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Home My WebLink About02-0651DENNIS J. SHATTO ANN E. RHOADS CLECKNER AND FEAREN ATTORNEYS AT LAW 119 LOCUST STREET P.O. BOX 11847 HARRISBURG, PENNSYLVANIA 17108-1847 TELEPHONE: (717} 238-1731 FAX: (717) 238-8481 June 24, 2004 OF COUNSEL ROBERT D. HANSON RETIRED RICHARD W. CLECKNER WILLIAM FEAREN Register of Wills Cumberland County Courthouse One Courthouse Square Carlisle, PA 17013 Re: Estate of Matthew R. Smith No. 2002-0651 Dear Sir/Madam: Enclosed herewith for filing in the above matter, please find the following: (1) Praecipe to Enter/Withdraw Appearance; (2) Status Report Under Rule 6.12; (3) Original and one (1) copy of Inheritance Tax Return. Enclosed is our check in the amount of $10 00 in payment of filing fee. ' If you have any questions, or need anything else, please advise. DJS:lnm Enclosures cc: Nancy Smith Thomas p. Gacki, Esquire Very truly yours, CLECKNER AND FEAREN Dennis J. Shatto' £V-1500 E;~ COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF REVENUE DEPT. 280601 HARRISBURG, PA 17128-0601 Z UJ REV-1500 INHERITANCE TAX RETURN RESIDENT DECEDENT DECEDENT'S NAME (LAST, FIRST, AND MIDDLE INITIAL) SMITH, MATTHEW R. DATE OF DEATH (MM-DD-YEAR) DATE OF BIRTH (MM-DD-YEAR) 06--23--2002 07--04--1963 (IF APPLICABLE) SURVIVING SPOUSE'S NAME (LAST, FIRST, AND MIDDLE INITIAL) SMITH, NANCY B. Z Z 0 "' FIRM NAME df Applicab~,) ,,, Cleckner and Fearen O X OFFICIAL USE ONLY FILE NUMBER -02 0 0 6 5 COUNTY CODE YEAR NUMBER SOCIAL SECURITY NUMBER 205 - 58 - 2283 1 THIS RETURN MUST BE FILED IN DUPLICATE WITH THE REGISTER OF WILLS SOCIAL SECURITY NUMBER' E~l. Original Return [] 2. Supplemental Return E~ 4. Limited Estate [---] 4a. Future Interest Compromise (date of death after 12-12-82) [~6. Decedent Died Testate (Attach copy of Wi{I) [] 7. Decedent Maintained a Living Trust (Attach copy of Trust) [~9. Litigation Proceeds Received [] 10. Spousal Povedy Credit (date of death between 12-31-91 and 1-1-95) THIS SECTION MUST BE COMPLETED;ALL¢CORRESpONO~[~_~( NAME Dennis J. Shatto TELEPHONE NUMBER 717-238-1731 ]---~ 3. Remainder Return (date ofdeath prior to 12-13-82) ~-~5. Federal Estate Tax Return Required 0 8. Total Number of Safe Deposit Boxes [~11. Election to tax under Sec. 9113(A) (Attach Sch O) COMPLETEMAILINGADDRESS 119 LOCUSt Street P. O- Box 11847 Harrisburg, PA 17108-1847 14. 1. Real Estate (Schedule A) (1) 2. Stocks and Bonds (Schedule B) (2) 3. Closely Held Corporation, Partnership or Sole-Proprietorship (3) 4. Modgages & Notes Receivable (Schedule D) (4) 8 7, 2 8 3.5 6 5. Cash. Bank Deposits & Miscellaneous Personal Property (5) 3 0 , 0 0 0.0 0 (Schedule E) 6. Jointly Owned Properly (Schedule F) (6) [~ Separate Billing Requested 7. Inter-Vivos Transfers & Miscellaneous Non-Probate Property (7) 3,700.00 (Schedule G or Ll 8. Total Gross Assets (total Lines 1-7) 9. Funeral Expenses & Administrative Costs (Schedule H) (9) 10. Debts of Decedent, Mortgage Liabilities, & Liens (Schedule I) (10) 11. Total.Deductions (total Lines 9 & 10) 12. Net Value of Estate (Line 8 minus Line 11) 13. Charitable and Governmental Bequests/Sec 9113 Trusts for which an election to tax has not been made (Schedule J) Net Value Subject to Tax (Line 12 minus Line 13) -0- :.~...:.' 405,000. O0 ,'_, (8) (11) (12) (13) (14) OFFICIAL USE ONLY 525,983.56 -0- 525; 983.56 --0-- 525,983.56 SEE INSTRUCTIONS ON REVERSE SIDE FOR APPLICABLE RATES 15. Amount of Line 14 taxable at the spousal tax rate, or transfers under Sec. 9116 (a)(1.2) 525,983.56 x.0 0 (15) -0- 16. Amount of Line 14 taxable at lineal rate x .0_ (16) 17. Amount of Line 14 taxable at sibling rate x .12 (17) 18. Amount of Line 14 taxable at collateral rate x .15 (18) 19. Tax Due (19) Decedent's Complete Address: STREETADDRESS 20 Eastgate Drive CITY Camp Hill STATE PA ZIP 17011 Tax Payments and Credits: 1. Tax Due (Page 1 Line 19) 2. Credits/Payments A. Spousal Poverty Credit B. Prior Payments C. Discount (1) -0- Total Credits ( A + B + C ) 3. Interest/Penalty if applicable D. Interest E. Penalty Total Interest/Penalty ( D + E ) 4. tf Line 2 is greater than Line 1 + Line 3, ehter the difference. This is the OVERPAYMENT. Check box on Page 1 Line 20 to request a refund 5. If Line 1 + Line 3 is greater than Line 2, enter the difference. This is the TAX DUE. A. Enter the interest on the tax due. B. Enter the total of Line 5 + 5A. This is the BALANCE DUE. (2) -O- (3) -O- (4) -O- (5) -O- (5A) -O- (58) -O- Make Check Payable to: REGISTER OF WILLS, AGENT -o- PLEASE ANSWER THE FOLLOWING QUESTIONS BY PLACING AN "X" IN THE APPROPRIATE BLOCKS 1. Did decedent make a transfer and: Yes No a. retain the use or income of the properly transferred; .......................................................................................... [] [] b. retain the right to designate who shall use the property transferred or its income; ............................................ [] [] C. retain a reversionary interest; or .......................................................................................................................... [] [] d. receive the premise for life of either payments, benefits or care? ...................................................................... [] [] 2. If death occurred after December 12, 1982, did decedent transfer property within one year of death without receiving adequate consideration? .............................................................................................................. [] [] 3. Did decedent own an "in trust for" or payable upon death bank account or security at his or her death? .............. [] [] 4. Did decedent own an Individual Retirement Account, annuity, or other non-probate property which contains a beneficiary designation? ........................................................................................................................ [~] [] IF THE ANSWER TO ANY OF THE ABOVE QUESTIONS IS YES, YOU MUST COMPLETE SCHEDULE 6 AND FILE IT AS PART OF THE RETURN Under penalties of perjury, I declare that I have examined this return, including accomj;lar~ing schedules and statements and to the best of my knowledge and belief, it is true, correct and complete, Declaration of preparer other than the personal representative is based on all inform~?/of which preparer has any knowledge, ADDRESS (./ 20 Eastgate Drive, Camp Hill, PA 17011 SIGNATURE OF PREPARER OTHER THAN REPRESENTATIVE DATE ADDRESS For dates of death on or after July 1, 1994 and before January 1, 1995, the tax rate imposed on the net value of transfers to or for the use of the surviving spouse is 3% [72 P.S. §9116 (a) (1.1)(i)]. For dates of death on or after January 1, 1995, the tax rate imposed on the net value of transfers to or for the use of the surviving spouse is 0% [72 RS. §9116 (a) (1.1) (i The statute does not exempt a transfer to a surviving spouse from tax, and the statutory requirements for disclosure of assets and filing a tax return are still applicable ever the surviving spouse is the only beneficiary. For dates of death on or after July 1, 2000: The tax rate imposed on the net value of transfers from a deceased child twenty-one years of age or younger at death to or for the use of a natural parent, an adoptive pare or a stepparent of the child is 0% [72 RS. §9116(a)(1.2)]. The tax rate imposed on the net value of transfers to or for the use of the decedent's lineal beneficiaries is 4.5%, except as noted in 72 RS. §9116(1.2) [72 RS. §9116(a)(1)]. The tax rate imposed on the net value of transfers to or for the use of the decedent's siblings is 12% [72 P.S. §9116(a)(1.3)]. A sibling is defined, under Section 9102, as ~ individual who has at least one parent in common with the decedent, whether by blood or adoption. REV-1504 E[X+ (7-83) COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE "C" CLOSELY HELD STOCK, PARTNERSHIP AND PROPRIETORSHIP ESTATE OF FILE NUMBER NATTHEW R. SMITH 2002-00651 (Schedule "C-1" or "C-2" must be attached for each business Interest of the decedent, other than a proprietorship.) VALUE AT DATE ITEM NUMBER DESCRIPTION 15 shares of co[~non stock in Appalachian Brewing Company, Inc. TOTAL (Also enter'on line 3, Recapitulation) OF DEATH 405,000.00 $ 405,000.00 (If more space is needed insert additional sheets of same size) REV-1505 EX+ J3-92) COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE C-1 CLOSELY HELD CORPORATE STOCK INFORMATION REPORT Please Type or Print ESTATE OF MATTHEW R. SMITH FILENUMBER 2002-00651 A. Detailed description showing the method of computation utilized in the valuation of the decedent's stock. Report: B. Complete copies of financial statements or complete copies of the Federal Tax Returns (Federal Form 1120) for the year of death and 4 preceding years. C. Statement of dividends paid each year. List those declared and unpaid. D. List names of officers, salaries, bonuses and any other benefits received from Corporation. E. If the Company owned real estate, submit a list showing the complete address/es and estimated Fair Market Value/s. If Real Estate Appraisals have been secured, please attach copies. F. List principal stockholders at date of death, number of shares held, and relationship to decedent. G. Any other information relative to the valuation of the decedent's interest. J~e~)or't Name of Corporation Street Address City Harrisburg State PA Federal I. D. Number 25-1772677 (Same As Federal Form 1120) Type of Business Brewe~- & restaurant Appalachian Brewing Company, Inc. State of Inc. PA 50 N, ..C~uueron Street Date of Inc. 1995 Zip Code 17101 Total Number of Shareholders Business Reporting Year_ ,]'an i to Dec 31 Product beer STOCK TYPE TOTAL # SHARES PAR VALUE # SHARES OWNED OUTSTANDING BY DECEDENT Common 107 15 Preferred 0 0 Provide all rights and restrictions pertaining to each class of stock. 5. Was decedent employed by the Corporation? [] Yes [] No If yes, Position Annual Salary S Time Devoted t0 business 6. Was the Corporation indebted to the decedent? [] Yes [] No If yes, provide amount of indebtedness $ 87,283.56 at date of death 7. Was there life insurance payable to the corporation upon death of decedent? [] Yes [] No If yes, Cash Surrender Value: $ Net Proceeds Payable: $ Owner of Policy 8. Did the decedent sell or transfer stock of this company within one year prior to death if the date of death was on or after 12ll 3/82 or within two years if the date of death was prior to 12/13/827 [] Yes [] No If yes: [] Transfer []Sale # of Shares Transferee or Purchaser Consideration $ Date Attach a separate sheet for additional transfers and/or sales. 9. Did the corporation have an interest in other corporations or partnerships? [] Yes [] No If yes, report the necessary information on a separate sheet, including Schedule "C-1" or "C-2" for each interest. 10. Was there a written shareholder's agreement in effect at the time of the decedent's death? If yes, provide a copy of the agreement. 1 1. Was the decedent's stock sold.~ [] Yes [] No If yes, provide a copy of the agreement of sale, etc. 12. Was the corporation dissolved or liquidated after the decedent's death? [] Yes If yes, provide a breakdown of liquidation distributions, etc. Attach e separate sheet. []Yes [] No [] No REV. 1507 EX+ (7.88} COMMONWEALTH OF PENNSYLVANIA INHIRITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE D MORTGAGES AND NOTES RECEIVABLE , Please Print or Type ESTATE OF FILE NUMBER MATTHEW R. SMITH 2002-00651 (All propert jointly-owned with the Right of Survivorship must be disclosed on Schedule F.) ITEM NUMBER DESCRIPTION VALUE AT DATE OF DEATH 1. Note receivable from Appalachian Brewing Company, Inc. $69,957.22 17,326.34 Face ~nount Accrued Interest through Date of Death TOTAL (Also enter on line 4, Recapitulation) (If more space is needed, insert additional sheets of same size.) S 87,283.56 87,283.56 'REV 1508 EX ° {1~37) ~ COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT ESTATE OF SCHEDULE E CASH, BANK DEPOSITS, & MISC. PERSONAL PROPERTY MATTHEW R. SMITH FILE NUMBER 2002-00651 Include the ITEM NUMBER ~roceeds of litigation and the date the proceeds were received by the estate, All property jointly-owned with the right of survivorshi DESCRIPTION Automobile - 1948 Chevrolet VIN 9FPG5772 Automobile - 1999 Chrysler VIN 2C3HE66GlXH759309 TOTAL (Also enter on line 5, Recapitulation) (If more space is needed, insert additional sheets of the same size) must be disclosed on Schedule F. VALUE AT DATE OF DEATH 20,000.00 10,000.00 $ 30,000.00 COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT ESTATE OF SCHEDULE G INTER-VIVOS TRANSFERS & MISC. NON-PROBATE PROPERTY MATTHEW R. SMITH FILE NUMBER 2002-00651 This schedule must be completed and filed if the answer to any of questions 1 through 4 on the reverse side of the REV-1500 COVER SHEET is yes. DESCRIPTION OF PROPERTY % OF ITEM ,NC~UDE THE NAME OF THE TRANSFEREE. THEIR RELATIONSHIP TO DECEDENT AND THE DATE OF TRANSFER DATE OF DEATH DECD'S EXCLUSION TAXABLE VALUE ATTACH A COPY OF THE DEED FOR REAL ESTATE. ..N.[IM. B~R VALUE OF ASSET INTEREST i,E APPUC^mE) 1. Roth 'rRA 724-80330-i-6-410 3,700. O0 iO0 3,700. O0 Nancy B. Smith - transferee TOTAL (Also enter on line 7, Recapitulation) $ 3,700. O0 (If more space is needed, insert additional sheets of the same size) ' REVdS~3 EX · (i 97) COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT ESTATE OF SCHEDULE J BENEFICIARIES MATTHEW R. SMITH FILE NUMBER 2002-00651 RELATIONSHIP TO DECEDENT AMOUNT OR SHARE NAME AND ADDRESS OF PERSON(S) RECEIVING PROPERTY Do Not List Trustee(s) OF ESTATE TAXABLE DISTRIBUTIONS (include outright spousal distributions) NUMBER Nancy B. Smith 20 Eastgate Drive Camp Hill, PA 17011 I1. Spouse 100% ENTER DOLLAR AMOUNTS FOR DISTRIBUTIONS SHOWN ABOVE ON LINEI 15 THROUGH 17, AS APPROPRIATE, ON REV 1500 COVER SHEET NON-TAXABLE DISTRIBUTIONS: A. SPOUSAL DISTRIBUTIONS UNDER SECTION 9113 FOR WHICH AN ELECTION TO TAX IS NOT BEING MADE B. CHARITABLE AND GOVERNMENTAL DISTRIBUTIONS TOTAL OF PART l! - ENTER TOTAL NON-TAXABLE DISTRIBUTIONS ~)N LINE 13 OF REV 1500 COVER SHEET $ (if more space is needed, insert additional sheets of the same size) LAST WILL AND TESTAMENT OF MATTIIEW R- SMITH 21-2002-65]. I, MATTHEW R. SMITH, of the Township of Hampden, County of Cumberland, Commonwealth of Pennsylvania, make this Last Will and Testame~i~; ~e~b~ ~evokin~ any an~ all former wi-i~'~ 'an© codicils. ITEM I - I give my wedding ring to my daughter, PEYTON ELIZABETH SMITH, to be held by my hereinafter named Trustee, in trust, until my said daughter reaches the age of twenty-four (24) years. ITEM II - I devise and bequeath all of the rest, residue and remainder of my estate, of every nature, and wherever situ- ate, together with all insurance thereon, to my wife, NANCY B. SM/TH, if she survives me by sixty (60) days. If my said wife' · does not survive me by sixty'-(60) days, I devise and bequeath all of the rest, residue and remainder of.my estate, of every nature and wherever situate, together with all insurance thereon, in equal shares to any of my children (including children born after execution of this will) who survive me. If I have no children who survive me, then I devise and bequeath all of the rest, residue and remainder of my estate, of every nature and wherever situate, together with all insurance thereon, in the following manner: A. To my mother, MARY ELLEN SMITH, one-half of the remainder; B. To my mother-in-law, BARBARA j. WESSELS, one-half of the remainder. ITEM III - If any beneficiary of my estate is under the age ~c~ ~enty-four (24) ye'a~'a~ '~I;~ ~i,,~e az w;,ic~l 'distribution of any property devised and bequeathed by this will would otherwise be made to such beneficiary, my personal representative shall distribute the share of such beneficiary to the Trustee herein named, to be held in separate trust for such beneficiary. The Trustee shall hold, manage, invest and reinvest any property received by the Trustee, whether under this will or otherwise, and shall collect the income thereof, and shall apply so much of the net income and, if the net income is insufficient, so much of the principal of the property held for such beneficiary as the Trustee shall deem necessary or advisable for such benefici- ary's health, maintenance, support and complete education,, both undergraduate, and graduate. When the beneficiary attains the ~,ge of twenty-four (2~) years, the Trustee shall distribute to such beneficiary all remaining property held by the Trustee for such beneficiary. If such beneficiary dies before attaining twenty-four (24) years of age, the Trustee shall distribute to the personal representative of such beneficiary, s estate all property held by the Trustee for such beneficiary. - 2 - ITEM IV - Ail shares of principal and income hereby given sha]~l be free from anticipation, assignment, pledge or obliga- tion of the beneficiaries and any of them, and shall not be subject to any execution, attachment, levy or sequestration or other claim of creditors of said beneficiaries or any of them. iTE~ ~ - No fiduciary und-~r~ k~i~ ~wii~ s;,aii De cequirec ~o give bond or other security for the faithful Performance of the fiduciary's duties. Any such fiduciary shall have the following powers, in addition to those given by law: A. To invest in, accept and retain any real estate or personal property, including stock of a corporate fiduciary or its holding investments; B. To sell, company, without restriction to legal exchange, partition or lease for any period of time any real or personal property and to give options therefor for cash or credit, with or without security; C. To borrow money from any person, including any fiduciary acting hereunder, and to mortgage or pledge any real or personal property; D. To hold shares of stock or other securities in nominee registration form, including that of a clearing corporation or depository, or in book entry form or unreg- istered or in such other form as will pass by delivery: E. To engage in litigation and compromise, arbitrate or abandon claims; - 3 - F. To make distribution in cash, or in kind at current values, or partly in each, allocating specific assets to particular distributees on a non-pro rata basis, and for such purposes to make reasonable determinations of current values; and C. l~o ,~=ke ='=ctions, decisions- t--.- - settlements in connection with all income, estate, inheri- tance, gift or other tax returns and the payment of sucll taxes, without obligation to adjust the distributive share of income and principal of any person affected thereby. ITEM VI - I appoint my wife, NANCY B. SMITH, Executrix of this will. If my said wife is unwilling or unable to act or continue as Executrix, for any reason whatsoever and whether before or after my death, I appoint my brother, DOUGLAS E. SMITH, and my sister-in-law, CAROL B. COLEMAN successor Co-Executors. ITEM VII - I appoint my brother, DOUGLAS E. SMITH, and my sister-in-law, CAROL B. COLEMAN, or the survivor of them, Co-Trustees under this will. If my said brother and sister-in-law are both unwilling or unable to act or continue as Trustee, for any reason whatsoever and whether before or after my death, I appoint DAUPHIN DEPOSIT BANK AND TRUST COMPANY, Harrisburg, Pennsylvania, successor Trustee. ITEM VIII - I appoint my brother DOUGLAS E. SMITH, Guardian of the person of each minor child of mine for whom I am entitled -- 4 to appoint a guardian of the person. If my said brother is unwilling or unable to act or continue as Guardian, for any reason whatsoever and whether before or after my death, I appoint my sister-in-law, CAROL B. COLEMAN, successor Guardian. ITEM IX - All estate taxes, inheritance taxes, transfer taxe.~ ~:~.f ~t!~u£ tax~g oK a simi]ar nature payable by ~.~a~o~ my death to any government or subdivision thereof upon or with respect to any property subject to such tax, and any penalties thereon, shall be paid by the personal representative out of my residuary estate, and all interest with respect 'to any such taxes shall be paid by the personal representative out of the inco~ne or principal or partly out of the income and partly out of the principal of such portion of my estate, in the absolute discretion of the personal representative, ithout reimbursement w from or apportionment among the beneficiaries, recipients or owners of such property for any such taxes, penalties or interest; provided, however, that the personal representative shall not pay any such taxes, penalties or interest attributable to any property included in my estate solely because of a power of appointment thereover which I possess, and such property shall bear its proportionate share of such taxes, penalties and interest. ITEM X - I direct that as soon as practicable after my death, my next of kin or personal representative make immediate contact with any entities or agencies involved in the placement - 5 - of donated organs and that all necessary steps be promptly undertaken to remove any of my body organs which are suitable for donation and use. ITEM XI - It is my desire that my body be cremated, and I direct that my personal representative make all necessary and appropriate arran~me,l~.s fur m~ IN WITNESS WHEREOF, I have hereunto set my hand and seal, to this my Last Will and Testament, this J/~day of September, 1993. MATTHEW R. SMITH The preceding instrument, consisting of this and five other typewritten pages, each identified by the signature of the Testator, was on the date hereof signed, published and declared by the said Testator, MATTHEW R. SMITH, to be his Last Will and Testament, and, at his request, in his presence and in the pre~e.n, ge Qf..'~:each. other,, we,.....beli.evinp.him, to be of sound mind, memory and understanding, ha~e hereunto subscribed our names as - 6 - COMMONWEALTH OF PENNSYLVANIA : : COUNTY OF DAUPHIN : SS: We, MATTHEW R. SMITH, TestatOr, ~)~Ajls ~-', S~ ~--~ and b l ~ D/~ ~Av~ , witnesses, respectively, whose names are signed to the attached or foregoing instrument, being first duly sworn, ~'~ :'~ ~e~iare to the undersigned authorit~ Testator signed and executed the instrument as his Last Will and Testament and that he had signed willingly, and that he executed it as his free and voluntary act for the purposes therein expressed, and that each of the witnesses, in the presence and hearing of the Testator, signed the Will as witnesses and that to the best of their knowledge, the Testator was at that time eighteen (18) years of age or older, of sound mind and under no constraint or undue influence. ..... [ ~~i~~itat°r Subscribed, sworn to and acknowledged before me by MATTHEW R. SMITH, the Testator, and subscribed and sworn to before me by .~~ l ~ ~-. ~ ~-~ and, b//~D~ '~/~V~A~ , witnesses, this ~ ~ day of _//~/~~ ~ , 1993. APPALACHIAN BREWING COMPANY, INC. VALUATION OF COMMON STOCK JUNE 23, 2002 APPALACHIAN BREWING COMPANY, INC. VALUATION OF COMMON STOCK JUNE 23, 2002 INDEX Valuation report Summary Capitalized earnings method: Computation of indicated value Industry average operating margin method: Computation of indicated value Actual transactions method: Computation of indicated value Summary of balance sheets Summary of statements of income Computation of adjusted net income Computation of capitalization rate Professional parameters Statement of appraiser qualifications WILLIAM B. BOLES BRIAN J. METZGER GARY G. GROVE, RETIRED BRIAN J. METZGER BRENT W. EMRICK THEODORE D. BROSIUS LISA A. RITTER BOLES, GROVE AND METZGER, P.C. CERTWIED PUBLIC ACCOUNTANTS AND CONSULTANTS 3601 NORTH FRONT STREET HARRISBURG, PENNSYLVANIA 17110 TELEPHONE: (717) 238-0446 FAX: (717) 238-3960 www. by~mcpa, corn MEMBE AMERICAN INST CERTIFIED PUBLIC A PENNSYLVANIA CERTIFIED PUBLIC A Thomas P. Gacki, Esquire Eckert, Seamans, Cherin & Mellott, LLC 213 Market St. Harrisburg, PA 17108 At your request, we have estimated the value of the 15 share minority interest Appalachian Brewing Company, Inc. (also referred to in this report as "the Company" ~ "ABC") common stock, owned by Matthew Smith, for the purpose of a buy/sell agreem,-~ due to the death of Matthew Smith on June 23, 2002.. This Valuation has been prepa~ specifically for this use and cannot be used for :anY. other Purpose. . We have prepared this estimate of value on the Presumption that value is equivalent "fair market value" and that"fair market valtie" is the Price at which a willing buyer will b: and a willing seller will sell an item of property, in an arms-length transaction with neitl- one being under any Compulsion to buy or Sell, and with both having reasona[ knowledge of all relevant facts. The addendum to the shareholder agreement provides ~ fair market value as used for estate tax purposes to be used as the standard of value. The common stock being valued is not a publicly traded security with an establish~:, market. Therefore, fair market value cannot be readily ascertained by reference to a~ such market. Actual fair market value can be determined only by bona fide negotiatio~ between knowledgeable buyers and sellers. We reviewed the fundamental valuation factors applicable to this particular study. TI- factors considered include: ~' · the nature of the business and the history of the enterprise · historical earnings · the value of underlying tangible assets · the existence of goodwill or other intangible assets · the earnings capacity of the Company · sales of other stock interests · the size of the interest to be valued · the economic outlook in general, and the anticipated impact of economic changes on the industry Also reviewed were the Company's tax returns (Form 1120S) for each year included in the study, December 31, 1998 through 2002, the Company's financial statements as compiled by McKonly and Asbury LLP for the years ended December 31, 1999 through 2002 ag we!l as other financial information provided by management. The balance of this report and the attached schedules will analyze the valuation findings es determined by our selection of appropriate valuation techniques. The final paragraphs include our summary of findings and opinion of the market value as of June 23, 2002. Statement of Procedural Policies and Limitinq Conditions All financial information, operating results, and the data pertaining to the income expenses of Appalachian Brewing Company, Inc., have been taken from the Company'¢ income tax returns and financial statements. The report is prepared for the stated purpose and should not be used for any n~her purpose. -- ' This report is to be used in whole and not in part. We assume no liability for matters that are legal in nature. All related facts, comments and statistical information set forth in the report have obtained from sources believed to be knowledgeable, reliable and accurate. responsibility is assumed for information supplied by others. All claims to property have been assumed valid and no investigation of legal fee title to or personal property has been conducted. Good title is assumed to exist. Liens encumbrances, which may be against the property, have been given no consider;.;;i,:~ except as may be specifically set forth in this report. Our conclusions are based on the assumption that there shall be a continuation of present management policies over whatever period is reasonable and necessary maintain the character and integrity of the Company, and that ownership and managern are assumed to be competent and responsible. The analyses, conclusions, and opinions concerning the preparation of this valuation report have been prepared by Brent W. Emrick, CPA/ABV, MBA, CFP Michael W. Zelko, CPA/ABV, and under the guidance and supervision of William B. CPA, ASA, CFP. The scope of our study and report thereon does not include the possible impact o? restrictions concerning the Company, except where such matters have been brought to ¢-t.:,- attention and are disclosed in the report. It is assumed that all necessary local, state and federal permits, approvals, and licenses, where applicable, have been or will be obtain.:~,::' and can be readily renewed and\or transferred to a purchaser. The subject Company is valued assuming that all necessary equipment, furnishings fixtures, working capital and inventory are in place. If any items essential to the operation of the Company are missing, we reserve the right to amend the opinion of value detai!ed in this report. This report and opinion of value assumes continued use of any access to the subject Company real property. If any changes occur in the use of this access, we reserve the right to amend the opinion of value detailed in this report. No opinion has been rendered concerning the existence or possible impact on value of potentially hazardous construction materials, toxic waste or the ability of the Company to meet Environmental Protection Agency Standards. No responsibility is assumed for the subject company to meet environmental approvals. Detection of hazardous substances is beyond the appraiser's scope and requires consultation with an expert in this field. If any of these hazards are in fact present on any of the sites owned by the Company under appraisal, the value of the Company would, at least, be reduced by the expense necessary to remediate the site, and income lost, if any, during remediation. This appraisal assumes that franchise affiliations if any, will continue. Any change in franchise affiliation could have a material effect on the fair market value detailed in this report. We reserve the right to amend the opinion of value stated in this report for any change in franchise affiliation. The appraisers herein, by reason of the report, are not required to give testimony in court, with reference to the business herein appraised, unless arrangements have previously been made. We hereby certify that, to the best of our knowledge and belief, the statements of fact contained in this report are true and correct, and this report has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation and the Principles of Appraisal Practice and Code of Ethics of the American Society of Appraisers: The American Society of Appraisers has a mandatory recertification program for all of its Senior Members. We are in compliance with that program. The fair market value determined in this report is only valid for the date specified. The fee paid for the formulations and reporting of the conclusions set forth herein is not contingent upon the values or other opinions presented in this report. No shareholder, employee or agent of Boles, Grove and Metzger P.C. has any direct or indirect interest in the Company. This report and any or all of the information contained herein may not be disseminated or disclosed in any manner, either directly or indirectly, to any party whatsoever without the prior written consent of Boles, Grove and Metzger, P.C. 3 Introduction Objective The purpose of this report is to present a detailed narrative explanation of the methods, procedures and calculations used to arrive at an opinion of the fair market value of a 15 share interest in Appalachian Brewing Company, Inc., common stock as of June 23, 2002 on a minority interest basis for buy/sell agreement purposes. Definition of Market Value The shareholder agreement indicates that estate tax value be used to determine the value of shares due to the death of a shareholder. Fair market value is the standard of value to be used for estate tax purposes. Fair market value is defined as the amount at which a property would change hands between a willing buyer and a willing seller, each having a reasonable knowledge of all the pertinent facts, neither being under compulsion to buy or sell. Our appraisal of the Company as of June 23, 2002, is in accordance with the above definition. This appraisal was also performed in a manner consistent with the guidelines set forth in U.S. Internal Revenue Ruling 59-60, (1959-1C.B.237). Premise of Value We have valued this entity under the going concern premise of value rather than liquidation va. lue. This premise of value indicates that the Company is a viable operating entity that is not in any danger of being forced out of business due to financial concerns. The financial statements provided to us did not indicate that continuing operations were in jeopardy. If this were the case the CPA firm compiling the financial statements would have been required to be certain that the statements or their report disclosed such circumstances. Economic Outlook THE NATIONAL ECONOMIC REVIEW Second Quarter 2002 General Economic Overview According to preliminary estimates released by the Department of Commerce's Bureau of Economic Analysis, Real Gross Domestic Product ("GDP"), the outpUt of goods and services produced by labor and property located in the United States, increased at an annualized rate of 1.1% during the second quarter of 2002. Annualized growth in GDP for the first quarter of '2002 was revised to 5.0%, lower than the preliminary estimated rate of 5.8%. Second quarter GDP reflected an increase in personal consumption expenditures, private inventory investment, exports and federal government spending. These gains were partly offset by a decrease in nonresidential structures and a sharp increase in imports. The Bureau of Economic Analysis indicated that second-quarter "advance" estimates are based on data that are incomplete or subject to revision. 4 THE NATIONAL ECONOMIC REVIEW Second QuaKer 2002 (Continued) Continuing its neutral position from the first quaker, the Federal Reserve i'the "F~,~!"):Ii, alter interest rates during the second quaker. Based upon the information avail,:~:;k, t(~ Fed for its June policy meeting, economic activity continues to increase, alth- .~.. 1 slower pace than the prior quaker. The Fed currently has a balanced risk as_~.~,.;r regarding price stability and sustainable growth. The Conference Board ("TCB") reported that the Composite Index of Leading -' Indicators ("LEI"), the government's primary forecasting gauge, remained unch:m ::e, June at 112.4 after a decrease of 0.3% and an increase of 0.6%, respectively fo~ ,'~F;il May. The index attempts to gauge economic activity six to nine months in ~ dt ~ :~. Multiple consecutive moves in the same direction are said to be indicative of th-: u direction of the economy. In June, five of the ten leading economic indicators ac ~;~: The positive contributors to the leading index were (largest to smallest) money .,; average weekly initial claims for unemployment insurance, average weekly mant~:%lu -¢ hours, vendor performance, and building permits. Negative contributors were sto:: ~ [ index of consumer expectations, interest rate spread, and manufacturers' new (~¢..'t( "s non-defense capital goods. The June Conference Board press release indicat,:~j ' ;t:; prices and consumer expectations are the primary components that are preve,~:i.~:!;l ~ .:~ leading index from continuing its positive trend in June. The recent wave of qued; io 'ai ,i '~, corporate practices and the lack of measures aimed at addressing them hav:;- 1~ 'c~ contributed to the weakness in these two components." In June the Coincide~:t ~!:..~. increased 0.3%', and the Lagging Index declined 0.1%. For the six-moth F. eriod ~:,; ~¢! ~.; -June the Coincident Index posted its largest six-month advance since that report( ~! l'~r April to October 2000 period. Near-term economic growth expectations are mixed. The average annu~flized (I ~a".( '. growth in GDP for the last four quakers has been 2.1% and the current trend significant deceleration. Investor concerns regarding financial reporting, a we::~'.~ market, and waning business conditions have eroded consumer confidenc(,. declined in June to the lowest point since February. While confidence is still high~ ,r was at the start of the year, consumers' assessment of current conditions ar'.:l Ih" expectations for the next six months declined. Consumer Spendin~ and Inflation According to the Bureau of Labor Statistics, the Consumer Price Index ("CPI") 0.1% to 179.9 in June (CPI - all urban consumers, 1982-1984 = 100, before adjustment). The seasonally adjusted annual rate ("SAAR") of inflation for the quaker of 2002 was 2.5%, compared to an increase of 0.7%, a decrease of 2.0%, 3.0% increase, respectively, for the third quaker (2001) through the first quarter cf During calendar 2001, the CPI-U rose 1.6%, the smallest annual advance since ~' rise in 1998. The energy index ended its decline from 2001 with a 15.8% se~:>r adjusted annualized increase during the second quaker of 2002. THE NATIONAL ECONOMIC REVIEW Second Quarter 2002 (Continued) The core rate of inflation, absent food and energy prices, rose at a 1.9% SAAR during the second quarter. So far during 2002, the core rate of inflation has advanced 2.0% versus a 2.7% rate for 2001. The Producer Price Index ("PPI"), which is generally recognized as predictive of near-term consumer inflation, rose 0.1% in June (PPI for finished goods, seasonally adjusted) following decreases of 0.2% in April and 0.4% in May. After adjustment for seasonal considerations, the core PPI (excluding food and energy) rose 1.1% during the second quarter and has risen 0.3% so far in 2002. Core PPI rose at a 0.9% seasonally adjusted rate during 2001. According to the Census Bureau of the Commerce Department, the percent change in retail sales for April to May 2002 was revised from -0.9% to -1.1 %. The advance estimate for June retail sales (adjusted for seasonal, holiday and trading-day differences) reflected an increase of 1.1% from May 2002. The June sales figure was 3.3% higher than June 2001. Total sales for the April to June period were also up 3.1% from the same period a year ago. Personal consumption spending represents approximately two-thirds of total economic activity and is a primary component of overall economic growth. Real personal consumption spending increased 1.9% in the second quarter of 2002 and 3.1% in the first quarter of 2002. Durable goods purchases increased 2.4% in the second quarter of 2002 after a 6.3% decrease during the first quarter. Purchases of nondurable goods decreased 0.6% in the second quarter versus a 7.9% increase in the first quarter. Business and Manufacturinq Productivity Productivity has been a primary feature of improved living standards and an important element in relatively Iow inflation. The seasonally adjusted annual rate of non-farm business productivity as measured by the hourly output of all persons increased 1.1% in the second quarter. Productivity advanced 1.4% (all figures seasonally adjusted and annualized) for the entire business sector. Non-farm productivity growth was the result of a drop in hours worked while output edged slightly higher. Manufacturing productivity, generally more volatile in its quarterly measures, increased 4.9% as output rose 4.1% and hours declined 0.8%. First quarter manufacturing productivity increased 9.7%. Manufacturinq and Industrial Production Industrial production rose 0.8% in June following a revised 0.4% increase in May. June marked the sixth consecutive monthly increase with production reaching its highest level since May of 2001. Second quarter production was up 4.6% (annual rate) and is up 0.2% from June of 2001. Manufacturing output rose 0.7% in June, to 0.3% above prior year levels. Manufacturing production in April and in May increased 0.1% and 0.5%, respectively. Capacity utilization rose to 76.1% in June. For all of 2001 and through the second quarter of 2002, capacity utilization has remained below the 81.9% average level for the 1967- 2001 timeframe. Improved productivity measures have hedged Iow utilization rates to provide a mitigating force to inflation. Manufacturing industries are expected to continue a modest revitalized performance resulting from monetary and fiscal stimuli. THE NATIONAL ECONOMIC REVIEW Second Quarter 2002 (Continued) The Financial Markets The Dow closed the second quarter at 9243.26, down 11.2% for the quarter and 7.8% for the year. The Dow declined 7.1% in 2001. The S&P 500 index decreased 13.7% during the quarter to close at 989.82 after a decrease of 13.0% for the year 2001. The S&P 500 remains in negative territory down 13.8% for the year. The NASDAQ Composite Index fell 20.7% during the second quarter to close at 1463.21. The NASDAQ Composite Index was down 5.4% for the first quarter and is down 25.0% for the year. The NASDAQ lost 21.1% of its value in 2001. The broad market Wilshire 5000 index closed at 9384.00, down 12.9% for the quarter. The Wilshire 5000 index reflected a loss of 12.1% in 2001 and is currently down 12.4% for 2002. Stocks declined in each month during the second quarter, with the largest monthly pementage decreases occurring in June. The Dow fell 6.9% and the NASDAQ was down 9.4% for the month. Worries continued during the second quarter as corporate earnings remain weak and the fear of compromised financial reporting erodes investor confidence. Although concerns still exist over the recent recession, economists' forecasts point towards moderate economic improvement. However, a continuing decline in stocks could contribute to a slide in consumer confidence which would likely reduce consumer spending and slow economic growth. The monthly average yields-to-maturity on the 20-year Treasury bond during the second quarter of 2002 were 5.85%, 5.81%, and 5.65%, respectively, for April, May, and June. Bond prices are negatively correlated with their respective yields, which can shift abruptly due to investor reactions to major variances in reported economic data versus market expectations (i.e., expected inflation, growth, monetary policy and other Fed action, etc.). Short-term yields fell modestly while long-term yields decreased significantly. Bond prices have benefited from a flight to quality given the woeful performance of the stock markets. Interest Rates The Federal Reserve's Open Market Committee ("FOMC") kept its target for the federal funds rate unchanged during the second quarter. The neutral position for the first six months of 2002 follows aggressive action during 2001, which included twelve interest rate cuts. Many speculate the Fed may be poised to begin cuffing rates if the economy continues its slow-down. The following was taken from the Fed's June 26 statement: The information that has become available since the last meeting of the Committee confirms that economic activity is continuing to increase. However, both the upward impetus from the swing in inventory investment and the growth in final demand appear to have moderated. The Committee expects the rate of increase of final demand to pick up over coming quarters, supported in part by robust underlying growth in productivity, but the degree of the strengthening remains uncertain. In these circumstances, although the stance of monetary policy is currently accommodative, the Committee believes that, for the foreseeable future, against the background of its long run goals of price stability and sustainable economic growth and of the information currently available, the risks are balanced with respect to the prospects for both goals. THE NATIONAL ECONOMIC REVIEW Second Quarter 2002 (Continued) Housincl Starts and Buildin.q Permit~ Home building is generally representative of overall economic activity bec;~ construction stimulates a broad range of industrial, commercial, and conserver and investment. According to the U.S. Commerce Department's E, ureau new privately owned housing starts were at a seasonally adjusted 1.672 million units in June, 3.6% below the revised May estimate of 1.735 2.4% above the June 2001 pace. Single-family housing starts in June 2.9% below the May level of 1.390 million units. An estimated 1.603 ~illion owned housing units were started in 2001,2.2% above the 2000 figure of The seasonally adjusted annual rate of housing units authori~_ed b~/ (considered the best indicator of future housing starts) was 1.700 million 1.4% above the revised May rate of 1.676 and approximately 5. 1% above from a year ago. Overall housing activity has remained strong as - investment and construction. .Unemployment According to the Labor Department's Bureau of Labor Statistics, [,'nem,o ~:,yme~.! !~;..~ during the second quarter of 2002 increased slightly from first quarter levels. Afte-ri.~i~~; ~ 6.0% in April, the unemployment rate fell to 5.8% in May and then ros~9 to ~.!~)% i'~ J, , .June marked the ninth consecutive month that the unemployment rgte was ~?..ove ~, ' ~ unemployment rate for all of 2001 was approximately 4.8%, up from 4.0% i:~ 20O~;i. ~ nonfarm payroll employment was changed slightly with 36,000 additional iogs. ?.::r ,' I growth has been slow for four months. Summary and Outlook The burst of economic activity reported during the first quarter of 2002 wan~:i during the second quarter. Growth in GDP declined and future prospects appear diminished due to falling consumer confidence. Dubious corpor~irte reporting in tandem with high-profile bankruptcies has contribute.d to si.~t~'~ifican~ market devaluation and tightening credit markets. Some economist~ and IT~'k~t have raised the possibility of a double-dip recession if the current dec~-Ierat The Fed appears to be considering possible monetary action to bolster investme~ relatively Iow inflation. The Fed's Beige Book reported uneven performance; Districts with some Districts pointing to continued modest growth in Economic forecasts have not been reliable of late given the failure to significant first quarter increase and the subsequent deceleration in the seco~d. expectations of 2.0%-2.5% real GDP growth for the year appear optimistic second quarter slow down and the fallout in consumer confidence. Regional Outlook Road to 2002 Update on Pennsylvania published by The Pennsylvania State UnJ in cooperation with the Verizon Economics Group and the Pennsylvania Development Association forecasts an economic slowdown through 2001 - recession. In 2002-03 both the state and nation should experience an increase and jobs. Pennsylvania's economy was on an upward trajectory during the last eight ye,,rs 1990s. Employment and population grew, but at slower rates than for the U.S. the state mirrored the nation in reducing unemployment - a vital measure of econo;; ~i,.. health. As of early 2001 both the state and the nation were experiencing a "slowdown" in growth compared to the past few years. This raises the question cf Pennsylvania's and the nation's economies will continue to slow down into recessit:n level off and start on a more vigorous growth path again. Current forecasts for the Pennsylvania economy by the Verizon Economics Grou~-, co, ':': i :-~ '. :' ,, to opt for: ' · A slowing rate in Gross State Product and employmen[ in an acceleration of growth in 2002-03. · Pennsylvania continuing to lag most of its neighboring of growth in Gross State Product in 2002. · Somewhat higher unemployment in 2001, but tending down ::; i:' ":.i 2002-03. " The bottom line for Pennsylvania by Verizon forecasters is that 2001 will be a slo .,. ,:: :~,..: year but will be followed by a modest upswing in 2002-03 when manufacturers" " are reduced and consumers breathe new life into the economy. The Industw According to statistics released by the Association of Brewers, the U.S. crff! industry grew at a rate of 3.4 percent based on production during 2002. The Asso..:::i~ti-~¢: ~ .~' Brewers is a trade association for the craft beer industry and, according to bee~tovzn. has been gathering the most accurate craft beer industry statistics since the emergence in 1980. In 2002, the craft beer industry produced more than 6.4 million barrels of craft United States, an increase 216,688 barrels over 2001 This equates to nearly cases of new craft beer sales during the year. Total sales for the industW amounted to $3.8 billion. This report also indicated a total of 1,409 craft breweries in the United States in 2002. consisting of 994 brewpubs, 369 microbreweries, and 46 regional specialty breweries. Market share for 2002 among the industry breaks down as follows: regional specialty breweries 59.8 percent, contract breweries, 18.2 percent, microbreweriesl 1.8 percent, an,ii brewpubs 10.2 percent. The Association of Brewers asserts that the strong growth of contract brewing companie.~. can be traced to successful new product rollouts and the players in the U.S. craft beer industry working together to solve capacity issues, such as when demand exceeds production capacity or when a brew pub has successful enough products that there is demand for a bottled product served off-premise. The Company Appalachian Brewing Company, Inc. is a large capacity microbrewery and full-service brewpub located in Harrisburg, Pennsylvania. The Companywas incorporated in 1995 and operates as an "S" Corporation. ABC distributes its craft-brewed beers to restaurants and taverns in central Pennsylvania and the greater Baltimore, MD area, with plans to expand into the central Mid-Atlantic area. The managing shareholders are Shawn M. Gallagher and Jack M. Sproch. Gallagher provides facilities management and manufacturing process engineering in addition to his extensive business knowledge and experience. He also operates three manufacturing and construction businesses in the Harrisburg area. Sproch operates an information systems design and development business outside of Washington, D.C. He is responsible for managing the brewery's business operations and financial interests. The Brewery plan was hatched by Sproch and Gailagher in the summer of 1994. They extensively researched the industry and outlined a detailed business plan. Their vision included a large-scale microbrewery manufacturing operation with automated packaging lines utilizing traditional brewing methods. The operation would include a full-service restaurant. The two partners embarked on an extensive market analysis of cities and towns in Pennsylvania, Maryland, Virginia, and Delaware before settling on Harrisburg, PA as the ideal site. The Harrisburg area has demonstrated a steady commitment toward new business and economic growth. Brewmaster Artie Tafoya was hired as a consultant to advise Sproch and Gallagher on the purchase of the brewing equipment from the Vancouver Island Brewing Company Victoria, BC, Canada. The entire brewery was purchased and shipped to Pennsylvania by barge, truck and rail. Tafoya also traveled to Germany to purchase state-of-the-art packaging equipment. 10 Gallagher and Sproch increased the management team to four with the addition of Matt Smith and Bill Habacivch. The City of Harrisburg agreed to provide a Iow interest loan and sell a building to the brewery for $1. The building required extensive repairs and improvements. The location of the brewery is the cornerstone of the city's Paxton Commons project. The area is expected to eventually include a civic arena and exposition center, shops, restaurants, and a park. The state capitol complex is nearby. The building has many features such as brick walls, oak beams, hardwood floors, a tremendous capital view and ample parking. After two years of renovations, ABC began operations in January 1997. Tafoya decided to join the Company full-time as Brewmaster and Director of Operations. He was instrumental in the design of the brewery packaging operations and layout of the brewpub and kitchen facilities. Tafoya's restaurant experience proved vital in the setup and operation of ABC's brewpub. Appalachian Brewing Company is one of only a few full-scale manufacturing and distributing microbreweries with an attached full-service restaurant and brewpub. At 50,000 square feet, ABC is one of the three largest brewpubs in the country. The brewery's initial production capacity is 15,000 barrels per year. Basis of Accounting Appalachian Brewing Company, Inc. prepares its financial statements on the accrual basis of accounting. Valuation Methods The methods employed in reaching our conclusions include the following: 1. Capitalized Earnings Method 2. Industry Average Operating Margin Method 3. Prior Transactions Method Methods Considered but not Utilized Adjusted Book Value Method In our opinion the value of this entity lies in the income stream, rather than in its net assets as shown on the financial statements. Often in a holding type entity the underlying assets are worth more than the income stream generated by those assets. In this case we believe that methods based on income provide more reliable results than those based on asset value due to the inherent lack of good valuation methods for the in place value of tangible assets, both equipment and realty. 11 Liquidation Value Method This method values the entity as if the assets were being sold off in an orderly manner. Since the business is a going concern this method was reiected. Excess Earnings Method The excess earnings method combines adjusted equity values with a gooch~ to the negative shareholder's equity values, this method would have resulted values. Publicly Traded Guideline Companies Method We considered using valuation ratios derived from publicly traded guideline conl~ an es determine the fair market value of the Company. Due to size, product mix, 6e.:,grap. hic location and capital structure differences between the public companies and th,:, subject company, we did not utilize this method. Adjustments to Net IncomP Earnings are the primary consideration in the capitalized earnings method.-Fhere elements that comprise earnings were reviewed for material factors that income. Ordinarily we do not use financial information from after the valuation date. S h~ce relatively new operation, we wanted to include a complete period for 2002. We co -annualized five plus months of information ' with a similar result. Due to tho . reaching an agreement, value should be based upon the most recent complete information available: ......... : · ,: ., No weight was given to the two methodologies utilizing year 2002 inform-~t:,oa We have adjusted income for depreciation expense taken on the real brewing equipment for each year included in our study. It is unlikely that th :~ assets is lower than the original cost basis due to the nature of these assets. If the premise of value were liquidation value, then one could make a case for the brewing equipment to be lower than its cost due to the expense of breaking equipment, shipping it to a new location, and the new owner reassembling it. premise of value in this engagement is as a going concern. This requires that we the value of the assets in place. Therefore these additional costs would not be ,Computation of Capitalization Rate Under the Build-Up Method Unlike some aspects of valuing a business, small changes in capitalization rah% c9~ a substantial difference in the fair market value arrived at by an appraiser. computed a capitalization rate under the build-up method. If the standard of value is fair market value, the correct capitalization r~te i.~ available on other comparable investments, adjusted for differences in ri~k factors. As shown in Exhibit 4 we have started with the rate, as of the appraisal date, available on long-term bonds. The rate utilized is as reported by the Federal Reserve Bank of St. Louis. This rate is then normalized by subtracting the horizon premium of bonds over bills, as detailed in Ibbotson's Stocks, Bonds, Bills and Inflation 2002 Yearbook. This yearbook is a statistical history of market results from 1926 to 2001. Due to practical problems encountered in the use of a short-term rate as the risk free rate, we utilize a "normalized" risk free treasury yield. The normalized risk free treasury yield is developed by subtracting from the long-term bond yield the average expected amokJ.~t by which long-term bond yields exceed short-term bill yields. This excess is called the "horizon premium". The equity risk premium, the difference in premium between stocks and bonds, is then added to the normalized risk free treasury yield to develop an average market return. This is the extra return earned by an average equity investor in excess of the return on long- term treasury securities. In other words, it attempts to measure the rate of return that an average investor would consider adequate for an investment in a Standard & Poor's 500 Company. We have reduced the equity risk premium by 1.25 percent based on research conducted by Roger Grabowski, ASA of Standard & Poor's CorDorate V~.~_ ~.,~,~, Grabowski asserts mat appraisers should use the arithmetic average of the geometric average when computing the equity risk premium. The average market return is then adjusted to take into consideration the additional risk inherent in a small closely-held company. There is obviously more risk associated with a closely-held company than with a major publicly traded S&P 500 company. Therefore, the capitalization rate must be adjusted to take into consideration this additional risk. We have utilized Ibbotson's expected "micro capitalization equity size premium" for companies with capitalization below $269 million. This rate is then adjusted for other risk factors inherent in the company being valued. We have adjusted the rate an additional 7.5 percent to account for other risk factors. -]'he Company is not very well diversified in its products and services, or in geographrcal locations. The discount rate for net cash flow is converted to a discount rate applicable to net earnings by adding an increment specific to net earnings. We have utilized 5.0 percent. One method of developing a company's net earnings discount rate or increment specific to earnings is to develop a conversion rate based on a range of typical differences between dividend yields (dividends/stock price) and earnings yields (earnings/stock price) of public companies. While there have been no definitive studies at this point, many experienced practitioners believe that this difference most typically ranges from 3 percent to 6 percent. 13 In order to convert the discount rate for net earnings to a capitalization rate for net earnings, the expected long-term average compound growth rate is subtracted from the discount rate for net earnings. Management has estimated the long-term growth rate to be approximately 4.0 percent. This calculation renders the net earnings capitalization rate applicable to the next year. To apply the capitalization rate to the Company's recent historical benefit stream it should be divided by 1 plus the projected growth rate. As detailed in Exhibit 4, the capitalization rate derived under this method is 21.29 percent. Capitalized Earnings Method As shown in Schedule 2, an estimated value has been determined under the capitalized earnings method. This method is based on the Company's earnings history over the most recent five years. Since earnings are considered the most important factor with this technique, the elements that comprise earnings were reviewed for material items that may distort income. These adjustments are detailed in Exhibit 3. The capitalized earnings method is based upon the principle of expectation. In this method, the value of a company is equivalent to the present value of the returns an investor expects to earn on his investment. This is normally accomplished by applying a capitalization rate to an adjusted historical income stream. The indicated value derived by this method represents the value of all assets and liabilities used to generate the income stream. Adjusted net income is weighted because generally the most current year is most indicative of the future. In this case we have placed a weight of 1 on year 2001 results. When compared to the other years under consideration the net income for 2001 appears to be less indicative of the future. The weighted average net income is then capitalized by utilizing a capitalization rate of 21.29 percent, as calculated in Exhibit 4, to arrive at an indicated value of $4,179 per share. Industry Average Operatinq Mar.qin Method In Schedule 3, an estimated value has been prepared in accordance with the industry average operating margin method. This method provides that if comparable companies within the same industry can produce an average operating profit margin, that margin should be an indicator of the potential income to be generated by the subject corporation being valued. We utilized the capitalization rate as determined by the build-up method to calculate the value under this method. The resulting indicated value per share is $4,166. 14 Actual Transactions Method A valuation consultant should consider any transactions involving closely held stock of the subject company. If it can be ascertained that the transactions in the Company's own stock are timely and on an arm's length basis, these transactions may provide a useful basis upon which a valuation procedure could be based. We stress that these transactions should be at arm's length and timely. Transactions in the Company's stock that were arm's length but occurred at a time when the company's operations were significantly different are not useful. Generally, transactions that are more than five years old are considered untimely. Appalachian Brewing Company had three transactions that, based on information provided to us by the Company, fit the timeliness and arm's length test. These transactions are shown on Schedule 4. The first transaction referred to on Schedule 4 involved a minority shareholder who held 1 share of stock. She purchased an additional share for $30,000 from the Company on June 15, 2000. The second transaction was the purchase of 1 share of stock by the mother of Jack Sproch, a major shareholder. Mrs. Sproch was not an owner of the Company's stock prior to this transaction. She also paid $30,000 to the Company for 1 share of stock. This sale took place on December 29, 2000. The third transaction involved the sale of 1 share of stock by William Habacivch who, prior to this sale, owned 15 shares of the outstanding stock of the Company. Mr. Habacivch sold 1 share of stock to Matthew Gamber, an unrelated individual for $30,000. This sale was initiated in 2000, however due to certain disputes did not settle until July 12, 2002. We also have been advised that Mr. Habacivch had reached an agreement in the spring of 2001 to sell an additional share of stock for $30,000 to an unrelated individual who was unable to complete the transaction due to his loss of employment. These recent transactions indicate a value of $30,000 per share. Conclusion When comparing the values, as listed on Schedule 1, it is necessary to determine the importance of each method. The methods that we have chosen to employ view the value of the Company from different perspectives. The capitalized earnings method values the total operation, including tangible assets and goodwill, in a lump sum. Instead of determining one capitalization rate for tangible assets and another for intangible assets, a single blended rate is established for all assets. The capitalized earnings method is a fundamentally sound approach that recognizes the importance of earnings and views value as an outside investor. This involves determining what rate of return an investor would require to assume the risk of putting money into a particular company. 15 The industry average operating margin method looks at the revenue of the Company and applies the industry average net income to indicate what level of income an average company in the same industry could produce given the subject company's sales. A capitalization rate is applied to this income to calculate the value under this method. The prior transactions method indicates a substantially higher value than the other two methods. In order for prior transactions to be relevant they must be timely and at arms length. We have no evidence to indicate that these transactions were not consummated at arms length. Each transaction was for the sale of a minority interest in the Company and occurred within approximately 2 years of the valuation date, with the most recent sale being consummated within 1 month of this valuation report. If the standard of value is "fair market value", then the prior transactions method seems to fit the definition of "fair market value" stated earlier in this report. "Fair market value" is the price at which a willing buyer will buy and a willing seller will sell an item of property, in an arms-length transaction with neither one being under any compulsion to buy or sell, and with both having reasonable knowledge of all relevant facts. Why would an investor pay a premium to buy into a company when traditional valuation methods show that the value is much lower than the asking price? The answer is that they are looking to the future. What will the future bring for this company, i.e. multiple locations in and around the region, a brand that becomes a hot seller? There are many opportunities for growth, and an investor in this Company is looking to get in on the ground floor of what could possibly be the next big thing. piscounts Minority Interest Discount The minority interest discount is the concept that recognizes the inherent relationship between a partial interest being valued and the entity taken as a whole. This relationship is a function of the control that a minority interest shareholder can exercise over the direction and management of the Company. A minority interest is worth less than a controlling interest, because a minority interest cannot compel distributions, election as an officer, employment or structure perquisites to its benefit. A minoritY interest cannot control or influence Company affairs and is at the mercy of the controlling interest. The limited availability of information regarding sales of closely held entities has limited the research published on discounts for minority interests. However, a study completed by W.T. Grimm & Company on control premiums in publicly traded stock transactions, published by Mer.qerstat Review, implies that a discount for a minority interest in excess of 25 percent can be utilized. However, a study completed by H. Calvin Coolidge published in Estate Planninq, Spring 1975, p.141 indicates that discounts for minority interests in which shareholders are unrelated can be as high as 70 percent, but that in sales where the shareholders were related and friendly relations existed the discount was generally below 20 percent. However, since the prior transactions method results in a minority interest value, no further discount for minority interest was applied. 16 Lack of Marketability Discount The concept of marketability involves the liquidity of an interest. In other words, marketability is how quickly and assuredly an investment can be converted to cash at the owner's discretion. Generally, an investment has greater value if it is readily marketable than if it is not, since investors prefer liquidity to the lack of it. An interest in a closely held business is not as liquid as compared to a majority of alternative investments. Since closely held interests are not readily marketable, a discount for lack of marketability is appropriate. We have reviewed various studies and court cases to assist us in developing a discount rate for lack of marketability. One source of information utilized in our search for an appropriate lack of marketability discount rate was the data available on transactions in letter stock. Letter stock is similar to the freely traded stock of a public company except that it is restricted from trading on the open market for a specified period of time. This time period is usually two years, however it can vary. The only difference between the letter stock of a company and its publicly traded shares, which are unrestricted, is the marketability of the interest. Therefore, the difference between the price of a company's publicly traded stock and the transaction price garnered for its letter stock should provide guidance as to an appropriate discount for restrictions on marketability. SEC {Securities Exchange Commission) "Accounting Release No. 113" imparts that i'he discount for lack of m~rketability can be substantial. Restricted securities are often I~urchased at a discount, frequently substantial, from the market price of outstanding unrestricted securities of the same class. 'This reflects the fact that securities which cannot be readily sold in the public market place are less valuable than securities which can be sold, and also the fact that by the direct sale of restricted securities, sellers avoid the expense, time and public disclosure which registration entails. Restrictions on the transfer of letter stock eventually expire and the seller can transfer the shares in the stock market. The same is not true of closely held stock or interests that are encumbered by a partnership agreement that restricts the disposition of partnership assets. Therefore, the discount assigned to closely held shares or interests encumbered by other means can be substantially greater than that indicated by the spread between the letter stock of a public company and its freely traded counterpart. in the "Institutional Investors Study Report" of the Securities and Exchange Commission that was published in 1971, one of the topics researched was the amount'of discount at which transactions in restricted stock (letter stock) took place compared to the prices of identical but unrestricted stock on the open market. The study detailed the difference between the open market price on letter stock transactions and the price of unrestricted stock trades. The amount of the spread was equivalent to the discount due to lack of marketability. These transactions were further broken down by the market in which the security was traded. The four categories utilized were the New York Stock Exchange, American Stock Exchange, over-the-counter (OTC) reporting companies, and OTC non-reporting companies. Reporting companies are those that must file forms and other information with the SEC. A non-reporting company is a publicly traded stock that is not subject to the reporting requirements of the SEC. A stock traded over-the-counter can avoid the reporting requirements by having assets of less than $1 million or by having 500 or fewer shareholders. The smaller non-reporting public companies probably better reflect the marketability characteristics of a closely held entity. The study detailed that the discounts on the letter stocks were smallest for shares traded on the NYSE and increased, in order, for AMEX listed stocks, OTC reporting companies and OTC non-reporting entities. For OTC non-reporting companies, the largest frequency of observations fell in the 30 to 40 percent discount range. Over 30 percent of the OTC reporting companies had discounts of over 30 percent. The overall mean average discount indicated by the study was 25.8 percent. However, for OTC nonreporting companies, which are probably more comparable to closely held companies, the average discount was 32.6 percent. Also reviewed was the ,'Moore Study of Court Decisions on Closely Held Interests" published in Trusts & Estates, February 1987, pp. 40-52. This study concludes that lack of marketability discounts can vary substantially in size, depending on a multitude of factors, but that the magnitude of lack of marketability discounts has steadily increased over the years. For the years 1980 to 1982 the study indicated an average discount of 28.6 percent. Evidence from more recent studies, namely the "FMV Study" published in Estate Plannin.q in 1994 and the "Management Planning Long-Term Study" published in The HandbOok of Advanced Business Valuation in 2000; show that marketability discounts are not as large as they were in the early to mid 1980's. The average discounts shown by these studies were 23.0 and 27.1 percent respectively. We also examined other studies of discounts for lack of marketability. In particular, we reviewed the "Gelman Study" published in 1972, the "Trout Study" published in 1972, the "Moroney Study" published in 1973, the "Maher Study" published in 1976, the "Standard Research Consultants Study" published in 1983, and the 'I/Villamette Management Associates Study" published in 1984. 18 The courts commonly use the data available on letter stock discounts to select an appropriate discount rate for lack of marketability in valuing closely held entities. However, some recent court cases have resulted in judges rejecting this data that valuation professionals had used to support the marketability discounts in their reports. One such case is Mandelbaum vs. Commissioner. The court cited the following factors that might cause a marketability discount to be higher or lower than benchmark averages: 1. Financial statement analysis 2. Dividend policy 3. Nature of the company, its history, its position in the industry and its economic outlook 4. The company's management 5. Amount of control in the transferred shares 6. Restrictions on transferability of the stock 7. Holding period for the stock 8. Company's redemption policy 9. Costs associated with a public offering While a number of these items may be considered repetitive factors that should have already been considered in the valuation process, particularly factors that are also considered in reaching a minority value, the conclusions reached reveal an overall trend in the tax courts. Although courts continue to accept discount studies for establishing marketability discounts, they no longer seem satisfied by a blind application of those studies. The presiding judge in the Mandlebaum case defends his position by noting that it may be appropriate to consider the same factors again for different reasons. Other relevant factors reviewed were items that, in our opinion, would affect the amount of the discount. Such items include the consistency of increases or decreases in sales and pre-tax income, any restrictive agreements in existence at the valuation date and any past sales or purchases of the common stock, the lease terms, the status of any franchise agreements, and other regulatory issues that are present in the industry. Accordingly, since the prior transactions method results in a marketable value, no further discount for lack of marketability was applied. Supplemental Marketability Discount The subject company is closely held with 3 transactions occurring within approximately 2 years of the valuation date. Each transaction was for 1 share of stock. The block of shares to be valued is 15 shares. In our opinion the probability of finding a buyer for all 15 shares is unlikely to be accomplished with ease. We have applied a supplemental marketability discount of 10.0 percent to the indicated value as shown on Schedule 1. If the shares were offered on an individual basis, this discount would not apply. Summary Based upon the information obtained, the procedures followed and the assumption:~ mad~ as set forth above, a reasonable estimate of the fair market value for 15 shares of the common stock of Appalachian Brewing Company, Inc., as of June 23, 200;! on : marketable minority interest basis is $405,000. However, because the validity of the assumptions made could be ultimately determined only as a result of litigation, if a controversy were involved, and because actual fair market value can only be determined by bona fide bargaining between well informed buyers and sellers, we do not represent that the amount set forth above will be the amount ultimatel~¢ so determined. Respectfully submitted, December 30, 2003 APPALACHIAN BREWING COMPANY, INC. VALUATION OF COMMON STOCK JUNE 23, 2002 SUMMARY OF VALUATION RESULTS Method Capitalized earnings method Industry average operating method Actual transactions method Indicated value per share Schedule 2 3 4 Indicated value per share $4,179 4,166 30,000 Indicated value of 15 shares Less supplemental marketability discount 10.0% Indicated value of 15 shares after supplemental marketability discount Weightin,~ factor 'at'. Schedule 1 APPALACHIAN BREWING.COMPANY, INC. VALUATION OF COMMON STOCK JUNE 23, 2002 CAPITALIZED EARNINGS METHOD COMPUTATION OF INDICATED VALUE Computation of weighted average adjusted earnings Totals Weighted average earnings Capitalization rate (Exhibit 4) Total indicated value Total shares outstanding Indicated value for 1 share of stock Value of 15 shares of stock Net income Year (Exhibit 3) 2002 $113,542 2001 19,701 2000 106,545 1999 107,565 1998 45,833 Schedule 2 APPALACHIAN BREWING COMPANY, INC. VALUATION OF COMMON STOCK JUNE 23, 2002 INDUSTRY AVERAGE OPERATING MARGIN METHOD COMPUTATION OF INDICATED VALUE Net sales (Exhibit 2) Industry average operating margin* Calculated operating income Income taxes Calculated net income Weights Weighted totals Sum of weighted totals Sum of weights Weighted Average net income Capitalization rate (Exhibit 4) Capitalized weighted average net income Capitalized weighted average net income factor Common shareholders' equity factor (Exhibit 1) Total indicated value Total shares outstanding Indicated value for 1 share of stock Value of 15 shares of stock 2002 2001 2000 $2,275,204 $2,150,213 $2.033,366 4.2% 6.2% 4.9% 95,559 133,313 99,635 0 0 0 95,559 133,313 99,635 5 4 3 477,795 533,252 8,905 ) -::3; $445,721 100.0% ($166,518) 0.0% *Source - Robert Morris Associates Annual Statement Studies, 2002 - 2003 Schedule 3 APPALACHIAN BREWING COMPANY, INC. VALUATION OF COMMON STOCK JUNE 23, 2002 ACTUAL TRANSACTIONS METHOD COMPUTATION OF INDICATED VALUE Recent stock transactions: Purchaser Brenda L. McGrath Nancy J. Sproch Matthew Gamber Number Date shares 06/15/2000 1 12/29/2000 1 07/12/2002 1 Indicated value for 1 share of stock Value of 15 shares of stock Schedule 4 APPALACHIAN BREWING COMPANY, INC. VALUATION OF COMMON STOCK SUMMARY OF BALANCE SHEETS DECEMBER 31, 2002, 2001, 2000, 1999 AND 1998 ASSETS Current assets Net property and equipment Other assets Total assets 2002 2001 2000 1999 1998 $198,525 $160,461 $187,335 $173,542 $196,558 1,250,992 1,339,478 1,434,573 1,436,872 1,520,914 65,156 70,036 94,059 144,506 81,646 $1,514,673 $1,569,975 $1,715,967 $1,754,920 $1,799,118 Current liabilities Long-term debt Shareholders' equity Total liabilities and shareholders' equity LIABILITIES AND SHAREHOLDERS' EQUITY $159,357 $197,093 $244,081 $269,947 $848,846 1,521,834 1,563,273 1,564,879 1,647,381 1,123,950 (166,518) (190,391) (92,993) (162,408) (173,678) $1,514,673 $1,569,975 $1,715,967 $1,754,920 $1,799,118 Exhibit 1 APPALACHIAN BREWING COMPANY, INC. VALUATION OF COMMON STOCK SUMMARY OF STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2002, 2001, 2000, 1999 AND 1998 Net sales Cost of sales Gross profit Operating expenses Opera.ting income Other income (expense) Net income (loss) 2002 2001 2000 1999 1998 $2,275,204 $2,150,213 $2,033,366 $1,865,528 $1,679,522 1,066,976 942,780 824,822 762,825 703,408 1,208,228 1,207,433 1,208,544 1,102,703 976,114 1,121,347 1,209,873 1,094,690 953,608 871,131 86,881 (2,440) 113,854 149,095 104,983 (63,508) (95,458) (105,939) (137,825) (154,874) $23,373 ($97,898) $7,915 $11,270 ($49,891) Exhibit 2 APPALACHIAN BREWING COMPANY, INC. VALUATION OF COMMON STOCK JUNE 23, 2002 COMPUTATION OF ADJUSTED NET INCOME Income before income taxes (Exhibit 2) Amortization Excess depreciation Adjusted net income 2002 2001 2000 1999 1998 $23,373 ($97,898) $7,915 $11,270 ($49,891) 4,881 32,311 14,792 14,580 14,539 85,288 85,288 83,838 81,715 81,185 $113,542 $19,701 $106,545 $107,565 $45,833 Exhibit 3 APPALACHIAN BREWING COMPANY, INC. VALUATION OF COMMON STOCK JUNE 23, 2002 COMPUTATION OF CAPITALIZATION RATE Appraisal date long-term bond yield - * Horizon premium - bonds over bills - ** Normalized risk free treasury yield Equity risk premium - stocks over bonds - ** Average market return Expected micro-capitalization equity size premium - ** Adjustments for other risk factors Discount rate for net cash flow Increment specific to net earnings Discount rate for net earnings Less sustainable average compound growth rate or "G" Net earnings capitalization rate for next year Divided by G plus 1 Net earnings capitalization rate for the current year 5.59 (1.40) 4.19 6.15 10.34 3.30 7.50 21.14 5.00 26.14 (4.OO) 22.14 104.00 21.29 % * Source - U.S. Financial Data, Federal Reserve Bank of St. Louis, July 25, 2002 issue, June 21, 2002 interest rate available on long-term treasury securities. ** Source - Stocks, Bonds, Bills and Inflation, Ibbotson Associates 2002 Yearbook, Market results for 1926-2001. Exhibit 4 Prof sio'nal Fararnetcrs 'tVi~he American Society of Appraisers is a professional organization of iridividuals. International in.structure, it is self-supportin~ unaffiliated and indepen.dent. The Society works cooperatively for the elevation of the appraisal profession. It is one of eight major ap'praisal societies that helped to found the Appraisal Foundation, a national self-regulatory organization created in 1987 to establish uniform qua'lification criteria for professional appraisers, to develop standards i'or appraisal worR, and to provide other programs to serve the Public. 't't~he only major appraisal organization representing all of the disciplines of appraisal specialist.s, the ,.Society was originated in 1956 and incorporated in 1932. It is head. quartered in suburban Washington' D.C. ~"tSociety members include specialists in business valuation, machinery and equip- ment, personal property (fine arts, antiques, residential content_s, gems and jewelry, and a variety of other subjecLs), real property (residential, commercial, industrial, and agricultural), and technical valuation (public utilities, industrials, natural resources, and others); in short, all types of property, tangible and intangible, real or personal. ~ach Society memberwho has conclusivelydemonstrated that hc orsheisqualified to appraise one or more kinds of property has been certified. Such certification is predicated upon Society criteria: intensive vn'itten examinations, submission of re_p- resentative appraisal reports and screening of applicant's practice and ethics. \\'ith five years or more of full-time valuation e. xperience members are granted the right to use the professional designation ASA. (Accredited seniorAppraiser). With more than t¥.,o years but less than five )'ears of experience members may use, the professional designation A.I'I (Accredited Nember). S enior appraisers are required to recertifs,, every five years, through a mandatory continuing education process. 't't~thical practices and conduct required of Society members are clearly defined in The Principles oflAppraisal Practice and Code off Ethics of the American Society of Appraisers." ~Intcrnational Pooard o[ Governors Resolution # 6-71-h. Rcv{scd 6-88 STATEMENT OF APPRAISER QUALIFICATIONS Overview Boles, Grove and Metzger, P.C. is a full service consulting and public accounting firm with an excellent reputation and a recognized expertise in the area of business valuation services. William B. Boles, CPA, ASA, CFP directs the Business Valuation Division of Boles, Grove and Metzger, P.C. Bill is an Accredited Senior Appraiser with the American Society of Appraisers in the business valuation area. He has over 30 years of practical experience in valuing a diverse array of business entities and types. Bill's experience combined with the experience and talents of the other members of his team, allows us to value just about any type of business. Bill's team consists of Michael W. Zelko, CPA/ABV and Brent W. Emr/ck, CPA/ABV, MBA, CFP. The team has valued businesses and business interests of all sizes, from small proprietorships to large corporations. We have also valued intangible assets such as goodwill, employment agreements, securities and copyrights. We have prepared merger and acquisition studies, employee stock ownership plan analysis, and other similar studies. _ Our work is used frequently in annual ESOP plan administration, estate and gift tax planning, buy/sell agreements, securities litigation, and marital dissolution. We have served as expert witnesses in a number of related litigation cases. Our valuation engagements include such diverse tasks as structuring and implementation of professional practice retiremenffbuyouts, the determination of economic losses in deprivation of value litigation including personal injury; contract disputes and eminent domain. Our office is located at: 3601 North Front Street Harrisburg, PA 17110 Tel: (717) 238-0446 STATEMENT OF APPRAISER QUALIFICATIONS Experience: Our Company has extensive experience in the valuation of both small and large companies in a wide variety of industries. The following is a partial list of various kinds of businesses for which we have supplied business valuation services: Agricultural Entities Architectural Finns Automobile Dealerships Beer Distributors Construction Companies Dry Cleaners Environmental Engineering Finns Electrical Connector Manufacturers Financial Institutions Fuel Oil Suppliers Gasoline Service Stations Law Practices Machine Shops Manufacturing Companies Medical Practices P ack aging Comp ani e s Real Estate Developers Restaurants Varied Retailers Various Wholesalers Woodworking Shops Valuation Library: yaluing Small Businesses and Professional Practices, First Edition, Dow Jones Irwin, Shannon P. Pratt. Valuing a Business - The Analysis of Closely-Held Companies~ Second and Third Editions, Dow Jones Irwin, Shannon P. Pratt. Handbook of Small Business Valuation Formulas and Rules of Thumb} Second and Third Editions, Valuation Press, Desmond and Marcello and Glenn Desmond, respectively. Guide to Business Valuations~ Practitioners Publishing Company, Jay E. Fishman, et.al. Financial Valuation: Business and Business Interests Maxwell, Macmillian, et. al. James H. Zukin. Handbook of Business Valuation~ John Wiley & Sons, Inc., et.al. Thomas L. West and Jeffrey D, Jones Federal Tax Valuation~ Warren, Gorham & Lamont, John A, Bogdanski. STATEMENT OF APPRAISER QUALIFICATIONS Quantifying Marketabili .ty Discounts, Peabody Publishing, LP, Z, Christopher Mercer Business Valuation Review.. The Quarterly Journal of the Business Valuation Committee of the American Society of Appraisers, 1988 through present. Shannon Pratt's Business Valuation Update Online~ Business Valuation ResourcesLLC, Shannon Pratt, et.al. Cost of Capital Estimation and Applications, Shannon P. Pratt. Stocks~ Bonds~ Bills and Inflation, 1991, 1992, 1993, 1994, 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002 and 2003 Yearbooks, Ibbotson Associates. RMA Annual Statement Studies~ 1988 through 2004, Robert Morris Associates. _Valuin~ Financial Institutions~ Business One Irwin, Z. Christopher Mercer. Valuin~ Intangible Assets~ McGraw Hill, Robert F. Reilly and Robert P. Schweihs. -Valuation of a Closely Held Business, AICPA, Small Business Consulting Practice Aid. IRS Valuation Guide ~for Income~ Estate and Gift Taxes, [RS Appeals Officer Valuation Training Program, Commerce Clearing House, Inc. Pratt's Stats Online, Business Valuation Resources, LLC. Futures~ Options~ and Swaps, Blackwell Publishers, Inc., Robert W. Kolb WILLIAM B. BOLES, CPA, ASA, CFP Curriculum Vit.q c BOLES, GROVE AND METZGER, P.C. CERTIFIED PUBLIC ACC()UNTAN~I S WORK EXPERIENCE: Boles, Grove and Metzger, P.C. (Shareholder 1978 to present) O purchase and sale of a business, valuation of :5~mily limited partnerskq,. · BGM Financial Associates, Ltd. ( Shareholder 1992 t,) m'esent) o Financial planning and investment management, including advisine c areas. · Laventhol & Horwath (Director of Tax Services 1969 tc 1978) o Represented and advised various corporations partnerst:ips, trust,,; anc tax matters. · United States Internal Revenue Service (Revenue Age~-,~. Field Aadit Division o Numerous individual and corporate tax examinations, bo h civil and crin~ EDUCATION AND PROFESSIONAL DESIG-- · University of Drexel, Pennsylvania - Bachelor )f Sc~en,.::~ · Certified Public Accountant · Senior Member of the American Society of Appraisers, t usiness '/aluation Di ;isle · Certified Financial Planner General accounting practice, including re~resenting and advising matters; business valuations, divorce and estate planning. Consul valuation and litigation support services sincc 1978, such services as well as initial valuations, board of direct:o? tender offer evaluali(,n: taxation matters, domestic relation issues-eqai.~able dis:ribution, depr. nl income litigation, planning for buy, buy/sell ~g~'eements, valuation o~' PROFESSIONAL AND CIVIC ACTIVITIES American Institute of Certified Public Accountants. Me o Member of Tax Division Pennsylvania Institute of Certified Public Accountants, M ember o Member, Federal Tax Committee o Chairman, Federal Tax Committee 1998-2000 o Testified on behalf of Pennsylvania Institute of Certified Public Governance and Oversight of the IRS and Taxpav,~,r Protecion and Right,.;, 1997, Hearings held by Senator Santorum and U~S. Representative Goodl o Federal Tax Conference, Speaker, Valley Forge & Harrisbt:rg, 1997 o Controllers Conference, Speaker, Trevose, _!002. (Business Valuation s planning) o Estate and Personal Financial Planning Conference, Speaker, Hershey, 20,)2 WILLIAM B. BOLES, CPA, ASA, CFP Curriculum Vitae, continued page 2 South Central Chapter Pennsylvania Institute of Certified Public Accountants o President 2001-2002 o President-Elect 2000-2001 o Vice President 1999-2000 o Secretary 1998-1999 o Treasurer 1997 - 1998 o Past Chairman of Tax Committee o Member of various committees such as Speakers Bureau, Legislative, Tax, Technical Meetings o Speaker various educational seminars on tax and business valuation topics including Dauphin County Bar Association Lunch and Learn, PICPA South Central Chapter December 1997 Business Valuation Update, December 1998, 1999, 2000, 2001 and 2002 Federal Tax Update. American Society of Appraisers, Member o Accredited as Senior Appraiser in 1992; Recertified in 1997 and 2002 o International Appraisal Conference ASA, Toronto 1996 o Joint Business Valuation Conference ASA/CIBV, Montreal 1998 o International Appraisal Conference ASA, Boston 1999 o International Appraisal Conference ASA, Tampa 2003 o ASA Uniform Standards of Appraisal Practice, USPAP, ASA Appraisal Education Completion Certificate, 15 hour course and exam, November 1994 o ASA Uniform Standards of Appraisal Practice, USPAP, ASA Appraisal Education Completion Certificate, 15 hour course and exam, August 1999 Hampden Township Vacancy Board -Past Member 1978-2000 · Hampden Township Industrial Development Authority-Past Chairman 1978 - 2000 · Parents Anonymous of Pennsylvania-Past Treasurer EXPERT WITNESS: Service was provided as an expert witness with regard to valuing businesses or business interests or evaluating income form marital dissolution matters such as equitable distribution and/or spousal support; appointment of guardian for an incompetent person in Orphans Court and a business transaction litigated in Federal Court. Service was also provided for several arbitration hearings regarding business valuation disputes. Either direct testimony or depositions were provided in Dauphin, Cumberland, Lebanon, York, Lancaster, Lycoming, Mifflin and Franklin Counties. MICHAEL W. ZELKO, CPAJABV curriculum vitae BOLES, GROVE AND METZGER, P.C. CERTIFIED PUBLIC ACCOUNTANTS WORK EXPERIENCE: Boles, Grove and Metzger, P.C. (Professional staff, 1987 to Supervisor of Business Valuation Department 1997 to present) 1991, Senior 1991 to 1995, General accounting practice, including audit, review and compilation procedures for corporations, local governments and non-profit organizations. Preparation and review of corporate, partnership, individual and fiduciary tax returns, and corporate and personal income tax planning, preparation of business valuations for Employee Stock Ownership Plans, mergers and acquisitions, divorce, and estate and gift tax issues, and management advisory services. BGM Financial Associates, Ltd. (Supervisor, 1996 to 1999, Shareholder, 2000) Financial planning and investment management, including serving on the Investment Committee for the selection of appropriate investments for clients in all planning areas Villa Teresa (Controller 1995 to 1996) Responsible for all financial affairs of 184 bed nursing home, including managing accounting staff, preparation of financial statements, filing appropriate tax forms with federal and state taxing bureaus, preparation of Medicare and Medicaid cost reports, management of pension plan and investments. EDUCATION AND PROFESSIONAL DESIGNATIONS York College of Pennsylvania, Bachelor of Science, 1987 Certified Public Accountant, 1992 Accredited in Business Valuation by the American Institute of Certified Public Accountants, 1999 PROFESSIONAL AND CIVIC ACTIVITIES American Institute of Certified Public Accountants, Member since 1992 Pennsylvania Institute of Certified Public Accountants, Member since 1992 Speaker and organizer for continued education programs presented by Boles, Grove and Metzger, P.C. as an approved sponsor by the Pennsylvania State Board of Accountancy. Chairman Business Valuation Committee South Central Chapter, Pennsylvania Institute of Certified Public Accountants, 1997 Treasurer Lawton Athletic Association 1999, 2000 School Board member St. Catherine Laboure School 2000-2001 Finance Committee member St. Catherine Laboure Church BRENT W. EMRICK, CPA/ABV, CFP Curriculum Vitae BOLES, GROVE AND METZGER, P.C. CERTIFIED PUBLIC ACCOUNTANTS PROFESSIONAL EXPERIENCE: Boles, Grove and Metzger, P.C. (Shareholder 1989, Manager 1986, Supervisor 1983, Staff Accountant 1980) General accounting practice, including representing and advising clients in all tax matters; business valuations, financial and estate planning. BGM Financial Associates, Ltd. (President, Shareholder 1992 to present) Financial planning and investment management. Advises clients in all planning areas. Walter Fry, CPA (StaffAccountant 1977 to 1980) Bookkeeping, financial statement preparation, tax return preparation, including corporations, individuals and fiduciary. Dauphin Deposit Bank (Trust Department, 1975 - 1977) Administrator of estates and trusts, preparation of Pennsylvania inheritance tax, federal estate tax and fiduciary income tax returns. EDUCATION AND PROFESSIONAL DESIGNATIONS Penn State University, Middletown, Pennsylvania -Master of Administration, Business Penn State University, Middletown, Pennsylvania - Bachelor of Business Harrisburg Area Community College, Harrisburg, Pennsylvania - Associate In Arts Certified Public Accountant Certified Financial Planner Accredited in Business Valuation by the American Institute of Certified Public Accountants PROFESSIONAL AND CIVIC ACTIVITIES American Institute of Certified Public Accountants, Member Pennsylvania Institute of Certified Public Accountants, Member Budget and Finance Committee Legislation Committee Past President - South Central Chapter Summerdale PA Community Federal Credit Union - Treasurer Estate Planning Council of Central Pennsylvania - Past President Hemlock Girl Scout Council - Former Treasurer Boy Scout Troop 89 - Former Scout Master Speaker and panel discussion participant for tax and financial planning seminars presented to professional organizations and the general public. Speaker and organizer for continuing education programs presented by the Pennsylvania Institute of Certified Public Accountants, Pennsylvania Controllers' Forum and Venture Training, Inc. IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA IN RE: · ORPHANS' COURT DIVISION ESTATE OF MATTHEW R. ' NO.: 2002-0651 SMITH, . Deceased · PRAECIPE TO ENTER/WITHDRAW APPEARANCE To The Clerk of the Orphans' Court: Kindly enter the appearance of Dennis J. Shatto, Esquire, of the law firm of Cleckner & Fearen, on behalf of the Estate of Matthew R. Smith, and withdraw the appearance of Thomas P. Gacki, Esquire, of the law firm of Eckert Seamans Cherin & Mellott, LLC. Respectfully submitted, Thomas P. Gacki, Esq-tfff~ ID # 44864 Eckert Seamans Cherin & Mellott, LLC 213 Market Street, 8th Floor P. O. Box 1248 Harrisburg, PA 17108-1248 717.237.6093 Respectfully submitted, ennls ~ ID # ;Z~?5 Cleckner & Fearen 119 Locust Street P. O. Box 11847 Harrisburg, PA 17108 717.238.1731 Dated: {L0280236.1} CERTIFICATE OF SERVICE I, Dennis J. Shatto, Esquire, hereby certify that I am this 2, ~ day of ~ 2004, serving a copy of the foregoing document via First-Class, U.S. Mail, which service satisfies the requirements of the Pennsylvania Rules of Civil Procedure, addressed as follows: Thomas P. Gacki, Esquire Eckert Seamans Cherin & Mellott, LLC 213 Market Street, 8th Floor P. O. Box 1248 Harrisburg, PA 17108-1248 BUREAU OF TNDTVTDUAL TAXES TNHERTTANCE TAX DTVTS'[OH DEPT. 280601 HARRTSBURG, PA 17128-0601 CONNONWEALTH OF PENNSYLVANIA DEPARTHENT OF REVENUE NOTICE OF /NHER/TANCE TAX APPRAZSENENT, ALLOWANCE OR D/SALLO#ANCE OF DEDUCT/ONS AND ASSESSNENT OF TAX REV-1E47 EX AFP DENNIS J SHATTO CLECKNER & FEAREN PO BOX 11847 HBG PA 17108 CUT ALONG TH'rS DATE 09-27-Z004 ESTATE OF SHITH DATE OF DEATH 06-25-2002 FILE NUNBER 21 02-0651 COUNTY CUHBERLAND ACN 101 I Amount Remitted NATTHEW HAKE CHECK PAYABLE AND REHZT PAYNENT TO: REGISTER OF WILLS CUN9ERLAND CO COURT HOUSE CARLISLE, PA 17013 RETAIN LOWER PORTION FOR YOUR RECORDS -~ ,-:: '~' DISALLOWANCE OF DEDUCTIONS AND ASSESSNENT OF TAX ESTATE OF~sH[TH .c~ ~HATTHEW R FILE NO. 21 02-0651 ACN 101 DATE 09-27-2004 TAX RETURN WAS: (X) ACCEPTED AS FILED ( ) CHANGED RESERVATION CONCERNING FUTURE INTEREST - SEE REVERSE APPRAISED VALUE OF RETURN BASED ON: 1. Real Estate (Schedule A) 2. $. 5. 6. 7. 8. ORIGINAL RETURN (1) Stocks and Bonds (Schedule B) (2) Closely Held Stock~Partnership Interest (Schedule C) ($) Mortgages/Notes Racelvable (Schedule D) (~) Cash/Bank Deposits~Misc. Personal Property (Schedule E) ($) Jointly O~ned Property (Schedule F) (6) Transfers (Schedule G) (7) Total Assets APPROVED DEDUCT:iONS AND EXENPTZONS: 9. Funeral Expenses/Ada. Costs/Misc. Expenses (Schedule H) 10. Debts/Nortgage Liabilities/Liens (Schedule 1) 11. Total Deduct ions 12. Nat Value of Tax Return 15. 1~. (9) (10) Charitable/Governmental Bequests; Non-elected 9115 Trusts (Schedule J) Nat Value of Estate Subject to Tax .00 .00 405~000.00 87~283.56 30~000.00 .00 3r700.00 {8) .00 .00 (11) (12) (15) (lq) NOTE Zf an assessment ~as lssued prev/ously, 1/nas 1~, 15 and/or 16, 17, reflect flgures that lnclude the total of ALL returns assessed to date. ASSESSNENT OF TAX: 1.6. Amount of L/ne 1~ at Spousal rata 16. Amount of Line lq taxable at Lineal/Class A rata 17. Amount of L~ne lq at Sibling rata 18. Amount of L~ne lq taxable at Collateral/Class B rata 19. Principal Tax Due TAX CREDITS: PAYHENT RECE/PT D/SCOUNT (+) DATE NUNBER INTEREST/PEN pAID (-) (1S). 525,983.56 X O0 = (16), .00 x 045= (17). . O0 x 12 = (18) .00 X 15 = (19)= AMOUNT PAZD ZF PAID AFTER DATE INDICATED, SEE REVERSE FOR CALCULATION OF ADDITIONAL INTEREST. NOTE: To insure proper cred/t to your account, submit the upper portlon of this form ~ith your tax payment. 525,983.56 .0O 525,983.56 .00 525,983.56 18 and 19 will .00 .00 .00 .00 .00 TOTAL TAX CREDIT BALANCE OF TAX DUE ZNTEREST AND PEN. TOTAL DUE .O0 .00 .00 .00 ( ZF TOTAL DUE ZS LESS THAN $1, NO PAYHENT ZS RE~U/RED. ZF TOTAL DUE 1S REFLECTED AS A 'CRED/T' (CR), YOU MAY BE DUE A REFUND. SEE REVERSE SIDE OF THIS FORN FOR INSTRUCTIONS.) RESERVATION: Estates of decedents dying on or before December 1Z, 19D2 -- if any future interest in the estate is transferred in possession or enjoyment to Class B (collateral) beneficiaries of the decedent after the expiration of any estate for life or for years, the CoemonNealth hereby expressly reserves the right to appraise and assess transfer Inheritance Taxes at the laaful Class B (collateral) rate on any such future interest. PURPOSE OF NOTICE: PAYNENT: REFUND (CR): OBJECTIONS: ADNIN- ISTRATIVE CORRECTIONS: DISCOUNT: PENALTY: INTEREST: To fulfill the requirements of Section Z140 of the Inheritance and Estate Tax Act, Act Z5 of ZOO0. (7Z P.S. Section 9140). Detach the top portion of this Notice and submit aith your payment to the Rag[star of Hills printed on the reverse side. --Make check or money order payable to: REGISTER OF HILLS, AGENT A refund of a tax credit, ahich ~as not requested on the Tax Return, may be requested by completing an "Application for Refund cf Pennsylvania Inheritance and Estate Tax" (REV-IS13). Applications ere available at the Office of the Register cf Hills, any of the ZS Revenue District Offices, or by calling the special Z4-hour answering service for fores ordering: 1-DOO-$SZ-ZO50; services for taxpayers ~ith special hearing and / or speaking needs: 1-800-447-30Z0 (TT only). Any party in interest not satisfied aith the appraisement, alloaance, or disalloaance of deductions, or assessment of tax (including discount or interest) as sheen on this Notice suet object ~ithin sixty (60) days of receipt of this Notice by: --written protest to the PA Department of Revenue, Board of Appeals, Dept. Z810Z1, Harrisburg, PA 171ID-lOll, OR --election to have the matter determined at audit of the account of the personal representative, OR --appeal to the Orphans' Court. Factual errors discovered on this assessment should be addressed in ~riting to: PA Department of Revenue, Bureau of Individual Taxes, ATTN: Post Assessment Reviea Unit, Dept. 280601, Harrisburg, PA 171Z8-0601 Phone (717) 787-6505. See page 5 of the booklet "Instructions for Inheritance Tax Return for a Resident Decedent" (REV-150i) for an explanation of administratively correctable errors. If any tax due is paid aithin three (3) calendar months after the decedant's death, a five percent (DZ) discount of the tax paid is allowed. The 1SI tax amnesty non-participation penalty is computed on the total of the tax and interest assessed, and not paid before January 18, 1996, the first day after the end of the tax amnesty period. This non-participation penalty is appealable in the same manner and in the the same time per[od as you .ould appeal the tax and interest that has been assessed as indicated on this notice. Interest is charged beginning with first day of delinquency, or nine (9) months and one (1) day from the data of death, to the date of payment. Taxes ahich became delinquent before January 1, 198Z bear interest at the rate of six (6Z) percent per annum calculated at a daily rate of .000164. All taxes which became delinquent on and after January l, 19BI will bear interest at a rate ~hich .i11 vary from calendar year to calendar year .ith that rate announced by the PA Department of Revenue. The applicable interest rates for 1982 through ZOO4 are: Interest Daily Interest Daily Interest Daily Year Rate Factor Year Rate Factor Year Rate Factor 1982 20Z .000548 '~'~'~'8-1991 11Z .000301 ~ 9X .000247 19AS 162 .000438 1992 9Z .000247 ZOOZ 6Z .000164 1984 112 .000301 1993-1994 72 .00019Z ZOOS 52 .000137 1985 13Z .000356 1995-1998 92 .000247 2004 42 .000110 1986 102 .000274 1999 7Z .O0019Z 1987 lOZ .000274 ZOO0 7Z .000192 --Interest is calculated as folloas: INTEREST = BALANCE OF TAX UNPAID X NUHBER OF DAYS DELINQUENT X DALLY INTEREST FACTOR --Any Notice issued after the tax becomes delinquent ~ill reflect an interest calculation to fifteen (15) days beyond the date of the assessment. If payment is made after the interest computation date sheen on the Notice, additional interest must be calculated. Register of wills of CUMBERLAND County, Pennsylvania PETITION FOR GRANT OF LETTERS Estate of MATTHEW R. SMITH No. .:J.1-o~61 Also known as Deceased Social Security No. 205-58-2283 Petitioller(s), who islare 18 pears or age or older, apply pes) for: (Complete" An or" B " BELOW:) ~ A. Probate and Grant of letters and aver that Petitioner(s) is/are the executOR Decedent, dated SEPTEMBER 12, 1993 and codicil(s) dated N/A Names in the Last Will of the State Relevant circumstances. e,g., renunciation. death of executor, ele Except as follows, Decedent did not marry, was not divorced, and did not have a child born or adopted after execution of the documents offered for probate; was not the victim of a killing and was never adjudicated incompetent: Decedent had two children bv survlvlna SDouse. Darbv date of birth. March 8. 1995 and Kieffer. date of birth. December 15. 1996 after will was executed. D B. Grant of Letters of Administration (c,(,a,. d,b.n.c.t.a.: pendente lite: durante absentia; durante minoritate) Petitioner(s) after a proper search has/have ascertained that Decedent left no Will and was survived by the following spouse (if any) and heirs: I Name Relationship Residence l (COMPLETE IN All CASES:) Attach addlllonal sheets If necessary. Decendent was domiciled at death in CUMBERLAND Residence at 20 EAST GATE DRIVE, CAMP Hill, PA 17011 (list street, number and municipality) County, Pennsylvania, with his/her last family or principal years of age, died JUNE 23 , 2002 ,at HOLY SPIRIT HOSPTIAl Decedent, then 38 Decedent at death owned property with estimated values as follows: (If domiciled in PA) All personal property.. ... ........... .....................................$ 585,000 (If not domiciled in PAl Personal property in Pennsylvania.... . ................................$ (If not domiciled in PAl Personal property in County. ..................................$ Value of real estate in Pennsylvania . .$ Total .... . .. ..... .............. .. ..............................$ 585,000 Real Estate situated as follows: Wherefore, Petitioner(s) respectfully request{s) the probate of the last Will and Codicil(s) presented with this Petition and the grant of letters in the appropriate form to the undersigned: T e or rinted name and residence NANCY B. SMITH 20 EAST GATE DRIVE CAMP Hill, PA 17011 RW-7 J7-7~- 5 ih!~ is to certifv that the information here given is correctly copied from all original cenihcatc of death duly filed with me as Loul Registrar.' The original certificate will he f01warded to the Stare \'ilal Records Off-Ice for permanent filing. WARNING: It is illegal to duplicate this copy by photostat or photograph. Fcc It)!" rhis ecrrillclte, $2.00 ~;,~~\q~'iitfl~""--"" !i'~ ~J'A ;'~I """'~<;,_' 1'_: .."P, ~-=:: .M. '~1: I~ 5;,' f,~ ~,:h~ ~~~..!.JI \~~~ ",,' ~\\\\# ";- 'l'-?,.. . ,\'<.'f-'e;' '<-";' MEN! ~\" "", ~~!!~ P 8384805 No. /) -;:n af;:,-' {,(Ar..Ar/ ," ( 7 ~l-"t_ty"..4f.- Local Registrar I" JUN 2 6 2002 [hre 144Aev, 1191 COMMONWEALTH OF PENNSYlVANIA. DEPARTMENT OF HEALTH. VITAL RECORDS CERTIFICATE OF DEATH (Coroner) R Smith '" 2. '!-fale Matthew UNDER I YEAR Monlhs Davs STATEF"ENUMBER SOCIAL SECURITY NUMBER DATEOFDEATH(Mooth,Day,Yea<i June 23) 2002 , 205-58-2283 WAS DECEDENT EVER IN US ARMED FORCES? ve.D NXJ Co~age (1_401 5~1 White UNDER I OAV Hours BlRTHPLACE (C'ly a"d PLACEOf'OEATHiCl,ec''''''''or"" ""''''lruCI'''''"",olr,e,..Je) S'aleo.f-or"'(j"C",,,Uy) HOSPITAL Pittsburgh, Pa Inpallenl [] ERiOul>>aUanljd' DCA U .. g=,IY)0 CITY,BOR Cumberland Holy Spirit Hospital k. DECEOENT'S USUAL OCCUPATION 1~v:;,'~~IIi~:;"d~u~';~,:i1 m. Salesman llb. Lamar Advertisin DECEDENT'S MAlUNG ADDRESS (Sir....., CotylTown, Sial... Z'p COOIl) DECEDENT'S ACTUAL RESIDENCE (S""'nstruchons 00 04har side) 17a.Slale Pa 20 Fast Gate Drive Camp Hill, Pa 17011 Oll11hPrland 17b.Caunl ". FATHER'S NAME (F"Sl, Modd... Lasi) Dale Snith RACE-Amarican Indian, Bleck.Whiill,elC IS......'ryl MARITAL STATUS. Ma<ried NaverMarried,WiOowed, Oivorced(Spoc,IYI SURVIVING SPOUSE (1I"'lle,g"6m~".lenn~rne) ". o. decedan! Ilvain. lownsllip? 17c.[][Ve., decedanl 11ve<l in Hnrrpipn 'W< 17d.D ~~;,~::7:1~,~~o' eilvlbo" ". INFORMANT'S NAME (TypelP"nt) Nancy Snith METHOD OF DISPOSITION BuNlID Cr&rnalionlKl OIl1ar(5pecoty\ MOTHER'S NAME (hrS!, Middle, Mu,den SllI<lame) " Mary Ellen Middleton INFORMANT'SMAILlNGADOAESSISlfwl CrlylT"",n State Z,pCc.de) ". 20 Fast Gate Drive Camp Hill, Pa 17011 PLACE Of' DISPOStTlON . Nama 01 Cemalery. C,emal(>fy LOCATION. CilylTown, Slale. Zip Code orOlherPlao. Removal hom SlaleD o 21C, UNER LICENSE NUMBER 011654-L Pa mfi:-tp~tmh OR PERSON ACTING AS SUCH 22b. TOlhabe mv nowladga,de.lhoccurr&dallhell"""daleandplaces1al&d IS'ynalu'..and r.~..) ,,,. TIME Of' DEATH DATE PRONOUNCED DEAD IMUI,lh, Duy, y"ul) 2... 8:48 P. M 25. June 23, 2002 27. PART I: Enlerlhedlsaues,injurlNo.-oomplicelionswhlchoauHdltladaelll,OonOlenlllfl hemod&old)ting.suchascaldiaco.-res.lllalOtya"asl,$IIOI;kolll....,llallu'.. Lialon!voneceuHoneacllline Occlusive Coronary Artery Disease DUE TO(OR AS A CONSEQUENCE Of) DUETO(OflASACDNSEOUENCfcDF) DUETOIOfIASACONSEQUENCEUF) , weRE AUTOPSY FINDINGS MANNER Of' DEATH _ILABLEPRIOfITO COMPLETION OF CAUSE OF DEATH? Nal"," OATEOFINJUflY (M...,!I"[!,.,, ,,'.HI No [J AccKlam ><.. Hom;cida 0 0 Pend"'lll"va51'\I&lion [] 0 Couklnolbedalalm.1\&d l] . 3gb PLACE OF INJURV - AI oo;;;-~:-f~;r;;:-;U';';,,'r:;'~io'y. ol1lca bUIld'ng, ale, i~,,,. "I ,I 'h. IFIER ""~ "'- ". 211I. 2&b. CERTIFIER(ChocI<Ol"llyona) 'CERTIFYING PHYSICIAN (Physicoan oerl1tyng causa '" daan, whan anolhel pI'y""'''" I>a, Il'o..ouncl>d rJahtl, aM C""'I.~".clllarTl ~ JI To__ofmyknow.....,...aUtoc<:u..addualotl>ac...-.(a).nd....nne.aealatad. . 'PROMOUNClNG AND CERTIFYING PHYSICIAN (PI'ys>c,.m bolt, l-'Ior1UUnc"'ll .-110 dmj "..-1"",'9 t(, <,au"" '-' dIIalhl To_~olmVknow~,dNlhoccur..d.tt"-tm...dat.,andptllC:..andd""lolh.ca....(.).ndm......r..elated.. 'MEDICAl EXAMJNERlCORONER On the b.... of.lt8mI...tlon .ndlortn.....tlptlon.ln my opinIon, d..lh occu..1KI at the Ume, d.t...oo pl8c.. anddu. to Ihe cau"laj and m.nn.r...t.IKI."....,...."....,.,.....,...........,........,..,.....",.,........................"..""".., 31a. FlEGISTRAfI'S SIGNATURE ANONUMBER 1;2,/,).,1 (I LICENSE NUMBER Ub. 23c. WAS CASE REFERRED TO ME~-J'L EXWl{lERiCORONER7 YesIJ' /-D ". '00 :Approximale ,lntetvaIOOI_n iooSelanddaalh PARTU, Olnersillnllicantcondsionsconlllbu1"'lllOdealh,bol nOlr"sulllnllinlhaundarlylsllcausegivenlnPARTI T'MEOf-INJURY Coroner OESCRiBE flOW INJURY OCCURRED SI'M) SIGNATURE A II,,~ LICENSE NUMBER DATESIGN[Oll.1wlt"Day,Y""" [] 31c. 3td. June 23) 2002 NAME AND ADDRESS OF PERSON WHOCOMPLETEDCAUSl: OF DEATH (1Iem27)TYP9o<Print Michael L. Norris) Coroner ~ 6375 Basehore Road) Suite #1 y.. 32. Mechanicsburg, Pa. 17050 DATEFILEDIMur ',Oay. Ye..'! ". ~ 2-~ ~2- 0:: "N.1 ~ l~~ \0:<; , LAST WILL AND TESTAMENT OF MATTHEW R. SMITH ou -Or;}. - foS I I, MATTHEW R. SMITH, of the Township of Hampden, County of Cumberland, Commonwealth of Pennsylvania, make this Last Will and Testament, hereby revoking any and all former wills and codicils. ITEM I - I give my wedding ring to my daughter, PEYTON ELIZABETH SMITH, to be held by my hereinafter named Trustee, in trust, until my said daughter reaches the age of twenty-four ::c E-t H :<; CJ) (24) years. ITEM II - I devise and bequeath all of the rest, residue and remainder of my estate, of every nature, and wherever situ- ate, together with all insurance thereon, to my wife, NANCY B. SMITH, if she survives me by sixty (60) days. If my said wife does not survive me by sixty (60) days, I devise and bequeath all of the rest, residue and remainder of my estate, of every nature and wherever together with all insurance situate, thereon, in equal shares to any of my children (including children born after execution of this will) who survive me. If I have no children who survive me, then I devise and bequeath all of the rest, residue and remainder of my estate, of every nature and wherever situate, together with all insurance thereon, in the following manner: 0:: :s: ril 0:: E-t E-t ..: " :>: '~ A. To my mother, MARY ELLEN SMITH, one-hal f of the remainder; B. To my mother-in-law, BARBARA J. WESSELS, one-half of the remainder. ITEM III - If any beneficiary of my estate is under the age of twenty-four (24) years at the time at which distribution of any property devised and bequeathed by this will would otherwise be made to such beneficiary, my personal representative shall distribute the share of such beneficiary to the Trustee herein named, to be held in separate trust for such beneficiary. The Trustee shall hold, manage, invest and reinvest any property received by the Trustee, whether under this will or otherwise, and shall collect the income thereof, and shall apply so much of the net income and, if the net income is insufficient, so much of the principal of the property held for such beneficiary as the Trustee shall deem necessary or advisable for such benefic i- ary's health, maintenance, support and complete education, both undergraduate and graduate. When the beneficiary attains the age of twenty-four (24) years, the Trustee shall distribute to such beneficiary all remaining property held by the Trustee for such beneficiary. If such beneficiary dies before attaining twenty-four (24) years of age, the Trustee shall distribute to the personal representative of such beneficiary's estate all property held by the Trustee for such beneficiary. - 2 - ~ ~" "'~ ~ , L,; ITEM IV - All shares of principal and income hereby given shall be free from anticipation, assignment, pledge or obliga- tion of the beneficiaries and any of them, and shall not be subject to any execution, attachment, levy or sequestration or other claim of creditors of said beneficiaries or any of them. ITEM V - No fiduciary under this will shall be required to give bond or other security for the faithful performance of the fiduciary's duties. Any such fiduciary shall have the following powers, in addition to those given by law: A. To invest in, accept and retain any real estate or personal property, including stock of a corporate fiduciary or its holding company, without restriction to legal investments; B. To sell, exchange, partition or lease for any period of time any real or personal property and to give options therefor for cash or credit, with or without security; c. To borrow money from any person, including any fiduciary acting hereunder, and to mortgage or pledge any real or personal property; D. To hold shares of stock or other securities in nominee registration form, including that of a clearing corporation or depository, or in book entry form or unreg- istered or in such other form as will pass by delivery; E. To engage in litigation and compromise, arbitrate or abandon claims; - 3 - ~ >~ ~5 ,(I) F. To make distribution in cash, or in kind at current values, or partly in each, allocating specific assets to particular distributees on a non-pro rata basis, and for such purposes to make reasonable determinations of current values; and G. To make elections, decisions, concessions and settlements in connection with all income, estate, inheri- tance, gift or other tax returns and the payment of such taxes, without obligation to adjust the distributive share of income and principal of any person affected thereby. ITEM VI - I appoint my wife, NANCY B. SMITH, Executrix of this will. If my said wife is unwilling or unable to act or continue as Executrix, for any reason whatsoever and whether before or after my death, I appoint my brother, DOUGLAS E. SMITH, and my sister-in-law, successor COLEMAN, CAROL B. Co-Executors. ITEM VII - I appoint my brother, DOUGLAS E. SMITH, and my sister-in-law, CAROL B. COLEMAN, or the survivor of them, Co-Trustees under this will. brother and If my said sister-in-law are both unwilling or unable to act or continue as Trustee, for any reason whatsoever and whether before or after my death, I appoint DAUPHIN DEPOSIT BANK AND TRUST COMPANY, Harrisburg, Pennsylvania, successor Trustee. ITEM VIII - I appoint my brother DOUGLAS E. SMITH, Guardian of the person of each minor child of mine for whom I am entitled - 4 - ~~ \l:s: ril , :c , \ ~ ,,<t: ~~ to appoint a guardian of the person. If my said brother is unwilling or unable to act or continue as Guardian, for any reason whatsoever and whether before or after my death, I appoint my sister-in-law, CAROL B. COLEMAN, successor Guardian. ITEM IX - All estate taxes, inheritance taxes, transfer taxes and other taxes of a similar nature payable by reason of my death to any government or subdivision thereof upon or with respect to any property subject to such tax, and any penalties thereon, shall be paid by the personal representative out of my residuary estate, and all interest with respect to any such taxes shall be paid by the personal representative out of the income or principal or partly out of the income and partly out of the principal of such portion of my estate, in the absolute discretion of the personal representative, without reimbursement from or apportionment among the beneficiaries, recipients or owners of such property for any such taxes, penalties or interest; provided, however, that the personal representative shall not pay any such taxes, penalties or interest attributable to any property included in my estate solely because of a power of appointment there over which I possess, and such property shall bear its proportionate share of such taxes, penalties and interest. ITEM X - I direct that as soon as practicable after my death, my next of kin or personal representative make immediate contact with any entities or agencies involved in the placement - 5 - of donated organs and that all necessary steps be promptly undertaken to remove any of my body organs which are suitable for donation and use. ITEM XI - It is my desire that my body be cremated, and I direct that my personal representative make all necessary and appropriate arrangements for my cremation. IN WITNESS WHEREOF I I have hereunto set my hand and seal, to this my Last Wi 11 and Testament, this {;?(. day of September, 1993. ~//~; ~~;:~~< 1/---. ,~EAL) MATTHEW R. SMITH * * * * * The preceding instrument, consisting of this and five other typewritten pages, each identified by the signature of the Testator, was on the date hereof signed, published and declared by the said Testator, MATTHEW R. SMITH, to be his Last Will and Testament, and, at his request, in his presence and in the presence of each other, we, believing him to be of sound mind, memory and understanding, have hereunto subscribed our names as wxnQA#flAM d~iv L~ of r 7- ~ Lr'VWvtt'/", ~ct. vltw ~~i (-?A 17070 ~J~l;f of - 6 - COMMONWEALTH OF PENNSYLVANIA SS: COUNTY OF DAUPHIN We, MATTHEW R. SMITH, Testator, PeNN 15 J, S ~IT TIC) and LINDA 'DEAVf:tJ wi tnesses, respectively, whose names are signed to the attached or foregoing instrument, being first duly sworn, do hereby declare to the undersigned authority that the Testator signed and executed the instrument as his Last Will and Testament and that he had signed willingly, and that he executed it as his free and voluntary act for the purposes therein expressed, and that each of the witnesses, in the presence and hearing of the Testator, signed the Will as witnesses and that to the best of their knowledge, the Testator was at that time eighteen (18) years of age or older, of sound mind and under no constraint or undue influence. by {Z1J!aL~ K f2~A/l1fL-/ Notarial seal Sharon K. Shaffer, Notary Public Harrisburg, Dauphin County My Commission Expires Aug. 11, 1996 Member, PennsylvaniaAssodalion of Notaries 6 CERTIFICATION OF NOTICE UNDER RULE 5.6(a) Name of Decedent: MA1rHEW R. 5Mln1 Date of Death: l)V/J(; 2'31 ']...ad'}.. Will No. 21-02:"651 Admin. No. To the Register: I certify that notice of (beneficial interest) estate administration required by Rule 5.6(a) of the Orphans' Court Rules was served on or mailed to the following beneficiaries of the above-captioned estate on J/ V <7 '5 200'].. : , Name Address NANCY [3. $JIII I'm (sPO(/$e) . f 1-0 EASt 0rTlfi PIt.! v E CAMP I1IU t'A t10t( f Notice has now been given to all persons entitled thereto under Rule 5.6(a) except !V/)/I/& L1MA?t(l Signature Date A. '7, 'h7Z. Name J>C,vNI~ J. $/{A1T() Address Irq LtJcvs"- ~r. H IlfUAS/3vfl.(j-- (JA 11 If/I f Telephone (1m Z3~-11:31 Capacity: _ Personal Representative --%-Counsel for personal representative STATUS REPORT UNDER RULE 6.1__2 724 Dz~eofDe~th:__~.)i//J~ Z} , WfllNo.: 2~oz- ~0 ~l Admin. No.: pm,,a~t W Rule 6.12 of~e Supr~e Co~ ~ban~' C°m Rd~' ~m0g ~e ~'.":.w~g ~'~ r~~t to completion of~e a~mfion of~e ~ov~capuom~ ~e: 1. State whe~ a~ni~fion of~e e~ate is complete: Y~s ~ No ~ 2. ~e ~er 2 No, state wh~ ~e p~on~ r~resenmfive re~on~ly heHev~. ~ lig, lu ~ ~g~ I ~ ~/~ ........ ' - -~-'~X;-;~,w~ m ~o 'i]Tvo~, ~g~; ~o f;~o~ ............. ~ Did ~o p~o~ r~r~en~five ~e a ~ ~t M~ ~e Corn? Yes No ~ b. ~ s~mte O~' Co~ No. (ff ~y) for ~e perso~ ~rc~e,~ive's c. Did ~ p~ond ~r~mm~ve state m a~omt Mommy to ~o p~ics c, Copi~ ofr~pm, rd~s, jo~d~ ~d ~proval of fom~ or ~m~ a~mm may be fil~ m~ ~e Clo~ of~c. ~h,m' Co~ ~dmaybea~c~dto~s~o~., ~ , , / / l/q L. ocas( Address Tel~hone No. Capacity: [--1 Personal Representative _l~. Co, m~el for personal representative 17/~/