<PAGE>
                                                                    EXHIBIT 2.1

                     IN THE UNITED STATES BANKRUPTCY COURT
                          FOR THE DISTRICT OF MARYLAND
                              (BALTIMORE DIVISION)

In re:                                   *

RAILWORKS CORPORATION, et al.,           *   Case Nos. 01-6-4463 through
                                                       01-6-4485
                                             (Chapter 11)
Debtors.                                 *   (Jointly Administered under
                                             Case No. 01-6-4463)

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

                        DISCLOSURE STATEMENT TO DEBTORS'
                  SECOND AMENDED JOINT PLAN OF REORGANIZATION

                           DATED AS OF AUGUST 8, 2002

THIS IS NOT A SOLICITATION OF ACCEPTANCES OR REJECTIONS OF THE DEBTORS' SECOND
AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE,
WHICH IS ATTACHED AS EXHIBIT A TO THIS DISCLOSURE STATEMENT (THE "PLAN").
ACCEPTANCES OR REJECTIONS WITH RESPECT TO THE PLAN MAY NOT BE SOLICITED UNTIL A
DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND. THIS DISCLOSURE STATEMENT IS BEING SUBMITTED FOR
APPROVAL, BUT HAS NOT YET BEEN APPROVED, BY THE BANKRUPTCY COURT. ANY SUCH
APPROVAL BY THE BANKRUPTCY COURT OF THIS DISCLOSURE STATEMENT AS CONTAINING
"ADEQUATE INFORMATION" WILL NOT CONSTITUTE ENDORSEMENT OF THE PLAN. INFORMATION
CONTAINED IN THIS DISCLOSURE STATEMENT IS SUBJECT TO COMPLETION AND AMENDMENT.

WILLKIE FARR & GALLAGHER                  WHITEFORD, TAYLOR & PRESTON L.L.P.
787 Seventh Avenue                        Seven Saint Paul Street
New York, New York  10019-6099            Baltimore, Maryland  21202-1626
(212) 728-8000                            (410) 347-8700

Co-Counsel to the Debtors and             Co-Counsel to the Debtors and
Debtors-in-Possession                     Debtors-in-Possession

THE DEADLINE BY WHICH EACH HOLDER OF AN IMPAIRED CLAIM ENTITLED TO VOTE ON THE
PLAN MUST CAST A PROPERLY COMPLETED AND DELIVERED BALLOT FOR ITS VOTE TO ACCEPT
OR REJECT THE PLAN TO BE COUNTED IS SEPTEMBER 13, 2002, AT 4:00 P.M. (EASTERN
TIME), UNLESS EXTENDED.


<PAGE>

<TABLE>
<S>   <C>     <C>   <C>                                                                                          <C>
I.    SUMMARY OF DISCLOSURE STATEMENT.............................................................................1

       A.     Purpose of this Disclosure Statement................................................................1

       B.     Background of Reorganization Cases..................................................................3

       C.     Voting..............................................................................................3

       D.     Effects of Exit Financing on Distributions Under the Plan...........................................8

       E.     Effects of Exit Bonding Facility on Distributions Under the Plan....................................8

       F.     Summary of Distributions to Be Made Under the Plan..................................................9

              1.    Summary of Classification and Treatment of Claims.............................................9

              2.    Summary of Distributions Under the Plan......................................................15

              3.    Classification and Treatment of Claims.......................................................20

       G.     Confirmation Hearing...............................................................................26

       H.     Cancellation of Existing Securities and Agreements.................................................27

II.   PRINCIPAL CHARACTERISTICS OF NEW RAILWORKS PREFERRED STOCK, NEW
      RAILWORKS SERIES B WARRANTS AND NEW RAILWORKS COMMON STOCK.................................................28

       A.     New Railworks Series A Preferred Stock.............................................................28

       B.     New Railworks Series B Preferred Stock.............................................................29

       C.     New Railworks Series B Warrants....................................................................30

       D.     New Railworks Series C Preferred Stock.............................................................31

       E.     New Railworks Common Stock.........................................................................32

       F.     Registration Rights Agreement......................................................................33

       G.     Amended Certificate of Incorporation and Amended Bylaws............................................33

III.  IMPLEMENTATION OF THE PLAN.................................................................................34

       A.     New Securities.....................................................................................34

       B.     Exit Facility......................................................................................34

       C.     Exit Bonding Facility..............................................................................36

       D.     New Railworks Secured Loan.........................................................................38

       E.     New Wood Waste Secured Loan........................................................................40
</TABLE>


                                       i
<PAGE>

<TABLE>
       <S>    <C>   <C>                                                                                          <C>
       F.     Termination and Discharge of All Existing Debts, Claims and Equity Interests.......................41

       G.     Deemed Consolidation of Debtors....................................................................41

       H.     Restructuring Transactions.........................................................................43

       I.     Management Rights Agreement........................................................................44

       J.     Dividends..........................................................................................44

       K.     Applicability of Federal and Other Securities Laws.................................................44

              1.    Initial Offer and Sale of Securities.........................................................45

              2.    Subsequent Transfers Under Federal Securities Laws...........................................46

              3.    Subsequent Transfers Under State Law.........................................................48

       L.     Certain Transactions by Stockbrokers...............................................................48

       M.     Fractional Shares -- Distribution of New Railworks Preferred Stock, New Railworks Common
              Stock and New Railworks Series B Warrants; Cash in Lieu of De Minimis New Railworks
              Common Stock Distributions to Class 9..............................................................48

       N.     Treatment of Claims and Equity Interests...........................................................49

              1.    Generally....................................................................................49

              2.    Setoffs and Recoupments......................................................................49

       O.     Conditions to Confirmation and Consummation........................................................49

       P.     Board of Directors.................................................................................51

       Q.     Compensation and Benefit Programs..................................................................51

       R.     Officers' and Directors' Indemnification Rights....................................................51

       S.     New Management Incentive and Retention Program.....................................................52

       T.     Issuance and Transfers of Common Stock of the Subsidiaries; Distribution of New Railworks
              Common Stock on behalf of Subsidiary Debtors.......................................................52

       U.     Surety Rights......................................................................................52

       V.     Travelers Bonded Claims............................................................................53

       W.     Litigation Trust...................................................................................53

       X.     Releases and Injunctions...........................................................................53

              1.    Releases by Debtors, Reorganized Debtors and Estates.........................................53
</TABLE>


                                       ii
<PAGE>

<TABLE>
<S>    <C>    <C>   <C>                                                                                          <C>
              2.    Other Releases...............................................................................54

       Y.     No Recourse........................................................................................54

       Z.     Injunction.........................................................................................55

       AA.    Release of Liens...................................................................................55

       BB.    Discharge of Debtors...............................................................................56

       CC.    Treatment of Executory Contracts and Unexpired Leases..............................................56

              1.    General Treatment............................................................................56

              2.    Cure of Defaults.............................................................................57

              3.    Schedule of Rejected Contracts and Leases....................................................57

              4.    Rejection of Completed Projects..............................................................58

              5.    Rejection Claims.............................................................................58

       DD.    Exculpation........................................................................................58

IV.   RISK FACTORS...............................................................................................59

       A.     The Reorganized Company Might Not be Able to Achieve its Financial Projections.....................59

       B.     Dependence on Certain Customers and Reliance on Ordinary Course Business Terms.....................60

       C.     Competition........................................................................................60

       D.     Public Sector Contracts and Funding................................................................60

       E.     Fixed Price Contracts; Competitive Bidding.........................................................60

       F.     Posting of Bonds...................................................................................61

       G.     Reliance on Qualified and Skilled Managers and Employees...........................................61

       H.     Reliance on Subcontractors and Suppliers...........................................................61

       I.     Unionized Workforce................................................................................61

       J.     Environmental and Other Government Regulation......................................................61

       K.     The Bankruptcy Filings May Further Disrupt the Debtors' Operations.................................62

       L.     The Debtors Have Incurred Net Losses and the Reorganized Company Anticipates Future Losses
              Through December 31, 2002..........................................................................62

       M.     The Reorganized Company May Not be Able to Meet Its Post-Reorganization Obligations................62
</TABLE>


                                      iii
<PAGE>

<TABLE>
<S>    <C>    <C>   <C>                                                                                          <C>
       N.     The Reorganized Debtors May Have Limited Access to Alternative Sources of Capital..................62

       O.     The Reorganized Debtors May Not Have Sufficient Cash Flow to Repay Existing Debt or Have
              Access to Sufficient Financing to Refinance such Debt at or Prior to Maturity......................63

       P.     The Terms and Conditions of the Exit Facility, the Exit Bonding Facility, the New Railworks
              Secured Loan and the New Wood Waste Secured Loan May Restrict the Reorganized
              Company's Ability to Fund Its Working Capital Requirements and to Pay Dividends....................63

       Q.     The Reorganized Company May Not be Able to Comply with Provisions Constituting Events of
              Default Contained in the Exit Facility, the New Railworks Secured Loan, the New Wood Waste
              Secured Loan and the Exit Bonding Facility.........................................................63

       R.     The Reorganized Company May Not be Able to Secure Ordinary Course Trade Terms......................64

       S.     The Estimated Valuation of the Reorganized Company and the Plan Securities, and the
              Estimated Recoveries to Holders of Claims, is not Intended to Represent the Trading Values of
              the Plan Securities................................................................................64

       T.     Resale of the Plan Securities May be Restricted by Law.............................................64

       U.     Bankruptcy Risks...................................................................................65

              1.    Parties in interest may object to the Debtors' classification of Claims......................65

              2.    The commencement of the Reorganization Cases may have negative implications under
                    certain contracts of the Debtors.............................................................65

              3.    The Debtors may not be able to secure confirmation of the Plan...............................65

              4.    The Debtors may object to the amount or classification of your Claim.........................66

       V.     Changes in the Cash Position of the Reorganized Debtors can have Significant Adverse Effects
              on the Amount and Value of Distributions under the Plan............................................66

       W.     Reorganized Railworks does not Expect to Pay any Dividends on the New Railworks Common
              Stock for the Foreseeable Future...................................................................66

       X.     Certain Tax Implications of the Debtors' Bankruptcy and Reorganization may Increase the Tax
              Liability of Reorganized Railworks.................................................................66

       Y.     The Debtors are, and the Reorganized Debtors will continue to be, Subject to Costs Arising in
              Connection with Regulation and Litigation..........................................................66

V.    CONFIRMATION OF THE PLAN...................................................................................67

       A.     Confirmation Generally.............................................................................67

       B.     Voting Procedures and Standards....................................................................67

       C.     Acceptance.........................................................................................68
</TABLE>


                                       iv
<PAGE>

<TABLE>
<S>    <C>    <C>   <C>                                                                                          <C>
       D.     Confirmation and Consummation......................................................................68

              1.    Best Interests of Holders of Claims and Interests............................................70

              2.    Financial Feasibility........................................................................70

              3.    Cram Down....................................................................................70

              4.    Classification of Claims and Interests.......................................................72

VI.   CERTAIN EFFECTS OF THE PLAN................................................................................72

       A.     Reorganized Railworks..............................................................................72

       B.     Financial Projections and Valuation Analysis.......................................................73

       C.     The Role of the Creditors' Committee...............................................................77

       D.     Post-Confirmation Jurisdiction of the Bankruptcy Court.............................................78

VII.  HISTORICAL INFORMATION.....................................................................................79

       A.     Business and Significant Recent Events.............................................................79

       B.     Events Leading to Chapter 11 and the Need to Reorganize............................................79

       C.     Outstanding Pre-Petition Liabilities...............................................................80

       D.     Litigation.........................................................................................80

       E.     Historical Financial Information...................................................................80

VIII. THE REORGANIZATION CASES...................................................................................81

       A.     Continuation of Business After the Petition Date...................................................81

              1.    Board of Directors...........................................................................81

              2.    Management...................................................................................81

              3.    Stabilizing Operations.......................................................................82

              4.    First Day Motions............................................................................82

              5.    Cash Management Motion.......................................................................85

              6.    Contract Assumption Motions and Pre-Petition Sureties Settlements............................86

              7.    Significant Asset Sales......................................................................87

       B.     Case Administration................................................................................87

              1.    Bar Date.....................................................................................87
</TABLE>


                                       v
<PAGE>

<TABLE>
<S>    <C>    <C>   <C>                                                                                         <C>
              2.    Exclusivity..................................................................................88

              3.    Schedules and Statements of Financial Affairs................................................88

              4.    Information and Estimates....................................................................88

              5.    Preferences and Fraudulent Transfers.........................................................90

              6.    Representation of the Debtors................................................................90

              7.    Representation of the Creditors' Committee...................................................91

IX.   CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES...............................................................91

       A.     Tax Consequences to Creditors......................................................................92

              1.    General......................................................................................92

              2.    Treatment of Certain Creditors...............................................................94

       B.     Federal Income Tax Treatment of the Litigation Trust...............................................97

       C.     Tax Consequences to the Debtors....................................................................98

              1.    Cancellation of Indebtedness Income..........................................................98

              2.    NOLs and Other Tax Attributes................................................................99

              3.    Section 382 Limitation.......................................................................99

X.    PROCEDURES FOR DISTRIBUTIONS UNDER THE PLAN...............................................................100

       A.     Distribution Record Date..........................................................................100

       B.     Disbursing Agent..................................................................................100

       C.     Rights and Powers of Disbursing Agent.............................................................101

       D.     Date of Distributions.............................................................................101

       E.     Distributions by Disbursing Agent.................................................................102

       F.     Distributions for Claims Allowed as of the Effective Date.........................................102

       G.     Delivery of Distributions to Classes; Unclaimed Distributions.....................................102

       H.     Surrender of Instruments; Lost, Stolen, Mutilated or Destroyed Instruments........................103

       I.     Procedures for Disputed Claims....................................................................103

              1.    Objections to Claims........................................................................103

              2.    Payments and Distributions with Respect to Disputed Claims..................................104
</TABLE>


                                       vi
<PAGE>

<TABLE>
<S>           <C>                                                                                               <C>
              3.    Amendments to Claims........................................................................104

XI.   ADDITIONAL INFORMATION....................................................................................104

XII.  CONCLUSION................................................................................................105
</TABLE>

Exhibit A         Plan of Reorganization

Exhibit B         List of Non-Debtor Subsidiaries

Exhibit C         List of Creditors' Committee Members

Exhibit D         Projections

Exhibit E         Liquidation Analysis

Exhibit F         Historical Financial Information


                                      vii
<PAGE>

                                IMPORTANT NOTICE

         THIS DISCLOSURE STATEMENT AND ITS RELATED DOCUMENTS ARE THE ONLY
DOCUMENTS AUTHORIZED BY THE BANKRUPTCY COURT TO BE USED IN CONNECTION WITH THE
SOLICITATION OF VOTES TO ACCEPT THE PLAN. NO REPRESENTATIONS HAVE BEEN
AUTHORIZED BY THE BANKRUPTCY COURT CONCERNING THE DEBTORS, THEIR BUSINESS
OPERATIONS OR THE VALUE OF THEIR ASSETS, EXCEPT AS EXPLICITLY SET FORTH IN THIS
DISCLOSURE STATEMENT.

         PLEASE REFER TO THE GLOSSARY AND THE PLAN (OR, WHERE INDICATED,
CERTAIN MOTIONS FILED WITH THE BANKRUPTCY COURT) FOR DEFINITIONS OF THE
CAPITALIZED TERMS USED IN THIS DISCLOSURE STATEMENT.

         THE DEBTORS RESERVE THE RIGHT TO FILE AN AMENDED PLAN AND DISCLOSURE
STATEMENT FROM TIME TO TIME. THE DEBTORS URGE YOU TO READ THIS DISCLOSURE
STATEMENT CAREFULLY FOR A DISCUSSION OF VOTING INSTRUCTIONS, RECOVERY
INFORMATION, CLASSIFICATION OF CLAIMS, THE HISTORY OF THE DEBTORS AND THE
REORGANIZATION CASES, THE DEBTORS' BUSINESSES, PROPERTIES AND RESULTS OF
OPERATIONS, HISTORICAL AND PROJECTED FINANCIAL RESULTS AND A SUMMARY AND
ANALYSIS OF THE PLAN.

         THE PLAN AND THIS DISCLOSURE STATEMENT HAVE NOT BEEN REQUIRED TO BE
PREPARED IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS OR OTHER
APPLICABLE NONBANKRUPTCY LAW. NONE OF THE SECURITIES AND EXCHANGE COMMISSION,
ANY STATE SECURITIES COMMISSION OR SIMILAR PUBLIC, GOVERNMENTAL OR REGULATORY
AUTHORITY HAS APPROVED THIS DISCLOSURE STATEMENT, THE PLAN OR THE SECURITIES
OFFERED UNDER THE PLAN, OR HAS PASSED ON THE ACCURACY OR ADEQUACY OF THE
STATEMENTS IN THIS DISCLOSURE STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY
BE A CRIMINAL OFFENSE. PERSONS TRADING IN OR OTHERWISE PURCHASING, SELLING OR
TRANSFERRING SECURITIES OF THE DEBTORS SHOULD EVALUATE THE PLAN IN LIGHT OF THE
PURPOSES FOR WHICH IT WAS PREPARED.

         THIS DISCLOSURE STATEMENT CONTAINS ONLY A SUMMARY OF THE PLAN. THIS
DISCLOSURE STATEMENT IS NOT INTENDED TO REPLACE THE CAREFUL AND DETAILED REVIEW
AND ANALYSIS OF THE PLAN, ONLY TO AID AND SUPPLEMENT SUCH REVIEW. THIS
DISCLOSURE STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN, THE
PLAN SUPPLEMENT AND THE SCHEDULES AND EXHIBITS ATTACHED THERETO AND THE
AGREEMENTS AND DOCUMENTS DESCRIBED THEREIN. IF THERE IS A CONFLICT BETWEEN THE
PLAN AND THIS DISCLOSURE STATEMENT, THE PROVISIONS OF THE PLAN WILL GOVERN. YOU
ARE ENCOURAGED TO REVIEW THE FULL TEXT OF THE PLAN AND PLAN SUPPLEMENT AND TO
READ CAREFULLY THE ENTIRE DISCLOSURE STATEMENT, INCLUDING ALL EXHIBITS, BEFORE
DECIDING HOW TO VOTE WITH RESPECT TO THE PLAN.

         EXCEPT AS OTHERWISE INDICATED, THE STATEMENTS IN THIS DISCLOSURE
STATEMENT ARE MADE AS OF AUGUST 8, 2002 AND THE DELIVERY OF THIS DISCLOSURE
STATEMENT WILL NOT, UNDER ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION
CONTAINED IN THIS DISCLOSURE STATEMENT IS CORRECT AT ANY TIME AFTER AUGUST 8,
2002. ANY ESTIMATES OF CLAIMS OR INTERESTS IN THIS DISCLOSURE STATEMENT MAY
VARY FROM THE FINAL AMOUNTS OF CLAIMS OR INTERESTS ALLOWED BY THE BANKRUPTCY
COURT.

         YOU SHOULD NOT CONSTRUE THIS DISCLOSURE STATEMENT AS PROVIDING ANY
LEGAL, BUSINESS, FINANCIAL OR TAX ADVICE. YOU SHOULD, THEREFORE, CONSULT WITH
YOUR OWN LEGAL, BUSINESS, FINANCIAL AND TAX ADVISORS AS TO ANY SUCH MATTERS IN
CONNECTION WITH THE PLAN, THE SOLICITATION OF VOTES ON THE PLAN AND THE
TRANSACTIONS CONTEMPLATED BY THE PLAN.

         AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER ACTIONS OR
THREATENED ACTIONS, THIS DISCLOSURE STATEMENT IS NOT, AND IS IN NO EVENT TO BE
CONSTRUED AS, AN ADMISSION OR STIPULATION. INSTEAD, THIS DISCLOSURE STATEMENT
IS, AND IS FOR ALL PURPOSES TO BE CONSTRUED AS, SOLELY AND EXCLUSIVELY A
STATEMENT MADE IN SETTLEMENT NEGOTIATIONS. THE SETTLEMENTS AND COMPROMISES
DESCRIBED IN THE PLAN AND THIS DISCLOSURE STATEMENT REMAIN SUBJECT TO ONGOING
NEGOTIATIONS WITH THE RESPECTIVE PARTIES.


<PAGE>

                                    GLOSSARY

         The following terms are used in the Disclosure Statement and the Plan.
When used in this Disclosure Statement, these terms have the meanings ascribed
to them in the table unless otherwise indicated. Please see the Plan (or, where
indicated, certain other motions filed with the Bankruptcy Court) for the
definitions of other capitalized terms used in the Disclosure Statement.

"Administrative Bar        means the date fixed pursuant to section 2.2 of the
Date"                      Plan and the Confirmation Order by which all Persons
                           asserting certain Administrative Expense Claims
                           arising before the Effective Date must have Filed
                           proofs of such Administrative Expense Claims or
                           requests for payment of such Administrative Expense
                           Claims or be forever barred from asserting such
                           Claims against the Debtors, the Estates or the
                           Reorganized Debtors or their property, or such other
                           date by which any such Claim must be Filed as may be
                           fixed by order of the Bankruptcy Court.

"Administrative            means any right to payment constituting a cost or
Expense Claim"             expense of administration of any of  the
                           Reorganization Cases (other than a Fee Claim)
                           allowed under sections 503(b), 507(a)(1) and 1114(e)
                           of the Bankruptcy Code, including, without
                           limitation: (i) any actual and necessary costs and
                           expenses of preserving one or more of the Debtors'
                           Estates; (ii) any actual and necessary costs and
                           expenses of operating one or more of the Debtors'
                           businesses; (iii) any fees or charges assessed
                           against one or more of the Estates of the Debtors
                           under section 1930 of chapter 123 of title 28 of the
                           United States Code; and (iv) any Allowed Claims that
                           are entitled to be treated as Administrative Expense
                           Claims pursuant to a Final Order of the Bankruptcy
                           Court.

"Allowed"                  means, with reference to any Claim: (i) subject to
                           sections 7.1 and 13.2 of the Plan, any Claim against
                           any Debtor which has been listed by such Debtor in
                           the Schedules as liquidated in amount and not
                           disputed or contingent and for which no contrary or
                           inconsistent proof of claim has been Filed; (ii) any
                           timely Filed Claim (a) as to which no objection to
                           allowance has been interposed prior to the deadline
                           by which such objections must be Filed in accordance
                           with section 7.1 of the Plan or such other
                           applicable period of limitation fixed by the
                           Bankruptcy Code, the Bankruptcy Rules, or the
                           Bankruptcy Court and as to which such deadline has
                           expired, or (b) as to which an objection has been
                           Filed and not withdrawn or settled and such
                           objection has been determined by a Final Order (but
                           only to the extent such Claim has been Allowed);
                           (iii) any Claim which is not a Disputed Claim; or
                           (iv) any Claim allowed under the Plan or by Final
                           Order. Unless otherwise specified herein or by order
                           of the Bankruptcy Court, Allowed Administrative
                           Expense Claims and Allowed Claims shall not, for any
                           purpose under the Plan, include interest on such
                           Administrative Expense Claims or Allowed Claims on
                           or after the Petition Date.

"Assumed Bond              means any Claims or obligations arising under or in
Claims"                    connection with any surety bonds issued by Travelers
                           prior to the Petition Date on behalf of the Debtors
                           and assumed, Reinstated, or rendered Unimpaired, as
                           the case may be, by one or more of the Debtors
                           either prior to the Effective Date or pursuant to
                           this Plan.

"Bankruptcy Code"          means title 11 of the United States Code, as amended
                           from time to time, as applicable to the
                           Reorganization Cases.


                                       ii
<PAGE>

"Bankruptcy Court"         means the United States Bankruptcy Court for the
                           District of Maryland, Baltimore Division, or any
                           other court exercising competent jurisdiction over
                           the Reorganization Cases or any proceeding therein.

"Bankruptcy Rules"         means collectively, the Federal Rules of Bankruptcy
                           Procedure and the Official Bankruptcy Forms, as
                           amended, the Federal Rules of Civil Procedure, as
                           amended, as applicable to the Reorganization Cases
                           or any proceeding therein, and the Local Rules of
                           the Bankruptcy Court, as applicable to the
                           Reorganization Cases or any proceeding therein, as
                           the case may be.

"Bar Date"                 means January 22, 2002, the date fixed in the Bar
                           Date Order by which all Persons asserting certain
                           Claims (as specified in the Bar Date Order) arising
                           before the Petition Date must have Filed proofs of
                           such Claims or be forever barred from asserting such
                           Claims against the Debtors or the Estates, or any
                           such other date (including the Supplemental Bar
                           Date) by which any such Claim must be Filed as may
                           be fixed by order of the Bankruptcy Court.

"BoA"                      means Bank of America, N.A.

"Bond Facility             means that certain Transit Debtor-In-Possession Bond
Agreement"                 Facility dated as of October 5, 2001, by and among
                           Railworks, as borrower, the other Debtors that
                           comprise the Transit Group, as indemnitors, and
                           Travelers, as the same has been or may be amended,
                           restated, modified or supplemented.

"Bond Facility             means the Claims arising under or in connection with
Agreement Claims"          surety bonds issued after the Petition Date on behalf
                           of the Debtors pursuant to the Bond Facility
                           Agreement.

"Bond Facility             means collectively, the Bond Facility Agreement and
Documents"                 any and all ancillary documents entered into in
                           connection with the Bond Facility Agreement.

"Bond Support              means Matlin Patterson Global Advisers LLC in its
Administrative Agent"      capacity as administrative agent for the Bond Support
                           Lenders under the Bond Support Credit Agreement.

"Bond Support Credit       means that certain Debtor-In-Possession Bond Support
Agreement"                 Credit Agreement dated as of October 5, 2001, by and
                           among, Railworks, as borrower, the other Debtors
                           that comprise the Transit Group, as guarantors, the
                           Bond Support Administrative Agent and the Bond
                           Support Lenders, as the same has been or may be
                           amended, restated, modified or supplemented.

"Bond Support              means collectively, the Bond Support Credit Agreement
Documents"                 and any and all ancillary documents entered into in
                           connection with the Bond Support Credit Agreement.

"Bond Support              means the syndicate of lenders or participants under
Lenders"                   the Bond Support Credit Agreement.

"Bond Support Lenders      means the Claims of the Bond Support Lenders in
Claims"                    respect of the obligations of the Debtors arising
                           under the Bond Support Documents.


                                      iii
<PAGE>

"BT&E"                     means Breaking Technology & Equipment, Inc., a
                           subsidiary of Railworks.

"Business Day"             means any day other than a Saturday, a Sunday, or
                           any other day on which banking institutions in
                           Baltimore, Maryland and New York, New York are
                           required or authorized to close by law or executive
                           order.

"Cash"                     means legal tender of the United States of America.

"Catch-up                  means with respect to each holder of an Allowed Claim
Distribution"              in Class 9, the difference between (i) the number of
                           shares of New Railworks Common Stock such holder
                           would have received if the resolution of all
                           Disputed Claims in such Class had been known on the
                           Initial Distribution Date, and (ii) the aggregate
                           number of shares of New Railworks Common Stock
                           previously received by such holder.

"Cause of Action"          means any action, cause of action, suit, account,
                           controversy, agreement, promise, right to legal
                           remedy, right to an equitable remedy, right to
                           payment and claim, whether known or unknown, reduced
                           to judgment, not reduced to judgment, liquidated,
                           unliquidated, fixed, contingent, matured, unmatured,
                           disputed, undisputed, secured, unsecured and whether
                           asserted or assertable directly or derivatively, in
                           law, equity or otherwise.

"Claim"                    means a claim against the Debtors, or any of them,
                           whether or not asserted, as defined in section
                           101(5) of the Bankruptcy Code.

"Class"                    means any group of Claims or Equity Interests
                           classified by the Plan as belonging to a single
                           particular class pursuant to section 1123(a)(1) of
                           the Bankruptcy Code.

"Class 6 Distribution"     has the meaning given to such term in section
                           I.F.3.(g) of the Disclosure Statement.

"Class 7 Distribution"     has the meaning given to such term in section
                           I.F.3.(h) of the Disclosure Statement.

"Class 7 Stock             means 203,333 shares of New Railworks Common Stock,
Distribution"              representing 20.33% of the aggregate amount of the
                           New Railworks Common Stock authorized to be issued on
                           the Effective Date.

"Class 9 Cash              means a Cash payment equal to $10.00 per share of New
Consideration"             Railworks Common Stock allocable to each holder of an
                           Allowed Unsecured Claim under Section 4.10(a)(ii) of
                           the Plan.

"Class 9 Cash              means the election of any holder of an Allowed
Election"                  Unsecured Claim to receive, in lieu of receipt of its
                           entire Pro Rata Share of the Class 9 Common Stock
                           Distribution to which such holder otherwise would
                           have been entitled but for this election, the Class
                           9 Cash Consideration.

"Class 9 Common            means 30,000 shares of New Railworks Common Stock,
Stock Distribution"        representing three percent (3%) of the aggregate
                           amount of the New Railworks Common Stock authorized
                           to be issued on the Effective Date.


                                       iv
<PAGE>

"Collateral"               means any property or interest in property of the
                           estate of any Debtor subject to a lien, charge, or
                           other encumbrance to secure the payment or
                           performance of a Claim, which lien, charge, or other
                           encumbrance is not subject to avoidance under the
                           Bankruptcy Code.

"Completed Project"        means any project, other than a project bonded by
                           Travelers, with respect to which the substantive
                           work has been completed as of the Confirmation Date,
                           pursuant to the terms of such project contract

"Confirmation"             means entry by the Bankruptcy Court of the
                           Confirmation Order.

"Confirmation Date"        means the date on which the Clerk of the Bankruptcy
                           Court enters the Confirmation Order on the docket.

"Confirmation Order"       means the order of the Bankruptcy Court confirming
                           the Plan of Reorganization pursuant to section 1129
                           of the Bankruptcy Code.

"Consolidation Order"      means an order of the Bankruptcy Court, which may be
                           the Confirmation Order, approving the deemed
                           consolidation of the Estates for purposes of section
                           5.1 of the Plan.

"Convenience Claim"        means a Claim that would otherwise be classified as
                           a Class 9 Unsecured Claim that is (i) in the amount
                           of $1,000 or less or (ii) in an amount greater than
                           $1,000 if the holder of such Claim elects, on such
                           holder's timely cast ballot for voting on the Plan,
                           to (x) reduce its Claim to the amount of $1,000 and
                           (y) accept the distribution set forth in section 4.9
                           of the Plan in full satisfaction, settlement and
                           release, and discharge of such Claim.

"Creditor"                 means any Person who holds a Claim against any of
                           the Debtors.

"Creditors'                means the statutory committee of unsecured creditors
Committee"                 appointed in the Reorganization Cases in accordance
                           with section 1102 of the Bankruptcy Code, as the
                           same may be reconstituted from time to time.

"CSFB"                     means Credit Suisse First Boston.

"Debtors"                  means individually, Railworks and each of the
                           Subsidiary Debtors, and collectively, Railworks and
                           the Subsidiary Debtors, including in their capacity
                           as debtors-in-possession pursuant to sections 1107
                           and 1108 of the Bankruptcy Code, and as reorganized
                           hereunder.

"DIP Agents"               means collectively, the TP&S Group Administrative
                           Agent, the Transit Group Administrative Agent and
                           the Bond Support Administrative Agent.

"DIP Agreements"           means collectively, the TP&S Group Facility
                           Agreement, the Transit Group Facility Agreement, the
                           Bond Support Credit Agreement and the Bond Facility
                           Agreement.

"DIP Lenders"              means collectively, the TP&S Group Lenders, the
                           Transit Group Lenders, the Bond Support Lenders and
                           Travelers.


                                       v
<PAGE>

"DIP Lenders Claims"       means collectively, the Claims of the DIP Lenders in
                           respect of the obligations of the Debtors arising
                           under the DIP Loan Documents.

"DIP Loan                  means collectively, the TP&S Group Loan Documents,
Documents"                 the Transit Group Loan Documents, the Bond Support
                           Documents and the Bond Facility Documents.

"DIP Order"                means that certain Final Order: (I) Authorizing
                           Debtors to (A) Obtain Post-Petition Financing,
                           Including the Execution of Credit Agreements, and
                           (B) Grant Senior Liens, Junior Liens and
                           Super-Priority Administrative Expense Status; and
                           (II) Approving Use of Cash Collateral and Granting
                           Adequate Protection, entered by the Bankruptcy Court
                           on October 24, 2001, as the same may have been
                           amended or supplemented by Orders dated February 4,
                           2002 and March 5, 2002.

"Disbursing Agent"         means any entity designated as such by Reorganized
                           Railworks (including any applicable Reorganized
                           Debtor if it acts in such capacity) in its capacity
                           as a disbursing agent.

"Disclosure                means the written disclosure statement that relates
Statement"                 to the Plan, as amended, supplemented or modified
                           from time to time (including all exhibits and
                           schedules annexed thereto and referred to therein),
                           and that is prepared and distributed in accordance
                           with section 1125 of the Bankruptcy Code and Fed. R.
                           Bankr. P. 3018.

"Disclosure Statement      means the hearing held by the Bankruptcy Court to
Hearing"                   consider approval of the Disclosure Statement as
                           containing adequate information as required by
                           section 1125 of the Bankruptcy Code.

"Disputed Claim"           means any Claim that is not an Allowed Claim as of
                           the relevant date.

"Distribution Record       means the Confirmation Date or such other date as
Date"                      shall be established by the Bankruptcy Court in the
                           Confirmation Order.

"EBITDA"                   means earnings before interest, taxes, depreciation
                           and amortization, reorganization items,
                           restructuring and refinancing charges and certain
                           items the Debtors believe are non-recurring.

"Effective Date"           means the first (1st) Business Day on or after the
                           Confirmation Date specified by the Debtors on which:
                           (i) no stay of the Confirmation Order is in effect;
                           and (ii) all conditions to the effectiveness of the
                           Plan specified in section 10.1 of the Plan have been
                           satisfied or waived in accordance with section 10.3
                           of the Plan.

"Enterprise Value"         means the enterprise value assumed for the
                           Reorganized Company solely for purposes of
                           implementing the Plan.

"Equity Interest"          means the interest of any holder of an equity
                           security of Railworks, whether or not represented by
                           any issued and outstanding shares of common or
                           preferred stock or other instrument evidencing a
                           present ownership interest in Railworks, whether or
                           not transferable, or any option, warrant, or right,
                           contractual or otherwise, to acquire any such
                           interest.


                                       vi
<PAGE>

"ERISA"                    means the Employee Retirement Income Security Act of
                           1974, as amended, 29 U.S.C.ss.ss. 1301-1461.

"Estate(s)"                means individually, the estate of each Debtor in the
                           Reorganization Cases, and, collectively, the estates
                           of all the Debtors in the Reorganization Cases,
                           created pursuant to section 541 of the Bankruptcy
                           Code.

"Estimation Order"         means one or more orders of the Bankruptcy Court
                           that (i) estimates the maximum dollar amount of
                           Allowed and Disputed Claims, inclusive of contingent
                           and/or unliquidated Claims, in a particular Class
                           and/or (ii) sets the amount of any particular Claim
                           for final allowance or distribution purposes
                           pursuant to sections 105 and 502(c) of the
                           Bankruptcy Code, including, without limitation, the
                           Confirmation Order to the extent that the
                           Confirmation Order grants the same relief that
                           otherwise would have been granted in a separate
                           Estimation Order.

"Exchange Act"             means the Securities and Exchange Act of 1934, 15
                           U.S.C.ss.ss.78a-78jj, as now in effect or hereafter
                           amended.

"Exit Bonding              means that certain exit bonding facility to be
Facility"                  entered into by Reorganized Railworks and Travelers
                           on the Effective Date, which facility shall be used
                           for the issuance of surety bonds in connection with
                           prosecution of work in the ordinary course by
                           Reorganized Railworks.

"Exit Cash Infusion"       means a cash payment, made to the Debtors by GOF on
                           the Effective Date for immediate distribution to
                           holders of Allowed Non-Exit Lenders Pre-Petition
                           Lenders Claims, in an amount equal to $7,685,602
                           (such amount assumes Pre-Petition Lenders Adequate
                           Protection Payments made through August, 2002).

"Exit Facility"            means that certain exit financing facility to be
                           entered into by Reorganized Railworks and the Exit
                           Lenders on the Effective Date, which facility shall
                           be used to fund certain cash distributions hereunder
                           and otherwise utilized for Reorganized Railworks'
                           working capital and other corporate needs.

"Exit Lenders"             means GOF and Stonehill in their capacities as
                           lenders under the Exit Facility.

"Exit Lenders Pre-         means all Pre-Petition Lenders Claims held by GOF or
Petition Lenders           Stonehill on the Effective Date (including any
Claims"                    Pre-Petition Lenders Claims deemed to be acquired
                           pursuant to section 5.5 of the Plan), in an amount
                           equal to $45,000,000 in aggregate principal amount,
                           plus a corresponding amount of Pre-Petition Lenders
                           Pre-Petition Accrued Interest and Fee Claims.

"Fee Claim"                means a Claim for compensation, indemnification or
                           reimbursement of expenses pursuant to sections 327,
                           328, 330, 331 or 503(b) of the Bankruptcy Code in
                           connection with the Reorganization Cases incurred
                           after the Petition Date and prior to and including
                           the Effective Date.

"File, Filed or Filing"    means file, filed or filing with the Bankruptcy
                           Court in the Reorganization Cases.


                                      vii
<PAGE>

"Final Distribution        means, in the event there exist on the Initial
Date"                      Distribution Date any Disputed Claims in Class 9, a
                           date selected by the Reorganized Debtors, in their
                           sole and absolute discretion, on which all such
                           Disputed Claims have been settled by the Debtors or
                           resolved by Final Order.

"Final Order"              means an order or judgment of the Bankruptcy Court
                           entered by the Clerk of the Bankruptcy Court on the
                           docket in the Reorganization Cases: (i) which has
                           not been reversed, vacated, or stayed, and as to
                           which the time to appeal, petition for certiorari or
                           move for a new trial, reargument, or rehearing has
                           expired; or (ii) which, if an appeal, writ of
                           certiorari, new trial, reargument, or rehearing
                           thereof has been sought, (a) such order or judgment
                           of the Bankruptcy Court shall not have been stayed
                           or the stay has been terminated, or (b) such order
                           or judgment, if stayed, shall have been affirmed by
                           the highest court to which such order was appealed,
                           or certiorari shall have been denied, or a new
                           trial, reargument, or rehearing shall have been
                           denied or resulted in no modification of such order,
                           and the time to take any further appeal, petition
                           for certiorari or move for a new trial, reargument
                           or rehearing shall have expired; provided, however,
                           that the filing of or the possibility that a motion
                           under Rule 60 of the Federal Rules of Civil
                           Procedure, or any analogous rule under the
                           Bankruptcy Rules, may be filed relating to such
                           order or judgment shall not cause such order or
                           judgment not to be a Final Order.

"GOF"                      means, collectively, Matlin Patterson Global
                           Advisers LLC and Matlin Patterson Global
                           Opportunities Partners L.P.1

"HSR Act"                  means the Hart-Scott-Rodino Antitrust Improvements
                           Act of 1976, as amended.

"Impaired"                 means when used with reference to a Claim or Equity
                           Interest, a Claim or Equity Interest that is
                           impaired within the meaning of section 1124 of the
                           Bankruptcy Code.

"Indenture Trustee"        means First Union National Bank/Corporate Trust
                           Group, solely in its capacity as Trustee under that
                           certain Indenture dated as of April 7, 1999 (as
                           amended, modified or supplemented) with respect to
                           the Senior Subordinated Notes.

"Initial Distribution      means the date upon which distributions from
Date"                      Reorganized Railworks are made to holders of Allowed
                           Class 9 Claims which date shall be the later to
                           occur of: (i) the Effective Date; and (ii) the first
                           (1st) Business Day after the date that is thirty
                           (30) calendar days after the date that the Debtors
                           or Reorganized Debtors, as the case may be, have
                           determined appropriate Claims estimates and reserves
                           in accordance with section 7.5 hereof or the
                           Bankruptcy Court has entered the Estimation Order,
                           or as soon thereafter as is practicable; provided,
                           however, that the Debtors or the Reorganized Debtors
                           shall determine and establish appropriate Claims
                           estimates and reserves, or seek an order of the
                           Bankruptcy Court establishing such estimates and
                           reserves, within sixty (60)

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

*        Effective July 16, 2002, GOF changed its name from CSFB Global
         Opportunities Partners, L.P. to Matlin Patterson Global Opportunities
         Partners L.P.


                                      viii
<PAGE>

                           days of the Effective Date.

"Insured Claim"            means any Claim to the extent such Claim arises
                           prior to the Petition Date from an incident or
                           occurrence that is covered under any of the Debtors'
                           insurance policies, but solely to the extent such
                           Claim is so covered.

"Intercreditor             means that certain agreement to be entered into, as
Agreement"                 of the Effective Date, between and among the Exit
                           Lenders, the lenders under the New Railworks Secured
                           Loan and Travelers, which shall be substantially in
                           the form contained in the Plan Supplement.

"Interdebtor Claim"        means any Claim held by a Debtor against another
                           Debtor.

"Litigation Trust"         means the trust that shall be created pursuant to
                           the Plan under certain circumstances for the purpose
                           of carrying out certain provisions of the Plan.

"Litigation Trust          means that certain Trust Agreement to be entered into
Agreement"                 by Reorganized Railworks and the Litigation Trustee
                           on the Effective Date, which agreement shall govern
                           the Litigation Trust. The Litigation Trust Agreement
                           shall be substantially in the form contained in the
                           Plan Supplement.

"Litigation Trust          means claims for the avoidance of any transfer by or
Claims"                    obligation of the Estates or the Debtors under
                           chapter 5 of the Bankruptcy Code or the recovery of
                           the value of such transfer; provided, however, that
                           no such claim shall exist against a Creditor whose
                           claim was paid pursuant to orders authorizing the
                           assumption of executory contracts or unexpired
                           leases and orders authorizing the payment of certain
                           pre-petition obligations to critical vendors and
                           service providers.

"Litigation Trustee"       means the trustee under the Litigation Trust
                           Agreement.


"Litigation Trust          means the financing, described in section 5.25 of
Financing"                 the Plan, in the amount of $250,000, to be funded
                           from the proceeds of the Exit Facility to fund the
                           activities of the Litigation Trust.

"Management Rights         means that certain agreement to be entered into, as
Agreement"                 of the Effective Date, between Reorganized Railworks
                           and Matlin Patterson Global Opportunities Partners
                           L.P., which agreement shall be substantially in the
                           form contained in the Plan Supplement.

"New Management            means the stock options or restricted stock awards
Equity Awards"             to be granted by Reorganized Railworks under the New
                           Management Incentive and Retention Plan covering in
                           the aggregate up to 100,000 shares of New Railworks
                           Common Stock, representing ten percent (10%) of the
                           New Railworks Common Stock authorized to be issued
                           on the Effective Date.

"New Management            means the equity incentive and retention plan or
Incentive and              plans to be adopted by Reorganized Railworks, which
Retention Plan"            shall be substantially in the form contained in the
                           Plan Supplement, pursuant to which officers, senior
                           managers and certain other employees of the
                           Reorganized Debtors will be eligible to receive New
                           Management Equity Awards and Cash.


                                       ix
<PAGE>

"New Railworks             means the 1,000,000 shares of common stock of
Common Stock"              Reorganized Railworks to be issued or reserved for
                           issuance on the Effective Date from those shares
                           authorized under the Amended Certificate of
                           Incorporation in respect of (i) to the extent
                           converted, the New Railworks Series C Preferred
                           Stock (but not the New Railworks Series B Preferred
                           Stock), (ii) the Class 7 Common Stock Distribution,
                           (iii) the Class 9 Common Stock Distribution and (iv)
                           the New Management Equity Awards.

"New Railworks             means, collectively, the New Railworks Series A
Preferred Stock"           Preferred Stock, the New Railworks Series B
                           Preferred Stock and the New Railworks Series C
                           Preferred Stock.

"New Railworks             means that certain $100,000,000 term loan to be
Secured Loan"              entered into by Reorganized Railworks and certain
                           holders of Pre-Petition Lenders Claims on the
                           Effective Date, which term loan shall be
                           substantially in the form contained in the Plan
                           Supplement.

"New Railworks Series      means the shares of Series A preferred stock of
A Preferred Stock"         Reorganized Railworks, with an aggregate liquidation
                           preference of $35,000,000, authorized and issued
                           hereunder on the Effective Date.

"New Railworks Series      means the shares of Series B convertible preferred
B Preferred Stock"         stock of Reorganized Railworks, with an initial
                           conversion rate of one share of New Railworks Common
                           Stock for each share of New Railworks Series B
                           Preferred Stock, authorized to be issued hereunder
                           on or after the Effective Date.


"New Railworks Series      means the warrants exercisable for ten years from
B Warrants"                the Effective Date to purchase all of the shares of
                           New Railworks Series B Preferred Stock, with an
                           initial aggregate exercise price of $21,000,000,
                           authorized to be issued hereunder on and after the
                           Effective Date.

"New Railworks Series      means the shares of Series C convertible preferred
C Preferred Stock"         stock of Reorganized Railworks, with an initial
                           liquidation preference of $45,000,000 and an initial
                           conversion rate of one share of New Railworks Common
                           Stock for each share of New Railworks Series C
                           Preferred Stock, authorized and issued hereunder on
                           the Effective Date.

"New Wood Waste            means that certain $999,197.83 (plus post-petition
Secured Loan"              accrued interest to the Effective Date as determined
                           in accordance with the Wood Waste Credit Agreement)
                           term loan to be entered into by the Reorganized Wood
                           Waste and BoA on the Effective Date, which term loan
                           shall be substantially in the form contained in the
                           Plan Supplement.

"Non-Debtor                means collectively, the direct and indirect
Subsidiaries"              subsidiaries of Railworks listed on Exhibit B
                           hereto, which have not commenced chapter 11 cases
                           and thus are not Debtors in these Reorganization
                           Cases.

"Non-Debtor                means any Claim held by a direct or indirect wholly
Subsidiaries Claims"       owned non-debtor subsidiary of the Debtors in
                           respect of an intercompany loan, advance or
                           transfer.

"Non-Exit Lenders          means all Pre-Petition Lenders Claims, exclusive of
Pre-Petition Lenders       the Exit Lenders


                                       x
<PAGE>

Claims"                    Petition Lenders Claims.


"Other Priority Claim"     means a Claim entitled to priority pursuant to
                           section 507(a) of the Bankruptcy Code other than DIP
                           Lenders Claims, Priority Tax Claims, Pre-Petition
                           Lenders Claims, Administrative Claims or Fee Claims.

"Other Secured Claim"      means a Secured Claim against any of the Debtors not
                           constituting a DIP Lenders Claim, a Pre-Petition
                           Lenders Claim or a Wood Waste Secured Claim.

"PBGC"                     means the Pension Benefit Guaranty Corporation, a
                           wholly-owned United States Government corporation
                           that administers the defined benefit pension plan
                           termination insurance program under Title IV of
                           ERISA.

"Pension Plan"             means the Breaking Technology & Equipment, Inc.
                           Defined Benefit Pension Plan, a defined benefit
                           pension plan covered by Title IV of ERISA that BT&E
                           sponsors and froze effective as of June 30, 2000.

"Person"                   means any individual, corporation, partnership,
                           association, indenture trustee, limited liability
                           company, organization, joint stock company, joint
                           venture, Estate, trust, governmental unit or any
                           political subdivision thereof, the Creditors'
                           Committee, interest holders, or any other entity.

"Petition Date"            means September 20, 2001, the date on which the
                           Debtors Filed their petitions for relief commencing
                           the Reorganization Cases.

"Plan"                     means the second amended joint chapter 11 plan of
                           reorganization, including, without limitation, the
                           Plan Supplement and all exhibits and schedules
                           thereto, as the same may be amended or modified from
                           time to time in accordance with the provisions of
                           the Bankruptcy Code and the terms of the Plan.

"Plan Documents"           means the documents (other than the Plan) to be
                           executed, delivered, assumed and/or performed in
                           conjunction with the consummation of the Plan on the
                           Effective Date, including, but not limited to: (i)
                           the Amended Bylaws; (ii) the Amended Certificate of
                           Incorporation; (iii) the Registration Rights
                           Agreement; (iv) the New Management Incentive Plan;
                           (v) New Railworks Secured Loan; (vi) the Exit
                           Facility; (vii) the Exit Bonding Facility; (viii)
                           the New Wood Waste Secured Loan; (ix) the
                           Intercreditor Agreement; (x) the Certificate of
                           Designation for the New Railworks Series A Preferred
                           Stock; (xi) the Certificate of Designation for the
                           New Railworks Series B Preferred Stock; (xii) the
                           Certificate of Designation for the New Railworks
                           Series C Preferred Stock; (xiii) the warrant
                           agreement for the New Railworks Series B Warrants;
                           (xiv) the Litigation Trust Agreement and (xv) the
                           Management Rights Agreement. If modifications to the
                           Plan Documents are made by the Debtors prior to the
                           occurrence of the Effective Date (A) the Debtors
                           shall provide copies of the modified documents to
                           counsel to the Creditors' Committee within one
                           Business Day of their completion and (B) the Debtors
                           shall seek Bankruptcy Court approval of such
                           modifications if and to the extent required by
                           Section 1127 of the Bankruptcy Code

 "Plan Securities"         means collectively, the New Railworks Common Stock,
                           the New Railworks Preferred Stock and the New
                           Railworks Series B Warrants.


                                       xi
<PAGE>

"Plan Supplement"          means the supplemental appendix to the Plan to be
                           Filed and posted on Railworks' website at
                           www.railworks.com at least five (5) days before the
                           date of the Voting Deadline that will contain draft
                           forms of the Plan Documents and certain other
                           documents.

"Pre-Petition Credit       means that certain Amended and Restated Credit
Agreement"                 Agreement dated as of April 28, 2000 (as
                           subsequently amended, restated, modified or
                           supplemented), between and among Railworks, as
                           borrower, and a syndicate of banks and other
                           institutional lenders, as lenders, including BoA, as
                           administrative agent.

"Pre-Petition Lenders"     means the lenders under the Pre-Petition Credit
                           Agreement.

"Pre-Petition Lenders      means the $500,000 monthly adequate protection
Adequate Protection        payments, commencing November 2001, made by
Payments"                  Railworks to the Pre-Petition Lenders pursuant to
                           the DIP Order.


"Pre-Petition Lenders      means that portion of the Pre-Petition Lenders
Post-Petition Accrued      Claims that corresponds to unpaid post-petition
Interest Claims"           accrued interest as determined in accordance with
                           the Pre-Petition Credit Agreement.

"Pre-Petition Lenders      means that portion of the Pre-Petition Lenders
Pre-Petition Accrued       Claims that corresponds to unpaid pre-petition fees
Interest and Fees          and accrued interest, as determined in accordance
Claims"                    with the Pre-Petition Credit Agreement.

"Pre-Petition Lenders      means the Claims of the Pre-Petition Lenders arising
Claims"                    under or as a result of the Pre-Petition Credit
                           Agreement, as reduced by the Pre-Petition Lenders
                           Adequate Protection Payments.

"Pre-Petition Lenders      means undrawn and unreimbursed letters of credit
Letters of Credit"         outstanding under the Pre-Petition Credit Agreement
                           on the Effective Date.

"Pre-Petition              means a cash payment in an amount equal to $144,398
Revolving Lenders          (such amount assumes Pre-Petition Lenders Adequate
Cash Payment"              Protection Payments made through August, 2002).

"Pre-Petition              means loans made under the revolving credit facility
Revolving Loans"           contained in the Pre-Petition Credit Agreement.

"Pre-Petition Sureties"    means Travelers, as issuer of surety bonds and as
                           administrator for itself and certain other surety
                           companies that have issued surety bonds on behalf of
                           the Debtors, and other surety companies (including
                           Federal Insurance Company) that have issued surety
                           bonds on behalf of the Debtors and entities
                           purchased or acquired by any of the Debtors prior to
                           the Petition Date.


                                      xii
<PAGE>
"Pre-Petition Sureties     means the Claims of the Pre-Petition Sureties
Claims"                    arising under or in connection with surety bonds
                           issued prior to the Petition Date on behalf of the
                           Debtors and entities purchased or acquired by any of
                           the Debtors prior to the Petition Date, which Claims
                           result from the Debtors' or Reorganized Debtors'
                           rejection of executory contracts for projects bonded
                           by the Pre-Petition Sureties, but specifically
                           excluding (i) the Travelers Pre-Petition Bonds
                           Claims and (ii) Claims of Pre-Petition Sureties
                           under executory contracts assumed by the Debtors.

"Priority Tax Claim"       means any Claim of a governmental unit against one
                           of more of the Debtors of the kind entitled to
                           priority in payment under section 507(a)(8) of the
                           Bankruptcy Code.

"Pro Rata Share"           means, with reference to any distribution on account
                           of any Allowed Claim in any Class, a distribution
                           equal in amount to the ratio (expressed as a
                           percentage) that the amount of such Allowed Claim
                           bears to the aggregate amount of all Allowed Claims
                           in that Class.

"Projections"              means the projected financial information contained
                           in this Disclosure Statement relating to the
                           Reorganized Debtors.

"Railworks"                means Railworks Corporation, a Delaware corporation.

"Registration Rights       means that certain Registration Rights Agreement
Agreement"                 with respect to the resale of the New Railworks
                           Common Stock (including the shares issuable upon
                           conversion of the New Railworks Series C Preferred
                           Stock but excluding any shares issuable in
                           connection with the New Management Equity Awards)
                           and the New Railworks Common Stock issuable upon
                           conversion of the New Railworks Series B Preferred
                           Stock that is issuable upon exercise of the New
                           Railworks Series B Warrants.

"Reinstated or             means (i) leaving unaltered the legal, equitable and
Reinstatement"             contractual rights to which a Claim or Equity
                           Interest entitles the holder of such Claim or Equity
                           Interest in accordance with section 1124 of the
                           Bankruptcy Code or (ii) notwithstanding any
                           contractual provision or applicable law that
                           entitles the holder of such Claim or Equity Interest
                           to demand or receive accelerated payment of such
                           Claim or Equity Interest after the occurrence of a
                           default (a) curing any such default that occurred
                           before or after the Petition Date, other than a
                           default of a kind specified in section 365(b)(2) of
                           the Bankruptcy Code; (b) reinstating the maturity of
                           such Claim or Equity Interest as such maturity
                           existed before such default; (c) compensating the
                           holder of such Claim or Equity Interest for any
                           damages incurred as a result of any reasonable
                           reliance by such holder of such Claim or Equity
                           Interest for any damages incurred as a result of any
                           reasonable reliance by such holder on such
                           contractual provision or such applicable law; and
                           (d) not otherwise altering the legal, equitable, or
                           contractual rights to which such Claim or Equity
                           Interest entitles the holder of such Claim or Equity
                           Interest; provided, however, that any contractual
                           right that does not pertain to the payment when due
                           of principal and interest on the obligation on which
                           such Claim or Equity Interest is based, including,
                           but not limited to, financial covenant ratios,
                           negative pledge covenants, covenants or restrictions
                           on merger or consolidation, and affirmative
                           covenants regarding corporate existence prohibiting
                           certain transactions or actions contemplated by the
                           Plan,


                                      xiii
<PAGE>

                           or conditioning such transactions or actions on
                           certain factors, shall not be required to be
                           reinstated in order to accomplish Reinstatement.


"Reorganization            means the jointly administered cases under chapter
Cases"                     11 of the Bankruptcy Code commenced by the Debtors
                           on the Petition Date in the Bankruptcy Court and
                           captioned In re Railworks Corporation, et al.,
                           01-6-4463 (ESD).

"Reorganized               means the Reorganized Debtors and each of their
Company"                   Non-Debtor Subsidiaries.

"Reorganized               means each of the Debtors as reorganized on the
Debtors"                   Effective Date.

"Reorganized               means Railworks Corporation on and after the
Railworks"                 Effective Date.

"Reorganized               means each of the Subsidiary Debtors on and after
Subsidiaries"              the Effective Date.

"Reorganized Wood          means Wood Waste Energy, Inc. on and after the
Waste"                     Effective Date.

"Representative(s)"        means (i) any officer, director, agent, financial
                           advisor, attorney, professional, accountant,
                           employee or controlling shareholder (direct or
                           indirect) of Railworks, in each case, solely in
                           their respective capacities as such, serving or
                           holding interests immediately prior to the
                           occurrence of the Effective Date and (ii) the
                           respective Presidents of the Debtors' Track,
                           Products and Services and Transit divisions, which
                           individuals are Robert Wolff, William Donley and
                           C.W. Moore, respectively, in each case, solely in
                           their capacities as such, to the extent such
                           individuals are serving or holding interests
                           immediately prior to the occurrence of the Effective
                           Date.

"Reserved Causes of        means (i) any and all Causes of Action against any
Action"                    present or former director or officer of any Debtor
                           based upon his or her obligations to one or more of
                           the Debtors under any promissory notes, loans or
                           other similar obligations to the Debtors, including,
                           but not limited to, expense reimbursement and other
                           obligations of such directors and officers due and
                           owing to the Debtors, and (ii) any and all Causes of
                           Action against any present or former director or
                           officer of any Debtor, for willful misconduct,
                           recklessness or gross negligence.

"Restructuring             has the meaning ascribed thereto in section 5.16 of
Transactions"              the Plan.

"Schedules"                means the schedules of assets and liabilities, lists
                           of holders of Equity Interests, and the statement of
                           financial affairs originally Filed by the Debtors
                           with the Bankruptcy Court on December 5, 2001, under
                           section 521 of the Bankruptcy Code, Bankruptcy Rule
                           1007 and the Official Bankruptcy Forms of the
                           Bankruptcy Rules as such schedules and statements
                           were amended on December 11, 2001 and February 8,
                           2002, and may be further supplemented or amended:
                           (a) through and including the date by which
                           objections to Claims may be filed with the
                           Bankruptcy Court or (b) in accordance with section
                           13.2


                                      xiv
<PAGE>

                           of the Plan.

"Schedule of Assumed       means the schedule of Completed Projects
Completed Projects"        and executory obligations thereunder to be
                           treated as executory contracts to be assumed
                           pursuant to section 365 of the Bankruptcy Code
                           consistent with the terms and conditions of section
                           8.4 of the Plan, which schedule will be included in
                           the Plan Supplement.

"Schedule of Rejected      means the schedule of executory contracts and
Contracts and Leases"      unexpired leases to be rejected  pursuant to section
                           365 of the Bankruptcy Code consistent with the terms
                           and conditions of section 8.3 of the Plan, which
                           schedule will be included in the Plan Supplement.

"Secured Claim"            means a Claim to the extent (i) secured by
                           Collateral, the amount of which is equal to or less
                           than the value of such Collateral (A) as set forth
                           in the Plan, (B) as agreed to by the holder of such
                           Claim and the Debtors, or (C) as determined by a
                           Final Order in accordance with section 506(a) of the
                           Bankruptcy Code, or (ii) secured by the amount of
                           any rights of setoff of the holder thereof under
                           section 553 of the Bankruptcy Code.

"Securities Act"           the Securities Act of 1933, 15 U.S.C.ss.ss.77a-77aa,
                           as now in effect or hereafter amended.

"Senior Subordinated       means the 11.5% Senior Subordinated Notes due 2009
Notes"                     issued by Railworks under that certain Indenture
                           dated as of April 7, 1999 (as subsequently amended,
                           modified or supplemented) between and among
                           Railworks, as issuer, Railworks' direct and indirect
                           U.S. subsidiaries, as guarantors, and First Union
                           National Bank, as Trustee.

"Senior Subordinated       means Claims against the Debtors for amounts due
Notes Claims"              under or in connection with the Senior Subordinated
                           Notes.

"Stonehill"                means, collectively, Stonehill Capital Management,
                           LLC, Stonehill Institutional Partners, L.P. and
                           Stonehill Offshore Partners Limited.

"Subsidiary Debtors"       means the direct and indirect subsidiaries of
                           Railworks listed on Schedule A to the Plan, each of
                           which is a Debtor.

"Subsidiary Debtors        means any share of common stock or other instrument
Equity Interest"           evidencing a present ownership interest in any of
                           the Subsidiary Debtors, whether or not transferable,
                           and any option, warrant or right, contractual or
                           otherwise, to acquire any such interest.


"Supplemental Bar          means the order entered by the Bankruptcy Court
Date Order"                establishing the Supplemental Bar Date.

"Supplemental Bar          means March 11, 2002, the date fixed in the
Date"                      Supplemental Bar Date Order by which all Persons
                           asserting certain Claims affected by amendments to
                           the Schedules (as specified in the Supplemental Bar
                           Date Order) arising before the Petition Date must
                           have Filed proofs of such Claims or be forever
                           barred from asserting such Claims against the
                           Debtors.



                                       xv
<PAGE>

"Surety Rights"            means any right of subrogation, reimbursement,
                           exoneration or contribution of the Pre-Petition
                           Sureties and any lien, right, or other interest of
                           any person to whom the Pre-Petition Sureties may be
                           subrogated.

"TP&S Group"               means Railworks, in respect of the track and
                           products and services segment of its business and
                           the following Subsidiary Debtors that are members of
                           Railworks' track and products and services group:
                           CPI Concrete Products Incorporated; Cranequip Inc.;
                           Gantrex Corporation; Midwest Construction Services
                           Inc.; Neosho Central America, Inc.; Neosho
                           Construction Company, Incorporated; Railworks Rail
                           Products & Services, Inc.; Railworks Wood Products,
                           Inc.; U.S. Railway Supply, Inc.; Wood Waste Energy,
                           Inc.; Dura-Wood, LLC; Railworks Track Services,
                           Inc.; Railworks Track Systems, Inc.; and Railworks
                           Track Systems.

"TP&S Group                means BoA in its capacity as administrative agent
Administrative Agent"      for the TP&S Group Lenders under the TP&S Group
                           Facility Agreement.

"TP&S Group Facility       means that certain Debtor-In-Possession Financing
Agreement"                 Agreement dated as of March 5, 2001, by and among,
                           Railworks, as borrower, the other Debtors that
                           comprise the TP&S Group, as guarantors, the TP&S
                           Group Administrative Agent and the TP&S Group
                           Lenders, as the same has been or may be amended,
                           restated, modified or supplemented.

"TP&S Group                means the syndicate of lenders under the TP&S Group
Lenders"                   Facility Agreement.

"TP&S Group Lenders        means the Claims of the TP&S Lenders in respect of
Claims"                    the obligations of the Debtors arising under the
                           TP&S Group Loan Documents.

"TP&S Group Loan           means collectively, the TP&S Group Facility
Documents"                 Agreement and any and all ancillary documents
                           entered into in connection with the TP&S Group
                           Facility Agreement.

"Transit Group"            means Railworks, in respect of the transit segment
                           of its business and the following Subsidiary Debtors
                           that are members of Railworks' transit group:
                           Breaking Technology & Equipment Inc.; HSQ
                           Technology, a Corporation; L.K. Comstock & Company,
                           Inc.; M-Track Enterprises, Inc.; Railworks Transit,
                           Inc.; RWKS Construction, Inc.; and Railworks Transit
                           Systems, Inc.

"Transit Group             means Matlin Patterson Global Advisers LLC, in its
Administrative Agent"      capacity as administrative agent for the Transit
                           Group Lenders under the Transit Group Facility
                           Agreement.

"Transit Group             means that certain Debtor-In-Possession Transit
Facility Agreement"        Revolving Credit Agreement dated as of October 5,
                           2001, by and among Railworks, as borrower, the other
                           Debtors that comprise the Transit Group, as
                           guarantors, the Transit Group Administrative Agent
                           and the Transit Group Lenders, as the same has been
                           or may be amended, modified, restated or
                           supplemented.


"Transit Group             means the syndicate of lenders or participants under
Lenders"                   the Transit Group Facility Agreement.


                                      xvi
<PAGE>

"Transit Group             means the Claims of the Transit Group Lenders in
Lenders Claims"            respect of the obligations of the Debtors arising
                           under the Transit Group Loan Documents.

"Transit Group Loan        means collectively, the Transit Group Facility
Documents"                 Agreement and any and all ancillary documents
                           entered into in connection with the Transit Group
                           Facility Agreement.

"Travelers"                means Travelers Casualty & Surety Company of
                           America, or one or more of its subsidiaries or
                           affiliates, or other sureties or co-sureties for
                           which Travelers acts as administrator for bonds
                           issued to or on behalf of the Debtors.

"Travelers Pre-Petition    means the Claims of Travelers arising under or in
Bonds Claims"              connection with surety bonds issued prior to the
                           Petition Date on behalf of the Debtors and entities
                           purchased or acquired by any of the Debtors prior to
                           the Petition Date.

"Unimpaired"               means, when used with reference to a Claim or Equity
                           Interest, a Claim or Equity Interest that is not
                           impaired within the meaning of section 1124 of the
                           Bankruptcy Code.

"United States             means the United States Trustee for the District of
Trustee"                   Maryland.

"Unsecured Claim"          means any Claim against any of the Debtors other
                           than Administrative Expense Claims, Assumed Bonded
                           Claims, Fee Claims, Priority Tax Claims, DIP Lenders
                           Claims, Other Secured Claims, the Wood Waste Secured
                           Claim, Priority Non-Tax Claims, Travelers
                           Pre-Petition Bonds Claims, Interdebtor Claims,
                           Non-Debtor Subsidiaries Claims, Pre-Petition Lenders
                           Claims, Convenience Claims (except for purposes of
                           defining Convenience Claims), Existing Securities
                           Law Claims and 510(c) Claims.

"Wood Waste Credit         means that certain Amended and Restated Loan
Agreement"                 Agreement dated as of August 22, 1998 (as
                           subsequently amended, restated, modified or
                           supplemented), between BoA and Wood Waste Energy,
                           Inc.

"Wood Waste Energy,        means Wood Waste Energy, Inc., a Virginia
Inc."                      corporation, and a Debtor in the Reorganization
                           Cases.

"Wood Waste Secured        means the claim of BoA arising under or as a result
Claim"                     of the Wood Waste Credit Agreement.

"Voting Agent"             means Bankruptcy Services LLC, as voting agent in
                           connection with voting by holders of Claims to
                           accept or to reject the Plan.

"Voting Classes"           means a Class that is Impaired under the Plan and
                           that is not deemed to have rejected the Plan.

"Voting Deadline"          means the deadline for voting to accept or to reject
                           the Plan, as determined by the Bankruptcy Court.

"Voting Procedures         means an order of the Bankruptcy Court that, among
Order"                     other things, sets which Claims may vote on the Plan
                           and designates the form of ballot to be used by each
                           Voting Class.


                                      xvii
<PAGE>

"Voting Record Date"       means the record date for voting to accept or to
                           reject the Plan, as determined by the Bankruptcy
                           Court.


                                     xviii
<PAGE>

                      I. SUMMARY OF DISCLOSURE STATEMENT

         A.       PURPOSE OF THIS DISCLOSURE STATEMENT

                  The purpose of this Disclosure Statement is to provide
holders of Claims that are entitled to vote on the Plan with sufficient
information to allow them to make an informed decision on whether to accept or
reject the Plan. The Debtors are debtors in cases under chapter 11 of the
Bankruptcy Code and are soliciting votes to accept or reject the Plan. The
overall purpose of the Plan is to provide for the restructuring of the Debtors'
liabilities in a manner designed to maximize recoveries to all stakeholders and
to enhance the financial viability of the Reorganized Company. A copy of the
Plan is attached as Exhibit A to this Disclosure Statement. Except as otherwise
indicated in this Disclosure Statement, please refer to the Glossary and the
Plan for definitions of capitalized terms used in this Disclosure Statement.

                            NON-DEBTOR SUBSIDIARIES

                  The Debtors' direct and indirect wholly-owned
                  foreign subsidiaries, as well as one inactive, no
                  asset U.S. subsidiary, are not Debtors in the
                  Reorganization Cases and are not in bankruptcy.
                  These subsidiaries are listed on Exhibit B attached
                  to this Disclosure Statement and are referred to as
                  the "Non-Debtor Subsidiaries." Except for certain
                  specified purposes as set forth in the Plan, debt
                  and equity interests issued by, and claims against,
                  the Non-Debtor Subsidiaries are not directly
                  affected by the commencement of the Reorganization
                  Cases, and holders of such claims and interests are
                  not entitled to vote on the Plan.

                  This Disclosure Statement:

                  -        describes how Claims against and Equity Interests in
                           the Debtors will be treated under the Plan (section
                           I.F., "Summary of Distributions to Be Made Under the
                           Plan") and the terms of the securities to be issued
                           under the Plan (section II., "Principal
                           Characteristics of New Railworks Preferred Stock,
                           New Railworks Series B Warrants and New Railworks
                           Common Stock");

                  -        explains how to vote on the Plan and who is entitled
                           to vote (section I.C., "Voting");

                  -        estimates the recoveries for holders of Claims and
                           Equity Interests (section I.F., "Summary of
                           Distributions to Be Made Under the Plan");

                  -        provides certain financial information about the
                           Reorganized Company, including operating and
                           financial projections through fiscal 2006 for the
                           Reorganized Company (section VI.B., "Financial
                           Projections and Valuation Analysis" and Exhibit D);

                  -        gives estimated enterprise valuations of the
                           Reorganized Company (section VI.B., "Financial
                           Projections and Valuation Analysis");

                  -        presents a liquidation analysis of the Debtors
                           (Exhibit E);

                  -        explains certain legal and practical aspects of
                           implementation of the Plan (section III.,
                           "Implementation of the Plan");


<PAGE>

                  -        notes certain risk factors that creditors should
                           consider before voting (section IV., "Risk
                           Factors");

                  -        discusses the procedure for confirming the Plan
                           (section V., "Confirmation of the Plan");

                  -        describes how Reorganized Railworks will be governed
                           when the Plan becomes effective (section VI.A.,
                           "Reorganized Railworks");

                  -        discusses the businesses of the Debtors and the
                           reasons they commenced their Reorganization Cases
                           (section VII., "Historical Information");

                  -        summarizes significant events that have occurred in
                           the Reorganization Cases (section VIII., "The
                           Reorganization Cases");

                  -        summarizes certain federal tax considerations
                           (section IX., "Certain U.S. Federal Income Tax
                           Consequences"); and

                  -        explains how distributions under the Plan will be
                           made and the manner in which disputed claims will be
                           resolved (section X., "Procedures for Distributions
                           Under the Plan").

                  The Plan Supplement will contain the following documents,
including the Plan Documents, among others, in substantially the form to be
entered into in connection with the implementation of the Plan: (i) the Amended
Bylaws of Reorganized Railworks; (ii) the Amended Certificate of Incorporation
of Reorganized Railworks; (iii) the Registration Rights Agreement; (iv) the New
Management Incentive Plan; (v) the New Railworks Secured Loan; (vi) the Exit
Facility; (vii) the Exit Bonding Facility; (viii) the New Wood Waste Secured
Loan; (ix) the Intercreditor Agreement; (x) the Certificate of Designation for
the New Railworks Series A Preferred Stock; (xi) the Certificate of Designation
for the New Railworks Series B Preferred Stock; (xii) the Certificate of
Designation for the New Railworks Series C Preferred Stock; (xiii) the warrant
agreement for the New Railworks Series B Warrants; (xiv) the Litigation Trust
Agreement; (xv) the Management Rights Agreement; (xvi) the Schedule of Rejected
Contracts and Leases; (xvii) the Schedule of Assumed Completed Projects; and
(xviii) the Schedule of Officers and Directors of Reorganized Railworks. After
it has been filed, you may obtain a copy of the Plan Supplement by written
request to the Voting Agent. The Plan Supplement will be available and posted
on Railworks' website at www.railworks.com on or before the date occurring five
(5) days prior to the Voting Deadline. ALL PLAN DOCUMENTS WILL BE SUBJECT TO
REVISION AND MODIFICATION PRIOR TO THE EFFECTIVE DATE. THIS MAY RESULT IN
MATERIAL CHANGES TO THE TERMS OF THE PLAN DOCUMENTS. If modifications to the
Plan Documents are made by the Debtors prior to the occurrence of the Effective
Date (A) the Debtors shall provide copies of the modified documents to counsel
to the Creditors' Committee within one Business Day of their completion and (B)
the Debtors shall seek Bankruptcy Court approval of such modifications if and
to the extent required by Section 1127 of the Bankruptcy Code.

                  Additional financial and other information about Railworks
and the other Debtors can be found in Railworks' Form 10-Ks for the fiscal
years ended December 31, 2000 and December 31, 2001 and its other filings from
time to time with the Securities and Exchange Commission (the "Commission" or
the "SEC"), each of which is incorporated in this Disclosure Statement by
reference. Copies of the Debtors' SEC filings may be obtained over the Internet
at www.sec.gov.


                                       2
<PAGE>

         B.       BACKGROUND OF REORGANIZATION CASES

                  On the Petition Date, the Debtors each filed a voluntary
petition for relief under chapter 11 of the Bankruptcy Code. Since the Petition
Date, the Debtors have continued to manage their businesses and affairs in the
ordinary course as debtors-in-possession under chapter 11 of the Bankruptcy
Code, subject to the control and supervision of the Bankruptcy Court.

                  On September 26, 2001, the United States Trustee for the
District of Maryland appointed the Creditors' Committee, an official committee
of unsecured creditors consisting of the persons listed in Exhibit C attached
hereto, to represent the interests of the Debtors' unsecured creditors in the
Reorganization Cases.

                  On March 15, 2002, the Debtors filed the original version of
the Debtors' Joint Plan of Reorganization under Chapter 11 of the Bankruptcy
Code (the "Original Plan") with the Bankruptcy Court. On that date, the Debtors
also filed a motion requesting that the Bankruptcy Court fix April 2, 2002 as
the deadline for filing the disclosure statement relating to the Original Plan
(the "Original Disclosure Statement"), which motion was granted. The Debtors
filed the Original Disclosure Statement on April 2, 2002. Following the filing
of the Original Plan and the Original Disclosure Statement, the Debtors, the
Pre-Petition Lenders, Travelers, GOF and Stonehill continued to engage in
discussions and negotiations concerning the terms and conditions of the
Original Plan and the treatment of Claims and Equity Interests under the Plan.
The culmination of those discussions and negotiations was the parties'
agreement to amend the terms of the Original Plan; such amendments were
embodied in the terms of the Plan version filed on June 18, 2002. The Plan was
subsequently amended and a revised version was filed on August 8, 2002.

                  The Debtors believe the Plan is fair and equitable in light
of the relative rights of creditors and represents the best opportunity for the
Debtors to emerge from Chapter 11. The Plan represents an integrated set of
compromises and agreements, many of which are highly beneficial to the Estates
and should strengthen the Reorganized Debtors' ability to operate effectively
post-confirmation. The Plan may not be confirmed, however, if the Bankruptcy
Court decides that the Plan fails to satisfy any of the confirmation standards
set forth in the Bankruptcy Code or declines to approve any of the compromises
set forth in the Plan. Because the Plan is structured as an integrated whole,
the Bankruptcy Court's failure to confirm the Plan would delay the Debtors'
emergence from bankruptcy and would increase the risks to the Debtors'
businesses. There can be no assurance that an alternative plan of
reorganization could be negotiated if the Bankruptcy Court declines to confirm
the Plan.

                  Following a hearing held on August 6, 2002, the Bankruptcy
Court approved this Disclosure Statement as containing "adequate information"
under the Bankruptcy Code.

         C.       VOTING

                  Each holder of a Claim of a Class that is Impaired under the
Plan, but is not deemed to have rejected the Plan, will receive this Disclosure
Statement, the Plan, the Voting Procedures Order, notice of the Confirmation
Hearing, and a ballot for voting to accept or reject the Plan. Each holder of a
Claim of a Class that is deemed to REJECT the Plan will receive this Disclosure
Statement, the Plan, the Voting Procedures Order, notice of the Confirmation
Hearing and a notice of non-voting status in the form approved by the
Bankruptcy Court, but will not receive a ballot and will not be eligible to
vote on the Plan. Holders of Claims of a Class deemed to ACCEPT the Plan will
not receive copies of the Plan, the Disclosure Statement or the Plan
Supplement, but may obtain copies of these documents by sending a written
request for such materials to the Voting Agent. Holders of Claims in Impaired
Classes may also receive a copy of the Plan Supplement after it has been filed
by sending a written request to the Voting Agent.


                                       3
<PAGE>

           WHICH CLASSES OF CLAIMS ARE ENTITLED TO VOTE ON THE PLAN?

                    Claims in Classes 1a, 6, 7, 8 and 9 are
                  Impaired and entitled to vote on the Plan.

         WHICH CLASSES OF CLAIMS ARE NOT ENTITLED TO VOTE ON THE PLAN?

                  Claims in Classes 1, 2, 3, 4, and 5 are Unimpaired
                  under the Plan, are deemed to have accepted the
                  Plan and will not be entitled to vote on the Plan.

                  Claims in Classes 10 and 11 and Equity Interests in
                  Class 12 will receive no distribution under the
                  Plan, are deemed to have rejected the Plan and will
                  not be entitled to vote on the Plan.

                  For a description of the Classes of Claims and Equity
Interests and their treatment under the Plan, see section I.F.3.,
"Classification and Treatment of Claims" below.

                  You may only vote on the Plan with respect to a Claim if that
Claim belongs to a Class that is Impaired under the Plan and is not deemed to
have rejected the Plan. The Bankruptcy Court has fixed August 9, 2002 as the
voting record date (the "Voting Record Date"). To be eligible to vote on the
Plan, persons with Claims that belong to the Voting Classes must have held them
on the Voting Record Date.

                  Under the Bankruptcy Code, the Plan will be deemed accepted
by an Impaired Class of Claims if the Voting Agent receives votes accepting the
Plan representing at least:

                  -        two-thirds of the total dollar amount of the allowed
                           Claims in the Class that cast a vote; and

                  -        more than one-half of the total number of allowed
                           Claims in the Class that cast a vote.

The Voting Procedures Order establishes which Claims are "allowed" for purposes
of voting and designates the form of ballot to be used by each Voting Class.
For more information on voting procedures, please consult the Voting Procedures
Order.

                  ALL PROPERLY COMPLETED BALLOTS RECEIVED BY THE VOTING AGENT
BEFORE 4:00 P.M. (EASTERN TIME) ON SEPTEMBER 13, 2002 (THE "VOTING DEADLINE"),
WILL BE COUNTED IN DETERMINING WHETHER EACH IMPAIRED CLASS ENTITLED TO VOTE ON
THE PLAN HAS ACCEPTED THE PLAN. ANY BALLOTS RECEIVED AFTER THE VOTING DEADLINE
WILL NOT BE COUNTED. ALL BALLOTS MUST CONTAIN AN ORIGINAL SIGNATURE TO BE
COUNTED. NO BALLOTS RECEIVED BY FACSIMILE WILL BE ACCEPTED.

                               VOTING ON THE PLAN


                                       4
<PAGE>

                  WHEN DOES THE VOTE NEED TO BE RECEIVED? The
                  deadline for the receipt by the Voting Agent of
                  properly completed ballots is 4:00 p.m. (Eastern
                  time), September 13, 2002.

                  WHICH CLASSES MAY VOTE? Persons may vote to accept
                  or reject the Plan only with respect to Allowed
                  Claims that belong to a Class that is Impaired
                  under the Plan and is not deemed to have rejected
                  the Plan. These are Classes 1a, 6, 7, 8 and 9.

                  WHICH MEMBERS OF THE IMPAIRED CLASSES MAY VOTE? The
                  Voting Record Date for determining which members of
                  Impaired Classes may vote on the Plan is August 9,
                  2002. Persons may vote on the Plan only with
                  respect to Claims that were held on the Voting
                  Record Date.

                  HOW DO I VOTE ON THE PLAN? For a vote to be
                  counted, the Voting Agent must receive an original
                  signed copy of the ballot form approved by the
                  Bankruptcy Court. Faxed copies and votes sent on
                  other forms will not be accepted.

                  WHOM SHOULD I CONTACT IF I HAVE QUESTIONS OR NEED A
                  BALLOT? You may contact the Voting Agent at the
                  address or phone number listed below.

                  This Disclosure Statement, the attached exhibits,
the Plan and the Plan Supplement are the only materials that you should use in
determining how to vote on the Plan. The Plan reflects an agreement and
compromise among the Debtors, the Pre-Petition Lenders, the Debtors' primary
surety company, Travelers, and GOF and Stonehill, collectively, Pre-Petition
Lenders and holders of approximately two-thirds (2/3) of the Senior
Subordinated Notes.(1) The Debtors believe that approval of the Plan is their
best opportunity to emerge from their Reorganization Cases and operate their
businesses as going concern entities. The Pre-Petition Lenders, Travelers, GOF
and Stonehill fully support the Plan. Towards that end, the Debtors have been
advised that Travelers, GOF, Stonehill and at least 51% of the Pre-Petition
Lenders (excluding the Exit Lenders) holding at least 66.67% of the principal
amount of obligations under the Pre-Petition Credit Agreement (excluding the
Exit Lenders) have entered into an intercreditor agreement pursuant to which
each party thereto has agreed to vote in favor of the Plan.

                             VOTING RECOMMENDATIONS

         The Debtors believe that the Plan presents the best
         opportunity for holders of Claims to maximize their
         recoveries and for the business operations of the Debtors to
         succeed. THE DEBTORS STRONGLY ENCOURAGE HOLDERS OF CLAIMS TO
         VOTE TO ACCEPT THE PLAN.

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

(1)      More specifically, GOF and Stonehill presently hold approximately
         $15.4 million and $10.8 million, respectively, in principal amount of
         Pre-Petition Lenders Claims and approximately $97.8 million and $24.1
         million, respectively, in Senior Subordinated Note Claims. In
         addition, as a result of the Exit Cash Infusion on the Effective Date,
         GOF and Stonehill will be deemed to have acquired an additional
         approximately $18.9 million in Pre-Petition Lenders Claims. Finally,
         GOF and Stonehill are lenders under the Transit Group Facility
         Agreement, pursuant to which the Transit Group Debtors are obligors on
         $30 million in outstanding borrowings and a $15 million outstanding
         letter of credit.


                                       5
<PAGE>

         The Pre-Petition Lenders, Travelers, GOF and Stonehill have
         participated fully in the reorganization process and also
         strongly urge holders of Claims to vote to accept the Plan.

                  The ballots have been specifically designed for the purpose
of soliciting votes on the Plan from each Class entitled to vote. For this
reason, in voting on the Plan, PLEASE USE ONLY THE BALLOT SENT TO YOU WITH THIS
DISCLOSURE STATEMENT. IF YOU HOLD CLAIMS IN MORE THAN ONE CLASS, YOU MUST USE A
SEPARATE BALLOT FOR VOTING WITH RESPECT TO EACH CLASS OF CLAIMS THAT YOU HOLD.
If you believe you have received the incorrect form of ballot, need another
ballot or have any questions concerning the form of ballot, please contact the
Voting Agent.

Please complete and sign your ballot and return it in the enclosed
pre-addressed envelope to the Voting Agent. All correspondence in connection
with voting on the Plan should be directed to the Voting Agent at the following
address:

                                  VOTING AGENT

                   If by hand delivery or overnight delivery:
                           Railworks Balloting Center
                          c/o Bankruptcy Services LLC
                         70 East 55th Street, 6th Floor
                               New York, NY 10022
                              Phone: 212-376-8494

                              If by regular mail:
                           Railworks Balloting Center
                          c/o Bankruptcy Services LLC
                                 P.O. Box 5014
                                  FDR Station
                            New York, NY 10150-5014

                  The Voting Agent will prepare and file with the Bankruptcy
Court a certification of the results of the voting on the Plan on a Class-by-
Class basis.

                  ADDITIONAL COPIES OF THE BALLOTS, THIS DISCLOSURE STATEMENT
AND THE PLAN, AND COPIES OF THE PLAN SUPPLEMENT (WHEN FILED), ARE AVAILABLE
UPON REQUEST MADE TO THE VOTING AGENT. PLEASE CONTACT THE VOTING AGENT WITH ANY
QUESTIONS RELATING TO VOTING ON THE PLAN.


                                       6
<PAGE>

                             YOUR VOTE IS IMPORTANT

                  Your vote on the Plan is important because:

                  -        Under the Bankruptcy Code, a plan of reorganization
                           can only be confirmed if certain majorities in
                           dollar amount and number of claims (as described
                           above) of each Impaired Class under the plan vote to
                           accept the plan, unless the "cram down" provisions
                           of the Bankruptcy Code are used.

                  -        Under the Bankruptcy Code, only the votes of those
                           holders of claims or interests who actually submit
                           votes on a plan are counted in determining whether
                           the specified majorities of votes in favor of the
                           plan have been received.

                  -        If you are eligible to vote with respect to a Claim
                           and do not deliver a properly completed ballot
                           relating to that Claim by the Voting Deadline, you
                           will be deemed to have abstained from voting with
                           respect to that Claim and your eligibility to vote
                           with respect to that Claim will not be considered in
                           determining the number and dollar amount of ballots
                           needed to make up the specified majority of that
                           Claim's Class for the purpose of approving the Plan.

                  The Debtors are seeking to "cram down" the Plan on certain
deemed non-accepting Classes of Claims and Equity Interests. See section
V.D.3., "Cram Down" below for a discussion of the "cram down" procedures under
the Bankruptcy Code.

                  In accordance with Bankruptcy Rule 3017(d), the Debtors will
send ballots to transfer agents, registrars, servicing agents, or other
intermediaries holding Claims for, or acting on behalf of, beneficial holders
of Claims (collectively, the "Intermediaries"). Each Intermediary will be
entitled to receive, upon request to the Debtors, a reasonably sufficient
number of ballots to distribute to the beneficial owners of the Claims for
which it is an Intermediary, and the Debtors will be responsible for and pay
each such Intermediary's reasonable costs and expenses associated with the
distribution of ballots to the beneficial owners of such Claims and tabulation
of the ballots. Additionally, each Intermediary will receive returned ballots
and will tabulate and return the results to the Voting Agent in a summary
"master" ballot in a form approved by the Bankruptcy Court (the "Master
Ballot") by 4:00 p.m. (Eastern time) on September 13, 2002, indicating the
number and dollar amount of cast ballots in the group of Claim holders for
which it is an Intermediary. The Intermediaries must certify that each
beneficial holder has not cast more than one vote with respect to any given
Claim for any purpose, including both for determining the number of votes and
the amount of the Claim, even if such holder holds securities of the same type
in more than one account. However, persons who hold Claims in more than one
voting Class will be entitled to one vote in each such Class, subject to the
applicable voting rules.


                       IMPORTANT - VOTING BY INTERMEDIARY


                                       7
<PAGE>


                  TIMING: If your vote is being processed by an Intermediary,
                  please allow time for transmission of your ballot to your
                  Intermediary for preparation and delivery to the Voting Agent
                  of a Master Ballot reflecting your vote and the votes of
                  other Claims tabulated by the Intermediary.

                  Your vote must be received EITHER (a) directly by the VOTING
                  AGENT on or before the Voting Deadline, or (b) if your vote
                  is processed by an Intermediary, by YOUR INTERMEDIARY by
                  September 9, 2002 at 4:00 p.m. to be counted.

                  RECEIPT BY THE INTERMEDIARY ON OR CLOSE TO THE VOTING
                  DEADLINE MAY NOT ALLOW SUFFICIENT TIME FOR THE INTERMEDIARY
                  TO INCLUDE YOUR VOTE IN THE MASTER BALLOT THAT IT PREPARES
                  AND DELIVERS TO THE VOTING AGENT BY THE VOTING DEADLINE.

                  QUESTIONS ON VOTING PROCEDURES: If you have a question
                  concerning the voting procedures, please contact your
                  Intermediary or the Voting Agent.

         D.       EFFECTS OF EXIT FINANCING ON DISTRIBUTIONS UNDER THE PLAN

                  In connection with implementation of the Plan, one or more of
the Reorganized Debtors will enter into the Exit Facility for payment of
certain Classes of Claims under the Plan and for working capital and other
corporate purposes. Under the terms of the Plan, each holder of an Allowed Exit
Lenders Pre-Petition Lenders Claim shall be obligated to participate, on a pro
rata basis, as an Exit Lender under the Exit Facility. The pertinent terms and
conditions of the Exit Facility are described in section III.B., "Exit
Facility" below.


                                 EXIT FACILITY

                  One of bases for the proposed compromise reached by the
                  Debtors, the Pre-Petition Lenders, GOF, Stonehill and
                  Travelers is the provision of a $100 million Exit Facility by
                  the Exit Lenders containing the terms and conditions set
                  forth on Schedule C to the Plan. The assumptions relating to
                  Projections, Enterprise Value and the recoveries for Claims
                  under the Plan used throughout this Disclosure Statement are
                  based on the assumption that the Debtors will obtain an Exit
                  Facility and that the Exit Facility will be consistent with
                  the general terms and conditions described in section III.B.,
                  "Exit Facility" below.


         E.       EFFECTS OF EXIT BONDING FACILITY ON DISTRIBUTIONS UNDER THE
                  PLAN

                  In connection with implementation of the Plan, one or more of
the Reorganized Debtors will enter into the Exit Bonding Facility with
Travelers, which facility shall be used for the issuance of surety bonds in
connection with prosecution of work in the ordinary course by the Reorganized
Debtors. The pertinent terms and conditions of the Exit Bonding Facility are
described in section III.C., "Exit Bonding Facility" below.


                             EXIT BONDING FACILITY


                                       8
<PAGE>

                  One of bases for the proposed compromise reached by the
                  Debtors, the Pre-Petition Lenders, GOF, Stonehill and
                  Travelers is the provision of a $750 million Exit Bonding
                  Facility by Travelers containing the terms and conditions set
                  forth on Schedule B to the Plan. The assumptions relating to
                  Projections, Enterprise Value and the recoveries for Claims
                  under the Plan used throughout this Disclosure Statement are
                  based on the assumption that the Debtors will obtain an Exit
                  Bonding Facility and that the Exit Bonding Facility will be
                  consistent with the general terms and conditions described in
                  section III.C., "Exit Bonding Facility" below.


         F.       SUMMARY OF DISTRIBUTIONS TO BE MADE UNDER THE PLAN

                  The following table and description summarize the
classification and treatment of Claims and Equity Interests and the
consideration contemplated to be distributed to the holders of such Claims and
Equity Interests under the Plan. Unless otherwise noted, these estimates are as
of August 8, 2002. For an explanation of the assumptions and uncertainties
regarding these calculations, see section IV., "Risk Factors" and section
VI.B., "Financial Projections and Valuation Analysis" below.

                  As further described below, the Plan provides for
distributions of Cash, shares of New Railworks Preferred Stock, New Railworks
Series B Warrants, shares of New Railworks Common Stock, ratable participations
in the New Railworks Secured Loan and execution of the New Wood Waste Secured
Loan in satisfaction of Allowed Claims. These distributions vary in amount and
the type of security distributed, as well as whether Cash is included in the
distribution, depending on the Class of the Claim.

         1.       SUMMARY OF CLASSIFICATION AND TREATMENT OF CLAIMS

<TABLE>
<CAPTION>

                                                                                            ESTIMATED
                                                                    ESTIMATED ALLOWABLE     RECOVERY (%
    CLASS          DESCRIPTION                TREATMENT                    AMOUNT           OF CLAIM)(2)         VOTING
    -----          -----------                ---------                    ------           ------------         ------
<S>            <C>                  <C>                            <C>                      <C>            <C>
Class 1        Other Secured        Unless otherwise agreed,       $1.1 million             100%           Unimpaired
               Claims               holders shall have their                                               (deemed to accept
                                    Claims Reinstated.  To the                                             and not entitled
                                    extent that the value of the                                           to vote)
                                    Collateral securing each
                                    Other Secured Claim is less
                                    than the amount of such
                                    Other Secured Claims, the
                                    undersecured portion of such
                                    Claim shall be classified as
                                    an Unsecured Claim
</TABLE>

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

(2)      Approximately 2,724 proofs of claim were filed as of January 22, 2002,
         the Bar Date. Approximately 96 additional proofs of claim were filed in
         accordance with the March 11, 2002 Supplemental Bar Date. As of the
         date of this Disclosure Statement, the Debtors have completed only a
         preliminary estimate of the Claims filed in these cases. Because
         recoveries under the Plan are directly linked to the amount and value
         of the Allowed Claims, any change in the Debtors' Claims estimates
         resulting from further analysis of the proofs of claim filed as of the
         Bar Date and the Supplemental Bar Date will impact their predictions of
         recoveries under the Plan.


                                       9
<PAGE>

<TABLE>
<CAPTION>
                                                                                             ESTIMATED
                                                                                            RECOVERY (%
                                                                    ESTIMATED ALLOWABLE     OF CLAIM)(2)
    CLASS          DESCRIPTION                TREATMENT                    AMOUNT                                VOTING
    -----          -----------                ---------                    ------                                ------
<S>            <C>                  <C>                            <C>                      <C>            <C>

Class 1a       Wood Waste Secured   BoA, as holder of the Wood     $999,197.83 plus         100%           Impaired
               Claim                Waste Secured Claim, shall     post-petition accrued                   (entitled to vote)
                                    receive a 100% interest in     interest to the
                                   the New Wood Waste Secured      Effective Date as
                                    Loan                           determined
                                                                   in
                                                                   accordance
                                                                   with the
                                                                   Wood Waste
                                                                   Credit
                                                                   Agreement.

Class 2        Priority Non-Tax     Unless otherwise agreed,       $294,422.00              100%           Unimpaired
               Claims               holders shall receive Cash                                             (deemed to accept
                                    in an amount equal to their                                            and not entitled
                                    Claims.                                                                to vote)

Class 3        Travelers            On the Effective Date, all     $950 million             100%           Unimpaired
               Pre-Petition Bonds   Claims shall become            (estimated face amount                  (deemed to accept
               Claims               obligations of the             of outstanding                          and not entitled
                                    Reorganized Debtors and all    prepetition bonds)                      to vote)
                                    bonds issued prior to the
                                    Petition Date and
                                    outstanding as of the
                                    Effective Date shall be
                                    deemed to be issued and
                                    outstanding under the Exit
                                    Bonding Facility.

Class 4        Interdebtor Claims   Subject to Restructuring       $65.4 million            100%           Unimpaired
                                    Transactions, if any, each                                             (deemed to accept
                                    holder shall have its Claim                                            and not entitled
                                    Reinstated.                                                            to vote)

Class 5        Non-Debtor           Subject to Restructuring       $5.8 million             100%           Unimpaired
               Subsidiaries Claims  Transactions, if any, each                                             (deemed to accept
                                    holder shall have its Claim                                            and not entitled
                                    Reinstated.                                                            to vote)

Class 6        Non-Exit Lenders     Each holder shall receive:     In an amount not less    73.2%(3)       Impaired
               Pre-Petition         (i)(1) a ratable               than $145,784,332                       (entitled to vote
               Lenders Claims       participation in the New       (such amount assumes
                                    Railworks Secured Loan; (2)    Pre-Petition Lenders
                                    a Pro Rata Share of the Exit   Adequate Protection
                                    Cash Infusion; (3) to the      Payments made
                                    extent
</TABLE>

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

(3)      The estimated recovery percentage for Classes 6 and 7 has been
         determined by calculating the respective recoveries to each such Class
         based upon its pro rata share of the total value being distributed to
         both Classes 6 and 7 (each of which contains Pre-Petition Lenders
         Claims), prior to the waiver of the respective Class's right to receive
         a portion of the specified distribution and the related distribution of
         such waived portion to the other Class in accordance with sections
         4.7(d) and 4.8(f) of the Plan. After giving effect to the waiver and
         distribution from each Class to the other, the estimated recovery
         percentages for Classes 6 and 7 would be 66.7% and 94.4%, respectively.


                                      10
<PAGE>

<TABLE>
<CAPTION>

                                                                                            ESTIMATED
                                                                    ESTIMATED ALLOWABLE     RECOVERY (%
    CLASS          DESCRIPTION                TREATMENT                    AMOUNT           OF CLAIM)(2)         VOTING
    -----          -----------                ---------                    ------           ------------         ------
<S>            <C>                  <C>                            <C>                      <C>            <C>

                                    such holder holds              through August, 2002
                                    Allowed Non-Exit Lenders       and excludes Pre-
                                    Pre-Petition Lenders Claims    Petition Lenders
                                    constituting Pre-Petition      Post-Petition
                                    Revolving Loans, a ratable     Accrued Interest
                                    (as determined in accordance   Claims).
                                    with the Pre-Petition Credit
                                    Agreement, ignoring
                                    Pre-Petition Revolving Loans
                                    held by Exit Lenders) share
                                    of the Pre-Petition
                                    Revolving Lenders Cash
                                    Payment; (4) a Pro Rata
                                    Share of the New Railworks
                                    Series A Preferred Stock;
                                    and (5) a Pro Rata Share of
                                    the New Railworks Series B
                                    Warrants, and (ii) a Pro
                                    Rata Share of the Class 7
                                    Distribution.  (For purposes
                                    of the foregoing, the
                                    relevant "Pro Rata Share"
                                    shall be determined by
                                    reference to Allowed Claims
                                    in both Class 6 and Class
                                    7.)  Any Pre-Petition
                                    Letters of Credit
                                    participated in by holders
                                    of Allowed Non-Exit Lenders
                                    Pre-Petition Lenders Claims
                                    pursuant to the Pre-Petition
                                    Credit Agreement shall be
                                    cash collateralized,
                                    replaced or secured by
                                    letters of credit issued
                                    under the Exit Facility.
</TABLE>


                                      11
<PAGE>

<TABLE>
<CAPTION>
                                                                                             ESTIMATED
                                                                    ESTIMATED ALLOWABLE     RECOVERY (%
    CLASS          DESCRIPTION                TREATMENT                    AMOUNT           OF CLAIM)(2)         VOTING
    -----          -----------                ---------                    ------           ------------         ------
<S>            <C>                  <C>                            <C>                      <C>            <C>

Class 7        Exit Lenders         Each holder shall receive:     In an aggregate          73.2%(4)       Impaired
               Pre-Petition         (i)(1) a Pro Rata Share of     principal amount equal                  (entitled to vote
               Lenders Claims       the New Railworks Series C     to $45,000,000 (such
                                    Preferred Stock; and (2) Pro   amount assumes
                                    Rata Share of the Class 7      Pre-Petition Lenders
                                    Common Stock Distribution,     Adequate Protection
                                    and (ii) a Pro Rata Share of   Payments made through
                                    the Class 6 Distribution.      August 2002 and
                                    (For purposes of the           excludes Pre-Petition
                                    foregoing, the relevant "Pro   Lenders Post-Petition
                                    Rata Share" shall be           Accrued Interest
                                    determined by reference to     Claims).
                                    Allowed Claims in both Class
                                    6 and Class 7.)  Any
                                    Pre-Petition Letters of
                                    Credit participated in by
                                    holders of Allowed Exit
                                    Lenders Pre-Petition Lenders
                                    Claims pursuant to the
                                    Pre-Petition Credit
                                    Agreement shall be cash
                                    collateralized, replaced or
                                    secured by letters of credit
                                    issued under the Exit
                                    Facility.

Class 8        Convenience Claims   Each holder shall receive      $400,000                 20%            Impaired
                                    Cash in an amount equal to                              (assuming      (entitled to vote)
                                    twenty percent (20%) of its                             Class 8
                                    Claim, which Claim shall not                            accepts)
                                    exceed $1,000.
                                    Notwithstanding the foregoing,
                                    if Class 8 votes to reject
                                    the Plan, then holders of
                                    Allowed Convenience Claims
                                    shall not receive any
                                    distribution under the Plan.
                                    </TABLE>

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

(4)      The estimated recovery percentage for Classes 6 and 7 has been
         determined by calculating the respective recoveries to each such Class
         based upon its pro rata share of the total value being distributed to
         both Classes 6 and 7 (each of which contains Pre-Petition Lenders
         Claims), prior to the waiver of the respective Class's right to receive
         a portion of the specified distribution and the related distribution of
         such waived portion to the other Class in accordance with sections
         4.7(d) and 4.8(f) of the Plan. After giving effect to the waiver and
         distribution from each Class to the other, the estimated recovery
         percentages for Classes 6 and 7 would be 66.7% and 94.4%, respectively.


                                      12
<PAGE>

<TABLE>
<CAPTION>
                                                                                             ESTIMATED
                                                                    ESTIMATED ALLOWABLE     RECOVERY (%
    CLASS          DESCRIPTION                TREATMENT                    AMOUNT           OF CLAIM)(2)         VOTING
    -----          -----------                ---------                    ------           ------------         ------
<S>            <C>                  <C>                            <C>                      <C>            <C>

Class 9        Unsecured Claims     Each holder shall receive:     At least $202.5          .5%            Impaired
                                    (i) its Pro Rata Share of      million(6)                              (entitled to vote)
                                    the Class 9 Common Stock
                                    Distribution; and (ii) its
                                    Pro Rata Share of any
                                    recoveries from Litigation
                                    Trust Claims.
                                    Notwithstanding the foregoing,
                                    if Class 9 votes to reject
                                    the Plan, then holders of
                                    Allowed Unsecured Claims
                                    shall not receive any
                                    distributions under the Plan.
                                    Each holder of an Allowed
                                    Unsecured Claim who votes in
                                    favor of the Plan (other than
                                    GOF and Stonehill) may make
                                    the Class 9 Cash Election and
                                    receive, in lieu of its Pro
                                    Rata Share of the Class 9
                                    Common Stock Distribution,
                                    the Class 9 Cash
                                    Consideration.(5)

Class 10       510(c) Claims        Each holder shall receive no   $0.00                    0%             Impaired (deemed
                                    distribution under the Plan.                                           to reject and not
                                                                                                           entitled to vote)

Class 11       Existing             Each holder shall receive no   undetermined             0%             Impaired (deemed
               Securities Law       distribution under the Plan.                                           to reject and not
               Claims                                                                                      entitled to vote)
</TABLE>
---------------

(5)      Holders of Allowed Unsecured Claims entitled to receive New Railworks
         Common Stock on account of their Allowed Claims that exercise the Class
         9 Cash Election shall be entitled to receive a Cash payment equal to
         $10.00 per share of New Railworks Common Stock allocable to such
         holder. This Cash payment would be in lieu of their right to receive
         the New Railworks Common Stock (valued at approximately $40 per share
         based upon a $210 million midpoint Enterprise Valuation), which will be
         highly illiquid given the fact that Reorganized Railworks will not be a
         public reporting company and that at least 87% of the New Railworks
         Common Stock (assuming conversion of the New Railworks Series C
         Preferred Stock) will be held by GOF and Stonehill.

(6)      See "Information and Estimates" (Section VIII(B)(4), footnote 16 below)
         for a more detailed description of this estimate.


                                      13
<PAGE>

<TABLE>
<CAPTION>
                                                                                             ESTIMATED
                                                                    ESTIMATED ALLOWABLE     RECOVERY (%
    CLASS          DESCRIPTION                TREATMENT                    AMOUNT           OF CLAIM)(2)      VOTING
    -----          -----------                ---------                    ------           ---------         ------
<S>            <C>                  <C>                             <C>                     <C>            <C>
Class 12       Equity Interests     Deemed cancelled and                   n/a              0%             Impaired (deemed
                                    extinguished as of Effective                                           to reject and not
                                    Date; each holder shall                                                entitled to vote)
                                    neither receive nor retain
                                    any property or interest in
                                    property.
</TABLE>


                  The Debtors expect that an aggregate of 1,000,000 shares of
New Railworks Common Stock will be issued or be authorized to be issued under
the Plan, inclusive of (i) to the extent converted, New Railworks Common Stock
issued in respect of the New Railworks Series C Preferred Stock, (ii) the Class
7 Common Stock Distribution, (iii) the Class 9 Common Stock Distribution and
(iv) New Railworks Common Stock issued in respect of New Management Equity
Awards. Based upon the above estimates, immediately after the consummation of
the Plan, the ownership of the Reorganized Company will be as described in the
table below. (The information in this table is based on an assumed Enterprise
Value of $210 million.) In addition, 176,471 shares of New Railworks Common
Stock will be authorized for issuance upon conversion of any New Railworks
Series B Preferred Stock that may be issued upon exercise of the New Railworks
Series B Warrants. See section VI.B., "Financial Projections and Valuation
Analysis" of this Disclosure Statement for an explanation of the calculations
and assumptions used in reaching this assumed Enterprise Value.


                                      14
<PAGE>

<TABLE>
<CAPTION>

 Class            Shares of     Shares of New       Percent        Estimated
 -----              New           Railworks        Ownership        Recovery
                  Railworks      Common Stock     (Diluted)(1)    (% Of Claim)
                Common Stock      Following       ----------      ------------
                ------------    Conversion of
                                  Railworks
                                  Series C
                               Preferred Stock
                               ---------------
<S>             <C>            <C>                <C>             <C>
 Class 7(2)     203,333           666,667            87%         73.2%(7)

 Class 9(2)      30,000                               3%           .5%
                -------           -------            ---         -----
 TOTAL                                               90%

</TABLE>

---------------
(1)  Does not take into account the options or restricted stock grants covering
     up to an additional 100,000 shares of New Railworks Common Stock under the
     New Management Incentive Plan or the conversion of any New Railworks
     Series B Preferred Stock upon the exercise of New Railworks Series B
     Warrants.

(2)  Approximately 2,724 proofs of claim were filed against the Debtors in the
     Reorganization Cases prior to the Bar Date and an additional 96 proofs of
     claim were filed prior to the Supplemental Bar Date. As of the date of
     this Disclosure Statement, the Debtors have completed only a preliminary
     estimate of the Claims filed in these cases. Because recoveries under the
     Plan are directly linked to the amount and value of the Allowed Claims,
     any change in the Debtors' Claims estimates resulting from further
     analysis of the proofs of claim filed as of the Bar Date and the
     Supplemental Bar Date will impact their predictions of recoveries under
     the Plan.


                  Gordian has estimated the aggregate value of (a) the New
Railworks Series C Preferred Stock to have a midpoint value of $34.5 million,
(b) the New Railworks Series A Preferred Stock to have no value and (c) the New
Railworks Series B Warrants to have a midpoint value of $3 million.

                  The shares of New Railworks Common Stock have been valued by
(a) subtracting from the midpoint of the Debtors' assumed Enterprise Value of
$210 million the amount of net indebtedness outstanding at the Effective Date,
and (b) considering the effect of the value of the New Railworks Preferred
Stock: See section VI.B., "Financial Projections and Valuation Analysis" for a
description of how this assumed Enterprise Value was reached, including certain
contingencies that could affect this valuation. The Enterprise Value is
calculated based on commonly accepted valuation analysis and is not intended to
represent values that will be achieved in the public or private markets for
securities distributed under the Plan. The Debtors cannot assure you that the
market value of the New Railworks Common Stock at the Effective Date will
reflect the $210 million Enterprise Value midpoint used in calculating the
distributions under the Plan or that there will be any trading market for the
New Railworks Common Stock after the Effective Date.

                  2.       SUMMARY OF DISTRIBUTIONS UNDER THE PLAN

                  The following section describes more fully the distributions
to be made to each Class of Claims and Equity Interests under the Plan. This
description is only a summary of certain important provisions of the Plan and
should not replace careful review of the Plan. Each holder of a Claim should
read

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

(7)      The estimated recovery percentage for Class 6 has been determined by
         calculating the recovery to Class 6 based upon its pro rata share of
         the total value being distributed to both Classes 6 and 7 (each of
         which contains Pre-Petition Lenders Claims), prior to the waiver of the
         respective Class's right to receive a portion of the specified
         distribution and the related distribution of such waived portion to the
         other Class in accordance with sections 4.7(d) and 4.8(f) of the Plan.
         After giving effect to the waiver and distribution provisions of these
         sections of the Plan, the estimated recovery percentage for Class 7
         would be 94.4%.

                                      15
<PAGE>

the Plan carefully before voting. Please refer particularly to Sections 3
and 4 of the Plan and the liquidation analysis annexed as Exhibit E hereto for
a more detailed description of the classification and treatment of Claims and
Equity Interests provided under the Plan.


HOLDERS OF CLAIMS DESIGNATED TO RECEIVE PLAN SECURITIES MAY NEED TO RECEIVE AND
               HOLD THEIR PLAN SECURITIES IN A BROKERAGE ACCOUNT.

         To allow timely and efficient distribution and transfer of the Plan
         Securities among a wide group of holders, in lieu of printing and
         distributing individual certificates representing the Plan Securities,
         Reorganized Railworks may issue some or all of the Plan Securities in
         global form and use the book-entry transfer facilities of The
         Depository Trust Company ("DTC") to effectuate distribution and
         transfer of the Plan Securities.

         Use of the DTC book-entry transfer facilities may require recipients
         of Plan Securities that are not themselves participants in the DTC
         book-entry system to receive and hold their securities in a brokerage
         account. If the Debtors use the book-entry transfer facilities of DTC
         to effectuate distribution and transfer of some or all of the Plan
         Securities, holders of Claims designated to receive those securities
         will receive instructions regarding the DTC book-entry transfer
         facilities and a request for information on the brokerage account (or
         other account of a DTC participant) to be credited with the receipt of
         Plan Securities with respect to that holder's Claim.

         If you do not already have a brokerage account and hold a Claim in a
         Class that will receive Plan Securities under the Plan, you may be
         required to open a brokerage account to receive and hold your Plan
         Securities.


                           (a)      ADMINISTRATIVE EXPENSE CLAIMS. Except to the
extent that a holder of an Allowed Administrative Expense Claim agrees to a
different treatment, the Debtors shall pay to each holder of an Allowed
Administrative Expense Claim Cash in an amount equal to such Claim on the later
of the Effective Date and the first (1st) Business Day after the date that is
thirty (30) calendar days after the date such Administrative Expense Claim
becomes an Allowed Administrative Expense Claim, or as soon thereafter as is
reasonably practicable.

         Allowed Administrative Expense Claims representing liabilities
incurred in the ordinary course of business by the Debtors, as
debtors-in-possession, including, without limitation, any Bond Facility
Agreement Claims and any Assumed Bonded Claims, shall be paid by the Debtors or
the Reorganized Debtors, as applicable, in the ordinary course of business,
consistent with past practice and in accordance with the terms and subject to
the conditions of any orders or agreements governing, instruments evidencing,
or other documents relating to such transactions.

         In addition to ordinary course of business expenses, the Debtors
expect that Administrative Expense Claims will consist of professional fees and
disbursements for the Debtors and the Creditors' Committee appointed in the
Reorganization Cases and financing fees relating to the Plan Securities, the
New Railworks Secured Loan, the Exit Facility, the Exit Bonding Facility and
the New Wood Waste Secured Loan. Such fees are difficult to estimate and will
vary depending on the length of the Reorganization Cases, the complexity and
length of any related litigation and the terms and conditions of the Plan
Securities, the New Railworks Secured Loan, the Exit Facility, the Exit Bonding
Facility and the New Wood Waste Secured Loan. The Debtors have budgeted
approximately $1.7 million for Administrative Expense Claims that are


                                      16
<PAGE>

not expenses arising and paid in the ordinary course of business (including
financing fees relating to the Plan Securities, the New Railworks Secured Loan,
the Exit Facility, indenture trustee fees and U.S. Trustee fees), based on an
assumed Effective Date of October 1, 2002.

                           (b)      BAR DATE FOR ADMINISTRATIVE EXPENSE CLAIMS.

                  PRE-EFFECTIVE DATE CLAIMS AND EXPENSES. No proof of
Administrative Expense Claim or application for payment of an Administrative
Expense Claim need be filed for the allowance of any of the following types of
Claims:

         -        expenses or liabilities incurred in the ordinary course of
                  the Reorganized Debtors' businesses on or after the Effective
                  Date;

         -        Administrative Expense Claims held by trade vendors or
                  others, which administrative liability was incurred by the
                  Debtors in the ordinary course of business of the Debtors and
                  such creditors after the Petition Date, including, without
                  limitation, any Assumed Bonded Claims, subject, however, to
                  the right of the Debtors or the Reorganized Debtors, as
                  applicable, to object to such Claims in the event of a bona
                  fide dispute;

         -        Fee Claims (discussed below); or

         -        fees of the United States Trustee arising under 28 U.S.C. ss.
                  1930.

                  TO BE ELIGIBLE FOR PAYMENT UNDER THE PLAN, ALL PERSONS
ASSERTING ADMINISTRATIVE EXPENSE CLAIMS OF ANY KIND NOT DESCRIBED ABOVE ARISING
ON OR AFTER THE PETITION DATE MUST FILE AND SERVE PROOFS OF SUCH ADMINISTRATIVE
EXPENSE CLAIMS PURSUANT TO THE PROCEDURES IN THE CONFIRMATION ORDER NO LATER
THAN FORTY-FIVE (45) DAYS AFTER THE EFFECTIVE DATE.

                  All of the Administrative Expense Claims described above,
other than Fee Claims, will be paid by the Reorganized Debtors in the ordinary
course of business. Fee Claims will be paid as described below.

                  EFFECT OF FAILURE TO TIMELY FILE CLAIM OR REQUESTS FOR
PAYMENT. Any request for payment of an Administrative Expense Claim that is not
exempt from the Administrative Bar Date and is not filed by the applicable
deadline set forth in section 2.2 of the Plan and the Confirmation Order will
be barred. Any Persons that fail to file a proof of Administrative Expense
Claim or request for payment thereof on or before the Administrative Bar Date
as required under the Plan shall be forever barred from asserting such Claim
against any of the Debtors, the Estates, the Reorganized Debtors or their
property, and the holder thereof will be enjoined from commencing or continuing
any action, employment of process or act to collect, offset or recover such
Administrative Expense Claim.

                           (c) FEE CLAIMS. All Persons seeking an award by the
Bankruptcy Court of a Fee Claim incurred through and including the Effective
Date shall, unless otherwise ordered by the Bankruptcy Court: (i) File their
respective final applications for allowance of compensation for services
rendered and reimbursement of expenses incurred by the date that is forty-five
(45) days after the Effective Date; and (ii) be paid in full in such amounts as
are approved by the Bankruptcy Court upon the later of (a) the date upon which
the order relating to any such Fee Claim is entered or (b) upon such other
terms as may be mutually agreed upon between the holder of such a Fee Claim and
the Debtors or, on and after the Effective Date, the Reorganized Debtors. The
Reorganized Debtors shall reserve and segregate Cash in an amount equal to
accrued but unpaid Fee Claims as of the Effective Date, which Cash shall be
used, until all Allowed Fee Claims have been paid in full, solely for the
payment of Allowed Fee Claims. Notwithstanding the foregoing, the fees and
expenses of the DIP Lenders arising in connection with the DIP Loan Documents
shall be paid in accordance with the DIP Loan Documents and the DIP Order. The
Debtors have budgeted


                                      17
<PAGE>

approximately $9.3 million (including amounts allocated to financial advisor
and professional fees and disbursements incurred, but not paid, during the
Reorganization Cases) for Fee Claims, based on an assumed Effective Date of
October 1, 2002.

                  Objections to Fee Claims, if any, must be filed and served
pursuant to the procedures set forth in the Confirmation Order no later than
seventy-five (75) days after the Effective Date.

                           (d) PRIORITY TAX CLAIMS. Unless otherwise agreed to
by the parties, each holder of an Allowed Priority Tax Claim will receive, at
the sole option of the Reorganized Debtors, in full and complete satisfaction
and discharge of its Allowed Priority Tax Claim:

         -        Cash equal to the unpaid portion of its Allowed Priority Tax
                  Claim, to be paid on, or as soon thereafter as is reasonably
                  practicable, the later of the Effective Date and the first
                  (1st) Business Day after the date that is thirty (30)
                  calendar days after the date on which such Priority Tax Claim
                  becomes Allowed; or

         -        equal annual Cash payments in an aggregate amount equal to
                  the amount of such Allowed Priority Tax Claim, together with
                  interest at six percent (6%) per annum, or such other rate as
                  determined by the Bankruptcy Court, paid over a period not
                  longer than six (6) years after the date the Allowed Priority
                  Tax Claim was assessed. Such payments will begin on, or as
                  soon thereafter as is reasonably practicable, after the later
                  of the Effective Date or the first (1st) Business Day that is
                  thirty (30) days after the date on which the Priority Tax
                  Claim was Allowed.

The Debtors have budgeted approximately $300,000 for Priority Tax Claims, based
on an assumed Effective Date of October 1, 2002.

                  All Allowed Priority Tax Claims that are not due and payable
on or before the Effective Date shall be paid by the Reorganized Debtors in the
ordinary course of business as such obligations become due.

                           (e)      DIP LENDERS CLAIMS

                                    (i)      TP&S GROUP LENDERS CLAIMS

                  ALLOWANCE AND TREATMENT. Subject to section 2.5(A)(c) of the
Plan, on the Effective Date each holder of a TP&S Group Lenders Claim shall
receive in full satisfaction, settlement and release, and discharge of and in
exchange for such Allowed TP&S Group Lenders Claim: (i) Cash equal to the
unpaid portion of such Allowed TP&S Group Lenders Claim; or (ii) such other
treatment as to which the Debtors or the Reorganized Debtors and such holder
shall have agreed upon in writing, subject to the consent of GOF and Stonehill,
which consent shall not be unreasonably withheld.

                  EFFECT OF PAYMENTS. Once such payments have been made, the
TP&S Group Loan Documents and any agreements or instruments related thereto
shall be deemed terminated and the TP&S Group Lenders shall take all reasonable
actions to confirm the removal of any liens of the TP&S Group Lenders on the
properties of the Debtors and the Non-Debtor Subsidiaries.

                  LETTERS OF CREDIT. On the Effective Date, any outstanding
letters of credit issued under the TP&S Group Loan Documents shall be cash
collateralized, replaced or secured by letters of credit issued under the Exit
Facility.

                                    (ii)     TRANSIT GROUP LENDERS CLAIMS


                                      18
<PAGE>

                  ALLOWANCE AND TREATMENT. Subject to section 2.5(B)(c) of the
Plan, on the Effective Date each holder of a Transit Group Lenders Claim shall
receive in full satisfaction, settlement and release, and discharge of and in
exchange for such Allowed Transit Group Lenders Claim: (i) Cash equal to the
unpaid portion of such Allowed Transit Group Lenders Claim; or (ii) such other
treatment as to which the Debtors or the Reorganized Debtors and such holder
shall have agreed upon in writing, subject to the consent of the TP&S Group
Administrative Agent, which consent shall not be unreasonably withheld.

                  EFFECT OF PAYMENTS. Once such payments have been made, the
Transit Group Loan Documents and any agreements or instruments related thereto
shall be deemed terminated and the Transit Group Lenders shall take all
reasonable actions to confirm the removal of any liens of the Transit Group
Lenders on the properties of the Debtors and the Non-Debtor Subsidiaries.

                  LETTERS OF CREDIT. On the Effective Date, any outstanding
letters of credit issued under the Transit Group Loan Documents shall be cash
collateralized, replaced or secured by letters of credit issued under the Exit
Facility, or, subject to the consent of the Exit Lenders and the issuers of
such letters of credit, be deemed issued and outstanding under the Exit
Facility, with the Reorganized Debtors assuming all prior obligations to
reimburse the issuers of such letters of credit.

                                    (iii)    BOND SUPPORT LENDERS CLAIMS

                  ALLOWANCE AND TREATMENT. Subject to section 2.5(C)(c) of the
Plan, on the Effective Date each holder of a Bond Support Lenders Claim shall
receive in full satisfaction, settlement and release, and discharge of and in
exchange for such Bond Support Lenders Claim: (i) Cash equal to the unpaid
portion of such Bond Support Lenders Claim; or (ii) such other treatment as to
which the Debtors or the Reorganized Debtors and such holder shall have agreed
upon in writing, subject to the consent of the TP&S Group Administrative Agent,
which consent shall not be unreasonably withheld.

                  EFFECT OF PAYMENTS. Once such payments have been made, the
Bond Support Documents and any agreements or instruments related thereto shall
be deemed terminated and the Bond Support Lenders shall take all reasonable
actions to confirm the removal of any liens of the Bond Support Lenders on the
properties of the Debtors and the Non-Debtor Subsidiaries.

                  LETTERS OF CREDIT. On the Effective Date, any outstanding
letters of credit issued under the Bond Support Documents shall be cash
collateralized, replaced or secured by letters of credit issued under the Exit
Facility.

                                    (iv)     BOND FACILITY AGREEMENT CLAIMS

                  ALLOWANCE AND TREATMENT. On the Effective Date, all bonds
issued and outstanding under the Bond Facility Agreement shall be deemed to be
issued and outstanding under the Exit Bonding Facility and all Bond Facility
Agreement Claims shall be deemed to have arisen under the Exit Bonding
Facility.

                  EFFECT OF EFFECTIVE DATE. Upon occurrence of the Effective
Date, the Bond Facility Documents and any agreements or instruments related
thereto shall be deemed terminated and Travelers shall take all reasonable
actions to confirm the removal of any liens on the properties of the Debtors
and the Non-Debtor Subsidiaries arising under or on account of the Bond
Facility Documents; provided, however, that Travelers' Surety Rights with
respect to any bond issued under the Bond Facility Agreement and any Allowed
Claim bonded by Travelers under the Bond Facility Agreement shall not be
affected or impaired.

                  NO COLLATERALIZATION REQUIREMENT. Notwithstanding any
provision of the Bond Facility Documents or the DIP Order to the contrary, on
and after the Effective Date the Reorganized Debtors shall have no obligation
to provide letters of credit, cash collateral or any other form of security to
Travelers on account of bonds previously issued and outstanding under the Bond
Facility Documents and deemed to be


                                      19
<PAGE>

issued and outstanding under the Exit Bonding Facility except as required by or
pursuant to the Exit Bonding Facility.

                  3.       CLASSIFICATION AND TREATMENT OF CLAIMS.

                           (a) CLASS 1 -- OTHER SECURED CLAIMS

                  TREATMENT. On or as soon as reasonably practicable after the
later of the Effective Date and the first (1st) Business Day after the date
that is thirty (30) calendar days after the date each Other Secured Claim
becomes Allowed, each holder of an Allowed Other Secured Claim, except to the
extent that such holder agrees to a different treatment, shall have its Claim
Reinstated.

                  VOTING. Holders of Allowed Other Secured Claims are
Unimpaired under the Plan. In accordance with section 1126(f) of the Bankruptcy
Code, the holders of Allowed Other Secured Claims are conclusively presumed to
accept the Plan and the votes of such holders will not be solicited with
respect to such Claims.

                  DEFICIENCY CLAIMS. To the extent that the value of the
Collateral securing each Other Secured Claim is less than the amount of such
Other Secured Claim, the undersecured portion of such Claim shall be treated
for all purposes under this Plan as an Allowed Unsecured Claim and shall be
classified as an Unsecured Claim.

                           (b) CLASS 1a -- WOOD WASTE SECURED CLAIM

                  ALLOWANCE. On the Effective Date, the Wood Waste Secured
Claim shall be deemed Allowed in the amount of $999,197.83, plus post-petition
accrued interest to the Effective Date as determined in accordance with the
Wood Waste Credit Agreement.

                  TREATMENT. On the Effective Date, BoA, as holder of the Wood
Waste Secured Claim, shall receive in full satisfaction, settlement and
release, and discharge of and in exchange for such Wood Waste Secured Claim a
100% interest in the New Wood Waste Secured Loan.

                  WAIVER OF SUBORDINATION RIGHTS. The claim of the holder of
the Wood Waste Secured Claim shall be deemed satisfied by the distributions
under, described in, contemplated by and/or implemented by section 4.2 of the
Plan and any claimed contractual subordination rights shall be deemed waived in
accordance with section 5.8 of the Plan.

                  NO WAIVER OF EXISTING GUARANTEES. In accordance with section
524(e) of the Bankruptcy Code, nothing in the Plan shall be deemed to discharge
or otherwise modify the liability of any guarantor of the Wood Waste Secured
Claim or to void, invalidate or otherwise affect any guaranty of the Wood Waste
Secured Claim, each of which shall remain in full force and effect.

                  VOTING.  BoA, as holder of the Wood Waste Secured Claim, is
impaired under the Plan and is entitled to vote to accept or to reject the
Plan.

                           (c) CLASS 2 -- PRIORITY NON-TAX CLAIMS

                  TREATMENT. Except to the extent that a holder of an Allowed
Priority Non-Tax Claim agrees to a different treatment, each holder of an
Allowed Priority Non-Tax Claim shall receive, in full satisfaction of such
Allowed Priority Non-Tax Claim, Cash in an amount equal to such Allowed
Priority Non-Tax Claim, on or as soon as reasonably practicable after the later
of (i) the Effective Date and (ii) the first (1st) Business Day after the date
that is thirty (30) calendar days after the date (a) such Claim becomes Allowed
or (b) for payment provided by any agreement or understanding between the
parties.


                                      20
<PAGE>

                  VOTING. Holders of Allowed Priority Non-Tax Claims are
Unimpaired under the Plan. In accordance with section 1126(f) of the Bankruptcy
Code, the holders of Allowed Priority Non-Tax Claims are conclusively presumed
to accept the Plan and the votes of such holders will not be solicited with
respect to such Claims.

                           (d) CLASS 3 -- TRAVELERS PRE-PETITION BONDS CLAIMS

                  ALLOWANCE.  On the Effective Date, all Travelers Pre-Petition
Bonds Claims shall be deemed Allowed.

                  TREATMENT. On the Effective Date, all Travelers Pre-Petition
Bonds Claims shall become obligations of the Reorganized Debtors and all bonds
issued prior to the Petition Date and outstanding as of the Effective Date
shall be deemed to be issued and outstanding under the Exit Bonding Facility.

                  NO COLLATERALIZATION REQUIREMENT. Notwithstanding any
provision of the Bond Facility Documents or the DIP Order to the contrary, on
and after the Effective Date the Reorganized Debtors shall have no obligation
to provide letters of credit, cash collateral or any other form of security to
Travelers on account of bonds issued prior to the Petition Date and outstanding
as of the Effective Date except as required by or pursuant to the Exit Bonding
Facility.

                  TRAVELERS' SURETY RIGHTS. Nothing in the Plan shall be deemed
to impair or restrict Travelers' Surety Rights, which Surety Rights shall be
and remain Unimpaired and unrestricted.

                  VOTING. Holders of Travelers Pre-Petition Bonds Claims are
Unimpaired under the Plan. In accordance with section 1126(f) of the Bankruptcy
Code, the holders of Travelers Pre-Petition Bonds Claims are conclusively
presumed to accept the Plan and the votes of such holders will not be solicited
with respect to such Claims.

                           (e) CLASS 4 -- INTERDEBTOR CLAIMS

                  TREATMENT.  Subject to the Restructuring Transactions, if any,
each holder of an Allowed Interdebtor Claim shall have its Claim Reinstated.

                  VOTING. Holders of Interdebtor Claims are Unimpaired under
the Plan. In accordance with section 1126(f) of the Bankruptcy Code, the
holders of Interdebtor Claims are conclusively presumed to accept the Plan and
the votes of such holders will not be solicited with respect to such Claims.

                  ALTERNATIVE TREATMENT. If the Bankruptcy Court determines
that the treatment of Allowed Interdebtor Claims proposed in section 4.5(a) of
the Plan violates section 1129 of the Bankruptcy Code or the Debtors otherwise
determine on or before the Effective Date to cancel Allowed Interdebtor Claims,
then such Claims shall be cancelled and receive no distribution under the Plan.

                           (f) CLASS 5 -- NON-DEBTOR SUBSIDIARIES CLAIMS

                  TREATMENT.  Subject to the Restructuring Transactions, if any,
each holder of an Allowed Non-Debtor Subsidiaries Claim shall have its Claim
Reinstated.

                  VOTING. Holders of Non-Debtor Subsidiaries Claims are
Unimpaired under the Plan. In accordance with section 1126(f) of the Bankruptcy
Code, the holders of Non-Debtor Subsidiaries Claims are conclusively presumed
to accept the Plan and the votes of such holders will not be solicited with
respect to such Claims.


                                      21
<PAGE>

                  ALTERNATIVE TREATMENT. If the Bankruptcy Court determines
that the treatment of Allowed Non-Debtor Subsidiaries Claims proposed in
section 4.6(a) of the Plan violates section 1129 of the Bankruptcy Code or the
Debtors otherwise determine on or before the Effective Date to cancel Allowed
Non-Debtor Subsidiaries Claims, then such Claims shall be cancelled and receive
no distribution under the Plan.

                           (g) CLASS 6 -- NON-EXIT LENDERS PRE-PETITION LENDERS
CLAIMS

                  ALLOWANCE. On the Effective Date, the Non-Exit Lenders
Pre-Petition Lenders Claims shall be deemed Allowed in the amount of not less
than $145,784,332 (such amount assumes Pre-Petition Lenders Adequate Protection
Payments made through August, 2002 and excludes Pre-Petition Lenders
Post-Petition Accrued Interest Claims).

                  TREATMENT. On the Effective Date, each holder of an Allowed
Non-Exit Lenders Pre-Petition Lenders Claim shall receive in full satisfaction,
settlement and release, and discharge of and in exchange for such Allowed
Non-Exit Lenders Pre-Petition Lenders Claim (i)(1) a ratable participation in
the New Railworks Secured Loan, (2) a Pro Rata Share of the Exit Cash Infusion,
(3) to the extent such holder holds Allowed Non-Exit Lenders Pre-Petition
Lenders Claims constituting Pre-Petition Revolving Loans, a ratable (as
determined in accordance with the Pre-Petition Credit Agreement, ignoring
Pre-Petition Revolving Loans held by Exit Lenders) share of the Pre-Petition
Revolving Lenders Cash Payment, (4) a Pro Rata Share of the New Railworks
Series A Preferred Stock, and (5) a Pro Rata Share of the New Railworks Series
B Warrants (items (i)(1) through (i)(5) herein being collectively referred to
as the "Class 6 Distribution"), and (ii) a Pro Rata Share of the Class 7
Distribution. (For purposes of the foregoing, the relevant "Pro Rata Share"
shall be determined by reference to Allowed Claims in both Class 6 and Class
7.) Any Pre-Petition Letters of Credit participated in by holders of Allowed
Non-Exit Lenders Pre-Petition Lenders Claims pursuant to the Pre-Petition
Credit Agreement shall be cash collateralized, replaced or secured by letters
of credit issued under the Exit Facility.

                  WAIVER OF SUBORDINATION RIGHTS. All Claims of the holders of
Non-Exit Lenders Pre-Petition Lenders Claims shall be deemed satisfied by the
distributions under, described in, contemplated by and/or implemented by
section 4.7 of the Plan and any claimed contractual subordination rights shall
be deemed waived in accordance with section 5.8 of the Plan.

                  WAIVER OF CLASS 7 DISTRIBUTIONS. Notwithstanding section
4.7(b) of the Plan, acceptance of the Plan by Class 6 shall constitute a waiver
of the right of the holders of Non-Exit Lenders Pre-Petition Lenders Claims to
receive their Pro Rata Share of the Class 7 Distribution. On the Effective
Date, the Debtors shall distribute such Pro Rata Share of the Class 7
Distribution on a pro rata basis to the holders of Allowed Exit Lenders
Pre-Petition Lenders Claims.

                  VOTING.  Holders of Non-Exit Lenders Pre-Petition Lenders
Claims are Impaired under the Plan and are entitled to vote to accept or to
reject the Plan.

                           (h) CLASS 7 -- EXIT LENDERS PRE-PETITION LENDERS
CLAIMS

                  ALLOWANCE. On the Effective Date, the Exit Lenders
Pre-Petition Lenders Claims shall be deemed Allowed in the aggregate principal
amount of $45,000,000 (such amount assumes Pre-Petition Lenders Adequate
Protection Payments made through August 2002 and excludes Pre-Petition Lenders
Post-Petition Accrued Interest Claims).

                  TREATMENT. On the Effective Date, each holder of an Allowed
Exit Lenders Pre-Petition Lenders Claim shall receive in full satisfaction,
settlement and release, and discharge of and in exchange of such Allowed Exit
Lenders Pre-Petition Lenders Claim (i)(1) a Pro Rata Share of the New Railworks
Series C Preferred Stock, and (2) a Pro Rata Share of the Class 7 Common Stock
Distribution (items (i)(1) and


                                      22
<PAGE>

(i)(2) herein being collectively referred to as the "Class 7 Distribution"), and
(ii) a Pro Rata Share of the Class 6 Distribution. (For purposes of the
foregoing, the relevant "Pro Rata Share" shall be determined by reference to
Allowed Claims in both Class 6 and Class 7.) Any Pre-Petition Letters of Credit
participated in by holders of Allowed Exit Lenders Pre-Petition Lenders Claims
pursuant to the Pre-Petition Credit Agreement shall be cash collateralized,
replaced or secured by letters of credit issued under the Exit Facility.

                  OBLIGATION TO FUND EXIT FACILITY. Each holder of an Allowed
Exit Lenders Pre-Petition Lenders Claim shall be obligated to participate, on a
pro rata basis, as an Exit Lender under the Exit Facility.

                  OBLIGATION TO FUND EXIT CASH INFUSION. GOF shall be obligated
to fund the Exit Cash Infusion.

                  WAIVER OF SUBORDINATION RIGHTS. All Claims of the holders of
Exit Lenders Pre-Petition Lenders Claims shall be deemed satisfied by the
distributions under, described in, contemplated by and/or implemented by
section 4.8 of the Plan and any claimed contractual subordination rights shall
be deemed waived in accordance with section 5.8 of the Plan.

                  WAIVER OF CLASS 6 DISTRIBUTION AND CLASS 7 COMMON STOCK
DISTRIBUTION. Notwithstanding section 4.8(b) of the Plan, (i) acceptance of the
Plan by Class 7 shall constitute a waiver of the right of the holders of Exit
Lenders Pre-Petition Lenders Claims to receive their Pro Rata Share of the
Class 6 Distribution, and (ii) acceptance of the Plan by Stonehill shall
constitute a waiver of Stonehill's right to receive its Pro Rata Share of the
Class 7 Common Stock Distribution. On the Effective Date, the Debtors shall
distribute (x) such Pro Rata Share of the Class 6 Distribution on a pro rata
basis to the holders of Allowed Non-Exit Lenders Pre-Petition Lenders Claims,
and (y) such Pro Rata Share of the Class 7 Common Stock Distribution to GOF.

                  VOTING.  Holders of Exit Lenders Pre-Petition Lenders Claims
are Impaired under the Plan and are entitled to vote to accept or to reject the
Plan.

                           (i) CLASS 8 -- CONVENIENCE CLAIMS

                  TREATMENT. On, or as reasonably practicable after, the later
of (i) the Effective Date and (ii) the date that is thirty (30) days after the
date such Convenience Claim becomes an Allowed Convenience Claim, each holder
of an Allowed Convenience Claim shall receive in full satisfaction, settlement
and release, and discharge of and in exchange for such Allowed Convenience
Claim, Cash equal to twenty percent (20%) of the unpaid amount of such Allowed
Convenience Claim. Notwithstanding the foregoing, if Class 8 votes to reject
the Plan, then holders of Allowed Convenience Claims shall not receive any
distribution under the Plan.(8)

                  ELECTION OF TREATMENT. Any holder of an Allowed Unsecured
Claim whose Claim is equal to or less than $1,000 shall receive the treatment
specified in section 4.9(a) of the Plan. Any holder of an Allowed Unsecured
Claim whose Allowed Unsecured Claim is more than $1,000, and who timely elects
to

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

(8)      The SEC staff has taken the position that it is improper to condition
         distributions to a class under a plan upon the acceptance of the plan
         by that class, and generally that such provisions may not be approved
         by a bankruptcy court under applicable law. The Office of the United
         States Trustee also has taken the position that these types of
         provisions are improper and should not be approved by the Bankruptcy
         Court. The Debtors nevertheless believe that such provisions are
         appropriate in certain circumstances, including those presented by
         these cases. See In re Zenith Electronics Corp., 2241 B.R. 92, 105
         (Bankr. D. Del. 1999) and In re Drexel Burnham Lambert Group, Inc., 140
         B.R. 347, 350 (S.D.N.Y. 1992).; but see In re Mcorp. Fin., Inc., 137
         B.R. 219, 236 (Bankr. S.D. Tex. 1992), appeal dismissed, 139 B.R. 820
         (S.D. Tex. 1992), confirmation granted, 160 B.R.941; In re Allegheny
         Intern., Inc., 118 B.R. 282, 304 (Bankr. W.D. Pa. 1990).


                                      23
<PAGE>

reduce the amount of such Claim to $1,000 in accordance with the terms of
section 4.9(b) of the Plan, also shall receive treatment of its Allowed
Unsecured Claim, as so reduced, as specified in section 4.9(a) of the Plan.
Election of treatment in Class 8 must be made on such holder's ballot for
voting on the Plan and be received by the Debtors on or prior to the Voting
Deadline. Any election of Class 8 treatment made after the Voting Deadline
shall not be binding upon the Debtors or the Reorganized Debtors unless such
deadline is expressly waived, in writing, by the Debtors or the Reorganized
Debtors. The holder of an Allowed Unsecured Claim that timely elects to reduce
the amount of its Allowed Claim shall be deemed to be the holder of an Allowed
Class 8 Convenience Claim for classification, voting and all other purposes
under this Plan.

                  WAIVER. Any holder of an Allowed Unsecured Claim that timely
elects to reduce the amount of its Allowed Claim and to receive treatment as an
Allowed Class 8 Convenience Claim shall be deemed to have released the Debtors,
their Estates, the Reorganized Debtors, and their respective property from any
and all liability for such excess amount.

                  VOTING. Holders of Convenience Claims are Impaired under the
Plan and are entitled to vote to accept or to reject the Plan.

                           (j) CLASS 9 -- UNSECURED CLAIMS

                  (i) TREATMENT. Each holder of an Allowed Unsecured Claim
shall receive in full satisfaction, settlement and release, and discharge of
and in exchange for such Allowed Unsecured Claim: (A) its Pro Rata Share of the
Class 9 Common Stock Distribution (subject to Section 4.10(a)(ii) of the Plan);
and (B) its Pro Rata Share of any recoveries from Litigation Trust Claims held
by the Litigation Trust. Notwithstanding the foregoing, if Class 9 votes to
reject the Plan, then holders of Allowed Unsecured Claims shall not receive any
distributions under the Plan.

                  (ii) ELECTION TO RECEIVE CASH IN LIEU OF NEW RAILWORKS COMMON
SHARES. Any holder of an Allowed Unsecured Claim who votes in favor of the Plan
may elect to make the Class 9 Cash Election and, subject to Section 6.11 of the
Plan, receive the Class 9 Cash Consideration in full satisfaction, settlement
and release, and discharge of and in exchange for such Allowed Unsecured
Claim. (9) The Class 9 Cash Election must be made on such holder's ballot for
voting on the Plan and be received on or prior to the Voting Deadline. Any
Class 9 Cash Election made after the Voting Deadline shall not be binding upon
the Debtors, the Reorganized Debtors, GOF or Stonehill unless such deadline is
expressly waived, in writing, by the Debtors or the Reorganized Debtors, and
GOF and Stonehill. Any such holder making the Class 9 Cash Election shall have
waived its right to receive its entire Pro Rata Share of the Class 9 Common
Stock Distribution. Any such holder who fails to make any election on its
voting ballot shall receive its Pro Rata Share of the Class 9 Common Stock
Distribution. The Class 9 Cash Election shall be payable upon the Final
Distribution Date. Notwithstanding the foregoing, if Class 9 votes to reject
the Plan, then holders of Allowed Unsecured Claims shall not be entitled to
receive any consideration in respect of the Class 9 Cash Election.

                  (iii) GOF AND STONEHILL NOT ENTITLED TO MAKE CLASS 9 CASH
ELECTION. Notwithstanding the foregoing, GOF and Stonehill shall not be
entitled to exercise the Class 9 Cash Election on account of their respective
Allowed Unsecured Claims.

                  (iv) PAYMENT OF CLASS 9 CASH CONSIDERATION BY GOF AND
STONEHILL AND RECEIPT OF NEW RAILWORKS COMMON STOCK. GOF and Stonehill shall be
jointly and severally liable for payment of the Class 9 Cash Consideration to
each holder of an Allowed Unsecured Claim who makes the

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

(9)      See Footnote 5 above.


                                      24
<PAGE>

Class 9 Cash Election, and each shall receive all shares of the New Railworks
Common Stock in respect of which it paid the Class 9 Cash Consideration. The
Class 9 Cash Consideration shall be paid in Cash in full by GOF and Stonehill
to the Disbursing Agent (within five (5) Business Days after receipt of written
notice from the Disbursing Agent setting forth the aggregate amount of Class 9
Cash Consideration due and owing, with such notice to be provided at least ten
(10) Business Days prior to the Final Distribution Date) for distribution upon
the Final Distribution Date. The Debtors and the Reorganized Debtors shall not
be liable for payment of the Class 9 Cash Consideration.

                  WAIVER OF OBJECTIONS. A vote by Class 9 in favor of the Plan
shall conclusively be determined to constitute a directive to, and shall
require, the Creditors' Committee to withdraw, with prejudice, as of the day
prior to the Confirmation Hearing, any objections to confirmation of the Plan.

                  VOTING. Holders of Unsecured Claims are Impaired under the
Plan and are entitled to vote to accept or to reject the Plan.

                           (k) CLASS 10 -- 510(C) CLAIMS

                  TREATMENT. Each holder of a 510(c) Claim shall receive no
distribution under the Plan.

                  VOTING. In accordance with section 1126(g) of the Bankruptcy
Code, the holders of 510(c) Claims are conclusively presumed to reject this
Plan and the votes of such holders will not be solicited with respect to such
Claims.

                           (l) CLASS 11 -- EXISTING SECURITIES LAW CLAIMS

                  TREATMENT. Each holder of an Existing Securities Law Claim
shall receive no distribution under the Plan.

                  VOTING. In accordance with section 1126(g) of the Bankruptcy
Code, the holders of Existing Securities Law Claims are conclusively presumed
to reject this Plan and the votes of such holders will not be solicited with
respect to such Claims.

                           (m) CLASS 12 -- EQUITY INTERESTS

                  TREATMENT. All Equity Interests shall be deemed cancelled and
extinguished as of the Effective Date, and each holder of an Equity Interest
shall neither receive nor retain any property or interest in property on
account of such Equity Interests.

                  VOTING. In accordance with section 1126(g) of the Bankruptcy
Code, the holders of such Equity Interests are conclusively presumed to reject
this Plan and the votes of such holders will not be solicited with respect to
such Interests.


                                      25
<PAGE>


                          IMPORTANT NOTE ON ESTIMATES

  The estimates in the tables and summaries in this Disclosure Statement may
differ from actual distributions because of variations in the nature and amount
  of the Exit Facility, the Exit Bonding Facility, the asserted or estimated
amounts of Allowed Claims, the existence of Disputed Claims and other factors.
Statements regarding projected amounts of Claims or distributions (or the value
     of such distributions) are estimates by the Debtors based on current
 information and are not representations as to the accuracy of these amounts.
Except as otherwise indicated, these statements are made as of August 8, 2002,
       and the delivery of this Disclosure Statement will not, under any
    circumstances, imply that the information contained in this Disclosure
    Statement is correct at any other time. Any estimates of Claims in this
 Disclosure Statement may vary from the final amounts of Claims allowed by the
                               Bankruptcy Court.

            In addition, the estimated valuation of the Reorganized
               Debtors and the Plan Securities, and the estimated
              recoveries to holders of Claims, is not intended to
              represent the value at which Reorganized Railworks'
           securities could be sold if a market for those securities
                   emerges. See section IV., "Risk Factors".

G.       CONFIRMATION HEARING

         The Bankruptcy Court will hold the Confirmation Hearing at the
following time and place:


                              CONFIRMATION HEARING

DATE AND TIME: commencing at 10:00 a.m. (Eastern time), on September 23, 2002.

PLACE: the United States Bankruptcy Court, District of Maryland (Baltimore
Division), 101 West Lombard Street, Baltimore, Maryland 21201.

JUDGE: Bankruptcy Judge E. Stephen Derby.

The Confirmation Hearing may be adjourned by the Debtors from time to time on
announcement in the Bankruptcy Court on the scheduled date for the hearing. No
further notice will be required to adjourn the hearing.

          At the Confirmation Hearing, the Bankruptcy Court will:

     -    determine whether sufficient majorities in number and dollar amount
          from each Voting Class have delivered properly executed votes
          accepting the Plan to approve the Plan;

     -    hear and determine objections, if any, to the Plan and to
          confirmation of the Plan that have not been previously disposed of;


                                      26
<PAGE>
     -    determine whether the Plan meets the confirmation requirements of the
          Bankruptcy Code; and

     -    determine whether to confirm the Plan.

          Any objection to confirmation of the Plan must be in writing and filed
and served as required by the Bankruptcy Court pursuant to the order approving
this Disclosure Statement. That order requires any objections to the
confirmation of the Plan to be served so as to be received on or before
September 13, 2002 at 12:00 midnight (Eastern time) by the following persons:

     -    the Office of the United States Trustee for the District of Maryland,
          300 W. Pratt Street, Suite 350, Baltimore, Maryland 21201, Attn.:
          Mark Neal, Esq.;

     -    Co-counsel for the Debtors, Willkie Farr & Gallagher, 787 Seventh
          Avenue, New York, New York 10019, Attn.: Paul V. Shalhoub, Esq.;

     -    Co-counsel for the Debtors, Whiteford, Taylor & Preston, L.L.P.,
          Seven Saint Paul Street, Baltimore, Maryland 21202-1626, Attn.:
          Martin T. Fletcher, Esq.;

     -    General counsel to the Debtors, Michael Rivera, Esq., Railworks
          Corporation, One North Lexington Avenue, 10th Floor, White Plains,
          New York 10601;

     -    Co-Counsel for the TP&S Administrative Agent and for the Pre-Petition
          Administrative Agent, Moore & Van Allen PLLC, 100 North Tryon Street,
          Floor 47, Charlotte, North Carolina 28202-4003, Attn.: David L.
          Eades, Esq.;

     -    Co-Counsel for the TP&S Administrative Agent and for the Pre-Petition
          Administrative Agent, Swidler Berlin Shereff Friedman, LLP, The
          Washington Harbour, 3000 K Street, NW, Suite 300, Washington, DC
          20007, Attn.: Monique Almy, Esq.;

     -    Co-Counsel for the Transit Administrative Agent and the Bond Support
          Administrative Agent, Stroock & Stroock & Lavan LLP, 180 Maiden Lane,
          New York, New York 10038, Attn.: Michael J. Sage, Esq.;

     -    Co-Counsel for the Transit Administrative Agent and the Bond Support
          Administrative Agent, Venable, Baetjer and Howard, LLP, 2 Two Hopkins
          Plaza, Suite 1800, Baltimore, Maryland 21201, Attn.: Gregory A.
          Cross, Esq.;

     -    Counsel for Travelers, Bingham McCutchen LLP, One State Street,
          Hartford, Connecticut 06103, Attn.: G. Eric Brunstad, Jr., Esq.; and

     -    Counsel for the Creditors' Committee, Shapiro, Sher & Guinot, 36
          South Charles Street, Baltimore, Maryland 21201, Attn.: Joel I. Sher,
          Esq.

     H.   CANCELLATION OF EXISTING SECURITIES AND AGREEMENTS

          The Plan provides for the cancellation on the Effective Date,
without any further action by the Debtors, the Reorganized Debtors or the
holders of Claims or Equity Interests (except for the purpose of evidencing a
right to distributions under the Plan of Reorganization), of all the
agreements, instruments and other documents evidencing Claims or Equity
Interests (except as otherwise expressly provided in the Plan or the
Confirmation Order) or rights of any holder of a Claim against, or an Equity
Interest in, the Debtors, including options or warrants to purchase Equity
Interests and any other capital stock of the Debtors, the


                                      27
<PAGE>

Equity Interests, and the Senior Subordinated Notes, and any agreement
obligating the Debtors to issue, transfer, or sell Equity Interests or the
Senior Subordinated Notes.

II.      PRINCIPAL CHARACTERISTICS OF NEW RAILWORKS PREFERRED STOCK, NEW
         RAILWORKS SERIES B WARRANTS AND NEW RAILWORKS COMMON STOCK


               THE FOLLOWING SUMMARY IS NOT A COMPLETE DESCRIPTION
                       OF THE PLAN OR THE PLAN SECURITIES

         This section provides a summary of the securities to be issued on or
         after the Effective Date of the Plan and certain other matters
         contemplated to occur under or in connection with confirmation of the
         Plan. This summary highlights certain substantive provisions of the
         Plan and Plan Securities, but is not, nor is it intended to be, a
         complete description of the Plan and Plan Securities or a substitute
         for a full and complete reading of the Plan, the Plan Supplement and
         their exhibits.

         The Debtors encourage you to read the entire Plan, the Plan Supplement
         and their exhibits carefully before deciding how to vote on the Plan.

                  The Plan provides that the capital structure of Reorganized
Railworks will be comprised of New Railworks Series A Preferred Stock, New
Railworks Series B Preferred Stock, New Railworks Series B Warrants, New
Railworks Series C Preferred Stock, New Railworks Common Stock, and loans and
obligations under the Exit Facility, the Exit Bonding Facility, the New
Railworks Secured Loan and the New Wood Waste Secured Loan. The principal
features of the Plan Securities are summarized below, and the Exit Facility,
the Exit Bonding Facility, the New Railworks Secured Loan and the New Wood
Waste Secured Loan are described in section III.B., "Exit Facility", section
III.C., "Exit Bonding Facility", section III.D., "New Railworks Secured Loan"
and section III.E., "New Wood Waste Secured Loan", respectively.

         A.       NEW RAILWORKS SERIES A PREFERRED STOCK

                  Subject to revision and modification prior to the Effective
Date, the Certificate of Designation for the New Railworks Series A Preferred
Stock shall contain the terms and conditions identified in Schedule E to the
Plan, including the following terms and conditions, among others:

Liquidation Preference:             $35.0 million, or $3,500 per share.

Purchase Price:                     Established as $0.0001 per share of Series
                                    A, which is equal to the par value.

Dividend Rights:                    No rights to receive any dividends.

Liquidation Preference:             In the event of, and only in the event of,
                                    any voluntary or involuntary specified
                                    bankruptcy events of Reorganized Railworks,
                                    after payment of or provision for any
                                    liabilities of Reorganized Railworks and
                                    the expenses associated with such event,
                                    the holders of outstanding Series A will be
                                    entitled to receive out of assets of
                                    Reorganized Railworks or proceeds thereof
                                    available for distribution to stockholders,
                                    pari passu to the New Railworks Series C
                                    Preferred Stock (in accordance with its
                                    terms) and before any payment or
                                    distribution is made to holders of


                                      28
<PAGE>


                                    the New Railworks Common Stock (or any other
                                    stock of the Company by its terms ranking
                                    junior to the Series A as to liquidation,
                                    dissolution or winding up), the amount per
                                    share equal to the per share Liquidation
                                    Preference of the Series A.

                                    If the assets available for distribution in
                                    such event are insufficient to pay the full
                                    aggregate amount payable to such holders of
                                    the Series A and holders of any other
                                    classes of stock ranking on parity with the
                                    Series A as to liquidation, dissolution or
                                    winding up, the assets will be distributed
                                    to the holders of the Series A and any such
                                    other holders pro rata based on the full
                                    respective preferential amounts to which
                                    they are entitled.

Conversion:                         No rights of conversion.

         B.       NEW RAILWORKS SERIES B PREFERRED STOCK

                  Subject to revision and modification prior to the Effective
Date, the Certificate of Designation for the New Railworks Series B Preferred
Stock shall contain the terms and conditions identified in Schedule F to the
Plan, including the following terms and conditions, among others:

Purchase Price:                     The Exercise Price paid under the New
                                    Railworks Series B Warrants (as explained
                                    below in section II.C., "New Railworks
                                    Series B Warrants").

Closing of Issuance:                Periodically upon any exercise of New
                                    Railworks Series B Warrants.


Post-Conversion Percentage:         The Series B will be convertible into
                                    176,471 shares of New Railworks Common
                                    Stock, which represents fifteen percent
                                    (15%) of the New Railworks Common Stock
                                    fully diluted as of the Effective Date,
                                    after giving effect to (I) the issuance of
                                    the New Railworks Common Stock, (II) the
                                    issuance and a deemed conversion of the
                                    Series C and (III) the vesting and exercise
                                    of any restricted stock, options or similar
                                    securities authorized to be issued or
                                    issuable upon exercise of any such
                                    securities authorized to be issued on the
                                    Effective Date (including the Series B and
                                    any shares issuable upon conversion
                                    thereof).

Dividend Rights:                    No rights for dividends.

Liquidation Preference:             In the event of any merger, stock sale or
                                    consolidation, or sale of all or
                                    substantially all assets, after which
                                    stockholders do not retain a majority of the
                                    voting power and capital stock in the
                                    surviving or successor corporation, upon the
                                    request of holders of at least a majority of
                                    the outstanding Series B, after payment of
                                    or provision for any liabilities of
                                    Reorganized Railworks and the expenses
                                    associated with such transaction and any
                                    related liquidation, dissolution or winding
                                    up, the holders of outstanding Series B will
                                    be entitled to receive out of assets of
                                    Reorganized Railworks or proceeds thereof
                                    available for distribution to stockholders,
                                    before any payment or distribution is made
                                    to holders of the New Railworks Common Stock
                                    (or any other stock of the Company by its
                                    terms ranking junior to the Series B as to
                                    liquidation, dissolution or winding up), the
                                    amount per


                                       29
<PAGE>

                                    share equal to that which would be received
                                    for such share in respect of shares issuable
                                    on conversion if converted immediately prior
                                    to such event.

                                    Such Liquidation Preference shall be pari
                                    passu with any liquidation preference on the
                                    New Railworks Series C Preferred Stock (in
                                    accordance with its terms).

                                    If the assets available for distribution in
                                    such event are insufficient to pay the full
                                    aggregate amount payable to such holders of
                                    the Series B and holders of any other
                                    classes of stock ranking on parity with the
                                    Series B as to liquidation, dissolution or
                                    winding up, the assets will be distributed
                                    to the holders of the Series B and any such
                                    other holders pro rata based on the full
                                    respective preferential amounts to which
                                    they are entitled.

Conversion:                         The holders of the Series B shall have the
                                    right to convert into shares of New
                                    Railworks Common Stock at any time, at an
                                    initial conversion rate of 1 for 1, subject
                                    to the same adjustment mechanisms applied to
                                    the New Railworks Series C Preferred Stock.

                                    Any adjustments to the conversion ratio
                                    shall apply to the entire Series B class
                                    whether or not any shares have been issued.

         C.       NEW RAILWORKS SERIES B WARRANTS

                  Subject to revision and modification prior to the Effective
Date, the warrant agreement for the New Railworks Series B Warrants shall
contain the terms and conditions identified in Schedule G to the Plan,
including the following terms and conditions, among others:

Exercise Price:                     Initially $21,000,000, or $119.00 per share
                                    (based on the 176,471 shares that comprise
                                    the authorized New Railworks Series B
                                    Preferred Stock, subject to reduction in an
                                    amount equal to the value of any cash or
                                    non-cash dividends paid on shares of New
                                    Railworks Common Stock issuable upon
                                    conversion of a share of New Railworks
                                    Series B Preferred Stock at such time.

Closing of Issuance:                At the Effective Date.

Post-Conversion Percentage:         The warrants will be exercisable for 176,471
                                    shares of New Railworks Series B Preferred
                                    Stock (which represent the shares of New
                                    Railworks Series B Preferred Stock that are
                                    convertible into fifteen percent (15%) of
                                    the New Railworks Common Stock fully diluted
                                    as of the Effective Date, after giving
                                    effect to (I) the issuance of the New
                                    Railworks Common Stock, (II) the issuance
                                    and a deemed conversion of the Series C and
                                    (III) the vesting and exercise of any
                                    restricted stock, options or similar
                                    securities authorized to be issued or
                                    issuable upon exercise of any such
                                    securities authorized to be issued on the
                                    Effective Date (including the Series B and
                                    any shares issuable upon conversion
                                    thereof)).

Transfer Restrictions:              Must transfer all and not less than all of
                                    the warrant.


                                       30
<PAGE>

Exercise Restrictions:              Exercisable at holder's discretion, whether
                                    the warrant is in-, out- or at-the-money.
                                    However, if exercised must be exercised in
                                    whole and not in part and may be exercised
                                    in cash or `net' as provided below.

Net Exercise:                       May be exercised by tendering as payment for
                                    the Exercise Price a portion of such warrant
                                    having a net fair market value as determined
                                    by the Board based on the New Railworks
                                    Common Stock issuable upon conversion of the
                                    New Railworks Series B Preferred Stock
                                    underlying such tendered portion of the
                                    warrant at such time. In such case, the
                                    holder will receive in a `net' exercise a
                                    number of shares of Series B having an
                                    aggregate fair market value equal to the
                                    spread between the fair market value of all
                                    underlying shares being exercised and the
                                    exercise price in respect of all such
                                    exercised shares.

Term:                               Expires on the day that is ten years from
                                    Effective Date.

         D.       NEW RAILWORKS SERIES C PREFERRED STOCK

                  Subject to revision and modification prior to the Effective
Date, the Certificate of Designation for the New Railworks Series C Preferred
Stock shall contain the terms and conditions identified in Schedule H to the
Plan, including the following terms and conditions, among others:

Base Liquidation Preference:        $45,000,000, or $67.50 per share (based on
                                    the 666,667 shares that represent the
                                    Post-Conversion Percentage described below
                                    as of the Effective Date).

Closing of Issuance:                On the Effective Date.

Post-Conversion Percentage:         The Series C will be convertible into
                                    sixty-six and two-thirds percent (66.67%) of
                                    the New Railworks Common Stock fully diluted
                                    as of the Effective Date, after giving
                                    effect to (I) the issuance of the New
                                    Railworks Common Stock, (II) the issuance
                                    and a deemed conversion of the Series C and
                                    (III) the vesting and exercise of any
                                    restricted stock, options or similar
                                    securities authorized to be issued or
                                    issuable upon exercise of any such
                                    securities authorized to be issued on the
                                    Effective Date (excluding the Series B
                                    Preferred and any shares issuable upon
                                    conversion thereof).

Dividend Rights:                    As specified in Schedule H to the Plan.

Liquidation Preference:             In the event of any voluntary or involuntary
                                    liquidation, dissolution or winding up of
                                    Reorganized Railworks, after payment of or
                                    provision for any liabilities of Reorganized
                                    Railworks and the expenses associated with
                                    such liquidation, dissolution or winding up,
                                    the holders of outstanding Series C will be
                                    entitled to receive out of assets of
                                    Reorganized Railworks or proceeds thereof
                                    available for distribution to stockholders,
                                    before any payment or distribution is made
                                    to holders of the New Railworks Common Stock
                                    (or any other stock of the Company by its
                                    terms ranking junior to the Series C as to
                                    liquidation, dissolution or winding up), the
                                    amount per share equal to the greater of (x)
                                    the per-share Base Liquidation Preference
                                    plus any accumulated and unpaid dividends
                                    and (y) that which would be


                                       31
<PAGE>

                                    received for such share in respect of shares
                                    issuable on conversion if converted
                                    immediately prior to such event.

                                    Such Liquidation Preference shall be pari
                                    passu with any liquidation preference on the
                                    New Railworks Series A Preferred Stock (in
                                    accordance with its terms).

                                    If the assets available for distribution in
                                    such event are insufficient to pay the full
                                    aggregate amount payable to such holders of
                                    the Series C and holders of any other
                                    classes of stock ranking on parity with the
                                    Series C as to liquidation, dissolution or
                                    winding up, the assets will be distributed
                                    to the holders of the Series C and any such
                                    other holders pro rata based on the full
                                    respective preferential amounts to which
                                    they are entitled.

                                    A merger, stock sale or consolidation or
                                    sale of all or substantially all assets,
                                    after which stockholders do not retain a
                                    majority of the voting power and capital
                                    stock in the surviving or successor
                                    corporation, will upon the request of
                                    holders of at least a majority of the
                                    outstanding Series C be deemed to be a
                                    liquidation, dissolution or winding-up.

Conversion:                         The holders of the Series C shall have the
                                    right to convert into shares of New
                                    Railworks Common Stock at any time, at an
                                    initial conversion rate of 1 for 1, subject
                                    to customary adjustments for stock-splits,
                                    stock dividends and recapitalizations.

E.       NEW RAILWORKS COMMON STOCK

                  The Debtors expect that an aggregate of 1,000,000 shares of
New Railworks Common Stock will be issued or be authorized to be issued under
the Plan, inclusive of (i) to the extent converted, New Railworks Common Stock
issued in respect of the New Railworks Series C Preferred Stock, (ii) the Class
7 Common Stock Distribution, (iii) the Class 9 Common Stock Distribution and
(iv) New Railworks Common Stock issued in connection with the New Management
Equity Awards, but exclusive of any shares issuable upon conversion of the New
Railworks Series B Preferred Stock that may be issued upon exercise of New
Railworks Series B Warrants.

                  Subject to revision and modification prior to the Effective
Date, the New Railworks Common Stock shall contain the following terms and
conditions, among others:

         -        The holders of New Railworks Common Stock will be entitled to
                  one vote per share for each share held of record on all
                  matters submitted to a vote of stockholders and are entitled
                  to receive ratably such dividends as may be declared by the
                  Board of Directors out of funds legally available therefor.

         -        Reorganized Railworks will be subject to certain limitations
                  on the declaration and payment of dividends under the terms of
                  the Exit Facility and the New Railworks Secured Loan, and it
                  is not anticipated that any cash dividends will be paid on the
                  New Railworks Common Stock for the foreseeable future.

         -        Upon a liquidation, dissolution or winding up of Reorganized
                  Railworks, holders of New Railworks Common Stock would have
                  the right to a ratable portion of assets remaining after
                  payment of liabilities and any outstanding New Railworks
                  Preferred Stock. The holders of New Railworks Common Stock
                  will have no preemptive rights.


                                       32
<PAGE>

                  No fractional shares of New Railworks Common Stock or New
Railworks Preferred Stock, no fractional New Railworks Series B Warrants, or
Cash in lieu thereof shall be distributed. For purposes of distribution,
fractional shares of New Railworks Common Stock or New Railworks Preferred
Stock, and fractional New Railworks Series B Warrants shall be rounded down to
the next whole number or zero, as applicable, and any percentages mentioned
herein shall be deemed to be modified to give effect to such rounding.
Notwithstanding anything to the contrary herein, in the event that Reorganized
Railworks reasonably determines that distributions of New Railworks Common
Stock to holders of Allowed Class 9 Claims could result in public filing
obligations under any applicable state, federal or non-United States securities
laws, Reorganized Railworks shall have the option of distributing Cash to
holders of Allowed Class 9 Claims in lieu of such stock (determined by smallest
Allowed Claim amount first) that would result in fewer than the threshold
number of holders of New Railworks Common Stock, such Cash to be in an amount
equal to the value as determined by the Bankruptcy Court in connection with
confirmation of the Plan, as of the Effective Date, of the New Railworks Common
Stock that otherwise would have been distributed.

         F.       REGISTRATION RIGHTS AGREEMENT

                  On the Effective Date, Reorganized Railworks will: (i)
execute and deliver the Registration Rights Agreement, which provides any
beneficial holder of two percent (2%) or more of the New Railworks Common Stock
(including after deemed exercise of New Railworks Series B Warrants and
conversion of the New Railworks Series B Preferred Stock and conversion of the
New Railworks Series C Preferred Stock but excluding such holdings solely by
virtue of New Management Equity Awards) who executes and delivers to
Reorganized Railworks the Registration Rights Agreement on or prior to the
Effective Date (collectively, the "Principal Holders") with certain rights to
require Reorganized Railworks to register their shares of New Railworks Common
Stock; and (ii) deliver the Registration Rights Agreement to such Principal
Holders. No registration rights will be provided to holders of New Railworks
Common Stock other than the Principal Holders. The following summary is
qualified in its entirety by reference to the Registration Rights Agreement,
which will be included in the Plan Supplement.

                  Under the Registration Rights Agreement, Reorganized
Railworks will use its reasonable best efforts to (a) register on Form S-3 the
New Railworks Common Stock held by a party upon a request by one or more
parties holding at least ten percent (10%) of the New Railworks Common Stock to
register New Railworks Common Stock held by such parties, (b) register on Form
S-3 the New Railworks Common Stock (assuming conversion of the New Railworks
Series B Preferred Stock) upon a request by one or more parties holding in the
aggregate at least 51% of the New Series B Preferred Stock, and (c) in
connection with any registered offering of the New Railworks Common Stock by
Reorganized Railworks, register the New Railworks Common Stock of such parties
that wish to sell their New Railworks Common Stock in the offering. In
addition, the requests for registration will be subject to other customary
limitations and cut-backs, as set forth in the Registration Rights Agreement.

                  The registration rights will not apply to New Railworks
Common Stock to the extent that: (a) a registration statement with respect to
the sale of New Railworks Common Stock has been declared effective under the
Securities Act and the holders' shares of New Railworks Common Stock have been
disposed of under that registration statement; or (b) the holders' shares of
New Railworks Common Stock have been disposed of under Securities Act Rule 144
or another exemption from the registration requirements of the Securities Act
under which the shares of New Railworks Common Stock are thereafter freely
tradable without restriction under the Securities Act.

                  Certain beneficial holders of two percent (2%) or more of the
New Railworks Common Stock will be entitled to receive the rights granted under
the Registration Rights Agreement by executing and delivering it to Reorganized
Railworks on or prior to the Effective Date.

         G.       AMENDED CERTIFICATE OF INCORPORATION AND AMENDED BYLAWS


                                       33

<PAGE>

                  Copies of the Amended Certificate of Incorporation and the
Amended Bylaws for Reorganized Railworks will be included in the Plan
Supplement.

                        III. IMPLEMENTATION OF THE PLAN

         A.       NEW SECURITIES

                  If the Plan is confirmed and approved by the Bankruptcy Court,
it will be implemented through the actions described in this section. In
accordance with section 5 of the Plan, the relevant Reorganized Debtors will:

         -        issue the New Railworks Preferred Stock and the New Railworks
                  Series B Warrants on the Effective Date or as soon thereafter
                  as is practicable;

         -        issue the New Railworks Common Stock on the Effective Date or
                  as soon thereafter as is practicable (with appropriate
                  reserves for Disputed Claims, the exercise of conversion
                  rights under the New Railworks Series C Preferred Stock and
                  New Railworks Series B Preferred Stock, and in connection with
                  the options granted under the New Management Incentive Plan);

         -        execute and deliver the Registration Rights Agreement on the
                  Effective Date; and

         -        execute and file the Certificates of Designation for the New
                  Railworks Preferred Stock and execute the warrant agreement
                  for the New Railworks Series B Warrants.

         B.       EXIT FACILITY

                  In connection with implementation of the Plan, one or more of
the Reorganized Debtors will enter into the Exit Facility for payment of certain
Classes of Claims under the Plan and for working capital and other corporate
purposes. Under the terms of the Plan, each holder of an Allowed Exit Lenders
Pre-Petition Lenders Claim shall be obligated to participate, on a ratable
basis, as an Exit Lender under the Exit Facility. Subject to revision and
modification prior to the Effective Date, the Exit Facility will contain the
terms and conditions identified in Schedule C to the Plan, including the
following terms and conditions, among others:

Exit Facility:                      A secured credit facility consisting of the
                                    (i) Revolving Facility (as defined below)
                                    and (ii) the Term Facility (as defined
                                    below).

Revolving Facility:                 $65 million maximum commitment revolving
                                    credit facility (the "Revolving Facility").

Term Facility:                      $35 million term loan facility (the "Term
                                    Facility").

Borrower:                           Reorganized Railworks.

Guarantors:                         All existing and future direct and indirect
                                    domestic subsidiaries of the Borrower.

Initial Lenders:                    Matlin Patterson Global Opportunities
                                    Partners L.P. and Stonehill Capital
                                    Management LLC and/or any affiliates
                                    thereof.


                                       34
<PAGE>

Interest Rates:                     The Exit Facility shall bear interest at a
                                    rate equal to one, two, three or six-month
                                    LIBOR plus 4.0% per annum and shall be paid
                                    on the last day of each applicable interest
                                    period.

Fees:                               The Borrower shall pay an Administrative
                                    Agent's Fee, a Collateral Agent's Fee and a
                                    Commitment Fee in connection with the
                                    closing of the Exit Facility.

Use of Proceeds:                    Loans pursuant to the Revolving Facility
                                    shall be used (i) for general working
                                    capital and corporate purposes, (ii) to the
                                    extent that a Litigation Trust is created
                                    under the Plan, to fund the Litigation Trust
                                    up to $250,000 and (iii) to repay, in part,
                                    the Transit Group Lenders under the Transit
                                    Group Loan Documents, the Bond Support
                                    Lenders under the Bond Support Documents,
                                    the TP&S Group Lenders under the TP&S Group
                                    Loan Documents, Allowed Administrative
                                    Expense Claims and Allowed Fee Claims.

                                    Loans pursuant to the Term Facility shall be
                                    used to repay the Transit Group Lenders
                                    under the Transit Group Loan Documents, the
                                    Bond Support Lenders under the Bond Support
                                    Documents, the TP&S Group Lenders under the
                                    TP&S Group Loan Documents, Allowed
                                    Administrative Expense Claims and Allowed
                                    Fee Claims.

Final Maturity:                     Final maturity of the Exit Facility will be
                                    five (5) years from the date of closing.

Amortization:                       The aggregate outstanding principal amount
                                    of the Revolving Facility and the Term
                                    Facility shall be due and payable at Final
                                    Maturity.

Commitments:                        At closing, the commitment under the
                                    Revolving Facility shall be $65 million.

                                    At closing, the commitment under the Term
                                    Facility shall be $35 million.

Borrowing                           Base: Loans made under the Revolving
                                    Facility will be subject to a reasonable
                                    borrowing base with standard advance rates
                                    to be agreed to between the Borrower and the
                                    Administrative Agent. No advances in excess
                                    of the Borrowing Base will be permitted.

Security:                           The Exit Facility shall be secured by a
                                    first priority perfected security interest,
                                    subject only to the security interest
                                    granted in connection with the New Wood
                                    Waste Secured Loan, in all present and
                                    future accounts receivable, retention
                                    receivables and inventory of the Borrower
                                    and each of the Guarantors, and all proceeds
                                    thereof.

                                    The Exit Facility shall be secured by a
                                    second priority perfected security interest,
                                    subject only to the security interest
                                    granted in connection with the New Wood
                                    Waste Secured Loan and the security interest
                                    granted in connection with the New Railworks
                                    Secured Loan, in all present and future
                                    assets and properties of the Borrower and
                                    each of the Guarantors, and all proceeds
                                    thereof, other than accounts receivable,
                                    retention receivables and inventory; said
                                    security interest


                                       35
<PAGE>

                                    to include, without limitation, real
                                    property, machinery, equipment, contracts,
                                    trademarks, copyrights, patents, license
                                    rights and general intangibles (including
                                    certain legacy claims).

Prepayments:                        Until the New Railworks Secured Loan has
                                    been satisfied in full, Borrower shall not
                                    be permitted to (i) make any prepayments on
                                    the Term Facility, or any prepayments
                                    accompanied by corresponding commitment
                                    reductions on the Revolving Facility, or
                                    (ii) refinance any portion of the Exit
                                    Facility.

Initial Conditions Precedent:       As specified in Schedule C to the Plan.

Additional Conditions
Precedent:                          As specified in Schedule C to the Plan.

Representations and Warranties:     As specified in Schedule C to the Plan.

Affirmative, Financial
and Negative Covenants:             As specified in Schedule C to the Plan.

Intercreditor                       Agreement: The Exit Lenders will enter into
                                    an intercreditor agreement with the
                                    Pre-Petition Lenders and Travelers
                                    containing the terms and conditions
                                    specified in Schedule C to the Plan.

         C.       EXIT BONDING FACILITY

                  In connection with implementation of the Plan, one or more of
the Reorganized Debtors will enter into the Exit Bonding Facility with
Travelers, which facility shall be used for the issuance of surety bonds in
connection with prosecution of work in the ordinary course by the Reorganized
Debtors. Subject to revision and modification prior to the Effective Date, the
Exit Bonding Facility will contain the terms and conditions identified in
Schedule B to the Plan, including the following terms and conditions, among
others:

Obligor:                            Reorganized Railworks.

Indemnitors:                        All existing and future subsidiaries and
                                    affiliates of Reorganized Railworks as
                                    specified in Schedule B to the Plan.

Bond Issuer:                        Travelers.

Bonding Facility:                   A revolving bond facility of an aggregate
                                    amount of up to $750,000,000 in availability
                                    for the issuance of surety bonds. The terms
                                    of the Exit Bonding Facility shall apply to
                                    any and all new surety bonds issued by
                                    Travelers (the "New Bonds") and shall
                                    likewise govern all surety bonds previously
                                    issued by Travelers (the "Old Bonds")
                                    (collectively the New Bonds and the Old
                                    Bonds are referred to herein as the
                                    "Bonds").

New Bonds:                          Subject to the conditions of the Exit
                                    Bonding Facility, Travelers may issue one or
                                    more New Bonds under and in accordance with
                                    the terms of the Exit Bonding Facility on
                                    behalf of one or more of the Indemnitors
                                    provided that the aggregate amount of all
                                    contracts bonded by all Bonds issued and
                                    outstanding from time to time under the Exit
                                    Bonding Facility (the "Bonded Contracts")
                                    less the amount of all payments made with
                                    respect to all such Bonded Contracts (the


                                       36
<PAGE>

                                    "Bonded Contract Payments") shall not exceed
                                    $750,000,000. New Bonds may be issued for
                                    contracts not to exceed thirty (30) months
                                    in duration and seventy five million dollars
                                    ($75,000,000) in amount. On a case by case
                                    basis, Travelers may require the relevant
                                    Indemnitor's participation with a joint
                                    venture partner acceptable to Travelers. An
                                    Indemnitor may request the issuance of a New
                                    Bond by making an application to Travelers
                                    and providing such information as Travelers
                                    in its sole discretion may request from time
                                    to time. Subject to ordinary bond
                                    underwriting criteria of Travelers,
                                    Travelers may issue New Bonds on behalf of
                                    one or more of the Indemnitors under the
                                    Exit Bonding Facility, with any bond
                                    issuance to be solely in the discretion of
                                    Travelers. New Bonds may be payment bonds,
                                    performance bonds, bid bonds, or such other
                                    bonds as Indemnitors may request for the
                                    prosecution of work in the ordinary course
                                    of their respective businesses.

Closing Date:                       The Closing of the Exit Bonding Facility
                                    shall occur on or by the Effective Date.

Maturity:                           The maturity date ("Maturity") of the Exit
                                    Bonding Facility shall be that date which is
                                    the earlier of (a) three years after the
                                    Effective Date or (b) Travelers' election to
                                    terminate the Exit Bonding Facility, which
                                    election Travelers may make at any time in
                                    its sole discretion, with or without the
                                    occurrence of an event of default.

Capital Funding
Requirements:                       Indemnitors shall have, and the Indemnitors'
                                    Exit Lenders shall provide to the
                                    Indemnitors, funding under their Exit
                                    Facility as follows:

                                    (a)      The Exit Lenders shall provide a
                                             term loan to the Indemnitors in the
                                             amount of thirty-five million
                                             dollars ($35,000,000), which term
                                             loan shall be secured by property
                                             of the Indemnitors, a portion of
                                             which shall be subordinate to the
                                             interests of the Obligor's
                                             Pre-Petition Lenders.

                                    (b)      The Exit Lenders shall provide a
                                             revolving loan facility to the
                                             Indemnitors in the amount of
                                             sixty-five million dollars
                                             ($65,000,000). Within this
                                             sixty-five million dollar
                                             ($65,000.00) facility, the first
                                             thirty-two million, five-hundred
                                             thousand dollars ($32,500,000) of
                                             availability (the "Special
                                             Availability Portion") shall be
                                             subject to special availability
                                             requirements as reflected in the
                                             term sheet for the Exit Facility.

Forbearance
And Other
Intercreditor
Terms:                              For a period of three years following the
                                    Effective Date, the Pre-Petition Lenders and
                                    Exit Lenders shall agree to forbear from
                                    foreclosing on their collateral,
                                    accelerating their indebtedness or
                                    exercising any remedy against the
                                    Indemnitors specifically to dispossess any
                                    Indemnitor of any of its assets or cease
                                    operations


                                       37
<PAGE>

                                    without Travelers' prior written consent,
                                    subject to the exceptions and for the
                                    periods specified in Schedule B to the Plan.

Interest, Premiums
and Commissions:                    As specified in Schedule B to the Plan.

Closing Fee:                        There shall be no closing fee provided that
                                    the Indemnitors shall timely pay the amounts
                                    required under subsection (k) of the
                                    Conditions of Provision of Exit Bonding
                                    Facility.

Documentation:                      The Exit Bonding Facility documents will
                                    contain customary representations and
                                    warranties, conditions precedent, covenants,
                                    events of default and other provisions
                                    appropriate for transactions of this size,
                                    type and purpose and shall be acceptable to
                                    Travelers and its counsel and Obligor and
                                    its counsel in every respect.

Covenants:                          The Exit Bonding Facility shall contain
                                    customary affirmative and negative
                                    covenants, including those specified in
                                    Schedule B to the Plan.

Events of Default:                  Usual and customary for facilities of this
                                    type, including but not limited to those
                                    specified in Schedule B to the Plan.

Conditions of
Provision of
Exit Bonding Facility:              As specified in Schedule B to the Plan.

Conditions of
Each Extension
of Credit:                          As specified in Schedule B to the Plan.



Trust Funds:                        All payments due, or received for or on
                                    account of any contract of any Indemnitor
                                    that is the subject of a Bond, shall be held
                                    in trust as trust funds by Indemnitors for
                                    the benefit and payment of all obligations
                                    for which Travelers may be liable under any
                                    Bond. For so long as there shall be no event
                                    of default under the Exit Bonding Facility,
                                    Indemnitors may collect and make use of
                                    bonded receivables in the ordinary course of
                                    business, subject to the Indemnitors'
                                    obligations under any relevant agreement and
                                    applicable law to satisfy bonded claims.

Governing Law:                      The State of New York.

         D.       NEW RAILWORKS SECURED LOAN

                  On the Effective Date, the Reorganized Debtors will enter into
and execute the New Railworks Secured Loan. Pursuant to the terms and conditions
of the Plan, the lenders under the New Railworks Secured Loan shall be the
holders of Non-Exit Lenders Pre-Petition Lenders Claims as of the Effective
Date. Subject to revision and modification prior to the Effective Date, the New
Railworks Secured Loan shall contain the terms and conditions identified in
Schedule D to the Plan, including the following terms and conditions, among
others:


                                       38
<PAGE>

Credit Facility:                    A $100 million term loan facility.

Borrower:                           Reorganized Railworks.

Guarantors:                         All existing and future direct and indirect
                                    domestic subsidiaries of the Borrower.

Administrative Agent:               BoA, as sole and exclusive administrative
                                    and collateral agent.

Initial Lenders:                    Holders of Non-Exit Lenders Pre-Petition
                                    Lenders Claims.

Interest Rates:                     The facility shall bear interest at a rate
                                    equal to one, two, three or six-month LIBOR
                                    plus 4.0% per annum and shall be paid on
                                    the last day of each applicable interest
                                    period.

Fees:                               The Borrower shall pay an annual
                                    Administrative Agent's Fee and Collateral
                                    Agent's Fee.

Maturity:                           Maturity of the facility will be two (2)
                                    years from the date of closing, unless
                                    extended by the Borrower as described below.

                                    Assuming that no event of default has
                                    occurred and is continuing, prior to
                                    maturity, and each year thereafter, the
                                    Borrower shall have the sole and exclusive
                                    option of extending the facility for an
                                    additional year upon payment of the
                                    applicable Extension Fee to the
                                    Administrative Agent for the ratable benefit
                                    of the Lenders; provided that under no
                                    circumstances may the Borrower extend the
                                    maturity date beyond the fifth anniversary
                                    of the date of closing.

                                    The Extension Fee for each applicable
                                    extension is set forth below:

                                    $ 5,000,000    Extension to 3rd anniversary
                                    $ 5,000,000    Extension to 4th anniversary
                                    $10,000,000    Extension to 5th anniversary

                                    The Borrower shall have the option of
                                    financing any applicable Extension Fee (at
                                    the interest rate and according to the terms
                                    and conditions set forth in the facility) by
                                    adding such amount to the existing principal
                                    balance under the facility, re-executing a
                                    new note to reflect such financing, and
                                    delivering the new note to the Agent at or
                                    prior to maturity.

Scheduled Amortization:             The outstanding principal amount of the
                                    facility shall be repaid pursuant to the
                                    following schedule:

                                    Installment of $1 million on December 31,
                                    2002

                                    Quarterly installments of $1.875 million in
                                    2003

                                    Quarterly installments of $3.5 million in
                                    2004, and to the extent the facility is
                                    extended as provided above, in 2005, 2006
                                    and 2007

                                    All unpaid principal shall be due and
                                    payable at maturity.


                                       39
<PAGE>

Security:                           The facility shall be secured by a first
                                    priority perfected security interest,
                                    subject only to the security interest
                                    granted in connection with the New Wood
                                    Waste Secured Loan, in all present and
                                    future assets and properties of the Borrower
                                    and each of the Guarantors, and all proceeds
                                    thereof, other than accounts receivable,
                                    retention receivables and inventory; said
                                    security interest to include, without
                                    limitation, real property, machinery,
                                    equipment, contracts, trademarks,
                                    copyrights, patents, license rights and
                                    general intangibles (including certain
                                    legacy claims identified in the facility).

                                    The facility shall be secured by a second
                                    priority perfected security interest,
                                    subject only to the security interest
                                    granted in connection with the New Wood
                                    Waste Secured Loan and the security interest
                                    granted in connection with the Exit
                                    Facility, in all present and future accounts
                                    receivable, retention receivables and
                                    inventory of the Borrower and each of the
                                    Guarantors, and all proceeds thereof.

Mandatory Prepayments:              As specified in Schedule D to the Plan.

Initial Conditions Precedent:       The effectiveness of the facility shall be
                                    subject to customary conditions precedent
                                    including those specified in Schedule D to
                                    the Plan.

Representations and Warranties:     As specified in Schedule D to the Plan.

Affirmative, Financial
and Negative Covenants:             As specified in Schedule D to the Plan.

Events of Default:                  Usual and customary for transactions of this
                                    type.

Intercreditor Agreement:            As specified in Schedule D to the Plan.

         E.       NEW WOOD WASTE SECURED LOAN

                  On the Effective Date, Reorganized Wood Waste and BoA will
enter into and execute the New Wood Waste Secured Loan. Subject to revision and
modification prior to the Effective Date, the New Wood Waste Secured Loan shall
contain the terms and conditions identified in Schedule I to the Plan, including
the following terms and conditions, among others:

Credit Facility:                    A $999,197.83 (plus post-petition accrued
                                    interest to the Effective Date as determined
                                    in accordance with the Wood Waste Credit
                                    Agreement) term loan facility.

Borrower:                           Reorganized Wood Waste Energy, Inc.

Guarantors:                         None (but Lender reserves rights to proceed
                                    against existing non-debtor guarantors).

Initial Lender:                     BoA

Interest Rates:                     The facility shall bear interest at a
                                    rate equal to the Prime Rate plus 1.5% per
                                    annum and shall be paid quarterly in
                                    arrears. The interest rate shall be subject
                                    to scheduled increases.


                                       40
<PAGE>

Fees:                               None.

Final Maturity:                     Final maturity of the facility will be last
                                    day of the calendar month that is twenty
                                    (20) full calendar months after the
                                    occurrence of the Effective Date (but not
                                    to occur after June 1, 2004).

Scheduled Amortization:             The facility shall be repaid over twenty
                                    (20) level monthly installments of principal
                                    and interest (but not to extend beyond June
                                    1, 2004).

Security:                           The facility shall be secured by a
                                    first priority perfected security
                                    interest in all present and future
                                    assets and properties of the Borrower
                                    (including, without limitation, real
                                    property, accounts receivable,
                                    inventory, machinery, equipment,
                                    contracts, trademarks, copyrights,
                                    patents, license rights and general
                                    intangibles).

Representations and Warranties:     Usual and customary for transactions of this
                                    type.

Covenants:                          Usual and customary for transactions of this
                                    type.

Events of Default:                  Usual and customary for transactions of this
                                    type.

         F.       TERMINATION AND DISCHARGE OF ALL EXISTING DEBTS, CLAIMS AND
EQUITY INTERESTS

                  Except as expressly provided for in the Plan or in the
Confirmation Order, the rights afforded in, and the payments and distributions
made under, the Plan will:

         -        discharge all existing debts and Claims, and terminate all
                  Equity Interests of any kind, nature or description against or
                  in the Debtors or any of their assets or properties to the
                  fullest extent permitted by section 1141 of the Bankruptcy
                  Code; and

         -        result in all holders of Claims and Equity Interests being
                  precluded and enjoined from asserting against the Reorganized
                  Debtors, or any of their assets or properties, any other or
                  further Claim or Equity Interest based on any act or omission,
                  transaction, or other activity of any kind or nature that
                  occurred before the Effective Date, whether or not the holder
                  of that Claim or Equity Interest Filed a proof of claim or
                  proof of equity interest.

                  The effect of these provisions will be that on the Effective
Date, in consideration of the distributions to be made under the Plan, the
Pre-Petition Credit Agreement, the Senior Subordinated Notes, common stock,
stock options, stock-based compensation, any documents and agreements relating
thereto, and all other Claims and Equity Interests will be cancelled, and all
obligations of the Debtors under or in respect of them will be terminated.

                  Each holder of an Equity Interest that is cancelled pursuant
to the Plan will neither receive nor retain any property or interest in property
on account of such Equity Interest. These provisions will have the effect of
allowing Reorganized Railworks to dissolve or maintain those of its direct and
indirect subsidiaries as it deems necessary for corporate organizational
purposes.

         G.       DEEMED CONSOLIDATION OF DEBTORS

                  Confirmation of the Plan shall constitute the approval,
pursuant to section 105(a) of the Bankruptcy Code, effective as of the Effective
Date, of the deemed consolidation of the Reorganization Cases for all purposes
related to the Plan, including, without limitation, for purposes of voting,
confirmation


                                       41
<PAGE>

and distribution. Accordingly, (i) all assets and liabilities of the Subsidiary
Debtors shall be deemed merged or treated as though they were merged into and
with the assets and liabilities of Railworks, (ii) no distributions shall be
made under the Plan on account of Interdebtor Claims among the Debtors except as
may otherwise be provided in the Plan, (iii) all guarantees of the Debtors of
the obligations of any other Debtor shall be deemed eliminated so that any claim
against any Debtor and any guarantee thereof executed by any other Debtor and
any joint or several liability of any of the Debtors shall be deemed to be one
obligation of the consolidated Debtors and (iv) each and every Claim Filed or to
be Filed in the Reorganization Case of any of the Debtors shall be deemed Filed
against the consolidated Debtors, and shall be deemed one Claim against and
obligation of the consolidated Debtors.

                  Notwithstanding the foregoing, such deemed consolidation shall
not (other than for purposes related to the Plan) affect (i) the legal and
corporate structures of the Reorganized Debtors, subject to the right of the
Debtors or Reorganized Debtors to effect Restructuring Transactions as provided
in section 5.16 of the Plan, (ii) Interdebtor Claims by and among the Debtors or
Reorganized Debtors, (iii) Non-Debtor Subsidiaries Claims, (iv) Subsidiary
Debtors Equity Interests, (v) pre- and post-Petition Date guarantees that are
required to be maintained (a) in connection with executory contracts or
unexpired leases that were entered into during the Reorganization Cases or that
have been or will be assumed, or (b) pursuant to the Plan, (vi) any of
Travelers' Surety Rights, and (vii) any of the rights of either the PBGC or the
Pension Plan with respect to the Pension Plan.

                  The deemed consolidation contemplated by the Plan will create
a single fund from which all claims against the Debtors, taken as a whole, are
satisfied. Consequently, a creditor of one of the consolidated debtors is
treated as a creditor of the consolidated group of debtors and issues of
individual corporate ownership of property and individual corporate liability on
obligations are ignored. However, the deemed consolidation does not affect the
debtors' separate corporate existence or independent ownership of property for
any purposes other than for making distributions of property under a plan of
reorganization or otherwise as necessary to implement the plan.

                  The power to consolidate interrelated reorganization cases in
this manner arises from the general equitable powers of a bankruptcy court set
forth in section 105 of the Bankruptcy Code. Numerous courts have stated that
the appropriateness of such consolidation is to be determined on a case-by-case
basis. Among the factors courts consider in determining whether to allow such
consolidation are: (a) whether creditors dealt with the debtor entities as a
single economic unit and did not rely on their separate identities in extending
credit, and (b) whether the affairs of the debtors are so entangled that the
consolidation will benefit all creditors of the debtors' estates. A significant
factor considered by courts also is whether creditors are prejudiced or harmed
by the consolidation.

                  In determining whether to permit the deemed consolidation, it
is likely that the Bankruptcy Court will consider the following additional
factors: (a) the presence or absence of consolidated financial statements; (b)
the existence of inter-company guaranties or loans; (c) the unity of interest
and ownership between the various corporate entities; (d) the transfer of assets
without formal observance of corporate formalities; (e) the degree of difficulty
in segregating and ascertaining individual assets and liabilities; (f) common
directors and/or officers shared by the parents, affiliates and subsidiaries;
and (g) whether the debtors' estates would realize cost reductions that could
result in increased distributions to creditors through consolidation of the
debtors' operations at fewer locations.

                  There is ample factual basis for the deemed consolidation of
the Debtors. First, given the enterprise value of the Debtors and the fact that
unsecured creditors would not be entitled to any recovery in these cases based
upon a strict application of the absolute priority rule, there is absolutely no
prejudice to unsecured creditors from the deemed consolidation of the Debtors
proposed under the Plan. The Debtors believe that this factor, standing alone,
is sufficient to justify the deemed consolidation contemplated by the Plan.


                                       42
<PAGE>

                  Second, the holders of the Pre-Petition Lenders Claims dealt
with all of the Debtors as a single economic unit and did not rely on their
separate identity in extending credit. Specifically, all of the Debtors are
obligors under the credit agreement governing the Pre-Petition Lenders Claims.
In addition, all of the Debtors granted first priority security interests in
substantially all of their unencumbered assets (and junior security interests in
properties already subject to liens) to secure the Pre-Petition Lenders Claims.
This factor also justifies the deemed consolidation proposed by the Plan.

                  Third, like the Pre-Petition Lenders, Travelers dealt with all
of the Debtors as a single economic unit and did not rely on their separate
identity in providing surety bonds and credit to the Debtors. Specifically, all
of the Debtors are indemnitors under the Travelers related surety agreements
governing the Travelers Pre-Petition Bond Claims. Likewise, the holders of the
Senior Subordinated Notes and Senior Subordinated Note Claims dealt with all of
the Debtors as a single economic unit, inasmuch as each of the Debtors are
obligors under the indenture governing such claims. This course of dealing and
expectations of Travelers and the holders of the Senior Subordinated Note Claims
also justify the deemed consolidation proposed by the Plan.

                  Finally, the books and records of the Debtors reflect a large
amount of intercompany claims reflecting, among other things, advances from
Railworks to fund the operations of the corporate family, upstreamed funds from
other Debtors to enable Railworks and other Debtors to make payments to
creditors, the allocation of corporate overhead, and the transfer of other
property from one Debtor to another. In view of the complexity of such
transactions and the adjustments that have been made over time, it would be
difficult to reconcile intercompany claims without embarking on a difficult and
unnecessary effort that would not benefit creditors given the circumstances of
these cases.

                  In light of the above, among other factors, the Debtors
believe that the deemed consolidation is appropriate and will facilitate
confirmation of the Plan and foster similarity and fairness of treatment of
holders of Claims. Unless the deemed consolidation has been approved by a prior
order of the Bankruptcy Court, the Plan will serve as a motion seeking entry of
an order consolidating the Reorganization Cases for purposes of the Plan. Unless
an objection to the deemed consolidation is made in writing by any party in
interest affected by the Plan no later than the deadline for the filing of
objections to the Plan, the Consolidation Order may be entered by the Bankruptcy
Court. If any objections are timely filed, a hearing will be scheduled by the
Bankruptcy Court, which hearing may, but need not, coincide with the
Confirmation Hearing.

         H.       RESTRUCTURING TRANSACTIONS

                  Pursuant to section 5.16 of the Plan, on and after the
Effective Date, (subject to the consent of GOF and Stonehill, which consent
shall not be unreasonably withheld), and subject to and only to the extent
permitted by applicable law, the applicable Reorganized Debtors may enter into
such transactions and may take such actions as may be necessary or appropriate
to effect a corporate restructuring of their respective businesses, to otherwise
simplify the overall corporate structure of the Reorganized Debtors, or to
reincorporate certain of the Subsidiary Debtors under the laws of jurisdictions
other than the laws of which the applicable Subsidiary Debtors are presently
incorporated. Such restructuring may include one or more mergers,
consolidations, restructures, dispositions, liquidations, or dissolutions, as
may be determined by the Debtors or the Reorganized Debtors to be necessary or
appropriate (collectively, the "Restructuring Transactions"). While the Debtors
presently do not contemplate any specific Restructuring Transactions, the
actions to effect the Restructuring Transactions may include: (i) the execution
and delivery of appropriate agreements or other documents of merger,
consolidation, restructuring, disposition, liquidation, or dissolution
containing terms that are consistent with the terms of the Plan and that satisfy
the applicable requirements of applicable state law and such other terms to
which the applicable entities may agree; (ii) the execution and delivery of
appropriate instruments of transfer, assignment, assumption, or delegation of
any asset, property, right, liability, duty, or obligation on terms consistent
with the terms of the Plan and having such other terms to which the applicable
entities may agree; (iii) the filing of appropriate certificates or


                                       43
<PAGE>

articles of merger, consolidation, or dissolution pursuant to applicable state
law; and (iv) all other actions that the applicable entities determine to be
necessary or appropriate, including making filings or recordings that may be
required by applicable state law in connection with such transactions. The
Restructuring Transactions may include one or more mergers, consolidations,
restructures, dispositions, liquidations, or dissolutions, as may be determined
by the Reorganized Debtors to be necessary or appropriate to result in
substantially all of the respective assets, properties, rights, liabilities,
duties, and obligations of certain of the Reorganized Debtors vesting in one or
more surviving, resulting or acquiring corporations. In each case in which the
surviving, resulting, or acquiring corporation in any such transaction is a
successor to a Reorganized Debtor, such surviving, resulting, or acquiring
corporation will perform the obligations of the applicable Reorganized Debtor
pursuant to the Plan to pay or otherwise satisfy the Allowed Claims against such
Reorganized Debtor, except as provided in any contract, instrument, or other
agreement or document effecting a disposition to such surviving, resulting, or
acquiring corporation, which may provide that another Reorganized Debtor will
perform such obligations.

         I.       MANAGEMENT RIGHTS AGREEMENT

                  On the Effective Date, Reorganized Railworks and Matlin
Patterson Global Opportunities Partners L.P. shall enter into the Management
Rights Agreement. It is anticipated that the Management Rights Agreement will be
substantially similar to the management rights agreement approved by the
Bankruptcy Court after a hearing held on May 24, 2002. A proposed order has been
submitted to the Bankruptcy Court consistent with its May 24th ruling.

         J.       DIVIDENDS

                  It is expected that the terms of the Exit Facility and the New
Railworks Secured Loan will restrict Reorganized Railworks' ability to pay
dividends, and it is not anticipated that any cash dividends will be paid on the
New Railworks Common Stock for the foreseeable future.

         K.       APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS

      THE ISSUANCE AND RESALE OF THE NEW RAILWORKS PREFERRED STOCK, THE NEW
   RAILWORKS SERIES B WARRANTS AND THE NEW RAILWORKS COMMON STOCK RAISE ISSUES
                    UNDER FEDERAL AND STATE SECURITIES LAWS.

             The issuance and resale of the New Railworks Preferred
             Stock, the New Railworks Series B Warrants and the New
               Railworks Common Stock under the Plan raise certain
           securities law issues under the Bankruptcy Code and federal
          and state securities laws that are discussed in this section.
            The information in this section should not be considered
            applicable to all situations or to all holders of Claims
           receiving New Railworks Preferred Stock, the New Railworks
   Series B Warrants and/or New Railworks Common Stock under the Plan. Holders
    of Claims should consult their own legal counsel concerning the facts and
         circumstances relating to the transfer of the Plan Securities.

                  No registration statement will be filed under the Securities
Act or any state securities laws relating to the initial offer, authorization
and distribution on the Effective Date under the Plan of the New Railworks
Preferred Stock, the New Railworks Series B Warrants and the New Railworks
Common Stock. The Debtors believe that the provisions of section 1145(a)(l) of
the Bankruptcy Code exempt the initial offer, authorization and distribution of
the Plan Securities on the Effective Date under the Plan from federal and state
securities registration requirements.


                                       44
<PAGE>

                  Similarly, no registration statement will be filed under the
Securities Act or any state securities laws relating to the issuance of New
Railworks Series B Preferred Stock or New Railworks Common Stock in connection
with the exercise of rights under the New Railworks Series C Preferred Stock,
the New Railworks Series B Warrants or the New Railworks Series B Preferred
Stock, as applicable. The Debtors believe that the provisions of section
1145(a)(2) of the Bankruptcy Code, as well as (in some cases) certain provisions
of the federal securities laws, exempt the offer, authorization and distribution
of the New Railworks Series B Preferred Stock and the New Railworks Common Stock
upon the exercise of such rights from federal and state securities registration
requirements.

         1.       INITIAL OFFER AND SALE OF SECURITIES

                  Section 1145(a)(1) of the Bankruptcy Code exempts the offer
and sale of securities under a plan of reorganization from registration under
the Securities Act and under state securities laws if three principal
requirements are satisfied:

         -        the securities must be offered and sold "under a plan" of
                  reorganization and must be securities of the debtors, of an
                  affiliate "participating in a joint plan" with the debtors or
                  of a successor to the debtors under the plan;

         -        the recipients of the securities must hold a pre-petition or
                  administrative expense claim against the debtors or an
                  interest in the debtors or such affiliate; and

         -        the securities must be issued entirely in exchange for the
                  recipient's claim against or interest in the debtors, or
                  "principally" in such exchange and "partly" for cash or
                  property.

                  The Debtors believe that the offer and sale of the New
Railworks Preferred Stock, the New Railworks Series B Warrants and the New
Railworks Common Stock under the Plan satisfy the requirements of section
1145(a)(1) of the Bankruptcy Code and are therefore exempt from registration
under the Securities Act and state securities laws.

                  Section 1145(a)(2) of the Bankruptcy Code exempts the offer of
a security through the offer and sale of any warrant, option or right to
subscribe that was offered and sold under a plan of reorganization in accordance
with section 1145(a)(1) of the Bankruptcy Code and the sale of a security upon
the exercise of such a warrant, option or right to subscribe. The Debtors
believe that the offer and sale of the New Railworks Series B Preferred Stock
and the New Railworks Common Stock in connection with exercise of the rights
under the New Railworks Series C Preferred Stock, the New Railworks Series B
Warrants and the New Railworks Series B Preferred Stock, as applicable, satisfy
the requirements of section 1145(a)(2) of the Bankruptcy Code, as well as (in
some cases) certain provisions of the federal securities laws, and are therefore
exempt from registration under the Securities Act and state securities laws.

                  In connection with the confirmation of the Plan, the Debtors
will seek from the Bankruptcy Court an order to the effect that:

         -        the offer and sale of the New Railworks Preferred Stock, the
                  New Railworks Series B Warrants and the New Railworks Common
                  Stock under the Plan are exempt from registration under the
                  Securities Act and state securities laws under section
                  1145(a)(1) of the Bankruptcy Code; and

         -        the offer and sale of the New Railworks Series B Preferred
                  Stock and the New Railworks Common Stock to be purchased upon
                  exercise of the rights under the New Railworks Series B
                  Warrants, the New Railworks Series B Preferred Stock and the
                  New Railworks Series C


                                       45
<PAGE>

                  Preferred Stock, as applicable, are exempt from registration
                  under the Securities Act and state securities laws under
                  section 1145(a)(2) of the Bankruptcy Code.

                  2.       SUBSEQUENT TRANSFERS UNDER FEDERAL SECURITIES LAWS

                  The New Railworks Preferred Stock, the New Railworks Series B
Warrants, the New Railworks Common Stock, and the New Railworks Common Stock
issuable upon conversion of certain of the New Railworks Preferred Stock
distributed under the Plan will not be "restricted securities" within the
meaning of Rule 144 under the Securities Act.

                  In general, all resales and subsequent transactions involving
the New Railworks Preferred Stock, the New Railworks Series B Warrants and the
New Railworks Common Stock, as applicable, offered and sold under the Plan or
upon the exercise of rights under the New Railworks Series B Warrants and the
New Railworks Preferred Stock will be exempt from registration under the
Securities Act under section 4(1) of the Securities Act, UNLESS the holder is
deemed to be an "underwriter" with respect to such securities, an "affiliate" of
the issuer of such securities or a "dealer." Section 1145(b)(1) of the
Bankruptcy Code defines four types of "underwriters":

         -        persons who purchase a claim against, an interest in, or a
                  claim for administrative expense against the Debtors with a
                  view to distributing any security received or to be received
                  in exchange for such a claim or interest ("accumulators");

         -        persons who offer to sell securities offered or sold under a
                  plan for the holders of such securities ("distributors");

         -        persons who offer to buy securities offered or sold under a
                  plan from the holders of the securities, if the offer to buy
                  is (a) with a view to distributing such securities and (b)
                  made under an agreement in connection with the plan or with
                  the offer or sale of securities under the plan; and

         -        a person who is an "issuer" with respect to the securities, as
                  the term "issuer" is defined in section 2(11) of the
                  Securities Act.

                  Under section 2(11) of the Securities Act, an "issuer"
includes any "affiliate" of the issuer, which means any person directly or
indirectly controlling or controlled by the issuer or any person under direct or
indirect common control with the issuer. Under section 2(12) of the Securities
Act, a "dealer" is any person who engages either for all or part of his or her
time, directly or indirectly, as agent, broker or principal, in the business of
offering, buying, selling or otherwise dealing or trading in securities issued
by another person. Whether or not any particular person would be deemed to be an
"underwriter" or an "affiliate" with respect to any security to be issued under
the Plan, or would be deemed a "dealer", would depend on various facts and
circumstances applicable to that person. Accordingly, the Debtors express no
view as to whether any person would be an "underwriter" or an "affiliate" with
respect to any security to be issued under the Plan or would be a "dealer."

                  In connection with prior bankruptcy cases, the staff of the
Commission has taken the position that resales by accumulators and distributors
of securities distributed under a plan of reorganization are exempt from the
registration under the Securities Act if effected in "ordinary trading
transactions." The staff of the Commission has indicated in this context that a
transaction may be considered an "ordinary trading transaction" if it is made on
an exchange or in the over-the-counter market at a time when the issuer of the
security is a reporting company under the Exchange Act and does not involve any
of the following factors:


                                       46
<PAGE>

         -        (a) concerted action by the recipients of securities issued
                  under a plan in connection with the sale of such securities,
                  or (b) concerted action by distributors on behalf of one or
                  more such recipients in connection with such sales, or (c)
                  both;

         -        use of informational documents concerning the offering of the
                  securities prepared or used to assist in the resale of such
                  securities, other than a disclosure statement and supplements
                  thereto and documents filed with the Commission under the
                  Exchange Act; or

         -        special compensation to brokers and dealers in connection with
                  the sale of such securities designed as a special incentive to
                  the resale of such securities (other than the compensation
                  that would be paid under arms' length negotiations between a
                  seller and a broker or dealer each acting unilaterally, and
                  not greater than the compensation that would be paid for a
                  routine similar-sized sale of similar securities of a similar
                  issuer).

                  The views of the Commission on these matters have not been
sought by the Debtors and, therefore, no assurance can be given regarding the
proper application of the "ordinary trading transaction" exemption described
above. Any persons intending to rely on such exemption are urged to consult
their own counsel as to the applicability thereof to their circumstances.

                  In addition, Rule 144 provides an exemption from registration
under the Securities Act for certain limited public resales of unrestricted
securities by "affiliates" of the issuer of such securities. Rule 144 allows a
holder of securities that is an affiliate of the issuer of such unrestricted
securities to sell, without registration, within any three month period a number
of shares of such unrestricted securities that does not exceed the greater of
one percent of the number of outstanding securities in question or the average
weekly trading volume in the securities in question during the four calendar
weeks preceding the date on which notice of such sale was filed under Rule 144,
subject to the satisfaction of certain other requirements of Rule 144 regarding
the manner of sale, notice requirements and the availability of current public
information regarding the issuer.

                  Under the Registration Rights Agreement, certain holders of
New Railworks Common Stock (including after deemed exercise of New Railworks
Series B Warrants and conversion of the New Railworks Series B Preferred Stock
and conversion of the New Railworks Series C Preferred Stock but excluding such
holdings solely by virtue of New Management Equity Awards) will be entitled,
under certain circumstances, to require Reorganized Railworks to register the
resale of their New Railworks Common Stock under the Securities Act. However, no
registration rights will be provided with respect to other holders of New
Railworks Common Stock. See section II.C., "Registration Rights Agreement."


                                       47
<PAGE>


 THE NEW RAILWORKS PREFERRED STOCK, THE NEW RAILWORKS SERIES B WARRANTS AND THE
   NEW RAILWORKS COMMON STOCK MAY NOT BE FREELY TRADABLE UNDER U.S. SECURITIES
                                      LAWS

              Given the complex nature of the question of whether a
          particular person may be an underwriter, the Debtors make no
           representations concerning the right of any person to trade
             in the New Railworks Preferred Stock, the New Railworks
           Series B Warrants and the New Railworks Common Stock to be
           distributed under the Plan. The Debtors recommend that any
                       person that receives New Railworks
           Preferred Stock, the New Railworks Series B Warrants and/or
          New Railworks Common Stock under the Plan consult his or her
                         own counsel concerning whether
                     they may freely trade such securities.



                  3.       SUBSEQUENT TRANSFERS UNDER STATE LAW

                  The state securities laws generally provide registration
exemptions for subsequent transfers made as part of an isolated transaction by a
bona fide owner for his or her own account and subsequent transfers to
qualifying institutional or accredited investors. Such exemptions are generally
expected to be available for subsequent transfers of New Railworks Preferred
Stock, New Railworks Series B Warrants, New Railworks Common Stock, and New
Railworks Common Stock issuable upon exercise of rights under the New Railworks
Preferred Stock.

                  Any person intending to rely on these exemptions is urged to
consult his or her own counsel as to their applicability to his or her
circumstances.

         L.       CERTAIN TRANSACTIONS BY STOCKBROKERS

                  Under section 1145(a)(4) of the Bankruptcy Code, stockbrokers
are required to deliver a copy of this Disclosure Statement (and any
supplements, if ordered by the Bankruptcy Court) at or before the time of
delivery of securities issued under the Plan to their customers for the first 40
days after the Effective Date. This requirement specifically applies to trading
and other after-market transactions in the securities.

         M.       FRACTIONAL SHARES -- DISTRIBUTION OF NEW RAILWORKS PREFERRED
                  STOCK, NEW RAILWORKS COMMON STOCK AND NEW RAILWORKS SERIES B
                  WARRANTS; CASH IN LIEU OF DE MINIMIS NEW RAILWORKS COMMON
                  STOCK DISTRIBUTIONS TO CLASS 9

                  No fractional shares of New Railworks Common Stock or New
Railworks Preferred Stock, no fractional New Railworks Series B Warrants, or
Cash in lieu thereof shall be distributed. For purposes of distribution,
fractional shares of New Railworks Common Stock or New Railworks Preferred
Stock, and fractional New Railworks Series B Warrants shall be rounded down to
the next whole number or zero, as applicable, and any percentage mentioned
herein shall be deemed to be modified to give effect to such rounding.
Notwithstanding anything to the contrary herein, in the event that Reorganized
Railworks reasonably determines that distributions of New Railworks Common Stock
to holders of Allowed Class 9 Claims could result in public filing obligations
under any applicable state, federal or non-United States securities laws,
Reorganized Railworks shall have the option of distributing Cash to holders of
Allowed Class 9 Claims in lieu of such stock (determined by smallest Allowed
Claim amount first) that would result in fewer than the threshold number of
holders of New Railworks Common Stock, such Cash to be in an amount equal to the
value as determined by the Bankruptcy Court in connection with confirmation of
the


                                       48
<PAGE>

Plan, as of the Effective Date, of the New Railworks Common Stock that otherwise
would have been distributed.

         N.       TREATMENT OF CLAIMS AND EQUITY INTERESTS

                  1.       GENERALLY

                  The Plan incorporates the compromise and settlement of various
issues that were resolved through negotiations among the Debtors, the DIP
Lenders, the Pre-Petition Lenders, Travelers, GOF and Stonehill. In connection
with these negotiations, certain of the parties have agreed that certain
distributions to which they would otherwise be entitled will be made available
to the holders of junior claims to promote confirmation of the Plan.

                  Holders of Claims against or Equity Interests in the Debtors
will receive the treatment under the Plan on account of such Claims or Equity
Interests described in the table and discussion in section I.E., "Summary of
Distributions to be Made Under the Plan".

                  2.       SETOFFS AND RECOUPMENTS

                  Except with respect to the Assumed Bonded Claims, the
Travelers Pre-Petition Bonds Claims, the Pre-Petition Lenders Claims and the
Senior Subordinated Notes Claims, the Debtors and the Reorganized Debtors may,
but shall not be required to, set off against or recoup from any Claim and the
payments to be made in respect of such Claim (for purposes of determining the
allowed amount of such Claim on which distribution shall be made), any claims of
any nature whatsoever that any of the Debtors, the Estates or the Reorganized
Debtors may have against the holder of such Claim, but neither the failure to do
so nor the allowance of any Claim hereunder shall constitute a waiver or release
by the Debtors or Reorganized Debtors of any such Claim any of the Debtors, the
Estates, or the Reorganized Debtors may have against the holder of such Claim.

                  3.       NEW RAILWORKS COMMON STOCK AMOUNT ADJUSTMENT

                  In the event Class 9 votes to reject the Plan, the 30,000
shares of New Railworks Common Stock otherwise authorized to be issued in
respect of the Class 9 Common Stock Distribution shall not be issued and the
number and relevant terms of the Plan Securities otherwise authorized to be
distributed under the Plan shall be adjusted accordingly.

                  4.       ALLOCATION OF PLAN DISTRIBUTIONS BETWEEN PRINCIPAL
                           AND INTEREST.

                  To the extent that any Allowed Claim entitled to a
distribution under the Plan is comprised of indebtedness and accrued but unpaid
interest thereon, such distribution shall be allocated to the principal amount
of the Claim first and then, to the extent the consideration exceeds the
principal amount of the Claim, to accrued but unpaid interest.

         O.       CONDITIONS TO CONFIRMATION AND CONSUMMATION

                  Under section 9.1 of the Plan, the Plan may not be confirmed
unless the proposed Confirmation Order is in form and substance acceptable to
the Debtors, the DIP Lenders, GOF and Stonehill.

                  The Debtors shall have the right to waive this condition
precedent at any time without leave of or notice to the Bankruptcy Court and
without any formal action other than proceeding with confirmation of the Plan,
subject to the consent of the DIP Lenders, GOF and Stonehill, which consent
shall not be unreasonably withheld.


                                       49
<PAGE>

                  Under section 10.1 of the Plan, the occurrence of the
Effective Date is subject to:

         -        the Exit Facility being executed and delivered consistent with
                  section 5.2 of the Plan and all conditions to the initial draw
                  thereunder having been satisfied in accordance with the terms
                  thereof;

         -        the Plan Documents to be entered into (rather than assumed) by
                  the Reorganized Debtors being executed and delivered in a form
                  reasonably satisfactory to the Debtors, the Reorganized
                  Debtors, the DIP Lenders, BoA, GOF and Stonehill;

         -        the statutory fees owing to the United States Trustee under 28
                  U.S.C.ss.1930 as of the Confirmation Date shall have been paid
                  in full;

         -        the Confirmation Order having become a Final Order;

         -        the Debtors having reserved a sufficient amount of Cash to
                  satisfy Allowed Administrative Claims due and owing as of the
                  Effective Date and Fee Claims accrued and unpaid as of the
                  Effective Date;

         -        the Debtors having sufficient Cash on hand and/or borrowing
                  availability under the Exit Facility to make all distributions
                  required on the Effective Date under the Plan; and

         -        all other actions, authorizations, consents and regulatory
                  approvals (including, without limitation, any approvals
                  required under the HSR Act) required (if any) and all Plan
                  Documents necessary to implement the provisions of the Plan
                  shall have been obtained, effected or executed in a manner
                  acceptable to the Debtors, the DIP Lenders, GOF and Stonehill
                  or, if waivable, waived by the Person or Persons entitled to
                  the benefit thereof.

                  Pursuant to section 10.2 of the Plan, if each condition to the
Effective Date has not been satisfied or duly waived within sixty (60) days
after the Confirmation Date, then (unless the period for satisfaction or waiver
of conditions has been extended at the option of the Debtors for a period not
exceeding 120 days) upon motion by any party in interest, made before the time
that each of the conditions has been satisfied or duly waived and upon notice to
such parties in interest as the Bankruptcy Court may direct, the Confirmation
Order will be vacated by the Bankruptcy Court; provided, however, that
notwithstanding the Filing of such motion, the Confirmation Order may not be
vacated if each of the conditions to the Effective Date is either satisfied or
duly waived before a Final Order granting such motion is entered by the
Bankruptcy Court. If the Confirmation Order is vacated pursuant to section 10.2
of the Plan, the Plan shall be deemed null and void in all respects, including
without limitation the discharge of Claims pursuant to section 1141 of the
Bankruptcy Code and the assumptions or rejections of executory contracts and
unexpired leases provided for herein, and nothing contained in the Plan shall
(1) constitute a waiver or release of any claims by, or Claims against, the
Debtors or (2) prejudice in any manner the rights, claims, or defenses of any
Debtor.

                  Under section 10.3 of the Plan, the Debtors shall have the
right to waive the conditions precedent to the Effective Date set forth in
section 10.1 of the Plan at any time without leave of or notice to the
Bankruptcy Court and without any formal action other than proceeding with
consummation of the Plan, subject to the consent of the DIP Lenders, GOF and
Stonehill, which consent shall not be unreasonably withheld. The failure to
satisfy or waive any condition to the Effective Date may be asserted by the
Debtors or Reorganized Debtors, regardless of the circumstances giving rise to
the failure of such condition to be satisfied (including any action or inaction
by a Debtor or Reorganized Debtor). The failure of a Debtor or Reorganized
Debtor to exercise any of the foregoing rights shall not be deemed a waiver of
any other rights, and each such right shall be deemed an ongoing right that may
be asserted at any time.


                                       50
<PAGE>

         P.       BOARD OF DIRECTORS

                  Section 5.14 of the Plan specifies that the initial Board of
Directors of Reorganized Railworks shall consist of five (5) members, three (3)
to be selected by GOF and Stonehill and two (2) to be selected by the Debtors.
Included as part of the Plan Supplement, the Debtors shall File with the
Bankruptcy Court a schedule setting forth the names of the persons to be
appointed as the directors of Reorganized Railworks under the Plan. Subject to
applicable non-bankruptcy law and any vacancy caused by death, disability or
resignation, the initial Board of Directors of Reorganized Railworks shall serve
until the first annual meeting of the holders of the New Railworks Common Stock.
Thereafter, the Board of Directors of Reorganized Railworks will be elected in
accordance with the Amended Certificate of Incorporation and Amended Bylaws and
applicable nonbankruptcy law.

                  The initial Board of Directors or other internal governing
body, as applicable, of each Reorganized Debtor other than Reorganized Railworks
shall be those directors identified on a schedule to be included in the Plan
Supplement, who shall continue in place until removed or replaced pursuant to
applicable law or in accordance with such Reorganized Debtor's corporate
governance procedures.

                  On the Effective Date, the officers of the Reorganized Debtors
shall be those officers identified on a schedule to be included in the Plan
Supplement. Such Officers shall serve in accordance with any employment
agreement with and corporate governance practice of the Reorganized Debtors and
applicable nonbankruptcy law. As set forth in Section VIII(A)(2) below,
Railworks recently has employed, subject to Bankruptcy Court approval, Mr. Ab
Rees as Chairman and Chief Executive Officer, and Mr. James Kimsey as Chief
Operating Officer. The base salaries of Mr. Rees and Mr. Kimsey are $450,000 and
$425,000, respectively. In addition to Messrs. Rees and Kimsey, it is expected
that the respective presidents of the Debtors' Product and Services and Transit
divisions, which individuals are William Donley and C.W. Moore, will continue in
their respective positions following the Effective Date. Messrs. Donley and
Moore's base salaries are $200,000 and $225,000, respectively. On or about
August 6, 2002, it was determined that that the employment of Robert Wolff,
presently president of the Debtors' Track Systems Group, would be terminated.

         Q.       COMPENSATION AND BENEFIT PROGRAMS

                  Unless terminated, on or before the Confirmation Date, all
employee compensation and benefit programs of the Debtors, including programs
subject to sections 1114 and 1129(a)(13) of the Bankruptcy Code, entered into
before or after the Petition Date shall continue after the Effective Date.
Nothing contained herein, however, shall restrict the Reorganized Debtors'
rights to modify the terms and conditions of the Debtors' compensation and
benefit programs, as otherwise permitted pursuant to the terms of the applicable
plans or non-bankruptcy law.

                  BT&E sponsors and administers the Pension Plan, a defined
benefit pension plan covered by Title IV of ERISA. Effective as of June 30,
2000, the Pension Plan was amended to cease and freeze future benefit accruals
under and new participants in the Pension Plan. BT&E intends to continue the
Pension Plan in its frozen state following the Effective Date. As part of its
continuation of the Pension Plan in its frozen state, BT&E intends to meet the
minimum funding standards under ERISA and the Internal Revenue Code, pay all
PBGC insurance premiums, and administer and operate the Pension Plan in its
frozen state in accordance with its terms and ERISA. Nothing in the Plan shall
be deemed to discharge, release, exculpate or relieve the Debtors, Reorganized
Debtors, or any other party from any current or future liability with respect to
the Pension Plan. Neither PBGC nor the Pension Plan shall be enjoined or
precluded from enforcing such liability as a result of the Plan's provisions or
confirmation.

         R.       OFFICERS' AND DIRECTORS' INDEMNIFICATION RIGHTS


                                       51
<PAGE>

                  Section 8.6 of the Plan provides that any obligation of one or
more of the Debtors, pursuant to their corporate charters and bylaws or
agreements entered into any time prior to the Petition Date, to indemnify a
Representative with respect to all present and future actions, suits and
proceedings against a Debtor or a Representative, based upon any act or omission
for or on behalf of a Debtor shall not be discharged or impaired by confirmation
or consummation of the Plan, whether or not a proof of claim was Filed;
provided, however, that the Debtors' obligations to indemnify a Representative
shall be limited (i) to the extent of available insurance coverage, and (ii) to
payment of any applicable deductibles related to such insurance coverage.

                  The extent of the Debtors' available director and officer
liability insurance coverage may be summarized as follows: (a) $25 million in
aggregate coverage (with a $5 million primary policy from National Union Fire
Insurance Co. of Pittsburgh, PA, and four $5 million excess policies provided by
various insurance providers); (b) the current coverage expires August 8, 2002,
although the Debtors are in the process of extending the existing coverage
through July 29, 2003 (although it has yet to be bound); and (c) the $5 million
primary policy is a standard claims made policy, with defense costs included in
the limits and a retention (deductible) per loss of $250,000 for securities
claims and $100,000 for all other claims.


         S.       NEW MANAGEMENT INCENTIVE AND RETENTION PROGRAM

                  Section 5.9 of the Plan provides that on the Effective Date,
Reorganized Railworks is authorized to, and shall adopt and implement, the New
Management Incentive and Retention Plan without the need for any further
corporate action or shareholder approval. On the Effective Date Reorganized
Railworks is further authorized (i) to grant restricted stock awards covering
shares of New Railworks Common Stock and (ii) to grant options to purchase
shares of New Railworks Common Stock, and to issue the shares of New Railworks
Common Stock issuable upon the exercise of such options, under the New
Management Incentive and Retention Plan in accordance with the terms therein.

                  The Debtors believe that programs like the New Management
Incentive and Retention Plan, which will be included within the Plan Supplement
and be filed at least five days prior to the Voting Deadline, are appropriate
executive retention programs that are necessary to incentivize key employees to
remain in a company's employ. Although the New Management Incentive and
Retention Plan still is being developed, none of the equity or other awards that
will be made available thereunder will be on account of any existing stock or
claims of eligible employees.

         T.       ISSUANCE AND TRANSFERS OF COMMON STOCK OF THE SUBSIDIARIES;
                  DISTRIBUTION OF NEW RAILWORKS COMMON STOCK ON BEHALF OF
                  SUBSIDIARY DEBTORS

                  Subject to any Restructuring Transactions, on the Effective
Date holders of Subsidiary Debtors Equity Interests will retain their interests.

                  The distribution of New Railworks Common Stock to the
creditors of each of the Subsidiary Debtors shall be made by Railworks on behalf
of the applicable Subsidiary Debtors. The New Railworks Common Stock so
distributed by Railworks to the creditors of a Subsidiary Debtor shall be
treated as a direct or indirect capital contribution by Railworks to the
applicable Subsidiary Debtor.

         U.       SURETY RIGHTS

                  Nothing contained in the Plan shall affect the Surety Rights
of the Pre-Petition Sureties.


                                       52
<PAGE>

         V.       TRAVELERS BONDED CLAIMS

                  All Claims and obligations bonded by Travelers prior to the
Petition Date shall become obligations of the Reorganized Debtors as provided in
the Plan. All Claims and obligations bonded by Travelers prior to the Petition
Date arising pursuant to or in connection with any executory contract previously
assumed by the Debtors shall be satisfied in accordance with the terms of such
assumption as approved by Final Order of the Bankruptcy Court. All Claims and
obligations bonded by Travelers prior to the Petition Date arising pursuant to
or in connection with any executory contract not previously assumed by the
Debtors, and all Claims and obligations bonded by Travelers prior to the
Petition Date other than pursuant to or in connection with any executory
contract shall be reinstated and satisfied in full either (i) in accordance with
the provisions of any Final Order of the Bankruptcy Court including, without
limitation, the Confirmation Order, or (ii) in accordance with their terms.

         W.       LITIGATION TRUST

                  As of the Effective Date, if, and only if, Class 9 votes to
accept the Plan, the Litigation Trust shall be created, all Litigation Trust
Claims shall be transferred thereto and the Creditors' Committee shall be
entitled to appoint the Litigation Trustee. If Class 9 votes to reject the Plan,
the Litigation Trust shall not be created, and all claims or Causes of Action
that were to constitute Litigation Trust Claims shall remain held by, and for
the benefit of, the Reorganized Debtors. The Litigation Trust shall be funded by
the Litigation Trust Financing. In no event shall the Debtors or the Reorganized
Debtors have any obligation to fund the Litigation Trust or its activities
beyond the Litigation Trust Financing. Proceeds from Litigation Trust Claims
held by the Litigation Trust shall be distributed to holders of Class 9 Claims
entitled to receive distributions from the Litigation Trust in accordance with
the terms and conditions of the Litigation Trust Agreement subject to applicable
terms and conditions of the Plan.

                  As set forth above, Litigation Trust Claims are claims for the
avoidance of any transfer by or obligation of the Estates or the Debtors under
chapter 5 of the Bankruptcy Code or the recovery of the value of such transfer;
provided, however, that no such claim shall exist against a Creditor whose claim
was paid pursuant to orders authorizing the assumption of executory contracts or
unexpired leases and orders authorizing the payment of certain pre-petition
obligations to critical vendors and service providers.

                  The Debtors have not conducted an in-depth investigation
concerning the extent, validity or potential value to these estates with respect
to Litigation Trust Claims. The Debtors note, however, that the Committee's
financial advisors, at their request, have examined and been provided access to
substantial documentation with respect to potential avoidance actions under
chapter 5 of the Bankruptcy Code. Accordingly, if Class 9 votes to accept the
Plan and the Litigation Trust is established, the Debtors expect that the
Committee and its financial advisers will be in a position to advise the
Litigation Trustee as to those Litigation Claims (if any) that may be valuable
causes of action that should be pursued. It should be noted, however, that there
can be no assurance that any valid Litigation Claims exist and that, even if
valid Litigation Claims do exist, that they would yield any significant
recoveries to creditors in these cases.

         X.       RELEASES AND INJUNCTIONS(10)

                  1.       RELEASES BY DEBTORS, REORGANIZED DEBTORS AND ESTATES.

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

(10)     The SEC Staff has taken the position that a release of third-party
         claims against third-party non-debtors under a plan of reorganization
         is generally not allowed, may be challenged in connection with
         confirmation of the Plan and generally may not be approved by a
         bankruptcy court under applicable law. To the extent that applicable
         law does not allow all or party of the releases contemplated in section
         11.6 of the Plan, only those provisions of the releases that are
         enforceable under applicable law (if any) would be effected by such
         section of the Plan.


                                       53
<PAGE>




                  SECTION 11.6.(a) OF THE PLAN PROVIDES THAT ON THE EFFECTIVE
DATE EACH OF THE DEBTORS, IN THEIR INDIVIDUAL CAPACITIES AND AS
DEBTORS-IN-POSSESSION, FOR AND ON BEHALF OF THE ESTATES, AND EACH OF THE
REORGANIZED DEBTORS, SHALL RELEASE AND DISCHARGE, ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND FOREVER, AND SHALL BE PERMANENTLY ENJOINED FROM ANY PROSECUTION
OR ATTEMPTED PROSECUTION OF, ANY AND ALL CAUSES OF ACTION ARISING FROM THE
BEGINNING OF TIME THROUGH THE EFFECTIVE DATE, EXCEPT FOR RESERVED CAUSES OF
ACTION(11), AGAINST (i) ANY REPRESENTATIVE, (ii) THE DIP LENDERS, (iii) THE
PRE-PETITION LENDERS, (iv) BOA, (v) CSFB, (vi) GOF, (vii) STONEHILL, (viii)
TRAVELERS, (ix) ANY MEMBER OF THE CREDITORS' COMMITTEE, AND ix) THE RESPECTIVE
CURRENT MEMBERS, OFFICERS, DIRECTORS, AGENTS, SUBSIDIARIES, AFFILIATES, GENERAL
AND LIMITED PARTNERS, FINANCIAL ADVISORS, INDEPENDENT ACCOUNTANTS, ATTORNEYS,
EMPLOYEES AND REPRESENTATIVES OF THE PERSONS RELEASED IN SUBCLAUSES (ii) THROUGH
(ix) OF SECTION 11.6(a) OF THE PLAN, ACTING IN SUCH CAPACITIES, IN ANY WAY
RELATING TO THE DEBTORS, THE REORGANIZATION CASES OR THE PLAN; PROVIDED,
HOWEVER, THAT THE FOREGOING SHALL NOT OPERATE AS A WAIVER OF OR RELEASE FROM ANY
CAUSES OF ACTION ARISING OUT OF (x) THE RIGHTS OF THE DEBTORS OR THE REORGANIZED
DEBTORS TO ENFORCE THE PLAN AND THE CONTRACTS, INSTRUMENTS, RELEASES, AND OTHER
AGREEMENTS OR DOCUMENTS DELIVERED THEREUNDER, (y) ANY EXPRESS CONTRACTUAL
OBLIGATION OWING BY ANY REPRESENTATIVE OR (z) ACTS OR OMISSIONS TO ACT INVOLVING
WILLFUL MISCONDUCT, RECKLESSNESS OR GROSS NEGLIGENCE.

2.       OTHER RELEASES.

                  SECTION 11.6.(b) OF THE PLAN PROVIDES THAT TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, EACH HOLDER OF A CLAIM (WHETHER OR NOT
ALLOWED) AGAINST OR EQUITY INTEREST IN THE DEBTORS, THE ESTATES OR THE
REORGANIZED DEBTORS SHALL BE ENJOINED FROM COMMENCING AND CONTINUING ANY CAUSE
OF ACTION, EMPLOYMENT OF PROCESS OR ACT TO COLLECT, OFFSET OR RECOVER AND SHALL
BE DEEMED TO RELEASE ANY CLAIM OR CAUSE OF ACTION ARISING FROM THE BEGINNING OF
TIME THROUGH THE EFFECTIVE DATE, EXCEPT FOR RESERVED CAUSES OF ACTION, AGAINST
ANY REPRESENTATIVE, ACTING IN SUCH CAPACITIES, IN ANY WAY RELATING TO THE
DEBTORS, THE REORGANIZATION CASES OR THE PLAN; PROVIDED, HOWEVER, THAT THE
FOREGOING SHALL NOT OPERATE AS A WAIVER OF OR RELEASE FROM, AND SHALL NOT ENJOIN
THE PROSECUTION OF, ANY CAUSES OF ACTION ARISING OUT OF (w) THE RIGHTS OF THE
DEBTORS OR THE REORGANIZED DEBTORS TO ENFORCE THE PLAN AND THE CONTRACTS,
INSTRUMENTS, RELEASES, AND OTHER AGREEMENTS OR DOCUMENTS DELIVERED THEREUNDER,
(x) ANY EXPRESS CONTRACTUAL OBLIGATION OWING BY ANY REPRESENTATIVE, (y) ACTS OR
OMISSIONS TO ACT INVOLVING WILLFUL MISCONDUCT, RECKLESSNESS OR GROSS NEGLIGENCE
OR (z) THE RIGHTS OF THE PENSION PLAN OR THE PBGC TO ENFORCE ANY OBLIGATIONS OF
THE DEBTORS OR OF ANY OTHER PERSON IN CONNECTION WITH THE PENSION PLAN
INCLUDING, BUT NOT LIMITED TO, LIABILITY FOR MINIMUM FUNDING CONTRIBUTIONS
REQUIRED UNDER 26 U.S.C. SS. 412, OR 29 U.S.C. SS. 1082, PREMIUM PAYMENTS TO THE
PBGC REQUIRED UNDER 29 U.S.C. SS. 1307, AND ANY OTHER LIABILITIES THAT HAVE
ARISEN OR MAY ARISE UNDER TITLE I OR TITLE IV OF ERISA IN RESPECT OF THE PENSION
PLAN.

Y.       NO RECOURSE

                  Pursuant to section 7.6 of the Plan, notwithstanding that the
allowed amount of any particular Disputed Claim is reconsidered under the
applicable provisions of the Bankruptcy Code and Bankruptcy Rules or is Allowed
in an amount for which after application of the payment priorities established
by the Plan there is insufficient value to provide a recovery equal to that
received by other

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

(11)     "Reserved Causes of Action" is defined under the Plan to mean (i) any
         and all Causes of Action against any present or former director or
         officer of any Debtor based upon his or her obligations to one or more
         of the Debtors under any promissory notes, loans or other similar
         obligations to the Debtors, including, but not limited to, expense
         reimbursement and other obligations of such directors and officers due
         and owing to the Debtors, and (ii) any and all Causes of Action against
         any present or former director or officer of any Debtor, for willful
         misconduct, recklessness or gross negligence. Under the Plan, Reserved
         Causes of Action will be preserved for and vest in the Reorganized
         Debtors. The Debtors are not aware of any Causes of Action outside the
         scope of the definition of Reserved Causes of Action that are being
         released under the Plan.


                                       54
<PAGE>

holders of Allowed Claims in the respective Class, no Claim holder shall have
recourse against the Disbursing Agent, the Debtors, the Creditors' Committee,
the DIP Lenders, BoA, CSFB, GOF, Stonehill, the Pre-Petition Lenders, Travelers,
the Reorganized Debtors, or any of their respective professionals, consultants,
officers, directors or members or their successors or assigns, or any of their
respective property. However, nothing in the Plan shall modify any right of a
holder of a Claim under section 502(j) of the Bankruptcy Code.

                  THE ESTIMATION OF CLAIMS AND ESTABLISHMENT OF RESERVES UNDER
THE PLAN MAY LIMIT THE DISTRIBUTION TO BE MADE ON INDIVIDUAL DISPUTED CLAIMS,
REGARDLESS OF THE AMOUNT FINALLY ALLOWED ON ACCOUNT OF SUCH DISPUTED CLAIMS.

         Z.       INJUNCTION

                  Section 11.8 of the Plan provides that, except as otherwise
provided in the Plan or the Confirmation Order, as of the Confirmation Date, but
subject to the occurrence of the Effective Date, all Persons who have held, hold
or may hold Claims against or Equity Interests in any of the Debtors or the
Estates are, with respect to any such Claims or Equity Interests in any of the
Debtors or the Estates, permanently enjoined from and after the Confirmation
Date from:

         -        commencing, conducting or continuing in any manner, directly
                  or indirectly, any suit, action or other proceeding of any
                  kind (including, without limitation, any proceeding in a
                  judicial, arbitral, administrative or other forum) against or
                  affecting the Debtors, the Estates or the Reorganized Debtors,
                  or any of their property, or any direct or indirect transferee
                  of any property of, or direct or indirect successor in
                  interest to, any of the foregoing Persons, or any property of
                  any such transferee or successor;

         -        enforcing, levying, attaching (including, without limitation,
                  any pre-judgment attachment), collecting or otherwise
                  recovering by any manner or means, whether directly or
                  indirectly, any judgment, award, decree or order against the
                  Debtors, the Estates or the Reorganized Debtors, or any of
                  their property, or any direct or indirect transferee of any
                  property of, or direct or indirect successor in interest to,
                  any of the foregoing Persons, or any property of any such
                  transferee or successor;

         -        creating, perfecting or otherwise enforcing in any manner,
                  directly or indirectly, any encumbrance of any kind against
                  the Debtors, the Estates or the Reorganized Debtors, or
                  against any of their property, or any direct or indirect
                  transferee of any property of, or successor in interest to,
                  any of the foregoing Persons;

         -        asserting any right of setoff, subrogation, or recoupment of
                  any kind, directly or indirectly, against any obligation due
                  to the Debtors, the Estates or the Reorganized Debtors, or
                  against any of their property, or any direct or indirect
                  transferee of any property of, or successor in interest to,
                  any of the foregoing Persons; and

         -        acting or proceeding in any manner, in any place whatsoever,
                  that does not conform to or comply with the provisions of the
                  Plan to the fullest extent permitted by applicable law.

         AA.      RELEASE OF LIENS

                  Pursuant to section 5.13 of the Plan, except as otherwise
specifically provided in or contemplated by the Plan or in any contract,
instrument or other agreement or document created in connection with the Plan,
each holder of DIP Lenders Claims, Other Secured Claims, Pre-Petition Lenders

                                       55
<PAGE>

Claims, any Claim that is purportedly secured, and/or any judgment, personal
property or ad valorem tax, mechanics', statutory or similar lien Claim, in each
case regardless of whether such Claim is an Allowed Claim, shall, on or
immediately before the Effective Date and regardless of whether such Claim has
been scheduled or proof of such Claim has been filed: (y) turn over and release
to the Debtors, the Estates or the Reorganized Debtors, as the case may be, any
and all property of a Debtor or Estate that secures or purportedly secured such
Claim, or such lien and/or Claim shall automatically, and without further action
by the Debtors, the Estates or the Reorganized Debtors, be deemed released; and
(z) execute such documents and instruments as the Disbursing Agent or the
Reorganized Debtors, as the case may be, require to evidence such Claim holder's
release of such property or lien, and if such holder refuses to execute
appropriate documents or instruments, the Debtors, the Estates or the
Reorganized Debtors (as applicable) may, in their discretion, file a copy of the
Confirmation Order in the appropriate recording office, which shall serve to
release any Claim holder's rights in such property.

                  On the Effective Date, all right, title and interest in such
property shall revert or be transferred to the respective Reorganized Debtors or
the Disbursing Agent, as applicable, free and clear of all claims and interests,
including, without limitation, liens, escrows, charges, pledges, encumbrances
and/or security interests of any kind, provided that the foregoing shall not
apply with respect to any liens that constitute Surety Rights.

                  Notwithstanding anything in section 5.13 of the Plan to the
contrary, the obligations of the DIP Lenders or the Pre-Petition Lenders to
release liens shall be conditioned upon the DIP Lenders or the Pre-Petition
Lenders receiving the distributions provided for under the Plan.

         BB.      DISCHARGE OF DEBTORS

                  Pursuant to section 11.3 of the Plan, upon the Effective Date
and in consideration of the distributions to be made under the Plan, except as
otherwise provided in the Plan, each holder (as well as any trustees and agents
on behalf of each holder) of a Claim or Equity Interest and any affiliate of
such holder shall be deemed to have forever waived, released, and discharged the
Debtors, to the fullest extent permitted by section 1141 of the Bankruptcy Code,
of and from any and all Claims, Equity Interests, rights, and liabilities that
arose prior to the Effective Date. Upon the Effective Date, all such persons
shall be forever precluded and enjoined, pursuant to sections 105, 524 and 1141
of the Bankruptcy Code, from prosecuting or asserting any such discharged Claim
against or terminated Equity Interest in the Debtors or Reorganized Debtors.
Notwithstanding the foregoing, nothing in this Plan or in the Confirmation Order
shall be deemed to discharge, exculpate, release or relieve the Debtors, the
Reorganized Debtors, any member of the Debtors' controlled groups (as defined
under 29 U.S.C. 1301(a)(14)), or any other party, in any capacity, from any
current or future liability with respect to the Pension Plan, and neither the
PBGC nor the Pension Plan shall be enjoined or precluded from enforcing any such
liability as a result of the Plan's provisions or confirmation.

         CC.      TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

                  1.       GENERAL TREATMENT.

                  Except as otherwise provided in the Plan, or in any contract,
instrument, release, indenture or other agreement or document entered into in
connection with the Plan, as of the Effective Date, each Debtor shall be deemed
to have assumed each executory contract and unexpired lease to which it is a
party, unless such contract or lease (i) was previously assumed or rejected by
such Debtor pursuant to Final Order of the Bankruptcy Court, (ii) is designated,
specifically or by category, as a contract or lease to be rejected on the
Schedule of Rejected Contracts and Leases contained in the Plan Supplement
(which Schedule shall be served upon the non-Debtor parties to the Rejected
Contracts and Leases), as such Schedule of Rejected Contracts and Leases may be
amended on written notice to affected parties from time to time prior to the
Confirmation Date to delete unexpired leases or executory contracts therefrom or
to add additional contracts


                                       56
<PAGE>

and leases thereto, (iii) is the subject of a separate motion to assume or
reject Filed under section 365 of the Bankruptcy Code by the Debtors prior to
the Confirmation Date, or (iv) is an option or warrant to purchase common stock
of any of the Debtors or a right to convert any Equity Interests into common
stock of any of the Debtors to the extent such an option, warrant, or conversion
right is determined not to be an Equity Interest. The Confirmation Order shall
constitute an order of the Bankruptcy Court under section 365 of the Bankruptcy
Code approving the contract and lease assumptions described above, as of the
Effective Date.

                  For purposes of the Plan, each executory contract and
unexpired lease that is assumed and relates to the use or occupancy of real
property, whether previously assumed pursuant to Final Order of the Bankruptcy
Court or assumed pursuant to the Plan, shall include (i) all modifications,
amendments, supplements, restatements, or other agreements made directly or
indirectly by any agreement, instrument, or other document that in any manner
affect such executory contract or unexpired lease, and (ii) all executory
contracts or unexpired leases appurtenant to the premises, including all
easements, licenses, permits, rights, privileges, immunities, options, rights of
first refusal, powers, uses, usufructs, reciprocal easement agreements, vaults,
tunnel or bridge agreements or franchises, and any other interests in real
estate or rights in rem relating to such premises to the extent any of the
foregoing are executory contracts or unexpired leases, unless any of the
foregoing agreements has been specifically rejected pursuant to a Final Order of
the Bankruptcy Court.

                  2.       CURE OF DEFAULTS

                  Except to the extent that different treatment has been agreed
to by the non-debtor party or parties to any executory contract or unexpired
lease to be assumed pursuant to section 8.1 of the Plan, the Debtors shall,
pursuant to the provisions of sections 1123(a)(5)(G) and 1123(b)(2) of the
Bankruptcy Code and consistent with the requirements of section 365 of the
Bankruptcy Code, within thirty (30) days after the Confirmation Date, File and
serve on parties to executory contracts or unexpired leases to be assumed and
other parties in interest a pleading with the Bankruptcy Court listing the cure
amounts of all executory contracts or unexpired leases to be assumed. The
parties to such executory contracts or unexpired leases to be assumed by the
Debtors or the Reorganized Debtors, as applicable, shall have fifteen (15) days
from the date of service to object to the cure amounts listed by the Debtors. If
an objection is Filed, and the parties are unable to reach a consensual
resolution of the disputed cure amount, the Bankruptcy Court shall hold a
hearing to determine the amount of the disputed cure amount. Notwithstanding the
foregoing, at all times through the date that is five (5) Business Days after
the Bankruptcy Court enters an order resolving and fixing the amount of a
disputed cure amount, the Debtors shall have the right to reject such executory
contract or unexpired lease.

                  3.       SCHEDULE OF REJECTED CONTRACTS AND LEASES

                  On the Effective Date, each executory contract and unexpired
lease listed on the Schedule of Rejected Contracts and Leases contained in the
Plan Supplement shall be rejected pursuant to section 365 of the Bankruptcy
Code, and the Confirmation Order shall so provide. Each contract or lease
listed, specifically or by category, on the Schedule of Rejected Contracts and
Leases shall be rejected only to the extent that any such contract or lease
constitutes an executory contract or unexpired lease; provided, however, that
the Debtors reserve their rights, at any time prior to the Confirmation Date and
on written notice to affected parties, to amend the Schedule of Rejected
Contracts and Leases prior to the Confirmation Date to delete unexpired leases
or executory contracts therefrom or to add additional contracts and agreements
thereto, except as would be inconsistent with the provisions of section 5.24 of
the Plan. Listing a contract or lease on the Schedule of Rejected Contracts and
Leases shall not constitute an admission by a Debtor or Reorganized Debtor that
such contract or lease is an executory contract or unexpired lease or that such
Debtor or Reorganized Debtor has any liability thereunder. The Confirmation
Order shall constitute an order of the Bankruptcy Court approving the rejections
described above, pursuant to section 365 of the Bankruptcy Code, as of the
Effective Date.


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<PAGE>

                  4.       REJECTION OF COMPLETED PROJECTS

                  Notwithstanding anything to the contrary in the Plan (other
than section 5.24 of the Plan), all Completed Projects and all executory
obligations thereunder (including warranty and/or indemnity obligations) other
than those Completed Projects explicitly set forth on the Schedule of Assumed
Completed Projects contained in the Plan Supplement (which Schedule of Assumed
Completed Projects shall be served upon the non-Debtor parties listed on such
schedule), shall be treated as executory contracts that are rejected pursuant to
section 365 of the Bankruptcy Code. Those Completed Projects and all executory
obligations thereunder (including warranty and/or indemnity obligations)
explicitly set forth on the Schedule of Assumed Completed Projects shall be
treated as executory contracts that are assumed pursuant to section 365 of the
Bankruptcy Code, and obligations thereunder shall be satisfied in the ordinary
course of business. The Debtors reserve the right to amend on written notice to
affected parties the Schedule of Assumed Completed Projects to delete or add any
Completed Project thereto, at any time prior to the Confirmation Date. The fact
that a Completed Project is listed on the Schedule of Assumed Completed Projects
shall not constitute an admission by a Debtor or a Reorganized Debtor that such
Completed Project is an executory contract or that a Debtor or Reorganized
Debtor has any liability thereunder. The Confirmation Order shall constitute an
order of the Bankruptcy Court approving the assumptions and rejections discussed
above, pursuant to section 365 of the Bankruptcy Code, as of the Effective Date.

                  5.       REJECTION CLAIMS

                  Except as otherwise ordered by the Bankruptcy Court, in the
event that the rejection of an executory contract, unexpired lease or Completed
Project by any of the Debtors pursuant to the Plan results in damages to the
other party or parties to such contract or lease, a Claim for such damages, if
not heretofore evidenced by a Filed proof of claim, shall be forever barred and
shall not be enforceable against the Debtors or the Reorganized Debtors, or
their respective properties or interests in property as agents, successors, or
assigns, unless a proof of claim has been Filed with the Bankruptcy Court and
served upon counsel for the Debtors on or before the date that is thirty (30)
days after the Effective Date or such later rejection date that occurs as a
result of a dispute concerning amounts necessary to cure any defaults.

         DD.      EXCULPATION

                  Section 11.7 of the Plan provides that, in accordance with
section 1125(e) of the Bankruptcy Code, except with respect to obligations under
the Plan and the Plan Documents, neither the Debtors, the Reorganized Debtors,
the Disbursing Agent, the DIP Lenders, BoA, CSFB, GOF, Stonehill, Travelers, the
Pre-Petition Lenders, the Creditors' Committee, nor any of their respective
members, officers, directors, employees, agents, or professionals, solely in
their capacity as such, shall have or incur any liability to any Person
whatsoever, including, without limitation, any holder of any Claim or Equity
Interest for any act or omission taken in good faith in connection with, or
arising out of, the Reorganization Cases, the formulation, preparation,
dissemination or confirmation of the Plan, the consummation of the Plan, or the
administration of the Plan or property to be distributed pursuant to the Plan,
or any contract, instrument, release, or other agreement or document created or
entered into, pursuant to or in connection with the Plan, except for willful
misconduct, recklessness or gross negligence.


                                       58
<PAGE>

                                IV. RISK FACTORS

                        IMPORTANT RISKS TO BE CONSIDERED


              HOLDERS OF CLAIMS AGAINST THE DEBTORS SHOULD READ AND
           CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS AND THE OTHER
                    INFORMATION IN THIS DISCLOSURE STATEMENT,
       THE PLAN, THE PLAN SUPPLEMENT AND THE OTHER DOCUMENTS DELIVERED OR
   INCORPORATED BY REFERENCE IN THIS DISCLOSURE STATEMENT AND THE PLAN, BEFORE
                      VOTING TO ACCEPT OR REJECT THE PLAN.

  THESE RISK FACTORS SHOULD NOT, HOWEVER, BE REGARDED AS CONSTITUTING THE ONLY
  RISKS INVOLVED IN CONNECTION WITH THE PLAN AND ITS IMPLEMENTATION. ADDITIONAL
            RISKS AND OTHER INFORMATION ABOUT RAILWORKS AND THE OTHER
              DEBTORS CAN BE FOUND IN RAILWORKS' FORM 10-KS FOR THE
                    FISCAL YEARS ENDED DECEMBER 31, 2000 AND
           DECEMBER 31, 2001, AND ITS OTHER FILINGS FROM TIME TO TIME
            WITH THE SEC, WHICH ARE INCORPORATED INTO THIS DISCLOSURE
                      STATEMENT BY REFERENCE. COPIES OF THE
            DEBTORS' SEC FILINGS MAY BE OBTAINED OVER THE INTERNET AT
                                  WWW.SEC.GOV.


         A.       THE REORGANIZED COMPANY MIGHT NOT BE ABLE TO ACHIEVE ITS
                  FINANCIAL PROJECTIONS

                  The Debtors historically have not met their projected
financial results and have failed to meet certain of their budgeted results
during these Reorganization Cases.

                  The Reorganized Company may not achieve the financial
projections upon which the Debtors have relied to develop the Plan. Failure to
meet budgeted results would likely trigger events of default under the Exit
Facility, the Exit Bonding Facility, the New Railworks Secured Loan and the New
Wood Waste Secured Loan. A default could give the Exit Lenders, Travelers and
the lenders under the New Railworks Secured Loan and the New Wood Waste Secured
Loan the right to exercise their respective remedies, including the right to
require repayment of all outstanding loans and bonds and to restrict the ability
of the Reorganized Company to borrow more money or obtain additional bonds
pursuant to the Exit Facility, the Exit Bonding Facility, the New Railworks
Secured Loan or the New Wood Waste Secured Loan, as the case may be.

                  The Reorganized Company's financial projections do not attempt
to demonstrate the viability of the business if "worst case" assumptions were
employed. If "worst case" assumptions were employed, the Reorganized Company
would not likely be able to meet its financial projections.

                  The Debtors businesses require access to capital. If the
Reorganized Company does not generate sufficient cash from operations or from
investing sources to meet its capital needs, it will lack the liquidity
necessary to operate in the ordinary course. This could have a material adverse
effect on the Reorganized Company's business, financial condition and results of
operations.

                  Additionally, as of the date of this Disclosure Statement, the
Debtors have completed only a preliminary estimate of the approximately 2,724
proofs of claim that were filed as of January 22, 2002, the Bar Date, and the
additional proofs of claim filed in connection with the March 11, 2002
Supplemental Bar Date. Distributions under the Plan and the Reorganized
Company's financial projections are impacted by the value of the Allowed Claims.
Any increase in the Debtors' Claims estimates resulting from further analysis of
the proofs of claim filed as of the Bar Date and the Supplemental Bar Date could
negatively impact the Debtors' financial projections. See section VI.B.,
"Financial Projections and Valuation Analysis" and Exhibit D.


                                       59
<PAGE>

         B.       DEPENDENCE ON CERTAIN CUSTOMERS AND RELIANCE ON ORDINARY
                  COURSE BUSINESS TERMS

                  The Debtors historically have derived a significant portion of
their revenue from their top ten customers. Approximately 37.4% and 37.8% of the
Debtors' revenue for the years ended December 31, 2000 and 2001, respectively,
were generated from their top ten customers.

                  More specifically, approximately 17.1% and 17.8% of the
Debtors' revenues for the years ended December 2000 and 2001, respectively, were
derived from projects undertaken for the New York City Transit Authority
("NYCTA") pursuant to numerous independent contracts. No other customer
accounted for more than 3.2% of the Debtors' revenue for the year ended December
31, 2001.

                  If the NYCTA or other of the Debtors' top ten customers were
to reduce the amount of business that they do with the Debtors or determine not
to do business with the Debtors in the future, it could have a material adverse
effect on the Reorganized Company's business, financial condition and results of
operations.

                  The Debtors rely on timely and regular payments from all their
customers on ordinary course business terms; therefore, the failure of the
Debtors' top customers to pay on ordinary course business terms may have a
material adverse effect on the Reorganized Company's business, financial
condition and results of operations.

         C.       COMPETITION

                  The Debtors operate in highly competitive sectors and many of
their competitors have greater resources and provide a broad range of services
and products. Moreover, many of the Debtors' competitors are likely to have
greater access to capital, including bonding capacity. In addition, there are
relatively few barriers to entry in the Debtors' businesses.

         D.       PUBLIC SECTOR CONTRACTS AND FUNDING

                  The Debtors' businesses involve contracts that are supported
by funding from federal, state and local governmental agencies, as well as
contracts with such agencies ("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. These contracts may also be subject to
significant pricing constraints. In addition, public sector contracts may
generally be terminated for reasons that are beyond the control of the
contractor. These factors or others unique to public sector contracts may have a
material adverse effect on the Reorganized Company's business, financial
condition and results of operations.

         E.       FIXED PRICE CONTRACTS; COMPETITIVE BIDDING

                  The Debtors businesses are frequently party to fixed price
contracts that are typically awarded pursuant to competitive bids. In bidding on
a project, the Debtors 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 the Debtors'
control. The Debtors' failure to predict the costs of fixed price contracts
could result in lower profits or losses on the projects. In addition, from time
to time, the Debtors may incur additional unanticipated contract costs for which
they seek recovery from customers. Recovery of such amounts involves various
uncertainties and may require extended periods of negotiation, litigation or
other costs. As a result of such uncertainties, amounts ultimately realized from
fixed price contracts may not be known for a significant period following
completion of a contract, and lower profits or losses may result. Lower profits
and losses could have a material adverse effect on the Reorganized Company's
business, financial condition and results of operations.


                                       60
<PAGE>

         F.       POSTING OF BONDS

                  The Debtors derive a substantial portion of their revenue from
contracts entered into through a competitive bid process. Many projects that are
competitively bid require the Debtors to post a bond to provide the customer
with assurances, including completion of the project, following a default by the
Debtors. The Debtors are dependent upon Travelers and other surety companies to
furnish the bonding required for such projects. If the Debtors fail to obtain
bonding, the Reorganized Company's ability to secure new business will be
significantly and adversely affected.

                  More specifically, the Reorganized Debtors anticipate
satisfying a large portion of their bonding needs after the Effective Date
through the Exit Bonding Facility. The terms and conditions of the Exit Bonding
Facility may require that Travelers function as the sole source of bonding for
the Reorganized Debtors. Under these circumstances, a failure of Travelers to
provide bonding for whatever reason, including a default under the Exit Bonding
Facility, could prevent the Reorganized Company from obtaining bonding and would
likely have a material adverse effect on the Reorganized Company's business,
financial condition and results of operation.

         G.       RELIANCE ON QUALIFIED AND SKILLED MANAGERS AND EMPLOYEES

                  Successful operation of the Debtors' businesses requires that
they attract and retain qualified and skilled managers and employees. Due to the
Reorganization Cases, the Reorganized Debtors have experienced some difficulties
with respect to recruiting and retaining qualified and skilled managers and
employees. There can be no assurance that these difficulties will be resolved by
the consummation of the Plan and the Debtors' emergence from bankruptcy. An
inability to recruit and retain such managers and employees could have a
material adverse effect on the Reorganized Company's business, financial
condition and results of operations.

         H.       RELIANCE ON SUBCONTRACTORS AND SUPPLIERS

                  In the operation of their businesses, the Debtors rely upon
subcontractors and suppliers. For certain of the Debtors' projects, only a
limited number of subcontractors and/or suppliers may be available. If
subcontractors or suppliers working for the Debtors default, or if a
subcontractor or supplier refuses or cannot do business with the Debtors, it
could have a material adverse effect on the Reorganized Company's business,
financial condition and results of operations.

         I.       UNIONIZED WORKFORCE

                  Approximately fifty percent (50%) of the Debtors' employees
are covered under collective bargaining agreements. Consequently, future strikes
or other work stoppages may negatively impact the Reorganized Company. In
addition, labor agreements are generally negotiated on an industry-wide basis
and the terms and conditions of future labor agreements could be beyond the
Reorganized Company's control. As a result, the Reorganized Company may be
subject to terms and conditions in future labor agreements that could have a
material adverse effect on the Reorganized Company's business, financial
condition and results of operations.

         J.       ENVIRONMENTAL AND OTHER GOVERNMENT REGULATION

                  The Debtors' 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 the
Debtors.


                                       61
<PAGE>

Environmental liabilities may also arise from claims asserted by adjacent
landowners or other third parties in toxic tort litigation. The Reorganized
Company will incur ongoing costs associated with environmental regulatory
compliance. In addition, the Debtors sometimes use hazardous materials in
connection with their operations. Although the Debtors believe that they
materially comply with all of the various environmental regulations applicable
to their businesses, the Reorganized Company may be faced with changed
requirements in the future that necessitate incurrence of significant additional
costs for compliance purposes.

                  In addition to safety, health and other regulations of general
applicability, the Debtors' 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
the Reorganized Company's business, financial condition and results of
operations.

         K.       THE BANKRUPTCY FILINGS MAY FURTHER DISRUPT THE DEBTORS'
                  OPERATIONS

                  The Debtors' commencement of the Reorganization Cases resulted
in the disruption of the Debtors' relationship with their customers, suppliers
and employees. The continued impact, if any, that the Reorganization Cases may
have on the operation of the Reorganized Company cannot be accurately predicted
or quantified. The Debtors believe the Reorganization Cases and consummation of
the Plan in an expeditious manner will help to minimize further adverse impacts
resulting from the bankruptcy filings on relationships with customers, employees
and suppliers, especially in view of the fact that the Plan is supported by the
Pre-Petition Lenders, GOF and Stonehill and Travelers. If, however, confirmation
and consummation of the Plan do not occur expeditiously, the Reorganization
Cases could further adversely affect the Debtors' relationships with their
customers, employees and suppliers. Moreover, even an expedited confirmation and
emergence from bankruptcy might not eliminate the detrimental impact on future
sales and patronage due to the stigma and ill will associated with the
Reorganization Cases among the Debtors' customers and suppliers.

         L.       THE DEBTORS HAVE INCURRED NET LOSSES AND THE REORGANIZED
                  COMPANY ANTICIPATES FUTURE LOSSES THROUGH DECEMBER 31, 2002

                  With the exception of the year ended December 31, 1999, the
Debtors have reported net losses since their inception in August 1998. Even if
the Reorganized Debtors achieve the results described in the financial
projections included in this Disclosure Statement, they expect to have net
losses for the fiscal year ended December 31, 2002.

         M.       THE REORGANIZED COMPANY MAY NOT BE ABLE TO MEET ITS
                  POST-REORGANIZATION OBLIGATIONS

                  The Debtors are currently highly leveraged. Although less
leveraged, the Reorganized Debtors will have substantial long-term debt as of
the Effective Date.

                  While the Debtors anticipate that the Reorganized Company will
have adequate operating cash flows to service its debt and capital expenditure
requirements, there can be no guarantee that the Reorganized Company will always
be able to meet its debt obligations. The Reorganized Company's failure to meet
its debt obligations could create a default under the Exit Facility, the Exit
Bonding Facility, the New Railworks Secured Loan and the New Wood Waste Secured
Loan.

         N.       THE REORGANIZED DEBTORS MAY HAVE LIMITED ACCESS TO ALTERNATIVE
                  SOURCES OF CAPITAL

                  As described above, there can be no assurances that the
Reorganized Debtors will always have sufficient operating cash flows to meet
their obligations as they come due. Under these circumstances,


                                       62
<PAGE>

the Reorganized Debtors may need to seek additional financing sources to satisfy
their liquidity needs. The Reorganized Debtors' access to additional capital
sources, however, may be limited as a result of, among other things, their
leveraged position and certain restrictions and limitations embodied in the
terms and conditions of the Exit Facility, the Exit Bonding Facility, the New
Railworks Secured Loan and the New Wood Waste Secured Loan.

         O.       THE REORGANIZED DEBTORS MAY NOT HAVE SUFFICIENT CASH FLOW TO
                  REPAY EXISTING DEBT OR HAVE ACCESS TO SUFFICIENT FINANCING TO
                  REFINANCE SUCH DEBT AT OR PRIOR TO MATURITY

                  As of the Effective Date, the Reorganized Debtors anticipate
that their borrowings will total not less than approximately $180 million. This
debt consists of approximately $76.8 million under the Exit Facility, inclusive
of approximately $15.0 million necessary to support letters of credit, as well
as outstanding secured indebtedness of approximately $100.0 million under the
New Railworks Secured Loan, approximately $1.0 million under the New Wood Waste
Secured Loan and approximately $1.1 million in connection with certain Other
Secured Claims that the Reorganized Debtors will Reinstate.

                  It is expected that the Exit Facility will mature no later
than 5 years from the Effective Date, that the New Railworks Secured Loan will
also mature no later than 5 years from the Effective Date and that the New Wood
Waste Secured Loan will mature no later than 3 years from the Effective Date.
Prior to the maturity of the Exit Facility, the New Railworks Secured Loan and
the New Wood Waste Secured Loan, the Reorganized Debtors may use specified
levels of excess cash flow from operations, if any, to repay such indebtedness.
However, excess cash flow from operations may be insufficient to fully repay the
Exit Facility, the New Railworks Secured Loan and/or the New Wood Waste Secured
Loan prior to or at their respective maturity dates. As a result, the
Reorganized Debtors would have to rely on external financing sources and/or a
refinancing of the Exit Facility, the New Railworks Secured Loan and/or the New
Wood Waste Secured Loan. There can be no assurance that the Reorganized Debtors
will be able to refinance this indebtedness.

         P.       THE TERMS AND CONDITIONS OF THE EXIT FACILITY, THE EXIT
                  BONDING FACILITY, THE NEW RAILWORKS SECURED LOAN AND THE NEW
                  WOOD WASTE SECURED LOAN MAY RESTRICT THE REORGANIZED COMPANY'S
                  ABILITY TO FUND ITS WORKING CAPITAL REQUIREMENTS AND TO PAY
                  DIVIDENDS

                  The Debtors' financial projections assume that proceeds of the
Exit Facility and the cash generated by the businesses of the Reorganized
Debtors will be sufficient to meet the Reorganized Debtors' working capital
needs for the foreseeable future. Nevertheless, the ability of the Reorganized
Debtors to gain access to additional capital, if needed, cannot be assured,
particularly in view of competitive factors, industry conditions and the terms
of the Exit Facility, the Exit Bonding Facility, the New Railworks Secured Loan
and the New Wood Waste Secured Loan.

                  The Debtors expect that the Exit Facility, the Exit Bonding
Facility, the New Railworks Secured Loan and the New Wood Waste Secured Loan
will contain restrictive financial and operating covenants and prohibitions,
including provisions that will limit the Reorganized Company's ability to make
capital expenditures and pay cash dividends and make other distributions to
holders of New Railworks Common Stock. Restrictions on capital investment are
expected to be more restrictive if the Reorganized Company's cash flow is lower
than projected. Failure to make necessary capital expenditures could have an
adverse effect on the Reorganized Company's ability to remain competitive.

         Q.       THE REORGANIZED COMPANY MAY NOT BE ABLE TO COMPLY WITH
                  PROVISIONS CONSTITUTING EVENTS OF DEFAULT CONTAINED IN THE
                  EXIT FACILITY, THE NEW RAILWORKS SECURED LOAN, THE NEW WOOD
                  WASTE SECURED LOAN AND THE EXIT BONDING FACILITY


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<PAGE>

                  There can be no assurance that the Reorganized Company will be
able to achieve, maintain or otherwise comply with the covenants, including
without limitation, the financial performance tests, and any other provisions
constituting an event of default under the Exit Facility, the New Railworks
Secured Loan, the New Wood Waste Secured Loan and the Exit Bonding Facility.
Moreover, any such event of default could result in a default both under any one
of the these facilities and under the other facilities as a result of
cross-default provisions. If any default were not remedied within the applicable
grace period (if any) the lenders under the Exit Facility, the New Railworks
Secured Loan and the New Wood Waste Secured Loan would be entitled to declare
the amounts outstanding thereunder due and payable, accelerate the payment of
all such amounts and likely would be entitled to foreclose upon all of the
tangible and intangible assets of Reorganized Railworks. Similarly, if any
default under the Exit Bonding Facility was not remedied, Travelers would be
entitled to, among other things, cease issuing bonds for the Reorganized
Debtors.

         R.       THE REORGANIZED COMPANY MAY NOT BE ABLE TO SECURE ORDINARY
                  COURSE TRADE TERMS

                  If the Reorganized Company is not able to obtain ordinary
trade terms from its vendors and suppliers, the Reorganized Company's cash flow
will be negatively impacted. Prior and subsequent to the Petition Date, certain
important suppliers altered a number of ordinary trade terms, including
shortening the length of time required to pay for goods and services and the
imposition of cash deposit or letter of credit requirements. The Debtors can
make no assurance that their suppliers will not impose further restrictive
pricing and trade terms and policies in the future.

         S.       THE ESTIMATED VALUATION OF THE REORGANIZED COMPANY AND THE
                  PLAN SECURITIES, AND THE ESTIMATED RECOVERIES TO HOLDERS OF
                  CLAIMS, IS NOT INTENDED TO REPRESENT THE TRADING VALUES OF THE
                  PLAN SECURITIES

                  The estimated valuation of the Reorganized Company used in
this Disclosure Statement has been prepared by Gordian based on commonly
accepted valuation methodology and is not intended to represent the trading
values of the Reorganized Company's securities in public or private markets. The
estimated recoveries under the Plan are based on this theoretical valuation.
This valuation is based on numerous assumptions, (the realization of many of
which is beyond the control of the Reorganized Company), including: (i) the
Reorganized Company's ability to meet the financial projections included with
this Disclosure Statement; (ii) the Reorganized Company's ability to maintain
sufficient financial flexibility to fund operations, working capital
requirements and capital expenditures; (iii) capital and financial market
conditions as of the date hereof; and (iv) the Reorganized Company's ability to
attract and retain key managers.

                  Even if the Reorganized Company successfully implements its
business plan and achieves the financial projections addressed within this
Disclosure Statement, the value of the Plan Securities could be adversely
impacted by, among other things: (i) the lack of a trading market for such
securities; and (b) concentrated holding and/or selling by recipients of the
Plan Securities.

         T.       RESALE OF THE PLAN SECURITIES MAY BE RESTRICTED BY LAW

                  The New Railworks Common Stock, the New Railworks Preferred
Stock, the New Railworks Series B Warrants and the New Railworks Common Stock
issuable upon the exercise of rights under the New Railworks Series B Warrants
and the conversion of the New Railworks Series B Preferred Stock and the New
Railworks Series C Preferred Stock will be distributed under the Plan without
registration under the Securities Act or any state securities laws under
exemptions from registration contained in section 1145(a) of the Bankruptcy
Code. If a holder of securities offered and sold under the Plan is deemed to be
an "underwriter" with respect to such securities (with certain exceptions for
"ordinary trading transactions" by certain persons) or an "affiliate" of the
issuer of such securities, and an exemption is not otherwise available, resales
of such securities by such holder would not be exempt from the registration
requirements under the Securities Act and securities laws under section 1145 of
the Bankruptcy Code and, accordingly, could be


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<PAGE>

effected only under an effective registration statement or a reliance on another
applicable exemption from these registration requirements. See section III.K.2.,
"Subsequent Transfers Under Federal Securities Laws".

         U.       BANKRUPTCY RISKS

                  1.       PARTIES IN INTEREST MAY OBJECT TO THE DEBTORS'
                           CLASSIFICATION OF CLAIMS.

                  Section 1122 of the Bankruptcy Code provides that a plan of
reorganization may place a claim or an interest in a particular class only if
such claim or interest is substantially similar to the other claims or interests
of such class. The Debtors believe that the classification of claims and
interests under the Plan complies with the requirements set forth in the
Bankruptcy Code. However, the Debtors cannot assure you that parties in interest
and/or the Bankruptcy Court will reach the same conclusion.

                  2.       THE COMMENCEMENT OF THE REORGANIZATION CASES MAY HAVE
                           NEGATIVE IMPLICATIONS UNDER CERTAIN CONTRACTS OF THE
                           DEBTORS.

                  The Debtors are party to various contractual arrangements
under which the commencement of the Reorganization Cases and the other
transactions contemplated by the Plan could, subject to the Debtors' rights and
powers under sections 362 and 365 of the Bankruptcy Code, (i) result in a
breach, violation, default or conflict, (ii) give other parties thereto rights
of termination or cancellation, or (iii) have other adverse consequences for the
Debtors or the Reorganized Debtors. The magnitude of any such adverse
consequences may depend on, among other factors, the diligence and vigor with
which other parties to such contracts may seek to assert any such rights and
pursue any such remedies in respect of such matters, and the ability of the
Debtors or Reorganized Debtors to resolve such matters on acceptable terms
through negotiations with such other parties or otherwise.

                  3.       THE DEBTORS MAY NOT BE ABLE TO SECURE CONFIRMATION OF
                           THE PLAN.

                  The Debtors cannot assure you that the requisite acceptances
to confirm the Plan will be received. Even if the requisite acceptances are
received, the Debtors cannot assure you that the Bankruptcy Court will confirm
the Plan. A non-accepting creditor or equity security holder of the Debtors
might challenge the balloting procedures and results as not being in compliance
with the Bankruptcy Code or Bankruptcy Rules. Even if the Bankruptcy Court were
to determine that the Disclosure Statement and the balloting procedures and
results are appropriate, the Bankruptcy Court could still decline to confirm the
Plan if it found that any of the statutory requirements for confirmation had not
been met. Section 1129 of the Bankruptcy Code sets forth the requirements for
confirmation and requires, among other things, a finding by the Bankruptcy Court
that the confirmation of the Plan is not likely to be followed by a liquidation
or a need for further financial reorganization and that the value of
distributions to non-accepting holders of claims and interests within a
particular class under the Plan will not be less than the value of distributions
such holders would receive if the Debtors were liquidated under chapter 7 of the
Bankruptcy Code. While the Debtors cannot assure you that the Bankruptcy Court
will conclude that these requirements have been met, the Debtors believe that
the Plan will not be followed by a need for further financial reorganization and
that non-accepting holders within each class under the Plan will receive
distributions at least as great as would be received following a liquidation
under chapter 7 of the Bankruptcy Code when taking into consideration all
administrative claims and the costs and uncertainty associated with any such
chapter 7 case. See the Liquidation Analysis attached hereto as Exhibit E.

                  The confirmation and consummation of the Plan are also subject
to certain conditions, including, without limitation, the Debtors having
sufficient Cash on hand and/or borrowing availability under the Exit Facility to
make all distributions required on the Effective Date under the Plan. If the
Plan is not confirmed and consummated, it is unclear whether a restructuring of
the Debtors could be implemented and what distribution holders of Claims or
Equity Interests ultimately would receive with respect to their Claims or Equity
Interests. If an alternative reorganization could not be agreed to, it is
possible that the Debtors


                                       65
<PAGE>

would have to liquidate their assets, in which case it is likely that holders of
Claims or Equity Interests would receive substantially less favorable treatment
than they would receive under the Plan.

                  4.       THE DEBTORS MAY OBJECT TO THE AMOUNT OR
                           CLASSIFICATION OF YOUR CLAIM.

                  The Debtors reserve the right to object to the amount or
classification of any Claim. The estimates set forth in this Disclosure
Statement cannot be relied on by any creditor whose Claim is subject to an
objection. Any such Claim holder may not receive its specified share of the
estimated distributions described in this Disclosure Statement.

         V.       CHANGES IN THE CASH POSITION OF THE REORGANIZED DEBTORS CAN
                  HAVE SIGNIFICANT ADVERSE EFFECTS ON THE AMOUNT AND VALUE OF
                  DISTRIBUTIONS UNDER THE PLAN

                  To the extent that the cash needs of the Reorganized Debtors
materially exceed estimates, including cash payments to be made with respect to
applicable Claims under the Plan, the value of the New Railworks Common Stock,
the New Railworks Preferred Stock and the New Railworks Series B Warrants
distributed under the Plan could be negatively impacted and thereby adversely
impact recoveries of Claim holders under the Plan.

         W.       REORGANIZED RAILWORKS DOES NOT EXPECT TO PAY ANY DIVIDENDS ON
                  THE NEW RAILWORKS COMMON STOCK FOR THE FORESEEABLE FUTURE

                  The Debtors expect that the terms of the Exit Facility, the
Exit Bonding Facility, the New Railworks Secured Loan and the New Wood Waste
Secured Loan will restrict Reorganized Railworks' ability to pay dividends, and
it is not anticipated that any cash dividends will be paid on the New Railworks
Common Stock for the foreseeable future.

         X.       CERTAIN TAX IMPLICATIONS OF THE DEBTORS' BANKRUPTCY AND
                  REORGANIZATION MAY INCREASE THE TAX LIABILITY OF REORGANIZED
                  RAILWORKS

                  The U.S. federal income tax consequences of consummation of
the Plan to holders of Claims or Equity Interests are complex and subject to
uncertainty. Certain U.S. tax attributes of the Debtors, including net operating
loss carryovers ("NOLs"), may be reduced or eliminated as a consequence of the
Plan. The elimination or reduction of NOLs and such other tax attributes may
increase the amount of tax payable by Reorganized Railworks following the
consummation of the Plan as compared with the amount of tax payable had no such
reduction been required.

                  See section IX, "Certain U.S. Federal Income Tax Consequences"
below for discussion of the U.S. federal income tax consequences for creditors,
equity holders and the Debtors and Reorganized Debtors resulting from the
consummation of the Plan.

         Y.       THE DEBTORS ARE, AND THE REORGANIZED DEBTORS WILL CONTINUE TO
                  BE, SUBJECT TO COSTS ARISING IN CONNECTION WITH REGULATION AND
                  LITIGATION

                  The Debtors are subject to various regulatory restrictions
relating to their businesses in the U.S. and other countries in which they
operate. In connection with these regulations, the Debtors and the Reorganized
Company may from time to time incur costs relating to compliance measures or
penalties imposed for non-compliance by relevant regulatory authorities, or face
restrictions on their operations. Certain regulations may also allow private
parties rights to pursue legal remedies against the Debtors or the Reorganized
Company, under which they may be required to make payments or restrict
operations. Additionally, the Debtors and the Reorganized Company are likely to
face in the normal course of their businesses from time to time other types of
legal action by private parties under which they may be required


                                       66
<PAGE>

to make significant payments for damages caused by the Debtors or the
Reorganized Company. Any such payments or restrictions could impact the
Reorganized Company's ability to meet the Projections.

                           V. CONFIRMATION OF THE PLAN

         A.       CONFIRMATION GENERALLY

                  The Bankruptcy Code requires the Bankruptcy Court to determine
whether a plan of reorganization complies with the technical requirements of
chapter 11 of the Bankruptcy Code. It further requires that a debtor's
disclosures concerning its plan of reorganization be adequate and include
information concerning all payments made or promised by the debtor in connection
with the plan.

                  If the Plan is confirmed, the Debtors expect the Effective
Date to occur not later than October 1, 2002.

                  To confirm the Plan, the Bankruptcy Court must find that all
of these and certain other requirements have been met. Thus, even if the
specified majority vote in number and dollar amount is achieved for each Class
of Impaired Claims, the Bankruptcy Court must make independent findings
respecting the Plan's conformity with the requirements of the Bankruptcy Code
before it may confirm the Plan. Some of these statutory requirements are
discussed below.

         B.       VOTING PROCEDURES AND STANDARDS

                  Holders of Claims in Classes that are "Impaired" under the
Plan (but not deemed to reject the Plan by virtue of receiving no distributions
under the Plan) will receive this Disclosure Statement, the Plan, the Voting
Procedures Order, notice of the Confirmation Hearing and a ballot for accepting
or rejecting the Plan.

                  A class is "Impaired" under a plan unless, with respect to
each claim or interest of such class, the plan:

                  -        leaves unaltered the legal, equitable and contractual
                           rights to which the claim or interest entitles the
                           holder of such claim or interest; or

                  -        notwithstanding any contractual provision or
                           applicable law that entitles the holder of such claim
                           or interest to demand or receive accelerated payment
                           on account of a default, cures any default,
                           reinstates the original maturity of the obligation,
                           compensates the holder for any damages incurred as a
                           result of reasonable reliance on such provision or
                           law and does not otherwise alter the legal, equitable
                           or contractual rights of such holder based on such
                           claim or interest.

                  A class that is not Impaired under a plan of reorganization is
deemed to have accepted the plan and, therefore, solicitation of acceptances
with respect to such class is not required.

                  The Debtors have filed a motion seeking entry of the Voting
Procedures Order to set certain procedures in connection with voting on the
Plan. If the Voting Procedures Order is approved it will set forth the
procedures to be employed in tabulating acceptances and rejections of the Plan.


                                       67
<PAGE>


                IF A BALLOT IS DAMAGED OR LOST OR IF YOU HAVE ANY
                 QUESTIONS CONCERNING VOTING PROCEDURES, YOU MAY
                       CONTACT THE DEBTORS' VOTING AGENT:

                   If by hand delivery or overnight delivery:
                           Railworks Balloting Center
                           c/o Bankruptcy Services LLC
                         70 East 55th Street, 6th Floor
                               New York, NY 10022
                                  212-376-8494

                               If by regular mail:
                               ------------------
                           Railworks Balloting Center
                           c/o Bankruptcy Services LLC
                                  P.O. Box 5014
                                   FDR Station
                             New York, NY 10150-5014

                  A VOTE MAY BE DISREGARDED IF THE BANKRUPTCY COURT DETERMINES,
AFTER NOTICE AND A HEARING, THAT SUCH ACCEPTANCE OR REJECTION WAS NOT MADE OR
SOLICITED OR PROCURED IN GOOD FAITH OR IN ACCORDANCE WITH THE PROVISIONS OF THE
BANKRUPTCY CODE.

                  UNDER THE BANKRUPTCY CODE, FOR THE PLAN TO BE "ACCEPTED," A
SPECIFIED MAJORITY VOTE IN NUMBERS OF CLAIMS AND DOLLAR AMOUNT IS REQUIRED FOR
EACH CLASS OF IMPAIRED CLAIMS. ANY IMPAIRED CLASS THAT FAILS TO ACHIEVE THE
SPECIFIED MAJORITY VOTE WILL BE DEEMED TO HAVE REJECTED THE PLAN.

         C.       ACCEPTANCE

                  The Bankruptcy Code defines acceptance of a plan by an
Impaired class of claims as acceptance by holders of at least two-thirds in
dollar amount, and more than one-half in number, of Allowed claims of that class
that actually vote. Acceptance of the Plan need only be solicited from holders
of Claims whose Claims belong to a Class that is "Impaired" and not deemed to
have rejected the Plan. See section I.C., "Voting" above. Except in the context
of a "cram down" (described below), as a condition to confirmation of the Plan,
the Bankruptcy Code requires that, with certain exceptions, each Impaired Class
accepts the Plan. If the specified majorities are not obtained, the Debtors have
the right, assuming that at least one Impaired Class has accepted the Plan, to
request confirmation of the Plan under section 1129(b) of the Bankruptcy Code.
This procedure is commonly referred to as a "cram down." For a more detailed
description of the requirements for acceptance of the Plan and of the criteria
for confirmation of the Plan notwithstanding rejection by certain Impaired
Classes, see section V.D.3., "Cram Down" below.

         D.       CONFIRMATION AND CONSUMMATION

                  At the Confirmation Hearing, the Bankruptcy Court will
determine whether the requirements of section 1129(a) of the Bankruptcy Code
have been satisfied with respect to the Plan. Confirmation of a plan under
section 1129(a) of the Bankruptcy Code requires, among other things, that:

                  -        the plan complies with the applicable provisions of
                           the Bankruptcy Code;

                  -        the proponent of the plan has complied with the
                           applicable provisions of the Bankruptcy Code;

                  -        the plan has been proposed in good faith and not by
                           any means forbidden by law;


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<PAGE>

                  -        any payment made or to be made by the proponent under
                           the plan for services or for costs and expenses in,
                           or in connection with, the chapter 11 case, or in
                           connection with the plan and incident to the case,
                           has been approved by, or is subject to the approval
                           of, the bankruptcy court as reasonable;

                  -        the proponent has disclosed the identity and
                           affiliations of any individual proposed to serve,
                           after confirmation of the plan, as a director,
                           officer, or voting trustee of the debtor, an
                           affiliate of the debtor participating in the plan
                           with the debtor, or a successor to the debtor under
                           the plan. The appointment to, or continuance in, such
                           office of such individual, must be consistent with
                           the interests of creditors and equity security
                           holders and with public policy and the proponent must
                           have disclosed the identity of any insider that the
                           reorganized debtor will employ or retain, and the
                           nature of any compensation for such insider;

                  -        with respect to each Impaired class of claims or
                           interests, either each holder of a claim or interest
                           of such class has accepted the plan, or will receive
                           or retain under the plan on account of such claim or
                           interest, property of a value, as of the effective
                           date of the plan, that is not less than the amount
                           that such holder would receive or retain if the
                           debtor were liquidated on such date under chapter 7
                           of the Bankruptcy Code;

                  -        each class of claims or interests has either accepted
                           the plan or is not Impaired under the plan;

                  -        except to the extent that the holder of a particular
                           claim has agreed to a different treatment of such
                           claim, the plan provides that allowed administrative
                           expenses and priority claims (other than priority tax
                           claims) will be paid in full on the effective date
                           (except that if a class of priority claims has voted
                           to accept the Plan, holders of such claims may
                           receive deferred cash payments of a value, as of the
                           effective date of the plan, equal to the allowed
                           amounts of such claims) and that holders of priority
                           tax claims may receive on account of such claims
                           deferred cash payments, over a period not exceeding
                           six (6) years after the date of assessment of such
                           claims, of a value, as of the effective date, equal
                           to the allowed amount of such claims;

                  -        if a class of claims is Impaired, at least one
                           Impaired class of claims has accepted the plan,
                           determined without including any acceptance of the
                           plan by any insider holding a claim in such class;
                           and

                  -        confirmation of the plan is not likely to be followed
                           by the liquidation, or the need for further financial
                           reorganization, of the debtor or any successor to the
                           debtor under the plan, unless such liquidation or
                           reorganization is proposed in the plan.

Subject to receiving the requisite votes in accordance with section 1129(a)(8)
of the Bankruptcy Code and the "cram down" of Classes not receiving any
distribution under the Plan, the Debtors believe that:

                  -        the Plan satisfies all of the statutory requirements
                           of chapter 11 of the Bankruptcy Code;

                  -        the Debtors have complied or will have complied with
                           all of the requirements of chapter 11 of the
                           Bankruptcy Code; and

                  -        the Plan has been proposed in good faith.


                                       69
<PAGE>

                  Set forth below is a more detailed summary of the relevant
statutory confirmation requirements.

                  1.       BEST INTERESTS OF HOLDERS OF CLAIMS AND INTERESTS

                  The "best interests" test requires that the Bankruptcy Court
find either

                  -        that all members of each Impaired class have accepted
                           the plan; or

                  -        that each holder of an allowed claim or interest of
                           each Impaired class of claims or interests will under
                           the plan receive or retain on account of such claim
                           or interest, property of a value, as of the effective
                           date of the plan, that is not less than the amount
                           that such holder would so receive or retain if the
                           debtor were liquidated under chapter 7 of the
                           Bankruptcy Code on such date.

                  The first step in meeting this test is to determine the dollar
amount that would be generated from the liquidation of the Debtors' assets and
properties in a chapter 7 liquidation case. The gross amount of cash available
in such a liquidation would be the sum of the proceeds from the disposition of
the Debtors' assets plus the cash held by the Debtors at the time of the
commencement of the chapter 7 case. This gross amount would be reduced by the
amount of any Allowed Claims secured by such assets, the costs and expenses of
the liquidation, and such additional administrative expenses and priority claims
that may result from the termination of the Debtors' business and the use of
chapter 7 for the purposes of liquidation. Any remaining net cash would be
allocated to creditors and equity interest holders in strict accordance with the
order of priority of claims contained in section 726 of the Bankruptcy Code.

                  THE DEBTORS HAVE DETERMINED, AS DISCUSSED IN THE LIQUIDATION
ANALYSIS ATTACHED AS EXHIBIT E HERETO, THAT CONFIRMATION OF THE PLAN WILL
PROVIDE EACH CREDITOR AND INTEREST HOLDER WITH A RECOVERY THAT IS NOT LESS THAN
IT WOULD RECEIVE PURSUANT TO A LIQUIDATION OF THE DEBTORS UNDER CHAPTER 7 OF THE
BANKRUPTCY CODE. See the Liquidation Analysis annexed as Exhibit E hereto for a
further discussion of how the Plan satisfies the "best interests" test.

                  2.       FINANCIAL FEASIBILITY

                  Section 1129(a)(11) of the Bankruptcy Code requires that
confirmation is not likely to be followed by the liquidation, or the need for
further financial reorganization, of the Debtors or any successor to the Debtors
unless such liquidation or reorganization is proposed in the Plan. Under the
terms of the Plan, the Allowed Claims potentially being paid in whole or part in
cash are the Allowed Administrative Expense Claims (approximately $1.7 million),
Allowed Fee Claims (approximately $9.3 million), Allowed Priority Tax
Claims(approximately $300,000), DIP Lenders Claims (approximately $64.3
million), Allowed Priority Non-Tax Claims (approximately $300,000) and certain
Convenience Claims (approximately $400,000). In total, the Debtors have
estimated the total amount of these cash payments to be approximately $76.3 and
expect sufficient liquidity from operations and the Exit Facility to fund these
cash payments as and when they become due.

                  The Debtors have prepared financial projections, a copy of
which is attached hereto as Exhibit D, that address the financial feasibility of
the Plan. The financial projections indicate, on a pro forma basis, that the
Reorganized Company is expected to generate EBITDA in the range of approximately
$27 million to $45.6 million for the projected years ending December 31, 2002 to
December 31, 2006. Based upon the projections, the Debtors believe that the Plan
is feasible within the meaning of the Bankruptcy Code. Please see section IV.,
"Risk Factors", for a discussion of some of the risks that could affect the
Reorganized Debtors.

                  3.       CRAM DOWN


                                       70
<PAGE>
                              CRAM DOWN BY DEBTORS

                THE DEBTORS ARE SEEKING TO CRAM DOWN THE PLAN ON
               CERTAIN HOLDERS OF CLAIMS AND EQUITY INTERESTS IN
                 IMPAIRED CLASSES DEEMED TO REJECT THE PLAN AND RESERVE
              THE RIGHT TO CRAM DOWN THE PLAN ON OTHER HOLDERS OF
              CLAIMS IN IMPAIRED CLASSES TO THE EXTENT THAT SUCH
                       IMPAIRED CLASSES REJECT THE PLAN.


                  The Bankruptcy Code contains provisions for confirmation of a
plan even if the plan is not accepted by all Impaired classes, as long as at
least one Impaired class of claims has accepted the Plan. The "cram down"
provisions of the Bankruptcy Code are set forth in section 1129(b) of the
Bankruptcy Code.

                  Under the "cram down" provisions, on the request of a plan
proponent the bankruptcy court will confirm a plan despite the lack of
acceptance by an Impaired class or classes if the bankruptcy court finds that:

                  -        the plan does not discriminate unfairly with respect
                           to each non-accepting Impaired class;

                  -        the plan is fair and equitable with respect to each
                           non-accepting Impaired class; and

                  -        at least one Impaired class has accepted the plan.

                  These standards ensure that holders of junior interests, such
as common stockholders, cannot retain any interest in the debtor under a plan
of reorganization that has been rejected by a senior Impaired class of claims
or interests unless the claims or interests in that senior Impaired class are
paid in full.

                  As used by the Bankruptcy Code, the phrases "discriminate
unfairly" and "fair and equitable" have narrow and specific meanings unique to
bankruptcy law. A plan does not discriminate unfairly if claims or interests in
different classes but with similar priorities and characteristics receive or
retain property of similar value under a plan. By establishing separate Classes
for the holders of each type of Claim and by treating each holder of a Claim in
each Class similarly, the Plan has been structured so as to meet the "unfair
discrimination" test of section 1129(b) of the Bankruptcy Code.

                  The Bankruptcy Code sets forth different standards for
establishing that a plan is "fair and equitable" with respect to a dissenting
class, depending on whether the class is comprised of secured or unsecured
claims. In general, section 1129(b) of the Bankruptcy Code permits confirmation
notwithstanding non-acceptance by an Impaired class if that class and all
junior classes are treated in accordance with the "absolute priority" rule,
which requires that the dissenting senior class be paid in full before a junior
class may receive anything under the plan. In the Reorganization Cases, it is
currently anticipated that the holders of Claims in the senior Impaired class
-- the holders of Non-Exit Lenders Pre-Petition Claims and Exit Lenders
Pre-Petition Lenders Claims -- will consent to the Plan. In addition, because
the holders of Claims in Classes 8 and 9 are being treated fairly, equitably
and in a non-discriminatory manner, and no junior class below such Classes is
receiving any distribution under the Plan, the Debtors will seek to confirm the
Plan regardless of whether holders of Claims in Classes 8 and 9 vote to accept
the Plan.

                  With respect to a Class of unsecured claims that does not
accept the Plan, the Debtors must demonstrate to the Bankruptcy Court that
either:


                                      71
<PAGE>


                  -        each holder of an unsecured claim in the dissenting
                           Class receives or retains under such Plan property
                           of a value equal to the allowed amount of its
                           unsecured claim; or

                  -        the holders of claims or holders of interests that
                           are junior to the claims of the holders of such
                           unsecured claims will not receive or retain any
                           property under the Plan.

Additionally, the Debtors must demonstrate that no class senior to a
non-accepting Impaired class receives more than payment in full on its claims.

                  If one of the Classes of Convenience Claims or Unsecured
Claims votes to reject the Plan, the Plan is designed to nevertheless satisfy
these standards, because the holders of Equity Interests, Existing Securities
Law Claims and 510(c) Claims will receive no recovery under the Plan and no
Class will receive more than payment in full on Claims in its Class.

                  If all the applicable requirements for confirmation of the
Plan are met as set forth in sections 1129(a)(1) through (13) of the Bankruptcy
Code, except that one or more Classes of Impaired Claims have failed to accept
the Plan under section 1129(a)(8) of the Bankruptcy Code, the Debtors will
request that the Bankruptcy Court confirm the Plan under the "cram down"
procedures in accordance with section 1129(b) of the Bankruptcy Code. The
Debtors believe that the Plan satisfies the "cram down" requirements of the
Bankruptcy Code, but cannot assure you either that the Bankruptcy Court will
determine that the Plan meets the requirements of section 1129(b) of the
Bankruptcy Code or that at least one Impaired Class of Claims will vote to
accept the Plan, as required for confirmation of a Plan under the "cram down"
procedures.

                  4.       CLASSIFICATION OF CLAIMS AND INTERESTS

                  The Debtors believe that the Plan meets the classification
requirements of the Bankruptcy Code that require that a plan of reorganization
place each claim or interest into a class with other claims or interests that
are "substantially similar."

                        VI. CERTAIN EFFECTS OF THE PLAN

         A.       REORGANIZED RAILWORKS

                  On or before the Effective Date, Reorganized Railworks shall
file the Amended Certificate of Incorporation and, subject to the Restructuring
Transactions, if any, an amended certificate of incorporation or other
appropriate organization documents for each of the Reorganized Debtors (other
than Reorganized Railworks) with the applicable Secretary of State. Such
amended certificates of incorporation shall prohibit the issuance of nonvoting
equity securities, as required by sections 1123(a) and (b) of the Bankruptcy
Code, subject to further amendment as permitted by applicable law. The Amended
Bylaws shall be deemed adopted by the Board of Directors of Reorganized
Railworks as of the Effective Date.

                  On the Effective Date, all matters provided for under the
Plan that would otherwise require approval of the stockholders, directors or
members of one or more of the Debtors or Reorganized Debtors or their
successors in interest under the Plan, including, without limitation, entry
into the Exit Facility, the Exit Bonding Facility, the New Railworks Secured
Loan and the New Wood Waste Secured Loan, the Management Rights Agreement, the
Registration Rights Agreement and the Litigation Trust Agreement, the issuance
of New Railworks Common Stock, New Railworks Preferred Stock and New Railworks
Series B Warrants and documents relating thereto, options pursuant to the
Management Incentive Plan, the amendment and restatement of certificates of
incorporation and bylaws of the Reorganized Debtors, corporate mergers or
dissolutions effectuated pursuant to the Plan, and the election or appointment,
as the case may be, of directors and officers of the Debtors pursuant to the
Plan, shall be taken without such authorizations pursuant to section 303 of the
General Corporation Law of the State of Delaware, in the case


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of the Debtors and Reorganized Debtors incorporated in the State of Delaware,
and, in the case of Debtors and Reorganized Debtors organized outside the State
of Delaware, pursuant to the applicable general corporation law of such other
jurisdictions.

                  On the Effective Date, pursuant to sections 1141(b) and (c)
of the Bankruptcy Code, except for leases and executory contracts that have not
yet been assumed or rejected (which leases and contracts shall be deemed vested
when and if assumed) and, if applicable, the Litigation Trust Claims
transferred to the Litigation Trust, all property of the Estates shall vest in
one or more of the Reorganized Debtors free and clear of all Claims, liens,
encumbrances, charges, and other interests, except as provided in the Plan.
Except as may otherwise be ordered by the Bankruptcy Court, the Debtors shall
have the right to cause any property of any Estate to vest in the Reorganized
Debtor designated for such purpose by the Debtors. From and after the Effective
Date, the Reorganized Debtors may operate their businesses and may use,
acquire, and dispose of property free of any restrictions of the Bankruptcy
Code or the Bankruptcy Rules and in all respects as if there were no pending
cases under any chapter or provision of the Bankruptcy Code, except as provided
in the Plan.

         B.       FINANCIAL PROJECTIONS AND VALUATION ANALYSIS

                    ACTUAL RESULTS MAY NOT MEET PROJECTIONS

     THE PROJECTIONS IN THIS DISCLOSURE STATEMENT ARE BASED ON A NUMBER OF
 SIGNIFICANT ASSUMPTIONS DESCRIBED BELOW. ACTUAL OPERATING RESULTS AND VALUES
MAY VARY FROM THOSE PROJECTED. SEE SECTION IV, "RISK FACTORS", FOR A DISCUSSION
        OF SOME OF THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO VARY.

   THE PROJECTIONS CONTAINED IN THIS DISCLOSURE STATEMENT HAVE BEEN PREPARED
     EXCLUSIVELY BY THE DEBTORS' MANAGEMENT (WITH THE ASSISTANCE OF THEIR
     FINANCIAL ADVISERS, GLASS & ASSOCIATES, INC.) IN CONNECTION WITH THE
                           DEVELOPMENT OF THE PLAN.

     THE PROJECTIONS UPON WHICH GORDIAN RELIED IN PERFORMING ITS VALUATION
        ANALYSES DO NOT CONTEMPLATE ANY SIGNIFICANT ASSET DISPOSITIONS.
   GORDIAN UNDERSTANDS THAT THE DEBTORS CURRENTLY ARE IN DISCUSSIONS WITH A
   POTENTIAL PURCHASER OF THE DEBTORS' BUSINESS AND ASSETS RELATING TO THEIR
   GANTREX OPERATIONS (SEE SECTION VIII(A)(7) OF THE DISCLOSURE STATEMENT).
 IN THE EVENT THAT THE DEBTORS AGREE TO DEFINITIVE DOCUMENTATION WITH RESPECT
      TO A SIGNIFICANT ASSET DISPOSITION, GORDIAN WOULD HAVE TO REVIEW AND
  ANALYZE THE IMPACT OF THE CONSUMMATION OF ANY SUCH TRANSACTION TO DETERMINE
          ITS EFFECT (IF ANY) UPON GORDIAN'S CONCLUSIONS AS TO VALUE.

 THE PROJECTIONS ASSUME THE PLAN AND THE TRANSACTIONS IT CONTEMPLATES WILL BE
IMPLEMENTED IN ACCORDANCE WITH THEIR TERMS. THESE PROJECTIONS, WHILE PRESENTED
WITH NUMERICAL SPECIFICITY, ARE NECESSARILY BASED ON A VARIETY OF ESTIMATES AND
ASSUMPTIONS THAT, THOUGH CONSIDERED REASONABLE BY DEBTORS' MANAGEMENT, MAY NOT
 BE REALIZED, AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND
  COMPETITIVE UNCERTAINTIES AS WELL AS OTHER UNCERTAINTIES AND CONTINGENCIES,
  MANY OF WHICH ARE BEYOND THE DEBTORS' CONTROL. SUCH UNCERTAINTIES AND OTHER
FACTORS INCLUDE THE REORGANIZED DEBTORS' ABILITY TO PROVIDE THEIR SERVICES AND
   PRODUCTS, ACCESS TO ADEQUATE FINANCING, ABILITY TO ATTRACT AND RETAIN KEY
MANAGEMENT PERSONNEL, GENERAL ECONOMIC CONDITIONS, AND OTHER FACTORS, INCLUDING
             THOSE RISKS DISCUSSED IN THIS SECTION AND SECTION IV.


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<PAGE>


       THE DEBTORS CAUTION THAT NO REPRESENTATIONS CAN BE MADE AS TO THE
     ACCURACY OF THE PROJECTIONS OR TO THE DEBTORS' ABILITY TO ACHIEVE THE
      PROJECTED RESULTS. SOME ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE.
     FURTHER, EVENTS AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON
        WHICH THE PROJECTIONS WERE PREPARED MAY BE DIFFERENT FROM THOSE
      ASSUMED OR, ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED, AND THUS THE
     OCCURRENCE OF THESE EVENTS MAY AFFECT FINANCIAL RESULTS IN A MATERIAL
      AND POSSIBLY ADVERSE MANNER. THE PROJECTIONS, THEREFORE, MAY NOT BE
       RELIED UPON AS A GUARANTY OR OTHER ASSURANCE OF THE ACTUAL RESULTS
                                THAT WILL OCCUR.

       MOREOVER, AS OF THE DATE OF THIS DISCLOSURE STATEMENT, THE DEBTORS
     HAVE COMPLETED ONLY A PRELIMINARY ESTIMATE OF THE APPROXIMATELY 2,724
     PROOFS OF CLAIM THAT WERE FILED AS OF THE BAR DATE AND THE ADDITIONAL
      PROOFS OF CLAIMS THAT WERE FILED IN CONNECTION WITH THE SUPPLEMENTAL
          BAR DATE. BECAUSE DISTRIBUTIONS UNDER THE PLAN AND ESTIMATED
        RECOVERIES TO CREDITORS ARE LINKED TO THE AMOUNT OF THE ALLOWED
       CLAIMS, ANY CHANGE IN THE DEBTORS' CLAIMS ESTIMATES RESULTING FROM
      FURTHER ANALYSIS OF THE PROOFS OF CLAIM FILED AS OF THE BAR DATE AND
          THE SUPPLEMENTAL BAR DATE COULD IMPACT CREDITOR RECOVERIES.

                  The Projections set forth in Exhibit D and the valuations set
forth below are based on a number of significant assumptions including, among
other things, the successful reorganization of the Debtors, an assumed
Effective Date of October 1, 2002, no significant downturn in the specific
markets in which the Debtors operate and capital market conditions as they
currently exist. The Projections are also based upon assumptions as to taxes,
which may ultimately prove to be conservative.

          In connection with the allocation of the distributions under the
Plan, the Debtors determined that it was necessary to estimate reorganization
values for Reorganized Railworks to provide for equitable distribution among
Classes of Claims. Accordingly, the investment banking firm of Gordian Group,
LLC ("Gordian") was engaged to prepare a valuation analysis of the Reorganized
Company. In preparing such valuation analysis, Gordian relied upon and assumed
the accuracy and completeness of the Projections and all of the other financial
and other information provided to it by the Debtors.

                  THE VALUATIONS SET FORTH HEREIN REPRESENT ESTIMATED
FULLY-DISTRIBUTED REORGANIZATION VALUES AND DO NOT NECESSARILY REFLECT VALUES
THAT COULD BE ATTAINABLE IN PUBLIC OR PRIVATE MARKETS. THE EQUITY VALUE SET
FORTH IN THE ANALYSIS DOES NOT PURPORT TO BE AN ESTIMATE OF THE
POST-REORGANIZATION MARKET VALUE. SUCH MARKET VALUE, IF ANY, MAY BE MATERIALLY
DIFFERENT FROM THE REORGANIZATION VALUE RANGES ASSOCIATED WITH THE GORDIAN
VALUATION ANALYSIS. THE REORGANIZATION EQUITY VALUE ALSO DOES NOT REFLECT ANY
"CONTROL PREMIUM" THAT COULD BE ACCORDED TO THE UNDERLYING SECURITIES, GIVEN
THE CONCENTRATION OF OWNERSHIP AS OF THE REORGANIZATION DATE.

                  ESTIMATES OF VALUE DO NOT PURPORT TO BE APPRAISALS NOR DO
THEY NECESSARILY REFLECT THE VALUES THAT MAY BE REALIZED IF THE REORGANIZED
COMPANY WERE SOLD. THE ESTIMATES OF VALUE REPRESENT HYPOTHETICAL VALUES
ASSUMING THE SUCCESSFUL IMPLEMENTATION OF THE REORGANIZED COMPANY'S BUSINESS
STRATEGIES, AS WELL AS OTHER SIGNIFICANT ASSUMPTIONS. SUCH ESTIMATES WERE
DEVELOPED SOLELY FOR PURPOSES OF ANALYZING THE PROJECTED RECOVERIES UNDER THE
PLAN.

                  1.       VALUATION

                  Various methodologies were used to derive the reorganization
value of the Reorganized Company, including:

                  -        an analysis of comparable public companies and M&A
                           transactions; and

                  -        a discounted cash flow analysis of the free cash
                           flows under the Projections, including assumptions
                           as to terminal value.


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<PAGE>


                  The comparable approach involved identifying a group of
publicly traded companies whose growth prospects and principal characteristics
are reasonably similar to those of the Debtors as a whole or significant
portions of the Debtors' operations, and then calculating ratios (multiples) of
various financial results to the public market values of these companies. In
addition, ratios (multiples) of various financial results to the consideration
paid for acquisitions of companies whose growth prospects and principal
characteristics are reasonably similar to those of the Debtors as a whole or
significant portions of the Debtors' operations were analyzed. The ranges of
ratios (multiples) derived through these two methods were then applied to the
Reorganized Company's projected financial results to derive a range of implied
enterprise values for the Reorganized Company. In estimating reorganization
value under this approach, Gordian selected a range of financial multiples for
publicly traded companies as well as M&A transactions, and applied such
valuation multiples to the Reorganized Company's projected results.

                  The discounted cash flow approach involved deriving the
unlevered free cash flows (before debt service) that the Reorganized Company
would generate over a certain projected period assuming the Projections were
realized. These cash flows, and an estimated value of the Reorganized Company
at the end of the projected period, were discounted to the present using a
range of weighted average costs of capital for the Reorganized Company to
determine a range of enterprise values for the Reorganized Company. In
estimating reorganization value under this approach, Gordian considered a range
of discount rates from 8% to 14% and calculated terminal values based upon,
among other factors, perpetual growth rates for the free cash flow in the
terminal year. Selection of these discount rates reflected, among other
considerations, current market conditions and the relative risks believed to be
associated with the Reorganized Company, including assessments as to the
achievability of the Projections.

                  Gordian has assisted the Debtors in allocating values among
the various business units, based largely upon relative cash flow
contributions. Such allocation was based upon information provided by the
Debtors with respect to estimates of corporate overhead that would need to be
incurred by each business unit were such unit a stand-alone entity. Gordian did
not independently value each such business unit in the context of a potential
piecemeal sale of the units, nor did Gordian evaluate the proceeds that could
be realized by the Debtors in the context of a sale pursuant to Chapter 7 of
the Bankruptcy Code.

                  Gordian also notes that the Debtors have recently changed
senior management, and that Gordian has not met with the new senior management.
The Projections, on which Gordian's valuation was based, were developed
pursuant to the directions of prior senior management. Accordingly, it is
possible that new senior management could take steps, or have views, that would
impact the Projections and related valuations, and that such effects could be
material. Gordian reserves the right to revise its valuation views as a result
of (i) discussions, if any, with the Debtors' new senior management or (ii)
further due diligence with respect to the impact on the Projections, if any,
due to the recent senior management change.

                  Based on the methods and assumptions described above, Gordian
believes the Enterprise Value, as of October 1, 2002, is between $185.0 million
and $235.0 million, with a midpoint value of approximately $210.0 million.

                  The Enterprise Value is highly dependent upon assumptions
regarding the prospect of achieving the results set forth in the Projections,
as well as the realization of certain other assumptions that are not
guaranteed.

                  As a result of the consummation of the Plan and the
transactions contemplated by the Plan, the financial condition and results of
operations of the Reorganized Company from and after the Effective Date will
not be comparable to the financial condition or results of operations reflected
in the historical financial statements of the Debtors contained in the Plan and
in the Exhibits attached hereto, in the Plan Supplement and in public filings
with the SEC.


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<PAGE>


                  To derive the Equity Value, the fair market value of the
estimated net indebtedness of the Reorganized Company at the Effective Date was
deducted from the Enterprise Value. Such assessment was confirmed by performing
a discounted cash flow analysis using leveraged cash flows.

                  The fair market value of the Exit Facility, the New Wood
Waste Secured Loan and other secured debt are estimated to be equal to their
face value. The face amount and fair market value of the Exit Facility as of
the Effective Date is $66.8 million (based on a $35.0 million Term Facility and
$31.8 million assumed to be drawn on the Revolving Facility as of the Effective
Date). The fair market value of the New RailWorks Secured Loan is estimated to
be less than its face value of $100 million. Gordian believes that the rate of
return on the New RailWorks Secured Loan (which consists of a coupon of one,
two, three or six-month LIBOR plus 4.0% per annum, as well as certain extension
fees) is below market rates for debt instruments with similar risk
characteristics. Based on comparable securities analysis, Gordian believes that
the market rate of return for a debt instrument with the risk characteristics
of the New RailWorks Secured Loan is in the range of 10% to 14%, with a
midpoint of 12%. Assuming the New RailWorks Secured Loan required a yield to
maturity equal to this midpoint and final maturity of 5 years, the fair market
value of the New RailWorks Secured Loan would be $94.5 million.

                   Deducting the fair market value of the foregoing
indebtedness from the Reorganized Company's Enterprise Value results in an
estimated Total Equity Value of the Reorganized Company of between $21.6
million and $71.6 million, with a midpoint value of $46.6 million.

                  The estimated Total Equity Value was then allocated among the
New RailWorks Series A Preferred Stock, the New RailWorks Series B Preferred
Stock, the New RailWorks Series B Warrants, the New RailWorks Series C
Preferred Stock and the New RailWorks Common Stock.

                  In performing such allocation, the New RailWorks Series A
Preferred Stock was deemed to have only speculative value, as it has no rights
to receive any dividends, no rights of conversion and no rights of redemption.
Furthermore, the New RailWorks Series A Preferred Stock shall automatically
cease to be outstanding with no payment thereon upon (x) written notice of a
bona fide public offering, the net proceeds of which exceed $20 million, or (y)
the event of a merger, stock sale or consolidation under which the New
RailWorks Secured Loan is paid or the requisite lenders thereunder have
consented and after which stockholders do not retain a majority of the voting
power and capital stock in the surviving corporation or sale of all or
substantially all assets under which the New RailWorks Secured Loan is paid or
the requisite lenders thereunder have consented.

                  The New RailWorks Series B Preferred Stock will not be issued
as of the Effective Date. Rather, prospective holders of the Series B Preferred
Stock will receive New RailWorks Series B Warrants as of the Effective Date.
These warrants were valued, in part, as out-of-the money call options using the
Black-Scholes model. Subject to certain assumptions, including a New RailWorks
Common Stock price per share of $39.12, a strike price of $119 per share, a 10
year maturity, a 5% continuously compounded risk-free interest rate and a
volatility of 50%, these warrants were valued pursuant to the Black-Scholes
model at $17.07 per share, or $3.0 million in aggregate.

                  The New RailWorks Series C Preferred Stock was valued
primarily based on comparable securities analysis. An analysis performed on
certain publicly-traded convertible securities with valuation parameters
roughly comparable to those of the Reorganized Company at the valuation
midpoint, revealed that they tend to have breakeven periods in the range of 2.5
to 6.5 years, conversion premiums in the range of 25% and 65%, and yields to
maturity in the range of 4% and 8%. Using these parameters to value the New
RailWorks Series C Preferred Stock yielded a value of $34.5 million, based upon
the midpoint Total Equity Value of $46.6 million.

                  The forgoing analysis of the New RailWorks Series C Preferred
Stock was necessarily based upon a simultaneous estimate of the value of the
New RailWorks Common Stock. In the case where the


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<PAGE>


value of the New RailWorks Series C Preferred Stock was $34.5 million, the
value of the New RailWorks Common Stock would be $9.1 million, or $39.12 per
share, assuming 233,333 shares of common stock issued and outstanding. If Class
9 votes to reject the Plan, then holders of Allowed Unsecured Claims would not
receive any distributions under the Plan and the value of the distribution they
would have received had they voted in favor of the Plan, $1.2 million, would be
reallocated to other constituencies.

                  At the low end of the Total Equity Value range of $21.6
million, Gordian estimates that the New RailWorks Series C Preferred Stock
would be valued at $18.5 million, while the New RailWorks Common Stock would be
valued at $2.7 million, or $11.58 per share, assuming 233,333 shares of common
stock issued and outstanding. If Class 9 votes to reject the Plan, then holders
of Allowed Unsecured Claims would not receive any distributions under the Plan
and the value of the distribution they would have received had they voted in
favor of the Plan, $0.3 million, would be reallocated to other constituencies.

                  At the high end of the Total Equity Value range of $71.6
million, Gordian estimates that the New RailWorks Series C Preferred Stock
would be valued at $49.0 million, while the New RailWorks Common Stock would be
valued at $15.9 million, or $68.13 per share, assuming 233,333 shares of common
stock issued and outstanding. If Class 9 votes to reject the Plan, then holders
of Allowed Unsecured Claims would not receive any distributions under the Plan
and the value of the distribution they would have received had they voted in
favor of the Plan, $2.0 million, would be reallocated to other constituencies.

                   The New Management Options were not included in the
foregoing analyses because their strike price has not yet been determined.

                  The Projections assume that certain insurance related claims
would be backstopped by a $15.0 million letter of credit. It is possible that
the Debtors would not be able to obtain such letter of credit and would have to
draw down on the Revolving Facility to cash collateralize these obligations. If
so, the Total Equity Value, the New RailWorks Series B Warrants value, the New
RailWorks Series C Preferred Stock value and the New RailWorks Common Stock
value cited above would be adversely affected.

            NOTE ON ESTIMATES OF VALUE IN THIS DISCLOSURE STATEMENT

         Estimates of value do not purport to be appraisals nor do they
       necessarily reflect the values that may be realized if individual
      assets of the Reorganized Company or the entire Reorganized Company
         were to be sold. The estimates of value represent hypothetical
           enterprise values for the Reorganized Company assuming the
       implementation of the Reorganized Company's business strategies as
      well as other significant assumptions. Such estimates were developed
      by the Debtors solely for purposes of formulating and negotiating a
      plan of reorganization and analyzing the projected recoveries under
       the Plan and should not be viewed as an estimate of the prices at
       which the securities of the Reorganized Company will trade on the
                       public or private capital markets.

         C.       THE ROLE OF THE CREDITORS' COMMITTEE

                  On the Effective Date, the duties of the Creditors' Committee
will terminate and the Creditors' Committee will dissolve.


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<PAGE>


         D.       POST-CONFIRMATION JURISDICTION OF THE BANKRUPTCY COURT

                  On and after the Effective Date, the Bankruptcy Court will
retain jurisdiction over all matters arising in, arising under, and related to
the Reorganization Cases for, among other things, the following purposes:

                  (a)      To hear and determine applications for the
assumption or rejection of executory contracts or unexpired leases and the
allowance of Claims resulting therefrom.

                  (b)      To determine any motion, adversary proceeding,
avoidance action, application, contested matter, and other litigated matter
pending on or commenced after the Confirmation Date.

                  (c)      To ensure that distributions to holders of Allowed
Claims are accomplished as provided herein.

                  (d)      To consider Claims or the allowance, classification,
priority, compromise, estimation, or payment of any Claim, Administrative
Expense Claim, or Equity Interest.

                  (e)      To enter, implement, or enforce such orders as may
be appropriate in the event the Confirmation Order is for any reason stayed,
reversed, revoked, modified, or vacated.

                  (f)      To issue injunctions, enter and implement other
orders, and take such other actions as may be necessary or appropriate to
restrain interference by any person with the consummation, implementation, or
enforcement of the Plan of Reorganization, the Confirmation Order, or any other
order of the Bankruptcy Court.

                  (g)      To hear and determine any application to modify the
Plan in accordance with section 1127 of the Bankruptcy Code, to remedy any
defect or omission or reconcile any inconsistency in the Plan, the Disclosure
Statement, or any order of the Bankruptcy Court, including the Confirmation
Order, in such a manner as may be necessary to carry out the purposes and
effects thereof.

                  (h)      To hear and determine all Fee Claims.

                  (i)      To hear and determine disputes arising in connection
with the interpretation, implementation, or enforcement of the Plan, the
Confirmation Order, any transactions or payments contemplated hereby, or any
agreement, instrument, or other document governing or relating to any of the
foregoing.

                  (j)      To hear and determine disputes arising in connection
with the adjudication of Surety Rights with respect to Claims and obligations
arising prior to the Effective Date.

                  (k)      To take any action and issue such orders as may be
necessary to construe, enforce, implement, execute, and consummate the Plan,
including any release or injunction provisions set forth herein, or to maintain
the integrity of the Plan following consummation.

                  (l)      To determine such other matters and for such other
purposes as may be provided in the Confirmation Order.

                  (m)      To hear and determine matters concerning state,
local, and federal taxes in accordance with sections 346, 505, and 1146 of the
Bankruptcy Code.

                  (n)      To hear and determine any other matters related
hereto and not inconsistent with the Bankruptcy Code, title 28 of the United
States Code and other applicable law.


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<PAGE>


                  (o)      To enter a final decree closing the Reorganization
Cases.

                  (p)      To recover all assets of the Debtors and property of
the Estates, wherever located.

                  (q)      To hear and determine fees and expenses of the
Indenture Trustee in accordance with section 5.9 of the Plan.

                  (r)      To hear and determine disputes regarding Litigation
Trust Claims and/or the administration and/or activities of the Litigation
Trust.

                          VII. HISTORICAL INFORMATION

         A.       BUSINESS AND SIGNIFICANT RECENT EVENTS

                  Railworks was formed in March 1998. In August 1998, through
its initial public offering, Railworks acquired in separate concurrent
transactions fourteen (14) groups of companies. Since that time, Railworks has
acquired an additional twenty-one (21) companies or groups of companies.

                  Railworks is a leading provider of integrated rail system
services and products to a diverse base of customers throughout North America.
It provides a full range of rail-related services and products on a "turnkey"
basis and offers rail system solutions under the "RailWorks" brand. Railworks
provides:

                  -        track construction, rehabilitation, repair and
                           maintenance;

                  -        installation of electrification, communication and
                           signaling equipment and systems for rail
                           applications; and

                  -        related products and services.

                  Railworks provides these services to a wide variety of
customers, including Class I, regional and shortline railroads, passenger rail
and rail transit authorities and commercial and industrial companies. Railworks
also provides non-rail products and services such as electrical contracting,
bridge and highway support structures and related concrete products to public
agencies, commercial, power and industrial customers.

         B.       EVENTS LEADING TO CHAPTER 11 AND THE NEED TO REORGANIZE

                  In September 2000, Railworks announced that it had terminated
a pending going private transaction, and decided to suspend its acquisition
program and initiate a strategic review of its operations. The resulting
restructuring plan contemplated reducing headcount, integrating systems and
rationalizing Railworks' asset base. These restructuring initiatives
necessitated much of the $63.3 million in charges to earnings for the year
ended December 31, 2000.

                  In early 2001, certain large projects in the Transit Group
(primarily in the commercial and power divisions) required large and unforeseen
infusions of working capital, creating an acute liquidity crisis during
Railworks' peak working capital season and at the time of an impending interest
payment under the Senior Subordinated Notes. In response, Railworks obtained an
amendment to its Pre-Petition Credit Agreement, allowing for a $15 million
increase in its senior borrowings. Notwithstanding this increase, Railworks'
liquidity problems persisted, forcing it to extend trade payables and otherwise
undertake extraordinary measures to conserve cash.


                                      79
<PAGE>


                  In an attempt to address its growing liquidity crisis prior
to the Petition Date, Railworks' actions included: (i) retaining restructuring
consultants; (ii) cutting costs by further reducing headcount; (iii) continuing
to extend payables; (iv) exploring strategic alternatives; and (v) negotiating
to achieve an out-of-court restructuring of its businesses. None of these
actions was able to reverse the deteriorating liquidity crisis that Railworks
experienced throughout the summer of 2001. As a result, the Debtors commenced
these Reorganization Cases.

                  On September 21, 2001, due to the commencement of the
Reorganized Cases, the NASDQ Listing Qualifications Staff halted trading in
Railworks' common stock, which shortly thereafter was delisted. Since the
delisting, Railworks common stock has traded on the OTC Bulletin Board, under
the symbol "RWKSQ.OB". After the Effective Date, it is contemplated that
Reorganized Railworks will not be a listed company or a publicly-traded
company, and will not otherwise make financial information publicly available.

         C.       OUTSTANDING PRE-PETITION LIABILITIES

                  Prior to the Petition Date, the Debtors' financing was
derived primarily from internally generated funds, borrowing under the
Pre-Petition Credit Agreement and funds generated from the Senior Subordinated
Notes and the initial public offering. The Pre-Petition Credit Agreement was
provided to Railworks through a syndicate of banks and other institutional
lenders, including BoA, as administrative agent. Railworks' obligations under
the Pre-Petition Credit Agreement are guaranteed by the Subsidiary Debtors and
the Debtors' obligations under the Pre-Petition Credit Agreement are secured by
liens on, and security interests in, substantially all of the Debtors' assets,
including inventory, receivables, equipment and general intangibles. The Senior
Subordinated Notes constitute general, unsecured obligations of Railworks, with
payment fully and unconditionally guaranteed by the Subsidiary Debtors. Payment
of the Debtors' obligations under the Senior Subordinated Notes is subordinated
and junior in right of payment to payment in full of the Debtors' obligations
under the Pre-Petition Credit Agreement.

                  As of the Petition Date, the Debtors were jointly and
severally liable under the Pre Petition Credit Agreement in the aggregate
amount of approximately $193.3 million, as follows: (i) approximately $94.3
million in principal amount owing under the revolver loan; (ii) approximately
$97.5 million in principal amount owing under the term loan; and (iii)
approximately $0.5 million owing in outstanding letters of credit. In addition,
as of the Petition Date the Debtors owed approximately $3.8 million of accrued
and unpaid interest and approximately $0.1 million of fees and expenses related
to the Pre-Petition Credit Agreement.

                  In addition, as of the Petition Date, the Debtors were liable
under the Senior Subordinated Notes for approximately $173.1 million in
principal and approximately $8.6 million in accrued interest.

                  Other significant pre-petition liabilities of the Debtors
include: (i) approximately $2.0 million in outstanding promissory notes held by
Persons who sold their businesses to the Debtors; (ii) obligations in the
approximate amount of $4.2 million to Persons who sold their businesses to the
Debtors; and (iii) substantial contingent liabilities to the Pre-Petition
Sureties for contingent claims on surety bonds.

         D.       LITIGATION

                  On September 6, 2001, Railworks and the former Chairman of
the Board of Directors were named as defendants in a class action lawsuit filed
in the United States District Court for the District of Maryland (Baltimore
Division), alleging securities fraud claims under the Exchange Act. The
plaintiffs are seeking an undetermined amount of damages. As a result of the
commencement of the Reorganization Cases, the District Court has stayed this
action as to all defendants and administratively closed the case pending
further order of the District Court.


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<PAGE>


         E.       HISTORICAL FINANCIAL INFORMATION

                  Exhibit F to this Disclosure Statement contains consolidated
balance sheets and income statements for the Debtors for fiscal years 1999,
2000 and 2001, and for the first fiscal quarter of 2002. Additional financial
and other information about Railworks and the other Debtors can be found in
Railworks' Form 10-Ks for the fiscal years ended December 31, 2000 and December
31, 2001 and its other filings from time to time with the SEC, which are
available at www.sec.gov.

                        VIII. THE REORGANIZATION CASES

         A.       CONTINUATION OF BUSINESS AFTER THE PETITION DATE

                  Since the Petition Date, the Debtors have continued to
operate their businesses in the ordinary course as debtors-in-possession under
sections 1107 and 1108 of the Bankruptcy Code. As described in further detail
below, a variety of steps have been and will be taken to attempt to strengthen
and enhance the value of the Debtors' businesses during these Reorganization
Cases.

                  1.       BOARD OF DIRECTORS

Railworks' Board of Directors currently consists of the following eight (8)
individuals: (i) Norman Carlson; (ii) Scott D. Brace; (iii) Ronald W. Drucker;
(iv) Wayne F. Hall; (v) Charles W. Hoppe; (vi) John Kennedy (vii) R. C. Matney;
and (viii) Donald P. Traviss.

                  2.       MANAGEMENT

                  Railworks' present management team consists of John Kennedy,
Chief Executive Officer; Robert D. Wolff, President of Railworks Track Systems
Group; William R. Donley, President of Railworks Products and Services Group;
and C.W. Moore, President of Railworks Transit Systems Group. On or about July
23, 2002, Eric H. Schless indicated his intention to resign his position as
Acting Executive Vice President and Chief Financial Officer. In addition, on or
about August 6, 2002, it was determined that Mr. Wolff's employment would be
terminated.

                  By motion dated May 9, 2002, Railworks requested authority to
employ James Kimsey as President and Chief Operating Officer. Pending
Bankruptcy Court consideration of this motion, Mr. Kimsey is serving in an
"at-will" capacity. A hearing to consider this application presently is
scheduled to take place on September 3, 2002. Shortly before the Kimsey
employment application was filed, and repeatedly thereafter, InfraSource, Inc.
("InfraSource") demanded that Railworks terminate Mr. Kimsey's employment or be
prepared to defend itself against alleged claims for tortious interference with
certain contracts and for unfair competition (collectively, the "Alleged Tort
Claims"). In response to these threats, RailWorks filed an adversary proceeding
in the Bankruptcy Court (the "Declaratory Judgment Action") against
InfraSource, asking the Bankruptcy Court to declare that Railworks' employment
of Mr. Kimsey did not and would not give rise to the Alleged Tort Claims. The
following week, InfraSource and one of its subsidiaries filed a civil action
(the "Civil Action") against Mr. Kimsey in a Pennsylvania state court, seeking,
inter alia, to enjoin Mr. Kimsey from working for Railworks and to compel Mr.
Kimsey to return certain documents. Mr. Kimsey removed the Civil Action to
federal court in Pennsylvania, after which, by agreement of the parties, the
matter (now an adversary proceeding in this case) was transferred to the
Bankruptcy Court. The plaintiffs then filed a motion to remand the action to
Pennsylvania state court, which motion as denied by the Bankruptcy Court, as
was the motion for abstention filed by InfraSource in the Declaratory Judgment
Action. Consequently, both adversary proceedings remain pending before the
Bankruptcy Court.

                  On July 23, 2002, Railworks announced that it also agreed to
employ, subject to Bankruptcy Court approval, Ab Rees as Chairman and Chief
Executive Officer. Railworks anticipates filing a motion to obtain Bankruptcy
Court approval of Mr. Rees' employment shortly. Pending Bankruptcy Court
consideration of this motion, Mr. Rees is serving in an "at-will" capacity.


                                      81
<PAGE>


                  3.       STABILIZING OPERATIONS

                  Both before and after the Petition Date, the Debtors have
taken actions to attempt to stabilize operations. On an ongoing basis, the
Debtors continue to address the many emergencies and other matters that are
incidental to the commencement of complex chapter 11 cases, including
responding to inquiries by employees, vendors, contractors, subcontractors,
surety companies, other unsecured creditors, the Creditors' Committee and its
professionals and other constituencies and parties-in-interest.

                  To provide post-petition financing for all segments of the
Debtors' businesses and a post-petition bonding facility for the Debtors'
transit systems business, within the first two (2) weeks of the Petition Date,
the Debtors sought approval from the Bankruptcy Court of a complex
debtor-in-possession financing arrangement (as subsequently amended, modified,
replaced, restated or supplemented, the "DIP Financing"). The DIP Financing,
which was the product of extensive negotiations between and among the Debtors,
GOF and Stonehill, BoA and Travelers, was approved on a final basis by the
Bankruptcy Court on October 24, 2001. The Debtors believe that approval of the
DIP Financing has been and will continue to be viewed by other third parties,
particularly the Debtors' employees, vendors, contractors, subcontractors and
project owners, as a means of providing stability and improving cash flow and
enhancing the long term competitiveness and business prospects of the Debtors.
See section VIII.A.4.b., "DIP Financing Motions" below. In addition, the DIP
Financing has enabled the Debtors to, among other things, (i) increase their
available financial resources, (ii) engender confidence in their vendors,
contractors, subcontractors and project owners such that the Debtors were and
are able to purchase goods and services on normal trade terms in most
circumstances, (iii) fund the payments set forth in their first day orders and
other orders entered by the Bankruptcy Court and (iv) compete for new business
and provide bonding for new jobs.

                  As of March 31, 2002, approximately (i) $45.0 million was
outstanding under the Transit Group Loan Documents, consisting of $30.0 million
of borrowings and a $15.0 million letter of credit; (ii) $19.3 million was
outstanding under the TP&S Group Loan Documents, consisting of $15.5 million of
borrowings and $3.8 million of letters of credit; and (iii) $15 million was
outstanding under the Bond Support Documents.

                  4.       FIRST DAY MOTIONS

                  Together with their petitions for relief, the Debtors filed a
number of "first day" motions and applications either on or shortly after the
Petition Date. In addition to these motions seeking affirmative or injunctive
relief (some of which are discussed below), several sought administrative
relief necessary to permit the Debtors to operate during the course of the
Reorganization Cases. Capitalized terms used in this section but not otherwise
defined in this Disclosure Statement have the meanings ascribed to them in the
applicable "first day" motion or application. The Debtors' first day motions
and applications included motions and applications for orders:

                  -        establishing interim compensation procedures for
                           professionals;

                  -        authorizing the Debtors to mail initial notices and
                           to file a list of creditors in lieu of a creditor
                           matrix;

                  -        authorizing the retention of the Debtors'
                           professionals and a noticing, claims and Voting
                           Agent;

                  -        authorizing the continued use of the Debtors'
                           existing bank accounts and business forms;


                                      82
<PAGE>


                  -        authorizing the joint administration of the Debtors'
                           cases;

                  -        authorizing the Debtors to satisfy pre-petition
                           claims held by certain critical vendors and
                           suppliers;

                  -        authorizing the payment of certain pre-petition
                           employee obligations;

                  -        authorizing the employment of certain ordinary
                           course professionals;

                  -        determining the procedures governing adequate
                           assurance of future performance under executory
                           contracts with utilities;

                  -        approving an administrative order limiting mandatory
                           notice requirements in the Reorganization Cases to
                           certain parties;

                  -        authorizing the Debtors to maintain their existing
                           cash management system;

                  -        approving certain investment guidelines;

                  -        authorizing the Debtors to borrow funds from certain
                           of the Transit Group Lenders on an emergency basis
                           prior to approval of the DIP Financing; and

                  -        authorizing interim borrowings under the DIP
                           Financing and the use of Cash Collateral

                           (a)      CRITICAL VENDOR MOTIONS

                  On October 1, 2001, the Debtors filed an emergency motion
seeking the Court's authorization to pay the claims of certain subcontractors
and vendors for goods or services provided prior to the Petition Date. The
Debtors subsequently filed four supplemental motions resulting in a total of
five orders authorizing the Debtors to pay the claims of certain tradespersons,
subcontractors and suppliers of goods and other services who are critical to
the near-term survival of the Debtors' businesses (the "Critical Vendors").
Payment of a Critical Vendor assures the continued supply of goods or services
to the Debtors in the ordinary course of business on as good or better terms
and conditions (including credit terms) that existed prior to the Petition
Date, during the pendency of the Reorganization Cases. As of March 15, 2002,
the Debtors had made approximately $40.5 million in payments to their Critical
Vendors as authorized by the Bankruptcy Court.

                           (b)      DIP FINANCING MOTION

                  As described above, the Debtors received approval of their
motion seeking authority to obtain the DIP Financing and to authorize the use
of cash claimed as collateral by the Pre-Petition Lenders. The DIP Financing
consists of four (4) separate facilities, as follows:

                  -        Transit Group Facility Agreement: A senior revolving
                           credit facility extended by the Transit Group
                           Lenders in an aggregate principal amount of up to
                           $45 million: (a) a $30 million revolver to be used
                           for (i) working capital purposes in support of the
                           Debtors' transit systems business, (ii) payment of
                           certain pre-petition payables of the Debtors in
                           respect of their transit systems business, and (iii)
                           a proportional share of bankruptcy related costs;
                           and (b) a $15 million letter of credit to secure
                           certain obligations of the Debtors under their 2002
                           commercial insurance program.


                                      83
<PAGE>


                  -        Bond Support Credit Agreement: A credit facility
                           extended by the Bond Support Lenders in an aggregate
                           principal amount of up to $40 million to be used
                           solely to collateralize 40% of the Debtors'
                           obligations under the Bond Facility Agreement.

                  -        Bond Facility Agreement: A facility for the issuance
                           of surety bonds extended by Travelers in an
                           aggregate principal amount of up to $100 million to
                           be used for the prosecution of work in the ordinary
                           course of the Debtors' transit systems business.

                  -        TP&S Group Facility Agreement: A senior revolving
                           credit facility extended by the TP&S Group Lenders
                           in an aggregate principal amount of up to $35
                           million to be used for: (i) working capital purposes
                           in support of the Debtors' track systems and
                           products and services businesses; (ii) payment of
                           certain pre-petition payables of the Debtors in
                           respect of their track systems and products and
                           services businesses; (iii) payments of adequate
                           protection to the Pre-Petition Lenders; and (iv) a
                           proportional share of bankruptcy related costs.

                  In general terms, the Debtors secured their obligations under
the DIP Financing as follows:

                  -        Transit Group Facility Agreement and Bond Support
                           Credit Agreement: Pursuant to sections 364(c) and
                           364(d) of the Bankruptcy Code, senior priming, first
                           priority and junior liens on and security interests
                           in all of the Transit Group Collateral (subject to
                           certain exceptions).

                  -        TP&S Group Facility Agreement: Pursuant to sections
                           364(c) and 364(d) of the Bankruptcy Code, senior
                           priming, first priority and junior liens on and
                           security interests in all of the TP&S Group
                           Collateral (subject to certain exceptions).

                  The DIP Financing contains various additional terms,
conditions and provisions, including, among other things:

                  -        Carve-Out: The DIP Financing provides for a
                           carve-out for payment of certain administrative
                           expenses in an aggregate amount not to exceed $2.5
                           million (divided as between the Transit Group
                           Facility Agreement, the Bond Support Credit
                           Agreement and the Bond Facility Agreement ($1.45
                           million collectively) and the TP&S Group Facility
                           Agreement ($1.05 million)), which amount may be used
                           by the Debtors after the occurrence of, and during
                           the continuance of, a default or event of default
                           under the DIP Financing.

                  -        Additional Fee: The DIP Financing originally
                           provided that the Debtors were obligated to pay an
                           additional fee in the amount of $1.65 million if a
                           plan of reorganization acceptable to the Transit
                           Group Lenders, the Bond Support Lenders and the TP&S
                           Group Lenders was not confirmed within five (5)
                           months of the Petition Date, and/or the consummation
                           of such plan of reorganization did not occur within
                           six (6) months after the Petition Date. By agreement
                           among the Debtors, the Transit Group Administrative
                           Agent and the TP&S Administrative Agent, these
                           deadlines were extended on three separate occasions.
                           Nevertheless, the Debtors' obligation to pay this
                           additional fee now has accrued, although the
                           relevant DIP Financing lenders have agreed to extend
                           the deadline for the payment of such fee subject to
                           specified conditions giving rise to an earlier
                           payment date, until consummation of a plan. Payment
                           prior to consummation would be required (a) in the
                           case of both the TP&S Group Facility Agreement and
                           the Transit Group Facility Agreement, in the event
                           of a breach or termination of the Intercreditor
                           Agreement


                                      84
<PAGE>


                           and (b) in the case of the TP&S Group Facility
                           Agreement, if the Debtors have sufficient cash on
                           hand and availability under the TP&S Group Facility
                           Agreement of at least $5,750,000 for ten (10)
                           consecutive business days.

                  -        Travelers Contract Assumptions: The terms of the DIP
                           Financing require that the Debtors assume any
                           contract bonded by Travelers in either the Transit
                           Group or the TP&S Group (other than certain excluded
                           contracts) and honor all obligations bonded by
                           Travelers. In the event that the Debtors default in
                           the performance of any of their obligations with
                           respect to any such contract or obligation,
                           Travelers may elect to take over any such bonded
                           contract or obligation at any time and complete the
                           contract or obligation itself or with another
                           contractor.

                  -        Material Pleadings: The DIP Financing requires that
                           the Debtors obtain the prior written consent of the
                           DIP Lenders before filing certain specified
                           "Material Pleadings," including: (a) a plan of
                           reorganization or a disclosure statement with
                           respect to a plan of reorganization; (b) a motion to
                           sell, lease or otherwise dispose of material assets
                           of the Debtors' estates; (c) a motion to extend the
                           Debtors' exclusive periods to file a plan of
                           reorganization and solicit acceptances thereto; (d)
                           a motion to implement, adopt or revise an employee
                           retention, severance or similar program; (e) a
                           motion to obtain replacement debtor-in-possession
                           financing that does not provide for the repayment of
                           all obligations under the DIP Financing; (f) a
                           motion to substantively consolidate the estates of
                           any Debtor within the Transit Group with any Debtor
                           within the TP&S Group; and (g) any other pleading
                           that impairs the Debtors' ability to repay its
                           obligations under the DIP Financing.

                           (c)      EMPLOYEE WAGE MOTION

                  To retain valued employees and ensure the Debtors' ability to
continue operating with a minimal amount of disruption after the Petition Date,
the Debtors sought an order of the Bankruptcy Court authorizing the Debtors to
honor in the ordinary course and/or pay pre-petition claims relating to unpaid
compensation, reimbursable expenses, employee benefits, and paid time off
obligations, which include, among other items, wages, salaries, commissions,
compensation, union benefits, federal and state withholding taxes, payroll
taxes, vacation days, holiday pay, personal days, life insurance, medical
insurance benefits and premiums, tuition reimbursement, 401(k) contributions,
reimbursable expenses and other employee benefits (collectively, the
"Pre-Petition Employee Obligations").

                  Pursuant to this motion, the Debtors satisfied payroll
obligations of approximately $11.5 million, including, approximately $3.7
million in wages and salaries to their approximately 3,000 employees, including
estimated payroll tax obligations, plus an additional $182,000 to independent
contractors. In addition to paying payroll expenses, pursuant to the motion,
the Debtors made payments, including, but not limited to, approximately (a)
$1.15 million to reimburse employees for business expenses they incurred
pre-petition; (b) $522,000 in connection with pre-petition obligations arising
under their self-insured health plan for non-union employees; (c) $790,000 for
workers' compensation insurance premiums; (d) $101,000 for various
miscellaneous insurance coverage for employees; (e) $4,800 in escrowed funds
for voluntary additional insurance coverage; (f) $3.65 million for union
employee fringe benefits; and (g) $1.2 million for 401(k) plan matches. The
Debtors were also authorized to make various bonus payments to eligible
employees as they became due.

                  5.       CASH MANAGEMENT MOTION

                  The Debtors sought and obtained authorization to continue the
management of their cash receipts and disbursements substantially in the manner
in which they were handled immediately before the Petition Date. The Debtors'
cash management system consolidates all the funds received by the Railworks


                                      85
<PAGE>


entities while also tracking which corporate entity is the owner of those
funds. The cash management system is separated principally into the collection
of receipts through depository accounts and the payment of accounts payable and
payroll through disbursement accounts established for such designated purposes.
The depository and disbursement accounts fund or are funded by, as the case may
be, a central cash concentration account. The continued use of this established
cash management system has allowed the Debtors to avoid the costs and
disruption that would necessarily result from the establishment of a new cash
management system from the ground up.

                  With the cash management motion, the Debtors have also
obtained a limited waiver of the investment guidelines that are statutorily
imposed upon debtors in possession. Pursuant to the Court's order (the "Cash
Management Order"), the Debtors may invest excess cash remaining in the
concentration account in accordance with the following practices:

         (a)      securities issued or directly and fully guaranteed by the
                  United States government or any agency thereof;

         (b)      commercial paper of domestic corporations rated "A-1" or
                  "P-1" or higher;

         (c)      interest bearing certificates of deposit, time deposits,
                  bankers' acceptances, or overnight bank deposits with
                  domestic commercial banks;

         (d)      repurchase agreements; and

         (e)      any funds (such as a mutual funds) investing in the
                  above-described securities or commercial paper to the extent
                  that the fund holds investments in excess of $100 million and
                  to the extent that the Debtor's aggregate investment in such
                  fund is less than ten percent (10%) of the total amount
                  invested in that fund.

The Debtors' investment practices have proven to be a reasonable and prudent
means of preserving estates assets, while at the same time maximizing the
return on the millions of dollars that the Debtors will collect during these
cases. The Cash Management Order has enabled the Debtors to maintain the
security of their investments while providing the Debtors with the flexibility
they require to maximize the yield on the investment of their funds.

                  6.       CONTRACT ASSUMPTION MOTIONS AND PRE-PETITION
SURETIES SETTLEMENTS

                  As noted above, the terms of the DIP Financing required the
Debtors to assume any contract bonded by Travelers in either the Transit Group
or the TP&S Group (other than certain excluded contracts) and honor all
obligations bonded by Travelers. Accordingly, on October 22, 2001, the Debtors
filed a motion seeking to assume their Travelers-bonded project contracts (the
"Travelers Contracts"). In addition to the requirement imposed upon the Debtors
as a result of the DIP Financing, the Debtors believed that assumption of the
Travelers Contracts was justified because: (a) on the aggregate, the Travelers
contracts were expected to generate, upon and after assumption, net positive
cash flow of approximately $90 million; and (b) assumption of the Travelers
Contracts allowed the Debtors to preserve and, in some cases, mend, important
customer relationships. By orders entered on or about November 11, 2001, the
Court authorized the assumption of the bulk of the Travelers Contracts, with
the exception of certain contracts with respect to which objections had been
received. All of these objections subsequently were resolved and assumption of
the relevant Travelers Contracts was approved by the Court.

                  After November 11, 2002, the Debtors identified other
Travelers-bonded contracts that inadvertently had been omitted from the October
22, 2001 motion. These largely consisted of certain smaller contracts and/or
those that had been substantially completed as of the Petition Date. The
Debtors therefore sought additional relief (which they ultimately secured) for
authorization to assume those contracts, by


                                      86
<PAGE>


motions dated November 29, 2001 and January 31, 2002, respectively. As of the
date hereof, and pursuant to Bankruptcy Court approval, the Debtors have made
cure payments in the amount of approximately $52.9 million in connection with
the assumption of the Travelers Contracts.

                  The Debtors also are parties to certain prepetition contracts
bonded by sureties other than Travelers (the "Non-Travelers Bonded Contracts").
In such cases, because the Debtors were not required to assume the
Non-Travelers Bonded Contracts, the Debtors were unwilling to do so unless, on
a contract-by-contract basis, assumption of the applicable Non-Travelers Bonded
Contract was expected to generate positive cash flow on a post-assumption
basis.

                  In order to induce the Debtors to assume certain
Non-Travelers Bonded Contracts, two of the Debtors' prepetition sureties,
Seaboard Surety Company ("Seaboard") and Federal Insurance Company ("Federal"),
each entered into negotiations and, ultimately, executed separate agreements
with the Debtors pursuant to which these respective sureties agreed to make
certain payments to the Debtors or to third parties on the Debtors' behalf in
connection with certain projects. In exchange, the Debtors agreed to assume the
related Non-Travelers Bonded Contracts, because, when considered with the
payments to be made by the sureties, these Non-Travelers Bonded Contracts were
now expected to generate positive cash flow. The respective agreements with
Federal and Seaboard were approved by the Court by orders dated February 1,
2002, and February 6, 2002, respectively. Notwithstanding anything to the
contrary contained in the Plan, the Debtors intend to comply with all of the
terms and conditions of the respective agreements with Federal and Seaboard.

                  Pursuant to the Debtors' agreement with Federal (the "Federal
Stipulation"), the Debtors agreed to assume four of the nine projects that were
bonded by Federal prior to the commencement of these cases. The Debtors now
have determined to reject the remaining five project contracts (specifically,
Contract Nos. E-31261, 36276, C-20203, E-31254, and A-35724) that were bonded
by Federal, which contracts will be rejected by operation of the Plan inasmuch
as the Debtors intend to list such contracts on the Schedule of Rejected
Contracts and Leases to be included in the Plan Supplement.

                  Additionally, by motion dated May 9, 2002, the Debtors sought
authorization to assume a Non-Travelers Bonded Contract between one of the
Debtors and the City and County of San Francisco, State of California Airport
Commission (the "Airport Contract"). The Airport Contract also is expected to
generate positive cash flow. National Surety Corporation ("National"), another
one of the Debtors' prepetition sureties, issued payment and performance bonds
for the underlying project. On May 24, 2002, National, along with one of the
subcontractors under the Airport Contract, filed objections to the contract
assumption motion. The Debtors consensually resolved the objection of the
subcontractor and on June 11, 2002, the Court overruled National's remaining
objections and approved the Debtors' Motion.

                  7.       SIGNIFICANT ASSET SALES.

                  The Debtors have not engaged in any significant, non-ordinary
course asset sale transactions during the course of these cases. Both prior and
subsequent to the Petition Date, however, the Debtors have pursued various
restructuring opportunities, including the potential disposition of certain
significant assets. In this regard, the Debtors have been marketing their
Gantrex line of business and assets for approximately one year. Although the
Debtors have not agreed to the terms of a transaction or executed definitive
documentation, discussions with a potential purchaser of the Gantrex assets
have proceeded to the documentation stage. In the event the Debtors
successfully conclude these discussions, the Debtors expect to file an
appropriate motion with the Bankruptcy Court seeking approval of the
transaction.


                                      87
<PAGE>


         B.       CASE ADMINISTRATION

                  1.       BAR DATE

                  In accordance with Bankruptcy Rules 3003(c) and 9029, by
order dated December 7, 2001 the Bankruptcy Court established January 22, 2002
(the "Bar Date") as the final date for filing proofs of claims against the
Debtors, subject to certain exceptions. Pursuant to Bankruptcy Rule 3003(c)(2),
any creditor: (a) whose Claim (i) was not scheduled by the Debtors or (ii) was
scheduled as disputed, contingent or unliquidated, and (b) who failed to file a
proof of claim on or before the Bar Date, will not be treated as a creditor
with respect to that Claim for purposes of voting on the Plan or receiving a
distribution under the Plan. As of the Bar Date, approximately 2,724 claims had
been timely filed.

                  By Order dated February 14, 2002, the Court established March
11, 2002 (the "Supplemental Bar Date") as the final date for filing proofs of
claims against the Debtors with respect to those creditors affected by the
filing of the Debtors' Amended Schedules. The Supplemental Bar Date will allow
the affected creditors to file proofs of claims against one or more of the
Debtors if they disagree with the newly scheduled amount or status of their
respective claims. The Debtors may object to all Claims filed after the Bar
Date or Supplemental Bar Date, and to duplicate, excessive or otherwise
meritless Claims.

                  2.       EXCLUSIVITY

                  The Debtors filed the Plan on March 15, 2002. Section 1121(b)
of the Bankruptcy Code provides that a debtor has the exclusive right to file a
plan of reorganization for an initial period of 120 days after the commencement
of the case (the "Exclusive Filing Period"). Additionally, section 1121(c)(3)
provides that, if a debtor has filed a plan within the initial 120-day period
under subsection (b), it then has an additional 60 days to exclusively solicit
acceptances to the plan it filed (the "Exclusive Solicitation Period"). On
February 5, 2002, this Court entered an order extending the Exclusive Filing
Period and the Exclusive Solicitation Period to and including February 18, 2002
and April 19, 2002, respectively. On February 11, 2002, the Debtors filed their
motion for order further extending the exclusive periods (the "Second Extension
Motion") seeking a further extension of the Exclusive Filing Period to and
including March 20, 2002 and the Exclusive Solicitation Period to and including
May 20, 2002. On March 12, 2002, the Court entered an order granting the relief
sought in the Second Extension Motion. On May 17, 2002, the Debtors filed their
motion for order further extending the exclusive period during which only the
Debtors may solicit acceptances to their plan of reorganization, which motion
is currently pending before the Court. On May 21, 2002, the Bankruptcy Court
entered a bridge order extending the exclusivity period pending its
determination of this motion.

                  3.       SCHEDULES AND STATEMENTS OF FINANCIAL AFFAIRS

                  The Debtors filed their Schedules of Assets and Liabilities
("Schedules"), lists and Statement of Financial Affairs on December 5, 2001.
Subsequent to the filing of the Schedules, additional information became
available to the Debtors and, accordingly, on December 11, 2001, the Debtors
filed their Amended Schedules (the "Amended Schedules"), changing the manner in
which claims of certain creditors are scheduled as compared to the Schedules
and adding certain other creditors' claims. As the Debtors continued to work
through various accounting and related issues during these reorganization
cases, additional information became available to the Debtors, necessitating
the amendment of their Amended Schedules. Accordingly, on February 8, 2002, the
Debtors filed their Second Amended Schedules, changing the manner in which
claims of certain creditors are scheduled as compared to the Schedules and/or
the Amended Schedules, and adding certain other creditors' claims. The Debtors
reserve their rights to amend such Schedules, lists and Statement of Financial
Affairs as may be necessary.

                  4.       INFORMATION AND ESTIMATES

                  In their Schedules of Assets and Liabilities, and statement
of financial affairs and executory contracts, the Debtors estimated the
approximate aggregate allowed amounts of Claims. Updated estimates, which are
preliminary and tentative given the limited review and analysis undertaken to
date, are set forth below.


                                      88
<PAGE>


                  THESE AMOUNTS REPRESENT ESTIMATES BY THE DEBTORS BASED ON
CURRENT INFORMATION ONLY. THE DEBTORS MAKE NO REPRESENTATION AS TO THE EXTENT
TO WHICH THESE ESTIMATES MAY ULTIMATELY PROVE ACCURATE IN LIGHT OF ACTUAL
CLAIMS AND THE RESOLUTION OF CLAIMS DISPUTES. FOR INFORMATION REGARDING THE
LIMITATIONS ON AND UNCERTAINTIES OF THESE ESTIMATES, SEE SECTION VI.B.,
"FINANCIAL PROJECTIONS AND VALUATION ANALYSIS," ABOVE:


<TABLE>
<CAPTION>
                  Class or Type of Claims                           Estimated Aggregate Allowed Amounts(12)
                  -----------------------                           ---------------------------------------

<S>                                                                 <C>
TP&S Group Lenders Claims...............................                $19.3 million
Transit Group Lenders Claims............................                $45.0 million
Bond Support Lenders Claims.............................                $0.0
Bond Facility Agreement Claims..........................                $69.4 million in face amount
Administrative Expense Claims...........................                $1.7 million(13)
Fee Claims..............................................                $9.3 million(14)
Priority Tax Claims.....................................                $.3 million
Other Secured Claims....................................                $1.1 million(15)
Wood Waste Secured Claim................................                $1.0 million
Priority Non-Tax Claims.................................                $294,422.00
Travelers Pre-Petition Bonds Claims.....................                $963 million (estimated face amount of
                                                                        outstanding prepetition bonds)
Interdebtor Claims......................................                $64 million
Non-Debtor Subsidiaries Claims..........................                $5.8 million
Non-Exit Lenders Pre-Petition Lenders Claims............                $147.8 million
Exit Lenders Pre-Petition Lenders Claims................                $45,000,000
Unsecured Claims........................................                At least $202 million(16)
510(c) Claims...........................................                $0.00(17)
Existing Securities Law Claims..........................                Undetermined
Equity Interests........................................                N/A
</TABLE>


---------
(12)     Approximately 2,724 proofs of claim were filed as of January 22, 2001,
         the Bar Date. Approximately 96 additional proofs of claims were filed
         pursuant to the Supplemental Bar Date. As of the date of this
         Disclosure Statement, the Debtors have completed only a preliminary
         estimate of the Claims filed in these cases. Because recoveries under
         the Plan are directly linked to the amount and value of the Allowed
         Claims, any change in the Debtors' Claims estimates resulting from
         further analysis of the proofs of claim filed as of the Bar Date and
         the Supplemental Bar Date will impact their predictions of recoveries
         under the Plan.

(13)     Including expenses that do not arise and are not paid in the ordinary
         course of business (including all fees relating to issuance of the
         Plan Securities and in connection with the Exit Facility, the New
         Railworks Secured Loan, the New Wood Waste Secured Loan, U.S. Trustee
         fees and indenture trustee fees).

(14)     Including a success fee for Glass & Associates and amounts allocated
         to other financial advisors and professional fees incurred, but not
         paid, during the Reorganization Cases.

(15)     Class 1 (other Secured Claims) is comprised of approximately 24 Other
         Secured Claims representing equipment and other capital lease
         arrangements that the Debtors believe are appropriately classified as
         secured financings.

(16)     The estimate for Unsecured Claims is inclusive of approximately (a)
         $181.2 million in prepetition principal and accrued interest in Senior
         Subordinated Note Claims and (b) $21 million in prepetition unsecured
         trade and other payables (including approximately $5.2 million of
         unpaid prepetition earn-outs relating to the years 2001 or earlier).
         The claims estimate for Unsecured Claims does not include any estimate
         for lease rejection or other contract rejection claims, which the
         Debtors believe may be significant. However, given that Class 9 is to
         receive only 3% of the New Railworks Common Stock (which is valued at
         approximately $1.2 million), even if the ultimate aggregate amount of
         Allowed Unsecured Claims were to increase by $100 million as a result
         of rejection claims, the recovery percentage to individual creditors
         likely would not be significantly impacted. By way of example, the
         recovery percentage on a claims pool of $202 million would equal .5%
         and the recovery percentage on a claims pool of $302 million would
         equal approximately .36%.

(17)     The Debtors do not believe that any claims exist in this Class.


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                  5.       PREFERENCES AND FRAUDULENT TRANSFERS

                  Under the Bankruptcy Code, a debtor may seek to recover,
through adversary proceedings in the bankruptcy court, certain transfers of the
debtor's property, including payments of cash, made while the debtor was
insolvent during the 90 days immediately before the commencement of the
bankruptcy case (or, in the case of a transfer to or on behalf of an "insider,"
one year before the commencement of the bankruptcy case) in respect of
antecedent debts to the extent the transferee received more than it would have
received on account of such preexisting debt had the debtor been liquidated
under chapter 7 of the Bankruptcy Code. Such transfers include cash payments,
pledges of security interests or other transfers of an interest in property. In
order to be preferential, such payments must have been made while the debtor
was insolvent; debtors are rebuttably presumed to have been insolvent during
the 90-day preference period. The Bankruptcy Code's preference statute can be
very broad in its application because it allows the debtor to recover payments
regardless of whether there was any impropriety in such payments.

                  However, there are certain defenses to such claims. For
example, transfers made in the ordinary course of the debtor's and the
transferee's business according to ordinary business terms are not recoverable.
Furthermore, if the transferee extended credit contemporaneously with or
subsequent to the transfer, and before the commencement of the bankruptcy case,
for which the transferee was not repaid, such extension constitutes an offset
against an otherwise recoverable transfer of property. If a transfer is
recovered by a debtor, the transferee has a general unsecured claim against the
debtor to the extent of the recovery.

                  Under the Bankruptcy Code and under various state laws, a
debtor may also recover or set aside certain transfers of property (fraudulent
transfers), including the grant of a security interest in property, made while
the debtor was insolvent or which rendered the debtor insolvent or
undercapitalized to the extent that the debtor received less than reasonably
equivalent value for such transfer.

                  The Debtors are not aware of any claims that would constitute
fraudulent transfers, however they have not performed an independent review to
determine whether any fraudulent transfers were made.

                  Because the Creditors' Committee did not elect to file an
objection or commence an action seeking a determination that the Pre-Petition
Lenders Claims be avoided as a fraudulent transfer or preference by December
26, 2001, the Pre-Petition Lenders Claims can no longer be challenged on such
grounds under the terms of the DIP Order.

                  6.       REPRESENTATION OF THE DEBTORS

                  The Debtors have retained for purposes of representation of
the Debtors in the Reorganization Cases the law firms of Willkie Farr &
Gallagher and Whiteford, Taylor & Preston L.L.P., as bankruptcy co-counsel,
Dorsey & Whitney LLP, as special counsel, Glass & Associates, as restructuring
consultants, Gordian Group, L.P., as valuation consultants, and Arthur
Andersen, LLP, as independent accountants and auditors. The Debtors' retention
of Willkie Farr & Gallagher was approved by an order of the Bankruptcy Court on
October 31, 2001, the Debtors' retention of Whiteford, Taylor & Preston L.L.P.
was approved by an order of the Bankruptcy Court on October 31, 2001, and the
Debtors' retention of Dorsey & Whitney LLP was approved by an order of the
Bankruptcy Court on October 31, 2001. The Debtors' retention of Glass &
Associates was approved by an order of the Bankruptcy Court on December 18,
2001, and the Debtors' retention of Arthur Andersen, LLP was approved by an
order of the Bankruptcy Court on February 14, 2002. The Debtors' retention of
the Gordian Group, L.P. was approved following a hearing on May 28, 2002 and an
order subsequently has been entered.


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                  On June 26, 2002, Henry D. Hoge, the former president of HSQ
Technology, one of the Debtors in these jointly administered cases ("HSQ"),
filed the "Motion of Henry D. Hoge to Disqualify Willkie Farr & Gallagher and
Whiteford, Taylor & Preston as Counsel for HSQ Technology, A Corporation" (the
"Motion to Disqualify"). The Motion to Disqualify alleges that Whiteford,
Taylor & Preston and Willkie Farr & Gallagher, co-counsel for the Debtors in
these cases, should not be allowed to represent HSQ because Mr. Hoge claims
that HSQ's interests conflict with those of the other Debtors. The Debtors do
not believe that the Motion to Disqualify has any merit and was interposed
solely as a litigation tactic to assist Mr. Hoge in his litigation with the
Debtors over the rejection of his Employment Agreement with HSQ. The Debtors
filed an Opposition to the Motion to Disqualify on July 15, 2002. The Unsecured
Creditors Committee filed an Opposition to the Motion to Disqualify on the same
date. The Bankruptcy Court has scheduled a hearing on the Motion to Disqualify
for August 22, 2002.

                  7.       REPRESENTATION OF THE CREDITORS' COMMITTEE

                  The Creditors' Committee has retained the law firm of Shapiro
Sher & Guinot, as legal counsel and Deloitte & Touche, LLP, as accountants and
financial advisors.

               IX. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES

                  The following discussion summarizes certain United States
federal income tax consequences of the implementation of the Plan to the
Debtors and certain holders of Claims and Equity Interests. The following
summary does not apply to holders whose Claims or Equity Interests are entitled
to reinstatement or payment in full in cash under the Plan.

                  The following summary is based on the Internal Revenue Code
of 1986, as amended (the "Code"), Treasury regulations promulgated thereunder,
judicial decisions and published rulings and pronouncements of the Internal
Revenue Service ("IRS") as in effect on the date hereof. Changes in these
rules, or new interpretations of these rules, may have retroactive effect and
could significantly affect the federal income tax consequences described below.

                  The federal income tax consequences of the Plan are complex
and subject to significant uncertainties. Also, the tax consequences to holders
of claims and interests may vary based on the individual circumstances of each
holder. The Debtors have not requested a ruling from the IRS or an opinion of
counsel with respect to any of the tax aspects of the Plan. Moreover, no legal
opinions have been requested from counsel with respect to any of the tax
aspects of the Plan. Thus, no assurance can be given as to the interpretation
that the IRS will adopt. In addition, this summary does not address foreign,
state or local tax consequences of the Plan, and it does not purport to address
the federal income tax consequences of the Plan to special classes of
taxpayers, such as, without limitation, foreign taxpayers, broker-dealers,
banks, insurance companies, financial institutions, small business investment
corporations, regulated investment companies, tax-exempt organizations,
investors in passthrough entities, litigation claimants, employees of the
Debtors with claims relating to their employment, or stockholders who acquired
the stock through the exercise of an employee stock option or otherwise as
compensation. This discussion assumes that holders hold their Claims and Equity
Interests, and will hold any property received in exchange for such Claims and
Equity Interests, as "capital assets" within the meaning of Code section 1221.
The tax consequences to holders of Claims or Equity Interests may vary based on
the specific characteristics and circumstances of the holders.

                  The following does not address the state and local tax
consequences of the implementation of the Plan to the Debtors or to holders of
Claims against or Equity Interests in the Debtors. As to the holders of Claims
and Equity Interests, the tax consequences to them will depend on the laws of
the particular state and local jurisdictions in which the holders reside, are
organized or engage in business. As to the state and local tax consequences to
the Debtors, in general, the income tax consequences will be similar to the
federal income tax consequences discussed below, although in certain cases, the
state and/or local


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income tax treatment may differ from the federal income tax treatment (although
the Debtors do not believe that such differences will be material). The Debtors
also do not believe that there will be any state sales tax liability arising
from the consummation of the Plan. Finally, with respect to the imposition of
any state stamp or other similar tax, the Debtors believe that the issuance,
transfer or exchange of a security, or the making or delivery of an instrument
of transfer under the Plan, will be exempt under section 1146(c) of the
Bankruptcy Code.

                  ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL INCOME
TAX CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR
CAREFUL TAX PLANNING AND ADVICE BASED ON THE INDIVIDUAL CIRCUMSTANCES
PERTAINING TO THE HOLDER OF A CLAIM OR EQUITY INTEREST. ALL HOLDERS OF CLAIMS
OR EQUITY INTERESTS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS IN DETERMINING
THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES TO THEM OF THE PLAN.

         A.       TAX CONSEQUENCES TO CREDITORS

                  1.       GENERAL

                           (a)      TAX SECURITIES

                  The federal income tax consequences of the Plan to a holder
of a Claim may depend in part upon whether such claim is based on an obligation
of the Debtors that constitutes a "security" for federal income tax purposes.
The determination of whether a debt obligation constitutes a security for
federal tax purposes is complex and depends on the facts and circumstances
surrounding the origin and nature of the Claim. Generally, obligations arising
out of the extension of trade credit have been held not to be tax securities,
while corporate debt obligations evidenced by written instruments with original
maturities of ten years or more have been held to be tax securities.
Accordingly, the Senior Subordinated Notes Claims will likely be treated as
securities for federal tax purposes, while the Unsecured Claims other than the
Senior Subordinated Notes Claims will likely not be securities for federal tax
purposes. It is uncertain whether the Non-Exit Lenders Pre-Petition Lenders
Claims and Exit Lenders Pre-Petition Lenders Claims will be considered
securities for federal tax purposes. All holders are advised to consult their
tax advisors with respect to this issue.

                           (b)      "FAIR MARKET VALUE"

                  For federal income tax purposes, the fair market value of the
New Railworks Common Stock, New Railworks Series B Warrants and New Railworks
Preferred Stock will be their actual fair market value on the date of the
exchange. The fair market value of the New Railworks Secured Loan will be its
"issue price," as defined in the Code. The "issue price" of any such
participation interest should be its "stated principal amount" (generally, the
aggregate of all payments due under the note, excluding stated interest), if
neither the note nor the Claim for which it is exchanged is considered to be
"publicly traded" within the meaning of the original issue discount ("OID")
rules of the Code within a short period before or after the Effective Date of
the Plan. Otherwise, such issue price will be its actual fair market value, as
determined by such public trading. For this purpose, "stated interest" does not
include interest unless it is unconditionally payable in cash or other property
(other than debt instruments of the issuer) at least annually at a single fixed
rate (or certain qualified floating rates). The OID rules of the Code define
"publicly traded" to include appearing on a "quotation medium" that provides a
reasonable basis to determine fair market value by disseminating either recent
price quotations of identified brokers, dealers or traders, or actual prices of
recent sales transactions. As no transfer restrictions are contemplated for the
New Railworks Secured Loan, the Debtors cannot assure you that they will not be
considered "publicly traded."


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                           (c)      CHARACTER OF GAIN OR LOSS

                  The character of any gain or loss as ordinary or capital with
respect to a Claim or Equity Interest, or with respect to the disposition of
stock or a security received in respect of a Claim or Equity Interest, will
depend on a number of factors, including, without limitation,

                  -        the origin and nature of the Claim or Equity
                           Interest,

                  -        the tax status of the holder of the Claim or Equity
                           Interest,

                  -        whether the Claim or Equity Interest is a capital
                           asset in the hands of the holder, and

                  -        the extent to which the holder previously claimed a
                           loss, bad debt deduction or charge to a reserve for
                           bad debts with respect to the Claim or Equity
                           Interest.

                  If gain or loss recognized by a holder of a Claim or Equity
Interest is capital gain or loss, it will generally be long-term if the holder
held it for more than one year.

                  Special considerations apply to holders that acquired their
Claim or Equity Interest at a discount subsequent to their issuance (see
"Market Discount" below), or when interest was in default. The tax consequences
of the receipt of cash and property that is attributable to accrued but unpaid
interest is discussed below in the section entitled "Consideration Allocable to
Interest." Each holder is urged to consult its tax advisor as to the
application of these factors to its own particular circumstances.

                           (d)      CONSIDERATION ALLOCABLE TO INTEREST

                  A holder of a Claim that receives a distribution under the
Plan with respect to its Claim will recognize ordinary income to the extent it
receives cash or property in respect of interest (including original issue
discount that has accrued during the time that the holder has held such Claim)
that has not already been included by the holder in income for federal income
tax purposes under its method of accounting. If the cash and other property
allocable to interest is less than the amount previously included as interest
in the holder's federal income tax return, the discharged portion of interest
may be able to be deducted in the taxable year in which the Effective Date
occurs. Under the Plan, distributions to a holder of a Claim are deemed for
federal income tax purposes to have been applied first in payment of the
principal amount of such Claim, and then to the payment of accrued interest.
The IRS may, however, attempt to treat payments as applied first to accrued
interest, in which case a holder of a Claim may recognize interest income even
though the holder otherwise may realize a loss with respect to such Claim.
Holders of Claims are urged to consult their own tax advisors regarding the
consequences to them if consideration distributed under the Plan is allocable
to accrued interest.

                           (e)      MARKET DISCOUNT

                  Generally, a "market discount" bond is one acquired after its
original issuance for less than the issue price of such bond plus the aggregate
amount, if any, of original issue discount includible in the income of all
holders of such bond before such acquisition. Generally, gain realized on the
disposition of a market discount bond (or on the disposition of property
exchanged for such bond in certain non-taxable exchanges) will be ordinary
income to the extent of "accrued market discount" at the time of such
disposition (determined using either constant interest or ratable daily
accrual). The market discount rules will also apply in the case of stock or a
security acquired in a non-taxable exchange for a market discount obligation.

                           (f)      ORIGINAL ISSUE DISCOUNT

                  If the participations in the New Railworks Secured Loan to be
issued under the Plan or the Non-Exit Lenders Pre-Petition Lenders Claims for
which they will be exchanged are "publicly traded" within the meaning of the
OID rules, the participations in the New Railworks Secured Loan may have
significant

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amounts of OID. The amount of OID would equal the difference between their
"stated redemption price at maturity" (as such term is defined in the Code) and
their "issue price" (determined as discussed above in the section on "Fair
Market Value"). In general, a holder of a debt instrument with OID must include
such OID in its income on a constant yield to maturity basis over the term of
the instrument. The rules and regulations governing the calculation and
taxation of OID are complex, and holders of Non-Exit Lenders Pre-Petition
Lenders Claims are urged to consult their tax advisors with regard to the tax
consequences to them of owning participations in the New Railworks Secured Loan
with OID.

                           (g)      BACKUP WITHHOLDING

                  Under the Code, interest, dividends and other "reportable
payments" may, under certain circumstances, be subject to "backup withholding."
Various claimants, such as corporations, are generally exempt from backup
withholding.

                  Backup withholding generally applies if the payee:

                  -        fails to furnish its social security number or other
                           taxpayer identification number (a "TIN");

                  -        furnishes an incorrect TIN;

                  -        fails to properly report interest or dividends; or

                  -        under certain circumstances, fails to provide a
                           certified statement, signed under penalty of
                           perjury, that the TIN provided is its correct number
                           and that it is not subject to backup withholding.

                  2.       TREATMENT OF CERTAIN CREDITORS

                           (a)      ALLOWED NON-EXIT LENDERS PRE-PETITION
LENDERS CLAIMS

                  As discussed in section I. F., "Summary of Distributions
Under the Plan," of this Disclosure Statement, under the Plan, on the Effective
Date each holder of Allowed Non-Exit Lenders Pre-Petition Lenders Claims will
receive, in complete settlement, satisfaction and discharge of its Class 6
Claim:

                  -        its ratable participation in the New Railworks
                           Secured Loan;

                  -        a Pro Rata Share of the Exit Cash Infusion;

                  -        to the extent such holder holds Allowed Non-Exit
                           Lenders Pre-Petition Lenders Claims constituting
                           Pre-Petition Revolving Loans, a share of the
                           Pre-Petition Revolving Lenders Cash Payment;

                  -        a Pro Rata Share of the New Railworks Series A
                           Preferred Stock

                  -        a Pro Rata Share of the New Railworks Series B
                           Warrants;

                  -        a Pro Rata Share of the Class 7 Distribution; and

                  -        any Pre-Petition Letters of Credit participated in
                           by holders of Allowed Non-Exit Lenders Pre-Petition
                           Lenders Claims pursuant to the Pre-Petition Credit
                           Agreement shall be cash collateralized, replaced or
                           secured by letters of credit issued under the Exit
                           Facility.


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<PAGE>


                  The preceding summary and following discussion assume the
holders of the Allowed Non-Exit Lenders Pre-Petition Lenders Claims have waived
their right to receive and accordingly will not receive a Pro Rata Share of the
Class 7 Distribution.

                  If the Non-Exit Lenders Pre-Petition Lenders Claims are
securities, the exchange of a Non-Exit Lenders Pre-Petition Lenders Claim will
constitute a recapitalization. An exchanging holder would not recognize any
loss realized on the exchange. If the holder realizes a gain on the exchange,
the holder must recognize such gain to the extent of the sum of (a) the amount
of cash and (b) if the participations in the New Railworks Secured Loan are not
securities, the fair market value of such participations on the date of the
exchange. If the participations are securities, then the holder's aggregate
basis in the participations will equal its basis in its Non-Exit Lenders
Pre-Petition Lenders Claim less the sum of the amount of cash received in the
exchange plus the amount of gain recognized by the holder on the exchange. If
the participations are not securities, then the holder's basis in the
participations will be their fair market value. If the participations are
securities, then the holder's holding period in the participations would
include the holder's holding period in the Non-Exit Lenders Pre-Petition
Lenders Claim exchanged therefor. If the participations are not securities, the
holder's holding period in the participations would begin on the day following
the exchange.

                  If the Non-Exit Lenders Pre-Petition Lenders Claims are not
securities, the exchange of a Non-Exit Lenders Pre-Petition Lenders Claim would
be a fully taxable transaction. The holder would recognize any gain or loss
realized on the exchange. The holder's basis in all property received in the
exchange would equal its fair market value on the date of the exchange. Its
holding period in such property would begin on the day following the exchange.

                           (b)      EXIT LENDERS PRE-PETITION LENDERS CLAIMS

                  As discussed in section I. F., "Summary of Distributions
Under the Plan," of this Disclosure Statement, under the Plan, on the Effective
Date each holder of an Allowed Exit Lenders Pre-Petition Lenders Claim will
receive, in complete settlement, satisfaction and discharge of its Class 7
Claim:

                  -        a Pro Rata Share of the New Railworks Series C
                           Preferred Stock;

                  -        a Pro Rata Share of the Class 7 Common Stock
                           Distribution;

                  -        a Pro Rata Share of the Class 6 Distribution; and

                  -        any Pre-Petition Letters of Credit participated in
                           by holders of Allowed Exit Lenders Pre-Petition
                           Lenders Claims pursuant to the Pre-Petition Credit
                           Agreement shall be cash collateralized, replaced or
                           secured by letters of credit issued under the Exit
                           Facility.

                  The preceding summary and following discussion assume the
holders of the Allowed Exit Lenders Pre-Petition Lenders Claims have waived
their right to receive and accordingly will not receive a Pro Rata Share of the
Class 6 Distribution.

                  If the Exit Lenders Pre-Petition Lenders Claims are
securities, the exchange of an Exit Lenders Pre-Petition Lenders Claim will
constitute a recapitalization. An exchanging holder would not recognize any
loss realized on the exchange. If the holder realizes a gain on the exchange,
the holder must recognize such gain to the extent of the amount of cash
received. The holder's aggregate basis in the New Railworks Series C Preferred
Stock and New Railworks Common Stock will equal its basis in its Exit Lenders
Pre-Petition Lenders Claim less the sum of the amount of cash received in the
exchange plus the amount of gain recognized by the holder on the exchange, and
such aggregate basis will be apportioned between the New Railworks Series C
Preferred Stock and New Railworks Common Stock in proportion to


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the relative fair market values on the date of the exchange. The holder's
holding period in the New Railworks Series C Preferred Stock and New Railworks
Common Stock will include the holder's holding period in the Exit Lenders
Pre-Petition Lenders Claim exchanged therefor.

                  If the Exit Lenders Pre-Petition Lenders Claims are not
securities, the exchange of a Exit Lenders Pre-Petition Lenders Claim would be
a fully taxable transaction. The holder would recognize any gain or loss
realized on the exchange. The holder's basis in the New Railworks Series C
Preferred Stock and New Railworks Common Stock received in the exchange would
equal its fair market value on the date of the exchange. Its holding period in
the New Railworks Series C Preferred Stock and New Railworks Common Stock would
begin on the day following the exchange.

                           (c)      CONVENIENCE CLAIMS

                  Under the Plan, holders of Unsecured Claims which are less
than $1,000 or who elect such treatment, will be treated as holders of
Convenience Claims. Under the Plan, each holder of a Convenience Claim will
receive cash equal to 20 percent of its Allowed Claim; provided, however, that
if Class 8 (Convenience Claims) votes to reject the Plan, such Class will
receive no distribution under the Plan. An exchanging holder of a Convenience
Claim will recognize gain or loss equal to the amount of cash received under
the Plan less its adjusted tax basis in its Convenience Claim. If Class 8
(Convenience Claims) votes to reject the Plan, and such Class will receive no
distribution under the Plan, each holder of a Convenience Claim will recognize
a loss in the amount of its adjusted tax basis in its Convenience Claim

                           (d)      UNSECURED CLAIMS

                  As discussed in section I. F., "Summary of Distributions
Under the Plan" of this Disclosure Statement, under the Plan, unless such
holder elects to be treated as if it held a Convenience Claim, on the Effective
Date each holder of an Allowed Unsecured Claim will receive, in complete
settlement, satisfaction and discharge of its Class 9 Claim:

                  -        its Pro Rata Share of the Class 9 Common Stock
                           Distribution; and

                  -        its Pro Rata Share of any recoveries from the
                           Litigation Trust;

provided, however, that if Class 9 (Unsecured Claims) votes to reject the Plan,
such Class will receive no distribution under the Plan. Also, each holder of an
Allowed Unsecured Claim who votes in favor of the Plan (other than GOF and
Stonehill) may make the Class 9 Cash Election and receive, in lieu of its Pro
Rata Share of the Class 9 Common Stock Distribution, the Class 9 Cash
Consideration.

                  As discussed below, unless the IRS requires otherwise, the
transfer of assets to the Litigation Trust by the Debtors will be treated for
federal income tax purposes as a transfer of such assets to the beneficiaries
of the Litigation Trust, followed by a deemed transfer of such assets by such
beneficiaries to the Litigation Trust. As a result of such treatment, the
beneficiaries will have to take into account the fair market value on the date
of the exchange of their pro rata share, if any, of the assets transferred on
their behalf to the Litigation Trust in determining the amount of gain realized
and required to be recognized upon consummation of the Plan on the Effective
Date. The Debtors believe that the value of the assets transferred to the
Litigation Trust is speculative and for federal income tax purposes intend to
treat such value as equal to the amount of the Litigation Trust Financing.

                  As indicated above, it is likely that the Unsecured Claims
other than the Allowed Senior Subordinated Note Claim, will not be considered
securities for federal income tax purposes and therefore, the exchange of a
Allowed Unsecured Claim will constitute a taxable exchange. Each such holder of
an Allowed Unsecured Claim will recognize gain or loss equal to the difference
between the sum of the fair market value of the New Railworks Common Stock as
of the Effective Date plus the fair market value of the


                                      96
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holder's interest in the Litigation Trust and its adjusted tax basis in its
Allowed Unsecured Claim. The holder's initial tax basis in its interest in the
Litigation Trust will equal the fair market value of such interest. Similarly,
tax basis in its interest in the New Railworks Common Stock will equal the fair
market value of such Common Stock. The holder's holding period in the New
Railworks Common Stock will include the holder's holding period in the Allowed
Unsecured Claim exchanged therefor.

                  On the other hand, it is likely that the Senior Subordinated
Notes Claims will be securities for federal income tax purposes and therefore,
the exchange of a Senior Subordinated Notes Claim for its Pro Rata Share of the
Class 9 Common Stock Distribution will constitute a recapitalization. Such an
exchanging holder should not recognize any loss realized on the exchange. If
the holder realizes a gain on the exchange, i.e., if the fair market value of
the holder's interest in the Litigation Trust plus the fair market value of the
New Railworks Common Stock received by the holder exceeds the holder's adjusted
tax basis in its Senior Subordinated Notes Claims, the holder must recognize an
amount equal to the lesser of the amount of such gain and the fair market value
of the holder's interest in the Litigation Trust. The holder's aggregate basis
in the New Railworks Common Stock will equal its basis in its Senior
Subordinated Notes Claim plus any gain recognized by such holder less the fair
market value of the holder's interest in the Litigation Trust. The holder's
initial tax basis in its interest in the Litigation Trust will equal the fair
market value on the date of the exchange of such interest. The holder's holding
period in the New Railworks Common Stock will include the holder's holding
period in the Senior Subordinated Notes Claim exchanged therefor.

                  Also, each holder of an Allowed Secured Claim who validly
elects to receive the Class 9 Cash Consideration in lieu of its Pro Rata Share
of the Class 9 Common Stock Distribution will recognize gain or loss equal to
the difference between the Class 9 Cash Consideration such holder receives plus
the fair market value of the holder's interest in the Litigation Trust and its
adjusted tax basis in its Allowed Unsecured Claim. The holder's initial tax
basis in its interest in the Litigation Trust will equal the fair market value
of such interest.

                  If Class 9 (Unsecured Claims) votes to reject the Plan, and
such Class will receive no distribution under the Plan, and notwithstanding the
discussion above, each holder of a Unsecured Claim will recognize a loss in the
amount of its adjusted tax basis in its Unsecured Claim

                           (e)      TAX CONSEQUENCES TO EQUITY HOLDERS

                  The Plan contemplates the cancellation of all Equity
Interests in Railworks. Holders of Equity Interests in Railworks should
therefore recognize on the Effective Date a capital loss equal to their basis
in their Equity Interest in Railworks.

         B.       FEDERAL INCOME TAX TREATMENT OF THE LITIGATION TRUST

                  As of the Effective Date, if Class 9 votes to accept the
Plan, certain assets of the Debtors will be transferred to the Litigation
Trust. The Debtors believe that the Litigation Trust should qualify as a
liquidating trust, as defined in Treasury Regulation section 301.7701-4(d), and
pursuant to Rev. Proc. 94-95, 1994-2 C.B. 684, would therefore be taxed as a
grantor trust, of which the holders of Claims entitled to receive Distributions
from the Litigation Trust ("Beneficiaries") will be treated as the grantors.
Thus, no tax should be imposed on the Litigation Trust itself on the income
earned or gain recognized by the Litigation Trust. Instead, the grantors would
be taxed on their allocable shares of such income and gain in each taxable
year, whether or not they received any distributions from the Litigation Trust
in such taxable year.

                  It is possible, however, that the IRS could require a
different characterization of the Litigation Trust, which could result in
different and possibly greater tax liability to the Litigation Trust and/or the
Beneficiaries. If the IRS determines that the powers granted to the trustee
that will be appointed to administer the Litigation Trust (the "Litigation
Trustee"), are greater than those normally associated with carrying out the
liquidation and distribution of assets transferred to a liquidating trust, as
described in


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Treasury Regulation section 301.7701-4(d), the IRS may attempt to
re-characterize the Litigation Trust as a complex trust under Code section 641.
A complex trust generally is subject to tax on income received, less deductions
allowed for its expenses and for distributions that it makes to beneficiaries
up to the amount of its distributable net income ("DNI"), as defined in Code
section 643(a). The Litigation Trust would be taxed on any current DNI not
distributed to the Beneficiaries, and the Beneficiaries would be taxed on
income currently distributed to them by the Litigation Trust (up to the amount
of their proportionate share of the Litigation Trust's DNI for that year).

                  Alternatively, the IRS may attempt to characterize the
Litigation Trust as a Qualified Settlement Fund ("QSF") pursuant to Treasury
Regulations under Code section 468B(g) (the "QSF Regulations"). The QSF
Regulations generally do not apply to trusts which are established to satisfy
claims of general trade creditors and debt holders in a bankruptcy case. The
QSF Regulations, however, do apply to a trust which is established to satisfy
liabilities which arise out of a tort, breach of contract, or violation of law
or are otherwise designated by the IRS. Thus, if the IRS asserted that the
Claims of beneficiaries of the Litigation Trust arose from such causes, the
Litigation Trust could be treated as a QSF. If the Litigation Trust were
treated as a QSF, it would be treated as a separate taxable entity subject to
federal income tax at the maximum tax rate applicable to trusts. Amounts
transferred to the QSF to resolve or satisfy a liability for which the QSF was
established are not included in gross income of the QSF. Pursuant to the
foregoing, if the Litigation Trust were treated as a QSF, Beneficiaries could
receive decreased distributions.

                  The Debtors do not intend to request any advance ruling from
the IRS regarding the tax characterization of the Litigation Trust as a
liquidating trust. However, to the extent possible, the Debtors will comply
with the requirements and guidelines set forth in Rev. Pro. 94-45, which
specifies conditions under which the IRS will consider issuing advance rulings.
If the Litigation Trust were determined by the IRS not to be taxable as a
liquidating trust, the taxation of the Litigation Trust and the transfer of
assets by the Debtors to the Litigation Trust could be materially different
than is described herein and could have a material adverse effect on the
holders of Claims.

         C.       TAX CONSEQUENCES TO THE DEBTORS

                  1.       CANCELLATION OF INDEBTEDNESS INCOME

                  The exchange of the Allowed Non-Exit Lenders Pre-Petition
Lenders Claims, the Allowed Exit Lenders Pre-Petition Lenders Claims, the
Senior Subordinated Notes Claims, the Unsecured Claims and the Convenience
Claims for participation in the New Railworks Secured Loan, the New Railworks
Preferred Stock, the New Railworks Common Stock, the New Railworks Series B
Warrants, Litigation Trust Claims and/or Cash, as the case may be, will result
in the cancellation of a portion of Railworks's outstanding indebtedness. Upon
consummation of the Plan, Railworks will realize cancellation of debt ("COD")
income in an amount equal to (i) the excess of the adjusted issue price
(including any accrued but unpaid interest) of the Exit Lenders Pre-Petition
Lenders Claims over the sum of (x) the fair market value of the New Railworks
Series C Preferred Stock, (y) the fair market value of the Class 7 Common Stock
Distribution and (z) the cash paid in exchange therefor plus (ii) the excess of
the adjusted issue price (including any accrued but unpaid interest) of the
Non-Exit Lenders Pre-Petition Lenders Claims over the sum of (x) the amount of
cash paid in exchange therefor, (y) the adjusted issue price of the
participations in the New Railworks Secured Loan paid in exchange therefor plus
(z) the fair market value of the New Railworks Series A Preferred Stock and the
New Railworks Class B Warrants plus (iii) in the event that Class 9 (Unsecured
Claims) votes to accept the Plan, the excess of the adjusted issue price
(including any accrued but unpaid interest) of the Unsecured Claims over the
sum of (x) the fair market value of the New Railworks Common Stock paid in
exchange therefor and (y) the fair market value of the Litigation Trust Claims,
or in the event that Class 9 (Unsecured Claims) votes to reject the Plan, the
excess of the adjusted issue price (including any accrued but unpaid interest)
of the Unsecured Claims plus (iv) the excess of the adjusted issue price
(including any accrued but unpaid interest) of the Convenience Claims over the
amount of cash paid in exchange therefor less (vi) the amount of any
indebtedness that would have given rise to a deduction if such


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liability had in fact been paid by Railworks. Because Railworks will be a
Debtor in a bankruptcy case at the time it realizes the COD income, Railworks
will not be required to include such COD income in its gross income for federal
income tax purposes. Instead, Railworks will be required to reduce certain of
its tax attributes by the amount of unrecognized COD income in the manner
prescribed by Code section 108(b). The required attribute reduction is
generally applied to reduce net operating loss carryovers ("NOLs"), to the
extent of such NOLs, and certain other tax attributes of Railworks and its
property (including the tax basis of certain property).

                  2.       NOLS AND OTHER TAX ATTRIBUTES

                  The appropriate methodology for applying the attribute
reduction described above to an affiliated group filing a consolidated federal
income tax return is uncertain. A recent Supreme Court case may be interpreted
to suggest, and the Internal Revenue Service has recently taken the position
that, an affiliated group's consolidated NOLs must be reduced when a member of
the group has COD that is excluded from income. In addition, the Debtors may be
entitled to make certain elections that will affect attribute reduction.

                  If the Debtors take and sustain the position that such
attribute reduction is implemented on a separate company basis, the NOLs of the
Debtors attributable to Railworks's operating subsidiaries will survive. On the
other hand, if the Debtors are required to reduce consolidated NOLs, all or
substantially all of the NOLs of the Railworks consolidated group will be
eliminated. The Debtors will determine the appropriate methodology and
elections under their interpretation of the law as in effect when the Debtors'
tax returns are filed. The Debtors cannot assure you that the IRS will agree
with the methodology chosen by the Debtors. Accordingly, the NOLs of the
Debtors may be substantially reduced or even eliminated. Other tax attributes
may also be reduced. To the extent that asset basis is reduced, depreciation or
amortization of assets would also be reduced, and gain recognized (and
therefore tax imposed) in connection with a subsequent disposition of assets
may be increased.

                  3.       SECTION 382 LIMITATION

                  To the extent Railworks's NOLs are not reduced as a result of
the unrecognized COD income, Code section 382 ("Section 382") may apply to
limit the ability of Railworks and its subsidiaries to utilize any such
remaining NOLs in future years. When a corporation undergoes an ownership
change, Section 382 generally limits the ability of the corporation to utilize
historic NOLs and certain subsequently recognized "built-in" losses and
deductions (i.e., losses and deductions that have economically accrued but have
not been unrecognized as of the date of the ownership change) (the "Annual
Section 382 Limitation"). For purposes of the Annual Section 382 Limitation, an
"ownership change" is generally defined as a more than 50 percentage point
change in ownership of the applicable corporation during the shorter of (i) the
three-year period ending on each date on which such change in ownership is
tested (a "Measurement Date") or (ii) the period beginning on the day after the
corporation's most recent previous ownership change and ending on the
Measurement Date. As a general rule, a corporation's Annual Section 382
Limitation equals the value of the stock of the corporation (with certain
adjustments) immediately before the ownership change multiplied by the
applicable "long-term tax-exempt rate" then in effect (e.g., 4.91% for a June
August ownership change). The Annual Section 382 Limitation may be increased by
certain "recognized built-in gains" triggered during a five year "recognition
period" beginning on the ownership change date. Certain "recognized built-in
losses," including certain deductions, triggered during the recognition period
may be limited in the same manner as if such loss were an NOL existing as of
the ownership change. Subject to certain limitations, any unused portion of the
Annual Section 382 Limitation may be available in subsequent years. A
corporation must meet certain continuity of business enterprise requirements
for at least two years following an ownership change in order to preserve the
Annual Section 382 Limitation.

                  Railworks believes that it is likely that it will undergo an
ownership change as a result of the implementation of Plan. If that occurs, the
ability of Railworks and its subsidiaries to utilize any NOLs that


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remain after the implementation of the Plan will be, and their ability to
utilize certain subsequently recognized built-in losses and deductions (if any)
may be, subject to an Annual Section 382 Limitation, as described above.

                  Although Code Section 382(l)(5) provides an exception to the
application of the Annual Section 382 Limitation for corporations under the
jurisdiction of a Bankruptcy Court (the "Bankruptcy Exception"), it is
anticipated that Railworks will not qualify for the Bankruptcy Exception. In
order for the Bankruptcy Exception to apply to Railworks, its historic
shareholders and creditors that held certain "qualified indebtedness" (as
defined by Treasury Regulations) prior to implementation of the Plan must own
more than 50% of the total voting power and total value of Railworks's stock
after such implementation. If the Bankruptcy Exception applied, Railworks's
ability to utilize its NOLs arising prior to the Effective Date and built-in
losses and deductions (if any) recognized after the effective date of the Plan
would not be limited as described above. The Bankruptcy Exception would,
however, reduce Railworks' and its subsidiaries' pre-change NOLs that may be
carried over to a post-change year. The Bankruptcy Exception also provides that
a second ownership change occurring during the two-year period immediately
following the first ownership change would prohibit the use any NOLs that arose
before the first ownership change. Section 382 provides that a corporation
under the jurisdiction of a Bankruptcy Court may elect out of the Bankruptcy
Exception even if the corporation meets all of the requirements thereof.

                  Since Railworks will not qualify for the Bankruptcy Exception
as discussed above, but is under the jurisdiction of a Bankruptcy Court, a
special rule under Code Section 382(l)(6) will apply in calculating Railworks's
Annual Section 382 Limitation. Under this special rule, Railworks's Annual
Section 382 Limitation will be calculated by reference to the lesser of (i) the
value of Railworks's stock (with certain adjustments) immediately after the
ownership change (as opposed to immediately before the ownership change, as
discussed above, and including any increase in value resulting from any
surrender or cancellation of indebtedness under the bankruptcy case) or (ii)
the value of Railworks's assets (determined without regard to liabilities)
immediately before the ownership change. Although such calculation may
substantially increase Railworks's Annual Section 382 Limitation, Railworks's
use of any NOLs and built-in losses and deductions (if any) remaining after the
implementation of the Plan may still be substantially limited after the
ownership change.

                X. PROCEDURES FOR DISTRIBUTIONS UNDER THE PLAN

         A.       DISTRIBUTION RECORD DATE

                  As of the close of business on the Distribution Record Date,
the various transfer and claims registers for each of the Classes of Claims or
Equity Interests as maintained by the Debtors, their respective agents, or the
Indenture Trustee shall be deemed closed, and there shall be no further changes
in the record holders of any of the Claims or Equity Interests. The Debtors
shall have no obligation to recognize any transfer of the Claims or Equity
Interests occurring after the close of business on the Distribution Record
Date. The Debtors and the Indenture Trustee shall be entitled to recognize and
deal for all purposes under the Plan only with those record holders stated on
the transfer ledgers as of the close of business on the Distribution Record
Date, to the extent applicable. Notwithstanding anything in this paragraph to
the contrary, the amount, and the corresponding distribution on account, of the
Exit Lenders Pre-Petition Lenders Claims shall be determined as of the
Effective Date.

         B.       DISBURSING AGENT

                  Unless otherwise provided in the Plan, all distributions
under the Plan initially shall be made by the Disbursing Agent on or after the
Effective Date as provided in the Plan. The Disbursing Agent shall not be
required to give any bond or surety or other security for the performance of
its duties unless otherwise ordered by the Bankruptcy Court; and, in the event
that the Disbursing Agent is so otherwise ordered, all costs and expenses of
procuring any such bond or surety shall be borne by the Reorganized Debtors.


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         C.       RIGHTS AND POWERS OF DISBURSING AGENT

                  The Disbursing Agent shall be empowered to (i) effect all
actions and execute all agreements, instruments, and other documents necessary
to perform its duties under the Plan, (ii) make all distributions contemplated
hereby, (iii) employ professionals to represent it with respect to its
responsibilities, and (iv) exercise such other powers as may be vested in the
Disbursing Agent by order of the Bankruptcy Court, pursuant to the Plan, by the
Confirmation Order, or as deemed by the Disbursing Agent to be necessary and
proper to implement the provisions hereof.

                  Except as otherwise ordered by the Bankruptcy Court, the
amount of any reasonable fees and expenses incurred by the Disbursing Agent on
or after the Effective Date (including, without limitation, taxes) and any
reasonable compensation and expense reimbursement claims (including, without
limitation, reasonable attorney and other professional fees and expenses) made
by the Disbursing Agent shall be paid in Cash by the Reorganized Debtors.

         D.       DATE OF DISTRIBUTIONS

                  Unless otherwise provided under the Plan, any distributions
and deliveries to be made under the Plan to Classes shall be made on the
Effective Date or as soon thereafter as is practicable; provided, however, that
distributions to holders of Allowed Class 9 Claims shall commence on the
Initial Distribution Date. In the event that any payment or act under the Plan
is required to be made or performed on a date that is not a Business Day, then
the making of such payment or the performance of such act may be completed on
or as soon as reasonably practicable after the next succeeding Business Day,
but shall be deemed to have been completed as of the required date.

                  Subject to the applicable provisions of the Plan, on the
Initial Distribution Date, the Disbursing Agent shall distribute the New
Railworks Common Stock to holders of Allowed Claims in Class 9. For the purpose
of calculating the amount of New Railworks Common Stock to be distributed to
holders of Allowed Claims in Class 9 on the Initial Distribution Date, all
Disputed Claims in such Class will be treated as though such Claims will be
Allowed Claims in the amounts asserted or as estimated by the Debtors or the
Bankruptcy Court in accordance with section 7.5 of the Plan. On the Final
Distribution Date, each holder of an Allowed Claim in Class 9 shall receive a
Catch-up Distribution, if applicable, of New Railworks Common Stock. After the
Initial Distribution Date but prior to the Final Distribution Date, the
Reorganized Debtors, in their sole discretion, may direct the Disbursing Agent
to distribute shares of New Railworks Common Stock to a holder of a Disputed
Claim in Class 9 which becomes an Allowed Claim after the Initial Distribution
Date such that the holder of such Claim receives the same shares of New
Railworks Common Stock that such holder would have received had its Claim been
an Allowed Claim in such amount on the Initial Distribution Date.

                  Subject to the applicable terms and conditions of the Plan
and the Litigation Trust Agreement, distributions from the Litigation Trust
shall be made in accordance with the Litigation Trust Agreement.


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                    HOLDERS OF CLAIMS DESIGNATED TO RECEIVE PLAN SECURITIES MAY
NEED TO RECEIVE AND HOLD THEIR PLAN SECURITIES IN A BROKERAGE ACCOUNT.

To allow timely and efficient distribution and transfer of the Plan Securities
among a wide group of holders, the Reorganized Company may issue some or all of
the Plan Securities in global form and use the book-entry transfer facilities
of DTC to effectuate distribution and transfer of the Plan Securities in lieu
of printing and distributing individual certificates representing the Plan
Securities.

Use of the DTC book-entry transfer facilities may require recipients of Plan
Securities that are not themselves participants in the DTC book-entry system to
receive and hold their securities in a brokerage account. If the Debtors use
the book-entry transfer facilities of DTC to effectuate distribution and
transfer of some or all of the Plan Securities, holders of Claims designated to
receive those securities will receive instructions regarding the DTC book-entry
transfer facilities and a request for information on the brokerage account (or
other account of a DTC participant) to be credited with the receipt of Plan
Securities with respect to that holder's Claim.

If you do not already have a brokerage account and hold a Claim in a Class that
will receive Plan Securities under the Plan, you may be required to open a
brokerage account to receive and hold your Plan Securities.

         E.       DISTRIBUTIONS BY DISBURSING AGENT

                  The Disbursing Agent shall make all distributions required
under the Plan (subject to the provisions of Sections 2, 4, 6 and 7 of the
Plan), except with respect to a holder of a Claim whose distribution is
governed by an indenture or other agreement and is administered by an indenture
trustee, agent, or servicer, which distributions shall be deposited with the
appropriate indenture trustee, agent, or servicer, who shall deliver such
distributions to the holders of Claims in accordance with the provisions of the
Plan and the terms of the relevant indenture or other governing agreement.

         F.       DISTRIBUTIONS FOR CLAIMS ALLOWED AS OF THE EFFECTIVE DATE

                  Except as otherwise provided herein or as ordered by the
Bankruptcy Court, distributions to be made on account of Claims that are
Allowed Claims as of the Effective Date shall be made on the Effective Date.
The Plan Securities to be issued under the Plan shall be deemed issued as of
the Effective Date regardless of the date on which they are actually
distributed. Distributions on account of Claims that first become Allowed
Claims after the Effective Date shall be made pursuant to Sections 4, 6 and 7
of the Plan.

         G.       DELIVERY OF DISTRIBUTIONS TO CLASSES; UNCLAIMED DISTRIBUTIONS

                  Subject to Bankruptcy Rule 9010, unless otherwise provided
herein, all distributions to any holder of an Allowed Claim other than a holder
of an Allowed Pre-Petition Lenders Claim or a Senior Subordinated Notes Claim
shall be made at the address of such holder as set forth on the Schedules Filed
with the Bankruptcy Court or on the books and records of the Debtors or their
agents, unless the Debtors have been notified in writing of a change of
address, including, without limitation, by the Filing of a proof of claim or
interest by such holder that contains an address for such holder different from
the address reflected on such Schedules for such holder. All Cash distributions
with respect to Allowed Pre-Petition Lender


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Claims shall be made via wire transfer to BoA, as administrative agent under
the Pre-Petition Credit Agreement. All distributions with respect to Allowed
Senior Subordinated Notes Claims shall be made to the Indenture Trustee for
distribution to the holders of the Senior Subordinated Notes.

                  In the event that any distribution to any holder is returned
as undeliverable, no distribution to such holder shall be made unless and until
the Disbursing Agent has been notified of the then current address of such
holder, at which time or as soon as reasonably practicable thereafter such
distribution shall be made to such holder without interest; provided, that,
such distributions shall be deemed unclaimed property under section 347(b) of
the Bankruptcy Code at the expiration of the later of one (1) year from (i) the
Effective Date and (ii) the date such holder's Claim is Allowed. After such
date, all unclaimed property or interest in property shall revert to
Reorganized Railworks, and the Claim of any other holder to such property or
interest in property shall be discharged and forever barred. Once any
distribution to a holder is deemed to be unclaimed property, the Debtors,
Reorganized Debtors and/or the Disbursing Agent, as applicable, shall have no
further obligation to make any distributions to such holder. The Debtors,
Reorganized Debtors and the Disbursing Agent shall have no obligation to
attempt to locate any holder of an Allowed Claim other than by reviewing their
books and records (including any proofs of claim Filed against the Debtors).

         H.       SURRENDER OF INSTRUMENTS; LOST, STOLEN, MUTILATED OR
DESTROYED INSTRUMENTS

                  As a condition to receiving any distribution under the Plan,
each holder of a Claim represented by an instrument, other than a Pre-Petition
Lenders Claim, including notes and certificates, must surrender such instrument
held by it to the Disbursing Agent or its designee. In addition to any
requirements under one or more of the Debtors' certificate of incorporation or
bylaws, any holder of a Claim evidenced by an instrument that has been lost,
stolen, mutilated or destroyed must, in lieu of surrendering such instrument,
deliver to the Disbursing Agent: (a) evidence satisfactory to the Disbursing
Agent and the Debtors of the loss, theft, mutilation or destruction of such
instrument; and (b) such security or indemnity as may be required by the
Disbursing Agent to hold the Disbursing Agent and the Debtors harmless from any
damages, liabilities or costs incurred in treating such individual as a holder
of an instrument. Upon compliance with section 6.6 of the Plan, the holder of a
Claim evidenced by any such lost, stolen, mutilated or destroyed instrument
will, for all purposes under the Plan, be deemed to have surrendered such
instrument. Any holder that fails to (i) surrender an instrument or (ii)
provide evidence of the loss, theft, mutilation or destruction of such
instrument satisfactory to the Disbursing Agent and the Debtors and execute and
deliver security or indemnity reasonably satisfactory to the Disbursing Agent
before the first (1st) anniversary of the Effective Date shall be deemed to
have forfeited all rights and Claims and may not participate in any
distribution under the Plan in respect of such rights and Claims. Any
distribution so forfeited shall become the sole and exclusive property of
Reorganized Railworks.

         I.       PROCEDURES FOR DISPUTED CLAIMS

                  1.       OBJECTIONS TO CLAIMS

                  Other than with respect to Fee Claims, and except as, and to
the extent that, Travelers has the right to contest Claims bonded by Travelers
as provided in the Exit Bonding Facility, only the Debtors and the Reorganized
Debtors shall have the authority to File, settle, compromise, withdraw or
litigate to judgment, objections to Claims. Any objections to Claims shall be
served and Filed on or before the later of: (i) one hundred twenty (120) days
after the Effective Date; (ii) thirty (30) days after a request for payment or
proof of Claim is timely Filed and properly served upon the Debtors; or (iii)
such other date as may be fixed by the Bankruptcy Court, whether fixed before
or after the dates specified in clauses (i) and (ii), hereof. Notwithstanding
any authority to the contrary, an objection to a Claim shall be deemed properly
served on the claimant if the Debtors or the Reorganized Debtors effect service
in any of the following manners: (a) in accordance with Federal Rule of Civil
Procedure 4, as modified and made applicable by Bankruptcy Rule 7004; (b) to
the extent counsel for a claimant is unknown, by first class mail, postage
prepaid, on the signatory on the proof of claim or other representative
identified in the proof of claim or any attachment


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thereto; or (c) by first class mail, postage prepaid, on any counsel that has
appeared on the claimant's behalf in the Reorganization Cases. From and after
the Effective Date, the Reorganized Debtors may settle or compromise any
Disputed Claim without approval of the Bankruptcy Court.

                  2.       PAYMENTS AND DISTRIBUTIONS WITH RESPECT TO DISPUTED
CLAIMS

                  Notwithstanding any other provision of the Plan, if any
portion of a Claim (other than a Fee Claim) is a Disputed Claim, no payment or
distribution provided under the Plan shall be made on account of such Claim
unless and until such Disputed Claim becomes an Allowed Claim.

                  Any tort claim as to which a proof of claim was timely filed
in the Reorganization Cases shall be determined and liquidated in accordance
with the Bankruptcy Code and/or applicable nonbankruptcy law. Any tort claim
determined and liquidated pursuant to (i) an Order of the Bankruptcy Court, or
(ii) applicable nonbankruptcy law, which determination shall no longer be
appealable or subject to review, shall be deemed, to the extent applicable, an
Allowed Unsecured Claim in such liquidated amount and satisfied in accordance
with the Plan (provided, that, to the extent a tort claim is an Allowed Insured
Claim, such claim shall be paid from the insurance proceeds available to
satisfy such liquidated amount). Nothing contained in section 7.3(b) of the
Plan shall constitute or be deemed a waiver of any Claim, right or cause of
action that the Debtors may have against any Person in connection with or
arising out of any tort claim, including, without limitation, any rights under
section 157(b) of title 28 of the United States Code.

                  3.       AMENDMENTS TO CLAIMS

                  A Claim may be amended prior to the Confirmation Date only as
agreed upon by the Debtors, the Creditors' Committee and the holder of such
Claim, or as otherwise permitted by the Bankruptcy Court, the Bankruptcy Rules
or applicable law. After the Confirmation Date, a Claim may not be amended
without the authorization of the Bankruptcy Court. Any amendment to a Claim
Filed after the Confirmation Date shall be deemed disallowed in full and
expunged without any action by the Debtors, the Reorganized Debtors or the
Estates, unless the Claim holder has obtained prior Bankruptcy Court
authorization for the Filing of such amendment.

                          XI. ADDITIONAL INFORMATION

                  The Debtors are subject to the information requirements of
the Exchange Act and in accordance therewith file reports and other information
with the SEC. Any statements contained in this Disclosure Statement concerning
the provisions of any document are not necessarily complete, and in each
instance reference is made to the copy of such document for the full text
thereof. Each such statement is qualified in its entirety by such reference.
Certain documents referred to in this Disclosure Statement have not been
attached as exhibits because of the impracticability of furnishing copies
thereof to all of the Debtors' creditors and equity security holders.
Additional financial and other information about Railworks and the other
Debtors can be found in Railworks' Form 10-Ks for the fiscal years ended
December 31, 2000 and December 31, 2001 and its other filings from time to time
with the SEC, each of which is incorporated in this Disclosure Statement by
reference and is available at www.sec.gov. All of the exhibits to the Plan, the
Plan Supplement and to this Disclosure Statement are available for inspection
by contacting the Voting Agent.


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                                XII. CONCLUSION

                  For all of the reasons set forth in this Disclosure
Statement, the Debtors believe that the confirmation and consummation of the
Plan is preferable to all other alternatives. Consequently, the Debtors urge
all holders of Claims in Classes 1a, 6, 7, 8 and 9 to vote to ACCEPT the Plan,
and to duly complete and return their ballots so that they will be ACTUALLY
RECEIVED on or before 4:00 Eastern Time on September 13, 2002.

Dated:   Baltimore, Maryland
         August 8, 2002


                                    Railworks Corporation
                                    (for itself and on behalf of each of
                                    Debtors)


                                    By: /s/ John Kennedy
                                       ----------------------------------------
                                    Name:  John Kennedy
                                    Title:  Chief Executive Officer


                                      105
<PAGE>


                                   EXHIBIT A

              DEBTORS' SECOND AMENDED JOINT PLAN OF REORGANIZATION


<PAGE>


                                   EXHIBIT B

                            NON-DEBTOR SUBSIDIARIES


Hovey South, Inc.
Cranequip Ltd.
Gantrex Group (Chile) Ltda.
Gantrex Limited
Hovey Industries, Ltd.
National Rail Contractors, Inc.
Pacific Northern Rail Contractors, Inc.
PNR Leasing Ltd.
RailWorks of Canada Company
RailWorks Rail Services of Canada Ltd.


<PAGE>


                                   EXHIBIT C

                          CREDITORS' COMMITTEE MEMBERS


Union Switch & Signal, Inc.
Kennedy Electrical Supply Corp.
Electrical Distribution Services, Inc.
Cummins Metropower
Lanier Steel Products, Inc.
First Union National Bank
Warde Electric Contracting, Inc.


<PAGE>


                                   EXHIBIT D

                                  PROJECTIONS


<PAGE>


                                   EXHIBIT E

                              LIQUIDATION ANALYSIS


<PAGE>


                                   EXHIBIT F

                        HISTORICAL FINANCIAL INFORMATION