, the Company sold $125 million of Senior Subordinated
Notes. The notes were sold in a private placement under Rule 144A under the
Securities Act of 1933. The net proceeds from the offering were used to repay
approximately $100 million of indebtedness with the remaining proceeds available
for general corporate purposes including future acquisitions. The notes have an
interest rate of 11.50%, payable semi-annually and are due in 2009 with no
interim amortization requirements.

ACQUISITIONS

On April 12, 1999, the Company acquired all the stock of McCord Treated
Wood, Inc. and Birmingham Wood, Inc. ("McCord") which supply creosote treated
wooden cross ties throughout the Southeastern United States. On April 30, 1999,
the Company acquired all the stock of M-Track Enterprises ("M-Track") which
specializes in rail transit construction, repair and maintenance of track in the
metropolitan New York City area.

The acquisitions were accounted for using the purchase method of accounting
and accordingly, the purchase price has been allocated to the assets acquired
and the liabilities assumed based upon the fair values at the date of
acquisition. The combined purchase price was $18,345,000 in cash and 93,842
shares of common stock, plus the potential to receive earnouts if targeted
revenue and profit goals are achieved. The estimated fair market value of assets
purchased was approximately $9,000,000 and the estimated goodwill recorded was
$10,345,000. The estimated fair market values reflected above are based on
preliminary estimates and assumptions and are subject to revision.

F-31
<PAGE> 154

REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS

To the Shareholders of

Gantrex Group Limited, Norapco Limited,

Gantrex Holding Corporation and Gantrex Systems Inc.:

We have audited the combined balance sheet of GANTREX GROUP LIMITED,
NORAPCO LIMITED, GANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC. as at
December 31, 1998 and the combined statements of income and retained earnings
and cash flows for the year then ended. These combined financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these combined financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.

In our opinion, these combined financial statements present fairly, in all
material respects, the combined financial position of Gantrex Group Limited,
Norapco Limited, Gantrex Holding Corporation and Gantrex Systems Inc. as at
December 31, 1998 and the combined results of their operations and their cash
flows for the year then ended in accordance with generally accepted accounting
principles.

Arthur Andersen LLP

March 15, 1999

Mississauga, Canada

F-32
<PAGE> 155

GANTREX GROUP LIMITED, NORAPCO LIMITED,
GRANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC.

COMBINED BALANCE SHEET
DECEMBER 31, 1998

<TABLE>
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $ 571,872
Accounts receivable....................................... 3,225,328
Inventories (Note 2)...................................... 1,392,711
Prepaid expenses.......................................... 93,089
Deferred income taxes..................................... 15,573
Income taxes receivable................................... 114,744
Other current assets...................................... 102,729
----------
5,516,046
CAPITAL ASSETS (Note 3)..................................... 1,071,567
TRADEMARKS, net of accumulated amortization of $15,648...... 11,162
PATENTS, net of accumulated amortization of $92,234......... 28,588
OTHER LONG-TERM ASSETS...................................... 83,628
----------
$6,710,991
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank demand loan (Note 4)................................. $ 206,607
Accounts payable and accrued liabilities.................. 2,724,081
----------
2,930,688
----------
DEFERRED INCOME TAXES....................................... 18,841
----------
SHAREHOLDERS' EQUITY
Share capital (Note 5).................................... 259,446
Retained earnings......................................... 3,502,016
----------
3,761,462
----------
$6,710,991
==========
</TABLE>

The accompanying notes are an integral part of this combined balance sheet.

F-33
<PAGE> 156

GANTREX GROUP LIMITED, NORAPCO LIMITED,
GRANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC.

COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<S> <C>
NET SALES................................................... $13,944,643
COST OF SALES............................................... 10,106,384
-----------
GROSS PROFIT................................................ 3,838,259
-----------
EXPENSES
Selling, general and administrative....................... 4,230,800
Depreciation and amortization............................. 33,254
Interest income, net...................................... (25,951)
Other income.............................................. (376,483)
-----------
3,861,620
-----------
LOSS BEFORE RECOVERY OF INCOME TAXES........................ (23,361)
RECOVERY OF INCOME TAXES.................................... 73,461
-----------
NET INCOME.................................................. 50,100
RETAINED EARNINGS, beginning of year........................ 3,451,916
-----------
RETAINED EARNINGS, end of year.............................. $ 3,502,016
===========
</TABLE>

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

F-34
<PAGE> 157

GANTREX GROUP LIMITED, NORAPCO LIMITED,
GRANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC.

COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<S> <C>
CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES:
Net income.................................................. $ 50,100
Items not affecting cash -
Depreciation and amortization............................. 145,870
Deferred income taxes..................................... (82,775)
Changes in non-cash working capital items................... (137,248)
---------
(24,053)
INVESTING ACTIVITY
Purchase of capital assets................................ (64,785)
FINANCING ACTIVITY
Decrease in bank demand loan.............................. (44,280)
---------
DECREASE IN CASH DURING THE YEAR............................ (133,118)
CASH AND CASH EQUIVALENTS, beginning of year................ 704,990
---------
CASH AND CASH EQUIVALENTS, end of year...................... $ 571,872
=========
</TABLE>

The accompanying notes are an integral part of this combined statement.

F-35
<PAGE> 158

GANTREX GROUP LIMITED, NORAPCO LIMITED,
GRANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF COMBINATION

The parent companies and their subsidiaries employ accounting policies and
standards of financial disclosure which are in accordance with the
recommendations of the Canadian Institute of Chartered Accountants.

All significant intercompany accounts and transactions have been
eliminated.

The combined financial statements include the accounts of:

1. GANTREX GROUP LIMITED consolidated with its wholly owned
subsidiaries:

Cranequip Limited
Gantrex Limited
Gantrex Systems Limited

2. NORAPCO LIMITED

3. GANTREX HOLDING CORPORATION consolidated with its wholly owned
subsidiary, Gantrex Corporation

4. GANTREX SYSTEMS INC.

USE OF ESTIMATES

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
revenues and expenses during the reporting period as well as disclosure of
contingencies at the date of the financial statements. Actual results could
differ from those estimates.

INVENTORIES

Inventories are valued at the lower of cost and net realizable value with
cost being determined on a first-in, first-out basis.

CAPITAL ASSETS

The Companies record their capital assets at cost. Depreciation and
amortization are provided in order to allocate the costs over the estimated
useful lives of the capital assets as follows:

<TABLE>
<S> <C>
Building.................................................... 5% straight line
Equipment and machinery..................................... 10% - 30% straight line
Furniture and fixtures...................................... 20% straight line
Computer hardware........................................... 30% declining balance
Computer software........................................... 50% straight line
Trademarks.................................................. 5% straight line
Tooling..................................................... 50% straight line
</TABLE>

F-36
<PAGE> 159
GANTREX GROUP LIMITED, NORAPCO LIMITED,
GRANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

TRANSLATION OF FOREIGN CURRENCIES

All foreign companies and their subsidiaries included in the combined group
are treated as integrated foreign operations for combination purposes.
Accordingly, their monetary assets and liabilities have been converted to United
States dollars using the exchange rate in effect at the balance sheet date. All
other assets and liabilities are converted at historical rates. Revenues and
expenses are translated at average exchange rates prevailing during the year.
The resulting exchange gain/loss on translation is included in net income.

INCOME TAXES

The Companies follow the deferral method of tax allocation in accounting
for income taxes. Under this method timing differences between accounting and
taxable income result in the recording of deferred income taxes.

2. INVENTORIES

<TABLE>
<S> <C>
Finished goods.............................................. $1,273,318
Raw materials............................................... 119,393
----------
$1,392,711
==========
</TABLE>

3. CAPITAL ASSETS

<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
---------- ------------ ----------
<S> <C> <C> <C>
Land................................................... $ 130,095 $ -- $ 130,095
Building............................................... 746,287 238,636 507,651
Equipment and machinery................................ 1,467,965 1,225,235 242,730
Furniture and fixtures................................. 406,484 299,478 107,006
Computer hardware...................................... 505,442 423,922 81,520
Computer software...................................... 77,953 75,388 2,565
---------- ---------- ----------
$3,334,226 $2,262,659 $1,071,567
========== ========== ==========
</TABLE>

4. BANK DEMAND LOAN

The Companies have operating lines of credit totalling $1,100,000 bearing
interest at rates not exceeding the bank's prime rate of interest plus 1% per
annum. Accounts receivable, inventories and certain other assets of subsidiaries
have been pledged as collateral under the bank lines of credit. As at December
31, 1998 the Companies had unused and available operating lines of credit of
approximately $900,000.

F-37
<PAGE> 160
GANTREX GROUP LIMITED, NORAPCO LIMITED,
GRANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. SHARE CAPITAL

As at December 31, 1998, the authorized share capital of the Companies
consisted of the following:

<TABLE>
<S> <C>
GANTREX GROUP LIMITED:

Unlimited................................................... Class A shares
Unlimited................................................... Class B shares
Unlimited................................................... Class C shares
Unlimited................................................... Common shares

NORAPCO LIMITED:
Unlimited................................................... Class A shares
Unlimited................................................... Class B shares
Unlimited................................................... Class C shares
Unlimited................................................... Class D shares
</TABLE>

GANTREX HOLDING CORPORATION:
10,235 Common shares........................................

GANTREX SYSTEMS INC.:
3,000 Common shares.........................................
</TABLE>

As at December 31, 1998 the following shares had been issued and remained
outstanding:

<TABLE>
<S> <C>
GANTREX GROUP LIMITED:
14,730,404 Class A shares................................... $101,834
1,068,171 Class B shares.................................... 20,372
10,792 Common shares........................................ 204
--------
$122,410
========
NORAPCO LIMITED:
955,085 Class A shares...................................... $127,500
1,043,361 Class B shares.................................... 8,415
10,544 Class D shares....................................... 85
--------
$136,000
========
GANTREX HOLDING CORPORATION:
3,500 Preferred shares...................................... $ 850
10,235 Common shares........................................ 86
--------
$ 936
========
GANTREX SYSTEMS INC.:
100 Common shares........................................... $ 100
========
</TABLE>

F-38
<PAGE> 161
GANTREX GROUP LIMITED, NORAPCO LIMITED,
GRANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

6. COMMITMENTS

At December 31, 1998, the Companies had commitments under lease contracts
for the rental of real estate, expiring in 2001, requiring annual rental
payments as follows:

7. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE

Most entities depend on computerized systems and therefore are exposed to
the Year 2000 conversion risk, which, if not properly addressed, could affect an
entity's ability to conduct normal business operations. Management is addressing
this issue, however, given the nature of this risk, it is not possible to be
certain that all aspects of the Year 2000 Issue affecting the Company and those
with whom it deals such as customers, suppliers or other third parties, will be
fully resolved without having an adverse impact on the Company's operations.

8. SUBSEQUENT EVENT

On January 26, 1999, the shareholders of the Companies sold all of the
outstanding shares to RailWorks Corporation.

F-39
<PAGE> 162

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Mid West Railroad Construction and Maintenance Corporation of Wyoming:

We have audited the accompanying balance sheet of MID WEST RAILROAD
CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING (a Wyoming corporation) as
of December 31, 1998, and the related statements of operations, retained
earnings and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MID WEST RAILROAD
CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING as of December 31, 1998, and
the results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.

Arthur Andersen LLP

Stamford, Connecticut
March 12, 1999

F-40
<PAGE> 163

MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING

BALANCE SHEET
DECEMBER 31, 1998

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 264,261
Accounts receivable....................................... 1,145,048
Due from employees, current portion....................... 15,679
Inventory................................................. 140,866
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 63,772
Prepaid expenses.......................................... 29,262
Income tax refund receivable.............................. 161,365
----------
Total current assets.............................. 1,820,253
----------
PROPERTY, PLANT AND EQUIPMENT:
Land...................................................... 69,715
Building.................................................. 408,950
Locomotives............................................... 494,340
Construction equipment.................................... 1,990,961
Vehicles.................................................. 401,981
Leasehold improvements.................................... 119,248
Office equipment.......................................... 68,946
----------
3,554,141
Less accumulated depreciation.......................... 983,477
----------
Property, plant and equipment, net........................ 2,570,664
----------
OTHER ASSETS,
Due from employees, non-current........................... 6,721
----------
$4,397,638
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt......................... $ 500,640
Accounts payable.......................................... 657,269
Accrued expenses.......................................... 96,241
Accrued payroll and payroll taxes......................... 32,007
Deferred income taxes..................................... 42,000
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 83,054
----------
Total current liabilities......................... 1,411,211
----------
OTHER LIABILITIES:
Long-term debt, net of current portion.................... 1,089,725
Deferred income taxes..................................... 232,000
----------
Total other liabilities........................... 1,321,725
----------
STOCKHOLDERS' EQUITY:
Common Stock, no par value; authorized 1,000 shares;
issued and outstanding 1,000 shares.................... 1,000
Additional paid-in capital................................ 606,780
Retained earnings......................................... 1,056,922
----------
Total stockholders' equity........................ 1,664,702
----------
$4,397,638
==========
</TABLE>

See Notes to Financial Statements.

F-41
<PAGE> 164

MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING

STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<S> <C>
EARNED REVENUE.............................................. $13,219,410
COST OF EARNED REVENUE...................................... 11,064,566
-----------
Gross profit.............................................. 2,154,844
GENERAL AND ADMINISTRATIVE EXPENSES......................... 1,646,408
-----------
INCOME FROM OPERATIONS...................................... 508,436
-----------
OTHER INCOME (EXPENSE):
Loss on sale of fixed assets.............................. (35,981)
Other income.............................................. 1,356
Interest expense.......................................... (155,402)
Interest income........................................... 17,402
Net rental income......................................... 2,921
-----------
OTHER EXPENSE, NET.......................................... (169,704)
-----------
INCOME BEFORE PROVISION FOR INCOME TAXES.................... 338,732
PROVISION FOR INCOME TAXES.................................. 2,635
-----------
NET INCOME.................................................. 336,097
RETAINED EARNINGS, BEGINNING................................ 720,825
-----------
RETAINED EARNINGS, ENDING................................... $ 1,056,922
===========
</TABLE>

See Notes to Financial Statements.

F-42
<PAGE> 165

MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 336,097
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 391,391
Loss on sale of fixed assets.............................. 35,981
Deferred income taxes..................................... (121,000)
Change in operating assets and liabilities:
Accounts receivables................................... 1,967,778
Due from employees..................................... (11,800)
Inventory.............................................. (25,002)
Costs and estimated earnings in excess of billings on
uncompleted contracts................................. 2,227,390
Prepaid expenses and other assets...................... (3,141)
Income tax refund receivable........................... (161,365)
Accounts payable....................................... (3,657,189)
Accrued expenses....................................... (133,589)
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. (93,717)
Accrued payroll and payroll taxes...................... (4,363)
-----------
Net cash provided by operating activities......... 747,471
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment........................... 13,087
Purchases of equipment.................................... (805,605)
-----------
Net cash used in investing activities............. (792,518)
-----------
CASH FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.................. 1,010,823
Principal payments of long-term debt...................... (1,006,942)
-----------
Net cash provided by financing activities......... 3,881
-----------
NET DECREASE IN CASH........................................ (41,166)
CASH AND CASH EQUIVALENTS, beginning of year................ 305,427
-----------
CASH AND CASH EQUIVALENTS, end of year...................... $ 264,261
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.................................................. $ 164,262
===========
Income taxes.............................................. $ 455,000
===========
</TABLE>

See Notes to Financial Statements.

F-43
<PAGE> 166

MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING

NOTES TO FINANCIAL STATEMENTS

1. NATURE OF BUSINESS

Mid West Railroad Construction and Maintenance of Wyoming ("the Company")
is a Wyoming corporation which was formed in 1988. The Company operates in
Wyoming, Utah and Colorado and other western U.S. states.

The Company performs contracts for repair, maintenance and construction of
privately owned railroad tracks, contracts to move railroad cars on private
railroad tracks to and from common carrier interchange points and provides
railroad track engineering.

2. SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from the estimates that were assumed
in preparing the financial statements.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash, accounts receivable and accounts payable
approximate fair value because of their short-term nature. The carrying amount
of long-term debt approximates fair value based on the borrowing rates currently
available to the Company for bank loans with similar terms and maturities.

REVENUE AND COST RECOGNITION

The Company recognizes revenues from fixed-fee construction contracts using
the percentage-of-completion method, measured by the ratio of cost incurred to
date to management's estimated total cost for each contract. That method is used
because management considers total cost to be the best available measure of
progress on the contracts. Changes in job performance, job conditions and
estimated profitability may result in revisions to cost and income, which are
recognized in the period in which the revisions are determined.

Revenues from time-and-material contracts are recognized as the work is
performed.

Contract costs include all direct material and labor costs and those
indirect costs related to contract performance. General and administrative costs
are charged to expense as incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined.

INVENTORY

Inventory, principally materials and supplies, is stated at the lower of
cost or net realizable value. Cost is determined by the first-in, first-out
method.

F-44
<PAGE> 167
MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost. Depreciation is provided
principally by use of the straight-line method over the estimated useful life of
the related asset. Accelerated methods are used for income tax reporting
purposes.

INCOME TAXES

Deferred income taxes are determined based on the difference between the
financial statement and income tax basis of assets and liabilities using tax
rates expected to be in effect in the years in which the differences are
expected to reverse. The temporary differences related primarily to the
reporting of revenue recognition on long-term contracts, depreciation and net
operating loss carryforwards.

CASH

From time to time, the Company's cash balance with financial institutions
exceeds the maximum FDIC insured balance of $100,000. The Company has not
experienced any losses in such accounts and believes it is not exposed to any
significant credit risk on cash.

For the reporting of cash flows, the Company considers savings accounts and
certificate of deposits with original maturities of three months or less to be
cash.

3. ACCOUNTS RECEIVABLE

Accounts receivable at December 31, 1998, consisted of the following:

<TABLE>
<S> <C>
Contract receivables........................................ $1,117,358
Retainage................................................... 27,690
----------
$1,145,048
==========
</TABLE>

Contract retainages have been billed but are not due pursuant to contract
provisions until contract completion. Such contract retainage is expected to be
collected within the following year.

4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Information with respect to contracts in process at December 31, 1998, are
as follows:

<TABLE>
<S> <C>
Costs incurred on uncompleted contracts..................... $1,084,103
Estimated earnings.......................................... 114,805
----------
1,198,908
Less billings to date....................................... 1,218,190
----------
$ (19,282)
==========
</TABLE>

Included in the balance sheet under the following captions:

<TABLE>
<S> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... $ 63,772
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (83,054)
--------
$(19,282)
========
</TABLE>

F-45
<PAGE> 168
MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. LONG-TERM DEBT

Long-term debt at December 31, 1998 consisted of the following:

<TABLE>
<S> <C>
Notes payable to Grand National Bank, principal and interest
at rates from 9.15% to 9.90%, payable monthly, maturing
from May 2000 to May 2001, secured by all inventory,
accounts receivable, contract rights, equipment, general
intangibles, fixtures and the personal guarantees of the
shareholders.............................................. $ 961,050
Vehicle and equipment notes payable, principal and interest
at rates from 7.90% to 18.20%, payable monthly, maturing
from May 1999 to December 2003, secured by vehicles and
equipment................................................. 568,867
Mortgage note payable in monthly installments of $1,661
including interest at 9.04%, maturing in June 1999,
secured by real property.................................. 8,119
Mortgage note payable in monthly installments of $1,349
including interest at 9.40%, maturing in November 2002,
secured by real Property.................................. 52,329
----------
1,590,365
Less current maturities..................................... 500,640
----------
$1,089,725
==========
</TABLE>

Aggregate principal payments as of December 31, 1998, on long-term debt are
as follows:

<TABLE>
<S> <C>
Year Ending December 31
1999...................................................... $ 500,640
2000...................................................... 645,453
2001...................................................... 240,697
2002...................................................... 91,688
2003...................................................... 111,887
----------
$1,590,365
==========
</TABLE>

Long-term debt contains certain restrictive covenants which place some
requirements and restrictions on the Company regarding the maintenance of
certain financial ratios measured on an annual basis.

6. LEASE AGREEMENTS

The Company leases certain vehicles under the classification of operating
leases. The following is a schedule of future minimum lease payments for
operating leases as of December 31, 1998:

<TABLE>
<S> <C>
Period Ending December 31
1999...................................................... $ 5,500
==========
</TABLE>

Rent expense under operating leases totaled $24,660 for the year ended
December 31, 1998.

7. EMPLOYEE BENEFIT PLAN

The Company sponsors a 401k plan (the "Plan") covering certain of its
employees. The Plan provides for contributions by the Company in such amounts as
the Board of Directors may annually determine. Contributions to the Plan
amounted to $8,126 for the year ended December 31, 1998.

F-46
<PAGE> 169
MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. INCOME TAXES

The income tax provision (benefit) as reported in the combined statements
of operations differs from the amounts computed by applying federal statutory
rates due to the following:

<TABLE>
<S> <C>
Federal income tax at statutory rate........................ $ 118,556
State income taxes, net of federal income tax benefit....... 8,402
Benefit of previously unrecognized alternative minimum tax
credits................................................... (126,198)
Other....................................................... 1,875
---------
Income tax provision........................................ $ 2,635
=========
</TABLE>

The tax effect of temporary differences that give rise to significant
portions of deferred tax assets at December 31, 1998 consisted of the following:

<TABLE>
<S> <C>
Deferred tax assets:
Depreciation.............................................. $232,000
Other, primarily deferred contract income................. 42,000
--------
Total deferred tax liabilities.................... $274,000
========
</TABLE>

9. RELATED PARTY TRANSACTIONS

The Company rents a building from a shareholder on a month to month basis.
The rent requires monthly payments of $2,447, plus real estate taxes. Rent
expense for the year ended December 31, 1998 was $30,417.

10. COMMITMENTS AND CONTINGENCIES

The Company is engaged in various lawsuits arising in the ordinary course
of business. In the opinion of management, based upon the advice of counsel, the
ultimate outcome of these lawsuits will not have a material impact on the
Company's financial statements.

11. SUBSEQUENT EVENT

On January 7, 1999, the stockholders of the Company sold all of the
outstanding stock to RailWorks Corporation.

F-47
<PAGE> 170

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Stockholders
F & V Metro Contracting Corp. and Affiliates

We have audited the accompanying combined statement of net liabilities of F
& V METRO CONTRACTING CORP. AND AFFILIATES at November 30, 1998, and the related
combined statements of operations and cash flows for the year then ended. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of F & V METRO
CONTRACTING CORP. AND AFFILIATES at November 30, 1998 and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.

Arthur Andersen LLP

Stamford, Connecticut
March 15, 1999

F-48
<PAGE> 171

F & V METRO CONTRACTING CORP. AND AFFILIATES

COMBINED STATEMENT OF NET LIABILITIES
NOVEMBER 30, 1998

<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 1,335,528
Marketable securities..................................... 7,846,300
Contract receivables...................................... 14,459,447
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 3,285,554
Inventory................................................. 1,740,873
Advances to and equity in joint ventures.................. 2,059,983
Advances to stockholders.................................. 71,378
Advances to affiliates.................................... 1,295,719
Prepaid expenses and other current assets................. 190,894
-----------
Total current assets.............................. 32,285,676
-----------
PROPERTY AND EQUIPMENT, net................................. 546,999
-----------
OTHER ASSET:
Security deposits........................................... 53,978
-----------
Total assets...................................... $32,886,653
-----------
LIABILITIES
Current Liabilities:
Notes payable - banks..................................... $ 4,653,333
Loans payable - other..................................... 239,148
Current maturities of long-term debt...................... 47,685
Accounts payable.......................................... 11,534,641
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 9,620,264
Accrued expenses and other current liabilities............ 871,189
-----------
Total current liabilities......................... 26,966,260
-----------
Long-Term Liabilities:
Notes payable -- banks.................................... 111,111
Long-term debt, less current maturities................... 69,397
Long-term advances........................................ 7,532,724
-----------
Total liabilities................................. 34,679,492
-----------
Excess of liabilities over assets................. $(1,792,839)
===========
</TABLE>

See independent auditors' report and notes to combined financial statements.

F-49
<PAGE> 172

F & V METRO CONTRACTING CORP. AND AFFILIATES

COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1998

<TABLE>
<S> <C>
Contract Revenues........................................... $46,039,928
Contract Costs.............................................. 42,227,163
-----------
Gross Profit................................................ 3,812,765
General and Administrative Expenses......................... 2,307,228
Other Income (Expense):
Interest income........................................... 375,043
Interest expense.......................................... (541,753)
Loss from joint ventures.................................. (578,279)
Loss on guarantee of project.............................. (1,490,646)
Other income.............................................. 54,944
-----------
Total other expense............................... (2,180,691)
-----------
Loss Before Income Taxes.................................... (675,154)
Income Taxes................................................ --
-----------
Net Loss.................................................... $ (675,154)
===========
</TABLE>

See independent auditors' report and notes to combined financial statements.

F-50
<PAGE> 173

F & V METRO CONTRACTING CORP. AND AFFILIATES

COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED NOVEMBER 30, 1998

<TABLE>
<S> <C>
NET LOSS.................................................... $ (675,154)
-----------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Depreciation and amortization............................. 121,884
Loss on disposal of fixed assets.......................... 16,651
Equity in loss from joint ventures........................ 578,279
Changes in assets (increase) decrease:
Marketable securities.................................. (495,000)
Contract receivables................................... (1,049,331)
Costs and estimated earnings in excess of billings on
uncompleted contracts................................. (1,500,742)
Inventory.............................................. (1,640,873)
Prepaid expenses and other current assets.............. 378,816
Security deposits...................................... 26,375
Changes in liabilities increase (decrease):
Accounts payable....................................... (2,098,124)
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. 7,038,393
Accrued expenses and other current liabilities......... 224,363
-----------
Total adjustments................................. 1,600,691
-----------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 925,537
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.............. 147,756
Purchase of property and equipment........................ (112,282)
Advances to joint ventures................................ (2,638,262)
-----------
NET CASH USED IN INVESTING ACTIVITIES............. (2,602,788)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term advances........................................ 5,184,814
Repayment of advances to stockholders..................... 460,328
Repayment of advances to affiliates....................... 100,078
Advances to affiliates.................................... (1,295,719)
Advances to stockholders.................................. (71,378)
Repayment of advances from stockholders................... (128,886)
Distributions to stockholders............................. (579,417)
Principal payments of long-term borrowings................ (81,002)
Repayment of notes payable -- bank........................ (1,013,334)
Repayment of advances from affiliates..................... (962,295)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 1,613,189
-----------
NET DECREASE IN CASH........................................ (64,060)
CASH, BEGINNING OF PERIOD................................... 1,399,588
-----------
CASH, END OF PERIOD......................................... $ 1,335,528
===========
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired through long-term
financing.............................................. $ 38,388
===========
</TABLE>

See independent auditors' report and notes to combined financial statements.

F-51
<PAGE> 174

F & V METRO CONTRACTING CORP. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS

F & V Metro Contracting Corp. and Affiliates (the "Companies") serve as
contractors for governmental, institutional and commercial projects, primarily
in the New York City Metropolitan area. Construction work is generally performed
under fixed-price and unit-price contracts. These contracts are undertaken by
the Companies or in partnership with other contractors through joint ventures.
The length of the Companies' contracts varies but typically ranges from one to
three years.

2. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF COMBINATION

The combined financial statements include the accounts of F & V Metro
Contracting Corp., V & R Electrical Contractors, Inc., F & V Mechanical/V & R
Electrical -- A Joint Venture, Impulse Enterprises of N.Y., Inc. and Impulse
Enterprises of N.Y., Inc. and F & V Mechanical Plumbing & Heating Corp. A Joint
Venture, which are related by virtue of common ownership. All intercompany
balances and transactions have been eliminated in the combined financial
statements.

The balance sheet dates for the entities included in the combined report
are as follows:

<TABLE>
<S> <C>
F&V Metro Contracting Corp.................................. 11/30/98
V&R Electrical Contractors, Inc............................. 12/31/98
F&V Mechanical/V&R Electrical a Joint Venture............... 12/31/98
Impulse Enterprises of N.Y., Inc............................ 10/31/98
Impulse Enterprises of N.Y., Inc. and F&V Mechanical a Joint
Venture................................................... 10/31/98
</TABLE>

REVENUE AND COST RECOGNITION

Revenues from fixed-price and unit-price, long-term construction contracts
are recognized under the percentage of completion method. Under this method,
progress towards completion is recognized according to the ratio of incurred
costs to estimated total costs.

Contract costs include all direct material and labor costs and all other
direct and indirect costs related to contract performance. General and
administrative costs are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in job performance, job conditions and estimated
profitability, including those arising from settlements, may result in revisions
to costs and income and are recognized in the period in which the revisions are
determined. Because of the inherent uncertainty in estimating the costs to
complete on contracts in process, it is at least reasonably possible that the
estimates used will change in the near term. Profit incentives are included in
revenues when their realization is reasonably assured. An amount equal to
contract costs attributable to claims is included in revenues when realization
is probable and the amount can be reliably estimated.

The Asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The Liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.

In accordance with normal construction industry practice, the Companies
classify as current all assets and liabilities related to the performance of
long-term construction contracts. The

F-52
<PAGE> 175
F & V METRO CONTRACTING CORP. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

contracting cycle may extend beyond one year and, accordingly, collection or
payment of amounts related to these contracts may extend beyond one year.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH EQUIVALENTS

The Companies consider securities with original maturities of three months
or less to be cash equivalents.

MARKETABLE SECURITIES

The Companies determine cost of marketable securities using the average
cost method for purposes of calculating realized gains or losses.

INVENTORY

Inventory is valued at the lower of cost or market, with cost determined
using the first-in, first-out method and with market defined as the lower of
replacement cost or realizable value.

CONCENTRATION OF CREDIT RISK

Substantially all of the Companies' business activity is with customers
located within the New York City metropolitan area. Substantially all of the
Companies' cash is maintained in two financial institutions, each of which are
in excess of the Federal Deposit Insurance Corporation (FDIC) insured limits of
$100,000. The Companies believe they are not exposed to any significant credit
risk on cash and cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. The costs of additions and
betterments are capitalized and expenditures for repairs and maintenance are
expensed in the period incurred. When items of property and equipment are sold
or retired, the related costs and accumulated depreciation are removed from the
accounts and any gain or loss is included in income.

Depreciation and amortization of property and equipment is provided
utilizing accelerated methods over the estimated useful lives of the respective
assets as follows:

<TABLE>
<S> <C>
Building.................................................... 31.5 years
Transportation equipment.................................... 5 years
Office equipment............................................ 3 to 5 years
Furniture and fixtures...................................... 5 to 7 years
</TABLE>

Leasehold improvements are amortized over the shorter of the remaining term
of the lease or the useful life of the improvement utilizing the straight-line
method.

F-53
<PAGE> 176
F & V METRO CONTRACTING CORP. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

INCOME TAXES

Federal income taxes have not been provided because the stockholders have
elected to have F & V Metro Contracting Corp., V & R Electrical Contractors,
Inc., and Impulse Enterprises of N.Y., Inc. treated as S corporations for income
tax purposes as provided in Section 1362(a) of the Internal Revenue Code. As
such, the Corporations' income or loss and credits are passed through to the
stockholders and reported on their individual income tax returns.

Generally, income taxes are not payable or provided by the Partnerships, F
& V Mechanical/V & R Electrical -- A Joint Venture and Impulse Enterprises of
N.Y., Inc. and F & V Mechanical Plumbing and Heating Corp. -- A Joint Venture.
Partners are taxed individually on their share of partnership earnings. The
partnership net income or loss is allocated to the partners based upon their
profit and loss percentages. The partnerships are subject to the New York City
unincorporated business tax for which no amounts are due for 1998.

PENSION PLANS

Union employees are covered by collectively bargained employee benefit
plans under which the Companies make contributions on a monthly basis based upon
hours worked.

PROFIT SHARING PLAN

The Companies sponsor a 401(k) plan covering all eligible salaried
employees who have met age and service requirements. Annual contributions to the
plan are discretionary and are determined by the Board of Directors. No Company
contributions were made in 1998.

3. MARKETABLE SECURITIES

The Companies' investments in marketable securities are classified as held
to maturity and are valued at cost, which approximates market value.

MARKETABLE DEBT SECURITIES

<TABLE>
<S> <C>
Municipal bonds............................................. $7,630,000
Cash........................................................ 216,300
----------
$7,846,300
==========
</TABLE>

The marketable securities have various maturity dates ranging from
December, 1998 to July, 2004 with interest rates ranging from 3.75% to 6.75% per
annum.

Bonds maturing after November 30, 1998 were replaced with similar
securities.

The Companies have substituted certain of their municipal bonds in lieu of
retainage totaling $7,902,788, related to certain uncompleted and completed
contracts.

F-54
<PAGE> 177
F & V METRO CONTRACTING CORP. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

4. CONTRACT RECEIVABLES

Contract receivables are summarized as follows:

<TABLE>
<S> <C>
Completed contracts......................................... $ 1,459,506
Contracts in process........................................ 10,740,881
Retainage................................................... 2,377,957
-----------
14,578,344
Less: Allowance for doubtful accounts....................... 118,897
-----------
$14,459,447
===========
</TABLE>

The Companies anticipate that approximately 55% of retainage at November
30, 1998 will be collected within one year.

5. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Costs and estimated earnings in excess of billings on uncompleted contracts
arise when revenues have been recorded but the amounts cannot be billed
currently under the terms of the contracts. Such amounts are recoverable from
customers upon various measures of performance, including achievement of certain
milestones, completion of specified units or completion of the contract. The
Companies anticipate that substantially all amounts, will be billed and
collected within one year.

Costs and estimated earning on uncompleted contracts are as follows:

<TABLE>
<S> <C>
Contract costs incurred..................................... $83,533,894
Estimated earnings.......................................... 10,442,645
-----------
93,976,539
Less: Billings to date...................................... 100,311,249
-----------
$(6,334,710)
===========
</TABLE>

Such amounts are included in the accompanying combined balance sheet under
the following captions:

<TABLE>
<S> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... $ 3,285,554
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (9,620,264)
-----------
$(6,334,710)
===========
</TABLE>

6. JOINT VENTURES

F & V Metro Contracting Corp. and Affiliates, in the normal conduct of its
business, has entered into four joint venture partnership agreements with third
parties. The joint venture agreements, which require the participants to
contribute additional capital as needed, provide that the Companies will receive
from the joint ventures their proportionate share of any profits or losses
realized from the contracts. The Companies have 50% or less participation in
these joint ventures and account for them under the equity method. The
investment is included in the balance "Advances to and equity in joint
ventures."

F-55
<PAGE> 178
F & V METRO CONTRACTING CORP. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

In addition, the Companies fulfill certain joint venture contractual
obligations and are reimbursed for all related costs incurred. During the year
ended November 30, 1998, the Companies received management fees from joint
ventures totaling $162,500, which is included in contract revenues.

7. RELATED PARTY TRANSACTIONS

Advances to and from affiliates and stockholders are summarized as follows:

<TABLE>
<S> <C>
ADVANCES TO AFFILIATES
Balance, beginning of period.............................. $ 100,078
Advances to affiliates.................................... 1,295,719
Repayment of advances..................................... (100,078)
----------
Balance, end of period.................................... $1,295,719
==========
ADVANCES TO STOCKHOLDERS
Balance, beginning of period.............................. $ 460,328
Advances to Stockholders.................................. 71,378
Repayment of advances..................................... (460,328)
----------
Balance, end of period.................................... $ 71,378
==========
ADVANCES FROM STOCKHOLDERS
Balance, beginning of period.............................. $ 128,886
Repayment of advances..................................... (128,886)
----------
Balance, end of period.................................... $ --
==========
</TABLE>

Advances between affiliates are repaid periodically throughout the year and
are non-interest bearing. The Companies anticipate that these advances will be
repaid within one year.

The Companies lease their office and warehouse facilities from an affiliate
on a month-to-month tenancy. Rent expense charged to operations for the year
ended November 30, 1998 amounted to $302,160, of which $47,520 is included in
contract costs.

The Companies have various loans receivable from related parties in the
amount of $85,310. These loans are unsecured, non-interest bearing and have no
specific repayment terms. The Companies anticipate these loans to be repaid
within one year. Such loans are included in the caption "Prepaid expenses and
other current assets."

8. PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

<TABLE>
<S> <C>
Transportation equipment.................................... $ 983,113
Office equipment............................................ 42,973
Furniture and fixtures...................................... 31,928
Leasehold improvements...................................... 250,604
----------
1,308,618
Less: Accumulated depreciation and amortization............. 761,619
----------
$ 546,999
==========
</TABLE>

Depreciation and amortization expense related to property and equipment
amounted to $121,884, of which $68,771 is included in contract costs for the
year ended November 30, 1998.

F-56
<PAGE> 179
F & V METRO CONTRACTING CORP. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

9. NOTES PAYABLE -- BANKS

Pursuant to an agreement with its bank, the Companies may borrow up to
$2,300,000 under an unsecured line of credit. The agreement contains financial
covenants related to the Companies' working capital, net worth and bank
borrowings. The agreement also contains a 30-day clean-up provision and is
personally guaranteed by the stockholders of the Companies. Interest is payable
at 1/2% above the bank's prime rate (for a total rate of 8.25% at November 30,
1998). The line of credit expires on May 31, 1999.

The outstanding balance on the above mentioned line of credit totaled
$2,220,000 at November 30, 1998. Subsequent to November 30, 1998, the Companies
repaid $1,817,908 of this balance.

Pursuant to an agreement with another bank, the Companies have borrowed
$2,300,000 under a term loan agreement. The agreement contains financial
covenants related to the Companies' working capital, net worth and bank
borrowings. The agreement also contains a provision whereby the Companies will
repay $40,000 per month, plus interest, towards the balance of the loan. The
loan is personally guaranteed by the stockholders of the Companies. Interest is
payable at 1/2% above the bank's prime rate (for a total rate of 8.25% at
November 30, 1998). The term loan expires on May 31, 1999.

The outstanding balance on the above mentioned term loan totals $2,100,000
at November 30, 1998. Subsequent to November 30, 1998, the Companies repaid
$160,000 of this balance.

In addition, the Companies have entered into agreements with the banks for
two, $500,000 term loans. Each loan is to be repaid in equal monthly
installments of $13,889, plus interest through March, 2000. These loans are
secured by the fixed assets of the Companies and are personally guaranteed by
the stockholders of the Companies. Interest is payable at 3/4% above the banks'
prime rate (for a combined rate of 8.50% at November 30, 1998).

The outstanding balances on the above mentioned term loans total $444,444
at November 30, 1998, of which $111,111 is long-term. Subsequent to November 30,
1998, the Companies repaid all outstanding balances relating to these term
loans.

Aggregate maturities of notes payable -- banks are as follows:

<TABLE>
<CAPTION>
YEARS ENDING NOVEMBER 30:
- -------------------------
<S> <C>
1999........................................................ $4,653,333
2000........................................................ 111,111
----------
$4,764,444
==========
</TABLE>

10. LONG-TERM DEBT

Long-term debt is summarized as follows:

<TABLE>
<S> <C>
Installment loans payable -- in equal monthly installments
totaling $4,670 including interest ranging from 7.9% to
9.9% per annum through varying periods from October, 1999
through October, 2002, secured by related transportation
equipment................................................. $117,082
Less: Current maturities.................................... 47,685
--------
Long-Term Debt.............................................. $ 69,397
========
</TABLE>

F-57
<PAGE> 180
F & V METRO CONTRACTING CORP. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Aggregate maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
YEARS ENDING NOVEMBER 30:
- -------------------------
<S> <C>
1999........................................................ $ 47,685
2000........................................................ 38,830
2001........................................................ 23,896
2002........................................................ 6,671
--------
$117,082
========
</TABLE>

11. PAYABLE -- OTHER

The Companies have various other loans payable to a related party which are
unsecured, non-interest bearing and have no specific repayment terms. The
Companies anticipate repaying these loans within one year.

12. LONG-TERM ADVANCES

The Companies have received various advances from a joint venture partner
which have been used to finance certain contracts unrelated to such joint
venture. Such amounts are non-interest bearing and have no specific repayment
terms. The Companies do not anticipate repaying such amounts within one year.

13. STOCKHOLDERS' EQUITY

Stockholders' equity of the Companies on a non-combined basis are
summarized as follows:

<TABLE>
<S> <C>
F & V METRO CONTRACTING CORP.
Common stock -- no par value; 400 shares authorized; 280
shares issued and outstanding.......................... $ 50,350
Retained earnings......................................... 605,638
-----------
Total Stockholders' Equity at November 30, 1998... $ 655,988
===========
V & R ELECTRICAL CONTRACTORS, INC.
Common stock -- no par value; 200 shares authorized, 100
shares issued and outstanding.......................... $ 10,000
Accumulated deficit....................................... (210,224)
-----------
Total Stockholders' Deficit at December 31,
1998............................................ $ (200,224)
===========
IMPULSE ENTERPRISES OF N.Y., INC.
Common stock -- no par value; 200 shares authorized,
issued and outstanding................................. $ 241,000
Accumulated deficit....................................... (2,489,603)
-----------
Total Stockholders' Deficit at October 31, 1998... $(2,248,603)
===========
</TABLE>

The changes in combined excess of liabilities over assets for the year
ended November 30, 1998 are as follows:

<TABLE>
<S> <C>
Net liabilities, beginning of year.......................... $ (538,268)
Net loss.................................................... (675,154)
Distributions to stockholders............................... (579,417)
-----------
Net liabilities, end of year................................ $(1,792,839)
===========
</TABLE>

F-58
<PAGE> 181
F & V METRO CONTRACTING CORP. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

14. COMMITMENTS AND CONTINGENCIES

The Companies have guaranteed a loan agreement entered into by a
non-combined affiliated company and its bank. The amount outstanding on this
loan agreement totals $664,444 at November 30, 1998.

The Companies are contingently liable to their surety under a general
indemnity agreement. Under this agreement, the Companies agree to indemnify the
surety for any payments made on their behalf and on behalf of their joint
ventures. The Companies believe that all contingent liabilities will be
satisfied by their performance on the specific contracts covered by the
agreement.

F & V Metro Contracting Corp., in an unrelated business transaction, has
entered into an agreement with another general contractor as a guarantor on one
of its projects. F&V Metro Contracting Corp. had no equity interest in the
project and was entitled to a fee based on the profit of the project. Each party
is jointly and severally liable to the surety under a general indemnity
agreement. Included in other expenses is $1,490,646, which represents amounts
reimbursed to the surety and vendors and the anticipated remaining cost to
complete the contract. F & V Metro Contracting Corp. will seek recovery of all
amounts from the general contractor; however, no amounts have been recorded as
ultimate collection is uncertain. It is reasonably possible that F & V Metro
Contracting Corp. will have to reimburse the surety for additional amounts under
the indemnity. Any such additional reimbursement cannot be estimated at November
30, 1998.

The Companies are involved in various legal proceedings which have been
filed against them. In the opinion of management and legal counsel, the outcome
of this litigation will not materially affect the Companies' financial position.

15. INCOME TAXES

The net deferred tax benefits in the accompanying combined balance sheet
include the following components:

<TABLE>
<S> <C>
Tax benefit from net operating loss carryforward............ $600,321
Valuation allowance......................................... (600,321)
--------
Net deferred tax asset...................................... $ --
========
</TABLE>

As of November 30, 1998, the Companies have New York State and New York
City net operating loss carryforwards of approximately $10,000,000, subject to
review by taxing authorities, expiring at varying dates ranging from October,
2007 to December, 2012.

16. SUBSEQUENT EVENT

On February 1, 1999, the stockholders of the Companies entered into an
agreement with RailWorks Corporation. Under the terms of the agreement, the
stockholders agreed to exchange their stock and ownership interests in the
Companies for cash and promissory notes. The transaction was completed on March
15, 1999.

F-59
<PAGE> 182

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

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY RAILWORKS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTIONS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF
OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF RAILWORKS SINCE SUCH DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors.......................... 10
Use of Proceeds....................... 18
Capitalization........................ 19
Pro Forma Financial Information....... 20
Selected Historical Consolidated
Financial Data...................... 27
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 29
Business.............................. 38
The Exchange Offer.................... 52
Management............................ 62
Certain Relationships and Related
Party Transactions.................. 67
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Principal Stockholders................ 70
Description of Capital Stock.......... 71
Description of Credit Facility........ 72
Description of the New Notes.......... 72
Exchange Offer; Registration Rights... 108
Book-Entry; Delivery and Form......... 112
Plan of Distribution.................. 113
Certain Untied States Federal Tax
Considerations...................... 115
Legal Matters......................... 115
Experts............................... 115
Where You Can Find More Information... 116
Special Note Regarding Forward-
Looking Statements.................. 116
Index to Financial Statements......... F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
OFFER TO EXCHANGE
(Railworks Logo)
11 1/2% SENIOR SUBORDINATED
NOTES DUE 2009
THAT HAVE BEEN REGISTERED
UNDER THE
SECURITIES ACT OF 1933
FOR ALL OUTSTANDING UNREGISTERED
11 1/2% SENIOR SUBORDINATED
NOTES DUE 2009
-------------------

PROSPECTUS
-------------------
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 183

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to some statutory limitations, the liability of directors to
the corporation or its stockholders for monetary damages for breaches of
fiduciary duty, except for liability (a) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the DGCL, or (d) for any transaction from which
the director derived an improper personal benefit. Article 10 of the
registrant's restated Certificate of Incorporation provides that the personal
liability of directors of the registrant is eliminated to the fullest extent
permitted by Section 102(b)(7) of the DGCL.

Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of being a director or officer of the
corporation if it is determined that the director or officer acted in accordance
with the applicable standard of conduct set forth in such statutory provision.
Article 7 of the registrant's Bylaws provides that the registrant will indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he is or was a director, officer, employee or agent of the registrant,
or is or was serving at the request of the registrant as a director, officer,
employee or agent of another entity, against certain liabilities, costs and
expenses. Article 7 further permits the registrant to maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
registrant, or is or was serving at the request of the registrant as a director,
officer, employee or agent of another entity, against any liability asserted
against such person and incurred by such person in any such capacity or arising
out of his status as such, whether or not the registrant would have the power to
indemnify such person against such liability under the DGCL. The registrant
expects to maintain directors' and officers' liability insurance.

The foregoing statements are subject to the detailed provisions of Article
10 of the registrant's restated Certificate of Incorporation.

Pursuant to the Registration Rights Agreement, RailWorks has agreed to
indemnify holders of registrable notes against certain liabilities. Also
pursuant to the Registration Rights Agreement, RailWorks and certain
broker-dealers, including certain persons associated with such broker-dealers,
have agreed to indemnify each other against certain liabilities.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
3.1 -- Restated Certificate of Incorporation of RailWorks
Corporation (incorporated by reference to Exhibit 3.1 to
Registration Statement on Form S-1 (File No. 333-53483)).
3.2 -- Bylaws of RailWorks Corporation (incorporated by reference
to Exhibit 3.2 to Registration Statement on Form S-1 (File
No. 333-53483)).
</TABLE>

II-1
<PAGE> 184

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
3.3 -- Certificate of Designation of the Series A Convertible
Preferred Stock (incorporated by reference to Exhibit 3.1 to
the Registrant's Current Report on Form 8-K filed on October
14, 1998).
4.1 -- Specimen Common Stock Certificate (incorporated herein by
reference to Exhibit 4.1 to Registration Statement on Form
S-1, File No. 333-53483).
4.2* -- Specimen Preferred Stock Certificate.
4.3* -- Form of 11 1/2% Senior Subordinated Notes due 2009 (included
in Exhibit 4.5).
4.4 -- Certificate of Designation of the Series A Convertible
Preferred Stock (incorporated by reference to Exhibit 3.1 to
the Registrant's Current Report on Form 8-K filed on October
14, 1998).
4.5* -- Indenture, dated as of April 7, 1999 (the "Indenture") among
RailWorks, the Guarantors named therein and First Union
National Bank, as Trustee.
4.6* -- Registration Rights Agreement, dated as of April 7, 1999,
among RailWorks, the Guarantors named therein and BT
Alex.Brown Incorporated, NationsBanc Montgomery Securities,
LLC and First Union Capital Markets Corp., as Initial
Purchasers.
5.1* -- Opinion of King & Spalding.
10.1 -- Uniform Provisions for the Acquisition of Founding Companies
(incorporated by reference to Exhibit 10.1 to Registration
Statement on Form S-1 (File No. 333-53483)).
10.2 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Wildcats
Alpha-Keystone Company, Alpha-Keystone Engineering, Inc. and
the stockholders named therein (incorporated by reference to
Exhibit 10.2 to Registration Statement on Form S-1 (File No.
333-53483)).
10.3 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Bulldog Comtrak
Company, Comtrak Construction, Inc. and the stockholders
named therein (incorporated by reference to Exhibit 10.3 to
Registration Statement on Form S-1 (File No. 333-53483)).
10.4 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Cardinal Annex
Railroad Builders Company, Annex Railroad Builders, Inc. and
the stockholders named therein (incorporated by reference to
Exhibit 10.4 to Registration Statement on Form S-1 (File No.
333-53483)).
10.5 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Huskies Condon
Brothers Company, Condon Brothers Inc. and the stockholders
named therein (incorporated by reference to Exhibit 10.5 to
Registration Statement on Form S-1 (File No. 333-53483)).
10.6 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Commodores
Concrete Company, CPI Concrete Products, Inc. and the
stockholders named therein (incorporated by reference to
Exhibit 10.6 to Registration Statement on Form S-1 (File No.
333-53483)).
10.7 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Nittany Lions
McGinley Company, HP McGinley Inc. and the stockholders
named therein (incorporated by reference to Exhibit 10.7 to
Registration Statement on Form S-1 (File No. 333-53483)).
10.8 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Owls Kennedy
Railroad Builders Company, Kennedy Railroad Builders, Inc.
and the stockholders named therein (incorporated by
reference to Exhibit 10.8 to Registration Statement on Form
S-1 (File No. 333-53483)).
</TABLE>

II-2
<PAGE> 185

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
10.9 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Red Storm
Comstock Company, Inc., L.K. Comstock & Company, Inc. and
the stockholders named therein (incorporated by reference to
Exhibit 10.9 to Registration Statement on Form S-1 (File No.
333-53483)).
10.10 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Sycamores Midwest
Construction Company, Midwest Construction Services, Inc.
and the stockholders named therein (incorporated by
reference to Exhibit 10.10 to Registration Statement on Form
S-1 (File No. 333-53483)).
10.11 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Bears Merit
Company, Merit Railroad Contractors, Inc. and the
stockholders named therein (incorporated by reference to
Exhibit 10.11 to Registration Statement on Form S-1 (File
No. 333-53483)).
10.12 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Hoosier Mize
Company, Mize Construction Company and the stockholders
named therein (incorporated by reference to Exhibit 10.12 to
Registration Statement on Form S-1 (File No. 333-53483)).
10.13 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Husky New England
Railroad Construction Company, New England Railroad
Construction Company Inc. and the stockholders named therein
(incorporated by reference to Exhibit 10.13 to Registration
Statement on Form S-1 (File No. 333-53483)).
10.14 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Wolverines
Northern Rail Services Company, Northern Rail Service and
Supply Company, Inc. and the stockholders named therein
(incorporated by reference to Exhibit 10.14 to Registration
Statement on Form S-1 (File No. 333-53483)).
10.15 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Big Orange
Minnesota Company, Minnesota Railroad Service Company and
the stockholders named therein (incorporated by reference to
Exhibit 10.15 to Registration Statement on Form S-1 (File
No. 333-53483)).
10.16 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Buckeye Railcorp,
Inc., Railcorp Inc. and the stockholders named therein
(incorporated by reference to Exhibit 10.16 to Registration
Statement on Form S-1 (File No. 333-53483)).
10.17 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Runnin' Rebels
Railroad Service Company, Railroad Service, Inc. and the
stockholders named therein (incorporated by reference to
Exhibit 10.17 to Registration Statement on Form S-1 (File
No. 333-53483)).
10.18 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Crusader Railroad
Specialties Company, Railroad Specialties, Inc. and the
stockholders named therein (incorporated by reference to
Exhibit 10.18 to Registration Statement on Form S-1 (File
No. 333-53483)).
10.19 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Screaming Eagle
Wood Preserving Company, Southern Indiana Wood Preserving
Company, Inc. and the stockholders named therein
(incorporated by reference to Exhibit 10.19 to Registration
Statement on Form S-1 (File No. 333-53483)).
</TABLE>

II-3
<PAGE> 186

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
10.20 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Fighting
Irish-U.S. Railway Supply Company, U.S. Railway Supply, Inc.
and the stockholders named therein (incorporated by
reference to Exhibit 10.20 to Registration Statement on Form
S-1 (File No. 333-53483)).
10.21 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Spartans
Trackworks Company, U.S. Trackworks, Inc. and the
stockholders named therein (incorporated by reference to
Exhibit 10.21 to Registration Statement on Form S-1 (File
No. 333-53483)).
10.22 -- Agreement and Plan or Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Mustang Smith
Construction Company, Wm. A. Smith Construction Co., Inc.
and the stockholders named therein (incorporated by
reference to Exhibit 10.22 to Registration Statement on Form
S-1 (File No. 333-53483)).
10.23 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Longhorn Smith
Rerailing Company, Wm. A. Smith Rerailing Services, Inc. and
the stockholders named therein (incorporated by reference to
Exhibit 10.23 to Registration Statement on Form S-1 (File
No. 333-53483)).
10.24 -- Amended and Restated Employment Agreement between RailWorks
Corporation and John G. Larkin dated as of August 4, 1998
(incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on form 10-Q filed on
September 11, 1998).
10.25 -- Amended and Restated Employment Agreement between RailWorks
Corporation and Michael R. Azarela dated as of August 4,
1998 (incorporated by reference to Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q filed on
September 11, 1998).
10.26 -- Amended and Restated Employment Agreement between RailWorks
Corporation and John Kennedy dated as of August 4, 1998
(incorporated by reference to Exhibit 10.3 to the
Registrant's Quarterly Report on Form 10-Q filed on
September 11, 1998).
10.27 -- Amended and Restated Employment Agreement between RailWorks
Corporation and Harold C. Kropp, Jr. dated as of August 4,
1998 (incorporated by reference to Exhibit 10.4 to the
Registrant's Quarterly Report on Form 10-Q filed on
September 11, 1998).
10.28 -- Form of Employment Agreement between each Founding Company
and Founding Company Officer (incorporated by reference to
Exhibit 10.28 to the Registrant's Registration Statement on
Form S-1 (File No. 333-53483)).
10.29 -- 1998 Incentive Stock Plan (incorporated by reference to
Exhibit 10.29 to the Registrant's Registration Statement on
Form S-1 (File No. 333-53483)).
10.30 -- Indemnity and Cooperation Agreement dated as of April 3,
1997 between Spie Enertrans S.A., Comstock Group, Inc., L.K.
Comstock & Company and LKC Acquisition Corp., together with
Memorandum of Understanding dated August 20, 1997 between
Spie Enertrans S.A., Comstock Group, Inc., L.K. Comstock &
Company and LKC Acquisition Corp. (incorporated by reference
to Exhibit 10.30 to the Registrant's Registration Statement
on Form S-1 (file No. 333-53483)).
10.31 -- Stock Purchase Agreement dated April 3, 1997 between
Comstock Group, Inc. and LKC Acquisition Corp., as amended
(incorporated by reference to Exhibit 10.31 to the
Registrant's Registration Statement on Form S-1 (file No.
333-53483)).
10.32 -- Contingent Promissory Note dated April 3, 1997 made by L.K.
Comstock & Company, Inc. to the order of Spie Enertrans S.A.
(incorporated by reference to Exhibit 10.32 to the
Registrant's Registration Statement on Form S-1 (File No.
333-53483)).
</TABLE>

II-4
<PAGE> 187

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
10.33 -- Employment Agreement dated as of January 7, 1999 between
Robert D. Wolff and MidWest Railroad Construction and
Maintenance Corporation of Wyoming (incorporated by
reference to Exhibit 10.33 to the Registrant's Annual Report
on Form 10-K filed on March 29, 1999).
10.34 -- Credit Agreement dated as of August 4, 1998 among RailWorks
Corporation, as Borrower, Certain Subsidiaries, as
Guarantors, the Lenders named therein, First Union National
Bank, as Documentation Agent and NationsBank, N.A., as
Administrative Agent (incorporated by reference to Exhibit
10.34 to the Registrant's Annual Report on Form 10-K filed
on March 29, 1999).
10.35 -- Amendment No. 1 to Credit Agreement dated December , 1998
among RailWorks Corporation, as Borrower, the Guarantors and
Lenders named therein and NationsBank, N.A., as
Administrative Agent (incorporated by reference to Exhibit
10.35 to the Registrant's Annual Report on Form 10-K filed
on March 29, 1999).
10.36 -- Amendment No. 2 to Credit Agreement dated February 2, 1999
among RailWorks Corporation, and as Borrower, the Guarantors
and Lenders named therein and NationsBank, N.A., as
Administrative Agent (incorporated by reference to Exhibit
10.36 to the Registrant's Annual Report on Form 10-K filed
on March 29, 1999).
10.37 -- Credit Agreement dated as of February 2, 1999 among
RailWorks Corporation, as Borrower, Certain Subsidiaries, as
Guarantors, the Lenders named therein and NationsBank, N.A.,
as Administrative Agent (incorporated by reference to
Exhibit 10.37 to the Registrant's Annual Report on Form 10-K
filed on March 29, 1999).
10.38 -- Employment Agreement between RailWorks Corporation and
Kenneth R. Burk dated as of May 10, 1999 (incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q filed on May 14, 1999).
12.1* -- Computation of Ratio of Earnings to Fixed Charges.
21.1* -- List of Subsidiaries.
23.1* -- Consent of King & Spalding (included as part of its opinion
filed as Exhibit 5.1).
23.2** -- Consent of Arthur Andersen LLP.
23.3** -- Consent of Arthur Andersen LLP (Canada).
24.1* -- Powers of Attorney.
25.1* -- Statement of Eligibility of Trustee on Form T-1.
99.1* -- Form of Letter of Transmittal for 11 1/2% Senior
Subordinated Notes Due 2009.
99.2** -- Form of Notice of Guaranteed Delivery for 11 1/2% Senior
Subordinated Notes Due 2009.
99.3* -- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
99.4* -- Stock Exchange Agreement dated October 8, 1998 between the
Registrant and BT Alex.Brown Incorporated (incorporated by
reference to Exhibit 99.1 to the Registrant's Current Report
on Form 8-K filed on October 14, 1998).
</TABLE>

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

* Previously filed.

** Filed herewith.

ITEM 22. UNDERTAKINGS

That, for purposes of determining any liability under the Securities Act of
1933, each filing of any Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by

II-5
<PAGE> 188

reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1993 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrants of expenses incurred
or paid by a director, officer or controlling person of the registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

II-6
<PAGE> 189

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Baltimore, State of Maryland, on June 29, 1999.

RAILWORKS CORPORATION

By: /s/ JOHN G. LARKIN
------------------------------------
John G. Larkin
Chairman of the Board
and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with RailWorks Corporation, and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* Chairman of the Board June 29, 1999
- -----------------------------------------------------
John G. Larkin

* Executive Vice President, Chief June 29, 1999
- ----------------------------------------------------- Financial Officer and Director
Michael R. Azarela (Principal Financial Officer)

* Vice President and Chief June 29, 1999
- ----------------------------------------------------- Accounting Officer (Principal
Harold C. Kropp Accounting Officer)

* Vice President, Chief Operating June 29, 1999
- ----------------------------------------------------- Officer -- Track Contractors
John Kennedy and Director

* Vice President, Chief Operating June 29, 1999
- ----------------------------------------------------- Officer -- Transit Operations
Peter Alan Pasch and Director

* Director June 29, 1999
- -----------------------------------------------------
Scott D. Brace

* Director June 29, 1999
- -----------------------------------------------------
Lambertus L. Tameling
</TABLE>

II-7
<PAGE> 190

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* Director June 29, 1999
- -----------------------------------------------------
Ronald W. Drucker

* Director June 29, 1999
- -----------------------------------------------------
R.C. Matney

* Director June 29, 1999
- -----------------------------------------------------
Steve C. Goggin

*By /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-8
<PAGE> 191

SIGNATURES

ALPHA KEYSTONE ENGINEERING, INC.

By: /s/ FULTON J. KENNEDY
------------------------------------
Fulton J. Kennedy
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Alpha Keystone Engineering, Inc. and on
the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President June 29, 1999
------------------------------------------------------
Fulton J. Kennedy

* Treasurer June 29, 1999
------------------------------------------------------
Harold C. Kropp

* Executive Vice President, June 29, 1999
------------------------------------------------------ Assistant Secretary and
Michael R. Azarela Director

* Assistant Secretary and June 29, 1999
------------------------------------------------------ Director
John Kennedy

* Director June 29, 1999
------------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-----------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-9
<PAGE> 192

SIGNATURES

ARMCORE ACQUISITION CORP.

By: /s/ RALPH JACKSON
------------------------------------
Ralph Jackson
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Armcore Acquisition Corp. and on the
date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director June 29, 1999
------------------------------------------------------
Ralph Jackson

* Treasurer June 29, 1999
------------------------------------------------------
Harold C. Kropp

* Executive Vice President and June 29, 1999
------------------------------------------------------ Director
Michael R. Azarela

* Director June 29, 1999
------------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-----------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-10
<PAGE> 193

SIGNATURES

ARMCORE RAILROAD CONTRACTORS, INC.

By: /s/ RALPH JACKSON
------------------------------------
Ralph Jackson
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Armcore Railroad Contractors, Inc. and
on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Ralph Jackson

* Treasurer June 29, 1999
- -----------------------------------------------------
Harold C. Kropp

* Executive Vice President and June 29, 1999
- ----------------------------------------------------- Director
Michael R. Azarela

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-----------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-11
<PAGE> 194

SIGNATURES

ANNEX RAILROAD BUILDERS, INC.

By: /s/ RONALD E. BROWN
------------------------------------
Ronald E. Brown
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Annex Railroad Builders, Inc. and on
the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Ronald E. Brown

* Treasurer June 29, 1999
- -----------------------------------------------------
Pamela J. Whitaker

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-----------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-12
<PAGE> 195

SIGNATURES

BIRMINGHAM WOOD, INC.

By: /s/ WILLIAM R. DONLEY

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

William R. Donley

Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Birmingham Wood,
Inc., and Michael R. Azarela, Executive Vice President and a Director of
Birmingham Wood, Inc., or either one of them, and any agent for service named in
this Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ WILLIAM R. DONLEY Chief Executive Officer June 29, 1999
------------------------------------------------------
William R. Donley

/s/ GENE CELLINI Treasurer June 29, 1999
------------------------------------------------------
Gene Cellini

/s/ MICHAEL R. AZARELA Executive Vice President and June 29, 1999
------------------------------------------------------ Director
Michael R. Azarela

/s/ JOHN G. LARKIN Director June 29, 1999
------------------------------------------------------
John G. Larkin
</TABLE>

II-13
<PAGE> 196

SIGNATURES

COMSTOCK HOLDINGS, INC.

By: /s/ C. WILLIAM MOORE
------------------------------------
C. William Moore
President

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
C. William Moore

* Treasurer June 29, 1999
- -----------------------------------------------------
Robert Herschenfeld

* Director June 29, 1999
- -----------------------------------------------------
Michael R. Azarela

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-14
<PAGE> 197

SIGNATURES

L.K. COMSTOCK & COMPANY, INC.

By: /s/ C. WILLIAM MOORE
------------------------------------
C. William Moore
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with L.K. Comstock & Company, Inc. and on
the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
C. William Moore

* Treasurer June 29, 1999
- -----------------------------------------------------
Robert Herschenfeld

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

* Director June 29, 1999
- -----------------------------------------------------
Michael R. Azarela

By: /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-15
<PAGE> 198

SIGNATURES

COMTRAK CONSTRUCTION, INC.

By: /s/ JOHN H. LAPP
------------------------------------
John H. Lapp
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Comtrak Construction, Inc. and on the
date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
John H. Lapp

* Treasurer June 29, 1999
- -----------------------------------------------------
Harold C. Kropp

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

By: /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-16
<PAGE> 199

SIGNATURES

CONDON BROTHERS, INC.

By: /s/ MARK E. CONDON
------------------------------------
Mark E. Condon
President

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Mark E. Condon

* Treasurer June 29, 1999
- -----------------------------------------------------
Kenneth Reger

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

By: /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-17
<PAGE> 200

SIGNATURES

CPI CONCRETE PRODUCTS INCORPORATED

By: /s/ JOHN D. BAKER
------------------------------------
John D. Baker
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with CPI Concrete Products Incorporated and
on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
John D. Baker

* Treasurer June 29, 1999
- -----------------------------------------------------
Julie Coletta

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

By: /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-18
<PAGE> 201

SIGNATURES

EARL CAMPBELL CONSTRUCTION COMPANY, INC.

By: /s/ ROBERT D. WOLFF

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

Robert D. Wolff

President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Earl Campbell
Construction Company, Inc., and Michael R. Azarela, Executive Vice President and
a Director of Earl Campbell Construction Company, Inc., or either one of them,
and any agent for service named in this Registration Statement and each of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended and any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Earl Campbell Construction Company,
Inc. and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ ROBERT D. WOLFF President June 29, 1999
------------------------------------------------------
Robert D. Wolff

/s/ KENNETH REGER Treasurer June 29, 1999
------------------------------------------------------
Kenneth Reger

/s/ MICHAEL R. AZARELA Executive Vice President and June 29, 1999
------------------------------------------------------ Director
Michael R. Azarela

/s/ JOHN G. LARKIN Director June 29, 1999
------------------------------------------------------
John G. Larkin
</TABLE>

II-19
<PAGE> 202

SIGNATURES

FCM RAIL, LTD.

By: /s/ DENNIS J. GILSTAD
------------------------------------
Dennis J. Gilstad
President

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Dennis J. Gilstad

* Treasurer and Vice President June 29, 1999
- -----------------------------------------------------
Harold S. Yip

* Executive Vice President and June 29, 1999
- ----------------------------------------------------- Director
Michael R. Azarela

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-----------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-20
<PAGE> 203

SIGNATURES

F&V METRO RW, INC.

By: /s/ BEN D'ALESSANDRO
------------------------------------
Ben D'Alessandro
President and Chief Executive
Officer

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President, Chief Executive June 29, 1999
- ----------------------------------------------------- Officer and Director
Ben D'Alessandro

* Treasurer June 29, 1999
- -----------------------------------------------------
Gene Cellini

* Executive Vice President and June 29, 1999
- ----------------------------------------------------- Director
Michael R. Azarela

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-----------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-21
<PAGE> 204

SIGNATURES

F&V METRO CONTRACTING CORP.

By: /s/ BEN D'ALESSANDRO

------------------------------------
Ben D'Alessandro
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with F&V Metro Contracting Corp. and on the
date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President, Chief Executive June 29, 1999
- ----------------------------------------------------- Officer and Director
Ben D'Alessandro

* Treasurer June 29, 1999
- -----------------------------------------------------
Gene Cellini

* Executive Vice President and June 29, 1999
- ----------------------------------------------------- Director
Michael R. Azarela

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-22
<PAGE> 205

SIGNATURES

IMPULSE ENTERPRISES OF NEW YORK, INC.

By: /s/ DAWN D'ALESSANDRO
------------------------------------
Dawn D'Alessandro
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Impulse Enterprises of New York, Inc.
and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Chief Executive June 29, 1999
- ----------------------------------------------------- Officer
Dawn D'Alessandro

* Treasurer June 29, 1999
- -----------------------------------------------------
Gene Cellini

* Executive Vice President and June 29, 1999
- ----------------------------------------------------- Director
Michael R. Azarela

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

* Director June 29, 1999
- -----------------------------------------------------
Ben D'Alessandro

*By: /s/ MICHAEL R. AZARELA
-----------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-23
<PAGE> 206

SIGNATURES

V&R ELECTRICAL CONTRACTORS, INC.

By: /s/ BEN D'ALESSANDRO
------------------------------------
Ben D'Alessandro
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with V&R Electrical Contractors, Inc. and on
the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President, Chief Executive June 29, 1999
- ----------------------------------------------------- Officer and Director
Ben D'Alessandro

* Treasurer June 29, 1999
- -----------------------------------------------------
Gene Cellini

* Executive Vice President and June 29, 1999
- ----------------------------------------------------- Director
Michael R. Azarela

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-----------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-24
<PAGE> 207

SIGNATURES

GANTREX RW, INC.

By: /s/ PETER LEVEY
------------------------------------
Peter Levey
President

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Peter Levey

* Treasurer June 29, 1999
- -----------------------------------------------------
Gene Cellini

* Executive Vice President and June 29,1999
- ----------------------------------------------------- Director
Michael R. Azarela

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-----------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-25
<PAGE> 208

SIGNATURES

GANTREX CORPORATION

By: /s/ PETER LEVEY
------------------------------------
Peter Levey
President

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Peter Levey

* Treasurer June 29, 1999
- -----------------------------------------------------
Gene Cellini

* Executive Vice President and June 29, 1999
- ----------------------------------------------------- Director
Michael R. Azarela

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-----------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-26
<PAGE> 209

SIGNATURES

GANTREX SYSTEMS, INC.

By: /s/ PETER LEVEY
------------------------------------
Peter Levey
President

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Peter Levey

* Treasurer June 29, 1999
- -----------------------------------------------------
Gene Cellini

* Executive Vice President and June 29, 1999
- ----------------------------------------------------- Director
Michael R. Azarela

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-----------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-27
<PAGE> 210

SIGNATURES

H.P. McGINLEY INC.

By: /s/ DAVID H. MCGINLEY
------------------------------------
David H. McGinley
President

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director June 29, 1999
- -----------------------------------------------------
David H. McGinley

* Treasurer June 29, 1999
- -----------------------------------------------------
Lynn Mingle

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-----------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-28
<PAGE> 211

SIGNATURES

KENNEDY RAILROAD BUILDERS, INC.

By: /s/ JOHN KENNEDY
------------------------------------
John Kennedy
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Kennedy Railroad Builders, Inc. and on
the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director June 29, 1999
- -----------------------------------------------------
John Kennedy

* Treasurer June 29, 1999
- -----------------------------------------------------
Harold C. Kropp

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-----------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-29
<PAGE> 212

SIGNATURES

McCORD TREATED WOOD, INC.

By: /s/ WILLIAM R. DONLEY

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

William R. Donley

Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of McCord Treated
Wood, Inc., and Michael R. Azarela, Executive Vice President and a Director of
McCord Treated Wood, Inc., or either one of them, and any agent for service
named in this Registration Statement and each of them, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with McCord Treated Wood, Inc. and on the
date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ WILLIAM R. DONLEY Chief Executive Officer June 29, 1999
------------------------------------------------------
William R. Donley

/s/ GENE CELLINI Treasurer June 29, 1999
------------------------------------------------------
Gene Cellini

/s/ MICHAEL R. AZARELA Executive Vice President and June 29, 1999
------------------------------------------------------ Director
Michael R. Azarela

/s/ JOHN G. LARKIN Director June 29, 1999
------------------------------------------------------
John G. Larkin
</TABLE>

II-30
<PAGE> 213

SIGNATURES

MERIT RAILROAD CONTRACTORS, INC.

By: /s/ STEVE C. GOGGIN

------------------------------------
Steve C. Goggin
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Merit Railroad Contractors, Inc. and on
the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director June 29, 1999
- -----------------------------------------------------
Steve C. Goggin

* Treasurer June 29, 1999
- -----------------------------------------------------
David Leehy

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-31
<PAGE> 214

SIGNATURES

MIDWEST CONSTRUCTION SERVICES, INC.

By: /s/ WILLIAM C. LUCAITIS
------------------------------------
William C. Lucaitis
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Midwest Construction Services, Inc. and
on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director June 29, 1999
- -----------------------------------------------------
William C. Lucaitis

* Treasurer June 29, 1999
- -----------------------------------------------------
Harold C. Kropp

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-32
<PAGE> 215

SIGNATURES

MID WEST RW, INC.

By: /s/ ROBERT D. WOLFF
------------------------------------
Robert D. Wolff
Chief Executive Officer

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chief Executive Officer and June 29, 1999
- ----------------------------------------------------- Director
Robert D. Wolff

* President June 29, 1999
- -----------------------------------------------------
William Bush

* Treasurer June 29, 1999
- -----------------------------------------------------
Mary Anne Haase

* Executive Vice President and June 29, 1999
- ----------------------------------------------------- Director
Michael R. Azarela

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-33
<PAGE> 216

SIGNATURES

MID WEST RAILROAD CONSTRUCTION &
MAINTENANCE CORPORATION OF WYOMING

By: /s/ ROBERT D. WOLFF
------------------------------------
Robert D. Wolff
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Mid West Railroad Construction &
Maintenance Corporation of Wyoming and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* Chief Executive Officer and June 29, 1999
- ----------------------------------------------------- Director
Robert D. Wolff

* President June 29, 1999
- -----------------------------------------------------
William Bush

* Treasurer and Secretary June 29, 1999
- -----------------------------------------------------
Mary Anne Haase

* Executive Vice President and June 29, 1999
- ----------------------------------------------------- Director
Michael R. Azarela

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-34
<PAGE> 217

SIGNATURES

MINNESOTA RAILROAD SERVICE, INC.

By: /s/ SCOTT D. BRACE
------------------------------------
Scott D. Brace
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Minnesota Railroad Service, Inc. and on
the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Scott D. Brace

* Treasurer June 29, 1999
- -----------------------------------------------------
Marie Zueger

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-35
<PAGE> 218

SIGNATURES

NEOSHO CONSTRUCTION COMPANY, INC.

By: /s/ STEVEN G. HUTCHINSON

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

Steven G. Hutchinson

President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Neosho Construction
Company, Inc., and Michael R. Azarela, a Director of Neosho Construction
Company, Inc., or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Neosho Construction Company, Inc. and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ STEVEN G. HUTCHINSON President June 29, 1999
------------------------------------------------------
Steven G. Hutchinson

/s/ DOUGLAS W. HUTCHINSON Treasurer June 29, 1999
------------------------------------------------------
Douglas W. Hutchinson

/s/ MICHAEL R. AZARELA Director June 29, 1999
------------------------------------------------------
Michael R. Azarela

/s/ JOHN G. LARKIN Director June 29, 1999
------------------------------------------------------
John G. Larkin
</TABLE>

II-36
<PAGE> 219

SIGNATURES

NEOSHO INCORPORATED

By: /s/ STEVEN G. HUTCHINSON

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

Steven G. Hutchinson

President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Neosho
Incorporated, and Michael R. Azarela, a Director of Neosho Incorporated, or
either one of them, and any agent for service named in this Registration
Statement and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended and any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agents or any
of them, their, or his or her, substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ STEVEN G. HUTCHINSON President June 29, 1999
------------------------------------------------------
Steven G. Hutchinson

/s/ DOUGLAS W. HUTCHINSON Treasurer June 29, 1999
------------------------------------------------------
Douglas W. Hutchinson

/s/ MICHAEL R. AZARELA Executive Vice President, June 29, 1999
------------------------------------------------------ Assistant Secretary and
Michael R. Azarela Director

/s/ JOHN G. LARKIN Director June 29, 1999
------------------------------------------------------
John G. Larkin
</TABLE>

II-37
<PAGE> 220

SIGNATURES

NEOSHO INTERNATIONAL, INC.

By: /s/ STEVEN G. HUTCHINSON

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

Steven G. Hutchinson

President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Neosho
International, Inc., and Michael R. Azarela, a Director of Neosho International,
Inc., or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Neosho International, Inc. and on the
date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ STEVEN G. HUTCHINSON President June 29, 1999
------------------------------------------------------
Steven G. Hutchinson

/s/ DOUGLAS W. HUTCHINSON Treasurer June 29, 1999
------------------------------------------------------
Douglas W. Hutchinson

/s/ MICHAEL R. AZARELA Director June 29, 1999
------------------------------------------------------
Michael R. Azarela

/s/ JOHN G. LARKIN Director June 29, 1999
------------------------------------------------------
John G. Larkin
</TABLE>

II-38
<PAGE> 221

SIGNATURES

NEOSHO ASIA, INC.

By: /s/ STEVEN G. HUTCHINSON

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

Steven G. Hutchinson

President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Neosho Asia, Inc.,
and Michael R. Azarela, a Director of Neosho Asia, Inc., or either one of them,
and any agent for service named in this Registration Statement and each of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended and any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ STEVEN G. HUTCHINSON President June 29, 1999
------------------------------------------------------
Steven G. Hutchinson

/s/ DOUGLAS W. HUTCHINSON Treasurer June 29, 1999
------------------------------------------------------
Douglas W. Hutchinson

/s/ MICHAEL R. AZARELA Director June 29, 1999
------------------------------------------------------
Michael R. Azarela

/s/ JOHN G. LARKIN Director June 29, 1999
------------------------------------------------------
John G. Larkin
</TABLE>

II-39
<PAGE> 222

SIGNATURES

NEOSHO CENTRAL AMERICA, INC.

By: /s/ STEVEN G. HUTCHINSON

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

Steven G. Hutchinson

President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Neosho Central
America, Inc., and Michael R. Azarela, a Director of Neosho Central America,
Inc., or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Neosho Central America, Inc. and on the
date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ STEVEN G. HUTCHINSON President June 29, 1999
------------------------------------------------------
Steven G. Hutchinson

/s/ DOUGLAS W. HUTCHINSON Treasurer June 29, 1999
------------------------------------------------------
Douglas W. Hutchinson

/s/ MICHAEL R. AZARELA Director June 29, 1999
------------------------------------------------------
Michael R. Azarela

/s/ JOHN G. LARKIN Director June 29, 1999
------------------------------------------------------
John G. Larkin
</TABLE>

II-40
<PAGE> 223

SIGNATURES

NEOSHO CONTRACTORS, INC.

By: /s/ STEVEN G. HUTCHINSON
------------------------------------

Steven G. Hutchinson

President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Neosho Contractors,
Inc., and Michael R. Azarela, a Director of Neosho Contractors, Inc., or either
one of them, and any agent for service named in this Registration Statement and
each of them, his or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any registration statement
filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended and
any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agents or any of them, their,
or his or her, substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Neosho Contractors, Inc. and on the
date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ STEVEN W. HUTCHINSON President June 29, 1999
------------------------------------------------------
Steven W. Hutchinson

/s/ DONALD W. HUTCHINSON Treasurer June 29, 1999
------------------------------------------------------
Donald W. Hutchinson

/s/ MICHAEL R. AZARELA Director June 29, 1999
------------------------------------------------------
Michael R. Azarela

/s/ JOHN G. LARKIN Director June 29, 1999
------------------------------------------------------
John G. Larkin
</TABLE>

II-41
<PAGE> 224

SIGNATURES

NEW ENGLAND RAILROAD
CONSTRUCTION CO., INC.

By: /s/ ANTHONY D. JULIAN, JR.
------------------------------------
Anthony D. Julian, Jr.
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with New England Railroad Construction Co.,
Inc. and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Anthony D. Julian, Jr.

* Treasurer June 29, 1999
- -----------------------------------------------------
Daniel F. Julian

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-42
<PAGE> 225

SIGNATURES

NORTHERN RAIL SERVICE AND SUPPLY
COMPANY, INC.

By: /s/ LAMBERTUS L. TAMELING
------------------------------------
Lambertus L. Tameling
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Northern Rail Service and Supply
Company, Inc. and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Lambertus L. Tameling

* Treasurer June 29, 1999
- -----------------------------------------------------
Harold C. Kropp

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-43
<PAGE> 226

SIGNATURES

PARSONS RAILWAY SHOPS, INC.

By: /s/ STEVEN G. HUTCHINSON

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

Steven G. Hutchinson

President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Parsons Railway
Shops, Inc., and Michael R. Azarela, a Director of Parsons Railway Shops, Inc.,
or either one of them, and any agent for service named in this Registration
Statement and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended and any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agents or any
of them, their, or his or her, substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Parsons Railway Shops, Inc. and on the
date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ STEVEN G. HUTCHINSON President June 29, 1999
------------------------------------------------------
Steven G. Hutchinson

/s/ DOUGLAS W. HUTCHINSON Treasurer June 29, 1999
------------------------------------------------------
Douglas W. Hutchinson

/s/ MICHAEL R. AZARELA Director June 29, 1999
------------------------------------------------------
Michael R. Azarela

/s/ JOHN G. LARKIN Director June 29, 1999
------------------------------------------------------
John G. Larkin
</TABLE>

II-44
<PAGE> 227

SIGNATURES

R.&M.B. RAIL CO., INC.

By: /s/ MARK A. BROWN
------------------------------------
Mark A. Brown
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with, R.&M.B. Rail Co., Inc. and on the date
indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Mark A. Brown

* Treasurer June 29, 1999
- -----------------------------------------------------
Pamela J. Whitaker

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-45
<PAGE> 228

SIGNATURES

RAILCORP, INC.

By: /s/ FULTON J. KENNEDY
------------------------------------
Fulton J. Kennedy
President

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President June 29, 1999
- -----------------------------------------------------
Fulton J. Kennedy

* Treasurer June 29, 1999
- -----------------------------------------------------
Harold C. Kropp

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

* Director June 29, 1999
- -----------------------------------------------------
John Kennedy

*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-46
<PAGE> 229

SIGNATURES

RAILROAD SERVICE, INC.

By: /s/ SCOTT D. BRACE
------------------------------------
Scott D. Brace
President

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Scott D. Brace

* Treasurer June 29, 1999
- -----------------------------------------------------
Marie Zueger

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-47
<PAGE> 230

SIGNATURES

RAILROAD SPECIALTIES, INC.

By: /s/ RONALD E. BROWN
------------------------------------
Ronald E. Brown
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Railroad Specialties, Inc. and on the
date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Ronald E. Brown

* Treasurer June 29, 1999
- -----------------------------------------------------
Pamela J. Whitaker

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-48
<PAGE> 231

SIGNATURES

RAILWORKS CANADA, INC.

By: /s/ JOHN G. LARKIN

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

John G. Larkin

President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, President and a Director of
RailWorks Canada, Inc., and Michael R. Azarela, Executive Vice President and a
Director of RailWorks Canada, Inc., or either one of them, and any agent for
service named in this Registration Statement and each of them, his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ JOHN G. LARKIN President and Director June 29, 1999
------------------------------------------------------
John G. Larkin

/s/ GENE CELLINI Treasurer June 29, 1999
------------------------------------------------------
Gene Cellini

/s/ MICHAEL R. AZARELA Executive Vice President and June 29, 1999
------------------------------------------------------ Director
Michael R. Azarela
</TABLE>

II-49
<PAGE> 232

SIGNATURES

SHELDON ELECTRIC, INC.

By: /s/ MICHAEL PRATT
------------------------------------
Michael Pratt
President and Chief Operating
Officer

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* Chief Executive Officer June 29, 1999
- -----------------------------------------------------
Michael A. Cahn

* President and Chief Operating June 29, 1999
- ----------------------------------------------------- Officer
Michael Pratt

* Treasurer June 29, 1999
- -----------------------------------------------------
Harold C. Kropp

* Executive Vice President and June 29, 1999
- ----------------------------------------------------- Director
Michael R. Azarela

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

* Director June 29, 1999
- -----------------------------------------------------
Barry Beil

*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-50
<PAGE> 233

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Amendment
No. 1 to the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Baltimore, State of Maryland, on June 29, 1999.

SOUTHERN INDIANA WOOD
PRESERVING CO., INC.

By: /s/ SEAN G. GOUGH
------------------------------------
Sean G. Gough
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with, Southern Indiana Wood Preserving Co.,
Inc. and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Sean G. Gough

* Treasurer June 29, 1999
- -----------------------------------------------------
Harold C. Kropp

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-51
<PAGE> 234

SIGNATURES

U.S. TRACKWORKS, INC.

By: /s/ LAMBERTUS L. TAMELING
------------------------------------
Lambertus L. Tameling
President

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Lambertus L. Tameling

* Treasurer June 29, 1999
- -----------------------------------------------------
Harold C. Kropp

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

*By: /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-52
<PAGE> 235

SIGNATURES

U.S. RAILWAY SUPPLY, INC.

By: /s/ RONALD E. BROWN
------------------------------------
Ronald E. Brown
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with U.S. Railway Supply, Inc. and on the
date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Ronald E. Brown

* Treasurer June 29, 1999
- -----------------------------------------------------
Pamela J. Whitaker

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

*By: /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-53
<PAGE> 236

SIGNATURES

WM. A. SMITH CONSTRUCTION CO., INC.

By: /s/ JACK I. WILT
------------------------------------
Jack I. Wilt
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Wm. A. Smith Construction Co., Inc. and
on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Jack I. Wilt

* Treasurer June 29, 1999
- -----------------------------------------------------
Dan Burg

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

*By: /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-54
<PAGE> 237

SIGNATURES

WM. A. SMITH RERAILING SERVICES, INC.

By: /s/ JACK I. WILT
------------------------------------
Jack I. Wilt
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with Wm A. Smith Rerailing Services, Inc.
and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Jack I. Wilt

* Treasurer June 29, 1999
- -----------------------------------------------------
Dan Burg

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

* Executive Vice President, June 29, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director

*By: /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-55
<PAGE> 238

SIGNATURES

M-TRACK ENTERPRISES, INC.

By: /s/ LUIGI IMPERIA
------------------------------------
Luigi Imperia
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities with M-Track Enterprises, Inc. and on the
date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* President and Director June 29, 1999
- -----------------------------------------------------
Luigi Imperia

* Treasurer June 29, 1999
- -----------------------------------------------------
Gene Cellini

* Director June 29, 1999
- -----------------------------------------------------
John G. Larkin

* Director June 29, 1999
- -----------------------------------------------------
Michael R. Azarela

*By: /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>

II-56

<PAGE> 1
EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this amended
registration statement.

ARTHUR ANDERSEN LLP

Stamford, Connecticut
June 28, 1999

<PAGE> 1
EXHIBIT 23.3

CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS

As independent chartered accountants, we hereby consent to the use of our report
dated March 15, 1999 (and to all references to our Firm) included in or made a
part of this amended registration statement.

ARTHUR ANDERSEN LLP

Mississauga, Canada
June 28, 1999

<PAGE> 1

EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY

FOR
11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
OF

RAILWORKS CORPORATION

PURSUANT TO THE PROSPECTUS DATED JULY 1, 1999

This form must be used by a holder of 11 1/2% Senior Subordinated Notes due
2009 (the "Old Notes") of Railworks Corporation, a Delaware corporation (the
"Company"), who wishes to tender Old Notes to the Exchange Agent pursuant to the
guaranteed delivery procedures described in "The Exchange Offer -- Guaranteed
Delivery Procedures" of the Company's Prospectus, dated ,
1999 (the "Prospectus") and in Instruction 2 to the related Letter of
Transmittal. Any holder who wishes to tender Old Notes pursuant to such
guaranteed delivery procedures must ensure that the Exchange Agent receives this
Notice of Guaranteed Delivery prior to the Expiration Date of the Exchange
Offer. Capitalized terms used but not defined herein have the meanings ascribed
to them in the Prospectus or the Letter of Transmittal.

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, JULY 30, 1999 UNLESS EXTENDED (THE "EXPIRATION DATE").

FIRST UNION NATIONAL BANK
(THE "EXCHANGE AGENT")

<TABLE>
<S> <C>
By Overnight Carrier or by Hand: By Registered or Certified Mail:

First Union National Bank First Union National Bank
First Union Customer Information Center First Union Customer Information Center
Corporate Trust Operations -- NC1153 Corporate Trust Operations -- NC1153
1525 West W.T. Harris Boulevard -- 3C3 1525 West W.T. Harris Boulevard -- 3C3
Charlotte, NC 28262-1153 Charlotte, NC 28288

Attention: Mike Klotz Attention: Mike Klotz
</TABLE>

By Facsimile (for Eligible Institutions only):

(704) 590-7628

Confirm by telephone: (704) 590-7408

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2

Ladies and Gentlemen:

Upon the terms and subject to the conditions set forth in the Prospectus
and the related Letter of Transmittal, the undersigned hereby tenders to the
Company, the principal amount of Old Notes set forth below pursuant to the
guaranteed delivery procedures set forth in the Prospectus and in Instruction 2
of the Letter of Transmittal.

The undersigned hereby tenders the Old Notes listed below:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL
AMOUNT REPRESENTED
CERTIFICATE NUMBER(S) (IF KNOWN) OF OLD NOTES OR BY OLD NOTES AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE DTC CERTIFICATE(S) AMOUNT TENDERED
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------

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

- ---------------------------------------------------------------------------------------------------------
</TABLE>

PLEASE SIGN AND COMPLETE

Signatures of Registered Holder(s) or Authorized Signatory:

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

Name(s) of Registered Holder(s):

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

Date: , 1999
Address:

------------------------------------------------
Area Code and Telephone No.
This Notice of Guaranteed Delivery must be signed by the holder(s) exactly
as their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
registered holder(s) by endorsements and documents transmitted with this Notice
of Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.

Please print name(s) and address(es)
(Name(s)):
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 3

GUARANTEE

(NOT TO BE USED FOR SIGNATURE GUARANTEE)

The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities and Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the Old Notes tendered hereby in proper
form for transfer (or confirmation of the book-entry transfer of such Old Notes
into the Exchange Agent's account at DTC described in the prospectus under the
caption "The Exchange Offer -- Guaranteed Delivery Procedures" and in the Letter
of Transmittal) and any other required documents, all by 5:00 p.m., New York
City time, on the third NASDAQ National Market trading day following the date of
execution hereof.

Name of firm
- --------------------------------------------------------------------------------

Address
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
(Include Zip Code)

Area Code and Tel. No.
- --------------------------------------------------------------------------------

Authorized Signature
- --------------------------------------------------------------------------------

Name
- --------------------------------------------------------------------------------
(Please Print)

Title
- --------------------------------------------------------------------------------

Dated
- ---------------------------, 1999

DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF
CERTIFICATES FOR OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN
EXECUTED LETTER OF TRANSMITTAL.
<PAGE> 4

RAILWORKS CORPORATION
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
DTC PARTICIPANT FROM BENEFICIAL OWNER
OF 11 1/2% SENIOR SUBORDINATED NOTES DUE 2009

To Registered Holder and/or DTC Participant:

The undersigned hereby acknowledge receipt of the Prospectus, dated July 1,
1999 (the "Prospectus") of, Railworks Corporation, a Delaware corporation (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange 11 1/2% Senior Subordinated Notes due 2009 (the "New Notes")
that have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for its outstanding 11 1/2% Senior Subordinated Notes due
2009 (the "Old Notes"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.

This will instruct you, the registered holder and/or DTC participant, as to
action to be taken by you relating to the Exchange Offer with respect to the Old
Notes held by you for the account of the undersigned.

The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (FILL IN AMOUNT):

$ of the 11 1/2% Senior Subordinated Notes due 2009;

With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):

[ ] TO TENDER the following aggregate principal amount of Old
Notes held by you for the account of the undersigned (INSERT
PRINCIPAL AMOUNT OF OLD NOTES TO BE TENDERED, IF ANY): $

[ ] NOT TO TENDER any Old Notes held by you for the account of
the undersigned.

If the undersigned instruct you to tender the Old Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to make
on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (FILL IN STATE), (ii) the
undersigned is acquiring the New Notes in the ordinary course of business of the
undersigned, (iii) the undersigned has no arrangement or understanding with any
person to participate in the distribution of the New Notes, (iv) except as
otherwise disclosed in writing herewith, the undersigned is not an "affiliate,"
as defined in Rule 405 under the Securities Act, of the Company and, if the
undersigned is such an affiliate, that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable,
(v) if the undersigned is not a broker-dealer, that the undersigned is not
engaged in and does not intend to engage in the distribution of any New Notes,
or (vi) if the undersigned is a broker-dealer, that it will receive New Notes
for its own account in exchange for tendered Old Notes that were acquired as a
result of market-making activities or other trading activities and that it will
deliver a prospectus in connection with any resale of such New Notes; (b) to
agree, on behalf of the undersigned, as set forth in the Letter of Transmittal;
and (c) to take such other action as necessary under the Prospectus or the
Letter of Transmittal to effect the valid tender of such Old Notes.
<PAGE> 5

SIGN HERE

Name of beneficial owner(s):
- --------------------------------------------------------------------------------

Signature(s):
- --------------------------------------------------------------------------------

Name (please print):
- --------------------------------------------------------------------------------

Address:
- --------------------------------------------------------------------------------

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

Telephone number:
- --------------------------------------------------------------------------------

Taxpayer Identification or Social Security Number:
- ------------------------------------------------------------

Date:
- --------------------------------------------------------------------------------
<PAGE> 6

TENDER FOR ALL OUTSTANDING

11 1/2% SENIOR SUBORDINATED NOTES DUE 2009

IN EXCHANGE FOR

11 1/2% SENIOR SUBORDINATED NOTES DUE 2009

THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OF

RAILWORKS CORPORATION

To Registered Holders:

We are enclosing herewith the material listed below relating to the offer
(the "Exchange Offer") by Railworks Corporation (the "Company"), a Delaware
corporation, to exchange its 11 1/2% Senior Subordinated Notes Due 2009 (the
"New Notes") that have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for a like principal amount of the Company's
issued and outstanding 11 1/2% Senior Subordinated Notes Due 2009 (the "Old
Notes") upon the terms and subject to the conditions set forth in the
Prospectus, dated July 1, 1999, and the related Letter of Transmittal.

Enclosed herewith are copies of the following documents:

1. Prospectus dated July 1, 1999;

2. Letter of Transmittal;

3. Notice of Guaranteed Delivery; and

4. Instruction to Registered Holder and/or DTC Participant from Beneficial
Owner.

We urge you to contact your clients promptly. Please note that the Exchange
Offer will expire at 5:00 p.m., New York City time, on July 30, 1999, unless
extended.

The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.

Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such New Notes, whether or not such person is such holder, (ii)
neither the holder of the Old Notes nor any such other person is participating
in, intends to participate in or has an arrangement or understanding with any
person to participate in the distribution of such Notes, (iii) neither the
holder nor any such other person is an "affiliate" of the Company as defined in
Rule 405 under the Securities Act of the Company or, if such holder is such an
affiliate, that it will comply with the registration and prospectus delivery
requirements of the Security Act to the extent applicable, (iv) if the holder is
not a broker-dealer, that neither the holder nor such other person is engaged in
or intends to engage in the distribution of any New Notes, and (v) if the holder
is a broker-dealer, that it will receive New Notes for its own account in
exchange for tendered Old Notes that were required as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.

The enclosed Instruction to Registered Holder and/or DTC Participant from
Beneficial Owner contains an authorization by the beneficial owners of the Old
Notes for you to make the foregoing representations.

The Company will not pay any fee or commission to any broker or dealer to
any other persons (other than the exchange agent for the Exchange Offer) in
connection with the solicitation of tenders of Old Notes pursuant to the
Exchange Offer. The Company will pay or cause to be paid any transfer taxes
payable
<PAGE> 7

on the transfer of Old Notes to it, except as otherwise provided in Instruction
7 of the enclosed Letter of Transmittal.

Additional copies of the enclosed material may be obtained from the
undersigned.

Very truly yours,

First Union National Bank

NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF THE COMPANY OR THE EXCHANGE AGENT OR AUTHORIZE YOU TO USE ANY
DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE EXCHANGE
OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED
THEREIN.