Confidential – 2014

3

Introduction: Michigan AuSable Valley Railroad (“MAVRR”) is a working railroad which provides passenger rides through the beautiful scenic landscape of Northern Michigan. A stable company with a loyal customer base, it has been in business since 1997. The Company is a part of Schrader Enterprises, Inc., a Michigan C-Corporation.

• Address: 230 South Abbe Road Fairview, MI 48621

Background: Established in 1978, Schrader Enterprises, Inc. is a privately held company primarily engaged in the business of Mail Order retail sales and operates under the trade name of Schrader's Railroad Catalog (entity for sale). Schrader Enterprises, Inc. also operates a railroad business under the name Michigan AuSable Valley Railroad. The Ride: The Michigan AuSable Valley Railroad is located near the AuSable River in jack pine country offering its visitors a unique, relaxing 18 minute rail adventure that travels through a jack pine forest, the Huron National Forest and overlooks the beautiful Comins Creek Valley.

The ride starts at the beautiful Victorian station and navigates a 1½ mile trip through a 115-foot tunnel and onto a 220-foot and a 100-foot wooden trestle overlooking the Comins Creek Valley. The trip is approximately 18 minutes long; on this scenic ride passengers will see animals that have been placed in the woods for their enjoyment as well as beautiful views of Michigan’s natural landscape. The ride traverses back over the trestles and through the tunnel traveling past the Victorian Station, into the redwood pine forest, over a crossover then back to the station.

Track Rail and Switches: The track consists of approximately 11,400 feet of 12-lb. steel rail, approximately 5,500 treated red pine 3 ½” x 4 ½” x 34” railroad ties and 20,000 1/2” x 3” miniature railroad spikes.

Confidential – 2014

4

There are eight automatic spring switches with 4-foot switch stands. Four are on the mainline that reverses the trip automatically using approximately 2,000 feet of the track twice on the ride. The additional four switches are used in the yard area. There is also a 21° crossover on the mainline. • 11,400 feet of 12 lb. Steel Rail - Sections are

between 20 feet and 30 feet long • 5,500 Treated Red Pine 3 ½” x 4 ½” x 34” ties • 20,000 1/2” x 3” miniature steel railroad spikes • 8 automatic Uhrich spring switches, 4 feet high

stands • 1- 21° Crossover on steel plate

Steam Engine: The Steam Engine is a 1/4 scale, 16-inch gauge Hudson Steam Locomotive. The late Carrington Eddy of Fairview, Michigan, built this engine. Mr. Eddy was a graduate of the University of Michigan Engineering School in the 1930’s. He worked for General Motors and was one of the designers of the Dynaflow Transmission for Buick. It took Mr. Eddy from 1956

to1961 to build this engine which is 29 feet long and has 5½” bore and 7” stroke. It is fitted with trap sanders, one 3/8” injector and a duplex steam feed water pump plus a similar duplex steam air pump. Tender capacity is 60 gallons of oil and 200 gallons of water. Drivers are 20”. All bearings on the engine are ball or roller with steam pressure of 150 lbs. This engine can handle 10 or more cars with a capacity of about 120 passengers, totaling about 14 ton of train, as the locomotive weighs 7 tons.

• 16–inch gauge Santa Fe 4-6-4 Hudson Steam Locomotive with Tender • 29 feet long by 54 inches high by 35 inches wide • Weighs approximately 7 Tons (14,500 lbs.) in working order • 5 ½ inch Cylinders with 7-inch stroke with 20 inch drivers with vacuum brakes • Type of valve gear: Walshire D-Valve • Produces 25 steam horse power • Boiler: 24-inch diameter with 37 1½ inch, 48-inch long tubes • Oil fired with 4 inch x 29 inch Pot Oil Burner • Running Steam Pressure: 150 psi with 2 Safety Valves • Heating surface: 80 square feet • Boiler has 3 1½ inch siphon tubes in fire box that supports fire bricks • Engine is superheated with condenser in smoke box • Pre-heater for water pump in smoke box - 60 feet of coiled one inch copper tubing • One-3/8 inch Penberthy injector • 1 Duplex Steam Pump for air, vacuum breaks • 1 Duplex Feed Water Pump with 2 2½ inch water feed cylinders • Fitted with trap sanders • Tender: 6 wheel Buckeye trucks with brakes with 60-gallon oil tank and 2-100 gallon

water tanks with Baffles holding a total of 200 gallons of water • Miniature Train Couplers

Confidential – 2014

5

Custom Steam Passenger Cars (5): • Four 15-foot, 12-Passenger Miniature

Train Cars completely sandblasted and painted with Emron paint. All trucks have been completely rebuilt with new wheels and new brake riggings in 2008

• One 17-foot Miniature Trains Observation Car completely sandblasted and painted with Emron paint. All trucks have been completely rebuilt with new wheels and brake assemblies in 2008

Diesel Engine: • 1/4 scale, 16-inch gauge unit consisting of two custom built Diesel F-7’s built in 1997 by

Custom Locomotives in Chicago, Illinois

• The Diesel Unit has two sections each one is 15 feet long by 54 inches high by 35 inches wide with fiberglass noses and stainless steel sides, Mars light and bell

• 80-horse power Perkins Diesel 4 cylinder engine with two Sunstrand Hydraulic pumps powering four hydraulic motors in each of the four trucks which are chain driven to the axles – all 16 wheels drive

• Weighs approximately 11,000 pounds in working order • Wheels are 10-inch diameter with air brakes • Also equipped with vacuum brakes for the four custom-made passenger cars • Painted with Emron paint

Confidential – 2014

6

Custom Diesel Passenger Cars (4):

• Two passenger cars are 22 feet long that accommodate 18 passengers each. Each car has a covered top with steel frames, wood sides and seats, miniature train trucks and couplers with vacuum brakes. Painted with Emron paint.

• The other two custom cars are 17 feet

long that accommodate 12 passengers each. They also have steel frames with metal sides and seats, covered tops, and miniature train trucks and couplers with vacuum brakes. Painted with Emron paint. All trucks have been rebuilt with all new wheels and brake assemblies in 2008.

Land and Buildings: The property is situated on a paved road, 3½ miles south of Fairview, Michigan, County Road 601 (230 South Abbe Road) on a national scenic route. The site includes 40 acres surrounded on two sides by the Huron Nationals Forest wooded with Jack Pine, White Pine and Oak trees. Comins Creek crosses the backside of the property and flows into the AuSable River which is approximately one mile to the south. Buildings on property include: 1. Home -– 750 square foot, built in 1960 with 2

bedrooms, 2 baths, walk out finished basement, fireplace, knotty pine interior/drywall, refinished hardwood floors, new galley kitchen, oil and wood heat, asphalt shingles. This home has a beautiful view of the Comins Creek Valley to the west.

Confidential – 2014

7

2. Turn of the Century Victorian Railroad Station – built in 1994. 12’ x 48’ on cement pad, custom doors, wood slat siding, asphalt shingles, finished inside with tongue and groove wood walls and ceilings. Inside is divided into waiting area, ticket office, and 12’ x 16’ gift shop with display shelves. Wired for inside/outside speaker system.

3. Engine House-Built in 1994, 18’ x 72’, wood slat siding, asphalt shingles, cement floor with

3 flush 16” gauge railroad tracks, built in work bench, custom doors and windows.

Confidential – 2014

8

4. Freight House – Built in 1998, 24’ x 40’ on cement pad, wood slat siding, hip roof,

asphalt shingles, 6 custom doors. Used as 4-car garage.

5. Office and Warehouse – Built in 2003, cement slab floors, wooden slat siding, asphalt

shingles, 2 separate heating and cooling units, LP Gas:

• Office -– 22’ x 24’, finished painted walls,

carpeted, accommodates 10 Herman Miller office cubicles.

• Middle Office (Filing Room) – 10’ x 15

½’, accommodates 2 Herman Miller office cubicles and filing cabinets.

Equipment / Office Supply Storage Room -– 8’ x 10’ equipment and office supply room that houses telephone and Internet systems with storage area.

Confidential – 2014

9

• Warehouse Building – 32’ x 106’, cement floor, finished painted drywall, fluorescent lighting

• Main Room-Warehouse: 32’ x 52’ – Bathroom 8’ x 10’, Handicap accessible with shower; Lunchroom/Conference Room 12’ x 18’ with full kitchen, built in microwave, stove, dishwasher and refrigerator; and a 12’ x 18’ Warehouse Office, carpeted, and will accommodate 3 Herman Miller office cubicles.

• Attached 3 Car Garage - 23’ x 36’ – Custom doors, electric door openers, a suspended LP Gas heater, 8’ x 36’ walk thru storage room with built in shelving.

• Shipping and Receiving Area -

Attached to Main Warehouse is a 16’ x 15’ Shipping and Receiving area with custom Overhead Door with electric door opener. Outside of Receiving area is a 16’ x 36’ concrete pad for delivery trucks.

Confidential – 2014

10

6. Other Buildings and Storage • Storage Building • Outhouse • Water Tower • Oil House

7. Additional Assets

7. Additional Assets: Displays, signage and tools and other equipment can be included as part of the asset purchase (not included in the stated purchase price)

8. Antique Car and Truck: • 1923 Model T

Touring Car, restored (available for sale; not included in the stated purchase price)

• 1930 Model A Pick-up, restored (available for sale; not included in the stated purchase price)

Storage building

Outhouse

Water Tower

Oil House

Confidential – 2014

11

Ownership and Management: The Company is owned by Howard and Joanne Schrader, who estimates that it would take approximately 6 months to learn the business and to effectively and profitably manage and maintain it.

Operations: • Current hours of operation are limited to Memorial Day weekend through Labor Day

weekend (Saturdays, Sundays and Holidays only) • Special events such as the Fall Color Tour the

first two weekends in October and themed events are also developed for added customer draw

• The train(s) runs from 10 am to 5 pm and customers are charged $6.00 per ride (kids under 2 ride free)

• The train leaves the station every half hour, so customers have time to browse through the gift shop to find a souvenir or perhaps a gift for a fellow train lover

• Food offerings are limited to popcorn and bottled drinks including soda pop and water (expanded offerings could be developed for added revenue)

Customers:

• Schrader’s primary customer base consists of individuals and families from neighboring communities and vacationers from across the state

• Many passengers are repeat customers who continue to bring family and friends year after year

• With minimal marketing efforts and operating times limited to summer weekends and holidays, it is typical to have 10,000 – 15,000 passengers every season

Advertising:

• MAVRR advertising is primarily using brochures that are distributed through kiosks around the state and local business ads using placemats

• Advertising budget is minimal and can be expanded to attract greater numbers of potential customers

Competitors: No direct competitors – other nearby tourist attractions include:

• Museums (Michigan Magazine Museum, Steiner Lumbering Museum) • Scenic Areas (Iargo Springs Scenic Area, Jack Pine Wildlife Viewing Tour) • Monuments/Shrines (Lumberman’s Monument, Our Lady of the Woods Shrine) • Pioneer General Amish Store • Fishing on the AuSable River (flies only) • Canoe Liveries • Camping and weekend rental properties

Confidential – 2014

12

Employees: • MAVRR employees have a part-time seasonal work schedule • Employees are typically high school students from the community • There are no employee contracts for acquiring company to inherit

Market Growth Opportunities: While the Schrader’s have actively chosen to keep the MAVRR a certain size and limit operations to seasonal to fit their lifestyle, there are several opportunities to scale the railroad business and expand use of the commercial property for greater sales and profits. For example: • Billboard advertising along US-23, I-75 and other northern Michigan roadways • Online localized advertising (Google AdWords, Groupon, Pure Michigan opportunities) • Active social media (Facebook, Twitter, Pinterest) • Added events and attractions

• Winter train (partnering sleigh ride, holiday lights) • Halloween train (hay ride, “spooky” tour) • Bus tour during weekdays • Partner with elementary schools for educational field trips • Event food offerings • Family reunions • Cabin rental

• Commercial Property Expansion Opportunities • Canoe livery • Zip line • Ropes Course • Adventure tours • Wildlife tour / walking path • Camping • Hunting lodge

Summary: The Michigan AuSable Valley Railroad offers a unique grouping of assets and land that will provide an immediate revenue stream in a well-established market with existing and loyal repeat customers. The MAVRR assets have been fairly and carefully analyzed internally and by outside industry experts using quantitative methods and industry standards. There are many yet-untapped market opportunities that would accelerate the sales and profitability of the MAVRR.