Prospectus

Filed Pursuant to Rule 424(b)(3)
Registration Nos. 333-173954
333-173954-01
333-173954-02
333-173954-03

Offer to exchange $475.0 million aggregate principal amount of 8 1/8% Senior Secured Notes due 2017 (which we refer to as the “old notes”) for $475.0 million aggregate principal amount of 8 1/8% Senior Secured Notes due 2017 (which we refer to as the “new notes” or the “Senior Secured Notes”), which have been registered under the Securities Act of 1933, as amended (the “Securities Act”). When we use the term “notes” in this prospectus, the term includes the old notes and the new notes, unless otherwise indicated or the context otherwise requires.

The exchange offer will expire at 5:00 p.m., New York City time, on September 12, 2011, unless we extend the exchange offer.

Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where such old notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the completion of this exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”

See “Risk Factors” beginning on page 18 for a discussion of risks you should consider prior to tendering your old notes for exchange.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

This prospectus contains forward-looking statements that may be identified by the use of words like “believe,” “expect,” “intend,” “anticipate” and “project.” Forward-looking statements reflect management’s good-faith evaluation of information currently available. However, such statements are dependent on and, therefore, can be influenced by, a number of external variables over which management has little or no control, including: domestic and international economic conditions; the business environment in industries that produce and consume rail freight; competition and consolidation within the transportation industry; the operations of carriers with which the Company interchanges traffic; acts of terrorism or war; fluctuation in prices or availability of key materials, in particular diesel fuel; labor difficulties, including strikes and work stoppages; legislative and regulatory developments; results of litigation; changes in capital markets; disruptions to the Company’s technology infrastructure, including computer systems; and natural events such as severe weather, hurricanes and floods. For a discussion of significant risk factors applicable to the Company, see “Risk Factors” on page 17 of this prospectus. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this prospectus to conform such statements to actual results or to changes in our expectations. The information in this prospectus is not a complete description of our business or the risks and uncertainties associated with your investment in the notes. You should carefully consider the various risks and uncertainties that impact our business and the other information in this prospectus and, in particular, information appearing under the headings “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.”

We obtained the market and competitive position data used throughout this prospectus from our own research, surveys or studies conducted by third parties and industry or general publications. While we believe that each of these studies and publications is reliable, we have not independently verified any data from third-party sources. Similarly, we believe our internal research is reliable, but it has not been verified by any independent sources.

We have included certain non-GAAP financial measures in this prospectus, including EBITDA, which represents net income (loss) before interest expense, provision for (benefit from) income taxes, and depreciation and amortization, and Adjusted EBITDA, which represents EBITDA adjusted to exclude equity compensation costs and other items related to severance, acquisition and financing costs as well as losses on terminations and modifications of derivative instruments. Our definitions and calculations of EBITDA and Adjusted EBITDA may differ from the EBITDA or Adjusted EBITDA or analogous calculations of other companies in our industry, and may limit its usefulness as a comparative measure. We use EBITDA and Adjusted EBITDA in a number of ways to assess our consolidated operating performance, and we believe this measure is helpful to management and investors in identifying trends in our operating results. We use EBITDA and Adjusted EBITDA as a measure of our consolidated operating performance exclusive of income and expenses that relate to the financing, incomes taxes, and capitalization of the business. In addition, Adjusted EBITDA assists us in comparing our operating performance on a consistent basis as it removes the impact of our asset base (primarily depreciation and amortization) and the impact of other costs. In addition, Adjusted EBITDA helps management identify controllable expenses and make decisions designed to help us meet our current financial goals and optimize our

financial performance. Accordingly, we believe these metrics measure our financial performance based on operational factors that management can impact in the short-term, namely the cost structure and expenses of the organization. EBITDA and Adjusted EBITDA will be the basis for the calculation of selected financial ratios as required in various covenants in the indenture governing the notes and our ABL credit facility (as defined below). See “Description of Other Indebtedness.”

EBITDA and Adjusted EBITDA are not a measurement of income (loss) from continuing operations and/or net income (loss), and should not be considered as an alternative to net income (loss) as a measure of operating performance. Rather, EBITDA and Adjusted EBITDA should be considered as supplementary information to our U.S. GAAP results, which are presented herein in order to provide a more complete understanding of our operating performance. Our presentation of EBITDA and Adjusted EBITDA should not be construed to imply that our future results will be unaffected by unusual or non-recurring items. EBITDA and Adjusted EBITDA have important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under U.S. GAAP. For example, EBITDA and Adjusted EBITDA:

SUMMARY

This summary highlights key aspects of the information contained elsewhere in this prospectus and may not contain all of the information you should consider before exchanging your old notes for new notes. You should read this summary together with the entire prospectus, including the information presented under the heading “Risk Factors,” and the historical financial statements and related notes included elsewhere in this prospectus.

In this prospectus, except as otherwise indicated, “FECR,” the “Company,” the “Issuer,” “we,” “our,” and “us” refer to Florida East Coast Railway Corp. and its consolidated subsidiaries and predecessor entity.

All amounts in this prospectus are expressed in U.S. dollars and the financial statements have been prepared with generally accepted accounting principles in the United States (“U.S. GAAP”).

Our Company

We own and operate a 351-mile freight railroad along the east coast of Florida from Jacksonville to Miami. Our railroad is one of only two major freight railroads serving Florida. In 2010, we provided our services to over 500 customers, and transported over 410,000 units. We generate rail-operating revenues primarily from both the movement of freight in conventional freight cars (such products as crushed rock (aggregate), automobiles, food products and other industrial products) and intermodal shipments of containers and trailers on flatcars. We count each move of a freight car, container or trailer on our line as one unit. We also generate freight revenue from dray moves (drayage is the movement of containers or trailers by truck to and from the rail yard). In addition to providing freight services, we also generate non-freight revenue from other sources such as car hire and demurrage (allowing our customers and other railroads to use our railcars for storage or transportation in exchange for a daily fee), real estate and equipment lease income (including Class I railroads), ancillary dray charges, switching (managing and positioning railcars within a customer’s facility), and other transportation services.

Our railroad’s geographic footprint was established over 100 years ago. Our direct route through some of the most highly congested regions of the State of Florida, combined with the efficiencies inherent in rail transportation—one train can haul the equivalent of up to 280 trucks—enables us to haul freight often more quickly and more cost effectively than other modes of transportation, such as trucking. Our direct access to the major south Florida ports of Miami, Everglades (Fort Lauderdale) and Palm Beach positions us well to continue to grow the volume of intermodal containers that we transport through these ports. We are also a major hauler of aggregate in the State of Florida and a key conduit for the transportation of automobiles into South Florida. As a result of our competitive position, we operate at a high level of density, which means that we carry a high number of units per track mile. In 2010, we carried approximately 1,168 units per mainline track mile, which we believe is more than any of the Class I railroads (classified by the American Association of Railroads (“AAR”) as a railroad with over $378.8 million in revenues in 2009) in the United States.

We believe that many of our customers choose our railroad due to the quality and reliability of our service. For example, United Parcel Service experienced over 2,000 consecutive days with no service interruptions on our railroad. In addition, several of our major customers are trucking companies who utilize our railroad as a more reliable and efficient mode for transporting goods into southern Florida versus utilizing the State’s highways. In many instances, our customers have substantial investments in facilities located directly on our line and served exclusively by us. Examples include limestone mines, for which we are the only direct rail service provider, major distribution centers for retail and commercial shippers, as well as major rail yards owned by other railroads, such as Norfolk Southern, that utilize our railroad as an extension into the State of Florida. In addition to hauling all of Norfolk Southern’s traffic from Jacksonville to Miami, we also haul substantially all of CSX’s intermodal traffic destined for South Florida because our network helps them meet the strict delivery deadlines of

their intermodal customers. In addition, due to our captive drayage (local trucking) company, Florida East Coast Highway Services, and connectivity with Class I railroads, we are able to extend our reach throughout the United States, Canada and Mexico.

We generated total operating revenue, net loss and Adjusted EBITDA of $200.0 million, $23.6 million, and $71.0 million, respectively, for the twelve months ended December 31, 2010. For the three months ended March 31, 2011, we generated total operating revenue, net loss, and Adjusted EBITDA of $51.5 million, $6.9 million and $16.1 million, respectively. As of March 31, 2011, we had assets of $859.8 million. For a definition of EBITDA and Adjusted EBITDA and a reconciliation of net income to EBITDA and Adjusted EBITDA, see—“Summary Consolidated Financial Data.”

Business Strengths

We believe that the key business strengths that will enable us to execute our strategy include:

Unique location and traffic flow: The geographic shape of Florida as a peninsula and the location of its major consumption markets (Miami and Orlando) in the southernmost and central regions of the state combine to create an imbalanced lane for the flow of goods into and out of the State. Because Florida is a net consuming state, this geography makes it undesirable for trucks to transport freight southbound, only to return empty northbound. Additionally, the South Florida Highway network, including Interstate 95 and Route US-1, frequently suffers from severe congestion and delays. According to the Texas Transportation Institute’s 2009 Urban Mobility Report, which measures congestion on United States roadways, Miami ranks fourth among all urban areas in the United States in terms of both hours of travel delay and excess fuel consumed. Due to the challenges that the traffic flow and road congestion present to trucking companies, in several instances, trucking companies utilize our service as an extension of their operations to obtain a more reliable and efficient means for transporting goods into southern Florida. Additionally, we provide interchange services to the two Class I railroads of the Eastern United States. FECR acts as an extension of Norfolk Southern’s rail system into Florida and transports CSX’s intermodal traffic destined for South Florida due to CSX’s less direct network to South Florida and lack of intermodal facilities in South Florida.

Favorable long-term industry dynamics: We expect to benefit from a number of favorable dynamics in the rail industry. Rail has increased its share of total U.S. freight transportation (measured in ton-miles) from 32% in 1990 to 43% in 2007, according to the Association of American Railroads (“AAR”). This shift to rail has been driven by the advent of intermodal freight, growth in bulk commodity markets, and the growing energy and environmental efficiency of rail. According to the AAR, railroads are estimated to be approximately four times more fuel efficient than truck transportation as a single train can haul the equivalent of up to 280 trucks. We believe that this fact, combined with increasing highway congestion and new regulations affecting the trucking industry will continue to contribute to the growth in demand for rail. Moreover, there is a limited supply of rail infrastructure to meet demand growth. Railroad land, track, and yards represent a difficult-to-replicate network and a limited supply of assets, reducing the risks associated with market overcapacity and creating a favorable supply-demand dynamic.

Established, long-term customer base: The majority of our revenue is derived from industrial customers and Class I railroads (most of which have investment grade credit ratings). Our railroad is often integrated into a customer’s facility and serves as an important component of that customer’s distribution or input network. In many circumstances, our customers have made significant capital investments in facilities on or near our railroad (as in the case of industrial plants, major warehouses, or terminals) or are geographically unable to relocate (as in the case of rock quarries). As a result, we believe the quality of our customers and our level of integration with their facilities provide a stable and predictable revenue base.

Long-lived, valuable rail infrastructure: Freight railroad land, track, and equipment are long-lived, valuable assets that are subject to minimal risk of fundamental change or obsolescence. Typically, the key structural components of railroad track, such as roadbed, ties, and steel rail, have long useful lives. In Florida in particular, warmer weather and lack of snow limits the amount of time and cost required to clear track after major

storms, while our straight route on the State’s relatively flat terrain reduces the rate of wear-and-tear on our track. In addition, the high cost of constructing new railroads and limited access to land required to assemble a railroad right-of-way create high barriers to entry and enhance the economic value of existing rail infrastructure.

Strong cash flow generation: We generate significant cash flow for debt service as a result of the profitability of our railroad, predictable capital expenditures, low working capital requirements and favorable tax attributes. For the three months ended March 31, 2011, our Adjusted EBITDA of $16.1 million remained flat compared to the same period in 2010. However, for the three months ended March 31, 2011, we generated cash inflow of $2.0 million, compared to a cash outflow of $3.1 million for the same period in 2010. For a definition of cash inflow and cash outflow, see “Management Discussion and Analysis of Financial Condition and Results of Operations.” We are continuously focused on growing our business and operating as efficiently as possible. Due to the operational simplicity of our railroad, we have more predictable and lower capital expenditures when compared to the complex, high-service requirements of many Class I networks. Our favorable tax attributes, including net operating loss carry-forwards and our eligibility to receive track maintenance tax credits under a federal program for short line railroads, substantially reduce our income tax obligations. As of March 31, 2011, we had $220.4 million of net operating loss carry-forwards available to us. Our favorable tax attributes may only be useful to us to the extent that we are able to generate taxable income in future periods.

Highly experienced management: Our senior management team is comprised of experienced transportation industry executives with a combined experience of over 180 years in the transportation industry and a track record of generating financial improvements. Several members have held senior positions at both Class I railroads as well as other major transportation companies. We believe that the experience of our senior management team and its management philosophy are significant contributors to improving the operating and financial performance of our railroad.

Business Strategy

We plan to build upon our business strengths and grow our revenue and cash flow by employing the following business strategies:

Improving operating efficiency and lowering costs: We are focused on driving financial improvement through a variety of cost savings initiatives. In 2009, we modified our train schedules to reduce labor and locomotive expenses, consolidated facilities, reduced third-party contractor costs and improved fuel efficiency by running more fuel-efficient and fewer locomotives. We continued to focus on fuel efficiency, train optimization, safety, and productivity as we increased volume (measured in units) in 2010. In part, as a result of these initiatives, our Adjusted EBITDA as a percentage of total operating revenue has increased from 32.0% in 2009 to 35.5% for the year ended December 31, 2010.

Growing freight revenue: In addition to benefiting from the railroad industry’s long-term favorable trends, we are focused on growing our freight revenue by seeking new business opportunities. Our commercial and development team actively solicits customers to utilize our railroad for transporting their freight. Given our high proportion of intermodal freight, we directly market to many of the nation’s largest shippers of retail products and consumer goods. We also seek to generate new business by working with shippers transporting freight internationally through the south Florida ports that we directly serve. Additionally, we constantly strive to grow our existing business with the Class I railroads with which we connect through further alliances, haulage agreements and joint marketing. For example, we recently entered into several new contracts that will generate additional revenue through the transportation of products for a major food and beverage manufacturer; the transportation of ethanol; the hauling of automobiles for a major automobile manufacturer; and in connection with the new Norfolk Southern intermodal facility in Titusville. Members of our senior management team have several years of prior experience in the marketing departments of other railroads, including Class I railroads, as well as relationships with major shippers that are potential future customers of our railroad. We transported

410,096 units in the twelve months ended December 31, 2010, representing a 10% increase from the twelve months ended December 31, 2009. For the three months ended March 31, 2011, we transported 103,436 units, representing an approximately 4% year-over-year increase from the same period in 2010.

Continuing our focus on safety: Our focus on safety allows us to improve the quality and reliability of our services, prevent accidents and injuries, and lower the costs and risks associated with operating our business. As a result of this focus, FECR has received the E.H. Harriman Memorial Safety Award, one of the most prestigious awards in the industry, in 2008 (Silver), 2007 (Bronze), and 2006 and 2005 (Gold). We also received the American Short Line and Regional Railroad Association, or “ASLRRA”—Jake Award in 2010, 2009, 2008, 2006 and 2005. The Jake Award program was created in 1995 and is awarded to any member railroad that finished the calendar year with a Federal Railroad Administration (“FRAT”) reportable injury frequency ratio less than or equal to the industry rate. For 2010, our FRA injury frequency ratio, measured as reportable injuries per 200,000 man hours worked, was 1.58, as compared to the average of 1.89 for all U.S. railroads for the same period.

Pursuing transportation-related investment opportunities in Florida: We believe that investing in complementary transportation businesses and infrastructure in the State of Florida will position us to grow market share, increase the levels of volume and revenue on our railroad, and achieve a number of other benefits. Such benefits include expanding and enhancing our services, further diversifying our revenue and achieving economies of scale by leveraging senior management experience and corporate costs over a broader revenue base. We believe that the unique location of our railroad positions us well to make investments in contiguous assets and businesses such as investments in ports that we exclusively serve, potential future intermodal freight hubs on our rail line that serve major population centers, and other bulk handling centers that consolidate freight to be handled by our railroad.

Industry Overview

The U.S. economy is dependent on the movement of freight ranging from raw materials such as coal, ores, aggregates, lumber and grain to finished goods, such as food products, paper products, automobiles and machinery. Railroads represent the largest component of the freight transportation industry in the United States, carrying more freight than any other mode of transportation. With a network of approximately 139,100 miles of track, railroads link businesses with each other domestically and with international markets through connections with ports and other international terminals. Unlike other modes of transportation, such as trucking (which uses highways, toll roads, etc.) and shipping companies (that utilize ports), railroad operators generally own their infrastructure of track, land and rail yards. This infrastructure, most of which was originally established over 100 years ago, represents a limited supply of assets and a difficult-to-replicate network.

The railroad industry has increased its share of freight ton-miles compared to other forms of freight transportation over the past quarter century due to its ability to haul heavy products over long distances more efficiently and at a lower cost. Since 1980, the railroad industry has continually improved its cost competitiveness compared to other forms of freight transportation as it consumes less fuel and has lower labor costs per ton transported than other forms of freight transportation. Railroads’ cost per ton-mile has decreased as a result of significant reductions to labor and rolling stock requirements and the spinning off of less dense network segments. According to the AAR, railroads are estimated to be approximately four times more fuel efficient than truck transportation—a single train can haul the equivalent of up to 280 trucks. Additionally, as the price of fuel has increased over the past several years, the fuel efficiency advantage of railroads as compared to other forms of freight transportation has increased. In 1980, one gallon of diesel fuel moved one ton of freight by rail an average of 235 miles, versus 2009 where the equivalent gallon of fuel moved one ton of freight an average of 480 miles by rail—representing a 104% increase over 1980. As a result, the railroad industry’s share of U.S. freight ton-miles has steadily increased from 30% in 1980 to 43% in 2007.

New regulation in the trucking industry is expected to create capacity constraints for trucking carriers, which will likely increase rail transport’s competitive advantage. The Federal Motor Carrier Safety Administration (“FMCSA”) has begun the roll-out of CSA 2010, which will enforce stricter safety-related standards. Under CSA 2010, drivers and fleets will be evaluated and ranked based on certain safety-related standards. As a result, certain current and potential drivers may no longer be eligible to drive. We expect that this could substantially decrease the number of available drivers as trucking carriers seek to maintain high Department of Transportation (“DOT”) safety ratings, thus limiting trucking carriers’ capacity. Additional regulations that could put further pressure on trucking carriers include reductions in the hours of service allowable for drivers and the implementation of electronic on-board recorders in tractors, which would enforce these new hours of service regulations. We believe that the combination of these additional regulations could decrease asset utilization across the trucking industry and further increase the attractiveness of the speed and reliability of rail transport.

According to the AAR, there were 563 railroads in the United States as of December 31, 2009. The AAR classifies railroads operating in the United States into the following three categories based on a railroad’s amount of revenues and track miles:


Classification of Railroads	Number		Aggregate Miles Operated		% of Revenue			Revenues and Miles Operated
Class I		7		93,921		93	%	Over $378.8 million
Regional		23		12,804		3	%	$40.0 to $378.8 million and/or 350 or more miles operated
Local / Short line		533		32,393		4	%	Less than $40.0 million and less than 350 miles operated

Total		563		139,118		100	%

Source: Association of American Railroads, Railroad Facts, 2010 Edition.

As the level of growth in the U.S. economy improved during 2010, the railroad industry experienced positive momentum through its increase in total volumes. Beginning in 2010, volumes began to rebound and have now recovered significantly. The Company has experienced this same type of recovery as the industry. There have been substantial year-over-year volume improvements for the year ended December 31, 2010 and total volumes for the same period were 410,096 units as compared to 372,487 for the year ended December 31, 2009, representing a 10.1% increase year-over-year. Additionally, improvements have continued for the three months ended March 31, 2011 as total volume was 103,436 units, representing a 4.3% increase to the same period in 2010. As the U.S. economy continues to recover, we expect manufacturing production and consumer spending to increase, which should prompt further growth in carload volumes. Despite the increase to date, volumes have yet to return to pre-crisis levels, and may increase further in 2011.

Organizational Corporate Structure

The chart below illustrates our organizational corporate structure as of the date of this prospectus.

LOGO

Our Principal Shareholders

As of March 31, 2011, certain private equity funds managed by an affiliate of Fortress Investment Group LLC, beneficially own approximately 99.8% of our outstanding common stock. Fortress Investment Group LLC (“Fortress”) is a leading global investment manager with approximately $44.6 billion in assets under management as of December 31, 2010. Fortress offers alternative and traditional investment products and was founded in 1998.

Additional Information

Certain entities commonly owned by private equity funds managed by affiliates of Fortress acquired all of the outstanding stock of Florida East Coast Industries, Inc. (“FECI”) on July 26, 2007. On December 31, 2007, FECI sold its rail transportation segment, which operated as separate legal entities (the “Railway”), to private equity funds managed by affiliates of Fortress (the “Rail Separation”). Concurrent with the Rail Separation,

SUMMARY DESCRIPTION OF THE EXCHANGE OFFER

On January 25, 2011, Florida East Coast Railway Corp. completed the private placement of $475,000,000 aggregate principal amount of the old notes. As part of that offering, Florida East Coast Railway Corp. entered into a registration rights agreement with the initial purchaser of the old notes, dated as of January 25, 2011, in which it agreed, among other things, to deliver this prospectus to you and to complete an exchange offer for the old notes. Below is a summary of the exchange offer. The term “notes” refers to both the old notes and the new notes, unless otherwise indicated or the context so requires.


Old Notes		$475.0 million aggregate principal amount of 8 1/8% Senior Secured Notes due 2017.

New Notes		Up to $475.0 million aggregate principal amount of 8 1/8% Senior Secured Notes due 2017, the issuance of which has been registered under the Securities Act of 1933. The form and terms of the new notes are identical in all material respects to those of the old notes, except that the transfer restrictions and registration rights relating to the old notes do not apply to the new notes.

Exchange Offer		We are offering to issue up to $475.0 million aggregate principal amount of the new notes in exchange for a like principal amount of the old notes to satisfy our obligations under the registration rights agreement that was executed when the old notes were issued in a transaction in reliance upon the exemptions from registration provided by Rule 144A and Regulation S of the Securities Act. Old notes may be tendered in minimum denominations of principal amount of $2,000 and integral multiples of $1,000. We will issue the new notes promptly after expiration of the exchange offer. See “The Exchange Offer—Terms of the Exchange; Period for Tendering Old Notes.”

Expiration Date; Tenders		The exchange offer will expire at 5:00 p.m., New York City time, on September 12, 2011 (21 business days following the date notice of the Exchange Offer was sent to the holders), unless extended by us. By tendering your old notes, you represent to us that:

		• you are not our “affiliate,” as defined in Rule 405 under the Securities Act;

		• any new notes you receive in the exchange offer are being acquired by you in the ordinary course of your business;

		• neither you nor anyone receiving new notes from you has any arrangement or understanding with any person to participate in a distribution, as defined in the Securities Act, of the new notes;

		• you are not holding old notes that have, or are reasonably likely to have, the status of an unsold allotment in the initial offering;

		• if you are a broker-dealer that will receive new notes for your own account in exchange for old notes that were acquired by you as a result of your market-making or other trading activities, you will deliver a prospectus in connection with any resale of the new notes you receive. For further information regarding resales of the new notes by participating broker-dealers, see the discussion under the caption “Plan of Distribution.”


Withdrawal; Non-Acceptance		You may withdraw any old notes tendered by you in the exchange offer at any time prior to 5:00 p.m., New York City time, on September 12, 2011. If we decide for any reason not to accept any old notes tendered for exchange, the old notes will be returned to the registered holder at our expense promptly after the expiration or termination of the exchange offer. In the case of the old notes tendered by book-entry transfer into the exchange agent’s account at The Depository Trust Company, any withdrawn or unaccepted old notes will be credited to the tendering holder’s account at DTC. For further information regarding the withdrawal of tendered old notes, see “The Exchange Offer—Terms of the Exchange Offer; Period for Tendering Old Notes” and the “The Exchange Offer—Withdrawal Rights.”

Conditions to the Exchange Offer		The exchange offer is subject to customary conditions, which we may waive. In the event of a material change in the offer, including the waiver of a material condition, we will extend the offer period if necessary so that at least five business days remain in the offer following notice of the material change. See the discussion below under the caption “The Exchange Offer—Conditions to the Exchange Offer” for more information regarding the conditions to the exchange offer.

Consequences of Not Exchanging Your Old Notes		If you are eligible to participate in the exchange offer and you do not tender your old notes, you will not have any further registration or exchange rights and your old notes will continue to be subject to transfer restrictions. These transfer restrictions and the availability of the new notes may adversely affect the liquidity of your old notes. See “The Exchange Offer—Consequences of Exchanging or Failing to Exchange Old Notes.”

Procedures for Tendering the Old Notes		You must do the following on or prior to the expiration or termination of the exchange offer to participate in the exchange offer:

		• tender your old notes by sending the certificates for your old notes, in proper form for transfer, a properly completed and duly executed letter of transmittal, with any required signature guarantees, and all other documents required by the letter of transmittal, to Wells Fargo Bank, National Association, as exchange agent, at one of the addresses listed below under the caption “The Exchange Offer—Exchange Agent,” or

		• tender your old notes by using the book-entry transfer procedures described below and transmitting a properly completed and duly executed letter of transmittal, with any required signature guarantees, or an agent’s message instead of the letter of transmittal, to the exchange agent. In order for a book-entry transfer to constitute a valid tender of your old notes in the exchange offer, Wells Fargo Bank, National Association, as exchange agent, must receive a confirmation of book-entry transfer of your old notes into the exchange agent’s account at DTC prior to the expiration or termination of the exchange offer. For more information regarding the use of book-entry transfer procedures, including a description of the required agent’s message, see the discussion below under the caption “The Exchange Offer—Book-Entry Transfers.”


Special Procedures for Beneficial Owners		If you are a beneficial owner whose old notes are registered in the name of the broker, dealer, commercial bank, trust company or other nominee and you wish to tender your old notes in the exchange offer, you should promptly contact the person in whose name the old notes are registered and instruct that person to tender on your behalf. If you wish to tender in the exchange offer on your own behalf, prior to completing and executing the letter of transmittal and delivering your old notes, you must either make appropriate arrangements to register ownership of the old notes in your name or obtain a properly completed bond power from the person in whose name the old notes are registered.

Certain U.S. Federal Income Tax Considerations		The exchange of the old notes for new notes in the exchange offer will not be a taxable transaction for United States federal income tax purposes. See the discussion under the caption “Certain U.S. Federal Income Tax Considerations” for more information regarding the tax consequences to you of the exchange offer.

Use of Proceeds		We will not receive any proceeds from the exchange offer.

Exchange Agent		Wells Fargo Bank, National Association is the exchange agent for the exchange offer. You can find the address and telephone number of the exchange agent below under the caption “The Exchange Offer—Exchange Agent.”

Resales		Based on interpretations by the staff of the Securities and Exchange Commission (“SEC”) as set forth in no-action letters issued to the third parties, we believe that the new notes you receive in the exchange offer may be offered for resale, resold or otherwise transferred without compliance with the registration and prospectus delivery provisions of the Securities Act. However, you will not be able to freely transfer the new notes if:

		• you are our “affiliate,” as defined in Rule 405 under the Securities Act;

		• you are not acquiring the new notes in the exchange offer in the ordinary course of your business;

		• you are participating or intend to participate, or have an arrangement or understanding with any person to participate in the distribution, as defined in the Securities Act, of the new notes you will receive in the exchange offer; or

		• you are holding old notes that have or are reasonably likely to have the status of an unsold allotment in the initial offering.

		If you fall within one of the exceptions listed above, you cannot rely on the applicable interpretations of the staff of the SEC and you must comply with the applicable registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction involving the new notes. See the discussion below under the caption “The Exchange Offer—Procedures for Tendering Old notes” for more information.


Broker-Dealer		Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where such old notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the Expiration Date (as defined herein), we will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”

		Furthermore, a broker-dealer that acquired any of its old notes directly from us:

		• may not rely on the applicable interpretations of the staff or the SEC’s position contained in Exxon Capital Holdings Corp., SEC no-action letter (Apr. 13, 1988); Morgan Stanley & Co. Inc., SEC no-action letter (June 5, 1991); or Shearman & Sterling, SEC no-Action Letter (July 2, 1993); and

		• must also be named as a selling security holder in connection with the registration and prospectus delivery requirements of the Securities Act relating to any resale transaction.

SUMMARY DESCRIPTION OF THE NOTES

The terms of the new notes and those of the outstanding old notes are substantially identical, except that the transfer restrictions and registration rights relating to the old notes do not apply to the new notes. When we use the term “notes” in this prospectus, the term includes the old notes and the new notes. For a more detailed description of the new notes, see “Description of the Notes.”


Issuer		Florida East Coast Railway Corp., a Delaware corporation.

Notes Offered		Up to $475.0 million aggregate principal amount of 8 1/8% senior secured notes due 2017.

Maturity		February 1, 2017.

Interest Payments		The notes will pay interest semi-annually in cash in arrears on February 1 and August 1, commencing on August 1, 2011. Interest will accrue from January 25, 2011.

Guarantees		All payments on the notes, including principal and interest, will be jointly and severally guaranteed on a senior secured basis by all of the Issuer’s existing and future wholly-owned domestic restricted subsidiaries other than domestic subsidiaries all of the material assets of which consist of stock in foreign subsidiaries (none of which are excluded as of the issue date) and certain domestic subsidiaries that do not have material assets or earnings (none of which are excluded as of the issue date) and certain other subsidiaries as described further in “Description of the Notes.”

Collateral		The notes and the guarantees are secured by a first-priority lien (subject to certain exceptions and permitted liens) on substantially all the tangible and intangible assets of the Issuer and the guarantors (other than ABL Collateral, as defined below) in each case held by us and the guarantors including the capital stock of any subsidiary held by the Issuer, any guarantor and any first-tier subsidiary that is a domestic subsidiary substantially all of the assets of which consist of stock in foreign subsidiaries (but limited to 65% of the voting stock of any such first-tier subsidiary that is a foreign subsidiary or a domestic subsidiary all of the material assets of which consist of stock in foreign subsidiaries), such assets, the “Notes Collateral.” See “Description of the Notes—Security for the Notes.”

		On January 25, 2011, the Company entered into a senior secured asset-based revolving credit facility with Bank of America, N.A., as administrative agent, and Merrill Lynch, Pierce, Fenner, & Smith Incorporated, as sole lead arranger and sole bookrunner, and a syndicate of financial institutions and institutional lenders (the “ABL Facility”). The notes and guarantees are also secured by a second-priority lien on the ABL Collateral. The “ABL Collateral” consists of rolling stock (i.e., railroad freight cars and locomotives), accounts receivable, deposit accounts, securities accounts, cash (other than cash proceeds of the Notes Collateral), related general intangibles and instruments related to the foregoing and proceeds of the foregoing, in each case held by the Issuer and the guarantors.


Ranking		The notes and the guarantees will be our and the guarantors’ senior secured obligations. The indebtedness evidenced by the notes and the guarantees will:

		• rank senior in right of payment to any existing and future subordinated indebtedness that is, by its terms, expressly subordinated in right of payment to the notes and or guarantees;

		• rank equally in right of payment with all of our and the guarantors’ existing and future senior indebtedness, including amounts outstanding under the ABL Facility;

		• be effectively senior to our unsecured debt to the extent of the value of the Notes Collateral and the ABL Collateral;

		• rank equally to the Issuer’s and the guarantors’ obligations under any other pari passu lien obligations incurred after the issue date to the extent of the value of the Notes Collateral;

		• have a second-priority lien on the ABL Collateral and be effectively subordinated to the ABL Facility to the extent of the value of the ABL Collateral; and

		• be structurally subordinated to all existing and future indebtedness and other liabilities of our non-guarantor subsidiaries (other than (i) indebtedness and liabilities owned by us or one of our guarantor subsidiaries and (ii) to the extent of any Notes Collateral or ABL Collateral owned by any such non-guarantor subsidiary).

		The indenture governing the notes permits additional indebtedness or other obligations to be secured by the Notes Collateral.

Optional Redemption		One time during each 12-month period commencing on the issue date and ending on the third anniversary thereof, we may redeem up to 10% of the initial aggregate principal amount of the notes issued under the indenture at a redemption price equal to 103% of the principal amount thereof plus accrued and unpaid interest, if any.

		We may also redeem some or all of the notes at any time before February 1, 2014 at a price equal to 100% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the redemption date and a make-whole premium.

		We may also redeem some or all of the notes at any time after February 1, 2014 at the redemption prices described under “Description of the Notes—Optional Redemption” plus, in each case, accrued and unpaid interest, if any.

		In addition, until February 1, 2014, we may also redeem up to 35% of the aggregate principal amount of the notes using the proceeds of certain equity offerings at a price equal to 108.125% of the aggregate principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any; provided that after giving effect to any such redemption, at least 65% of the notes issued on the issue date would remain outstanding immediately after such redemption. See “Description of the Notes—Optional Redemption.”


Change of Control		Upon a change of control, we will be required to make an offer to purchase each holder’s notes at a price of 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. See “Description of the Notes—Repurchase at the Option of Holders—Change of Control.”

Asset Sales		If we sell assets under certain circumstances, we will be required to make an offer to purchase the notes at their face amount, plus accrued and unpaid interest to the purchase date. See “Description of the Notes—Repurchase at the Option of Holders—Asset Sales.”

Certain Covenants		The indenture governing the notes contain covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to:

		• incur additional indebtedness or issue certain disqualified stock and preferred shares;

		• create liens on certain assets to secure debt;

		• pay dividends or make other equity distributions;

		• purchase or redeem capital stock;

		• make certain investments;

		• sell assets;

		• agree to any restrictions on the ability of restricted subsidiaries to transfer property or make payments to us;

		• consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

		• engage in transactions with affiliates; and

		• permit any person to become a restricted subsidiary without guaranteeing payment of the notes.

		These limitations will be subject to a number of important qualifications and exceptions. See “Description of the Notes—Certain covenants.” Many of these covenants will cease to apply to the notes during any period that such notes have investment grade ratings from both Moody’s Investors Service, Inc. and Standard & Poor’s.

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

The following tables summarize historical consolidated financial information for our business. You should read these tables along with “Selected Historical Consolidated Financial Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Business”, and our consolidated historical financial statements and the related notes thereto included elsewhere in this prospectus.

The summary historical consolidated financial data presented for the years ended December 31, 2008, 2009, and 2010, and as of December 31, 2010 and 2009, respectively, have been derived from the audited historical Consolidated Financial Statements included elsewhere in this prospectus.

The summary historical consolidated statement of operations and cash flows data for the three months ended March 31, 2010 and 2011 and the summary historical consolidated balance sheet data as of March 31, 2011 have been derived from our unaudited historical Consolidated Financial Statements included elsewhere in this prospectus. The unaudited historical Consolidated Financial Statements have been prepared on substantially the same basis as our audited historical Consolidated Financial Statements.

Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011 or for any future period.


	Year Ended December 31,									Three Months Ended March 31,
	2008			2009			2010			2010			2011
	(in thousands)
STATEMENT OF OPERATIONS DATA:
Freight Revenue	$	225,389		$	167,958		$	180,669		$	43,342		$	46,604
Non-Freight Revenue		15,701			13,109			19,354			4,240			4,881

Total operating revenue		241,090			181,067			200,023			47,582			51,485
Operating expenses		203,869			153,251			157,011			38,594			42,711

Operating income		37,221			27,816			43,012			8,988			8,774
Interest (expense)		(50,156	)		(54,430	)		(66,250	)		(15,564	)		(12,316	)
Other income (loss)(1)		122			(2,880	)		(368	)		4			4
Loss on derivative instrument		(7,936	)		—			—			—			—

Loss before income taxes		(20,749	)		(29,494	)		(23,606	)		(6,572	)		(3,538	)
Provision for (benefit from) income taxes		—			—			—			—			3,339

Net loss	$	(20,749	)	$	(29,494	)	$	(23,606	)	$	(6,572	)	$	(6,877	)


	As of December 31,						As of March 31,
	2008		2009		2010		2011
	(in thousands)
BALANCE SHEET DATA:
Cash and cash equivalents	$	46,174	$	8,242	$	9,306	$	11,362
Accounts receivable, net of allowance		25,443		25,007		25,760		28,856
Locomotives, transportation, and other equipment		93,809		94,738		95,625		89,314
Total assets		906,381		861,101		848,755		859,814
Total long-term debt, including current maturities		600,000		601,594		601,185		475,000
Total liabilities		668,457		662,087		672,661		526,156
Total stockholders’ equity		237,924		199,014		176,094		333,658


	Year Ended December 31,									Three Months Ended March 31,
	2008			2009			2010			2010			2011
	(in thousands, except for units and revenue per unit)
OTHER FINANCIAL DATA:
Freight units		445,870			372,487			410,096			99,136			103,436
Average revenue per unit	$	506		$	451		$	441		$	437		$	451
EBITDA(2)		58,766			52,998			70,246			15,891			15,631
Adjusted EBITDA(2)		74,334			57,956			71,028			16,092			16,105
Depreciation and amortization		29,359			28,062			27,602			6,899			6,853
Capital expenditures		16,917			14,005			16,009			2,340			3,850
Net cash provided by (used in)
Operating Activities		11,408			841			21,936			3,356			428
Investing Activities		(894	)		(13,066	)		(19,646	)		(6,370	)		3,093
Financing Activities		23,045			(25,707	)		(1,226	)		(47	)		(1,465	)

Notes:

(1)	Other loss for 2009 primarily relates to third party fees incurred with the amendment of the $1.656 billion Senior Secured Credit Facility (the “Old Facility”) that we, along with FECI, entered into in connection with the Acquisition.

(2)

EBITDA and Adjusted EBITDA are measures of operating performance that are not defined under U.S. GAAP. We define EBITDA as net income (loss) before interest expense, provision for (benefit from) income taxes, and depreciation and amortization. We define Adjusted EBITDA as EBITDA adjusted to exclude equity compensation costs and other items related to severance, acquisition and financing costs as well as losses on terminations and modifications of derivative instruments. Our definitions and calculations of EBITDA and Adjusted EBITDA may differ from the EBITDA or Adjusted EBITDA or analogous calculations of other companies in our industry, and may limit its usefulness as a comparative measure.

EBITDA and Adjusted EBITDA have limitations as an analytical tool. EBITDA and Adjusted EBITDA are not a measurement of income (loss) from continuing operations and/or net income (loss), and should not be considered as an alternative to net income (loss) as a measure of operating performance. Rather, EBITDA and Adjusted EBITDA should be considered as supplementary information to our U.S. GAAP results, shown here in order to provide a more complete understanding of our operating performance.

We use EBITDA and Adjusted EBITDA in a number of ways to assess our consolidated operating performance, and we believe this measure is helpful to management and investors in identifying trends in our operating results. We use EBITDA and Adjusted EBITDA as a measure of our consolidated operating performance exclusive of income and expenses that relate to the financing, incomes taxes, and capitalization of the business. In addition, Adjusted EBITDA assists us in comparing our operating performance on a consistent basis as it removes the impact of our asset base (primarily depreciation and amortization) and the impact of other costs. In addition, Adjusted EBITDA helps management identify controllable expenses and make decisions designed to help us meet our current financial goals and optimize our financial performance. Accordingly, we believe these metrics measure our financial performance based on operational factors that management can impact in the short-term, namely the cost structure and expenses of the organization.

The following table shows the reconciliation of our EBITDA and Adjusted EBITDA from net income (loss):


	Year Ended December 31,									Three Months Ended March 31,
	2008			2009			2010			2010			2011
Net income (Loss) to EBITDA and Adjusted EBITDA Reconciliation:
Net (loss)	$	(20,749	)	$	(29,494	)	$	(23,606	)	$	(6,572	)	$	(6,877	)
Provision for (benefit from) income taxes		—			—			—			—			3,339
Interest expense, net of interest income		50,156			54,430			66,250			15,564			12,316
Depreciation and amortization		29,359			28,062			27,602			6,899			6,853

EBITDA		58,766			52,998			70,246			15,891			15,631
Non-cash adjustments:
Shared-based compensation		1,815			715			782			201			474
Adjustments:
Severance costs(a)		2,303			48			—			—			—
Acquisition related costs(b)		3,514			1,359			—			—			—
Loss on derivative instrument(c)		7,936			—			—			—			—
Financing costs(d)		—			2,836			—			—			—

Adjusted EBITDA	$	74,334		$	57,956		$	71,028		$	16,092		$	16,105

Notes:

(a)	Severance costs in 2008 relate to a voluntary separation program. Severance costs in 2009 relate to the consolidation of our locomotive repair shop in New Smyrna Beach with Bowden yard.

(b)	Costs in 2008 and 2009 represent payouts in relation to senior management exercising their contract buyout rights.

(c)	Charges relate to the loss on the termination of interest rate swap agreements in October 2008. We entered into the interest rate swap agreements in December 2007.

(d)

Relates to third party fees incurred with the amendment of the Old Facility, completed in July 2009. This amendment to the Old Facility agreement provided for an 18-month maturity of the principal from July 26, 2009 to January 26, 2011, with three six-month extensions. This amendment was treated as a modification under U.S. GAAP.

You should consider carefully the following risks and all the information set forth in this prospectus before deciding to tender your old notes and participate in the exchange offer.

Adverse macroeconomic and business conditions, particularly in the State of Florida and the southeast, have and could continue to have an adverse impact on our business.

The decline in economic activity in the United States and throughout the world over the past two and a half years has had an adverse impact on our business. In particular, our freight traffic is generally affected by overall economic conditions in Florida and the southeast, which have been severely impacted by the recent economic downturn. Our largest carload market, aggregates, is highly dependent upon the residential construction market, the commercial construction market and state and federal highway construction, each of which have been negatively affected by the recent economic conditions. The pace of residential construction as well as the level of state and federal highway and other public projects affect the amount of aggregate loadings that our customers request. During the recent economic downturn, the State of Florida has experienced an unprecedented decline in homebuilding. The condition of international economies, including the Caribbean, South America, Europe and Asian economies, can also affect our intermodal traffic.

In addition, certain of our customers and suppliers are directly affected by the economic downturn, are facing credit issues and could experience cash flow problems that have and could continue to give rise to payment delays, increased credit risk, bankruptcies and other financial hardships that could decrease the demand for our rail services or delay our receipt of payment from certain customers. Adverse economic conditions could also affect our costs for insurance and our ability to acquire and maintain adequate insurance coverage for risks associated with the railroad business if insurance companies experience credit downgrades or bankruptcies. In addition, changes in governmental banking, monetary and fiscal policies to stimulate the economy, restore liquidity and increase credit availability may not be effective. It is difficult to determine the depth and duration of the economic and financial market problems and the many ways in which they may impact our customers, suppliers and our business in general. Moreover, given the asset-intensive nature of our business, the economic downturn increases the risk of significant asset impairment charges since we are required to assess for potential impairment of non-current assets whenever events or changes in circumstances, including economic circumstances, indicate that the respective asset’s carrying amount may not be recoverable. This may limit our ability to sell our assets to the extent we need, or find it desirable, to do so.

Furthermore, our railroad competes directly with other modes of transportation, including motor carriers, and ship, barge and pipeline operators. If these alternative methods of transportation become more cost-effective to our customers due to macroeconomic changes, or if legislation is passed providing materially greater opportunity for motor carriers with respect to size or weight restrictions, our operating results, financial condition and liquidity could be materially adversely affected.

Continuation or further worsening of current macroeconomic, business and financial conditions, particularly in the State of Florida and the southeast, could have a material adverse effect on our operating results, financial condition and liquidity.

Fuel costs were approximately 13.0% of our total operating revenue for the three months ended March 31, 2011, and were approximately 10.8%, 9.1%, and 15.5% of our total operating revenue for the years ended December 31, 2010, 2009 and 2008, respectively. Fuel prices and supplies are influenced significantly by

international, political and economic circumstances. If fuel supply shortages or unusual price volatility were to arise for any reason, the resulting higher fuel prices would significantly increase our operating costs. Increases in fuel price may be passed along to customers through a “fuel surcharge” or otherwise, though often with delayed effect. However, there are no assurances that these surcharges will cover the entire fuel price increase for a given period, or that competitive market conditions will effectively allow us to pass along this cost.

As part of our railroad operations, we frequently transport hazardous materials, the accidental release of which could have an adverse effect on our operating results.

We are required to transport hazardous materials to the extent of our common carrier obligation. An accidental release of hazardous materials could result in significant loss of life and extensive property damage. The associated costs could have an adverse effect on our operating results, financial condition or liquidity. In 2010, approximately 1.0% of our moves were related to hazardous materials.

Some of our employees belong to labor unions, and strikes or work stoppages could adversely affect our operations.

Many of our employees are union-represented. Our union employees work under collective bargaining agreements with various labor organizations. One of our collective bargaining agreements is currently under negotiation. Our inability to negotiate acceptable contracts with these unions could result in, among other things, strikes, work stoppages or other slowdowns by the affected workers. If our union-represented employees were to engage in a strike, work stoppage or other slowdown, or other employees were to become unionized or their terms and conditions in future labor agreements were renegotiated, we could experience significant disruption of our operations and higher ongoing labor costs.

Because we depend on Class I railroads and certain other customers for a significant percentage of our operations, our business and financial results may be adversely affected if our relationships with Class I carriers and such customers deteriorate.

The railroad industry in the United States is dominated by a small number of Class I carriers that have substantial market control and negotiating leverage. Approximately 55.9% of our traffic for the year ended December 31, 2010 was interchanged from CSX and Norfolk Southern, each a Class I carrier, and South Central Florida Express, a regional short line railroad. In addition, approximately 48.2% of our total freight revenue for the year ended December 31, 2010 was derived from Class I traffic and Norfolk Southern accounted for 11% of our total freight revenue for the same period. Approximately 1.0% of our total freight revenue for the year ended December 31, 2010 was derived from the regional short line traffic. No other customer represented more than 11% of our total freight revenue for the year ended December 31, 2010. Our ability to provide rail service to our customers depends in large part upon our ability to maintain cooperative relationships with Class I carriers and certain other customers with respect to, among other matters, freight rates, car supply, switching, interchange, fuel surcharges and trackage rights (an arrangement where the Company that owns the line retains all rights, but allows another company to operate over certain sections of its track). In addition, loss of customers or service interruptions or delays by our Class I and other interchange partners relating to customers who ship over our track may decrease our revenue. Furthermore, the ability of Class I carriers, in particular CSX and Norfolk Southern, to market and service southbound traffic into the Florida market will affect the amount of traffic we move. Failure to maintain good relationships may adversely affect our ability to negotiate acquisitions of branch lines.

Although our operations served approximately 500 customers in 2010, freight revenue from our 10 largest freight revenue customers accounted for approximately 47.0% of our total freight revenues for the year ended December 31, 2010. In addition, we have three primary aggregate customers with operations in south Florida whose freight revenues represented approximately 16.1% of our total freight revenues for the year ended December 31, 2010 (of the three primary aggregate customers, none accounted for more than 10% of total freight revenue individually). Our revenues are affected by the demand for aggregate material, primarily in Florida, and

the ability of these customers to supply this natural raw material efficiently and effectively. Substantial reduction in business with or loss of important customers could have a material adverse effect on our business and financial results.

If the track maintenance tax credit is not renewed by Congress upon its expiration on December 31, 2011, we will no longer be able to earn or assign credits for track maintenance.

In 2010, we received approximately $2.4 million from the assignment of tax credits for certain track maintenance expenditures pursuant to Section 45G of the Internal Revenue Code. Section 45G expired at the end of 2009, but was subsequently and retroactively reinstated on December 17, 2010, when President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 into law, which includes provisions to extend several tax provisions through 2010 and 2011, including Section 45G. Accordingly, the Section 45G tax credit has been extended until December 31, 2011 to cover expenditures paid or incurred in the 2010 and 2011 taxable years. There can be no assurance, however, that legislation extending the availability of the Section 45G tax credit will be enacted upon its expiration on December 31, 2011.

We are subject to environmental and other governmental regulation of our railroad operations, which could impose significant costs.

Our operations and properties are subject to federal, state and local environmental laws and regulations that impose strict, and in certain cases joint and several, liability for such costs, including, among other things, discharge of pollutants into the air, water and soil, the generation, handling, storage, transportation, treatment and disposal of waste and other regulated materials, and the cleanup of contaminated properties and human health and safety. The failure to comply with environmental and other governmental regulations could have a material adverse effect on us. We could incur significant costs, fines and penalties as a result of any allegations or findings to the effect that we have violated or are strictly liable under these laws or regulations. We may be required to incur significant expenses to investigate and remediate environmental contamination. See “Business—Environmental Matters,” for more information. We are also subject to governmental regulation by a significant number of federal, state and local regulatory authorities with respect to our railroad operations and a variety of health, safety, labor, maintenance and other matters.

New legislation or regulatory changes could impact our or restrict our ability to independently negotiate prices.

Legislation passed by Congress or new regulations issued by federal agencies can significantly affect the revenues, costs and profitability of our business. For instance, in December 2009, a proposed bill called the “Surface Transportation Board Reauthorization Act of 2009” was introduced in the Senate but not advanced. In January 2011, the bill now referred to as the Surface Transportation Board Reauthorization Act of 2011 (“STB Reauthorization Bill”) was reintroduced. The STB Reauthorization Bill, if adopted, could increase government involvement in railroad pricing, service and operations. The proposed legislation also includes provisions that would reduce the ability to price at market levels, and open a carrier’s privately-owned and maintained rail network to competitors where certain conditions are met.

If adopted as proposed, this bill could significantly change the federal regulatory framework of the railroad industry. Several of the changes under consideration could have a significant negative impact on our ability to determine prices for rail services, meet service standards and could force a reduction in capital spending. Statutes imposing price constraints or affecting rail-to-rail competition could adversely affect our profitability.

Severe weather and natural disasters could disrupt normal business operations, which could result in increased costs and liabilities and decreases in revenues.

Our operating assets are located on Florida’s eastern seaboard. Severe weather conditions and other natural phenomena, including hurricanes and other severe storms, fires and floods, may cause significant damage,

destruction and business interruptions and result in increased costs, increased liabilities and decreased revenue. Additionally, the operations and properties of some of our customers (especially aggregate suppliers) are also subject to natural disasters, which could significantly reduce the volumes they ship and result in decreased revenue.

We face possible catastrophic loss and liability, and our insurance may not be sufficient to cover our damages or damages to others.

The operation of any railroad carries with it an inherent risk of catastrophe, mechanical failure, collision, and property loss. In the course of our operations, spills or other environmental mishaps, cargo loss or damage, business interruption due to political developments, as well as labor disputes, strikes and adverse weather conditions, could result in a loss of revenues or increased liabilities and costs. Collisions, cargo leaks or explosions, environmental mishaps, or other accidents can cause serious bodily injury, death, and extensive property damage, particularly when such accidents occur in heavily populated areas. Additionally, our operations may be affected from time to time by natural disasters such as hurricanes and other severe storms and floods. The occurrence of a major natural disaster could have a material adverse effect on our operations and financial condition. We maintain insurance that is consistent with industry practice against the accident-related risks involved in the conduct of our business and business interruption due to natural disaster. In addition, due to the location of our assets on Florida’s eastern seaboard, we also maintain windstorm coverage. However, our insurance is subject to a number of limitations on coverage, depending on the nature of the risk insured against. This insurance may not be sufficient to cover our damages or damages to others and this insurance may not continue to be available at commercially reasonable rates. In addition, we are subject to the risk that one or more of our insurers may become insolvent and would be unable to pay a claim that may be made in the future. Even with insurance, if any catastrophic interruption of service occurs, we may not be able to restore service without a significant interruption to operations which could have an adverse effect on our financial condition.

We may face liability for casualty losses that are not covered by insurance.

We have obtained insurance coverage, including windstorm coverage, for losses sustained by our railroad arising from personal injury and for property damage in the event of derailments or other incidents. Personal injury claims made by our railroad employees are subject to the Federal Employers’ Liability Act (FELA) rather than state workers’ compensation laws. Currently, we are responsible for the first $2.0 million of expenditures per each incident under our general liability insurance policy and $0.75 million of expenditures per each incident under our property insurance policy. Severe accidents or personal injuries could cause our liability to exceed our insurance limits which might have a material adverse effect on our business and financial condition. Our annual insurance limits are $200.0 million and $35.0 million on liability and property, respectively. In addition, adverse events directly and indirectly attributable to us, including such things as derailments, accidents, discharge of toxic or hazardous materials, or other like occurrences in the industry, can be expected to result in increases in our insurance premiums or our self insured retentions and could result in limitations to the coverage under our existing policies. Furthermore, the market for windstorm coverage remains very limited and costly. It is unknown how much windstorm coverage we will purchase in the future, and it is possible that our property will experience windstorm damage and utility service interruption in excess of insurance limits.

Our inability to efficiently utilize our rail car and intermodal fleet could have an adverse effect on our operations and financial condition.

We earn per diem rents on the use of our rail car and intermodal fleet of equipment based on other railroads’ or transportation service providers’ use of the equipment. Future significant downturns in the overall U.S. economy, equipment obsolescence or reduced market demand for our car and/or intermodal fleet, or efforts by other railroads or transportation providers to improve equipment utilization practices or increase or decrease the size of their equipment fleets could affect the utilization of and per diem rents for our equipment.

Also, we, through operating agreements, currently lease approximately 3,026 rail cars from Greenbrier Leasing Corporation (“Greenbrier”), The CIT Group (formerly, Bombardier Capital) and other entities, with lease lengths generally of three, five and ten years. Under the terms of the lease, the counterparty bills us an hourly rate based upon the length of time the car is on our railroad (on-line) or on another railroad (off-line). As a car goes off- line, a per diem rent sharing arrangement goes into effect whereby we and the counterparty apportion the rent based upon the length of time the car is off-line. Certain of these leases provide that we must pay the counterparty a base rent payment if the car remains on our line for a specified number of days. As a result, if a car remains on our line beyond certain periods of time, we may be required to pay our applicable counterparty a base rent amount even though we have not received any revenue under the contract because the car has not been off our line, which would reduce our operating results. Rents from the Greenbrier, CIT, and other leases received by us were $1.5 million for the three months ended March 31, 2011, and $6.8 million, $5.5 million, and $6.2 million in 2010, 2009, and 2008, respectively. By contrast, to date, the base rent payments that we have made to counterparties—i.e., payments we have made to counterparties in excess of the amount of revenue we have generated under the applicable lease—have been minimal.

Shared use of our railroad corridor with passenger railroad operations could have an adverse effect on our ability to utilize our railway efficiently, which could impact our operations and financial condition.

In December 2007, we granted to FDG Passenger ROW Holdings LLC (“FDG Passenger”), a subsidiary of FECI, a permanent, perpetual and exclusive easement for purposes consistent with, or relating to, commuter rail and transit passenger railroad operations, subject to certain exceptions. If FDG Passenger were to commence operating a passenger railroad on our railway corridor pursuant to the right granted by the passenger rail easement, we could be required to reduce our levels of freight volume as a result of sharing the corridor, which could have an adverse effect on our ability to utilize our railway efficiently, which may impact our operations and financial condition. We may also incur additional liability, casualty and property risks as a result of shared use of the corridor with passenger railroad operations, which could also adversely effect our operations and financial condition.

We depend on our management and key personnel, and we may not be able to operate and grow our business effectively if we lose the services of our management or key personnel or are unable to attract qualified personnel in the future.

The success of our business is heavily dependent on the continued services and performance of our current management and other key personnel and our ability to attract and retain qualified personnel in the future. The loss of key personnel could affect our ability to run our business effectively. Competition for qualified personnel is intense, and we cannot assure you that we will be successful in attracting and retaining such personnel. Although we have entered into employment agreements with certain of our key personnel, these agreements do not ensure that our key personnel will continue in their present capacity with us for any particular period of time. The loss of any key personnel could require one or more remaining key personnel to divert immediate and substantial attention to seeking a replacement or performing the duties of the departed executive. An inability to find a suitable replacement for any departing executive officer on a timely basis could adversely affect our ability to operate and grow our business.

Future acts of terrorism or war, as well as the threat of war, may cause significant disruptions in our business operations.

Terrorist attacks, such as those that occurred on September 11, 2001, as well as the more recent attacks on the transportation systems in Madrid and London, any government response to those types of attacks and war or risk of war may adversely affect our results of operations, financial condition or liquidity. Our rail lines and facilities could be direct targets or indirect casualties of an act or acts of terror. Such acts could cause significant business interruption and result in increased costs and liabilities and decreased revenues, which could have an

adverse effect on our operating results and financial condition. Such effects could be magnified where releases of hazardous materials are involved. Any act of terror, retaliatory strike, sustained military campaign or war or risk of war may have an adverse effect on our operating results and financial condition by causing or resulting in unpredictable operating or financial conditions, including disruptions of rail lines, volatility or sustained increase of fuel prices, fuel shortages, general economic decline and instability or weakness of financial markets which could restrict our ability to raise capital. In addition, insurance premiums charged for some or all of our coverage could increase dramatically or certain coverage may not be available to us in the future.

The availability of qualified personnel and an aging workforce may adversely affect our operations.

Changes in demographics, training requirements and the availability of qualified personnel, particularly train crew members, could negatively affect our service levels. Unpredictable increases in demand for rail services may exacerbate these risks and may have an adverse effect on our operating results, financial condition or liquidity.

We have a substantial amount of indebtedness, which may adversely affect our cash flow and our ability to operate our business.

As of March 31, 2011, our total indebtedness was approximately $475.0 million, which represented approximately 55% of our total capitalization. Our substantial indebtedness could have important consequences, including:

Despite our substantial indebtedness level, we and our subsidiaries will still be able to incur significant additional amounts of debt, which could further exacerbate the risks associated with our substantial indebtedness.

We may be able to incur substantial additional indebtedness in the future. Although our ABL Facility and the indenture governing the notes contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions and, under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial. If new debt, including future Indebtedness (as defined in “Description of the Notes”), is added to our existing debt levels, the related risks that we now face would increase. In addition, the indenture governing the notes will not prevent us from incurring obligations that do not constitute indebtedness under the indenture.

Our debt agreements contain restrictions that will limit our flexibility in operating our business.

The indenture governing the notes and our ABL Facility contain various covenants that will limit our ability to engage in specified types of transactions. The indenture and the ABL Facility covenants will limit our and our restricted subsidiaries’ ability to, among other things:

In addition, if availability under the ABL Facility is below $7.5 million, we will be subject to a minimum fixed charge coverage ratio (as defined in the ABL Facility) of 1.1 to 1.0. If this covenant becomes operative in the future, events beyond our control, including changes in general economic and business conditions, may affect our ability to meet this financial ratio test. We cannot assure you that we will meet this potential financial ratio test or that our lenders will waive any failure to meet this test.

A breach of any of these covenants or covenants contained in future agreements could result in a default under the indenture, the ABL Facility, or such future agreements. In addition, any debt agreements we enter into in the future may further limit our ability to enter into certain types of transactions. Upon the occurrence of an event of default under any of the agreements governing our indebtedness, the lenders and holders of the notes could elect to declare all amounts outstanding to be due and payable and exercise other remedies as set forth in the applicable agreements. If any of our indebtedness were to be accelerated, there can be no assurance that our assets would be sufficient to repay this indebtedness in full, which could have a material adverse effect on our ability to continue to operate as a going concern. See “Description of the Notes—Events of Default and Remedies.”

We may not be able to generate sufficient cash to service the notes or our other indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on the notes or our other indebtedness. Any payments we make directly or indirectly to our parent companies would reduce the level of cash available to us to make the scheduled payments in respect of the notes.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance the notes or our other indebtedness. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of the indenture governing the notes and existing or future debt instruments may restrict us from adopting some of these alternatives. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.

Our ABL Facility is senior to the notes with respect to the ABL Collateral.

Obligations under our ABL Facility are secured by a first-priority lien on the ABL Collateral. Obligations under the notes are secured by a second-priority lien on the ABL Collateral. In addition, the indenture permits us to incur additional indebtedness secured on a first-priority basis by the ABL Collateral in the future. As of March 31, 2011, we have approximately $30 million of availability under the ABL Facility, after taking account of borrowing base limitations. Holders of the indebtedness under our ABL Facility and any other indebtedness secured by a first-priority lien in the ABL Collateral will be entitled to receive proceeds from the realization of value of the ABL Collateral to repay such indebtedness in full before the holders of the notes will be entitled to any recovery from such collateral.

The value of the collateral securing the notes may not be sufficient to satisfy our obligations under the notes.

No appraisal of the value of the Notes Collateral has been made and the fair market value of the Notes Collateral is subject to fluctuations based on factors that include, among others, general economic conditions and similar factors. The amount to be received upon a sale of the Notes Collateral would be dependent on numerous factors, including, but not limited to, the actual fair market value of the Notes Collateral at such time, the timing and the manner of the sale and the availability of buyers. By its nature, portions of the Notes Collateral may be illiquid and may have no readily ascertainable market value. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, the Notes Collateral may not be sold in a timely or orderly manner and the proceeds from any sale or liquidation of the Notes Collateral may not be sufficient to pay our obligations under the notes.

To the extent that pre-existing liens, liens permitted under the indenture and other rights, including liens on excluded assets, such as those securing purchase money obligations, government- financed or -sponsored projects and capital lease obligations granted to other parties (in addition to the holders of obligations secured by first-priority liens), encumber any of the Notes Collateral securing the notes and the guarantees, those parties have or may exercise rights and remedies with respect to the Notes Collateral that could adversely affect the value of the Notes Collateral and the ability of the Notes Collateral agent, the trustee under the indenture or the holders of the notes to realize or foreclose on the Notes Collateral.

Furthermore, the indenture governing the notes permits us, subject to compliance with certain financial tests, to issue additional secured debt, including debt secured equally and ratably by the same assets pledged for the benefit of the holders of the notes. Any such issuance would reduce amounts payable to holders of the notes from the proceeds of any sale of the Notes Collateral.

There may not be sufficient Notes Collateral to pay off any additional notes we may issue together with the notes offered hereby. Consequently, liquidating the Notes Collateral securing the notes and the guarantees may not result in proceeds in an amount sufficient to pay any amounts due under the notes after also satisfying the obligations to pay any creditors with prior liens. If the proceeds of any sale of Notes Collateral are not sufficient to repay all amounts due on the notes, the holders of the notes (to the extent not repaid from the proceeds of the sale of the Notes Collateral) would have only an unsecured, unsubordinated claim against our and the subsidiary guarantors’ remaining assets, and there may not be sufficient assets remaining to repay any or all amounts due on the notes.

There are circumstances other than repayment or discharge of the notes under which the collateral securing the notes and guarantees will be released automatically, without your consent or the consent of the trustee.

Under various circumstances, all or a portion of the Notes Collateral may be released, including:

In addition, the guarantee of a subsidiary guarantor will be released in connection with a sale of such subsidiary guarantor in a transaction not prohibited by the indenture.

The indenture also permits us to designate one or more of our restricted subsidiaries that is a guarantor of the notes as an unrestricted subsidiary. If we designate a subsidiary guarantor as an unrestricted subsidiary, all of the liens on any Notes Collateral owned by such subsidiary or any of its subsidiaries and any guarantees of the notes by such subsidiary or any of its subsidiaries will be released under the indenture. Designation of an unrestricted subsidiary will reduce the aggregate value of the Notes Collateral securing the notes to the extent that liens on the assets of the unrestricted subsidiary and its subsidiaries are released. In addition, the creditors of the unrestricted subsidiary and its subsidiaries will have a senior claim on the assets of such unrestricted subsidiary and its subsidiaries. See “Description of the Notes.”

There are certain other categories of property that are also excluded from the Notes Collateral.

Our ability to incur purchase money indebtedness and capital lease obligations is subject to limitations, as described in “Description of the Notes.” Certain categories of assets are excluded from the Notes Collateral. Excluded assets include, among other categories, assets of our subsidiaries located outside the U.S. to the extent a security interest cannot be granted under federal or state law, assets in which the grant of a security interest is prohibited by law, certain after-acquired property, outstanding stock of certain controlled foreign corporations and assets (including leasehold interests in real property) in which we are contractually obligated not to create a security interest. See “Description of the Notes.” These excluded assets represent approximately 8.2% of our total assets as of March 31, 2011. If an event of default occurs and the notes are accelerated, the notes and the guarantees will rank equally with the holders of other unsubordinated and unsecured indebtedness of the relevant entity with respect to such excluded property.

We have not conducted lien searches on the portion of the Notes Collateral that constitutes rail lands and other real property. If conducted, such lien searches could reveal a prior lien or multiple prior liens on such portion of the Notes Collateral, and such liens may prevent or inhibit the Notes Collateral agent from foreclosing on the liens on such Notes Collateral securing the notes and impair the value of such Notes Collateral. We cannot guarantee that if lien searches were to have been conducted that such lien searches would not reveal any prior liens on such Notes Collateral. Any such prior lien could be significant, could be prior to the liens securing the notes and could have an adverse effect on the ability of the Notes Collateral agent to realize or foreclose upon such Notes Collateral.

Rights of holders of the notes in the Notes Collateral may be adversely affected by the failure to perfect security interests in Notes Collateral.

Applicable law requires that a security interest in certain tangible and intangible assets can only be properly perfected and its priority retained through certain actions undertaken by the secured party. The liens in the Notes Collateral may not be perfected with respect to the claims of the notes if the Notes Collateral agent does not take the actions necessary to perfect any of these liens. Specifically, we do not expect the Notes Collateral agent to have completed all the actions necessary to perfect the liens in any real property by the time of completion of this offering. In addition, applicable law requires that certain property and rights acquired after the grant of a general security interest, such as real property, equipment subject to a certificate of title and certain proceeds, can only be perfected at the time such property and rights are acquired and identified. We and the guarantors have limited obligations to perfect the security interest of the holders of the notes in specified Notes Collateral. There can be no assurance that the trustee or the Notes Collateral agent will monitor, or that we will inform such trustee or Notes Collateral agent of, the future acquisition of property and rights that constitute Notes Collateral, and that the necessary action will be taken to properly perfect the security interest in such after-acquired Notes Collateral. Neither the trustee nor the Notes Collateral agent has an obligation to monitor the acquisition of additional

property or rights that constitute Notes Collateral or the perfection of any security interest. Such failure may result in the loss of the security interest in the Notes Collateral or the priority of the security interest in favor of the notes against third parties.

The failure of the Trustee or the Notes Collateral agent to monitor the status of an international treaty relating to the perfection of security interests in rolling stock could adversely affect the security interest in the Notes Collateral or the priority of the security interest in favor of the Notes against third parties.

The perfection of security interests in rolling stock—i.e., railroad freight cars and locomotives—is governed by federal law and requires that filings be made with the Department of Transportation’s Surface Transportation Board (“STB”) including when we acquire additional rolling stock. Any filing with the STB must include a description of the equipment and the identification number affixed to each item of rolling stock. However, not all items of rolling stock bear such an identification number. We and the guarantors have limited obligations to perfect the security interest of the holders of the notes in specified Notes Collateral. There can be no assurance that the trustee or the Notes Collateral agent will monitor, or that we will inform such trustee or Notes Collateral agent of, the future acquisition of property and rights that constitute Notes Collateral, and that the necessary action will be taken to properly perfect the security interest in such after-acquired Notes Collateral. Neither the trustee nor the Notes Collateral agent has an obligation to monitor the acquisition of additional property or rights that constitute Notes Collateral or the perfection of any security interest. Such failure may result in the loss of the security interest in the Notes Collateral or the priority of the security interest in favor of the notes against third parties.

In addition, we are subject to changes in local, state, federal and international laws and regulations that affect the perfection of security interests in rolling stock. An international convention intended to standardize transactions involving movable property, including rolling stock, has been ratified by the United States. This convention, however, enters into force only if the United States ratifies a specific protocol, which the United States has not yet done. In the event that the United States ratifies the protocol, the provisions of the convention and protocol will enter into force and will preempt applicable U.S. laws enacted earlier in time with respect to the perfection of security interests in rolling stock. We and the guarantors have limited obligations to perfect the security interest of the holders of the notes in specified Notes Collateral. There can be no assurance that the trustee or the Notes Collateral agent will monitor, or that we will inform such trustee or Notes Collateral agent of, ratification of the protocol or force of the treaty and that the necessary action will be taken to properly perfect the security interest in the Notes Collateral. Neither the trustee nor the Notes Collateral agent has an obligation to monitor the ratification of the protocol or force of the treaty or the perfection of any security interest thereunder. Such failure may result in the loss of the security interest in the Notes Collateral or the priority of the security interest in favor of the notes against third parties.

Title insurance policies and surveys will not be obtained for any real property.

Title insurance policies and surveys were not be obtained in connection with the mortgages against any of our real property. Accordingly, the mortgages will not have the benefit of (i) title insurance policies insuring our title to and the first priority of the liens of the mortgages with respect to any of the real property owned or leased by us and (ii) any surveys that would reveal encroachments, adverse possession claims, zoning or other restrictions that exist with respect to such real properties which could adversely affect the value or utility of such property securing the notes. There can be no assurance that there does not exist a mechanics’ lien or other lien encumbering one or more of the real properties that is senior to the lien (or a portion of the lien) of any such mortgage. The existence of such liens could adversely affect the value of the real property securing the notes as well as the ability of the Notes Collateral agent to realize or foreclose on such real property.

In addition, there can be no assurance that the legal descriptions attached to the mortgages (i) accurately describe and encumber the property intended to be mortgaged as security for the notes, (ii) include all real property owned, leased or otherwise held by us intended to constitute Notes Collateral or (iii) do not include real property not owned, lease or otherwise held by us.

The Hialeah rail yard is subject to a ground lease with a term of 25 years (see “Certain Relationships and Related Party Transactions—Lease Agreements” for more information). Mortgages secured by a lien on a leasehold interest are subject to risks not associated with mortgage loans secured by a lien on a fee estate. The most significant of these risks is that a leasehold interest could be terminated before the debt secured by the mortgage is paid in full. The forms of these ground leases vary in scope and extent with respect to provisions designed to protect the interests of a leasehold mortgagee. However, the real property subject to the ground lease require that the ground lessor provide the leasehold mortgagee with notice of the occurrence of a default under the ground lease and the opportunity to cure the applicable borrower’s default.

In general, the ground lease does not prohibit the ground lessee from encumbering its interest in the property, though in some cases, consent of the ground lessor is required. If a mortgage on the fee interest in the property is recorded prior to the recordation of a memorandum of the ground lease or if the ground lease, by its terms, is subordinate to a fee mortgage, the holder of the fee mortgage could, in the event of the foreclosure of the fee mortgage, elect to terminate the applicable ground lease, and thus your security interest in such leasehold.

The existence or imposition of certain permitted liens could adversely affect the value of the Notes Collateral.

The collateral securing the notes will be subject to liens permitted under the terms of the indenture governing the notes, whether arising on or after the date the notes were issued. The existence of any permitted liens could adversely affect the value of the Notes Collateral as well as the ability of the Notes Collateral agent to realize or foreclose on such collateral. The Notes Collateral that will secure the notes may also secure future indebtedness and other obligations of the Company and the guarantors to the extent permitted by the indenture and the security documents. Your rights to the Notes Collateral would be diluted by any increase in the indebtedness secured by the Notes Collateral.

Remedies available to the Notes Collateral Agent may be limited by state law, practicability and lease provisions.

Several states have laws that prohibit more than one “judicial action” or “one form of action” to enforce a mortgage obligation, and some courts have construed the term “judicial action” broadly. In addition, the Notes Collateral agent may be required to foreclose first on real property located in states where such “one action” rules apply (and where non-judicial foreclosure is permitted) before foreclosing on properties located in states where judicial foreclosure is the only permitted method of foreclosure. As a result of the foregoing considerations, among others, the ability of the Notes Collateral agent to realize upon the mortgages may be limited by the application of state laws.

In addition, the large number of real properties may render mortgage foreclosure impracticable. The Notes Collateral agent may elect to forego foreclosure on the individual real properties and foreclose on the equity interests of the owners of such real property instead. A foreclosure on the equity interests of such entities could violate provisions of certain ground leases and contracts entered into by such entities and could result in early termination of such agreements.

In addition, a foreclosure of the equity interests, rather than of the liens of the mortgages, will leave in place any junior liens that may have been recorded subsequent to the recording of the mortgages.

Any future pledge of collateral in favor of the Notes Collateral agent, including pursuant to security documents delivered after the date of the indenture governing the notes, might be avoidable by the pledgor (as debtor in possession) or by its trustee in bankruptcy if certain events or circumstances exist or occur, including if the pledgor is insolvent at the time of the pledge, the pledge permits the holders of the notes to receive a greater

recovery than if the pledge had not been given and a bankruptcy proceeding in respect of the pledgor is commenced within 90 days following the pledge, or, in certain circumstances, a longer period. As more fully described herein, certain of the assets securing the notes will not be subject to a valid and perfected security interest on the closing date. We have agreed to use commercially reasonable efforts to obtain a valid and perfected security interest on such assets to secure the notes within 60 days after the closing date.

We intend to maintain insurance or otherwise insure against hazards in a manner appropriate and customary for our business. There are, however, certain losses that may be either uninsurable or not economically insurable, in whole or in part. Insurance proceeds may not compensate us fully for our losses. If there is a complete or partial loss of any of the Notes Collateral, the insurance proceeds may not be sufficient to satisfy all of the secured obligations, including the notes and the guarantees. In the event of a total or partial loss to any of the mortgaged facilities, certain items of equipment may not be easily replaced.

In the event of our bankruptcy, the ability of the holders of the notes to realize upon the collateral securing the notes will be subject to certain bankruptcy law limitations.

The ability of holders of the notes to realize upon the Notes Collateral will be subject to certain bankruptcy law limitations in the event of our bankruptcy. Under applicable U.S. federal bankruptcy laws, secured creditors are prohibited from, among other things, repossessing their security from a debtor in a bankruptcy case without bankruptcy court approval and may be prohibited from retaining security repossessed by such creditor without bankruptcy court approval. Moreover, applicable federal bankruptcy laws generally permit the debtor to continue to retain collateral, including cash collateral, even though the debtor is in default under the applicable debt instruments, provided that the secured creditor is given “adequate protection.”

The secured creditor is entitled to “adequate protection” to protect the value of the secured creditor’s interest in the collateral as of the commencement of the bankruptcy case but the adequate protection actually provided to a secured creditor may vary according to the circumstances. Adequate protection may include cash payments or the granting of additional security if and at such times as the court, in its discretion and at the request of such creditor, determines after notice and a hearing that the collateral has diminished in value as a result of the imposition of the automatic stay of repossession of such collateral or the debtor’s use, sale or lease of such collateral during the pendency of the bankruptcy case. In view of the lack of a precise definition of the term “adequate protection” and the broad discretionary powers of a U.S. bankruptcy court, we cannot predict whether or when the trustee under the indenture for the notes could foreclose upon or sell the Notes Collateral or whether or to what extent holders of notes would be compensated for any delay in payment or loss of value of the collateral through the requirement of “adequate protection.”

Moreover, the Notes Collateral agent and the trustee may need to evaluate the impact of the potential liabilities before determining to foreclose on Notes Collateral consisting of real property because secured creditors that hold a security interest in real property may be held liable under environmental laws for the costs of remediating or preventing the release or threatened releases of hazardous substances at such real property. Consequently, the Notes Collateral agent may decline to foreclose on such Notes Collateral or exercise remedies available in respect thereof if it does not receive indemnification to its satisfaction from the holders of the notes.

In the event of a bankruptcy of us or any of the guarantors, holders of the notes may be deemed to have an unsecured claim to the extent that our obligations in respect of the notes exceed the fair market value of the collateral securing the notes.

In any bankruptcy proceeding with respect to us or any of the guarantors, it is possible that the bankruptcy trustee, the debtor-in-possession or competing creditors will assert that the fair market value of the Notes Collateral with respect to the notes on the date of the bankruptcy filing was less than the then-current principal

amount of the notes. Upon a finding by the bankruptcy court that the notes are under-collateralized, the claims in the bankruptcy proceeding with respect to the notes would be bifurcated between a secured claim in an amount equal to the value of the Notes Collateral and an unsecured claim with respect to the remainder of its claim which would not be entitled to the benefits of security in the Notes Collateral. Other consequences of a finding of under-collateralization would be, among other things, a lack of entitlement on the part of the notes to receive post-petition interest and a lack of entitlement on the part of the unsecured portion of the notes to receive “adequate protection” under federal bankruptcy laws. In addition, if any payments of post-petition interest had been made at any time prior to such a finding of under-collateralization, those payments would be recharacterized by the bankruptcy court as a reduction of the principal amount of the secured claim with respect to the notes.

The value of the collateral securing the notes may not be sufficient to secure post-petition interest.

In the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding against us, holders of the notes will only be entitled to post-petition interest under the United States Bankruptcy Code to the extent that the value of their security interest in the Notes Collateral is greater than their pre-bankruptcy claim. Holders of the notes that have a security interest in Notes Collateral with a value equal or less than their pre-bankruptcy claim will not be entitled to post-petition interest under the United States Bankruptcy Code. No appraisal of the fair market value of the Notes Collateral has been prepared in connection with this offering and therefore the value of the noteholders’ interest in the Notes Collateral may not equal or exceed the principal amount of the notes.

Upon the occurrence of specific kinds of change of control events, we will be required to offer to repurchase all old notes at 101% of their principal amount, plus accrued and unpaid interest. The source of funds for any such purchase of the notes will be our available cash or cash generated from our and our subsidiaries’ operations or other sources, including borrowings, sales of assets or sales of equity. We may not be able to repurchase the notes upon a change of control because we may not have sufficient financial resources to purchase all of the notes that are tendered upon a change of control. Accordingly, we may not be able to satisfy our obligations to purchase the notes unless we are able to obtain financing. Our failure to repurchase the notes upon a change of control would cause a default under the indenture governing the notes.

In addition, the change of control provisions in the indenture may not protect you from certain important corporate events, such as a leveraged recapitalization (which would increase the level of our indebtedness), reorganization, restructuring, merger or other similar transaction, unless such transaction constitutes a “Change of Control” under the indenture. Such a transaction may not involve a change in voting power or beneficial ownership or, even if it does, may not involve a change that constitutes a “Change of Control” as defined in the indenture that would trigger our obligation to repurchase the notes. Therefore, if an event occurs that does not constitute a “Change of Control” as defined in the indenture, we will not be required to make an offer to repurchase the notes and you may be required to continue to hold your notes despite the event. See “Description of the Notes—Repurchase at the Option of Holders—Change of Control.”

If we become the subject of a bankruptcy proceeding within 90 days after the date of the indenture (or, with respect to any insiders specified in bankruptcy law who are holders of the notes, within one year after we issue the notes), and the court determines that we were insolvent at the time of the closing (under the preference laws, we would be presumed to have been insolvent on and during the 90 days immediately preceding the date of filing of any bankruptcy petition), the court could find that the incurrence of the obligations under the notes involved a preferential transfer. In addition, to the extent that certain of our collateral is not perfected until after closing, such 90-day preferential transfer period would begin on the date of perfection. If the court determined that the

granting of the security interest was therefore a preferential transfer, which did not qualify for any defense under bankruptcy law, then holders of the notes would be unsecured creditors with claims that ranked pari passu with all other unsecured creditors of the applicable obligor, including trade creditors. In addition, under such circumstances, the value of any consideration holders received pursuant to the notes, including upon foreclosure of the collateral, could also be subject to recovery from such holders and possibly from subsequent assignees, or such holders might be returned to the same position they held as holders of the notes.

Federal and state fraudulent transfer laws may permit a court to void the notes and the guarantees, subordinate claims in respect of the notes and any guarantees and require noteholders to return payments received and, if that occurs, you may not receive any payments on the notes.

Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of the notes, the incurrence of any guarantees of the notes entered into upon issuance of the notes and subsidiary guarantees that may be entered into thereafter under the terms of the indenture governing the notes and the granting of liens to secure the notes and the guarantees. Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, the notes, any guarantee or any of the liens securing the notes and the guarantees could be voided as a fraudulent transfer or conveyance if (1) we or any of the guarantors, as applicable, issued the notes, incurred its guarantee or granted the liens with the intent of hindering, delaying or defrauding creditors or (2) we or any of the guarantors, as applicable, received less than reasonably equivalent value or fair consideration in return for issuing the notes, incurring its guarantee or granting the liens and, in the case of (2) only, one of the following is also true at the time thereof:

A court would likely find that we or a guarantor did not receive reasonably equivalent value or fair consideration for the notes or such guarantee if we or such guarantor did not substantially benefit directly or indirectly from the issuance of the notes or the applicable guarantee. As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or now or antecedent debt is secured or satisfied. We cannot be certain as to the standards a court would use to determine whether or not we or the guarantors were solvent at the relevant time or, regardless of the standard that a court uses, that the issuance of the guarantees would not be further subordinated to our or any of our guarantors’ other debt. Generally, however, an entity would be considered solvent if, at the time it incurred indebtedness:

If a court were to find that the issuance of the notes or the incurrence of the guarantee was a fraudulent transfer or conveyance, the court could void the payment obligations under the notes or such guarantee or subordinate the notes or such guarantee to presently existing and future indebtedness of ours or of the related guarantor, or require the holders of the notes to repay any amounts received with respect to such guarantee. In addition, the court may avoid and set aside the liens securing the collateral. In the event of a finding that a fraudulent transfer or conveyance occurred, you may not receive any repayment on the notes.

Although each guarantee entered into by a subsidiary will contain a provision intended to limit that guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent transfer, this provision may not be effective to protect those guarantees from being voided under fraudulent transfer law, or may reduce that guarantor’s obligation to an amount that effectively makes its guarantee worthless.

Holders who fail to exchange their old notes will continue to be subject to restrictions on transfer.

If you do not exchange your old notes for new notes in the exchange offer, you will continue to be subject to the restrictions on transfer of your old notes described in the legend on the certificates for your old notes. The restrictions on transfer of your old notes arise because we issued the old notes under exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, you may only offer or sell the old notes if they are registered under the Securities Act and applicable state securities laws, or offered and sold under an exemption from these requirements. We do not plan to register the old notes under the Securities Act. In addition, if a large number of old notes are exchanged for new notes and there is only small amount of old notes outstanding, there may not be an active market in the old notes, which may adversely affect the market price and liquidity of the old notes. For further information regarding the consequences of tendering your old notes in the exchange offer, see the discussions below under the captions “The Exchange Offer—Consequences of Exchanging or Failing to Exchange Old Notes” and “Certain U.S. Federal Income Tax Considerations.”

You must comply with the exchange offer procedures in order to receive freely tradable new notes.

Delivery of new notes in exchange for old notes tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of the following:

Therefore, holders of old notes who would like to tender old notes in exchange for new notes should be sure to allow enough time for the old notes to be delivered on time. We are not required to notify you of defects or irregularities in tenders of old notes for exchange. Old notes that are not tendered or that are tendered but we do not accept for exchange will, following consummation of the exchange offer, continue to be subject to the existing transfer restrictions under the Securities Act and, upon consummation of the exchange offer, certain registration and other rights under the registration rights agreement will terminate. See “The Exchange Offer—Procedures for Tendering Old notes” and “The Exchange Offer—Consequences of Exchanging or Failing to Exchange Old notes.”

The notes are a new issue of securities. There is no active public trading market for the notes. We do not intend to apply for listing of the notes on a security exchange or to include the notes in any automated quotation system. The initial purchasers of the notes have informed us that they intend to make a market in the notes. However, the initial purchasers may cease their market-making at any time. Therefore, we cannot assure you that an active trading market for the notes will develop or, if developed, that it will continue. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the notes. We cannot assure you that any such disruptions may not adversely affect the prices at which you sell your notes. In addition, subsequent to their initial issuance, the notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar notes, our performance, our ability to effect the exchange offer and other factors.

The following table sets forth information regarding our ratio of earnings to fixed charges for each of the periods shown. For purposes of calculating this ratio, (i) earnings consist of income (loss) from continuing operations before provision (benefit) for income taxes and fixed charges and (ii) fixed charges consist of interest expense, which includes amortization of deferred finance charges. The interest component of rent was determined based on an estimate of a reasonable interest factor at the inception of the leases.

We will not receive any proceeds from the exchange offer. Any old notes that are properly tendered and exchanged pursuant to the exchange offer will be retired and cancelled.

The following tables summarize selected historical consolidated financial information for our business. You should read these tables along with “Summary Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Business”, and our consolidated historical financial statements and the related notes thereto included elsewhere in this prospectus.

Certain entities commonly-owned by private equity funds managed by affiliates of Fortress acquired all of the outstanding stock of Florida East Coast Industries, Inc. (“FECI”) on July 26, 2007 (herein referred to as the “Acquisition”). On December 31, 2007, FECI sold its rail transportation segment, which operated as separate legal entities (“Florida East Coast Railway, L.L.C.” and “FEC Highway Services, L.L.C.”), to private equity funds managed by affiliates of Fortress (herein referred to as the “Rail Separation”). Concurrent with the Rail Separation, FECR Rail LLC and the Company were formed to carry on the activities of Florida East Coast Railway, L.L.C.

The selected historical consolidated financial data presented for the year ended December 31, 2006 and the period from January 1, 2007 to July 26, 2007 (the “Predecessor” period) have been derived from the audited historical Consolidated Financial Statements of FECR prior to the Acquisition. The selected historical consolidated financial data for the period July 27, 2007 to December 31, 2007, and the years ended December 31, 2008, 2009, and 2010 (the “Successor” period), have been derived from the audited historical Consolidated Financial Statements of FECR subsequent to the Acquisition. As a result of the Acquisition, our current capital structure and our basis of accounting differ from those prior to the Acquisition. Our historical consolidated financial data in respect of reporting periods subsequent to July 26, 2007, reflect the Acquisition under the purchase method of accounting. Therefore, our historical consolidated financial data for the Predecessor period may not be comparable to our financial data for the Successor period.

The selected historical consolidated statement of operations and cash flows data for the three months ended March 31, 2010 and 2011 and the selected historical consolidated balance sheet data as of March 31, 2011 have been derived from our unaudited historical Consolidated Financial Statements included elsewhere in this prospectus. The unaudited historical Consolidated Financial Statements have been prepared on substantially the same basis as our audited historical Consolidated Financial Statements.

Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011 or for any future period.

The following discussions and analysis of our financial condition and results of operations should be read together with our financial statements and related notes and other financial information appearing elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that involve risk, uncertainties, and assumptions. See “Special Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors, including those discussed in “Risk Factors” and elsewhere in this prospectus. Except where the context otherwise requires, the terms “FECR,” the “Company,” “we”, “our” and “us” refer to the business of Florida East Coast Railway Corp. and its consolidated subsidiaries.

You should read the following discussion in conjunction with our historical Consolidated Financial Statements and the notes thereto appearing elsewhere in this prospectus as well as the rest of the information in this prospectus, including “Summary Historical Consolidated Financial Data” and “Selected Historical Consolidated Financial Data.”

We own and operate a 351-mile freight railroad along the east coast of Florida from Jacksonville to Miami. Our railroad is one of only two major freight railroads serving Florida. We operate at a high level of density, which means that we carry a high number of units per track mile. In 2010, we carried approximately 1,168 units per mainline track mile, which we believe is more than any of the Class I railroads in the United States.

In 2010, we transported over 410,000 units on our railroad comprising various types of freight for over 500 customers. We transport products such as intermodal containers and trailers, crushed rock (aggregate), automobiles, food, and other industrial products. We are a major hauler of aggregate in the State of Florida and a key conduit for the transportation of automobiles into South Florida.

We provide a direct route through some of the most highly congested regions of the State of Florida, and we believe that we are able to haul freight often more quickly and more cost effectively than other modes of transportation, such as trucking, as one train can haul the equivalent of up to 280 trucks.

We have direct access to the major south Florida ports of Miami, Everglades (Fort Lauderdale) and Palm Beach through which we transport intermodal containers. We believe that our unique positioning to these ports will help us continue our growth of volumes of intermodal containers.

We generate rail-operating revenues primarily from both the movement of freight in conventional freight cars and intermodal shipments of containers and trailers on flatcars. We count each move of a freight car, container or trailer on our line as one unit. We also generate revenue from dray moves (drayage is the movement of containers or trailers by truck to and from the rail yard). Non-freight operating revenues are derived from car hire and demurrage (allowing our customers and other railroads to use our railcars for storage or transportation in exchange for a daily fee), real estate and equipment lease income, ancillary dray charges, switching (managing and positioning railcars within a customer’s facility), and other transportation services.

Our rail expenses consist of salaries (approximately 70% of our work force is covered by collective bargaining agreements), related payroll taxes and employee benefits, depreciation (primarily reflecting our capital requirements for maintaining current operations), insurance and casualty claim expenses, diesel fuel,

repairs billed to/from others (generally, a net rent credit received from repairs of foreign cars on our line less repairs paid by us for our cars on a foreign line), property taxes, material and supplies, purchased services, and other expenses.

We manage our business performance by attempting to (i) grow our freight and non-freight revenue, (ii) drive financial improvements through a variety of cost-savings initiatives, and (iii) continued focus on safety to lower the costs and risks associated with operating our business.

Growth in units and increases in revenue per unit have a positive effect on freight revenue. In 2008 and 2009, the rail industry experienced freight units declines due to the global economic slowdown. However, we implemented a number of cost-savings initiatives in 2009 and 2008 such as employee reductions to match current volumes, renegotiation of third-party services, consolidation of facilities, continued focus on lower fuel consumption and safe operations, and more efficient locomotive and railcar utilization, among others. As a consequence, our operating ratio—which we define as total operating expenses divided by total operating revenues—improved for the year ended December 31, 2010 in comparison to the year ended December 31, 2009. The Company anticipates that it will continue to benefit from these cost-saving initiatives in the future and we continue to implement more effective pricing by centralizing and carefully analyzing pricing decisions and expect revenue per unit to continue to improve in 2011. We deem operating ratio as an important metric to measure our operational performance, however, operating ratio is not a measure as defined under U.S. GAAP.

Non-freight services offered to our rail customers include switching (or managing and positioning railcars within a customer’s facility), car hire and demurrage (allowing our customers and other railroads to use our railcars for storage or transportation in exchange for a daily fee), realty and equipment lease rentals, and dray ancillary charges (detention, lumper, and other). Each of these services leverages our existing customer relationships and generates additional revenue with minimal capital investment.

Our operating costs include labor, equipment rents (locomotives and railcars), purchased services (contract labor and professional services), diesel fuel, casualties and insurance, materials, property taxes, and other expenses.

The U.S. economy is dependent on the movement of freight ranging from raw materials, such as coal, ores, aggregates, lumber, and grain, to finished goods, such as food products, paper products, automobiles, and machinery. Railroads represent the largest component of the U.S. freight transportation industry, carrying more freight than any other mode of transportation on a ton-mile basis.

With a network of over 139,100 miles of track (in the U.S.), railroads link businesses with each other domestically and with international markets through connections with ports and other international terminals. Unlike other modes of transportation, such as trucking (which uses highways, toll roads, etc.) and shipping companies (that utilize ports), railroad operators generally own their infrastructure of track, land, and rail yards. This infrastructure, most of which was originally established over 100 years ago, represents a limited supply of assets and a difficult-to-replicate network.

Over the past quarter century, rail has increased its share of total U.S. freight transportation due to its ability to haul heavy products over long distances more efficiently and at a lower cost. According to the American Association of Railroads (“AAR”), railroads are estimated to be approximately four times more fuel efficient than truck transportation as a single train can haul the equivalent of up to 280 trucks. We believe that this fact, combined with increasing highway congestion, has contributed to the growth in demand for rail. Moreover, there is a limited supply of rail infrastructure to meet demand growth. Railroad land, track, and yards represent a

difficult-to-replicate network and a limited supply of assets, reducing the risks associated with market overcapacity and creating a favorable supply-demand dynamic.

Since 1980, the railroad industry has continually improved its cost competitiveness compared to other forms of freight transportation as it consumes less fuel and has lower labor costs per ton transported than other forms of freight transportation. In 1980, one gallon of diesel fuel moved one ton of freight by rail an average of 235 miles, versus 2009 where the equivalent gallon of fuel moved one ton of freight an average of 480 miles by rail—representing a 104% increase over 1980.

On July 26, 2007, Fortress acquired all of the outstanding capital stock of FECI in the Acquisition, which was accounted for using the purchase method of accounting in accordance with the Business Combinations Topic of the Financial Accounting Standards Board (“FASB”). Under the purchase method of accounting, the assets acquired and liabilities assumed from FECI were recorded at the date of acquisition at their respective fair values.

As of December 31, 2007, subsequent to the Acquisition, we acquired all of the assets and liabilities of Florida East Coast Railway, L.L.C. and FEC Highway Services L.L.C. in the Rail Separation for a cash consideration of $246.4 million.

Comparison of Operating Results for the Three Months Ended March 31, 2011 and 2010

Operating revenues increased $3.9 million, or 8.2%, to $51.5 million for the three months ended March 31, 2011 from $47.6 million for the three months ended March 31, 2010. The net increase was primarily due to increased volumes, increased fuel surcharges and an increase in non-freight revenues.

Freight revenues increased $3.3 million, or 7.5%, to $46.6 million for the three months ended March 31, 2011 from $43.3 million for the three months ended March 31, 2010. Included in freight revenues were $7.3 million and $4.3 million in fuel surcharges for the three months ended March 31, 2011 and 2010, respectively, for a net increase of $3.0 million. This increase in fuel surcharges resulted from increased fuel prices and higher volumes of traffic. Total units increased 4.3% to 103,436 for the three months ended March 31, 2011, from 99,136 for the three months ended March 31, 2010 (an increase in intermodal volumes was offset by a decrease in carload volumes).

The increase in average revenue per unit to $451 for the three months ended March 31, 2011 from $437 for the three months ended March 31, 2010 was due to an increase in price and fuel surcharges, offset by a decrease related to traffic mix (our volume growth was driven by shorter haul moves), and, to some extent, a change in mix from carload traffic to intermodal traffic. Carload traffic, which has a higher average revenue per unit, was 19.0% of the traffic in 2011 as compared to 21.8% in 2010.

The following table compares freight revenues, units, and average freight revenue per unit for the three months ended March 31, 2011 and the three months ended March 31, 2010:

Intermodal revenues increased $3.7 million (Rate/Mix increase—$1.6 million; Volume increase—$2.1 million) for the three months ended March 31, 2011, compared to the three months ended March 31, 2010. Rate/Mix represents the change in price per unit charged to the customer as well as the change in price per unit due to the mix in traffic as the rate per unit may vary per the commodity handled and the length of the haul. Our Rate/Mix increase was driven by an increase in actual price offset by a change in mix. Included in the $3.7 million increase in revenues is the impact of increased fuel surcharges of $2.7 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010. Overall, Intermodal shipments increased 8.1% or approximately 6,260 units for the three months ended March 31, 2011, compared to the three months ended March 31, 2010. This growth was attributable to our international business (which primarily includes our customers that ship freight through maritime ports), freight to a Class I intermodal facility in Titusville, which accesses the large Orlando market, as well as additional contracts with two major truckload carriers.

Carload revenues for the three months ended March 31, 2011 decreased $0.5 million (Rate/Mix increase—$1.0 million; offset by Volume decrease—$1.5 million) from 2010 levels for the same period. Included in the decreased revenues is the impact of increased fuel surcharges of $0.3 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010. Overall, carload shipments declined 9.1%, or approximately 1,960 units, for the three months ended March 31, 2011 compared to the three months ended March 31, 2010. This decrease in carload revenue was primarily due to the net effect of the following:

Non-freight revenues increased $0.6 million, or 15.1%, to $4.9 million for the three months ended March 31, 2011 from $4.3 million for the three months ended March 31, 2010. The primary increase in non-freight revenues was due to an increase in flagging revenue (services billed for workmen that maintain safety while work is being performed at or near the rail by outside parties) and car hire income.

The following table sets forth the operating revenue and expenses for our consolidated operations for the periods indicated (dollars in thousands):

Operating expenses increased to $42.7 million for the three months ended March 31, 2011, from $38.6 million for the three months ended March 31, 2010, an increase of $4.1 million, or 10.7%. The operating ratio was 83.0% for the three months ended March 31, 2011 compared to 81.1% for the three months ended March 31, 2010. Set forth below is additional detail regarding changes in our operating expenses:

Interest Expense (net of interest income). Interest expense decreased $3.2 million, or 20.9%, to $12.3 million for the three months ended March 31, 2011 from $15.6 million for the three months ended March 31, 2010. The decrease was primarily due to a decrease in interest rates in connection with refinancing the Old Facility with $475.0 million proceeds from the sale of the Senior Secured Notes (9.75% interest rate on the Old Facility as compared to a rate of 8.125% on the Senior Secured Notes).

Other Income (Loss). Other income (loss) remained relatively consistent for the comparable periods.

Provision for Income Taxes. For the three months ended March 31, 2011, we believe that it is more likely than not that our net operating losses expected to be generated by the Company in 2011 will expire unused. Accordingly, we recognized tax expense in the amount of $3.3 million for the three months ended March 31, 2011. For the three months ended March 31, 2010, we expected that our net operating losses would be fully utilized.

Operating revenue increased $18.9 million, or 10.5%, to $200.0 million for the year ended December 31, 2010 from $181.1 million for the year ended December 31, 2009. The net increase was primarily due to increased volumes, increased fuel surcharge and an increase in non-freight revenues.

Freight revenues increased $12.7 million, or 7.6%, to $180.7 million for the year ended December 31, 2010 from $168.0 million for the year ended December 31, 2009. Included in freight revenues are $21.7 million and $13.4 million in fuel surcharges for the years ended December 31, 2010 and 2009, respectively, for a net increase of $8.3 million. This increase in fuel surcharges resulted from increased fuel prices and higher volumes of traffic. Total units increased 10.1% to 410,096 in 2010 from 372,487 in 2009 (increased intermodal volumes were offset by decreased carload volumes).

The decrease in the average revenue per unit to $441 for the year ended December 31, 2010 from $451 for the year ended December 31, 2009 was primarily due to the decrease in traffic mix (our volume growth has been driven by shorter haul moves), and, to some extent, the change in mix from carload traffic to intermodal traffic, partially offset by the increase in price and fuel surcharges. Carload traffic, which has a higher average revenue per unit, was 20.8% of the total volume in 2010 as compared to 25.6% in 2009.

The following table compares freight revenues, units, and average freight revenue per unit for the years ended December 31, 2010 and 2009:

Intermodal revenues increased $15.9 million (Rate/Mix decrease—$0.7 million; Volume increase—$16.6 million) for the year ended December 31, 2010 in comparison to the year ended December 31, 2009. Included in the $15.9 million increase in revenues is the impact of increased fuel surcharges of $7.7 million year-over-year. Overall, intermodal shipments increased 17.1%, or approximately 47,500 units for the year ended December 31, 2010 in comparison to the year ended December 31, 2009. This increase in intermodal volumes was consistent with industry trends.

Carload revenues decreased $3.2 million (Rate/Mix increase—$4.2 million; Volume decrease—$7.4 million) for the year ended December 31, 2010 in comparison to the year ended December 31, 2009. Included in the decreased revenues is the impact of increased fuel surcharges of $0.6 million for the year ended December 31, 2010 in comparison to the year ended December 31, 2009. Overall, carload shipments declined 10.4%, or approximately 9,900 units for the year ended December 31, 2010 from the year ended December 31, 2009. This decrease in carload revenues was primarily due to the net effect of the following:

Non-freight revenues increased $6.2 million, or 47.6%, to $19.4 million for the year ended December 31, 2010 from $13.1 million for the year ended December 31, 2009. The primary increase in non-freight revenues was due to an increase of $3.2 million deferred revenues related to a three-year contract administration fee, an increase in car hire income of $1.6 million, an increase in locomotive lease revenues of $1.1 million, and an increase in real estate lease revenues of $0.4 million.

The following table sets forth the operating revenue and expenses for our consolidated operations for the periods indicated (dollars in thousands):

Operating expenses increased to $157.0 million in the year ended December 31, 2010, from $153.3 million in the year ended December 31, 2009, an increase of $3.7 million or 2.4%. Excluding the impact of fuel, operating expenses decreased $1.5 million as the cost savings implemented in 2009 had a positive impact on costs incurred. The operating ratio was 78.5% in 2010 compared to 84.6% in 2009. The increase in operating expenses was due to the following:

Interest Expense (net of interest income). Interest expense increased $11.8 million, or 21.7%, to $66.3 million in the year ended December 31, 2010 from $54.4 million in the year ended December 31, 2009. The increase was primarily due to a $14.7 million increase in interest expense in connection with the extension of the Old Facility (9.7% weighted average interest rate for the year ended December 31, 2010 compared to 7.2% for the year ended December 31, 2009), offset by a $2.3 million decrease in amortization related to terminated derivative agreements.

Other Income (Loss). Other income (loss) decreased $2.5 million, due to a $0.4 million loss in the year ended December 31, 2010, from a $2.9 million of loss in the year ended December 31, 2009 primarily related to $2.8 million in third-party fees paid in relation to the amendment of the Old Facility agreement in July 2009.

Operating revenue decreased $60.0 million, or 24.9%, to $181.1 million for the year ended December 31, 2009 from $241.1 million for the year ended December 31, 2008.

Freight revenues decreased $57.4 million, or 25.5%, to $168.0 million for the year ended December 31, 2009 from $225.4 million for the year ended December 31, 2008. Included in the 2009 and 2008 freight revenues are $13.4 million and $36.8 million, respectively, in fuel surcharges constituting a net decrease of $23.4 million. This decrease in fuel surcharges resulted from decreased fuel prices and lower volumes of traffic. Total units decreased to 372,487 units, or 16.5%, in 2009 from 445,870 units in 2008.

The decrease in the average revenue per unit to $451 for the year ended December 31, 2009 from $506 for the year ended December 31, 2008, was primarily due to the decrease in fuel surcharges and, to some extent, the change in mix from carload traffic to intermodal traffic offset by an increase in price for both carload units and intermodal units. Carload traffic, which has a higher average revenue per unit, was 25.6% of the total volume in 2009 as compared to 29.1% in 2008.

The following table compares freight revenues, units, and average freight revenue per unit for the years ended December 31, 2009 and 2008:

Intermodal revenues decreased $29.4 million (Rate/Mix decrease—$14.0 million; Volume decrease—$15.4 million) for the year ended December 31, 2009 in comparison to the year ended December 31, 2008. Included in

the $29.4 million decrease in revenues is the impact of decreased fuel surcharges of $15.2 million year-over-year. Overall, intermodal shipments declined 12.2%, or approximately 38,700 units, for the year ended December 31, 2009 in comparison to the year ended December 31, 2008. Our international shipments, which represented 25% of intermodal revenues and 34% of intermodal volumes in 2008, decreased by 26% in volume year-over-year due to the sharp decline in imports from Asia as a result of the economic downturn that began in October 2008. Imports and exports both dropped as a result of the financial crisis and spike in unemployment. In addition to our international shipments, our retail, motor carrier, and less-than-truckload (“LTL”) shipments declined, due to the economic downturn. Dray revenue decreased $2.2 million due to the general decline in the economy.

Carload revenues decreased $28.0 million (Rate/Mix decrease—$1.5 million; Volume decrease—$26.5 million) for the year ended December 31, 2009 in comparison to the year ended December 31, 2008. Included in the $28.0 million decrease in revenues is the impact of decreased fuel surcharges of $8.2 million year-over-year. Overall, carload shipments declined 26.7%, or approximately 34,700 units for the year ended December 31, 2009 from the year ended December 31, 2008. This decrease in carload revenues was primarily due to the net effect of the following:

Non-freight revenues decreased $2.6 million, or 16.5%, to $13.1 million for the year ended December 31, 2009 from $15.7 million for the year ended December 31, 2008. The primary decrease in non-freight revenues was due to a decrease in car hire income of $1.3 million, a decrease in real estate revenues of $0.7 million, and a decrease of demurrage and storage of $0.6 million.

In 2009, we entered into a Track Maintenance Agreement with an unrelated third-party customer (“Shipper”). Under the agreement, the Shipper pays for qualified railroad track maintenance expenditures during 2009 in exchange for the assignment of railroad track miles which permits the Shipper to claim certain tax credits pursuant to Section 45G of the Internal Revenue Code. The reduction in maintenance expenditures is reflected as a reduction in other expenses in the results of operations set forth below. For the year ended December 31, 2009, the Shipper paid for $2.4 million of maintenance expenditures.

The following table sets forth the operating revenue and expenses for our consolidated operations for the periods indicated (dollars in thousands):

Operating expenses decreased to $153.3 million in the year ended December 31, 2009, from $203.9 million in the year ended December 31, 2008. The operating ratio was 84.6% in 2009 compared to 84.6% in 2008. Although volumes decreased 16.5% year-over-year, we were able to maintain a stable operating ratio by implementing cost savings initiatives in 2009, which included a reduction in labor force to match current volumes, renegotiation of third-party services, consolidation of facilities, and continued focus on lower fuel consumption and safe operations. The net decrease in operating expenses was due to the following:

Interest Expense (net of interest income). Interest expense increased $4.3 million, or 8.5%, to $54.4 million for year ended December 31, 2009 from $50.2 million in the year ended December 31, 2008 mainly due to a $1.5 million increase related to swap agreements terminated in late 2008, a $0.9 million waiver fee on the Old Facility paid in 2009, a $0.2 million increase in the amortization of bank financing fees, a $1.2 million increase related to interest paid on the Old Facility (7.23% weighted average interest rate in 2009 compared to 7.03% in 2008), and a $1.4 million reduction in interest income received, offset by a $1.2 million reduction in interest paid on redeemable preferred shares due to principal redemptions of $62.2 million in 2008 and $4.6 million in 2009.

Other Income (Loss). Other income (loss) decreased $3.0 million, to a $2.9 million loss in the year ended December 31, 2009, from $0.1 million of income in the year ended December 31, 2008 mainly due to $2.8 million in third-party fees paid in relation to the amendment of the Old Facility agreement in July 2009.

Loss on Derivative Instrument. Loss on derivative instrument decreased $7.9 million for the year ended December 31, 2009 in comparison to the year ended December 31, 2008. In October 2008, the swap agreements were terminated, and $7.9 million was recognized as interest expense as certain forecasted cash flows were no longer probable. This loss was presented separately on the consolidated statements of operations as a loss on derivative instrument.

The discussion of liquidity and capital resources that follows reflects our consolidated results and includes all of our subsidiaries. We have historically met our liquidity requirements primarily from cash generated from operations and borrowings under our credit agreements which are used to fund capital expenditures and debt service requirements. For the three months ended March 31, 2011 and 2010, there was a net cash inflow from operations of $0.4 million and $3.4 million, respectively, primarily related to cash flow generated by operations.

We have historically met our liquidity requirements primarily from the following sources:

We expect that our cash flows from operations and existing credit facilities will be sufficient to meet our ongoing operating requirements, to fund capital expenditures for property, plant and equipment, and to satisfy our debt requirements. Our current projections of cash flows from operations and the availability of funds under our ABL Facility (as further described below) are expected to be sufficient to fund our maturing debt and contractual obligations in the next several years. No assurance can be made that we will be able to meet our financing and liquidity needs as currently contemplated. See “Risk Factors—We have a substantial amount of indebtedness, which may adversely affect our cash flow and our ability to operate our business.”

We have implemented capital spending programs designed to assure the ability to provide safe, efficient and reliable transportation services. For the remainder of 2011, we plan to spend $27.2 million of capital of which approximately 46% will be used to sustain the core infrastructure. We are intending to fund these capital investments through cash generated from operations.

The remaining amounts will be allocated to locomotives, freight cars, technology and high return growth or productivity investments such as the planned intermodal container rail service on our own rail line leading into the port of Miami. This project will enable cargo to be moved directly from the port’s facility to an inland distribution center and alleviate traffic congestion in and around the port. We estimate the total costs to be $50.0 million, of which we will contribute an estimated $10.9 million.

We are continually evaluating market and regulatory conditions that could affect our ability to generate sufficient returns on capital investments. We may revise our future estimates for capital spending as a result of changes in business conditions, tax legislation or the enactment of new laws or regulations. Although new legislation or regulations could have a material adverse effect on our operations and financial performance in the future, we can not predict the manner or severity of such impact. However, we continue to take steps and explore opportunities to reduce the impact of our operations on the environment, including investments in new technologies, reducing fuel consumption and increasing fuel efficiency and lowering emissions.

Cash Flow Information for the Three Months ended March 31, 2011 and 2010 and for the Years ended December 31, 2010, 2009 and 2008

Cash generated by operating activities was $0.4 million for the three months ended March 31, 2011 compared to cash provided by operating activities of $3.4 million for the three months ended March 31, 2010. The decrease in cash generated by operating activities of $3.0 million was primarily related to the amortization of a three-year contract administration fee, an increase in operating assets off-set by lower interest costs and a decrease in accrued property taxes.

Cash generated by operating activities was $21.9 million, $0.8 million and $11.4 million for the years ended December 31, 2010, 2009, and 2008, respectively. The increase in cash from operating activities for the year ended December 31, 2010 in comparison to 2009 of $21.1 million was primarily due to an increase in operating income, advance payments received related to contract administration fees subject to recognition over the next three years, an increase in accrued bonuses and accruals for personal injuries, partially off-set by a decrease in accrued property taxes.

The decrease in cash from operating activities for the year ended December 31, 2009 in comparison to the year ended December 31, 2008 of $10.6 million was primarily due to a decrease in income due to lower volumes.

Cash provided by investing activities was $3.1 million for the three months ended March 31, 2011 compared to cash used in investing activities of $6.4 million for the three months ended March 31, 2010, respectively. The increase in cash provided by investing activities of $9.5 million was primarily related to the release of the interest reserve account related to the Refinancing as well as proceeds from the sale of assets off-set by an increase of capital expenditures.

Cash used in investing activities was $19.6 million, $13.1 million, and $0.9 million for the years ended December 31, 2010, 2009, and 2008, respectively. The increase in cash used in investing activities of $6.5 million for the years ended December 31, 2010 in comparison to 2009 was primarily due to the funding of the interest reserve account of $4.0 million, as well as increased capital expenditures of $2.0 million. The increase in cash used in investing activities for the years ended December 31, 2009 in comparison to 2008 of $12.2 million was primarily due to a reduction in cash generated by investments in non-affiliated companies, which were sold during 2008, partially offset by a reduction in capital expenditures.

Cash used in financing activities was $1.5 million for the three months ended March 31, 2011. The cash used for financing activities was minor for the three months ended March 31, 2010. The increase of $1.5 million was primarily related to the refinancing of the Rail Term Loan of $601.2 million, the payment of related transaction costs of $15.0 million off-set by the proceeds from the Senior Secured Notes of $475.0 million and the equity contribution from our direct parent, Florida East Coast Holdings Corp. of $140.0 million.

Cash used in financing activities was $1.2 million and $25.7 million for the years ended December 31, 2010 and 2009, respectively. Cash generated by financing activities was $23.0 million for the year ended December 31, 2008.

The decrease of cash used in financing activities of $24.5 million for the year ended December 31, 2010 in comparison to 2009, was mainly related to the extension of the Old Facility in July 2009. For that, we incurred costs of $7.5 million related to the refinancing of the Old Facility. We also distributed $20.0 million to FECR Rail LLC and redeemed $4.6 million of our Series A Redeemable Preferred Stock to FECR Rail LLC. Off-setting these cash outlays, we received a $5.0 million contribution from FECR Rail LLC and received $1.6 million of additional proceeds related to the refinancing of the Old Facility.

The decrease of cash used in financing activities of $48.7 million for the years ended December 31, 2009 in comparison to 2008 was primarily related to the redemption of our Series A Preferred Stock of $62.2 million off-set by the proceeds from the issuance of additional Series A Preferred Stock of $86.6 million in 2008.

In connection with the Acquisition, we, along with FECI, entered into the $1.656 billion Old Facility. The Old Facility consisted of:

As a result of the Rail Separation, the $600.0 million Rail Term Loan was assumed by the Company and FECR Rail LLC. The $50 million Revolving Credit Facility remained in place for FECI and us after the Rail Separation. Prior to December 31, 2007, all amounts outstanding under the Revolving Credit Facility were drawn by and were the obligation of FECI. All obligations outstanding under the Old Facility were cross-guaranteed by FECI and our respective subsidiaries.

On January 31, 2009, the Old Facility’s initial 18-month term was extended for an additional six months, giving the Old Facility a maturity date of July 26, 2009. In connection with the extension, $1.6 million of financing fees were paid to arrangers of the Old Facility, representing the pro rata portion of the total fee payable upon the extension of the Old Facility.

In July 2009, the Old Facility agreement was amended (the “amended Old Facility”), which provided for an additional 18-month extension of principal from July 26, 2009, with three six-month extensions available contingent upon compliance with the terms of the Old Facility, including principal reductions required to be made prior to the extension date. The initial maturity date relating to the 18-month extension was January 26, 2011. The first, second, and third extension maturity dates were July 26, 2011, January 26, 2012, and July 26, 2012, respectively. The amended Old Facility converted all outstanding balances under the existing credit facility to a term loan and there was no further Revolving Credit Facility available under the amended Old Facility. This amendment was accounted for as a loan modification. In connection with the modification, we incurred $10.3 million of transaction fees (of which $7.5 million were amortized over the 18-month extension period, and $2.8 million of third-party fees were included in other expense in the consolidated statement of operations). The amended Old Facility agreement required a principal payment in January 2010, equal to the lesser of (1) $175.0 million or (2) the aggregate outstanding balance of the loans, together with accrued interest thereon.

The Old Facility was further amended in December 2009, requiring a principal payment of $465.0 million plus accrued interest in December 2009. This payment was made by Fortress and FECI. Due to the prepayment in December 2009, the required January 2010 payment was lowered to $125.0 million. A principal payment of $125.0 million was made by FECI and Fortress in January 2010.

The Old Facility and its amendments were secured by a first-priority, perfected security interest in substantially all of our tangible and intangible assets, including, but not limited to, intellectual property, owned and material leased real property and all of the capital stock of FECR and FECI and each of its direct and indirect subsidiaries. We were the borrower under the Rail Term Loan, whereas FECI was the borrower under the remaining portions of the Old Facility, though FECI and our respective subsidiaries jointly and severally cross-guaranteed the loans.

The amended Old Facility required FECI and us to comply with, affirmative and negative covenants, the most significant of which were: (1) minimum net worth, as defined, of FECI and us as a combined group of $1.65 billion, (2) limitations on the aggregate amount of capital expenditures incurred from July 26, 2009, until the expiration of the third extension period and (3) the interest reserve account balance to be maintained at $15.0 million for FECI and us combined.

The Old Facility bore interest with respect to the loans at the bank’s base rate or London Interbank Offered Rate (“LIBOR”), at our option, plus an applicable margin ranging between 125 and 225 basis points, respectively. The weighted-average interest rate of the Old Facility was 7.03% for the year ended December 31, 2008.

The amended Old Facility bore interest based on an alternative base rate (“ABL”) or LIBOR at the Company’s option. Interest under the ABL method had a base rate for any day, a rate per annum equal to the greater of (a) the base rate in effect on such a day or (b) the federal funds effective rate in effect on such day plus ¹/2 of 1.0% subject to a floor of 3.0%, plus an applicable margin of 6.5% per annum through the 18-month extension periods. The margin increased to 8.0%, 9.5% and 11.0% for the first, second, and third extension period, respectively. Interest under the LIBOR method had a base rate of LIBOR, subject to a floor of 3.0%, plus an applicable margin of 7.5% per annum through the 18-month extension periods. The margin increased to 9.0%, 10.5% and 12.0% for the first, second, and third extension period, respectively.

In July 2009, a letter of credit was drawn upon at the amount of $1.6 million, which was included in the outstanding balance of the Rail Term Loan as of December 31, 2010, and 2009, respectively.

The Company’s outstanding balances of the amended Old Facility were $601.2 million and $601.6 million as of December 31, 2010 and 2009, respectively. The weighted-average interest rate on the amended Old Facility was 9.66% and 7.23 % for the years ended December 31, 2010, and 2009, respectively. The aggregate outstanding balance on the amended Old Facility, which included the Company’s outstanding balance of $601.2 million, was $799.1 million as of December 31, 2010.

All outstanding amounts under the amended Old Facility were paid in January 2011 (as described in “Refinancing” below).

On January 25, 2011, we sold $475.0 million aggregate principal amount of the Senior Secured Notes for gross proceeds of $475.0 million in a private offering. The net proceeds of the issuance of the Senior Secured Notes, together with an approximately $140.0 million equity contribution from our immediate parent Florida East Coast Holdings Corp. were used to repay an amount outstanding of approximately $601.2 million under the Old Facility owed by the Company (herein referred to as the “Refinancing”), to pay certain fees and expenses incurred in connection with the offering of the Senior Secured Notes and for general corporate purposes. FECI entered into a separate financing transaction whereby it paid down its outstanding balance of approximately $197.9 million under the Old Facility. As a result, the Old Facility is no longer outstanding and none of its obligations are further jointly and severally cross-guaranteed by the subsidiaries of FECI and the Company. None of the Company’s subsidiaries continue to guarantee the outstanding obligations of FECI.

In connection with the issuance of the Senior Secured Notes, on January 25, 2011, we also entered into the ABL Facility. The ABL Facility matures on January 25, 2015 and bears interest at the Company’s option of: (a) a base rate determined in the greater of (1) the prime rate of the administrative agent, (2) federal funds effective rate plus ¹/2 of 1%, or (b) a LIBOR rate determined by reference to the cost of funds for U.S. dollar deposits in London interbank market for the interest period relevant to such borrowing. The applicable margin with respect to (a) base rate borrowings will be 2.25%, and (b) LIBOR borrowings will be 3.25%. Obligations under the ABL Facility are secured by a first-priority lien on the ABL Collateral. As of March 31, 2011, we had no outstanding balance and approximately $30.0 million of undrawn availability under the ABL Facility, taking into account borrowing base limitations. See “Description of Other Indebtedness” for more information regarding the ABL Facility.

The Senior Secured Notes are secured by first-priority liens on substantially all of our tangible and intangible assets and the guarantors’ (other than the ABL Collateral securing the ABL Facility) and a second-priority lien on ABL Collateral. The guarantors are defined primarily as existing and future wholly owned domestic restricted subsidiaries.

We may redeem up to 10% of the aggregate principal amount of the Senior Secured Notes issued during any 12-month period commencing on the issue date and ending on the third anniversary thereof at a price equal to 103% of the principal amount thereof plus accrued and unpaid interest, if any. We may also redeem some or all of the Senior Secured Notes at any time before February 1, 2014 at a price equal to 100% of the aggregate principal amount thereof plus a make-whole premium. In addition, prior to February 1, 2014, we may redeem up to 35% of the Senior Secured Notes at a redemption price of 108.125% of the aggregate principal amount thereof

with the proceeds from an equity offering. Subsequent to February 1, 2014, we may redeem the Senior Secured Notes at 104.063% of their principal amount. The premium then reduces to 102.031% commencing on February 1, 2015 and then 100% on February 1, 2016 and thereafter. See “Description of the Notes” for more information regarding the Senior Secured Notes.

The indenture governing the notes and our ABL Facility contain various covenants that limit, among other things, our ability to engage in specified types of transactions. In addition, if availability under the ABL Facility is below $7.5 million during any future period, we will be subject to a minimum fixed charge coverage ratio (as defined in the ABL Facility) of 1.1 to 1.0. See “Description of Other Indebtedness” and “Description of the Notes” for more information about the covenants contained in our debt agreements.

On December 18, 2007, we entered into an interest rate swap agreement with a seven-year term to hedge the variable interest rate on the Old Facility and other potential future borrowings. Pursuant to the swap agreement, we effectively paid a fixed rate of interest over the term of the agreement without the exchange of the underlying notional amount. This $600.0 million swap was designated as a cash flow hedge and was considered to be highly effective in hedging the variable rate risk associated with the Old Facility.

In October 2008, these swap agreements were terminated. Pursuant to ASC 815, Derivatives and Hedging, a portion of the balance—related to cash flows no longer expected to occur that were recorded in accumulated other comprehensive income (loss)—was recorded as a loss of $7.9 million for the year ended December 31, 2008, while the residual balance of $3.1 million was amortized to interest expense over the remaining term of expected interest payments related to the Rail Term Loan. The respective amortization charges for unrealized losses were $2.3 million and $0.8 million for the years ended December 31, 2009 and December 31, 2008, respectively. For both years ended December 31, 2010 and 2009, accumulated other comprehensive income (loss) did not include any unamortized losses relating to the hedge termination.

Under the terms of the interest rate swap agreement, we were required to provide $17.6 million of collateral to the counterparty of the swap. In addition, in the event the fair value of the swap fell in value by more than $12.4 million, we were required to increase the collateral amount by such amount. All collateral amounts were returned to us upon the termination of the interest rate swap in October 2008.

The following table represents the minimum future payments on our long-term debt and our existing lease obligations as of December 31, 2010 (in thousands).

The initial semi-annual interest payment of the Senior Secured Notes is payable on August 1, 2011. The remaining interest payments are due on February 1 and August 1 of each year, through and including February 1, 2017. Interest payments on the Senior Secured Notes will be $20.0 million in 2011, $77.2 million in 2012-2013, $77.2 million in 2014-2015 and $57.9 million thereafter.

The railyard lease agreement was amended and restated on January 24, 2011. Under the restated agreement, base rent commenced on January 1, 2011 at $4.5 million per annum with a 2.5% escalation clause per year for 25 years and will automatically renew for additional five year periods. Under the amended agreement, we may terminate the agreement after five years upon a two year notice to terminate, and we have the option to purchase the property at fair market value upon written notice of such intent and the payment of a non-refundable 3% deposit.

Our Consolidated Financial Statements have been prepared in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. We base our estimates on historical experiences and assumptions believed to be reasonable under the circumstances and re-evaluate them on an ongoing basis. Those estimates form the basis for our judgments that affect the amounts reported in the Consolidated Financial Statements. Actual results could differ from our estimates under different assumptions or conditions. Our significant accounting policies, which may be affected by our estimates and assumptions, are more fully described in Note 2 “Summary of Significant Accounting Policies” in our audited Consolidated Financial Statements that appear elsewhere in this prospectus.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Although we believe the policies summarized below to be the most critical, other accounting policies also have significant effect on our financial statements and certain of these policies also require the use of estimates and assumptions.

The critical financial statement accounts that are subject to significant estimation are reserves for litigation, casualty and environmental matters, deferred income taxes and property, plant and equipment depreciation methods.

In accordance with FASB Contingencies Topic, an accrual for a loss contingency is established if information available prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred or an asset has been impaired and can be reasonably estimated. These estimates have been developed in consultation with outside counsel handling our defense in these matters and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. Subsequent to changes to those estimates are reflected in our statements of operations in the period of change.

Deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based on historical taxable income, future taxable income, and the expected timing of the reversals of existing temporary differences. If we are unable to generate sufficient future taxable income, or there is a material change in the statutory tax rates or time period within which the underlying temporary differences become taxable or deductible, we could be required to establish an additional

valuation allowance against a portion of our deferred tax asset, resulting in an increase in our effective tax rate and adverse effect on earnings. Additionally, changes in our estimates regarding the statutory tax rates to be applied to the reversal of deferred tax assets and liabilities could materially affect our effective tax rate.

Property, plant and equipment comprised 93.8% of our total assets as of December 31, 2010. These assets are stated at cost, less accumulated depreciation. We utilize the group-life method to classify, depreciate and retire the majority of our assets. Under the group-life method, assets with similar characteristics and intended use are assigned an asset class with a specific life. Assets are either recorded individually (locomotives, freight cars, vehicles, etc.) or as a “mass” asset (rail, ties, ballast, etc.) at the time of capitalization. All depreciable assets use the straight line method for depreciation based on an average life of the asset class.

We determine the estimated service lives of depreciable railroad property by means of depreciation studies. Our depreciation studies take into account the following factors:

Our policy is to perform life studies approximately every eight years. Estimated services lives of depreciable railroad property may vary over time due to changes in physical use, technology, asset strategies, and other factors that will have an impact on the retirement profiles of our assets. Historically, depreciation expense has not materially changed based on the results of our life studies. If recent changes in the mix of our traffic from heavier cargo (stone, gravel and aggregates) to lighter cargo (intermodal containers) are sustained, future life studies may result in an increase in the life of our track assets. Changes in asset lives due to the results of the life studies are applied on a prospective basis and could significantly impact future periods’ depreciation expense, and thus, the results of operations.

Under normal retirements or sale of assets, no gain or loss is recorded. The net asset value (cost less accumulated depreciation minus any proceeds) for a retirement or sale of asset is charged back to accumulated depreciation, and the net asset value is amortized over the remaining life of its assigned asset class. Expenditures that increase asset value or extend the useful life are capitalized. Repair and maintenance expenditures (track inspections, locomotive running repairs, repair of broken rail, rail grinding, etc.) are charged to expense when the work is preformed. For the year ended December 31, 2010, repairs and maintenance expenditures charged to operating expenses represented approximately 28.0% of our total spend (including capitalized expenditures) for track and related assets. We review the carrying value of our property for impairment whenever an event or changes in circumstances indicate the carrying value of an asset or asset grouping may not be recoverable from the undiscounted cash flows expected to be generated over its remaining useful life.

For a complete description of our accounting policies, see Note 2 “Summary of Significant Accounting Policies” to our audited Consolidated Financial Statements included elsewhere in this prospectus.

value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements, and (3) a reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of ASU No. 2010-06 did not have a material impact on the Company’s financial position or results of operations.

We are exposed to market risks from changing interest rates and diesel fuel prices. Changes in these factors could cause fluctuations in earnings and cash flows.

Interest Rates. Our Senior Secured Notes issued in January 2011 are fixed rate instruments, and therefore, would not be impacted by changes in interest rates. Our potential interest rate risk results from our ABL Facility as an increase in interest rates would result in lower earnings and increased cash outflows. We do not have any outstanding balances under this facility, but if we were to draw upon it, we would be subject to changes in interest rates.

Diesel Fuel. We are exposed to fluctuations in diesel fuel prices. Fuel costs represented 10.8% of total operating revenues during the year ended December 31, 2010. We participate in fuel surcharge programs which provide additional revenue to help offset the increase in fuel expenses. We utilize the Department of Energy’s Retail Diesel Fuel Price index to calculate the fuel surcharges that are charged to our customers. The fuel surcharges fluctuate with the price of diesel fuel with a lag of less than one month. Therefore, we believe that we have reduced the risk of fluctuating diesel fuel prices to a low level. We are continuing to optimize our fuel surcharge programs to reduce our risk to the lowest level possible.

Customer Concentration Risk. Although our operations served approximately 500 customers in 2010, freight revenue from our 10 largest customers accounted for approximately 47% of our total freight revenues for the year ended December 31, 2010 with our largest customer accounting for approximately 11% of our total freight revenue. In addition, we have three primary aggregate customers with operations in south Florida whose freight revenues represented approximately 16% of our total freight revenues for the year ended December 31, 2010. Our revenues are affected by the demand for aggregate material, primarily in Florida, and the ability of these customers to supply this natural raw material efficiently and effectively. Substantial reduction in business with or loss of an important customer could have a material adverse effect on our business and financial results.

We own and operate a 351-mile freight railroad along the east coast of Florida from Jacksonville to Miami. Our railroad is one of only two major freight railroads serving Florida. In 2010, we provided our services to over 500 customers, and transported over 410,000 units. We generate rail-operating revenues primarily from both the movement of freight in conventional freight cars (such products as crushed rock (aggregate), automobiles, food products and other industrial products) and intermodal shipments of containers and trailers on flatcars. We count each move of freight car, container or trailer on our line as one unit. We also generate freight revenue from dray moves (drayage is the movement of containers or trailers by truck to and from the rail yard). We generated total operating revenue, net loss and Adjusted EBITDA of $200.0 million, $23.6 million and $71.0 million, respectively, for the year ended December 31, 2010. For the three months ended March 31, 2011, we generated total operating revenue, net loss and Adjusted EBITDA of $51.5 million, $6.9 million and $16.1 million, respectively. As of March 31, 2011, we had assets of $859.8 million.

We generate freight revenue primarily under two different types of service: local and interchange. Local service, which represented approximately 44.3% of our total 2010 freight revenue, involves transporting freight that both originates and terminates on our rail line. Examples of local service include most crushed rock aggregates, which originate from South Florida quarries served by us and terminate at various consumption points in the middle and northern portions of the State, as well as retailers and grocers moving their goods from North Florida to retail stores in South Florida. Interchange service represented approximately 49.2% of our total 2010 freight revenue. Interchange services vary by customer shipping needs with freight either (i) originating at the customer’s facility on our line for transport to other destinations in the United States, Canada and Mexico via our Jacksonville interchange with CSX and Norfolk Southern or (ii) being received at our Jacksonville interchange and hauled to a customer’s plant or port, where the freight is subsequently consumed or further distributed.

Typically, we provide our freight services under a contract or similar arrangement with either the customer located on our rail line or the connecting Class I railroad. Contracts and arrangements vary in terms of duration, pricing and volume requirements. We collect the majority of our revenue from Class I railroads and other significant business entities. Moreover, our railroad is often integrated into a customer’s facility and serves as an important component of that customer’s distribution or input. In certain circumstances, our customers have made significant capital investments in facilities on or near our railroad (as in the case of industrial plants or major warehouses) or are geographically unable to relocate (as in the case of rock quarries). We believe the quality of our customers and our level of integration with their facilities provide a stable and predictable revenue base. In addition, due to our captive drayage (local trucking) company, Florida East Coast Highway Services, and our alliances with the Class I railroads that we connect with in Jacksonville — Norfolk Southern and CSX — we are able to extend our reach throughout North America.

In addition to providing freight services, we also generate non-freight revenues from other sources such as car hire and demurrage (allowing our customers and other railroads to use our railcars for storage or transportation in exchange for a daily fee), real estate and equipment lease income (including Class I railroads), ancillary dray charges, switching (managing and positioning railcars within a customer’s facility), and other transportation services.

The level of growth in the U.S. economy recovered in 2010, and we — as well as the railroad industry in general — have experienced significant increases in volumes and operating results during 2010. We have experienced substantial year-over-year volume improvements transporting 410,096 units for the year ended December 31, 2010, representing a 10.1% increase to the same period in 2009. This trend continued for the three months ended March 31, 2011, which had a 4.3% increase in total volumes in comparison to the same period in 2010. These improved volumes have propelled strong performance during 2010 as described above. We note that while volumes have improved from the 2009 amounts, they are still below the 2008 amount of 445,870 units.

Products hauled over our rail line include more than 6 major freight groups, such as intermodal units (containers and truck trailers), crushed rock (aggregate), automobiles, food products, chemicals and other industrial products. The chart below provides detail regarding the percentage of 2010 freight revenue that we generated from hauling various products:

Intermodal (62% of 2010 freight revenue): We transport intermodal containers and trailers (on piggy-back railcars) for major shippers including retailers, parcel delivery companies, maritime shipping companies, trucking companies, and Intermodal Marketing Companies (“IMCs”) as well as the intermodal business units of Class I railroads. We benefit from the geographic shape of Florida as a peninsula and the location of its largest consumption markets (Miami and Orlando) in the southernmost and central regions, which combine to create an imbalanced lane for the flow of goods into and out of the State. As a net consuming state, this geography makes it undesirable for trucks to transport freight southbound, only to return empty northbound. Additionally, the South Florida Highway network, including Interstate 95 and Route US-1, suffer from severe congestion and delays. Due to the challenges that the traffic flow and road congestion present to major shippers, in several instances, these shippers utilize our service as an extension of their operations to obtain a more reliable and efficient means for transporting products north and south within Florida, and in most cases, our service exceeds that of trucks.

Aggregate (15% of 2010 freight revenue): We transport aggregate (primarily crushed limestone) from quarries located in South Florida to distribution points in the middle and northern portions of the State. In most cases, we are the only railroad directly serving a particular quarry. Moreover, given the heavy weight and distance hauled of aggregate, we compete favorably with over-the-road (primarily dump trucks) distribution — one “unit train” (a dedicated train consisting entirely of one product) of aggregate can haul the maximum equivalent of approximately 480 trucks.

Food Products (7% of 2010 freight revenue): We transport three main food commodities which include fruit juice, beer products and high fructose corn sweeteners. These products interchange in our Jacksonville facility, with a Class I railroad and either originate or terminate on our line.

Automobiles (5% of 2010 freight revenue): We serve as a major conduit for transporting finished automobiles primarily from our interchange with Class I railroads in Jacksonville to points in the central and southern portions of the State. Specifically, we transport automobiles either to our own rail yards where the automobiles are then distributed by truck to nearby dealers and rental companies or to yards located on our rail line but owned directly by the Class I with whom we partner to provide total rail transportation.

Chemicals (4% of 2010 freight revenue): We transport a variety of chemical commodities including liquefied petroleum gas (LPG), ethanol and plastics. LPG and ethanol are handled in private tank cars which are then transported to wholesalers for final delivery. Plastics are handled to manufacturers directly as well as to bulk distribution terminals for final motor carrier delivery.

All other products (7% of 2010 freight revenue): We transport a variety of other freight including building materials, waste and scrap, and petroleum products. Due to the efficiencies of rail transportation and the nature of the freight that we carry — high volumes of heavy freight shipped long distances — our service is often the most competitive mode of transportation for customers.

As of March 31, 2011, we served approximately 500 customers. In 2010, our 10 largest customers accounted for approximately 47% of our total freight revenue, with our largest customer accounting for approximately 11% of our total freight revenue. The table below provides a summary of our top 10 customers in 2010:

A substantial portion of our freight revenue is generated under contracts and similar arrangements with either customers located on our line or the Class I railroads with which we connect. Almost all commercial arrangements are subject to some form of fuel surcharge program that protects us from sudden increases in fuel costs. Commercial agreements that are not subject to a fuel surcharge program can typically be cancelled on short notice. Individual contracts and arrangements vary in terms of duration, pricing and volume requirements, but can generally be categorized as follows:

Contracts directly with customers/shippers (approximately 53% of 2010 freight revenue): In many cases, we maintain a contract with the customer that we directly serve. Typically, the customer has significant rail infrastructure within its facility and is a major shipper or receiver of industrial freight. Contracts stipulate the term and pricing arrangements, and often include minimum customer volume requirements with liquidated damages paid to us to the extent volumes fall below certain levels.

Contracts directly with Class I railroads (approximately 11% of 2010 freight revenue): In these cases, we act as an agent for the connecting Class I railroad, with the Class I typically maintaining a contract directly with the customer/shipper for the entire length of haul. The Class I railroad pays us upon our providing the service for the portion of the total haul that occurs on our railroad, and the Class I, pays us regardless of whether the customer pays the Class I which results in low credit exposure and timely payment.

Quoted rate, or tariff (approximately 36% of 2010 freight revenue): In the remaining cases, our railroad generates freight revenue using a rate per unit based on the type of freight service and market environment. Rates can typically be adjusted upon 30-days notice although some of our larger customers often request a private rate that provides more price certainty over a longer period of time. While we do not serve customers under signed contracts in these cases, we have long standing relationships with our customers and, in many instances, we are the only rail service provider available to customers. Moreover, the heavy nature of the freight shipped by the customer and/or the long distances carried competitively positions us favorably versus other modes of transportation.

In addition to providing freight services, we also generate non-freight revenue from other sources such as car hire and demurrage (allowing our customers and other railroads to use our railcars for storage or transportation in exchange for a daily fee), real estate and equipment lease income (including Class I railroads), ancillary dray charges, switching (managing and positioning railcars within a customer’s facility), and other transportation services.

A summary of our non-freight revenue generated during 2010 and 2009 is presented in the table below:

We own a railroad right-of-way, generally 100-feet wide, along the east coast of Florida extending for 351 miles from Jacksonville to Miami, used for our railroad operations. We also own/lease and operate approximately 235 miles of branch, switching and other secondary track, 115 miles of yard track, various rail car marshalling yards, trailer/container and automobile loading and unloading facilities, signaling system facilities, and a number of operating offices, shops and service house buildings.

The mainline is, in general, constructed of 132-pound per yard continuous welded rail supported on concrete cross-ties. The facilities provide a reliable infrastructure for rail operations suited to the business demands of our customers, including unrestricted movement of double-stacked containers, tri-level automobiles and heavier rail axle cars. The branch mainlines, way switching and yard tracks are, for the most part, constructed of 115-pound per yard materials supported by wood ties.

As of December 31, 2010, the Company owned or leased 85 diesel electric locomotives, 4,826 freight cars, 1,808 trailers, containers and chassis for highway revenue service, numerous pieces of rail-mounted work equipment and numerous automobiles used in maintenance and transportation operations. Generally, the Company’s equipment is in good physical condition, considering its years of service and operating utilization.

A summary of the rolling stock owned and leased by us at the end of 2010 is presented in the table below:

In 2009, the Company began to lease out our excess locomotives. At the end of 2010, the Company had leased out 32 locomotives of its fleet. Most of these leases are on one-year terms.

The average age of our locomotives and railcars is 30 years as compared to a depreciable life of 50 years for new locomotives. The average of our railcars is 23 years as compared to depreciable life of 50 years for a new railcar.

In addition to the rolling stock that the Company owns, the Company currently manages 3,026 rail cars from Greenbrier Leasing Corporation and other entities, with lease lengths generally of three, five and ten years. The lease terms call for the Company to be billed an hourly rate based upon the length of time the car is on our

railroad (on-line) or on another railroad (off-line). As a car goes off-line, a per diem rent sharing arrangement goes into effect whereby Greenbrier and the Company apportion the rent based upon the length of the time the car is off-line. Rents from Greenbrier and other entities received by the Company were $6.8 million, $5.5 million, and $6.2 million in 2010, 2009, and 2008, respectively.

As of March 31, 2011, we had approximately 535 employees, of which approximately 370 employees were represented by the following labor unions: United Transportation Union (“UTU”), representing train and engine service employees, Brotherhood of Maintenance of Way Employees (“BMWE”), representing track maintenance, structures and roadway shop employees, and International Brotherhood of Electrical Workers (“IBEW”), representing agents and clerical, carmen, maintenance of equipment foreman, signals and communications, train dispatchers, electricians, machinists, sheetmetal workers and shop laborers. In total, the Company is party to 9 labor agreements. We have developed a standard template with which to negotiate with the unions and are confident of its ability to satisfy them. In our entire history, we have experienced only one strike, which ended in 1976 and which resulted in minimal service interruptions due to employee and supervisor cooperation.

In 2009, 2010 and 2011, the Company successfully ratified bargaining agreements with the UTU and IBEW. These agreements were extended until the end of 2012, carrying an annual general wage increase of approximately 2%, and introduced a Incentive Compensation Plan (“ICP”) based on safety and Company results, whereby the employee can earn up to a 6% bonus should the criteria be met.

We endeavor to conduct safe railroad operations for the benefit and protection of employees, customers and the communities we serve. Our safety program, led by our Operations management team, involves all of our employees and is administered by our safety group. Operating personnel are trained and certified in train operations, hazardous materials handling, personal safety and all other areas subject to federal regulations. Each employee involved in train operations is subject to pre-employment and random drug testing as required by federal regulation. We believe that we comply in all material respects with federal, state, and local regulations. We also participate in committees of the American Association of Railroads, or “AAR,” governmental and industry sponsored safety programs including Operation Lifesaver (the national grade crossing awareness program) and numerous American Short Line and Regional Railroad Association Committees. Our Federal Railroad Administration (“FRA”) reportable injury frequency ratio, measured as reportable injuries per 200,000 man hours worked, was 1.58 in 2010, as compared to 1.67 in 2009. For 2010, the industry average for all railroads was 1.89.

We are subject to various federal, state and local laws and regulations relating to pollution and the protection of the environment. These include requirements for governing such matters as the management of wastes, the discharge of pollutants into the air and into surface and underground waters, the manufacture and disposal of regulated substances and remediation of contaminated soil and groundwater. Failure to comply with environmental requirements can result in fines and penalties, and may subject us to third party claims alleging personal injury, and/or property damage or seeking restrictions on our operations. Some environmental laws impose strict, and under some circumstances joint and several, liability for costs of investigation and remediation of contaminated sites on current and prior owners or operators of the sites, and also on entities that sent regulated materials to the sites, and also impose liability for related damages to natural resources.

In September 2006, the Florida Department of Environmental Protection (“FDEP”) notified us and an adjacent property owner that we had been identified as potentially responsible parties, or “PRPs,” with respect to groundwater contaminated with pesticides identified in Fort Pierce, Florida. We are continuing to undertake the

environmental investigation of property in Fort Pierce as required by Florida law. Our environmental contractor recently completed supplemental site assessment activities and prepared a site assessment report which was submitted to the FDEP. The FDEP responded with a request to prepare a groundwater Remedial Action Plan and further limited work to delineate the groundwater plume. Subsequently, FEC and FDEP agreed on the scope of further investigation. Due to ongoing investigation, however, we are unable to estimate the total costs to address this site at this time. Based upon available information, as of March 31, 2011, the Company has accrued $1.7 million related to the alleged contamination of which $1.5 million is expected to be paid out over the next 5 to 10 years. In 2010 and 2009, $0.2 million and $0.4 million, respectively, were paid out for testing and site assessment. No fees were paid in the three months ending March 31, 2011.

We believe that we operate in material compliance with current environmental laws and regulations. We estimate that any expenses incurred in maintaining compliance with current environmental laws and regulations will not have a material effect on our earnings or capital expenditures. However, there can be no assurance that new, or more stringent enforcement of existing, requirements or discovery of currently unknown conditions will not result in significant expenditures in the future.

We maintain liability and property insurance coverage. Our primary liability policies have self-insured retentions of up to $2.0 million per occurrence. In addition, we maintain excess liability policies that provide supplemental coverage for losses in excess of our primary policy limits of up to $200.0 million per occurrence. Due to the location of our assets on Florida’s eastern seaboard, we also maintain windstorm coverage.

With respect to the transportation of hazardous commodities, our liability policies cover sudden releases of hazardous materials, including expenses related to evacuation, up to the same excess coverage limits and subject to the same self-insured retentions. Personal injuries associated with grade crossing accidents are also covered under liability policies.

Our employees are covered by the Federal Employers’ Liability Act (the “FELA”), a fault-based system under which claims resulting from injuries and deaths of railroad employees are settled by negotiation or litigation. FELA-related claims are covered under our liability insurance policies. Employees of our trucking business are covered under workers’ compensation policies.

Our property damage policies, including windstorm coverage, provide coverage for track, infrastructure, business interruption, and all locomotives and rail cars in our care custody and control. This policy provides coverage up to $35.0 million per occurrence, subject to self-insurance retention of $0.75 million per occurrence.

efficiently and at a lower cost. Since 1980, the railroad industry has continually improved its cost competitiveness compared to other forms of freight transportation as it consumes less fuel and has lower labor costs per ton transported than other forms of freight transportation. Railroads’ cost per ton-mile has decreased as a result of significant reductions to labor and rolling stock requirements and the spinning off of less dense network segments. According to the AAR, railroads are estimated to be approximately four times more fuel efficient than truck transportation while a single train can haul the equivalent of up to 280 trucks. Additionally, as the price of fuel has increased over the past several years, the fuel efficiency advantage of railroads as compared to other forms of freight transportation has grown. In 1980, one gallon of diesel fuel moved one ton of freight by rail an average of 235 miles, versus 2009 where the equivalent gallon of fuel moved one ton of freight an average of 480 miles by rail — representing a 104% increase over 1980. As a result, the railroad industry’s share of U.S. freight ton-miles has steadily increased from 30% in 1980 to 43% in 2007.

The table below details the growth in railroad market share based on freight ton-miles since 1980.

According to the AAR, there are 563 railroads in the United States operating approximately 139,100 miles of track. The AAR classifies railroads operating in the United States into one of three categories based on the amount of revenues and track miles. Class I railroads, those with over $378.8 million in revenues, represent approximately 93% of total rail revenues. Regional and local/short line railroads operate approximately 45,200 miles of track in the United States. The primary function of these smaller railroads is to provide feeder traffic to the Class I carriers. Regional and local/short line railroads combined account for approximately 7% of total industry rail revenues.

Class I railroads operate across many different states and concentrate largely, though not exclusively, on long-haul, high density intercity traffic lanes. The six largest railroads in North America are BNSF Railway, Union Pacific, Norfolk Southern, CSX, Canadian National Railway, and Canadian Pacific Railroad Company. Regional railroads typically operate 400-650 miles of track and provide service to selected areas of the country, mainly connecting neighboring states and/or economic centers (including intrastate). Typically short line railroads serve as branch lines connecting customers with Class I railroads. Short line railroads have more predictable and straightforward operations as they generally perform point-to-point service over short distances, without the complex networks associated with the large Class I railroads.

Use of regional and short line railroads is largely driven by interchange traffic between carriers. Typically, a Class I railroad will transport the freight the majority of the distance, usually hundreds or thousands of miles and drop it off with the short line, which provides the final step of service directly to the customer. Most short line railroads depend on Class I traffic for a substantial portion of their revenue.

The North American short line and regional railroad industry has experienced steady growth over several decades. Short lines and regional railways have always been a part of the rail industry in North America. In the 1800’s, most North American railroads were constructed to serve a local or regional interest. Today’s Class I railroads are descended from hundreds of short lines and regionals that came together in successive waves of consolidation.

During the 1980’s, the number of regional and short line railroads increased dramatically. Deregulation of U.S. railroads simplified abandonment and sales regulations, allowing the major carriers to gain many of the savings of abandonment while preserving the traffic on the rail lines. Carriers created through this divestiture process now account for the majority of regional and short line railroads. Short line and regional railroads today serve important roles in moving freight within their service areas and function as a critical traffic “feeder” network for the Class I railroads.

Over the past decade, the number of regional and short line railroads has remained relatively constant. While some new entrants were formed through spin-offs or divestitures of Class I railroads, they have generally been offset by other existing regional and short lines either exiting the business or being merged with or acquired by other railroads. With the growth of multi-carrier holding companies, such as RailAmerica, Inc. (“RailAmerica”) and Genesee & Wyoming, the number of operators of regional and short line railroads has decreased. The consolidation brought on by multi-carrier holding companies has induced a number of shippers with private railroads to sell those railroads to the major short line operators. Similarly, Class I railroads sell and lease rail lines to smaller rail entities in order to address a range of issues impacting costs and productivity.

Short lines and regional railroads have a variety of ownership structures and are owned by shippers, governments, and multi-carrier holding companies.

Short line and regional railroads compete against each other and other forms of freight transportation based on cost, location and service. The cost of transporting goods and services via different forms of freight transportation is a major factor in determining which means of transportation a shipper will utilize. With respect to location, potential customers often experience geographic constraints that significantly impact the relative freight transportation costs of different alternatives. For example, a shipper can be constrained by railroad’s trackage, accessible waterways, access to pipelines, and proximity to airports. As a result, short line and regional railroad operators often evaluate the feasibility of other forms of freight transportation available to a customer when developing their rate and service offerings.

Some short line and regional railroad customers have multiple forms of freight transportation available. Depending on circumstances, truck, water, or other railroads may be competitive alternatives for a shipment. In such instances, customers will compare both the relative costs, reliability of on-time delivery and quality of service when determining what mode(s) of transport to use.

Trucking is often considered as a viable alternative to rail transport. Our intermodal freight services (trailers and containers on flat-rail cars) compete directly with trucking carriers. While trucking provides additional delivery location flexibility due to the geographic diversity of North America’s highway network relative to railway network, railroads are substantially more cost competitive along travel routes they serve. Recently, rail transport has become a more cost efficient alternative for shippers moving bulk goods over long distances, because of volatile fuel costs.

Other factors that enhance rail’s competitive advantage over trucking include:

New regulation in the trucking industry is expected to create capacity constraints for trucking carriers which will likely increase rail transport’s competitive advantage. The Federal Motor Carrier Safety Administration, or FMCSA, has begun the roll-out of CSA 2010, which will enforce stricter safety-related standards. CSA 2010 will revise the methodology for determining a trucking carrier’s DOT safety rating to include the on-road safety performance of all drivers. We expect that this could substantially decrease the number of available drivers as trucking carriers seek to maintain high DOT safety ratings, thus limiting trucking carriers’ capacity. We estimate that this could decrease available drivers by approximately 10%. These new standards are expected to be fully implemented and enforced by the end of 2011. Additional regulations that could put further pressure on trucking carriers include reductions in the hours of service allowable for drivers (shift from 11 driving hours / 14 service hours to 10 driving hours / 12 service hours) and the implementation of electronic on-board recorders in tractors, which would enforce these new hours of service regulations. We believe that the combination of these additional regulations could decrease asset utilization across the trucking industry and further increase the attractiveness of the speed and reliability of rail transport.

Further, for many shipments, transport options that include alternative railroads are competitive, even where direct service by a second rail carrier is not available. Although we are often the only rail carrier directly serving our customers, we compete directly with other railroads that potentially could deliver freight to our markets and customers via different routes and use of multiple modes of transportation. Our primary rail competition for carload traffic is CSX. However, our railroad is the most direct route to Southern Florida and due to this, FECR is the most well tailored to handle intermodal traffic and carries CSX’s intermodal traffic.

Options to ship by water are limited geographically, but when available can be very competitive with rail. Factors that enhance rail’s competitiveness over water options include:

Demand for freight rail service is tied to the demand for products that railroads haul. A key economic measure of the health of an economy, and therefore demand, is the Gross Domestic Product (“GDP”). As can be see in the chart below, the U.S. GDP and freight rail traffic have historically been closely correlated:

As the level of growth in the U.S. economy has improved in 2010, the railroad industry has experienced positive momentum through its increase in total volumes. Beginning in 2010, volumes began to rebound and have now recovered significantly. There have been continued volume improvements for the first three months of 2011 and total volumes for the three months ended March 2011 were 103,436, representing a 4.3% increase to the same period in 2010.

We are subject to various safety and other laws and regulations administered by numerous government agencies, including (1) regulation by the U.S. Department of Transportation (the “USDOT”) and the Surface Transportation Board of the USDOT (the “STB”), successor to the Interstate Commerce Commission, through the FRA, (2) labor related statutes including the Railway Labor Act, the Railroad Retirement Act, the Railroad Unemployment Insurance Act, and the FELA, and (3) some limited regulation by the State of Florida and in the states in which we do business.

The STB, established by the ICC Termination Act of 1995 (the “ICC Termination Act”), has jurisdiction over, among other matters, the construction, acquisition, or abandonment of rail lines, the consolidation or merger of railroads, the assumption of control of one railroad by another railroad, the use by one railroad of another railroad’s tracks through lease, joint use or trackage rights, the rates charged for regulated transportation services, and the service provided by rail carriers.

As a result of the 1980 Staggers Rail Act (the “Staggers Rail Act”), the rail industry is trusted with considerable rate and market flexibility including the ability to obtain wholesale exemptions from numerous provisions of the Interstate Commerce Act. The Staggers Rail Act allowed the deregulation of all containerized and truck trailer traffic handled by railroads. Requirements for the creation of new short line railroads or the

expansion of existing short line railroads were substantially expedited and simplified under the exemption process. On regulated traffic, railroads and shippers are permitted to enter into contracts for rates and provision of transportation services without the need to file tariffs. Moreover, on regulated traffic, the Staggers Rail Act allows railroads considerable freedom to raise or lower rates without objection from captive shippers, although certain proposed shipper-backed legislative initiatives threaten to limit some of that pricing freedom. While the ICC Termination Act retained maximum rate regulation on traffic over which railroads have exclusive control, the new law relieved railroads from the requirements of filing tariffs and rate contracts with the STB on all traffic other than agricultural products.

The FRA regulates railroad safety and equipment standards, including track maintenance, handling of hazardous shipments, locomotive and rail car inspection and repair requirements, and operating practices and crew qualifications.

Railroad industry personnel are covered by the Railroad Retirement System instead of Social Security. Our contributions under the Railroad Retirement System have been approximately triple those of employees in industries covered by Social Security. The Railroad Retirement System, funded primarily by payroll taxes on covered employers and employees, includes a benefit roughly equivalent to Social Security (“Tier I”), an additional benefit similar to that allowed in some private defined-benefit plans (“Tier II”), and other benefits. For 2010, the Railroad Retirement System required up to a 19.75% contribution by railroad employers on eligible wages, while the Social Security and Medicare Acts only required a 7.65% contribution on similar wage bases.

The following table sets forth the name, age and position of our directors and executive officers, as of March 31, 2011. Each of our executive officers holds office until his or her successor is elected or appointed and qualified or until his or her death, resignation, retirement or removal, if earlier. Each director holds office until his or her successor is duly elected or appointed and qualified or until his or her earlier death, retirement, disqualification, resignation or removal.

Wesley R. Edens, has served on the Board of Florida East Coast Railway Corp. since 2008 and serves as the Chairman. Mr. Edens is founding principal and Co-Chairman of the board of directors of Fortress and has been a principal and the Chairman of the Management Committee of Fortress since co-founding the same in May 1998. Previously, Mr. Edens served as Chief Executive Officer of Fortress from inception to August 2009. Mr. Edens has primary investment oversight of Fortress private equity and publicly traded alternative businesses. Mr. Edens is Chairman of the board of directors of each of the following companies: Aircastle Limited, Brookdale Senior Living Inc., Eurocastle Investment Limited, GateHouse Media, Inc., Mapeley Limited, and Newcastle Investment Corp. and a director of GAGFAH S.A. and Penn National Gaming Inc. Mr. Edens was Chief Executive Officer of Global Signal Inc. from February 2004 to April 2006 and Chairman of the board of directors from October 2002 to January 2007. Mr. Edens serves in various capacities in the following two registered investment companies: Chairman, Chief Executive Officer and Trustee of Fortress Registered Investment Trust and Fortress Investment Trust II. Mr. Edens previously served on the boards of the following publicly traded company and registered investment companies: Crown Castle Investment Corp. (merged with Global Signal Inc.) from January 2007 to July 2007; Fortress Brookdale Investment Fund LLC, from August 13, 2000 (deregistered with the SEC in March 2009); Fortress Pinnacle Investment Fund, from July 24, 2002 (deregistered with the SEC in March 2008); and RIC Coinvestment Fund LP, from May 10, 2006 (deregistered with the SEC in June 2009). Prior to forming Fortress, Mr. Edens was a partner and managing director of BlackRock Financial Management Inc., where he headed BlackRock Asset Investors, a private equity fund. In addition, Mr. Edens was formerly a partner and managing director of Lehman Brothers. Mr. Edens received a B.S. in Finance from Oregon State University.

Mr. Edens brings strong leadership, extensive business and managerial experience, and a tremendous knowledge of our Company and the transportation-related industry, to the Board. In addition, Mr. Edens brings his broad strategic vision to our Company and the Board. Further, his experience on the boards of other public companies, including serving as chairman of the board, provides our Board with insights into how boards at other companies address issues similar to those faced by the Company.

Joseph P. Adams, Jr., has served on the Board of Florida East Coast Railway Corp. since 2008. Mr. Adams is Managing Director at Fortress, within the Private Equity Group. He serves as Deputy Chairman of Aircastle Limited and has been a member of its board since August 2, 2006. Previously, Mr. Adams was a partner at Brera Capital Partners and at Donaldson, Lufkin & Jenrette where he was in the transportation industry group. In 2002, Mr. Adams served as the first Executive Director of the Air Transportation Stabilization Board. Mr. Adams received a BS in Engineering from the University of Cincinnati and an MBA from the Harvard Business School.

Mr. Adam’s experience, including his role serving as Deputy Chairman on a number of boards for portfolio companies of Fortress, provides the Board with insights into how boards at other companies address issues similar to those faced by the Company. In addition, his experience as a private equity investor and investment and merchant banker provides the Board with valuable insights on financial, strategic planning and investor relations matters, particularly as it relates to transportation-related industries.

Randal A. Nardone, has served on the Board of Florida East Coast Railway Corp. since 2008. Mr. Nardone is a director of Alea Group Holdings (Bermuda) Ltd., GAGFAH S.A. and Eurocastle Investment Limited. Mr. Nardone was previously a managing director of UBS from May 1997 to May 1998. Prior to joining UBS in 1997, Mr. Nardone was a principal of BlackRock Financial Management, Inc. Prior to joining BlackRock, Mr. Nardone was a partner and a member of the executive committee at the law firm of Thacher Proffitt & Wood. Mr. Nardone received a B.A. in English and Biology from the University of Connecticut and a J.D. from Boston University School of Law.

As a result of his past experiences, Mr. Nardone has extensive credit, private equity finance and management expertise, extensive experience as an officer and director of public companies and a deep familiarity with our Company, all of which provide him the qualifications and skills to serve as a director.

James Hertwig, has served as President and Chief Executive Officer of Florida East Coast Railway Corp. since July 2010. Mr. Hertwig brings his 40 years of freight transportation experience to this position. Prior to joining Florida East Coast Railway Corp., Mr. Hertwig served as President of CSX Intermodal, Inc., a leading supplier of rail-based freight transportation in North America based in Jacksonville, Florida. Prior to joining CSX Intermodal, Inc., Mr. Hertwig spent nearly 9 years as President of Landstar Logistics, a transportation services company, and one of the largest truckload carriers in North America. During 1994 and 1995, Mr. Hertwig served as President and CEO of Carolina Freight Carriers Corporation and also as Chairman and CEO of Red Arrow Freight Lines, two large regional LTL carriers. Prior to 1994, Mr. Hertwig spent 8 years as President and CEO of Con-Way Intermodal, a multimodal truckload service provider and international non vessel operating common carrier (NVOCC). Mr. Hertwig also spent 13 years holding key management positions at CF Motor Freight, a nationwide LTL carrier. Mr. Hertwig began his carrier in the transportation industry in 1971 as a dock foreman with Associated Transport in Erie, Pennsylvania. Mr. Hertwig has served on the Board of Directors for the Florida Trucking Association and the Executive Committee of the Transportation Research Board. Mr. Hertwig also serves on the Board of Directors of the Intermodal Transportation Institute at the University of Denver and is beginning his third term on the Board of Directors for the Intermodal Association of North America.

John Brenholt, has served as Executive Vice President and Chief Financial Officer of Florida East Coast Railway Corp. since November 2010 and has over 20 years experience in the distribution and transportation industries. Prior to joining the Company, from 2007 to 2010, Mr. Brenholt was the Executive Vice President and Chief Financial Officer for Schneider National, Inc., a provider of truckload, logistics and intermodal services headquartered in Green Bay, Wisconsin. Mr. Brenholt also served as Senior Vice President and Chief Financial Officer for Vistar Corporation and Corporate Express, Inc. Mr. Brenholt has also held finance positions of progressively greater responsibility at Terex Corporation and Deloitte & Touche. Mr. Brenholt received his B.B.A from the University of Wisconsin—Milwaukee in 1986.

Husein Cumber, has served as Executive Vice President for Corporate Development of Florida East Coast Railway Corp since January 2011. Prior to joining the Company, Mr. Cumber served as President of H.A. Cumber & Company, a transportation consulting firm that specialized in rail, transit and highway projects that provides business development and government relations support to various clients throughout the United States, including the Company and RailAmerica. From 2007 to 2009, Mr. Cumber served as the Deputy Chief of Staff at the U.S. Department of Transportation (“USDOT”), where he assisted in the daily operations of the federal agency. Previously, from 2005 to 2007, Mr. Cumber served as the Assistant to the Secretary for Policy at the USDOT and in that role had responsibility for highway, rail (including Amtrak), transit, motor carrier, pipeline, and domestic security issues. Mr. Cumber was nominated by President George W. Bush on May 20, 2008, to be a member of the Surface Transportation Board. His nomination was terminated after the November 2008 election.

Prior to his appointment at USDOT, from 2002 to 2005, Mr. Cumber led the public affairs efforts for Florida East Coast Industries, Inc. (the former holding company of the Company), where he secured funding for several major public-private partnership projects that increased capacity within the Company’s rail corridor. Mr. Cumber received his B.A. in U.S. National Security from Duke University in 1997.

Joel Haka, has served as Executive Vice President and Chief Operating Officer of Florida East Coast Railway Corp since February 2011. Prior to joining the Company, from 2005 to 2011, Mr. Haka was Senior Vice President and Chief Operating Officer for CMA CGM (America) LLC, a large container shipping company based in Norfolk, Virginia. Mr. Haka was responsible for CMA CGM’s North American marine, terminal and inland operations, and has a 30-year track record in the maritime operations and transportation industry. Prior to joining CMA CGM, Mr. Haka was Senior Vice President of Corporate Operations for P&O Nedlloyd, an ocean-going container shipping company where his responsibilities included terminal operations, intermodal, and truck operations. Mr. Haka has worked ashore since 1988 in varying operating capacities in Guam, Long Beach, Chicago, Dallas, New Jersey, and Norfolk for companies such as, Sea-Land Service, CSX Intermodal, Maersk Sealand, and Maersk Logistics. Mr. Haka graduated in 1980 from the United States Merchant Marine Academy at Kings Point, New York, after which he spent 8 years at sea as a merchant officer. Mr. Haka also holds a Master’s license for United States merchant vessels and is a retired Commander in the U.S. Naval Reserve.

Kim Cooper, has served as Vice President and Corporate Controller of Florida East Coast Railway Corp since 2010. Ms. Cooper joined the Company in January 2005, with over 26 years of experience in corporate finance and public accounting. Ms. Cooper’s experience includes working at Convergys Corporation as a Financial Director, Johnson & Johnson also as a Finance Director in a variety of positions, and IBAX Healthcare Systems as an Accounting Manager. Ms. Cooper began her career in public accounting with Touche Ross & Co. (before its merger with Deloitte & Touche), where she served on the audit staff and also achieved manager level. Ms. Cooper received her B.S.B.A. from Grand Valley State in 1984 and her MBA from the University of Central Florida in 1989.

Our bylaws provide that our board shall consist of not less than one and not more than fifteen directors as the board of directors may from time to time determine. Our board of directors consists of three directors. Directors are elected by a plurality of the votes cast at the annual meetings of stockholders.

Our bylaws do not provide for cumulative voting in the election of directors, which means that the holders of a majority of the issued and outstanding common shares can elect all of the directors standing for election, and the holders of the remaining shares will not be able to elect any directors.

The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Company. Presently no such committees have been established.

Our directors receive no payment in their capacity as such, though they are eligible for reimbursement of any expenses incurred as a director (including costs of attendance at board of directors meetings.

Set out below is a discussion and analysis of the 2010 compensation program for our Chief Executive Officer (the “CEO”), our Chief Financial Officer, and the one other most highly compensated executive officer who was serving as such at December 31, 2010 (and with respect to whom we are required to provide compensation disclosure under SEC rules), and two additional individuals who served as our President and Chief Financial Officer, respectively, for part but not all of 2010 (collectively, the “named executive officers”). This discussion and analysis should be read together with the Summary Compensation Table below and the additional narrative and tables that follow and support it.

Effective January 1, 2010, we, through our wholly owned direct subsidiary Florida East Coast Railway, L.L.C., entered into a Shared Services Agreement with RailAmerica that provides for services to be provided to us from time to time by certain of RailAmerica’s senior executives and other employees and for certain reciprocal administrative services, including finance, accounting, human resources, purchasing and legal services. The terms of those arrangements are generally consistent with arms-length arrangements with third parties providing similar services.

We allocate the compensation cost of an employee under the Shared Services Agreement in proportion to the services provided to the respective companies. Accordingly, the compensation set out in the Summary Compensation Table and the supporting tables below reflect only the compensation attributable to services provided to us.

Certain executive management functions were provided to us for part of 2010 under the shared services agreement by, among others, John Giles, our former President and Clyde Preslar, our former Senior Vice President and Chief Financial Officer. Those individuals all ceased to provide executive officer services to us effective December 1, 2010 but, in accordance with SEC rules, are included among our named executive officers for 2010. The overall compensation of Messrs. Giles and Preslar was determined by RailAmerica and our portion of that compensation was determined under the Shares Services Agreement.

Our primary compensation goals for our named executive officers are to attract, motivate and retain the most talented and dedicated executives and to align annual and long-term incentives for those executives with enhancing shareholder value. To achieve these goals, our compensation program:

Our board of directors evaluates our performance, including achievement of key investment and capital raising goals, and the individual performance of each named executive officer with a goal of setting overall compensation at levels that it believes are appropriate. The board of directors does not engage in “benchmarking” or compare the compensation of our named executive officers to a peer group of companies. Nor have we or our board of directors retained a compensation consultant to review our policies and procedures with respect to executive compensation, although the board of directors may elect in the future to retain a compensation consultant if it determines that doing so would assist it in implementing and maintaining our compensation programs.

Each of our presently employed named executive officers (Messrs. Hertwig and Brenholt and Ms. Cooper) is party to an employment agreement with us (and/or Florida East Coast Railway, L.L.C.) that governs the terms and conditions of their employment. Moreover, each of our other named executive officers are party to a consulting agreement with us and Florida East Coast Railway, L.L.C. that governed the terms and conditions of certain consulting services provided to us during 2010.

The agreements with Messrs. Hertwig and Brenholt, which became effective July 1, 2010 and November 8, 2010, respectively, have an initial two-year term that automatically renews for successive one-year terms absent 60 days notice and provide for:

The employment agreements with Messrs. Hertwig and Brenholt also include certain restrictive covenants (including a one-year nonsolicitation obligation and nondisparagement and confidentiality obligations).

The agreement with Ms. Cooper became effective on January 6, 2011 and is for an indefinite term of at-will employment without severance entitlement and provides for:

Before entry into those agreements, we granted (in March 2010) 21 restricted stock units to Ms. Cooper in respect of services during 2009. Those grants vest in three annual installments on March 1 of 2011, 2012 and 2013. Annual bonus amounts for 2010 were determined by our board of directors in its discretion taking into account our strategic and financial performance as a whole, as well as the contribution of Ms. Cooper to that performance.

The consulting agreements with Messrs. Giles and Preslar (which were effective as of October 1, 2009) provided for grants of restricted stock units covering 800 shares for Mr. Giles and 200 shares for Mr. Preslar (vesting in each case in four equal annual installments following the grant date) in consideration for the

performance of consulting services for us (relating to the development of strategic initiatives designed to grow our revenue and enhance the value of our franchise). The consulting agreements and related agreements also include certain restrictive covenants (including a one-year noncompetition/nonsolicitation obligation and nondisparagement and confidentiality obligations).

The severance provisions of the various employment and consulting agreements are described under “Severance/Change in Control Benefits” below.

Our named executive officers are not in any way directly responsible for determining our CEO’s compensation, although they may provide information to the board of directors that will be relevant to its evaluation of our CEO’s compensation (for instance, in terms of our performance). By contrast, the CEO plays a more active role in determining the compensation of the other named executive officers, who are his subordinates. He regularly advises the board of directors of his own evaluation of their job performance and, from time to time, offers for consideration by the board of directors his own recommendations for their compensation levels. The board of directors will have the discretion to consider these recommendations in making compensation determinations. As noted above, the CEO has the authority (in consultation with the board of directors) under Mr. Brenholt’s employment agreement to increase (but not decrease) his compensation.

Our executive officers who in 2010 served in the capacity as consultants were compensated at levels established by RailAmerica (and, in their capacity as consultants, by means of a restricted stock unit grant made in 2009). Our compensation program for our own employees relies principally on base salary, an annual bonus and restricted stock unit grants. Base salaries are intended to complement the at-risk components of our compensation program (annual bonus and restricted stock unit grants) by assuring that the executives will receive an appropriate minimum level of compensation. Other benefits—such as a 401(k) plan and welfare benefits—are provided on a basis that are no more favorable to the executives than other salaried employees. We do not view perquisites as a significant element of our compensation program. Nor do we provide any retirement or deferred compensation programs to our named executive officers, or any of our employees, other than participation in our 401(k) plan, which is available to all eligible employees.

Determinations regarding any one element of compensation will affect determinations regarding each other element of compensation because our goal is to set overall compensation for our named executive officers at an appropriate level. In this regard, the board of directors takes into account the extent to which different compensation elements are at risk. Accordingly, for example, the amount of salary paid to a named executive officer is considered in determining the amount of any bonus award, though we do not expect the relationship among the elements to be formulaic because of the need to balance the likelihood that the at-risk components of the compensation will actually be paid at any particular level.

As described above, the compensation levels of the named executive officers are largely determined by the terms of their respective employment agreements (or consulting agreements, as the case may be). Those terms were established for each executive based upon the scope of his or her respective responsibilities, the competition for qualified executives and, as applicable, compensation levels at recent prior employment. In 2010, Mr. Hertwig’s annual base salary increased from $300,000 to reflect his additional responsibilities relative to our other executive officers; such increase was determined to be equitable under the circumstances by the board of directors.

The Company generally awards discretionary annual bonuses to our named executive officers. The annual incentive bonuses are intended to compensate our named executive officers for our overall financial performance and for achieving important milestones as well as for individual performance. Bonus levels will vary depending on the individual executive and generally will include such factors as our overall financial performance, quality

and amount of new investments and improving our operations. Short-term cash incentives are designed to advance the interests of the Company by providing incentives in the form of periodic bonus awards to certain key employees who contribute significantly to the strategic and long-term performance objectives and growth of the Company. For 2010, Mr. Hertwig’s bonus of $450,000 (representing 113% of his annual base salary) was based upon a determination by our board of directors that Mr. Hertwig played a key role in the overall management and performance of the Company. Ms. Cooper’s annual bonus for 2010 of $41,120 (approximately 50% of her annual base salary) was based on a determination by Mr. Hertwig that Ms. Cooper performed outstandingly in 2010.

The employment agreements for Messrs. Hertwig and Brenholt provide that, subject to the execution of a release of claims, upon termination of the respective officer’s employment by us without “cause” or by the officer for “good reason” (each as defined in the applicable employment agreement), (i) the officer is entitled to receive severance payments equal to one year of the executive’s then-current base salary, paid in equal installments over the one-year period following the executive’s termination, (ii) if the termination does not occur within one year following a change in control of the Company, the restricted stock units scheduled to vest on the next regular vesting date will vest, and (iii) if the termination occurs within twelve months following a change of control, all restricted stock units will vest in full. However, in no event will such severance payments or accelerated vesting be provided to the extent it would cause us to be unable to claim a federal income tax deduction by reason of the “golden parachute” limitations set forth in Section 280G of the Code.

The restricted stock unit agreements for Ms. Cooper provide that, subject to the execution of a release of claims, upon termination of Ms. Cooper’s employment by us without “cause” or by her for “good reason” (each as defined in the applicable award agreement), (i) the restricted stock units scheduled to vest on the next regular vesting date will vest if the termination does not occur within one year following a change in control of the Company and (ii) all restricted stock units will vest in full if the termination occurs within twelve months following a change of control. Ms. Cooper is not otherwise entitled to severance payments.

The 2009 restricted stock unit agreements with Messrs. Giles and Preslar provide that, upon the termination of their consulting services by us without “cause” (as defined in their respective consulting agreements) or by reason of their death or disability, the restricted stock units scheduled to vest on the next regular vesting date will vest, subject to the execution of a release of claims, and that, upon the termination of their consulting services by us without “cause” within one year following a change in control of the Company, all restricted stock units will vest in full. Messrs. Giles and Preslar are not otherwise entitled to severance benefits, and they were not entitled to any payments or benefits by reason of the cessation of their service as our executive officers in 2010.

We generally develop our compensation programs such that our compensation is fully deductible for federal income tax purposes. However, in certain situations, we may approve compensation that will not meet these requirements in order to ensure competitive levels of total compensation for our executive officers. Likewise, we are aware of the financial accounting treatment of our compensation programs and decisions, but accounting considerations do not determine the amount or types of compensation we pay or the timing of its payment.

Set forth below is information concerning the cash and non-cash compensation earned by, awarded to or paid to our named executive officers for 2010.

As described above in “Executive Officer Compensation—Compensation Discussion and Analysis—Severance/Change in Control Benefits,” we make certain severance and change in control benefits available to our named executive officers. The following chart sets forth the payments the respective named executive officers would have received had the requisite triggering event occurred as of December 31, 2010; the value shown in respect of the accelerated vesting of the restricted stock units is based upon a value per share of Company stock of $992.98 as of December 31, 2010. In addition to the benefits shown below, Messrs. Hertwig and Brenholt, and Ms. Cooper are entitled to a death benefit equal to their base salary (but not in excess of $150,000).

The following table sets forth the total number of shares of common stock beneficially owned, and the percent so owned. The percentage of beneficial ownership of our common stock is based on 250,555 shares of common stock of Holdings Corp., our immediate parent, issued and outstanding as of July 31, 2011.

We, through our wholly owned direct subsidiary Florida East Coast Railway, L.L.C., began leasing our Hialeah rail yard in December 2007 from FDG Hialeah LLC, an entity owned by investment funds managed by affiliates of Fortress. The cancellable lease agreement provides for annual rent increases of 4%, along with a 20% decrease for years two and three, as we vacate portions of the property under the terms of the agreement. Under the lease agreement relating to year two, we were required to vacate 20% of the land effective April 1, 2010. We entered into two amendments extending the date to vacate to July 1, 2011. The first amendment extended the date to vacate to July 1, 2010 at an additional lease cost of $0.1 million. The second amendment extended the date to vacate to July 1, 2011 at an additional cost of $1.9 million, of which $1.4 million was prepaid for the period October 1, 2010 through June 30, 2011. We paid $1.9 million and $1.8 million in base rent in the years ended December 31, 2010 and 2009, respectively. On January 24, 2011, we entered into an amended and restated lease, which, among other things: extends the date to vacate to December 31, 2035 (unless we elect not to renew the lease); provides for an annual rental fee of $4.5 million a year (subject to a 2.5% annual increase); provides us the right to purchase certain land from FDG Hialeah LLC at a mutually determined fair market value; provides FDG Hialeah LLC the right to require us to relocate (at its expense) from such land to comparable property with competitive rental rates. The amended and restated lease is cancellable after five years with a two year notice requirement.

Through Florida East Coast Railway, L.L.C., we lease space for our headquarters from Flagler Development Company, L.L.C. through 2018. For the years ended December 31, 2010, 2009 and 2008, we paid $1.4 million, $1.5 million and $0.8 million in rent, respectively. A portion of this office space is being sublet to RailAmerica, an entity partially owned by investment funds managed by affiliates of Fortress. Under the sublease agreement, which is subject to the terms and conditions of the corporate headquarters agreement with Flagler Development Company, L.L.C., we billed RailAmerica $1.0 million, $1.0 million and $0.2 million for the years ended December 31, 2010, 2009 and 2008, respectively. Balance due to the Company for rent from RailAmerica was $0.1 million at December 31, 2010, 2009 and 2008.

During 2009, the Company participated in nine short-term operating lease agreements with RailAmerica related to the leasing of locomotives between the companies for ordinary business operations, which are based on current market rates for similar assets. During 2010, these locomotive lease agreements were combined into one master lease agreement. With respect to such agreements, during the years ended December 31 2010, 2009 and 2008, RailAmerica paid on a net basis $2.0 million, $0.6 million and $0.1 million, respectively. The Company had no receivable due from RailAmerica at December 31, 2010 and 2009, and the Company had a $0.1 million payable to RailAmerica at December 31, 2008.

The Company rents chassis equipment for ordinary business operations from TRAC Intermodal, an entity owned by funds managed by affiliates of Fortress. These rents are based on current market rates for similar assets. During the years ended December 31, 2010, 2009 and 2008, the Company paid rents in the amount of $0.7 million, $0.8 million and $0.7 million, respectively.

Effective January 1, 2010, we, through our wholly owned indirect subsidiary Florida East Coast Railway, L.L.C., entered into a Shared Services Agreement with RailAmerica that provides for services to be provided from time to time by certain of RailAmerica’s senior executives and other employees and for certain reciprocal administrative services, including finance, accounting, human resources, purchasing and legal. The agreements are generally consistent with arms-length arrangements with third parties providing similar services. The net amount of payments received by us under this agreement was approximately $0.8 million for the year ended December 31, 2010. As of December 31, 2010, the Company had a receivable of $0.2 million due from RailAmerica under this agreement.

We declared and paid a cash dividend of (a) $3.7 million, in the aggregate, with respect to our Series A Redeemable Preferred Stock (the “Preferred Dividend”), and (b) $16.3 million, in the aggregate, with respect to our common stock (the “Common Dividend”), in each case, allocated among the holders of record of each such class of stock on the record date of July 27, 2009.

Certain funds managed by affiliates of Fortress held by 27% of our outstanding debt of $601.2 million at December 31, 2010.

In October 2009, we entered into consulting agreements with certain RailAmerica executives until such agreements are terminated. The consultants shall provide assistance to us with strategic initiatives designed to grow our revenue and enhance the value of our franchise. In consideration of the consultant’s performance, the consultants received a grant of restricted stock units with respect to shares of our common stock.

Given the ownership structure and management of the Company, we have not adopted policies and procedures for the review, approval, or ratification of transactions required to be reported pursuant to Item 404(a) of Regulation S-K.

We have no securities listed for trading on a national securities exchange or in an automated inter-dealer quotation system of a national securities association, which has requirements that a majority of our board of directors be independent. For purposes of complying with the disclosure requirements of the SEC we have adopted the definition of independence used by the New York Stock Exchange. Under the New York Stock Exchange’s definition of independence, none of our directors are independent.

We summarize below the principal terms of our senior secured asset-based revolving credit facility. This summary is not a complete description of all such terms.

General. On January 25, 2011, we entered into a senior secured asset-based revolving credit facility, or ABL Facility, with Bank of America, N.A., as administrative agent, and Merrill Lynch, Pierce, Fenner, & Smith Incorporated, as sole lead arranger and sole bookrunner, and a syndicate of financial institutions and institutional lenders. Set forth below is a summary of the terms of the ABL Facility.

The ABL Facility provides for revolving credit financing of up to $30 million, subject to borrowing base availability, with a maturity of four years. The borrowing base at any time is expected to equal (a) the product of 85% multiplied by the amount of adjusted eligible billed accounts at such time, plus (b) the product of 65% multiplied by the sum of (i) the amount of adjusted eligible unbilled accounts plus (ii) the amount of adjusted eligible car hire accounts at such time, plus (c) the lesser of (i) $15 million, (ii) 50% of the net orderly liquidation value of eligible rolling stock and (iii) 95% of the net book value of eligible rolling stock, minus reserves as deemed necessary by the administrative agent.

The ABL Facility includes borrowing capacity available for letters of credit and for swingline loans. All borrowings under the ABL Facility were subject to the satisfaction of customary conditions, including absence of a default under the ABL Facility and accuracy of representations and warranties.

Interest rate and fees. Borrowings under the ABL Facility bear interest at a rate per annum equal to, at our option, either (a) a base rate determined by reference to the greater of (1) the prime rate of the administrative agent, (2) the federal funds effective rate plus 1/2 of 1% or (b) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits in the London interbank market for the interest period relevant to such borrowing. The applicable margin with respect to (a) base rate borrowings will be 2.25% and (b) LIBOR borrowings is 3.25%. In addition to paying interest on outstanding principal under the ABL Facility, we are required to pay a commitment fee, in respect of the unutilized commitments thereunder, which fee will be determined based on utilization of the ABL Facility (increasing when utilization is low and decreasing when utilization is high). We must also pay customary letter of credit fees equal to 3.25% of the maximum face amount of such letter of credit, a fronting fee for each letter of credit equal to 0.25% of the maximum face amount of such letter of credit and customary agency fees.

Guarantees and security. All obligations under the ABL Facility will be unconditionally guaranteed jointly and severally on a senior basis by all of our existing and subsequently acquired or organized direct or indirect U.S. restricted subsidiaries that are not direct borrowers under the ABL Facility, subject to certain exceptions. All obligations under the ABL Facility, and the guarantees of those obligations, are secured, subject to certain exceptions, by a first-priority security interest in the ABL Collateral (as defined in the “Description of the Notes”). Obligations under the ABL Facility are secured by a second-priority security interest in the Notes Collateral.

Covenants, Representations and Warranties and Events of Default. The ABL Facility includes customary affirmative and negative covenants, including, among other things, restrictions on (i) the incurrence of indebtedness and liens, (ii) investments and loans, (iii) dividends and other payments with respect to capital stock, (iv) redemption and repurchase of capital stock, (v) mergers, acquisitions and asset sales, (vi) payments and modifications of other debt (including the notes), (vii) affiliate transactions, (viii) altering our business, (ix) engaging in sale-leaseback transactions and (x) entering into agreements that restrict our ability to create liens or repay loans or issue capital stock. In addition, if availability under the ABL Facility is below a certain level, we will be subject to a minimum fixed charge coverage ratio of 1.1 to 1.0.

The ABL Facility contains certain customary representations and warranties and events of default, including, among other things, (i) payment defaults, (ii) breach of representations and warranties, (iii) covenant defaults, (iv) cross-defaults to certain indebtedness, (v) certain events of bankruptcy, (vi) certain events under ERISA, (vii) material judgments, (viii) actual or asserted failure of any guaranty or security document supporting the ABL Facility to be in full force and effect, and (ix) change of control.

Subject to terms and conditions detailed in this prospectus, we will accept for exchange old notes which are properly tendered on or prior to the expiration date and not withdrawn as permitted below. As used herein, the term “expiration date” means 5:00 p.m., New York City time, on September 12, 2011 (21 business days following the date notice of the Exchange Offer was sent to the holders). However, if we, in our sole discretion, extend the period of time during which the exchange offer is open, the term “expiration date” shall mean the latest time and date to which the exchange offer is extended.

As of the date of this prospectus, $475.0 million aggregate principal amount of old notes are outstanding. This prospectus, together with the letter of transmittal, is first being sent on or about the date hereof, to all holders of old notes known to us.

We expressly reserve the right, at any time, to extend the period of time during which the exchange offer is open, and delay acceptance for exchange of any old notes, by giving oral or written notice of such extension to the holders thereof as described below. During any such extension, all old notes previously tendered will remain subject to the exchange offer and may be accepted for exchange by us. Any old notes not accepted for exchange for any reason will be returned without expense to the tendering holder promptly after the expiration or termination of the exchange offer.

Old notes tendered in the exchange offer must be in minimum denominations of principal amount of $2,000 and integral multiples of $1,000.

We expressly reserve the right to amend or terminate the exchange offer, and not to accept for exchange any old notes, upon the occurrence of any of the conditions of the exchange offer specified under “— Conditions to the Exchange Offer.” We will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the old notes as promptly as practicable. Such notice, in the case of any extension, will be issued by means of a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date.

The tender to us of old notes by you as set forth below and our acceptance of the old notes will constitute a binding agreement between us and you upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal. Except as set forth below, to tender old notes for exchange pursuant to the exchange offer, you must transmit a properly completed and duly executed letter of transmittal, including all other documents required by such letter of transmittal or, in the case of a book-entry transfer, an agent’s message in lieu of such letter of transmittal, to U.S. Bank National Association, as exchange agent, at the address set forth below under “— Exchange Agent” on or prior to the expiration date. In addition:

The term “agent’s message” means a message, transmitted by DTC to and received by the exchange agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the tendering participant stating that such participant has received and agrees to be bound by the letter of transmittal and that we may enforce such letter of transmittal against such participant.

The method of delivery of old notes, letters of transmittal and all other required documents is at your election and risk. If such delivery is by mail, it is recommended that you use registered mail, properly insured, with return receipt requested. In all cases, you should allow sufficient time to assure timely delivery. No letter of transmittal or old notes should be sent to us.

Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the old notes surrendered for exchange are tendered:

In the event that signatures on a letter of transmittal or a notice of withdrawal are required to be guaranteed, such guarantees must be by a firm which is a member of the Securities Transfer Agent Medallion Program, the Stock Exchanges Medallion Program or the New York Stock Exchange Medallion Signature Program (each such entity being hereinafter referred to as an “eligible institution”). If old notes are registered in the name of a person other than the signer of the letter of transmittal, the old notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as we or the exchange agent determine in our sole discretion, duly executed by the registered holders with the signature thereon guaranteed by an eligible institution.

We or the exchange agent in our sole discretion will make a final and binding determination on all questions as to the validity, form, eligibility (including time of receipt) and acceptance of old notes tendered for exchange. We reserve the absolute right to reject any and all tenders of any particular old note not properly tendered or to not accept any particular old note which acceptance might, in our judgment or our counsel’s, be unlawful. We also reserve the absolute right to waive any defects or irregularities or conditions of the exchange offer as to any particular old note either before or after the expiration date (including the right to waive the ineligibility of any holder who seeks to tender old notes in the exchange offer). Our or the exchange agent’s interpretation of the term and conditions of the exchange offer as to any particular old note either before or after the expiration date (including the letter of transmittal and the instructions thereto) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old notes for exchange must be cured within a reasonable period of time, as we determine. We are not, nor is the exchange agent or any other person, under any duty to notify you of any defect or irregularity with respect to your tender of old notes for exchange, and no one will be liable for failing to provide such notification.

If the letter of transmittal is signed by a person or persons other than the registered holder or holders of old notes, such old notes must be endorsed or accompanied by powers of attorney, in either case signed exactly as the name(s) of the registered holder(s) that appear on the old notes and the signatures must be guaranteed by an eligible institution.

If the letter of transmittal or any old notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing. Unless waived by us or the exchange agent, proper evidence satisfactory to us of their authority to so act must be submitted with the letter of transmittal.

By tendering old notes, you represent to us that, among other things, the new notes acquired pursuant to the exchange offer are being obtained in the ordinary course of business of the person receiving such new notes, whether or not such person is the holder, that neither the holder nor such other person has any arrangement or understanding with any person, to participate in the distribution of the new notes, and that you are not holding old notes that have, or are reasonably likely to have, the status of an unsold allotment in the initial offering. If you are our “affiliate,” as defined under Rule 405 under the Securities Act, are engaged in or intend to engage in or have

an arrangement or understanding with any person to participate in a distribution of such new notes to be acquired pursuant to the exchange offer, you or any such other person:

Each broker-dealer that receives new notes for its own account in exchange for old notes, where such old notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. See “Plan of Distribution.” The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

Furthermore, any broker-dealer that acquired any of its old notes directly from us:

Upon satisfaction or waiver of all of the conditions to the exchange offer, we will accept, promptly after the expiration date, all old notes properly tendered and will issue the new notes promptly after acceptance of the old notes. See “— Conditions to the Exchange Offer.” For purposes of the exchange offer, we will be deemed to have accepted properly tendered old notes for exchange if and when we give oral (confirmed in writing) or written notice to the exchange agent.

The holder of each old note accepted for exchange will receive a new note in the amount equal to the surrendered old note. Holders of new notes on the relevant record date for the first interest payment date following the consummation of the exchange offer will receive interest accruing from the most recent date to which interest has been paid on the old notes. Holders of new notes will not receive any payment in respect of accrued interest on old notes otherwise payable on any interest payment date, the record date for which occurs on or after the consummation of the exchange offer.

In all cases, issuance of new notes for old notes that are accepted for exchange will be made only after timely receipt by the exchange agent of:

If any tendered old notes are not accepted for any reason set forth in the terms and conditions of the exchange offer or if old notes are tendered for a greater principal amount than the holder desires to exchange, such unaccepted or non-exchanged old notes will be returned to the holder without cost to such holder or, in the case of old notes tendered by book-entry transfer into the exchange agent’s account at DTC pursuant to the procedure described above, such unaccepted or non-exchanged old notes will be credited to an account maintained with DTC promptly after the expiration or termination of the exchange offer.

For purposes of the exchange offer, the exchange agent will request that an account be established with respect to the old notes at DTC within two business days after the date of this prospectus, unless the exchange

agent has already established an account with DTC suitable for the exchange offer. Any financial institution that is a participant in DTC may make book-entry delivery of old notes by causing DTC to transfer such old notes into the exchange agent’s account at DTC in accordance with DTC’s procedures for transfer. Although delivery of old notes may be effected through book-entry transfer at DTC, the letter of transmittal or facsimile thereof or an agent’s message in lieu thereof, with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the exchange agent at the address set forth under “—Exchange Agent” on or prior to the expiration date.

You may withdraw your tender of old notes at any time prior to 5:00 p.m., New York City time, on the expiration date. To be effective, a written notice of withdrawal must be received by the exchange agent at one of the addresses set forth under “—Exchange Agent.” This notice must specify:

If certificates for old notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of such certificates, the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an eligible institution, unless such holder is an eligible institution. If old notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn old notes and otherwise comply with the procedures of DTC.

We or the exchange agent will make a final and binding determination on all questions as to the validity, form and eligibility (including time of receipt) of such notices. Any old notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any old notes tendered for exchange but not exchanged for any reason will be returned to the holder without cost to such holder (or, in the case of old notes tendered by book-entry transfer into the exchange agent’s account at DTC pursuant to the book-entry transfer procedures described above, such old notes will be credited to an account maintained with DTC for the old notes as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn old notes may be retendered by following one of the procedures described under “— Procedures for Tendering Old Notes” above at any time on or prior to the expiration date.

Despite any other term of the exchange offer, we will not be required to accept for exchange, or to issue new notes in exchange for, any old notes, and we may terminate or amend the exchange offer as provided in this prospectus before accepting any old notes for exchange, if:

In addition, we will not be obligated to accept for exchange the old notes of any holder that has not made to us:

We expressly reserve the right at any time or at various times to extend the period of time during which the exchange offer is open. Consequently, we may delay acceptance of any old notes by notice by press release or other public announcement as required by Rule 14e-1(d) of the Act of such extension to their holders. During any such extensions, all old notes previously tendered will remain subject to the exchange offer, and we may accept them for exchange. We will return any old notes that we do not accept for exchange for any reason without expense to their tendering holder as promptly after the expiration or termination of the exchange offer.

We expressly reserve the right to amend or terminate the exchange offer and to reject for exchange any old notes not previously accepted for exchange upon the occurrence of any of the conditions of the exchange offer specified above. In the event of a material change in the offer, including the waiver of a material condition, we will extend the offer period if necessary so that at least five business days remain in the offer following notice of the material change. We will give notice by press release or other public announcement as required by Rule 14e-1(d) of the Act of any extension, amendment, non-acceptance or termination to the holders of the old notes. In the case of any extension, such notice will be issued no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date.

These conditions are for our sole benefit, and we may assert them regardless of the circumstances that may give rise to them so long as such circumstances do not arise due to our action or inaction or waive them in whole or in part at any or at various times in our sole discretion. If we fail at any time to exercise any of the foregoing rights, this failure will not constitute a waiver of such right. Each such right will be deemed an ongoing right that we may assert at any time or at various times.

We have appointed Wells Fargo Bank, National Association as the exchange agent for the exchange offer. Wells Fargo Bank, National Association also acts as trustee under the indenture governing the notes. All executed letters of transmittal should be directed to the exchange agent at the address set forth below. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal should be directed to the exchange agent addressed as follows:

DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF SUCH LETTER OF TRANSMITTAL VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL.

The principal solicitation is being made by mail by Wells Fargo Bank, National Association, as exchange agent. We will pay the exchange agent customary fees for its services, reimburse the exchange agent for its reasonable out-of-pocket expenses incurred in connection with the provision of these services and pay other registration expenses, including fees and expenses of the trustee under the Indenture relating to the new notes, filing fees, blue sky fees and printing and distribution expenses. We will not make any payment to brokers, dealers or others soliciting acceptances of the exchange offer.

Additional solicitation may be made by telephone, facsimile or in person by our and our affiliates’ officers and regular employees and by persons so engaged by the exchange agent.

We will record the new notes at the same carrying value as the old notes, as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes. The expenses of the exchange offer will be amortized over the term of the new notes.

Holders who tender their old notes for exchange will not be obligated to pay any related transfer taxes, except that holders who instruct us to register new notes in the name of, or request that old notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer taxes.

If you do not exchange your old notes for new notes in the exchange offer, your old notes will continue to be subject to the provisions of the indenture relating to the notes regarding transfer and exchange of the old notes and the restrictions on transfer of the old notes described in the legend on your certificates. These transfer restrictions are required because the old notes were issued under an exemption from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the old notes may not be offered or sold unless registered under the Securities Act, except under an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not plan to register the old notes under the Securities Act. Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, we believe that the new notes you receive in the exchange offer may be offered for resale, resold or otherwise transferred without compliance with the registration and prospectus delivery provisions of the Securities Act. However, you will not be able to freely transfer the new notes if:

We do not intend to request the SEC to consider, and the SEC has not considered, the exchange offer in the context of a similar no-action letter. As a result, we cannot guarantee that the staff of the SEC would make a similar determination with respect to the exchange offer as in the circumstances described in the no action letters discussed above. Each holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of new notes and has no arrangement or understanding to participate in a distribution of new notes. If you are our affiliate, are engaged in or intend to engage in a distribution of the new notes or have any arrangement or understanding with respect to the distribution of the new notes you will receive in the exchange offer, you may not rely on the applicable interpretations of the staff of the SEC and you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction involving the new notes. If you are a participating broker-dealer, you must acknowledge that you will deliver a prospectus in connection with any resale of the new notes. In addition, to comply with state securities laws, you may not offer or sell the new notes in any state unless they have been registered or qualified for sale in that state or an exemption from registration or qualification is available and is complied with. The offer and sale of the new notes to “qualified institutional buyers” (as defined in Rule 144A of the Securities Act) is generally exempt from registration or qualification under state securities laws. We do not plan to register or qualify the sale of the new notes in any state where an exemption from registration or qualification is required and not available.

The notes were issued under an indenture (the “Indenture”), dated as of January 25, 2011, among Florida East Coast Railway Corp., as Issuer, all of the Issuer’s direct and indirect wholly owned Domestic Subsidiaries existing on the Issue Date, subject to certain exceptions, as Guarantors (the “Guarantors”), and Wells Fargo Bank, National Association, as Trustee (the “Trustee”) and as collateral agent (the “Notes Collateral Agent”). The Indenture will be subject to and governed by the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act,” or “TIA”). The terms of the notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The following is a summary of the material terms and provisions of the notes, Indenture, Security Documents and Intercreditor Agreement. The following summary does not purport to be a complete description of the notes or such agreements and is subject to the detailed provisions of, and qualified in its entirety by reference to, the Indenture, Security Documents and Intercreditor Agreement. You can find definitions of certain terms used in this description under the heading “—Certain Definitions.” For purposes of this summary,

The notes will be guaranteed by all Subsidiaries of the Issuer (other than Unrestricted Subsidiaries and Foreign Subsidiaries).

The Issuer issued $475.0 million aggregate principal amount of notes in this offering on January 25, 2011. The notes will mature on February 1, 2017. The Issuer may issue additional notes from time to time after this offering under the Indenture (“Additional Notes”). Any offering of Additional Notes is subject to the covenants described below under the caption “Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” and “Certain covenants—Liens.” The notes offered hereby and any Additional Notes subsequently issued under the Indenture will be treated as a single class for all purposes under the Indenture, the Security Documents and the Intercreditor Agreement. Unless the context requires otherwise, references to “notes” for all purposes of the Indenture and this “Description of the Notes” include any Additional Notes that are actually issued. The notes were be issued in minimum denominations of $2,000 and any integral multiple of $1,000 in excess thereof.

Interest on the notes will accrue at the rate of 8.125% per annum and will be payable semi-annually in arrears on February 1 and August 1, commencing on August 1, 2011, to Holders of record on the immediately preceding January 15 and July 15. Interest on the notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance of the notes. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

Principal of, premium, if any, and interest on the notes will be payable at the office or agency of the Issuer maintained for such purpose or, at the option of the Issuer, payment of interest may be made by check mailed to the Holders of the notes at their respective addresses set forth in the register of Holders; provided that all payments of principal, premium, if any, and interest with respect to notes represented by one or more global notes registered in the name of or held by DTC or its nominee will be made by wire transfer of immediately available funds to the accounts specified by the Holder or Holders thereof. Until otherwise designated by the Issuer, the Issuer’s office or agency will be the office of the trustee maintained for such purpose.

The Indebtedness evidenced by the notes and the Guarantees will be senior Indebtedness of the Issuer or the applicable Guarantor, as the case may be, and will rank Pari Passu in right of payment with all existing and future

senior Indebtedness of the Issuer and the Guarantors, as the case may be. The notes will have first-priority with respect to the Notes Collateral and a second-priority lien on the ABL Collateral. Any Other Pari Passu Lien Obligations incurred after the Issue Date will share in the Notes Collateral equally and ratably with the notes and Guarantees. The Indebtedness under the Credit Agreement and any other Lenders Debt incurred in the future will have first priority with respect to the ABL Collateral. The Indebtedness evidenced by the notes and the Guarantees will be senior in right of payment to all existing and future Subordinated Indebtedness of the Issuer and the Guarantors, as the case may be.

As of March 31, 2011, the Issuer and its Subsidiaries had $475.0 million aggregate principal amount of senior Indebtedness outstanding. All of the operations of the Issuer are conducted through its Subsidiaries. Unless the Subsidiary is a Guarantor, claims of creditors on such Subsidiaries, including trade creditors, and claims of preferred stockholders (if any) of such Subsidiaries generally will have priority with respect to the assets and earnings of such Subsidiaries over the claims of creditors of the Issuer, including the Holders of the notes. The notes, therefore, will be structurally subordinated to holders of Indebtedness and other creditors (including trade creditors) and preferred stockholders (if any) of Subsidiaries of the Issuer that are not Guarantors.

Although the Indenture limits the incurrence of Indebtedness by certain of the Issuer’s Subsidiaries, such limitation is subject to a number of significant qualifications. See “— Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.”

Although the Indenture contains limitations on the amount of additional Other Pari Passu Lien Obligations and additional priority-secured Indebtedness that the Issuer and its Restricted Subsidiaries may incur, under certain circumstances the amount of such Other Pari Passu Lien Obligations and priority-secured Indebtedness could be substantial. See “Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” and “Certain covenants—Liens.”

The Issuer’s obligations under the notes, the Indenture, the Security Documents and the Intercreditor Agreement will be jointly and severally guaranteed on a senior secured basis (the “Guarantees”) by each Guarantor. Unrestricted Subsidiaries, Foreign Subsidiaries, and certain domestic subsidiaries that do not have material assets or earnings will not be Guarantors. “Material assets or earnings” means, with respect to all such domestic subsidiaries, that they in the aggregate have $500,000 of total assets as of the end of the latest quarter for which internal financial statements are available or in the aggregate have $500,000 of operating revenue for the latest four quarter period for which internal financial statements are available. In the event of a bankruptcy, liquidation or reorganization of any of these non-Guarantor Subsidiaries, these non-Guarantor Subsidiaries will pay the holders of their debts and their trade creditors before they will be able to distribute any of their assets to us. All of our existing Subsidiaries were Guarantors as of the Issue Date.

As of the date of the Indenture, all of our Subsidiaries were “Restricted Subsidiaries.” However, under the circumstances described below under the subheading “Certain covenants—Limitation on Restricted Payments,” the Issuer will be permitted to designate some of our Subsidiaries as “Unrestricted Subsidiaries.” The effect of designating a Subsidiary as an “Unrestricted Subsidiary” will be:

The obligations of each Guarantor under its Guarantee will be limited to the maximum amount as will result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. This provision may not, however, be effective to protect a Guarantee from being voided under fraudulent transfer law, or may reduce the applicable Guarantor’s obligation to an amount that effectively makes its Guarantee worthless. If a Guarantee was rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the Guarantor, and, depending on the amount of such indebtedness, a Guarantor’s liability on its Guarantee could be reduced to zero. See “Risk Factors—Risks Related to the Notes and Collateral—Federal and state fraudulent transfer laws may permit a court to void the notes and the guarantees, subordinate claims in respect of the notes and any guarantees and require noteholders to return payments received and, if that occurs, you may not receive any payments on the notes.” Each Guarantor that makes a payment for distribution under its Guarantee will be entitled to a contribution from each other Guarantor in a pro rata amount based on adjusted net assets of each Guarantor.

The notes and the Guarantees have the benefit of the Notes Collateral as to which the Holders of the notes and holders of any future Other Pari Passu Lien Obligations have a first-priority security interest (subject to Permitted Liens) and the ABL Collateral as to which the Holders of the notes and holders of any future Other Pari Passu Lien Obligations have a second-priority security interest (subject to the first-priority security interest securing the Credit Agreement and other Permitted Liens).

The Issuer and the Guarantors will be able to incur additional Indebtedness in the future which could share in all or part of the Collateral. The amount of all such additional Indebtedness will be limited by the covenants disclosed under “Certain covenants—Liens” and “Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.” Under certain circumstances the amount of such additional secured Indebtedness could be significant.

The Notes Collateral is pledged as collateral to the Notes Collateral Agent for the benefit of the Trustee, the Notes Collateral Agent and the Holders of the notes. The notes and guarantees are secured by first-priority security interests in the Notes Collateral, subject to certain Permitted Liens. The “Notes Collateral” generally consists of the following assets of the Issuer and the Guarantors, whether now or hereafter acquired except to the extent constituting Excluded Assets:

Initially, subject to Permitted Liens, only the notes and Guarantees will have the benefit of the first-priority security interest in the Notes Collateral. No other Indebtedness incurred by the Issuer may share in the first-priority security interest in the Notes Collateral other than any Additional Notes and future Indebtedness that constitutes Other Pari Passu Lien Obligations.

We have agreed to deliver mortgages, financing statements, certificates and opinions of counsel as shall be reasonably necessary to vest in the Notes Collateral Agent perfected security interests in and mortgage liens on all of our real property intended to constitute Notes Collateral in favor of the Notes Collateral Agent for the benefit of the Noteholder Secured Parties within 60 days of the Issue Date. See “Risk factors—Risks Related to the Notes and the Collateral—We do not expect that mortgages on all of our real properties intended to constitute Notes Collateral will be delivered and recorded at the time of the issuance of the notes. Any issues that we are not able to resolve in connection with the delivery and recordation of such mortgages may impact the value of the Notes Collateral. Delivery and recordation of such mortgages after the issue date of the notes increases the risk that the liens granted by those mortgages could be avoided.”

The Equity Interests or intercompany note of a Restricted Subsidiary will constitute Notes Collateral only to the extent that such Equity Interests or intercompany note can secure the notes without Rule 3-10 or Rule 3-16 of Regulation S-X under the Securities Act (or any other law, rule or regulation) requiring separate financial statements of such Restricted Subsidiary to be filed with the commission). In the event that Rule 3-10 or Rule 3-16 of Regulation S-X under the Securities Act requires or is amended, modified or interpreted by the Commission to require (or is replaced with another rule or regulation, or any other law, rule or regulation is adopted, that would require) the filing with the Commission of separate financial statements of any Restricted Subsidiary due to the fact that such Restricted Subsidiary’s Equity Interests or intercompany note secures the notes, then the Equity Interests or intercompany note of such Restricted Subsidiary shall automatically be deemed not to be part of the Notes Collateral. In such event, the Security Documents may be amended or modified, without the consent of any holder of Notes, to the extent necessary to release the Liens on the Equity Interests or intercompany note that is so deemed to no longer constitute part of the Notes Collateral.

In the event that Rule 3-10 or Rule 3-16 of Regulation S-X under the Securities Act is amended, modified or interpreted by the Commission to permit (or is replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would permit) such Restricted Subsidiary’s Equity Interests or intercompany note to secure the notes without the filing with the Commission of separate financial statements of such Restricted Subsidiary, then the Equity Interests or intercompany note of such Restricted Subsidiary shall automatically be deemed to be a part of the Notes Collateral. In such event, the Security Documents may be amended or modified, without the consent of any holder of notes, to the extent necessary to subject such Equity Interests or intercompany note to the Liens under the Security Documents.

In accordance with the limitations set forth in the immediately two preceding paragraphs as in effect on the date hereof, the Notes Collateral will include Equity Interests or intercompany note of any Restricted Subsidiaries only to the extent that the applicable value of such Equity Interests or intercompany note (on a Restricted Subsidiary-by-Restricted Subsidiary basis) is less than 20% of the aggregate principal amount of the notes outstanding. Accordingly, the portion of the Equity Interests or intercompany note of Restricted Subsidiaries constituting Notes Collateral in the future may decrease or increase as described above.

The “ABL Collateral” will generally consist of all of the following assets of the Issuer and the Guarantors whether now owned or hereafter acquired:

Promptly following the acquisition by the Issuer, any Guarantor or any Foreign Subsidiary described in clause (ii) of the definition of Foreign Subsidiary of any After-Acquired Property (but subject to the limitations, if applicable, described under “—Notes collateral” and “—ABL collateral”), the Issuer, such Guarantor or such Foreign Subsidiary shall execute and deliver such mortgages, deeds of trust, security instruments, financing statements and certificates and opinions of counsel as shall be reasonably necessary to vest in the Notes Collateral Agent a perfected security interest in such After-Acquired Property and to have such After-Acquired Property added to the Collateral and thereupon all provisions of the Indenture relating to the Collateral shall be deemed to relate to such After-Acquired Property to the same extent and with the same force and effect. Notwithstanding the foregoing, we will not be required to obtain any title insurance or surveys with respect to any of such properties.

The Issuer will furnish to the Notes Collateral Agent, with respect to the Issuer or any Guarantor, prompt written notice of any change in such Person’s (i) legal name, (ii) jurisdiction of organization or formation, (iii) identity or corporate structure or (iv) Organizational Identification Number. The Issuer and the Guarantors will agree not to effect or permit any change referred to in the preceding sentence unless all filings have been made or will have been made within any applicable statutory period under the Uniform Commercial Code or otherwise that are required in order for the Notes Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral. The Issuer also agrees promptly to notify the Notes Collateral Agent if any material portion of the Collateral is damaged, destroyed or condemned.

Each year, at the time of delivery of the annual financial statements with respect to the preceding fiscal year, the Issuer shall deliver to the Trustee a certificate of a financial officer setting forth the information required

pursuant to the schedules required by the Security Documents or confirming that there has been no change in such information since the date of the prior annual financial statements.

The Issuer and the Guarantors shall execute any and all further documents, financing statements, agreements and instruments, and take all further action that may be required under applicable law, or that the Notes Collateral Agent may reasonably request, in order to grant, preserve, protect and perfect the validity and priority of the security interests and Liens created or intended to be created by the Security Documents including, without limitation, any documents reasonably required to be executed with respect to the Flagler option. In addition, from time to time, the Issuer will reasonably promptly secure the obligations under the notes, the Indenture and the Security Documents by pledging or creating, or causing to be pledged or created, perfected security interests and Liens with respect to the Collateral. Such security interests and Liens will be created under the Security Documents and other security agreements, mortgages, deeds of trust and other instruments and documents in form and substance reasonably satisfactory to the Notes Collateral Agent.

The Issuer, the Guarantors, the Notes Collateral Agent and the Trustee entered into one or more Security Documents creating and establishing the terms of the security interests and Liens that secure the notes and the Guarantees. These security interests and Liens will secure the payment and performance when due of all of the Obligations of the Issuer and the Guarantors under the notes, the Indenture, the Guarantees and the Security Documents, as provided in the Security Documents. The Trustee was appointed, pursuant to the Indenture, as the Notes Collateral Agent. The Security Documents provide that the Security Documents may be amended from time to time without the consent of the Holders to add other parties holding Other Pari Passu Lien Obligations to the extent permitted to be incurred under the Indenture and other applicable agreements. See “Amendment, Supplement and Waiver.”

On or prior to the Issue Date, the Issuer, the Guarantors, the Notes Collateral Agent and the ABL Agent entered into the Intercreditor Agreement. Although the Holders of the notes and the holders of Lenders Debt are not party to the Intercreditor Agreement, by their acceptance of the notes and Lenders Debt, respectively, they will each agree to be bound thereby.

The Security Agreement provides that, as between trustees or agents representing holders of Indebtedness for whose benefit equal priority Liens have been granted on the Collateral for the benefit of holders of different series of Indebtedness (e.g. the Trustee and the trustee or agent for any Other Pari Passu Lien Obligations as to their respective first priority Liens on the Notes Collateral and the second priority Liens on the ABL Collateral), the “Applicable Authorized Representative” will have the right to direct the Notes Collateral Agent with respect to foreclosures and other actions with respect to the applicable Collateral and the other trustees or agents shall have no right to take actions or direct the Notes Collateral Agent to take action with respect to such Collateral. The Applicable Authorized Representative shall be the trustee or agent representing the series of Indebtedness with the greatest outstanding aggregate principal amount.

Until the discharge of obligations secured by a first-priority Lien with respect to any Collateral (e.g. the Lien of the Notes Collateral Agent with respect to the Notes Collateral or the Lien of the ABL Agent with respect to the ABL Collateral), whether or not any insolvency or bankruptcy proceeding has been commenced by or against the Issuer or any Guarantor, the trustee or agent acting on behalf of any holders (or the holders themselves) of obligations secured by second-priority Liens on such Collateral will not exercise or seek to exercise any rights or remedies with respect to any such Collateral or institute any action or proceeding with

respect to such rights or remedies (including any action of foreclosure); provided, however, that such trustee or agent acting on behalf of any holders (or the holders themselves) of obligations secured by second-priority Liens on such Collateral may, exercise any or all such rights or remedies after the passage of a period of 90 days (the “Priority Lien Standstill Period”) has elapsed since the later to occur of (i) the date on which such obligations secured by second-priority liens are accelerated; or if the date on which the trustee or agent acting on behalf of the holders of obligations secured by a first-priority Lien on such Collateral received notice of such acceleration; provided, however, that notwithstanding anything herein to the contrary, in no event will any trustee or agent acting on behalf of any holders (or the holders themselves) of obligations secured by second-priority Liens on such Collateral, exercise any rights or remedies with respect to such Collateral if, notwithstanding the expiration of the Priority Lien Standstill Period, the trustee or agent acting on behalf of the holders of obligations secured by a first-priority Lien on such Collateral with respect to the applicable Collateral, has commenced and is diligently pursuing the exercise of their rights or remedies with respect to all or any material portion of such Collateral.

Notwithstanding the expiration of the Priority Lien Standstill Period, (A) the trustee or agent acting on behalf of any holders (or the holders themselves) of obligations secured by second-priority Liens on any Collateral shall not take any enforcement action with respect to deposit accounts or securities accounts over which a trustee or agent acting on behalf of any holders of obligations secured by first-priority Liens has control or take action that interferes with collection of account receivables, without such trustee’s or agent’s consent; and (B) the trustee or agent acting on behalf of any holders (or the holders themselves) of obligations secured by second-priority Liens on any Collateral shall not take any enforcement action with respect to any real property subject to a mortgage unless the trustee or agent acting on behalf of any holders of obligations secured by first-priority Liens has commenced enforcement with respect to such real property.

In addition, until the discharge of obligations secured by a first-priority Lien with respect to any Collateral, whether or not any insolvency or bankruptcy proceeding has been commenced by or against the Issuer or any Guarantor, the trustee or agent acting on behalf of any holders (or the holders themselves) of obligations secured by second-priority Liens on such Collateral will not (i) contest, protest or object to any foreclosure proceeding or action brought with respect to the applicable Collateral or any other exercise of any rights and remedies relating to such Collateral, whether under the applicable Security Documents or otherwise and (ii) will not object to the forbearance by the trustee or agent acting on behalf of the holders of obligations secured by a first-priority Lien on such Collateral from bringing or pursuing any rights or remedies;

Until the earlier of (i) the discharge of obligations secured by a first-priority Lien with respect to any Collateral has occurred or (ii) the expiration of the Priority Lien Standstill Period, whether or not any insolvency or bankruptcy proceeding has been commenced by or against the Issuer or any Guarantor, the trustee or agent acting on behalf of the holders of obligations secured by a first-priority Lien on such Collateral will have the exclusive right to enforce rights, exercise remedies (including, without limitation, set-off and the right to credit bid their debt) and, in connection therewith make determinations regarding the release, disposition, or restrictions with respect to such Collateral without any consultation with or the consent of the trustee or agent acting on behalf of any holders (or the holders themselves) of obligations secured by second-priority Liens on such Collateral; provided, however, that the Liens of all secured parties shall attach to any proceeds (other than those properly applied to the obligations secured by prior Liens) of any Collateral released or disposed of, subject to the relative priorities. In exercising rights and remedies, any trustee or agent acting on behalf of the holders of obligations secured by a first-priority Lien on any Collateral may enforce the provisions of the Security Documents and exercise remedies thereunder with respect to such Collateral, all in such order and in such manner as they may determine in the exercise of their sole discretion and they shall have the right to sell or otherwise dispose of any such Collateral upon foreclosure, to incur expenses in connection with such disposition, and to exercise all the rights and remedies of a secured creditor under the uniform commercial code and of a secured creditor under the bankruptcy laws of any applicable jurisdiction.

Notwithstanding the foregoing, the trustee or agent acting on behalf of any holders (or the holders themselves) of obligations secured by second-priority Liens on any Collateral, may (i) file a claim or statement of

interest; provided that an insolvency or bankruptcy proceeding has been commenced by or against the Issuer or any Guarantor, (ii) take any action (not adverse to the priority status of the prior Liens, or the rights of the holders thereof) in order to create, perfect, preserve or protect such Liens, (iii) file any necessary responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleading made by any person objecting to or otherwise seeking the disallowance of its claims, (iv) file any pleadings, objections, motions or agreements that assert rights or interests available to unsecured creditors not inconsistent with the terms of the Intercreditor Agreement, (v) vote on any plan of reorganization, file any proof of claim, make other filings and make any arguments and motions that are, in each case, in accordance with the terms of the Intercreditor Agreement, (vi) exercise any of its rights or remedies (including acceleration) after the termination of the Priority Lien Standstill Period, (vii) make a cash bid on all or any portion of such Collateral in any foreclosure proceeding or action, (viii) credit bid on all or any portion of the Collateral, provided any obligations secured by prior Liens on such Collateral are discharged prior to or in connection with any such credit bid, (ix) join in any judicial proceedings commenced by the any trustee or agent acting on behalf of the holders of obligations secured by a first-priority Lien on such Collateral to enforce Liens on such Collateral; provided, however, that they may not interfere with the enforcement actions of the such trustee or agent; and (x) engage consultants, valuation firms, investment bankers, and perform or engage third parties to perform audits, examinations and appraisals of the Collateral for the sole purpose of valuing the Collateral and not for the purpose of marketing or conducting a disposition of such Collateral; provided, however, that the trustee or agent acting on behalf of any holders (or the holders themselves) of obligations secured by second-priority Liens on any Collateral shall not take any of the foregoing actions if they would interfere in any material respect with the enforcement by the trustee or agent acting on behalf of the holders of obligations secured by a first-priority Lien on such Collateral.

The Notes Collateral Agent, for itself and/or on behalf of the Noteholder Secured Parties will agree that, to the extent any Noteholder Secured Party or the Notes Collateral Agent exercises its rights of set-off against the Issuer’s or any Guarantor’s deposit Accounts or securities Accounts (other than Asset Sales Proceeds Accounts), the amount of such set-off will be deemed to be ABL Collateral to be held and distributed pursuant to the Intercreditor Agreement. The Notes Collateral Agent for itself and/or on behalf of the Noteholder Secured Parties will further agree that all funds deposited under account control agreements (other than account agreements governing Asset Sales Proceeds Accounts) and then applied to the obligations outstanding under the Credit Agreement will be treated as ABL Collateral, unless after the earlier to occur of (i) any insolvency or bankruptcy proceeding with respect to the Issuer or any Guarantor and (ii) the issuance of an enforcement notice by the Notes Collateral Agent, the ABL Agent has actual knowledge that any such funds are the indentifiable proceeds of Notes Collateral that have been deposited under account control agreements without the express written consent of the Notes Collateral Agent (all such deposits being “Specified Notes Priority Collateral Deposits”), and any claim by any of the Notes Collateral Agent or the Noteholder Secured Parties that payments made to the ABL Agent (other than Specified Notes Priority Collateral Deposits) are proceeds of or otherwise constitute Notes Collateral, are waived. Each of the ABL Agent, the ABL Secured Parties, the Notes Collateral Agent and the Noteholder Secured Parties will also agree that any proceeds of Collateral, whether or not deposited under account control agreements, that are used by the Issuer or any Guarantor to acquire other property that is Collateral prior to the earlier of (i) any insolvency or bankruptcy proceeding with respect to the Issuer or any Guarantor and (ii) the issuance of any enforcement notice, will not (as among the ABL Agent, the ABL Secured Parties, the Notes Collateral Agent and the Noteholder Secured Parties) be treated as proceeds of Collateral for purposes of determining the relative priorities in the Collateral that was so acquired.

The Intercreditor Agreement provides that if the ABL Agent takes any enforcement action with respect to the ABL Collateral, the Noteholder Secured Parties (i) will cooperate with the ABL Agent and use reasonable efforts to ensure its activities do not interfere materially in any respect the ABL Agent from enforcing its security

interest in the ABL Collateral, and (ii) will, subject to the rights of any landlords under real estate leases, permit the ABL Agent and its agents, representatives and designees non-exclusive access to the Notes Collateral for the purpose of arranging for and effecting the disposition removal or security of ABL Collateral, including the production, completion, packaging and other preparation or removal of such ABL Collateral for disposition and/or the removal or copying of books and records relating to ABL Collateral at that location and/or protecting the ABL Collateral., for a period not to exceed 180 days after the taking of such enforcement action; provided, however, that nothing contained in the Intercreditor Agreement will restrict the rights of the Notes Collateral Agent from selling, assigning or otherwise transferring any Notes Collateral prior to the expiration of such 180-day period if the purchaser, assignee or transferee thereof agrees to be bound by the provisions of the Intercreditor Agreement. If any stay or other order prohibiting the exercise of remedies with respect to the ABL Collateral has been entered by a court of competent jurisdiction, such 180-day period shall be tolled during the pendency of any such stay or other order.

The ABL Agent agrees to promptly repair any damage (other than ordinary wear and tear) to any and all Notes Collateral caused by the entry onto, or use of, such Notes Collateral by the ABL Agent, the ABL Secured Parties and/or their agents.

The Issuer and the Guarantors will be entitled to the releases of property and other assets other than any disposition to the Company or another Guarantor included in the Collateral from the Liens securing the notes under any one or more of the following circumstances:

In addition, at any time prior to discharge of obligations secured by a first-priority Lien with respect to any Collateral, if, in connection with (i) any enforcement in respect of such Collateral by any trustee or agent acting on behalf of any holders (or the holders themselves) of such obligations, (ii) a disposition permitted under the terms of both the first-priority and junior Security Documents, or (iii) a disposition conducted by the Issuer or any Guarantor at the direction of, any trustee or agent acting on behalf of any holders (or the holders themselves) of such obligations after the occurrence and during the continuance of a default with respect to such obligations, such trustee or agent releases its Liens on any part of such Collateral, then, in each case, the Liens, if any, securing any junior obligations, on such Collateral sold or disposed of in connection with such enforcement or that disposition, will be automatically, unconditionally and simultaneously released; provided that no release of Liens securing such junior obligations with respect to any Collateral will be deemed to have occurred (a) upon a discharge of obligations secured by a first-priority Lien with respect to any Collateral (other than any such discharge as a result of the application of the proceeds of the disposition of such Collateral to such obligations) or (b) in a refinancing of obligations secured by a first-priority Lien with respect to any Collateral with secured indebtedness that is incurred contemporaneously with or promptly after the discharge of such pre-existing obligations.

The security interests in all Collateral securing the notes and Guarantees also will be released upon (i) payment in full of the principal of, together with accrued and unpaid interest on, the notes and all other Obligations under the Indenture, the Guarantees under the Indenture and the Security Documents that are due and payable at or prior to the time such principal, together with accrued and unpaid interest, are paid or (ii) a legal defeasance or covenant defeasance under the Indenture as described below under “—Legal Defeasance and Covenant Defeasance” or a discharge of the Indenture as described under “—Satisfaction and Discharge.”

The Credit Agreement and related documents and the Indenture and related documents may be amended, restated, extended, supplemented or otherwise modified in accordance with the terms thereof and hereof, and the obligations under the Credit Agreement and the obligations under the Notes may be refinanced in accordance with the respective terms thereof and hereof, in each case, without notice to, or the consent of, any or all of the Notes Collateral Agent, the Holders, the ABL Agent and ABL Secured Parties, all without affecting the Lien subordination or other provisions of the Intercreditor Agreement, provided, however, that any such amendment, restatement, extension, supplement or modification or refinancing shall not, without the consent of the applicable trustees and agents, including the Notes Collateral Agent and the ABL Agent be inconsistent with or in violation of the Intercreditor Agreement; and the holders of such refinancing debt, either directly or through an agent or representative, bind themselves to the Intercreditor Agreement in a manner reasonably acceptable to the Notes Collateral Agent and the ABL Agent.

The Indenture provides that the Issuer will comply with the provisions of TIA § 314 to the extent applicable. To the extent applicable, the Issuer will cause TIA § 313(b), relating to reports, and TIA § 314(d), relating to the release of property or securities subject to the Lien of the Security Documents, to be complied with. Any certificate or opinion required by TIA § 314(d) may be made by an officer or legal counsel, as applicable, of the Issuer except in cases where TIA § 314(d) requires that such certificate or opinion be made by an independent Person, which Person will be an independent engineer, appraiser or other expert selected by or reasonably satisfactory to the Trustee. Notwithstanding anything to the contrary in this paragraph, the Issuer will not be required to comply with all or any portion of TIA § 314(d) if it reasonably determines that under the terms of TIA § 314(d) or any interpretation or guidance as to the meaning thereof of the Commission and its staff, including “no action” letters or exemptive orders, all or any portion of TIA § 314(d) is inapplicable to any release or series of releases of Collateral.

Without limiting the generality of the foregoing, certain no action letters issued by the Commission have permitted an indenture qualified under the Trust Indenture Act to contain provisions permitting the release of collateral from Liens under such indenture in the ordinary course of the issuer’s business without requiring the issuer to provide certificates and other documents under Section 314(d) of the Trust Indenture Act. The Issuer and the Guarantors may, subject to the provisions of the Indenture, among other things, without any release or consent by the Noteholder Secured Parties, conduct ordinary course activities with respect to the Collateral, including, without limitation:

The Issuer must deliver an Officer’s Certificate to the trustee or agent acting on behalf of any holders (or the holders themselves) of obligations secured by second-priority Liens on any Collateral within 30 days following

the end of each six-month period beginning on July 1 and January 1 of each year, to the effect that all such releases and withdrawals during the preceding six-month period (or since the Issue Date, in the case of the first such certificate) in the ordinary course of the Issuer’s or the Guarantors’ business, as described in the preceding paragraph, were not prohibited by the Indenture.

Except to the extent that Issuer may be required to offer to purchase the notes as set forth below under “— Repurchase at the option of holders,” the Issuer is not required to make mandatory redemption or sinking fund payments with respect to the notes.

Except as described below, the notes are not redeemable at the Issuer’s option until February 1, 2014. From and after February 1, 2014 the Issuer may redeem the notes, in whole or in part, upon not less than 30 nor more than 60 days’ prior notice by first class mail, postage prepaid, with a copy to the Trustee, to each Holder of notes to the address of such Holder appearing in the security register at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to, but not including, the applicable redemption date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on February 1 of each of the years indicated below:

In addition, prior to February 1, 2014, the Issuer may, at its option, redeem up to 35% of the aggregate principal amount of notes issued under the Indenture at a redemption price equal to 108.125% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to, but not including, the redemption date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date, with the net proceeds of one or more Equity Offerings of the Issuer or any direct or indirect parent of the Issuer to the extent such net proceeds are contributed to the capital of the Issuer; provided that at least 65% of the sum of the aggregate principal amount of notes originally issued under the Indenture and any Additional Notes issued under the Indenture after the Issue Date remains outstanding immediately after the occurrence of each such redemption; provided further that each such redemption occurs within 90 days of the date of closing of each such Equity Offering.

Additionally, prior to February 1, 2014, one time during each 12-month period, commencing on the Issue Date, the Issuer will be entitled at its option to redeem up to 10% of the aggregate principal amount of the notes issued under the Indenture at a redemption price equal to 103.000% of the aggregate principal amount thereof, plus accrued interest thereon, if any, to, but not including, the redemption date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date. Notice of any such redemption must be mailed by first-class mail to each Holder’s registered address, not less than 30 or more than 60 days prior to the redemption date.

At any time prior to February 1, 2014, the Issuer may also redeem all or a part of the notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first class mail to each Holder’s registered address, at a redemption price equal to 100% of the principal amount of notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, to, but not including, the redemption date, subject to the rights of Holders of record on the relevant record date to receive interest due on the relevant interest payment date.

The Trustee shall select the notes to be purchased in the manner described under “—Repurchase at the option of Holders—Selection and notice.”

Notice of redemption upon any Equity Offering or in connection with a transaction (or series of related transactions) that constitute a Change of Control may, at the Issuer’s option and discretion, be subject to one or more conditions precedent, including, but not limited to, completion of an Equity Offering or Change of Control, as the case may be.

If a Change of Control occurs, the Issuer will make an offer to purchase all of the notes pursuant to the offer described below (the “Change of Control Offer”) at a price in cash (the “Change of Control Payment”) equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to, but not including, the date of purchase, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date. Within 30 days following any Change of Control, the Issuer will send notice of such Change of Control Offer by first class mail, with a copy to the Trustee, to each Holder of notes to the address of such Holder appearing in the security register with a copy to the Trustee or otherwise in accordance with the procedures of DTC, with the following information:

(1) a Change of Control Offer is being made pursuant to the covenant entitled “Change of control,” and that all notes properly tendered pursuant to such Change of Control Offer will be accepted for payment;

(2) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the “Change of Control Payment Date”);

(3) any note not properly tendered will remain outstanding and continue to accrue interest;

(4) unless the Issuer defaults in the payment of the Change of Control Payment, all notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on, but not including, the Change of Control Payment Date;

(5) Holders electing to have any notes purchased pursuant to a Change of Control Offer will be required to surrender the notes, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the notes completed, to the paying agent specified in the notice at the address specified in the notice prior to the close of business on the third business day preceding the Change of Control Payment Date;

(6) Holders will be entitled to withdraw their tendered notes and their election to require the Issuer to purchase such notes; provided that the paying agent receives, not later than the close of business on the last day of the offer period, a facsimile transmission or letter setting forth the name of the Holder of the notes, the principal amount of notes tendered for purchase, and a statement that such Holder is withdrawing his tendered notes and his election to have such notes purchased;

(7) if such notice is mailed prior to the occurrence of a Change of Control, stating the Change of Control Offer is conditional on the occurrence of such Change of Control; and

(8) that Holders whose notes are being purchased only in part will be issued new notes equal in principal amount to the unpurchased portion of the notes surrendered, which unpurchased portion must be equal to $2,000 or an integral multiple of $1,000 in excess thereof.

While the notes are in global form and the Issuer makes an offer to purchase all of the notes pursuant to the Change of Control Offer, a Holder may exercise its option to elect for the purchase of the notes through the facilities of DTC, subject to its rules and regulations.

We will not be required to make a Change of Control Offer following a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the

requirements set forth in the indenture applicable to a Change of Control Offer made by us and purchases all notes validly tendered and not withdrawn under such Change of Control Offer or (2) notice of redemption has been given pursuant to the indenture as described under the caption “—Optional Redemption,” unless and until there is a default in payment of the applicable redemption price. Notwithstanding anything to the contrary herein, a Change of Control Offer may be made in advance of a Change of Control, conditional upon such Change of Control.

The Issuer will comply with the requirements of Section 14(e) under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the Issuer will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in the Indenture by virtue thereof.

On the Change of Control Payment Date, the Issuer will, to the extent permitted by law,

(1) accept for payment all notes or portions thereof properly tendered pursuant to the Change of Control Offer,

(2) deposit with the paying agent an amount equal to the aggregate Change of Control Payment in respect of all notes or portions thereof so tendered, and

(3) deliver, or cause to be delivered, to the Trustee for cancellation the notes so accepted together with an Officers’ Certificate stating that such notes or portions thereof have been tendered to and purchased by the Issuer.

The paying agent will promptly mail to each Holder of the notes the Change of Control Payment for such notes, and the Trustee will promptly authenticate and mail to each Holder a new note equal in principal amount to any unpurchased portion of the notes surrendered, if any; provided that each such new note will be in a principal amount of $2,000 or an integral multiple of $1,000 in excess thereof. The Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

The Credit Agreement will (subject to limited exceptions), and future credit agreements or other agreements relating to senior Indebtedness to which the Issuer becomes a party may, provide that certain change of control events with respect to the Issuer would constitute a default thereunder. In the event a Change of Control occurs at a time when the Issuer is prohibited from purchasing the notes, the Issuer could seek the consent of its lenders to permit the purchase of the notes or could attempt to refinance the borrowings that contain such prohibition. If the Issuer does not obtain such consent or repay such borrowings, the Issuer will remain prohibited from purchasing the notes and such default could result in amounts outstanding under the Credit Agreement being declared due and payable. In such case, the Issuer’s failure to purchase tendered notes would constitute an Event of Default under the Indenture.

The Change of Control purchase feature of the notes may in certain circumstances make more difficult or discourage a sale or takeover of us and, thus, the removal of incumbent management. The Change of Control purchase feature is a result of negotiations between the initial purchaser of the notes and us. After the Issue Date, we have no present intention to engage in a transaction involving a Change of Control, although it is possible that we could decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of Indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to incur additional Indebtedness are contained in the covenants described under “Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” and “Certain covenants—Liens.” Such restrictions in the Indenture can be waived only with the consent of the Holders of a majority in principal amount

of the notes then outstanding. Except for the limitations contained in such covenants, however, the Indenture will not contain any covenants or provisions that may afford Holders of the notes protection in a highly levered transaction.

The definition of “Change of Control” includes a disposition of all or substantially all of the assets of the Issuer to certain Persons. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of “all or substantially all” of the assets of the Issuer. As a result, it may be unclear as to whether a Change of Control has occurred and whether a Holder of notes may require the Issuer to make an offer to repurchase the notes as described above.

The existence of a Holder’s right to require the Issuer to repurchase such Holder’s notes upon the occurrence of a Change of Control may deter a third party from seeking to acquire the Issuer in a transaction that would constitute a Change of Control.

The provisions under the Indenture relative to our obligation to make an offer to repurchase the notes as a result of a Change of Control may be waived or modified with the written consent of the holders of a majority in principal amount of the notes.

(a) The Indenture provides that the Issuer will not, and will not permit any Restricted Subsidiary to, cause, make or suffer to exist an Asset Sale, unless:

(1) the Issuer or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed of;

(2) except in the case of a Permitted Asset Swap, at least 75% of the consideration therefor received by the Issuer or such Restricted Subsidiary, as the case may be, is in the form of cash or Cash Equivalents;

(3) to the extent that any consideration received by the Issuer or a Restricted Subsidiary in such Asset Sale constitute securities or other assets that constitute Notes Collateral, such securities or other assets, including the assets of any Person that becomes a Guarantor as a result of such transaction, are concurrently with their acquisition added to the Notes Collateral securing the notes;

(4) to the extent the Asset Sale involves assets constituting ABL Collateral, the consideration received from such Asset Sale is used to repay (x) any Indebtedness under the Credit Agreement or any Indebtedness of the Issuer or a Guarantor that in each case is secured by a Lien on the ABL Collateral or (y) any Indebtedness of a Restricted Subsidiary that is not a Guarantor (and, in the case of revolving obligations under clause (y), to correspondingly reduce commitments with respect thereto), in each case other than Indebtedness owed to the Issuer or a Subsidiary of the Issuer; and

(5) the Net Proceeds from any such Asset Sale of Notes Collateral is paid directly by the purchaser thereof to the Notes Collateral Agent to be held in trust in an Asset Sale Proceeds Account for application in accordance with this covenant.

Within 365 days after the Issuer’s or a Restricted Subsidiary’s receipt of the Net Proceeds of any Asset Sale covered by this clause (a), the Issuer or such Restricted Subsidiary, at its option, may apply the Net Proceeds from such Asset Sale:

(1) to make one or more offers to the Holders of the notes (and, at the option of the Issuer, the holders of Other Pari Passu Lien Obligations) to purchase notes (and such Other Pari Passu Lien Obligations) pursuant to and subject to the conditions contained in the Indenture (each, an “Asset Sale Offer”); provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to this

clause (1), the Issuer or such Restricted Subsidiary shall permanently retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased; provided further that if the Issuer or such Restricted Subsidiary shall so reduce any Other Pari Passu Lien Obligations, the Issuer will equally and ratably reduce Indebtedness under the notes by making an offer to all Holders of notes to purchase at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and additional interest, if any, the pro rata principal amount of the notes, such offer to be conducted in accordance with the procedures set forth below for an Asset Sale Offer but without any further limitation in amount;

(2) to make an investment in (a) any one or more businesses; provided that such investment in any business is in the form of the acquisition of Capital Stock and results in the Issuer or a Restricted Subsidiary, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (b) properties, (c) capital expenditures or (d) acquisitions of other assets, in each of (a), (b), (c) and (d), used or useful in a Similar Business; provided, further, that such investment is concurrently added to the Collateral securing the notes;

(3) to the extent such Net Proceeds are not from Asset Sales of Notes Collateral, to permanently reduce Indebtedness of a Restricted Subsidiary, other than Indebtedness owed to the Issuer, a Guarantor or another Restricted Subsidiary; or

(4) to the extent such Net Proceeds are from Asset Sales of ABL Collateral, in accordance with clause (3) of the preceding paragraph.

Any Net Proceeds from the Asset Sales covered by this clause (a) that are not invested or applied as provided and within the time period set forth in the first sentence of the immediately preceding paragraph will be deemed to constitute “Excess Proceeds.” In the case of clauses (2) and (3) above, a binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment; provided that (x) such investment is consummated within 545 days after receipt by the Issuer or any Restricted Subsidiary of the Net Proceeds of any Asset Sale and (y) if such investment is not consummated within the period set forth in subclause (x), the Net Proceeds not so applied will be deemed to be Excess Proceeds. When the aggregate amount of Excess Proceeds exceeds $25.0 million, the Issuer shall make an Asset Sale Offer to all Holders of the notes, and, if required by the terms of any Other Pari Passu Lien Obligations, to the holders of such Other Pari Passu Lien Obligations, to purchase the maximum principal amount of notes and such Other Pari Passu Lien Obligations, that are $2,000 or an integral multiple of $1,000 in excess thereof that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof (or, in the case of any Other Pari Passu Lien Obligations offered at a significant original issue discount, 100% of the accreted value thereof, if permitted by the relevant indenture or other agreement governing such Other Pari Passu Lien Obligations), plus accrued and unpaid interest, if any, to, but not including, the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. The Issuer will commence an Asset Sale Offer with respect to Excess Proceeds within 30 days after the date that Excess Proceed exceeds $25.0 million by mailing the notice required pursuant to the terms of the Indenture, with a copy to the Trustee. To the extent that the aggregate amount of notes and such Other Pari Passu Lien Obligations tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for general corporate purposes, subject to other covenants contained in the Indenture. If the aggregate principal amount of notes or the Other Pari Passu Lien Obligations surrendered by such holders thereof exceeds the amount of Excess Proceeds, the notes and such Other Pari Passu Lien Obligations will be purchased on a pro rata basis based on the accreted value or principal amount of the notes or such Other Pari Passu Lien Obligations tendered. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. After the Issuer or any Restricted Subsidiary has applied the Net Proceeds from any Asset Sale of any Notes Collateral as provided in, and within the time periods required by, this paragraph (a), the balance of such Net Proceeds, if any, from such Asset Sale of Notes Collateral shall be released by the Notes Collateral Agent to the Issuer or such Restricted Subsidiary for use by the Issuer or such Restricted Subsidiary for any purpose not prohibited by the terms of the Indenture.

(b) For the purposes of this covenant, any sale by the Issuer or a Restricted Subsidiary of the Capital Stock of a Restricted Subsidiary that owns assets constituting Notes Collateral shall be deemed to be sale of such Notes Collateral.

For purposes of this covenant, the following are deemed to be cash or Cash Equivalents:

(a) any liabilities (as shown on the Issuer’s, or such Restricted Subsidiary’s most recent internally available balance sheet or in the notes thereto) of the Issuer or any Restricted Subsidiary constituting Other Pari Passu Lien Obligations, indebtedness secured by assets of the Issuer or a Guarantor not constituting Notes Collateral or indebtedness of a non-Guarantor that are assumed by the transferee of any such assets and for which the Issuer and all Restricted Subsidiaries have been validly released by all creditors in writing;

(b) any securities, notes or other obligations and assets received by the Issuer, a Guarantor or such Restricted Subsidiary from such transferee that are converted by the Issuer or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of such Asset Sale;

(d) any Designated Noncash Consideration received by the Issuer or any Restricted Subsidiary in such Asset Sale having an aggregate Fair Market Value, taken together with all other Designated Noncash Consideration received pursuant to this clause (c) that is at that time outstanding, not to exceed the greater of (x) ($25.0 million and (y) 3.0% of Total Assets) at the time of the receipt of such Designated Noncash Consideration, with the Fair Market Value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value.

The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the Issuer will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in the Indenture by virtue thereof.

If less than all of the notes or such Other Pari Passu Lien Obligations are to be redeemed at any time, selection of such notes for redemption, will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such notes are listed, or, if such notes are not so listed, on a pro rata basis or by lot or such similar method in accordance with the procedures of DTC; provided that no notes of $2,000 or less shall be purchased or redeemed in part.

Notices of purchase or redemption shall be mailed by first class mail, postage prepaid, at least 30 but not more than 60 days before the purchase or redemption date to each Holder of notes to be purchased or redeemed at such Holder’s registered address. If any note is to be purchased or redeemed in part only, any notice of purchase or redemption that relates to such note shall state the portion of the principal amount thereof that has been or is to be purchased or redeemed.

A new note in principal amount equal to the unpurchased or unredeemed portion of any note purchased or redeemed in part will be issued in the name of the Holder thereof upon cancellation of the original note. On and after the purchase or redemption date, unless the Issuer defaults in payment of the purchase or redemption price, interest shall cease to accrue on notes or portions thereof purchased or called for redemption.

Set forth below are summaries of certain covenants contained in the Indenture. If on any date following the Issue Date (i) the notes have Investment Grade Ratings from both Rating Agencies, and (ii) no Default has occurred and is continuing under the Indenture (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a “Covenant Suspension Event”), the Issuer and the Restricted Subsidiaries will not be subject to the following covenants (collectively, the “Suspended Covenants”):

(3) “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”;

(4) clause (4) of the first paragraph of “—Merger, Consolidation or Sale of All or Substantially All Assets”;

(6) “—Limitations on Guarantees of Indebtedness by Restricted Subsidiaries”; and

(7) “—Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.”

In the event that the Issuer and the Restricted Subsidiaries are not subject to the Suspended Covenants under the Indenture for any period of time as a result of the foregoing, and on any subsequent date (the “Reversion Date”) one or both of the Rating Agencies (a) withdraw their Investment Grade Rating or downgrade the rating assigned to the notes below an Investment Grade Rating and/or (b) the Issuer or any of its Affiliates enters into an agreement to effect a transaction that would result in a Change of Control and one or more of the Rating Agencies indicate that if consummated, such transaction (alone or together with any related recapitalization or refinancing transactions) would cause such Rating Agency to withdraw its Investment Grade Rating or downgrade the ratings assigned to the notes below an Investment Grade Rating, then the Issuer and the Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants under the Indenture with respect to future events, including, without limitation, a proposed transaction described in clause (b) above.

The period of time between the Suspension Date and the Reversion Date is referred to in this description as the “Suspension Period.” Additionally, upon the occurrence of a Covenant Suspension Event, the amount of Excess Proceeds from Net Proceeds shall be reset at zero. During the Suspension Period, no additional subsidiary may be designated an Unrestricted Subsidiary unless such designation would have been permitted if the covenant described under the caption “Limitation on Restricted Payments” had been in effect at all times during the Suspension Period. In the event of any such reinstatement, no action taken or omitted to be taken by the Issuer or any of its Restricted Subsidiaries prior to such reinstatement will give rise to a Default or Event of Default under the Indentures with respect to notes; provided that (1) with respect to Restricted Payments made after any such reinstatement, the amount of Restricted Payments made will be calculated as though the covenant described under the caption “—Limitation on Restricted Payments” had been in effect prior to, but not during the Suspension Period, and (2) all Indebtedness incurred, or Disqualified Stock or preferred stock issued, during the Suspension Period will be classified to have been incurred or issued pursuant to clause (c) of the second paragraph of “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.”

There can be no assurance that the notes will ever achieve or maintain Investment Grade Ratings.

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly:

(1) declare or pay any dividend or make any distribution on account of the Issuer’s or any Restricted Subsidiary’s Equity Interests, including any dividend or distribution payable in connection with any merger or consolidation other than:

(A) dividends or distributions by the Issuer payable in Equity Interests (other than Disqualified Stock) of the Issuer or in options, warrants or other rights to purchase such Equity Interests; or

(B) dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a Wholly-Owned Subsidiary, the Issuer or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities;

(2) purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of the Issuer or any direct or indirect parent of the Issuer, including in connection with any merger or consolidation;

(3) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value in each case, prior to any scheduled repayment, sinking fund payment or maturity, any Subordinated Indebtedness, other than (x) the purchase, repurchase or other acquisition of Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition and (y) Indebtedness of the Issuer to a Restricted Subsidiary or a Restricted Subsidiary to the Issuer or another Restricted Subsidiary; or

(all such payments and other actions set forth in clauses (1) through (4) above being collectively referred to as “Restricted Payments”), unless, at the time of such Restricted Payment:

(a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof;

(b) immediately after giving effect to such transaction on a pro forma basis, the Issuer could incur $1.00 of additional indebtedness under the provisions of the first paragraph of the covenant described “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”; and

(c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuer and its Restricted Subsidiaries after the Issue Date (including Restricted Payments permitted by clauses (1), (2) (with respect to the payment of dividends on Refunding Capital Stock pursuant to clause (b) thereof only) and (9) of the next succeeding paragraph, but excluding all other Restricted Payments permitted by the next succeeding paragraph), is less than the sum of:

(1) 50% of the Consolidated Net Income of the Issuer for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing immediately preceding the Issue Date, to the end of the Issuer’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, or, in the case such Consolidated Net Income for such period is a deficit, minus 100% of such deficit, plus

(2) 100% of the aggregate net cash proceeds and the Fair Market Value of marketable securities or other property received by the Issuer since immediately after the Issue Date (other than net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness, Disqualified Stock or preferred stock pursuant to clause (m) of the second paragraph of “Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”) from the issue or sale of:

(x) Equity Interests of the Issuer, excluding cash proceeds and the Fair Market Value of marketable securities or other property received from the sale of:

(A) Equity Interests to members of management, directors or consultants of the Issuer, any direct or indirect parent of the Issuer and the Issuer’s Subsidiaries after the Issue Date to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of the next succeeding paragraph; and

and to the extent actually contributed to the Issuer, Equity Interests of the Issuer’s direct or indirect parents (excluding contributions of the proceeds from the sale of Designated Preferred Stock of such Persons); or

(y) debt securities, Designated Preferred Stock or Disqualified Stock of the Issuer or any Restricted Subsidiary that have been converted into or exchanged for such Equity Interests of the Issuer or its direct or indirect parents;

provided, however, that this clause (2) shall not include the proceeds from (a) Refunding Capital Stock (as defined below), (b) Equity Interests or converted or exchanged debt securities of the Issuer sold to a Restricted Subsidiary or the Issuer, as the case may be, (c) Disqualified Stock or debt securities that have been converted into or exchanged for Disqualified Stock or (d) Excluded Contributions, plus

(3) 100% of the aggregate amount of cash and the Fair Market Value of marketable securities or other property contributed to the capital of the Issuer following the Issue Date (other than net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness, Disqualified Stock or preferred stock pursuant to clause (m) of the second paragraph of “Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”) (other than by a Restricted Subsidiary and other than by any Excluded Contributions), plus

(4) 100% of the aggregate amount received in cash and the Fair Market Value of marketable securities or other property received by the Issuer or a Restricted Subsidiary by means of:

(A) the sale or other disposition (other than to the Issuer or a Restricted Subsidiary) of Restricted Investments made by the Issuer and its Restricted Subsidiaries and repurchases and redemptions of such Restricted Investments from the Issuer and its Restricted Subsidiaries and repayments of loans or advances which constitute Restricted Investments by the Issuer and its Restricted Subsidiaries in each case after the Issue Date; or

(B) the sale (other than to the Issuer or a Restricted Subsidiary) of the stock of an Unrestricted Subsidiary (other than in each case to the extent the Investment in such Unrestricted Subsidiary was made by the Issuer or a Restricted Subsidiary pursuant to clause (10) of the next succeeding paragraph or to the extent such Investment constituted a Permitted Investment) or a dividend or distribution from an Unrestricted Subsidiary in each case after the Issue Date; plus

(5) in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the Fair Market Value of the Investment in such Unrestricted Subsidiary, in the case of an Unrestricted Subsidiary, such Fair Market Value may exceed $25.0 million, in writing by an independent and reputable investment banking, appraisal or valuation firm generally acceptable to institutional investors in the industry, at the time of the redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary, other than to the extent the Investment in such Unrestricted Subsidiary was made by the

Issuer or a Restricted Subsidiary pursuant to clause (7) of the next succeeding paragraph or to the extent such Investment constituted a Permitted Investment.

(1) the payment of any dividend or distribution or the consummation of any irrevocable redemption within 60 days after the date of declaration of such dividend or distribution or notice of such redemption, if at the date of declaration or notice such payment would have complied with the provisions of the Indenture;

(2)(a) any Restricted Payment in exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary) of, Equity Interests of the Issuer or of a direct or indirect parent company of the Issuer contributed to the capital of the Issuer (in each case, other than any Disqualified Stock) (“Refunding Capital Stock”) and (b) if immediately prior to the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Issuer (“Retired Capital Stock”), the Issuer and the Restricted Subsidiaries could incur $1.00 of additional Indebtedness under the provisions of the first paragraph of the covenant described “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”, the declaration and payment of dividends on the Refunding Capital Stock (other than Refunding Capital Stock the proceeds of which were used to redeem, repurchase, retire or otherwise acquire any Equity Interests of any direct or indirect parent of the Issuer) in an aggregate amount per year no greater than the aggregate amount of dividends per annum that was declarable and payable on such Retired Capital Stock immediately prior to such retirement;

(3) the redemption, repurchase or other acquisition or retirement of Subordinated Indebtedness of the Issuer or a Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, new Indebtedness of the Issuer or a Guarantor, as the case may be, which is incurred in compliance with “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” so long as:

(A) the principal amount (or accreted value) of such new Indebtedness does not exceed the principal amount, plus any accrued and unpaid interest, of the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired for value, plus the amount of any premium and any tender premiums, defeasance costs or other fees and expenses incurred in connection with the issuance of such new Indebtedness,

(B) such Indebtedness has a final scheduled maturity date equal to or later than the earlier of (x) the final scheduled maturity date of the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired and (y) 91 days following the maturity of the notes, and

(C) such Indebtedness has a Weighted Average Life to Maturity which is not less than the shorter of (x) the remaining Weighted Average Life to Maturity of the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired and (y) the Weighted Average Life to Maturity that would result if all payments of principal on the Subordinated Indebtedness being so redeemed, repurchased, defeased, acquired or retired that were due on or after the date one year following the maturity date of any notes then outstanding were instead due on such date one year following the maturity date of such notes (provided that, in the case of this subclause (C)(y), such Indebtedness does not provide for any scheduled principal payments prior to the maturity date of the notes in excess of, or prior to, the scheduled principal payments due prior to such maturity for the Indebtedness being refunded or refinanced or defeased);

(4) a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of Equity Interests of the Issuer or any of its direct or indirect parents held by any future, present or former employee, officer, director, manager or consultant (or any spouses, successors, executors, administrators, heirs or legatees of any of the foregoing) of the Issuer, any of its Subsidiaries or any of its direct or indirect parents pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or other agreement or arrangement; provided, however, that the

aggregate Restricted Payments made under this clause (4) do not exceed in any calendar year $5.0 million (with unused amounts in any calendar year being carried over to succeeding calendar years subject to a maximum (without giving effect to the following proviso) of $10.0 million in any calendar year; provided further that such amount in any calendar year may be increased by an amount not to exceed:

(A) the cash proceeds from the sale of Equity Interests (other than Disqualified Stock) of the Issuer and, to the extent contributed to the Issuer, Equity Interests of any of the Issuer’s direct or indirect parents, in each case to members of management, directors or consultants of the Issuer, any of its Subsidiaries or any of its direct or indirect parents that occurred after the Issue Date, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (c) of the preceding paragraph, plus

(B) the cash proceeds of key man life insurance policies received by the Issuer and its Restricted Subsidiaries after the Issue Date; less

provided that the Issuer may elect to apply all or any portion of the aggregate increase contemplated by subclauses (A) and (B) above in any calendar year;

(5) the declaration and payment of dividends to holders of any class or series of Disqualified Stock of the Issuer or any other Restricted Subsidiary issued in accordance with the covenant described under “— Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” to the extent such dividends are included in the definition of Fixed Charges;

(6)(A) the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by the Issuer after the Issue Date; provided that the aggregate amount of dividends paid pursuant to this clause (A) shall not exceed the aggregate amount of cash actually received by the Issuer from the sale of such Designated Preferred Stock; or

(B) the declaration and payment of dividends to a direct or indirect parent of the Issuer, the proceeds of which will be used to fund the payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of such parent issued after the Issue Date; provided that the amount of dividends paid pursuant to this clause (B) shall not exceed the aggregate amount of cash actually contributed to the Issuer from the sale of such Designated Preferred Stock;

provided, however, in the case of each of (A) and (B) of this clause (6), that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock, after giving effect to such issuance on a pro forma basis, the Issuer and the Restricted Subsidiaries the Issuer could incur $1.00 of additional Indebtedness under the provisions of the first paragraph of the covenant described “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”;

(7) Investments in Unrestricted Subsidiaries having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (7) that are at the time outstanding, not to exceed $10.0 million and 0.75% of Total Assets at the time of such investment; provided, that the dollar amount of Investments made pursuant to this clause (7) may be reduced by the Fair Market Value of the proceeds received by the Issuer and/or its Restricted Subsidiaries from the subsequent sale, disposition or other transfer of such Investments (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(8) repurchases of Equity Interests deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;

(9) the payment of dividends on the Issuer’s Common Stock after the Issue Date, of up to 6% per annum of the net proceeds received by or contributed to the Issuer in any public offering, other than public offerings registered on Form S-8 and other than any public sale constituting an Excluded Contribution;

(11) other Restricted Payments in an aggregate amount taken together with all other Restricted Payments made pursuant to this clause (11) not to exceed $30.0 million;

(12) the declaration and payment of dividends by the Issuer to, or the making of loans to, its direct parent in amounts required for either of their respective direct or indirect parents to pay:

(A) franchise taxes and other fees, taxes and expenses required to maintain their corporate existence,

(B) federal, state and local income taxes of a consolidated or combined tax group of which the direct or indirect parent is the common parent, to the extent such income taxes are attributable to the income of the Issuer and the Restricted Subsidiaries and not directly payable by the Issuer or the Restricted Subsidiaries and, to the extent of the amount actually received from its Unrestricted Subsidiaries, in amounts required to pay such taxes to the extent attributable to the income of such Unrestricted Subsidiaries; provided that in no event will such dividends exceed the amounts that the Issuer and its Restricted and/or Unrestricted Subsidiaries (as applicable) would have paid as a stand-alone group,

(C) customary salary, bonus and other benefits payable to officers and employees of any direct or indirect parent of the Issuer to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Issuer and the Restricted Subsidiaries,

(D) general corporate overhead expenses of any direct or indirect parent of the Issuer to the extent such expenses are attributable to the ownership or operation of the Issuer and the Restricted Subsidiaries; and

(E) any amounts required for any direct or indirect parent of the Issuer to pay fees and expenses, other than to Affiliates of the Issuer, related to any equity or debt offering of such parent, in an aggregate amount not to exceed $3.0 million from the Issue Date;

(13) Restricted Payments by the Issuer or any Restricted Subsidiary to allow the payment of cash in lieu of the issuance of fractional shares upon the exercise of options or warrants or upon the conversion or exchange of Capital Stock of any such Person;

(14) repurchases of Equity Interests deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants and repurchases of Equity Interests or options to purchase Equity Interests in connection with the exercise of stock options to the extent necessary to pay applicable withholding taxes;

(15) the purchase by the Issuer of fractional shares arising out of stock dividends, splits or combinations or business combinations;

(17) the repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness required pursuant to the provisions similar to those described under the captions “—Repurchase at the Option of Holders—Change of Control” and “—Repurchase at the Option of Holders—Asset Sales”; provided that there is a concurrent or prior Change of Control Offer or Asset Sale Offer, as applicable, and all notes tendered by holders of the notes in connection with such Change of Control Offer or Asset Sale Offer, as applicable, have been repurchased, redeemed or acquired for value;

provided however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (4), (5), (6), (7), (9) and (11), no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof.

As of the time of issuance of the notes, all of the Issuer’s Subsidiaries will be Restricted Subsidiaries. Issuer will not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the last sentence of the definition of “Unrestricted Subsidiary.” For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the Issuer and its Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated will be deemed to be Restricted Payments in an amount determined as set forth in the last sentence of the definition of “Investment.” Such designation will be permitted only if a Restricted Payment in such amount would be permitted at such time, whether pursuant to the first paragraph of this covenant or under clause (7), (10) or (11) of the second paragraph of this covenant, or pursuant to the definition of “Permitted Investments,” and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries will not be subject to any of the restrictive covenants set forth in the Indenture.

Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, (collectively, “incur” and collectively, an “incurrence”) with respect to any Indebtedness (including Acquired Indebtedness) and the Issuer will not issue any shares of Disqualified Stock and will not permit any Restricted Subsidiary to issue any shares of Disqualified Stock or preferred stock; provided, however, that the Issuer may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock, and any Guarantor may incur Indebtedness (including Acquired Indebtedness), issue shares of Disqualified Stock and issue shares of preferred stock, if the Fixed Charge Coverage Ratio for the Issuer and the Restricted Subsidiaries for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or preferred stock is issued would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or preferred stock had been issued, as the case may be, and the application of proceeds therefrom had occurred at the beginning of such four-quarter period.

(a) the incurrence of Indebtedness of the Issuer or any of the Restricted Subsidiaries under Credit Facilities in an aggregate amount at any time outstanding not to exceed the greater of (i) $40 million and (ii) the Borrowing Base as of the date of such incurrence;

(b) the incurrence by the Issuer and any Guarantor of Indebtedness represented by the notes (including any Guarantee) (other than any Additional Notes) and new notes issued in exchange for such notes pursuant to the Registration Rights Agreement and new notes issued in exchange for any Additional Notes issued under the Indenture;

(d) Indebtedness (including Capitalized Lease Obligations), Disqualified Stock and preferred stock incurred by the Issuer or any of its Restricted Subsidiaries, to finance the purchase, lease, development, construction, maintenance or improvement of property (real or personal) or equipment that is used or useful in a Similar Business, whether through the direct purchase of assets or the Capital Stock of any Person owning such assets, in an aggregate principal amount which, when aggregated with the principal amount of all other Indebtedness, Disqualified Stock and preferred stock then outstanding and incurred pursuant to this clause (d) and including all Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness, Disqualified Stock and preferred stock incurred pursuant to this clause (d), does not exceed the greater of (x) $40.0 million and (y) 5.0% of Total Assets;

(e) Indebtedness incurred by the Issuer or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit and bank guarantees issued in the ordinary course of business, including without limitation letters of credit in respect of workers’ compensation claims, health, disability or other benefits to employees or former employees or their families or property, casualty or liability insurance or self-insurance, and letters of credit in connection with the maintenance of, or pursuant to the requirements of, environmental or other permits or licenses from governmental authorities, or other Indebtedness with respect to reimbursement type obligations regarding workers’ compensation claims; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence;

(f) Indebtedness arising from agreements of the Issuer or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition;

(g) Indebtedness of the Issuer to a Restricted Subsidiary; provided that, other than in the case of intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of the Issuer and the Restricted Subsidiaries to finance working capital needs of the Restricted Subsidiaries, any such Indebtedness owing to a non-Guarantor is subordinated in right of payment to the notes; provided further, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary) shall be deemed, in each case to be an incurrence of such Indebtedness not permitted by this clause (g);

(h) Indebtedness of a Restricted Subsidiary to the Issuer or another Restricted Subsidiary; provided that, other than in the case of intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of the Issuer and its Subsidiaries to finance working capital needs of the Subsidiaries, if a Guarantor incurs such Indebtedness to a Restricted Subsidiary that is not the Issuer or a Guarantor such Indebtedness is subordinated in right of payment to the Guarantee of such Guarantor; provided further, that any subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary) shall be deemed, in each case to be an incurrence of such Indebtedness not permitted by this clause (h);

(i) shares of preferred stock of a Restricted Subsidiary issued to the Issuer or another Restricted Subsidiary; provided that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of preferred stock (except to the Issuer or another Restricted Subsidiary) shall be deemed in each case to be an issuance of such shares of preferred stock not permitted by this clause (i);

(j) Hedging Obligations (excluding Hedging Obligations entered into for speculative purposes) for the purpose of limiting:

(k) obligations in respect of performance, bid, appeal and surety bonds and completion guarantees provided by the Issuer or any Restricted Subsidiary in the ordinary course of business or consistent with past practice or industry practice;

(m) Indebtedness, Disqualified Stock and preferred stock of the Issuer or any Restricted Subsidiary not otherwise permitted hereunder in an aggregate principal amount or liquidation preference, which when aggregated with the principal amount and liquidation preference of all other Indebtedness, Disqualified Stock and preferred stock then outstanding and incurred pursuant to this clause (m), does not at any one time outstanding exceed the sum of:

(y) 100% of the net cash proceeds received by the Issuer since immediately after the Issue Date from the issue or sale of Equity Interests of the Issuer or cash contributed to the capital of the Issuer (in each case other than proceeds of Disqualified Stock or sales of Equity Interests to the Issuer or any of its Subsidiaries) as determined in accordance with clauses (c)(2) and (c)(3) of the first paragraph of “—Limitation on Restricted Payments” to the extent such net cash proceeds or cash have not been applied pursuant to such clauses to make Restricted Payments or to make other investments, payments or exchanges pursuant to the second paragraph of “—Limitation on Restricted Payments” or to make Permitted Investments (other than Permitted Investments specified in clauses (a) and (c) of the definition thereof);

provided further, however, that the aggregate amount of Indebtedness, Disqualified Stock and preferred stock incurred by Restricted Subsidiaries (other than Guarantors) pursuant to this clause (m) may not exceed $25.0 million outstanding at any one time;

(n)(1) any guarantee by the Issuer or a Guarantor of Indebtedness or other obligations of any Restricted Subsidiary so long as the incurrence of such Indebtedness incurred by such Restricted Subsidiary is permitted under the terms of the Indenture, or

(2) any guarantee by a Restricted Subsidiary of Indebtedness of the Issuer or another Restricted Subsidiary so long as the incurrence of such Indebtedness incurred by the Issuer or such other Restricted Subsidiary is permitted under the terms of the Indenture;

(o) the incurrence by the Issuer or any Restricted Subsidiary of Indebtedness, Disqualified Stock or preferred stock which serves to refund or refinance any Indebtedness, Disqualified Stock or preferred stock incurred as permitted under the first paragraph of this covenant and clauses (b) and (c) above, this clause (o) and clause (p) below or any Indebtedness, Disqualified Stock or preferred stock issued to so refund or refinance such Indebtedness, Disqualified Stock or preferred stock including additional Indebtedness, Disqualified Stock or preferred stock incurred to pay premiums (including tender premiums), defeasance costs and fees in connection therewith (the “Refinancing Indebtedness”) prior to its respective maturity; provided, however, that such Refinancing Indebtedness:

(1) has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred which is not less than the shorter of (x) remaining Weighted Average Life to Maturity of the Indebtedness, Disqualified Stock or preferred stock being refunded or refinanced and (y) in the case of Subordinated Indebtedness, the Weighted Average Life to Maturity that would result if all payments of principal on the Subordinated Indebtedness being so redeemed, repurchased, defeased, acquired or retired that were due on or after the date one year following the maturity date of any notes then outstanding were instead due on such date one year following the maturity date of such notes (provided that, in the case of this subclause (o)(1)(y), such Indebtedness does not provide for any scheduled principal payments prior to the maturity date of the notes in excess of, or prior to, the scheduled principal payments due prior to such maturity for the Indebtedness, Disqualified Stock or preferred stock being refunded or refinanced or defeased);

(2) to the extent such Refinancing Indebtedness refinances (i) Indebtedness subordinated in right of payment to the notes or any Guarantee of the notes, such Refinancing Indebtedness is subordinated in right of payment to the notes or such Guarantee at least to the same extent as the Indebtedness being refinanced or refunded or (ii) Disqualified Stock or preferred stock, such Refinancing Indebtedness must be Disqualified Stock or preferred stock, respectively; and

(x) Indebtedness, Disqualified Stock or preferred stock of a non-Guarantor Subsidiary that refinances Indebtedness, Disqualified Stock or preferred stock of the Issuer;

(y) Indebtedness, Disqualified Stock or preferred stock of a Subsidiary that is not a Guarantor that refinances Indebtedness, Disqualified Stock or preferred stock of a Guarantor; or

(z) Indebtedness, Disqualified Stock or preferred stock of the Issuer or a Restricted Subsidiary that refinances Indebtedness, Disqualified Stock or preferred stock of an Unrestricted Subsidiary;

(p) Indebtedness, Disqualified Stock or preferred stock of Persons that are acquired by the Issuer or any Restricted Subsidiary or merged into the Issuer or a Restricted Subsidiary in accordance with the terms of the Indenture; provided that such Indebtedness, Disqualified Stock or preferred stock is not incurred in contemplation of such acquisition or merger; provided further, that after giving effect to such acquisition or merger, either:

(1) the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first sentence of this covenant; or

(2) the Fixed Charge Coverage Ratio is greater than immediately prior to such acquisition or merger;

(q) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within five Business Days of its incurrence;

(r) Indebtedness of Foreign Subsidiaries in an aggregate amount not to exceed the greater of $12.5 million and 15% of Total Assets of Foreign Subsidiaries at any time outstanding; provided that Indebtedness under this clause (r) may be incurred under any Credit Facility;

(s) Indebtedness of the Issuer or any Restricted Subsidiary supported by a letter of credit issued pursuant to the Credit Agreement, in a principal amount not in excess of the stated amount of such letter of credit;

(t) Indebtedness of the Issuer or any Restricted Subsidiary consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;

(u) Indebtedness of the Issuer or any Restricted Subsidiary borrowed from or guaranteed by any federal, state or local governmental entities or agencies incurred for investment in, or the purchase, lease, development, construction, maintenance or improvement of property (real or personal) or equipment that is used or useful in, a Similar Business; provided that such Indebtedness has a maturity date at the time such Indebtedness is incurred which is not less than the maturity date of any notes then outstanding; and

(v) Indebtedness consisting of Additional Notes not to exceed $75.0 million in aggregate principal amount issued since the Issue Date.

For purposes of determining compliance with this covenant, in the event that an item of Indebtedness, Disqualified Stock or Preferred Stock meets the criteria of more than one of the categories of permitted Indebtedness, Disqualified Stock or Preferred Stock described in clauses (a) through (t) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Issuer, in its sole discretion, may classify or reclassify such item of Indebtedness in any manner that complies with this covenant and the Issuer may divide and classify an item of Indebtedness in more than one of the types of Indebtedness described in the first and second paragraphs above. Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness, Disqualified Stock or Preferred Stock will not be deemed to be an incurrence of Indebtedness, Disqualified Stock or Preferred Stock for purposes of this covenant.

For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt; provided that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced.

The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing.

The Indenture provides that the Issuer will not, and will not permit any Guarantor to directly or indirectly, incur any Indebtedness (including Acquired Indebtedness) that is subordinated or junior in right of payment to any Indebtedness of the Issuer or such Guarantor, as the case may be, unless such Indebtedness is expressly subordinated in right of payment to the notes or such Guarantor’s guarantee to the extent in the same manner as such Indebtedness is subordinated in right of payment to other Indebtedness of the Issuer or such Guarantor as the case may be.

The Indenture will not treat (1) unsecured Indebtedness as subordinated or junior to secured Indebtedness merely because it is unsecured or (2) Indebtedness as subordinated or junior to any other Indebtedness merely because it has a junior priority with respect to the same collateral.

The Issuer will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien that secures obligations under any Indebtedness or any related Guarantees (the “Initial Lien”) of any kind upon any of their property or assets, now owned or hereafter acquired, except:

(1) in the case of Initial Liens on any Collateral, any Initial Lien if such Initial Lien is a Permitted Lien; and

(2) in the case of any other asset or property, any Initial Lien if (i) the notes are equally and ratably secured with (or on a senior basis to, in the case such Initial Lien secures any Subordinated Indebtedness) the obligations secured by such Initial Lien or (ii) such Initial Lien is a Permitted Lien.

Any Lien created for the benefit of the Holders of the notes pursuant to clause (2) of the preceding paragraph shall provide by its terms that such Lien shall be automatically and unconditionally released and discharged upon the release and discharge of the Initial Lien which release and discharge in the case of any sale of any such asset or property shall not affect any Lien that the Notes Collateral Agent may have on the proceeds from such sale.

As to any Permitted Senior Easement arising after the Issue Date, the Issuer or any Guarantor may request that the Holders of the Notes subordinate their interest to such Senior Permitted Easement. Issuer or a Guarantor shall be required to deliver to the Trustee a certificate of an Officer describing in reasonable detail the proposed easement, certifying that such easement is a Permitted Senior Easement and attaching thereto the requested form of subordination agreement. The Trustee shall, within ten (10) business days after receipt of the request, execute and deliver to the grantee of any such Permitted Senior Easement an agreement subordinating the lien of such mortgage to such Permitted Senior Easement. Issuer shall pay all fees and expenses related to the granting of a

Permitted Senior Easement, including the Trustee’s out-of-pocket expenses incurred in connection therewith. The Trustee may conclusively rely on a certificate of Issuer or a Guarantor stating that the Permitted Senior Easement is permitted by the terms of this agreement and such mortgage.

The Issuer may not consolidate or merge with or into or wind up into (whether or not the Issuer is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to any Person unless:

(1) the Issuer is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a Person organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Person, as the case may be, being herein called the “Successor Company”);

(2) the Successor Company, if other than the Issuer, expressly assumes all the obligations of the Issuer under the Indenture, the notes and the Security Documents pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;

(4) immediately after giving pro forma effect to such transaction, as if such transaction had occurred at the beginning of the applicable four-quarter period,

(A) the Successor Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first sentence of the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” or

(B) the Fixed Charge Coverage Ratio for the Successor Company and the Restricted Subsidiaries would be greater than such ratio for the Issuer and the Restricted Subsidiaries immediately prior to such transaction;

(5) each Guarantor, unless it is the other party to the transactions described above, in which case clause (2) of the second succeeding paragraph shall apply, shall have by supplemental indenture confirmed that its Guarantee shall apply to such Person’s obligations under the Indenture and the notes;

(6) the Issuer shall have delivered to the Trustee an Officers’ Certificate and an opinion of counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with the Indenture and, if a supplemental indenture or any supplement to any Security Document is required in connection with such transaction, such supplement shall comply with the applicable provisions of the Indenture;

(7) to the extent any assets of the Person which is merged or consolidated with or into the Successor Company are assets of the type which would constitute Collateral under the Security Documents, the Successor Company will take such action as may be reasonably necessary to cause such property and assets to be made subject to the Lien of the Security Documents in the manner and to the extent required in the Indenture or any of the Security Documents and shall take all reasonably necessary action so that such Lien is perfected to the extent required by the Security Documents;

(a) continue to constitute Collateral under the Indenture and the Security Documents,

(b) be subject to the Lien in favor of the Collateral Agent for the benefit of the Trustee and the Holders of the notes, and

The Successor Company will succeed to, and be substituted for the Issuer under the Indenture and the notes. Notwithstanding the foregoing clauses (3) and (4),

(a) any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Issuer; and

(b) the Issuer may merge with an Affiliate incorporated solely for the purpose of reincorporating the guarantor or the Issuer in another State of the United States so long as the amount of Indebtedness of the Issuer and the Restricted Subsidiaries is not increased thereby.

Subject to certain limitations described in the Indenture governing release of a Guarantee upon the sale, disposition or transfer of a Guarantor, each Guarantor will not, and the Issuer will not permit any Guarantor to, consolidate or merge with or into or wind up into (whether or not such Guarantor is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, any Person unless:

(A)(1) such Guarantor is the surviving Person or the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a Person organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Guarantor or such Person, as the case may be, being herein called the “Successor Person”);

(2) the Successor Person, if other than such Guarantor, expressly assumes all the obligations of such Guarantor under the Indenture and such Guarantor’s Guarantee pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;

(4) the Issuer shall have delivered to the Trustee an Officers’ Certificate and an opinion of counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, amendments, supplements or other instruments relating to the Security Documents if any, comply with the Indenture, if a supplemental indenture or any supplement to any Security Document is required in connection with such transaction, such supplement shall comply with the applicable provisions of the Indenture;

(5) to the extent any assets of the Person which is merged or consolidated with or into the Successor Company are assets of the type which would constitute Collateral under the Security Documents, the Successor Company will take such action as may be reasonably necessary to cause such property and assets to be made subject to the Lien of the Security Documents in the manner and to the extent required in the Indenture or any of the Security Documents and shall take all reasonably necessary action so that such Lien is perfected to the extent required by the Security Documents; and

(i) continue to constitute Collateral under the Indenture and the Security Documents,

(ii) be subject to the Lien in favor of the Collateral Agent for the benefit of the Trustee and the Holders, and

(B) the transaction is made in compliance with the covenant described under “Repurchase at the option of Holders—Asset sales.”

Subject to certain limitations described in the Indenture, the Successor Person will succeed to, and be substituted for, such Guarantor under the Indenture and such Guarantor’s Guarantee. Notwithstanding the foregoing, any Guarantor may merge into or transfer all or part of its properties and assets to another Guarantor or the Issuer.

The Issuer will not, and will not permit any Restricted Subsidiary to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Issuer (each of the foregoing, an “Affiliate Transaction”) involving aggregate payments or consideration in excess of $5.0 million, unless:

(a) such Affiliate Transaction is on terms that are not materially less favorable to the Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person; and

(b) the Issuer delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate payments or consideration in excess of $10.0 million, a resolution adopted by the majority of the Board of Directors approving such Affiliate Transaction and set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (a) above.

(1) transactions between or among the Issuer and any of its Restricted Subsidiaries or between or among such Restricted Subsidiaries;

(2) Restricted Payments permitted by the provisions of the Indenture described above under the covenant “—Limitation on Restricted Payments” and Permitted Investments;

(3) the payment of management, consulting, monitoring and advisory fees and related expenses to Sponsor and its Affiliates in an aggregate amount in any fiscal year not to exceed an amount per annum equal to $2.0 million;

(4) the payment of reasonable and customary fees paid to, and indemnities provided on behalf of, officers, directors, employees or consultants of the Issuer, any of its direct or indirect parents or any Restricted Subsidiary;

(5) payments by the Issuer or any Restricted Subsidiary to Sponsor or its Affiliates made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures, which payments are approved by the Board of Directors of the Issuer in good faith;

(6) transactions in which the Issuer or any Restricted Subsidiary, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Issuer or such Restricted Subsidiary from a financial point of view or meets the requirements of clause (a) of the preceding paragraph;

(7) payments or loans (or cancellation of loans) to employees or consultants of the Issuer, any of its direct or indirect parents or any Restricted Subsidiary which are approved by the Board of Directors of the Issuer in good faith;

(8) any agreement as in effect as of the Issue Date, or any amendment thereto (so long as any such amendment, taken as a whole, is no less favorable to the Issuer and its Restricted Subsidiaries than the agreement in effect on the date of the Indenture (as determined by the Board of Directors of the Issuer in good faith));

(9) the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Issuer or any Restricted Subsidiary of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (9) to the

extent that the terms of any such amendment or new agreement, taken as a whole, is no less favorable to the Issuer and its Restricted Subsidiaries than the agreement in effect on the date of the indenture (as determined by the Board of Directors of the Issuer in good faith);

(10) transactions with customers, clients, suppliers, or purchasers or sellers of goods or services, in each case in the ordinary course of business or consistent with past practice and otherwise in compliance with the terms of the Indenture which are fair to the Issuer and the Restricted Subsidiaries, in the reasonable determination of the Board of Directors of the Issuer or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party (as determined by the Board of Directors of the Issuer in good faith);

(11) the issuance of Equity Interests (other than Disqualified Stock) of the Issuer to any Affiliate of the Issuer;

(12) transactions or payments pursuant to any employee, officer or director compensation or benefit plans, employment agreements, severance agreement, indemnification agreements or any similar arrangements entered into in the ordinary course of business or approved in good faith by the Board of Directors of the Issuer;

(13) transactions in the ordinary course with (i) Unrestricted Subsidiaries or (ii) joint ventures in which the Issuer or a Subsidiary of the Issuer holds or acquires an ownership interest (whether by way of Capital Stock or otherwise) so long as the terms of any such transactions are no less favorable to the Issuer or Subsidiary participating in such joint ventures than they are to other joint venture partners;

(14) payments permitted under clause 12(B) of the covenant described under “Certain Covenants—Limitation on Restricted Payments” by the Issuer and/or its Subsidiaries pursuant to tax sharing agreements among the Issuer and its Subsidiaries on customary terms;

(15) transactions with a Person (other than an Unrestricted Subsidiary of the Issuer) that is an Affiliate of the Issuer solely because the Issuer owns, directly or through a Restricted Subsidiary, an Equity Interest in, or controls, such Person;

(16) sales of accounts receivable, or participations therein, in connection with any Receivables Facility;

(17) investments by the Sponsor or its Affiliates in securities of the Issuer (other than any security that ranks senior or pari passu with the notes) or any Restricted Subsidiary of the Issuer so long as the investment is being or has been offered generally to other investors on the same or more favorable terms or the securities are acquired in market transactions; and

(18) guarantees (but not any consideration paid for such guarantee) by the Sponsor or any direct and indirect parent of the Issuer of Obligations of the Issuer and its Restricted Subsidiaries.

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any such Restricted Subsidiary to:

(a)(1) pay dividends or make any other distributions to the Issuer or any Restricted Subsidiary on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits or

(c) sell, lease or transfer any of its properties or assets to the Issuer or any Restricted Subsidiary, except (in each case) for such encumbrances or restrictions existing under or by reason of:

(1) contractual encumbrances or restrictions in effect on the Issue Date, including, without limitation, pursuant to the Credit Agreement and its related documentation;

(3) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature discussed in clause (c) above on the property so acquired;

(5) any agreement or other instrument of a Person acquired by the Issuer or any Restricted Subsidiary in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired;

(6) contracts for the sale of assets, including, without limitation, customary restrictions with respect to a Subsidiary pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary that impose restrictions on the assets to be sold;

(7) secured Indebtedness otherwise permitted to be incurred pursuant to the covenants described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” and “—Liens” that limit the right of the debtor to dispose of the assets securing such Indebtedness;

(8) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;

(9) other Indebtedness, Disqualified Stock or preferred stock of Foreign Subsidiaries permitted to be incurred subsequent to the Issue Date pursuant to the provisions of the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” that impose restrictions solely on the Foreign Subsidiaries party thereto;

(10) customary provisions in joint venture agreements and other similar agreements relating solely to such joint venture;

(11) customary provisions contained in leases and other agreements entered into in the ordinary course of business;

(12) any such encumbrance or restriction with respect to a Foreign Subsidiary pursuant to an agreement governing Indebtedness, Disqualified Stock or Preferred Stock incurred by such Foreign Subsidiary that was permitted by the terms of the Indenture to be incurred;

(13) any such encumbrance or restriction pursuant to an agreement governing Indebtedness incurred pursuant to clauses (a) or (u) of the second paragraph of the covenant described under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock,” which encumbrances or restrictions will not, in the good faith judgment of the Issuer’s Board of Directors, materially affect the Issuer’s ability to make anticipated principal and interest payments on the notes;

(14) any encumbrances or restrictions of the type referred to in clauses (a), (b) and (c) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (11) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Issuer’s Board of Directors, no more restrictive, taken as a whole, with respect to such encumbrance and other restrictions than those prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing; and

(15) restrictions created in connection with any Receivables Facility that, in the good faith determination of the Board of Directors of the Issuer, are necessary or advisable to effect such Receivables Facility.

(a) The Issuer will not permit any person to become a Restricted Subsidiary that is a wholly-owned Domestic Subsidiary, other than a Guarantor or a special-purpose Restricted Subsidiary formed in connection with Receivables Facilities, unless:

(A) such Restricted Subsidiary within 30 days executes and delivers supplemental indentures to the Indenture providing for a guarantee of payment of the notes by such Restricted Subsidiary and joinders to the Security Agreement and other Security Documents or new Security Documents and takes all actions required by such Security Documents or the Indenture to perfect the Liens created thereunder; and

(B) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Issuer or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its guarantee;

provided that this paragraph (a) shall not be applicable to any Person that becomes a Restricted Subsidiary so long as (i) the Total Assets of each such Person that becomes a Restricted Subsidiary are less than $25.0 million and the Total Assets of all such Persons that become Restricted Subsidiaries are less than $75.0 million in the aggregate, and (ii) the agreement governing the Acquired Indebtedness of any such Person contains a prohibition of such guarantee and such Acquired Indebtedness was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary.

(b) Notwithstanding the foregoing and the other provisions of the Indenture, any Guarantee by a Restricted Subsidiary of the notes shall provide by its terms that it shall be automatically and unconditionally released and discharged upon:

(A) any sale, exchange or transfer (by merger or otherwise) of all of the Issuer’s Capital Stock in such Guarantor (including any sale, exchange or transfer following which the applicable Guarantor is no longer a Restricted Subsidiary) or all or substantially all the assets of such Guarantor, which sale, exchange or transfer is made in compliance with the applicable provisions of the Indenture,

(B) if such Guarantor is designated as an Unrestricted Subsidiary or otherwise ceases to be a Restricted Subsidiary, in each case in accordance with the provisions of the Indenture, upon effectiveness of such designation or when it first ceases to be a Restricted Subsidiary, respectively; or

(C) if the Issuer exercises its legal defeasance option or its covenant defeasance option as described under “—Legal Defeasance and Covenant Defeasance” or if its obligations under the Indenture are discharged in accordance with the terms of the Indenture.

Notwithstanding that the Issuer may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and quarterly basis on forms provided for such annual and quarterly reporting pursuant to rules and regulations promulgated by the Securities and Exchange Commission, the Indenture will require the Issuer to file with the Commission (and make available to the Trustee and Holders of the notes (without exhibits), without cost to each Holder, within 15 days after it files them with the Commission),

(a) within 90 days (or the successor time period then in effect under the rules and regulations of the Exchange Act for a non-accelerated filer) plus any grace period provided by Rule 12b-25 under the Exchange Act, after the end of each fiscal year, annual reports on Form 10-K, or any successor or comparable form, containing the information required to be contained therein, or required in such successor or comparable form;

(b) within 45 days (or the successor time period then in effect under the rules and regulations of the Exchange Act) plus any grace period provided by Rule 12b-25 under the Exchange Act, after the end of each of the first three fiscal quarters of each fiscal year, reports on Form 10-Q, containing the information required to be contained therein, or any successor or comparable form;

(c) promptly from time to time after the occurrence of an event required to be therein reported, such other reports on Form 8-K, or any successor or comparable form; and

(d) any other information, documents and other reports which the Issuer would be required to file with the Commission if it were subject to Section 13 or 15(d) of the Exchange Act;

provided that the Issuer shall not be so obligated to file such reports with the Commission if the Commission does not permit such filing, in which event the Issuer will make available such information to prospective purchasers of notes, in addition to providing such information to the Trustee and the Holders of the notes, in each case within 15 days after the time the Issuer would be required to file such information with the Commission, if it were subject to Sections 13 or 15(d) of the Exchange Act.

The availability of the foregoing materials on the Commission’s EDGAR service (or its successor) shall be deemed to satisfy the Issuer’s delivery obligation, provided, however, that the Trustee shall have no obligation whatsoever to determine if such materials have been made so available.

In the event that any direct or indirect parent company of the Issuer becomes a Guarantor of the Notes, the Indenture will permit the Issuer to satisfy its obligations in this covenant with respect to financial information relating to the Issuer by furnishing financial information relating to such parent; provided that the same is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such parent, on the one hand, and the information relating to the Issuer and its Restricted Subsidiaries on a standalone basis, on the other hand.

Notwithstanding the foregoing, such requirements shall be deemed satisfied prior to the commencement of the exchange offer or the effectiveness of the shelf registration statement described in the Registration Rights Agreement (1) by the filing with the Commission of the exchange offer registration statement or shelf registration statement (or any other similar registration statement), and any amendments thereto, with such financial information that satisfies Regulation S-X, subject to exceptions consistent with the presentation of financial information in this prospectus, to the extent filed within the times specified above, or (2) by posting reports that would be required to be filed substantially in the form required by the Commission on the Company’s website (or that of any of its parent companies) or providing such reports to the Trustee within 15 days after the time the Issuer would be required to file such information with the Commission (which for the first quarterly report required to be posted or provided after the Issue Date shall be 60 days after the end of the applicable fiscal quarter) if it were subject to Section 13 or 15(d) of the Exchange Act, the financial information that would be required to be included in such reports, subject to exceptions consistent with the presentation of financial information in this prospectus, to the extent filed within the times specified above.

(1) default in payment when due and payable, upon redemption, acceleration or otherwise, of principal of, or premium, if any, on the notes issued under the Indenture;

(2) default for 30 days or more in the payment when due of interest on or with respect to the notes issued under the Indenture;

(3) failure by the Issuer or any Guarantor for 60 days after receipt of written notice given by the Trustee or the Holders of at least 25% in principal amount of the notes then outstanding and issued under the Indenture to comply with any of its other agreements in the Indenture, the Security Documents, the Intercreditor Agreement or the notes;

(4) default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness for money borrowed by the Issuer or any Restricted Subsidiary or the payment of which is guaranteed by the Issuer or any Restricted Subsidiary, other than Indebtedness owed to the Issuer or a Restricted Subsidiary, whether such Indebtedness or guarantee now exists or is created after the issuance of the notes, if both:

(B) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at stated final maturity (after giving effect to any applicable grace periods and any extensions thereof), or the maturity of which has been so accelerated, aggregate $20.0 million or more at any one time outstanding;

(5) failure by the Issuer or any Significant Subsidiary to pay final judgments aggregating in excess of $20.0 million, which final judgments remain unpaid, undischarged and unstayed for a period of more than 60 days after such judgment becomes final, and in the event such judgment is covered by insurance, an enforcement proceeding has been commenced by any creditor upon such judgment or decree which is not promptly stayed;

(6) certain events of bankruptcy or insolvency with respect to the Issuer or any Significant Subsidiary;

(7) the Guarantee of any Significant Subsidiary shall for any reason cease to be in full force and effect or be declared null and void or any responsible officer of any Guarantor that is a Significant Subsidiary, as the case may be, denies that it has any further liability under its Guarantee or gives notice to such effect, other than by reason of the termination of the related Indenture or the release of any such Guarantee in accordance with the Indenture; or

(8) any security interest and Lien purported to be created by any Security Document with respect to any Collateral, individually or in the aggregate, having a Fair Market Value in excess of $20.0 million shall cease to be in full force and effect, or shall cease to give the Notes Collateral Agent, for the benefit of the Noteholder Secured Parties, the Liens, rights, powers and privileges purported to be created and granted thereby (including a perfected first-priority security interest in and Lien on, all of the Collateral thereunder (except as otherwise expressly provided in the Indenture, the Security Documents and the Intercreditor Agreement)) in favor of the Notes Collateral Agent, for a period of 30 days after notice, or shall be asserted by the Issuer or any Guarantor to not be, a valid, perfected, first-priority (except as otherwise expressly provided in the Indenture, the Security Documents or the Intercreditor Agreement) security interest in or Lien on the Collateral covered thereby; except to the extent that any such loss of perfection or priority results from the failure of the Trustee to make filings, renewals and continuations (or other equivalent filings) or take other appropriate action or the failure of the Trustee to maintain possession of certificates actually delivered to it representing securities pledged under the Security Documents.

If any Event of Default (other than of a type specified in clause (6) above) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in principal amount of the then old notes issued under the Indenture may declare the principal, premium, if any, interest and any other monetary obligations on all the then old notes issued under the Indenture to be due and payable immediately.

Upon the effectiveness of such declaration, such principal and interest will be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising under clause (6) of the first paragraph of this section, all old notes will become due and payable without further action or notice. Holders may not

enforce the Indenture or the notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then old notes issued under the Indenture may direct the Trustee in its exercise of any trust or power. The Indenture provides that the Trustee may withhold from Holders notice of any continuing Default or Event of Default, except a Default or Event of Default relating to the payment of principal, premium, if any, or interest, if it determines that withholding notice is in their interest. In addition, the Trustee shall have no obligation to accelerate the notes if in the best judgment of the Trustee acceleration is not in the best interest of the Holders of such notes.

The Indenture provides that the Holders of a majority in aggregate principal amount of the then old notes issued thereunder by notice to the Trustee may on behalf of the Holders of all of such notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, premium, if any, or the principal of any such note held by a non-consenting Holder. In the event of any Event of Default specified in clause (4) above, such Event of Default and all consequences thereof (excluding any resulting payment default, other than as a result of the acceleration of the notes) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders, if within 20 days after such Event of Default arose

(x) the Indebtedness or guarantee that is the basis for such Event of Default has been discharged, or

(y) the holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default, or

The Indenture provides that the Issuer is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuer is required, within five Business Days, upon becoming aware of any Default or Event of Default or any default under any document, instrument or agreement representing Indebtedness of the Issuer or any Guarantor, to deliver to the Trustee a statement specifying such Default or Event of Default.

No director, officer, employee, incorporator or stockholder of the Issuer or any Guarantor or any of their parent companies shall have any liability for any obligations of the Issuer or the Guarantors under the notes, the Guarantees or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy.

The obligations of the Issuer and the Guarantors under the Indenture will terminate (other than certain obligations) and will be released upon payment in full of all of the notes issued under the Indenture. The Issuer may, at its option and at any time, elect to have all of its obligations discharged with respect to the notes issued under the Indenture and have each Guarantor’s obligation discharged with respect to its Guarantee (“Legal Defeasance”) and cure all then existing Events of Default except for:

(1) the rights of Holders of notes issued under the Indenture to receive payments in respect of the principal of, premium, if any, and interest on such notes when such payments are due solely out of the trust created pursuant to the Indenture,

(2) the Issuer’s obligations with respect to notes issued under the Indenture concerning issuing temporary notes, registration of such notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust,

(3) the rights, powers, trusts, duties and immunities of the Trustee, and the Issuer’s obligations in connection therewith and

In addition, the Issuer may, at its option and at any time, elect to have its obligations and those of each Guarantor released with respect to certain covenants that are described in the Indenture (“Covenant Defeasance”) and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the notes. In the event Covenant Defeasance occurs, certain events (not including bankruptcy, receivership, rehabilitation and insolvency events pertaining to the Issuer) described under “Events of Default” will no longer constitute an Event of Default with respect to the notes.

In order to exercise either Legal Defeasance or Covenant Defeasance with respect to the notes issued under the Indenture:

(1) the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest due on the notes issued under the Indenture on the stated maturity date or on the redemption date, as the case may be, of such principal, premium, if any, or interest on the notes; provided that, upon any redemption that requires the payment of the Applicable Premium, the amount deposited shall be sufficient for purpose of the Indenture to the extent that an amount is deposited with the Trustee equal to the Applicable Premium calculated as of the date of the notice of redemption, with any deficit on the date of redemption (any such amount, the “Applicable Premium Deficit”) only required to be deposited with the Trustee on or prior to the date of redemption. Any Applicable Premium Deficit shall be set forth in an Officers’ Certificate delivered to the Trustee simultaneously with the deposit of such Applicable Premium Deficit that confirms that such Applicable Premium Deficit shall be applied toward such redemption

(2) in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions,

(A) the Issuer has received from, or there has been published by, the United States Internal Revenue Service a ruling or

(B) since the issuance of the notes, there has been a change in the applicable U.S. federal income tax law,

in either case to the effect that, and based thereon such opinion of counsel in the United States shall confirm that, subject to customary assumptions and exclusions, the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3) in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4) no Default or Event of Default (other than that resulting from borrowing funds to be applied to make such deposit or the granting of Liens in connection therewith) shall have occurred and be continuing on the date of such deposit;

(5) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Credit Agreement or any other material agreement or instrument (other than

the Indenture) to which, the Issuer or any Guarantor is a party or by which the Issuer or any guarantor is bound (other than that resulting from borrowing funds to be applied to make such deposit and the granting of Liens in connection therewith);

(6) the Issuer shall have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by the Issuer with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuer or any Guarantor or others; and

(7) the Issuer shall have delivered to the Trustee an Officers’ Certificate and an opinion of counsel in the United States (which opinion of counsel may be subject to customary assumptions and exclusions) each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with.

The Indenture will be discharged and will cease to be of further effect as to all notes issued thereunder, when either

(a) all such notes theretofore authenticated and delivered, except lost stolen or destroyed notes which have been replaced or paid and notes for whose payment money has theretofore been deposited in trust, have been delivered to the Trustee for cancellation; or

(b) (1) all such notes not theretofore delivered to such Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year, and the Issuer or any Guarantor has irrevocably deposited or caused to be deposited with such Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest to pay and discharge the entire indebtedness on such notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption;

(2) no Default or Event of Default (other than that resulting from borrowing funds to be applied to make such deposit or the granting of Liens in connection therewith) with respect to the Indenture or the notes issued thereunder shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound (other than an instrument to be terminated contemporaneously with or prior to the borrowing of funds to be applied to make such deposit and the granting of Liens in connection therewith);

(3) the Issuer has paid or caused to be paid all sums payable by it under the Indenture; and

(4) the Issuer has delivered irrevocable instructions to the Trustee under the Indenture to apply the deposited money toward the payment of such notes at maturity or the redemption date, as the case may be.

In addition, the Issuer must deliver an Officers’ Certificate and an opinion of counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

The Issuer will maintain one or more paying agents for the notes. The initial paying agent for the notes will be the Trustee.

The Issuer will also maintain a registrar. The initial registrar will be the Trustee. The registrar will maintain a register reflecting ownership of the notes outstanding from time to time and will make payments on and facilitate transfer of notes on behalf of the Issuer.

The Issuer may change the paying agents or the registrars without prior notice to the Holders. The Issuer or any Guarantor may act as a paying agent or registrar.

A Holder may transfer or new notes in accordance with the Indenture. The registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuer may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuer is not required to transfer or exchange any note selected for redemption. Also, the Issuer is not required to transfer or exchange any note for a period of 15 days before the mailing of a notice of redemption of notes to be redeemed.

The registered Holder of a note will be treated as the owner of the note for all purposes.

Except as provided in the next four succeeding paragraphs, the Indenture, Security Documents, Intercreditor Agreement, any related Guarantee and the notes issued thereunder may be amended or supplemented with the consent of the Holders of a majority in principal amount of the notes then outstanding and issued under the Indenture, including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes, and any existing Default or Event of Default or compliance with any provision of the Indenture or the notes issued thereunder may be waived with the consent of the Holders of a majority in principal amount of the then old notes issued under the Indenture, other than notes beneficially owned by the Issuer or its Affiliates (including consents obtained in connection with a purchase of or tender offer or exchange offer for notes).

The Indenture provides that, without the consent of each Holder affected, an amendment or waiver may not, with respect to any notes issued under the Indenture and held by a non-consenting Holder:

(1) reduce the principal amount of notes whose Holders must consent to an amendment, supplement or waiver,

(2) reduce the principal of or change the fixed maturity of any such note or alter or waive the provisions with respect to the redemption of the notes (other than provisions relating to the covenants described above under the caption “—Repurchase at the Option of Holders”),

(4) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the notes issued under the Indenture, except a rescission of acceleration of the notes by the Holders of a majority in aggregate principal amount of the notes and a waiver of the payment default that resulted from such acceleration, or in respect of a covenant or provision contained in the Indenture or any guarantee which cannot be amended or modified without the consent of all Holders,

(6) make any change in the provisions of the indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of or premium, if any, or interest on the notes,

(8) impair the right of any Holder to receive payment of principal of, or interest on such Holder’s notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s notes,

(9) make any change in any Security Document, any Intercreditor Agreement or the provisions in the Indenture dealing with the Collateral or the Security Documents or the application of trust proceeds of the Collateral that would adversely affect the Holders in any material respect or release all or substantially all of

the Collateral from the Liens of the Security Documents (except as permitted by the terms of the Indenture, the Security Documents and the Intercreditor Agreement) or change or alter the priority of the security interests in the Collateral, or

(10) make any change to or modify the ranking of the notes that would adversely affect the holders.

Notwithstanding the foregoing, without the consent of any Holder, the Issuer, any Guarantor (with respect to a Guarantee or the Indenture to which it is a party) and the Trustee may amend or supplement the Indenture, any Guarantee, the notes, the Security Documents or the Intercreditor Agreement:

(2) to provide for uncertificated notes in addition to or in place of certificated notes or to alter the provisions of the Indenture relating to the form of notes (including the related definitions) in a manner that does not materially adversely affect any Holder;

(3) to comply with the covenant relating to mergers, consolidations and sales of assets;

(4) to provide for the assumption of the Issuer’s or any Guarantor’s obligations to Holders;

(5) to make any change that would provide any additional rights or benefits to the Holders or that does not materially adversely affect the rights under the Indenture of any such Holder;

(6) to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Issuer;

(7) to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act;

(8) to evidence and provide for the acceptance and appointment under the Indenture of a successor Trustee pursuant to the requirements thereof;

(9) to provide for the issuance of new notes or private new notes, which are identical to new notes except that they are not freely transferrable;

(10) provide for the issuance of notes issued after the Issue Date in accordance with the limitations set forth in this Indenture;

(11) to add or release a Guarantor under the Indenture or to add additional assets as Collateral or release Collateral, in each case in accordance with the terms of the Indenture;

(12) to conform the text of the Indenture, Guarantees or the notes or any Security Document or the Intercreditor Agreement to any provision of this “Description of the Notes” to the extent that such provision in this “Description of the Notes” was intended to be a verbatim recitation of a provision of the Indenture, the Guarantees, the notes, such Security Document or such Intercreditor Agreement, as provided in an Officers’ Certificate delivered to the Trustee; or

(13) in the case of the Intercreditor Agreement, in order to subject the security interests in the Collateral in respect of any Other Pari Passu Lien Obligations and Lender Debt to the terms of the Intercreditor Agreement, in each case to the extent the Incurrence of such Indebtedness, and the grant of all Liens on the Collateral held for the benefit of such Indebtedness were permitted hereunder.

The Intercreditor Agreement may be amended from time to time with the consent of certain parties thereto. In addition, the Intercreditor Agreement and Security Documents may be amended from time to time at the sole request and expense of the Issuer, and without the consent of the ABL Agent and the Notes Collateral Agent:

(1) (A) to add other parties (or any authorized agent thereof or trustee therefor) holding Other Pari Passu Lien Obligations that are incurred in compliance with the Credit Agreement, the Indenture and the Security Documents and (B) to establish that the Liens on any Collateral securing such Other Pari Passu

Lien Obligations shall be Pari Passu under the Intercreditor Agreement with the Liens on such Collateral securing the Obligations under the Indenture, the notes and the Guarantees subordinated to the Liens on such ABL Collateral securing obligations under the Credit Agreement, the Indenture, notes and the Guarantees, all on the terms provided for in the Intercreditor Agreement as in effect immediately prior to such amendment; and

(2) (A) to add other parties (or any authorized agent thereof or trustee therefor) holding an Obligation with Junior Lien Priority that is incurred in compliance with the Credit Agreement and the Indenture and the Security Documents and (B) to establish that the Liens on any Collateral securing such Indebtedness shall be junior and subordinated to the Liens on such Collateral securing any obligations under the Indenture and the notes and the Guarantees, all on the terms provided for in the Intercreditor Agreement in effect immediately prior to such amendment. Any such additional party and the ABL Agent, Trustee and Notes Collateral Agent shall be entitled to rely upon a certificate delivered by an Officer certifying that such Other Pari Passu Lien Obligations or an Obligation with Junior Lien Priority, as the case may be, were issued or borrowed in compliance with the Credit Agreement and the Indenture and the Security Documents. Any amendment of the Intercreditor Agreement or Security Documents that is proposed to be effected without the consent of the ABL Agent or the Notes Collateral Agent, as applicable, will be submitted to such Person for its review at least 5 business days prior to the proposed effectiveness of such amendment.

The consent of the holders of the notes is not necessary under the Indenture, any Security Document or the Intercreditor Agreement to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment.

Notices given by publication will be deemed given on the first date on which publication is made and notices given by first-class mail, postage prepaid, will be deemed given five calendar days after mailing.

The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Issuer, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign.

The Indenture provides that the Holders of a majority in principal amount of the old notes issued thereunder will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent person in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of the notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.

The Indenture, the notes and the Guarantees are governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles thereof.

Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is

provided. For purposes of the Indenture, unless otherwise specifically indicated, the term “consolidated” with respect to any Person refers to such Person consolidated with its Restricted Subsidiaries, and excludes from such consolidation any Unrestricted Subsidiary as if such Unrestricted Subsidiary were not an Affiliate of such Person.

“ABL Agent” means Bank of America, N.A., in its capacity as Administrative Agent, and any of its successors or assigns.

“ABL Secured Parties” means the ABL Agent and holders of Lenders Debt secured by ABL Collateral.

(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Restricted Subsidiary of such specified Person, and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Additional Notes” means additional notes issued under the Indenture, to the extent permitted by the covenant described under “—Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock,” which are secured equally and ratably with the notes by the Collateral.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management of such Person, whether through the ownership of voting securities, by agreement or otherwise.

“After-Acquired Property” means any property of the Issuer, any Guarantor or any Foreign Subsidiary described in clause (ii) of the definition thereof acquired after the Issue Date that would constitute Collateral and is intended to secure the Obligations under the Indenture and the notes pursuant to the Indenture and the Security Documents.

“Applicable Premium” means, with respect to any note on any Redemption Date, the greater of:

(a) the present value at such redemption date of (i) the redemption price of the note at February 1, 2014 (such redemption price being set forth in the table appearing above under the caption “—Optional Redemption”), plus (ii) all required interest payments due on the note through February 1, 2014 (excluding accrued but unpaid interest to the Redemption Date), computed using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points; over

(1) the sale, conveyance, transfer or other disposition, whether in a single transaction or a series of related transactions, of property or assets (including by way of a sale and leaseback) of the Issuer, a Guarantor or any Restricted Subsidiary (each referred to in this definition as a “disposition”), or

(2) the issuance or sale of Equity Interests of any Restricted Subsidiary, whether in a single transaction or a series of related transactions (other than preferred stock of Restricted Subsidiaries issued in compliance

with the covenant described under “Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”) in each case of (1) or (2) above, other than:

(a) a disposition of cash or Cash Equivalents or dispositions of any obsolete, damaged or worn out equipment in the ordinary course of business, a disposition of inventory or goods held for sale in the ordinary course of business or any disposition of any abandoned rail lines or property;

(b) the disposition of all or substantially all of the assets of the Issuer in a manner permitted pursuant to the provisions described above under “—Certain covenants—Merger, Consolidation or Sale of All or Substantially All Assets” or any disposition that constitutes a Change of Control pursuant to the Indenture;

(c) the making of any Restricted Payment or Permitted Investment that is permitted to be made, and is made, under the covenant described above under “—Certain covenants—Limitation on Restricted Payments”;

(d) any disposition of assets or issuance or sale of Equity Interests of any Restricted Subsidiary in any transaction or series of transactions with an aggregate Fair Market Value of less than $2.5 million;

(e) any disposition of property or assets or issuance of securities by a Restricted Subsidiary to the Issuer or by the Issuer or a Restricted Subsidiary to a Restricted Subsidiary;

(f) to the extent allowable under Section 1031 of the Internal Revenue Code of 1986, as amended, any exchange of like property (excluding any boot thereon) for use in a Similar Business;

(g) the lease, assignment, sub-lease or license of any real or personal property;

(h) any sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary (with the exception of Investments in Unrestricted Subsidiaries acquired pursuant to clause (j) of the definition of Permitted Investments);

(j) (i) sales of accounts receivable, or participations therein, in connection with the Credit Agreement or any Receivables Facility and (ii) the sale or discount of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof or in bankruptcy or similar proceeding;

(k) the surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claim of any kind, in each case, in the ordinary course of business;

(m) the sale of land pursuant to the Flagler Option or the termination of the lease with respect to the Hialeah Yard in accordance with the terms of Article XII of such lease as in effect on the Issue Date; and

(n) any financing transaction with respect to property built or acquired by the Issuer or any Restricted Subsidiary after the Issue Date, including, without limitation, sale leasebacks and asset securitizations permitted by the Indenture.

“Asset Sale Proceeds Account” means one or more deposit accounts or securities accounts holding the proceeds of any sale or disposition of Notes Collateral.

“Bankruptcy Law” means Title 11 of the United States Code, as amended, or any similar federal or state law for the relief of debtors.

“Borrowing Base” means, as of any date, an amount equal to 85% of the book value of the accounts receivable and 30% of the net book value of locomotives, transportation and other equipment, in each case, of the Issuer and the Restricted Subsidiaries on a consolidated basis as of the end of the most recently completed fiscal quarter preceding such date for which internal financial statements are available.

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock,

(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited), and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“Capitalized Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) in accordance with GAAP.

(3) (a) euro, or any national currency of any participating member state in the European Union,

(c) in the case of any Foreign Subsidiary that is a Restricted Subsidiary, such local currencies held by them from time to time in the ordinary course of business,

(4) securities issued or directly and fully and unconditionally guaranteed or insured by the United States or Canadian government or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and credit obligation of such government with maturities of 24 months or less from the date of acquisition,

(5) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any commercial bank having capital and surplus in excess of $500.0 million,

(6) repurchase obligations for underlying securities of the types described in clauses (4) and (5) entered into with any financial institution meeting the qualifications specified in clause (5) above,

(7) commercial paper rated at least P-2 by Moody’s or at least A-2 by S&P and in each case maturing within 12 months after the date of creation thereof,

(8) investment funds investing 95% of their assets in securities of the types described in clauses (1) through (7) above,

(9) readily marketable direct obligations issued by any state of the United States of America or any political subdivision thereof or any Province of Canada having one of the three highest rating categories obtainable from either Moody’s or S&P with maturities of 24 months or less from the date of acquisition and

(10) Indebtedness or preferred stock issued by Persons with a rating of “A” or higher from S&P or “A2” or higher from Moody’s with maturities of 12 months or less from the date of acquisition.

Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in currencies other than those set forth in clauses (1) through (3) above; provided that such amounts are converted into any currency listed in clauses (1) through (3) as promptly as practicable and in any event within ten Business Days following the receipt of such amounts.

(1) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, other than one or more Permitted Holders), is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of Voting Stock representing 50% or more of the voting power of the total outstanding Voting Stock of the Issuer;

(2) (a) all or substantially all of the assets of the Issuer and the Restricted Subsidiaries, taken as a whole, are sold or otherwise transferred to any Person other than a Wholly-Owned Restricted Subsidiary or one or more Permitted Holders or (b) the Issuer consolidates or merges with or into another Person or any Person consolidates or merges with or into the Issuer, in either case under this clause (2), in one transaction or a series of related transactions in which immediately after the consummation thereof Persons beneficially owning (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) Voting Stock representing in the aggregate a majority of the total voting power of the Voting Stock of the Issuer, immediately prior to such consummation do not beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) Voting Stock representing a majority of the total voting power of the Voting Stock of the Issuer, or the applicable surviving or transferee Person, provided that this clause shall not apply (i) in the case where immediately after the consummation of the transactions Permitted Holders beneficially own Voting Stock representing in the aggregate a majority of the total voting power of the Issuer, or the applicable surviving or transferee Person or (ii) to a merger of the Issuer with or into (x) a corporation, limited liability company or partnership or (y) a wholly-owned subsidiary of a corporation, limited liability company or partnership that, in either case, immediately following the transaction or series of transactions, has no Person or group (other than Permitted Holders), which beneficially owns Voting Stock representing 50% or more of the voting power of the total outstanding Voting Stock of such entity and, in the case of clause (y), the parent of such wholly-owned subsidiary guarantees the Issuer’s obligations under the notes, the Indenture and the Security Documents; or

(3) the Issuer shall adopt a plan of liquidation or dissolution or any such plan shall be approved by the stockholders of the Issuer.

“Collateral” means, collectively, the Notes Collateral and the ABL Collateral.

“Consolidated Depreciation and Amortization Expense” means with respect to any Person for any period, the total amount of depreciation and amortization expense, including any amortization of deferred financing fees, amortization in relation to terminated Hedging Obligations and amortization of net lease discounts and lease incentives, of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.

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

(a) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted in computing Consolidated Net Income (including amortization of original issue discount resulting from the issuance of Indebtedness at less than par, non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark to market valuation of Hedging Obligations or other derivative instruments pursuant to the Derivates and Hedging Topic and excluding non-cash interest expense attributable to the amortization of gains or losses resulting from the termination prior to or reasonably contemporaneously with the Issue Date of Hedging Obligations), the interest component of Capitalized Lease Obligations and net payments, if any, pursuant to interest rate Hedging Obligations, and excluding amortization of deferred financing fees and any expensing of bridge or other financing fees), and

(b) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued less

“Consolidated Net Income” means, with respect to any Person for any period, the aggregate of the Net Income, of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided, however, that

(1) any net after-tax extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses (including, without limitation, relating to severance, relocation and new product introductions) shall be excluded,

(2) the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period,

(3) any net after-tax income (loss) from disposed or discontinued operations and any net after-tax gains or losses on disposal of disposed or discontinued operations shall be excluded,

(4) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the ordinary course of business, as determined in good faith by the Board of Directors of the Issuer, shall be excluded,

(5) the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Issuer shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period,

(6) solely for the purpose of determining the amount available for Restricted Payments under clause (c)(1) of the first paragraph of “Certain covenants—Limitation on Restricted Payments,” the Net Income for such period of any Restricted Subsidiary (other than any Guarantor) shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination wholly permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or in similar distributions has been legally waived; provided that Consolidated Net Income of the Issuer will be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) to the Issuer or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein,

(7) the effects of adjustments resulting from the application of purchase accounting in relation to any acquisition that is consummated after the Issue Date, net of taxes, shall be excluded,

(8) any net after-tax income (loss) from the early extinguishment of Indebtedness or Hedging Obligations or other derivative instruments shall be excluded,

(9) any impairment charge or asset write-off pursuant to the Goodwill and Other Topic and the amortization of intangibles arising pursuant to the Business Combinations Topic shall be excluded, and

(10) any non-cash compensation pursuant to the Share-Based Payment Topic shall be excluded.

Notwithstanding the foregoing, for the purpose of the covenant described under “Certain covenants—Limitation on Restricted Payments” only (other than clause (c)(4) thereof), there shall be excluded from Consolidated Net Income any income arising from any sale or other disposition of Restricted Investments made by the Issuer and the Restricted Subsidiaries, any repurchases and redemptions of Restricted Investments from the Issuer and the Restricted Subsidiaries, any repayments of loans and advances which constitute Restricted Investments by the Issuer or any Restricted Subsidiary, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary, in each case only to the extent such amounts increase the amount of Restricted Payments permitted under such covenant pursuant to clause (c)(4) thereof.

“Consolidated Senior Secured Debt Ratio” means, as of any date of determination, the ratio of (1) the aggregate principal amount of Indebtedness of the Issuer and/or the Restricted Subsidiaries that is secured by any Lien to (2) the Issuer’s EBITDA for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur, in each case with such pro forma adjustments as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.

“Contingent Obligations” means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent,

(1) to purchase any such primary obligation or any property constituting direct or indirect security therefor,

(B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, or

(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.

“Credit Agreement” means the Credit Agreement dated as of the Issue Date among the Issuer, the Guarantors, the various lenders and agents party thereto and Bank of America, N.A., as Administrative Agent, together with any amendments, supplements, modifications, extensions, renewals, restatements or refundings thereof and any indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that replace, refund or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder, alters the maturity thereof or adds Restricted Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, lender or group of lenders.

“Credit Facilities” means, with respect to the Issuer, one or more debt facilities, including, without limitation, the Credit Agreement, or commercial paper facilities with banks or other institutional lenders or investors or any federal, state or local government entity or agency or indentures providing for revolving credit loans, term loans, receivables financing, including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against receivables, letters of credit or other long-term indebtedness, including any guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements or refundings thereof and any indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors or any federal, state or local government entity or agency that replace, refund or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Designated Noncash Consideration” means the Fair Market Value of noncash consideration received by the Issuer or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated

Noncash Consideration pursuant to an Officers’ Certificate, setting forth the basis of such valuation, executed by a senior vice president or the principal financial officer of the Issuer, less the amount of cash or Cash Equivalents received in connection with a subsequent sale of such Designated Noncash Consideration.

“Designated Preferred Stock” means preferred stock of the Issuer or any parent thereof (in each case other than Disqualified Stock) that is issued for cash (other than to a Guarantor or a Restricted Subsidiary) and is so designated as Designated Preferred Stock, pursuant to an Officers’ Certificate executed by a senior vice president or the principal financial officer of the Issuer or the applicable parent thereof, as the case may be, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (c) of the first paragraph of the “—Certain covenants—Limitation on Restricted Payments” covenant.

“Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable, other than as a result of a change of control or asset sale, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, other than as a result of a change of control or asset sale, in whole or in part, in each case prior to the date 91 days after the earlier of the maturity date of the notes or the date the notes are no longer outstanding; provided, however, that if such Capital Stock is issued to any plan for the benefit of employees of the Issuer or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Issuer or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations.

“Domestic Subsidiary” means, with respect to any Person, any Restricted Subsidiary of such Person other than a Foreign Subsidiary.

“EBITDA” means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (without duplication)

(a) provision for taxes based on income or profits, plus franchise or similar taxes, of such Person for such period deducted in computing Consolidated Net Income, plus

(b) Consolidated Interest Expense (and other components of Fixed Charges to the extent changes in GAAP after the Issue Date result in such components reducing Consolidated Net Income) of such Person for such period to the extent the same was deducted in calculating such Consolidated Net Income, plus

(c) Consolidated Depreciation and Amortization Expense of such Person for such period to the extent such depreciation and amortization were deducted in computing Consolidated Net Income, plus

(d) any expenses or charges related to any Equity Offering, Permitted Investment, acquisition, disposition, recapitalization or Indebtedness permitted to be incurred by the Indenture (whether or not successful), including such fees, expenses or charges related to the offering of the notes and the Credit Facilities, and deducted in computing Consolidated Net Income, plus

(e) the amount of any restructuring charge deducted in such period in computing Consolidated Net Income, including any one-time costs incurred in connection with acquisitions after the Issue Date, plus

(f) any other non-cash charges reducing Consolidated Net Income for such period, excluding any such charge that represents an accrual or reserve for a cash expenditure for a future period, plus

(g) the amount of any non-controlling interest expense deducted in calculating Consolidated Net Income (less the amount of any cash dividends paid to the holders of such minority interests), plus

(h) any net loss (or minus any gain) resulting from currency exchange risk Hedging Obligations, plus

(j) the amount of management, monitoring, consulting and advisory fees and related expenses paid to Sponsor or any of its Affiliates, plus

(k) expenses related to the implementation of enterprise resource planning system, plus

(l) expenses related to the implementation of new accounting pronouncements and other regulatory requirements, less

(m) non-cash items increasing Consolidated Net Income of such Person for such period, excluding any items which represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period.

“EMU” means economic and monetary union as contemplated in the Treaty on European Union.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.

“Equity Offering” means any public or private sale of common stock or preferred stock of the Issuer or any of its direct or indirect parents (excluding Disqualified Stock), other than

(a) public offerings with respect to the Issuer’s or any direct or indirect parent’s common stock registered on Form S-8;

(b) any such public or private sale that constitutes an Excluded Contribution; and

“euro” means the single currency of participating member states of the EMU.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

“Excluded Assets” means the collective reference to (i) any leasehold interests in real property with respect to which consent of the lessor is required to grant a security interest therein; and such consent is not obtained by the Issuer or Guarantors after having utilized commercially reasonable efforts to obtain such consent, (ii) the leasehold interest of the Issuer or the Guarantors in office space located in Jacksonville, Florida, (iii) any property or asset (other than any leasehold interest in real property) only to the extent and for so long as the grant of a security interest in such property or asset is prohibited by any applicable law or requires a consent not obtained of any governmental authority pursuant to applicable law; (iv) any right, title or interest in any permit, license or contract held by the Issuer or any Guarantor or to which the Issuer or any Guarantor is a party or any of its right, title or interest thereunder, in each case only to the extent and for so long as the terms of such permit, license or contract validly prohibits the creation by the Issuer or a Guarantor, as applicable, of a security interest in such permit, license or contract in favor of the Notes Collateral Agent (after giving effect to Section 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code (or any successor provisions) of any relevant jurisdiction or any other applicable law (including Title 11 of the United States Code) or principles of equity); (v) Capital Stock of a Person that constitutes a Subsidiary (other than a Wholly-Owned Subsidiary) the pledge of which would violate a contractual obligation to the owners of the other Capital Stock of such Person that is binding on or relating to such Capital Stock; (vi) any equipment or real property (and proceeds thereof) of the Issuer or any Guarantor that is subject to a purchase money Lien or Capitalized Lease Obligation permitted under the Indenture to the extent the documents relating to such purchase money Lien or Capitalized Lease Obligation would not permit such equipment or real property (and proceeds thereof) to be subject to the Liens created under the Security Documents; provided, that immediately upon the ineffectiveness, lapse or termination of any such restriction, such equipment or real property shall cease to be an “Excluded Asset”; (vii) assets of the Issuer or any Guarantor located outside of the United States to the extent a Lien on such assets cannot be created and perfected under United States federal or state law; (viii) After-Acquired Property subject to Permitted Liens described in clauses (9), (10), (32) or (38) of the definition of “Permitted Liens” so long as the documents governing such Permitted Liens do not permit any other Liens on such After-Acquired Property; provided, however, that

Excluded Assets will not include (a) any proceeds, substitutions or replacements of any Excluded Assets referred to above (unless such proceeds, substitutions or replacements would constitute Excluded Assets or (b) any asset which secures obligations with respect to the Lenders Debt; (ix) any of the outstanding stock of a Foreign Subsidiary in excess of 65% of the voting power of all classes of capital stock of such Foreign Subsidiary entitled to vote; and (x) locomotives and other rail equipment leased from third parties subject to leases and other similar contractual obligations with such third parties that do not permit such locomotives or other rail equipment to be subject to the Liens created under the Security Documents; provided, that immediately upon the ineffectiveness, lapse or termination of any such restriction, such equipment or property shall cease to be an “Excluded Asset.”

“Excluded Contribution” means net cash proceeds, marketable securities or Qualified Proceeds received by the Issuer from

(b) the sale (other than to a Subsidiary of the Issuer or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of the Issuer) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Issuer,

in each case designated as Excluded Contributions pursuant to an officers’ certificate executed by a senior vice president or the principal financial officer of the Issuer on the date such capital contributions are made or the date such Equity Interests are sold, as the case may be, which are excluded from the calculation set forth in clause (c) of the first paragraph under “—Certain covenants—Limitation on Restricted Payments.”

“Existing Indebtedness” means Indebtedness of the Issuer or the Restricted Subsidiaries in existence on the Issue Date, plus interest accruing thereon.

“Fair Market Value” means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party, determined in good faith by the chief financial officer, chief accounting officer, controller of the Issuer or the Restricted Subsidiary with respect to valuations not in excess of $10 million or determined in good faith by the Board of Directors of the Issuer or the Restricted Subsidiary with respect to valuations equal to or in excess of $10 million, as applicable, which determination will be conclusive (unless otherwise provided in the indenture).

“Fixed Charge Coverage Ratio” means, with respect to any Person for any period, the ratio of EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Issuer or any Restricted Subsidiary incurs, assumes, guarantees or redeems, retires or extinguishes any Indebtedness (other than reductions in amounts outstanding under revolving facilities unless accompanied by a corresponding termination of commitment) or issues or redeems Disqualified Stock or preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption, retirement or extinguishment of Indebtedness, or such issuance or redemption of Disqualified Stock or preferred stock, as if the same had occurred at the beginning of the applicable four-quarter period.

For purposes of making the computation referred to above, Investments, acquisitions, dispositions, mergers, consolidations and disposed operations (as determined in accordance with GAAP) that have been made by the Issuer or any Restricted Subsidiary during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Calculation Date shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, mergers, consolidations and disposed operations (and the change in any associated fixed charge obligations and the change in EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Issuer or any Restricted

Subsidiary since the beginning of such period) shall have made any Investment, acquisition, disposition, merger, consolidation or disposed operation that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, merger, consolidation or disposed operation had occurred at the beginning of the applicable four-quarter period.

For purposes of this definition, whenever pro forma effect is to be given to a transaction, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Issuer (including pro forma expense and cost reductions, regardless of whether these cost savings could then be reflected in pro forma financial statements in accordance with Regulation S-X promulgated under the Securities Act or any other regulation or policy of the SEC related thereto). If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Issuer to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Issuer may designate.

“Fixed Charges” means, with respect to any Person for any period, the sum of

(b) all cash dividend payments (excluding items eliminated in consolidation) on any series of preferred stock (including any Designated Preferred Stock) or any Refunding Capital Stock of such Person, and

“Flagler Option” means the purchase option held by FDG Passenger Row Holdings LLC, a subsidiary of Florida East Coast Industries, Inc., an Affiliate of the Issuer, pursuant to the Option Agreement, dated as of December 20, 2007, between Florida East Coast Railway, L.L.C. (a subsidiary of the Issuer) and FDG Passenger Row Holdings LLC, entitling the holder to exercise the option to purchase all or any portion of the Issuer’s main line right-of-way prior to December 20, 2027, the exercise of which is conditioned upon, among other things, a payment of $10.00 and the concurrent effectiveness of a perpetual, exclusive easement enabling the Issuer to continue its freight rail operations on the main line right-of-way.

“Foreign Subsidiary” means, with respect to any Person, any Restricted Subsidiary of such Person that is (i) a controlled foreign corporation within the meaning of Section 957 of the Internal Revenue Code of 1986, as amended (a “CFC”) or (ii) organized in or under the laws of the United States, any state thereof or the District of Columbia and all of the material assets of such Restricted Subsidiary consist of stock in one or more CFCs.

“GAAP” means generally accepted accounting principles in the United States which are in effect on the Issue Date. At any time after the Issue Date, the Issuer may elect to apply IFRS accounting principles in lieu of GAAP and, upon any such election, references herein to GAAP shall thereafter be construed to mean IFRS (except as otherwise provided in the indenture); provided that calculation or determination in the Indenture that requires the application of GAAP for periods that include fiscal quarters ended prior to the Issuer’s election to apply IFRS shall remain as previously calculated or determined in accordance with GAAP. The Issuer shall give notice of any such election made in accordance with this definition to the Trustee and the Holders of notes.

(a) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged, or

(b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,

which, in either case, are not callable or redeemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.

“guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations.

“Guarantee” means the guarantee by any Guarantor of the Issuer’s Obligations under the Indenture.

“Hedging Obligations” means, with respect to any Person, the obligations of such Person under

(a) currency exchange, interest rate or commodity swap agreements, currency exchange, interest rate or commodity cap agreements and currency exchange, interest rate or commodity collar agreements, and or combinations thereof; and

(b) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange, interest rates or commodity prices.

(a) any indebtedness (including principal and premium) of such Person, whether or not contingent

(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers’ acceptances (or, without double counting, reimbursement agreements in respect thereof),

(3) representing the balance deferred and unpaid of the purchase price of any property (including Capitalized Lease Obligations), except (i) any such balance that constitutes a trade payable or similar obligation to a trade creditor, in each case accrued in the ordinary course of business and (ii) any earn-out obligations until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP, or

if and to the extent that any of the foregoing Indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP,

(b) to the extent not otherwise included, any obligation by such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the Indebtedness of another Person, other than by endorsement of negotiable instruments for collection in the ordinary course of business, and

(c) to the extent not otherwise included, Indebtedness of another Person secured by a Lien on any asset owned by such Person, whether or not such Indebtedness is assumed by such Person;

provided, however, that Contingent Obligations shall be deemed not to constitute Indebtedness; and obligations under or in respect of Receivables Facilities shall not be deemed to constitute Indebtedness.

“Independent Financial Advisor” means an accounting, appraisal, investment banking firm or consultant to Persons engaged in Similar Businesses of nationally recognized standing that is, in the good faith judgment of the Issuer, qualified to perform the task for which it has been engaged.

“Intercreditor Agreement” means the intercreditor agreement dated as of the Issue Date among the ABL Agent, the Trustee, the Notes Collateral Agent, the Issuer and each Guarantor, as it may be amended from time to time in accordance with the Indenture.

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P, or an equivalent rating by any other Rating Agency.

“Investments” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, trade credit, advances to customers, commission, travel, moving and similar advances to officers, directors and employees and deposits, in each case made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet (excluding the footnotes) of the Issuer in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property. For purposes of the definition of “Unrestricted Subsidiary” and the covenant described under “—Certain covenants—Limitation on Restricted Payments,”

(1) “Investments” shall include the portion (proportionate to the Issuer’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of a Subsidiary of the Issuer at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Issuer shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to

(x) the Issuer’s “Investment” in such Subsidiary at the time of such redesignation less

(y) the portion (proportionate to the Issuer’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time of such redesignation; and

(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer, in each case as determined in good faith by the Issuer.

“Junior Lien Priority” means, relative to specified Indebtedness, having a Lien priority junior to that of the Lien in favor of the Noteholders on specified Collateral and subject to the Intercreditor Agreement.

“Lenders Debt” means any (i) Indebtedness outstanding from time to time under the Credit Agreement, (ii) any Indebtedness which has a security interest in the ABL Collateral, and (iii) all cash management Obligations and Hedging Obligations incurred with any Bank Lender (or their affiliates).

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction; provided that in no event shall an operating lease be deemed to constitute a Lien.

“Management Group” means at any time, the Chairman of the Board, any President, any Executive Vice President or Vice President, any Managing Director, any Treasurer and any Secretary or other executive officer of any of the Parent, the Issuer or any Subsidiary of any such company at such time.

“Net Income” means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends.

“Net Proceeds” means the aggregate cash proceeds received by the Issuer, a Guarantor or any Restricted Subsidiary in respect of any Asset Sale, including, without limitation, any cash received upon the sale or other disposition of any Designated Noncash Consideration received in any Asset Sale, net of the direct costs relating to such Asset Sale and the sale or disposition of such Designated Noncash Consideration, including, without limitation, legal, accounting and investment banking fees, and brokerage and sales commissions, any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), distributions to minority interest holders in Restricted Subsidiaries of such holders proportionate share of such cash proceeds of such Asset Sale, amounts required to be applied to the repayment of principal, premium, if any, and interest on Indebtedness secured by a Lien permitted under the Indenture on assets that do not constitute Collateral required (other than required by clause (1) of the second paragraph of clause (a) “—Repurchase at the option of holders—Asset sales”) to be paid as a result of such transaction and any deduction of appropriate amounts to be provided by the Issuer as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Issuer after such sale or other disposition thereof, including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction.

“Note Documents” means the notes, the Notes Guarantees, the Indenture, the Security Documents and the Intercreditor Agreement.

“Noteholder Secured Parties” means the Trustee, Notes Collateral Agent, the Holders and any successor or transferee of any of the foregoing.

“Notes Collateral Agent” means Wells Fargo Bank, National Association, in its capacity as “Collateral Agent” under the Indenture and under the Security Documents, and any successor thereto in such capacity.

“Obligations” means any principal, interest (including any interest accruing subsequent to the filing of a petition in bankruptcy, reorganization or similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable state, federal or foreign law), penalties, fees, indemnifications, reimbursements (including, without limitation, reimbursement obligations with respect to letters of credit and banker’s acceptances), damages and other liabilities, and guarantees of payment of such principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities, payable under the documentation governing any Indebtedness.

“Officer” means the Chairman of the board of directors, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the Issuer.

“Officers’ Certificate” means a certificate signed on behalf of the Issuer by two Officers of the Issuer, one of whom must be the principal executive officer, the principal financial officer or the principal accounting officer of the Issuer that meets the requirements set forth in the Indenture.

“Other Pari Passu Lien Obligations” means any Additional Notes and any other Indebtedness having Pari Passu Lien Priority relative to the notes with respect to the Collateral; provided that the holders of such Indebtedness or their trustee, agent or other authorized representative executes a joinder to the Security Agreement and the Intercreditor Agreement in the forms provided for therein.

“Pari Passu Lien Priority” means, relative to specified Indebtedness, having a Lien priority equal to that of the Lien in favor of the Noteholders on specified Collateral and subject to the Security Agreement and the Intercreditor Agreement.

“Permitted Asset Swap” means the concurrent purchase and sale or exchange of Related Business Assets or a combination of Related Business Assets and cash or Cash Equivalents between the Issuer or any of its Restricted Subsidiaries and another Person; provided that any cash or Cash Equivalents received must be applied in accordance with the “Asset sales” covenant.

“Permitted Holders” means the collective reference to the Sponsor, its Affiliates and the Management Group. Any Person or group whose acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of the applicable Indenture will thereafter, together with its Affiliates, constitute an additional Permitted Holder.

(c) any Investment by the Issuer or any Restricted Subsidiary of the Issuer in a Person if as a result of such Investment:

(2) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary;

(d) any Investment in securities or other assets not constituting cash or Cash Equivalents and received in connection with an Asset Sale made pursuant to the provisions of “—Repurchase at the option of holders—Asset sales” or any other disposition of assets not constituting an Asset Sale;

(f) advances to employees not in excess of $5.0 million outstanding at any one time, in the aggregate;

(1) in exchange for any other Investment or accounts receivable held by the Issuer or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the Issuer of such other Investment or accounts receivable; or

(2) as a result of a foreclosure by the Issuer or any Restricted Subsidiary with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;

(h) Hedging Obligations permitted under clause (j) of the covenant described in “—Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock or Preferred Stock” covenant;

(i) loans to officers, directors and employees for business-related travel expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business;

(j) any Investment in a Similar Business having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (j) that are at that time outstanding (without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash and/or marketable securities), not to exceed the greater of (x) $25.0 million and (y) 3.0% of Total Assets at the time of such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(k) Investments the payment for which consists of Equity Interests of the Issuer, or any of its direct or indirect parents or any Unrestricted Subsidiary (exclusive of Disqualified Stock); provided, however, that such Equity Interests will not increase the amount available for Restricted Payments under clause (c) of the first paragraph under the covenant described in “—Certain covenants—Limitation on Restricted Payments”;

(l) guarantees of Indebtedness permitted under the covenant described in “—Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”;

(m) any transaction to the extent it constitutes an investment that is permitted and made in accordance with the provisions of the second paragraph of the covenant described under “—Certain covenants—Transactions with Affiliates”;

(n) Investments consisting of purchases and acquisitions of inventory, supplies, material or equipment or the licensing or contribution of intellectual property pursuant to joint marketing arrangements with other Persons;

(o) additional Investments having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (o) that are at that time outstanding (without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash and/or marketable securities), not to exceed the greater of (x) $12.5 million and (y) 2.0% of Total Assets at the time of such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(q) any Investments received in compromise or resolution of (A) obligations of trade creditors or customers that were incurred in the ordinary course of business of the Issuer or any of its Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (B) litigation, arbitration or other disputes with Persons who are not Affiliates;

(r) any Investment in a Person (other than the Issuer or a Restricted Subsidiary) pursuant to the terms of any agreements in effect on the Issue Date and any Investment that replaces, refinances or refunds an existing Investment; provided, that the new Investment is in an amount that does not exceed the amount replaced, refinanced or refunded (after giving effect to write-downs or write-offs with respect to such Investment), and is made in the same Person as the Investment replaced, refinanced or refunded;

(s) endorsements for collection or deposit in the ordinary course of business; and

(t) Investments relating to any special purpose wholly-owned subsidiary of the Issuer organized in connection with a Receivables Facility that, in the good faith determination of the Board of Directors of the Issuer, are necessary or advisable to effect such Receivables Facility.

(a) pledges or deposits by such Person under workmen’s compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or U.S. government bonds to secure surety or appeal

bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case incurred in the ordinary course of business;

(b) Liens imposed by law, such as carriers’, warehousemen’s and mechanics’ Liens, in each case for sums not yet overdue for a period of more than 30 days or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review and, in the case of Collateral, such proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien;

(c) Liens for taxes, assessments or other governmental charges not yet overdue for a period of more than 30 days or payable or subject to penalties for nonpayment or which are being contested in good faith by appropriate proceedings and, in the case of Collateral, such proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien;

(d) Liens in favor of issuers of performance and surety bonds or bid bonds or with respect to other regulatory requirements or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business;

(e) Permitted Senior Easements and minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens incidental, to the conduct of the business of such Person or to the ownership of its properties which were not incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;

(f) Liens securing Indebtedness permitted to be incurred pursuant to the covenant described under “—Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”; provided that any such Indebtedness has Pari Passu Lien Priority or Junior Lien Priority relative to the notes; provided further that at the time of incurrence and after giving pro forma effect thereto, the Consolidated Senior Secured Debt Ratio would be no greater than 4.0 to 1;

(g) Liens securing Indebtedness permitted to be incurred pursuant to the covenant described under “—Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”; provided that any such Indebtedness has Pari Passu Lien Priority or Junior Lien Priority relative to the notes; provided further that the proceeds of such Indebtedness are used solely to finance the purchase or acquisition of Railroad Assets or Capital Stock of a Person 90% of whose assets are Railroad Assets (and/or the repayment of Acquired Indebtedness and/or fees and expenses incurred in connection therewith) and, in each case, such Railroad Assets or the assets of such Person, as the case may be, are pledged as Collateral and such Person becomes a Guarantor, and the principal amount of such Indebtedness does not exceed 4.0x pro forma EBITDA of such Railroad Assets or Person for the most recently ended four full fiscal quarters for which internal statements are available (with such pro forma adjustments for such acquisition or purchase as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of “Fixed Charge Coverage Ratio” (without duplication of the EBITDA of such Railroad Assets or Person included in the calculation of the Consolidated Senior Secured Debt Ratio for purposes of any lien incurred under the immediately preceding clause (6)));

(h) Liens existing on the Issue Date (other than Liens in favor of secured parties under the Credit Agreement);

(i) Liens on assets, property or shares of stock of a Person at the time such Person becomes a Subsidiary; provided, however, such Liens are not created or incurred in connection with, or in contemplation of, such other Person becoming such a subsidiary; provided, further, however, that such Liens may not extend to any other property owned by the issuer or any Restricted Subsidiary;

(j) Liens on assets or property at the time the Issuer or a Restricted Subsidiary acquired the assets or property or within 180 days of such acquisition, including any acquisition by means of a merger or

consolidation with or into the Issuer or any Restricted Subsidiary; provided, however, that such Liens are not created or incurred in connection with, or in contemplation of, such acquisition; provided, further, however, that the Liens may not extend to any other property owned by the issuer or any Restricted Subsidiary (other than assets on a property affixed or appurtenant thereto);

(k) Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to the Issuer or another Restricted Subsidiary permitted to be incurred in accordance with the covenant described under “—Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” and included in the Collateral;

(l) Liens securing Hedging Obligations and the costs thereof so long as the related Indebtedness is, and is permitted to be under the Indenture, secured by a Lien on the same property securing such Hedging Obligations;

(m) Liens on specific items of inventory of other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(n) leases and subleases of real property granted to others in the ordinary course of business so long as such leases and subleases are subordinate in all respects to the Liens granted and evidenced by the Security Documents and which do not materially interfere with the ordinary conduct of the business of the Issuer or any of the Restricted subsidiaries;

(o) Liens arising from Uniform Commercial Code financing statement filings regarding operating leases entered into by the Issuer and its Restricted Subsidiaries in the ordinary course of business;

(q) Liens on equipment of the Issuer or any Restricted Subsidiary granted in the ordinary course of business to the Issuer’s client at which such equipment is located;

(r) Liens on accounts receivable and related assets incurred in connection with a Receivables Facility;

(s) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancing, refunding, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (8), (9), (10), (11), (12), (16) and (32); provided, however, that (x) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property), (y) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (8), (9), (10), (11), (12), (16), (32) and (38) at the time the original Lien became a Permitted Lien under the Indenture, and (B) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement and (z) the new Lien has no greater priority and the holders of the Indebtedness secured by such Lien have no greater intercreditor rights relative to the notes and Holders thereof than the original Liens and the related Indebtedness;

(t) other Liens securing obligations incurred in the ordinary course of business which obligations do to exceed the greater of $10.0 million and 1.00% of Total Assets at any one time outstanding; provided that if such Liens attach to Collateral, such Liens have Pari Passu Lien Priority or Junior Lien Priority relative to the notes;

(u) Liens on ABL Collateral securing Indebtedness Incurred pursuant to clause (a) of the second paragraph of the covenant described under “Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”;

(v) (i) Liens securing the notes outstanding on the Issue Date, Refinancing Indebtedness with respect to such notes and the Subsidiary Guarantees relating thereto and any obligations with respect to such notes, Refinancing Indebtedness and Subsidiary Guarantees and (ii) Liens securing the Additional Notes issued

pursuant to clause (v) of the second paragraph of the covenant entitled “Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”;

(w) Liens on the Collateral in favor of any collateral agent relating to such collateral agent’s administrative expenses with respect to the Collateral;

(x) Liens to secure Indebtedness of any Foreign Subsidiary permitted by clause (r) of the second paragraph of the covenant entitled “Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” covering only the assets of such Foreign Subsidiary;

(z) Liens securing judgments for the payment of money not constituting an Event of Default under clause (5) under the caption “Events of Default and Remedies” so long as such Liens are adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired;

(aa) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

(bb) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code, or any comparable or successor provision, on items in the course of collection, (ii) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business, and (iii) in favor of banking institutions arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

(cc) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;

(dd) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Issuer or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Issuer and its Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;

(ee) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale or purchase of goods entered into by the Issuer or any Restricted Subsidiary in the ordinary course of business;

(ff) Liens securing Indebtedness permitted to be incurred pursuant to clause (d) of the second paragraph under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”; provided that Liens extend only to the assets so financed, purchased, constructed or improved;

(gg) Liens incurred to secure cash management services or to implement cash pooling arrangements in the ordinary course of business and Liens arising by virtue of any statutory or common law provisions relating to banker’s Liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a depository or financial institution;

(hh) any encumbrance or restriction (including put and call arrangements) with respect to Capital Stock of any joint venture or similar arrangement pursuant to any joint venture or similar agreement;

(ii) any amounts held by a trustee in the funds and accounts under an indenture securing any revenue bonds issued for the benefit of the Issuer or any Restricted Subsidiary;

(jj) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof;

(kk) Liens solely on any cash earnest money deposits made by the Issuer or any of its Restricted Subsidiaries in connection with any letter of intent or purchase agreement; and

(ll) Liens securing Indebtedness permitted to be incurred pursuant to clause (u) of the second paragraph of the covenant described under “—Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;” provided that such Liens extend only to those assets and property acquired with the proceeds of such Indebtedness.

For purposes of determining compliance with this definition, (A) Permitted Liens need not be incurred solely by reference to one category of Permitted Liens described above but are permitted to be incurred in part under any combination thereof and (B) in the event that a Lien (or any portion thereof) meets the criteria of one or more of the categories of Permitted Liens described above, the Issuer may, in its sole discretion, classify or reclassify such item of Permitted Liens (or any portion thereof) in any manner that complies with this definition and the Issuer may divide and classify a Lien in more than one of the types of Permitted Liens in one of the above clauses.

“Permitted Senior Easements” means (a) easements that burden solely an asset which is not used in the operation of a short line railroad, (b) underground easements, (c) access, pedestrian and vehicular crossing, longitudinal driveway, public and private grade crossing and similar easements, (d) aerial easements or rights (including leases) granted in connection with communications, fiber optic or utility facilities (including easements for installation of cellular towers), (e) pylon sign and billboard easements and leases, (f) above-ground drainage or slope easements, (g) scenic and clear vision easements, (h) liens and easements given to a public utility or any municipality or governmental or other public authority when required or requested, or (i) easements, licenses, rights of way or similar encumbrances granted in the ordinary course of business; provided that in any case except clause (h), no material adverse effect on the fair market value of the property or the use of the property for railroad operations or the operation of the railroad line would result from granting such easement or other right.

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

“preferred stock” means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution, or winding up.

“Qualified Proceeds” means assets that are used or useful in, or Capital Stock of any Person engaged in, a Similar Business; provided that the fair market value of any such assets or Capital Stock shall be determined by the board of directors in good faith.

“Railroad Assets” means assets that are used or useful in the operation of short line or regional railroads and assets reasonably related thereto.

“Rating Agencies” means Moody’s and S&P or if Moody’s or S&P or both shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Issuer which shall be substituted for Moody’s or S&P or both, as the case may be.

“Receivables Facility” means one or more receivables financing facilities, as amended from time to time, the Indebtedness of which is non-recourse (except for standard representations, warranties, covenants and indemnities made in connection with such facilities) to the Issuer and the Restricted Subsidiaries pursuant to which the Issuer and/or any of its Restricted Subsidiaries sells its accounts receivable to a Person that is not a Restricted Subsidiary.

“Receivables Fees” means distributions or payments made directly or by means of discounts with respect to any participation interest issued or sold in connection with, and other fees paid to a Person that is not a Restricted Subsidiary in connection with, any Receivables Facility.

“Related Business Assets” means assets (other than cash or Cash Equivalents) used or useful in a Similar Business; provided that any assets received by the Issuer or a Restricted Subsidiary in exchange for assets transferred by the Issuer or a Restricted Subsidiary shall not be deemed to be Related Business Assets if they consist of securities of a Person, unless upon receipt of the securities of such Person, such Person would become a Restricted Subsidiary.

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Subsidiary” means, at any time, any direct or indirect Subsidiary of the Issuer (including any Foreign Subsidiary) that is not then an Unrestricted Subsidiary; provided, however, that upon the occurrence of an Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of “Restricted Subsidiary.”

“Securities Act” means the Securities Act of 1933 and the rules and regulations of the Commission promulgated thereunder.

“Security Documents” means the security agreements, pledge agreements, mortgages, deeds of trust, deeds to secure debt, collateral assignments, control agreements and related agreements (including, without limitation, finance statements under the Uniform Commercial Code of the relevant states), as amended, supplemented, restated, renewed, refunded, replaced, restructured, repaid, refinanced or otherwise modified from time to time, creating the security interests in the Collateral as contemplated by the Indenture.

“Significant Subsidiary” means any Restricted Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such regulation is in effect on the date hereof.

“Similar Business” means any business conducted or proposed to be conducted by the Issuer and its Restricted Subsidiaries on the date of the Indenture or any business that is similar, reasonably related, incidental or ancillary thereto.

(a) respect to the Issuer, any Indebtedness of the Issuer which is by its terms subordinated in right of payment to the notes, and

(b) respect to any Guarantor, any Indebtedness of such Guarantor which is by its terms subordinated in right of payment to the Guarantee of such Guarantor.

(1) any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof; and

(2) any partnership, joint venture, limited liability company or similar entity of which

(x) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and

(y) such Person or any Restricted Subsidiary of such Person is a controlling general partner or otherwise controls such entity.

“Total Assets” means the total assets of the Issuer and the Restricted Subsidiaries, as shown on the most recent balance sheet of the Issuer for which internal financial statements are available immediately preceding the date on which any calculation of Total Assets is being made, with such pro forma adjustments for transactions consummated on or prior to or simultaneously with the date of the calculation as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.

“Transactions” means the issuance of the notes offered hereby on the Issue Date, the use of proceeds therefrom as described under the caption “Use of Proceeds” and other transactions in connection therewith or incidental thereto.

“Treasury Rate” means, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) that has become publicly available at least two business days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to February 1, 2014; provided, however, that if the period from the redemption date to February 1, 2014 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

(1) any Subsidiary of the Issuer which at the time of determination is an Unrestricted Subsidiary (as designated by the board of directors of the Issuer, as provided below) and

The board of directors of the Issuer may designate any Subsidiary of the Issuer (including any existing Subsidiary and any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on, any property of, the Issuer or any Subsidiary of the Issuer (other than any Subsidiary of the Subsidiary to be so designated); provided that

(a) any Unrestricted Subsidiary must be an entity of which shares of the Capital Stock or other Equity Interests (including partnership interests) entitled to cast at least a majority of the votes that may be cast by all shares or Equity Interests having ordinary voting power for the election of directors or other governing body are owned, directly or indirectly, by the Issuer,

(b) such designation complies with the covenants described under “—Certain covenants—Limitation on Restricted Payments” and

(2) its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Issuer or any Restricted Subsidiary.

The board of directors of the Issuer may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that, immediately after giving effect to such designation no Default or Event of Default shall have occurred and be continuing and either

(1) the Issuer could incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test described in the first sentence under “Certain covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” or

(2) the Fixed Charge Coverage Ratio for the Issuer and its Restricted Subsidiaries would be greater than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation.

Any such designation by the Board of Directors of the Issuer shall be notified by the Issuer to the Trustee by promptly filing with the Trustee a copy of the board resolution giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing provisions.

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness, Disqualified Stock or preferred stock, as the case may be, at any date, the quotient obtained by dividing

(1) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock or preferred stock multiplied by the amount of such payment, by

“Wholly-Owned Restricted Subsidiary” is any Wholly-Owned Subsidiary that is a Restricted Subsidiary.

“Wholly-Owned Subsidiary” of any Person means a Subsidiary of such Person, 100% of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person.

The exchange of an old note for an new note pursuant to the exchange offer will not constitute a “significant modification” of the old note for United States federal income tax purposes and, accordingly, the new note received will be treated as a continuation of the old note in the hands of such holder. As a result, there will be no United States federal income tax consequences to a holder who exchanges an old note for an new note pursuant to the exchange offer and any such holder will have the same adjusted tax basis and holding period in the new note as it had in the old note immediately before the exchange. A holder who does not exchange its old note for an new note pursuant to the exchange offer will not recognize any gain or loss, for United States federal income tax purposes, upon consummation of the exchange offer.

Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where such old notes were acquired as a result of market-making activities or other trading activities. We on behalf of yourself and the subsidiary guarantors have agreed that, for a period of 180 days after the completion of this exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until November 9, 2011, all dealers effecting transactions in the new notes may be required to deliver a prospectus.

We will not receive any proceeds from any sale of new notes by broker-dealers. New notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the new notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such new notes. Any broker-dealer that resells new notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such new notes may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on any such resale of new notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

Furthermore, any broker-dealer that acquired any of the old notes directly from us:

For a period of 180 days after the completion of this exchange offer we and the subsidiary guarantors will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We and the subsidiary guarantors have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holders of the old notes) other than commissions or concessions of any broker-dealers and will indemnify the holders of the old notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

Certain legal matters with respect to the validity of the issuance of the new notes and related guarantees will be passed upon for us by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. Certain legal matters with respect to the laws of the State of Florida will be passed upon for us by Shutts & Bowen LLP, West Palm Beach, Florida.

Ernst & Young LLP, independent registered public accounting firm, has audited our Consolidated Financial Statements at December 31, 2010 and 2009, and for each of the three years in the period ended December 31, 2010, as set forth in their report. We have included our Consolidated Financial Statements in this prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

We and the guarantors have filed with the SEC a registration statement on Form S-4 under the Securities Act with respect to the new notes being offered hereby. This prospectus, which forms a part of the registration statement, does not contain all of the information set forth in the registration statement. For further information with respect to us, the guarantors or the new notes, reference is made to the registration statement. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete. We are not currently subject to the informational requirements of the Exchange Act. As a result of the offering of the new notes, we will become subject to the informational requirements of the Exchange Act, and, in accordance therewith, will file reports and other information with the SEC. The registration statements, such reports and other information can be inspected and copied at the Public Reference Room of the SEC located at Room 1580, 100 F Street, N.E., Washington D.C. 20549. Copies of such materials, including copies of all or any portion of the registration statement, can be obtained from the Public Reference Room of the SEC at prescribed rates. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room. Such materials may also be accessed electronically by means of the SEC’s home page on the Internet (http://www.sec.gov).

We have audited the accompanying consolidated balance sheets of Florida East Coast Railway Corp. and Subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Florida East Coast Railway Corp. and Subsidiaries as of December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

The accompanying notes are an integral part of the Consolidated Financial Statements.

The accompanying Consolidated Financial Statements of Florida East Coast Railway Corp. and its subsidiaries (the “Company” or “FECR Rail Corp.” or “Florida East Coast Railway”) have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The Company’s rail transportation operations are conducted through its indirect wholly owned subsidiaries, Florida East Coast Railway, L.L.C. and FEC Highway Services, L.L.C. (collectively, the “Railway”). The Railway operates a Class II railroad along 351 miles of mainline track between Jacksonville and Miami, Florida, serving some of the most densely populated areas of Florida. Additionally, the Railway owns and operates approximately 270 miles of branch, switching and other secondary track and 115 miles of yard track, all within Florida. The Railway has the only coastal right-of-way between Jacksonville and Miami and is the exclusive rail-service provider to the Port of Palm Beach, Port Everglades (Fort Lauderdale), and the Port of Miami.

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162. This statement modifies the hierarchy of U.S. generally accepted accounting principles (“U.S. GAAP”) by establishing two levels of U.S. GAAP, authoritative and nonauthoritative literature. Effective July 2009, the FASB ASC, also known as the “Codification,” is considered the single source of authoritative U.S. accounting and reporting standards, except for additional authoritative rules and interpretative releases issued by the Securities and Exchange Commission (“SEC”). The Codification was developed to organize U.S. GAAP pronouncements by topic so that users can more easily access authoritative accounting guidance. It is organized by topic, subtopic, section, and paragraph, each of which is identified by a numerical designation. All accounting references have been updated, and therefore SFAS references have been replaced with ASC references.

On July 26, 2007, private equity funds managed by affiliates of Fortress Investment Group LLC (collectively, “Fortress”) acquired all of the outstanding stock of Florida East Coast Industries, Inc. (“FECI”), a then publicly held company. As part of the acquisition of FECI (herein referred to as the “Fortress Acquisition”), Fortress assumed a portion of FECI’s long-term debt and repaid the remaining outstanding debt and took FECI private.

On December 31, 2007, FECI’s rail transportation segment was transferred to private equity funds managed by affiliates of Fortress (the “Rail Separation”). Concurrent with the Rail Separation, FECR Rail LLC and Florida East Coast Railway Corp. were formed to carry on the activities of FECI’s rail transportation segment. As a result of the Rail Separation, FECR Rail LLC became the immediate parent of FECR Rail Corp. which in turn became the immediate parent of the Railway.

Fortress made a $250 million equity investment in FECR Rail LLC, the majority of which was used by FECR Rail LLC to fund the Rail Separation. The purchase price was allocated over the net assets transferred based on the book values, which approximated fair value at the time of the Rail Separation.

Florida East Coast Holdings Corp. (“Holdings Corp.”), was incorporated in Florida on January 10, 2011 to hold the investments of the Company.

On January 25, 2011, FECR Rail LLC contributed all of its holdings of FECR Corp.’s common and preferred shares in exchange for 250,555 newly issued common shares of Holdings Corp. As a result, FECR Rail LLC became the immediate parent of Holdings Corp., whereas Holdings Corp. became the immediate parent of Florida East Coast Railway Corp.

The following is a summary of entities included in the Consolidated Financial Statements:

The accompanying Consolidated Financial Statements of the Company include all wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The preparation of the Consolidated Financial Statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

Certain prior year amounts have been reclassified to conform to the current year presentation.

The Company considers all highly liquid instruments purchased with a maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents include cash on hand, bank demand accounts, money market accounts and overnight repurchase agreements having original maturities of less than three months.

Restricted cash consists of cash that is held by the Company in interest reserve accounts to hold the cash collateral related to the Company’s credit facility, letters of credit, and to hold cash in escrow accounts for long-term incentive cash awards for employees.

Allowance for doubtful accounts are recorded by management based on the Company’s historical experience of bad debts to sales, analysis of accounts receivable aging, and specific identification of customers in financial distress, e.g., bankruptcy or poor payment record. Management reviews material past due balances on a monthly basis. Account balances are charged against the allowance when management determines it is probable that the receivable will not be recovered. Activity in the Company’s allowance for doubtful accounts was as follows:

Materials and supplies are stated principally at average cost, which is not in excess of replacement cost. Materials are stated at an amount that does not exceed estimated realizable value.

Railway properties are stated at cost, and are depreciated and amortized on a straight-line method over the useful life.

The following describes the depreciation methodologies applied for the significant asset groups of the Company:

For track and related assets, the Company uses the group method of depreciation under which a single depreciation rate is applied to the gross investment. The Company reevaluated the useful lives of its track and related assets and established new depreciable lives based on a life study performed by valuation experts (as further described below) during 2004 through 2006 for bridges and 2005 for other track assets. The assets were also reviewed by valuation experts in connection with the Fortress Acquisition in 2007.

For rolling stock (such as locomotives and freight cars), the Company uses the group method of depreciation. Assets are specifically identified and utilize straight-line depreciation methods on a per asset basis based on the depreciation rate for the average life for the respective asset class. The Company reevaluated the useful lives of its rolling stock and established new depreciable lives based on a life study (as further described below) performed by valuation experts during 2004. The assets were also reviewed by valuation experts in connection with the Fortress Acquisition in 2007 as well as the offering of the Senior Secured Notes in 2011.

Under the group method, the service lives and salvage values for each group of assets are determined by completing periodic life studies and applying management’s assumptions regarding the service lives of its properties. A life study is the periodic review of asset lives for group assets conducted and analyzed by the Company’s management with the assistance of a third-party expert. The results of the life study process determine the service lives for each asset group under the group method. There are

several factors taken into account during the life study and they include statistical analysis of historical life, retirements and salvage data for each group of property, evaluation of current operations, review of the previous assessment of the condition of the assets and the outlook for their continued use, consideration of technological advances and maintenance schedules and comparison of asset groups to peer companies.

The Company’s policy is to perform life studies approximately every eight years. Changes, if any, in asset lives due to the results of a life study will be applied on a prospective basis and could significantly impact future periods’ depreciation expense, and thus, the Company’s results of operations.

Real estate properties are stated at historical cost (such as land, building and building improvements) and are specifically identified. The Company reevaluated the useful lives of its building and improvements and established new depreciable lives on reviews performed by valuation experts in connection with the Fortress Acquisition in 2007.

Rail operations are capital intensive and the Company accounts for these costs in accordance with U.S. GAAP. Routine repairs and maintenance costs, for all asset categories, are expensed as incurred. The Company self-constructs portions of its track structure and rebuilds certain of its rolling stock. In addition to direct labor and material, certain indirect costs are capitalized. The Company defines capital projects as any purchase of an asset that has an expected useful life greater than one year. Additionally, any expenditure which significantly increases an asset’s value or extends its useful life is capitalized.

The majority of the Company’s capital expenditures are related to track and rolling stock. Annual program work for rail, turnouts, surfacing, undercutting, bridges, locomotive and freight car overhauls are capitalized. Normal repairs, inspections, and maintenance costs are expensed as incurred, which includes track inspections, locomotive running repairs, repair of broken rail, and rail grinding. The Company incurs certain direct labor, contract service and other costs associated with the development and installation of internal-use computer software. Costs for newly developed software or significant enhancements to existing software are capitalized. Research, preliminary project planning, operations, maintenance and training costs are charged to operating expense when the work is performed.

Upon normal sale or retirement of track assets and rolling stock, costs less net salvage value are charged to accumulated depreciation and no gain or loss is recognized. As part of the life studies performed, an assessment will be made of the recorded amount of accumulated depreciation. Any deficiency (or excess), including any deferred gains or losses, will be amortized as a component of depreciation expense over the remaining useful life of the asset group until the next required life study. Since the overall assumption with group method is that the assets within the group on average have the same life and characteristics, it is therefore concluded that the deferred gains and losses offset over time.

The Company utilizes a first-in, first-out approach to track assets and related asset retirements. Generally, the Company estimates the historical cost of the replaced assets using historical accounting records and/or inflation indices published by the Bureau of Labor Statistics which are applied to the replacement value based on the age of the retired asset. These indices closely correlate with the major cost of the materials comprising the applicable road assets.

In the event that large groups of assets are removed from service as a result of unusual acts or sales, resulting gains and losses are recognized immediately. These acts are not considered to be in the normal course of business and are therefore recognized when incurred. Examples of such acts would be the major destruction of assets due to significant storm damage (e.g., major hurricanes) and the sale, disposal or abandonment of a rail line segment. There were no abnormal losses during the periods ended December 31, 2010, 2009 and 2008, respectively.

Upon retirement or disposal of any of the land, land improvements, building and building improvements, and other fixed assets, resulting gains and losses are recognized in earnings.

The Company reviews the carrying value of its property for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset grouping may not be recoverable from the undiscounted future net cash flows expected to be generated over its remaining useful life. As of December 31, 2010, management has not identified indicators of an impairment of value for any significant asset group of the Company. However, events or changes in circumstances could develop or occur that could cause the Company to evaluate the recovery of its long-lived assets and potentially record an impairment, the amount of which could be material. Assets that are deemed impaired are recorded at the lower of carrying amount or fair value.

Certain key employees and executives of the Company are the recipients of employment agreements that have restricted share benefits. Furthermore, the Company granted restricted share benefits to non-employees (executives of affiliates of the Company, herein referred to as “consultants”) to provide strategic consulting services to the Company. Share-based compensation is accounted for using the fair value based method prescribed by ASC 718, Compensation—Stock Compensation. Management determines fair value based on independent third party valuations. Generally, the fair value of restricted shares is based on a valuation approach including the market-based approach using current market multiples as well as the income approach utilizing a discounted cash flow analysis, performed on a quarterly basis. For share-based awards issued to employees, a compensation charge is recorded against earnings based on the fair value of the award. The Company uses a straight-line method of accounting for compensation costs related to share-based payment awards that contain pro rata vesting provisions. For transactions with consultants in which services are performed in exchange for the Company’s common stock or other equity instruments, the transactions are recorded on the basis of the fair value of the service received or the fair value of the equity instruments issued, whichever is more readily measurable at the date performance is complete or service is provided.

The Company follows the asset and liability method of accounting for income taxes, as such, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Future

tax benefits, such as net operating loss carry forwards and alternative minimum tax credit carry forwards, are recognized to the extent that realization of these benefits is considered to be more likely than not.

As of and during the periods ended December 31, 2010, 2009, and 2008, the Company did not have any uncertain tax positions.

The Company recognizes freight revenue after the freight has been moved from origin to destination, which is not materially different from the recognition of revenue as shipments progress due to the relatively short length of the Company’s railroads. Other revenue, which includes car hire, storage fees, and fuel surcharge on dray moves, is recognized when the service is performed.

ASC 825, Financial Instruments, requires disclosure of the fair value of certain financial instruments. The following methods and assumptions were used to estimate the fair value of each class of financial instruments held by the Company:

The carrying amounts and estimated fair values of the Company’s financial instruments were as follows:

Costs associated with environmental compliance and preventing future contamination that are estimable and probable are accrued and expensed, or capitalized as appropriate. Expected remediation and monitoring costs relating to the remediation of an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are accrued and expensed in the period that such costs become estimable. Liabilities are recognized for remedial activities when they are probable and the remediation cost can be reasonably estimated.

The Company’s policy is to reserve for certain contingencies consisting primarily of various claims and lawsuits resulting from its operations in accordance with ASC 450, Contingencies. In the opinion of management, appropriate reserves have been made for the estimated liability that is probable of resulting from disposition of such matters. Management’s opinion, and ultimately, the reserve recorded in the financial statements, is based on known facts and circumstances. In certain circumstances, management uses the services of outside counsel and experts to help evaluate the facts and circumstances and considers their professional judgment in establishing the appropriate reserve. The ultimate resolution of these contingencies may be for an amount greater or less than the amount estimated by management.

In January 2010, the FASB issued Accounting Standards Update No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in Codification Subtopic 820-10. ASU 2010-06 amends Codification Subtopic 820-10 to require (1) a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; (2) in the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements, and (3) a reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of ASU No. 2010-06 did not have a material impact on the Company’s financial position or results of operations.

The Company allocated net charges of $1.3 million, $1.4 million, and $0.7 million for management services and facility rents to affiliates of FECI for the years ended December 31, 2010, 2009, and 2008, respectively. The net charges include management services incurred during the transition period subsequent to the Rail Separation and rents for space leased from FECI for office space. As of December 31, 2010, and 2009, respectively, the Company did not have an outstanding net receivable or payable from or to FECI.

In addition, the Company allocated net proceeds of $3.8 million, $1.6 million, and $0.3 million for management services, and facility and equipment rents to affiliates of RailAmerica, Inc. (“RailAmerica”) for the years ended December 31, 2010, 2009, and 2008, respectively. RailAmerica is an entity partially owned by investment funds managed by affiliates of Fortress. The net charges include expenses for services provided from time to time for certain reciprocal administrative services, including finance, accounting, human resources, information technology, purchasing and legal, for fees received related to leased locomotives rented to RailAmerica’s affiliated companies and for office space sub-leased to RailAmerica. Services and fees are based on arm’s-length arrangements. The Company had a net receivable from RailAmerica of $0.3 million and $0.1 million as of December 31, 2010, and 2009, respectively.

The Company rents chassis equipment for ordinary business operations from TRAC Intermodal, an entity indirectly owned by funds managed by affiliates of Fortress. These rents are based on current market rates for similar assets. During the years ended December 31, 2010, 2009, and 2008, the Company paid rents at the amounts of $0.7 million, $0.8 million, and $0.7 million, respectively.

In connection with the Rail Separation, an affiliate of FECI obtained certain rights to use the Railway’s right of way for other than freight purposes and also received certain nonoperating land parcels. In addition, another FECI affiliate obtained and then leased back to the Railway certain property currently used by the Railway as a rail yard. The cancellable lease agreement provided for annual rent increases of 4%, along with a 20% decrease for years two and three, as the Railway vacated portions of the property under the terms of the agreement. Under this lease agreement, the Company was required to vacate 20% of the land by April 1, 2010. Two amendments were entered into to extend the date to vacate by July 1, 2011. The first amendment extended the date to vacate to July 1, 2010, at an additional lease cost of $0.1 million. The second amendment extended the date to vacate to July 1, 2011, at an additional cost of $1.9 million, of which $1.4 million was prepaid during the period October 1, 2010 through June 30, 2011. The Railway paid $1.9 million, $1.8 million and $2.5 million for the railyard base rent for the years ended December 31, 2010, 2009, and 2008, respectively.

The railyard lease agreement was amended and restated on January 24, 2011. Under the restated agreement, base rent will commence on January 1, 2011, at $4.5 million per annum with a 2.5% escalation clause per year for 25 years and will automatically renew for an additional five-year period. Under the amended agreement, the Company may terminate the agreement after five years upon a two-year notice to terminate and has the option to purchase the property at fair market value upon written notice of such intent and the payment of a nonrefundable 3% deposit.

The Company declared and paid a cash dividend of (a) $3.7 million, in the aggregate, with respect to its Series A Redeemable Preferred Stock, and (b) $16.3 million, in the aggregate, with respect to its common stock in each case, allocated among the holders of record of each such class of stock on the record date of July 27, 2009.

In September 2009, the Company received a $5.0 million cash contribution from FECR Rail LLC.

Depreciation expenses, including assets recorded under capital leases, were $27.5 million, $28.0 million, and $28.4 million for the years ended December 31, 2010, 2009, and 2008, respectively.

As a result of the Rail Separation, the Company had no future responsibility for income taxes for periods prior to and including December 31, 2007, as it related to activities under FECI’s period of ownership of the Company. For the years ended December 31, 2010, 2009 and 2008, there was no current or deferred income tax expense. Income tax expenses differed from the amounts computed by applying the statutory federal income tax rate to pretax income as a result of the following:

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities were as follows:

A valuation allowance against deferred tax assets is required if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company established a valuation allowance of $18.7 million and $10.4 million as of December 31, 2010 and 2009, respectively, to reduce deferred tax assets to their expected realizable value at December 31, 2010.

The Company has net operating loss carryforwards as of December 31, 2010, as follows:

The Company recognizes interest and penalties related to uncertain tax positions in its provision for income taxes. As of December 31, 2010 and 2009, the Company did not believe that it had any uncertain tax positions. As of December 31, 2010, the U.S. taxing jurisdiction remains open to examination for the years 2010, 2009, and 2008.

In connection with the Fortress Acquisition, the Company, along with FECI, entered into a $1.656 billion Senior Secured Credit Facility (the “Facility”). The Facility consisted of:

As a result of the Rail Separation, the $600 million Rail Term Loan was assumed by the Company and FECR Rail LLC. The $50 million Revolving Credit Facility remained in place for the Company and FECI after the Rail Separation. The Revolving Credit Facility was utilized by FECI for general corporate purposes. The outstanding balance was drawn by FECI and therefore, FECI’s obligation.

The Property and Rail Term Loan proceeds were used to consummate the Fortress Acquisition, repay certain long-term debt and pay fees related to the Fortress Acquisition. The Property Term Loan was the obligation of FECI.

The Delayed Draw Property Term Loan was used for development work, tenant improvements and normalized leasing costs of properties that were under development at the time of the acquisition. The Delayed Draw Property Term Loan was the obligation of FECI.

In January 2009, the Facility’s initial 18-month term was extended for an additional six months, giving the Facility a maturity date of July 26, 2009. In connection with the extension, the Company paid a $1.6 million fee to arrangers of the Facility, representing the pro rata portion of the total fee payable to the arrangers. This fee was included in interest expense for the year ended December 31, 2009.

In July 2009, the Company and FECI entered into an amended agreement that provided for an additional 18-month extension of principal with three six-month extensions available contingent upon compliance with the terms of the Facility including principal reductions required to be made prior to the extension date. The initial maturity date relating to the 18-month extension was January 26, 2011. The first, second, and third extension maturity dates were July 26, 2011, January 26, 2012, and July 26, 2012, respectively. The amended Facility converted all outstanding balances under the existing Facility to a term loan, and there was no further revolving credit facility available under the amended Facility. This extension was accounted for as a loan modification.

In connection with the modification, the Company incurred $10.3 million of transaction fees (of which $7.5 million were amortized over the 18-month extension period, and $2.8 million of third-party fees were included in other expense in the consolidated statement of operations) and accrued interest. Further, the amended Facility agreement required a principal payment in January 2010, equal to the lesser of (1) $175.0 million or (2) the aggregate outstanding balance of the amended Facility, together with accrued interest thereon.

In December 2009, the amended Facility was further amended, which required a principal payment of $465.0 million plus accrued interest in December 2009, which were paid by Fortress and FECI. As a result of the December payment, the required January 2010 payment was lowered to $125.0 million. A principal payment of $125.0 million was made by FECI in January 2010.

The Facility and its amendments were secured by a first priority, perfected security interest in substantially all of the Company’s tangible and intangible assets, including, but not limited to, intellectual property, owned and material leased real property and all of the capital stock of the Company and FECI and each of their direct and indirect subsidiaries. The Company continued to be the borrower under the Rail Term Loan and FECI the borrower under the remaining portions of the Facility, whereas the subsidiaries of FECI and the Company jointly and severally cross-guaranteed the entire Facility.

The Facility and its amendments required the Company and FECI to comply with, affirmative and negative covenants, the most significant of which were: (1) minimum net worth, as defined, of the Company and FECI as a combined group of $1.65 billion, (2) limitations on the aggregate amount of capital expenditures incurred from July 26, 2009, until the expiration of the third extension period, and (3) the interest reserve account balance to be maintained at $15 million for the Company and FECI combined. The Company was in compliance with the debt covenants as of December 31, 2010.

The Facility bore interest with respect to the loans at the bank’s base rate or London Interbank Offered Rate (“LIBOR”), at the Company’s option, plus an applicable margin ranging between 125 and 225 basis points, respectively. Subsequent to April 30, 2008, the margins increased to 150 and 250 basis points, respectively. The weighted-average interest rate of the Facility was 7.03% for the year ended December 31, 2008.

The amended Facility bore interest based on an alternative base rate (“ABL”) or LIBOR at the Company’s option. Interest under the ABL method had a base rate for any day, a rate per annum equal to the greater of (a) the base rate in effect on such a day or (b) the federal funds effective rate in effect on such day plus ¹/2 of 1.0% subject to a floor of 3.0%, plus an applicable margin of 6.5% per annum through the 18-month extension periods. The margin increased to 8.0%, 9.5% and 11.0% for the first, second, and third extension period, respectively. Interest under the LIBOR method had a base rate of LIBOR, subject to a floor of 3.0%, plus an applicable margin of 7.5% per annum through the 18-month extension periods. The margin increased to 9.0%, 10.5% and 12.0% for the first, second, and third extension period, respectively.

In July 2009, a letter of credit was drawn upon at the amount of $1.6 million, which was included in the outstanding balance of the Rail Term Loan as of December 31, 2010, and 2009, respectively.

The Company’s outstanding balances of the amended Facility were $601.2 million and $601.6 million as of December 31, 2010, and 2009, respectively. The weighted-average interest rate on the amended Facility was 9.66% and 7.23 % for the years ended December 31, 2010, and 2009, respectively. The aggregate outstanding balance on the amended Facility, which included the Company’s outstanding balance of $601.2 million, was $799.1 million as of December 31, 2010.

All outstanding amounts under the amended Facility were paid in January 2011 (as described in “Refinancing” below).

On January 25, 2011, the Company sold $475.0 million of 8¹/8% Senior Secured Notes due 2017 (“Senior Secured Notes”) in a private offering, for gross proceeds of $475.0 million. The net proceeds of the issuance of the Senior Secured Notes, together with an approximately $140.0 million equity contribution from Holdings Corp. were used to repay an amount outstanding of approximately $601.2 million under the Facility owed by the Company, to pay certain fees and expenses incurred in connection with the offering of the Senior Secured Notes and for general corporate purposes. FECI entered into a separate financing transaction whereby it paid down its outstanding balance of approximately $197.9 million under the Facility. As a result, the Facility is no longer outstanding and none of its obligations are further jointly and severally cross-guaranteed by the subsidiaries of FECI and the Company. None of the Company’s subsidiaries continue to guarantee the outstanding obligations of FECI.

In connection with the issuance of the Senior Secured Notes, the Company and certain of its subsidiaries also entered into the Asset-Based Lending (“ABL”) Facility. The ABL Facility matures on January 25, 2015 and bears interest at the Company’s option of: (a) a base rate determined in the greater of (1) the prime rate of the administrative agent, (2) federal funds effective rate plus ¹/2 of 1%, or (b) a LIBOR rate determined by reference to the cost of funds for U.S. dollar deposits in London interbank market for the interest period relevant to such borrowing. The applicable margin with respect to (a) base rate borrowings will be 2.25%, and (b) LIBOR borrowings will be 3.25%. Obligations under the ABL Facility are secured by a first-priority lien on the ABL Collateral.

The Senior Secured Notes are secured by first-priority liens on substantially all of the tangible and intangible assets of the Company and its subsidiary guarantors’ (other than the ABL collateral securing the ABL Facility) and a second-priority lien on ABL collateral. The guarantors are defined primarily as existing and future wholly owned domestic restricted subsidiaries. The Company may redeem up to 10% of the aggregate principal amount of the Senior Secured Notes issued during any 12-month period commencing on the issue date and ending on the third anniversary thereof at a price equal to 103% of the principal amount thereof plus accrued and unpaid interest, if any. The Company may also redeem some or all of the Senior Secured Notes at any time before February, 2014 at a price equal to 100% of the aggregate principal amount thereof plus a make-whole premium. In addition, prior to February 1, 2014, the Company may redeem up to 35% of the Senior Secured Notes at a redemption price of 108.125% of the aggregate principal amount thereof with the proceeds from an

equity offering. Subsequent to February 1, 2014, the Company may redeem the Senior Secured Notes at 104.063% of their principal amount. The premium then reduces to 102.031% commencing on February 1, 2015 and then 100% on February 1, 2016 and thereafter.

The ABL Facility and indenture governing the Senior Secured Notes contain various covenants and restrictions that limits the Company and its restricted subsidiaries’ ability to incur additional indebtedness, pay dividends, make certain investments, sell or transfer certain assets, create liens, designate subsidiaries as unrestricted subsidiaries, consolidate, merge or sell substantially all the assets, and enter into certain transactions with affiliates. It is anticipated that proceeds from any future borrowings will be used for general corporate purposes.

On December 18, 2007, the Company entered into an interest rate swap agreement with a seven-year term to hedge the variable interest rate on the Company’s Facility and other potential future borrowings. Pursuant to the swap agreement, the Company effectively paid a fixed rate of interest over the term of the agreement without the exchange of the underlying notional amount. This $600.0 million swap was designated as a cash flow hedge and was considered to be highly effective in hedging the variable rate risk associated with the Facility.

In October 2008, these swap agreements were terminated. Pursuant to ASC 815, Derivatives and Hedging, a portion of the balance related to cash flows no longer expected to occur that were recorded in accumulated other comprehensive income (loss) was recorded as a loss of $7.9 million for the year ended December 31, 2008, while the residual balance of $3.1 million was amortized to interest expense over the remaining term of expected interest payments related to the Rail Term Loan. The respective amortization charges for unrealized losses were $2.3 million and $0.8 million for the years ended December 31, 2009 and December 31, 2008, respectively.

For both years ended December 31, 2010 and 2009, accumulated other comprehensive income (loss) did not include any unamortized losses relating to the hedge termination.

The Company sponsors two 401(k) plans, which are available to the Company’s employees. Contributions are at the employee’s discretion, subject to maximum limits imposed by the IRS (generally, $16,500 in both 2010 and 2009, and $15,500 in 2008), and an additional contribution up to 10% of after-tax compensation, also subject to maximum limits imposed by the IRS. Total contributions in 2010, 2009 and 2008, including the Company’s match if any, were limited by IRS regulations to $49,000 per participant.

The 401(k) Plan for Salaried Employees—In accordance with the terms of the plan, the Company matched the employee’s contributions up to the first $1,200 contributed by the employee. For employee contributions in excess of $1,200, the Company matched $0.25 for every $1.00 in pretax employee contributions up to the IRS maximum limits. The amounts of matching contributions by the Company were $0.2 million, $0.3 million, and $0.4 million for the years ended December 31, 2010, 2009, and 2008, respectively.

401(k) Plan for Hourly Wage Employees and/or Employees Covered by Collective Bargaining Agreement—This is a limited contributory plan that was instituted in April 1995. In 2002, train and engine hourly employees became eligible for a Company matching contribution of $0.20 for every $1.00 of employee contributions up to $200 annually. In 2006 boilermakers, electricians, machinists, shop laborers, and signal and

communication workers also became eligible for the same matching contributions. In 2009, the International Brotherhood of Electrical Workers (“IBEW”) carmen, agents, clerical workers, dispatchers, and foreman also became eligible for the same matching contributions. The amounts of matching contributions for the years ended December 31, 2010, 2009, and 2008 were immaterial.

Pension Plan—The Company adopted an unfunded defined benefit plan covering previous officers of the Company in 1998. The benefits are based on years of service and the employee’s compensation during the five years before retirement. The Company curtailed this plan in 1999, causing no additional benefits to accrue to covered officers. The following chart summarizes the benefit obligations and includes rate assumptions associated with the defined benefit plan for the years ended December 31, 2010, 2009, and 2008:

As of December 31, 2010, and 2009, the total accrued liability related to the benefit obligation was $3.7 million and $3.9 million, respectively. Of the total liability, $3.3 million and $3.5 million were classified in other long-term liabilities in the consolidated balance sheet as of December 31, 2010 and 2009, respectively. The remaining balance of $0.4 million, for each year, was presented as other current liabilities in the consolidated balance sheet. As of December 31, 2010 and 2009, accumulated other comprehensive income (loss) included $0.7 million and $0.6 million, respectively, of unrealized losses related to the benefit plan. Assuming no change in participation, the Company expects to incur benefit payments of $0.2 million per year over the next five years.

Share-based compensation expenses related to restricted stock grants for the years ended December 31, 2010, 2009, and 2008, were $0.8 million, $0.7 million, and $1.8 million, respectively.

During 2008, the Company entered into a consulting agreement in which the consultant could earn three times the amount of the initial purchased restricted stock units (“RSUs”) for services rendered. The consultant purchased 221 shares or $0.2 million of common shares from FECR Rail LLC and its related entities pursuant to the agreement. Additionally, 221 shares were issued to the consultant and vested during 2008. This agreement was terminated effective July 31, 2008, and the consultant was issued an additional 113 common shares as part of the termination agreement. The Company incurred $0.3 million of consulting expense, based on the fair value of the common shares on the vesting or issue date, for the year ended December 31, 2008.

In October 2009, the Company entered into consulting agreements with certain RailAmerica executives until such agreements are terminated. The consultants provide assistance to the Company with strategic initiatives to grow the Company’s revenue and enhance the value of its franchise. The Company granted 2,550 restricted stock units RSUs with respect to shares of common stock, par value $0.01, in relation to the consulting agreements. The Company incurred $0.5 million and $0.1 million of consulting expense, based on the fair value of the common shares, for the years ended December 31, 2010, and 2009, respectively.

In March, July and November 2010, the Company granted 2,617 RSUs with respect to shares of common stock, par value $0.01, to executives of the Company. The Company incurred $0.2 million of compensation expense for the year ending December 31, 2010.

As of December 31, 2010, there was $3.3 million of unrecognized compensation expense related to unvested restricted share compensation arrangements, which is expected to be recognized over a weighted average period of 2.7 years.

During 2008, FECR Rail Corp. issued $86.6 million (or 86,625 units) of Series A Redeemable Preferred Stock (the “preferred shares”) to FECR Rail LLC in exchange for cash. In addition, preferred shares amounting to $62.2 million were redeemed along with accrued preferred yield of $2.2 million during the year ended December 31, 2008.

During the year ended December 31, 2009, preferred shares amounting to approximately $4.6 million were redeemed along with an accrued preferred yield of $0.7 million.

Dividends on the preferred shares were cumulative at the rate of 15% per annum, subject to limitations on distributions by the Company imposed by the terms of any financing, swap, or other agreement. The Company was able to redeem in whole or in part the preferred share units at any time. Subject to limitations on distributions, on December 31, 2012, the Company would have been required to redeem for cash the preferred shares outstanding together with the unpaid preferred yield.

As of December 31, 2010 and 2009, the total unpaid preferred yield was $4.1 million and $1.2 million, respectively, on the then 19,809 preferred share units with a carrying value of $19.8 million for both years. The accrual of the preferred yield was reflected in interest expense and the balance of the unpaid preferred yield and the outstanding preferred share units was classified as a long-term liability.

On January 19, 2011, the Company amended its certificate of incorporation whereby all of the preferred shares were no longer subject to redemption and as such, have been reclassified from liability to stockholders’ equity upon the execution of the agreement.

The Company is the defendant and plaintiff in various lawsuits resulting from its operations. In the opinion of management, appropriate provisions have been made in the Consolidated Financial Statements for the

estimated liability that is probable of resulting from disposition of such matters. The Company maintains comprehensive liability insurance for bodily injury and property claims, but is self-insured or maintains a significant self-insured retention (i.e., deductible) for these exposures.

In September 2006, the Florida Department of Environmental Protection notified the Company and an adjacent property owner that they had been identified as potentially responsible parties (“PRPs”) as a result of an investigation into contaminated groundwater in Fort Pierce, Florida. Based upon site assessments performed in 2010 and 2009, the Company estimated the potential remediation and cleanup costs could be material even if the source of the contamination did not reside on its property. As of December 31, 2010, and 2009, the Company had accrued $1.7 million related to the alleged contamination of which $1.5 million is expected to be paid over the next 5 to 10 years. During the years ended December 31, 2010 and December 31, 2009, $0.2 and $0.4 million, respectively, were paid out for testing and site assessment.

In addition to the above site, the Company monitors a small number of other sites leased to others, or acquired by the Company or its subsidiaries. Based on management’s ongoing review and monitoring of these sites, and the ability to seek contribution or indemnification from the PRPs, the Company does not expect to incur material additional costs.

It is difficult to quantify future environmental costs as many issues relate to actions by third parties or changes in environmental regulations. However, based on information presently available, management believes that the ultimate disposition of currently known matters will not have a material effect on the financial position, liquidity, or results of operations of the Company.

The Company leases various pieces of equipment under three year leases that expire in 2011. Future minimum payments under the capital leases, which are recorded as other liabilities are as follows (in thousands):

The Company is obligated under several noncancellable operating leases covering its facilities and equipment (primarily locomotives, trailers, and office and computer equipment). The lease terms are from one to ten years.

Future minimum payments under the leases, including applicable sales tax, are as follows (in thousands):

As previously described in Note 3, on January 24, 2011, the Company entered into an amended and restated railyard lease, which, among other things, extends the date to vacate to December 31, 2035 (unless the Company elects to terminate the lease or purchase the land), provides for an annual rental fee of $4.5 million a year (subject to a 2.5% annual increase), provides the Company with the right to purchase certain land from FECI’s affiliate at a mutually determined fair market value, and provides FECI’s affiliate with the right to relocate the Company (at its expense) from such land to comparable property with competitive rental rates. The lease is cancellable after five years, with a two-year notice requirement.

As a result of the change in control that occurred in connection with the Rail Separation, the Company was required to make a $2.5 million advance payment to a lessor of locomotives in 2009. This payment is being amortized over the remaining term of the lease.

The Railway has three primary aggregate customers with operations in South Florida whose freight revenues represent approximately 14%, 17%, and 19% of the Railway’s total revenues for the years ended December 31, 2010, 2009 and 2008, respectively. The Railway’s revenues are affected by the demand for aggregate material, primarily in Florida, and the ability of these customers to supply, efficiently and effectively, this natural raw material. In addition, one customer represents approximately 10%, 10%, and 13% of total revenues for the years ended December 31, 2010, 2009 and 2008, respectively.

In January 2010, the U.S. Court of Appeals for the Eleventh Circuit upheld a decision to cancel all 2002 issued mining permits for certain quarries in the Lake Belt area of Miami-Dade County. Following this decision by the Court, the U.S. Army Corps of Engineers has signed a Record of Decision (“ROD”) for rock mining in the Lake Belt Area and issued a specific permit to Cemex Construction Materials Florida for FEC Quarry.

After extensive study and coordination with the public and other state and federal agencies, the ROD found that the discharge of fill material into 10,044 acres of Waters of the U.S. for mining in the Lake Belt area is not contrary to the public interest and is in compliance with the Section 404 of the Clean Water Act 404(b)(1) guidelines subject to certain permit conditions. Of the total impacts, 2,717 acres of wetlands were impacted under the 2002 permits, prior to the permits being vacated. The 7,327 acres of “new” authorized impacts are separated into two geographic areas: Section 1 (4,591 acres) and Section II (2,736 acres).

While there are no assurances, the Railway’s customers expect to have adequate reserves of minable aggregate material to satisfy demand in the foreseeable future. For the years ended December 31, 2010, 2009, and 2008, aggregate loads accounted for approximately $27.1 million, $30.3 million, and $42.8 million of freight revenue, respectively, or 14%, 17%, and 18%, respectively, of the Railway’s freight revenues.

In the fourth quarter of 2010, the Company entered into a Track Maintenance Agreement with an unrelated third-party customer (the “Shipper”). Under the agreement, the Shipper paid for qualified railroad track maintenance expenditures during 2010 in exchange for the assignment of railroad track miles, which permits the Shipper to claim certain tax credits pursuant to Section 45G of the Internal Revenue Code. The Company entered into a similar agreement in the third quarter of 2009. During the years ended December 31, 2010, and 2009 the Shipper paid for $2.4 million and $2.4 million, respectively, of maintenance expenditures. The track maintenance tax credit has been renewed by Congress through 2011.

In October 2010, Miami-Dade County, owner of the Port of Miami, was awarded a $22.8 million federal grant under the U.S. Department of Transportation’s Transportation Investment Generating Economic Recovery II (“TIGER”) program to rehabilitate the port’s rail bridge and construct new rail facilities on port property (“on-port project”). These projects will enable cargo to be moved directly from the port’s facility to an inland distribution center and alleviate traffic congestion in and around the port. The Company plans to establish intermodal container rail service on its own rail line leading into the port at an estimated total cost of $21.8 million (“off-port project”). The Company signed an agreement with the Florida Department of Transportation (“FDOT”) on January 24, 2011, in which FDOT will participate in funding of the “off-port project” and will reimburse the Company an estimated $10.9 million of the total cost.

The accompanying notes are an integral part of the Consolidated Financial Statements.

The accompanying Consolidated Financial Statements of Florida East Coast Railway Corp. and its subsidiaries (the “Company” or “FECR Rail Corp.” or “Florida East Coast Railway”) are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting and, in the opinion of the Company’s management, reflect all adjustments, including normal recurring items, which are necessary to present fairly the results for interim periods. All significant intercompany transactions and accounts have been eliminated in consolidation. Certain information and footnote disclosures normally included in Consolidated Financial Statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC; however, management believes that the disclosures are adequate to make information presented not misleading. The results of operations for interim periods are not necessarily indicative of results of operations for the full year. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Consolidated Financial Statements for the year ended December 31, 2010 included elsewhere in this prospectus.

Florida East Coast Holdings Corp., a Florida corporation, was incorporated in Florida on January 10, 2011.

On January 25, 2011, FECR Rail LLC contributed all of its holdings of FECR Corp.’s common and preferred shares in exchange for 250,550 newly issued common shares of Holdings Corp. As a result, FECR Rail LLC became the immediate parent of Holdings Corp., whereas Holdings Corp. became the direct parent of Florida East Coast Railway Corp.

The following is a summary of entities included in the Consolidated Financial Statements:

The preparation of the Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

Certain prior year amounts have been reclassified to conform to the current year presentation.

The carrying amounts and estimated fair values of the Company’s financial instruments were as follows:

No recent accounting pronouncements have a material impact on the Company’s financial reporting policies.

FECR incurred net charges of $0.4 million and $0.2 million for management services and facility rents to affiliates of FECI for the three months ended March 31, 2011 and 2010, respectively. The net charges include management services incurred during the transition period subsequent to the Rail Separation and rents for space leased from FECI for office space. As of March 31, 2011 and December 31, 2010, respectively, the Company did not have an outstanding net receivable or payable from or to FECI.

In addition, FECR allocated net proceeds of $0.9 million and $0.9 million for management services and facility and equipment rents to affiliates of RailAmerica, Inc. (“RailAmerica”) for the three months ended March 31, 2011, and 2010, respectively. RailAmerica is an entity partially owned by investment funds managed by affiliates of Fortress. The net charges include expenses for services to be provided from time to time for certain reciprocal administrative services, including finance, accounting, human resources, purchasing and legal and for rents received on locomotives rented to RailAmerica and office space sub-leased to RailAmerica. Services and fees are based on arm’s-length arrangements. FECR had a net receivable from RailAmerica of $0.2 million and $0.3 million as of March 31, 2011 and December 31, 2010, respectively.

The Company rents chassis equipment for ordinary business operations from TRAC Intermodal, an entity indirectly owned by funds managed by affiliates of Fortress. These rents are based on current market rates for similar assets. During the three months ended March 31, 2011 and 2010, the Company paid rents at the amount of $0.1 million and $0.2 million, respectively.

On January 24, 2011, the Company entered into an amended and restated railyard lease, which, among other things: extends the date to vacate to December 31, 2035 (unless the Company elects not to renew the lease); commencing on January 1, 2011 provides for an annual rental fee of $4.5 million a year (subject to a 2.5% annual increase); provide the Company the right to purchase certain land from FECI at a mutually determined fair

market value; provide FECI with the right to relocate the Company (at its expense) from such land to comparable property with competitive rental rates. The lease is cancellable after five years with a two years notice requirement. The Railway paid $1.2 million and $0.4 million for the railyard base rent for the three months ended March 31, 2011 and March 31, 2010, respectively.

In January 2011, Holdings Corp. contributed $140 million to the Company to repay a portion of the amounts outstanding under the existing debt.

As a result of the Rail Separation, the Company has no future responsibility for income taxes for periods prior to and including December 31, 2007, as it relates to activities under FECI’s period of ownership of the Company. It is more likely than not that the net operating losses expected to be generated by the Company in 2011 will expire unused. Accordingly, the Company has recognize tax expense in 2011 to reflect an increase in the Company’s deferred tax valuation allowance. As such, the Company recorded an income tax expense of $3.3 million and $0 million, for the three months ended March 31, 2011 and 2010, respectively.

A valuation allowance against deferred tax assets is required if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has established a valuation allowance of $23.2 million and $18.7 million as of March 31, 2011, and December 31, 2010, respectively, to reduce deferred tax assets to their expected realizable value at March 31, 2011.

The Company has net operating loss carryforwards as of March 31, 2011, as follows:

The Company recognizes interest and penalties related to uncertain tax positions in its provision for income taxes. As of December 31, 2010 and 2009, the Company does not believe that it had any uncertain tax positions. As of December 31, 2010, the U.S. taxing jurisdiction remains open to examination for the years 2010, 2009, and 2008.

On January 25, 2011, the Company sold $475.0 million of 8 1/8% Senior Secured Notes due 2017 (“Senior Secured Notes”) in a private offering, for gross proceeds of $475.0 million. The net proceeds of the issuance of the Senior Secured Notes, together with an approximately $140.0 million equity contribution from Holdings Corp. were used to repay all amounts outstanding under the Facility as well as fees and expenses incurred in

connection with the offering of the Senior Secured Notes. In connection with the issuance of the Senior Secured Notes, the Company entered into the Asset Based Lending (“ABL”) Facility that matures on January 25, 2015. Availability on the ABL Facility as of March 31, 2011 was approximately $30.0 million and was undrawn.

As of March 31, 2011, the Senior Secured Notes will mature as follows (in thousands):

For the three months ended March 31, 2011 and 2010, interest expense of $12.3 million and $15.6 million was incurred, respectively.

On January 19, 2011, the Company amended the articles of its certificate of incorporation related to all of its outstanding Series A Redeemable Preferred Stock (the “preferred shares”) whereby the preferred shares were no longer subject to redemption. Upon the execution of the amendment, the Company reclassified all of its outstanding 19,809 preferred shares including its accumulated preferred yield of 15%, or $4.3 million, from liability to stockholders’ equity. Dividends continue to be cumulative at the rate of 15% per annum.

For the three months ended March 31, 2011, the total unpaid preferred yield was $0.7 million on outstanding preferred shares of 19,809 that had a carrying value of $19.8.

In January and February 2011, FECR Corp. issued 1,240 restricted share units (“RSU’s) with respect to shares of common stock, par value $0.01, and a grant date fair value of $1.2 million to certain executives. The shares vest over three years. The grant date fair value of the restricted shares are based upon the market value of the Company’s common stock as of the quarterly evaluation performed.

Share-based compensation expenses for the three months ended March 31, 2011 and March 31, 2010 were $0.5 million and $0.2 million, respectively.

In March 2011, the terms of the existing share-based compensation agreements were amended in order to convert the right to obtain shares of common stock of FECR Corp. into the right to obtain shares of common stock of Holdings Corp. The Company accounted for the amendment in accordance with ASC 718, Compensation – Stock Compensation and determined that no additional compensation charges were required. The Company continues to record the compensation expense of the unvested shares in Holdings Corp. over the remaining vesting period subsequent to the date of the amendment.

The following table reconciles net loss to comprehensive loss for the three months ended March 31, 2011 and 2010:

The Company is the defendant and plaintiff in various lawsuits resulting from its operations. In the opinion of management, appropriate provision has been made in the Consolidated Financial Statements for the estimated liability ‘that is probable of resulting from disposition of such matters. The Company maintains comprehensive liability insurance for bodily injury and property claims, but is self-insured or maintains a significant self-insured retention (i.e., deductible) for these exposures.

In September 2006, the Florida Department of Environmental Protection notified the Company and an adjacent property owner that they had been identified as potentially responsible parties (“PRPs”) as a result of an investigation into contaminated groundwater in Fort Pierce, Florida. Based upon site assessments performed in 2008 and 2009, the Company recorded liabilities (undiscounted) for environmental remediation costs to the extent such costs are probable and can be reasonably estimated. As of March 31, 2011 and December 31, 2010, the Company accrued $1.7 million and $1.7 million, respectively, related to the alleged contamination of which $1.5 million is expected to be paid out over the next 5 to 10 years.

In October 2010, Miami-Dade County, owner of the Port of Miami, was awarded a $22.8 million federal grant under the U.S. Department of Transportation’s Transportation Investment Generating Economic Recovery II (“TIGER”) program to rehabilitate the port’s rail bridge and construct new rail facilities on port property (“on-port project”). These projects will enable cargo to be moved directly from the port’s facility to an inland distribution center and alleviate traffic congestion in and around the port. The Company plans to establish intermodal container rail service on its own rail line leading into the port at an estimated total cost of $21.8 million (“off-port project”). The Company signed an agreement with the Florida Department of Transportation (“FDOT”) on January 24, 2011, under which FDOT will participate in the funding of the “off-port” project and will reimburse the Company an estimated $10.9 million of the total costs. Florida East Coast Railway, L.L.C. (“FEC”) signed an assumption agreement with Miami-Dade County on March 15, 2011 under which FEC agreed

to assume all of the County’s obligations and requirements under its grant agreement with the Maritime Administration, an agency of the U.S. Department of Transportation, to the extent relating or pertaining to the “off-port” project elements. The assumption agreement was executed because the off-port project is considered the required non-federal match for the on-port project.

The Company’s Senior Notes are jointly and severally, fully and unconditionally guaranteed on a senior secured basis by substantially all wholly-owned, domestic subsidiaries of FECR Rail Corp. (collectively, the “guarantors”). The guarantors include Florida East Coast Railway, L.L.C. and its subsidiary and FEC Highway Services, L.L.C. and are 100% directly owned by FECR Rail Corp.

Florida East Coast Railway Corp. is a holding company and does not have any material assets or operations other than the ownership of the capital stock of its direct subsidiaries. All of the Company’s operations are conducted through its subsidiaries, and, therefore, the Company is expected to continue to be dependent upon the cash flows of its subsidiaries to meet its obligations.

During the second quarter of 2011, the Company identified new facts during discovery of certain lawsuits related to the Company’s operations. As a result, the Company changed its estimates of the reserves for personal injury and other legal matters and recorded additional expenses of $1.6 million during the second quarter of 2011.

During the second quarter of 2011, the Company entered into a plan to dispose of certain locomotives that were previously under lease. The Company classified these locomotives as held for sale, and recorded a charge of $2.8 million to adjust their carrying value to their fair value during the second quarter of 2011.

Offer to exchange $475.0 million aggregate principal amount of 8¹/8% Senior Secured Notes due 2017

$475.0 million aggregate principal amount of 8¹/8% Senior Secured Notes due 2017, which have been registered under the Securities Act

Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where such old notes were acquired as a result of market-making activities or other trading activities. We on behalf of yourself and the subsidiary guarantors have agreed that, for a period of 180 days after the completion of this exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until November 9, 2011, all dealers effecting transactions in the new notes may be required to deliver a prospectus.


	Predecessor				Successor
	Year Ended December 31, 2006		Period from January 1, 2007 to July 26, 2007		Period from July 27, 2007 to December 31, 2007		Year Ended December 31, 2008		Year Ended December 31, 2009		Year Ended December 31, 2010		Three Months Ended March 31,
	Year Ended December 31, 2006		Period from January 1, 2007 to July 26, 2007		Period from July 27, 2007 to December 31, 2007		Year Ended December 31, 2008		Year Ended December 31, 2009		Year Ended December 31, 2010		2010		2011
	(in thousands, except freight units)				(in thousands, except freight units)
OTHER DATA:
Freight units		534,556		284,656		199,309		445,870		372,487		410,096		99,136		103,436
Dividends paid(1)	$	59,782	$	10,437	$	—	$	—	$	20,000	$	—	$	—	$	—


	Three months ended March 31,
	2011						2010
	Freight Revenues		Units		Average Revenue per unit		Freight Revenues		Units		Average Revenue per unit
	(in thousands, except unit and average revenue per unit)

Intermodal	$	30,378		83,830	$	362	$	26,629		77,570	$	343

Crushed Stone (Aggregate)		6,108		10,323		592		6,685		12,519		534
Food Products		2,583		2,199		1,175		3,123		2,741		1,139
Motor Vehicles & Equipment		2,036		1,656		1,229		1,974		1,680		1,175
Chemicals		1,869		1,147		1,629		1,865		966		1,931
Other		3,630		4,281		848		3,066		3,660		838

Carload Subtotal		16,226		19,606		828		16,713		21,566		775
Total	$	46,604		103,436	$	451	$	43,342		99,136	$	437


	Three months ended March 31,
	2011				2010
Operating revenue	$	51,485		100.0%	$	47,582	100.0%
Operating expenses:
Labor and benefits		12,292		23.9%		11,097	23.3%
Equipment rents		2,806		5.5%		2,715	5.7%
Purchased services		8,265		16.0%		7,758	16.3%
Diesel fuel		6,701		13.0%		5,054	10.6%
Depreciation and amortization		6,853		13.3%		6,899	14.5%
Net gain on sale of assets		(74	)	*		—	*
Other expenses		5,868		11.4%		5,071	10.7%

Total operating expenses	$	42,711		83.0%	$	38,594	81.1%

Operating income	$	8,774		17.0%	$	8,988	18.9%


	Year ended December 31,
	2010						2009
	Freight Revenues		Units		Average Revenue per unit		Freight Revenues		Units		Average Revenue per unit
	(in thousands, except units and average revenue per unit)

Intermodal	$	112,724		324,797	$	347	$	96,784		277,250	$	349

Crushed Stone (Aggregate)		27,051		48,699		555		30,258		55,766		543
Food Products		11,868		10,523		1,128		13,169		11,839		1,112
Motor Vehicles & Equipment		8,225		6,661		1,235		8,196		7,114		1,152
Chemicals		7,624		4,116		1,852		6,643		3,571		1,860
Other		13,176		15,300		861		12,908		16,947		762

Carload Subtotal		67,944		85,299		797		71,174		95,237		747
Total	$	180,668		410,096	$	441	$	167,958		372,487	$	451


	Year ended December 31,
	2010			2009
Operating revenue	$	200,023	100.0%	$	181,067		100.0%
Operating expenses:
Labor and benefits		42,366	21.2%		45,797		25.3%
Equipment rents		11,231	5.6%		10,910		6.0%
Purchased services		33,214	16.6%		32,469		17.9%
Diesel fuel		21,671	10.8%		16,410		9.1%
Depreciation and amortization		27,602	13.8%		28,062		15.5%
Net gain on sale of assets		—	—		(190	)	*
Other expenses		20,927	10.5%		19,793		10.9%

Total operating expenses	$	157,011	78.5%	$	153,251		84.6%

Operating income	$	43,012	21.5%	$	27,816		15.4%


Special Note Regarding Forward-Looking Statements			ii
Summary			1
Risk Factors			18
Ratio of Earnings to Fixed Charges			33
Use of Proceeds			34
Selected Historical Consolidated Financial Data			35
Management’s Discussion and Analysis of Financial Condition and Results of Operations			37
Business			58
Management			70
Security Ownership of Certain Beneficial Owners and Management			80
Certain Relationships and Related Party Transactions			82
Description of Other Indebtedness			84
The Exchange Offer			86
Description of the Notes			93
Certain U.S. Federal Income Tax Considerations			157
Plan of Distribution			158
Legal Matters			159
Experts			159
Where You Can Find Additional Information			159
Index To Consolidated Financial Statements			F-1


	Predecessor						Successor
	Year Ended December 31, 2006			Period from January 1, 2007 to July 26, 2007			Period from July 27, 2007 to December 31, 2007			Year Ended December 31, 2008			Year Ended December 31, 2009			Year Ended December 31, 2010			Three Months Ended March 31,
	Year Ended December 31, 2006			Period from January 1, 2007 to July 26, 2007			Period from July 27, 2007 to December 31, 2007			Year Ended December 31, 2008			Year Ended December 31, 2009			Year Ended December 31, 2010			2010			2011
	(in thousands)						(in thousands)
STATEMENT OF OPERATIONS DATA:
Operating revenue	$	277,061		$	144,509		$	103,942		$	241,090		$	181,067		$	200,023		$	47,582		$	51,485
Operating expenses		188,095			117,744			88,973			203,869			153,251			157,011			38,594			42,711

Operating income		88,966			26,765			14,969			37,221			27,816			43,012			8,988			8,774
Interest income (expense)		(99	)		(20	)		55			(50,156	)		(54,430	)		(66,250	)		(15,564	)		(12,316	)
Other income (loss)		67			67			18			122			(2,880	)		(368	)		4			4
(Loss) on derivative instrument		—			—			(4,690	)		(7,936	)		—			—			—			—

Income (loss) before income taxes		88,934			26,812			10,352			(20,749	)		(29,494	)		(23,606	)		(6,572	)		(3,538	)
Provision for (benefit from) income taxes		30,498			8,893			3,657			—			—			—			—			3,339

Net income (loss)	$	58,436		$	17,919		$	6,695		$	(20,749	)	$	(29,494	)	$	(23,606	)	$	(6,572	)	$	(6,877	)


	Predecessor		Successor
	As of December 31, 2006		As of December 31,								As of March 31, 2011
	As of December 31, 2006		2007		2008		2009		2010		As of March 31, 2011
	(in thousands)		(in thousands)
BALANCE SHEET DATA:
Total assets	$	433,639	$	911,048	$	906,381	$	861,101	$	848,755	$	859,814
Total long-term debt, including current maturities		—		600,000		600,000		601,594		601,185		475,000
Series A Redeemable Preferred Stock		—		—		26,706		21,049		23,912		—
Total stockholders’ equity		259,464		261,724		237,924		199,014		176,094		333,658


	Total		2011		2012-2013		2014-2015		After 2015
Long-term debt⁽¹⁾	$	601,185	$	601,185	$	—	$	—	$	—
Interest payments on long-term debt		4,015		4,015		—		—		—
Capital lease obligations		69		69		—		—		—
Operating lease obligations⁽²⁾		27,227		5,097		8,667		6,530		6,933

Total contractual obligations⁽³⁾	$	632,496	$	610,366	$	8,667	$	6,530	$	6,933


Top 10 Customers (Industry)	2010 Freight Revenue (in US $ millions)		% of Total Freight Revenue
Norfolk Southern (Class I railroad)	$	19.0		11%
Customer #2 (aggregate)		15.5		9%
Customer #3 (intermodal business units of Class I railroad)		10.4		6%
Customer #4 (maritime shipping)		8.4		4%
Customer #5 (aggregate)		7.3		4%
Customer #6 (maritime shipping)		6.4		4%
Customer #7 (parcel shipping)		5.6		3%
Customer #8 (auto)		4.5		2%
Customer #9 (aggregate)		4.4		2%
Customer #10 (maritime shipping)		4.0		2%

Total—Top 10 Customers		85.5		47%
Other		95.2		53%

Total	$	180.7		100%


	December 31, 2010		December 31, 2009
	(in thousands)
Car hire income	$	7,731	$	6,170
Other non-freight revenue		4,590		1,056
Dray accessorial revenue		2,047		2,062
Locomotive lease revenue		1,785		682
Real estate lease income		1,742		1,439
Demurrage and Storage		1,198		1,465
Railcar switching		261		235

Total	$	19,354	$	13,109


Railcars							Locomotives
Type	Owned		Leased		Total		Horsepower / Unit	Owned		Leased		Total

Open Hopper Cars		1,307		—		1,307	2000hp / GP 38–2		11		—		11
Flat Cars		147		2,977		3,124	3000hp / GP 40		1		—		1
Gondolas		24		209		233	3000hp / GP 40–2		24		—		24
Auto:							3000hp / GP 40–3		17		—		17
Carrier Railcar		—		50		50	3000hp / SD 40–2		21		—		21
Racks		112		—		112	4300hp / SD 70M–2		—		11		11
Containers/Chassis:
53ft		—		656		656
48ft or less		14		152		166
Trailers:
53ft		447		90		537
48ft or less		409		40		449
Other Misc. Railcars		85		19		104

Totals		2,545		4,193		6,738			74		11		85


Name	Age		Position
Wesley R. Edens		49	Chairman of the Board of Directors
Joseph Adams, Jr.		53	Director
Randal A. Nardone		55	Director
James R. Hertwig		59	President and Chief Executive Officer
John Brenholt		49	Executive Vice President and Chief Financial Officer
Husein Cumber		35	Executive Vice President for Corporate Development
Joel Haka		53	Executive Vice President and Chief Operating Officer
Kim Cooper		48	Vice President and Corporate Controller


Name and Principal Position	Year		Salary ($)		Bonus ($)		Stock/Unit Awards ($) (3)		All Other Compensation ($) (4)		Total ($)
James Hertwig(1)		2010		183,333		450,000		964,752				1,598,085
Chief Executive Officer and President

John Brenholt(2)(4)		2010		58,333		225,000		652,265		14,017		949,615
Executive Vice President and Chief Financial Officer

Kim Cooper (3)(4)(5)		2010		81,966		41,120		12,687		4,347		140,120
Vice President and Corporate Controller

John Giles(5)(6)		2010		75,000		123,750						198,750
Former President

Clyde Preslar(5)(6)		2010		45,000		48,750						93,750
Former Senior Vice President and Chief Financial Officer


Name	Grant Date	All other Stock Awards: Number of Shares of Stock or Units (#) (1)			Grant Date Fair Market Value of Stock and Option Awards ($)
Mr. Hertwig	July 1, 2010		1,407	(2)		964,752
Mr. Brenholt	November 8, 2010		930	(2)		652,265
Ms. Cooper	March 1, 2010		21	(3)		12,687


	Stock Awards
Name	Number of Shares or Units of Stock That Have Not Vested (#)			Market Value of Shares or Stock or Units That Have Not Vested ($)(4)
Mr. Hertwig		1,407	(1)		1,397,123
Mr. Brenholt		930	(1)		923,471
Ms. Cooper		21	(2)		20,853
Mr. Giles		600	(3)		595,788
Mr. Preslar		150	(3)		148,947


Name	Number of Shares/Units Acquired on Vesting (#)		Value Realized on Vesting ($) (1)
Mr. Giles		200		140,272
Mr. Preslar		50		35,068


		Employees				Consultants
Name	Compensation Element	Not For Cause or Good Reason Termination		Not For Cause or Good Reason Termination Following a Change of Control		Not for Cause, Death or Disability Termination		Not for Cause Termination Following a Change in Control
Mr. Hertwig	Cash Severance	$	400,000	$	400,000
	Accelerated Vesting of Restricted Stock Units		460,743		1,397,123

	Total	$	860,743	$	1,797,123


Mr. Brenholt	Cash Severance		350,000		350,000
	Accelerated Vesting of Restricted Stock Units		303,852		923,471

	Total	$	653,852	$	1,275,471


Ms. Cooper	Accelerated Vesting of Restricted Stock Units		5,958		20,853

	Total	$	5,958	$	20,853


Mr. Giles	Accelerated Vesting of Restricted Stock Units					$	198,596	$	595,788

	Total					$	198,596	$	595,788


Mr. Preslar	Accelerated Vesting of Restricted Stock Units						49,649		148,947

	Total					$	49,649	$	148,947


	Number of Shares Beneficially Owned(1)
Name of Beneficial Owner(1)	Number of Shares		Percent
Executive Officers and Directors(2)
Wesley R. Edens(3)		250,000		99.8	%
Joseph P. Adams, Jr.		—		—
Randal A. Nardone		—		—
James R. Hertwig		—		—
John Brenholt		—		—
Husein Cumber		—		—
Joel Haka		—		—
Kim Cooper		—		—
All directors and executive officers as a group (8 persons)		250,000		99.8	%
5% stockholders
FECR Rail Holding, LLC(3)		250,000		99.8	%


Registered & Certified Mail:	Regular Mail or Courier:	In Person by Hand Only:
Wells Fargo Bank, N.A.	Wells Fargo Bank , N.A.	Wells Fargo Bank, N.A.
Corporate Trust Operations	Corporate Trust Operations	Corporate Trust Services
MAC N9303-121	MAC N9303-121	Northstar East Building—12^th Floor
P.O. Box 1517	6^th St & Marquette Avenue	608 Second Avenue South
Minneapolis, MN 55480	Minneapolis, MN 55479	Minneapolis, MN 55402

	By facsimile: (For Eligible Institutions only): (612) 667-9825 Confirmation: (800) 344-5128


Year	Percentage
2014		104.063	%
2015		102.031	%
2016 and thereafter		100.000	%


Reports of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheets as of December 31, 2010 and 2009		F-3

Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008		F-4

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2010, 2009, and 2008		F-5

Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009, and 2008		F-6

Notes to audited Consolidated Financial Statements		F-7

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010		F-25

Consolidated Statements of Operations for the three months ended March 31, 2011 and 2010		F-26

Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010		F-27

Notes to unaudited Consolidated Financial Statements		F-28


	December 31,
	2010			2009
ASSETS
Current assets:
Cash and cash equivalents	$	9,306		$	8,242
Restricted cash		4,133			748
Accounts receivable, net		25,760			25,007
Materials and supplies		2,850			3,033
Deferred income taxes		3,315			4,622
Prepaid and other current assets		2,347			1,738

Total current assets		47,711			43,390
Noncurrent assets:
Property, plant and equipment, less accumulated depreciation		796,077			807,963
Investments in non-affiliates		110			75
Intangible assets, less accumulated amortization		332			388
Other assets		4,525			9,285

Total non current assets		801,044			817,711

Total assets	$	848,755		$	861,101

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	22,617		$	19,469
Taxes payable		6,724			7,565
Deferred revenue		3,703			396
Other current liabilities		868			1,092

Total current liabilities		33,912			28,522
Deferred income taxes		3,315			4,622
Long-term debt		601,185			601,594
Other long-term liabilities		10,337			6,300
Series A Redeemable Preferred Stock		23,912			21,049

Total liabilities		672,661			662,087
Stockholders’ equity:
Common stock, $0.01 par value, 500,000 shares authorized; 250,555 issued and outstanding as of December 31, 2010 and December 31, 2009		3			3
Additional paid-in capital		243,948			243,195
Accumulated deficit		(67,154	)		(43,548	)
Accumulated other comprehensive loss		(703	)		(636	)

Total stockholders’ equity		176,094			199,014

Total liabilities and stockholders’ equity	$	848,755		$	861,101


	Years Ended December 31,
	2010			2009			2008
Operating revenue	$	200,023		$	181,067		$	241,090
Operating expenses:
Labor and benefits		42,366			45,797			57,504
Equipment rents		11,231			10,910			11,922
Purchased services		33,214			32,469			39,866
Fuel		21,671			16,410			37,311
Depreciation and amortization		27,602			28,062			29,359
Gain on sale of assets, net		—			(190	)		(7	)
Other		20,927			19,793			27,914

Total operating expenses		157,011			153,251			203,869

Operating income		43,012			27,816			37,221

Interest expense (net of interest income)		(66,250	)		(54,430	)		(50,156	)
Other income (expense)		(368	)		(2,880	)		122
Loss on derivative instrument		—			—			(7,936	)

Loss before income taxes		(23,606	)		(29,494	)		(20,749	)
Provision for income taxes		—			—			—

Net loss	$	(23,606	)	$	(29,494	)	$	(20,749	)


	Number of Shares Issued		Par Value		Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Total
Successor
Balance as of January 1, 2008		250,000	$	3	$	253,880		$	6,695	$	—	$	260,578
Net loss		—		—		—			(20,749)		—		(20,749	)
Change in market value of derivative instruments		—		—		—			—		(3,088)		(3,088	)
Unrealized gain (loss) on marketable securities held for sale		—		—		—			—		(20)		(20	)
Actuarial loss associated with pension plan		—		—		—			—		(168)		(168	)
Amortization of unrealized loss from derivative instruments		—		—		—			—		816		816

Total comprehensive loss													(23,209	)

Proceeds from sale of common stock		221				221			—		—		221
Share-based compensation		334				334			—		—		334

Balance as of December 31, 2008		250,555	$	3	$	254,435		$	(14,054)	$	(2,460)	$	237,924

Net loss		—		—		—			(29,494)		—		(29,494	)
Unrealized gain on marketable securities held for sale		—		—		—			—		20		20
Actuarial loss associated with pension plan		—		—		—			—		(468)		(468	)
Amortization of unrealized loss from derivative instruments		—		—		—			—		2,272		2,272

Total comprehensive loss													(27,670	)

Distribution to FECR Rail LLC		—		—		(16,326	)		—		—		(16,326	)
Contribution from FECR Rail LLC		—		—		5,000			—		—		5,000
Share-based compensation		—		—		86			—		—		86

Balance as of December 31, 2009		250,555	$	3	$	243,195		$	(43,548)	$	(636)	$	199,014

Net loss		—		—		—			(23,606)		—		(23,606	)
Unrealized loss on marketable securities held for sale		—		—		—			—		(6)		(6	)
Actuarial loss associated with pension plan		—		—		—			—		(61)		(61	)

Total comprehensive loss													(23,673	)

Contribution from FECR Rail LLC		—		—		234			—		—		234
Share-based compensation						519			—		—		519

Balance as of December 31, 2010		250,555	$	3	$	243,948		$	(67,154)	$	(703)	$	176,094


Road (track, ties, ballast, etc.)			7-61 years
Buildings and improvements			10-50 years
Locomotives, transportation and other equipment			3-50 years
Office equipment and capitalized software			5-10 years
Land improvements			15 years


	December 31, 2010
	Carrying Amount		Fair Value
Cash and cash equivalent	$	9,306	$	9,306
Rail Term Loan		601,185		601,185


As of December 31, 2010	Cost		Accumulated Depreciation		Net Book Value		Estimated Useful Life (c)
(in thousands)
Land		335,173		n/a		335,173		n/a
Road
Rail & Other Track Material		119,866		18,577		101,289		16-45 years
Signals & Interlockers		86,011		15,313		70,698		7-38 years
Ties		81,994		5,648		76,346		20-50 years
Bridges & Culverts		79,715		5,684		74,031		14-61 years
Ballast		32,123		1,578		30,545		30-43 years
Other (a)		14,545		2,092		12,453		10-50 years

Total Road		414,254		48,892		365,362

Locomotives, Transportation, and Other Equipment
Freight Cars		39,776		6,172		33,604		7-50 years
Locomotives		28,351		5,703		22,648		3-50 years
Work Equipment and Other (b)		20,317		9,957		10,360		3-29 years
Trailers		7,181		3,530		3,651		5-20 years

Total Locomotives, Transportation, and Other Equipment		95,625		25,362		70,263
Buildings and Improvements		28,542		4,139		24,403		10-50 years
Construction-In-Progress		876		n/a		876		n/a

		874,470		78,393		796,077


As of December 31, 2009	Cost		Accumulated Depreciation		Net Book Value		Estimated Useful Life (c)
(in thousands)
Land		335,095		n/a		335,095	n/a
Road
Rail & Other Track Material		115,586		12,132		103,454	16-45 years
Signals & Interlockers		84,805		10,187		74,618	7-38 years
Ties		80,984		3,722		77,262	20-50 years
Bridges & Culverts		77,379		3,755		73,624	14-61 years
Ballast		29,079		912		28,167	30-43 years
Other (a)		14,465		1,424		13,041	10-50 years

Total Road		402,298		32,132		370,166

Locomotives, Transportation, and Other Equipment
Freight Cars		40,640		4,568		36,072	7-50 years
Locomotives		27,261		4,034		23,227	3-50 years
Work Equipment and Other (b)		20,144		7,267		12,877	3-29 years
Trailers		6,693		2,401		4,292	5-20 years

Total Locomotives, Transportation, and Other Equipment		94,738		18,270		76,468
Buildings and Improvements		28,192		2,738		25,454	10-50 years
Construction-In-Progress		780		n/a		780	n/a

		861,103		53,140		807,963


	Shares			Weighted- average fair value per share at grant date		Fair value of nonvested shares at grant date
						(in thousands}
Outstanding as of January 1, 2008		—		$	—	$	—
Granted		555			1,000.00		555.0
Vested		(555	)		1,000.00		(555.0	)

Outstanding as of December 31, 2008		—			—		—
Granted		2,550			714.64		1,822.3

Outstanding as of December 31, 2009		2,550			714.64		1,822.3
Granted		2,617			682.53		1,786.2
Vested		(659	)		711.01		(468.6	)
Cancelled		(116	)		604.16		(70.4	)

Outstanding as of December 31, 2010		4,392		$	698.89	$	3,069.5


Net minimum lease payments	$	69
Amount representing interest		2

Obligation under capital leases	$	71


2011	$	5,097
2012		4,501
2013		4,166
2014		3,538
2015		2,992
Thereafter		6,933

	$	27,227


	March 31, 2011			December 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	11,362		$	9,306
Restricted cash		125			4,133
Accounts receivable, net		28,856			25,760
Materials and supplies		5,056			2,850
Deferred income taxes		2,996			3,315
Prepaid and other current assets		2,270			2,347

Total current assets		50,665			47,711
Noncurrent assets:
Property, plant and equipment, less accumulated depreciation		790,222			796,077
Investments in nonaffiliates		119			110
Intangible assets, less accumulated amortization		318			332
Other assets		18,490			4,525

Total noncurrent assets		809,149			801,044

Total assets	$	859,814		$	848,755

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	29,317		$	22,617
Taxes payable		2,038			6,724
Deferred revenue		3,884			3,703
Other current liabilities		788			868

Total current liabilities		36,027			33,912
Deferred income taxes		6,335			3,315
Long-term debt		475,000			601,185
Other long-term liabilities		8,794			10,337
Series A Redeemable Preferred Stock		—			23,912

Total liabilities		526,156			672,661
Stockholders’ equity:
Series A Perpetual Preferred Stock, $0.01 par value, 100,000 shares authorized, 19,809 shares issued and outstanding as of March 31, 2011 and none issued and outstanding as of December 31, 2010		—			—
Common stock, $0.01 par value, 500,000 shares authorized; 250,555 shares issued and outstanding as of March 31, 2011 and December 31, 2010		3			3
Additional paid-in capital		408,374			243,948
Accumulated deficit		(74,032	)		(67,154	)
Accumulated other comprehensive loss		(687	)		(703	)

Total stockholders’ equity		333,658			176,094

Total liabilities and stockholders’ equity	$	859,814		$	848,755


	Three Months Ended March 31,
	2011			2010
CASH FLOW FROM OPERATING ACTIVITIES:
Net (loss)	$	(6,877	)	$	(6,572	)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization		6,853			6,899
Amortization of debt financing fees		877			1,234
Share based compensation costs		474			201
Deferred taxes		3,339			—
Gain on sale of assets		(74	)		—
Changes in operating assets and liabilities:
Change in restricted cash		—			573
Accounts receivable		(3,096	)		88
Prepaids and other current assets		82			22
Materials and supplies		(2,206	)		(181	)
Other assets and deferred charges		202			54
Accounts payable and accrued expenses		6,700			(353	)
Taxes payable		(4,686	)		(5,465	)
Deferred revenue		181			3,450
Other current liabilities		(257	)		(475	)
Other long-term liabilities		(1,084	)		3,881

Net cash provided by (used in) operating activities		428			3,356

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of properties and equipment		(3,850	)		(2,340	)
Release of interest reserve account		4,008			—
Funding of interest reserve account		—			(4,000	)
Proceeds from disposition of assets		2,935			(30	)

Net cash provided by (used in) investing activities		3,093			(6,370	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from Florida East Coast Holdings Corp.		140,000			—
Payment on long-term debt		(601,185	)		—
Proceeds from issuance of long-term debt		475,000			—
Purchase of common shares outstanding		(236	)		—
Financing costs		(15,044	)		(47	)

Net cash (used in) financing activities		(1,465	)		(47	)

Net increase (decrease) in cash and cash equivalents		2,056			(3,061	)
Cash and cash equivalents at beginning of period		9,306			8,242

Cash and cash equivalents at end of period	$	11,362		$	5,181

Supplemental cash flow information:
Cash paid for interest	$	4,015		$	14,235


	March 31, 2011
	Carrying Amount		Fair Value
Cash and cash equivalents	$	11,362	$	11,362
8 1/8% Senior Secured Notes		475,000		475,000