1.1 Assumptions and Limiting Conditions

This appraisal is subject to the following assumptions and limiting conditions. Use of or reliance on the appraisal, regardless of whether such use or reliance is known or authorized by the Appraiser, constitutes acknowledgement and acceptance of these assumptions and limiting conditions, any extraordinary assumptions or hypothetical conditions stated in the report, and any other terms and conditions stated in the report. Within these assumptions and limiting conditions, the term “Appraiser” means the appraiser(s) who performed the appraisal, and “Firm” means and includes Reliant Business Valuation, LLC, as well as its employees, officers, members and independent contractors.

  • All of the facts, data, information and/or material (“Facts & Data”) used to prepare this report, its forecasts, estimates, analysis, and projections, including those given to the Appraiser by the Client or Company and others associated with the Company (the “Information Provider”), are considered to be reliable but cannot be guaranteed to be accurate.
  • Facts & Data provided to the Appraiser have not been audited or verified for accuracy by the Appraiser. The accuracy and validity of the Facts & Data supplied to the Appraiser is the responsibility of the Information Provider.
  • All Facts & Data set forth in the report are accepted to be true and accurate and it is assumed that the Information Provider of such Facts & Data has not knowingly withheld or omitted anything from the Appraiser that could affect the value estimate.
  • The Appraiser assumes that there are no hidden or unexpected conditions of the business that would adversely affect value, other than as indicated in this report.
  • IRS Revenue Ruling 59-609 states, “Detailed profit-and-loss statements should be obtained and considered for a representative period immediately prior to the required date of valuation, preferably five or more years.”[1] The Client has provided «48» months of historical financial statements. The Appraiser notes that there may be additional inherent risk in relying on only «48» months of financials (as opposed to the recommended five years/sixty months by the IRS).
  • It is assumed that Information Provider has made the Appraiser aware of all relevant facts, data or other conditions that existed at the time of the valuation date, when such Facts & Data are, or should be known to the Information Provider. It is the responsibility of the Information Provider to provide the Appraiser with any additional Facts & Data of which the Information Provider becomes aware, in writing, either subsequent to an initial provision of such Facts and Data before the valuation report is completed, and/or subsequent to the completion of the valuation report. If the Appraiser learns of additional Facts & Data, other than those made available to the Appraiser by the Information Provider, either during the valuation assignment, or after completion of the valuation report, the Appraiser reserves the right to review, and potentially revise, all calculations and statements made within the report and revise his or her opinion based on the revelation of such additional Facts & Data. The Appraiser shall determine, at the Appraiser’s sole discretion, whether there will be an additional charge for revision of the valuation report due to any additional Facts & Data.
  • This report has been prepared for the stated purpose and function. It is not to be used or relied on for any other purpose. This report is only valid as of the Effective Date identified herein. No events subsequent to the Effective Date have been taken into consideration.
  • Appraiser and Firm shall have no liability to any party other than Client in connection with this appraisal. In the event any party asserts a claim against Appraiser and/or Firm relating to this Appraisal, however, the maximum collective monetary liability of the Appraiser and Firm for any such claims shall be limited to the total fee actually received by the Appraiser and Firm for the appraisal. This limitation of liability extends to all types of claims and causes of action, whether in contract or tort, but excludes claims/causes of action for intentionally fraudulent or criminal conduct, or intentionally caused injury.
  • The estimate of fair market value reached in this report is necessarily based on the definition of fair market value as defined in Section 1.8 Standard of Value: Fair Market Value. An actual transaction may be concluded at a higher value or lower value depending on the circumstances surrounding the company, the appraised business interest, or the motivations and knowledge of both the buyers and sellers at that time.
  • It should be specifically noted that the valuation assumes the business will be competently managed and maintained by financially sound and prudent owners, over a reasonable period of ownership. This valuation assignment does not entail an evaluation of management’s effectiveness, nor is the Appraiser responsible for analyzing events beyond the Effective Date including, but not limited to, future marketing efforts and other management or ownership actions upon which actual results will depend.
  • The Appraiser notes that the transaction type (stock or asset) and the assets and/or liabilities included in the Final Value are based on information extracted from sources provided to the Appraiser, such as a Letter of Intent to Purchase, Purchase Agreement, Business Valuation Questionnaire, and Supplemental Questionnaire, among others, as of the report date. If the terms of the transaction are modified, the Final Value may be impacted. The Appraiser is not obligated to modify or update this report, unless specifically requested to update the report by the Client. Such updates must be mutually agreed upon by Client and the Appraiser and are subject to the Appraiser’s update fees which are at the sole discretion of the Appraiser.
  • No opinion has been developed or expressed within the valuation for matters that require legal or other specialized expertise, investigation, or knowledge beyond that customarily employed by appraisers valuing businesses. The Appraiser is not responsible for any losses incurred by the Company or those associated with the Company resulting from legal or tax matters. All values are stated without any reference to legal claims unless specifically stated.
  • The engagement for appraisal, consultation, or analytical service is fulfilled and the total fee is due and payable upon delivery of the report to Client. The Appraiser and/or Firm are not obligated by reason of this report to provide testimony (expert or fact) before any court or commission, unless mutually agreeable arrangements are made for such testimony, including appraiser’s fees, which are at the sole discretion of the Appraiser.
  • It is assumed that there are no regulations of any government entity to control or restrict the use of the underlying assets or the Company as a whole, unless specifically referred to in the report, and that the underlying assets and the company as a whole will not operate in violation of any applicable government regulations, codes, ordinances, or statutes.
  • All titles are assumed to be good and marketable, unless otherwise stated. No investigations of titles to assets or searches for liens against assets have been made by the Appraiser.
  • This report may contain prospective financial information, estimates, or opinions that represent the view of the Appraiser about reasonable expectations as of the Effective Date. Such information, estimates, or opinions do not fully reflect the range of factors that may potentially impact the future operations of the Company, including, but not limited to: income, profit, or extraneous events.
  • Hazardous substances, if present, can introduce an actual or potential liability that could adversely affect the marketability and value of a business. Such liability may be in the form of immediate recognition of existing hazardous conditions, or future liability that could stem from the release of currently non-hazardous contaminants. In the development of the opinion of value, no consideration was given to such liability or its impact on value unless specifically stated. The Appraiser has not taken into account any and all future environmental considerations and potential liability.
  • Possession of this report, or a copy thereof, does not carry with it the right of publication of all or part of it, nor may it be used for any purpose other than stated within the report without the prior written consent of Reliant Business Valuation, LLC, which consent shall be at its sole discretion. Every page of this report is copyrighted by Reliant Business Valuation, LLC. Excerpts taken out of context of this report may be misleading or misconstrued.
  • No part of this report or the Appraiser’s opinions or conclusions may be published or used in any advertising materials, media, sales listings, investment offerings or prospectuses, or securities filings or statements without the prior written consent of Reliant Business Valuation, LLC, which consent shall be at its sole discretion. Any party who publishes or uses the report or the Appraiser’s work product without such consent or who provides the report or Appraiser’s work product for such unauthorized use or publication agrees to indemnify and hold the Appraiser and Firm harmless from and against all damages, liabilities, losses, causes of actions, expenses, claims and costs, including attorneys’ fees, incurred in the investigation and/or defense of any claim arising from or in any way connected to the unauthorized use or publication.
  • The Appraiser has reviewed the [Draft] Purchase Agreement or Letter of Intent to Purchase if such document was made available to the Appraiser, but the Appraiser is not an attorney and has only relied on this document to extract certain deal terms, such as Buyer, Seller, Price, Allocations, Sale Type (stock or asset) and Non-Compete clauses. Any further analysis is outside of the scope of work of this engagement. Similarly, a Lease may be reviewed only to determine the lease commencement and expiration dates, options to extend and approximate base or gross rental rates. All leases are assumed to have annual rental rate increases of 3% and are expected to have a total term (including options) of at least 10 years. No percentage rent has been accounted for unless specifically provided as part of the Facts & Data.
  • An appraisal of fixed assets and/or real estate was not performed by Reliant Business Valuation, LLC. The Appraiser may rely on third party appraisal reports for estimated fair market values of real estate rent and/or fixed assets, if provided by the Information Provider. Where such values are used in this appraisal, no warranty is made with respect to these values. The Appraiser will attempt to only rely on USPAP compliant reports in which the Client is the intended user – although Reliant Business Valuation, LLC is not an intended user, the Client has authorized the Appraiser to utilize information from third party appraisal reports and therefore the Client assumes liability for the validity of such information. If values stated in relied-upon reports are incorrect, the resulting estimate of the value of the subject ownership interest may be affected. If a USPAP compliant equipment appraisal was not available, the Appraiser has relied on the net book value of fixed assets, which may not be reflective of their actual fair market value.
  • Public information, purchased private information, and industry statistical information are from sources deemed to be reliable. The Appraiser does not make any representation as to the accuracy or correctness of such information beyond reason and has accepted the information as true without further investigation. The Appraiser and Firm are not and do not claim to be guarantors of value. The valuation of closely-held businesses is an imprecise science, with value being a matter of opinion and where such opinions may fall within a large range. The Appraiser has utilized conceptually sound and accepted approaches and techniques of valuation within the business valuation industry in determining the estimated value included in this report.
  • «The underlying transaction of the Company may be based on either a minority or majority interest. However, the Appraiser has been engaged by the Client to value a 100% interest in the Company. Therefore, the Appraiser’s scope of work does not include adjustments for minority discounts such as a lack of control or lack of marketability. As such, a minority or majority interest derived from the Appraiser’s subject valuation may not be equal to the pro-rata share of the 100% value.»
  • «The Company or current owner(s) of the Company may own the real estate from which it operates. In this instance, the Appraiser will be required to estimate the fair market rent of the subject real estate or similar business location, as fair market value assumes a hypothetical buyer will not benefit from owning the real estate from which the Company operates. In order to determine the Company’s appropriate occupancy costs under a hypothetical buyer, the Appraiser may rely on third-party specialists, such as real estate appraisers, or conduct research for comparable properties within the Company’s geographic area through online commercial real estate listing sources. The Appraiser is not a real estate appraiser. The fair market rental rates estimated by the Appraiser are strictly for use in this report and should not be construed as a real estate appraisal or relied upon to establish the rental rates associated with any other specific property.»
  • Unless the time period is shorter under applicable law, any legal action or claim relating to the appraisal or the Appraiser’s and/or Firm’s services shall be filed in court within two (2) years from the date of delivery to Client of the report. This time period shall not be extended by any delay in the discovery or accrual of the underlying claims, causes of action or damages and shall apply to all non-criminal claims or causes of action of any type.
  • «In no way is the Appraiser or Firm recommending that the Client offer financing to the borrower or Company, or that a potential buyer purchase the Company at a certain price. The Appraiser is only offering his or her opinion of value about the fair market value of the business as of the Effective Date, and nothing further. No underwriting or analysis has been conducted on the borrower, as all buyers are assumed to be hypothetical buyers, according to the definition of fair market value stated in Section 1.8. By requesting and relying on this report, the Client agrees not to hold the Appraiser or Firm responsible for any future loan default. The Appraiser and Firm recommend that the Client and related parties obtain a second opinion to limit their liability or loss.»

[1] Internal Revenue Service, Revenue Ruling 59-60, Sec. 4. Factors to Consider, paragraph. d.

1 Institute of Business Appraisers, Business Appraisal Standards, Sec. 5.3(h). Mandatory Content.
2Internal Revenue Service, Revenue Ruling 59-60, Sec. 4. Factors to Consider, paragraph. d.