Canadian Pacific Railway Agrees to Convey Vancouver Island Rail Network To RailAmerica.

CALGARY, Alberta and BOCA RATON, Fla.--(BUSINESS WIRE)-- Sept. 21, 1998--Canadian Pacific Railway (CPR) today announced it has signed a letter of intent to convey its 290-km (181-mile) Esquimalt and Nanaimo Railway Company (E&N) to RailAmerica, Inc. (Nasdaq/NNM: RAIL).

E&N provides freight and passenger rail service between Victoria and Courtenay, and freight service between Port Alberni and Nanaimo, on British Columbia's Vancouver Island.

The transaction includes the sale of the 109-km (68-mile) section of rail line between Port Alberni and Nanaimo. In addition, CPR has agreed to lease to RailAmerica the Victoria-to-Nanaimo and Parksville-to-Courtenay segments of the E&N network, about 181 km (113 miles), to enable E&N to continue to provide freight and passenger rail service on Vancouver Island.

Terms of the transaction, which is expected to close by year-end, were not disclosed.

"CPR is pleased to reach this new agreement with RailAmerica. As a company with significant experience in the operation of short line railroads, RailAmerica will enhance the prospects for the future viability of both freight and passenger service on the E&N rail line," said Ed Dodge, CPR's executive vice-president, operations.

In 1997, E&N moved approximately 7,900 carloads of freight, primarily forest/paper products, mineral and chemical traffic. E&N also operates a daily passenger rail service under contract with VIA Rail Canada, from Victoria to Courtenay. This passenger service will not be affected by the transaction.

E&N, commonly known as E&N Railfreight, was established in March 1996 by CPR to provide a local management focus for its Vancouver Island operations. CPR announced in April it was seeking bids for the E&N.

The transfer of the E&N will affect 45 employees. The employees, who were notified today of the agreement, are protected by federal and provincial successor rights legislation.

RailAmerica, Inc. Chairman, President and Chief Executive Officer Gary O. Marino said, "This transaction fits perfectly into RailAmerica's acquisition strategy of providing customized rail service in niche markets. We are delighted to establish this business relationship with Canadian Pacific Railway and look forward to working with CPR and the freight shippers on Vancouver Island in order to expand the opportunities for enhanced rail service. The E&N is a great franchise and we anticipate seeking ancillary growth opportunities through the implementation of expanded intermodal and transload services.

"In addition, RailAmerica and CPR are dedicated to working with the local communities and VIA Rail to strengthen and improve the passenger rail service on Vancouver Island and intend to work closely with the E&N Steering Committee in its efforts to define a new, long-term vision for the E&N."

Calgary-based CPR, a subsidiary of Canadian Pacific Limited, operates about 25,500 km (15,800 miles) of track in Canada and the U.S. The railway has about 20,000 employees and annual revenues of $3.7 billion Cdn. CPR's Website address is: http://www.cpr.ca

RailAmerica, Inc. is a diversified international transportation company operating 12 railroads over approximately 3,840 route km (2,400 route miles) in eight U.S. states and the Republic of Chile. The Company holds a minority equity interest in the transcontinental Australian passenger rail service and owns Kalyn/Siebert, Inc., a specialty truck trailer manufacturer with production facilities in Gatesville, Texas and Trois-Rivieres, Quebec, Canada. Receive RailAmerica's latest news and other corporate information by visiting our website at www.railamerica.com.

This press release contains forward-looking statements regarding future events and the future performance of the companies that involve risks and uncertainties that could cause actual results to differ materially, including, but not limited to, economic conditions, customer demand, increased competition in the relevant market, and others. We refer you to the documents that the companies file from time to time with the Securities and Exchange Commission, such as the Form 10-K, Form 10-Q and Form 8-K reports of RailAmerica, and Form 40-F and Form 6-K reports of Canadian Pacific Railways Company, in the United States, which contain additional important factors that could cause its actual results to differ from its current expectations and from the forward-looking statements contained in this press release.