1. HOW TO VALUE YOUR BRAND AND OTHER “SOFT” ASSETS Part of the VALUATION 2015 Series Premier Date: September 11, 2015 HOW TO VALUE YOUR BRAND AND OTHER “SOFT” ASSETS ©2015

2. MEET THE FACULTY 2 ©2015 PANELISTS Richard ClaywellBusiness Valuation Garth TebayValue Defined HOW TO VALUE YOUR BRAND AND OTHER “SOFT” ASSETS MODERATOR Gary Frantzen, Alvarez & Marsal

3. Practical and entertaining education for business owners and executives, Accredited Investors, and their legal and financial advisors. For more information, visit www.financialpoisewebinars.com www.financialpoisewebinars.com DISCLAIMER: THE MATERIAL IN THIS PRESENTATION IS FOR INFORMATIONAL PURPOSES ONLY. IT SHOULD NOT BE CONSIDERED LEGAL ADVICE. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE WHAT MAY BE BEST FOR YOUR INDIVIDUAL NEEDS ©2015 3 HOW TO VALUE YOUR BRAND AND OTHER “SOFT” ASSETS

4. ABOUT THIS SERIES 4 ©2015 HOW TO VALUE YOUR BRAND AND OTHER “SOFT” ASSETS Valuation is used by financial market participants to determine the price they are willing to pay or receive to effect a sale of a business or an asset. The same valuation tools are often used by valuation experts to resolve disputes related to estate and gift taxation, divorce litigation, corporate disputes, allocate business purchase price among business assets, estimate the value of ownership interests for buy-sell agreements, shareholder disputes or estate planning as well as many other business and legal purposes. Attorneys often work with valuation experts.

5. ABOUT THIS EPISODE 5 ©2015 HOW TO VALUE YOUR BRAND AND OTHER “SOFT” ASSETS What is a brand and how do you value it? Is it the same as goodwill or is it an intangible asset or group of assets? This webinar will help attorneys understand how experts go about valuing soft assets.

6. EPISODES IN THIS SERIES EPISODE #1 Valuing a Business For a Sale2/6/15 EPISODE #2 Valuing Lost Profits for Litigation Purposes3/6/15 EPISODE #3 How to Select the Right Valuation Expert7/10/15 EPISODE #4 How to Value Your Brand and Other “Soft” Assets9/11/15 EPISODE #5 Valuation in the Context of Fraudulent Transfer or Preference Attack10/9/15 EPISODE #6 Valuing Real Estate11/6/15 6 HOW TO VALUE YOUR BRAND AND OTHER “SOFT” ASSETS ©2015 (Dates below are premier dates; all webinars also available on demand)

7. ALL ABOUT BUSINESS VALUATIONS What is a Brand? A brand is an asset or combination of assets such as a name, term, design, symbol or other feature intended to differentiate a product or service from those of others. A brand is usually represented by assets that may be subject to copyrights or other legal protection such as trade names, logos, trade dress, trademarks, internet domain names, tag lines, “jingles” and other intangible assets. Intangible Assets are nonphysical assets such as franchises, trademarks, patents, copyrights, goodwill, equities, mineral rights, securities, and contracts (as distinguished from physical assets) that grant rights and privileges and have value for the owner. – International Glossary of Business Valuation Terms as agreed to by the American Institute of Certified Public Accountants, American Society of Appraisers, Canadian Institute of Chartered Business Valuators, National Association of Certified Valuation Analysts, and The Institute of Business Appraisers Thus, a brand is generally a group of assets that would be considered a subset of intangible assets. 7

8. ALL ABOUT BUSINESS VALUATIONS Types of Intangible Assets 8 1. Intellectual Property (Legally Protected) Patents Trademarks Copyrights Trade Secrets 2. Intellectual Assets (Unregistered but Codified) Drawings Software Blueprints Documents Databases Formulas Recipes 3. Intellectual Capital (Uncodified Human and Organizational) Collective Corporate Knowledge Individual Employee Skills and Knowledge Know How Organizational Culture Customer Satisfaction

9. ALL ABOUT BUSINESS VALUATIONS Accounting Standards Codification 805: Categories of Identifiable Intangible Assets ASC 805-20-55 presents five categories of identifiable intangible assets: Marketing-related intangible assets Customer-related intangible assets Artistic intangible assets Contract-related intangible assets Technology-related intangible assets According to ASC 805, goodwill is also an intangible asset, although it is not an identifiable intangible asset 9

10. ALL ABOUT BUSINESS VALUATIONS ASC 805 Marketing-Related Intangible Assets Examples of marketing-related intangible assets: Newspaper mastheads Trademarks, service marks, trade names, collective marks, certification marks Trade dress Internet domain name Noncompetition agreements 10

11. ALL ABOUT BUSINESS VALUATIONS ASC 805 Customer-Related Intangible Assets Examples of customer-related intangible assets: – Customer lists – Customer contracts and related customer relationships – Noncontractual customer relationships – Order or production backlogs 11

12. ALL ABOUT BUSINESS VALUATIONS ASC 805 Artistic-Related Intangible Assets Examples of artistic-related intangible assets: – Plays, operas, ballets – Books, magazines, newspaper, and other literary works – Musical works such as compositions, song lyrics, and advertising jingles – Photographs, drawings, and clip art – Audiovisual material including motion pictures, music videos, television programs 12

13. ALL ABOUT BUSINESS VALUATIONS ASC 805 Contract-Related Intangible Assets Examples of contract-based intangible assets: License, royalty, standstill agreements Advertising contracts Lease agreements Construction permits Construction contracts Construction management, service, or supply contracts Broadcast rights Franchise rights Operating rights Use rights Servicing contracts Employment contracts 13

14. ALL ABOUT BUSINESS VALUATIONS ASC 805 Technology-Related Intangible Assets Examples of technology-based intangible assets: Patented or copyrighted software Design patents Mask works Unpatented technology and know-how Databases Trade secrets 14

15. ALL ABOUT BUSINESS VALUATIONS How Do Intangibles Create Value? Branding is a marketing strategy to build intangible assets that create a differentiated name and image in the market that will attract and retain customers. A brand and other intangible assets in general provide value through: Market Advantage/Power Premium pricing Reduced costs Increased market share Defensive Value / Freedom to Operate Defensive assets protect market share or pricing advantages Certain legally protected intangibles (i.e., intellectual property) create an arsenal to discourage lawsuits by others or from utilizing information Hinder competition from branding efforts or differentiating product 15

16. ALL ABOUT BUSINESS VALUATIONS Comparing Business Valuation and Intangible Asset Valuation Both business and asset valuation consider the same three approaches: income, market and cost. However, the methods within each approach may be different. Intangible asset valuation typically entails valuation of a single asset or small group of assets rather than the assemblage of all assets necessary to operate a business. Assets involve assessing an incremental benefit stream – specific cash flows attributed to intangible asset vs. total company available cash flow. Business valuation typically assumes an indefinite life – i.e. perpetual returns from a going concern, whereas most intangible assets are assumed to have a finite life/diminishing returns. 16

17. ALL ABOUT BUSINESS VALUATIONS Comparing Business Valuation and Intangible Asset Valuation The assessment and quantification of risk can vary significantly Finite life of assets Lack of “fungibility” – uniqueness of the asset to a specific business precludes it from being redeployed in another business. Intangible assets are less desirable as collateral. Market approach is more difficult to apply to intangible assets By definition, intangible assets are unique Lack of robust secondary market to observe arms-length trades – i.e. no stock market. Business valuation more often entails partial ownership interests that require a consideration of certain discounts and premia. Partial ownership of intangible assets is rare. 17

18. ALL ABOUT BUSINESS VALUATIONS Valuation Parameters Purpose of the valuation Standard of value Premise of value Valuation date 18

19. ALL ABOUT BUSINESS VALUATIONS Purpose of the Valuation Transaction advisory – Sale/purchase, licensing, M&A, joint ventures, etc. Strategic decision-making (i.e., IP management) – R&D planning, make v. buy, maintenance fees, etc. Tax regulation/planning – Transfer pricing, creation of IP holding/management companies Financial reporting – Purchase price allocation, value impairment Financing (i.e., use of IP as collateral) Bankruptcy Litigation Regulatory requirements Others The value of an asset may be different depending upon the purpose of the valuation 19

20. ALL ABOUT BUSINESS VALUATIONS Standard of Value The definition of value being utilized for a valuation Typically selected to match the purpose of the valuation – Certain purposes require the use of a specific standard of value Three primary standards of value – Fair market value/arm’s length standard – U.S. income, gift & estate tax reporting – Investment value (i.e., strategic value) – decision making – Fair value – U.S. GAAP for financial reporting The same asset may have vastly different values under different standards of value 20

21. ALL ABOUT BUSINESS VALUATIONS Premise of Value Operational Premise: Going concern (value in-use) - Assumes continued future use of the assets as a group. Liquidation (value in-exchange) – Assumes sale of assets piece-meal – Orderly (sold over reasonable period of time) – Forced (time-constrained - similar to auction; i.e., “fire sale”) Valuation Premise: Value in-exchange – the value of an asset or business interest assuming it will be changing hands in a real or hypothetical sale Value to the holder – the value of an asset or business interest assuming it is not being sold but instead is being maintained in its present form by its present owners. The same asset may have vastly different values under different premises of value 21

22. ALL ABOUT BUSINESS VALUATIONS Valuation Date All valuations only represent a snapshot in time and are performed as of a specific date to be clearly identified for the user The value of the same asset can change from one date to another 22

23. ALL ABOUT BUSINESS VALUATIONS Generally Accepted Intangible Asset Valuation Approaches and Methods Cost approach methods Reproduction cost new less depreciation method Replacement cost new less depreciation method Trended historical cost less depreciation method Market approach methods Comparable uncontrolled transactions method Comparable profit margin method Income approach methods Relief from royalty method (cost savings) Differential income (with/without) method Profit split method Residual (excess earnings) method 23

24. ALL ABOUT BUSINESS VALUATIONS Identifying and Accounting for Risk in Intangible Asset Valuations Types of Risk – Business Risk – Technology Risk – Legal Risk Methods to mitigate or manage risk – Due Diligence – Pricing Methods for Pricing Risk and Uncertainty – Discounted Cash Flows – adjust discount rate for risk premiums – Discounted Cash Flows – adjust cash flow projections Weighted range of scenarios (best, likely, worst) Decision tree – lattice models with discrete probabilistic outcomes Monte Carlo simulation – continuous probability distributions with a central tendency and std deviation 24

25. ALL ABOUT BUSINESS VALUATIONS Intangible Asset Valuation Best Practices Consider all three approaches – Available data – Purpose of the valuation – Try to implement more than one approach Determining a value – Each valuation approach (and related methodology) that is implemented provides a distinct “indication of value” – Try to rely on more than one approach/method – Weigh results based on facts and circumstances, and purpose of the valuation Use reasonableness tests as a check – Context – Implied investment returns and arbitrage theory – Rules of Thumb – but be careful!!! 25

26. ALL ABOUT BUSINESS VALUATIONS Attributes of an Effective Intangible Asset Valuation Report Professional Standards for Intangible Assets Valuation Reports: AICPA’s Statement on Standards for Valuation Services No. 1, “Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset” Uniform Standards of Professional Appraisal Practice, Standard 10, Business Appraisal, Reporting 26

27. ALL ABOUT BUSINESS VALUATIONS Attributes of an Effective Intangible Asset Valuation Report In order to encourage the readers acceptance, the effective intangible asset valuation report should be: – clear, convincing, and cogent – well-organized, well-written, and well-presented – free of grammar, punctuation, spelling, and mathematical errors – procedurally and mathematically replicable, without the use of any unexplained or unsourced valuation variables The persuasive intangible asset valuation report will tell a narrative story that: – defines the valuation analyst’s assignment, – describes the analyst’s data gathering and due diligence procedures, – justifies the analyst’s selection of (and rejection of) the generally accepted valuation approaches, methods, and procedures, – explains how the analyst performed the valuation synthesis and reached the final value conclusion, – defends the analyst’s intangible asset value conclusion, and – describes all of the data sources that the analyst relied on (and includes copies of non-public source documents) 27

28. MORE ABOUT THE FACULTY 28 GARY FRANTZEN ©2015 HOW TO VALUE YOUR BRAND AND OTHER “SOFT” ASSETS Gary Frantzen leads Alvarez & Marsal's Valuation Services practice in Chicago. He specializes in the valuation of businesses and business interests including equity, liabilities and debt securities, options and other derivative securities / instruments, intellectual property and other tangible and intangible assets. Mr. Frantzen has provided opinions of value, fairness and solvency for a wide variety of purposes including financial reporting, tax planning and reporting, dispute resolution, mergers and acquisitions and other business purposes.He has advised clients regarding the value impact of potential strategic alternatives, business plans and enterprise transactions; valued assets for business combinations, fresh start accounting and impairment measurement; valued business interests for tax planning and reporting, and has provided independent fairness and solvency opinions regarding contemplated transactions. Mr. Frantzen earned a bachelor's degree in civil engineering from the University of Illinois at Urbana- Champaign and master's degree in business administration from DePaul University in Chicago. He is a Chartered Financial Analyst (CFA) and registered as a General Securities Representative and Securities Agent (FINRA Series 7 and 63). He is a member of the CFA institute and CFA Society of Chicago. gfrantzen@alvarezandmarsal.com

29. MORE ABOUT THE FACULTY 29 RICHARD CLAYWELL ©2015 HOW TO VALUE YOUR BRAND AND OTHER “SOFT” ASSETS richard@biz-valuation.com Richard is a practicing Certified Public Accountant, and holds the additional designations of Accredited in Business Valuation, Accredited Senior Appraiser, Certified Business Appraiser, International Certified Valuation Specialist, Certified Valuation Analyst, Certified in Merger & Acquisition Advisor, Master Analyst in Financial Forensics, Certified in Fraud Deterrence, Accredited in Business Appraisal Review. Richard has been valuing closely held companies since 1985. Richard’s practice is restricted to business valuation, economic damages, profit enhancement and exit planning. Richard received his Bachelor of Science in Accounting in 1979 from the University of Houston – Clear Lake. He then received certification as a Public Accountant in 1983. Over the years, Richard has earned additional accreditations that relate to business valuations, economic damages and fraud. Richard has been an instructor for the National Association of Certified Valuation Analysts for many years, has been an instructor for the Internal Revenue Service and the International Association of Consultants Valuators and Analysts (IACVA). Richard is currently the Director of Education for the IACVA and is responsible for the business valuations materials being taught in 55 countries. Richard has taught business valuation or economic damage courses in China, Korea, Taiwan. Richard has performed over 1,000 business valuations since 1985. Richard has testified in Texas County Court, Texas State Court, Bankruptcy Court and Texas State Courts. Richard has given testimony in economic damages (lost profits), shareholder disputes, personal injury, wrongful termination and divorce.

30. MORE ABOUT THE FACULTY 30 GARTH TEBAY ©2015 HOW TO VALUE YOUR BRAND AND OTHER “SOFT” ASSETS gtebay@valuedefined.com Mr. Tebay is a practicing Certified Public Accountant, Certified Valuation Analyst, Master Analyst in Financial Forensics and Certified in Mergers & Acquisitions with over 43 years of experience. He is the founder and Managing Partner of Value Defined™ and Managing Director of Headwaters SC Valuation Services, a business valuation and litigation support firm in Perrysburg, Ohio and an Affiliate of Business Growth Alliance, which provides value growth consulting and investment banking services to middle-market business. He is also the Managing Partner of Tebay & Associates, LLC, full service accounting, tax, and consulting firm in Perrysburg, Ohio. Mr. Tebay received his Bachelor of Science in Accounting in 1972 from Findlay College in Ohio. He then received certification as a Public Accountant in 1975. In 1997, he became a Certified Valuation Analyst, and was awarded the CM&A (Certified in Mergers & Acquisitions) in 2001 and received certification as a Master Analyst in Financial Forensics in 2008. He is a member of the Ohio Society of Certified Public Accountants, the American Institute of Certified Public Accountants (Tax Division and Consulting Services Division), the Alliance of Merger and Acquisition Advisors, National Association of Certified Valuation Analysts, through which he is a member of the NACVA Standards Committee (provide interpretations and expand upon technical standards), the NACVA Training Development Team, the NACVA Course Review Committee (dedicated to reviewing NACVA’s substantial curriculum), member of NACVA Mentor Support Group, the NACVA Education Quality Assurance Board, the NACVA Speakers’ Bureau, and MPPA Advisory Board at Ohio Northern University, as well as many other local memberships. Mr. Tebay is an instructor for NACVA and routinely speaks on business valuation and economic damages for various professional organizations. In May 1983 and again in July 1997, Mr. Tebay was awarded Accounting Advocate of the Year. In 2007, Mr. Tebay was appointed by the Governor of the State of Ohio to The Executor Order of the Ohio Commodore. Mr. Tebay’s primary focus within the firm is management consulting services, which includes business valuations, litigation support, and mergers and acquisitions. Prior to founding Tebay & Associates, LLC, Mr. Tebay was a Partner at Brell, Tebay, Holt & Dettinger, Inc., and was CFO & Director of Westhaven Services.

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33. 33 About Financial Poise™ DailyDAC, LLC, d/b/a Financial Poise™ provides continuing education to business owners and executives, investors, and their respective trusted advisors. Its websites, webinars, and books provide Plain English, sometimes entertaining, explanations about legal, financial, and other subjects of interest to these audiences. ©2015 HOW TO VALUE YOUR BRAND AND OTHER “SOFT” ASSETS

34. IMPORTANT NOTE: THE MATERIAL IN THIS PRESENTATION IS FOR GENERAL EDUCATIONAL PURPOSES ONLY. IT SHOULD NOT BE CONSIDERED LEGAL, INVESTMENT, FINANCIAL, OR ANY OTHER TYPE OF ADVICE ON WHICH YOU SHOULD RELY. YOU SHOULD CONSULT WITH AN APPROPRIATE PROFESSIONAL ADVISOR TO DETERMINE WHAT MAY BE BEST FOR YOUR INDIVIDUAL NEEDS. 34 ©2015 HOW TO VALUE YOUR BRAND AND OTHER “SOFT” ASSETS