KnightHawk is pleased to announce that its indirectly wholly owned subsidiary company, Kelowna Pacific Railway Ltd. ("KPR"), has reached an agreement with Canadian National Railway Company ("CN") which will see an increase in KPR haulage revenue, increased service frequency, and formula based cash payments from CN for both track expenditures and rising fuel costs.

In particular, the adjustment formula for KPR haulage rates has been modified, resulting in an increase in KPR haulage revenue effective April 1, 2005. Further increases, if any, will occur on April 1 of each year, thus linking them more closely with CN's performance in the prior calendar years.

In addition, effective January 1, 2005, KPR will receive formula based payments for rising fuel costs which should reduce KPR's overall fuel expense. A discount clause, which deterred traffic growth, has also been eliminated.

Since KPR operates rail service on track leased from CN, CN has agreed to provide KPR a formula based cash payment for track expenditures which should substantially reduce KPR's maintenance expense. Payments will be tied to KPR rail car volumes and is limited to the three-year period April 1, 2005 to March 31, 2008.

"We continue to pursue revenue opportunities, operational efficiencies, and cost savings for the KPR and this agreement with CN is an important step in that direction" says Ken Fitzgerald, Chairman of KnightHawk. "One of our immediate goals at KnightHawk is to improve the operating results of the railroad with a view toward enhancing shareholder value."