Calculation of Value Terms

The objective of this analysis is to perform calculations of the approximate value of Your Company or (the “Company”) owned by you as of the last balance sheet date provided in connection with this analysis.  These calculations should not under any circumstances be construed as our opinion of fair market value. These calculations are not an appraisal and therefore, do not comply with the Uniform Standards of Professional Appraisal Practice standards as an appraisal and do not entail consideration of all factors enumerated by the Statement of Standards for Valuation Services of the American Institute of Certified Public Accountants as the fundamental relevant factors to consider in valuing stock of closely held businesses.  Rather, the calculations performed under terms of this agreement are intended to provide an approximate indication of value based upon the performance of limited procedures.  The calculation of value is intended for your personal use only for planning purposes and should not be used, quoted, cited or distributed for any other purpose.

Upon gathering the information in this limited questionnaire, we will calculate an approximate indication of value of Your Company owned by You as of the last balance sheet date provided. You agree to the following selected methodology:

Capitalization of historical earnings

This project is less in scope than an opinion of value engagement.  If additional procedures were performed, the results of the calculations could change, and the extent of the change may be significant.  If it is determined at the conclusion of this engagement that more formal or additional procedures are desirable and/or necessary, we will make appropriate arrangements with you at that time.

Should information become known that would make our continued involvement in this engagement inappropriate, we reserve the right to withdraw from this engagement. 

Company is primarily responsible for the accuracy and fair statement of the information provided to us for use in performing the appraisal.  We will not audit, compile, or review those financial statements, forecasts, or financial data.  Our engagement cannot be relied upon to disclose errors, irregularities, or illegal acts, including fraud or defalcations, that may exist.

O’Keeffe & O’Malley, Inc.’s liability relating to the services rendered under this analysis(regardless of form of action, whether in contract, negligence or otherwise) shall be limited to the charges paid to O’Keeffe & O’Malley, Inc. for the portion of its services or work products giving rise to the liability.  In no event shall O’Keeffe & O’Malley, Inc. be liable for special, incidental or punitive loss, damage or expense (including without limitation, lost profits, opportunity costs, etc.) even if O’Keeffe & O’Malley, Inc. has been advised of their possible existence.

You shall indemnify and hold harmless O’Keeffe & O’Malley, Inc. and its personnel from and against any claims, liabilities, costs and expenses (including, without limitation, attorney's fees and the time of O’Keeffe & O’Malley, Inc.’s personnel involved) brought against, paid or incurred by O’Keeffe & O’Malley, Inc. at any time and in any way arising out of or relating to O’Keeffe & O’Malley, Inc.’s services under this Agreement.

We will prepare a summary letter with supporting schedules attached and will contain appropriate language describing the restricted scope of our analysis.  It will specifically state the analysis should not be construed as our opinion of fair market value.  Please note the calculations are not an appraisal and do not meet the standards set by Uniform Standards of Professional Practice (USPAP) Standard 9, Business Appraisal, Development and Standard 10, Business Appraisal, Reporting. The report will be subject to the Statement of Assumptions and Limiting Conditions set forth in this Agreement.

It is our understanding that the letter and supporting schedules will be used by you in connection with the analysis.  Use of the report should be restricted to and consistent with this purpose only and should not be distributed to outside parties.  In accordance with the limited scope of the calculations engagement, this report may not be attached to any federal or state tax returns.
If you are in agreement with the foregoing arrangements, please indicate your acceptance by clicking the acceptance button.  
 
ASSUMPTIONS AND LIMITING CONDITIONS

The calculation of value will be conducted under the following assumptions and limiting conditions:

1.    The calculation of value will consider certain but not all elements pertaining to the valuation of closely held businesses per the Statement of Standards for Valuation Services issued by the American Institute of Certified Public Accountants.  The type, availability, and significance of such information vary with the subject interest.  In a valuation engagement the analyst should, as available and applicable to the valuation engagement, obtain sufficient nonfinancial and financial information to enable him or her to understand the subject entity.   Due to the limited scope of the calculation of value, we will not obtain or review the following financial and nonfinancial information listed below that may be necessary to arrive at a conclusion of value:

• Nature, background, and history
• Facilities
• Organizational structure
• Management team (which may include officers, directors, and key employees)
• Classes of equity ownership interests and rights attached thereto
• Products or services, or both
• Economic environment
• Geographical markets
• Industry markets
• Key customers and suppliers
• Competition
• Business risks
• Strategy and future plans
• Governmental or regulatory environment
• Historical financial information (including annual and interim financial statements and key financial statement ratios and statistics) for an appropriate number of years
• Prospective financial information (for example, budgets, forecasts, and projections)
• Comparative summaries of financial statements or information covering a relevant time period
• Comparative common size financial statements for the subject entity for an appropriate number of years
• Comparative common size industry financial information for a relevant time period
• Income tax returns for an appropriate number of years
• Information on compensation for owners including benefits and personal expenses
• Information on key man or officers’ life insurance
• Management’s response to inquiry regarding:
  • Advantageous or disadvantageous contracts
  • Contingent or off-balance-sheet assets or liabilities
  • Information on prior sales of company stock

2.    The calculation of value will not be an appraisal and therefore will not comply with the Uniform Standards of Professional Appraisal Practice.  While the calculation of value is not an appraisal, it will meet the standards of “calculations” in conformity with the Principles of Appraisal Practice and Code of Ethics of the American Society of Appraisers and the Statement of Standards for Valuation Services of the American Institute of Certified Public Accountants.  

3.    All calculations of value will be based upon the data provided by you and will be accepted without further verification.  You are primarily responsible for the accuracy and fair statement of the information provided to us for use in performing the calculation of value.  The scope of this engagement does not include an examination of the underlying financial information and, accordingly, we will not express an opinion on it.

4.    No investigation of title to the business or its assets will be made.  Ownership claims to the business and its assets will be assumed to be valid.  No consideration will be given to liens or encumbrances that may exist against the business or its assets.

5.    With regard to any real property owned or leased by the subject business, we will not undertake to discover any toxic substances or other environmental hazards that may exist at any of the properties.  Such investigation is beyond the scope of this project and outside the scope of our expertise.

6.    The calculation of value will be based on the assumption that present management would continue to maintain the character and integrity of the enterprise through any sale, reorganization or diminution of the owner’s participation.

7.    The values presented will be stated before any taxes related to the transfer of any ownership interest.

8.    Due to the economic and individual motivational influences that may affect the sale of a business interest, the appraiser assumes no responsibility for the actual price of the subject interest if it is sold or transferred.

9.    The appraiser has no past, present or anticipated financial interest in the Company or any affiliate thereof.  The appraiser has no personal interest in or bias toward any parties involved.  The appraiser’s compensation for the project is not contingent upon the conclusions reported nor upon any action or event resulting from the analysis, opinions, or conclusions.  

10.    Neither O’Keeffe & O’Malley, Inc. nor any individuals associated with the calculation of value shall be required to give testimony or appear in court or other legal proceedings, unless specific arrangements therefore have been made.