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Home My WebLink About01-13-06 COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF REVENUE BUREAU OF INDIVIDUAL TAXES DEPT. 280601 HARRISBURG. PA 17128-0601 REV-1162 EX(11-96) RECEIVED FROM: PENNSYLVANIA INHERITANCE AND ESTATE TAX OFFICIAL RECEIPT NO CD 006207 BROSIUS DARWIN K 254 STONEHEDGE lANE MECHANICSBURG, PA 17055-7008 ACN ASSESSMENT CONTROL NUMBER AMOUNT ____un fold 101 $1,354.13 ESTATE INFORMATION: SSN: 177-24-3150 FILE NUMBER: 2105-0437 DECEDENT NAME: BROSIUS DELROY D SR DATE OF PAYMENT: 01/13/2006 POSTMARK DATE: 01/13/2006 COUNTY: CUMBERLAND DATE OF DEATH: 04/17/2005 TOTAL AMOUNT PAID: $1,354.13 REMARKS: D BROSIUS CHECK# 2293 SEAL INITIALS: VZ RECEIVED BY: GLENDA FARNER STRASBAUGH REGISTER OF WillS REGISTER OF WILLS COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF REVENUE BUREAU OF INDIVIDUAL TAXES DEPT. 280601 HARRISBURG, PA 17128-0601 REV-1162 EX(11-96) RECEIVED FROM: PENNSYLVANIA INHERITANCE AND ESTATE TAX OFFICIAL RECEIPT NO. CD 006209 BROSIUS DARRELL C 35 S AL YDAR BLVD DILLSBURG, PA 17019 ACN ASSESSMENT AMOUNT CONTROL NUMBER --~----- fold --~----~-- -------- 101 I $1,354.13 ESTATE INFORMATION: SSN: 177-24-3150 I FILE NUMBER: 2105-0437 I DECEDENT NAME: BROSIUS DELROY 0 SR I DATE OF PAYMENT: 01/13/2006 I POSTMARK DATE: 01/13/2006 I COUNTY: CUMBERLAND I DATE OF DEATH: 04/17/2005 I I TOTAL AMOUNT PAID: $1 ,354. 1 3 REMARKS: o BROSIUS CHECK# 668 INITIALS: VZ SEAL RECEIVED BY: GLENDA FARNER STRASBAUGH REGISTER OF WILLS REGISTER OF WILLS COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF REVENUE BUREAU OF INDIVIDUAL TAXES DEPT. 280601 HARRISBURG, PA 17128-0601 REV-1162 EX( 11-96) RECEIVED FROM: PENNSYLVANIA INHERITANCE AND ESTATE TAX OFFICIAL RECEIPT NO. CD 006208 BROSIUS HAROLD R 474 OLD STAGE ROAD LEWISBERRY, PA 17339 ACN ASSESSMENT AMOUNT CONTROL NUMBER n______ fold ---------- -------- 101 I $1,312.56 ESTATE INFORMATION: SSN: 177-24-3150 I FILE NUMBER: 2105-0437 I DECEDENT NAME: BROSIUS DELROY 0 SR I DATE OF PAYMENT: 01/13/2006 I POSTMARK DATE: 01/13/2006 I COUNTY: CUMBERLAND , DATE OF DEATH: 04/17/2005 I I TOTAL AMOUNT PAID: $1,312.56 REMARKS: H BROSIUS CHECK# 2518 INITIALS: VZ SEAL RECEIVED BY: GLENDA FARNER STRASBAUGH REGISTER OF WILLS REGISTER OF WILLS Subject Photo Page Cou CUMBERLAND .'II':~ ,f State P A Code 17011 Subject Front 2240 ORCHARD ROAD Sales Price Gross Uvlng Area Total Rooms Total Bedrooms Total Bathrooms Location View Site Quality Age 998 4 2 1 AVERAGE AVERAGE 0.24 ACRES 65 YEARS Subject Rear Subject Street Form PICPIX.SR - '10T AL lor Windows' appraisal software by a la mode, inc. - 1-80o-AlAMODE Comparable Photo Page Coo CUMBERLAND S PA ,':-"4 .~~~.~ "'~t. .< ~~~~ C 17011 Comparable 1 1191 SHOREHAM ROAD Prox. to Subject 1.40 miles Sale Price 121,000 Gross LlYtng Area 942 Total Rooms 5 Total Bedrooms 2 T olal Bathrooms 1 Location AVERAGE View AVERAGE SRe 0.13 ACRES Quality Age 55 YEARS Comparable 2 1908 CARLISLE ROAD Prox. to Subjact 0.58 miles Sale Price 116,000 Gross Uvlng Area 1,040 Total Rooms 4 Total Bedrooms 2 Total Bathrooms 2 L.ocaIIon AVERAGE View AVERAGE sna 0.17 ACRES Quality Age 49 YEARS Comparable 3 1813 WILLOW ROAD Prox. to Sub/eel 0.70 miles Sale Price . 134.900 Gross UvIng Area 1,256 T olal Rooms 5 Total Bedrooms 2 Total Battvooms 1 Location AVERAGE View AVERAGE SRe 0.19 ACRES Quality Age 55 YEARS Form PICPlltCR - "TOTAL lor Windows' appraisal software by a la mode, Inc. -1.8O().ALAMODE Comparable Photo Page N/A n CUMBERLAND State PA ZI Cod 17011 Comparable 4 517 S 18TH STREET Prox. to Subject 0.76 miles Sale Price 122,500 Gross LiYlng Area 1,064 Total Rooms 5 Total Bedrooms 2 Total Bathrooms 1.5 location AVERAGE View AVERAGE Stte 0.20 ACRES Quality Age 45 YEARS Comparable 5 Prox. to Subject Sale Price Gross UvIng Area Total Rooms Total Bedrooms Total Bathrooms location View Stte Quality Age Comparable 6 Prox. to Subject Sale Price Gross Uving Area Total Rooms Total Bedrooms Total Bathrooms location View Stte Quality Age Form PICPIX.CR - 'TOTAL for Windows' appraisal software by a Ia mode. Inc. - l-S00-AlAMODE Building Sketch (Page - 1) au CUMBERLAND Stale P A ZI C e 17011 16.0' 12.0' 15.0' Kitchen Bedroom Beth Dlnlng Area Cone,... ~ - Pallo 26.0' - 33.0' Bedroom LIvlng Room 31.0' Skmh Iw Aou IV- Comments: AREA CALCULATIONS SUMMARY LIVING AREA BREAKDOWN Cod. D..crIpt1on Size Nit! Totals Brukdown Subtotals QLU Fir.t. Floor "e. DO "1.00 Fir.t. Floor 16.0 x 31.0 601. DO 15.0 x 26.0 no.oo TOTAL LIVABLE (rounded) 998 2 Calculations Total (rounded) 998 Form SKT .BIdSkl- 'TOTAL for Windows' appraisal software by a la mode. Inc. - 1-80D-AlAMODE Location Map Co CUMBERlAND Ie PA ZI Co 17011 I, -il _:,:~,::,:f \r# _/~~,.j )\,'<,- -~~\ '. /' .. ",Y" / .::~- i. ..' . \~~r \ ". 1I~'\i ,/ ., ~ ' \ . <:","~",'.',.,J,J,.,.\_~_~;'3.J:~J:tI~_=,~..,"""" ;;-~\,. ..' " .\\f....~~ -,;, . ii !L::~~~((~ /;,1r"" .. .. . 1~"(; '_~ II ~,,,.i> .;,' '..~.~+ __-~.'~,~:..--:;~~f,,~~-- Ii ,. ,,=--~ ~I ~-- ~ ;i;;r't:.~ .......:~:.....~~....:-.~~~ //~ ~~ ........... ..:,' \ '. .......~. . Rossmory<l -:. / ~ .\ 'I ,/ I -\\ ~ *M,'~C" ~OO4'NII'IEQ,aH"""T."\." .-,~~".bt-." ...... .......... ::\ ,II ., Form MAP.LOC -"TOTAL lor Windows' appraisal software by a Ia mode, Inc. -1-800-ALAMODE Location Map Cou CUMBERLAND PA 17011 , '\ '\1;~k~ ;, "\\'t"'" \: ,..t#!!\j)J' < ~~'" \ \\ ~-~= ,J:" <:\{ .' ~ :~:<,/,,(':",;~k:~- '.~ f .... .~~-.-:rr -' , "f "" ,_., J !.,. =.."., \ ~ ~~+\, _' " U'~~, l )-"~"'.\.' _._.....-.-..\.-".,:,,:, ''..''''- - eltY"...wl.[,," . ~~" '\1, \_.lt~. .~. ...,...' ""~~ "f:J... "-"."~' ct' ~~,; ". ., ~> ' ."~" \__~~..1: : " t!i \'.,' .~ ~~~j;=,p. ~ i<,,_~ . , \' ~~;;'>~;'\l\ - . 'L.::: :::;:::..'\" y..~-,. it, II ' >,/ I f { '=-", \ 'I, ,,/ \~ <)-Jf' /' !81\ I '\</, , \\~)~- ~ ,: I \, ;"i!(~=Ro. ~,'i1'i\ ..' " II, - ~ .p"'r" \ I~ ';;:~~r\ 11 i" ~ ~.I JL ~':-~;::''''''';l". ~ .. I ';i, Rossmoyh,o - il " .' /i ......... , '. .......... . ,.1' / ;4:-b ~~:,'," ...... "");'!lColp -.o'Mt...Q...._,...;'>, "'if"""""DTJ't.Iy j ,',' ....... .......... \~~~; ..'.i: .! II ~" " Form MAP.LOC - 'TOTAl for Windows. appraisal software by a la mode, inc, -1-800.ALAMODE SUMMARY OF SALIENT FEATURES Subject Address 2244 ORCHARD ROAD legal Description DEED BOOK 00222, PAGE 01073 City CAMP HILL County CUMBERLAND Stale PA Zip Code 17011-7445 Census Tract 0110.00 Map Reference HBG ADC MAP 20/C-4 Sale Price $ REFINANCE Dale of Sale INSP 06-16-05 Borrower I Client N/A lender PRIVATE Size (Square Feel) 868 Price per Square Fool $ location AVERAGE Age 65 YEARS Condition AVERAGE Total Rooms 4 Bedrooms 2 Baths Appraiser ROBERT K. BANZHOFF Date of Appraised Value 06-16-05 Rnal Estimate of Value $ 120,000 Form SSD - "TOTAL for Windows' appraisal software by a la mode, inc. -1-800-AlAMODE ~~ J:ianmelVlae Central Penn Appraisals, Inc. (717) (3{-4500 Desktop Underwriter Quantitative Analysis Appraisal Report File No. ORCHARD2244 THIS SUMMARJ APPRAISAL REPORT IS INTENOEO FOR USE BY THE LENOER/CLlENT FOR A MORTGAGE FINANCE TRANSACTION ONLY. ProDe"" Address 2244 ORCHARD ROAD Citv CAMP HILL State PA ZiD Code 17011-7445 LenalDescrintion DEED BOOK 00222 PAGE 01073 Countv CUMBERLAND Assessor's Parcel No. 13-23-0549-149 Tax Year 04/05 R.E. Taxes t 1 214.88 Snecial A""essments $ NONE Borrower N/A Current Owner BROSIUS Occunanl r l Owner I'XI Tenant r l Vacant - Neinhbomood or Pro'ect Name LOWER ALLEN TOWNSHIP ProiAct Tyne fl PUD r1 Condominium HOA t N/A /Mo. Sales Price t REFINANCE Date of Sale INSP 06-16-05 De crimion / !tamount of loan charnes/conces ions to be nairl by soller NONE Prone"" riDhts aDDraisedl'X'l Fee SlmDle I I Leasehold I Man Reference HBG ADC MAP 20/C-4 Census Tract 0110.00 No"', IADinA Location 0 Urban C8J Suburban 0 Rural Property values C8J Increasing 0 Stable 0 Declining BuiKup ~Over75% W25-75% OUnder25% Demand/supply WShortage C8Jlnbalanceg Oversupply . Growthrate nRanid IXIStable nSlow Mar\(etinntime IXIUnder3mos. n 3-6 mos. I I Over 6 mos. Neighborhood boundaries This suburban neiohborhood has averane characteristics and is bounded on the north bv Gettvsburn & Carlisle Roads on the east bv Interstate 83 on the south bv York County line and on the west bv St Johns and Slate Hill Roads located in Lower Allen Townshio. Dimensions SEE LEGAL DESCRIPTION Sije area 0.25 ACRES SpecUic zoning classUicalion and description R-RESIDENT AL SINGLE FAMILY Zoning compliance C8J Legal 0 Legal nonconforming (Grandtathered use) 0 Illegal, attach description 0 No zoning Highest and best use of subject property as Improved (Of as proposed per plans and specifications): C8J Present use 0 Other use, attach description. Utllltlea Public Other Public Other I Off-alte Improvement' Type Public Electricity C8J Water C8J I Street AS PHAL TC8J Fi Gas n NONE Sanijarv sewer fXi I A1lev NONE Are there anv aDDarent adverse slle conditions (easements encroachments sl\l!cial assessments slide areas etc.l? r l Yes r;(\ No II Yes attach descriDtion. Source(s) use~r physical characterisllcs of prop~:_ ~ Interior and ~erior inspection U Exterior Inspection from street TI Previous appraisal files n tALS IXI Assessment and lax records I I Prior insnection I I PrOM"" owner un Other IDescribe\: No. of Stories 1 Tvne /Det/AIl.) DET. Exterior Walls ALUMINUM Roo! Sunace SHINGLES Manulactured Housinn r l Yes r;(\ No Does the oronel1v nenerallY conform to the neiohborhood in terms of slvle condition and construction materials? r;(\ Yes rl No II No attach descriDtion. A~ere any ~arent physical deficiencies or conditions that would affecl the soundness or structural Integrity of the improvements or the livability of the property? I I Yes IXI No II Yes attach descriDtion. Are there any apparent adverse environmental conditions (hazardous wastes, toxic substances, etc.) presenl in the improvements, on the sne, or in the immediate vicinity of the subject property? 0 Yes C8J No II Yes, attach description. I researched the subject market area for comparable listings and sales that are the most similar and proximate to the subject property. My research revealed a total of 4 sales ranging in sales price from $ 116,000 to $ 134,900 My research revealed a total of 5 listings ranging in list price 1rom $ 109,900 10 $ 129,900 The analysis of the comoarable sales below reflects mar$el reaction to sianllicant variations between the sales and the subiect DroDe"". FEATURE SUBJECT SALE 1 SALE 2 SALE 3 2244 ORCHARD ROAD 1191 SHOREHAM ROAD 1908 CARLISLE ROAD 1813 WtLLOW ROAD Addres~ CAM.P HILLI""""" ","f' ,. " CAMP .HILL CAMP .HILL CAMP HILL ProXlmilvto Subiect ""'''i;l''i~~,,,~~,~i;$WW'!f ~" ",,?~e ~~I~S . ~ SalesPnce Is ~ 121000 ",!\i. "," 116~~ 134900 Price/GrossLivinoArea Is rP 128.45rP l~t~.Mi1\';.~1I1rs 111.54rP 111[.f~t\r1!:l0W~lliiils 107.40rP I'.;;c~ill~~~'i!': Dala & V.riflcatlon Sourc.s JW1;ffj(!fl!I,i<.~~1~:ttw ASMT RECORDSIMLS/AGENT ASMT RECORDS/MLS/AGENT ASMT RECORDS/MLS/AGENT VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION I +(-\$ Mills\. DESCRIPTION I +1-1$ Adlus\. DESCRIPTION I +1-)$ Adlusl. Sales or Financing CONVENTIONAL CASH CONVENTIONAL Concessions NONE KNOWN NONE KNOWN NONE KNOWN Date of Salemme 05-25-05 OM 15 : 04-22-05 DM 42 : 10-15-04 OM 24 : Location AVERAGE AVERAGE: AVERAGE: AVERAGE Site 0.25 ACRES 0.13 ACRES : 0.17 ACRES: 0.19 ACRES View AVERAGE AVERAGE: AVERAGE: AVERAGE Desion ISMe) RANCH/AVG RANCH/AVG: RANCH/AVG: RANCH/AVG Actual Aoe fYrs.\ 65 YEARS 55 YEARS 49 YEARS 55 YEARS Condition AVERAGE AVERAGE, AVERAGE AVERAGE - Above Grade Total : Bdrms: Baths Total: Bdrms: Baths -l~~~~~~a~!~.~fi~>>~~:\% Total : Bdrms: Baths t~rb\l~~~#.j~ Total : Bdrms: Baths r~fijl}!f~*Nt~\~[~; . Room Count 4 : 2 : 1 5: 2 : 1 : 4 2 2 -2,000 5 2 1 : Gross Livino Area 868 So. Ft. 942 SD. Fl. : 1 040 So. FI. : -1 700 1 256 Sn. Fl. : Basement &. Finished FULL BSMT FULL BSMT FULL BSMT FULL BSMT Room. Below Grade UNFINISHED UNFINISHED UNFINISHED REC ROOM Garane/Camor! NONE lCAR/CARPORT: -2500 lCAR/CARPORT : -2500 lCAR/CARPORT : HEATING &. COOLING FHAlCA FHAlCA : FHAlCA : FHAlCA : FEATURES ~H NONE : +3000 CV PATIO : +1500 SUNROOM : NetAdi. ltotaJ\" + - : $ 500M- : $ 4700M- : S 6800 Adjusted Sales Price ' ; 01 Comparables . 121 500 111 300 1$ 128100 Date 01 Prior Sale 06-07-2000 04-07-2005 NONE KNOWN TO EXIST NONE KNOWN TO EXIST Price of Prior Sale 1$ 1.001s 103 000 Is Is Analysis of any current agreement of sale, option, or listing of the subject property and analysis of the prior sales of subject and comparables: The subiecl is not known to be under anY ontion for sale or anreement 01 sale as 01 the effective date on this reDort. Summary of sales comparison and value conclusion: See allached addenda. Single 'wlly hoUllni Condominium housing PRICE AGE PRICE IW appllc.) AGE $(000) (yrs) $(000 (yrs) 80 Low NEW N/A Low ~ ..~.~O Hia~ 100\ ,,~/A Hinh N/~, :,iIT Predominant ~1i,~~ft:IPredomlnant IilJl!' 150 50 N/A N/A Shape RECTANGULAR Private R +4 500 -5 800 -3 000 -2500 This appraisal is made C8J "as-is", 0 subject to completion per plans and specffications on the basis of a hypothetical condition that the improvements have been completed, or o subject 10 the following repairs, atterations or conditions BASED ON AN 0 EXTERIOR INSPECTION FROM TIlE STREET OR AN PROPERTY TIIAT IS TIlE SUBJECT OF TIllS REPORTTO BE $ 120.000 IZIINTERIOR AND EXTERIOR INSPECTION ,I ESTIMATE TIlE MARKET VALUE, AS DEFINED, OF TIlE REAL ,ASOF 06.16-05 PAGE 1 OF 3 Form 205 - "TOTAL for Windows" appraisal sottware by a la mode, inc. - t-800-AlAMODE Fannie Mae Form 2055 9-96 Desktop Underwriter Quantitative Analysis Appraisal Report File No. ORCHARD2244 Plojecllnlormallon 101 PUDa (" applicable) . - Is the developer/builder In control oflhe Home Owners' Association (HOA)? 0 Yes 0 No Provtde the lollowing information for PUOs only n lh8 developer/bullder Is in control of the HOA and the subject property Is an attached dwelling un": Total number of phases N/A Total number of unils N/A Total number of units sold N/A Total number 01 units rented N/A Total number of unils lor sale N/A Data Source(s) N/A Was the project created by the conversion of existing buildings into a PUD? 0 Yes 0 No W yes, date of conversion: N/A . Does the project contain any multi-dwelling unils? 0 Yes 0 No Data Source: N/A Are the common elements completed? 0 Yes 0 No i1 No, describe stallls of completion: N/A Are any common elements leased \0 or by the Home Owners' Association? Describe common elements and recreational facUities: N/A DYes DNo i1 yes, attach addendum describing rental terms and options. Pro)ecllnlormatlon lor Condominium. (If applicable) . - Is the developar/builder In control 01 the Home Owners' Association (HOA)? Provide the following information for all Condominium Projects: Tolal number 01 phases N/A Total number of unils N/A Total number of unils sold Tolal number of unils rented N/A Total number 01 unils for sale N/A Data Source(s) N/A Was the project created by the conversion of existing buildings into a condominium? 0 Yes 0 No "yes, date of conversion: Project Type: 0 Primary Residence 0 Second Home or Recreational 0 Row or Townhouse 0 Garden 0 Mldrise Condition of the projec~ quality at construction, un" mix, etc.: N/A DYes ONo N/A N/A o Highrise 0 Are the common elements completed? DYes 0 No i1 No, describe status of completion: N/A Are any common elements leased to or by the Home Owners' Association? Describe common elements and recreational facilities: N/A DYes 0 No i1 yes, attach addendum describing rental terms and options. PURPOSE OF APPRAISAL: The purpose of this appraisal is to estimate the market value of the real property that is the subject of this report based on a quantnatlve sales comparison analysis for use In a mortgage finance transaction. DEANITlON OF MARKET VALUE: The most probable price which a property should bring in a competnlve and open market under all condilions requisile to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assumillg the price Is not affected by undue stimulus. Implicit in this definilion Is the consummation of a sale as of a speCified date and the passing of title flom seller to buyer under condnions whereby: (1) buyer and seller are typically motivated; (2) both parties are well infomned or well advised, and each acting in what he considers his own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment Is made in terms of cash in U.S. dollars or in tenns of financial arrangements comparable thereto; and (5) the price represents the nonnal consideration for the property sold unaffected by special or creative financing or sales concessions. granted by anyone associated with the sale. . Adjustments to the com parables must be made for special or creative financing or sales concessions. No adjustments are necessary for those costs which are nonnally paid by sellels as a result of tradilion or law in a market area; these costs are readily identifiable since the seller pays these costs in virtually all sales transactions. Special or creative financing adjustments can be made to the comparable property by comparisons to financing tenns offered by a third party insmutional lender that is not already involved In the property or transaction. Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing 01 concession but the dollar amount of any adjustment should approximate the market's reaction to the financing or concessions based on the appraiser's judgment. STATEMENT OF LIMITING CONDITIONS AND APPRAISER'S CERTIFICATION CONTINGENT AND LIMITING CONDITIONS: The appraiser's certification that appears In the appraisal report 15 subject to the following condilions: 1. The appraisel will not be responsible for matters of a legal nature that affect eilher the property being appraised or the tille to it. The appraiser assumes that the title 15 good and marketable and, therefore, will not render any opinions about the tille. The property is appraised on the basis of il being under responsible ownership. 2. The appraiser has provided any required sketch in the appraisal report to show approximate dimensions of the Improvements and the sketch 15 Included only to assist the reader of the report in visualizing the property and understanding the appraiser's detemnlnation of its size. 3. The appraiser will not give testimony or appear In court because he or she made an appraisal of the property in question, unless specific arrangements to do so have been made beforehalld. 4. The appraiser has noted In the appraisal report any adverse conditions (such as, but 1I0t limited to, needed repairs, the presence of hazardous wastes, toxic substances, etc.) observed during the inspection of the subject property or that he or she became aware of during the nonnal research involved in perfomning the appraisal. Unless otherwise stated in the appraisal report, the appraiser has no knowledge of any hidden or unapparent condillons of the property or adverse envirollmental conditions (illcludillg the presence of hazardous wastes, toxic subsfances, etc.) that would make the property more or less valuable, and has assumed that there are no such condnlons and makes no guarantees or warranties, expressed or Implied, regarding the condition of the property. The appraiser will not be responsible for any such condilions that do exisf or for any engineering or testing that might be required to discover whether such condlliolls exist. Because the appraiser is not an expert in the field of environmental hazards, the appraisal report must not be considered as an envirollmental assessment of the property. 5. The appraiser obtained the infonnation, estimates, and opinlolls that were expressed in the appraisal report from sources that he or she considers to be reliable and believes them to be true and correct. The appraiser does not assume responsibility for the accuracy of such Items that were furnished by other parties. 6. The appraiser will not disclose the contents of the appraisal report except as provided for in the Unlfomn Standards of Professional Appraisal Practice. 7. The appraiser must provide his or her prior written consent before the lender/client specified In the appraisal report can distribute the appraisal report (Including conclusions about the property value, the appraiser's identity and professional designations, and references to any professional appraisal organizations or the linn wilh which the appraiser is associated) to anyone other than the borrower; the mortgagee or ils successors and assiglls; the mortgage insuler; consultants; professional appraisal organizations; any state or federally approved financial Instilutlon; or any department, agency, or instrumentallly of the Uniled States or any state or the District of Columbia; except that the lender/client may distribute the report to data collection or reporting service(s) wilhout having to obtain the appraiser's prior written consent. The appraiser's written cOllsent alld approval must also be obtained before the appraisal can be conveyed by anyone to the public through advertising, public relations, news, sales, or other media. 8. The appraiser has based his or her appraisal report and valuation conclusion for an appraisal that is subject to completion per plans and specifications on 011 the basis of a hypothetical condnion that the improvements have been completed. 9. The appraiser has based his or her appraisal report and valuation conclusion for an appraisal that Is subject to completion, repairs, or alterations on the assumption that completion of the improvements will be pertonned in a workmanlike manner. PAGE 2 OF 3 Form 205 - 'TOTAL lor Windows' appraisal soltware by a la mode. inc. -l.BOO-ALAMODE Fannie Mae Form 2055 9-96 Deskto File No. ORCHARD2244 APPRAISER'S CERTIFICA nON: The Appraiser certifies and agrees that: 1. I performed this appraisal by (1) personally Inspecting from the street the subject property and neighborhood and each 01 the comparable sales (unless I have otherwise Indicated in this report that I also Inspected the interior of the subject property); (2) collecting, confirming, and analyzing data from reliable public and/or private sources; and (3) reporting the results of my inspection and analysis In this summary appraisal report. I further certijy that I have adequate information about the physical characteristics of the subject property and the comparable sales to develop this appraisal. 2. I have researched and analyzed the comparable sales and offeringsllistings in the subject market area and have reported the comparable sales in this report that are the best avaUable for the subject property. I further certify that adequate comparable market data exists in the general market area to develop a reliable sales comparison analysis for the subject property. 3. I have taken Into consideration the factors that have an Impact on value in my development of the estimate of market value in the appraisal report. I further certify that I have noted any apparent or known adverse conditions in the subject Improvements, on the subject site, or on any site within the immediate vicinity of the subject property of which I am aware, have considered these adverse conditions in my analysis of the property value to the extent that I had market evidence to support them, and have commented about the effect of the adverse conditions on the marketability of the subject property. I have not knowingly withheld any signmcant information from the appraisal report and I believe, to the best of my knowledge, that all statements and information In the appraisal report are true and correct. 4. I stated in the appraisal report only my own personal, unbiased, and professional analysis, opinions, and conclusions, which are SUbject only to the contingent and limiting conditions specffied in this form. 5. I have no present or prospective Interest in the property that is the SUbject of this report, and I have no present or prospective personal interest or bias with respect to the participants In the transaction. I did not base, either partially or completely, my analysis and/or the estimate of market value in the appraisal report on the race, color, religion, sex, age, marital status, handicap, familial status, or national origin of either the prospective owners or occupants of the subject property or of the present owners or occupants of the properties in the Vicinity of the subject property or on any other basis prohibited by law. 6. I have no present or contemplated future interest in the subject property, and neither my current or future employment nor my compensation for performing this appraisal Is contingent on the appraised value of the property. 7. I was not required to report a predetermined value or direction in value that favors the cause of the client or any related party, the amount of the value estimate, the attainment of a specijlc result, or the occurrence of a subsequent event in order to receive my compensation and/or employment for performing the appraisal. I did not base the appraisal report on a requested minimum valuation, a specific valuation, or the need to approve a specmc mortgage loan. 8. I estimated the market value of the real property that is the subject of this report based on the sales comparison approach to value. I further certify that I considered the cost and income approaches to value, but, through mutual agreement with the client, did not develOp them, unless I have noted otherwise In this report. 9. I performed this appraisal as a limited appraisal, subject to the Departure Provision of the Unnorm Standards of Professional Appraisal Practice that were adopted and promulgated by the Appraisal Standards Board of The Appraisal Foundation and that were In place as of the effective date of the appraisal (unless I have otherwise indicated in this report that the appraisal Is a complete appraisal, in which . case, the Departure Provision does not apply). 10. 1 acknowledge that an estimate of a reasonable time for exposure in the open market is a cond~lon in the definition of market value. The exposure time associated with the estimate of market value for the subject property is consistent with the marketing time noted in the Neighborhood section of this report. The marketing period concluded for the subject property at the estimated market value is also consistent w~h the marketing lime noted in the Neighborhood section. 11. I personally prepared all conclusions and opinions about the real estate that were set forth In the appraisal report further certijy that no one provided signijicant professional assistance to me in the development of this appraisal. SUPERVISORY APPRAISER'S CERTIFICATION: If a supervisory appraiser signed the appraisal report, he or she certifies and agrees that: I directly supervise the appraiser who prepared the appraisal report, have examined the appraisal report for compliance with the Unijorm Standards of Professional Appraisal Practice, agree with the statements and conclusions of the appraiser, agree to be bound by the appraiser's certifications number d 5 through 7 above, and am taking full responsibility for the appraisal and the appraisal report APPRAISER: SUPERVISORY APPRAISER (ONLY IF REQUIRED): Signature: Name: Company Name: Company Address: APPRAISALS 1 24 WES IN STREET SHIREMANSTOWN. PA 17011 Date of ReporVSlgnature: 06-27-05 State Certlflcatlon #: PACERT Rl-001231-l or State License #: RM-049277-A State: PA Expiration Date of Certification or License: 6130/2007 Date 01 ReporVSignature: State Certlflcatlon #: or State License #: State: Expiration Date of Certlflcatlon or License: ADDRESS OF PROPERTY APPRAISED: 2244 ORCHARD ROAD CAMP Hill, PA 17011-7445 APPRAISED VALUE OF SUBJECT PROPERTY $ EFFECTIVE DATE OF APPRAISAl/INSPECnON lENDER/CLIENT: PRIVATE Name: Company Name: PRIVATE Company Address: 120,000 06-16-05 SUPERVISORY APPRAISER: SUBJECT PROPERTY o Did not inspect subject property o Did inspect exterior of subject property from street o Did inspect interior and exterior of subject property COMPARABLE SALES o Did not inspect exterior of comparable sales from street o Did inspect exterior of comparable sales from street PAGE 3 OF 3 Form 205 - 'TOTAL for Windows' appraisal soltware by a la mode, inc. - 1-800-ALAMODE Fannie Mae Form 2055 9-96 Desktop Underwriter Quantitative Analysis Appraisal Report FEATURE SUBJECT SALE 4 2244 ORCHARD ROAD 517 S 18TH STREET Address CAMP HILL CAMP HILL Proxim;t;;lo Sub'ect l!\;f~' ,J " Ii ,.,.,?! 0.76 miles Sales Prire I~ -:,~." ,';': '~; 122 500 1l!iiJ1li~f.~!;iJ~",1fIil ~ :lir1l'~~"~'ii~~~I~ Prlce'GrossLivinnArea 1$ 1tJ1$ 115.13ItJ'" ;"" ....f{rf ~ ItJ Iliif#~~t,~~~,~rt ItJ ti~:m:%1;.~~'Miil!': Dala & Vel1ficaUon Soorces r'" ';' .,... .~1t'R! ASMT RECORDS/MLS/AGENT VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION I +/-\$ Adiosl. Sales or Financing CONVENTIONAL Concessions NONE KNOWN Oat. of SalelTime 08-24-04 OM 41 : Location AVERAGE AVERAGE SUe 0.25 ACRES 0.20 ACRES . View AVERAGE AVERAGE nesinn ISMe' RANCH/AVG RANCH/AVG Actual AnelYrs.\ 65 YEARS 45 YEARS ~ondltion AVERAGE AVERAGE Above Grade Total : Bdrms: Baths Total: Bdrms: Baths Ift~~i~~.~t~: Room Count 4 : 2 1 5 2: 1.5: -1,000 Gross Uvinn Area 668 So. Ft. 1 064 Sn, Ft. : -2 900 Basement & Finished FULL BSMT FULL BSMT Rooms Below Grade UNFINISHED REC ROOM Garane/Camort NONE 1CAR/CARPORT : HEATING & COOLING FHNCA HW/CA : FEATURES IIJIIiE 2 FIREPLACES: -1000 Net MI. Ilotal' + - : t 5300.- : $ Adjusled Sales Price of Comnarable h 117 200 J s Date of Prior Sale 06-07-2000 NONE KNOWN TO EXIST Price of Prior Sale Is 1.00 I $ 1$ SALE 5 SALE 6 DESCRIPTION I + H$ Adlusl. DESCRIPTION I +1-\$ Adiusl. +5100 Total :Bdrms: Baths ti~R<'lt~j;1'~.1t'!ir Total :Bdrms: B~s So. Ft : Sn, Ft. : -3 000 -2 500 -- It Comments: Central Penn Appraisals, Inc. (717) 737-4600 Form 205.(AC) - 'TOTAL for Windows' appraisal software by a la mode, inc. -1-800-ALAMODE Fannie Mae Form 2055 9-96 Borrower/Client N/A Pronortv Address 2244 ORCHARD ROAD City CAMP HILL Countv CUMBERLAND State PA Zin Code 17011-7445 Lender PRIVATE ~upplemental AddendUm Rle No ORCHARD2244 . Desktop Quantitative 2055: Sales Comparison Comments These improvements are of average quality frame & aluminum design and reflect average maintenance. This house has less than typical physical depreciation due to regular maintenance. Utility of floor plan is typical for a house of this age and style and should receive average acceptance in the market place. No unusual functional obsolescence or extemal inadequacies were observed. All four sales are considered to be reliable indicators of value, and are weighted similarly in the final reconciliation. Appropriate adjustments have been made for all differences. Comparables sales used are all closed sales. It is noted that Comparable Sale No.3 & 40ccurred over six months prior to the appraisal date. Comparables that sold within six months of the date of the appraisal were significantly different in location, size, condition, special conditions, and/or style. In the appraiser's judgment the comparable selected is a better indicator of value than more recent sales. Time adjustments are based on mls statistics. It is noted that Fanny Mae suggested guidelines on square footage were exceeded on Comp Sale No.3. This adjustment is larger than normal, but the sales chosen are considered the best available. Other comparables analyzed would have required less desirable adjustments and were not used for that reason. All four comparable sales are located in the same market area as the subject property and would be considered by the same perspective purchaser if all were on the market at the same time as the subject. This appraisal report has been prepared with the property in "as is. condition. No personal property has been included in this valuation. This appraisal assumes a reasonable marketing period for the subject property of three months. The Income Approach is inappropriate because few single family houses are rented in this market. In view of the age of these improvements, the Cost Approach cannot be considered an accurate indicator of value. Given the high quality of the available sale data, the value indicated by the Market Approach is used as the final estimated value. THIS IS A SUMMARY REPORT OF A COMPLETE APPRAISAL. APPRAISER ACKNOWLEDGEMENT APPRAISERS ACKNOWLEDGES AND AGREES, IN CONNECTION WITH ELECTRONIC SUBMISSION OF APPRAISALS, AS FOLLOWS: THE SOFTWARE UTILIZED BY THE APPRAISER TO GENERATE THE APPRAISAL PROTECTS SIGNATURE SECURITY BY MEANS OF A DIGITAL SIGNATURE SECURITY FEATURE WHICH LOCKS THE REPORT WITHIN OUR OFFICE AND CAN NOT BE ALTERED BY ANYONE OTHER THAN OUR OFFICE. APPRAISER CERTIFICATION APPRAISER STANDARDS I acknowledge and certify that (I) my appraisal of the above referenced property may be used in a federally related financial transaction subject to requirements of Title XI of the Financial Institution Reform, Recovery and Enforcement Act of 1989 (FIRREAU); (Ii) the appraisal must comply with FIRREA and the applicable regulations implementing Title IX of Firrea; and (Iii) the appraisal was completed in accordance with USPAP. APPRAISER COMPETENCY I certify that I am fully qualified and competent by trainin9, knowledge, and experience to perform this appraisal. APPRAISER INDEPENDENCE I represent and certify that (I) the appraisal assignment was based not based on a requested minimum valuation, a specific valuation, or the approval of a loan; (Ii) my employment was not conditioned upon the appraisal producing a specific value or value within a given range; (iii) my future employment is not dependent upon an appraisal producing a specific value; (iv) my employment, compensation, and future employment are not based upon whether a loan application was approved; (v) neither me nor any person wilh an ownership interest in the company employing me, is related 10 or has any ownership or other financial interest in, either the builder/developer, seller, buyer, mortgage broker, or real eslate broker/salesperson (or any person related to any of them) involved in the transaction for which this appraisal was requested, or with the most recent sale or refinancing of any property used as a comparable property in this appraisal, and {vi} I am not aware of any facts which would disqualify me from being considered an Independent appraiser. NOTE: JENNIFER WARNER WAS THE ASSISTANT TO THE STATE CERTIFIED APPRAISER AND ASSISTED WITH THIS REPORT AND RENDERED SIGNIFICANT ASSISTANCE IN ALL ASPECTS OF ITS PREPARATION AND INSPECTION. Form TADD - 'TOTAL for Windows' appraisal software by a la mode, inc. - l-BOO-ALAMODE Subject Photo Page Co CUMBERLAND S Ie PA Zl ode 17011-7445 Subject Front 2244 ORCHARD ROAD Sales Price GIIlSS lIvtng Area Total Rooms Total Bedrooms Total Bathrooms Location VIew Slle QuaUty Age Form PICPIX.SR - 'TOTAL lor Windows' appraisal software by a la mode, Inc. - 1-800.ALAMODE 668 4 2 1 AVERAGE AVERAGE 0.25 ACRES 65 YEARS Subject Rear Subject Street Comparable Photo Page OIl CUMBERLAND State PA i-Z ... ./ ~-' .~,. Zi e 17011-7445 Comparable 1 1191 SHOREHAM ROAD Prox. to Subject 1.40 miles Sale Price 121.000 Gross UvIng Area 942 TDlaI Rooms 5 TDlaI Bedrooms 2 Total Bathrooms 1 location AVERAGE View AVERAGE Site 0.13 ACRES Quality Age 55 YEARS Comparable 2 1908 CARLISLE ROAD Prox. to Subject 0.58 miles Sale Price 116,000 Gross UYing Area 1 ,040 T DlaI Rooms 4 Total Bedrooms 2 Total Bathrooms 2 location AVERAGE View AVERAGE SIla 0.17 ACRES Ouaiy ~e 49 YEARS Comparable 3 1813 WILLOW ROAD Prox. to Subject 0.70 miles Sale Price 134,900 Gross UYing Area 1,258 T DlaI Rooms 5 TDlaI Bedrooms 2 Total Bathrooms 1 location AVERAGE View AVERAGE Site 0.19 ACRES Quality Age 55 YEARS Fonn PICPlllCR - "TOTAl lor Windows' appraisal software by a la mode, Inc. -1-800-AlAMODE Comparable Photo Page Cou CUMBERlAND PA Zl Cod 17011-7445 Comparable 4 517 S 18TH STREET Prox. to SUbject 0.76 miles Sale Price 122,500 Gross Uving Area 1,064 Total Rooms 5 Total Bedrooms 2 Total Bathrooms 1.5 Location AVERAGE View AVERAGE Stte 0.20 ACRES Quality Age 45 YEARS Comparable 5 Prox. to SUbject Sale Price Gross UvIng Area Total Rooms T olal Bedrooms Total Bathrooms Location View Stte QuaJlly Age Comparable 6 Prox. to Subject Sale Price Gross UvIng Area Total Rooms Total Bedrooms Total Bathrooms location View Stte Quality Age Form PICPIX.CR - 'TOTAL for Windows' appraisal software by a la mode, Inc. -1-800-ALAMODE Building Sketch (Page - 1) N/A 2244 ORCHARD ROAD CAMP HILL ender PRIVATE c CUMBERLAND e PA 17011-7445 Deck 32.0' KllChen Dining Bedroom Area I: - 23.0' 34.0' Bath 1 Room c--- Entry 20.0' Bedroom 11.0' Porch 12.0' 11In:h....A-.rv- Corrmenta: AREA CALCULATIONS SUMMARY LIVING AREA BREAKDOWN Cod. De......plIon Size Net Totals S....kdown Subtotal. OLAl I'ir.t "loo~ 868.00 868.00 I'ir.t Floor p,p Porch 160.00 160. DO 31.0 x 32.0 136.00 11.0 x U.O 132. DO TOTAL LIVABLE (rounded) 868 2 Calculations Total (rounded) 868 Form SKT.BldSkI- "TOTAl for Windows' appraisal software by a la mode, inc. -1-80D-ALAMOOE Location M ap ';';':;' ~.J:~,t::il ...~~.~,..;.. ~~..~..-. - .. I \ . " \ .......\'\ ~\ / :". ~ \ ~ ./ "~'''' .......~~.."..r ''{,;..-;.,.. / ,I .. \ Q .,~ ...... ...... ... '-"1~ ~.~~~ , '" .-... Q ;': ~N" ~:..,,~:./\.. '" "'-t.. ...,.... ~.. -.. \ :I. .~~...... i Ii' I CUMBERLAND au Slat P A ..t;.\\ ..~~ Q .~~, \ \\ IMM'II\'''-~ _ ~'\ i.' ..y '. I' b. ~ J l 1 :I. .,. ' ;~i(1 ;~\~~;ii~'b > '\. '''}~~~~~~~.' ..... "'........ .....'" ... '\ \ .. ~\ \ 1 ~ ~a ~ '\ :I. " ./ \ \;a. t, i .1 . \ .' \ ". J'-" (....J\ ..~'" ! .......'\. .. t\ ~ Q,. :;:~"- ,. ~ " ...... ,;'" ~ ...\ /'! (......-... l ."." ~'.. __...... ..0.-.......... '~"lji ..-.... .... ..... ... ... /,1 ~ ,!oj "'~ .r I .,~ ~".' ../ "I ...... l I i ... \, i~ .,; #' I -.. '. ...... " ~ ...... ,pi .~..' ~ l' -... ) i , \1 ,./ \..... " +. '."" ... ....-~ / """". ; "' ,'\Wl_ o,,,\. .,,- .\~ "'\ " i ". ", '" \ '(, ....-.. , <; "'.. '" \.....- /","'sL--. /.-:'- "....' '\ //-',.... .<!>it i o'f"'''' :I. f ., \ .....~..{ . \ ~ ' _-#<.. ...~ ~.. ~ q,. .... .~ !\,.. , ''\. \. z' I' ,.. ~ j ;~~-;= ~:;:-.~.,.. .- "':'Y"-.;,.I!M).' Form MAP .Loe 'TOT ALtor Windows' ' appralsal software by a I a mode, Inc, - 1-8DO-ALAM ODe THIS IS NOT A TAX Bill MAILrNG DATE: May 10, 2004 Parce1 Identifier: 13-23-0549-064. District: 13 - LOWER ALLEN TOWNSHIP SChool..: WEST SHORE SD TAXABLE Old Assessed Value 2004 New Assessed Value (2000 Market x 100%) Market Value (2004 Market x 100%) land 1,040 5,000 " 5,000 Buildings 0 0 0 TOTAL " ' 1,040 5,000 5,000 2004 Clean and Green Values " land NOT NOT NOT Buildings APPLICABLE APPLICABLE APPLICABLE TOTAL , Clean and Green values apply to some farm and forest land. Such values become effective only upon application and approval. All applications must be received by the Assessment Office by 4:30 p.m. on October 15,2004. Those previously approved for Clean and Green do not need to rti-apply. Location: NINA ALLEY SPRING LAKE COLONY LOT 102 MIse BLK 14 PG 281 UNIT/LOT ID..: L-0102 Land Size....: .20 acres Property Type: Ll Vacant Land Pennsylvania law requires that all real estate be valued as of the most recent county-wide reassessment. The last reassessment, or tax base year, was 2000. Since the last reassessment in 2000, properties have been assessed at 100% of Year 2000 value (the .Pre-Determined Ratio"). The new tax base year will be the Year 2004, with the new assessed values becoming effective for the 2005 tax year. The Pre-Determined Ratio remains at 100%. Your new assessed value equals your Year 2004 market value. When the new 2004 tax base is determined after this reassessment, al/ taxing districts are required by law to lower the millage rate by the same proportion that the tax base went up. The law provides that in the first year after reassessment (2005), the county and all townships and boroughs may not increase overall revenue on their existing tax base by more than five percent (5%) and school districts may not increase overall revenue on their existing taxbase by more than ten percent (10%). The county and the other taxing bodies will make these decisions next year, and may choose not to increase overall revenue. Of course, some individual's taxes will go up or down by more than those percentages. The essential point is that an increase in market values does not necessarily mean a corresponding increase in taxes. Individual changes in taxes will depend upon a specific property's change as compared to the overall change for the taxing district The ESTIMATED impact statement printed below is our best estimate of change, based on 2004 COUNTY tax figures. THIS ESTIMATE DOES NOT INCLUDE ANY BOROUGH. TOWNSHIP, OR SCHOOL DISTRICT IMPACT. ESTIMATED COUNTY TAX IMPACT: Current 2004 County mills = Adjusted 2004 County mills = 2.352 2.138 $ $ 2 11 2004 County Tax BEFORE Reassessment. 2004 County Tax AFTER Reassessment. t .__m.. ( '. ,- THI~ IS NOTAT Ax BILL MAILING DATE: July 1, 2004 District: 38 .;.' srLVER SPRrNG 'l'Wl? School..: CU"MBERLAND\lALLEYSD J?arceJ. Iden tif'.ier ; 38-17-1025-032. Location: wrLLOW MrLL PARK ROAD LOT 2 Old Assessed Value 2004 New Assessed Value (2000 Market x 100%) Market Value (2004 Market x 100%) Land 38,130 49,100 49,100 Buildings 0 0 0 TOTAL 38,130 49,100 49,100 2004 Clean and Green Values Land NOT NOT NOT Buildings APPLIcABLE APPLICABLE APPLICABLE TOTAL Clean and Green values apply to some farm and forest land. Such values be~me effective only upon application and approval. All applications must be recelyed by the Assessment Office by 4:30 p.m. on October 15, 2004. Those prevIously approved for Clean and Green do not need to re-apply. TAXABLE UNrT/LOT rD..: L-0002 Land Size....: 1,41 acres Property Type: L2 Vacant Land THIS IS NOT A TAX BILL MArLrNG DATE: July 1, 2000 District. 38 - SrLVER SPRrNG TWP School. .. CUMBERLAND VALLEY SD Parcel Identifier: 38-17-1025-032. Location. wrLLOW MrLL PARK ROAD LOT 2 2000 Assessed Value Old Assessed Value Market Value (2000 Market x 100'Y.) (1974 Marke~ x 25%) Land 38,130 38,130 '.. 870 Buildings 0 0 0 TOTAL 38,130 38,130 870 . 2000 Clean and Green Values. Land NOT NOT NOT Buildings APPLICABLE APPLICABLE APPLICABLE TOTAL . . .. Clean and Green values apply to some farm and forest land. Such values become effective only upon application and approval. All applications must be received by the Assessment Office by 4:30 p.m. on October 15, 2000. Those previously approved for Clean and Green do not need to re-apply. TAXABLE UNIT/LOT rD..: L-0002 Land Size....: 1.41 acres Property Type. L2 Vacant Land Control No: 38002052 CURNSGIS Pennsylvania law requires that all real estate be valued as of the most recent county-wide reassessment. The last reassessment, or tax base year, was 1974. Since the last reassessmentin 1974, properties have been assessed at 25% of the 1974 value (the "Pre-Determined Ratioj. The new tax base year will be the Year 2000, with the new assessed values becoming effective for the 2001 tax year. The Pre-Determined Ratio has been changed to 100%. Your new assessed value equals your Year 2000 market value. It is very Important for you to know that when the new 2000 tax base Is determined after this reassessment, all taxing districts are required by law to lower the millage rate by the same proportion that the tax base went up. The law provides that in the first year after reassessment (2001), the county and all townships and boroughs may not increase overall revenue by more than five percent (5%) and school districts may not increase overall revenue by more than ten percent (10%). The county and the other taxing bodies will make these decisions next year, and may choose not to increase overall revenue. Of course, some individual's taxes will go up or down by more than those percentages. The essential point Is that an increase in market values does not necessarily mean a corresponding Increase In taxes. Individual changes In taxes will depend upon a specific property's change as compared to the overall change for the taxing district. . ... - .-- - _L - _:_L_..J L. -.-... :- _..r h",,+ 0"'+;""''''+0 nf ,..h~nnt:> h::lc:t:>rI nn ?nnn aPNCBAN< S.ember 9, 2005 Scott M DinMr Attomey al L.w 3117 Cbatnllt St. Camp lfill1 P A 17011 U: Estate of Delroy D Bre.iua (D<<4aMCl) SSN: 1"-24-31$0 DQD: 04-17-2005 Deu Mr. Dinner: Iv;p In IWpOMe to your request for Dlte of Dhth ~lanc. for the cu.omer noted above, our records .how tile (ollowiftl: CIMcld1ll1 Aceouat Aoeount #S 140153416 Bltabli.bed 05-01-1976 DELROY D BkOSIUS CAIlOL A BR.OSIUS DOD ba!anQt: $11,436.78 + $0.12 aoerued tft\..- s........ Aeeouat Account "5000751156 ElfabJl.Jl<<t ()4-26.J 996 DEL1l0Y D 8P.OSIUS CAROL A BROSIUS DOD balance: $49.239.14 -4- $92.611OCfUed illtemt PI... note that this officw only J'I1Mdee date of death balance. fQr deposit ICCOunt. (IRAI, COt. CbeckiDllIIId Savinp 8OCO\Il\tt). W. do .. prve... ..Y......... traadettoll' .t pnmd. .......Int. 11 you need uall'C&DCe ",1m Ill)" or thete items, pleue call 1.8S8-PNC-B"NK (1.888-762-226S) or stop by )'Our local PNC Bank brmch office. Sincere1y, ~ ~. .LI~ L.1~ Erb L Selll.... 1.~-7~-177S P7-PFSC-04-F ~OOFinl A~ Pltu~'A 15219 Memb. porc ~...~. _..... .w.......".. .__..... "_.~. ...........H.._...._.. ___...... . .._....~_._... .._......~. ..._ ..._.. ,~~_. . __... .__...._..._.__... "__~_" .....:--.... .".......... _.....".. _n..." -.. ....- -.-......--.-.-... -:-....--.-.- ; KIMBERLY IN.GERSOll - ~e: prod - Date of Death Request .. . _ .... Pa~ From: To: Date: Subject: fo: Kimberly, DATE OF DEATH REQUESTS INGERSOLL, KIMBERLY 8/31/200510:13:12 AM Re: prod - Date of Death Request Please find the date of death balance you had requested on the below account for decedent DELROY 0 BROSIUS -social security" 177-24-3150 for the Date of death: 04/1712005 1. Account Number: 23526092 - Balance $2,095.22 + S 0.21 =$ 2.095.43 total >>> <kingersoIlCmandtbank.com> 08/26/0510:34 AM >>> Account Information Date of death: 04/1712005 Account Number: 23526092 Product Type: Deposit Account Request Details Deliver to: Other Delivery Options: Mail Mailing Address Name: Scott M Dinner, Esquire Address: 3117 Chestnut St City: Camp Hili State: pa Zip: 17011 llE~ IIIIIIIII~ MPANY .. Plumbing .. HVAC .. Electrical .. Roofing It Industrial Hose .2058 State Road. camp Hill, PA 17011 . PH: (117) 761-0660 . FAX: (711) 761-6428 November 15, 2005 The Estate of Deb"oy D. Brosius RE: 401k Value at time of death The value of Delroy's 401k plan on April IS, 2005 was 5316,219.30. Yours truly, ~. Janet Le~ron~~ REV-1500 EX (6-00) REV-1500 OFFICIAL USE ONLY COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN DEPARTMENT OF REVENUE FILE NUMBER 001.32- DEPT. 280601 RESIDENT DECEDENT ~l-Q5 HARRISBURG, PA 17128-0601 COlMY CODE YEAR t-LMBER DECEDENT'S NAME (LAST, FIRST, AND MIDDLE INITIAL) SOCIAL SECURITY NUMBER ~ Z BROSIUS, DELROY D 177-24-3150 W DATE OF DEATH (MM-DD-YEAR) DATE OF BIRTH (MM-DD-YEAR) THIS RElURN MUST BE FILED IN DUPLICATE WITH THE C W 04-17-2005 02-15-1930 REGISTER OF WILLS (.) W (IF APPLICABLE) SURVIVING SPOUSE'S NAME (LAST, FIRST, AND MIDDLE INITIAL) SOCIAL SECURITY NUMBER C BROSIUS, CAROL A 162-36-9033 w [Xl 1. Original Return 0 2. Supplemental Return o 3. Remainder Return (date of death prior to 12-13-82) 1-0 ~s;(j) o 4. Limited Estate 0 4a. Future Interest Compromise (date of death after 12-12-82) !Xl 5. Federal Estate Tax Return Required UO::~ w[l.U [Xl 6. Decedent Died Testate (Attach copy of Will) 07. IOO Decedent Maintained a Living Trust (Attach copy of Trust) ~ 8. Total Number of Safe Deposit Boxes uO::--' [l.CO [l. o 9. Litigation Proceeds Received o 10_ Spousal Poverty Cred~ (date of death between 12-31-91 and 1-1-95) o 11. Election to tax under See 9113(A) (Attach Sth o~ <{ f- THIS SECTION MUST BE COMPLETED. ALL CORRESPONDENCE AND CONFIDENTIAL TAX INFORMATION SHOULD BE DIRECTED ToT z NAME COMPLETE MAILING ADDRESS w Cl CLARENCE E ASBURY 415 z FALLOWFIELD ROAD 0 FIRM NAME (If Applicable) [l. CAMP HILL, PA 17011 (j) MCKONLY & ASBURY, LLP w 0:: TELEPHONE NUMBER 0:: 0 u 717-761-7910 1. Real Estate (Schedule A) (1) 0.00 Ol:'l:'lrlAI II!=\F ONLY 2. Stocks and Bonds (Schedule B) (2) 0.00 n N ~ 1,430,000.00 ~O ~~8 3. Closely Held Corporation, Partnership or Sole-Proprietorship (3) S3?:l (l 4. Mortgages & Notes Receivable (Schedule D) (4) 43,697.00 lI1~ng~b ~Zf;;(jlI10 5. Cash, Bank Depos~s & Miscellaneous Personal Property (5) 86,250.00 >-C/l~~?:l Z -II" 00 Z (Schedule E) ti8O'"d"rJ"rJ 0 6. Jointly ONned Property (Schedule F) (6) 468,982.00 nC"rJS::~:::l ~ P?:l ~L<g , o Separate Billing Requested >-;j >-l .. L< 0 "WJ >- OC/l 7. Inter-Vivos Transfers & Miscellaneous Non-Probate Property (7) 316,219.00 o -"r:I :;) ~ (Schedule G or L) c: 8. Total Gross Assets (total Lines 1 - 7) (8) 2,345,148.00 <( (.) 9. Funeral Expenses & Administrative Costs (Schedule H) (9) 25,571.00 W (t:: 10. Debts of Decedent, Mortgage Liabil~ies, & Liens (Schedule I) (10) 2,429.00 11. Total Deductions (total Lines 9 & 10) (11) 28,000.00 12. Net Value of Estate (Line 8 minus Line 11) (12) 2,317,148.00 13. Chamable and Governmental Bequests/See 9113 Trusts ,ei which an e1ectioo to tax has na been (13) 0.00 made (Schedule J) 14. Net Value Subject to Tax (Line 12 minus Line 13) (14) 2,317,148.00 SEE INSTRUCTIONS FOR APPUCABLE RATES Z 15. Amount a Line 14 taxable at the spousal tax 0 8 9 5 , 0 1 9 x.O 0 0 ~ rate, or transfers under See. 9116 (a)(t2) (15) 0.00 1 , 4 2 2 , 12 9 x.o 4 5 '. ~ 16. Amount a Line 14 taxable at lineal rate (16) 63,995.81 :;) Q. 17. Amount a Line 14 taxable at sibling rate x .12 (17) 0.00 :E 0 18. Amount a Line 14 taxable at collateral rate X _15 (18) 0.00 (.) ~ 19. Tax Due (19) 63,995.81 20_ 0 I CI-ECK HERE IF YOU ARE REQUESnNG A REFlINDOF AN OVERPAYMENT I " > > BE SURE 10 ANSWER ALL QUESTIONS ON REVERSE SIDE AND REaECK MATH < < /OA SlFPA42021F.1 ~ Decedent's Complete Address: STREET ADDRESS 2 13 7 ORCHARD ROAD CITY I STATE -I ZIP 1 7 011 CAMP HILL PA Tax Payments and Credits: 1. Tax Due (Page 1 Line 19) 2. Credits/Payments A. Spousal Poverty Credit 8. Prior Payments C. Discount (1 ) 63,995.81 57,050 2,925 Total Credits (A + 8 + C) (2) 59,975.00 3. InteresUPenalty if applicable D. Interest E. Penalty 0.00 TotallnteresUPenalty (D + E) (3) 4. If Line 2 is greater than Line 1 + Line 3, enter the difference. This is the OVERPAYMENT. Check box on Page 1 line 20 to request a refund (4) 5. If Line 1 + Line 3 is greater than Line 2, enter the difference. This is the TAX DUE. (5) 0.00 4,020.81 A. Enter the interest on the tax due. (5A) B. Enter the total of Line 5 + 5A. This is the BALANCE DUE. (58) Make Check Payable to: REGISTER OF WILLS, AGENT 4,020.81 1. Did decedent make a transfer and: Yes No a. retain the use or income of the property transferred; ........................................ 0 [Xl b. retain the right to designate who shall use the property transferred or its income; . . . . . . . . . . . . . . . . . ., 0 [Xl c. retain a reversionary interest; or ........................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., 0 [Xl d. receive the promise for life of either payments, benefits or care? ............................... 0 [Xl 2. If death occurred after December 12, 1982, did decedent transfer property within one year of death without receiving adequate consideration? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 0 [Xl 3. Did decedent own an "in trust for" or payable upon death bank account or security at his or her death? . . . .. 0 [XJ 4. Did decedent own an Individual Retirement Account, annuity, or other non-probate property which contains a beneficiary designation? .................................. . . . . . . . . . . . . . . . . . . . .. !Xl 0 IF THE ANSWER TO Atf( OF THE ABOVE QUESTIONS IS YES, YOU MUST COMPLETE SCHEDULE G AND FILE IT AS PART OF THE RETURN. Under penalties of pe~ury, I declare that I have examined this return, including accompanying 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 rep esentative is based on all information of which preparer has any knowledge. SIGNATUR ;;ON RESP SI i<.~ F G RETURN , PLEASE ANSWER THE FOLLOVVlNG QUESTIONS BY PLACING AN "Xli IN THE APPROPRIATE BLOCKS 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 ofthe surviving spouse is 3% [72 P.S. ~9116 (a) (1.1) (ill. 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 P.S. ~9116 (a) (1.1) (ii)]. 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 retum are still applicable even if 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 parent, or a stepparent ofthe child is 0% [72 P.S. ~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 P.S. ~9116(1.2) [72 P.S. S9116(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 an individual who has at least one parent in common with the decedent, whether by blood or adoption. STFPA42021F.2 REV-1502 EX + (1-97) (I) COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE A REAL ESTATE ESTATE OF FILE NUMBER DELROY D BROSIUS 2005-00437 All real property owned solely or as a tenant in common must be reported at fair market value. Fair market value is defined as the price at which property would be exchanged between a willing buyer and a willing seller, ne~her being compelled to buy or sell, both having reasonable knowledge of the relevant facts. Real property which is jointly-owned with right of survivorship must be disclosed on Schedule F. ITEM NUMBER DESCRIPTION VALUE AT DATE OF DEATH 1. TOTAL (Also enter on line 1, Recapitulation) $ (If more space is needed, insert additional sheets of the same size) 0.00 STFPA42021F.3 REV-1503 EX + (1-97) (I) COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE B STOCKS & BONDS ESTATE OF DELROY D BROSIUS FILE NUMBER 2005-00437 All property jointly-owned with the right of survivorship must be disclosed on Schedule F. ITEM NUMBER DESCRIPTION 1. VALUE AT DATE OF DEATH TOTAL (Also enter on line 2, Recapitulation) $ (If more space is needed, insert additional sheets of the same size) STFPA42021F.4 0.00 REV-1504 EX + (1-97) (I) COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE C CLOSELY-HELD CORPORATION, PARTNERSHIP or SOLE-PROPRIETORSHIP ESTATE OF DELROY D BROSIUS FILE NUMBER 2005-00437 Schedule C-1 or C-2 (Including all supporting informatiOl"l) must be attached for each c1osely-held corporation/partnership interest of the decedent, other than a sole-proprietorship. See instructions for the supporting information to be submitted for sole-proprietorships. ITEM VALUE AT DATE NUMBER DESCRIPTION OF DEATH 1. 2. 980 SHARES OF CLASS B STOCK OF R.F. FAGER COMPANY PAR VALUE $10/SHARE; MARKET VALUE $1,430/SHARE. 20 SHARES OF CLASS A STOCK OF R.F. FAGER COMPANY PAR VALUE $10/SHARE; MARKET VALUE $1,430/SHARE. 1,401,400 28,600 TOTAL (Also enter on line 3, Recapitulation) $ 1 30 00 ,4 ,0 .00 (If more space is needed, insert additional sheets of the same size) STFPA42021F.5 REV-1505 EX + (1-97) (I) SCHEDULE C-1 COMMONWEALTH OF PENNSYLVANIA CLOSELY-HELD CORPORATE INHERITANCE TAX RETURN STOCK INFORMATION REPORT RESIDENT DECEDENT ESTATE OF FILE NUMBER DELROY D BROSIUS 2005-00437 1. Name of Corporation R. F . FAGER COMPANY State of Incorporation PENNSYLVANIA Address 2 0 5 8 STATE ROAD Date of Incorporation 11 / 0 4 / 197 4 City CAMP HILL State P A Zip Code 1 7 0 11 Total Number of Shareholders 6 2. Federal Employer I.D. Number 23 -19 3 7 2 3 0 Business Reporting Year 2 0 0 4 3. Type of Business SALES Product/Service PLUMB I N G & HEATING SUPPLY 4. TYPE TOTAL NUMBER OF NUMBER OF SHARES VALUE OF THE STOCK Voting / Non- Voting SHARES OUTSTANDING PAR VALUE OWNED BY THE DECEDENT DECEDENT'S STOCK Common 100/5000 5,100 10 1,000 $ 1,430,000 Preferred $ Provide all rights and restrictions pertaining to each class of stock. 5. Was the decedent employed by the Corporation? [X] Yes DNo If yes, Position EXECUTIVE Annual Salary $ 2 2 7 , 60 9 Time Devoted to Business 1 0 0 % 6. Was the Corporation indebted to the decedent? [X] Yes DNo If yes, provide amount of indebtedness $ 30,000 7. Was there life insurance payable to the corporation upon the death of the decedent? DYes [X] No If yes, Cash Surrender Value $ Net proceeds payable $ Owner of the policy 8. Did the decedent sell or transfer stock of this company within one year prior to death or within two years if the date of death was prior to 12-31-82? DYes [X] No If yes, DTransfer o Sale Number of Shares Transferee or Purchaser Consideration $ Date Attach a separate sheet for add~ional transfers and/or sales. 9. Was there a written shareholder's agreement in effect at the time of the decedent's death? [X] Yes DNo If yes, provide a copy of the agreement. 10. Was the decedent's stock sold? DYes IX] No If yes, provide a copy of the agreement of sale, etc. 11. Was the corporation dissolved or liquidated after the decedent's death? DYes IX] No If yes, provide a breakdown of distributions received by the estate, including dates and amounts received. 12. Did the corporation have an interest in other corporations or partnerships? DYes IX] No If yes, report the necessary information on a separate sheet, including a Schedule C-1 or C-2 for each interest. THE FOLLOWING INFORMATION MUST BE SUBMITTED WITH THS SCHEDULE .. A. Detailed calculations used in the valuation of the decedent's stock. B. Complete copies of financial statements or Federal Corporate Income Tax retums (Fonn 1120) for the year of death and 4 preceding years. C. If the corporation owned real estate, submit a list showing the complete addressles and estimated fair marl<et value/s. If real estate appraisals have been secured, attach copies. D. List of principal stockholders at the date of death, number of shares held and their relationship to the decedent. E. List of officers, their salaries, bonuses and any other benefits received ftom the corporation. F. Statement of dividends paid each year. Ust those declared and unpad. , G. Any other infonnation relating to the valuation of the decedent's stock. STFPA42021F.6 REV-1506 EX + (1-97) (I) COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE C-2 PARTNERSHIP INFORMATION REPORT ESTATE OF DELROY D BROSIUS FILE NUMBER 2005-00437 1. Name of Partnership Address City 2. Federal Employer 1.0. Number 3. Type of Business Date Business Commenced Business Reporting Year State Zip Code Product/Service 4. Decedent was a 0 General 0 Limited partner. If decedent was a limited partner, provide initial investment $ 5. PERCENT OF PERCENT OF BALANCE OF PARTNER NAME INCOME OWNERSHIP CAPITAL ACCOUNT A. B. C. D. 6. Value of the decedent's interest $ 7. Was the Partnership indebted to the decedent? o Yes ONo If yes, provide amount of indebtedness $ 8. Was there life insurance payable to the partnership upon the death of the decedent? 0 Yes 0 No If yes, Cash Surrender Value $ Net proceeds payable $ Owner of the policy 9. Did the decedent sell or transfer an interest in this partnership within one year prior to death or within two years if the date of death was prior to 12-31-82? o Yes 0 No If yes, 0 Transfer 0 Sale Percentage transferred/sold Transferee or Purchaser Consideration $ Date Attach a separate sheet for additional transfers and/or sales. 10. Was there a written partnership agreement in effect at the time of the decedent's death? If yes, provide a copy of the agreement. 11. Was the decedent's partnership interest sold? 0 Yes 0 No If yes, provide a copy of the agreement of sale, etc. 12. Was the partnership dissolved or liquidated after the decedent's death? o Yes ONo o Yes ONo If yes, provide a breakdown of distributions received by the estate, including dates and amounts received. 13. Was the decedent related to any of the partners? o Yes ONo If yes, explain 14. Did the partnership have an interest in other corporations or partnerships? o Yes 0 No If yes, report the necessary infonnation on a separate sheet, including a Schedule C-1 or C-2 for each interest. A. Detailed calculations used in the valuation of the decedent's partnership interest. B. Complete copies of financial statements or Federal Partnership Income Tax retums (Form 1065) for the year of death and 4 preceding years. C. If the partnership owned real estate, submit a list showing the complete addressles and estimated fair market value/s. If real estate appraisals have been secured, attach copies. D. Any other infonnation relating to the valuation of the decedent's partnership interest. STFPA42021F.7 REV-1507 EX + (1-97) (I) COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE D MORTGAGES & NOTES RECEIVABLE ESTATE OF DELROY 0 BROSIUS FILE NUMBER 2005-00437 All property jointly-owned with the right of survivorship must be disclosed on Schedule F. ITEM NUMBER DESCRIPTION 1. NOTE PAYABLE OF $30,000, UNPAID BALANCE: $30,000; R.F. FAGER COMPANY TO DELROY BROSIUS; DUE ON DEMAND; INTEREST PAYABLE AT 6% ANNUALLY. MORTGAGE OF $55,000, UNPAID BALANCE: $13,697; DATED SEPTEMBER 1, 1994; CHRISTINE & RALPH MARQUART TO DELROY BROSIUS; PREMISES: 2252 ORCHARD RD, CAMP HILL, PA; DUE SEPTEMBER 2007; INTEREST PAYABLE AT 6% THE FIRST OF EACH MONTH. 2. VALUE AT DATE OF DEATH 30,000 13,697 STFPA42021F.8 TOTAL (Also enter on line 4, Recapitulation) $ (If more space is needed, insert additional sheets of the same size) 43,697.00 REV-150B EX + (1-97) (I) COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE E CASH, BANK DEPOSITS, & MISC. PERSONAL PROPERTY ESTATE OF DELROY D BROSIUS FILE NUMBER 2005-00437 Include the proceeds of litigation and the date the proceeds were received by the estate. All property jointly-owned with the right of survivorship must be disclosed on Schedule F. ITEM VALUE AT DATE NUMBER DESCRIPTION OF DEATH 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. TRAC HALLA EXCAVATOR; VALUED AT SALE PRICE. TWO JOHN DEERE TRACTORS, ONE MOWER; VALUED AT COMPARABLE SALES PRICE. CAT WHEEL LOADER; VALUED AT SALES PRICE. 1996 FORD VAN ECONOLINE; VALUED AT SALES PRICE. 1985 CHEVROLET CORVETTE; VALUED AT SALES PRICE. 1990 LINCOLN TOWN CAR; VALUED AT SALES PRICE. 1997 FORD 3/4 TON PICUP; VALUED AT KELLEY BLUE BOOK VALUE 1997 FORD EXPEDITION; VALUED AT KELLEY BLUE BOOK VALUE. MISCELLANEOUS VEHICLES; VALUED AT SALE PRICE. MISCELLANEOUS HAND TOOLS & YARD EQUIPMENT; VALUED AT ESTIMATED SALES PRICE. MISCELLANEOUS HOUSEHOLD ITEMS AND CLOTHING; VALUED AT MARKET VALUE. JOHN DEERE TRACTOR; VALUED AT COMPARABLE SALES PRICE. 20,000 14,000 12,000 5,500 5,000 2,800 4,000 4,500 650 5,000 5,500 7,300 STF PA42021 F.9 TOTAL (Also enter on line 5, Recapitulation) $ (If more space is needed, insert additional sheets of the same size) 86,250.00 REV-1509 EX + (1-97) (I) COMMONWEALTH OF PENNSYlVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE F JOINTLY-OWNED PROPERTY ESTATE OF DELROY D BROSIUS 7. 8. 9. 10. STFPA42021F.10 If an asset was made joint within one year of the decedent's date of death, it must be reported on Schedule G. A. CAROL A. BROSIUS SURVIVING JOINT TENANT(S) NAME ADDRESS B. c. JOINTLY-OWNED PROPERTY: LETTER ITEM FOR JOINT NUMBER TENANT DATE MADE JOINT 1. A. 2. A. 3. A. 4. A. 5. A. 6. A. A. A. A. A. 2137 ORCHARD RD. CAMP HILL, PA 17011 DESCRIPTION OF PROPERTY Irdude name of finarcial institution and bark accollll runber or similar identifying runber. Attach deed for join1!y-held real estate. HOUSE AND LOT, 2137 ORCHARD RD., CAMI HILL, PA. BARN, GARAGE AND LOT, 2139 ORCHARD RI . CAMP HILL, PA. HOUSE AND LOT, 2240 ORCHARD RD., CAMI HILL, PA. HOUSE AND LOT, 2244 ORCHARD RD., CAMI HILL, PA. 0.20 ACRES VACANT LOT, NINA ALLEY, CAMP HILL, PA; LOT 102. 1.41 ACRES VACANT LOT, WILLOW MILL PARK ROAD, MECHANICSBURG, PA; LOT L-C002 PNC CHECKING ACCOUNT #5140253416 PNC SAVINGS ACCOUNT #5000758156 ACCRUED INTEREST ON ITEM #8. M&T CHECKING ACCOUNT #23526092 FILE NUMBER 2005-00437 DATE OF DEATH VALUE OF ASSET 335,000 245,000 121,000 120,000 5,000 49,100 11,437 49,239 93 2,095 RELATIONSHIP TO DECEDENT SURVIVING SPOUSE %OF DECD'S INTEREST DATE OF DEATH VALUE OF DECEDENTS INTEREST 50167,500.00 0.00 50122,500.00 0.00 50 60,500.00 0.00 50 60,000.00 0.00 50 2,500.00 0.00 5024,550.00 0.00 50 5,718.50 50 24,619.50 50 46.50 50 1,047.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 TOTAL (Also enter on line 6, Recapitulation) $ (If more space is needed, insert additional sheets of the same size) 468,982.00 REV-1510 EX + (1-97) (I) COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT ESTATE OF DELROY D BROSIUS SCHEDULE G INTER-VIVOS TRANSFERS & MISC. NON-PROBATE PROPERTY FILE NUMBER 2005-00437 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 INCLUDE M NAME OF Tl-E TRANSFEREE, Tl-EIR RELATIONSHIP TO DECEDENT AI{) M DATE DATE OF DEATH DECO'S EXCLUSION TAXABLE VALUE NUMBER OF TRANSFER. ATTACH A COPY OF Tl-E DEED FOR REAL ESTATE. VALUE OF ASSET INTEREST (IF APPLICABLE) 1. R.F. FAGER COMPANY QUALIFIED 401 (k) PLAl 316,219 100 316,219.00 (SPOUSE IS SOLE BENEFICIARY) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 TOTAL (Also enter on line 7, Recapitulation) $ 316 219.00 STF PA42021F.ll (If more space is needed, insert additional sheets of the same size) REV-1511 EX + (1-97) (I) COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE H FUNERAL EXPENSES & ADMINISTRATIVE COSTS ESTATE OF DELROY D BROSIUS FILE NUMBER 2005-00437 Debts of decedent must be reported on Schedule I. ITEM NUMBER DESCRIPTION AMOUNT A. FUNERAL EXPENSES: 1. AUER MEMORIAL HOME CREMATION INC. 1,240 B. ADMINISTRATIVE COSTS: 1. Personal Representative's Commissions Name of Personal Representative(s) Social Security Number( s) I EIN Number of Personal Representative( s) Street Address City Slate Zip Year(s) Commission Paid: 2. AttomeyFees 6,000 3. Family Exemption: (If decedent's address is not the same as claimant's, attach explanation) Claimant Street Address City Slate Zip Relationship of Claimant to Decedent 4. Probate Fees 775 5. Accountant's Fees 16,000 6. Tax Retum Preparer's Fees 7. NOTICE/PUBLICATION FEES 256 8. APPRAISAL FEES 1,300 TOTAL (Also enter on line 9, Recapitulation) $ 25.571.00 STF PA42021 F.12 (If more space is needed, insert additional sheets of the same size) REV-1512 EX + (1-97) (I) COMMONWEALTH OF PENNSYlVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE I DEBTS OF DECEDENT, MORTGAGE LIABILITIES, & LIENS ESTATE OF DELROY 0 BROSIUS FILE NUMBER 2005-00437 Include unreimbursed medical expenses. ITEM NUMBER DESCRIPTION AMOUNT 2,429 1. HOLY SPIRIT HOSPITAL, JOHN D. MULLIKEN M.D., QUANTUM IMAGING, JOYCE HELT; MEDICAL EXPENSES INCURRED PRIOR TO DEATH. S1F PA42021 F.13 TOTAL (Also enter on line 10, Recapitulation) $ (If more space is needed, insert additional sheets of the same size) 2,429.00 REV-1513 EX + (9-DO) COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE J BENEFICIARIES ESTATE OF DELROY D BROSIUS FILE NUMBER 2005-00437 RELATIONSHIP TO DECEDENT NUMBER NAME AND ADDRESS OF PERSON(S) RECEIVING PROPERTY Do Not List Trustee(s) I. TAXABLE DISTRIBUTIONS [include outright spousal distributions, and transfers under Sec. 9116 (a) (1.2)] CAROL A BROSIUS 1. 2137 ORCHARD ROAD CAMP HILL, PA 17011 SPOUSE 2. HAROLD R BROSIUS 474 OLD STAGE ROAD LEWISBERRY, PA 17339 SON 3. DARWIN K BROSIUS 254 STONEHEDGE LANE MECHANICSBURG, PA 17055 SON 4. DARRELL C BROSIUS 35 S. ALYDAR BLVD. DILLSBURG, PA 17019 SON AMOUNT OR SHARE OF ESTATE 907,850 483,966 476,666 476,666 ENTER DOLLAR AMOUNTS FOR DISTRIBUTIONS SHOWN ABOVE ON LINES 15 THROUGH 18, AS APPROPRIATE, ON REV-1500 COVER SHEET II. NON-TAXABLE DISTRIBUTIONS: A. SPOUSAL DISTRIBUTIONS UNDER SECTION 9113 FOR WHICH AN ELECTION TO TAX IS NOT BEING MADE 1. B. CHARITABLE AND GOVERNMENTAL DISTRIBUTIONS 1. TOTAL OF PART II - ENTER TOTAL NON-TAXABLE DISTRIBUTIONS ON LINE 13 OF REV-1500 COVER SHEET $ (If more space is needed, insert additional sheets of the same size) 0.00 STF PA42021 F.14 REV-1514 EX + (1-97) (I) SCHEDULE K LIFE ESTATE, ANNUITY COMMONWEALTH OF PENNSYLVANIA & TERM CERTAIN INHERITANCE TAX RETURN RESIDENT DECEDENT (Check Box 4 on Rev-1500 Cover Sheet) ESTATE OF FILE NUMBER DELROY D BROSIUS 2005-00437 This schedule is to be used for all single life, joint or successive life estate and term certain calculations. For dates of death prior to 5-1-89, actuarial factors for single life calculations can be obtained from the Department of Revenue, Specialty Tax Unit. Actuarial factors can be found in IRS Publication 1457, Actuarial Values, Alpha Volume for dates of death on or after 5-1-89. Indicate the type of instrument which created the future interest below and attach a copy to the tax return. DWiIl D Intervivos Deed of Trust D Other . . UFE ESTATEJNTERESTCALCULATION . .. NAME(S) OF NEAREST AGE AT TERM OF YEARS LIFE ESTATE IS LIFE TENANT(S) DATE OF BIRTH DATE OF DEATH PAYABLE o Life or OTenn of Years o Life or 0 Tenn of Years o Life or 0 Tenn of Years o Life or OTenn of Years 1. Value of fund from which life estate is payable $ 2. Actuarial factor per appropriate table Interest table rate - 031/2% 06% 010% o Variable Rate % 3. Value of life estate (Line 1 multiplied by Line 2) $ .. ANN.u.I"Rl.IN:r~R.~ST~A~~.u~TIQN..... NAME(S) OF NEAREST AGE AT TERM OF YEARS ANNUITANT(S) DATE OF BIRTH DATE OF DEATH ANNUITY IS PAYABLE o Life or OTenn of Years o Life or OTenn of Years o Life or 0 T enn of Years o Life or OTenn of Years 1. Value of fund from which annuity is payable $ 2. Check appropriate block below and enter corresponding (number) Frequency of payout - o Weekly (52) OBi-weekly (26) o Monthly (12) o Quarterly (4) 0 Semi-annually (2) o Annually (1) o Other ( ) 3. Amount of payout per period $ 4. Aggregate annual payment, Line 2 multiplied by Line 3 0.00 5. Annuity Factor (see instructions) Interest table rate 031/2% 06% 010% o Variable Rate % 6. Adjustment Factor (see instructions) 7. Value of annuity -If using 3 1/2%, 6%, 10%, or if variable rate and period payout is at end of period, calculation is: Line 4 x Line 5 x Line 6 $ If using variable rate and period payout is at beginning of period, calculation is: (Line 4 x Line 5 X Line 6) + Line 3 $ NOTE: The values of the funds which create the above future interests must be reported as part of the estate assets on Schedules A through G of this tax return. The resu~ing life or annuity interest( s) should be reported at the appropriate tax rate on Lines 13, 15, 16 and 17. (If more space is needed, insert additional sheets of the same size) STF PA42021 F.15 REV-1647 EX + (9-00) SCHEDULE M FUTURE INTEREST COMPROMISE COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT (Check Box 4a on Rev-1500 Cover Sheet) ESTATE OF FILE NUMBER DELROY D BROSIUS 2005-00437 This schedule is appropriate only for estates of decedents dying after December 12,1982. This schedule is to be used for all future interests where the rate of tax which will be applicable when the future interest vests in possession and enjoyment cannot be established with certainty. Indicate below the type of instrument which created the future interest and attach a copy to the tax return. o Will o Trust o Other I. Beneficiaries NAME OF BENEFICIARY RELATIONSHIP DATE OF BIRTH AGE TO NEAREST BIRTHDAY 1. 2. 3. 4. 5. n. For decedents dying on or after July 1, 1994, if a surviving spouse exercised or intends to exercise a right of withdrawal within 9 months of the decedent's death, check the appropriate block and attach a copy of the document in which the surviving spouse exercises such withdrawal right. 0 Unlimited right of withdrawal 0 Limited right of withdrawal m. Explanation of Compromise Offer: Iv. Summary of Compromise Offer: 1. Amount of Future Interest.. . . .. .. . .. . .. . . . . . . . . . . . . . . .. . . . . . . . . .. .. .. .. . . . . .. . . . .. .. .. . . . . . . . $ 2. Value of Line 1 exempt from tax as amount passing to charities, etc. (also include as part of total shown on Line 13 of Cover Sheet) ........... $ 3. Value of Line 1 passing to spouse at appropriate tax rate Check One 06%, 03%, 00% .......................... $ (also include as part of total shown on Line 15 of Cover Sheet) 4. Value of Line 1 taxable at lineal rate Check One 06%, 04.5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $ (also include as part of total shown on Line 16 of Cover Sheet) 5. Value of Line 1 Taxable at sibling rate (12%) (also include as part of total shown on Line 17 of Cover Sheet) ........... $ 6. Value of Line 1 Taxable at collateral rate (15%) (also include as part of total shown on Line 18 of Cover Sheet) ........... $ 7. Total value of Future Interest (sum of Lines 2 thru 6 must equal Line 1) . . . . . . . . . . .. . . .. . . . . . . . . . . . .. .. . $ 0.00 STF PA42021 F.16 (If more space is needed, insert additional sheets of the same size) REV-1649 EX + (1-97) (I) COMMONWEALTH OF PENNSYLVANIA INHERrrANCE TAX RETURN RESIDENT DECEDENT SCHEDULE 0 ELECTION UNDER SEC. 9113(A) (SPOUSAL DISTRIBUTIONS) ESTATE OF FILE NUMBER DELROY D BROSIUS 2005-00437 Do not complete this schedule unless the estate is making the election to tax assets under Section 9113 (A) of the Inheritance & Estate Tax Act If the election applies to more than one trust or similar arrangement, a separate form must be filed for each trust. This election applies to the Trust (marital, residual A, B, By-pass, Unified Credit, etc.). If a trust or similar arrangement meets the requirements of Section 9113 (A), and: a. The trust or similar arrangement is listed on Schedule 0, and b. The value of the trust or similar arrangement is entered in whole or in part as an asset on Schedule 0, then the transferor's personal representative may specifically identify the trust (all or a fractional portion or percentage) to be included in the election to have such trust or similar property treated as a taxable transfer in this estate. If less than the entire value of the trust or similar property is included as a taxable transfer on Schedule 0, the personal representative shall be considered to have made the election only as to a fraction of the trust or similar arrangement. The numerator of this fraction is equal to the amount of the trust or similar arrangement included as a taxable asset on Schedule O. The denominator is equal to the total value of the trust or similar arrangement. PART A: Enter the description and value of all interests, both taxable and non-taxable, regardless of location, which pass to the decedent's surviving spouse under a Section 9113 (A) trust or similar arrangement. DESCRIPTION VAlLE Part A Total $ PART B: Enter the description and value of all interests included in Part A for which the Section 9113 (A) election to tax is being made. DESCRIPTION VAlLE 0.00 Part B Total $ (If more space is needed, insert additional sheets of the same size) 0.00 STF PA42021 F.17 706 United States Estate (and Generation-Skipping Transfer) Form Tax Return OMS No. 1545-0015 (Rev. August 2005) Estate of a citizen or resident of the United States (see separate instructions). Department of the Treasury To be filed for decedents dying after December 31,2004, and before January 1, 2006. Internal Revenue Service 1a Decedent's first name and middle initial (and maiden name, if any) /1b Decedent's last name 12 Decedent's Social Security No. "- DELROY D. BROSIUS 177-24-3150 0 .... ::J 3a County, state, and ZIP code, or foreign country, of legal residence (domicile) at time of death 3b Year domicile established 14 Date of birth 15 Date of death (,l Q) CUMBERLAND. PA 17011 02/15/1930 04/17/2005 )( W Executor's address (number and street including apartment or suite no. or rural route; city, "C 6a Name of executor (see page 3 of the instructions) STMT 1 6b l: town, or post office; state; and ZIP code) and phone no. I'll CAROL A. BROSIUS 2137 ORCHARD RD .... l: CAMP HILL, PA 17011 Q) 6c Executor's social security number (see page 3 of the instructions) "C Q) 162-36-9033 Phone no. (,l Q) a 7a Name and location of court where will was probated or estate administered 1:7b Case number I ..: CARLISLE 2105-0437 1:: 8 If decedent died testate check here. [X] and attach a certified coov of the will. 19 If vou extended the time to file this Form 706 check here ~D I'll Q. 10 If Schedule R-1 is attached. check here. D 1 Total gross estate less exclusion (from Part 5, Recapitulation, page 3, item 12) ...... ........ ... ................. ................... 1 2 498.825. 2 Total allowable deductions (from Part 5, Recapitulation, page 3, item 22) ........ .............. ................... 2 1.089.592. 3a Tentative taxable estate (before state death tax deduction) (subtract line 2 from line 1) ....... .................................. 3a 1.409.233. b State death tax deduction ....................... - ........... .................... ............ ........ ................. 3b 63.996. c Taxable estate (subtract line 3b from line 3a) ............................ ............. .... .. ....... ..... 3c 1.345.237. 4 Adjusted taxable gifts (total taxable gifts (within the meaning of section 2503) made by the decedent after December 31,1976, other than gifts that are includible in decedent's gross estate (section 2001(b))) -....................... .... 4 243 000. 5 Add lines 3c and 4 ..n............... .................... ........... ........ . .................. .u_n...... .... ......... .. n............ 5 1 588 237. 6 Tentative tax on the amount on line 5 from Table A on page 4 of the instructions ........... ..................... 6 595 507. 7 Total gift tax payable with respect to gifts made by the decedent after December 31,1976. Include gift taxes by the decedent's spouse for such spouse's share of split gifts (section 2513) only if the decedent was the donor of these gifts and they are includible in the decedent's gross estate (see instructions) .................... ....... ..................... 7 O. 8 Gross estate tax (subtract line 7 from line 6) .......... .................. ....... ..-..... ...... .......... 8 595 507. l: 9 Maximum unified credit (applicable credit amount) against estate tax 9 555.800. 0 ... ...... .......... :;::l 10 Adjustment to unified credit (applicable credit amount). (This adjustment I'll .... ::J may not exceed $6,000. See page 5 of the instructions.) 10 Co ....................... E 11 Allowable unified credit (applicable credit amount) (subtract line 10 from line 9) 11 555.800. 0 ....... . . . . . . . . . . . . . ........... . . . . . . . . . . . . .......... 0 12 Subtract line 11 from line 8 (but do not enter less than zero) 12 39.707. )( ......... ...... ......... ........ ..... .. ........... ...... ~ Credit for foreign death taxes (from Schedule(s) Pl. (Attach .... 13 I t'J Form(s) 706-CE.) ......... ....-............ ........................... . . . . . . . . . . . . 13 1:: 14 Credit for tax on prior transfers (from Schedule Q) 14 I'll ......................... ...... ... ..... Q. 15 Total credits (add lines 13 and 14) 15 ...................... ......... - .n................... .. "n... .................... 16 Net estate tax (subtract line 15 from line 12) .................................... ........... ........ ..................... ...................... 16 39.707. 17 Generation.skipping transfer taxes (from Schedule R, Part 2, line 10) ... ..... ..-....... . . . . . . . . . . . .......... .... 17 18 Total transfer taxes (add lines 16 and 17) . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . ............. ..... .... .... .. ..................... 18 39 707. 19 Prior payments. Explain in an attached statement . . - . .. ........... ........... .... ......... .... ......... .. ... ............. .. ........... 19 20 Balance due (or overoavment\ (subtract line 19 from line 18\ ..................... .-.... ....... ......... . . . . . . . . . . . ....... ..... ....... 20 39.707. Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer other than the executor is based on all information of which preparer has any knowledge. Signature(s) of executor(s) Date MCKONLY & ASBURY, LLP P.O. BOX 1331 HARRISBURG, PA 17105 Signature of preparer other than executor Address (and ZIP code) For Privacy Act and Paperwork Reduction Act Notice, see page 27 of the separate instructions for this form. Date Form 706 (Rev. 6-2005) 6g~~~-~5 LHA 1 Form 706 (Rev. 8-2005) Estate of: DELROY D. BROSIUS Part 3 - Elections by the Executor Please check the "Yes" or "No" box for each question. (See instructions beginning on page 6.) 1 Do you elect alternate valuation? .............. ....... ....... ...... 2 Do you elect special-use valuation? ............ . . .... .... ............ ...... If "Yes: you must complete and attach Schedule A-t 3 Do you elect to pay the taxes in installments as described in section 6166? ............... ........ ........... If "Yes" ou must attach the additional information described on a e 9 of the instructions. 3 4 Do ou elect to ost one the art of the taxes attributable to a reversionar or remainder interest as described in section 6163? 4 X Part 4 - General Information /Note: Please attach the necessary supplemental documents. You must attach the death certificate.) (See instr. on paqe 10.) Authorization to receive confidential tax information under Regs. sec. 60t504(b)(2)(i); to act as the estate's representative before the IRS; and to make written or oral presentations on behalf of the estate if return prepared by an attorney, accountant, or enrolled agent for the executor: Name of representative (print or type) State Address (number, street, and room or suite no., city, state, and ZIP code) P.O. BOX 1331 CLARENCE E. ASBURY PA RISBURG PA 17105 I declare that I am the D attorney/ [X] certified public accountanV D enrolled agent (you must check the applicable box) for the executor and prepared this return for the executor. I am not under suspension or disbarment from practice before the Internal Revenue Service and am qualified to practice in the state shown above. Signature CAF number Date Telephone number 2600-00101R 7177617910 Yes No X X 2 X 1 Death certificate number and issuing authority (attach a copy of the death certificate to this return). P 11557955: COMMONWEALTH OF PA, DEPT. OF HEALTH 2 Decedent's business or occupation. If retired, check here ~ D and state decedent's former business or occupation. EXECUTIVE 3 Marital status of the decedent at time of death: [X] Married D Widow or widower - Name, SSN, and date of death of deceased spouse ~ D Single D Legally separated D Divorced - Date divorce decree became final 4a Surviving spouse's name CAROL A. BROSIUS 4b Social security number 162-36-9033 4c Amount received (see page 10 of the instructions) 1 061 527. 5 Individuals (other than the surviving spouse), trusts, or other estates who receive benefits from the estate (do not include charitable beneficiaries shown in Schedule 0 see instructions. Name of individual, trust, or estate receiving $5,000 or more HAROLD R. BROSIUS Identifying number Relationship to decedent 209-46-0833 SON Amount (see instructions) 483,966. DARWIN K. BROSIUS 209-46-0834 SON 476,666. DARRELL C. BROSIUS 201-52-2401 SON 476,666. All unascertainable beneficiaries and those who receive less than $5,000 Total .............. ...................... Please check the "Yes" or "No" box for each question. 1 437 298. Yes No 6 Does the gross estate contain any section 2044 property (qualified terminable interest property (QTIP) from a prior gift or estate) (see page 10 of the instructions)?.. ........... ....... ..... ........ 7 a Have Federal gift tax returns ever been filed? .... ................... If "Yes" lease attach co ies of the returns if available and furnish the followin information: 7 b Period(s) covered 7c Internal Revenue office(s) where filed 1993 PHILADELPHIA PA ~g:f~:05 (continued on next page) X Page 2 2 Form 706 (Rev. 8-2005) ESTATE OF DELROY D. BROSIUS Part 4 - General Information (continued) 177-24-3150 If you answer ''Yes' to any of questions 8.16, you must attach additional information as described in the instructions. Yes No 8 a Was there anv insurance on the decedent's life that is not included on the return as Dart of the aross estate? . ................... . ............ X b Did the decedent own any insurance on the life of another that is not included in the aross estate? ..... .........--..... . . . . . . . . . . . . .... . . . . . . . . . . . . . . . X 9 Did the decedent at the time of death own any properly as a joint tenant with right of survivorship in which (a) one or more of the other joint tenants was someone other than the decedent's spouse, and (b) less than the full value of the properly is included on the return as part of the nross estate? If ''Yes: vou must comolete and attach Schedule E ........... ............................................... ....... ..... .... ....... . . . . . . . . . . . . . X 10 Did the decedent, at the time of death, own any interest in a partnership or unincorporated business or any stock in an inactive or closely held corn oration? .. ............................. ...... ....................... .................. ............. ...... . .......... ........ .......... ............. .......... X 11 Did the decedent make any transfer described in section 2035, 2036, 2037, or 2038 (see the instructions for Schedule G beainnina on Daae 13 of the seoarate instructions)? If "Yes" vou must comnlete and attach Schedule G .... ....--........... ...... .............. ............... X 12 a Were there in existence at the time of the decedent's death any trusts created bv the decedent durinG his or her lifetime? ... ........... X b Were there in existence at the time of the decedent's death any trusts not created by the decedent under which the decedent nossessed any Dower beneficial interest or trusteeshiD? ............. ..................... .. .................. .... ....... ....... ...... X c Was the decedent receiving income from a trust created after October 22,1986 by a parent or grandparent? . X If "Yes" was there a GST taxable termination (under section 2612) unon the death of the decedent? .................. ............ ...... .......... .............. X d If there was a GST taxable termination (under section 2612), attach a statement to explain. Provide a copy of the trust or will creating the trust, and Give the name address and ohone number of the current trustee(s\. 13 Did the decedent ever possess, exercise, or release any general power of appointment? If 'Yes," you must complete and attach Schedule H X 14 Was the marital deduction computed under the transitional rule of Public Law 97-34, section 403( e )(3) (Economic Recovery Tax Act of 1981)? X If ''Yes,'' attach a separate computation of the marital deduction, enter the amount on item 20 of the Recapitulation, and note on item 20 "computation attached." 15 Was the decedent, immediately before death, receiving an annuity described in the "General" paragraph of the instructions for Schedule I? If ''Yes," you must complete and attach Schedule I ..................... ............... ......... ....-................ ............ ..... .......... ...... ....... .............. X 16 Was the decedent ever the beneficiary of a trust for which a deduction was claimed by the estate of a pre-deceased spouse under section 20561bH7\ and which is not reoorted on this return? If 'Yes" attach an exolanation ........................... .......... ......... --.... ......... X P rt5 a - Recapitulation Item Gross estate Alternate value Value at date of death number 1 Schedule A . Real Estate ............. .... ........................ ........... .......... ........ .... 1 O. 2 Schedule B - Stocks and Bonds . . . . . - ............ ............................... ... ................ 2 1.430.000. 3 Schedule C - Mortgages, Notes, and Cash ............................... ........ ........ ............. 3 43.697. 4 Schedule D - Insurance on the Decedent's Life (attach Form(s) 712) ......... . . . . . . . . . . . . . . . . . 4 153.677. 5 Schedule E - Jointly Owned Properly (attach Form(s) 712 for life insurance) .... ...... 5 468 982. 6 Schedule F - Other Miscellaneous Properly (attach Form(s) 712 for life insurance) ......... 6 86 250. 7 Schedule G - Transfers During Decedent's Life (attach Form(s) 712 for life insurance) . 7 O. 8 Schedule H - Powers of Appointment ................... ............. 8 O. 9 Schedule I - Annuities ........ ........................... ..........---............................. 9 316 219. 10 Total gross estate (add items 1 through 9) ..... . .......... ..................... ......... ......... 10 2 498 825. 11 Schedule U - Qualified Conservation Easement Exclusion 11 12 Total gross estate less exclusion (subtract item 11 from item 10). Enter here and on line 1 of Part 2 - Tax Computation ..... ....... .......... ....... .... ..-........ . . . . . . . . . . . . . . . 12 2 498 825. Item Deductions number Amount 13 Schedule J - Funeral Expenses and Expenses Incurred in Administering Properly Subject to Claims ... .............. ..... ..... 13 25.636. 14 Schedule K . Debts of the Decedent ............... . . . . . . . . . . . . . . . . . . . . ... ............... ............ ................ 14 2.429. .................. 15 Schedule K - Mortgages and Liens ............. .............. ................... ........ ......... ........... ........... ................ 15 16 Total of items 13 through 15 . .. ...... ........... .... ........ ........... ........ ....... . .. ......... ..... . . . . . . . . . . . . . . ............... 16 28.065. 17 Allowable amount of deductions from item 16 (see the instructions for item 17 of the Recapitulation) ..................-........ 17 28.065. 18 Schedule L . Net Losses During Administration .. ...... .............. .... ..................... ....................... . . . . . . . . . . . . . . . . 18 19 Schedule L - Expenses Incurred in Administering Properly Not Subject to Claims .............. ............. 19 20 Schedule M - Bequests, etc., to Surviving Spouse ......... ...... ................. ........... ...........................-.......... 20 1. 061. 527. 21 Schedule 0 . Charitable Public and Similar Gifts and Benuests .......-.... ..... .... .............. ................. .................. 21 22 Total allowable deductions (add items 17 thrOUGh 21). Enter here and on line 2 of the Tax Comoutation .... 22 1. 089 592. Page 3 407013 09-26-05 3 Form 706 (Rev. 8-2005) Estate of: DELROY D. BROS IUS SCHEDULE B - Stocks and Bonds (For jointly owned property that must be disclosed on Schedule E, see the instructions for Schedule E.) Item Description including face amount of bonds or number of shares and par number value for identification. Give CUSIP number. If closely held entity, give EIN. Unit value Alternate valuation date Alternate value Value at date of death CUSIP number 1 980 SHARES OF CLASS B STOCK OF R.F. FAGER COMPANY, A CLOSELY HELD ENTITY (EIN: 23-1937230). 1,430.0000 1,401,400. 2 20 SHARES OF CLASS A STOCK OF R.F. WAGER COMPANY, A CLOSELY HELD ENTITY (EIN: 23-1937230). 1,430.0000 28,600. Total from continuation schedules (or additional sheets) attached to this schedule TOTAL. (Also enter on Part 5 RecaDitulation. Dane 3 at item 2.\ .. ..... .... 1 430 000. (If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size.) (The instructions to Schedule B are in the separate instructions.) 407041 09-26-05 Schedule B - Page 12 4 Form 706 (Rev. 8-2005) Estate of: DELROY D. BROSIUS SCHEDULE C - Mortgages, Notes, and Cash Item number Description (For jointly owned property that must be disclosed on Schedule E, see the instructions for Schedule E.) Alternate valuation date Value at date of death 1 OTE PAYABLE OF $30,000, UNPAID ALANCE: $30,000; R.F. FAGER OMPANY TO DELROY BROSIUS; DUE ON EMAND; INTEREST PAYABLE AT 6% ALLY. 2 OF $55,000, UNPAID $13,697; DATED SEPTEMBER CHRISTINE & RALPH QUART TO DELROY BROSIUS; PREMISES: 2252 ORCHARD RD, CAMP ILL PA; DUE SEPTEMBER 2007; INTEREST PAYABLE AT 6% THE FIRST F EACH MONTH. Total from continuation schedules or additional sheets attached to this schedule Alternate value 5 30,000. 13,697. 43 697. Schedule C - Page 13 Form 706 (Rev. 8-2005) Estate of: DELROY D. BROSIUS SCHEDULE D - Insurance on the Decedent's Life Item number You must list all oolicies on the life of the decedent and attach a Form 712 for each oolicy. Alternate valuation date Description Alternate value 1 ~INCOLN FINANCIAL GROUP; POLICY# 5008300. 2 RELIASTAR LIE INSURANCE COMPANY; POLICY# 2173863. Total from continuation schedules (or additional sheets) attached to this schedule TOTAL. (Also enter on Part 5 Recaoitulation. Dace 3 at item 4.\ ..................... .......... (If more space is needed, attach the continuation schedule from the end of this package or additIOnal sheets of the same size.) (See instructions.) 407061/09-26-05 6 Value at date of death 43,000. 110,677. 153 677. Schedule 0 - Page 15 Form 706 (Rev. 8-2005) Estate of: DELROY D. BROS IUS SCHEDULE E - Jointly Owned Property (If you elect section 2032A valuation, you must complete Schedule E and Schedule A-1.) PART 1. - Qualified Joint Interests - Interests Held by the Decedent and His or Her Spouse as the Only Joint Tenants (Section 2040(b)(2)) Item Description number For securities, give CUSIP number. lOUSE AND LOT, 2137 ORCHARD RD., AMP HILL, PA. VALUE BASED ON PPRAISAL, COPY OF WHICH IS TTACHED. Alternate valuation date Alternate value Value at date of death 3 OUSE AND LOT, 2240 ORCHARD RD., AMP HILL, PA. VALUE BASED ON PPRAISAL, COPY OF WHICH IS TTACHED. 335,000. 2 ARN, GARAGE AND LOT, 2139 ORCHARD D., CAMP HILL, PA. VALUE BASED ON PPRAISAL, COPY OF WHICH IS TTACHED. 245,000. 121,000. Total from continuation schedules or additional sheets attached to this schedule 1a Totals ............. ............. .............. 1b Amounts included in ross estate one-half of line 1a . .... ................. PART 2. - All Other Joint Interests 1a 1b 236 964. 937 964. 468 982. 2a State the name and address of each survivino co-tenant. If there are more t an tree survivino co-tenants list the additional co-tenants on an attached sheet. Name Address (number and street, city, state, and ZIP code) A. B. C. Item Enter Description Percentage Includible Includible value at letter for (including alternate valuation date if any). number co-tenant For securities. oive CUSIP number. includible alternate value date of death Total from continuation schedules (or additional sheets) attached to this schedule ............... 2b Total other ioint interests ........ ............... . ................ ....... 2b 3 Total includible joint interests (add lines 1b and 2b). Also enter on Part 5, Recapitulation, caae 3 at item 5 .......... .... ................... .. ........... ....... ........ ....... .n............. 3 468.982. .. h h (If more space IS needed, attach the continuatIOn schedule from the end of thIS package or addItIOnal sheets of the same size.) (See instructions.) 407071/09-26-05 Schedule E - Page 17 7 Estate of: DELROY D. BROSIUS Continuation of Schedule CONTINUATION SCHEDULE E, PART 1 (Enter letter of schedule you are continuing.) Alternate value Item number Description 4 ~OUSE AND LOT, 2244 ORCHARD RD., CAMP HILL, PA. VALUE BASED ON ~PPRAISAL, COPY OF WHICH IS ~TTACHED. 5 0.20 ACRES VACANT LOT, NINA ALLEY, CAMP HILL, PA (LOT 102). VALUE BASED ON PROPERTY TAX ASSESSMENT, COPY OF WHICH IS ATTACHED. 6 1.41 ACRES VACANT LOT, WILLOW MILL PARK ROAD, MECHANICSBURG, PA (LOT L-0002). VALUE BASED ON PROPERTY TAX ASSESSMENT, COpy OF WHICH IS ATTACHED. 7 PNC CHECKING ACCOUNT #5140253416. 8 PNC SAVINGS ACCOUNT #5000758156. ACCRUED INTEREST ON ITEM 8 9 M&T CHECKING ACCOUNT #23526092. Alternate valuation date 405031 05-01-04 TOTAL. (Carry forward to main schedule.) ................................................... ........... ............... 8 Value at date of death 120,000. 5,000. 49,100. 11,437. 49,239. 93. 2,095. 236 964. Form 706 (Rev. 8-2005) Estate of: DELROY D. BROS IUS SCHEDULE F - Other Miscellaneous Property Not Reportable Under Any Other Schedule (For jointly owned property that must be disclosed on Schedule E, see the instructions for Schedule E.) (If you elect section 2032A valuation, you must complete Schedule F and Schedule A-1.) 1 Did the decedent at the time of death own any articles of artistic or collectible value in excess of $3,000 or any collections whose artistic or collectible value combined at date of death exceeded $10,000? ................. .......................... . .... ....... . ............ If 'Yes" submit full details on this schedule and attach aooraisals. 2 Has the decedent's estate, spouse, or any other person, received (or will receive) any bonus or award as a result of the decedent's employment or death? ............................................................................. ................ ............................... ..... ...... ... If 'Yes" submit full details on this schedule. 3 Did the decedent at the time of death have, or have access to, a safe deposit box? ....................................................................... If 'Yes; state location, and if held in joint names of decedent and another, state name and relationship of joint depositor. Yes No X X X If any of the contents of the safe deposit box are omitted from the schedules in this return, explain fully why omitted. Item number Description For securities, give CUSIP number. Alternate valuation date Alternate value Value at date of death 10 ~RAC HALLA EXCAVATOR; VALUED AT SALE PRICE. 20,000. 11 TWO JOHN DEERE TRACTORS, ONE MOWER; VALUED AT COMPARABLE SALE PRICE. 12 CAT WHEEL LOADER; VALUED AT SALES PRICE. 14,000. 12,000. 13 1996 FORD VAN ECONOLINE; VALUED AT SALES PRICE. 5,500. 14 1985 CHEVROLET CORVETTE; VALUED AT SALES PRICE. 5,000. 15 1990 LINCOLN TOWN CAR; VALUED AT SALES PRICE. 2,800. 16 1997 FORD 3/4 TON PICKUP; VALUED ~T KELLEY BLUE BOOK VALUE. 17 1997 FORD EXPEDITION; VALUED AT ~ELLEY BLUE BOOK VALUE. 18 MISCELLANEOUS VEHICLES; VALUED AT SALES PRICE. 19 MISCELLANEOUS HAND TOOLS & YARD EQUIPMENT; VALUED AT ESTIMATED SALES PRICE. 4,000. 4,500. 650. 5,000. Total from continuation schedules (or additional sheets) attached to this schedule 12-800. TOTAL. (Also enter on Part 5 Recaoitulation naDe 3 at item 6.\ . 86.250. Schedule F - Page 19 (If more space IS needed, attach the continuation schedule from the end of this package or additional sheets of the same size.) (See instructions.) 407081/09-26-05 9 Estate of: DELROY D. BROSIUS CONTINUATION SCHEDULE Continuation of Schedule F (Enter letter of schedule you are continuing.) Item number Description Alternate valuation date Alternate value Value at date of death 20 MISCELLANEOUS HOUSEHOLD ITEMS AND ~LOTHING; VALUED AT ESTIMATED FAIR MARKET VALUE. 21 ~OHN DEERE TRACTOR; VALUED AT SALES PRICE. 5,500. 7,300. TOTAL. (Carry forward to main schedule.) .... 40503 ~ 05-0~-04 12.800. 10 Form 706 (Rev. 8-2005) Estate of: DELROY D. BROS IUS SCHEDULE I - Annuities Note. Generallv. no exclusion is allowed for the estates of decedents dvina after December 31 1984 Isee oaae 15 of the instructions\. A Are you excluding trom the decedent's gross estate the value of a lump-sum distribution described in section 2039(f)(2) (as in effect before its repeal by the Deficit Reduction Act of 1984)?.. If 'Yes . vou must attach the information reauired bv the instructions. Item Description Alternate Includible number Show the entire value of the annuity before any exclusions. valuation date alternate value 1 ~.F. FAGER COMPANY QUALIFIED 401(K) PLAN. VALUE IS FAIR MARKET ~ALUE AT DATE OF DEATH. Yes No X Includible value at date of death 316,219. Total from continuation schedules (or additional sheets\ attached to this schedule. TOTAL. IAlso enter on Part 5 Recaoitulation. oaae 3 at item 9.\ 316.219. (If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size.) Schedule I - Page 22 (The instructions to Schedule I are in the separate instructions.) 407101 09-26-05 11 Form 706 (Rev. 8-2005) Estate of: DELROY D. BROSIUS SCHEDULE J - Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims Note. Do not list on this schedule expenses of administering property not subject to claims. For those expenses, see the instructions for Schedule L. If executors' commissions, attorney fees, etc., are claimed and allowed as a deduction for estate tax purposes, they are not allowable as a deduction in computing the taxable income of the estate for federal income tax purposes. They are allowable as an income tax deduction on Form 1041 if a waiver is filed to waive the deduction on Form 706 (see the Form 1041 instructions). Item number Description Expense amount Total amount A. Funeral expenses: ~UER MEMORIAL HOME CREMATION INC. 1,240. Total funeral expenses ........................ .................. .......... ....... B. Administration expenses: Executors' commissions - amount estimated/agreed upon/paid. (Strike out the words that do not apply.) ." ....~ 1 240. 2 Attorney fees - amount estimated/~i5fEM~~~(Strike out the words that do not apply.) ......ST~T .2. 6 000. 3 Accountant fees - amount estimated~~ (Strike out the words that do not apply.). ..... STMT .:3. 16 000. 4 Miscellaneous expenses: 3 ~UMBERLAND COUNTY, REGISTER OF WILLS; PROBATE/FILING FEES. 4 SENTINEL; NOTICE PUBLICATION. 5 CENTRAL PENN BUSINESS JOURNAL; NOTICE PUBLICATION. 6 CENTRAL PENN APPRAISALS, INC.; APPRAISALS. 7 MARK HILLBERT; APPRAISAL FEE. Expense amount 840. 181. 75. 825. 475. Total miscellaneous expenses from continuation schedules (or additional sheets) attached to this schedule...... ......... ...... ....... ......... ............ ....... .... ..... ....... Total miscellaneous exnenses .......... ........ ............................................... .... . ..... ~ 2 396. TOTAL. (Also enter on Part 5 Recaoitulation. oaae 3 at item 13.\ .... ........ ~ 25 636. (If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size.) (See instructions.) 407111/09-26-05 Schedule J - Page 23 12 Form 706 (Rev. 8-2005) Estate of: DELROY D. BROSIUS SCHEDULE K - Debts of the Decedent, and Mortgages and Liens Item Debts of the Decedent - Creditor and nature of claim, number and allowable death taxes 1 HOLY SPIRIT HOSPITAL, JOHN D. MULLIKEN M.D., QUANTUM IMAGING, JOYCE HELT; MEDICAL EXPENSES INCURRED PRIOR TO DEATH. Amount unpaid to date Amount in contest Amount claimed as a deduction o. o. 2,429. Total from continuation schedules (or additional sheets) attached to this schedule...... TOTAL (Also enter on Part 5 RecaDitulation. Daoe 3 at item 14.) ....... Item number 2 429. Mortgages and Liens - Description Amount Total from continuation schedules lor additional sheets) attached to this schedule ......... TOTAL (Also enter on Part 5 Recanitulation. Daoe 3 at item 15.) ................... (If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size.) (The instructions to Schedule K are in the separate instructions.) 407121 09-26-05 Schedule K - Page 25 13 Form 706 (Rev. 8-2005\ Estate of: DELROY D. BROSIUS SCHEDULE M - Bequests, etc., to Surviving Spouse Election To Deduct Qualified Terminable Interest Property Under Section 2056(b)(7). If a trust (or other property) meets the requirements of qualified terminable interest property under section 2056(b )(7), and a. The trust or other property is listed on Schedule M, and b. The value of the trust (or other property) is entered in whole or in part as a deduction on Schedule M, then unless the executor specifically identifies the trust (all or a fractional portion or percentage) or other property to be excluded from the election, the executor shall be deemed to have made an election to have such trust (or other property) treated as qualified terminable interest property under section 2056(b)(7). If less than the entire value of the trust (or other property) that the executor has included in the gross estate is entered as a deduction on Schedule M, the executor shall be considered to have made an election only as to a fraction of the trust (or other property). The numerator of this fraction is equal to the amount of the trust (or other property) deducted on Schedule M. The denominator is equal to the total value of the trust (or other property). Election To Deduct Qualified Domestic Trust Property Under Section 2056A. If a trust meets the requirements of a qualified domestic trust under section 2056A(a) and this return is filed no later than 1 year after the time prescribed by law (including extensions) for filing the return, and a. The entire value of a trust or trust property is listed on Schedule M, and b. The entire value of the trust or trust property is entered as a deduction on Schedule M, then unless the executor specifically identifies the trust to be excluded from the election, the executor shall be deemed to have made an election to have the entire trust treated as ualified domestic trust ro er . Did any property pass to the surviving spouse as a result of a qualified disclaimer? If "Yes," attach a copy of the written disclaimer required by section 2518(b). 2 a In what country was the surviving spouse born? b What is the surviving spouse's date of birth? c Is the surviving spouse a U.S. citizen? ................ d If the surviving spouse is a naturalized citizen, when did the surviving spouse acquire citizenship? e If the surviving spouse is not a U.S. citizen, of what country is the surviving spouse a citizen? 3 Election Out of QTIP Treatment of Annuities - Do you elect under section 2056(b)(7)(C)(ii) not to treat as qualified terminable interest property any joint and survivor annu ities that are included in the gross estate and would otherwise be treated as qualified terminable interest property under section 2056(b)(7)(C)? (see instructions) .............. ........ Item number Yes No X 2c X 3 X Description of property interests passing to surviving spouse Amount 1 OTE PAYABLE OF $30,000, UNPAID BALANCE: $30,000; R.F. FAGER COMPANY TO DELROY BROSIUS; DUE ON DEMAND; INTEREST PAYABLE AT 6% ANNUALLY. (SCHEDULE C, ITEM 1) 30,000. 2 ORTGAGE OF $55,000, UNPAID BALANCE: $13,697; DATED SEPTEMBER 1, 1994; CHRISTINE & RALPH MARQUART TO DELROY ROSIUS; PREMISES: 2252 ORCHARD RD, CAMP HILL PA; DUE SEPTEMBER 2007; INTEREST PAYABLE AT 6% THE FIRST OF EACH ONTH. (SCHEDULE C, ITEM 2) 3 INCOLN FINANCIAL GROUP; POLICY# 5008300. (SCHEDULE D, ITEM 1) 4 LIE INSURANCE COMPANY; POLICY# 2173863. D, ITEM 2) 13,697. 43,000. 110,677. 5 OUSE AND LOT 2137 ORCHARD RD. CAMP HILL PA. VALUE Total from continuation schedules or additional sheets attached to this schedule .... 4 Total amount of property interests listed on Schedule M .................. 5 a Federal estate taxes payable out of property interests listed on Schedule M b Other death taxes payable out of property interests listed on Schedule M c Federal and state GST taxes payable out of property interests listed on SChedule M ..................... d Add items 5a, b, and c ............... 6 Net amount of property interests listed on Schedule M (subtract 5d from 4). Also enter on Part 5, Reca itulation a e 3 at item 20 . ........................ .. ........... (If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size.) (See instructions.) 407141 09-26-05 5c 5d 5a 5b 6 1 061 527. Schedule M - Page 27 14 Estate of: DELROY D. BROSIUS CONTINUATION SCHEDULE Continuation of Schedule M (Enter letter of schedule you ere continuing.) Item number Description Amount ASED ON APPRAISAL, COpy OF WHICH IS ATTACHED. (SCHEDULE E, PART 1, ITEM 1) 6 ARN, GARAGE AND LOT, 2139 ORCHARD RD., CAMP HILL, PA. ALUE BASED ON APPRAISAL, COPY OF WHICH IS ATTACHED. (SCHEDULE E, PART 1, ITEM 2) 167,500. 7 OUSE AND LOT, 2240 ORCHARD RD., CAMP HILL, PA. VALUE ASED ON APPRAISAL, COPY OF WHICH IS ATTACHED. (SCHEDULE E, PART 1, ITEM 3) 122,500. 60,500. 8 OUSE AND LOT, 2244 ORCHARD RD., CAMP HILL, PA. VALUE ASED ON APPRAISAL, COpy OF WHICH IS ATTACHED. (SCHEDULE E, PART 1, ITEM 4) 60,000. 9 0.20 ACRES VACANT LOT, NINA ALLEY, CAMP HILL, PA (LOT 102). VALUE BASED ON PROPERTY TAX ASSESSMENT, COpy OF ICH IS ATTACHED. (SCHEDULE E, PART 1, ITEM 5) 10 1.41 ACRES VACANT LOT, WILLOW MILL PARK ROAD, ECHANICSBURG, PA (LOT L-0002). VALUE BASED ON PROPERTY AX ASSESSMENT, COpy OF WHICH IS ATTACHED. (SCHEDULE E, PART 1, ITEM 6) 11 PNC CHECKING ACCOUNT #5140253416. (SCHEDULE E, PART 1, ITEM 7) 12 PNC SAVINGS ACCOUNT #5000758156. (SCHEDULE E, PART 1, ITEM 8) 2,500. 24,550. 5,719. CCRUED INTEREST 24,620. 47. 13 &T CHECKING ACCOUNT #23526092. (SCHEDULE E, PART 1, ITEM 9) 1,048. 14 RAC HALLA EXCAVATOR; VALUED AT SALE PRICE. (SCHEDULE F, ITEM 10) 15 0 JOHN DEERE TRACTORS, ONE MOWER; VALUED AT COMPARABLE SALE PRICE. (SCHEDULE F, ITEM 11) 20,000. 14,000. 16 AT WHEEL LOADER; VALUED AT SALES PRICE. (SCHEDULE F, ITEM 12) 17 1996 FORD VAN ECONOLINE; VALUED AT SALES PRICE. (SCHEDULE F, ITEM 13) 12,000. 5,500. TOTAL. (Carry forward to main schedule.) . 520 484. 405131 05-01-04 15 Estate of: DELROY D. BROSIUS CONTINUATION SCHEDULE Continuation of Schedule M (Enter letter of schedule you are continuing.) Item number Description Amount 18 1985 CHEVROLET CORVETTE; VALUED AT SALES PRICE. (SCHEDULE F, ITEM 14) 5,000. 19 1990 LINCOLN TOWN CAR; VALUED AT SALES PRICE. (SCHEDULE F, ITEM 15) 20 1997 FORD 3/4 TON PICKUP; VALUED AT KELLEY BLUE BOOK ALUE. (SCHEDULE F, ITEM 16) 21 1997 FORD EXPEDITION; VALUED AT KELLEY BLUE BOOK VALUE. (SCHEDULE F, ITEM 17) 2,800. 4,000. 4,500. 22 ISCELLANEOUS VEHICLES; VALUED AT SALES PRICE. (SCHEDULE F, ITEM 18) 650. 23 ISCELLANEOUS HAND TOOLS & YARD EQUIPMENT; VALUED AT STIMATED SALES PRICE. (SCHEDULE F, ITEM 19) 24 ISCELLANEOUS HOUSEHOLD ITEMS AND CLOTHING; VALUED AT STIMATED FAIR MARKET VALUE. (SCHEDULE F, ITEM 20) 25 .F. FAGER COMPANY QUALIFIED 401(K) PLAN. VALUE IS FAIR KET VALUE AT DATE OF DEATH. (SCHEDULE I, ITEM 1) 5,000. 5,500. 316,219. TOTAL. (Carry forward to main schedule.) 343 669. 405131 05-01-04 16 DELROY D. BROSIUS 177-24-3150 ~ORM 706 EXECUTORS STATEMENT 1 CAROL A. BROSIUS 2137 ORCHARD RD CAMP HILL, PA 17011 162-36-9033 HAROLD R. BROSIUS 474 OLD STAGE RD LEWISBERRY, PA 17339 209-46-0833 mRM 706 SCHEDULE J, ATTORNEY FEES STATEMENT 2 ESTIMATED/ AGREED UPON/ )ESCRIPTION PAID AMOUNT ~COTT DINNER, ESQ.j LEGAL SERVICES. ESTIMATED 6,000. ~OTAL TO FORM 706, SCHEDULE J, SECTION B, LINE 2 6,000. ~ORM 706 SCHEDULE J, ACCOUNTANT FEES STATEMENT 3 >ESCRIPTION ESTIMATED/ AGREED UPON/ PAID AMOUNT ICKONLY & ASBURY, LLPj VALUATION AND TAX lREPARATION SERVICES. ESTIMATED 16,000. ~OTAL TO FORM 706, SCHEDULE J, SECTION B, LINE 3 16,000. 17 STATEMENT(S) 1, 2, 3 ESTATE OF DELROY D. BROSIUS Worksheet TG - Taxable Gifts Reconciliation (To be used for lines 4 and 7 of the Tax Computation) 177-24-3150 a. b. Note: For the definition of a taxable gift see section 2503. Follow Form 709. That is, include cD Calendar year or Total taxable gifts only the decedent's one-half of split gifts, whether the gifts were made by the decedent or the Q)"" calendar quarter for period (see Note) decedent's spouse. In addition to gifts reported on Form 709, you must include any taxable c,... gifts in excess of the annual exclusion that were not reported on Form 709. ::l0l ,... ... Q) Q) ... ;::.2 c. d. e. f. cv Q) Q).Q Taxable amount Taxable amount Gift tax paid by Gift tax paid by "0"0 included in col. b included in col. b for decedent on gifts decedent's spouse on CV C E CV for gifts included gifts that qualify for in cot d gifts in col. c 1IIl:'i in the gross estate "special treatment of ;::M split gifts" described .- Ol "... 1. Total taxable gifts in instructions made before 1977 1993 243,000. o. Q)1l) "0,... CVOl E... III ... ;::Q) .- ;:: "cv 2. Totals for gifts made after 1976 243 000. o . o. o. o. Line 4 Worksheet - Adjusted Taxable Gifts Made After 1976 1. Taxable gifts made after 1976. Enter the amount from line 2, column b, Worksheet TG ..... ..... n........... ................. ......., ....... 1 243 000 . 2. Taxable gifts made after 1976 reportable on Schedule G. Enter the amount from line 2, column c, Worksheet TG . ...... -..... . . . . . . . - . . . . . . . . - - .............. ........... ................... 2 3. Taxable gifts made after 1976 that qualify for "special treatment.. Enter the amount from line 2, column d, Worksheet TG .......... ......................, ...... ......... ....... ....... ......... 3 4. Add tines 2 and 3 ...... ..... ..... . . . . , . . . . ............ ... ............ ..... .... ...... ............ ....... ................... ........ 4 5. Adjusted taxable gifts. Subtract line 4 from line 1. Enter here and on line 4 of the Tax Computation of Form 706 .............. ...... "" ................. ..... .... .... ... ........ ...... ....... .......... ...... ...... .......... ........ ...... 5 243 000. line 7 Worksheet - Gift Tax on Gifts Made After 1976 a. b. c. d. e. f. Calendar year Total taxable gifts for prior Taxable gifts for this Tax payable using Unused unified credit Tax payable for this or calendar periods (from Form 709. period (from Form 709, Table A (applicable credit amount) period (subtract quarter Tax Computation, line 2) Tax Computation, line 1) (see instructions) for this period col. e from col. d) Total pre-1977 (see instructions) (see instructions) taxable gifts. Enter the amount from line 1, Worksheet TG 1993 o. 243,000. 68,560. 192,800. O. 1. Total gift taxes payable on gifts made after 1976 (combine the amounts in column f) . ...... .......... ..... ....... .......... ...... ..... 1 o. 2. Gift taxes paid by the decedent on gifts that Qualify for 'special treatment.' Enter the amount from line 2, column e, Worksheet TG . ......... ........ ........ ....... .... ........ ...... ..... .............. ..... . 2 3. Subtract line 2 from line 1 .... .................... ........ ..... ..... ...... ......... ...... ....... 3 4. Gift tax paid by decedent's spouse on split gifts included on Schedule G. Enter the amount from line 2, column f, WorksheetTG . ....... ......... ....... ... .... .. ...... ....... ,.... . .... ,..... ............. ..... ..... 4 5. Add lines 3 and 4. Enter here and on line 7 of the Tax Comnutation of Form 706...... .... ........ ...... ...... ........ ........ 5 o. 405911 09-10-04 17.1 4 \ J II. LAST WILL AND TESTAMENT OF DELROY D. BROSIUS, SR. I. DELROY D. BROSIUS, SR., of Lower Allen Township, Cumberland County, Pennsylvania, declare this to be my Last Will and Testament, hereby revoking any will previously made by me. I. - I direct the payment of all my just debts and funeral expenses out of my estate as soon as may be practical after my death. II. ~ I give all my furniture or articles of household use to my wife, Carol A. Brosius, if she SurVlves me by sixty (60) days. If she does not so survive me, I give all such property ~ (()J SAIDIS, GUIDO, SHUFF & MASLAND 26 W. High Street Carlisle, PA my wife's children, CHRISTINE MARQUART and ANDREA L. as so survive me, to be divided between them as they may agree or, in the absence of agreement, as my executor may think appropriate, except, that I give my 1250 John Deere Tractor to my son, Harold R. Brosius. III. ~ I bequeath all of my shares of Class A Voting Stock and Class B Non-voting Stock in R.F. Fager Company in the following manner: (A) Thirty-three and one-third (33 1/3%) percent of said shares to my son, DARRELL C. BROSIUS. ~ g 1 <OJ' ~' 0) SAIDIS, GUIDO, SHUFF & MASLAND 26 W. High Street Carlisle, PA (B) Thirty-three and one-third (33 1/3%) percent of said shares to my son, HAROLD R. BROSIUS. (C) Thirty-three and one-third (33 1/3%) percent of said shares to the Trust for the benefit of DARVIN K. BROSIUS hereinafter established in Item IV of this my Last will and Testament. (D) My beneficiaries, who inherit the stock shall reimburse the estate, the proportionate part of Pennsylvania Inheritance Tax and Federal Estate Tax attributable to the value of the shares. These bequests of Stock in R.F. Fager Company are under and subject to the terms of the Shareholders Agreement now in effect or hereafter amended. IV. - The thirty-three and one-third (33 1/3%) percent interest of my Class A Voting Stock and Class B Non-voting Stock in R.F. Fager Company, for the benefit of my son DARVIN K. BROSIUS, also known as DARWIN K. BROSIUS, shall be held in trust upon the following terms and provisions: (A) My trustee shall pay the net income, including dividends arising from the principal of this trust, in installments, as frequently as my trustee thinks advisable to DARVIN K. BROSIUS during his lifetime. 2 (B) During the lifetime of DARVIN K. BROSIUS, my trustee shall use or apply to or for his benefit, so much of the principal of this trust as may be necessary in the case of illness or emergency and/or for his support and maintenance only upon taking into consideration any and all other sources of income as well as his station in life. Upon the death of DARVIN K. BROSIUS, the then-remaining 4 ~ ~ [lp principal and undistributed income shall be distributed to my grandchildren, JONATHAN BROSIUS and CHRISTOPHER BROSIUS, per stirpes. (C) Should any of the heirs provided for in this Item be under the age of twenty-five (25) or in the opinion of my trustee unable to properly administer the assets so -> ~ Q bequeathed, the trust herein provided shall continue until the youngest then-living beneficiary attains the age of twenty-five (25)years. V. - I give, devise and bequeath all the rest residue and remainder of my estate, of whatever nature and wherever situate ~AlDIS, GUIDO, SHUFF & MASLAND 26 w. High Street Carlisle, PA to my wife, CAROL A. BROSIUS, provided that she has survived me by sixty (60) days. VI. - In the event my wife, CAROL A. BROSIUS, fails 3 di ~ ~ iAIDIS, GUIDO, SHUFF & MASLAND 26 w. High Street Carlisle, PA to survive me by sixty (60) days, then I give, devise and bequeath all the rest residue and remainder of my estate to my step-daughters, ANDREA L. WESTOVER and CHRISTINE MARQUART, per stirpes. VII. - Survivorship: Any person, other than my wife, who shall have died at the same time as myself, or under such circumstances that the order of deaths cannot be established by proof, or within thirty (30) days of my death, shall be deemed to have predeceased me. If my wife dies at the same time as myself, or under such circumstances that the order of deaths cannot be established by proof, my wife shall be deemed to have survived me. Any person (other than myself) who shall have died at the same time as any then recipient of income under such ircumstances that the order of deaths cannot be established by proof, shall be deemed to have predeceased such beneficiary. VIII. Protective Provisions: No part of the income of the property held under the Trusts shall be subject to attachment, levy or seizure by any creditor, spouse, assignee or trustee or receiver in bankruptcy of any beneficiary prior to his or her actual receipt thereof. Trustee shall pay over the net income and the principal to the parties herein designated, as their interest may appear, without regard to any attempted anticipation, pledging or assignment by any beneficiary under a 4 ~ ~ .j J oj ~ ~ ~ )AIDIS, GUIDO, SHUFF & MAS LAND 26 W. High Street Carlisle, PA Trust and without regard to any claim thereto or attempted levy, attachment, seizure or other process against said beneficiary. IX. Powers of Personal Representative and Trustee: My personal representative and Trustee shall posses, among others, the following powers exercisable without court approval: A. To vary or to retain investments, including the stock of any corporate Trustee named herein, when deemed desirable by them, and to invest in such bonds, stocks, notes, real estate mortgages or securities or in such other property, real or personal as they shall deem wise. B. In order to effect a division of the principal of a Trust or for any other purpose, including any final distribution of a Trust, they are authorized to make said divisions or distributions of the personalty and realty, partly or wholly in kind, and to allocate specific assets among beneficiaries and Trusts created hereunder so long as the total market value of any share is not affected by such allocations. Should it appear desirable to partition any real estate, they are authorized to make, join in and consummate partitions of lands, voluntarily or involuntarily, including giving of mutual deeds, recognizance's, or other obligations with as wide powers as can be exercised by an individual owner in fee simple. C. To sell either at public or private 5 sale and upon such terms and conditions as they may deem advantageous to a Trust, any or all real or personal estate or interest therein owned by a Trust severally or in conjunction with other persons, and to consummate said sale or sales by sufficient deeds or other instruments to the purchasers or purchasers, conveying a fee simple title, free and clear of all . ~ r;: ~ trust and without obligation or liability of the purchaser or purchasers to see to the application of the purchase money, or make inquiry into the validity of said sale or sales; also, make, execute, acknowledge and deliver any and all deeds, ssignments, options or other writings which may be necessary or ~I W desirable in carrying out any of the powers conferred upon them in this ITEM or elsewhere in the instrument. D. To mortgage real estate, and to make leases of real estate, extending beyond the term of the Trusts hereunder. E. To borrow money from any party, including my personal representative and trustee, to pay indebtedness of a Trust and taxes, and to assign and pledge assets of a Trust )AlDIS, GUIDO, SHUFF & MASLAND 26 W. High Street Carlisle, PA therefor. F. To pay all costs, taxes, expenses and charges in connection with the administration of a Trust, including a reasonable compensation to agents. If any estate or 6 ~ c:4., {l ? :-' ,< i ~ d inheritance taxes are payable from assets received by Trustee, such taxes shall be paid from the assets of the Trust. G. In the discretion of my personal representative or trustee, to unite with other owners of similar property in carrying out any plans for the reorganization of any corporation or company whose securities form a part of a Trust. H. To vote any shares of stock which form a part of a Trust. I. To assign to and hold in trust an undivided portion of any asset. J. To divide any Trust created in this Agreement into two or more separate Trusts (1) to segregate ~. property not subject to Pennsylvania inheritance tax, or (2) so that the inclusion ratio for purposes of the generation-skipping SAIDIS, GUIDO, SHUFF & MASLAND 26 w. High Street Carlisle. PA transfer tax shall be either zero or one, in order that an election under 2652 (Section a) (3) of the Internal Revenue Code may be made with respect to one of the separate Trusts, or (3) for any other reason. K. To do all other acts in its judgment deemed necessary or desirable for the proper and advantageous management, investment and distribution of the Trusts. L. Any corporate fiduciary acting as a personal representative or trustee hereunder shall be entitled to 7 compensation based on its regular schedule of fees for such services in effect at the time of the service rendered. M. Should the principal of any Trust herein provided for become too small, in their discretion, so as to make continuance of the Trust inadvisable, they may make immediate distribution of the then remaining principal and any ~ ~ accumulated or undistributed income outright to the person or ~ persons and in the proportions they are then entitled to income. termination the rights of all persons who might otherwise have any interest as succeeding income beneficiary or remainder shall cease. If any person to receive distribution a minor or disabled in any way, they may pay the fund to the parent, guardian, or person or organization taking care of that person, or, with respect to a minor, Trustee may deposit the fund in a savings fund account in the minor's name payable to the minor at majority. These authorities shall extend to all property at any time held by my Executrix or my Trustee and shall continue in full force until the actual distribution of all such property, except as otherwise specifically stated. All SAlDIS, GUIDO, SHUFF & MASLAND 26 w. High Street Carlisle, PA powers, authorities, and discretion granted by this will shall be in addition to those granted by law and shall be exercisable without court authorization. x. Legal Disability of Beneficiary. Whenever and as often as any beneficiary hereunder, to whom payments of income 8 4 j Q ~ ~ YA ;AIDIS, GUIDO, SHUFF & MASLAND 26 w. High Street Carlisle. PA II compensation based on its regular schedule of fees for such services in effect at the time of the service rendered. M. Should the principal of any Trust herein provided for become too small, in their discretion, so as to make continuance of the Trust inadvisable, they may make immediate distribution of the then remaining principal and any accumulated or undistributed income outright to the person or persons and in the proportions they are then entitled to income. Upon such termination the rights of all persons who might otherwise have any interest as succeeding income beneficiary or in remainder shall cease. If any person to receive distribution is a minor or disabled in any way, they may pay the fund to the parent, guardian, or person or organization taking care of that person, or, with respect to a minor, Trustee may deposit the fund in a savings fund account in the minor's name payable to the minor at majority. These authorities shall extend to all property at any time held by my Executrix or my Trustee and shall continue in full force until the actual distribution of all such property, except as otherwise specifically stated. All powers, authorities, and discretion granted by this will shall be in addition to those granted by law and shall be exercisable without court authorization. X. Leqal Disability of Beneficiary. Whenever and as often as any beneficiary hereunder, to whom payments of income 8 or principal are herein directed to be made, shall be under legal disability, or in the sole judgment of Trustee, shall otherwise be unable to apply such payments to his own or her own best interests and advantages, Trustee may make all or any portion of such payments in anyone or more of the following ways: ~ A. Directly to such beneficiary; B. To the Legal Guardian or Conservator of such beneficiary; C. To a relative of such beneficiary, to be expended by such relative for the benefit or such beneficiary; D. By itself expending same for the benefit of said beneficiary. XI. Uniform Transfers to Minor's Act. If a beneficiary under the age of twenty-one (21) years is entitled to receive assets under a Trust, the Trustee shall receive those assets as Custodian for the beneficiary under the Pennsylvania Uniform Transfers to Minors Act. The Custodian may receive and iAIDIS, GUIDO, SHUFF & MASLAND 26 w. High Street Carlisle. PA administer all assets authorized by law, and shall have full authority as provided by the Pennsylvania Uniform Transfers to Minors Act to use assets in the manner the Custodian deems advisable for the best interest of the beneficiary. 9 XII. Executors and Trustees: I appoint my wife, CAROL A. BROSIUS and my son, HAROLD R. BROSIUS, as Co-Executors of this, my Last Will and Testament. Should either of them fail to qualify or cease to act as such, then I appoint the other as sole executor of this, my Last Will and Testament; provided, if HAROLD R. BROSIUS either is unwilling or unable to serve, I appoint my son, DARRELL C. BROSIUS to perform the duties of Executor or Co-Executor. I appoint my sons, DARRELL C. BROSIUS and HAROLD R. BROSIUS, Co-trustees of any trusts created herein. Provided, ~ if either is unwilling or unable to serve, the duties of Trustee :AIDIS, GUIDO, SHUFF & MAS LAND 26 w. High Street Carlisle, PA shall be performed by the other. None of my trustees, personal representatives, executors or administers shall be required to post bond in this or any juris- diction. IN WITNESS WHEREOF, I /"/ 711- and seal on this, the _w have hereunto set my hand ~ day of ~'3..'2-u~7 2000. ~~ ~_ ~ k (SEAL) 10 ~ J' '~ GSA q," ~' ~ ~ .AlDIS, GUIDO, SHUFF & MASLAND 26 w. High Street Carlisle. PA In our presence the above-named testator clared it to be his will, and now at his ence, and in the presence of each other, /~ // c: ' Name L / .. )n t( LUL~/}L/ - .:JIUl>yotJ7A Name 1~6 signed this and de- request, in his pres- we sign as witnesses: PV /,k~ J4- Addre ('~ t ~;i ~ j'{J1 ,(;; 6c-vz 5 . /b<- ' Address / 11 SAlDlS, GUIDO, SHUFF & MASLAND 26 W. High Street Carlisle. PA COMMONWEALTH OF PENNSYLVANIA) COUNTY OF CUMBERLAND) SS. WE, the undersigned, the testator and the witnesses, respectively, whose names are signed to the 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 signed willingly (or willingly directed another to sign for him), and that he executed it as his free will 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 years of age or older, of sound mind, and under no constraint or undue influence. ~.~l%v\ ~ ~ .1S~~ ~ U Testator "'K' ,/" .//- ( , Witness Subscribed, sworn to testator, and subscribed and nesses, this /t..IA day of 0L~~. ~6VL Witness and acknowledged before me by the sworn to before me by both wit- ~1.~"7/ ' 2000. She/b L ~otar/al Seal ~mp ~, Bo~g~ng. Notary PUblic Y COmmIsSion' E Urrberland COunty Member Pe Xplres April 8, 2000 , nnsylvania .~<"'" "-"_~ 12 CODICIL TO THE LAST WILL AND TESTAMENT OF DELROY D. BROSIUS, SR. I, DELROY D. BROSIUS, SR., of Lower Allen Township, Cumberland County , Pennsylvania, declare this to be the sole Codicil to my Last Will dated February 16, 2000. I. I amend Paragraph III (C) to provide that the shares of voting and non-voting stock in R.F. Fager Company bequeathed to my son, Darvin K. Brosius, shall be given to him outright without the imposition of a trust as provided in the said paragraph. II. I hereby revoke Paragraph IV of said Will, which states the terms of said trust. III. In all other respects, I hereby ratify, confirm and republish my Will dated February 16, 2000, together with this sole Codicil as and for my Last Will. IN WITNESS WHEREOF, I, DELROY D. BROSIUS, SR., have hereunto set my hand and seal to this Codicil to my Last Will Co} Zf.. ~i day of March, 2005. and Testament on this ~~&J,~~~ DELROY . BROSIUS, SR. 1 Signed, sealed, published and declared by the above-named Testator, as and for a Codicil to his Last Will and Testament in the presence of us, who have hereunto subscribed our names at his request as witnesses, thereto, in the presence of said Tei~tor and of taCh other. ~ Al ~ ADDRESS (J~ /I..J;~ ,f]: I .!:t () ;'4 ~y~ ADDRESS COMMONWEALTH OF PENNSYLVANIA COUNTY OF CUMBERLAND We, Delroy D. Brosius, Sr. , Jolt. vt E,::; /'./:.e and r.(~r~1 ~ p. ~h:6(1!> the Testator and witnesses, respectively whose names are signed to the foregoing or attached instrument, being first duly sworn, do hereby declare to the undersigned authority that the Testator signed and executed the instrument as his Codicil and that he signed willingly and that he executed 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 Codicil as witness and that to the best of their knowledge the Testator was at the time 18 or more years of age, of sound mind and under no constraint or undue influence. Subscribed, sworn to and acknowledged before me by Delroy D. Brosius, Sr., the Testator, and sUbsCribedj~rand sworn or affirmed to before me by the witnesses, this ,.. day of March, 2005. rn Notar' IS I . Sara J. Ensinger. otary Pubhc Camp Hill Boro, Cumberland County My Commission E:<r'!r~~ Oct. 17,2005 Member, Pennsylvll~ia J~oci<1liOn of Notaries 2 I I I I I I I I I I I I I I I I I I I Business Valuation of 20 shares of Class A and 980 shares of Class B common stock ofR.F. Fager Company Prepared by: McKonly & Asbury LLP 415 Fallowfield Road, 2nd Floor Camp Hill, PA 17011 As of: April 17, 2005 I I I Mc~~~g~~URY LLP MEMBERS A,\1U,IC\N !\,D PIW,SYIV.,\i'-I'\ INSTITUTI:S OF ORTIIIII) l'UlllI( ;\((()LJ,NTANTS ~~ ~,iI BE~~ ~~~f~~ - 1Il'mI .-;m I December 15,2005 I Mr. Harold Brosius, Co-Executor Ms. Carol Brosius, Executrix of Delroy Brosius Estate 474 Old Stage Rd. Lewisberry, PA 17339 I Dear Mr. Brosius: I At your request, McKonly & Asbury LLP was retained to give an opinion of the fair market value of 20 shares of Class A and 980 shares of Class B common stock ofR.F. Fager Company as of April 17, 2005. We understand that the results of our analysis will be used exclusively for internal use to assist you in determining the value of20 shares of Class A and 980 shares of Class B common stock ofR.F. Fager Company solely for estate tax purposes. I The standard of value is fair market value, defined as "the price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts." Court decisions frequently state in addition that the hypothetical buyer and seller are assumed to be able, as well as willing, to trade and to be well informed about the property and concerning the market for such property. The premise of value is going concern. I I Based on the information contained in the following narrative report, it is our opinion that the fair market value of 20 shares of Class A and 980 shares of Class B common stock ofR.F. Fager Company as of April 17, 2005 is best expressed as $1,430,000. I ONE MILLION FOUR HUNDRED THIRTY THOUSAND DOLLARS I This letter, report, and its associated results are to be distributed only in their entirety, and are intended and restricted for use by the management of R.F. Fager Company and its legal counsel solely for estate tax purposes. This letter and accompanying report are not to be used, circulated, quoted or otherwise referred to in whole or in part for any other purpose or to any other party for any purpose without our express written consent. I If you have any questions concerning this valuation, please contact Clarence E. Asbury or T. Eric Blocher at (717) 761-7910. I Our opinion of value is subject to the assumptions and limiting conditions set forth in this report. I Very truly yours, I /r)<! k~ ~~. '-~r I McKONL Y & ASBURY LLP Certified Public Accountants I HEADQUARTERS 415 FAllOWflElD ROAD 2ND FLOOR. CAMP Hill, PA POll (717) 7hl-7910 . FAX (717) 761-7944 I 225 MARKET STREET, SUITE 3()2 HARRISBURG. PA 17101 (717) n2-4989 . FAX (717) 761-7'J44 ~ 11\',:'\:\,1111.\:\\1'1"'\\\\\1111 _'I' 1,'\ NC\STf" 1',\ ] -'1-11] -; )~;-L!H() . 1 i\X I I ~CI ~ ;:;-i-~q I..' 1\1/\IIIN(, ,\!)[ )1\15\, 1',1 ) 1)( IX 1 2: , flM,r\lSIJUI\C, 1',\ '''' (1-, vvr-B SilT. \\'\\\\'.rn,1( 1),1'-,.( (Jill I I I I I I I I I I I I I I I I I I I TABLE OF CONTENTS I. CERTIFICA nON OF v ALUA TORS II. INTRODUCTION SUBJECT OF THE VALUATION SUMMARY DESCRIPTION OF R.F. FAGER COMPANY NATURE AND FUNCTION OF THE VALUATION DATE OF VALUATION OWNERSHIP AND CONTROL SCOPE OF THE ASSIGNMENT DEFINITIONS PRINCIPAL SOURCES OF INFORMATION ASSUMPTIONS AND LIMITING CONDITIONS III. ECONOMIC CONDITIONS AND INDUSTRY DATA IV. SURVEY OF R.F. FAGER COMPANY HISTORY PRODUCT LINES COMPETITION MANAGEMENT EMPLOYEES V. FINANCIAL ANALYSIS RATIO ANALYSIS ADJUSTED BALANCE SHEET ADJUSTED INCOME STATEMENTS VI.V ALUATION OF R.F. FAGER COMPANY AS OF APRIL 17,2005 VALUATION ApPROACHES VALUATION METHODOLOGIES CONSIDERED BUT REJECTED ADJUSTMENTS FOR DISCOUNTS AND / OR PREMIUMS CONCLUSION OF VALUE APPENDIX A: V ALUA TORS' QUALIFICATIONS APPENDIX B: BIBLIOGRAPHY EXHIBITS EXHIBIT 1 - ECONOMIC CONDITIONS EXHIBIT 2 - INDUSTRY DATA EXHIBIT 3 - HISTORICAL BALANCE SHEET SUMMARY EXHIBIT 4 - HISTORICAL BALANCE SHEET AS A PERCENT OF ASSETS EXHIBIT 5 - HISTORICAL INCOME STATEMENT SUMMARY EXHIBIT 6 - HISTORICAL INCOME STATEMENT AS A PERCENT OF SALES EXHIBIT 7 - HISTORICAL STATEMENT OF CASH FLOW SUMMARY EXHIBIT 8 - STOCK OWNERSHIP EXHIBIT 9 - HISTORICAL COMP ARA TIVE ANALYSIS EXHIBIT 10 - ADJUSTED BALANCE SHEET SUMMARY EXHIBIT 11 - NORMALIZA TION ADJUSTMENTS EXHIBIT 12-ADJUSTED INCOME STATEMENT SUMMARY 5 6 6 6 6 6 6 6 7 7 7 8 8 8 9 9 9 10 10 10 10 10 11 11 12 16 18 19 21 22 23 27 37 38 39 41 43 44 45 46 47 49 3 I I II I I I I I I I I I I I I I I I I II EXHIBITS (CONTINUED) EXHIBIT 13 - ADJUSTED INCOME STATEMENT SUMMARY AS A PERCENT OF SALES EXHIBIT 14 - NORMALIZED CASH FLOW SUMMARY EXHIBIT 15 - WEIGHTED AVERAGE CASH FLOW EXHIBIT 16 - IBBOTSON BUILD-UP METHOD EXHIBIT 17 - STRAIGHT CAPIT ALIZA nON OF EARNINGS METHOD V ALUA nON SUMMARY EXHIBIT 18 - MINORITY INTEREST DISCOUNT FACTORS EXHIBIT 19 - MARKET ABILITY DISCOUNT FACTORS 51 51 52 53 54 55 56 57 4 I I I I. CERTIFICATION OF VALUATORS Statement of Certification I We certify that, to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. I 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased, professional analyses, opinions, and conclusions. I 3. We have no present or prospective interest in the property that is the subject of this report, and we have no personal interest or bias with respect to the parties involved. I 4. Our compensation is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. I 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with NACV A Standards. I 6. This report was prepared under the direction of Clarence E. Asbury, CPA, CV A, with significant professional assistance from T. Eric Blocher, CPA, CV A. I c: ?n(l,K~.LL~ McKONL Y & A Y LLP I I I I -:7~~ T. Eric Blocher I I I I I 5 I I II. INTRODUCTION I Subject of the Valuation I The subject of this valuation report is 20 shares of Class A and 980 shares of Class B common stock of R.F. Fager Company. I I Summary Description ofR.F. Fager Company The subject business, R.F. Fager Company, was founded in 1959. Its primary business activity is retail and wholesale sales of plumbing, heating, and roofmg supplies. The business markets its products to businesses, contractors, and individuals in the central Pennsylvania region. Nature and Function ofthe Valuation I The objective of this valuation is to determine the fair market value of 20 shares of Class A and 980 shares of Class B common stock of RF. Fager Company for the sole purpose of estate tax purposes. I Date of Valuation The date of valuation is defined as the valuation effective date and is April 17, 2005. I Ownership and Control I The ownership ofRF. Fager Company's common stock is shown on Exhibit 8. Scope of the Assignment I I I I The scope of the assignment is limited to opining to the fair market value of 20 shares of Class A and 980 shares of Class B common stock ofRF. Fager Company as of April 17, 2005 for estate tax purposes. In our determination of value, we considered the following relevant factors that are specified by the Internal Revenue Service in Revenue Ruling 59-60: I The history and nature ofR.F. Fager Company The economic outlook of the United States and that of the plumbing and heating supply industry in particular The book value of R.F. Fager Company's stock and the fmancial condition of RF. Fager Company The earnings capacity ofR.F. Fager Company The dividend paying capacity ofR.F. Fager Company Whether or not R.F. Fager Company has goodwill or other intangible value Sales of the stock and size of the block of stock to be valued Our study included, but was not limited to, the above-mentioned guidelines. I In performing our work, we were provided with and/or relied upon various sources of management supplied information, including: I I I Reviewed financial statements for R.F. Fager Company for the years ending December 31, 2000 through December 31,2004 Industry publications Consultation of several fmancial publications and databases 6 I I The procedures employed in valuing 20 shares of Class A and 980 shares of Class B common stock of R.F. Fager Company included such steps as we considered necessary, including but not limited to: I A visit to R.F. Fager Company Discussions with management regarding the past and future operations ofR.F. Fager Company An analysis of the historical [mancial condition ofR.F. Fager Company An analysis of the plumbing and heating supply industry An analysis of the general economic environment as of the valuation date, including equity and debt investor return expectations An analysis of other pertinent facts and data resulting in our conclusion of value I I Definitions I · Fair market value is the cash or cash equivalent price at which the property would change hands between a willing buyer and a willing seller; neither being under a compulsion to buy or to sell and both having reasonable knowledge of all relevant facts. I I · Goodwill is that intangible asset which arises as a result of name, reputation, customer patronage, location, products, and similar factors that have not been separately identified and/or valued but which generate economic benefits. I . A "Going Concern" is an operating business enterprise. · Non-Operating Assets and Liabilities are those assets and liabilities present in the business that are not necessary to the ongoing operation of the business. I Principal Sources of Information I The principal sources of information used in this valuation analysis are the Company's [mancial statements and income tax returns, interviews with the Company's owners, Integra Information, and The Risk Management Association Annual Statement Studies. A complete bibliography is provided in Appendix B to this valuation report. I Assumptions and Limiting Conditions I · This report is a valuation report designed to give an opinion of fair market value. It is not an accounting report, and it should not be relied upon to disclose hidden assets or to verify financial reporting. It is an opinion of the fair market value of20 shares of Class A and 980 shares of Class B common stock ofR.F. Fager Company as of April I?, 2005. I · We have accepted the reviewed [mancial statements of R.F. Fager Company without testing their accuracy. The financial statements consist of balance sheets, income statements, and statements of cash flows. The accuracy of the financial statements is the sole responsibility of the management ofR.F. Fager Company. I I · We have relied on representations made by the owners about the background and history of R.F. Fager Company. The management ofR.F. Fager Company has acknowledged to us that the information they provided us was complete and accurate. If significant additional information should come to light, the final opinion of value described in this report could be different, and that difference could be material. We assume no responsibility for the accuracy of the information provided to us by R.F. Fager Company's management. I · All related facts, information, estimates, comments, and statistical information set forth in the report have been obtained from sources believed to be knowledgeable, reliable, and accurate. However, we assume no liability for the accuracy of the information provided to us by others. I I 7 I I I · This valuation report is based upon facts and conditions existing as of the date of valuation. Events and conditions occurring after that date have not been considered, and unless specifically requested by the client and agreed upon by us, we have no obligation to update our report for such events and conditions. I · This report and/or any or all of the information contained in this report is confidential. It has been prepared only for the purposes stated and shall not be used for any other purpose. Neither this report nor any portions thereof (including any conclusion as to value) shall be disseminated to third parties without the prior consent of McKonly & Asbury LLP and R.F. Fager Company. I · We have assumed that R.F. Fager Company has unimpaired, valid, and unencumbered legal ownership of all assets disclosed. We assumed that title to the assets held is marketable. I · We have assumed that R.F. Fager Company has not entered into any negotiations to sell any of its assets or segments of its business. I · We have assumed that there are no undisclosed liabilities and that all parties with whom R.F. Fager Company has conducted, or will conduct business, will meet their written or oral obligations. I · As of the date of valuation, we were not aware of the existence of any environmental hazard(s). No environmental study was provided and we were advised that there is no indication of the presence of any existing or potentially hazardous conditions and/or toxic substances that would presently or in the future have an adverse impact upon R.F. Fager Company. It is a basic assumption of our valuation that, in the absence of any information to the contrary, R.F. Fager Company is not impacted by any hazardous environmental conditions. I I · We are not required to give testimony in court, or be in attendance during any hearings or depositions, with reference to R.F. Fager Company, unless previous arrangements have been made. I · We have assumed that there is no material impact on the fair market of 20 shares of Class A and 980 shares of Class B common stock of R.F. Fager Company opined to in this valuation report for any change in the fair market value of the Company's net assets between December 31, 2004 (date of most recent reviewed [mancial statements) and April 17, 2005 date of valuation. I I · The value opined to in this report applies only to R.F. Fager Company as of April 17, 2005. In addition, our opinion of value is valid for estate tax purposes. I III. ECONOMIC CONDITIONS AND INDUSTRY DATA I As part of our analysis of the fair market value of 20 shares of Class A and 980 shares of Class B common stock of R.F. Fager Company, we have analyzed the conditions of the economy and the plumbing and heating supply industry that existed at the April 17, 2005 date of valuation. The schedules presented in Exhibit 1 and Exhibit 2 present our analysis of the economic conditions and industry data. The economic statistics shown in these exhibits will help the reader to understand the general business climate, investor expectations, return requirements, as well as the reasonableness ofR.F. Fager Company's historical performance. I IV. SURVEY OF R.F. FAGER COMPANY I I History R.F. Fager Company was founded in 1959 by Richard F. Fager Sr. and Delroy Brosius selling primarily hydraulic I 8 I I hose and fittings and sheet metal supplies. The original building was leased and was in the rear of the building known as the Iron Kettle Bar. As the business grew, plumbing lines were added in the 1960's. I I A new building was constructed in 1962 at 2056 State Road on an approximately 3 acre parcel. The early business was at fIrst a partnership. In 1966 the Company was incorporated in the Commonwealth of Pennsylvania. In 1970 Richard Fager, Jr. joined the Company which then had approximately 10 employees. Harold Brosius and Darwin Brosius also joined the Company in the late 1970's. Darrell Brosius joined the company in 1981. A 20,000 square foot warehouse was constructed early in 1981. I I I I In February 1992 the corporation changed to a subchapter S corporation. At that time the adjoining property known as the Dog House Bar wa!l purchased to allow for the construction of its present main building at 2058 State Road. During this time the Company had approximately 40 employees. The new building allowed for a larger plumbing showroom and a larger customer service area. In 1994 Bryce Fager joined the Company. Year 2000 marked the passing of Richard Fager,Sr. at which time Richard Fager, Jr. became President. The Company at that time had approximately 80 employees. In 2003 the L.B. Smith Building at 2051 State Road was purchased on 4 acres which is now the roofmg department. Year 2005 marked the passing of DeIroy Brosius. Product Lines R.F. Fager Company's major product lines are as follows: 50% Plumbing Supplies: Kohler Plumbing Fixtures Moen Faucets Delta Faucets PVC Pipe & Fittings Copper tubing & Fittings Lasco Tubs I I I 30% Heating Supplies: Nordyne HV AC Burnham Boilers 20% Roofing Supplies: T AMKO Shingles ELK Shingles Rubber Roofing I Competition I R.F. Fager Company's sources of competition are from various sources which include Hajoca Corp., York Corrugating, Noland Co., Thomas Sommerville, Kohl Roofing, ABC Roofmg, Home Depot, and Lowes. I I Management The management ofR.F. Fager Company includes the following key individuals: Richard Fager Jr, President - Served as Vice President since 1980 and President since 2000 managing all areas including sales, financial and logistics. I I I I Bryce Fager, Vice President - Served as Vice President since 2000. Responsibilities include commercial sales, personnel, and strategic planning. Darrell Brosius - Responsibilities include managing the showroom operation including sales, personnel and product management. Harold Brosius - Responsibilities include managing the sales counter operation, express counter, water softener and other water purification and pump products. 9 I I Bob MacKay, Office Manager - Responsibilities include the Accounts Receivable and Credit Department. I I Jason Henry, Delivery Manager - Responsibilities include supervising of the delivery service which consist of trucking, order processing, and drivers. Jim Cook, Buildings and Maintenance Manager - Responsibilities include supervising the hose shop operation, truck and forklift maintenance, and computer operations. I I I I Steve Dittmer, Heating Department Manager - Responsibilities include product management, outside sales manager, and marketing committee. All of the management employees are paid on a salaried basis. Employees R.F. Fager Company has approximately 95 employees which consist of warehouse, counter, drivers, administration, outside and inside sales, and showroom. The Company provides a progressive benefit package including health insurance, life insurance, and a 401 K savings and profit sharing plan. v. FINANCIAL ANALYSIS Ratio Analysis I I I I As part of our fmancial analysis of the fair market value of 20 shares of Class A and 980 shares of Class B common stock of R.F. Fager Company, we calculated some of the Company's fmancial and operating ratios from its historical fmancial statements. These ratios can be compared with general industry guidelines and [mancial information as shown in Exhibit 2. Exhibit 9 presents a listing of these ratios. Adjusted Balance Sheet We analyzed R.F. Fager Company's assets and liabilities in order to adjust them to their estimated fair market value as of the April 17, 2005 date of valuation. Exhibit 3 and Exhibit 4 present the historical balance sheets of R.F. Fager Company for the periods ending December 31, 2000 through December 31, 2004. Specifically, the following adjustments have been made to the December 31, 2004 balance sheet: I Investments with a carrying value of $3,772,991 were adjusted to their fair market value of $3,882,883 at December 31,2004. These investments are non-operating assets and had been removed from the Company's adjusted balance sheet. I I I I I I R.F. Fager Company's fixed assets were adjusted to their estimated fair market value as of December 31,2004. The Company purchased a building at the end of 2003. The accumulated depreciation on the building at December 31, 2004 was added back to arrive at the building's fair market value. The Company owns undeveloped raw land that was purchased for investment purposes. The land is a non-operating asset and had been removed from the Company's adjusted balance sheet. The adjusted balance sheet ofR.F. Fager Company is presented in Exhibit 10. Adjusted Income Statements In our analysis of the fair market value of R.F. Fager Company, we reviewed the historical income statements for the period December 31, 2000 to December 31, 2004 and the common size income statements for the same period, presented in Exhibit 5 and Exhibit 6. 10 I I There are two types of normalization adjustments. The fIrst type removes the impact of unusual or non-recurring items that have impacted a company's earnings history or earnings capacity and adjusts for the income and expenses of non-operating assets and liabilities. These types of adjustments are made whether the interest being valued is a controlling interest or a minority interest. The second type adjusts discretionary expenses that would likely not exist in a well run public company. The second type of adjustment is typically made by controlling interests. In order to determine R.F. Fager Company's earnings capacity, we considered if it would be necessary to adjust R.F. Fager Company's income statements for both types of normalization adjustments. The valuation of 20 shares of Class A and 980 shares of Class B common stock of R.F. Fager Company at April 17, 2005 implies the valuation of a minority interest. A minority interest ownership of 20 shares of Class A and 980 shares of Class B common stock would not have any ability to change or remove non-operating revenues and expenses, unusually high or low expenses, and discretionary expenses. Accordingly, we have not recorded any of the second type of adjustments. I I I I R.F. Fager Company is a Subchapter S corporation and reduced the income tax liability to its individual owners by paying excess compensation. It is our opinion that this is an example of the fIrst type of a normalization adjustment that was done solely for tax implications. The actual owners' compensation was added back to the reported net income and an estimate of the fair value for their services was deducted. The estimate of the fair value of the officers' compensation was based on the average total compensation for officers of a similarly sized company operating in the same industry. Specifically, the information on owners' compensation was obtained from the Integra Information report on "Wholesale Trade - Plumbing & hydronic heating supplies" report included in Exhibit 2. I I For valuation purposes, the portion of the payroll tax expense related to the "excess" officers' compensation has been added back to R.F. Fager Company's reported net income. Specifically, payroll tax expense estimated at 2.9% of payroll, was added back to net income. I Interest income generated from non-operating investments was deducted from R.F. Fager Company's reported net income. I The result of adjusting R.F. Fager Company's income statements is a net income for each period under consideration that reflects R.F. Fager Company's "normalized" profitability. The adjusted income statements of R.F. Fager Company are presented in Exhibit 12 and Exhibit 13. I VI. VALUATION OF R.F. FAGER COMPANY AS OF APRIL 17,2005 I Valuation Approaches I There are two premises by which a company may be valued. A company can be valued as a going concern, indicating it is an ongoing business, or it can be valued as if it were being liquidated. Because we believe R.F. Fager Company to be a viable business that will continue to operate, we will use the going concern premise to value the Company. I There are three basic approaches that can be used in valuing a business. These are the market approach, the asset based approach, and the income approach. Following, is a short discussion of each of these approaches: I THE MARKET APPROACH I The market approach involves attempting to determine the value of a business by using actual events in the current market. This is done by comparing the company being valued to other companies that are in the same industry or a similar business. The most common technique under this approach is to attempt to locate guideline businesses that have been sold and use the price at which they were sold to derive a value for the company being valued. The theory behind this approach is that the market will determine what price is acceptable based on the earnings stream, book value, or some other factor in an industry. Generally, this approach is difficult to use because guideline companies are difficult to fmd and even if a similar company is found, an amount of time has usually passed and the market has changed. There are three main methodologies used in the market approach. These are the Publicly-Traded Guideline Companies, the Privately-Held Guideline Companies, and the Dividend Payout Ratio. These methods are discussed I I I 11 I I in more detail in the following sections of the report. I THE ASSET APPROACH I The asset approach uses the value of a company's assets to determine the value of a business. This approach only considers the value of the tangible assets and recorded intangible assets of a company. It does not take into account the value of unrecorded intangible assets or the earnings stream of the company. This approach is most often used when the value of a company lies more in its assets than its earnings stream and there is little or no intangible value involved. Intangible value that is not recorded can consist of items like a trademark, trade name, existing customer base, or good reputation in the industry. There are two main methodologies used in the asset approach. These are the book value method and the adjusted book value method. These methods are discussed in more detail in the following sections of the report. I I THE INCOME APPROACH I The income approach uses the future estimated earnings to be generated by a company to value the business. Because estimating the future income of a business is speculative, historical data is generally used as the starting point for deriving the value under the income approach. First, a basis of performance must be selected. The basis of performance can be earnings before taxes, earnings after taxes, or cash flows. The selection of the basis of performance is generally determined by the type of business being valued. Earnings before taxes would generally be used in valuing an S corporation because S corporations do not pay taxes. Earnings after taxes would generally be used in valuing a C corporation because C corporations do pay taxes. Once the basis of performance is selected, a figure for projected earnings is arrived at and a discount or capitalization rate is applied. This rate is to take into account certain risk factors, the required rate of return, and the type of projected earnings (pre-tax or post-tax). There are three main methodologies used in the income approach. These are the capitalization of earnings method, the capitalization of excess earnings method, and the discounted future earnings method. These methods are discussed in more detail in the following sections of the report. I I I Valuation Methodologies Considered but Rejected I In our valuation of the fair market value of 20 shares of Class A and 980 shares of Class B common stock of R.F. Fager Company as of April 17, 2005, we considered the following valuation methodologies but rejected them as applicable to the valuation assignment. I Publicly-Traded Guideline Companies Method I In the valuation of R.F. Fager Company, we considered using valuation ratios derived from publicly-traded guideline companies to determine the fair market value of R.F. Fager Company as of April 17,2005. We reviewed BIZCOMPS and FreeEdgar.com for transactions involving similar companies. However, because of the disparity in the size, product mix, geographic location, and capital structure between the publicly-traded guideline companies and R.F. Fager Company, we rejected the method as an accurate indicator of the fair market value of R.F. Fager Company I Privately-Held Guideline Companies Method I In the valuation of R.F. Fager Company, we considered using valuation ratios derived from the sales of privately- held guideline companies. We reviewed BIZCOMPS and PRATTS STATS for transactions involving similar companies. However, we rejected using the privately-held guideline companies method because of the insufficient number of transactions involving privately-held guideline companies that are similar to R.F. Fager Company I Dividend Paying Capacity Method I Although I.R.S. Revenue Ruling 59-60 specifically mentions using a dividend paying capacity method in valuing a closely held business for income tax purposes, it is rarely used by appraisers. Additionally, Revenue Ruling 59-60 states "Where an actual or effective controlling interest in a corporation is to be valued, the dividendfactor is not a material element, since the payment of such dividends is discretionary with the controlling stockholders". Because I I 12 I I the holder of 20 shares of Class A and 980 shares of Class B common stock of R.F. Fager Company would not have the ability to declare the level and necessity of dividends, (and the Company has not historically paid dividends) we rejected the dividend paying capacity method as an accurate indicator of the fair market value of R.F. Fager Company as of April 17, 2005. I Liquidation Value Method I Liquidation value is the value of the business' assets (minus liabilities) as if they were to be sold in an orderly, piecemeal manner. Although we considered R.F. Fager Company's liquidation value, we rejected this method as an accurate indicator ofR.F. Fager Company's fair market value due to our opinion that the business is a going concern. I Book Value Method I The book value ofR.F. Fager Company as of December 31, 2004 was $10,766,975. Book value is an accounting value that is calculated by subtracting total liabilities from total assets. Because a company's book value does not consider the fair market value of its assets and liabilities, the fair market value of any intangible assets, or its earning capacity it is not an accurate reflection of the business's fair market value as of the date of valuation. R.F. Fager Company's value is primarily derived from its earnings flow; therefore, although we considered R.F. Fager Company's book value, we rejected it as an accurate indicator of the fair market value as of April 17, 2005. I I Adjusted Book Value Method I A business's adjusted book value is calculated by adjusting its assets and liabilities from their book value to their estimated fair market value. In a going concern, fair market value usually is the depreciated replacement cost. As of December 31, 2004, R.F. Fager Company's adjusted book value was $6,657,317. However, like the book value method, the adjusted book value method does not consider R.F. Fager Company's earnings capacity. The adjusted book method is used primarily to value holding companies and companies that do not possess goodwill value. Because R.F. Fager Company's value is derived primarily from its earnings flow, we rejected the adjusted book value method as an indicator of its fair market value as of April 17, 2005. I I Capitalization of Excess Earnings Method I The capitalization of excess earnings method is primarily used to value small businesses and / or professional practices. Although we considered the capitalization of excess earnings method for valuing R.F. Fager Company, we rejected it as an appropriate method to value R.F. Fager Company because the method considers both the adjusted net assets of the Company as well as the earnings flow. In order to make an accurate indication of excess earnings, a normalized level of operating assets for the industry and a required rate of return on those assets would need to be determined. Due to the disparity in size and capital structure among companies operating in this industry, we did not consider it practicable to determine what a normalized level of operating assets and a normalized rate of return on those assets for the industry and, as such, have not considered this method. I I Discounted Future Earnings Method I The discounted future earnings method is used when a business's value is primarily related to its earnings. In addition, the method is useful when the subject business' short-term earnings are not expected to grow at the same rate as its long-term earnings. In the valuation of R.F. Fager Company, we considered using the discounted future earnings method, but rejected it because we believe R.F. Fager Company's short-term earnings will grow at the same rate as its long-term earnings. I Selection of the Most Suitable Method I In determining the fair market value of20 shares of Class A and 980 shares of Class B common stock ofR.F. Fager Company as of April 17, 2005, it is our opinion that the primary method to be used is Capitalization of Earnings. Application of Capitalization of Earnings Method I I I3 I I Conceptual Basis I The capitalization of earnings method values the business based on an expected stream of earnings (cash flow) capitalized by a risk-adjusted rate of return to derive the business's operating value. A capitalization of earnings method is primarily used to value a business whose earnings are expected to remain stable and whose value is primarily based on its projected earnings stream. Our reasons for selecting this method are that we believe the fair market value of R.F. Fager Company is derived from its earnings stream and that the short-term growth in earnings will approximate its long-term growth in earnings. The steps involved in using the capitalization of earnings method are: I I · Estimate R.F. Fager Company's pro-forma sustainable earnings. I · Determine the appropriate capitalization rate. · Capitalize the sustainable earnings into an operating value. I · Add / subtract non-operating assets and / or liabilities to determine the fair market value (prior to any discounts and / or premiums) for the entire entity at April 17, 2005. I Income to be Capitalized I We considered cash flow to be the primary basis of performance (earnings basis) that a willing buyer and willing seller would consider when establishing a value for R.F. Fager Company. We arrived at this determination because cash flow available for distribution to the stockholders is the primary investment motive of an investor in a Subchapter S corporation. R.F. Fager Company is a Subchapter S corporation and does not pay federal or state income taxes, but rather the individual owners pay income tax on their proportionate share of the Company's net income. This requirement of the individual owners to pay the income tax makes cash flow available for distribution to offset the liability the primary earnings base. I I In order to estimate R.F. Fager Company's fair market value using the capitalization of earnings method, it is necessary to determine R.F. Fager Company's sustainable earnings base as of April 17, 2005. The fIrst step is adjusting the historical cash flow statements for non-operating expenses and revenues. The impact of adjustments to the income statement previously discussed was accounted for in arriving at normalized cash flows. Additionally, the cash flow impact of discretionary items such as loans to owners and repayments of those loans were removed. A normalized level of capital expenditures was used based on historical fmancial information and management's expectations (after the consideration of large one-time purchases). Additionally, normalized levels of debt fInancing activity were determined after consideration of large one-time fmancing arrangements for the aforementioned purchases. Lastly, the cash flow impact of the net change in non-operating investments was removed to arrive at normalized cash flows, as seen in Exhibit 14. The second step is weighting the normalized cash flows, and calculating the sustainable earnings base. The "Weighted Average Cash Flow Method" was used to calculate the sustainable earnings. The calculation of the "Weighted Average Cash Flow" earnings base of $1,504,827 is presented in Exhibit 15. I I I I Selection of Discount / Capitalization Rate I Capitalization rates vary among particular types of businesses and from one period of time to another. Expressed as a percentage, the more speculative or the lower the expected growth rate in the business's income stream, the higher the capitalization rate; conversely, the less speculative or the higher the expected growth rate in the income stream, the lower the capitalization rate. I The basic components of a capitalization rate are the discount rate and a growth factor. The discount rate may be broken down into the risk-free rate ofreturn and a risk premium (fmancial and market). I The risk-free rate of return includes the investors' required rate of return for the riskless use of their funds and a I 14 I I factor for inflation. The rate of return earned on long-term U.S. Government bonds is considered a good proxy for the risk-free rate of return. As of the date of valuation, the rate of return on a long-term U.S. Government Treasury Bond was 4.79%. Therefore, the risk-free rate of return is 4.79%. I We considered a method of developing a risk premium that is widely used in the business valuation industry. The method we considered is the Ibbotson Build-Up method. I The risk premium return is the additional rate of return required by investors in the market to compensate them for the additional risk in investing in a stock security as compared to a long-term U.S. Government security. In Ibbotson Associates'Stocks, Bonds, Bills and Inflation Yearbook, it is shown that, between 1926 and 2004, the average total returns earned on large corporate stocks has been approximately 7.20% higher than the average total annual returns for long-term U.S. Government bonds.. Therefore, in developing a discount rate, we added an equity risk premium of7.20% to the risk-free rate of return. I I In addition to the equity risk premium, the same Ibbotson Associates' study indicates that the smallest stocks traded on the New York Stock Exchange (defined as the lowest 20 percent) earned an additional 6.41 % premium over the larger stocks traded on the exchange. This small stock premium was added to the risk-free rate of return and the equity risk premium. I I The same Ibbotson Associates' study indicates that businesses operating in the Hardware, and Plumbing and Heating Equipment and Supplies industry were less risky than the market as a whole and as such a specific industry risk adjustment of -0.53% should be deducted from the premiums previously listed. I Summing the risk-free rate of return with the equity and small stock risk premia and the specific industry risk adjustment equals the average total return required by investors to induce them to invest in the smallest stocks traded on the New York Stock Exchange. I However, investing in the stock of a closely held business involves additional elements of risk, which must be compensated by offering a higher rate of return. The additional risk may be from specific risks associated with the industry or the company as compared to the entire marketplace. Specific risk premiums are based upon judgments of the business and industry risk surrounding the business. Specific risk premiums relate to key-factors of historical and projected growth, profitability and stability of the business and the overall industry. Positive specific risk premiums indicate an overall risk to the business. An example of this would be dependence of the business upon one key individual or operating within one market. Negative specific risk premiums indicate stability and increase value of a company. An example of this would be a well-diversified product mix that would allow the business to remain profitable in an underperforming market. An analysis of the specific risk premiums for the R.F. Fager Company includes consideration of the following factors: I I I · The depth ofR.F. Fager Company's management. · The importance of Key Personnel. . The stability ofthe industry. · The diversification ofR.F. Fager Company's customer base. · The impact ofR.F. Fager Company's geographic location. · The stability ofR.F. Fager Company's earnings. · The earnings margins ofR.F. Fager Company. · The financial structure ofR.F. Fager Company. I I I After considering the aforementioned factors, it is our opinion that the subjective risk premium for R.F. Fager Company should be 3.0%. I Summing all of the above components equals a discount rate of approximately 20.87%. I The Ibbotson Build-Up method develops a discount rate. In order to calculate a capitalization rate, it is necessary to subtract R.F. Fager Company's expected long-term growth rate in earnings or cash flows from the calculated I 15 I I discount rate. Based on R.F. Fager Company's historical growth rate and the expected growth rate in the industry, it is our opinion that R.F. Fager Company's long-term growth rate will be approximately 3.0% resulting in a capitalization rate of 17.35%. I Finally, the non-operating assets previously discussed in the Adjusted Balance Sheet section of this valuation report were added to the indicated value to arrive at the fair market value of20 shares of Class A and 980 shares of Class B common stock ofR.F. Fager Company as of April 17,2005. I Summary ofIndicated Value I Exhibits 16 and 17 show the components that make up the capitalization rate and the value derived under the Ibbotson Build-Up method for R.F. Fager Company as of April 17, 2005 using the capitalization of earnings method. I Adjustments for Discounts and / or Premiums I Minority Interest Discount I A minority interest is an ownership position ofIess than 50.00% of the voting interest in a business. The essence of a minority interest discount is shown by the holder of a minority interest not being in a position to: I I. Elect directors and appoint management 2. Establish levels of management compensation and prerequisites of management 3. Determine dividends 4. Establish company policies and the mission of the business 5. Determine investments and fmancing of the business 6. Purchase or sell assets 7. Determine when and how to liquidate the company 8. Change the articles of incorporation or by-laws I I An important variable affecting the size of the minority interest discount to be applied in a particular case is the degree or amount of control the interest being valued holds. For example, if a stockholder owns 70 % of the stock of a company and another individual holds owns the remaining 30 %, the owner of the 30 % interest has no control over the operations of the business. However, if two individuals each own a 40 % interest and a third individual owns a 20 % interest, the 20 % owner holds the power of a swing vote, and thus has a higher degree of control than the 30 % owner. I I Empirical Studies I Very little information is available on sales of minority interests in closely held businesses. Data is available from transactions involving the stock of publicly held companies that can be used for guidance in quantifYing a minority interest discount. Studies have been published documenting control premiums paid in transactions involving the purchase of a controlling interest in publicly traded companies. I W.T. Grimm & Company W.T. Grimm & Company tracks purchases of controlling interests in publicly traded companies and published data on the control premiums in their annual Mergerstat Review. In almost all cases where a controlling interest in a public company was purchased, a premium was paid in excess of the market price at which the stock had been trading as a minority interest previously. The statistics gathered and published by W.T. Grimm indicate that the average control premiums for these transactions imply a range of minority interest discounts from 26 % to 33.3 %. I I Houlihan. Lokev. Howard & Zukin Houlihan, Lokey, Howard & Zukin, Inc. publishes the quarterly HLHZ Control Premiums Study which presents the results of their comparison of prices of larger public companies' stock prior to the controlling interest purchase transaction date, to the actual price paid for the controlling interest. Their studies indicate an average control I I 16 I I premium of approximately 41 % to 48 % which calculates to an average minority interest discount of approximately 29 % to 33 %. I In our opinion, a minority interest discount of 25% is warranted because 20 shares of Class A and 980 shares of Class B common stock of R.F. Fager Company can not elect directors nor appoint management, establish levels of compensation, determine dividends, establish company policies, exercise any control over previously discussed items. Furthermore, an investor with "reasonable knowledge of all relevant facts" would not pay the same amount for investment in similar companies where one would have control over such factors. See Exhibit 18 for detail regarding this discount. I I Marketability Discount I Marketability discounts are calculated separately from minority interest discounts and control premiums. Marketability discounts sometimes are needed because several approaches to valuation are calculated using comparable sales or discount rates that are based on marketable business interests. I In actual application, the control premium or minority interest discount usually is applied before the marketability discount to determine the fair market value of the business interest on afreely traded basis. Once the marketability discount has been applied, the result is the fair market value of the closely held business interest. I Subtracting a discount for lack of marketability is the [mal adjustment normally required when valuing a block of closely held stock. Because many valuation approaches rely on data generated from securities from the public marketplace, the results are for freely traded stock. Because closely held stock is not as freely traded as publicly traded stock, investors will require a discount to compensate them for the closely held stock's relative illiquidity. I The quantification of the marketability discount usually involves comparing the stock prices of common stocks that are identical except for the fact that one group of stock is classified as restricted stock. Over the past twenty-five years, numerous studies have indicated that the discount for lack of marketability in the public marketplace is approximately 30 to 40 percent. The following table lists the most commonly cited studies regarding discounts for the lack of marketability. I I Study Columbia Financial Advisors Johnson FMV Opinions, Inc. SEC Overall A vg. Management Planning, Inc. Willamette Management Studies SEC Non-Reporting Avg. Gelman Trout Silber Moroney Maher Standard Research Consultants Discount 13.0% 20.0% 23.0% 25.8% 27.7% 31.2% 32.6% 33.0% 33.5% 33.8% 35.6% 35.4% 45.0% I I I I Because each business has its own unique marketability issues, adjustments to this base rate are usually necessary. In order to help quantify the various factors affecting the marketability of a closely held business, the base marketability discount rate should be increased or decreased based on the following factors: I 1. Restrictions on transfers 2. Amount and consistency of dividends payout 3. Prospects of public offering or sale of company 4. The existence of a put option 5. Existence of a limited market that may be interested in purchasing shares 6. The size of the block of stock I I , I 17 I I 7. The existence of buy/sell agreements I After considering all of the above factors, it is our opinion that a 25% discount for lack of marketability is appropriate to apply to 20 shares of Class A and 980 shares of Class B common stock of R.F. Fager Company as of April 17, 2005. See Exhibit 19 for details regarding this discount. I Conclusion of Value I Based on our analysis of R.F. Fager Company and all of the factors affecting its value, it is our opinion that the fair market value of 20 shares of Class A and 980 shares of Class B common stock as of April 17, 2005 is $1,430,000 and is calculated on Exhibit 17. I I I I I I I I I I I I I I 18 I I APPENDIX A: Valuators' Qualifications I CLARENCE E. ASBURY Principal I Academic and Professional Credentials I Bachelor of Science, Elizabethtown College, 1967 Certified Public Accountant I Certified Valuation Analyst Certificate of Educational Achievement in Business Valuations - American Institute of Certified Public Accountants I Position and Experience I Principal, McKonly & Asbury, Certified Public Accountants 2005 - present Managing Partner, McKonly & Asbury, Certified Public Accountants 1993 - 2004 I Partner, McKonly & Asbury, Certified Public Accountants 1973 - 2004 Manager, Main LaFrantz & Company 1969 - 1973 I Qualified as an expert witness on business valuation issues Professional Affiliations I American Institute of Certified Public Accountants I Pennsylvania Institute of Certified Public Accountants National Association of Certified Valuation Analysts I Central Pennsylvania Estate Planning Council I I I I I I 19 I I I T. ERIC BLOCHER Senior Manager I Academic and Professional Credentials I Bachelor of Business Administration, Cum Laude, James Madison University, 1990 Certified Public Accountant I Certified Valuation Analyst Position and Experience I Senior Manager, McKonly & Asbury, Certified Public Accountants July 2001 - Present Manager, McKonly & Asbury, Certified Public Accountants 1997 - July 2001 I Supervisor, McKonly & Asbury, Certified Public Accountants 1995 - 1997 Senior, McKonly & Asbury, Certified Public Accountants 1994 - 1995 I Staff, McKonly & Asbury, Certified Public Accountants 1990 - 1994 I Qualified as an expert witness on business valuation issues Professional Affiliations I I American Institute of Certified Public Accountants Pennsylvania Institute of Certified Public Accountants Pennsylvania Institute of Certified Public Accountants - South Central Chapter - Business Valuation Committee Chairman I National Association of Certified Valuation Analysts I I I II I I 20 I I APPENDIX B: Bibliography I Bureau of Economic Analysis, National Accounts Data, April 2005, http://www.bea.doc.gov I Economic Report of the President, Submitted to the Congress, February 2004, http://www .access. gool ecop/index.html I Federal Reserve, Statistical Releases and Historical Data, January 2004, http://www . federalreserve. gOV Federal Reserve Press Release, December 14,2004. I Bureau of Labor Statistics, Most Requested Series, April 2005, http://www.bls.gov Yahoo Finance, January 2005, http://finance.vahoo.com I Conference Board, January 2005, http://ww.conference-board.org I AI CPA, Business Valuation Certificate of Educational Achievement Program Ibbotson Associates, Stocks, Bonds, Bills and Inflation 2005 Yearbook; Market Results for 1926 - 2004, Chicago Illinois I Integra Information, Industry Growth Outlook Report - 5074 Wholesale Trade - Plumbing & hydronic heating supplies, August 2005 I National Association of Certified Valuation Analysts, Valuations: Fundamentals, Techniques & Theory, Salt Lake City, Utah I Practitioners Publishing Company, "Guide to Business Valuations - Seventh Edition", "Financial Studies of the Small Business", Fort Worth, Texas I The Risk Management Association, Annual Statement Studies - 2004/2005, Philadelphia, Pennsylvania I I I I I I I 21 EXIlIBI'fS ~ , , , , , , , , , , 22 . -- I I EXHIBIT 1- ECONOMIC CONDITIONS I Analysis of 2004 I The economy experienced strong growth in 2004, with strong performances in all but two sectors. The economy grew at a rate of 4.4% in 2004 compared with the 2003 growth rate of 3.0%. After lowering interest rates during 2001-2003, the Federal Reserve began the long-term process of raising rates back to what they perceive to be long- term workable levels. At year end, the Federal Reserve views the economy as having roughly similar risks of upside and downside problems which implies that the Central Bank plans to continue a policy of raising rates at a slow pace. I I In addition to the overall performance of the economy, it is important to look at the key sectors of the economy to analyze where the strengths and weaknesses exist to better predict what is likely to happen in the future. The most important contributors to economic growth in 2004 were personal consumption expenditures, non-residential investment, residential investment, exports, and federal government spending. The only sectors that did not grow were state and local government spending and imports. II I Personal consumption expenditures make up roughly two-thirds of the economy and is the most important measure of current economic performance. In 2004, personal consumption expenditures grew 3.8% after growing by 3.3% in 2003. Despite a growth year in employment, high levels of unemployment and debt apparently continue to partially offset the relatively low cost of debt, the benefit of tax cuts, and rising equity values. Non-residential investment grew by 10.3% in 2004 compared with 2.8% in 2003, making it the leading growth sector for 2004. Nonresidential investment promotes the increases in productivity necessary to sustain full employment stable-price growth. The software and equipment segment of nonresidential investment grew 13.4% in 2004 after growing by 6.4% in 2003. Investment in nonresidential structures continues to struggle, growing by only 1.0% in 2004 after declining by 5.6% in 2003. The marginal to negative growth of this sector appears to reflect businesses failing to grow in facility size. Residential investment continued to grow, rising 9.5% in 2004 and 8.8% in 2003. However, this sector experienced slower growth in the second half of 2004. The export sector grew by 8.1% in 2004. For the most part, the low value of the dollar is pushing up export growth as expected; however, imports continue to grow faster than exports. Imports grew at a rate of 9.8% in 2004. The negative balance of goods and services pressures the dollar to decline further, which in turn, pressures U.S. prices to rise. The continued ability of Americans to purchase more imports reflects better U.S. economic growth compared to many major trading partners and the willingness of Americans to undertake large levels of debt. Federal government expenditures grew 4.7% in 2004 after growing 6.6% in 2003, but this sector continues to be one of the economy's leading growth sectors. Defense expenditures grew 7.4% in 2004 after growing 9.0% in 2003. State and local government expenditures grew at a rate of .4% after growing .7% in 2003. State and local government expenditures continue to be pressured by both a lack of revenue growth and the adherence to balanced budget amendments. 1 1 I I I I 2004 reintroduced the concern of inflation. The Consumer Price Index (CPI) rose by 3.3% in 2004. The CPI rose by 1.9% in 2003 and 2.4% in 2002. However, most economists prefer the core inflation rate, believing that it yields a better indication of "underlying" inflation by deducting the volatile food and energy sectors from the CPI. In 2004, the core inflation rate was 2.2% compared to 1.1 % in 2003 and 1.9% in 2002, indicating that inflation is still under control. However, the accommodative monetary policy of the Federal Reserve has created an extremely liquid economy and, coupled with the falling dollar, inflationary pressure remains a concern. I I Capacity utilization, long a problem area in terms of economic growth, improved in 2004. In the fourth quarter of 2004, capacity utilization rose to 79.2% from 76.8% in the fourth quarter of 2003 and compares reasonably well to the average utilization rate of 81.1 % for the period from 1972-2003. The 2004 increase indicates that the economy is beginning to move to average capacity outcomes. However, the low levels of capacity utilization of recent years is one of the reasons inflationary pressure has been negligible, so the elimination of excess capacity could be another factor in price pressure. I 'I 23 I I I The unemployment rate fell from 5.7% in 2003 to 5.4% in 2004. Despite the fact that over 2 million non-farm jobs were added, non-farm employment was lower at the end of 2004 than it was at the end of2000. Full employment, if achieved, is another catalyst of increasing price pressure. I Financial markets offer another view of the future because investors' returns are paid by future cashflows; therefore, investors value securities based on what they believe will happen. In 2004, the Standard and Poor's 500 index (S&P 500) gained 9.0%, gaining 8.7% in the last quarter. The NASDAQ Composite Index fared similarly, rising 8.6% in 2004 and 14.69% in the fourth quarter. The returns in 2004 are slightly below historical averages, reflecting that investors are not expecting an abnormally positive or negative future. In December of 2004, the 90-day Treasury Bill was priced to yield 2.19%, up from .90% in December of 2003. The Treasury bill rate reflects changes in the Federal Reserve's federal funds rate target. However, the long-term rates are the crucial rates for economic growth because it is these rates at which corporations and government borrow to invest in growth projects. The 20-year Treasury bond was priced to yield 4.88% at year-end 2004 after yielding 5.11 % at year-end 2003. Moody's Baa corporate bonds were priced to yield 6.15% at year-end 2004 after yielding 6.60% at the end of 2003. Not only are these long-term rates low, but the default risk spread (the difference between the corporate yield and the Treasury yield) has also been falling. The default risk yield spread was only 1.27% at year-end 2004 versus 1.49% at year-end 2003. The lower bond yields imply that bondholders have little fear of inflation and the lower yield spreads indicate that bondholders see little default risk. In other words, bondholders appear to agree with equity investors that strong growth is not likely. I I I I I For the past three years, the Federal Reserve has accommodated the Bush Administration's strategy of deficit spending by keeping borrowing rates low. The Central Bank is now moving to a longer-tenn strategy of neutrality. The tentative change in policy took the form of an increase in the Federal Funds rate target from 1.00% to 2.25% through five consecutive one-quarter point increases during the second half of 2004. The current view of the Federal Reserve is that the risk that growth will be too slow is equal to the risk that growth will be too fast. I I The employment cost data continued its positive trend. The employment cost index rose by 3.7% in 2004 after rising by 3.8% in 2003, implying that costs are being kept at a reasonable growth rate. However, productivity growth has lessened. Unfortunately, unlike last year these "normal" cost increases have not equaled large increases in productivity. Year to year productivity growth through the third quarter of 2004 was 3.1 %, compared to 4.4% in 2003. As productivity growth declines, unit labor costs begin to rise which ultimately leads to inflationary price pressure. Through the third quarter of 2004, unit labor costs rose at an annualized rate of less than 2.0%. Although, this figure is not alarming, it compares poorly to the .4% decline in 2003. While the signs indicate that price pressure may begin, it has not at the end of2004. I I Consumer confidence is another variable because it is likely to impact consumer spending on consumer durables and possibly entertainment and travel. The Consumer Confidence Index reached 103.4 in January 2005, up from 102.7 in December 2004 and 91.7 in December 2003. That good news is tempered by a large decrease in the January Future Expectation Index which fell from 100.7 to 98.4. This data also implies that current conditions are improving, but few consumers see strong growth in the near future. I I Overall the economic performance in 2004 was solid. Forecast for 2005 and 2006 I Prospects for near term normal growth appear to be solid. The Bush Administration continues to rely on significant federal government deficits accompanied by accommodative monetary policy to encourage firms to invest and consumers to spend. The results of 2004 indicate the strategy has worked. The low interest rate levels, modestly rising equity values, and remaining tax cuts all seem to impact positively on personal consumption expenditures and residential investment. However, huge consumer and federal debt levels, coupled with a continued high level of unemployment threaten to hurt future growth. The reallocation of resources away from the civilian sector to military and security needs does not bode well for longer-term growth prospects. Allocating considerable amounts of resources to military and security needs may be necessary, but has consequences. Ultimately, foreign bondholders, who account for approximately two-thirds of the total bondholders, need to be paid back, and it is the American taxpayers that have to pay the debt, sending fmancial resources abroad instead of keeping them at home to finance I I I I 24 I I I I I I I I I I I I I I I I I I I domestic growth. While this financial strategy may be legitimate in the face of terrorism, it will mean less U.S. economic growth at some future date. Europe and Japan continue to have slow growth. In the long term, these economies need to grow significantly because the United States cannot sustain high levels of long-term growth without its. key trading partners participating. The dollar has depreciated significantly against both the Euro and the Yen. The full impact has not yet been felt in Europe and Japan, and that impact will impede their growth. On the positive side, the depreciated dollar makes United States exports more competitive and should improve United States employment. Conversely, foreign imports become more expensive and that puts pressure on business costs and on prices to rise. The recovery from SARS and the benign impact of the bird flu should improve American export performance in Asia in 2005. The economies of Southeast Asia and China are among the best performing economies in the world. As their income rises, their demand for United States goods and services will increase. Government expenditure growth is expected to slow in 2005. Because it is not an election year, the reduction in growth is expected primarily from non-military expenditures. However, any significant decreases in government expenditures will probably require significant cutbacks in military spending. The growth of personal consumption expenditures is likely to slow in 2005, but to remain positive. Credit rates are beginning to rise and high debt levels will begin to create borrowing issues. In addition, the benefits of tax cuts for consumer growth are completed. However, a large enough increase in employment could offset these negatives. Non-residential investment should continue to rise, but the non-residential structures area is likely to lag until full capacity is reached. As non- residential investment grows there will be pressure on mortgage rates to rise. As with personal consumption expenditures, low levels of employment and high household debt levels are interfering with the growth in residential investment. The equipment and software sector continues to benefit from technological change as well as increased consumer and government demand. Export growth continues to be difficult to evaluate. The depreciated dollar should provide extraordinary growth in this area, and, import growth is expected to slow given the strength of the dollar. Finally, state and local government expenditure growth should rise with the greater level of national income growth experienced over the last two years. The terrorist attacks of September 11, 2001 did not harm the industrial base of the United States, but, they did radically alter government spending levels and patterns. As a result, economic growth will continue to be impacted for the near and intermediate future. Economic growth is expected to fall in 2005 to about 3.1%. Growth is expected from increases in exports relative to import increases. However, by 2006 growth is expected to slow to between 2.3% and 2.5%. Expectations of increases in inflationary pressure due to the weak dollar, the federal deficit, and the attainment of average capacity utilization account for the estimated slowdown in economic growth. What can change the rather tepid picture painted above? There is a race between debt load costs and income and wealth growth. While the tax cut was clearly stimulative, it may be the Federal Reserve's decision to accommodate federal government deficit spending by holding interest rates down that deserves most of the credit. Optimally, interest rates would rise slowly enough so that non-residential investment will continue to grow quickly and lead to strong economic growth, resulting in higher equity prices and increased wealth to accommodate debt levels. The biggest indicator that such an outcome is possible is the current positive data on non-residential investment. If Europe improves its efficiency and Japan improves both its efficiency and its transparency, their economies would benefit and the United States would benefit as well. If the war on terrorism and the rebuilding of Iraq could be brought to a positive and quick conclusion, resources could be reallocated to the private sector and the federal government could attempt to return to surplus spending. The problems of developing nations and the collapse of the World Trade Organization's momentum are not trivial because the health of developing nations is important for positive long-term performance. The coalescing of many developing nations into a power block at the World Trade Organization meetings in Mexico raises the specter of a shift away from free trade and investment momentum. Alternatively, it could be the catalyst that encourages Europe and the United States to practice the policies they preach, which could lead to a greater movement toward free exchange markets. Finally the large drop in the value of the United States dollar could create volatility in production and global investment, as the United States gains competitive position but needs to fight rising prices. The long-term outlook for the U.S. and other world economies has become less optimistic. The inability to currently pay for the war on terrorism places a demanding burden on future generations and the prospects of long-term 25 I I growth. However, if global conditions allow for a reduced U.S. military presence or if the U.S. is able to currently pay for its military operations, the long-term outlook for the United States and other world economies will be extremely positive. Also, a positive outcome depends on nations recognizing their interdependence and responding to that interdependence with action. Gains from opening markets and establishing universal codes of conduct need to be strengthened and maintained. The Bush Administration's prescription for long-term stable growth may be too conservative. Long-term stable growth may be maintained at around 3.3% with an inflation rate of about 2.5% and unemployment of about 4.5%. Technology growth and global competition will continue to be the engines that drive worldwide growth well into the future, and these factors should lead to a better long-term economic enviromnent than that envisioned by the Bush Administration. I I I I I I I I I I I I I I I I I 26 I I I I I I I I I I I I I I I I I I I EXHIBIT 2 - INDUSTRY DATA 27 I integrainfo.com I Profile Name: Date: Database #: Profile Type: 8-29-05 2004.2 Industry Profile SIC: Description: Sales Range: Final Year Business Count: Business Profiler - Profile Summary These figures represent the Peer Group 5074 Wholesale Trade - Plumbing & hydronic heating supplies All Sales Ranges 7,333 I I SIC Description Sales Range # of Firms In Sales Range 5074 Wholesale Trade - Plumbing & hydronic heating supplies Establishments primarily engaged in the wholesale distribution of hydronic plumbing and heating equipment and supplies:-Construction contractors primarily engaged in'installing plumbing and heating equipment from their own stock are classified in Construction, Industry 1711. All Sales Ranges 7,333 I I I I I I I I I I I I I I All Integra Information Reports ("Reports") are owned by Integra Information. Inc.\lntegra") and are protected by United States copyright laws. You have the right to use the reports and do not acquire any rights of ownership in the reports. These reports may not be resold. The information contained in the reports is provided 'as is' without warranty of any Idnd, either express or implied, including, but not limited to the implied warranties of merchantability and fitness for a particUlar purpose, as to the accuracy or completeness of any information contained within the reports. In no event will Integra be liable to you for any damages, including any loss of profits. lost savings or other incidental or consequential damages arising out r:i the use or inability to use the reports even if Integra has been advised r:i the possibility of such damages. or for any claim by any other party. IPOW_dby INTEGR:A I It: t< a " Ii!: " t I !:I N' I I integrainfo.com I Profile Name: Date: Database #: Profile Type: I I I I Year Ending: I I I I I I I I I I I I 8-29-05 2004.2 Industry Profile lodu ., . .'GroWth:. . . Industry Gr.owth - Revenue Industry Growth ... EBITDA Industry Growth - Pre-Tax Income 2004 Balance Sneef.; ..' Current Assets Fixed Assets Other Assets Total Assets ! 1,730 299 28 2,235 Business Profiler . Overview SIC: Description: Sales Range: Final Year Business Count These figures represent the Peer Group 5074 Wholesale Trade - Plumbing & hydronic heating supplies All Sales Ranges 7,333 2001 -3.5.%_ -3.3% -4.5% 2002 2.1% 3.1% 1.6% 2003 0.5% 1.6% (Dollars in Thousands) All Integra Information Reports ("Reports") are owned by Integra Information, Inc.("lntegra") and are protected by United States copyright laws. You have the right to use the reports and do not acquire any rights of ownership in the reports. These reports may not be resold. The information contained in the reports is provided 'as is' without warranty of any kind, either express or implied, including, but not limited to the implied warranties of merchantability and fitness for a particular purpose, as to the accuracy or completeness of any information contained within the reports. In no event will Integra be liable to you for any damages, including any loss of profits. lost saYings or other incidental or consequential damages arising out of the use or inability to use the reports even if Integra has been advised c:J the possibility of such damages, or for any claim by any other party. I ~ 77.4% 13.4% 1.3% 100.0% Current Liabilities Long Term Debt Other Liabilities Total Liabilites Net Worth Casl~OflowAria1Ysis' ^ ::, ,'., 2004 10.0% 11.2% 9.4% CAGR 2.2% 3.0% 1.5% ! 889 348 18 1,328 907 ~ 39.8% 15.6% 0.8% 59.4% 40.6% ! ~ Provided/fUsed) by 1 Revenue 5,099 100.0% Gross Margin 1,218 23.9% Operating Activities 40 Operating Expenses 1,075 21.1% Investing Activities (81) Operating Income 142 2.8% Financing Activities 55 Pre-lax Income 98 1.9% Net Income 61 1.2% 'Ratios' , : t ' ;,^'" , , eo , , I . ^'., , " Return on Net Worth Return on Assets Current Ratio Quick Ratio DebVNet Worth Z Score <1.23 Weak >2.90 Strong 6.7% 2.7% 1.95 0.92 x1.46 4.94 BUSIness CountS, W . Sales Range All Sales Ranges Less Than $250,000 $250,000 - $499,999 $500,000 - $999,999 $1,000,000 - $2,499,999 $2,500,000 - $4,999,999 $5,000,000 - $9,999,999 $10,000,000 - $24,999,999 $25,000,000 - $49,999,999 $50,000,000 - $99,999,999 $100,000,000 - $249,999,999 $250,000,000 - $499,999,999 More Than $500,000,000 Business Count 7,333 628 661 1,092 2,387 1,151 767 519 78 36 12 o 2 IPCWEt"ed by INTEGRA IM-fOft.',l.lION' I integrainfo.com I Profile Name: Date: Database #: Profile Type: 8-29-05 2004.2 Industry Profile I I rofitability. h " 7 ' . / ',; .,"':; . I Gross Margin EBITDA to Sales Operating Margin Operating Cash Flow to Sales Pre-Tax Return on Assets After-Tax Return on Assets Pre-Tax Return on Net Worth Aftel- Tax Return-on Net Worth- Pre-Tax Return on Sales After-Tax Return on Sales I 2000 24.3% 3.4% 2.7% 4.7% 2.9% 11.5% 7.1% 2.0% 1.2% Business Profiler . Ratios These figures represent the Peer Group 5074 Wholesale Trade - Plumbing & hydronic heating supplies All Sales Ranges 7,333 SIC: Description: Sales Range: Final Year Business Count 2001 2002 2003 2004 24.2% 24.1% 24.0% 23.9% 3.4% 3.5% 3.5% 3.5% 2.7% 2.I% 2.8% 2.8% 1.7% 1.5% 1.6% 0.8% 4.6% 4.5% 4.4% 4.4% 2.8% 2.8% 2.7% 2.7% 10.6% 10.5% 10.3% 10.8% 6.6% 6.5% 6.4% - 6.7% 1.9% 1.9% 1.9% 1.9% 1.2% 1.2% 1.2% 1.2% 2001 2002 2003 2004 $757 $777 $795 $841 16.6% 16.6% 17.0% 16.0% 7.2% 7.1% 7.0% 7.2% 95.4% 95.8% 95.4%- 98.7% 28.9% 28.8% 28.1% 29.6% 45.2% 46.2% 46.4% 50.1% 2001 2002 2003 2004 88.8% 88.7% 88.5% 88.3% 21.5% 21.3% 21.2% 21.1% 0.7% 0.7% 0.7% 0.7% 42.8% 43.3% 44.0% 43.8% x5.44 x5.43 x5.33 x5.62 1752.4% 1728.6% 1699.0% 1702.6% 21.1% 21.3% 21.5% 21.4% 0.8% 0.8% 0.8% 0.8% 0.7% 0.9% 0.9% 1.3% 2004 2.2% 3.1% 1.5% 1.5% 3.6% 3.8% 3.2% I orkin!) Capital;: ifD;;nff(E~lTt;dasamfJi'] I Working Capital Working Capital to Sales Net Income to Working Capital Inventory to Working Capital Short Term Debt to Working Capital Long Term Debt to Working Capital I 2000 $738 15.8% 7.7% 98.6% 31.4% 47.8% perating Efficiency'''.,. . ..: '., I Operating Expenses to Gross Margin Operating Expenses to Sales Depreciation & Amortization to Sales Total Assets to Sales Sales to Net Worth Sales to Fixed Assets Inventory to Cost of Sales Intangible Assets to Sales Capital Expenditures to Sales I I 2000 88.9% 21.6% 0.7% 41.5% x5.85 1810.9% 20.5% 0.8% I LC1 '.}IJl.ti:ll.,~tei:"''''~~~ I Sales Operating Income Pre-Tax Profit Net Income Assets Liabilities Net Worth I I I I All Integra Information Reports rReports") are owned by Integra Information, Inc.("'ntegra") and are protected by Unijed Slates copyright laws. You have the right to use the reports and do not acquire any rights of ownership in the reports. These reports may not be resold. The information contained in the reports is provided 'as is' without warranty of any kind, either express or implied. including. but not limited to the implied warranties of merchantability and fitness for a particular purpose, as to the accuracy or completeness of any information contained within the reports. In no event will Integra be liable to you for any damages, including any loss of profits, lost savings or other incidental or consequential damages arising out of the use or inability to use the reports even jf Integra has been advised 01 the possibility of such damages, or for any claim by any other party. Ipowere.. by INTEGRA I IK,I~ 0 III."'" f 10 I'l'''' I I integrainfo.com I Profile Name: Date: Database #: Profile Type: 8-29-05 2004.2 Industry Profile SIC: Description: Sales Range: Final Year Business Count: Business Profiler - Income Statement These figures represent the Peer Group 5074 Wholesale Trade - Plumbing & hydronic heating supplies All Sales Ranges 7,333 I I Income ~talement ' " ,~}:: ~ ' 2000 2001 2002 2003 2004 100.0% 100.0% 100.0% 100.0% 100.0% 75.7% 75.8% 75.9% 76.0% . 76.1% 24.3010 24.2% 24.1% 24.0% 23.9% 15.7% 15.6% 15.5% 15.4% 15.3% 2.5% 2.4% 2.4% 2.4% 2.4% 0.9% 0.9% 0.9% 0.9% 0.9% 0.3% 0.3% 0.3% 0.3% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% 1.3% 1.3% 1.3% 1.2% 1.2% 0.7% 0.7% 0.7% 0.7% 0.7% 21.6% 21.5% 21.3% 21.2% 21.1% ""2~ 7% 2.7% 2.7% 2:8"ID '2.8% 0.1% 0.1% 0.1% 0.1% 0.1% -0.9% -0.9% -0.9% -0.9% -0.9% 0.1% -0.1% -0.2% 2.0% 1.9% 1.9% 1.9% 1.9% -0.8% -0.7% -0.7% -0.7% -0.7% 1.2% 1.20/0 1.2% 1.2% 1.2% Revenue I Cost of Sales Gross Margin I Selling,. General. & Administrative Officer Compensation Pension & Benefits Advertising & Sales Bad Debts Rents Paid Depreciation & Amortization I I Operating Expenses Operating Income I Interest Income Interest Expense Total Other Inc(Exp) I Pre-Tax Income Income Taxes * I Net Income * Income taxes are derived by applying a 38% tax rate to pre-tax income. I I I I I I I All Integra Information Reports ("Reports") are owned by Integra Informalion. Inc.("lntegra") and are protected by United Slates copyright laws. You have the right to use the reports and do not acquire any rights of ownership in the reports. These reports may not be resold. The information contained in the reports is provided 'as is' without warranty of any kind, either express or implied, including, but not limited to the implied warranties of merchantability and fitness for a particular purpose, as to the accuracy or completeness of any information contained within the reports. In no event will Integra be liable to you for any damages, including any loss of profits, lost savings or other incidental or consequential damages arising out of the use or inabllrty to use the reports even if Integra has been advised of the possibility of such damages. or for any claim by any other party. IpOWolt9d by INTEGRA I K: rOil .. ,. T I 0 K> I I integrainfo.com Business Profiler - Income Statement These figures represent the Peer Group SIC: 5074 Description: Wholesale Trade - Plumbing & hydronic heating supplies Sales Range: All Sales Ranges Final Year Business Count: 7,333 (Dollars in Thousands) 2000 2001 2002 2003 2004 4,681 4,515 4,610 4,635 5,099 3,544 3,424 3;500 3,523 3,881 1,137 1,092 1,110 1,111 1,218 735 706 716 715 782 115 110 111 110 120 43 41 42 42 46 15 14 14 14 16 10 9 10 10 11 59 57 58 57 63 34 33 34 34 38 1,011 970 984 983 1,075 126 122 126 128 142 6 6 6 6 7 (43) (41) (41) (40) (44) 4 1 (1) (4) (8) 92 88 89 89 98 (35) (33) (34) (34) (37) 57 55 55 56 61 I Profile Name: Date: Database #: Profile Type: 8-29-05 2004.2 Industry Profile I I Income Statement :' ,.;, , ", Revenue I Cost of Sales Gross Margin I Selling, General & Administrative Officer Compensation Pension & Benefits Advertising & Sales Bad Debts Rents Paid Depreciation & Amortization I I Operating Expenses Operating Income I Interest Income Interest Expense Total Other Inc(Exp) I Pre-Tax Income Income Taxes. I Net Income . Income taxes are derived by applying a 38% tax rate to pre-tax income. I I I I I I I All Integra Information Reports ("Reports") are owned by Integra Information, Inc.("lntegra") and are protected by Unned States copyright laws. You have the right to use the reports and do nolacquire any rights of ownership in the reports. These reports may not be resold. The information contained in the reports is provided 'as is' without warranty of any kind, either express or implied, including, but not limited to the implied warranties r:l merchantability and fitness for a particular purpose, as to the accuracy or completeness of any information contained within the reports. In no event will Integra be liable to you for any damages, including any loss of profits, lost savings or other incidental or col'tSequential damages arising out of the use or inabiUty to use the reports even if Integra has been advised of the possibility of such damages, or for any claim by any other party. IpOW......dhYINTEG,RA I K' I' D II If A T f 0 ft' I I integrainfo.com Profile Name: Date: Database #: Profile Type: 8-29-05 2004.2 Industry Profile SIC: Description: Sales Range: Final Year Business Count Business Profiler - Balance Sheet These figures represent the Peer Group 5074 Wholesale Trade - Plumbing & hydronic heating supplies All Sales Ranges 7,333 I I I BalanCe Sheet , . '. '[;:"ii~ :4 2000 2001 2002 2003 2004 6.8%, 6.8% 6.8% .6,8% 6.8% 0.4% 0.4% 0.4% 0.4% 0.4% 30.0% 30.0% 29.9% 29.9% 29.8% -0.4% -0.4% -0.4% -0.4% -0.4% 29.6% 29:6% 29.5% 29:-4% 29.4% I Assets Cash- Marketable Securities I Accounts Receivable less Allowance for Bad Debt Accounts Receivable, net I Raw Material Work in Process Finished Goods Inventory Other Current Assets 37.5% 37.4% 37.3% 37.2% 37.1% 3.5% 3.5% 3.6% 3.6% 3.7% 77.8% 77.7% 77.60/0 77.5% 77.4% 29.3% 29.9% 30.4% 30.9% 31.4% -16.0% -16.5% -17.0% -17.5% -18.0% 13.3% 13.3% 13.4% 13.4% 13.4% 2.0% 1.9% 1.9% 1.9% 1.9% 5.8% 5.9% 5.9% 6.0% 6.1% 1.1% 1.2% 1.2% 1.2% 1.3% 100.0% 100.0% 100.0% 100.0% 100.0% I Total Current Assets I Property, Plant & Equipment less Accumulated Depreciation Property, Plant & Equipment, net I Intangible Assets, net Depletable Assets, net Investments Other Assets I Total Assets Liabilities & Net Worth I Short Term Debt 11.9% 11.3% 11.2% 10.9% 11.1% Accounts Payable 21.4% 20.8% 21.0% 21.0% 21.8% Other Current Uabilities 6.5% 6.4% 6.5% 6.5% 6.8% Total Current Liabilities 39.8% 38.5% 38.7% 38.5% 39.8% I Long Term Debt 15.2% 14.8% 15.0% 15.0% 15.6% Loans from Shareholders 3.0% 2.9% 3.0% 3.1% 3.3% I Other Uabilities 0.9% 0.8% 0.8% 0.8% 0.8% Total Long Term Liabilities 19.0% 18.5% 18.8% 18.9% 19.6% Total Liabilities 58.8% 57.1% 57.5% 57.3% 59.4% I Total Net Worth 41.2% 42.9% 42.50/0 42.7% 40.6% Total Liabilities & Net Worth 100.0% 100.0% 100.0% 100.0% 100.0% I I I All Integra Information Reports ("Reports") are owned by Integra Information, Inc.("lntegra"} and are protected by United States copyright laws. You have the right lo use the reports and do not acquire any rights of O'Nnership in the reports. These reports may not be resold. The information contained in the reports is provided 'as is. without warranty of any kind, either express or implied. including, but not limited to the implied warranties of merchantability and fitness for a particular purpose. as to the accuracy or completeness of any information contained within the reports. In no event will Integra be liable to you for any damages, including any loss of profits, lost savings or other incidental or consequential damages arising out of the use or inability to use the reports even if Integra has been advised of the possibility of such damages, or for any claim by any other party. IP__et~d by INTEGRA I tIi t' D M. HAl I 0 tr" I I integrainfo.com I Profile Name: Date: Database #: Profile Type: 8-29-05 2004.2 Industry Profile SIC: Description: Sales Range: Final Year Business Count: Business Profiler - Balance Sheet These figures represent the Peer Group 5074 Wholesale Trade - Plumbing & hydronic heating supplies All Sales Ranges 7,333 I I Bal~lnce Sbeet ,:~::~' '"<, (Dol/ars in Thousands) 2000 2001 2002 2003 2004 132 13:1- 135 138 15j_ 9 8 8 8 9 584 579 597 609 667 (8) (8) (8) (9) (10) -576 571 589 600- 65"7- I Assets Cash Marketable Securities I Accounts Receivable less Allowance for Bad Debt Accounts Receivable, net I Raw Material Work in Process Finished Goods Inventory 728 722 744 758 830 67 68 71 74 82 1,512 1,501 1,548 1,579 1,730 570 577 606 629 701 (312) (319) (339) (356) (402) 258 258 267 273 299 38 38 39 39 42 113 114 119 122 135 22 22 24 25 28 1,943 1,932 1,996 2,038 2,235 232 219 223 223 249 416 402 419 428 487 126 123 129 133 153 774 744 772 784 889 295 286 298 305 348 58 57 60 63 73 17 16 16 16 18 369 358 375 384 439 1,143 1,103 1,147 1,169 1,328 800 830 849 870 907 1,943 1,932 1,996 2,038 2,235 Other Current Assets I Total Current Assets I Property, Plant & Equipment less Accumulated Depreciation Property, Plant & Equipment, net I Intangible Assets, net Depletable Assets, net Investments Other Assets I Total Assets I Liabilities & Net Worth Short T errn Debt Accounts Payable Other Current liabilities Total Current Liabilities I LongTerrn Debt Loans from Shareholders Other liabilities Total Long Term Liabilities I Total Liabilities I Total Net Worth Total Liabilities & Net Worth I I I All Integra Information Reports ("Reports") are owned by Integra Information, Inc.("lntegra") and are protected by United States copyright laws. You have the right to use the reports and do not acquire any rights of ownership in the reports. These reports may not be resold. The information contained in the reports is provided 'as is' without warranty of any kind, either express or implied, including, but not limited to the implied warranties of merchantability and fitness for a particular purpose, as to the accuracy or completeness of any information contained within the reports. In no event will Integra be liable to you for any damages, including any loss of profits, lost savings or other incidental or consequential damages arising out of the use or inability to use the reports even if Integra has been advised of the possibility of such damages, or for any claim by any other party. Ip_eU'd by INTEGRA I Ill' " 0: II, N A , lOti.. I I integrainfo.com Profile Name: Date: Database #: Profile Type: 8-29-05 2004.2 Industry Profile SIC: Description: Sales Range: Final Year Business Count: Business Profiler . Cash Flow Analysis These figures represent the Peer Group 5074 Wholesale Trade - Plumbing & hydronic heating supplies All Sales Ranges 7,333 I I (Dollars in Thousands) I ~ aJysjs of Ca~h Flow ~.;, 2001 2002 2003 2004 I Operating Cash Flow Net Income 55 55- 56 61 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and Amortization 33 _-34 34 38 Change in Accounts Receivable, net 4 (18) (11) (57) Change in Inventory 5 (22) (14) (72) Change in Accounts Payable (14) 17 9 59 Change in Other Operating Activities (6) 2 (0) 10 I I Total Adjustments 24 13 18 (21) I Cash Provided by Operating Activities 78 68 73 40 I Investing Activities I Capital Expenditures (32) (44) (41) (68) Change in Marketable Securities 0 (0) 0 (1) I Change in Investments (1) (5) (4) (13) Cash Provided by Investing Activities (32) (49) (45) (81) I Financing Activities I Change in Short Term Debt (13) 4 (O) 26 I Change in Long Term Debt (9) 13 7 43 Change in Loans from Shareholders (1) 4 3 10 Change in Equity (24) (36) (35) (23) I Cash Provided by Financing Activities (47) (15) (26) 55 Note: The intent of the Cash Flow Analysis is to reflect operating performance. It does not address investments or changes I in capital structure which can vary significantly from firm to firm. When evaluating cash flow, this information should be used in conjunction with specifics around an indMdual firm's capital structure. I I I I All Integra Information Reports ("Reports") are owned by Inlegra Information, Inc.rlntegra") and are protected by United States copyright laws. You have the right I P_....f>d by INTEGRA \0 use the reports and do not acquire any lights of ownership in the reports. These reports may not be resold. The information contained in the reports is . provided 'as is' without warranty of any kind, either express or implied, including, but not limited to the implied warranties of merchantability and fitness for a I · r <> " IE ~ t I <> · particular purpose, as to the accuracy or completeness of any information contained within the reports. In no event will Integra be liable to you for any damages. including any loss of profits, lost savings or other incidental or consequential damages arising out of the use or inability to use the reports even if Integra has been advised of the possibility of such damages, or for any claim by any other party. I I integrainfo.com I Profile Name: Date: Database #: Profile Type: 8-29-05 2004.2 Industry Profile SIC: Description: Sales Range: Final Year Business Count: Business Profjler . Ratios These figures represent the Peer Group 5074 Wholesale Trade - Plumbing & hydronic heating supplies All Sales Ranges 7,333 I I L1quiditj'ISoJvem;y/. h.:~':/' ; 2000 2001 2002 2003 2004 0.93 0.96 0.95 0.95 0.92 1.95 2.02 2.01 2.01 1.95. 46 46 47 45 44 43 44 43 60 61 62 59 77 76 78 75 13% 1-3% 13% 13% 9% 9% 9% 9% 96.8% 89.7% 90.9% 90.2% 98.0% xl.06 xl.03 xl.04 xl.03 xl.07 x8.52 x8.51 x8.35 x8.23 x7.97 2000 2001 2002 2003 2004 x7.87 x7.95 x7.79 x8.11 x34.26 x34.58 x33.91 x35.27 x4.72 x4.77 x4.69 x4.89 x3.00 x3.02 x2.96 x3.08 x6.04 x6.01 xS.90 x6.24 x17.50 x17.58 x17.18 x17.82 x2.33 x2.35 x2.30 x2.39 2000 2001 2002 2003 2004 xO.57 xO.61 xO.61 xO.68 xO.59 xO.63 xO.62 xO.67 xO.47 xO.50 xO.49 xO.53 x2.90 x2.98 x3.04 x3.16 x3.25 x6.53 x6.85 x6.93 x7.08 x6.96 36.4% 36.5% 36.5% 36.6% 36.7% 20.3% 19.9% 19.5% 19.1% 18.7% 18.1% 17.7% 18.0% 18.1% 18.9% 73.1% 67.7% 68.6% 68.0% 73.9% 58.8% 57.1% 57.5% 57.3% 59.4% xl.57 xl.53 xl.54 xl.54 xl.60 xl.43 xl.33 xl.35 xl.34 xl.46 2000 2001 2002 2003 2004 5.00 5.18 5.14 5.15 4.94 xO.32 xO.31 xO.31 xO.31 xO.33 I Quick Ratio Current Ratio. Days Accounts Receivable Outstanding Days Accounts Payable Days Working Capital Days Inventory Accounts Receivable to Sales Accounts Payable to Sales Current Liabilities to Net Worth Current Liabilities to Inventory Cost of Sales to Payables I I I din over ~ "~<::: * 'j ~ ;j~~':/ ~ "y ~::~(r~ I Receivables Tumover Cash T umover Inventory Tumover Current Asset Tumover Working Capital Tumover Fixed Asset Tumover Total Asset Tumover I Debt t ~ < ~ , s~1~f~"! 1'~; ,'{* "1<;t>~ I Debt Service Coverage - EBITDA Debt Service Coverage - Pre-Tax Debt Service Coverage - After-Tax Interest Coverage Current Assets to Short Term Debt Accounts Payable to Total Debt Short Term Debt to Total Debt Long Term Debt to Total Assets ST Debt plus LT Debt to Net Worth Total Debt to Assets Total Debtto Inventory Total Debt to Net Worth I I I RisK. : ':' >,~':." <' ", / f :. I Z Score Fixed Assets to Net Worth I I II All Integra Information Reports ("Reports") are owned by Integra Information, Inc.("lntegra") and are protected by United SlaIes copyright laws. You have the right to use the reports and do not acquire any rights of ownership in the reports. These reports may not be resold. The information contained in the reports is provided 'as is' without warranty of any kind, either express or implied, including, but not limited to the implied warranties of merchantability and fitness for a particular purpose, as to the accuracy or completeness of any information contained within the reports. In no event will Integra be liable to you for any damages, including any loss of profits, lost savings or other incidental or consequential damages arising out of the use or inability to use the reports even jf Integra has been advised of the possibility or such damages, or for any claim by any other party. IPow....ed by INTEGRA I I K r' 0 Ill. W '" '" I tl li'lt! II I Exhibit: 3 I R.F. Fager Company Historical Balance Sheet Summary I 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 Assets Current Assets I Cash $ 652,370 $ 588,816 $ 780,809 $ 703,156 $ 895,774 Accounts Receivable 2,635,543 2,386,187 2,515,599 2,394,298 2,902,547 Inventory 3,869,534 3,733,937 3,551,793 2,941,752 3,323,012 I Prepaid expenses 11,033 7,864 4,492 4,903 7,704 Interest Receivable 5,702 5,343 4,407 Current Portion ofN/R 50,000 50,000 Total Current Assets 7,168,480 6,716,804 6,858,395 6,099,452 7,183,444 I Property & Equipment Land 219,086 219,086 594,962 767,973 776,231 I Building 1,742,715 1,742,715 1,807,715 3,314,468 3,381,851 Equipment 701,469 684,264 696,661 362,618 401,240 Motor Vehicles 652,208 634,656 643,285 716,385 729,948 Less Accumulated Depreciation (1,580,759) (1,704,927) (1,881,756) (1,937,822) (2,144,416) I Net Property & Equipment 1,734,719 1,575,794 1,860,867 3,223,622 3,144,854 Other Assets I CVLI 9,726 8,640 9,439 9,986 Loan Receivable 39,900 41,651 100,000 50,000 Investments 3,649,665 4,402,056 4,354,447 3,984,775 3,772,991 Goodwill 18,194 I Organization Costs 2,490 318 Total Other Assets 3,719,975 4,452,665 4,363,886 4,094,761 3,822,991 I Total Assets $ 12,623,174 $ 12,745,263 $ 13,083,148 $ 13,417,835 $ 14,151,289 Liabilities & Stockholders' Equity I Current Liabilities Current Portion LIT Debt $ 106,000 $ 106,000 $ 103,638 $ 177,229 $ 155,404 Line of Credit 323,971 328,960 326,535 Accounts payable 1,537,597 1,582,163 1,529,285 1,496,029 1,763,862 I Accrued liabilities 441,804 462,521 494,599 518,723 588,870 Notes payable officer 140,000 150,000 140,000 30,000 30,000 Total Current Liabilities 2,549,372 2,629,644 2,594,057 2,221,981 2,538,136 I Long-Term Debt Notes Payable 518,192 412,192 310,916 1,049,596 846,178 Total Long-Term Debt 518,192 412,192 310,916 1,049,596 846,178 I Total Liabilities 3,067,564 3,041,836 2,904,973 3,271,577 3,384,314 I Equity Common Stock 51,000 51,000 51,000 51,000 51,000 Retained Earnings 9,118,216 9,480,946 9,607,019 9,653,778 10,095,259 Dividends Paid I Current Year Income (Loss) 362,730 176,078 414,997 441,480 620,716 Total Equity 9,531,946 9,708,024 10,073,016 10,146,258 10,766,975 I Total Liabilities & Equity $ 12,623,174 $ 12,745,263 $ 13,083,148 $ 13,417,835 $ 14,151,289 I 37 I Exhibit: 4 R.F. Fager Company I Historical Balance Sheet As A Percent Of Assets I 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 Assets Current Assets I Cash 5.17% 4.62% 5.97% 5.24% 6.33% Accounts Receivable 20.88% 18.72% 19.23% 17.84% 20.51% Inventory 30.65% 29.30% 27.15% 21.92% 23.48% Prepaid expenses 0.09% 0.06% 0.03% 0.04% 0.05% I Interest Receivable 0.00% 0.00% 0.04% 0.04% 0.03% Current Portion ofN/R 0.00% 0.00% 0.00% 0.37% 0.35% Total Current Assets 56.79% 52.70% 52.42% 45.46% 50.76% I Property & Equipment Land 1.74% 1.72% 4.55% 5.72% 5.49% Building 13.81% 13.67% 13.82% 24.70% 23.90% I Equipment 5.56% 5.37% 5.32% 2.70% 2.84% Motor Vehicles 5.17% 4.98% 4.92% 5.34% 5.16% Less Accumulated Depreciation -12.52% -13.38% -14.38% -14.44% -15.15% I Net Property & Equipment 13.74% 12.36% 14.22% 24.02% 22.22% Other Assets I CVLI 0.08% 0.07% 0.07% 0.07% 0.00% Loan Receivable 0.32% 0.33% 0.00% 0.75% 0.35% Investments 28.91% 34.54% 33.28% 29.70% 26.66% Goodwill 0.14% 0.00% 0.00% 0.00% 0.00% I Organization Costs 0.02% 0.00% 0.00% 0.00% 0.00% Total Other Assets 29.47% 34.94% 33.36% 30.52% 27.02% I Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% Liabilities & Stockholders' Equity Current Liabilities I Current Portion LIT Debt 0.84% 0.83% 0.79% 1.32% 1.1 0% Line of Credit 2.57% 2.58% 2.50% 0.00% 0.00% Accounts payable 12.18% 12.41% 11.69% 11.15% ] 2.46% I Accrued liabilities 3.50% 3.63% 3.78% 3.87% 4.]6% Notes payable officer 1.11% 1.18% 1.07% 0.22% 0.21% Total Current Liabilities 20.20% 20.63% ]9.83% 16.56% 17.94% I Long-Term Debt Notes Payable 4.11% 3.23% 2.38% 7.82% 5.98% Total Long-Term Debt 4.1 ] % 3.23% 2.38% 7.82% 5.98% I Total Liabilities 24.30% 23.87% 22.20% 24.38% 23.92% I Equity Common Stock 0.40% 0.40% 0.39% 0.38% 0.36% Retained Earnings 72.23% 74.39% 73.43% 71.95% 71.34% Dividends Paid 0.00% 0.00% 0.00% 0.00% 0.00% :1 Current Year Income (Loss) 2.87% 1.38% 3.17% 3.29% 4.39% Total Equity 75.51% 76.17% 76.99% 75.62% 76.08% I Total Liabilities & Equity 100.00% 100.00% 100.00% 100.00% 100.00% I 38 I Exhibit: 5 R.F. Fager Company I Historical Income Statement Summary I 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 Sales Sales $ 26,485,137 $ 26,393,217 $ 28,425,350 $ 29,353,734 $ 28,320,565 I Total Sales 26,485,137 26,393,217 28,425,350 29,353,734 28,320,565 Cost of Sales I COGS 23,038,155 22,666,864 24,034,942 24,609,340 23,626,302 Total Cost of Sales 23,038,155 22,666,864 24,034,942 24,609,340 23,626,302 I Gross Profit 3,446,982 3,726,353 4,390,408 4,744,394 4,694,263 Operating Expenses Depreciation & amortization 186,840 218,261 178,059 333,485 243,124 I Officers' compensation 1,295,838 1,480,910 1,848,672 2,214,609 2,343,011 Payroll taxes 362,523 366,195 386,237 376,146 336,966 Rent expense 22,500 I Contributions 750 1,235 1,732 1,065 1,905 Legal and Accounting 75,045 90,317 72,201 93,328 79,665 Auto and Truck 107,210 105,886 105,952 106,377 126,288 Advertising 55,220 55,235 60,256 63,996 21,759 I Bank Service Charges 95,348 98,240 121,345 128,634 123,079 Contract Labor 57,395 74,623 87,702 52,580 44,002 Data Processing 3,262 2,537 3,323 3,365 3,531 I Dues and Subscriptions 6,499 8,903 9,052 8,268 4,190 Equipment Rental 46,718 51,328 50,024 54,648 56,016 Insurance 293,423 388,814 375,342 398,106 365,358 Utilities 49,224 48,203 49,969 49,974 61,612 I Office supplies and expenses 73,348 80,321 85,479 81,744 67,645 Pension and Profit Sharing 110,000 110,000 110,000 110,000 110,000 Pension administration fees 2,649 2,585 6,124 5,253 2,364 I Postage 30,050 26,995 29,747 23,661 16,513 Repairs 30,151 38,842 71,157 30,956 36,811 Shop Supplies 5,061 4,568 5,036 3,567 3,971 Telephone 80,523 60,521 58,921 54,101 32,749 I Travel and Entertainment 86,511 98,983 135,331 101,583 31,383 Miscellaneous 33,617 31,598 24,159 15,801 19,825 Admin Salaries 48,920 50,336 171,819 93,708 I Total Operating Expenses 3,136,125 3,495,436 4,047,639 4,427,455 4,131,767 Income from operations 310,857 230,917 342,769 316,939 562,496 I Other Income (Expense) Gain (loss) on sale of assets 3,627 1,679 1,000 250,000 I Interest expense (125,842) (87,602) (40,079) (23,206) (49,937) Interest Income 281,559 207,514 192,943 179,178 173,037 Gain (loss) on sale of investments 22,352 (2,486) (195) (6,698) (6,026) I Dividend Income 13,900 9,551 6,372 7,233 11,393 Impairment of Goodwill (18,194) Bad Debt (53,493) (70,275) (1,837) (210,411 ) (109,907) Equity in Subsidiaries (623) I Other Income 4,654 8,920 1,164 13,532 132,587 Total other income (expense) 146,757 49,107 158,745 209,628 151,147 I Earnings before taxes 457,614 280,024 501,514 526,567 713,643 39 I I I I I I I I I I I I I I I I I I I Exhibit: 5 R.F. Fager Company Historical Income Statement Summary 12/31/01 12/31/02 12/31/04 12/31/00 Income tax expense 94,884 362,730 $ 103,946 176,078 $ 86,517 414,997 $ Net Profit (Loss) $ 12/31/03 85,087 441,480 $ 92,927 620,716 40 I Exhibit: 6 I R.F. Fager Company Historical Income Statement As A Percent Of Sales I 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 Sales Sales 100.00% 100.00% 100.00% 100.00% 100.00% I Total Sales 100.00% 100.00% 100.00% 100.00% 100.00% Cost of Sales I COGS 86.99% 85.88% 84.55% 83.84% 83.42% Total Cost of Sales 86.99% 85.88% 84.55% 83.84% 83.42% I Gross Profit 13.01% 14.12% 15.45% 16.16% 16.58% Operating Expenses I Depreciation & amortization 0.71% 0.83% 0.63% 1.14% 0.86% Officers' compensation 4.89% 5.61% 6.50% 7.54% 8.27% Payroll taxes 1.3 7% 1.39% 1.36% 1.28% 1.19% Rent expense 0.00% 0.00% 0.00% 0.08% 0.00% I Contributions 0.00% 0.00% 0.01% 0.00% 0.01% Legal and Accounting 0.28% 0.34% 0.25% 0.32% 0.28% Auto and Truck 0.40% 0.40% 0.37% 0.36% 0.45% I Advertising 0.21% 0.21% 0.21% 0.22% 0.08% Bank Service Charges 0.36% 0.37% 0.43% 0.44% 0.43% Contract Labor 0.22% 0.28% 0.31% 0.18% 0.16% Data Processing 0.01% 0.01% 0.01% 0.01% 0.01% I Dues and Subscriptions 0.02% 0.03% 0.03% 0.03% 0.01% Equipment Rental 0.18% 0.19% 0.18% 0.19% 0.20% Insurance 1.11% 1.47% 1.32% 1.36% 1.29% I Utilities 0.19% 0.18% 0.18% 0.17% 0.22% Office supplies and expenses 0.28% 0.30% 0.30% 0.28% 0.24% Pension and Profit Sharing 0.42% 0.42% 0.39% 0.37% 0.39% I Pension administration fees 0.01% 0.01% 0.02% 0.02% 0.01% Postage 0.11% 0.10% 0.10% 0.08% 0.06% Repairs 0.11% 0.15% 0.25% 0.11% 0.13% Shop Supplies 0.02% 0.02% 0.02% 0.01% 0.01% I Telephone 0.30% 0.23% 0.21% 0.18% 0.12% Travel and Entertainment 0.33% 0.38% 0.48% 0.35% 0.11% Miscellaneous 0.13% 0.12% 0.08% 0.05% 0.07% I Admin Salaries 0.18% 0.19% 0.60% 0.32% 0.00% Total Operating Expenses 11.84% 13.24% 14.24% 15.08% 14.59% I Income from operations 1.17% 0.87% 1.21% 1.08% 1.99% Other Income (Expense) I Gain (loss) on sale of assets 0.01% 0.01% 0.00% 0.85% 0.00% Interest expense -0.48% -0.33% -0.14% -0.08% -0.18% Interest Income 1.06% 0.79% 0.68% 0.61% 0.61% I Gain (loss) on sale of investments 0.08% -0.01% 0.00% -0.02% -0.02% Dividend Income 0.05% 0.04% 0.02% 0.02% 0.04% Impairment of Goodwill 0.00% -0.07% 0.00% 0.00% 0.00% Bad Debt -0.20% -0.27% -0.01% -0.72% -0.39% I Equity in Subsidiaries 0.00% 0.00% 0.00% 0.00% 0.00% Other Income 0.02% 0.03% 0.00% 0.05% 0.47% Total other income (expense) 0.55% 0.19% 0.56% 0.71% 0.53% II 41 I I I I I I I I I I I I I I I I I I I Earnings before taxes Income tax expense Net Profit Exhibit: 6 R.F. Fager Company Historical Income Statement As A Percent Of Sales 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 1.73% 1.06% 1.76% 1.79% 2.52% 0.36% 0.39% 0.30% 0.29% 0.33% 1.37% 0.67% 1.46% 1.50% 2.19% 42 I Exhibit: 7 R.F. Fager Company I Historical Statement of Cash Flow Summary 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 I CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 362,730 $ 176,078 $ 414,997 $ 441,480 $ 620,716 I Adjustments to reconcile net income to net cash Impairment of goodwill 18,194 (Gain) Loss on sale of subsidiary (250,000) (Gain) Loss on sale of investments (22,352) 2,486 195 6,698 6,026 I (Gain) Loss on sale of assets (3,627) (9,929) (1,000) (1,000) Depreciation and amortization 186,840 218,261 178,377 333,485 243,124 (Increases) decrease in: Accounts Receivable 91,516 249,356 (129,412) (292,076) (508,249) I Inventory (207,391) 135,597 182,144 (131,943) (381,260) Prepaid expenses (284) 3,169 3,372 (15,837) (2,801) Interest Receivable 5,177 (5,702) 359 936 Increase (decrease) in: I Accounts payable 126,293 44,566 (52,878) 370,963 267,835 Accrued liabilities (387) 20,717 32,078 89,975 70,146 Notes payable officer (60,000) 10,000 (10,000) 25,000 I Net Cash Provided by Operations 478,515 868,495 612,171 578,104 315,473 CASH FLOWS FROM INVESTING ACTIVITIES: I Change in CVLI 950 1,086 (799) (547) 9,986 Change in investments (325,932) (783,138) 157,170 257,815 205,758 Purchase ofPP & E (326,181) (57,835) (463,132) (1,776,968) (164,356) Proceeds from sale ofPP & E 16,500 10,600 1,000 1,000 I Proceeds from sale of subsidiary 250,000 Change in loan receivable - officer (39,900) (1,751) 41,651 (150,000) 50,000 Change in loan receivable - officer (39,900) (1,751) 41,651 (150,000) 50,000 I Net cash provided (used) by investing (674,563) (831,038) (264,110) (1,419,700) 102,388 CASH FLOWS FROM FINANCING ACTMTIES: Commercial Debt I Line of credit (6,347) 4,989 (2,425) 1,677 Long-term (11 0,808) (106,000) (103,638) 812,271 (225,243) Equity transactions Retained Earnings - distributions (40,002) (50,005) (50,005) I Net cash provided (used) by fmancing activities (157,157) (101,011) (156,068) 763,943 (225,243) Net Increase (decrease) in cash (353,205) (63,554) 191,993 (77,653) 192,618 I Cash at beginning of year 1,005,575 652,370 588,816 780,809 703,156 Cash at end of year $ 652,370 $ 588,816 $ 780,809 $ 703,156 $ 895,774 I I I I I 43 I I II I I I I I I I I I I I I I I I I Shareholder Exhibit: 8 R.F. Fager Company Stock Ownership Richard F. Fager, Jr. Bryce Fager Delroy Brosius Estate Harold Brosius Darrell Brosius Darwin Brosius Class A Class B 51 2,785 9 215 20 980 10 340 10 340 340 100 5,000 44 I Exhibit: 9 I R.F. Fager Company Historical Comparative Analysis I 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 Ratio Analysis I Activity Ratios Receivables turnover 9.88 10.51 11.60 11.96 10.69 Days Receivable 36.94 34.73 31.47 30.52 34.14 I Payables turnover 17.96 16.92 18.27 19.41 17.38 Days payable 20.32 21.57 19.98 18.80 21.00 Cash conversion cycle 16.62 13.16 11.49 11.72 13.14 I Working capital turnover 5.55 6.06 6.81 7.21 6.65 Fixed asset turnover (gross assets) 8.27 8.00 8.09 6.59 5.42 Total asset turnover 2.13 2.08 2.20 2.22 2.05 I Liquidity Ratios Current 2.81 2.55 2.64 2.75 2.83 Quick 1.29 1.13 1.27 1.42 1.52 I Cash 0.26 0.22 0.30 0.32 0.35 Cash flow from operations 0.19 0.33 0.24 0.26 0.12 Defensive interval 45.23 40.65 42.27 39.34 58.68 I Debt to total capital 0.09 0.08 0.07 0.11 0.09 Debt to equity 0.10 0.09 0.07 0.12 0.09 Times interest earned 4.64 4.20 13.51 23.69 15.29 I EBDA to current maturities 5.18 3.72 5.72 4.37 5.56 Capital expenditures 2.13 -24.99 1.33 0.41 2.47 CFO to debt 0.77 1.68 1.48 0.47 0.31 I Operating Profitability Ratios Gross margin 13.01% 14.12% 15.45% 16.16% 16.58% Operating margin 1.17% 0.87% 1.21% 1.08% 1.99% I Margin before interest and taxes 2.20% 1.39% 1.91% 1.87% 2.70% Pretax margin 1.73% 1.06% 1.76% 1.79% 2.52% Profit margin 1.3 7% 0.67% 1.46% 1.50% 2.19% I Return on Investment ROI 4.42% 2.28% 4.29% 4.22% 5.71% ROA 3.53% 1.81 % 3.40% 3.44% 4.72% I ROE (pretax) 4.88% 2.91% 5.07% 5.21% 6.82% I I I I I 45 I I I Assets Current Assets Cash I Accounts Receivable Inventory Prepaid expenses Interest Receivable I Current Portion ofN/R Total Current Assets Property & Equipment I Land Building Equipment Motor Vehicles I Less Accumulated Depreciation Adjustment to fair market value Net Property & Equipment I Other Assets Loan Receivable Total Other Assets I Total Assets Liabilities & Stockholders' Equity Current Liabilities I Current Portion LiT Debt Accounts payable Accrued liabilities I Notes payable officer Total Current Liabilities Long-Term Debt I Notes Payable Total Long-Term Debt Total Liabilities I Equity Common Stock Retained Earnings I Dividends Paid Current Year Income (Loss) Adjustments to Equity Total Equity I Total Liabilities & Equity I I I I Exhibit: 10 R.F. Fager Company Adjusted Balance Sheet Summary 12/31104 $ 895,774 2,902,547 3,323,012 7,704 4,407 50,000 7,183,444 371,686 3,415,790 401,240 729,948 (2,144,416) 33,939 2,808,187 50,000 50,000 $ 10,041,631 $ 155,404 1,763,862 588,870 30,000 2,538,136 846,178 846,178 3,384,314 51,000 10,095,259 2,215,450 (5,704,392) 6,657,317 $ 10,041,631 46 I I I I I I I I I I I I I I I I I I II Exhibit: 11 R.F. Fager Company Normalization Adjustments Description 12/3 1/00 12/31/01 12/31/02 12/31/03 12/31/04 Officers' compensation Compensation percentage 2.50% 2.40% 2.40% 2.40% 2.40% Reasonable Compensation Additional items Officers' Compensation $ 662,128 $ 633,437 $ 682,208 $ 704,490 $ 679,694 $ 1,295,838 $ 1,480,910 $ 1,848,672 $ 2,214,609 $ 2,343,011 Adjustment Necessary $ (633,710) $ (847,473) $ (1,166,464) $ (1,510,119) $ (1,663,317) Officers' compensation was adjusted to a reasonable amount based on an an average of officers' compensation of similarly sized companies operating in the same industry. Payroll taxes Officers' Compensation Adj. x estimated taxes $ (633,710) $ 2.90% (847,473) $ (1,166,464) $ 2.90% 2.90% (1,510,119) $ 2.90% (1,663,317) 2.90% Adjustment Necessary $ (18,378) $ (24,577) $ (33,827) $ (43,793) $ (48,236) Payroll taxes needed to be adjusted for the change in officers' compensation. The estimated amount of payroll taxes applicable to officers' compensation was 2.9%. Investment interest income Investment interest income $ 135,555 $ 129,162 $ 120,618 $ 115,225 $ 116,820 Adjustment Necessary $ (135,555) $ (129,162) $ (120,618) $ (115,225) $ (116,820) Investment income is a non-operating source of income. Investments Amount per fmancial statements Market Value $ 3,772,991 $ 3,882,833 $ 109,842 $ 3,882,833 $ (3,882,833) Adjustment necessary to bring to Fair market value Fair market value carrying amount Adjustment to remove non-operating asset 47 I I I I I I I I I I I I I I I I I I I Exhibit: 11 R.F. Fager Company Normalization Adjustments Description 12/31/00 12/31/01 12/31/02 12/31/03 Property & equipment FMV - Building Book Value - Building FMV Adjustment Necessary Adjustment to remove non operating land investment The building was purchased at the end of2003 and the depreciation had been added back to arrive at FMV A parcell of raw land help for investment purposes was removed from the balance sheet at 4/17/2005. 12/31/04 $ 3,415,790 $ (3,381,851) $ 33,939 $ (404,545) 48 I Exhibit: 12 R.F. Fager Company I Adjusted Income Statement Summary I 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 Sales Sales $ 26,485,137 $ 26,393,217 $ 28,425,350 $ 29,353,734 $ 28,320,565 I Total Sales 26,485,137 26,393,217 28,425,350 29,353,734 28,320,565 Cost of Sales I COGS 23,038,155 22,666,864 24,034,942 24,609,340 23,626,302 Total Cost of Sales 23,038,155 22,666,864 24,034,942 24,609,340 23,626,302 I Gross Profit 3,446,982 3,726,353 4,390,408 4,744,394 4,694,263 Operating Expenses Depreciation & amortization 186,840 218,261 178,059 333,485 243,124 I Officers' compensation 662,128 633,437 682,208 704,490 679,694 Payroll taxes 344,145 341,618 352,410 332,353 288,730 Rent expense 22,500 I Contributions 750 1,235 1,732 1,065 1,905 Legal and Accounting 75,045 90,317 72,201 93,328 79,665 Auto and Truck 107,210 105,886 105,952 106,377 126,288 Advertising 55,220 55,235 60,256 63,996 21,759 I Bank Service Charges 95,348 98,240 121,345 128,634 123,079 Contract Labor 57,395 74,623 87,702 52,580 44,002 Data Processing 3,262 2,537 3,323 3,365 3,531 I Dues and Subscriptions 6,499 8,903 9,052 8,268 4,190 Equipment Rental 46,718 51,328 50,024 54,648 56,016 Insurance 293,423 388,814 375,342 398,106 365,358 Utilities 49,224 48,203 49,969 49,974 61,612 I Office supplies and expenses 73,348 80,321 85,479 81,744 67,645 Pension and Profit Sharing 110,000 110,000 110,000 110,000 110,000 Pension administration fees 2,649 2,585 6,124 5,253 2,364 I Postage 30,050 26,995 29,747 23,661 16,513 Repairs 30,151 38,842 71,157 30,956 36,811 Shop Supplies 5,061 4,568 5,036 3,567 3,971 I Telephone 80,523 60,521 58,921 54,101 32,749 Travel and Entertainment 86,511 98,983 135,331 101,583 31,383 Miscellaneous 33,617 31,598 24,159 15,801 19,825 Admin Salaries 48,920 50,336 171,819 93,708 I Total Operating Expenses 2,484,038 2,623,386 2,847,348 2,873,542 2,420,213 Income from operations 962,944 1,102,967 1,543,060 1,870,852 2,274,050 I Other Income (Expense) Gain (loss) on sale of assets 3,627 1,679 1,000 250,000 I Interest expense (125,842) (87,602) (40,079) (23,206) (49,937) Interest Income 146,004 78,352 72,325 63,953 56,217 Gain (loss) on sale ofinvestments 22,352 (2,486) (195) (6,698) (6,026) I Dividend Income 13 ,900 9,551 6,372 7,233 11,393 Impairment of Goodwill (18,194) Bad Debt (53,493) (70,275) (1,837) (210,411) (109,907) Equity in Subsidiaries (623) I Other Income 4,654 8,920 1,164 13,532 132,587 Total other income (expense) 11,202 (80,055) 38,127 94,403 34,327 I Earnings before taxes 974,146 1,022,912 1,581,187 1,965,255 2,308,377 49 I I I .1 I I I I I I I I I I I I I I I Exhibit: 12 R.F. Fager Company Adjusted Income Statement Summary 12/31/00 12/31/01 12/31/02 12/31/04 Income tax expense 94,884 879,262 $ 103,946 918,966 $ 86,517 1,494,670 $ Net Profit $ 12/31/03 85,087 1,880,168 $ 92,927 2,215,450 50 I Exhibit: 13 R.F. Fager Company I Adjusted Income Statement As A Percent Of Sales I 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 Sales Sales 100.00% 100.00% 100.00% 100.00% 100.00% I Total Sales 100.00% 100.00% 100.00% 100.00% 100.00% Cost of Sales I COGS 86.99% 85.88% 84.55% 83.84% 83.42% Total Cost of Sales 86.99% 85.88% 84.55% 83.84% 83.42% I Gross Profit 13.01% 14.12% 15.45% 16.16% 16.58% Operating Expenses Depreciation & amortization 0.71% 0.83% 0.63% 1.14% 0.86% I Officers' compensation 2.50% 2.40% 2.40% 2.40% 2.40% Payroll taxes 1.30% 1.29% 1.24% 1.13% 1.02% Rent expense 0.00% 0.00% 0.00% 0.08% 0.00% I Contributions 0.00% 0.00% 0.01% 0.00% 0.01% Legal and Accounting 0.28% 0.34% 0.25% 0.32% 0.28% Auto and Truck 0.40% 0.40% 0.37% 0.36% 0.45% I Advertising 0.21% 0.21% 0.21% 0.22% 0.08% Bank Service Charges 0.36% 0.3 7% 0.43% 0.44% 0.43% Contract Labor 0.22% 0.28% 0.31% 0.18% 0.16% Data Processing 0.01% 0.01% 0.01% 0.01% 0.01% I Dues and Subscriptions 0.02% 0.03% 0.03% 0.03% 0.01% Equipment Rental 0.18% 0.19% 0.18% 0.19% 0.20% Insurance 1.11% 1.47% 1.32% 1.36% 1.29% I Utilities 0.19% 0.18% 0.18% 0.17% 0.22% Office supplies and expenses 0.28% 0.30% 0.30% 0.28% 0.24% Pension and Profit Sharing 0.42% 0.42% 0.39% 0.37% 0.39% Pension administration fees 0.01% 0.01% 0.02% 0.02% 0.01% I Postage 0.11% 0.10% 0.10% 0.08% 0.06% Repairs 0.11% 0.15% 0.25% 0.11% 0.13% Shop Supplies 0.02% 0.02% 0.02% 0.01% 0.01% I Telephone 0.30% 0.23% 0.21% 0.18% 0.12% Travel and Entertainment 0.33% 0.38% 0.48% 0.35% 0.11% Miscellaneous 0.13%' 0.12% 0.08% 0.05% 0.07% I Admin Salaries 0.18% 0.19% 0.60% 0.32% 0.00% Total Operating Expenses 9.38% 9.94% 10.02% 9.79% 8.55% Income from operations 3.64% 4.18% 5.43% 6.37% 8.03% I Other Income (Expense) I Gain (loss) on sale of assets 0.01% 0.01% 0.00% 0.85% 0.00% Interest expense -0.48% -0.33% -0.14% -0.08% -0.18% Interest Income 0.55% 0.30% 0.25% 0.22% 0.20% I Gain (loss) on sale of investments 0.08% -0.01% 0.00% -0.02% -0.02% Dividend Income 0.05% 0.04% 0.02% 0.02% 0.04% Impairment of Goodwill 0.00% -0.07% 0.00% 0.00% 0.00% Bad Debt -0.20% -0.27% -0.01% -0.72% -0.39% I Equity in Subsidiaries 0.00% 0.00% 0.00% 0.00% 0.00% Other Income 0.02% 0.03% 0.00% 0.05% 0.47% Total other income (expense) 0.04% -0.30% 0.13% 0.32% 0.12% I 51 I I I I I I I I I I I I I I I I I I I Earnings before taxes Income tax expense Net Profit Exhibit: 13 R.F. Fager Company Adjusted Income Statement As A Percent Of Sales 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 3.68% 3.88% 5.56% 6.70% 8.15% 0.36% 0.39% 0.30% 0.29% 0.33% 3.32% 3.48% 5.26% 6.41% 7.82% 52 I I I I I I I I I I I I I I I I I I I Historical net cash flow Adjustments to historical net income with cash flow impact Officers compensation Payroll tax impact Adjustments to historical cash flow for discretionary items Loan to Owner Add back capital expenditures Less normal capital expenditures Add back actual debt financing activity Less normal debt financing activity Adjustments to historical cash flow for non-operating assets Investment interest income Change in investments Normalized Cash Flow Exhibit: 14 R.F. Fager Company Normalized Cash Flow Summary 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 $ (353,205) $ (63,554) $ 191,993 $ (77,653) $ 192,618 633,710 18,378 847,473 24,577 1,166,464 33,827 1,510,119 43,793 1,663,317 48,236 39,900 1,751 (41,651) 150,000 (50,000) 326,181 57,835 463,132 1,776,968 164,356 (200,000) (200,000) (200,000) (200,000) (200,000) 110,808 106,000 103,638 (812,271) 225,243 (136,422) (136,422) (136,422) (136,422) (136,422) (135,555) 325,932 (129,162) 783,138 (120,618) (157,170) (115,225) (257,815) (116,820) (205,758) $ 629,726 $ 1,291,636 $ 1,303,193 $ 1,881,495 $ 1,584,771 53 I I I I I I I I I I I I I I I I I I I Exhibit: 15 R.F. Fager Company Weighted Average Cash Flow x y X*Y Cash Flow Weight Cash Flow X Weight 12/31/00 $ 629,726 1 $ 629,726 12/31/01 $ 1,291,636 2 $ 2,583,271 12/31/02 $ 1,303,193 3 $ 3,909,579 12/31/03 $ 1,881,495 4 $ 7,525,979 12/31/04 $ 1,584,771 5 $ 7,923,853 Total $ 6,690,820 15 $ 22,572,409 Weighted Average Cash Flow $ 1,504,827 54 I I I I I I I I I I I I I I I I I I 'I Exhibit: 16 R.F. Fager Company Ibbotson Build-up Method Risk-free investment rate at valuation date: Equity Risk Premium: SmaIl Stock Premium: Industry Risk Premium: Specific Company Risk: NET CASH FLOW DISCOUNT RATE Less: Long Term Growth Rate: NET CASH FLOW CAPIT ALlZA TION RATE for the next year = (Net Cash Flow Discount Rate - Long Term Growth) NET CASH FLOW CAPITALIZATION RATE for the current year = (Net Cash Flow Discount Rate - Average Growth)/(l + Average Growth) Factor to convert net cash flow discount rate to a net earnings discount rate = (Historical Average Normalized Earnings) /(Historical Average Normalized Cash Flow) NET EARNINGS DISCOUNT RATE = [((Conversion Factor)*(Net Cash Flow Discount Rate - Average Growth))+ Average Growth] NET EARNINGS CAPITALIZATION RATE for next year = (Net Earnings Discount Rate - Average Growth) NET EARNINGS CAPITALIZATION RATE for the current year = (Net Earnings Discount Rate - Average Growth)/( 1 + Average Growth) 4.79% 7.20% 6.41% -0.53% 3.00% 20.87% -3.00% 17.87% 17.35% 1.00 20.87% 17.87% 17.35% 55 I I I I I I I I I I I I I I I I I I I Exhibit: 17 R.F. Fager Company Straight Capitalization of Earnings Method Valuation Summary Projected Earnings Amount (cash flow) $ 1,504,827 Capitalization Rate 17.35% Intangible Value 8,673,599 Add non operating assets: Investments 3,882,833 Land held for investment 404,545 $ 12,960,977 V ALUA nON SUMMARY (All Values Calculated and Rounded in Dollars) Value of Business $ 12,960,977 / Shares Outstanding 5,100 Per Share Value 2,541 Minority Interest Discount 25.00% Adjusted Per Share Value 1,906 Marketability Discount 25.00% Adjusted Per Share Value 1,430 Number of Shares Being Valued 1,000 Value of Shares Being Valued $ 1,430,000 56 I Exhibit: 18 R.F. Fager Company I Minority Interest Discount Factors I Above average means business has more desirable traits and reduces minority discount. Above A vg to Below A vg Below I Avg Above A vg Avg To Avg Avg 1 Elect directors and appoint management x 2 Determine management's compensation and I prerequisites, set policy and change the course of business, acquire or liquidate assets, select people with whom to do business and award x I contracts 3 Make acquisitions of other companies x 4 Liquidate, dissolve, sellout or re-capitalize the company, sell or acquire treasury shares, register I the company's stock for public offering, change the Articles ofIncorporation or Bylaws x 5 Declare and pay dividends x I 6 Quality of management x 7 Restrictions on transfer of interest x 8 Level of debt x 9 Size of the company x I 10 Number of shareholders, voting power, and concentration x 11 Size of block of stock x I 12 Volatility of earnings x 13 Level and payment of dividends x 14 Types and levels of management's compensation and perks x I Total x's 0 5 9 0 0 Weighting -1 -0.5 0 0.5 1 I Net Factor 0 -2.5 0 0 0 Benchmark minority interest discount 30.00% I Total factors analyzed 14 Weighting for each factor 2.14% I Net(+or-) (2.5) Add to or (deduct from) benchmark -5.36% I Subject Minority interest discount 24.64% Minority interest discount (rounded) 25.00% I 'I I I 57 I I Exhibit: 19 R.F. Fager Company Marketability Discount Factors I Above average means business has more desirable traits and reduces marketability discount. Above A vg to Below A vg Below Avg Above A vg Avg To Avg Avg I Existence and reliability of financial information x 2 Company's dividend policy x 3 Nature of company, its history, its position in the industry, and its economic outlook x 4 Company's management x 5 Number of shareholders x 6 Concentration of control owner x 7 Number of potential buyers x 8 Access to capital marketplace x 9 Size of business x 10 Volume of comparable private transactions x II Owners with adversarial relationship or inconsistent business philosophy x 12 Desirability of the business x 13 Existence of restricted stock agreement x 14 Existence of non-compete agreement x 15 Liquidity of control owners x 16 Existence and impact of pending litigation x Total x's 0 5 II 0 0 Weighting -I -0.5 0 0.5 I Net Factor 0 -2.5 0 0 0 Benchmark marketability discount 30.00% Total factors analyzed 16 Weighting for each factor 1.88% Net (+ or-) (2.5) Add to or (deduct from) benchmark -4.69% Subject marketability discount 25.31 % Marketability discount (rounded) 25.00% I I I I I I I I I I I I I I I I 58 R. F. FAGER COMPANY AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS CASH VALUE OF LIFE INSURANCE In January 2004, the Company distributed the officer's life insurance policy having a cash value of $9,986 at December 31, 2003 to the beneficiaries. DEPRECIATION Depreciation expense is summarized as follows: Description 2004 2003 Buildings Autos and trucks Equipment $ 122,131 79,716 41,277 $ 167,986 116,842 48,657 $ 243,124 $ 333,485 PENSION AND PROFIT-SHARING PLANS The parent Company funds a non-contributory profit sharing plan for all eligible employees. Employees must be 21 years of age and have six months of service in order to participate. For the years ended December 31, 2004 and 2003, contributions to the plan were $110,000 each while associated administration fees were $2,364 and $2,935. The subsidiary Company adopted a 401(k) defined contribution plan in July of 1997 covering all employees who meet certain age and service requirements. Employer profit sharing and matching contributions to the plan are discretionary. For the nine months ending September 30, 2003, the Company had not made any discretionary contributions. (continued) 10 R. F. FAGER COMPANY AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS LONG-TERM DEBT Long-term debt at December 31, 2004 and 2003 consisted of the following: 2004 2003 Note payable - M&T Bank was renegotiated in October 2003. The note requires quarterly principal payments of $25,910 plus monthly interest payments at LIBOR plus 2% (4.37% at December 31, 2003). It is secured by virtually all assets of the Company. $ 83,185 $ 236,825 Note payable Community Banks requires monthly payments of $5,350 including principal and interest at a rate of 5.15%. The note is secured by the real estate and improvements owned by R. F. Fager Co. 461,032 500,000 Note payable Community Banks requires monthly payments of $4,085 including principal and interest at LIBOR plus 2% (4.28% at December 31, 2004). The note is secured by the real estate and improvements owned by R. F. Fager Co. 457,365 490,000 1,001,582 1,226,825 Less current portion (155,404) (177,229) Total long-term debt $ 846,178 $ 1,049,596 Total interest incurred and expensed was $49,937 and $23,206 for the years ended December 31, 2004 and 2003. Total interest paid was $49,518 and $29,103 for the years ended December 31, 2004 and 2003. Maturities of long-term debt in each of the next five years are as follows: 2005 2006 2007 2008 2009 $ $ $ $ $ 155,404 74,702 78,357 82,193 86,218 LINE OF CREDIT The Company had a line of credit with M&T Bank in the amount of $350,000 thru September 30, 2003. The line of credit was then assumed by Colt Plumbing Company. Any amounts borrowed were payable on demand and bore interest at the bank's prime rate less 1/2%. (continued) 11 R. F. FAGER COMPANY AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS OPERATING LEASES The Company leases a photocopier under a non-cancelable lease expiring in October, 2007. Non-related party operating lease expense amounted to $4,645 and $8,948 for the years ended December 31, 2004 and 2003. Future minimum lease payments under all operating leases for years ending December 31 are as follows: 2005 2006 2007 $ $ $ 3,129 3,129 2,608 ADVERTISING COSTS The Company expenses advertising costs as incurred. The Company incurred advertising costs of $21,759 and $63,996 for the years ended December 31, 2004 and 2003. INCOME TAXES Effective February 1, 1992, the R. F. Fager Company elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay federal or state corporate income taxes on its taxable income. Instead, the stockholders are liable for individual federal and state income taxes on their respective shares of the Company's taxable income. Effective January 1, 1999 through September 30, 2003, the Colt Plumbing Company elected to be a qualifying subsidiary under Subchapter S of the Internal Revenue Code {QSS}. Under those provisions, the Company did not pay federal or state income taxes on its taxable income. Instead, it reported its taxable income on its parent's return, as if it were a consolidated return. The stockholders of the parent Company were then liable for individual federal and state income taxes on their respective shares of the Company's taxable income. RELATED PARTY TRANSACTIONS At December 31, 2004 and 2003, the Company had one note totaling $30,000 payable to one officer of the Company. The note is due on demand and bears interest at 6%. During the years ended December 31, 2004 and 2003, the Company incurred and paid interest costs of $1,800 each. The Company was indebted to another officer of the Company in the amount of $135,000 at September 30, 2003. The loan carried an interest rate of 6% in 2003. No repayment terms had been established. Interest paid to the officer was $4,950 in 2003. This loan was assumed by Colt Plumbing Company as of September 30, 2003. { continued} 12 R. F. FAGER COMPANY AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS RELATED PARTY TRANSACTIONS (Cont'd) The Company rents a telephone system and computer equipment on a month to month basis from a related company, Fager Leasing, which is owned by two of the stockholders of the Company. Rental payments totaled $51,371 and $45,460 for the years ended December 31, 2004 and 2003. CONCENTRATION OF CREDIT RISK The Company has concentrated its credit risk for cash by maintaining deposits in several banks which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (FDIC). The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk to cash. CONTINGENCY In the event of the death of a stockholder, the Company is obligated to purchase shares of stock not bequeathed to family members as outlined in the Shareholders' Agreement. The stock shall be valued in accordance with the Shareholders' Agreement. Amounts are to be paid over a four-year period plus interest on the unpaid balance at 8% per annum. 13 TIDS PAGE IS INTENTIONALLY LEFT BLANK SUPPLEMENTARY INFORMATION 14 R. F. FAGER COMPANY AND SUBSIDIARY SCHEDULES OF COST OF REVENUES AND SELLING AND ADMINISTRATIVE EXPENSES YEAR ENDED DECEMBER 31, 2004 Schedule #1 - Cost of Revenues Cost of revenues Inventory - beginning Purchases Freight Labor $ 2,941,752 20,676,972 72,840 3,257,750 26,949,314 (3,323,O12) $ 23,626,302 Inventory - ending Total cost of revenues Schedule #2 - Selling and Administrative Expenses Selling and administrative expenses Accounting and legal Auto and truck expense Advertising Bank service charges Contract labor Contributions Data processing Depreciation Dues and subscriptions Equipment rental Insurance Utilities Officers' salaries Office supplies and expense Payroll taxes Pension and profit sharing Pension administration expense Postage Repairs Shop supplies and expense Taxes Telephone Travel and entertainment Miscellaneous $ 79,665 126,288 21,759 123,079 44,002 1,905 3,531 243,124 4,190 56,016 365,358 61,612 2,343,011 67,645 336,966 110,000 2,364 16,513 36,811 3,971 92,927 32,74.9 31,383 19,825 Total selling and administrative expenses $ 4,224,694 See accountant's report. 15 R. F. FAGER COMPANY AND SUBSIDIARY SCHEDULE OF OTHER INCOME (EXPENSE) YEAR ENDED DECEMBER 31, 2004 Schedule #3 - Other income (expense) Other income (expense) Dividend income Interest income Loss on sales of investments Gain on sale of fixed assets Bad debt expense Administrative fees Rental income Miscellaneous income Interest expense Total other income (expense) See accountant's report. 16 $ 11,393 173,037 (6,026) 1,000 (109,907) 49,992 69,561 12,034 (49,937) $ 151,147 R. F. FAGER COMPANY AND SUBSIDIARIES (An S Corporation) CONSOLIDATED FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION YEARS ENDED DECEMBER 31, 2003 AND 2002 R. F. FAGER COMPANY AND SUBSIDIARIES TABLE OF CONTENTS Page Accountant's Report on Financial Statements 1 Financial Statements Consolidated Balance Sheets - Income Tax Basis 2 Consolidated Statements of Income - Income Tax Basis 4 Consolidated Statements of Changes in Stockholders' Equity - Income Tax Basis 5 Consolidated Statements of Cash Flows - Income Tax Basis 6 Notes to Financial Statements 7 Supplementary Information Consolidating Balance Sheet by Companies - Income Tax Basis 15 Consolidating Statement of Income and Cash Flows by Companies - Income Tax Basis 17 Schedules of Cost of Sales and Selling and Administrative Expenses (Schedule #1 and Schedule #2) 18 Schedules of Other Income (Expense) (Schedule #3) 19 R. F. Fager Company Camp Hill, Pennsylvania We have reviewed the accompanying consolidated balance sheets of R. F. Fager Company (an S Corporation) and subsidiaries, as of December 31, 2003 and 2002, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the years then ended, all prepared on the basis used for income tax reporting purposes, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of R. F. Fager Company and subsidiaries. A review consists principally of inquiries of Company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements in order for them to be in conformity with the income tax basis of accounting as described in the Summary of Accounting Policies. Our reviews were made for the purpose of expressing limited assurance that there are no material modifications that should be made to the consolidated financial statements in order for them to be in conformity with the income tax basis of accounting, as described in the Summary of Accounting Policies. The data presented in the supplementary information accompanying the consolidated financial statements is presented only for supplementary analysis purposes. Such information has been subjected to the inquiry and analytical procedures applied in the reviews of the basic consolidated financial statements. This information is presented on the income tax basis of accounting, and we did not become aware of any material modifications that should be made thereto. 9vlc1(onCy ctl Jls6ury, LLP Harrisburg, Pennsylvania May 5, 2004 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - INCOME TAX BASIS DECEMBER 31, 2003 AND 2002 ASSETS Total current assets 2003 2002 $ 703,156 $ 780,809 2,389,704 2,514,349 4,594 1,250 5,343 5,702 2,941,752 3,551,793 4,903 4,492 50,000 6,099,452 6,858,395 4,143,583 4,354,447 767,973 594,962 3,314,468 1,807,715 716,385 643,285 362,618 696,661 5,161,444 3,742,623 (1,937,822) (1,881,756) 3,223,622 1,860,867 9,986 9,439 100,000 109,986 9,439 Current assets Cash and cash equivalents Receivables Trade, (net of allowance for doubtful accounts of $90,558 and $65,400) Employees Interest receivable Inventory Prepaid expenses Note receivable, current portion Investments Property, plant, and equipment Land Buildings Autos and trucks Equipment Accumulated depreciation Other assets Cash value of life insurance Note receivable, net of current portion Total assets $ 13,576,643 $ 13,083,148 See accompanying notes and accountant's report. 2 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Line of credit Current portion of long-term debt Demand notes payable - officers Accounts payable - trade Accrued liabilities and withholdings Pennsylvania sales tax Employee payroll deductions Interest Payroll Payroll taxes Pension and profit sharing Deposits Corporate tax Total current liabilities Long-term debt, notes payable - bank Stockholders' equity Common stock Class A, voting, par value $10 per share; authorized 100 shares, issued and outstanding 100 shares Class B, nonvoting, par value $10 per share; authorized 5,000 shares, issued and outstanding 5,000 shares Retained earnings Accumulated comprehensive income, unrealized holding gains on investments Total stockholders' equity Total liabilities and stockholders' equity 3 2003 $ 177,229 30,000 1,496,029 97,910 51,757 481 203,491 1,354 110,000 53,730 2,221,981 1,049,596 1,000 50,000 10,095,258 158,808 10,305,066 $ 13,576,643 2002 $ 326,535 103,638 140,000 1,529,285 92,226 7,008 6,378 203,127 624 110,000 68,594 6,642 2,594,057 310,916 1,000 50,000 10,022,016 105,159 10,178,175 $ 13,083,148 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME - INCOME TAX BASIS YEARS ENDED DECEMBER 31, 2003 AND 2002 2003 2002 Net sales $ 29,353,734 $ 28,425,350 Cost of sales 24,609,340 24,034,942 Gross profit 4,744,394 4,390,408 Selling and administrative expenses 4,512,542 4,134,156 Operating income 231,852 256,252 Other income 209,628 158,745 Net income $ 441,480 $ 414,997 See accompanying notes and accountant's report. 4 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - INCOME TAX BASIS Balance - January 1, 2002 comprehensive income Net income Unrealized gains on investments Distributions Balance - December 31, 2002 Comprehensive income Net income Unrealized gains on investments Sale of subsidiary Distributions Balance - December 31, 2003 YEARS ENDED DECEMBER 31, 2003 AND 2002 Common Stock Class A Class B $ 1,000 $ 50,000 Retained Earnings $ 9,657,024 414,997 (50,005) 10,022,016 441,480 (318,233) (50,005) $10,095,258 Accumulated Comprehensive Income (Loss) $ (4,597) 1,000 50,000 109,756 105,159 53,649 $ 158,808 See accompanying notes and accountant's report. $ $ 50,000 1,000 5 Total $ 9,703,427 414,997 109,756 (50,005) 10,178,175 441,480 53,649 (318,233) (50,005) $10,305,066 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - INCOME TAX BASIS YEARS ENDED DECEMBER 31, 2003 AND 2002 2003 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization (Gain) loss on sale Subsidiary Equipment Investments Increase in cash value of life insurance (Increase) decrease in Trade receivable Interest receivable Prepaid expenses Inventory Increase (decrease) in Accounts payable Accrued liabilities and withholdings $ 441,480 333,485 (250,000) 6,698 (547) (292,076) 359 (15,837) (131,943) 370,963 89,975 Net cash provided by operating activities 552,557 Cash flows from investing activities Purchase of property, plant and equipment Proceeds from sale of subsidiary Proceeds from sale of equipment Proceeds from sale of investments Purchase of investments Advances on note receivable Payments on note receivable (1,776,968) 250,000 1,349,450 (1,091,635) (250,000) 100,000 Net cash used in investing activities (1,419,153) Cash flows from financing activities Net borrowings (repayments) on line of credit Proceeds from note payable - bank Payments on notes payable - bank Proceeds from note payable - officer Payments on note payable - officer Distributions to stockholders 1,677 990,000 (177,729) 25,000 (50,005) Net cash provided by (used in) financing activities 788,943 Net increase (decrease) in cash and cash equivalents (77,653) Cash and cash equivalents - beginning 780,809 Cash and cash equivalents - ending $ 703,156 See accompanying notes and accountant's report. 6 2002 $ 414,997 178,377 (1,000) 195 (799) (129,412) (5,702) 3,372 182,144 (52,878) 32,078 621,372 (463,132 ) 1,000 2,360,327 (2,203,157) 41,651 (263,311) (2,425) (103,638) (10,000) (50,005) (166,068) 191,993 588,816 $ 780,809 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS SUMMARY OF ACCOUNTING POLICIES Principles or Consolidation The accompanying consolidated financial statements include the accounts of R. F. Fager Company and its wholly owned subsidiaries. R. F. Fager Company, located in Camp Hill, Pennsylvania, was incorporated November 4, 1974. The Company and its subsidiary, Colt Plumbing Company, sell and service plumbing and heating equipment and supplies. The Companies grant credit to customers, substantially all of whom are located in the state and, generally, require no collateral from their customers. All material intercompany balances and transactions have been eliminated in consolidation. On November 13, 1996, Colt Plumbing Company issued 10,000 shares of common stock. On that same date, R. F. Fager Company acquired the 10,000 shares of common stock of Colt Plumbing Company, which represents 100% of the total shares outstanding. On September 30, 2003, Colt Plumbing Company was sold to its vice president. On December 8, 1997, Fager Development Corporation issued 1,000 shares of common stock. On that same date, R. F. Fager Company acquired the 1,000 shares of common stock of Fager Development Corporation, which represents 100% of the total shares outstanding. Fager Development Corporation develops land and buildings for sale in Pennsylvania. On December 31, 2002, Fager Development Corporation was merged into R. F. Fager Company. Method or Accounting The financial statements are prepared on the accounting basis used for the Company's federal income tax return. Consequently, accelerated depreciation methods are used, including the use of the Accelerated Cost Recovery System, as subsequently modified by the Tax Reform Act of 1986. Accordingly, the accompanying financial statements are not intended to present financial position and results of operations in conformity with accounting principles generally accepted in the United States of America. Casb and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be "cash equivalents." {continued} 7 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS SUMMARY OF ACCOUNTING POLICIES (Cont'd) Investments The Company follows the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 115 (Statement 115), Accounting for Certain Investments in Debt and Equity securities. In accordance with Statement 115, the Company has classified its investments in debt and equity securities as available for sale securities. Statement 115 requires available for sale securities to be reported at fair value, with unrealized holding gains and losses excluded from results of operations and reported as a separate component of stockholders' equity. Realized investment gains and losses are determined using the specific identification method. Trade Accounts Receivable Trade accounts receivable is recorded net of an allowance for expected losses. The allowance is estimated from historical performance and projections of trends. Comprehensive Income Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, (SFAS 130), requires that total comprehensive income be reported in the financial statements. Total comprehensive income is presented on the Statement of Changes in Stockholders' Equity. Inven tory Inventory is valued at lower of cost or market using the first-in, first-out (FIFO) method. Property, Plant, and Equipment Property, plant, and equipment are carried at cost. Depreciation is computed using the straight-line and declining-balance methods. Assets acquired after January 1, 1981 are depreciated at the generally shorter lives permitted by the accelerated cost recovery system (ACRS) and the modified-accelerated cost recovery system (MACRS) under the Internal Revenue Code, which has not materially affected the operating results of the period. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized and deductions are made for retirements resulting from the renewals or betterments. Use of Estimates The preparation of financial statements in conformity with accounting principles used for income tax reporting purposes requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements I and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. ( continued) 8 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS SUMMARY OF ACCOUNTING POLICIES (Cont'd) Reclassification Certain items in the 2002 financial statements have been reclassified to conform with the presentation of the 2003 financial statements. NOTE RECEIVABLE The note is due in three equal installments of $50,000, plus interest at 5%, on September 30, 2004, 2005, and 2006 from Colt Plumbing, Inc. The sole shareholder of Colt Plumbing, Inc. has personally guaranteed the note. INVESTMENT SECURITIES The amortized cost and fair values of investment securities at December 31, 2003 follows: Amortized Cost Gross Unrealized Holding Gains State and municipal government debt securities Mutual funds Corporate equity securities $ 3,762,999 155,736 66,039 $ 187,311 860 35,104 $ 3,984,774 $ 223,275 $ Gross Unrealized Holding Losses Fair Value $ (8,207) (41,394) (14,865) $ 3,942,103 115,202 86,278 (64,466) $ 4,143,583 The amortized cost and fair values of investment securities at December 31, 2002 follows: Amortized Cost Gross Unrealized Holding Gains State and municipal government debt securities Mutual funds Corporate equity securities $ 4,021,089 155,529 72,669 $ 179,105 14,844 $ 4,249,287 $ 193,949 $ Gross Unrealized Holding Losses Fair Value $ (4,810) (61,276) (22,703) $ 4,195,384 94,253 64,810 (88,789) $ 4,354,447 The gross realized gains and losses on sales of investment securities were $2,845 and $(9,543) for the year ended December 31, 2003 and $323 and $(518) for the year ended December 31, 2002. ( continued) 9 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS INVESTMENT SECURITIES (Cont'd) The scheduled maturities of u.S. Treasury notes and state and municipal government debt securities at December 31, 2003 follows: Due in one year or less Due from one year to five years Due from five years to ten years Due after ten years Cost Fair Value $ 80,313 $ 80,412 1,532,220 1,599,939 1,614,595 1,716,802 429,055 434,406 3,656,183 3,831,559 262,552 225,746 $ 3,918,735 $ 4,057,305 No stated maturity date The Company has shares in mutual funds that have no stated maturity date. These mutual funds primarily invest in government debt securities. DEPRECIATION Depreciation expense is summarized as follows: Description 2003 2002 Buildings Autos and trucks Equipment $ 167,986 116,842 48,657 $ 47,848 81,209 49,002 $ 333,485 $ 178,059 PENSION AND PROFIT-SHARING PLANS The parent Company funds a non-contributory profit sharing plan to all eligible employees. Employees must be 21 years of age and have six months of service in order to participate. For the years ended December 31, 2003 and 2002, contributions to the plan were $110,000 each while associated administration fees were $2,935 and $2,498. The subsidiary Company adopted a 401(k) defined contribution plan in July of 1997 covering all employees who meet certain age and service requirements. Employer profi t sharing and matching contributions to the plan are discretionary. For the nine months ending September 30, 2003 and the year ending December 31, 2002, the Company has not made any discretionary contributions. (continued) 10 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS LONG-TERM DEBT Long-term debt at December 31, 2003 and 2002 consisted of the following: 2003 2002 Note payable - M&T Bank was renegotiated in October 2003. The note requires quarterly principal payments of $25,910 plus monthly interest payments at LIBOR plus 2% (3.12% at December 31, 2003). It is secured by virtually all assets of the Company. $ 236,825 $ 414,554 Note payable Community Banks requires payments of $5,350 including principal and at a rate of 5.15%. The note is secured by estate and improvements owned by R. F. Fager, monthly interest the real Co. 500,000 Note payable Community Banks requires monthly payments of $4,085 including principal and interest at LIBOR plus 2% (3.12% at December 31, 2003). The note is secured by the real estate and improvements owned by R. F. Fager, Co. 490,000 1,226,825 414,554 Less current portion (177,229) (103,638) Total long-term debt $ 1,049,596 $ 310,916 Total interest incurred and expensed was $23,206 and $40,079 for the years ended December 31, 2003 and 2002. Total interest paid was $29,103 and $45,079 for the years ended December 31, 2003 and 2002. Maturities of long-term debt in each of the next five years are as follows: 2004 2005 2006 2007 2008 $ $ $ $ $ 177,229 180,388 109,596 83,505 87,117 LINE OF CREDIT The Company had available for its use, a line of credit with M&T Bank in the amount of $350,000 thru September 30, 2003, it was assumed by (the new) Colt Plumbing Company. Any amounts borrowed were payable on demand and bore interest at the bank's prime rate less 1/2%. There was $326,535 outstanding at December 31, 2002. (continued) 11 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS OPERATING LEASES The Company leases a photocopier under a non-cancelable lease expiring in October, 2007. Non-related party operating lease expense amounted to $8,948 and $6,447 for the years ended December 31, 2003 and 2002. Future minimum lease payments under all operating leases for years ending December 31 are as follows: 2004 2005 2006 2007 $ $ $ $ 3,129 3,129 3,129 2,608 ADVERTISING COSTS The Company expenses advertising costs as incurred. The Company incurred advertising costs of $63,996 and $60,256 for the years ended December 31, 2003 and 2002. INCOME TAXES Effective February 1, 1992, the R. F. Fager Company elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay federal or state corporate income taxes on its taxable income. Instead, the stockholders are liable for individual federal and state income taxes on their respective shares of the Company's taxable income. Effective January 1, 1999, the Colt Plumbing Company elected to be a qualifying subsidiary under Subchapter S of the Internal Revenue Code (QSS). Under those provisions, the Company does not pay federal or state income taxes on its taxable income. Instead, it reports its taxable income on its parent's return, as if it were a consolidated return. The stockholders of the parent Company are then liable for individual federal and state income taxes on their respective shares of the Company's taxable income. RELATED PARTY TRANSACTIONS At December 31, 2003 and 2002, the Company had one note totaling $30,000 payable to one officer of the Company. The note is due on demand and bears interest at 6%. During the years ended December 31, 2003 and 2002, the Company incurred and paid interest costs of $1,800 each. The Company was indebted to another officer of the Company in the amount of $135,000 and $110,000 at September 30, 2003 and December 31, 2002. The loan carried an interest rate of 6% in 2003 and 5% in 2002. No repayment terms had been established. Interest paid to the officer was $4,950 in 2003 and $5,500 in 2002. This loan was assumed by Colt Plumbing Company as of September 30, 2003. (continued) 12 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS RELATED PARTY TRANSACTIONS (Cont'd) The Company rents a telephone system and computer equipment on a month to month basis from a related company, Fager Leasing, which is owned by two of the stockholders of the Company. Rental payments totaled $45,460 and $41,237 for the years ended December 31, 2003 and 2002. CONCENTRATION OF CREDIT RISK The Company maintains cash balances at several financial institutions located in Central Pennsylvania. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. At December 31, 2003 and 2002, the Company's uninsured cash balances totaled $513,989 and $454,726. CONTINGENCY In the event of the death of a stockholder, the Company is obligated to purchase shares of stock not bequeathed to family members as outlined in the Shareholders' Agreement. The stock shall be valued in accordance with the Shareholders' Agreement. Amounts are to be paid over a four-year period plus interest on the unpaid balance at 8% per annum. SUBSEQUENT EVENT In January 2004, the Company distributed the officer's life insurance policy having a cash value of $9,986 at December 31, 2003 to the beneficiaries. 13 TIDS PAGE IS INTENTIONALLY LEFT BLANK SUPPLEMENTARY INFORMATION 14 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET BY COMPANIES - INCOME TAX BASIS Current Assets Cash and cash equivalents Receivables Trade Employees Interest receivable Inventory Prepaid expenses Note receivable, current portion Total current assets Investments Property, plant, and equipment Land Buildings Autos and trucks Equipment Accumulated depreciation Other assets Cash value of life insurance Note receivable, net of current portion Total assets YEAR ENDED DECEMBER 31, 2003 ASSETS R. F. Fager Company Colt Plumbing Company Eliminations Consolidated Total $ 703,156 $ $ $ 703,156 2,389,704 4,594 5,343 2,941,752 4,903 2,389,704 4,594 5,343 2,941,752 4,903 50,000 50,000 6,099,452 6,099,452 4,143,583 4,143,583 767,973 767,973 3,314,468 3,314,468 716,385 716,385 362,618 362,618 5,161,444 5,161,444 {1,937,822l {1,937,822l 3,223,622 3,223,622 9,986 9,986 100,000 100,000 109,986 109,986 $ 13,576,643 $ $ $ 13,576,643 See accountant's report. 15 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current portion of long-term debt Demand notes payable - officers Accounts payable - trade Accrued liabilities and withholdings Sales tax Employee payroll deductions Interest Payroll Payroll taxes Pension and profit sharing Deposits Total current liabilities Long-term debt, notes payable - bank Stockholder's equity Common stock Class A Class B Retained earnings Accumulated comprehensive income, unrealized holding gains on investments Total stockholders' equity Total liabilities and stockholders' equity R. F. Fager Company $ 177,229 30,000 1,496,029 97,910 51,757 481 203,491 1,354 110,000 53,730 2,221,981 1,049,596 1,000 50,000 10,095,258 158,808 10,305,066 $ 13,576,643 Colt Plumbing Company $ $ 16 Eliminations $ $ Consolidated Total $ 177,229 30,000 1,496,029 97,910 51,757 481 203,491 1,354 110,000 53,730 2,221,981 1,049,596 1,000 50,000 10,095,258 158,808 10,305,066 $ 13,576,643 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATING STATEMENT OF INCOME AND CASH FLOWS BY COMPANIES - INCOME TAX BASIS Net sales Cost of sales (Schedule #1) Gross Profit Selling and administrative expenses (Schedule #2) Operating income (loss) Other income (expense) (Schedule #3) Net income (loss) Cash flows Net income (loss) Depreciation and amortization YEAR ENDED DECEMBER 31, 2003 R. F. Fager Company $ 25,881,090 21,701,997 4,179,093 3,930,480 248,613 (1,957,251) (1,708,638) (1,708,638) 311,538 $ (1,397,100) Colt Plumbing Company $ 3,565,461 3,000,160 565,301 582,062 (16,761) 2,166,879 2,150,118 2,150,118 21,947 $ 2,172,065 See accountant's report. 17 Eliminations $ (92,817) (92,817) $ Consolidated Total $ 29,353,734 24,609,340 4,744,394 4,512,542 231,852 209,628 441,480 441,480 333,485 $ 774,965 R. F. FAGER COMPANY AND SUBSIDIARIES SCHEDULES OF COST OF SALES AND SELLING AND ADMINISTRATIVE EXPENSES YEAR ENDED DECEMBER 31, 2003 Schedule #1 - Cost of Sales Colt R. F. Fager Plumbing Company Company Cost of sales Inventory - beginning $ 2,752,979 $ 798,814 Purchases 18,845,334 1,438,370 Freight 56,778 74,473 Labor 2,988,658 679,396 Supplies 9,107 24,643,749 3,000,160 Inventory - ending (2,941,752) Total cost of sales $ 21,701,997 $ 3,000,160 Schedule #2 - Selling and Administrative Expenses R. F. Fager Company Colt Plumbing Company Selling and administrative expenses Accounting and legal Administrative salaries Auto and truck expense Advertising Bank service charges Building rental Contract labor Contributions Data processing Depreciation and amortization Dues and subscriptions Equipment rental Insurance Utilities Officers' salaries Office supplies and expense Payroll taxes Pension and profit sharing Pension administration expense Postage Repairs Shop supplies and expense Taxes Telephone Travel and entertainment Miscellaneous $ 77,134 $ 16,194 93,708 106,377 38,614 110,043 25,382 18,591 22,500 1,849 50,731 1,065 3,015 311,538 8,068 48,829 335,009 43,689 2,114,635 66,454 307,610 110,000 2,935 15,538 22,657 3,567 78,785 30,376 28,424 15,387 350 21,947 200 5,819 63,097 6,285 99,974 15,290 68,536 2,318 8,123 8,299 6,302 23,725 73,159 414 Total selling and administrative expenses $ 3,930,480 $ 582,062 See accountant's report. 18 R. F. FAGER COMPANY AND SUBSIDIARIES SCHEDULE OF OTHER INCOME (EXPENSE) YEAR ENDED DECEMBER 31, 2003 Schedule #3 - Other income (expense) R. F. Fager Company Other income (expense) Dividend income Interest income Gain on sale of subsidiary Loss on sales of investments Bad debt expense Forgiveness of debt Administrative fees Miscellaneous income Interest expense $ 7,233 179,178 250,000 (6,698) (196,537) (2,200,498) 8,000 5,532 (3,461) Total other income (expense) $ (1,957,251) See accountant's report. 19 Colt Plumbing Company $ (13,874) 2,200,498 (19,745) $ 2,166,879 R. F. FAGER COMPANY AND SUBSIDIARIES (AN S CORPORATION) CONSOLIDATED FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION YEARS ENDED DECEMBER 31, 2002 AND 2001 R. F. FAGER COMPANY AND SUBSIDIARIES TABLE OF CONTENTS Page Accountant's Report on Financial Statements 1 Financial Statements Consolidated Balance Sheets 2 Consolidated Statements of Income 4 Consolidated Statements of Changes in Stockholders' Equity 5 Consolidated Statements of Cash Flows 6 Notes to Financial Statements 7 Supplementary Information Consolidating Balance Sheet by Companies 15 Consolidating Statement of Income by Companies 17 Cost of Sales and Selling and Administrative Expenses (Schedule #1 and Schedule #2) 18 Other Income - (Expense) (Schedule #3) 19 R. F. Fager Company Camp Hill, Pennsylvania We have reviewed the accompanying consolidated balance sheets of R. F. Fager Company (an S Corporation) and subsidiaries, as of December 31, 2002 and 2001, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the years then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of R. F. Fager Company and subsidiaries. A review consists principally of inquiries of Company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America. The data presented in the supplementary information accompanying the financial statements is presented only for supplementary analysis purposes and has been subj ected to the inquiry and analytical procedures applied in the review of the basic financial statements. We did not become aware of any material modifications that should be made to such data. 1n.1r7f ~ a. '?" ~~,. Harrisburg, Pennsylvania February 28, 2003 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2002 AND 2001 ASSETS 2002 Current assets Cash and cash equivalents Accounts receivable Trade, (net of allowance for doubtful accounts of $65,400 and $74,700) Employees Interest receivable Prepaid expenses Inventory $ 780,809 2,514,349 1,250 5,702 4,492 3,551,793 Total current assets 6,858,395 Investments 4,354,447 Property, plant and equipment Land Buildings Autos and trucks Equipment 594,962 1,807,715 643,285 696,661 Accumulated depreciation 3,742,623 (1,881,756) 1,860,867 Other assets Organization costs (net of amortization) Note receivable Cash value of life insurance 9,439 9,439 Total assets $ 13,083,148 See accompanying notes and accountant's report. 2 2001 $ 588,816 2,357,172 29,015 7,864 3,733,937 6,716,804 4,402,056 219,086 1,742,715 634,656 684,264 3,280,721 (1,704,927) 1,575,794 318 41,651 8,640 50,609 $ 12,745,263 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Line of credit Current portion of long-term debt Demand notes payable - officers Accounts payable - trade Accrued liabilities and withholdings Pennsylvania sales tax Employee payroll deductions Interest Payroll Payroll taxes Pension and profit sharing Deposits Accrued corporate tax Total current liabilities Long-term debt Note payable - bank Stockholders' equity Common stock Class A, voting, par value $10 per share; authorized 100 shares, issued and outstanding 100 shares Class B, nonvoting, par value $10 per share; authorized 5,000 shares, issued and outstanding 5,000 shares Retained earnings Accumulated comprehensive income Unrealized holding gains (losses) on investments Total stockholders' equity Total liabilities and stockholders' equity 3 2002 $ 326,535 103,638 140,000 1,529,285 92,226 7,008 6,378 203,127 624 110,000 68,594 6,642 2,594,057 310,916 1,000 50,000 10,022,016 105,159 10,178,175 $ 13,083,148 2001 $ 328,960 106,000 150,000 1,582,163 85,500 3,034 12,578 166,237 492 110,000 83,850 830 2,629,644 412,192 1,000 50,000 9,657,024 (4,597) 9,703,427 $ 12,745,263 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2002 AND 2001 2002 2001 Net sales $ 28,425,350 $ 26,393,217 Cost of sales 24,034,942 22,666,864 Gross profit 4,390,408 3,726,353 Selling and administrative expenses 4,134,156 3,599,382 Operating income 256,252 126,971 Other income 158,745 49,107 Net income $ 414,997 $ 176,078 See accompanying notes and accountant's report. 4 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Balance - January I, 2001 Comprehensive income Net income Unrealized gains on investments Balance - December 31, 2001 Comprehensive income Net income Unrealized losses on investments Distributions Balance - December 31, 2002 YEARS ENDED DECEMBER 31, 2002 AND 2001 Common Stock Class A Class B $ 1,000 $ 50,000 Retained Earnings $ 9,480,946 176,078 9,657,024 414,997 (50,005) $10,022,016 Accumulated Comprehensive Income $ 23,664 1,000 50,000 (28,261) (4,597) 109,756 $ 105,159 See accompanying notes and accountant's report. $ 1,000 $ 50,000 5 Total $ 9,555,610 176,078 (28,261) 9,703,427 414,997 109,756 (50,005) $10,178,175 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2002 AND 2001 2002 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization Gain on sale of fixed assets Loss on sale of investments Impairment of goodwill Cash value of life insurance (Increase) decrease in Accounts receivable Interest receivable Prepaid expenses Inventory Increase (decrease) in Accounts payable Accrued liabilities $ 414,997 178,377 (1,000) 195 (799) (129,412) (5,702) 3,372 182,144 (52,878) 32,078 Net cash provided by operating activities 621,372 Cash flows from investing activities Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from sale of investments Purchase of investments Advances on note receivable Payments on note receivable (463,132) 1,000 2,360,327 (2,203,157) 41,651 Net cash used in investing activities (263,311) Cash flows from financing activities Net borrowings (repayments) on line of credit Payments on note payable - bank Proceeds from note payable - officer Payments on note payable - officer Distributions to shareholders (2,425) (103,638) (10,000) (50,005) Net cash used in financing activities (166,068) Net increase (decrease) in cash and cash equivalents 191,993 Cash and cash equivalents - beginning 588,816 Cash and cash equivalents - ending $ 780,809 See accompanying notes and accountant's report. 6 2001 $ 176,078 218,261 (9,929) 2,486 18,194 1,086 249,356 3,169 135,597 44,566 20,717 859,581 (57,835) 10,600 1,825,649 (2,608,787) (41,651) 39,900 (832,124) 4,989 (106,000) 10,000 (91,011) (63,554) 652,370 $ 588,816 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS SUMMARY OF ACCOUNTING POLICIES Principles or Consolidation The accompanying consolidated financial statements include the accounts of R. F. Fager Company and its wholly owned subsidiaries. R. F. Fager Company, located in Camp Hill, pennsylvania, was incorporated November 4, 1974. The Company and its subsidiary, Colt Plumbing Company, sell and service plumbing and heating equipment and supplies. The Companies grant credit to customers, substantially all of whom are located in the state and, generally, require no collateral from their customers. All material intercompany balances and transactions have been eliminated in consolidation. On November 13, 1996, Colt Plumbing Company issued 10,000 shares of common stock. On that same date, R. F. Fager Company acquired the 10,000 shares of common stock of Colt Plumbing Company, which represents 100% of the total shares outstanding. On December 8, 1997, Fager Development corporation issued 1,000 shares of common stock. On that same date, R. F. Fager Company acquired the 1,000 shares of common stock of Fager Development Corporation, which represents 100% of the total shares outstanding. Fager Development Corporation develops land and buildings for sale in Pennsylvania. On December 31, 2002, Fager Development Corporation was merged into R. F. Fager Company. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be "cash equivalents." Investments The Company follows the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 115 (Statement 115), Accounting for Certain Investments in Debt and Equity securities. In accordance with Statement 115, the Company has classified its investments in debt and equity securities as available for sale securities. Statement 115 requires available for sale securities to be reported at fair value, with unrealized holding gains and losses excluded from results of operations and reported as a separate component of stockholders' equity. Realized investment gains identification method. and losses are determined using the specific Trade Accounts Receivable Trade accounts receivable is recorded net of an allowance for expected losses. The allowance is estimated from historical performance and projections of trends. (continued) 7 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS SUMMARY OF ACCOUNTING POLICIES (Cont'd) Comprehensive Income Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, (SFAS 130), requires that total comprehensive income be reported in the financial statements. Total comprehensive income is presented on the Statement of Changes in Stockholders' Equity. Inven tory Inventory is valued at lower of cost or market using the first-in, first-out (FIFO) method. Property, Plant and Equipment Property, plant and equipment are carried at cost. Depreciation is computed using the straight-line and declining-balance methods. Assets acquired after January 1, 1981 are depreciated at the generally shorter lives permitted by the accelerated cost recovery system (ACRS) and the modified-accelerated cost recovery system (MACRS) under the Internal Revenue Code, which has not materially affected the operating results of the period. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized and deductions are made for retirements resulting from the renewals or betterments. Goodwill The Company's subsidiary Colt Plumbing Company was amortizing its goodwill using the straight-line method over 15 years. During 2001, they evaluated the future benefit of the remaining goodwill and found its carrying amount to exceed its fair value. Colt Plumbing Company recorded an impairment loss of $18,194 for the year ended December 31, 2001. Organization Costs Organization costs were capitalized and amortized over 5 years. Use of Estimates The preparation of financial statements generally accepted in the United States estimates and assumptions that affect liabilities at the date of the financial revenue and expenses during the reporting those estimates. in conformity with accounting principles of America requires management to make the reported amounts of assets and statements, and the reported amounts of period. Actual results could differ from (continued) 8 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS SUMMARY OF ACCOUNTING POLICIES (Cont'd) Reclassification Certain items in the 2001 financial statements have been reclassified to conform with the presentation of the 2002 financial statements. INVESTMENT SECURITIES The amortized cost and fair values of investment securities at December 31, 2002 follows: Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value State and municipal government debt securities $ 4,021,089 $ 179,105 $ (4,810) $ 4,195,384 Mutual funds 155,529 (61,276) 94,253 Corporate equity securities 72,669 14,844 (22,703) 64,810 $ 4,249,287 $ 193,949 $ (88,789) $ 4,354,447 The amortized cost and fair values of investment securities at December 31, 2001 follows: Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value State and municipal government debt securities Mutual funds Corporate equity securities $ 4,178,484 155,500 72,669 $ 64,090 $ (26,183) (39,125) (19,650) $ 4,216,391 116,375 69,290 16,271 $ 4,406,653 $ 80,361 $ (84,958) $ 4,402,056 The gross realized gains and losses on sales of investment securities were $323 and $ (518) for the year ended December 31, 2002 and $910 and $ (3,396) for the year ended December 31, 2001. (continued) 9 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS INVESTMENT SECURITIES (Cont'd) The scheduled maturities of u.S. Treasury notes and state and municipal government debt securities at December 31, 2002 follows: No stated maturity date Cost Fair Value $ 228,678 $ 228,660 1,533,048 1,611,923 1,610,708 1,690,302 476,081 480,007 3,848,515 4,010,892 328,103 278,745 $ 4,176,618 $ 4,289,637 Due in one year or less Due from one year to five years Due from five years to ten years Due after ten years The Company has shares in mutual funds that have no stated maturity date. These mutual funds primarily invest in government debt securities. DEPRECIATION Depreciation expense is summarized as follows: Description 2002 2001 Buildings Autos and trucks Equipment $ 47,848 81,209 49,002 $ 48,442 108,504 61,090 $ 178,059 $ 218,036 PENSION AND PROFIT-SHARING PLANS The parent Company funds a non-contributory profit sharing plan to all eligible employees. Employees must be 21 years of age and have six months of service in order to participate. For the years ended December 31, 2002 and 2001, contributions to the plan were $110,000 each while associated administration fees were $2,498 and $2,585. The subsidiary Company adopted a 401(k) defined contribution plan in July of 1997 covering all employees who meet certain age and service requirements. Employer profit sharing and matching contributions to the plan are discretionary. For the years ending December 31, 2002 and 2001 the Company has not made any discretionary contributions. (continued) 10 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS LONG-TERM DEBT Long-term debt at December 31, 2002 and 2001 consisted of the following: 2002 Note payable Allfirst Bank was renegotiated in February 2002. The note requires quarterly principal payments of $25,910 plus monthly interest payments at LIBOR plus 2% (3.42% at December 31, 2002). It is secured by virtually all assets of the Company. $ 414,554 Less current portion (103,638) Total long-term debt $ 310,916 2001 $ 518,192 (106,000) $ 412,192 Total interest incurred and expensed was $40,079 and $79,256 for the years ended December 31, 2002 and 2001. Total interest paid was $45,079 and $92,117 for the years ended December 31, 2002 and 2001. Maturities of long-term debt in each of the next five years are as follows: 2003 2004 2005 2006 2007 LINE OF CREDIT $ $ $ $ $ 103,638 103,639 103,638 103,639 The Company has available for its use, a line of credit with Allfirst Bank in the amount of $350,000. Any amounts borrowed are payable on demand and bear interest at the bank's prime rate less 1/2% (4.75% at December 31, 2002). There was $326,535 and $328,960 outstanding at December 31, 2002 and 2001. OPERATING LEASES The Company leases two photo copiers under non-cancelable leases expiring in September 2004 and October 2007. Lease expense under these operating leases for the years ended December 31, 2002 and 2001 was $6,447 and $1,481. Future minimum lease payments under all operating leases for years ending December 31 are as follows: 2003 2004 2005 2006 2007 (continued) 11 $ $ $ $ $ 9,054 7,573 3,129 3,129 2,608 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS ADVERTISING COSTS The Company expenses advertising costs as incurred. The Company incurred advertising costs of $60,256 and $55,235 for the years ended December 31, 2002 and 2001. INCOME TAXES Effective February I, 1992, the R. F. Fager Company elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay federal or state corporate income taxes on its taxable income. Instead, the stockholders are liable for individual federal and state income taxes on their respective shares of the Company's taxable income. Effective January 1, 1999, the Colt Plumbing Company elected to be a qualifying subsidiary under Subchapter S of the Internal Revenue Code (QSS). Under those provisions, the Company does not pay federal or state income taxes on its taxable income. Instead, it reports its taxable income on its parent's return, as if it were a consolidated return. The stockholders of the parent Company are then liable for individual federal and state income taxes on their respective shares of the Company's taxable income. RELATED PARTY TRANSACTIONS At December 31, 2002 and 2001, there were no accounts receivable due from officers of the Company. The accounts receivable amounts from prior years included $98,329 representing the cash value of an officer's life insurance policy previously owned by the Company. During 1995, the beneficiary was changed from the Company to individual stockholders and was owned and paid for personally by the insured stockholder. These receivables were forgiven by the Company during 2001. At December 31, 2002 and 2001, the Company had one note totaling $30,000 payable to one officer of the Company. The note is due on demand and bears interest at 6%. During the years ended December 31, 2002 and 2001, the Company incurred and paid interest costs of $1,800 and $2,400. The Company is indebted to another officer of the Company in the amount of $110,000 and $120,000 at December 31, 2002 and 2001. The loan carries an interest rate of 5% and 7.5% for the years ended December 31, 2002 and 2001. No repayment terms have been established. Interest paid to the officer was $5,500 and $7,548 for the years ended December 31, 2002 and 2001. The Company rents computer equipment under a formal agreement with a related company, Fager Leasing, which is owned by two of the stockholders of the Company. Rental payments totaled $41,237 for the years ended December 31, 2002 and 2001. ( continued) 12 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS CONCENTRATION OF CREDIT RISK The Company maintains cash balances at several financial institutions located in Central Pennsylvania. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. At December 31, 2002 and 2001, the Company's uninsured cash balances totaled $454,726 and $258,086. CONTINGENCY In the event of the death of a stockholder, the Company is obligated to purchase shares of stock not bequeathed to family members as outlined in the Shareholders' Agreement. The stock shall be valued in accordance with the Shareholders' Agreement. Amounts are to be paid over a four-year period plus interest on the unpaid balance at 8% per annum. 13 SUPPLEMENTARY INFORMATION 14 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET BY COMPANIES YEAR ENDED DECEMBER 31, 2002 ASSETS R. F. Fager Company Colt Plumbing Company Fager Development Corporation Consolidated Eliminations Total Current Assets Cash and cash equivalents $ 817,629 $ (36,820) $ $ Accounts receivable Trade 2,159,837 354,512 Employees 1,250 Affiliates 1,306,993 2,455 Interest receivable 5,702 Prepaid expenses 4,492 Inventory 2,752,979 798,814 Total current assets 7,044,390 1,123,453 Investments 4,354,447 $ 780,809 2,514,349 1,250 (1,309,448) 5,702 4,492 3,551,793 (1,309,448) 6,858,395 4,354,447 Property, plant and equipment Land Buildings Autos and trucks Equipment 594,962 594,962 1,807,715 1,807,715 643,285 643,285 340,209 356,452 696,661 3,386,171 356,452 3,742,623 (1,626,284) (255,472) (1,881,756) 1,759,887 100,980 1,860,867 Accumulated depreciation Other assets Note receivable - affiliated company Cash value of life insurance 417,097 (417,097) 9,439 9,439 426,536 (417,097) 9,439 Total assets $13,585,260 $ 1,224,433 $ $(1,726,545) $13,083,148 See accountant's report. 15 LIABILITIES AND STOCKHOLDERS' EQUITY Colt Fager R. F. Fager Plumbing Development Consolidated Company Company Corporation Eliminations Total Current liabilities Line of credit $ $ 326,535 $ $ $ 326,535 Current portion of long-term debt 103,638 103,638 Demand notes payable - officers 30,000 110,000 140,000 Note payable - affiliate 1,008,000 (1,008,000) Accounts payable Trade 1,094,773 434,512 1,529,285 Affiliates 2,455 298,993 (301,448) Accrued liabilities and withholdings Sales tax 87,621 4,605 92,226 Employee payroll deductions 4,216 2,792 7,008 Interest 6,378 6,378 Payroll 171,327 31,800 203,127 Payroll taxes 624 624 Pension and profit sharing 110,000 110,000 Deposits 68,594 68,594 Accrued corporate tax 5,590 1,052 6,642 Total current liabilities 1,575,200 2,328,305 (1,309,448) 2,594,057 Long-term debt Notes payable - affiliated company 417,097 (417,097) Notes payable 310,916 310,916 Total long-term debt 728,013 (417,097) 310,916 Stockholder's equity Common stock Class A 1,000 200,000 (200,000) 1,000 Class B 50,000 50,000 Retained earnings (deficit) 11,853,901 (2,031,885) 200,000 10,022,016 Unrealized holding gains on investments 105,159 105,159 Total stockholders' equity 12,010,060 (1,831,885) 10,178,175 Total liabilities and stockholders' equity $13,585,260 $ 1,224,433 $ $(1,726,545) $13,083,148 See accountant's report. 16 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATING STATEMENT OF INCOME BY COMPANIES Net sales Cost of sales (Schedule #1) Gross Profit Selling and administrative expenses (Schedule #2) Operating income (loss) Other income (expense) (Schedule #3) Net income (loss) Cash flows Net income (loss) Depreciation and amortization YEAR ENDED DECEMBER 31, 2002 R. F. Fager Company $24,135,188 20,308,784 3,826,404 3,337,903 488,501 201,657 690,158 690,158 147,836 $ 837,994 Colt Plumbing Company Fager Development Consolidated Corporation Eliminations Total $ 4,504,377 $ 3,940,373 564,004 796,253 (232,249) (42,912) (275,161) (275,161) 30,223 $ (244,938) $ 623 (623) (623) (623) 318 (305) $ See accountant's report. 17 $ (214,215) $28,425,350 (214,215) (623) 623 623 623 623 24,034,942 4,390,408 4,134,156 256,252 158,745 414,997 414,997 178,377 $ 593,374 R. F. FAGER COMPANY AND SUBSIDIARIES COST OF SALES AND SELLING AND ADMINISTRATIVE EXPENSES YEAR ENDED DECEMBER 31, 2002 Schedule #1 - Cost of Sales Colt R. F. Fager Plumbing Company Company Cost of sales Inventory - beginning $ 2,998,653 $ 735,284 Purchases 17,138,395 2,916,716 Freight 62,378 107,649 Labor 2,862,337 963,669 Supplies 15,869 23,061,763 4,739,187 Inventory - ending (2,752,979) (798,814) Total cost of sales $20,308,784 $ 3,940,373 Schedule #2 - Selling and Administrative Expenses R. F. Fager Company Colt Plumbing Company Selling and administrative expenses Accounting and legal Administrative salaries Auto and truck expense Advertising Bank service charges Contract labor Contributions Data processing Depreciation and amortization Dues and subscriptions Equipment rental Insurance Utilities Officers' salaries Office supplies and expense Payroll taxes Pension and profit sharing Pension administration expense Postage Repairs Shop supplies and expense Taxes Telephone Travel and entertainment Miscellaneous $ 51,228 $ 20,973 171,819 4,800 55,142 25,203 7,868 101,152 5,114 96,142 79,834 1,732 3,323 147,836 8,790 44,235 286,689 42,476 1,772,672 66,279 286,245 110,000 2,498 13,541 59,927 5,036 78,975 29,884 23,831 20,464 30,223 262 5,789 88,653 7,493 76,000 19,200 99,992 3,626 16,206 11,230 7,542 29,037 111,500 3,695 Total selling and administrative expenses $ 3,337,903 $ 796,253 See accountant's report. 18 Fager Development Corporation $ $ Fager Development Corporation $ 318 250 55 $ 623 R. F. FAGER COMPANY AND SUBSIDIARIES OTHER INCOME (EXPENSE) YEAR ENDED DECEMBER 31, 2002 Schedule #3 - Other income (expense) R. F. Fager Company Other income (expense) Dividend income Interest income Equity in subsidiaries Gain on sale of fixed assets Loss on sales of investments Bad debt recovery (expense) Miscellaneous income Interest expense $ 6,372 192,943 (623) 1,000 (195) 2,796 1,164 (1,800) Total other income (expense) $ 201,657 See accountant's report. 19 Colt Plumbing Company $ (4,633) (38,279) $ (42,912) Fager Development Corporation $ $ R. F. FAGER COMPANY AND SUBSIDIARIES (An S Corporation) CONSOLIDATED FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION YEARS ENDED DECEMBER 31, 2001 AND 2000 R. F. FAGER COMPANY AND SUBSIDIARIES TABLE OF CONTENTS Page Accountant's Report on Financial Statements 1 Financial Statements Consolidated Balance Sheets 2 Consolidated Statements of Income 4 Consolidated Statements of Changes in Stockholders' Equity 5 Consolidated Statements of Cash Flows 6 Notes to Financial Statements 7 Supplementary Information Consolidating Balance Sheet by Companies 15 Consolidating Statement of Income by Companies 17 Cost of Sales and Selling and Administrative Expenses (Schedule #1 and Schedule #2) 18 Other Income - (Expense) (Schedule #3) 19 R. F. Fager Company Camp Hill, Pennsylvania We have reviewed the accompanying consolidated balance sheets of R. F. Fager Company (an S Corporation) and subsidiaries, as of December 31, 2001 and 2000, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the years then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of R. F. Fager Company and subsidiaries. A review consists principally of inqulrles of Company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America. The data presented in the supplementary information accompanying the financial statements is presented only for supplementary analysis purposes and has been subjected to the inquiry and analytical procedures applied in the review of the basic financial statements. We did not become aware of any material modifications that should be made to such data. Harrisburg, Pennsylvania March 4, 2002 1n.1r7 + ~I.'" R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2001 AND 2000 ASSETS Current assets Cash and cash equivalents Accounts receivable Trade, (net of allowance for doubtful accounts of $74,700 and $88,070) Officers Employees prepaid expenses Inventory 2001 $ 588,816 2,357,172 29,015 7,864 3,733,937 6,716,804 4,402,056 219,086 1,742,715 634,656 684,264 3,280,721 (1,704,927) 1,575,794 Total current assets Investments Property, plant and equipment Land Buildings Autos and trucks Equipment Accumulated depreciation Other assets Goodwill (net of amortization) Organization costs (net of amortization) Note receivable Cash value of life insurance 318 41,651 8,640 50,609 Total assets $12,745,263 See accompanying notes and accountant's report. 2 2000 $ 652,370 2,487,183 143,736 4,624 11,033 3,869,534 7,168,480 3,649,665 219,086 1,742,715 652,208 701,469 3,315,478 (1,580,759) 1,734,719 18,194 2,490 39,900 9,726 70,310 $12,623,174 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Line of credit Current portion of long-term debt Demand notes payable - officers Accounts payable - trade Accrued liabilities and withholdings Pennsylvania sales tax Employee payroll deductions Interest payroll Payroll taxes Pension and profit sharing Deposits Accrued corporate tax Total current liabilities Long-term debt Note payable - bank Stockholders' equity Common stock Class A, voting, par value $10 per share; authorized 100 shares, issued and outstanding 100 shares Class B, nonvoting, par value $10 per share; authorized 5,000 shares, issued and outstanding 5,000 shares Retained earnings Accumulated comprehensive income Unrealized holding gains (losses) on investments Total stockholders' equity Total liabilities and stockholders' equity 3 2001 2000 $ 328,960 $ 323,971 106,000 106,000 150,000 140,000 1,582,163 1,537,597 85,500 78,175 3,034 7,320 12,578 14,311 166,237 153,668 492 1,138 110,000 110,000 83,850 76,912 830 280 2,629,644 2,549,372 412,192 518,192 1,000 1,000 50,000 50,000 9,657,024 9,480,946 (4,597) 23,664 9,703,427 9,555,610 $12,745,263 $12,623,174 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2001 AND 2000 Net sales Cost of sales Gross profit Selling and administrative expenses Operating income Other income Net income 2001 2000 $26,538,247 $26,485,137 22,811,894 23,038,155 3,726,353 3,446,982 3,599,382 3,231,009 126,971 215,973 49,107 146,757 $ 176,078 $ 362,730 See accompanying notes and accountant's report. 4 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Balance - January 1, 2000 Comprehensive income Net income Unrealized gains on investments Distributions Balance - December 31, 2000 Comprehensive income Net income Unrealized losses on investments Balance - December 31, 2001 YEARS ENDED DECEMBER 31, 2001 AND 2000 Common Stock Class A Class B $ $ 50,000 Retained Earnings $9,158,218 362,730 (40,002) 9,480,946 176,078 $9,657,024 Accumulated Comprehensive Income Total $ (38,463) $9,170,755 62,127 23,664 (28,261) 362,730 62,127 (40,002) 9,555,610 176,078 (28,261) $ (4,597) $9,703,427 See accompanying notes and accountant's report. 1,000 1,000 50,000 $ $ 50,000 1,000 5 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2001 AND 2000 2001 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization Gain on sale of fixed assets (Gain) loss on sale of investments Impairment of goodwill Cash value of life insurance (Increase) decrease in Accounts receivable Interest receivable Prepaid expenses Inventory Increase (decrease) in Accounts payable Accrued liabilities $ 176,078 218,261 (9,929) 2,486 18,194 1,086 249,356 3,169 135,597 44,566 20,717 Net cash provided by operating activities 859,581 Cash flows from investing activities Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from sale of investments Purchase of investments Advances on note receivable Payments on note receivable (57,835) 10,600 1,825,649 (2,608,787) (41,651) 39,900 Net cash used in investing activities (832,124) Cash flows from financing activities Net borrowings (repayments) on line of credit Payments on note payable - bank Payments on note payable - officer Proceeds from note payable - officer Distributions to shareholders 4,989 (106,000) 10,000 Net cash used in financing activities (91,011) Net decrease in cash and cash equivalents (63,554) Cash and cash equivalents - beginning 652,370 Cash and cash equivalents - ending $ 588,816 See accompanying notes and accountant's report. 6 2000 $ 362,730 186,840 (3,627) (22,352) 950 91,516 5,177 (284) (207,391) 126,293 (387) 539,465 (326,181) 16,500 2,019,100 (2,345,032) (39,900) (675,513) (6,347) (110,808) (70,000) 10,000 (40,002) (217,157) (353,205) 1,005,575 $ 652,370 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS SUMMARY OF ACCOUNTING POLICIES Principles or Consolidation The accompanying consolidated financial statements include the accounts of R. F. Fager Company and its wholly owned subsidiaries. R. F. Fager Company, located in Camp Hill, Pennsylvania, was incorporated November 4, 1974. The Company and its subsidiary, Colt Plumbing Company, sell and service plumbing and heating equipment and supplies. The Companies grant credit to customers, substantially all of whom are located in the state and, generally, require no collateral from their customers. All material intercompany balances and transactions have been eliminated in consolidation. On November 13, 1996, Colt Plumbing Company issued 10,000 shares of common stock. On that same date, R. F. Fager Company acquired the 10,000 shares of common stock of Colt Plumbing Company, which represents 100% of the total shares outstanding. On December 8, 1997, Fager Development Corporation issued 1,000 shares of common stock. On that same date, R. F. Fager Company acquired the 1,000 shares of common stock of Fager Development Corporation, which represents 100% of the total shares outstanding. Fager Development Corporation develops land and buildings for sale in Pennsylvania. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be "cash equivalents." Investments The Company follows the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 115 (Statement 115), Accounting for Certain Investments in Debt and Equi ty Securi ties. In accordance with Statement 115, the Company has classified its investments in debt and equity securities as available for sale securities. Statement 115 requires available for sale securities to be reported at fair value, with unrealized holding gains and losses excluded from results of operations and reported as a separate component of stockholders' equity. Realized investment gains identification method. and losses are determined using the specific (continued) 7 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Cont'd) SUMMARY OF ACCOUNTING POLICIES (Cont'd) Comprehensive Income Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, (SFAS 130), requires that total comprehensive income be reported in the financial statements. Total comprehensive income is presented on the Statement of Changes in Stockholders' Equity. Inventory Inventory is valued at lower of cost or market using the first-in, first-out (FIFO) method. Property, Plant and Equipment Property, plant and equipment are carried at cost. Depreciation is computed using the straight-line and declining-balance methods. Assets acquired after January I, 1981 are depreciated at the generally shorter lives permitted by the accelerated cost recovery system (ACRS) and the modified-accelerated cost recovery system (MACRS) under the Internal Revenue Code, which has not materially affected the operating results of the period. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized and deductions are made for retirements resulting from the renewals or betterments. Goodwill The Company's subsidiary Colt Plumbing Company was amortizing its goodwill using the straight-line method over 15 years. During 2001, they evaluated the future benefit of the remaining goodwill and found its carrying amount to exceed its fair value. Colt Plumbing Company recorded an impairment loss of $18,194 for the year ended December 31, 2001. Organization Costs Organization costs were capitalized and amortized over 5 years. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. (continued) 8 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Cont'd) SUMMARY OF ACCOUNTING POLICIES (Cont'd) Reclassification Certain items in the 2000 financial statements have been reclassified to conform with the presentation of the 2001 financial statements. INVESTMENT SECURITIES The amortized cost and fair values of investment securities at December 31, 2001 follows: Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value State and municipal government debt securities $ 4,178,484 $ 64,090 $ (26,183) $ 4,216,391 Mutual funds 155,500 (39,125) 116,375 Corporate equity securities 72,669 16,271 (19,650) 69,290 $ 4,406,653 $ 80,361 $ (84,958) $ 4,402,056 The amortized cost and fair values of investment securities at December 31, 2000 follows: Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value State and municipal government debt securities $ 3,428,333 $ 48,638 $ (17,645) $ 3,459,326 Mutual funds 125,000 (13,141) 111,859 Corporate equity securities 72,669 22,100 (16,289) 78,480 $ 3,626,002 $ 70,738 $ (47,075) $ 3,649,665 The gross realized gains and losses on sales of investment securities were $910 and $ (3,396) for the year ended December 31, 2001 and $44,326 and $ (21,974) for the year ended December 31, 2000. (continued) 9 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Cont'd) INVESTMENT SECURITIES (Cont'd) The scheduled maturities of u.S. Treasury notes and state and municipal government debt securities at December 31, 2001 follows: Due in one year or less Due from one year to five years Due from five years to ten years Due after ten years Cost Fair Value $ 301,806 $ 302,087 1,338,088 1,359,019 1,897,767 1,921,878 534,008 527,707 4,071,669 4,110,691 262,315 222,075 $ 4,333,984 $ 4,332,766 No stated maturity date The Company has shares in mutual funds that have no stated maturity date. These mutual funds primarily invest in government debt securities. DEPRECIATION Depreciation expense is summarized as follows: Description 2001 2000 Buildings Autos and trucks Equipment $ 48,442 108,504 61,090 $ 49,492 72,618 60,713 $ 218,036 $ 182,823 PENSION AND PROFIT-SHARING PLANS The parent Company funds a non-contributory profit sharing plan to all eligible employees. Employees must be 21 years of age and have six months of service in order to participate. For the years ended December 31, 2001 and 2000, contributions to the plan were $110,000 each while associated administration fees were $2,585 and $2,649. The subsidiary Company adopted a 401(k) defined contribution plan in July of 1997 covering all employees who meet certain age and service requirements. Employer profit sharing and matching contributions to the plan are discretionary. For the years ending December 31, 2001 and 2000 the Company has not made any discretionary contributions. (continued) 10 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Cont'd) LONG-TERM DEBT Long-term debt at December 31, 2001 and 2000 consisted of the following: 2001 2000 Note payable Allfirst Bank requires quarterly principal payments of $26,500 plus interest at 7.75% $ 518,192 $ 624,192 Less current portion (106,000) (106,000) Total long-term debt $ 412,192 $ 518,192 Total interest incurred and expensed was $79,256 and $92,458 for the years ended December 31,2001 and 2000. Total interest paid was $92,117 and $89,353 for the years ended December 31, 2001 and 2000. Maturities of long-term debt in each of the next five years are as follows: 2002 2003 2004 2005 2006 $ $ $ $ $ 106,000 106,000 106,000 106,000 94,192 LINE OF CREDIT The Company has available for its use, a line of credit with Allfirst Bank in the amount of $350,000. Any amounts borrowed are payable on demand and bear interest at the bank's prime rate less 1/2% (5% at December 31, 2001). There was $328,960 and $323,971 outstanding at December 31, 2001 and 2000. OPERATING LEASES The Company leases a photo copier under a non-cancelable lease exp~r~ng in September 2004. Lease expense under this operating lease for the year ended December 31, 2001 was $1,481. Future minimum lease 31 are as follows: 2002 2003 2004 payments under all operating leases for years ending December $ 5,925 $ 5,925 $ 4,444 (continued) 11 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Cont'd) ADVERTISING COSTS The Company expenses advertising costs as incurred. The Company incurred advertising costs of $55,235 and $55,220 for the years ended December 31, 2001 and 2000. INCOME TAXES Effective February 1, 1992, the R. F. Fager Company elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay federal or state corporate income taxes on its taxable income. Instead, the stockholders are liable for individual federal and state income taxes on their respective shares of the Company's taxable income. Effective January 1, 1999, the Colt Plumbing Company elected to be a qualifying subsidiary under Subchapter S of the Internal Revenue Code (QSS). Under those provisions, the Company does not pay federal or state income taxes on its taxable income. Instead, it reports its taxable income on its parent's return, as if it were a consolidated return. The stockholders of the parent Company are then liable for individual federal and state income taxes on their respective shares of the Company's taxable income. RELATED PARTY TRANSACTIONS At December 31, 2001 and 2000, accounts receivable in the amount of $0 and $143,736 were due from certain officers of the Company. The receivables were noninterest- bearing. The accounts receivable amounts for 2000 included $98,329 representing the cash value of an officer's life insurance policy previously owned by the Company. During 1995, the beneficiary was changed from the Company to individual stockholders and was owned and paid for personally by the insured stockholder. These receivables were forgiven by the Company during 2001. At December 31, 2001 and 2000, the Company had one note totaling $30,000 payable to one officers of the Company. The note is due on demand and bears interest at 8%. During the years ended December 31, 2001 and 2000, the Company incurred and paid interest costs of $2,400 and $7,067. The Company is indebted to another officer of the Company in the amount of $120,000 and $110,000 at December 31, 2001 and 2000. The loan carries an interest rate of 6% and 7.75% for the years ended December 31, 2001 and 2000. No repayment terms have been established. Interest paid to the officer was $7,408 and $7,500 for the years ended December 31, 2001 and 2000. The Company rents computer equipment under a formal agreement with a related company, Fager Leasing, which is owned by two of the stockholders of the Company. Rental payments totaled $41,237 for the years ended December 31, 2001 and 2000. (continued) 12 R. F. FAGER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Cont'd) CONCENTRATION OF CREDIT RISK The Company maintains cash balances at several financial institutions located in Central Pennsylvania. Accounts at each ins ti tution are insured by the Federal Deposit Insurance Corporation up to $100,000. At December 31, 2001 and 2000, the Company's uninsured cash balances totaled $258,086 and $267,239. CONTINGENCY In the event of the death of a stockholder, the Company is obligated to purchase shares of stock not bequeathed to family members as outlined in the Shareholders' Agreement. The stock shall be valued in accordance with the Shareholders' Agreement. Amounts are to be paid over a four-year period plus interest on the unpaid balance at 8% per annum. 13 SUPPLEMENTARY INFORMATION 14 R. F. FAGER COMPANY AND SUBSIDIARIES Current Assets Cash and cash equivalents Accounts receivable Trade Employees Affiliates Prepaid expenses Inventory Total current assets Investments Property, plant and equipment Land Buildings Autos and trucks Equipment Accumulated depreciation Other assets Organization costs (net of amortization) Investment in subsidiaries Note receivable Note receivable - affiliated company Cash value of life insurance Total assets CONSOLIDATING BALANCE SHEET BY COMPANIES YEAR ENDED DECEMBER 31, 2001 R. F. Fager Company $ 629,626 2,092,304 27,415 907,317 3,100 2,998,653 6,658,415 4,402,056 219,086 1,742,715 634,656 329,490 2,925,947 (1,479,678) 1,446,269 60,584 417,097 8,640 486,321 $12,993,061 ASSETS Colt Plumbing Company $ (42,582) $ Fager Development Corporation 1,772 16,593 250 18,615 318 41,651 41,969 $ 60,584 264,868 1,600 1,128 4,514 735,284 964,812 354,774 354,774 (225,249) 129,525 $ 1,094,337 See accountant's report. 15 Consolidated Eliminations Total $ $ 588,816 (925,038) (925,038) (60,584) (417,097) (477,681) 2,357,172 29,015 7,864 3,733,937 6,716,804 4,402,056 219,086 1,742,715 634,656 684,264 3,280,721 (1,704,927) 1,575,794 318 41,651 8,640 50,609 $ (1,402,719) $12,745,263 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET BY COMPANIES YEAR ENDED DECEMBER 31, 2001 LIABILITIES AND STOCKHOLDERS' EQUITY Colt Fager R. F. Fager Plumbing Development Consolidated Company Company Corporation Eliminations Total Current liabilities Line of credit $ $ 328,960 $ $ $ 328,960 Current portion of long-term debt 106,000 106,000 Demand notes payable - officers 30,000 120,000 150,000 Note payable - affiliate 733,000 (733,000) Accounts payable Trade 1,276,918 305,245 1,582,163 Affiliates 1,128 190,910 (192,038) Accrued liabilities and withholdings Sales tax 81,987 3,513 85,500 Employee payroll deductions 3,107 (73) 3,034 Interest 1,200 11,378 12,578 Payroll 144,228 22,009 166,237 Payroll taxes 492 492 Pension and profit sharing 110,000 110,000 Deposits 83,850 83,850 Accrued corporate tax 830 830 Total current liabilities 1,732,910 1,821,772 (925,038) 2,629,644 Long-term debt Notes payable - affiliated company 417,097 (417,097) Notes payable 412,192 412,192 Total long-term debt 829,289 (417,097) 412,192 Stockholder's equity Common stock Class A 1,000 200,000 1,000 (201,000) 1,000 Class B 50,000 50,000 Retained earnings (deficit) 11,213,748 (1,756,724) 59,584 140,416 9,657,024 Unrealized holding gains on investments (4,597) (4,597) Total stockholders' equity 11,260,151 (1,556,724) 60,584 (60,584) 9,703,427 Total liabilities and stockholders' equity $12,993,061 $ 1,094,337 $ 60,584 $ (1,402,719) $12,745,263 See accountant's report. 16 R. F. FAGER COMPANY AND SUBSIDIARIES CONSOLIDATING STATEMENT OF INCOME BY COMPANIES YEAR ENDED DECEMBER 31, 2001 Colt Fager R. F. Fager Plumbing Development Consolidated Company Company Corporation Eliminations Total Net sales $22,987,123 $ 3,470,703 $ 80,421 $ $26,538,247 Cost of sales (Schedule #1) 19,566,212 3,155,284 90,398 22,811,894 Gross Profit 3,420,911 315,419 (9,977) 3,726,353 Selling and administrative expenses (Schedule #2) 3,014,760 591,465 1,407 (8,250) 3,599,382 Operating income 406,151 (276,046) (11,384) 8,250 126,971 Other income (Schedule #3) 152,280 (106,307) 5,026 (1,892) 49,107 Net income (loss) 558,431 (382,353) (6,358) 6,358 176,078 Cash flows Net income (loss) 558,431 (382,353) (6,358) 6,358 176,078 Depreciation and amortization 172,094 45,942 225 218,261 $ 730,525 $ (336,411) $ (6,133) $ 6,358 $ 394,339 See accountant's report. 17 R. F. FAGER COMPANY AND SUBSIDIARIES COST OF SALES AND SELLING AND ADMINISTRATIVE EXPENSES YEAR ENDED DECEMBER 31, 2001 Schedule #1 - Cost of Sales Cost of sales Inventory - beginning Purchases Freight Labor Settlement charges Supplies Inventory - ending Total cost of sales R. F. Fager Company $ 2,965,057 16,832,415 38,512 2,72B,881 22,564,865 (2,998,653) $19,566,212 Schedule #2 - Selling and Administrative Expenses Selling and administrative expenses Accounting and legal Administrative salaries Auto and truck expense Advertising Bank service charges Building rental Contract labor Contributions Data processing Depreciation and amortization Dues and subscriptions Equipment rental Insurance utilities Officers' salaries Office supplies and expense payroll taxes Pension and profit sharing Pension administration expense Postage Repairs Shop supplies and expense Taxes Telephone Travel and entertainment Miscellaneous Total selling and administrative expenses R. F. Fager Company $ 68,793 105,886 18,228 77,423 74,623 1,235 2,537 172,094 4,623 49,413 315,302 40,979 1,409,410 64,853 273,611 110,000 2,585 15,004 29,167 4,568 95,290 33,899 19,830 25,407 $ 3,014,760 See accountant's report. 18 Colt Plumbing Company $ 816,684 2,022,708 90,740 947,185 13,251 3,890,568 (735,284) $ 3,155,284 Colt Plumbing Company $ 20,549 50,336 37,007 20,817 8,250 45,942 4,280 1,915 73,512 7,224 71,500 15,468 92,584 11,991 9,675 8,748 26,622 79,153 5,892 $ 591,465 Fager Development Corporation $ 87,793 1,545 1,060 90,398 $ 90,398 Fager Development Corporation $ $ 975 225 (92) 299 1,407 R. F. FAGER COMPANY AND SUBSIDIARIES OTHER INCOME (EXPENSE) YEAR ENDED DECEMBER 31, 20001 Schedule #3 - Other income (Expense) R. F. Fager Plumbing Development Company Company Corporation Other income (expense) Administrative fees $ 1,125 $ $ Dividend income 9,551 Interest income 202,488 5,026 Equity in subsidiaries (6,358) Gain (loss) on sale of fixed assets 10,600 (671) Gain on sales of investments (2,486) Bad debt expense (68,035) (2,240) Impairment of Goodwill (18,194) Miscellaneous income 7,795 Interest expense (2,400) (85,202) Total other income (expense) $ 152,280 $ (106,307) $ 5,026 See accountant's report. 19 28-Mar-95 LOAN AMORTIZATION SCHEDULE DELROY BROSIUS .-------------------------------------------------------------------------------------------.--.------------.-----.---- PRINCIPAL: $55,000.00 RATE: 6.000% YEARS: 13 MON PAYMENT: $508.60 -----------------------------------------------------------------------------------------------.----------------------- PMT DATE BEG BALANCE PAYMENT INTEREST CUM. INT. PRIN RED CUM PRIN RED END BALANCE -------------------------------------------------------------------.-----.--.-------------------------------.---------- 93 Jun-2002 27,796.29 508.60 138.98 861.28 369.62 2,190.32 27,426.67 94 Jul-2002 27,426.67 508.60 137.13 998.41 371.47 2,561.79 27,055.20 95 Aug-2002 27,055.20 508.60 135.27 1,133.68 373.33 2,935.12 26,681.87 96 Sep-2002 26,681.87 508.60 133.40 1,267.08 375 . 20 3,310.32 26,306.67 97 Oet-2002 26,306.67 508.60 131.53 1,398.61 3n.07 3,687.39 25,929.60 98 Nov-2002 25,929.60 508.60 129.64 1,528.25 378.96 4,066.35 25,550.64 99 Dee-2002 25,550.64 508.60 127.75 1,656.00 6 380.85 4,447.20 --15,169.79 100 Jan-2UU.s 25, 169.79 508.60 125.84 125.84 382.76 382.76 24,787.03 101 Feb-2003 24,787.03 508.60 123.93 249.n 384.67 767.43 24,402.36 102 Mar-2003 24,402.36 508.60 122.01 371 .78 386.59 1,154.02 24,015.n 103 Apr-2003 24,015.n 508.60 120.07 491.85 388.53 1,542.55 23,627.24 104 May-2003 23,627.24 508.60 118.13 609.98 390.47 1,933.02 23,236.n 105 Jun-2003 23,236.n 508.60 116.18 726.16 392.42 2,325.44 22,844.35 106 Jul-2003 22,844.35 508.60 114.22 840.38 394.38 2,719.82 22,449.97 107 Aug-2003 22,449.97 508;60 112.24 952.62 396.36 3,116.18 22,053.61 108 Sep-2003 22,053.61 508.60 110.26 1,062.88 398.34 3,514.52 21,655.27 109 Oet-2003 21,655.27 508.60 108.27 1,171.15 400.33 3,914.85 21,254.94 110 Nov-2003 21,254.94 508.60 106.27 1,2n.42 402.33 4,317.18 20,852.61 111 Dee-2003 20,852.61 5Q8,60 194_ '_?~. _ __J ,~8J!.~!! _~_Q4.3L.___.4_'!..?l,.5J__ _ _ ..2Q.~4~,..?!~L 112 Jan-2004 20,448.27 508.60 102.24 102.24 406.36 406.36 20,041. 91 113 Feb-2004 20,041.91 508.60 100.20 202.44 408.40 814.76 19,633.51 114 Mar-2004 19,633.51 508.60 98.16 300.60 410.44 1,225.20 19,223.07 115 Apr-2004 19,223.07 508.60 96.11 396.71 412.49 1,637.69 18,810.58 116 May-2004 18,810.58 508.60 94.05 490.76 414.55 2,052.24 18,396.03 117 Jun-2004 18,396.03 508.60 91.98 582.74 416.62 2,468.86 17,979.41 118 Jul-2004 17,979.41 508.60 89.89 672.63 418.71 2,887.57 17,560.70 119 Aug-2004 17,560.70 508.60 87.80 760.43 420.80 3,308.37 17,139.90 120 Sep-2004 17,139.90 508.60 85.69 846.12 422.91 3,731.28 16,716.99 121 Oet-2004 16,716.99 508.60 83.58 929.70 425.02 4,156.30 16,291.97 122 Nov-2004 16,291. 97 508.60 81.45 1,011.15 427.15 4,583.45 15,864.82 123 Dee-2004 15,864.82 508.60 79.32 (-1.~~2.= 4 7 -~. _ __ __429-'-?L___.._ _?,J~_12. IL__ J~A:35_.~4 124 Jan-2005 15,435;54 508-:-60.... - 77 :'1Y- n.17 431.43 431. 43 15,004.11 125 Feb-2005 15,004.11 508.60 75.02 152.19 433.58 865.01 14,570.53 126 Mar-2005 14,570.53 508.60 72.85 225.04 435 .75 1,300.76 14,134.78 127 Apr-2005 14,134.78 508.60 70.67 295.71 437.93 1,738.69 13,696.85 128 May-2005 13,696.85 508.60 68.48 364.19 440.12 2,178.81 13,256.73 129 Jun-2005 13,256.73 508.60 66.28 430.47 442.32 2,621.13 12,814.41 130 Jul-2005 12,814.41 508.60 64.07 494.54 444.53 3,065.66 12,369.88 131 Aug-2005 12,369.88 508.60 61.84 556.38 446.76 3,512.42 11,923.12 132 Sep-2005 11,923.12 508.60 59.61 615.99 448.99 3,961.41 11,474.13 133 Oet-2005 11,474.13 508.60 57.37 673.36 451. 23 4,412.64 11,022.90 134 Nov-2005 11,022.90 508.60 55.11 728.47 453.49 4,866.13 10,569.41 135 Dee-2005 10,569.41 508.60 52.84 781.31 455.76 5,321.89 10,113.65 136 Jan-2006 10,113.65 508.60 50.56 50.56 458.04 458.04 9,655.61 137 Feb-2006 9,655.61 508.60 48.27 98.83 460.33 918.37 9,195.28 138 Mar-2006 9,195.28 508.60 45.97 144.80 462.63 1,381.00 8,732.65 Page 3 . {/,' -~/j~:)(:",~. / 1,.(5-' . (;;rd~7~"r:~y_"._._,__ .---.--- --.. -',...-------'1. -...~----~. ......~--- , - I cJ 1 (i)' JS ,S-.v-M I I! ,I II '1 II I' I AlDIS, GUIDO, SHUFF & MASLAND 2109 Market Street Camp Hill, PA ,.~"..;-. _!:....., - -----.---....--------..., i I \ \ ! I I INSTALLMENT AGREEMENT OF SALE THIS AGREEMENT made as of the / 4:3'- . , day of ~k~~ ! I CAROL A. BROSIUS, his I ~ I 1994 by and between DELROY D. BROSIUS and wife, hereinafter referred to as "seller" and CHRISTINE MARQUART ..5J+ /~~.... 4~'" ~~7 and RALPH E. MARQUART II, her husband, hereinafter referred to as ~6~ ,cU- ~2-- ~!.{)O "buyer," WITNESSETH: I I j, " " II ii THAT, in consideration of the mutual covenants and agree- I, II ments hereinafter contained, seller agrees to sell and convey, 1\ and buyer agrees to purchase, I, " 111 !, 'I i' ALL that certain tract or parcel of land, together with the i! improvements erected thereon, if any, as more particularly j! II described and set forth in Exhibit "A" attached hereto and II 'I Ii incorporated herein by reference, upon the following terms and II \1 conditions: !I Ii 1. CONSIDERATION - The purchase price to be paid by 'I buyer shall be the sum of $55,500, to be paid as follows: Ii " ii A. $500.00 in cash at the signing and delivery of Ii this agreement, the receipt whereof is hereby acknowledged; II II B. The balance of $55,000, together with interest I at the rate of 6% per annum shall be due and payable within 13 Ii years from the date hereof. Commencing on the 1st day of Octo- 11 ber, 1994, and thereafter on the 1st day of each month, buyer 1 shall m~ke payments of $508.60 to be applied first to interest as I aforesaid and the balance to principal until both principal and I interest have been fully paid. Nothing herein contained shall I alter or affect the maturity date of this agreement. I 1 1/ !I \1 ii BOOK 481. PM;E ~J .~4 t~ " : , .', '.' ~i',,~' :, ,?~~F .;... '.' :~ . I~~;', ....; '.:' :.~ ,-:H~~':"?"'"' '. . .\ I "1\<- I [~ ,<5. ~ \" z1 ,. ;1:; ,. I, ..,"'....., . . f, '. . ."~. '.:' , "':;\;::;;'::~, . . '.:':;.,::.: ~~. ~. :'f;'.'.,'" . ;~G;it;\'~t :::.;;:;:~.",i.~.:,~,'::.;:~..::r":,~,;,;,~,',:,!",:.: .. . .' ':\J~\~l:.:;;t '.... . .:~~s.:"'~U~~l"', .. . . 'Il: ':\ " ", . Ut I ~.. . . .~:..' ~'I'~~,' . I. '(..... ." '. '. . . ..... .' __::/.:' ." ;'" ." ~ .>.~i~i<';r~'~ "\'f:;;i f','-_, _':1, .',~' ,::,,: ~.l:;'~~'1~~~~f~,'r~;.~~:'~~- _:: .:j')~'}~:"Y:'~",~!&~/:"i; ALL those two 'certaiIl.,tl!'a.~~~.l9~~:~a1').~~~~,it~Il,:t(,.". nj~Lower'i"Alleri?Township~' Cumberland county ,.~ennsylvania';' more"particularly bounded and described as follows, to wit: ...... . :;:W)/::: . \ .. .... ~.' . I.' " . ,:1~,~~;~":>.-,;"':, ::".' TRACT NO.1: BE~INNING at a point on the northern side of Orchard Road, as shown on the hereinafter mentioned plan of lots, at the southeast corner of Lot No. 14; thence northeastwardly along Orchard Road, 75 feet to a point at the western line of Lot No. 12; thence at right angles to said Orchard Road and in a northwestwardly direction along the western line of Lot No. 12, 145.7 feet to a point at the right-of-way of the Philadelphia & Reading Railway; thence south- westwardly along said right-of-way, 75 feet to a point at the north- eastern corner of Lot No. 14, aforementioned, and thence along the eastern line of Lot No. 14 and at right angles to said Orchard Road, 147.8 feet to a point, the Place of BEGINNING. BEING Lot No. 13 on the Spring Lake Colony Plan of Lots, which plan is recorded in Plan Book 2, Page ___, Cumberland County records. "''-~''4 ... u . HAVING thereon erected a dwelling house known and numbered as Orchard Road, Camp Hill, Pennsylvania ....E:;.?d.. . . .....I<~,..,p...-. ,....'.....M.....M....UW..,..............:;~~~~r . ............_...~,._.'.~'...r..~...',.'..... ". .... . . ".... '..:::: :;::,<". :~',;!~..l/i.:\\:.'~\t:~..: ...~.:;....\.~.~~~..~::.~;.....:..~.~. ..... ',' '.V ,l'(l~' ...... . . . .'~;:~~;l:~':..~.r ,:~<. <: :'. . ....., ..; . .,.,::;~}%~>. .:::~:;../.~',.\.i: d H f:lh- ,) . .,... q.~ ,",i,;',':;' ti. ? ~ '.. I. :~:.::~::':~ WJ.~~.':,~lf..i.~fl.: ?.\ .. ... "~~"""."I . C .. ..... . . wi J'/ .. \..' ' '" \ ",".' ...... ...." ~ I '_',' '~ .,t\~.. .. .~.I 'f~~~~~:(:'::r'~' .-' '. I C;..:...... L\\ 2252 ",",".-:' "p .' ~ .' >,: ,':rnn:-;vlvania 1 55 . ,( Cl.;."llerland . f 0 cls , . ""., l.r'I!I'e tor the recordmg 0 eo ,1 n, ,th. " '.' ... 'I,d t,lr I :lIll1\;N\~d countyia'j ~;J,150i)\!' 'tlLL Vol. _ Page . .:.., ....,.'; n1Y hand and, seal of OffiC~ qv.. .J,. . tJ of' "'19~ :..,!i;t.:;Pt~~l'I~4'.1,.~.. 't~;~ ,f':? -,7 ......;.. SUMMARY OF SALIENT FEATURES Subject Address 2137 ORCHARD ROAD Legal Description DEED BOOK 0035P PAGE 00613 City CAMP HILL County CUMBERLAND State PA Zip Code 17011 Census Tract 0110.00 Map Reference HBG ADC MAP 20/C-4 Sale Price $ N/A Date of Sale N/A Borrower I Client N/A Lender PRIVATE Size (Square Feet) 3.516 Price per Square Foot Location AVERAGE Age 65 YEARS Condition AVERAGE T olal Rooms 6 Bedrooms 3 Baths 3.5 Appraiser Date oj Appraised Value ROBERT K. BANZHOFF 06-16-05 Final Estimate 01 Value ~ Form SSD - "TOTAL tor Windows' appraisal software by a la mode. inc. -1-800-ALAMOOE r~~ J:i anmelV.lae ~entral Penn AppraisalS, Inc. lilt) f3{-4tiUU Desktop Underwriter Quantitative Analysis Appraisal Report File No" ORCHARD2137 THIS SUMMARY APPRAISAL REPORT IS INTENDED FOR USE BY THE LENDER/CLIENT FOR A MORTGAGE FINANCE TRANSACTION ONLY. Prooertv Address 2137 ORCHARD ROAD CiIv CAMP HILL State PA Zln Code 17011 leoalOescriotion DEED BOOK 0035P PAGE 00613 CounlY CUMBERLAND Assessor's Parcel No. 13-23-0549-135A Tax Vear 04/05 R.E. Taxes S 4 725.61 ts t NONE Borrower N/A Current Owner BROSIUS CAROL Occunant 5?1 Owner rl Tenant rl Vacant - Nelllhborhood or Proiect Name LOWER ALLEN TOWNSHIP ProleclTvne rl PUD rl Condominium HOA t N/A IMo. Sales Price $ N/A Date of Sale N/A Oescriotion / S amount of loan charne~concesslons to be oald bv seiler N/A ProDertv rinhts annralsed !Xl Fee Simnle 11 Leasehold I Man Reference HBG ADC MAP 20/C-4 Census Tract 0110.00 I Note: 0 i Location 0 Urban -~ Suburban 0 Rural Property values 0 Increasing 0 Stable 0 Declining ;r Buinup ~Over75% g25.75% gUnder25% Demand/supply gShortage ~Inbalanceg Oversupply Grow1h rate I I Raold IXI Stable I I Slow Mart<.etino time IXI Under 3 mos. I I 3-6 mos. I lOver 6 mos. Neighborhood boundaries This suburban neiahborhood has averaae characteristics and is bounded on the north bv Geltvsbum 8. Carlisle Roads on the east bv Interstate 63 on the south bv Yorl< Counlv line and on the west bv St Johns and Slate Hill Roads located In Lower Allen Townshin. Dimensions SEE LEGAL DESCRIPTION S~e area 1.62 ACRES Specific zoning classliication and description R 4 MULTI FAMILY RESIDENTIAL Zoning compliance 0 Legal 0 Legal nonconforming (Grandfathered use) 0 Illegal, attach description 0 No zoning Highest and besl use of subject property as Improved (or as proposed per plans and specifications): 0 Present use 0 Other use, attach description. Ulllttlea Public Other Public Other I Oft-lile Improvementl Type Public Private Electricity 0 Waler 0 Street ASPHALT ~ g Gas Fi NONE San~arv sewer 5a I Allev NONE I I I I Are there anv aDDarent adverse s~e condillons (easements encroachments s""clal assessments slide areas etc.\? r 1 Ves i:X No Ii Ves atlach descriotion. So nurce(s) use~r physical characteristics of prop~:_ IXIlnlerior andnelderiOr inspection 0 Exterior inspection from street U Previous appraisal files MLS IXI Assessment and tax records I Il'riDr insnection pronertv owner 11 Other m'scnb,I' No. of Stories 1 Tvne (Det/Alt.\ DET. Elderior Walls STONElSTUCC Roof Surface SHINGLES MallUlaclured Houslnn r 1 Ves I'XI No Does the nronertv nenerallv conform 10 the neinhborhond In terms of s\VIe condltiDn and constOlr.fion materials? 5?1 Ves r1 No "No atlach desr.rintion. Are tllere any apparent physical deliciencies or conditions that would allect the soundness or structural integrity ollhe improvements or the livability of the property? n Ves rX1 No ff Ves atlach descrintion. Are there any apparent adverse environmental conditions (hazardous wastes, toxic substances, etc.) present In the Improvements, on the s~e, or in the immediate vlcin~ of the subject property? 0 Ves 0 No "Ves, atlach description. I researched the subjecl mart<.el area for comparable listings and sales that are the most similar and proximate tD the subject property. My research revealed a fotal of 4 sales ranging in sales price from $ 276,000 to $ 415,000 My research revealed a total of 1 listings ranging In list price Irom $ 319,900 to $ 319,900 The anatysls of the comnarable sales below ref/ecls market reaction to signnicant variations between the sales and tlle subiect Dronertv. FEATURE I SUBJECT SALE 1 SALE 2 SALE 3 2137 ORCHARD ROAD 1500 FOX HOLLOW ROAD 15 WHITE BIRCH lANE 616 SYAMORE CIRCLE Address CAMP HILL MECHANICSBURG MECHANICS BURG CAMP HILL Proximilv to Subiecli\I~\;~~;,iii!:i)(2;lri,';t;,f!!f;.;jiI" 2.91 miles 6.97 miles 2.24 miles Sales Price ~JI!1illlf{~~,,!;#W.~1 $ 299 100 lmt'lWi\:lit~~i\1 ~ 261 500 <<tii'i;;~;1I!a~,r,;;f\1 276000 Price/Gross livino Area ctJl$ 121.66ctJ 1f;l1!.~A%,~);:;Jr ~ 106.07 ctJ~~;!t!!1l,1.~~f,i!S 105.34 ctJ [\l.WW~,;I!;~~~, Dlla & Veri1icallon Sources ~~~~1i;l!!0Jmf'i<,t.iijQ~!; ASMT RECORDS/MLS/AGENT ASMT RECORDS/MLS/AGENT ASMT RECORDSIMLS/AGENT VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION I +1-1$ Adiust. DESCRIPTION I +1-1$ Adlus\. DESCRIPTION T +1=\$ Miusl. Sales or Rnancing CONVENTIONAL CASH CASH Concessions NONE KNOWN NONE KNOWN NONE KNOWN Date 01 SalerTime 6-1-05110: 7-27-04/29: 7-29-04/55 Location AVERAGE BTR AVERAGE: -10000 AVERAGE: BTR AVERAGE : S~e 1.62 ACRES 0.96 ACRES : +3 300 3 ACRES : -6900 0,60 ACRES View AVERAGE AVERAGE: AVERAGE: AVERAGE Desinn ISlvle1 RANCH/AVG RANCH/AVG: RANCH/AVG: RANCH/AVG Actual Ane Nrs.\ 65 YEARS 35 YEARS: 15 YEARS : -15000 45 YEARS _ Condition AVERAGE AVERAGE AVERAGE: AVERAGE: r Above Grade Total : Bdrms: Baths T olal : Bdrms: Baths 1~~~"t}j1;f':~1.'~/ljl't Total: Bdrms: Baths Im~~~\'0 T oIal : Rdrms: Baths f~~~~jj!f;:J[i; Room Counl B 3 3.5 B 4: 2.5: +3,000 7 3 3.5 : 7 : 3 : 2: +4,000 . Grossi Ivlnn Area 3516 Sn, Fl. 2456 Sn. Fl.: +15900 2654 Sn. Fl.: +13000 2620 So. Fl. : +13500 Basement & Finished FULL BSMT EX FULL BSMT : +6,000 FULL BSMT EX FULL BSMT : +6,000 Rooms Below Grade REC/DEN/KIT/B REC ROOM +6000 UNFINISHED +15000 UNFINISHED +15000 Garane/Camort 5 GAR/2 CPORT 2 CAR GARAGE: +13000 2 CAR GARAGE: +13000 2 CAR GARAGE: +13000 HEATING & COOLING FHNCA FHAlCA : HP/CA : HW/CA : _ INLAW APT POOL : NONE : +4 000 NONE : +4 000 : NelAdj,ltotall _-,S 37200M-:T 24600M-:S 52300 Adjusfed Sales Price of Comparables is 336 300 l $ 306 300 1 S 326 300 Date 01 Prior Sale NO PRIOR SALE NONE KNOWN TO EXIST NONE KNOWN TO EXIST NONE KNOWN TO EXIST Price of Prior Sale 11 I~ Is 1$ Analysis of any current agreement of sale, option, or listing of the subjecl property and analysis of the prior sales of subject and comparables: Accordina to information erovided bv the multi.list services in this renion the subiect eroeertv has not been listed for sale within the east 12 menths. v 0 Summary of sales comparison and value conclusion: See attached addenda. Single family hou11"t Condominium hoUllng PRICE AGE PRiCE PI appnc.) AGE S(OOD} (yrs) $(000) (yrs) 80 Low NEW N/A Low ~ 250 Hlah 100+ N/A Hinh N/A ;~ml Predominant r~lpredominantl?'I~ 150 50 N/A N/A Shape IRREGULAR -10000 +5 000 This appraisal is made I:8J "as-is', 0 subject to completion per plans and specifications on the basis of a hypothetical condition that the improvements have been completed, or o subject to the following repairs, anerations Dr cond~lons BASED ON AN 0 EXTERIOR INSPECTION FROII THE STREET OR AN PROPERTY THAT IS THE SUBJECT OF THIS REPORTTO BE S 335.000 I:8J INTERIOR AND EXTERIOR IISPECTIOH ,\ ESTlMA TE THE IlARKET VALUE, AS DEFINED, OF THE REAL ,ASDF 06-16-05 PAGE 1 OF 3 Form 205 - "TOTAL lor Windows' appraisalsoltware by a la mode, Inc. - 1-800-ALAMODE Fannie Mae Form 2055 9.96 Desktop Underwriter Quantitative Analysis Appraisal Report File No. ORCHARD2137 Pro}ecllnlormallon lor PUO. Iii applicable) - -Is the developerlbuilder in control of the Home Owners' Association (HOA)? 0 Yes 0 No Provide the following information lor PUDs only iI the developerlbuilder is in control of the HOA and the subject property is an attached dwelling unil: Total number of phases N/A Tolal number of unils N/A Tolal number of unils sold N/A Total number of units rented N/A Tolal number of unils lor sale N1A Data Source(s) N/A Was the project created by the conversion of existing buildings into a PUD? 0 Yes D No iI yes, date of conversion: N/A . Does the project contain any multi-dwelling units? DYes D No Data Source: N/A Are the common elements completed? DYes D No iI No, describe status 01 completion: N/A Are any common elements leased to or by the Home Owners' Association? Describe common elements and recreational facilities: N/A DYes DNo iI yes, attach addendum describing rental terms and options. Projecllnlormallon lor Condominium. Iii applicable) - - Is the developerlbuilder in control of the Home Owners' Association (HOA)? Provide the following information for all Condominium Projects: Total number of phases N/A Total number of unils N/A Total number of unils sold Total number of unils rented NfA Total number 01 unils for sale N/A Data Source(s) N/A Was the project created by the conversion of existing buildings into a condominium? 0 Yes D No iI yes, date of conversion: Project Typa: D Primary Residence D Second Home or Recreational 0 Row or Townhouse D Garden D Midrise Condition of the project, quality 01 COllStruction, unil mix. etc.: NfA DYes DNo N/A N/A D Highrise D Are the common elements completed? DYes 0 No iI No, describe status of completion: N/A Are any common elements leased to or by the Home Owners' Association? Describe common elements and recreationallacilities: N/A DYes D No iI yes, attach addendum describing rental terms and options. PURPOSE OF APPRAISAL: The purpose of this appraisal is to estimate the market value of the real property that Is the SUbject of this report based on a quantilative sales comparison analysis for use In a mortgage finance transaction. DEFINmON OF MARKET VALUE: The most probable price which a property should bring in a competillve and open market under all condilions requisile to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming tile price is not affected by undue stimulus. Implicil In this definilion is the consummation of a sale as of a specilied date and the passing of tille from seller to buyer under conditions wllereby: (1) buyer and seller are typlcaHy motivated;. (2) both parties are well infonned or well advised, and each acUng in wllat he considers lIis own best interest; (3) a reasonable time is allowed for exposure in tile open market; (4) payment is made in terms of cash in U.S. dollars or in tenns 01 financial arrangements comparable thereto; and (5) the price represents the nonnalconsideratlon for the property sold unaffected by special or creative financing or sales concessions. granted by anyone associated with the sale. . Adjustments to the comparables must be made for special or creative financing or sales concessions. No adjustments are necessary for those costs which are nonnally paid by sellers as a result of tradition or law in a market area; these costs are readily Identiliable since the seller pays these costs in virtually all sales transactions. Special or creative financing adjustments can be made to the comparable property by comparisons to financing tenns offered by a third party instilutional lender that is not already involved in the property or transaction. Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market's reaclion to the financing or concessions based on the appraiser's judgment. STATEMENT OF LIMITING CONDITIONS AND APPRAISER'S CERTIFICATION CONTINGENT AND LIMITING CONDITIONS: The appraiser's certilication that appears in the appraisal report is subject to the following conditions: 1. The appraiser will not be responsible for matters of a legal nature that affect eilher the property being appraised or the title to it. The appraiser assumes that the title is good and marketable and, therefore, will not render any opinions about the mle. The property is appraised on the basis of iI being under responsible ownership. 2. The appraiser has provided any required sketch in the appraisal report to show approximate dimensions of the improvements and the sketch is included only to assist the reader of the report in visualizing the property and understanding the appraiser's determination of ils size. 3. The appraiser will not give testimony or appear in court because he or she made an appraisal of the property in question, unless specilic arrangements to do so have been made beforehand. 4. The appraiser has noted in the appraisal report any adverse condillons (such as, but not limited to, needed repairs, the presence of hazardous wastes, toxic substances, etc.) observed during the inspection of the subject property or that he or she became aware of during the nonnal research involved in perfonning the appraisal. Unless otherwise stated in the appraisal report, the appraiser has no knowledge of any hidden or unapparent conditions of the property or adverse environmental condilions (including the presence of lIazardous wastes, toxic substances, etc.) that would make the property more or less valuable, and has assumed that there are no such condilions and makes no guarantees or warranties, expressed or Implied, regarding Ihe condition of the property. The appraiser will not be responsible for any such condilions that do exist or for any engineering or testing that might be required to discover whether such conditions exist. Because the appraiser is not an expert In the field of environmental hazards, the appraisal report must not be considered as an environmental assessment of the property. 5. The appraiser obtained the Information, estimates, and opinions that were expressed in the appraisal report from sources that he or she considers to be reliable and believes them to be true and correct. The appraiser does not assume responslbilily for the accuracy of such Items that were furnished by other parties. 6. The appraiser will not disclose the contents of the appraisal report except as provided for in the Unilonn Standards of Professional Appraisal Practice. 7. The appraiser must provide his Of her prior written consent before the lender/client specilled in the appraisal report can distribute the appraisal report (including conclusions about the property value, the appraiser's identily and professional designations, and references to any professional appraisal organizations or the firm with which the appraiser is associated) to anyone other than the borrower; the mortgagee or its successors and assigns: the mortgage Insurer; consultants; professional appraisal organizations; any state or federally approved financial institution; or any department, agency, or Instrumentalily of the United States or any state or the District of Columbia; except that the lender/client may distribute the report to data collection or reporting service(s) wilhout having to obtain the appraiser's prior written consent. The appraiser's wrillen consent and approval must also be obtained before the appraisal can be conveyed by anyone to the public through advertising, public relations, news, sales, or other media. 8. The appraiser has based his or her appraisal report and valuation conclusion for an appraisal that is subject to completion per plans and specifications on on the basis ot a hypothetical condilion that the improvements have been completed. 9. The appraiser has based his or her appraisal report and valuation conclusion for an appraisal that Is subject 10 completion, repairs, or alterations on the assumption that completion of the improvements will be perfonned in a workmanlike manner. PAGE 2 OF 3 Form 205 - .101AL tor Windows. appraisal software by a la mode, inc. -1-800-ALAMODE Fannie Mae Form 2055 9-96 Deskto Underwriter Quantitative Anal sis A raisal Report File No. ORCHARD2137 APPRAISER'S CERTIFICATION: The Appraiser certaies and agrees that: 1. I pertormed this appraisal by (1) personally inspecting from the street the subject property and neighborhood and each of the comparable sales (unless I have otherwise indicated in this report that I also inspected the interior of the subject property); (2) collecting, confirming, and analyzing data from reliable public and/or private sources; and (3) reporting the results of my inspection and analysis in this summary appraisal report. I further certify that I have adequate information about the physical characteristics of the subject property and the comparable sales to develop this appraisal. 2. I have researched and analyzed the comparable sales and offeringslllstings in the subject market area and have reported the comparable sales in this report that are the best ava~able for the subject property. I further certify that adequate comparable market data exists in the general market area to develop a reliable sales comparison analysis for the subject property. 3. I have taken into consideration the factors that have an impact on value in my development of the estimate of market value in the appraisal report. I lurther certay that I have noted any apparent or known adverse conditions in the subject Improvements, on the subject site, or on any site within the immediate vicinity of the subject property of which 1 am aware, have considered these adverse conditions in my analysis 01 the property value to the extent that I had market evidence to support them, and have commented about the effect of the adverse conditions on the marketability of the subject property. I have not knowingly withheld any signa/cant information from the appraisal report and I believe, to the best of my knowledge, that all statements and information in the appraisal report are true and correct. 4. I stated In the appraisal report only my own personal, unbiased, and professional analysis, opinions, and conclusions; which are subject only to the contingent and limiting conditions specified in this form. 5. I have no present or prospective interest in the property that is the subject of this report, and I have no present or prospective personal interest or bias with respect to the participants in the transaction. I did not base, either partially or completely, my analysis and/or the estimate of market value In the appraisal report on the race, color, religion, sex, age, marital status, handicap, familial status, or national origin 01 either the prospective owners or occupants of the SUbject property or of the present owners or occupants of the properties in the vicinity of the subject property or on any other basis prohiblled by law. 6. I have no present or contemplated future interest in the subject property, and neither my current or future employment nor my compensation for pertorming this appraisal is contingent on the appraised value of the property. 7. I was not required to report a predetermined value or direction in value that favors the cause of the client or any related party, the amount of the value estimate, the attainment of a specaic resull, or the occurrence of a subsequent event in order to receive my compensation ancVor employment for pertorming the appraisal. I did not base the appraisal report on a requested minimum valuation, a specalc valuation, or the need to approve a specific mortgage loan. 8. I estimated the market value of the real property that is the subject of this report based on the sales comparison approach to value. I further certify that I considered the cost and income approaches to value, but, through mutual agreement with the client, did not develop them, unless I have noted otherwise in this report. 9. I pertormed this appraisal as a limited appraisal, subject to the Departure Provision of the Uniform Standards of Professional Appraisal Practice that were adopted and promulgated by the Appraisal Standards Board 01 The Appraisal Foundation and that were in place as of the effective date of the appraisal (unless I have otherwise indicated in this report that the appraisal Is a complete appraisal, in which case, the Departure Provision does not apply). 10. I aCknowledge that an estimate of a reasonable time for exposure in the open market is a condition in the definition of market value. The exposure time associated wllh the estimate of market value for the subject property is consistent with the marketing time noted In the Neighborhood section of this report. The marketing period concluded for the subject property at the estimated market value is also consistent with the marketing time noted in the Neighborhood section. 11. I personally prepared all conclusions and opinions about the real estate that were set forth in the appraisal report. further certify that no one provided significant professional assistance to me in the development of this appraisal. SUPERVISORY APPRAISER'S CERTIFICATION: If a supervisory appraiser signed the appraisal report, he or she certifieS and agrees that: I directly supervise the appraiser who prepared the appraisal report, have examined the appraisal report for compliance with the Uniform Standards of Professional Appraisal Practice, agree with the statements and conclusions of the appraiser, agree to be bound by the appraiser's certifications number d 5 through 7 above, and am taking full responsibility for the appraisal and the appraisal report. APPRAISER: SUPERVISORY APPRAISER (ONLY IF REQUIRED): Signature: Name: Company Name: Company Address: APPRAISALS I '. 24 WES IN STREET SHIREMANSTOWN, PA 17011 Date of Report/Signature: 6-27-05 State Certification #: PACERT RL-001231-L or State license #: RM-049277-A State: PA Expiration Date of Certlficatlon or license: 613012005 Date of Report/Signature: State Certification #: or State license #: State: Expiration Date of Certification or License: ADDRESS OF PROPERTY APPRAISED: 2137 ORCHARD ROAD CAMP HILL, PA 17011 APPRAISED VALUE OF SUBJECT PROPERTY $ EFFECTIVE DATE OF APPRAISAl/INSPECTlON LENDER/CLIENT: Name: Company Name: PRIVATE Company Address: 335,000 06-16-05 SUPERVISORY APPRAISER: SUBJECT PROPER1Y o Did not inspect subject property o Did inspect exterior of subject property from street o Did inspect interior and exterior of subject property COMPARABLE SALES o Did not inspect exterior of comparable sales from street o Did inspect exterior of comparable sales from street PAGE 3 OF 3 Form 205 - 'TOTAL lor Windows' appraisal software by a la mode, inc. -1-800-ALAMOOE Fannie Mae Form 2055 9-96 Desktop Underwriter Quantitative Ana ySis Appraisal Report FEATURE SUBJECT SALE 4 2137 ORCHARD ROAD 801 INDIANA AVE Address CAMP HILL LEMOYNE Proximilv to Sub'ect Imi't~];1jR.t~I\~~iR1~1i11i' 1.50 miles Sales Price Is ~~~~11,i,~1~lt~~ S 415 000 ,~~~{:?,j~~~1 t ~~~\~~.m,~~~i\ls Price/Gross Livino Area Is ltJls 13B.3BltJ 1~~~~i~li1.IS ltJ r~~!liWWf#.i":;j.-'~'f)l s ltJ I~W$:!!t!tr'M~{il~lff Data & Verification Sources :H@~!i"'!i~;~!Wiii~",l,~\f,:l ASMT RECORDS/MLS/AGENT VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION I +(-)S Adiust. Sales or Financing CONVENTIONAL Concessions NONE KNOWN Date of SalelTime 10-29-04/6B Location AVERAGE GOOD Site 1.62 ACRES .76 ACRES View AVERAGE BTR AVERAGE : Desion (Stvlel RANCH/AVG RANCH/AVG Actual Aoe IVrs.l 85 YEARS 46 YEARS Condition AVERAGE AVERAGE Above Grade Total : Bdrms: Baths Total: Bdrms: Baths ~~if;>~l!fj~;,,~:l;g - Room Count 8 : 3 3.5 7 3: 3.5 : Gross Livina Area 3 518 So. Ft. 2 999 Sa. Ft. : - Basement & Finished FULL BSMT EX FULL BSMT EX Rooms Below Grade REC/DEN/KIT/B REC/DEN/BED/B Garaoe/Caroort 5 GAR/2 CPORT 2 CAR GARAGE : HEATING & CODLING FHAlCA FHAlCA : ~N WAPT NONE : +4000 NelAdi. Itotall + - : S 900~- : S Adjusted Sales Price of Comoarable 414 100 Date of Prior Sale NO PRIOR SALE NONE KNOWN TO EXIST Price of Prior Sale I S I S I S SALE 5 SALE 6 DESCRIPTIDN I +1 -IS Adjust. DESCRIPTION I + HS Adiust. -20 000 +4 300 -10000 Total : Bdrms: Baths ~itRr(~~'liliil!?;,;~ Total : Bdrms: Baths f:l;~~~~,,\1fJffi& +7 BOO Sn, Ft. : So. Ft : +13 000 ~: 1$ Comments: Central Penn Appralsals,lnc. (717) 737-4600 Form 205.(AC) - 'TOTAL for Windows" appraisal software by a la mode. inc. -1-800-ALAMODE Fanme Mae Form 2055 9-96 Borrower/Client N/A Proner1v Adrlress 2137 ORCHARD ROAD Citv CAMP HILL Countv CUMBERLAND State PA Zin Code 17011 Lender PRIVATE . supplemental Addendum File No ORCHARD2137 . Desktop Quantitative 2055: Sales Comoarison Comments These improvements are of average quality frame design and reflect average maintenance with no repairs needed. No unusual functional obsolescence or external inadequacies were observed. The subject property starded as a smaller ranch home and has had many additions over the years. The loft area could be used as a third bedroom. The cost approach was considered but deemed inappropriate because of the subjective adjustments warranted for physical depreciation due to the subject's actual age. The estimate remaining economic life for the subject improvements is 45 years. All four sales are considered to be reliable indicators of value, and are weighted similarly in the final reconciliation. Insufficient sales in close proximity to the subject property require the appraiser to extend search parameters. In this market area and price range it is not unusual to go a further distance for comparables. In order to find comparables sales it was necessary to use less recent sales. All four comparable sales are located in the same market area as the subject property and would be considered by the same perspective purchaser if all were on the market at the same time as the subject. Com parables sales used are all closed sales. This appraisal report has been prepared with the property in "as is" condition. No personal property has been included in this valuation. This appraisal assumes a reasonable marketing period for the subject property of three months. The Market Approach reflects recent activity in the market place. The Income Approach is inappropriate because few single family houses are rented in this market. In view of the age of these improvements, the Cost Approach cannot be considered an accurate indicator of value. THIS IS A SUMMARY REPORT OF A COMPLETE APPRAISAL. APPRAISER ACKNOWLEDGEMENT APPRAISERS ACKNOWLEDGES AND AGREES, IN CONNECTION WITH ELECTRONIC SUBMISSION OF APPRAISALS, AS FOLLOWS: THE SOFTWARE UTILIZED BY THE APPRAISER TO GENERATE THE APPRAISAL PROTECTS SIGNATURE SECURITY BY MEANS OF A DIGITAL SIGNATURE SECURITY FEATURE WHICH lOCKS THE REPORT WITHIN OUR OFFICE AND CAN NOT BE ALTERED BY ANYONE OTHER THAN OUR OFFICE. APPRAISER CERTIFICATION APPRAISER STANDARDS I acknowledge and certify that (I) my appraisal of the above referenced property may be used in a federally related financial transaction subject to requirements of Title XI of the Financial Institution Reform, Recovery and Enforcement Act of 1989 (FIRREA''}; (ii) the appraisal must comply with FIRREA and the applicable regulations implementing Title IX of Firrea; and (iii) the appraisal was completed in accordance with USPAP. APPRAISER COMPETENCY I certify that I am fully qualified and competent by training, knowledge, and experience to perform this appraisal. APPRAISER INDEPENDENCE I represent and certify that (I) the appraisal assignment was based not based on a requested minimum valuation, a specifiC valuation, or the approval of a loan; (ii) my employment was not conditioned upon the appraisal producing a speCific value or value within a given range; (iii) my future employment is not dependent upon an appraisal producing a specific value; (iv) my employment, compensation, and future employment are not based upon whether a loan application was approved; (v) neither me nor any person with an ownership interest in the company employing me, is related to or has any ownership or other financial interest in, either the builder/developer, seller, buyer, mortgage broker, or real estate broker/salesperson (or any person related to any of them) involved in the transaction for which this appraisal was requested, or with the most recent sale or refinancing of any property used as a comparable property in this appraisal, and (vi) I am not aware of any facts which would disqualify me from being considered an independent appraiser. Form TAOO - 'TOTAL for Windows' appraisal software by a la mode, inc. -1-800-AlAMOOE Subject Photo Page Cou CUMBERLAND State P A ZI Code 17011 Subject Front 2137 ORCHARD ROAD Sales prtce Gross Uvtng Area Total Rooms Total Bedrooms Total Bathrooms Location View Site Quality Age 3.518 8 3 3.5 AVERAGE AVERAGE 1.62 ACRES 85 YEARS Subject Rear Subject Street Form PICPIX.SR - 'TOTAL tor Windows' appraisal software by a Ia mode, Inc. - 1.80D-ALAMODE PHOTOGRAPH ADDENDUM NIA d ess 2137 ORCHARD ROAD CAMP HILL Coun CUMBERLAND PRIVATE PA Form GPICPIX - 'TOTAL for Windows' appraisal softl'lare by a la mode, inc. -1-800-AlAMOOE Code 17011 Comparable Photo Page Cou CUMBERLAND S t PA Zi Code 17011 Comparable 1 1500 FOX HOLLOW ROAD Prox. to Subject 2.91 miles Sale Price 299,100 Gross Uvi1g Area 2,458 Total Rooms 8 Total Bedrooms 4 Total 8aI1rooms 2.5 LocaIioa BTR AVERAGE ~ew AVERAGE Site 0.96 ACRES Quality Age 35 YEARS Comparable 2 15 WHITE BIRCH lANE Prox. to Subject 6.97 miles Sale Price 281,500 Gross Uvlng Area 2,654 Total Rooms 7 Total Bedrooms 3 Total Bathrooms 3.5 Locatian AVERAGE ~ew AVERAGE Site 3 ACRES Quality Age 15 YEARS Comparable 3 816 SYAMORE CIRCLE Prox. to Subject 2.24 miles Sale Price 276,000 Gross LIving Area 2,620 Total Rooms 7 Total Bedrooms 3 Total Bathrooms 2 Location BTR AVERAGE ~ew AVERAGE Site 0.60 ACRES Quality Age 45 YEARS Form PICPlllCR - 'TOTAL tor Windows' appraisal software by a la mode, inc. -1-800-ALAMODE Comparable Photo Page Coun CUMBERLAND Slate PA Code 17011 Comparable 4 801 INDIANA AVE Prox. to Subject 1.50 miles Sale Price 415,000 Gross living Area 2,999 Total Rooms 7 Total Bedrooms 3 Total Bathrooms 3.5 Location GOOD View BTR AVERAGE Sfte .76 ACRES Quality Age 46 YEARS Comparable 5 Prox. to Subject Sale Price Gross living Area Total Rooms Total Bedrooms Total Bathrooms Location View Sfte Quality Age Comparable 6 Prox. to Subject Sale Price Gross living Area Total Rooms Total Bedrooms Total Bathrooms Location View Sfte Quality Age Form PICPIX.CR - 'TOTAL tor Windows' appraisal software by a la mode, Inc. -1-BOO-ALAMODE Building Sketch (Page - 1) N/A Coun CUMBERLAND S Ie PA Zi C 17011 92.0' DECK DEN BEDROOM BEDROOM FAMILY ROOM 22.0' KITCHEN BAlM ClOSET BATH GARAGE LAUNDRY PR 14.0' FOYER 24.0' STUDY UVlNG ROOM CARPORT 22.0' 8.0' I 22.0' 26.0' 9.0' -=1 17.0' 24.0' BEDROOM I LOFT 26.0' Skft::h bv ADellC IV" Comments: AREA CALCULATIONS SUMMARY LIVING AREA BREAKDOWN Code O..crIpt1on SIze Net Totals Breakdown Subtotals OLU Firat rloor 21".00 21".00 Firat Floor OLU a.oODeS 1'100r 522.00 522 . 00 42.0 " 48.0 2016.00 OAR Garave 572.00 572.00 8.0 " 38.0 304.00 LO " 26.0 104.00 12.0 " 22.0 261.00 14.0 " 22.0 308.00 Second. 1'100r 18.0 " 2&.0 U8.00 & .0 " '.0 54.00 TOTAL LIVABLE (rounded) 3518 7 Calculations Total (rounded) 3518 Form SKT .BldSkI - 'TOTAL for Windows' appraisal software by a la mode, Inc. - 1-80D-AlAMODE Location Map II N/A r s 2137 ORCHARD ROAD C CAMP HILL lender PRIVATE Cou CUMBERLAND Slat P A ZI Code 17011 -~ /@' ,;-, ", ~. . ~--., o A U P. H f N ........MJcnMft. .~apPolnt ..r-fiP)..:/ -+- ~;r ~/' ./ , /_." I!" PERRY ,/ ---.._---'--_.--.._-~----_..._.. ........... ............... .......................... \~ r'lli1; \ 'l ~#t ~t=/~ ... i t.. , t 1- ..~.........~ Y 0 Ril K ........,....~... --l, ........ \ \\, , .., ./ / / / ,./ FOlID MAP.LOC - "TOTAL lor Windows' appraisal software by a Ia mode, inc. -1-800-ALAMODE Mark E. Hilbert & Associates 05-217M FIle No. 05-217M APPRAISAL OF p:' -- Summery Appraisal LOCATED AT: 2139 Orchard Road Camp Hill, PA 17011 FOR: Scott M. Dinner Esq. 3117 Chestnut Street Camp Hill, PA 17011 BORROWER: Delroy Brosius Estate AS OF: April 17, 2005 BY: Mark E. Hilbert MARK E. HILBERT & ASSOCIATES 3607 Rosemount Avenue, PA 17011, Phone 717-901-8224, Fax 717-901-4n9 05-217M Mark E. Hilbert & Associates LAND APPRAISAL REPORT File f'.b 05-217M Property Address 2139 Orchard Road Census Tract 109 lENDER DISCRETIONARY USE City Camo Hill County Cumberland State PA Zip Code 17011 Sale Price $ leoal Description Recorded Cumberland County Court House Book 0036S, PaaeOO548 Date Owler/Occupant Delroy Brosius Estste Ma Reference Mortgage Armunt $ .. Sale Price $ Estate Date of Sale N/ A Property Rights Appraised Mortgage Type Loan charoes/concessions to be paid bv seller $ N/ A lKJ Fee Sil1l>le DiscounfPoints and Other Concessions R.E. Taxes $ 2 035 TaxYear 04-05 HOA $1Mo. N/A 0 Leashold Paid by Seller $ Lender/Client Scott M. Dinner Eso. 0 Condominium (HUDlVA) 3117 Chestnut Street Camo Hill PA. 17011 l PUD Source LOCATION W lkban l2$J Suburban W Rural NEIGHBORHOOD ANALYSIS Good Avg. ,.. p~ BUILT UP lKJ Over 75% o 25-75% o Under 25% EfTllloyment Stability olKJoo GROWTH RATE o Rapid lKJ Stable o Slow Convenience to El1l>loyment olKJoo PROPERTY VALUES o Inaeasing lKJ Stable o Declining Convenience to Shopping olKJoo DEMAND/SUPPLY o Shortage lKJ In Balance R OverSupply Convenience to Schools olKJoo MARKETING TIME n Under 3 Mos. rx1 3-6 Mos. Over 6 Mos. Adequacy of Public Transportation olKJoo . PRESENT LAND USE % LAND USE CHANGE PREDOMINANT SNllEFAMLYHOOSING Reaeation Facilities olKJoo . . Single Farrily ~ Not Likely lKJ OCCUPANCY PRICE AGE Adequacy of Facilities olKJoo . 24 Family ~ Likely 0 Owner lKJ $(000) (yrs) Prcperily COl1l>atibility olKJoo . .. Multi-F arrily ~ In process 0 Tenant 0 ~ Low ----1!! Protection from Detrimental Cond. olKJoo Commercial 3% To: Vacant (0-5%) lKJ ~High~ Police & Are Protection olKJoo Industrial "1% Vacant (over 5%) 0 Predorrinant General Appearance of Properties R~RR Vacant 11% 185- 58 Aooealto Market Note: Race or the racial composition of the neighborhood are not considered reliable appraisal factors. COWMENTSArea has a (lood mix and variety of well kept properties. Dimensions See Attached Deed Topography Basicallv Level Site !>lea 5.99 Acres Comer Lot No Size 5.99 Acres Zoning Oassfication R-4 Residential Zoning Col1l>liance Yes Shape Irrooular HIGHEST & BEST USE: Present Use No Other Use See attached Reoulations Drainage Aooears Adeouate UTILITIES Public Other SITE IMPROVEMENTS Type Public Private View Typical Electricity lKJ Street Macadam lKJ 0 Landscaping Tvoical Gas 0 Curb/Gutter None 0 0 Driveway Macadam Water 0 Sidewalk None 0 0 Apparent Easements None Novted Sanita:y Se_ R Street Lights None R R FEMA Rood Hazard Yes' C &A No Storm Sewer Allev None FEMA' MaplZone 421016B / 09-30-77 Comments (Apparent adverse easements. encroachments. special assessments, slide areas. etc.): None Apparent Subiect however to reservations easem ents, conditions and right of wav of record. The undersigned hit recited thr., recent Sllu of prop.ttiu most ,imiliar and proximate to subject and has considered these In the market anarysls. The ducripllon Includes a dollar adjustment, reflecting muket ruclion to thou Items of ,igniflc.nt uri.tion b.tween the subJ.ct and comparabl. properllts. If I significant item In th. comparabl. property Is ,uperior to, or more favorabl. than, the subject properly, I mlnu, (-) .dJutmenl Is made, thul reducing the indicated vtlu. 01 subject; If a significant Item In the comparable is inferior to, or less 'a...orable th.n, the subject properly, a plus (ot) .dJustment II m.de, thus Increasing the indic.tad ....Iu. of the subject. ITEM I SUBJECT COMPARABLE NO. 1 COMPARABLE NO.2 COMPARABLE NO.3 2139 Orchard R 9 Tannanbaum Road 3 Allen Glen 3 Kelly Drive Address Camp Hill PA Dillsburo PA Bowmansdale PA Carlisle, PA. Proximitv to Subject 3 Miles +/- 1.8 Miles +/- Ii Miles +/- Sales Price $ ESTATE $ 169 000 $ 220 000 $ 195 000 Price/ Per Acre $ 40,900 iz'J $ 86 $ $ Data Source Inspection C.P.M.L. C.P.M.L. C.P.M.L. VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION I ~.)lAdjuolmonl DESCRIPTION I '(.)1 Adju_' DESCRIPTION I +(-)$ Adjustment . Sales or Financing DOM 0 DOM10 DOM 300 Concessions Conventional , Conventional Conventional Date of SalelTme 01-13-05 : 12-27-04 : 07-30-04 : . Location Suburb/Good Suburb/Good Suburb/Good Suburb/Good SiteMew 5.99 Acres 1.96 Acres : +40 000 5.07 Acres : 12000 5.07 Acres +12000 Water Public Public : Private : +3 000 Private : +3,000 Sewer Public Public Public Private +7,000 Buildinos 2/ 40x80 Buildin None : +25,000 None : +25000 None : +25000 None None None : None : None : Net Adi. (total) + ' $ 65000jiB:$ 40'000~$ 47000 indicated Value of Subject $ 234 000 $ 260 000 $ 242 000 Comments of Sales Comparison: See Attached addendum. Comments and Conditions of Appraisal: The aooraiser assumes a maretable title and that eauiomenl assaciated with the imorovemenl is in workin(l order Final Reconciliation: The market approach (lood indicator of fair market value. . DATE OF DEATH APRIL 17 2005 I (WE) ESTlMATE THE MARKET VALUE, AS DEFINED, OF THE SUBJECT PROPERTY AS OF April 17 , 2005 tobe$ 245 000 . I (We) certify: that to the best of my (our) knowledge and belief, the facts and data used herein are true and correct; that I (we) personally inspected the subject property and inspected all comparable salesZis repo~nd that I (we) have no undisclosed interest. present or prospective therein. AppraiS6!(s) 11'~ ~L"7 Review Appraiser o Did o Did Not Mark E. Hilbert r -, (if applicable) Inspect Property Prop-ielarylandForm04J88 ProdUO!ld utng ACllOIIwIrll, 000.234.8127 www.lIClweb.com Mark E. Hilbert and Assoc. 05-217M File No. 05-217M DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of tille from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he considers his own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions' granted by anyone associated with the sale. 'Adjustments to the comparables must be made for special or creative financing or sales concessions. No adjustments are necessary for those costs which are normally paid by sellers as a result of tradition or law in a market area; these costs are readily identifiable since the seller pays these costs in virtually all sales transactions. Special or creative financing adjustments can be made to the comparable property by comparisons to financing terms offered by a third party institutional lender that is not already involved in the property or transaction. Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the markers reaction to the financing or concessions based on the Appraiser's judgment. STATEMENT OF LIMITING CONDITIONS AND APPRAISER'S CERTIFICATION CONTINGENT AND LIMITING CONDITIONS: The appraiser's certification that appears in the appraisal report is subject to the following conditions: 1. The appraiser will not be responsible for matters of a legal nature that affect either the property being appraised or the title to it. The appraiser assumes that the title is good and marketable and, therefore, will not render any opinions about the tille. The property is appraised on the basis of it being under responsible ownership. 2. The appraiser has provided a sketch in the appraisal report to show approximate dimensions of the improvements and the sketch is included only to assist the reader of the report in visualizing the property and understanding the appraiser's determination of its size. 3. The appraiser has examined the available flood maps that are provided by the Federal Emergency Management Agency (or other data sources) and has noted in the appraisal report whether the subject site is located in an identified Special Flood Hazard Area. Because the appraiser is not a surveyor, he or she makes no guarantees, express or implied, regarding this determination. 4. The appraiser will not give testimony or appear in court because he or she made an appraisal of the property in question. unless specific arrangements to do so have been made beforehand. 5. The appraiser has estimated the value of the land in the cost approach at its highest and best use and the improvements at their contributory value. These separate valuations of the land and improvements must not be used in conjunction with any other appraisal and are invalid ~ they are so used. 6. The appraiser has noted in the appraisal report any adverse conditions (such as, needed repairs, depreciation, the presence of hazardous wastes, toxic substances, etc. ) observed during the inspection of the subject property or that he or she became aware of during the normal research involved in performing the appraisal. Unless otherwise stated in the appraisal report, the appraiser has no knowledge of any hidden or unapparent conditions of the property or adverse environmental conditions (including the presence of hazardous wastes. toxic substances, etc. ) that would make the property more or less valuable, and has assumed that there are no such conditions and makes no guarantees or warranties, express or implied, regarding the condition of the property. The appraiser will not be responsible for any such conditions that do exist or for any engineering or testing that might be required to discover whether such conditions exist. Because the appraiser is not an expert in the field of environmental hazards, the appraisal report must not be considered as an environmental assessment of the property. 7. The appraiser obtained the information, estimates, and opinions that were expressed in the appraisal report from sources that he or she considers to be reliable and believes them to be true and correct. The appraiser does not assume responsibility for the accuracy of such items that were furnished by other parties. 8. The appraiser will not disclose the contents of the appraisal report except as provided for in the Uniform Standards of Professional Appraisal Practice. 9. The appraiser has based his or her appraisal report and valuation conclusion for an appraisal that is subject to satisfactory completion, repairs, or alterations on the assumption that completion of the improvements will be performed in a workmanlike manner. 10. The appraiser must provide his or her prior written consent before the lender/client specified in the appraisal report can distribute the appraisal report (including conclusions about the property value, the appraiser's identity and professional designations, and references to any professional appraisal organizations or the firm with which the appraiser is associated) to anyone other than the borrower; the mortgagee or its successors and assigns; the mortgage insurer; consultants; professional appraisal organizations; any state or federally approved financial institution; or any department, agency, or instrumentality of the United States or any state or the District of Columbia; except that the lender/client may distribute the property description section of the report only to data collection or reporting service(s) without having to obtain the appraiser's prior written consent. The appraiser's written consent and approval must also be obtained before the appraisal can be conveyed by anyone to the public through advertising, public relations, news. sales, or other media. Vacant Land Page 1 of 2 05-217M File No. 05-217M APPRAISERS CERTIFICATION: The Appraiser certifies and agrees that: 1. I have researched the subject market area and have selected a minimum of three recent sales of properties most similar and proximate to the subject property for consideration in the sales comparison analysis and have made a dollar adjustment when appropriate to reflect the market reaction to those items of significant variation. If a significant item in a comparable property is superior to , or more favorable than, the subject property, I have made a negative adjustment to reduce the adjusted sales price of the comparable and, if a significant item in a comparable property is inferior to, or less favorable than the subject property, I have made a positive adjustment to increase the adjusted sales price of the comparable. 2. I have taken into consideration the factors that have an impact on value in my development of the estimate of market value in the appraisal report. I have not knowingly withheld any significant information from the appraisal report and I believe, to the best of my knowledge, that all statements and information in the appraisal report are true and correct. 3. I stated in the appraisal report only my own personal, unbiased, and professional analysis, opinions, and conclusions, which are subject only to the contingent and Limiting Conditions specified in this form. 4. I have no present or prospective interest in the property that is the subject to this report, and I have no present or prospective personal interest or bias with respect to the participants in the transaction. I did not base, either partially or completely, my analysis and/or the estimate of market value in the appraisal report on the race, color, religion, sex, handicap, familial status, or national origin of either the prospective owners or occupants of the subject property or of the present owners or occupants of the properties in the vicinity of the subject property. 5. I have no present or contemplated future interest in the subject property, and neither my current or future employment nor my compensation for performing this appraisal is contingent on the appraised value of the property. 6. I was not required to report a predetermined value or direction in value that favors the cause of the client or any related party, the amount of the value estimate, the attainment of a specific result, or the occurrence of a subsequent event in order to receive my compensation and/or employment for performing the appraisal. I did not base the appraisal report on a requested minimum valuation, a specific valuation, or the need to approve a specific mortgage loan. 7. I performed this appraisal in conformity with the Uniform Standards of Professional Appraisal Practice that were adopted and promulgated by the Appraisal Standards Board of The Appraisal Foundation and that were in place as of the effective date of this appraisal, with the exception of the departure provision of those Standards, which does not apply. I acknowledge that an estimate of a reasonable time for exposure in the open market is a condition in the definition of market value and the estimate I developed is consistent with the marketing time noted in the neighborhood section of this report, unless I have otherwise stated in the reconciliation section. 8. I have personally inspected the subject property and the exterior of all properties listed as comparables in the appraisal report. I further certify that I have noted any apparent or known adverse conditions in the subject improvements, on the subject site, or on any site within the immediate vicinity of the subject property of which I am aware and have made adjustments for these adverse conditions in my analysis of the property value to the extent that I had market evidence to support them. I have also commented about the effect of the adverse conditions on the marketability of the subject property. g. I personally prepared all conclusions and opinions about the real estate that were set forth in the appraisal report. If I relied on significant professional assistance from any individual or individuals in the performance of the appraisal or the preparation of the appraisal report, I have named such indivldual(s) and disclosed the specific tasks performed by them in the reconciliation section of this appraisal report. I certify that any individual so named is qualified to perform the tasks. I have not authorized anyone to make a change to any item in the report; therefore, if an unauthorized change is made to the appraisal report, I will take no responsibility for it. SUPERVISORY APPRAISER'S CERTIFICATION: If a supervisory appraiser signed the appraisal report, he or she certifies and agrees that: I directly supervise the appraiser who prepared the appraisal report, have reviewed the appraisal report, agree with the statements and conclusions of the appraiser, agree to be bound by the appraiser's certifications numbered 4 through 7 above, and am taking full responsibility for the appraisal and the appraisal report. ADDRESS OF PROPERTY APPRAISED: 2139 Orchard Road, Camp Hill, PA, 17011 APPRAISER: SUPERVISORY APPRAISER (only if required) Signature: lI~b~~~ Name: Mark E. Hilbert / Date Signed: January 5, 2006 State Certification #: RL-000388-L or State License #: RB029755A State: PA Expiration Date of Certification or License: June 30, 2007 Signature: Name: Date Signed: State Certification #: or State License #: State: Expiration Date of Certification or License: MARK E. HILBERT & ASSOCIATES o Did 0 Did Not Inspect Property Vacant Land Page 20f2 Borrower: Delroy Brosius Eroperty Address: 2139 Orchard Road City: Camp Hill Lender: Scott M. Dinner Es . Slale: PA ,. ~ File No.: 05-217M Case No.: 05-217M Zip: 17011 FRONT VIEW OF SUBJECT PROPERTY Appraised Dale: April 17, 2005 Appraised Value: $ 245,000 REAR VIEW OF SUBJECT PROPERTY STREET SCENE Borrower: Delroy Brosius File No.: 05-217M Property Address: 2139 Orchard Road Case No.: 05-217M City: Camp Hill State: PA Zip: 17011 Lender: Scott M. Dinner Esn. Location: Subject propert is located along Orchard Road in Lower Allen Township, Cumberland County, P A. Site Comments: Some ofthe subject property is in Flood Zone "A". See attached flood map. Subject has a stream on the property. There are two 40X80 buildings: lone story and 1 two story. If property is sold to be used as "R-4", the buildings will probably be removed. Zoning: Subject property has an "R-4" zoning. Attached are copies of Zoning Regulations showing 15 units per acre. Due to the stream and flood zone, it cuts the number of units to approximatelylO per acre or a total of60 units. In January 1988 a plan to develop this plot was presented to the zoning board of Lower Allen Township and was approved for 60 Garden Units, with a few minor conditions required. At this time the project was dropped. Conclusion: Considering the above facts, it is my beliefthat the land value, cost per unit was estimated at $4,500.00 per unit X 60 units = $270,000.00 less the cost ofremoving the two buildings at approximately $30,000.00, leaving a value of approximately $240,000.00. /VjJ LJ, /c~.re-r- ..../IiU\ ,/;)<1. 1.1 r ~ 220-46 LOWER A~N TOWNSHIP CODE ~ 220-48 A. Off-street parking for nonresidential uses. Off-street parkinglloading and unloading areas shall be provided in accordance with provisions set forth in Article XIX herein. Such parking shall only be located to the side or rear of buildings. B. Lighting. (1) Lighting must be controlled in both height and intensity to maintain neighborhood character. (2) Light standards are restricted to a maximum of 20 feet in height. (3) , Under no circumstances may the light level at the lot line exceed 0.2 footcandle, measured at ground level. To achieve this standard. luminaires shall be shielded to prevent light shining beyond the lot lines onto neighboring properties or public rights-of-way. C. Screening and buffering. Where nonresidential uses abut residential uses, screening and buffering shall be provided in accordance with ~ 220-158B herein. ARTICLE Vill R-4 Multifamlly Residential District ~ 220-47. Intent. Consistent with the general purposes of this chapter and the goals and objectives of the Lower Allen Township Comprehensive Plan, the specific intent of this article is: A. To provide reasonable standards for the development of higher density, multifamily residential uses. B. To establish design standards that will avoid undue traffic congestion on the streets, provide for the public convenience and harmonize with adjoining residential uses. ~ 220-48. Permitted uses. The permitted uses are as follows: A. Single-family detached dwellings. B. Two-family detached dwellings. C. Two-family attached dwellings. D. Single-family attached dwellings, in accordance with ~ 220-56. E. Multifamily dwelling units, in accordance with ~ 220-56. F. Apartment buildings. G. Family day-care homes, in accordance with ~ 220-118. H. Group day-care homes, in accordance with ~ 220-118. 220:74 11 - 01 - :1003 9 220-48 ZONING 9 220-49 I. Medical centers and hospitals. 1. Group-care homes, in accordance with ~ 220-120. K. Boarding homes, in accordance with ~ 220-112. L. Nursing homes. M. Personal-care boarding homes. N. Home occupations, in accordance with ~ 220-122. O. Day-care centers, in accordance with ~ 220-116. P. Studios for instruction in music, arts and sciences and radio and television stations. Q. Places of worship, including accessory residential uses. R. Public and private schools, including accessory residential uses. S. Public parks. public playgrounds, public recreation areas and public camping facilities. [Amended 11-10-2003 by Orcl. No. 2003-05] T. Municipal buildings, libraries and museums. U. Parking garages/decks and lots accessory to other permitted uses, in accordance with Article XIX. V. Utility facilities, where operation requirements necessitate location within the district. in accordance with ~ 220-136. W. Signs, when erected and maintained in accordance with Article XX. X. Accessory uses and structures on the same lot with /l!ld customarily incidental to the above pennitted residential and nonresidential uses, in accordance with ~ 220-106. . Y. The following uses are permitted, provided that such retail establishments shall be compatible with and incidental to other permitted uses and shall not exceed 5.000 square feet in gross floor area. (1) Eating establishments, excluding drive-through services. (2) Fitness centers. (3) Retail establishments. Z. Continuing care retirement community. [Added 11-13-2000 by Ord. No. 2000-03] 9 220-49. Building height limit. No building shall be erected to a height in excess of 75 feet, provided that an additional setback of one foot for all sides of the tract shall be required for each foot exceeding 50 feet in height. 220:75 12 .01 - 2003 9 220-50 LOWER ALLEN TOWNSHIP CODE 9 220-53 9220-50. Residential unit density. The maximum pennitted density shall be 15 units per gross acre, excluding existing dedicated rights-of-way. 9 220-51. Lot area and width. A. There shall be no minimum lot area. Lot area shall be based upon required setbacks, impervious coverage, off-street parking and loading/unloading, floodplains/wetlands, steep slope requirements, woodland preservation and other applicable criteria as set forth in this chapter. B. The minimum lot width shall be not less than 50 feet at the dedicated right-of-way line. 9 220-52. Impervious coverage. Impervious coverage shall not exceed 50%. 9220-53. Yards. '>'\ A. Unless otherwise stated herein, yards of the following minimum depths and widths shall be provided: ( I) Front yard setback: 20 feet. (2) Side yard setbacks (for each side yard): (a) Semidetached dwellings: 20 feet. (b) Attached dwellings (including multifalnily units): [I] Three to four attached units: 35 feet. [2] Five to six attached units: 50 feet. (c) Semidetached dwellings abutting an attached dwelling: 35 feet. (d) A nonresidential principal stmcture abutting a residential principal structure: 50 feet. (e) Nonresidential principal structures: 10 feet. No side yard shall be required where stmctures abut one another, provided that a written agreement is entered into by such property owners and submitted to the Zoning Officer. However, in no case shall common party walls be pennitted between properties of separate ownership. (3) Rear yard setback: 35 feet. B. Buffer yards and screen plantings shall be provided in accordance with 9 220-158 herein. 220:76 12 - 01 - 2003 ~ 220-54 ZONING ~ 220-59 fi 220-54. Cluster development option. A cluster development option may be utilized in accordance with !}220-173 herein. ~ 220-55. Performance standards. All uses must comply with performance standards as set forth within Article XV herein. ~ 220-56. Use limitations. A. No more than six single-family dwelling units shall be attached. B. A vertical or horiwntal visual structural offset or other deviation in exterior architectural materials shall be provided for every other single-family auached dwelling unit and between every four multifamily dweHing units. ~ 220-57. Off-street parking. Off-street parking, loading space and motor vehicle access shall be provided in accordance with the provisions of Article XIX. ~ 220.58. Site design standards. In addition to performance standards contained within Article XV. the following additional site design standards are applicable for any new construction within the R-4 Multifamily Residential District. A. Off-street parking. Off-street parkinglloading and unloading areas shaH be provided in accordance with provisions set fOM in Article XIX herein. Such parking shaH only be located to the side or rear of buildings. B. Lighting. (J) Lighting must be controlled in both height and intensity to maintain neighborhood character. (2) Under no circumstances may the light level at the lot line exceed 0.2 footcandle. measured at ground level. To achieve this standard, luminaires shall be shielded to prevent light shining beyond the lot lines onto neighboring residential properties or public rights-of-way. ARTICLE IX C-! Neighborhood Commercial District ~ 220-59. Intent. Consistent with the general purposes of this chapter and the goals and objectives of the Lower Allen Township Comprehensive Plan. the specific intent of this article is: 220:77 11-0t .1003 '" ---- ., _.:&;;1;".~i~' :;"~' ~- ," ,;.. , .....; \ .- . .;,i:'; -~. -;r-- .. ' " ... 1J; .,.. . '- -.t. ,;.;.... ".' -<J. 'f' ,-r--< - --.-- ~ ;-- I -';-\ '--\ ;--,' ...>- J.. <-< -r .,;; _-:' I , : .-' /0~ ~.. '. ~.: .~! ;;", -- ., "- ~~";.' .(1 '~, ~~ I. vl- ' ~ ,. ","ft _ __ ~:_ '" '-\.c, ~-.: t"ntsP~ ~ . ~ m " !'. ,.:. \." !lo. \, ~~~ ',.. ~:Jf'-=.",~ ~. ~~.. tf ~--~. "'" ~ ~ - ~ -, ~ - .'" : ' ' , ' " ,,' -r' ~ ~l~ . 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Ije .' ~~ ._ "'l .-d w I. [ir-7- I! \ ~I ~ (\ Llx /b\ ,,~ \ I--c - \ "" J" Subject Address Legal Descrtptlon City County Slate Zip Code Census Tract Map Re1erence Sale Price Date of Sale Borrower I Client Lender Size (Square Feet) prtce per Square Fool Location Age Condition Total Rooms Bedrooms Baths Appraiser Date at Appraised Value Final Estimate 01 Value SUMMARY OF SALIENT FEATURES 2240 ORCHARD ROAD DEED BOOK 00222, PAGE 01071 CAMP HILL CUMBERLAND PA 17011 0110.00 HBG ADC MAP 2D/C-4 $ REFINANCE INSP 06-16-05 NfA PRIVATE 998 AVERAGE 65 YEARS AVERAGE 4 2 ROBERT K. BANZHOFF 06-16-05 $ 121,000 Form SSD - 'TOTAL for Windows' appraisal software by a la mode, inc. - 1.800-ALAMODE :-..::.:, l~ anmelVlae central penn AppraisalS, Inc. till) (J{-4~UU Desktop Underwriter Quantitative Analysis Appraisal Report File No. ORCHARD2240 THIS SUMMARY APPRAISAL REPORT IS INTENDED FOR USE BY THE LENDER/CLIENT FOR A MORTGAGE FINANCE TRANSACTION ONLY. Prooertv Address 2240 ORCHARD ROAD CiIv CAMP HILL State PA 7io Code 17011 Leoal Descriotion DEED BOOK 00222 PAGE 01071 CounlY CUMBERLAND Assessor's Parcel No. 13-23-0549-148 Tax Vear 04/05 - R.E. Taxes S 1 270.16 NONE ., Borrower N/A Curr.nt Owner BROSIUS CAROL A. Occuoant fl Owner 1><1 Tenant r l Vacant - Neiohborhood or Proiect Name LOWER ALLEN TOWNSHIP Proiect Tvoe rl PUD f l Condominium HOA $ N/A /MD. Sales Price s REFINANCE Oate of Sale INSP 06-16-05 Descrintion 1 $ amount ollnan chames/concessions to be naid bv selle NONE Prooertv riohts aooraised I'XI Fee Slmnle rl Leasehold I Mao Reference HBG ADC MAP 20/C-4 Census Tract 0110.00 Nom: c - Location 0 Urban ~ Suburban 0 Rural Property values c><:J Increasing 0 Stable 0 Declining - Buill up ~ Over 75% Q 25-75% 0 Under 25" Demand/supply 0 Shortage ~ In balance g Over supply ., Growth rate Fi Ranid IXI Stable n Slow Marketion time &i Under 3 mos. I I 3-6 mos. I lOver 6 mos. Neighborhood boundaries This suburban neiohborhood has averane characteristics and is bounded on the north bv Gettvsburn & Carlisle Roads on the east bv Interstate B3 on the south bY Yorll County line and on the west bv St Johns and Slate Hill Roads located in Lower Allen TownshlD. Dimensions SEE LEGAL DESCRIPTION SlIe area 0.25 ACRES Specific zoning classllication and description R-RESIDENTAL SINGLE FAMILY Zoning compliance c><:J Legal 0 Legal nonconlorming (Grandfathered use) 0 Illegal, attach description 0 No zoning Highest and besl use 01 subject property as Improved (or as proposed per plans and specifications): c><:J Present use 0 Other use, attach description. Ulllllie. Public Other Public Other I Oll-slle Improvement. Type Public Electricity c><:J Water c><:J Street ASPHALT ~ Gas Fi NONE Sanll.IV sewer &i I ABey NONE I I Are there anv aooarent adverse slle conditions (easements encroachments soeclal assessments slide areas etc.l? rl Ves So hurce(s) use~r physical characteristics of prop~: !l:J Interior andnexterior inspection. 0 Exterior inspection from street MLS IXI Assessment and tax records I I Prior insnection Prooertv owner -n Other (Describe\: No. of Stories 1 Tvne IDetJAtt.l DET. Exterior Walls VINYL Roof Surlace SHINGLES Manufactured Housion r l Ves 5<1 No Ooes the nronerlv nenerally conform to the neinhborhood in terms 01 slYle condition and construction materials? IXI Ves I 1 No "No attach de.crintion. Are there any apparent physical deficiencies or conditions that would allect the soundness br structural integrity of the improvements or the livabillly 01 the property? , n Ves ~ No "Ves attach descrintion. Are there any apparent adverse environmental conditions (hazardous wastes, toxic substances, etc.) present in the improvements, on the slle, or in the immediate vicinlly of the sublect property? 0 Ves c><:J No "Ves, attach deSCription. I researched the subject market area lor comparable listings and sales that are the most similar and proximate to the subject property, My research revealed a total of 4 sales ranging in sales price from $ 116,000 to $ 134.900 My research revealed a total of S listings ranging in list price tram $ 109.900 to $ 129.900 The analysis 01 the comparable sales below reflects market reaction to signllicant variations between the sales and the sublect oroperty. FEATURE I SUBJECT SALE 1 SALE 2 SALE 3 2240 ORCHARD ROAD 1191 SHOREHAM ROAD 1908 CARLISLE ROAD 1B13 WILLOW ROAD Address CAMP HILL CAMP HILL CAMP HILL CAMP HILL Proximilv to Sublect "lWJ-}'%Nj~\t~If<!W\~]V,~~ 1.40 miles .. 0,58miles ~ Sales Price ,'8. "..".r...: 121000W~Jrd;;i!m..,rn\ls 116000~ 134900 PricelGrosslivlnnArea I~ ItJls 128.4SItJ 1ilif,~I\!iJ.f@f~~1s 111.541tJ 1~~J-'41~ s 107.401tJ ,~,' ."!( Data & Veti1ication Sources l!i1!li'~~,(Hi)ri~\~ill'l'rll\i' ASMT RECORDS/MLS/AGENT ASMT RECORDS/MLS/AGENT ASMT RECORDS/MLS/AGENT VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION I +(-)$ Adios!. DESCRIPTION I +(-)$ Adlusl. OESCRIPTION I +1-\$ Adlosl. Sales or Financing CONVENTIONAL CASH CONVENTIONAL Concessions NONE KNOWN NONE KNOWN NONE KNOWN Date of SalelTime 05-25-05 OM 15 : 04-22-05 DM 42 : 10-15-04/24 . Location AVERAGE AVERAGE: AVERAGE: AVERAGE Site 0.24 ACRES 0.13 ACRES: 0.17 ACRES: 0.19 ACRES View AVERAGE AVERAGE: AVERAGE: AVERAGE Desion (SlYle' RANCH/AVG RANCH/AVG RANCH/AVG: RANCH/AVG Actual Aoe IYrs.l 65 YEARS 55 YEARS 49 YEARS 55 YEARS Condition AVERAGE AVERAGE AVERAGE AVERAGE - AboveGrade Total :Bdrms: Baths 10tal :Bdrms: Baths 1~~~~~~1~)~ri.~..,,:; Total :Bdrms: RaUls ~,~ ~" Total :Bdrm~: Baths t;.~4BJ~i!n~,;+.;Plt.t~: , Room Count 4 2: 1 5: 2 : 1 : 4 2: 2: -2,000 5: 2 1 : _ Gross Livino Area 99B Sn. F!. 942 Sa. Ft. : 1 040--;:';: Ft. : 1 256 So FL : Basement &. Finished FULL BSMT FULL BSMT FULL 8SMT FULL BSMT Rooms BP.low Grade UNFINISHED UNFINISHED UNFINISHED REC ROOM Garane/Camort CARPORT CARPORT: CARPORT: CARPORT: HEATING &. COOLING FHAlCA FHAlCA : FHAlCA : FHAlCA : _NE NONE : FIREPLACE: -2000 SUN ROOM : -3000 NetAdi.ltotan' + -is M-:$ 2300Il!-iS 3600 Adjusted Sales Price olComparableS 121000 Is 113700 Is 131300 Date of Prior Sale 06-07-2000 04-07-2005 NONE KNOWN TO EXIST NONE KNOWN TO EXIST Price 01 Prior Sale Is 1.001t 103000 Is 1$ Analysis of any current agreement of sale, option. or listing of the subject property and analysis of the prior sales 01 subject and comparables: The subiect is not known to be under anv ootion for sale or aoreement of sale as olthe effective date on this reoort. Summary of sales comparison and value conclusion: See attached addenda. Single '"mlly housing Condominium hoUllng PRICE AGE PRICE j" applk:.) AGE $(000) (yrs) $(000 (yrs) BO Low NEW N/A Low ~ 250 Hinh 100+ N/A Hinh N/A lilEPJ Predominant 1'Uf;l!lii~~IPredominantl1~:,' 150 50 I NIA N/A Shape RECTANGULAR Private R 15<1 No "Ves attach descriotion. U Previous appraisal files +4 500 -3 900 -3 000 lhis appraisal is made [8J 'as-is', 0 subject to completion per plans and specnications on the basis 01 a hypothetical condition that the improvements have been completed, or o subject to the following repairs, anerations or conditions BASED ON AN 0 EXTERIOR INSPECTION FROM THE STREET OR AN PROPERTY THAT IS THE SUBJECT OF THIS REPORT TO BE $ 121.000 c><:J IlTERIOR AND EXTERIOR INSPECllON ,I EsTlMA TE lllE MARKET VALUE, AS DEfINED, OF THE REAL ,AsOF 06-16-05 PAGE 1 OF 3 Form 205 - 'TOTAL for Windows' appraisal software by a la mode, inc. -1-8DO-ALAMODE Fannie Mae Form 2055 9-96 Desktop Underwriter Quantitative Analysis Appraisal Report File No. ORCHARD2240 . Project Inlormatlon lor PUOs I" applicable) - -Is the developer/builder in control of the Home Owners' Association (HOA)? OVes DNa Provide the following information for PUDs only ff the developer/builder is in control of the HOA and the subject property Is an attached dwelling untt: Total number of phases N/A Total number of untts N/A Total number of untts sold N/A Total number of untts rented N/A Total number 01 untts lor sale N/A Data Source{s) N/A Was the project created by the conversion of existing buildings into a PUD? DVes DNa iI yes, date of conversion: N/A - Does the project contain any multi-dwelling untts? OVes DNa Data Source: N/A Are the common elements completed? DVes DNo " No, describe status of compilltion: NIA Are any common elements leased to or by the Home Owners' Association? OVes ONo iI yes, attach addendum describing rental terms and options. Describe common elements and recreational facilities: N/A Projectlntonnallon for CondomIniums (iI applicable) - -Is the developer/bullder in control of the Home Owners' Association (HOA)? OVes DNa Provide the following information for all Condominium Projects: Total number of phases N/A Total number of untts N/A Total number of untts sold N/A Total number of untts rented N/A Total number of untts tor sale N/A Data Source{s) N/A Was the project created by the conversion of existing buildings into a condominium? OVes DNa II yes, date of conversion: N/A Project Type: o Primary Residence o Second Home or Recreational o Row or Townhouse o Garden o Midrise o Highrise 0 Condition of the project, quality of construction, untt mix. etc.: N/A - - o Ves DNa Are the common elements completed? II No, describe status 01 completion: N/A Are any common elements leased to or by the Home Owners' Association? DVes DNa iI yes, attach addendum describing rental terms and options. Describe common elements and recreationalfaciflties: N/A PURPOSE OF APPRAISAL: The purpose of this appraisal Is to estimate the market value of the real property that is the subject o! this report based on a quantitative sales comparison analysis for use in a mortgage finance transaction. DEFINITION OF MARKET VALUE: The most probable price which a property should bring In a competnive and open market under all condUions requisUe to a fair sale, the buyer and seller, each acting prudentiy, knowledgeably and assuming the price Is not affected by undue stimulus. ImplicU in this deflnttion is the consummation of a sale as of a specilied date and the passing of tUle from seller to buyer under condUions whereby: (1) buyer and seller are typiCally motivated; (2) both parties are well informed or well advised, and each acting in what he considers his own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made In terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions. granted by anyone associated wUh the sale. . Adjustments to the comparables must be made for special or creative financing or sales concessions. No adjustments are necessary for those costs which are normally paid by sellers as a result of tradUlon or law In a market area; these costs are readily identniable since the seller pays these costs In virtually all sales transactions. Special or creative financing adjustments can be made to the comparable property by comparisons to financing terms offered by a third party InstUutional lender that is no! already involved in the property or transaction. Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market's reaction to the financing or concessions based on the appraiser's judgment. STATEMENT OF LIMITING CONDITIONS AND APPRAISER'S CERTIFICATION CONTINGENT AND LIMITING CONDITIONS: The appraiser's certffication that appears In the appraisal report is subject to the following condUions: 1. The appraiser will not be responsible for matters of a legal nature that affect eUher the property being appraised or the title to tt. The appraiser assumes that the title is good and marketable and, therefore, wnJ not render any opinions about the title. The property Is appraised on the basis of U being under responsible ownership. 2. The appraiser has provided any required sketch in the appraisal report to show approximate dimensions of the improvements and the sketch Is included only to assist the reader of the report in visualizing the property and understanding the appraiser's determination of Us size. 3. The appraiser will not give testimony or appear in court because he or she made an appraiSal of the property In question, unless specific arrangements to do so have been made beforehand. 4. The appraiser has noted in the appraisal report any adverse condttions (such as, but not limited to, needed repairs, the presence of hazardous wastes, toxic substances, etc.) observed during the inspection of the subject property or that he or she became aware of during the normal research involved in performing the appraisal. Unless otherwise stated in the appraisal report, the appraiser has no knowledge of any hidden or unapparent condUions of the property or adverse environmental condltlons (including the presence of hazardous wastes, toxic substances, etc.) that would make the property more or less valuable, and has assumed that there are no such condUions and makes no guarantees or warranties, expressed or implied, regarding the condition of the property. The appraiser will not be responsible for any such condUlons that do exist or for any engineering or testing that might be required to discover whether such condUions exist. Because the appraiser Is not an expert in the field of environmental hazards, the appraisal report must not be considered as an environmental assessment 01 the property. 5. The appraiser obtained the information, estimates, and opinions that were expressed in the appraisal report trom sources that he or she considers to be reliable and believes them to be true and correct. The appraiser does no! assume responslbilUy for the accuracy of such Uems that were fumished by other parties. 6. The appraiser will not disclose the contents of the appraisal report except as provided for in the Uniform Standards of Professional Appraisal Practice. 7. The appraiser must provide his or her prior written consent before the lender/client specified in the appraisal report can distribute the appraisal report (including conclusions about the property value, the appraiser's identUy and professional designations, and references to any professional appraisal organizations or the firm wUh which the appraiser is associated) to anyone other than the borrower; the mortgagee or its successors and assigns; the mortgage insurer. consultants; profeSSional appraisal organizations; any state or federally approved financial instUution; or any department. agency, or instrumentalUy of the UnUed States or any state or the District of Columbia; except that the lender/client may distribute the report to data collection or reporting service(s) without having to obtain the appraiser's prior written consent. The appraiser's written consent and approval must also be obtained before the appraisal can be conveyed by anyone to the public through advertising, public relations, news, sales, or other media. 8. The appraiser has based his or her appraisal report and valuation conclusion for an appraisal that is subject to completion per plans and specifications on on the basis of a hypothetical condUion that the improvements have been completed. 9. The appraiser has based his or her appraisal report and valuation conclusion lor an appraisal that is subject to completion, repairs, or alterations on the assumption that completion of the improvements will be performed in a workmanlike manner. PAGE 2 OF 3 Fannie Mae Form 2055 9-96 Form 205 - 'TOTAL lor Windows' appraisal software by a la mode, inc. -1-800-ALAMODE Deskto raisal Report File No. ORCHARD2240 APPRAISER'S CERTIFICATION: The Appraiser certifies and agrees that: 1. I performed this appraisal by (1) personally inspecting from the street the subject property and neighborhood and each of the comparable sales (unless I have otherwise indicated in this report that I also inspected the Interior of the subject property); (2) collecting, confirming, and analyzing data from reliable public and/or private sources; and (3) reporting the results of my inspection and analysis in this summary appraisal report. I further certify that I have adequate information about the physical characteristics of the subject property and the comparable sales to develop this appraisal. 2. I have researched and analyzed the comparable sales and offeringsllistlngs in the subject market area and have reported the comparable sales in this report thai are the best available for the subject property. I further certify thai adequate comparable market data exlsts In the general market area to develop a reliable sales comparison analysis for the subject property. 3. I have taken into consideration the factors that have an impact on value In my development of the estimate of market value in the appraisal report. I further certify thai I have noted any apparent or known adverse conditions In the subject improvements, on the subject site, or on any site within the immediate vicinity of the subject property of which I am aware, have considered these adverse conditions In my analysis of the property value to the extent that I had market evidence to support them, and have commented about the effect of the adverse conditions on the marlletability of the subject property. I have not knowingly withheld any significant information from the appraisal report and I believe, to the best of my knowledge, that all statements and information in the appraisal report are true and correct. 4. I stated in the appraisal report only my own personal, unbiased, and professional analysis, opinions, and conclusions, which are subject only to the contingent and limiting conditions specified In this form. 5. 1 have no present or prospective interest in the property that Is the subject of this report, and I have no present or prospective personal interest or bias with respect to the participants in the transaction. I did not base, either partially or completely, my analysis and/or the estimate of market value in the appraisal report on the race, color, religion, sex. age, marital status, handicap, familial status, or national origin of either the prospective owners or occupants of the subject property or of the present owners or occupants of the properties in the vicinity of the subject property or on any other basis prohibited by law. 6. I have no present or contemplated future Interest In the subject property, and neither my current or future employment nor my compensation for performing this appraisal is contingent on the appraised value of the property. 7. I was not required to report a predetermined value or direction In value that favors the cause of the client or any related party, the amount of the value estimate, the attainment of a specific result, or the occurrence of a subsequent event in order to receive my compensation and/or employment for performing the appraisal. I did not base the appraisal report on a requested minimum valuation, a specific valuation, or the need to approve a specific mortgage loan. B. I estimated the marllet value of the real property that Is the subject of this report based on the sales comparison approach to value. J further certify that I considered the cost and income approaches to value, but, through mutual agreement with the client, did not develop them, unless I have noted otherwise in this report. 9. I performed this appraisal as a limited appraisal, SUbject to the Departure Provision of the Uniform Standards of Professional Appraisal Practice that were adopted and promulgated by the Appraisal Standards Board of The Appraisal Foundation and that were in place as of the effective date of the appraisal (unless I have otherwise indicated in this report that the appraisal Is a complete appraisal, In which case, the Departure Provision does not apply). 10. I acknowledge that an estimate of a reasonable time for exposure In the open market Is a condition In the definition of market value. The exposure time associated with the estimate of market value for the sublect property is consistent with the marlleting time noted in the Neighborhood section of this report. The marketing period concluded for the subject property at the estimated marllet value is also consistent with the marlleting time noted in the Neighborhood section. 11. I personally prepared all conclusions and opinions about the real estate that were set forth In the appraisal report. further cert~y that no one provided Significant professional assistance to me in the development of this appraisal. SUPERVISORY APPRAISER'S CERTIFICATION: If a superviSOry appraiser signed the appraisal report, he or she certifies and agrees that: I directly supervise the appraiser who prepared the appraisal report, have examined the appraisal report for compliance with the Uniform Standards of Professional Appraisal Practice, agree with the statements and conclusions of the appraiser, agree to be bound by the appraiser's certifications number d 5 through 7 above, and am taking full responsibility for the appraisal and the appraisal report. APPRAISER: SUPERVISORY APPRAISER (ONLY IF REQUIRED): APPRAISALS I 24 WES IN STREET SHIREMANSTOWN, PA 17011 Date of Report/Signature: 06-27-2005 State Certification #: PACERT RL-001231-L or State License #: RM-049277-A State: PA , Expiration Date of Certification or License: 6130/2005 Signature: Name: Company Name: Company Address: Date of Report/Signature: State Certification #: or State License #: State: Expiration Date of Certification or License: ADDRESS OF PROPERTY APPRAISED: 2240 ORCHARD ROAD CAMP HILL, PA 17011 APPRAISED VALUE OF SUBJECT PROPERTY $ EFFECTIVE DATE OF APPRAISAl/INSPECTION LENDER/CLIENT: PRIVATE Name: Company Name: PRIVATE Company Address: 121 ,000 06-16-05 SUPERVISORY APPRAISER: SUBJECT PROPERTY o Did not inspect subject property o Did inspect exterior of subject property from street o Did inspect interior and exterior of subject property COMPARABLE SALES o Did not inspect exterior of comparable sales from street o Did inspect exterior of comparable sales from street PAGE 3 OF 3 Form 205 - "101 AL tor Windows" appraisal software by a la mode. inc. -l-BOO-ALAMODE Fannie Mae Form 2055 9-96 Desktop Underwriter Quantitat ve AnalYSIS Appraisal Report FEATURE I SUBJECT SALE 4 2240 ORCHARD ROAD 517 S 18TH STREET Address CAMP HILL CAMP HILL Proximitv 10 Subiocl if!~,ljiliN'l1f"~1%~'\(~( 0.76 miles Sales Price . ..... )j!H 122500 f~"'".. ~,jlfim:lt ';.:.'..!.... ~. Price/GrossUvinoArea rtJ 115.13ltJ I&t'i'~~.~ .I"~ ltJ '.",' ;f,'\iL~:ll rtJ ~~ii\l,~~'i{il;i!~~itil1:l~' Data & Verification Sources jjj.'1.;jFil~~fji1fl!:i<i.~i!Ili!1j ASMT RECORDS/MLS/AGENT ASMT RECORDS/MLS/AGENT ASMT RECORDS/MLS/AGENT VALUE ADJUSTMENTS _ESCRIPTlON DESCRIPTION I +1-1$ Adiust. DESCRIPTION I +1-\$ Adiust. DESCRIPTION I +1-1$ Adiust. Sales or Financing CONVENTIONAL : Concessions NONE KNOWN : Dale of SalelTime 8-24-04/41: +5100: : Localion AVERAGE AVERAGE : : : Sne 0.24 ACRES 0.20 ACRES : : : . View AVERAGE AVERAGE : : : Desion ISMe\ RANCH/AVG RANCH/AVG : : : Actual Aoe Nrs.\ 65 YEARS 45 YEARS : : Condition AVERAGE AVERAGE Above Grade Total : Bdrms: Raths Total :Bdrms: Baths Ir?JJ1;~,!Iif'Iii'(I~1' Total :Bdrms: Baths m~:J;jF"~'~IM.1l!J1S\; Total :Bdrms: Baths t~1i:,,,,,,1~jl~~1i' Room Count 4 : 2 1 5 2: 1.5: -1,000 : : : : : Gross Uvino Area 99B Sn. Ft 1 064 Sa. F\. : So. Ft : SO. F\. : Basement & Finished FULL BSMT FULL BSMT Rooms Below Grade UNFINISHED REC ROOM -3000 GaraoelCamort CARPORT CARPORT : : HEATING & COOLING FHAlCA HW/CA: : : : ~: 1~:~ ~TOEXIST ~OEXIST II 1.00ll Is SALE 5 SALE 6 Net Adi. Itotall Adjusted Sales Price of Comnarable Date of Prior Sale Price of Prior Sale ~s ~~OEXIST Is Comments: Central Penn Appraisals. Inc. (717) 737-4600 Form 205.(AC) - 'TOTAL lor Windows' appraisal soltware by a la mode, inc. -1-BOD-ALAMODE Fannie Mae Form 2055 9-96 ~ :supplemental Addendum File No. ORCHARD2240 Coon CUMBERLAND State P A Zi Code 17011 . DesktoD Quantitative 2055: Sales ComDarlson Comments These improvements are of average quality frame & vinyl design and reflect average maintenance. This house has less than typical physical depreciation due to regular maintenance. Utility of floor plan is typical for a house of this age and style and should receive average acceptance in the market place. No unusual functional obsolescence or external inadequacies were observed. All four sales are considered to be reliable indicators of value, and are weighted similarly in the final reconciliation. Appropriate adjustments have been made for all differences. Com parables sales used are all closed sales. It is noted that Comparable Sale No.3 & 4 occurred over six months prior to the appraisal date. Comparables that sold within six months of the date of the appraisal were significantly different in location, size, condition, special conditions, and/or style. In the appraiser's judgment the comparable selected is a better indicator of value than more recent sales. Time adjustments are based on local mls statistics. All four comparable sales are located in the same market area as the subject property and would be considered by the same perspective purchaser if all were on the market at the same time as the subject. This appraisal report has been prepared with the property in "as is" condition. No personal property has been included in this valuation. This appraisal assumes a reasonable marketing period for the subject property of three months. The Income Approach is inappropriate because few single family houses are rented in this market. In view of the age of these improvements, the Cost Approach cannot be considered an accurate indicator of value. Given the high quality of the available sale data, the value indicated by the Market Approach is used as the final estimated value. THIS IS A SUMMARY REPORT OF A COMPLETE APPRAISAL. APPRAISER ACKNOWLEDGEMENT APPRAISERS ACKNOWLEDGES AND AGREES, IN CONNECTION WITH ELECTRONIC SUBMISSION OF APPRAISALS, AS FOLLOWS: THE SOFTWARE UTILIZED BY THE APPRAISER TO GENERATE THE APPRAISAL PROTECTS SIGNATURE SECURITY BY MEANS OF A DIGITAL SIGNATURE SECURITY FEATURE WHICH LOCKS THE REPORT WITHIN OUR OFFICE AND CAN NOT BE ALTERED BY ANYONE OTHER THAN OUR OFFICE. APPRAISER CERTIFICATION APPRAISER STANDARDS I acknowledge and certify that (I) my appraisal of the above referenced property may be used in a federally related financial transaction subject to requirements of Title XI of the Financial Institution Reform, Recovery and Enforcement Act of 1989 (FIRREA"); (ii) the appraisal must comply with FIRREA and the applicable regulations implementing Title IX of Firrea; and (iii) the appraisal was completed in accordance with USPAP. APPRAISER COMPETENCY I certify that I am fully qualified and competent by training, knowledge, and experience to perform this appraisal. APPRAISER INDEPENDENCE I represent and certify that (I) the appraisal assignment was based not based on a requested minimum valuation, a specific valuation, or the approval of a loan; (ii) my employment was not conditioned upon the appraisal producing a specific value or value within a given range; (iii) my future employment is not dependent upon an appraisal producing a specific value; (iv) my employment, compensation, and future employment are not based upon whether a loan application was approved; (v) neither me nor any person with an ownership interest in the company employing me, is related to or has any ownership or other financial interest in, either the builder/developer, seller, buyer, mortgage broker, or real estate broker/salesperson (or any person related to any of them) involved in the transaction for which this appraisal was requested, or with the most recent sale or refinancing of any property used as a comparable property in this appraisal, and (vi) I am not aware of any facts which would disqualify me from being considered an Independent appraiser. NOTE: JENNIFER WARNER WAS THE ASSISTANT TO THE STATE CERTIFIED APPRAISER AND ASSISTED WITH THIS REPORT AND RENDERED SIGNIFICANT ASSISTANCE IN ALL ASPECTS OF ITS PREPARATION AND INSPECTION. Form TADD - 'TOTAL for Windows' appraisal software by a la mode, inc. -1-800-ALAMODE SAIDIS tUFF, FLOWER & LINDSAY \TIORNE)'S.AT.LA W ~ 109 Market Street Camp Hill. PA SHAREHOLDERS' AGREEMENT THIS AGREEMENT made as of the ft day of MAY , 1-00i by and between R. F. FAGER COMPANY, a Pennsylvania Corporation (the lICorporationll ) and RICHARD F. FAGER, JR., BRYCE FAGER, DELROY D. BROSIUS, DARWIN K. BROSIUS, HAROLD R. BROSIUS and DARREL C. BROSIUS, (collectively the "Shareholders" and individually the "Shareholder"), WITNESSETH: The Shareholders own all the issued and outstanding capital stock of the Corporation and they wish to protect against ownership of the Corporation by persons who are not willing or able to continue the Corporation's policies. Accordingly, Shareholders agreed restrict have to the transferability of their stock, require purchases and sales of their stock in certain circumstances, and provide for certain other matters relating to the Corporation, all as more fully set forth in this Agreement. NOW, THEREFORE, the Corporation and the Shareholders, in consideration of the foregoing and of the mutual covenants contained herein, and intending to be legally bound hereby, agree as follows: 1. Capitalization; Transfer of Certain Shares. At the date of this Agreement there are issued and outstanding to the Shareholders the following number of shares of common stock $1.00 par value (the "stock"), the Corporation's only class of authorized capital stock, constituting all of Corporation's outstanding capital stock or options, warrants, or other rights convertible into, or exercisable for, the stock: Name CLASS A COMMON CLASS B COMMON Richard F. Fager, Jr. 51 ~801 Bryce Fager 9 199 Delroy D. Brosius 20 980 Darwin K. Brosius 0 340 Harold R. Brosius 10 340 Darrel C. Brosius 10 340 TOTAL 100 5,000 2 _ Restrictions on Lifetime Transfers of Stock_ Except as hereinafter provided, no Shareholder shall, in any manner, sell, transfer, donate, encumber, or otherwise dispose of (each such transaction being referred to herein as a "transfer") any stock which he now owns or hereafter acquires, except as expressly set forth in this Agreement. SAlOIS HUFF, FLOWER & LINDSAY A. During the lifetime of the respective Shareholders, the shares of Class A Voting Common Stock shall be freely transferable between the parties who are related, i.e. Richard F. Fager Jr. and Bryce Fager are free to transfer their shares between themselves; and Delroy D. Brosius, Darwin K. Brosius, Darrel C. Brosius and Harold R. Brosius are free to transfer their shares among themselves, in such manner and on such terms as they shall determine, but provided that the shares, after they are transferred, shall be subj ect to this Agreement. Class B Non-voting Common Stock may be transferred by the current owners of said shares to their respective children who are full-time employees of the Corporation; provided that the shares, after they are transferred, are subject to the terms of this Agreement. ATrORNEYS-AT-LAW 2109 Markel Street Camp Hill. PA shares Upon approval of of Class A Voting the holders of a majority of the Stock and the Board of Directors, 2 either Class A or Class transferred to the spouse spouse or children of Corporation. B or any shares of common stock children or to a trust of the Shareholders may be for the of the B. Other than as stated in Paragraph A. above, if a Shareholder (the IIselling Shareholderll) proposes to make a transfer of all or any of his stock, he shall obtain the prior written consent of all the other Shareholders and of the Corporation to the proposed transfer. In the absence of such consent, the selling Shareholder shall, prior to making a transfer give the Corporation written notice of his intention to make such a transfer, setting forth the proposed transferee and the price and other terms and conditions of the proposed transfer, which notice shall constitute an offer (the Hofferll) to sell such stock to the Corporation. The Corporation shall have the option, exercisable in writing within thirty days after receipt of the offer, to purchase all or any portion of such stock upon the terms and conditions set forth in the offer. C. If the Corporation does not purchase all the stock subject to the offer pursuant to subparagraph A, the selling Shareholder shall transmit to the other Shareholder a notice similar to that submitted to the Corporation pursuant to subparagraph A, which notice shall constitute an offer (the IIsecond Offerll) to sell such stock to the other Shareholder for the same price and under the same terms and conditions as in the offer to the Corporation pursuant to subparagraph A. The other Shareholder shall have the option, exercisable in writing within 30 days after receipt of the second offer to purchase all or any portion of such stock in accordance with the second offer. SAlOIS HUFF, FLOWER & LINDSAY AlTORNEYS'AT'LAW 2109 Market Street Camp Hill. PA D. If the Corporation and/or the other Shareholder do not purchase all the selling Shareholder1s stock in accordance with subparagraphs A. and B., the selling Shareholder may transfer the remaining stock to the transferee identified in the offer at the price and under the terms and conditions of the offer provided that the transferee agrees in writing to be bound by all the terms and conditions of this Agreement. If such transfer does not occur within six months after the date of the offer, the selling Shareholder shall, prior to any transfer, again offer to sell his or her stock to Corporation and the other Shareholder in accordance with subparagraphs A. and B. hereof. E. A Shareholder may, during his lifetime, transfer all or any portion of his stock to his children, provided, however, that any stock so transferred shall be subject to all 3 . ,( SAlOIS WFF, FLOWER & LINDSAY \TTQRNEYS'AT'\.AW ! 109 Market Street Camp Hill. PA the restrictions of this Agreement, as if the transfer had not been made and the. stock were still owned by the Shareholder, including, without limitation, the restrictions of paragraph 2 on lifetime transfers and the provisions of paragraph 3 on mandatory repurchases. 3. Option to Repurchase. Upon the occurrence of any of the following events, and subject to the provisions of paragraph 4 hereinafter stated there shall be options to acquire all or part of a Shareholder I s stock in the manner hereinafter described: A. The death of a Shareholder. B. The cessation of a Shareholder, for any reason, to be an employee of Corporation; a petition by or against any or State bankruptcy, liquidation debtor relief legislation, pro- a petition filed against a not dismissed wi thin 30 days C. The filing of Shareholder under any Federal or insolvency statute or other vided that in the case of Shareholder, such petition is after its filing; or D. The assignment by a Shareholder for the benefit of his creditors. (1) Upon the occurrence of any of the aforesaid conditions, the Corporation shall have the option, for a period of 75 days after notice received, to purchase any shares owned by the affected Shareholder. The exercise of the option by the Corporation shall be to purchase the shares at a price equal to the share value as hereinafter set forth in Paragraph 5 and shall be payable as set forth in Paragraph 7. Such option shall be exercised in writing by notice to a deceased Shareholder 1 s personal represen- tative, the Shareholder, the bankruptcy trustee, or the assignee of the Shareholder (as the case may be), with copies to the other Shareholders, stating the number of shares the Corporation elects to purchase. If the Corporation. If the Corporation elects not to purchase any of the shares owned by said Shareholder, the secretary of the Corporation shall give written notice to that effect to the personal representative of a deceased Shareholder, or to the Shareholder, or bankruptcy trustee 4 or assignee, later than notice. with copies to the surviving Shareholders not 75 days after the Corporation's receipt of (2) If the Corporation does not exercise its option to purchase all the shares owned by the deceased or other Shareholder, the surviving Shareholders shall have the option, for a period of 15 days following receipt of the election notice or the non-purchase notice (as the case may be), to purchase said shares not purchased by the Corporation. The price per share shall equal the share value as hereinafter set forth and shall be payable as set forth in Paragraph 5. Any surviving Shareholder desiring to acquire any part or all of said shares not purchased by the Corporation shall deliver to the deceased Shareholder1s personal representative, the Shareholder, or the trustee or assignee (as the case may be) a written election to purchase the shares or a specified number of them. If the total number of shares specified in the purchasing Shareholders' notices exceeds the total number of available shares, each purchasing Shareholder shall have priority up to the number of shares specified in the notice to purchase such portion of the available shares as the number of shares that the purchasing Shareholder holds bears to the total number of shares held by all the purchasing Shareholders. (3) In the case of the death of a Shareholder, it' the Corporation and/or the surviving Shareholders do not purchase all of the shares of the deceased Shareholder, the personal representative of the deceased Shareholder shall have the right to require the Corporation to purchase the remaining shares i provided, however, that the purchase price, at the election of the Corporation, shall be either the price as set forth in Paragraph 5 herein or shall be the fair market value of the shares as determined by one or more independent appraisers selected by the Corporation. The cost of such appraisal shall be borne by the Corporation. 4. Death of a Shareholder. At death, Richard F. Fager Jr. and Bryce Fager shall be free to bequeath their shares of SAIDIS HUFF, FLOWER & LINDSAY Class A Voting Common Stock or any part thereof to each other, ATIORNEYS.AT.LAW 2109 Market Street Camp Hill. PA and Delroy D. Brosius shall be free to bequeath his shares of Class A Voting Common Stock or any part thereof to Darwin K. 5 I ..~ SAlOIS HUFF, FLOWER & LINDSAY ATIORNEYS'AT'!.AW 2109 Market Street Camp Hill. PA Brosius, Darrel C. Brosius or Harold R. Brosius. The parties to this Agreement shall be free to bequeath their shares of Class B Non-voting Common Stock to their children who are full- time employees of the Corporation or to their father, whether or not they are full-time employees. Any shares of stock which are not bequeathed to family members as aforesaid may be purchased by the Corporation or the other Shareholders in accordance with the terms of this Agreement. The value of the shares of stock shall be determined in accordance with the provisions of Paragraph 5 of this agreement. In addition to the value of the stock as determined in accordance with Paragraph 5, the company shall pay to the spouse of the deceased Shareholder or to the deceased Shareholder's estate if he does not have a spouse surviving him, a salary in monthly installments for a period of 12 months equal to one-fourth of the salary paid to the deceased Shareholder during the 12 months immediately preceding his death. Upon approval of a majority of the holders of Class A Voting Common Stock and the Board of Directors, a Shareholder may provide for the transfer, at his death, of either Class A or Class B shares to his spouse or children or to a trust for his spouse or children. 5. Valuation of Securities. The value of the stock and the price to be paid therefor, in the event of a sale for which valuation under this paragraph 5 is required, shall be as follows: 6 SAlOIS HUFF, FLOWER & LINDSAY A ITORNEYS' A r'LA W 2109 Market Street Camp Hill, PA A. The value of such stock, for the purposes of this Agreement, shall be the book value of the shares and shall be the same value whether Class A or Class B stock. Book value shall be determined by the Corporation's independent regularly engaged accountant in accordance with sound accounting princi- ples and practices on a basis consistent with prior years, and any such determination shall be final, conclusive and binding on the parties. The total purchase price for the stock being sold shall be that proportion of the total book value of the Corporation as the total of the shares of stock being sold bears to the total issued and outstanding stock of the Corporation, and the per share price shall be computed by dividing the total number of shares to be sold into the above total purchase price. Consideration may be given to whether or not the shares represent a minority interest in the Corporation. B. In the case of death of a Shareholder, the value of the shares shall be increased by any death tax liability resulting to the estate of the deceased Shareholder on account of a higher value having been placed on said shares as a result of a final determination of their value by the Internal Revenue Service or Pennsylvania Department of Revenue or its counterpart. 6. Loans. In the event that, at the time of sale of all or a portion of the stock of a Shareholder to anyone there are loans or other indebtedness of such Shareholder or his estate payable to the Corporation, such loans or other indebtedness shall be repaid to the Corporation out of the proceeds of such sale and each Shareholder hereby assigns to the Corporation the paYments of such stock first falling due to an amount sufficient to pay such indebtedness and any interest that may be or become due thereon. 7 . Manner of Payment. The purchase price for stock valued under paragraph 5 hereof shall be paid in the following manner: 7 A. 20% of the total or the entire proceeds of any insurance owned by the Corporation on the life of the Shareholder whose stock is being sold, whichever is greater ("initial payment"), within 60 days after the maturing of the obligation to purchase, and the balance in 48 equal consecutive monthly installments with interest on the unpaid balance from the due date of such initial payment at the rate of 16% per annum, the first installment being payable on the first day of the first calendar month following the month in which the initial payment is made. Any installment may be prepaid at any time without premium or penalty. B. The obligation to pay the purchase price, as aforesaid, shall be evidenced by a promissory note (the "note") executed and secured as follows: (i) in the event of a sale to Corporation, the note shall be executed by the Corporation; (ii) in the event of a sale to one or more of the other Shareholders, the note or notes shall be executed by the respective purchasing Shareholders, with respect to the stock which each purchases; (iii) the notes shall be secured by a pledge of the stock sold, upon the following terms and conditions: After the stock sold is registered in the name of the buyer, the buyer shall deliver the stock to the seller endorsed in blank for transfer, and the seller shall retain and hold the stock as security for the note. Upon the occurrence of any of the events referred to in sub- paragraph 6.C. hereof, the seller shall, in addition to the exercise of any other available remedies, be entitled to offer the stock at public or private sale. ATfORNEYS-AT-1.AW 2109 Markel Street Camp Hill, PA The seller shall be entitled to bid for and purchase any or all of the stock at any such public sale, and if the seller is the successful bidder, the obligation of the buyer in default shall be deemed to be fully satisfied by the proceeds of the sale, even if insufficient to satisfy the obligations. Notice of foreclosure and all other statutory requirements of such sale shall be deemed waived by the buyer, except that the buyer whose stock is to be offered for sale shall be given ten days notice of the time and place of such sale. The proceeds of any such sale shall be applied first to pay the expenses of conducting such sale, including reasonable legal fees incurred in connection therewith, then to pay any balance due the seller of such stock by the buyer thereof, with any surplus to be paid to the buyer in default. SAlOIS HUFF, FLOWER & LINDSAY 8 j . SAlOIS HUFF, FLOWER & LINDSAY ATfORNEYSoAToLAW 2109 Markel Street Camp Hill. PA Upon payment in full by a buyer of the purchase price to a seller, the seller shall immediately return to the buyer the stock pledged with him. Further, during such pledge, but only so long as the buyer is not in default under his note, the buyer shall exercise and enjoy all of the right accruing from the ownership of said stock. C. The notes shall provide for acceleration of the entire unpaid balance and confession of judgment in the event of the following: (i) failure to pay any installment payment within seven days after written notice of failure to pay on its due date; and (ii) if the Corporation is the purchaser: levy or attachment upon any of the assets of the Corporation, which is not removed within 60 days from the making thereof, except that if the Corporation, in good faith, contests such levy or attachment, no default shall exist or be declared as long as the Corporation proceeds diligently and continually with such contest, or until all rights and time to contest the same have expired; or (iii) the buyer is adjudicated a bankrupt, makes an assignment for the benefit of creditors, or a receiver is appointed for its assets and is not removed ,within 30 days. D. If the Corporation is the purchaser, it will not, until the principal and interest of the note has been paid in full, without prior written consent of the holder of the note: (i) issue any shares of its stock, or any options, warrants or other rights which prior to payment in full of the note are exercisable for, or convertible into, shares of its stock; (ii) amend its Articles of Incorporation; (iii) sell, lease or substantially all of its assets; or all mortgage or (iv) liquidate, dissolve, or reduce its usual and normal operations. substantially 80 Resignations 0 Upon delivery to the seller of the money and/or obligations required for the purchase of all of a 9 Shareholder's stock, the Shareholder shall resign from any office or directorship in, or employment by, the Corporation. 9. Insurance. A. In order to aid in funding the purchase of stock after the death of a Shareholder, the Corporation may purchase, own and become the beneficiary of insurance policies on the lives of each of the Shareholders. Upon the sale by a Shareholder during his lifetime of all his stock, either to the Corporation or to the other Shareholder, the selling Shareholder may, within 30 days after the date of such sale, purchase from the Corporation, for the cash value thereof, any policies of insurance on the life of such selling Shareholder then owned by the Corporation. B. Upon the death of any Shareholder, the proceeds of any insurance owned by the Corporation on the life of the deceased Shareholder shall be applied in the following order: (i) to the repayment of any loans, outstanding at the time of the deceased Shareholder1s death, from the deceased Shareholder to the Corporation, (ii) to the repayment of any loans, out- standing at the time of the deceased Shareholder's death, from any other person or entity to the Corporation, the paYment of which is guaranteed by the deceased Shareholder, and (iii) to the payment of the purchase price for the purchase by the Corporation of the deceased Shareholder's stock. 10. s. Corporation. It is further agreed: SAIDIS HUFF, FLOWER & LINDSAY AITORNEYS'AT'l.AW 2109 Market Street Camp Hill, PA A. Each Shareholder hereby reaffirms such Shareholder's consent to the election by the company to be treated, for federal and state income tax purposes, according to the provisions of Subchapter S of the Code, ~~ 1361 et seq. (the "election"), effective for the company's fiscal year beginning February 1, 1992, and to the company's taxable income being taxed directly to the Shareholders as provided under the provisions of the Code and otherwise under applicable law, whether or not such taxable income is distributed to the Shareholders. Each Shareholder further agrees that it is ~n the best interest of the company to make the election and to maintain the election in effect until revoked or terminated as provided in H below and each Shareholder further agrees to comply with all requirements under the Code or otherwise maintain the election in effect until revoked or terminated as provided in H below. Notwithstanding anything to the contrary in this Agreement, each Shareholder further agrees that no transfer or other disposition of shares of capital stock 10 (whether voluntary or involuntary by operation of law or otherwise) will be made or consented to by such Shareholder or otherwise will be permitted which would have the effect of terminating or revoking the election, and any such attempted transfer or other disposition of shares of capital stock shall be void and of no further force and effect. B. The company hereby agrees to use its best efforts to maintain the election in effect until revoked or terminated pursuant to H below, and will refrain from any action which would result in a termination or revocation of the election. C. No disposition for any shares of shall be effected unless and until the transferor opinion of counsel, acceptable to the company, disposition will not adversely affect the election. the company received an that such D. No amendments and/or modifications shall be executed with respect to the governing instrument of any Shareholder subj ect to Subchapter J of the Code, ~~ 641 et ~, unless and until such amendments and/or modifications are approved by an opinion of counsel acceptable to the company. Approval of such an amendment or modification will be given only if such amendment or modification will not adversely affect the election. E. Each Shareholder and the company hereby acknowledges and agrees that any breach of this paragraph 10 by any Shareholder or the company would cause irremediable damage to the company and/or the other Shareholders and that such damage would be exceedingly difficult to calculate. Accordingly, in the event that any Shareholder or the company shall breach or attempt to breach the terms of this paragraph 10, each Shareholder and the company shall be entitled as a matter of right, in addition to compensatory damages, to obtain from any court of competent jurisdiction an injunction (i) prohibiting further breaches of this paragraph 10, (ii) rescinding any action taken contrary to this paragraph 10, and/or (iii) specifically enforcing the terms of this paragraph 10. ATfORNE\,S'AT'LAW 2] 09 Market Street Camp Hill, PA F. In the event that shares are purchased by the company or the Shareholders, or any of them, under paragraph 2 or 3 of this Agreement while the company is an S Corporation, the company and the Shareholders agree to elect the pro-ration method as provided in ~ 1377 (a) (1) of the Code for such allocations, such method shall be elected if all of the following conditions are met: SAlOIS ;HUFF, FLOWER & LINDSAY 11 ,./ I I SAIDIS HUFF, FLOWER & LINDSAY AITORNEYS'AT'!.A W 2109 Market Street Camp Hill. PA 1. The party desiring to agree to pay all accounting and associated with its being elected. use such method legal fees and shall costs 2. The party desiring to use such method shall give written notice to all other parties to the transaction within 30 days following exercise of an option to purchase pursuant to subsection 2 or 3 of this Agreement. 3. If a party to a purchase consists of more than one individual or entity, then the decision of the part shall be determined by a majority vote, with each individual or entity voting the number or shares being purchased or sold by him/it. Such vote shall be binding on all persons and/or entities comprising of the party. 4. If both purchaser and seller desire to use the interim closing of the books method, the fees and costs described in 1. above shall be equally shared. G. The Shareholders, and each of them, and the company agree to make, execute and deliver any and all documents and to do and perform any and all such further acts and things, as shall be or become necessary, proper or convenient to carry out, put into effect or make operative their respective agreements contained herein. H. Revocation of Election. The company's election to be treated as an S Corporation shall be revoked upon the occurrence of one of the following events: 1. The Shareholders of the company, by affirmative vote of at least 60% of the votes which all of the company's Shareholders are entitled to cast, determine to terminate the company's status as an S Corporation, and thereafter provide each Shareholder with written notice of such determination; or 2. The percentage representing the sum of the maximum federal and state individual income tax rates (the "Maximum Marginal Rate") in effect for any taxable period exceeds 50% and any Shareholder elects to cause the company to terminate the company's status as an S Corporation, and thereafter provides each Shareholder with written notice of such election. In the event of a revocation of the election pursuant to this subparagraph 10-H within 60 days after the delivery of the required notice, each Shareholder, if 12 "I' , requested, will execute a consent to the revocation of the election in the form prescribed by the Internal Revenue Service and shall deliver such consent to the Secretary of the company. I. Inadvertent Termination of Subchapter S Election. In the event of a termination of the company's status as an S Corporation, if the company and the Shareholders remaining after termination desire that the company's status as an S Corporation be continued, the company and such Shareholders agree to use their best efforts to obtain from the Internal Revenue Service a waiver of the terminating events on the ground of inadvertency. The company and such Shareholders further agree to take such steps, and make such adjustments, as may be required by the Internal Revenue Service pursuant to ~ 1362 (f) (3) and (4) of the Code. The Shareholder who caused the terminating event to occur shall bear the expense of procuring the waiver, including the legal, accounting and tax costs of taking such steps, and of making such adjustments as may be required. J. No Adj ustments to Price. In establishing the purchase price, the Shareholders have considered the company's status as an S Corporation and have determined that no adjustments shall be made to the purchase price of any stock on account of the company's tax status as an S Corporation. SAlOIS HUFF, FLOWER & LINDSAY K. Dividends to Pay Tax Liabilities. 1. With respect to any taxable period of the company during which it is an S corporation, 30 days. before any Shareholder is required to remit a quarterly estimated tax payment to any taxing authority, the company shall declare and pay a dividend to all Shareholders in an amount equal to one- fourth times (i) that portion of the company's income attributed to such Shareholder (or which would have been attributed to a person owning the percentage interest in the company of such Shareholder) for the most recent complete taxable period of the company, multiplied by (ii) the maximum marginal rate then in effect or 50%, whichever is smaller, less (iii) the amount of any dividends declared and paid by the company since the last dividend pursuant to this subparagraph 10. K.1. excluding dividends pursuant to subparagraph 10. K.2. below. ATTORNEYS-AT.lAW 2109 Market Street Camp Hill. PA 2. With respect to any taxable period of the company during which it is an S corporation, within 30 days after the company files its federal income tax return, Form 1120S, for such taxable period, the company shall promptly declare and pay a dividend to all Shareholders in an amount equal to 13 -I . , SAIDIS HUFF, FLOWER & LINDSAY ATTORNEYS' A T.LA W 2109 Market Street Camp Hill, PA (i) that portion of the company's income attributed to such Shareholder during such taxable period multiplied by (ii) the maximum marginal rate in effect for such taxable period or 50%, whichever is smaller, less (iii) the amount of any dividends declared by the company during such taxable period. The company's obligation to declare and pay such a dividend to the Shareholders in such an amount is subject to the restrictions governing dividends under the Pennsylvania Business Corporation Law and such other pertinent governmental restrictions as are now, or may hereafter become effective. If the company at the time of the request does not have sufficient funds available to permit it lawfully to declare and pay such dividend, the Shareholders and the company shall take such action, adopt such resolutions, and cause such certificates and other documents to be filed as may be necessary to create sufficient funds to permit the paYment of such dividend, whereupon the company shall declare and pay such dividend. If the maximum marginal rate exceeds 50% at any time, the company's status as an S corporation may be terminated at the option of any Shareholder as provided in lO.H, above. 11. Shareholder Wills. Each Shareholder agrees to include in his will a direction and authorization to his executor to comply with the provisions of this Agreement and to sell his shares in accordance with this Agreement; and, if the company is an S corporation at the time of such Shareholder's death, to take such action as may be necessary to maintain the company's status as an S corporation; provided, however, the failure of any Shareholder to do so shall not the validity or affect enforceability of this Agreement. 12. Limitation on Company's Option. If the exercise of any option granted herein to the company would result in a distribution taxable as ordinary income to the disposing Shareholder under any provisions of the Internal Revenue Code, and there is no reasonable opportunity for disposing Shareholder 14 SAlOIS iHUFF, FLOWER & LINDSAY ATTORNEYS-AT-LAW 2109 Market Street Camp Hill. PA to avoid this result, such option shall not be exercised without disposing Shareholder's approval. As to this question, the opinion of counsel mutually acceptable the disposing to Shareholder and the company, or a ruling by Internal Revenue Service to this effect, shall be binding upon the disposing Shareholder and the company. 13. Endorsement on Certificates. Upon the execution of this Agreement, the certificates for the stock subject hereto shall be surrendered to the Corporation and endorsed as follows: This certificate is subject to, and is transferable only upon compliance with, an Agreement entered into as of the day of , between and among R. F. Fager Company and certain of its Shareholders, a copy of which is on file in the office of the Corporation. After endorsement, the certificates for the stock shall be. returned to the Shareholders, who shall be entitled to exercise all rights of ownership of such certificates under the Articles of Incorporation of the Corporation. All certificates for stock hereafter issued to or transferred by Shareholders shall bear the same endorsement. 14_ Termination of Agreement_ This Agreement shall be effective for a period of three years from the date hereof and thereafter shall be renewed automatically from year to year unless and until a majority of the Shareholders of the Class "A" voting stock shall agree to its termination by a vote taken 15 ',' . SAIDIS HUFF, FLOWER & LINDSAY ATfORNEYS'AT'LAW 2 J 09 Market Street Camp Hill. PA at a regularly scheduled meeting of the Corporation; provided, that, this Agreement shall terminate upon the occurrence of any of the following events: A. Cessation of the Corporation's business; B. the Corporation; Bankruptcy , receivership or dissolution of C. Shareholders; or The voluntary agreement of the then D. As to any Shareholder, upon his ceasing to own any stock in the Corporation, after which time he shall no longer be included within the meaning of the term IIShareholder" or "Shareholders.1I Upon termination of this Agreement, each Shareholder shall cause to be surrendered to the Corporation certificates for the stock registered in his name, and the Corporation shall issue to him or her like certificates for the stock without the endorsement set forth in Paragraph 13 hereof. 15. Further Assurances. Each of the parties agrees to take such action and execute and deliver such documents as may be reasonably necessary or appropriate to effectuate the terms of this Agreement. 16. Applicable Law. Pennsylvania law shall govern the validity, construction, interpretation, and effect of this Agreement. 17. Benefit. This Agreement shall be binding on, and inure to the benefit of, the parties hereto and their respective heirs, executors, administrators, successors, and 16 . ~ c.:. SAIDIS :HUFF, FLOWER & LINDSAY ATIORNEYS'AT'LAW 2\ 09 Market Street Camp Hill. PA assigns. 18. Entire Agreement. This Agreement constitutes the entire understanding between the parties with respect to the subj ect matter hereof r no other representations or covenants having induced any party to enter into this Agreement. This Agreement may not be amended or modified in any manner except by a written agreement executed by the party to be charged. 19. Reduction of Capital. Ifr the time the at Corporation is required to make paYment of the purchase price for the stock of a Shareholder hereunder, its surplus is insufficient for such purpose r the Corporation and the other Shareholders shall promptly take all required action to reduce the capital of the Corporation to the fullest extent possible to permit the purchase of such stock by the Corporation. 20. Arbitration. Any controversy or claim arising out of or relating to this Agreement shall be settled by arbitrationr at Philadelphiar PA in accordance with the then current Rules for Commercial Arbitration of the American Arbitration Associationr and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. 21. Headings. The paragraph headings of this Agreement are for convenience of reference only and do not form a part of the terms, conditions, or covenants of this Agreement or give full notice thereof. 17 SAIDIS 'HUFF, FLOWER & LINDSAY ATIORNEYS'AT'LAW 2109 Markel Street Camp Hill. PA 22. Notices. All notices, offers, or exercises of options required or permitted by this Agreement shall be in writing and sufficiently given only if mailed by certified or registered mail, return receipt requested, to the party to receive notice at the following addresses, or at such other address as any party may, by notice, direct: If to Richard F. Fager, Jr. : 2056 State Road, Camp Hill, PA If to Delroy D. Brosius: 2056 State Road, Camp Hill, PA If to Darwin K. Brosius: 2056 State Road, Camp Hill, PA If to Darrel C. Brosius: 2056 State Road, Camp Hill, PA If to Harold R. Brosius: 2056 State Road, Camp Hill, PA If to Bryce Fager: 2056 State Road, Camp Hill, PA If to the Corporation: 2056 State Road, Camp Hill, PA 23. Miscellaneous. It is further agreed that: A. Upon termination of shall be forthwith released of and obligations under this Agreement, accrued prior to termination. this Agreement, each party from any and all rights and except such as may have B. Notwithstanding the language of this Agreement, the purchase of any shares by the company pursuant to this Agreement shall be deemed redemption thereof. Shares thus redeemed may be held as treasury stock or returned to the status of authorized but unissued shares, as determined by company's board of directors. The company's right to exercise the option and its obligation to purchase the shares is, however, subject to the restrictions governing the right of a corporation to purchase its own stock in pennsylvania Business Corporation Law Section 701 and such other pertinent governmental restrictions as are now, or may hereafter become, effective. If the company does not, at any time, have sufficient surplus available to permit it lawfully to exercise its option or to purchase any or all shares which it may purchase, the date 'by which it must exercise its option or make 18 such purchase shall be extended 30 days and the acquiring Shareholders and the company shall take such action, adopt such resolutions, and cause such certificates and other documents to be filed as may be necessary to create sufficient surplus to permit the purchase to the extent legally possible. C. This Agreement shall be binding on, and shall inure to the benefit of, the parties to it and their respective heirs, legal representatives, successors, and assigns, provided that no transferee or successor in interest who holds shares of capi tal stock free of the terms of this Agreement shall be entitled to any benefit hereunder unless such transferee or successor in interest becomes party hereto. D. This Agreement represents the entire agreement of the parties on the subject matter hereof, and cancels and supersedes any prior verbal or written agreement between the parties hereto pertaining to the subject matter hereof. E. Whenever necessary for the interpretation of this Agreement, pronouns of any gender shall be deemed synonymous, as shall singular and plural pronouns. F. This Agreement shall be governed in all respects whether as to the validity, construction, capacity, performance or otherwise, by the laws of the Commonwealth of Pennsylvania. G. This Agreement may be executed in several counterparts each of which shall be deemed an original, but together they shall constitute one and the same instrument. H. Each term and provision of this Agreement shall be treated as severable, to the end that, if "anyone or more such terms or provisions shall be adjudged or declared illegal, invalid or unenforceable, this Agreement shall be interpreted and shall remain in full force and effect as though such term or provision had never been contained in this Agreement. I. Each party to this Agreement agrees to perform any further acts and execute and deliver any documents that may be reasonably necessary to carry out the provisions of this Agreement. SAIDIS HUFF, FLOWER & LINDSAY ATTORNEYS'AT'LAW 2109 Market Street Camp Hill, PA J . Except as provided in Paragraph 9, provisions of this Agreement may be waived, altered, repealed, in whole or in part, only on the written all parties to this Agreement. above, the amended or consent of K. compelled to, (i) The Company will not, nor may it be recognize any transfer, or issue any certificate 19 representing any capital stock to any person who has not delivered to the company (a) a written undertaking to be bound by the terms and conditions of this Agreement and (b) for so long as the company's status as an S Corporation continues, a written consent to the treatment of the company as an S Corporation. The company will not, nor be compelled tOI recognize any transfer, or issue any certificate representing any capital stock to any personl the transfer to whom or to whichl in the opinion of the company's counsel, could disqualify the company as an S Corporation. (ii) The company will notl nor may it be compelled tOI recognize any transfer made other than in accordance with the terms of this Agreement I nor will it issue any certificate representing the capital stock to any person who has received such capital stock in a transfer made other than in accordance with the terms of this Agreement. IN WITNESS WHEREOF, the Corporation and Shareholders have set their hands and seals the day and year first above appearing. SAlOIS iHUFF, FLOWER & LINDSAY ATfORNEYS'AT'LAW 2 I 09 Market Street Camp Hill, PA ATTEST: (SEAL) Jr. (SEAL) 20 R. F. FAGER COMPANY AND SUBSIDIARY (An S Corporation) CONSOLIDATED FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION YEARS ENDED DECEMBER 31, 2004 AND 2003 R. F. FAGER COMPANY AND SUBSIDIARY TABLE OF CONTENTS Page Accountant's Report on Financial Statements 1 Financial Statements Consolidated Statements of Assets, Liabilities, and Stockholders' Equity - Income Tax Basis 2 Consolidated Statements of Revenues and Expenses - Income Tax Basis 4 Consolidated Statements of Changes in Stockholders' Equity - Income Tax Basis 5 Consolidated Statements of Cash Flows - Income Tax Basis 6 Notes to Financial Statements 7 Supplementary Information Schedules of Cost of Revenues and Selling and Administrative Expenses (Schedule #1 and Schedule #2) 15 Schedules of Other Income (Expense) (Schedule #3) 16 R. F. Fager Company Camp Hill, Pennsylvania We have reviewed the accompanying consolidated statements of assets, liabilities, and stockholders' equity income tax basis of R. F. Fager Company (an S Corporation) and subsidiary, as of December 31, 2004 and 2003, and the related consolidated statements of revenues and expenses, changes in stockholders' equity, and cash flows for the years then ended, all prepared on the basis used for income tax reporting purposes, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these consolidated financial statements is the representation of the management of R. F. Fager Company and subsidiary.. A review consists principally of inquiries of Company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements in order for them to be in conformity with the income tax basis of accounting as described in the Summary of Accounting Policies. Our reviews were made for the purpose of expressing limited assurance that there are no material modifications that should be made to the consolidated financial statements in order for them to be in conformity with the income tax basis of accounting, as described in the Summary of Accounting Policies. The data presented in the supplementary information accompanying the consolidated financial statements is presented only for supplementary analysis purposes. Such information has been subj ected to the inquiry and analytical procedures applied in the reviews of the basic consolidated financial statements. This information is presented on the income tax basis of accounting, and we did not become aware of any material modifications that should be made thereto. 9vlc1(onfy et Jls6ury, LLP Harrisburg, Pennsylvania February 25, 2005 R. F. FAGER COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY - INCOME TAX BASIS DECEMBER 31, 2004 AND 2003 ASSETS Total current assets 2004 2003 $ 895,774 $ 703,156 2,901,302 2,389,704 1,175 4,594 70 4,407 5,343 3,323,012 2,941,752 7,704 4,903 50,000 50,000 7,183,444 6,099,452 3,772,991 3,984,775 776,231 767,973 3,381,851 3,314,468 729,948 716,385 401,240 362,618 5,289,270 5,161,444 (2,144,416) (1,937,822) 3,144,854 3,223,622 9,986 50,000 100,000 50,000 109,986 $ 14,151,289 $ 13,417,835 Current assets Cash and cash equivalents Receivables Trade, (net of allowance for doubtful accounts of $115,411 and $90,558) Employees Officers Interest receivable Inventory Prepaid expenses Note receivable, current portion Investments Property, plant, and equipment Land Buildings Autos and trucks Equipment Accumulated depreciation Other assets Cash value of life insurance Note receivable, net of current portion Total assets See accompanying notes and accountant's report. 2 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current portion of long-term debt Demand notes payable - officers Accounts payable - trade Accrued liabilities and withholdings Pennsylvania sales tax Employee payroll deductions Interest Payroll Payroll taxes Pension and profit sharing Deposits Total current liabilities Long-term debt, notes payable - bank Stockholders' equity Common stock Class A, voting, par value $10 per share; authorized 100 shares, issued and outstanding 100 shares Class B, nonvoting, par value $10 per share; authorized 5,000 shares, issued and outstanding 5,000 shares Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 3 2004 2003 $ 155,404 $ 177,229 30,000 30,000 1,763,864 1,496,029 119,334 97,910 35,866 51,757 900 481 231,952 203,491 1,168 1,354 110,000 110,000 89,649 53,730 2,538,137 2,221,981 846,178 1,049,596 1,000 1,000 50,000 50,000 10,715,974 10,095,258 10,766,974 10,146,258 $ 14,151,289 $ 13,417,835 R. F. FAGER COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES - INCOME TAX BASIS YEARS ENDED DECEMBER 31, 2004 AND 2003 2004 2003 Net revenues $ 28,320,565 $ 29,353,734 Cost of revenues 23,626,302 24,609,340 Gross profit 4,694,263 4,744,394 Selling and administrative expenses 4,224,694 4,512,542 Operating income 469,569 231,852 Other income 151,147 209,628 Net income $ 620,716 $ 441,480 See accompanying notes and accountant's report. 4 R. F. FAGER COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - INCOME TAX BASIS YEARS ENDED DECEMBER 31, 2004 AND 2003 Common Stock Retained Class A Class B Earnings Total Balance - January I, 2003 $ 1,000 $ 50,000 $ 10,022,016 $ 10,073,016 Net income 441,480 441,480 Sale of subsidiary (318,233) (318,233) Distributions (50,005) (50,005) Balance - December 31, 2003 1,000 50,000 10,095,258 10,146,258 Net income 620,716 620,716 Balance - December 31, 2004 $ 1,000 $ 50,000 $ 10,715,974 $ 10,766,974 See accompanying notes and accountant's report. 5 R. F. FAGER COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS - INCOME TAX BASIS YEARS ENDED DECEMBER 31, 2004 AND 2003 2004 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities Depreciation (Gain) loss on sale Subsidiary Equipment Investments (Increase) decrease in cash value of life insurance (Increase) decrease in Trade receivable Interest receivable Prepaid expenses Inventory Increase (decrease) in Accounts payable Accrued liabilities and withholdings $ 620,716 243,124 (1,000) 6,026 9,986 (508,249) 936 (2,801) (381,260) 267,835 70,146 Net cash provided by operating activities 325,459 Cash flows from investing activities Purchase of property, plant and equipment Proceeds from sale of subsidiary Proceeds from sale of equipment Proceeds from sale of investments Purchase of investments Advances on note receivable Payments on note receivable (164,356) 1,000 2,475,086 (2,269,328) 50,000 Net cash provided by (used in) investing activities 92,402 Cash flows from financing activities Net borrowings on line of credit Proceeds from note payable - bank Payments on notes payable - bank Proceeds from note payable - officer Distributions to stockholders (225,243) Net cash provided by (used in) financing activities (225,243) Net increase (decrease) in cash and cash equivalents 192,618 Cash and cash equivalents - beginning 703,156 Cash and cash equivalents - ending $ 895,774 See accompanying notes and accountant's report. 6 2003 $ 441,480 333,485 (250,000) 6,698 (547) (292,076) 359 (15,837) (131,943 ) 370,963 89,975 552,557 (1,776,968) 250,000 1,349,450 (1,091,635) (250,000) 100,000 (1,419,153) 1,677 990,000 (177,729) 25,000 (50,005) 788,943 (77,653) 780,809 $ 703,156 R. F. FAGER COMPANY AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS SUMMARY OF ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of R. F. Fager Company (the Company) and its wholly owned subsidiary. R. F. Fager Company, located in Camp Hill, Pennsylvania, was incorporated November 4, 1974. The Company and its subsidiary, Colt Plumbing Company, sell and service plumbing and heating equipment and supplies. The Companies grant credit to customers, substantially all of whom are located in the state and, generally, require no collateral from their customers. All material intercompany balances and transactions have been eliminated in consolidation. On November 13, 1996, Colt Plumbing Company issued 10,000 shares of common stock. On that same date, R. F. Fager Company acquired the 10,000 shares of common stock of Colt Plumbing Company, which represents 100% of the total shares outstanding. On September 30, 2003, Colt Plumbing Company was sold to its vice president. Method of Accounting The financial statements are prepared on the accounting basis used for the Company's federal income tax return. Consequently, accelerated depreciation methods are used, including the use of the Accelerated Cost Recovery System, as subsequently modified by the Tax Reform Act of 1986. Accordingly, the accompanying financial statements are not intended to present financial position and results of operations in conformity with accounting principles generally accepted in the United States of America. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be "cash equivalents." Inves tmen ts The Company classified its marketable debt and equity securities as available for sale. Securities classified as available for sale are carried in the financial statements at cost. Realized investment gains and losses, determined using the specific identification method, are included in earnings. Trade Accounts Receivable The Company is on the method for bad debts. The allowance is estimated from historical performance and projections of trends. Accounts receivable are typically due net 30 days after the issuance of the invoice. Receivables past due more than 30 days are considered delinquent. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customers. The Company charges interest to its customers for delinquent accounts at a monthly rate of 1~%. (continued) 7 R. F. FAGER COMPANY AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS SUMMARY OF ACCOUNTING POLICIES (Cont'd) Inven tory Inventory is valued at lower of cost or market using the first-in, first-out (FIFO) method. Property, Plant, and Equipment Property, plant, and equipment are carried at cost. Depreciation is being provided on accelerated methods over the lives prescribed for tax purposes, rather than depreciated over the estimated useful lives of the assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized and deductions are made for retirements resulting from the renewals or betterments. Use of Estimates The preparation of financial statements in conformity with accounting principles used for income tax reporting purposes requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Reclassification Certain items in the 2003 financial statements have been reclassified to conform with the presentation of the 2004 financial statements. NOTE RECEIVABLE The note is due in three equal installments of $50,000, plus interest at 5%, on September 30, 2004, 2005, and 2006 from Colt Plumbing, Inc. The sole shareholder of Colt Plumbing, Inc. has personally guaranteed the note. The total balance due was $100,000 and $150,000 as of December 31, 2004 and 2003. (continued) 8 R. F. FAGER COMPANY AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS INVESTMENT SECURITIES The amortized cost and fair values of investment securities at December 31, 2004 follows: Amortized Cost State and municipal government debt securities Mutual funds Corporate equity securities $ 3,551,049 156,102 65,840 $ 3,772,991 $ Gross Unrealized Holding Gains $ 123,199 160 51,648 Gross Unrealized Holding Losses Fair Value 175,007 $ $ (19,685) (32,457) (13,023) $ 3,654,563 123,805 104,465 (65,165) $ 3,882,833 The amortized cost and fair values of investment securities at December 31, 2003 follows: Amortized Cost State and municipal government debt securities Mutual funds Corporate equity securities $ 3,763,000 155,736 66,039 $ 3,984,775 Gross Unrealized Holding Gains $ 187,310 860 35,104 Gross Unrealized Holding Losses Fair Value $ 223,274 $ $ (8,207) (41,394) (14,865) $ 3,942,103 115,202 86,278 (64,466) $ 4,143,583 The gross realized gains and losses on sales of investment securities were $1,064 and $(7,090) for the year ended December 31, 2004 and $2,845 and $(9,543) for the year ended December 31, 2003. The scheduled maturities of U.S. Treasury notes debt securities at December 31, 2004 follows: Due in one year or less Due from one year to five years Due from five years to ten years Due after ten years No stated maturity date and state and municipal government Cost Fair Value $ 402,178 $ 413,892 1,615,762 1,671,381 1,088,543 1,122,797 355,517 354,848 3,462,000 3,562,918 89,049 91,645 $ 3,551,049 $ 3,654,563 The Company has shares in mutual funds that have no stated maturity date. These mutual funds primarily invest in government debt securities. (continued) 9