Sale by Tender Memorandum

Sale by Tender Memorandum December 2013 Industrial Rail Services Inc.

Industrial Rail Services Inc. Sale by Tender Ernst & Young Inc. ( EY ) is the Court-appointed Receiver and Receiver-Manager (the Receiver ) of the assets and undertakings of Industrial Rail Services Inc. ( Industrial Rail ) pursuant to the Order of the Court of Queen s Bench of New Brunswick (the Court ) dated 19 April 2012 (the Receivership Order ). In our capacity as Receiver, we hereby solicit tenders for the purchase of the Receiver s right, title and interest in an asset of Industrial Rail specifically being a prototype passenger rail car known as #6202. Tenders are to be received by the undersigned no later than 12 o clock noon (Atlantic Daylight Savings Time) on Friday, January 10, 2014. We have enclosed a detailed description of the asset offered for sale and the terms and conditions relating to its purchase. Appointments to view the asset can be made by contacting Mr. Ingo Eckoldt at 709 570 8252 or ingo.eckoldt@ca.ey.com. The information contained in this package is provided for information purposes only and should not be relied upon by tenderers Yours very truly, Ernst & Young Inc. Court-appointed Receiver for Industrial Rail Services Inc. Per: Paul D. Hickey, KC*SG, CA, CIRP Senior Vice President

Table of contents Sale by Tender...1 Conditions of sale...2 Schedule A - Form of Tender...7 Appendix A - Parcel Information...8 Parcel 1.0 Prototype Passenger Rail Car #6202...9

Sale by Tender Prototype Passenger Rail Car Ernst & Young Inc. ( EY ) is the Court-appointed receiver and receiver-manager (the Receiver ) of the assets and undertakings of Industrial Rail Services Inc. ( Industrial Rail ) pursuant to the Order of the Court of Queen s Bench of New Brunswick (the Court ) dated 19 April 2012 (the Receivership Order ). The Receiver is conducting a Sale by Tender process to sell its right, title and interest in an asset of Industrial Rail specifically being a prototype passenger rail car known as #6202. A Tender Information Package is available for review by anyone wishing additional information on the opportunity. Sealed tenders will be accepted by the Receiver until 12 o clock noon (Atlantic Daylight Savings Time) on Friday, 10 January 2014 for the purchase of the Receiver s right, title and interest in following asset: Parcel 1.0 Prototype Passenger Rail Car #6202 The highest or any offer will not necessarily be accepted. Tenders must be accompanied by a certified cheque payable to Ernst & Young Inc. Receiver for Industrial Rail Services Inc. for 15% of the amount of the offer price as a deposit which will be refunded if the offer is not accepted and forfeited to the Receiver on account of liquidated damages if the offer is accepted and the sale is not completed by the offerer. The balance of the offer price will be payable by banker s draft or wire transfer on closing. All tenders shall be subject to the Conditions of Sale, which shall form part thereof and may be obtained from the Receiver and accessible on the Receiver s website at: http://www.ey.com/ca/industrial Tenders will only be accepted in sealed envelopes, clearly marked Tender Industrial Rail. A more detailed description of the prototype passenger rail car #6202, appointments for viewing or further information may be obtained by contacting Mr. Ingo Eckoldt at 709 570 8252 or ingo.eckoldt@ca.ey.com. Ernst & Young Inc. Court-Appointed Receiver for Industrial Rail Services Inc. 11, rue Englehart Dieppe, NB E1A 7Y7 Canada Page 1

Conditions of sale 1. The Vendor is EY in its capacity as Receiver of the property and assets of Industrial Rail. 2. The Vendor is selling its right, title and interest, if any, in the following asset pursuant to these Conditions of Sale: Parcel 1.0 Prototype Passenger Rail Car #6202 3. Information on Parcel 1.0 is attached hereto as Appendix A. Such information and any other material provided to prospective tenderers relating to the asset have been prepared solely for the convenience of prospective tenderers and are not represented or warranted to be complete or accurate and do not form part of these Conditions of Sale. Every tenderer shall be deemed to have relied on its own inspection and investigation of Parcel 1.0 and the title thereto. 4. Tenders will be for a fixed amount and there will be no adjustments of any kind except as specifically set out in these Conditions of Sale. 5. Sealed tenders marked Tender Industrial Rail Services Inc. shall be delivered or mailed postage prepaid to Ernst & Young Inc., 11, rue Englehart, Dieppe, New Brunswick, E1A 7Y7; to the attention of Mr. Ingo Eckoldt, so as to be received before 12 o clock noon (Atlantic Daylight Savings Time) on Friday, 10 January 2014, at which time tenders will be opened in private. 6. Every tender submitted should be in the form of tender attached hereto as Schedule A, but may contain proposals for amending the Conditions of Sale. However, a tender that has not complied with all of, or has amended the Conditions of Sale, or tenders received that are not on the attached form, may, at the sole discretion of the Vendor, be rejected. 7. Proposals from auctioneers to auction Parcel 1.0 on behalf of the Vendor containing a guaranteed minimum net return to the Vendor will be considered. Any auction proposal must provide for the auction to occur at a location other than the premises where the asset is currently located. 8. The closing of the Agreement of Purchase and Sale formed by the acceptance of a tender shall take place at the office of the Vendor at 11, rue Englehart, Dieppe, New Brunswick E1A 7Y7 or such other place as the Vendor may designate at 1:00 o clock in the afternoon (Atlantic Standard Time) on the Closing Date defined in paragraph 9 hereof. 9. Each tenderer shall, with its tender, deliver to the Vendor a bank draft payable to Ernst & Young Inc. Receiver Industrial Rail Services Inc. for fifteen percent (15%) of the aggregate tendered price (the Purchase Price ). If the tender is accepted by the Vendor ( Vendor Acceptance ), said monies shall be a cash deposit and the successful tenderer(s) (hereinafter called the Purchaser ) of Parcel 1.0 shall pay the balance of the Purchase Price to the Vendor by bank draft or wire transfer within 7 days of Vendor Acceptance, unless some other date is mutually agreed upon by the Vendor and the Purchaser (hereinafter called the Closing Date ). Page 2

10. Bank drafts accompanying tenders that are not accepted by the Vendor will be returned to the tenderer at the address set out in its tender or made available for pick-up not later than ten (10) days following the opening of tenders, unless otherwise arranged with the tenderer. 11. If any tender is conditionally accepted by the Vendor, then such conditional acceptance shall be communicated to the Purchaser within four (4) days of the opening of the tenders by notice in writing sent by the Vendor to the Purchaser at the address set forth in its tender, such notice to be given by mail, courier, telegram, facsimile, e-mail or personal delivery and to be deemed effectively given when deposited in the post office or telegraph office, when personally delivered, or when sent by facsimile, mail, courier or e-mail, as the case may be. 12. Upon Vendor Acceptance, the terms of the advertised Notice of Sale by Tender, the tender and the acceptance thereof, and these Conditions of Sale shall constitute an agreement of purchase and sale (hereinafter called the Agreement of Purchase and Sale ), between the Purchaser and the Vendor (hereinafter referred to as the Purchased Property ). 13. Upon closing of the sale contemplated by the Agreement of Purchase and Sale, the Purchaser shall be entitled to a certificate from the Receiver issued in accordance with the Order of the Court of Queen s Bench of New Brunswick dated November 7, 2013, to convey the Vendor s interest in the Purchased Property to the Purchaser. A copy of the order may be accesed at http://www.ey.com/ca/industrial. 14. The Purchaser shall pay on closing, in addition to the Purchase Price, and shall, with respect to any liability therefore, indemnify and save harmless the Vendor from: a) all applicable Federal and Provincial taxes arising on the sale and payable by the Purchaser including, without restriction, taxes under the Harmonized Sales Tax Act (New Brunswick), and the Excise Tax Act (Canada). Any taxes which the Vendor is required by law to collect from the Purchaser on sale shall be paid by the Purchaser to the Vendor on closing; b) costs, if any, of dismantling or removing the Purchased Property from its present location and restoring such location to a neat and clean condition; c) the cost of repairing any damage caused by the dismantling and/or removal of the Purchased Property from its present location, such that the site is restored to its original condition. 15. The Purchaser shall, within seven (7) days of Vendor Acceptance, or such later date as may be agreed to by the Vendor and after full payment has been received, at its own expense dismantle and or remove the Purchased Property from its present location and shall restore the current location and/or site to a neat and clean condition and the Purchaser shall repair and be liable for any damages or claims whatsoever caused by, or in any way arising out of, such dismantling and or removal. The Vendor will not be responsible for any damages or costs whatsoever which may arise if the Purchaser fails to remove such Purchased Property within seven (7) days of Vendor Acceptance. Page 3

16. The Vendor shall not be required to produce any tax certificate, clearance certificate, abstract of title or documents or copies thereof or any evidence as to title, other than those in its actual possession. 17. The obligation of the Vendor to sell and of the Purchaser to purchase the Purchased Property shall, at the option of the Vendor, terminate in the event that prior to the Closing Date of the sale the Purchased Property is substantially destroyed by fire, flood, the elements, Government action, or civil commotion or any other external cause beyond the control of the Vendor. Such option to terminate by the Vendor shall be exercised by giving notice in writing to the Purchaser that it intends to take the proceeds, if any, payable under any existing insurance policies and terminate the Agreement of Purchase and Sale. In such event, the Agreement of Purchase and Sale shall automatically terminate and be deemed null and void and the deposit money shall be returned to the Purchaser without interest, cost, compensation or deduction and no party shall be liable to another for any costs or damages whatsoever. If the Vendor does not exercise such option, the Purchaser, at his option may complete the Agreement of Purchase and Sale, such option to be exercised, in writing, within seven (7) days after notice to the Purchaser that the Vendor does not intend to exercise its option to terminate. In such event, the Purchaser shall be entitled only to an assignment of any proceeds payable under the existing insurance policies and transfer of any remaining Purchased Property in full settlement of the Vendor s obligations to repair or replace the damaged asset and in full satisfaction of this Agreement of Purchase and Sale. If the Purchaser does not exercise his option, the Agreement of Purchase and Sale shall be automatically terminated and deemed null and void and the deposit money shall be refunded to the Purchaser without interest, costs, compensation or deduction and neither party shall be liable to the other for any costs or damages whatsoever. 18. The Vendor shall remain in possession of the Purchased Property until the Purchase Price thereof has been paid in full. 19. If the Purchaser fails to comply with these Conditions of Sale, the deposit shall be forfeited to the Vendor on account of liquidated damages and Parcel 1.0 may be resold by the Vendor and the Purchaser shall pay to the Vendor (i) an amount equal to the amount, if any, by which the Purchase Price under the Agreement of Purchase and Sale exceeds the net purchase price received by the Vendor pursuant to such resale; and (ii) an amount equal to all costs and expenses incurred by the Vendor in respect of or occasioned by the Purchaser s failure to comply with the Agreement of Purchase and Sale. 20. By submitting a tender, the Purchaser acknowledges that it has inspected the Purchased Property and that the Purchased Property is sold on an as is, where is basis at the time of closing and that no representation, warranty or condition is expressed or implied as to title, description, fitness for purpose, merchantability, quantity, condition, cost, or quality thereof or compliance of the Purchased Property with environmental laws and requirements, or in respect of any other matter or thing whatsoever. Without limitation, Parcel 1.0 is specifically offered as it exists on closing and with no adjustments to be allowed the Purchaser for changes in conditions, qualities or quantities of Parcel 1.0 from the date hereof to the Closing Date. The Purchaser acknowledges that the Vendor is not required to inspect or count, or provide any inspection or counting, of the Purchased Property or any part thereof and the Purchaser shall be deemed to have relied entirely on Page 4

its own inspection and investigation including an independent investigation by the Purchaser of current and past uses of the Purchased Property to satisfy the Purchaser as to the effects of any environmental laws, regulations or requirements upon the Purchased Property or the transfer by the Vendor to the Purchaser of the Purchased Property. It shall be the Purchaser s sole responsibility to obtain, at its own expense, any consent to such transfer and any further documents or assurances which are necessary or desirable in the circumstances. 21. EY acts in its capacity as Receiver as aforesaid and shall have no personal or corporate liability hereunder or from any Agreement of Purchase and Sale contemplated hereby or as a result of any sale. 22. The highest or any tender will not necessarily be accepted. 23. In consideration of the Vendor making available to tenderers these Conditions of Sale, any other information, and the opportunity of inspection, and/or in consideration of receiving and considering any tender to be submitted hereunder, each tenderer agrees that its tender is irrevocable and cannot be retracted, withdrawn, varied or countermanded prior to acceptance or rejection thereof. 24. In the event that some of the tenders submitted are substantially in the same terms and/or amounts, the Vendor may in its sole discretion call upon those tenderers to submit further tenders. 25. The Vendor, at its discretion, may waive or vary any or all of the Terms and Conditions hereof or its Notice of Sale by Tender. 26. The terms and conditions contained herein shall not merge on closing unless otherwise provided for in writing between the parties. 27. The Purchaser shall submit to the Vendor all proposed advertisement(s) which make references to the purchase from the Vendor which it intends to make concerning any resale of the Purchased Property. Such advertisement(s) will not be placed without the Vendor s prior written approval, such approval not to be unreasonably withheld. 28. The validity and interpretation of these Conditions of Sale, and each provision and part thereof and of the Agreement of Purchase and Sale defined herein, shall be governed by the laws of the Province of New Brunswick and the courts of the Province of New Brunswick shall have exclusive jurisdiction with respect to any dispute arising out of these Conditions of Sale or any Agreement of Purchase and Sale entered into pursuant hereto. 29. This Agreement shall enure to the benefit of and be binding upon the parties thereto, and their respective heirs, executors, administrators, successors or assigns as the case may be. The Purchaser may not assign its interest in the Agreement of Purchase and Sale without the prior written consent of the Vendor. 30. All stipulations as to time are strictly of the essence. Page 5

31. Any tender of documents or money hereunder may be made upon the Vendor or the Purchaser, or their respective solicitors. 32. The Purchaser shall assume, at the Purchaser s cost, complete responsibility for compliance with all municipal, provincial or federal or other applicable laws and regulations in so far as the same apply to the Purchased Property and the use thereof by the Purchaser. 33. The Purchaser shall arrange its own insurance and there shall be no assignment of insurance. The Vendor assumes no responsibility or liability for and shall not be required to discharge or adjust for any taxes, assessments, rates, liens, or other liabilities which do not by law form a specific lien or charge upon or against the Purchased Property in priority to the interest being conveyed. 34. The Vendor reserves the right, in its sole and unfettered discretion, to withdraw the asset being offered for sale at any time without notice to any party. If the Vendor exercises the right, the Agreement of Purchase and Sale affecting Parcel 1.0 shall be automatically terminated and deemed null and void and the deposit money shall be refunded to the Purchaser without interest, costs, compensation or deduction and neither party shall be liable to the other for any costs or damages whatsoever. DATED at Moncton, New Brunswick this 10 th day of December 2013. Ernst & Young Inc. Court-Appointed Receiver for Industrial Rail Services Inc. Page 6

Schedule A - Form of Tender To: Ernst & Young Inc. Court-Appointed Receiver for Industrial Rail Services Inc. 11, rue Englehart Dieppe, NB E1A 7Y7 Canada Attention: Mr. Ingo Eckoldt 1. 2. (Name of Tenderer) (Address of Tenderer) 3. 4. (Telephone Number) (Facsimile Number) 5. I/We hereby submit this tender for the purchase of Parcel 1.0 Prototype Passenger Rail Car #6202 in the amount of: $ (Cdn.) 6. We/I have read and understand all of the Conditions of Sale dated 9 December 2013 (the Conditions of Sale ). We/I agree in the event this tender is accepted, to be bound by the Conditions of Sale and that the Conditions of Sale are deemed to form part of this tender. 7. This tender and offer is irrevocable. 8. Enclosed is a bank draft payable to Ernst & Young Inc., Receiver for Industrial Rail Services Inc. as a deposit in the amount of $, representing 15% of the total amount of our/my tender submitted herein. DATED at this day of 201. Witness (Signature) (If Tenderer is a corporation, the corporate seal must be affixed). Page 7

Appendix A - Parcel Information Page 8

Parcel 1.0 Prototype Passenger Rail Car #6202 The Receiver s right, title and interest in one (1) Prototype Passenger Rail Car #6202 including a copy of the documentation and software owned by Industrial Rail Services Inc. that is currently in the Receiver s possession related to Prototype Passenger Rail Car #6202 including certain design and engineering plans which were used in the development of Prototype Passenger Rail Car #6202. The documentation and software (the Documentation ) will, by appointment only, be made available for review by prospective tenderers only at Ernst & Young Inc. office located at 11, rue Englehart, Dieppe, New Brunswick, E1A 7Y7. The Documentation will be provided to the successful tenderer solely for the purposes of operating and maintaining Prototype Passenger Rail Car #6202 and and not for use in relation to or for any other purpose. The Receiver has no knowledge as to the current operating and/or mechanical condition of the prototype passenger rail car and the Receiver understands that it has not been operated in recent years. Specifications: Please be advised that the below specifications are those as described by Wikipedia for a Budd Rail Diesel Car. http://en.wikipedia.org/wiki/budd_rail_diesel_car. Please be advised that the Prototype Passenger Rail Car #6202 as offered for tender herein has been modified and may not adhere to the below listed specifications. The Purchaser is required to rely on its own inspections and measurements in determining exact specifications of the Prototype Passenger Rail Car #6202. Car body construction Stainless Steel Car length RDC-1/2/3/9: 85 ft (25.91 m) RDC-4: 73 ft 10 in (22.50 m) Width 10 ft 3/8 in (3.06 m) Height 14 ft 7 in (4.45 m) Wheel diameter 33 in (838 mm) Wheelbase 68 ft (20.73 m) Maximum speed 85 mph (137 km/h) Page 9

Weight Engine(s) Power output Transmission UIC classification AAR wheel arrangement Braking system(s) Track gauge (RDC-1) 113,120 lb (51,310 kg) RDC-1/2/3/4: 2 GM 110 diesels DC-9: 1 GM 110 diesel RDC-1/2/3/4: 550 hp (410 kw) RDC-9: 275 hp (205 kw) Hydraulic torque converter RDC-1/2/3/4: (1A)(A1) RDC-9: (1A)2 RDC-1/2/3/4: 1A-A1 RDC-9: 1A-2 Air 4 ft 8 1 2 in (1,435 mm) Sample Photographs: Page 10

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