OverviewDM&E is a privately held corporation headquartered in Brookings, South Dakota and is one of the largest regional (Class II) railroads in the United States, with 1,103 miles of track located principally in South Dakota and Minnesota. The Company’s mainline extends from the Mississippi River at Winona, Minnesota across southern Minnesota and central South Dakota to Rapid City. In addition, in 1996, DM&E acquired more than 200 miles of track from UP, extending from Colony, Wyoming through Rapid City to Crawford, Nebraska. Of the 1,103 miles, 908 miles are owned by the Company and the remainder are operated under long-term trackage rights agreements. The Company currently owns or leases approximately 4,800 rail cars and has approximately 350 employees. History1983-1985 Chicago & NorthWestern Railroad files to abandon a South Dakota segment of what is today the DM&E Railroad. South Dakota US Senator Larry Pressler opposes the abandonment and wins the case before the ICC in 1985. Later in 1985 Senator Pressler strikes a deal with C&NW that leads to the creation of DM&E as an alternative to abandonment.September 1986 DM&E was formed through the acquisition of 826 miles of rail infrastructure and 139 miles of trackage rights, and certain buildings, locomotives, vehicles, equipment and inventory from the C&NW. C&NW had operated the railroad for over 75 years. Lombard Investments, Inc.’s affiliated investor group provided the equity capital for the transaction and currently controls the Company.June 1994 DM&E completed the restructuring of certain operating agreements, and a subsequent recapitalization.1995 / 1996 DM&E issued revenue bonds with the South Dakota Railroad Authority and borrowed under a bank facility to finance the upgrade of approximately 100 miles of its mainline track between Wolsey and Pierre, South Dakota. May 1996 DM&E acquired the Colony Line and issued Senior Secured Notes to finance the purchase of the Colony Line from the UP.February 1998 DM&E filed its application with the STB seeking authority to construct approximately 260 miles of new railroad line, primarily in southwestern South Dakota and northeastern Wyoming, to access low-sulfur western coal reserves for movement to Midwestern utilities (the "PRB Project").December 1998 STB issued decision that the PRB Project meets the statutory transportation related requirements and is consistent with the criteria for a Certificate of Public Convenience and Necessity. November 2001 STB published the final EIS that is favorable to the PRB Project. January 2002 STB issued its Decision granting final approval to the PRB Project. February 2002 IC&E executes a definitive Asset Purchase Agreement to acquire the 9/18/02 3:04 PMSTB Field Hearing Schedule and Oral Testimony ProcessPage 1 of 5http://www.dmerail.com/OVERVIEW.htmassets of IMRL.Current OperationsIn fiscal 2001, DM&E transported over 65,300 carloads of freight for approximately 130 customers. The principal commodities handled by DM&E include grain and grain products (approximately 56% of 2001 carloadings), bentonite and kaolin clay (21%), cement (7%), and wood and wood products (3%). Virtually all of DM&E existing traffic base is comprised of bulk commodity traffic. The Company moves no intermodal traffic and very little merchandise traffic. However, both its customer and commodity base are diversified, and the Company is generally the most cost-cempetitive transportation option for its customers.Structure and Management. The Company is organized broadly into five functional departments: (1) Transportation (train operations), (2) Mechanical (locomotive and car maintenance), (3) Engineering (track maintenance), (4) Finance & Accounting, and (5) Marketing. the senior management team of DM&E has tremendous depth and a diverse experience base that provides for operational excellence, as well as long-term vision and strategic focus. The seasoned management team is led by Kevin V. Schieffer, who has been DM&E's CEO since 1996 and has been intimately involved with the creation and development of the Company since 1983, three years prior to its start-up. After a 1983 abandonment battle, Mr. Schieffer worked directly with the Chicago & North Western Railroad in 1985 to develop the compromise agreement that led to the creation of the DM&E. He continued to be involved in significant C&NW/DM&E issues in the first decade of DM&E operations. As legal counsel for the Company in 1993 he led negotiations with C&NW that led to its successful re-financing and freight car fleet acquisition. He also negotiated the 1996 acquisition of the 203-mile Colony Line (which today runs north-south through Rapid City on DM&E's west end). In addition, DM&E's seven executive officers have over 170 years of combined experience in the railroad industry. Five officers are responsible for DM&E's operations and two officers are primarily focused on PRB Project development efforts.DM&E maintains a cost-effective operating structure. The Company benefits from its freedom from traditional industry work rules and wage rate agreements and operates two person train crews. DM&E maintains a base track maintenance crew and contracts for major projects during the construction seasons. DM&E maintains cost-efficient on-line locomotive and car repair facilities and contracts for major repairs as needed.!The following map depicts the DM&E, IC&E and PRB project:9/18/02 3:04 PMSTB Field Hearing Schedule and Oral Testimony ProcessPage 2 of 5http://www.dmerail.com/OVERVIEW.htmManagementThe following is a list of top management and directors of the Company as of December 2001.Exhibit [ ]: Key Management Team9/18/02 3:04 PMSTB Field Hearing Schedule and Oral Testimony ProcessPage 3 of 5http://www.dmerail.com/OVERVIEW.htmName Age Date of HireYears w/Company TitleKevin V. Schieffer 43 11/07/96 5 President and Chief Executive Officer; DirectorRobert O. Brownell 60 03/01/02 NA Vice President, OperationsLynn A. Anderson 54 09/05/86 15 Vice President, Secretary and DirectorKurt V. Feaster 49 12/14/92 9 Vice President, Chief Financial Officer/TreasurerSteven Scharnweber 49 10/31/95 6 Vice President, Transportation and EngineeringDaniel L. Goodwin 54 01/06/97 5 Chief Mechanical OfficerJohn L. Waltman 56 01/01/98 4 Vice President, Energy - (PRB Project)Ray G. Gigear 46 06/19/98 3 Project Engineer - (PRB Project)Management TeamKevin V.
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