Purpose of this assumption instruction schedule Orderly Liquidation Value generally cannot be ascertained directly from market evidence. Therefore, to derive the value, some appraisers gather information from auction values and move upwards due to greater market time and reduced duress of the sale. Other appraisers consider historic sales history and used market information, moving downwards due to the possibly shortened time frame and additional duress of the sale. Lenders also view Orderly Liquidation Value differently. Some consider six months to be the appropriate time frame, others four months. Some assume management is gone with the seller being an auctioneer or dealer, others assume management is in place. Also, the type of assets / inventory may make a difference in the approach, or the loan applicant’s financial conditions may change the assumptions. Due to these variances of valuation requests and methodology, this schedule is an attempt to assure that the appraiser is instructed in the assumptions to consider in completing the appraisal. Further, the appraisal buyer (authorizer) is encouraged to communicate with the appraiser concerning these and other assumptions both before the appraisal is completed, and after thoroughly reading all elements of the appraisal, particularly the assumptions, limiting conditions, and methodology. Definition Orderly Liquidation Value (”OLV”) is an opinion of the gross amount, expressed in terms of money, that typically could be realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date (per American Society of Appraisers). Selected Assumptions Selections below may consider balance sheet strength, overall repayment capability, loan to value ratio, additional (boot) collateral available, personal guaranty’s, the industry, management, and so forth. May Result in Higher Value o Six month selling time frame o Knowledgeable management / plant personnel will remain for the selected time period to assist in the asset sale and promotion of the assets being sold o The assets will be sold in place and in use (not applicable for inventory) o The seller will offer general assistance in the removal of the assets (fork lift trucks, use of cranes, etc.) o The firm will appear to continue in operation, albeit “winding down” during the early term of the sale o Manufacturing operations will be limited to completion of existing orders (if applicable) o All assets will be sold under an orderly  scenario in the allotted time frame May Result in Lower Value o Four month selling time frame o All personnel will be gone (the more “high tech” the assets / inventory the more management may be needed for the sale) o The assets will be removed from their location during the sale process o The purchaser will be responsible for the removal of the assets without any assistance from the seller o The firm will appear from the outset to be going out of business o Manufacturing will cease immediately o After four months, an auction will be planned for the sale of the remaining assets in 30 to 45 days Additional Possible Requirements of the Appraiser • Assume the asset / inventory quantification is correct • Test count the assets / inventory • Review and opine upon the reasonableness of the costing process • Estimate the costs of the sale process by percentage range estimate • Estimate the costs of the sale by line item detail (utilities, fees, etc.) • Intangible assets will be included in the sale of related tangible assets • Describe the sale procedures, discounts applied, etc. • Discuss the exit strategies to optimize the sale proceeds • State the value variance of each asset or group of assets (see observation below) • State the value variance in the aggregate (see observation below) • Suggest changes to the process that will facilitate future control, information, and valuations • Estimate the Forced Liquidation Value (auction) • Estimate the costs of a Forced Liquidation Value (auction) sale Observations 1. An appraisal is an estimate of value, as of a certain point in time, with assumptions of the sale as noted above. 2. It is the appraiser’s responsibility to be competent, to complete the valuation task in a professional and timely manner, and to do so at a fair fee. Further, the appraiser will not have any interest, directly or indirectly, in the values ascertained. 3. The appraiser’s opinion of value usually does not have a level of accuracy greater than plus or minus 10% in aggregate. 4. The appraiser will state within the appraisal report the possible level of variance. It is expected that the appraiser will use more time to appraise the higher valued assets or groups of assets. Also, inventory that is obsolete, slow moving or overstocked, assets requiring possible repackaging, and damaged goods will be particularly considered. 5. It is the lender’s decision to select the higher, mid-point, or lower position of the value range indicated in the appraisal. As an example, the appraiser may state the following: The appraisal has a variance of plus or minus 10%. The mid-point of the range represents our conclusion of value.