KEVIN B. JOHNSON v. THE BIG BROKERAGE HOUSE DAMAGES REPORT FOR USE IN AN ARBITRATION KEVIN B. JOHNSON v. THE BIG BROKERAGE HOUSE DAMAGES REPORT FOR USE IN AN ARBITRATION

©TRUGMAN VALUATION ASSOCIATES, INC. 2004

©TRUGMAN VALUATION ASSOCIATES, INC. 2004 - 1 -

DAMAGES REPORT

This report calculates damages sustained by Kevin B. Johnson as a result of the actions of The Big Brokerage House. It assumes that liability exists. Damages have been calculated to be $18,185,652.

BACKGROUND: Mr. Johnson had been employed by The Big Brokerage House for 16 years prior to his termination on November 2, 2004. At the time of his termination, Mr. Johnson was a Senior Vice President - Investments producing in excess of $20 million in “production credits” during the prior 10 years. Despite this track record and his efforts to become employed with other major brokerage houses, he currently remains unemployed. Mr. Johnson’s income history from The Big Brokerage House from 1994 to 2004 appears in Table 1.

DAMAGE CALCULATIONS: The economic damages suffered by Mr. Johnson were based on the following information: - 2 - Termination Date - 2 - November 2, 2004 ArTermibitranatitionon D ateDate - 2 - JulNovy ember26, 2006 2, 2004 - 2 - MrArTermibit. Jraohnsonatitionon Dn’s ateD ateBirth Date DecNovJulyember 26, 2006 2,17, 2004 1946 Termination Date November 2, 2004 AgeArMrbit. J raatohnso tiDismissalon Dn’sate Birth Date 57.JulDecy88 ember26, years 2006 17, 1946 Arbitration Date July 26, 2006 WMrAgeork. J atohnso Lif Dismissale Expectann’s Birth cyDate1 57.Dec 9.3088ember years 17, 1946 Mr. Johnson’s Birth Date1 December 17, 1946 WAgeRetiremork at Lif Dismissalente Expectan Age cy 57. 67. 9.308818 years Age at Dismissal 57.88 years WRetiremork Lifente Expectan Age 2 cy1 67. 9.3018 years Life Expectancy 1 22.01 years Work Life Expectan2 cy 9.30 years ExpectedRetiremLife Expectanent Age Agecy at Death 79.67.22.891801 years Retirement Age 67.18 years ExpectedLife Expectan Agecy at2 Death 22.79.0189 years Life Expectancy2 22.01 years Mr. Johnson earnedExpected $1,141,937 Age at f roDeathm January 1, 200479.89 tyearshrough November 2, 2004, or Expected Age at Death 79.89 years $1,361,Mr. Johnso398,n onear anned annual $1,141,937ized basi fros.m JBuant uar fory the 1, 2004action t hrofoug theh dNefendant,ovember 2,ther 2004,e is noro Mr$1,361,reason. Johnso 398,to ben onearliev annede annual tha $1,t 141,937Mr.ized J ohnsobasi fros.mn JBu waoulnt uar ford y notthe 1, 2004 havactione t chrofontioug thenuedh dNefendant,ov inember his e 2,tmployher 2004,e iments noro $1,361,Mrreposiason. Jtiohnsoon, 398,to o r benin onear lianotherev annede annual tha $1, eqt 141,937Mr.uivizaleed J ohnsontbasi pofros.simn ti onJBu waoul ntw uar foritdh y notanotthe 1, 2004 havheraction efir tm chrofonti,oug etheanuedrningh dNefendant,ov iinncomeember his e 2,wtmployherit 2004,he s imiiments nlaroro $1,361,regposiroasonwtithon, r398,atesto o r bein onas lianotherev heane hannual thaad eq ti nMr.uiv theizaleed J pas ohnsontbasi t.pos.sin ti onBu woul tw foritdh notanotthe havheraction efir m cofonti, etheanuedrning defendant, iinncome his e wtmployherithe s imiiments nlaro reposigroasonwtithon, ratesto o r bein as lianotherev hee h thaad eq ti nMr.uiv theale J pasohnsont t.posinti on woul witdh notanot havher efir m conti, eanuedrning iinncome his e wmployith simimentlar gposiInro ordewtithon, rates o tor in forecaas another he sth ad Mr. eq in uiv Johnsontheale pasnt t.po’s si incometion wit,h I anot turneherd fir tom two, ea frequerning incomently used wit fhoreca similarst gInmoro ordedels;wth r ates line to farorecaas t herend sth adline Mr. in Johnsonanthed pas exponet.’s incomential tren, I dline. turne d toTab twole 2 freque reflectsntly Mr.used Johnso forecan’sst Inhismo tor ordedels;icalr line toear farorecanin tgrends,st and line Mr. hi Johnsonans ford ecas expone’sted incomential ear nin tren, g I sdline. turne from d 2005 toTab twole thr 2oug freque refhlects 2014ntly Mr. usedusi ng Johnso f orecabothn’s ofst Inmohisthe tor ordedels;seic accealr line toearpta farorecaninble tgrend s,test chniques.and line Mr. hi Johnsonans ford ecas expone’sted incomential ear nin tren, g I sdline. turne from d 2005 toTab twole thr 2oug freque refhlects 2014ntly Mr. usedusi ng Johnso f orecabothn’s ofst hismothetordels;seic acceal lineearptaarninble tgrend s,te chniques.andline hi ans ford ecas exponetedntial ear nin trengsdline. from 2005 Table thr 2oug refhlects 2014 Mr. usi ng Johnso bothn’s of histheIn mytorseic opiacceal nioearptan,nin bleeigther s,te chniques.and of the his forforecasecaststed is likearelynin. gFacs frtoroms 2005such asthr ouggrowhth 2014 in the usi marng ketboth and of theInnew myse pr opiacceoductnioptan, intr bleeithero teductchniques. ofion thes, fasorecas wellts as is Mlikr.ely Jo. hnsonFactor’ss suc provhen as trgackrow threcor in thed l eadsmarket me and to Innewbel myiev pr eopioduct thaniot n, eiintr thereitherod guctro ofionw theths, scen fasorecas warelliots ascoul is Mlikdr. elybe Jo. achi hnsonFacevtor’sed.s suc pr ovHowhen asev trgackerro,w Ithr havecor in ethed c lhosen eadsmarket meto and be to Innewmobel myievre pr eopi conseoduct thaniot n, eirvintr therativeeitherod guct ro of inionw theth mys, scen f asor calculatioecas warelliots ascoul is ns Mlikd r. elybe w Johich. achi hnsonFac ev istor ’sed.s inten suc pr ovHowdedhen asev trg toackerro ,w ref Ithr havecorle inc etthe d c the lhosen eadsmar possibleket meto and be to newbelfluctmoievre uati pre conseoduct onsthat in eirvintr therativetheod sguct tocro inionw kth mymars, scen asket calculatio war perfellio ascoulormanc nsMd r. be w Johiche. achihnson Therefor ev is ’sed. inten pr e,ovHowded enI havev tr toackere ,us ref Ir edhavecorle cthet d ec the lhosenleadsow er possible meofto the be to mobelflucttwoievre aluati eter conse onsthanatit vineirves therativethe in mysg tocro in caw kth mylcmar ulascen ket calculatiotions.ar perfio coulormancnsd be whiche. achi Therefor ev is ed. inten e,Howded I havev toere ,us refI edhavle cthet ec the hosenlow er possible ofto thebe fluctmotwore aluati ter conseonsnati vinrves ativethe in mys toc in ca k mylcmarula ket calculatiotions. perf ormancns whiche. Therefor is intene,ded I hav toe us refedle ctht e the low er possible of the flucttwo aluatiteronsnati vines the in mystoc cak lcmarulakettions. perf ormance. Therefore, I have used the lower of the two alternatives in my calculations. 1 W orklife Estimates: Effects of Race and Education, U.S. Department of Labor, Bureau of 1 Labor Statistics, February, 1986 Bulletin 2254, for men active in the workforce, and with W orklife Estimates: Effects of Race and Education, U.S. Department of Labor, Bureau of 15 or more years of education. Labor Statistics, February, 1986 Bulletin 2254, for men active in the workforce, and with 1 2 15W or okr lmifeor Este yiearmatses: of eduEffectcatsi on.of Race and Education, U.S. Department of Labor, Bureau of 1 Life Expectancy information from: “Arias, E., United States life tables, 2002, National Vital WLaorbokrl iSfeta Esttistiimcsat, es:Feb Efrufaectry,s 1 of98 R6 aceBul laendtin 2Educa254, fotion,r m Uen.S. a cDtieparve int mthente w ofork Labforcore, Burandeau with of 2 Statistics Reports, Vol. 53, No. 6. Hyattsville, MD, National Center for Health Statistics, Li15Lafe bo oExpectrr m Sortaetis ancyytiearcs, s iFnf ofeorb edurumaatry,cation 1ion. 9fr8om6 B: u“Arlleitias,n 2 E.25, 4U, nifotred m Stenat aescti vliefe i ntabl thees, w o200rkfo2,rc Neat, aionalnd w Viithtal 2004.” 15Stat oirst micsor Re eporyeartss, of Vol edu. 53,cat iNon.o. 6. Hyattsville, MD, National Center for Health Statistics, 2 Li20fe0 4Expect.” ancy information from: “Arias, E., United States life tables, 2002, National Vital 2 LiStfate iExpectstics Rancyeport s,inf Volorm. at53,ion N fo.rom 6.: H“Aryatias,tsv iE.lle,, UMniDt,ed N atStionalates Clifente tabler es,for H200eal2,th N Statationalistics, Vital St20at04ist.”ics Reports, Vol. 53, No. 6. Hyattsville, MD, National Center for Health Statistics, 2004.” - 3 -

In addition to lost earnings, Mr. Johnson lost the fringe benefits that he received as part of his compensation package. I have estimated the lost fringe benefits to be 30 percent of earnings. I have requested, but have not received, detailed fringe benefit information from The Big Brokerage House. I reserve the right to amend this report if and when this information is received.

Damages have been calculated in Tables 3 and 4. Interest and present value calculations were based on the 10-year Treasury rates at the date of termination.

Therefore, the damages estimated in this report, are as follows:

Pre-Trial Lost Earnings $ 3,405,663 Post-Trial Lost Earnings 14,779,989

Total $ 18,185,652

I reserve the right to update this report if additional information is received. - 4 -

DOCUMENTS REVIEWED IN PREPARATION OF THIS ANALYSIS

In order to perform this assignment, the following documents were reviewed:

1. Statement of Claim by Mr. Johnson against The Big Brokerage House dated May 9, 2005.

2. The Big Brokerage House’s answer and affirmative defenses dated June 30, 2005.

3. U.S. Individual Income Tax Returns for Kevin and Carla Johnson for 1994 through 2004.

4. Form W-2 Wages and Tax Statements for Kevin Johnson for 1994 through 2004.

5. Uniform Submission Agreement dated June 28, 2005.

6. FC Pool Participation Agreement between Kevin Johnson and Steve Brown dated December 13, 2002.

7. Memo dated October 5, 2004 from Tom Thomas to Kevin Johnson and Steve Brown.

8. Letter sent via e-mail from Kevin Johnson to Tom Thomas dated October 21, 2004.

9. Various e-mails from Kevin Johnson.

10. Other items cited in the report.

In addition to the documents reviewed, I interviewed Mr. Johnson. - 5 - - 5 -

TABLE 1 KEVIN JOHNSON INCOME GROWTH ANALYSIS TABLE 1 KEVIN JOHNSON INCOMEA GRnnualOWTHized ANALYSIS Year W-2 Income W-2 Income % Growth Annualized 1994Year $ W-2417,620 Incom.39e $ W-2417,620 Income.39 % Growth 1995 481,287.10 481,287.10 15% 19961994 $ 502,887417,620.69.39 $ 417,620502,887.39.69 4% 19971995 663,495481,287.46.10 663,495481,287.46.10 32%15% 19981996 892,688502,887.56.69 892,688502,887.56.69 35%4% 19971999 1,005,663,495512.84.46 1,005,663,495512.84.46 13%32% 20001998 1,360,892,688598.41.56 1,360,892,688598.41.56 35% 20011999 1,660,1,005,323.40512.84 1,660,1,005,323.40512.84 22%13% 20022000 1,360,901,953598.41.29 1,360,901,953598.41.29 -435%6% 20032001 1,660,585,484323.40.22 1,660,585,484323.40.22 -322%5% 20042002 1,141,901,953937.34.29 1,361,901,953397.61.29 133%-46% 2003 585,484.22 585,484.22 -35% Av2004erage 1,141,937.34 1,361,397.61 133%21% AMeveragdiane 21%19% Median 19% - 6 -

- 6 - TABLE 2 KEVIN JOHNSON INCOME FORECAST TABLE 2 ExpKEonVINent ialJOHNSON INCOME FORLinearECAST Year W-2 Income % Growth W-2 Income % Growth Exponential Linear 1994(Yearh) $ W-2 Inc417,620ome % Growth $ W-2 Inc417,620ome % Growth 1995(h) 481,287 15% 481,287 15% 1996(1994(h) $ 502,888417,620 4% $ 502,888417,620 4% 1997(1995(h) 663,495481,287 32%15% 663,495481,287 32%15% 1998(1996(h) 892,689502,888 35%4% 892,689502,888 35%4% 1999(1997(h) 1,005,663,495513 13%32% 1,005,663,495513 13%32% 2000(1998(h) 1,360,892,689598 35% 1,360,892,689598 35% 2001(1999(h) 1,660,1,005,323513 22%13% 1,660,1,005,323513 22%13% 2002(2000(h) 1,360,901,953598 -435%6% 1,360,901,953598 -435%6% 2003(2001(h) 1,660,585,484323 -322%5% 1,660,585,484323 -322%5% 2004(2002(h)(a) 1,361,901,953398 133%-46% 1,361,901,953398 133%-46% 2005(2003(f)h) 1,451,585,484076 -36.6%5% 1,373,585,484628 -30.9%5% 2006(2004(f)h)(a) 1,599,1,361,333398 10.2%133% 1,453,1,361,578398 133%5.8% 2007(2005(f) 1,762,1,451,736076 10.2%6.6% 1,533,1,373,527628 5.5%0.9% 2008(2006(f) 1,942,1,599,835333 10.2% 1,613,1,453,477578 5.2%5.8% 2009(2007(f) 2,141,1,762,334736 10.2% 1,693,1,533,426527 5.0%5.5% 2010(2008(f) 2,360,1,942,114835 10.2% 1,773,1,613,375477 4.7%5.2% 2011(2009(f) 2,601,2,141,246334 10.2% 1,853,1,693,325426 4.5%5.0% 2012(2010(f) 2,867,2,360,015114 10.2% 1,933,1,773,274375 4.3%4.7% 2013(2011(f) 3,159,2,601,938246 10.2% 2,013,1,853,224325 4.1%4.5% 2014(2012(f) 3,482,2,867,788015 10.2% 2,093,1,933,173274 4.0%4.3% 2013(f) 3,159,938 10.2% 2,013,224 4.1% (h2014()= hf)istorical earn3,482,ings 788 10.2% 2,093,173 4.0% (a)= annualized (f(h)=)= fhoistrecaoricstaeld e eaarnrniningsgs (a)= annualized (f)= forecasted earnings - 7 -

- 7 - - 8 - - 8 - TABLE 3 PRE-ARBITRATION LOST EARNINGS PRE-ARBITRATATIONBL EL OST3 EARNINGS PRE-ARBITRATION LOST EARNINGS Plaintiff Would Have Earned Totals Plaintiff Would Total Present Have Earned Totals Date Date Earnings Annual Fringe Lost Value Total Present From To Growth Income Benefits Earnings of Loss Date Date Earnings Annual Fringe Lost Value 11/Fr02/om2004 12/31/To2004 G0.ro00%wth $ In219,come460 $ Ben65,efits838 $ Ear285,nings298 $ of309, Loss172

11/01/02/01/20042005 12/31/20042005 0.00%90% $ 1,219,373,628460 $ 412,65,088838 $ 1,785,285,717298 $ 1,935,309,147172

01/01/20062005 07/12/26/31/20062005 5.0.82%90% 1,824,373,358628 247,412,307088 1,071,785,665717 1,161,935,343147

01/01/2006 07/26/2006 5.82% $ 2,824,417,358446 $ 247,725,307234 $ 1,3,071,142,665680 $ 1,3,161,405,343663 $ 2,417,446 $ 725,234 $ 3,142,680 $ 3,405,663

TABLE 4 POST-ARBITRATION LOST EARNINGS POST-ARBITRATATIBLONE L 4OST EARNINGS POST-ARBITRATION LOST EARNINGS Plaintiff Would Have Earned Totals Plaintiff Would Total Present Have Earned Totals Year Earnings Discount Annual Fringe Lost Value Total Present Ending Growth Rate Income Benefits Earnings of Loss Year Earnings Discount Annual Fringe Lost Value Ending Growth Rate Income Benefits Earnings of Loss 12/31/2006 (p) 5.82% 4.10% $ 629,220 $ 188,766 $ 817,986 $ 817,986

12/31/20072006 (p) 5.50%82% 4.10% $ 1,533,629,527220 $ 188,460,766058 $ 1,817,993,986585 $ 1,817,915,986068

12/31/20072008 5.50%21% 4.10% 1,533,613,527477 460,484,058043 1,2,993,097,585520 1,915,935,068551

12/31/20082009 5.4.21%96% 4.10% 1,613,693,477426 484,508,043028 2,097,201,520454 1,935,951,551450

12/31/20092010 4.96%72% 4.10% 1,693,773,426375 508,532,028013 2,201,305,454388 1,951,963,450094

12/31/20102011 4.72%51% 4.10% 1,773,853,375325 532,555,013997 2,305,409,388322 1,963,970,094794

12/31/20112012 4.51%31% 4.10% 1,853,933,325274 555,579,997982 2,409,513,322257 1,970,974,794842

12/31/20122013 4.31%14% 4.10% 1,2,933,013,274224 579,603,982967 2,513,617,257191 1,975,974,515842

12/31/2014(2013 p) 3.4.97%14% 4.10% 2,292,013,471224 603,87,741967 2,380,617,212191 1,275,975,689515

12/31/2014(p) 3.97% 4.10% $13,335,292,319471 $ 4,000,87,596741 $ 17,335,380,914212 $14,779,275,989689

(p)= partial period $13,335,319 $ 4,000,596 $ 17,335,914 $14,779,989 (p)= partial period GARY R. TRUGMAN, C.P.A.*/A.B.V., M.C.B.A., A.S.A., M.V.S. PROFESSIONAL QUALIFICATIONS Experience President of Trugman Valuation Associates, Inc., a firm specializing in business valuation and litigation support services. Business valuation experience includes a wide variety of assignments including closely-held businesses, professional practices and thinly traded public companies. Industries include but are not limited to security, automotive, funeral homes, health care, securities brokerage and financial institutions, retail, manufacturing, service, and professional business establishments. Assignments have also included the valuation of stock options and various types of intangible assets. Business valuation and litigation support services have been rendered for a variety of purposes including, but not limited to family law matters, business damages, lender liability litigation, buy-sell agreements, shareholder litigation, estate and gift tax matters, buying and selling businesses, malpractice litigation, wrongful death, sexual discrimination, age discrimination, wrongful termination, and breach of contract. Representation in litigation includes plaintiff, defendant, mutual, and court-appointed neutral. Court Testimony. Has been qualified as an expert witness in various state and federal courts, as well as before the National Association of Securities Dealers and the American Stock Exchange.

Professional Designations • *CPA: Licensed in (1996), (1978) and (1977). • ABV: Accredited in Business Valuation designated by The American Institute of Certified Public Accountants (1998). • MCBA: Master Certified Business Appraiser designated by The Institute of Business Appraisers, Inc. (1999). Original certification (CBA) in 1987. • ASA: Accredited Senior Appraiser designated by the American Society of Appraisers (1991). Reaccredited in 2001.

Education • Masters in Valuation Sciences - Lindenwood College, St. Charles, MO (1990). Thesis topic: Equitable Distribution Value of Closely-Held Businesses and Professional Practices. • B.B.A. in Accountancy - Bernard M. Baruch College, New York, NY (1977).

Faculty • National Judicial College, Reno, since 1997. GARY R. TRUGMAN, C.P.A.*/A.B.V., M.C.B.A., A.S.A., M.V.S. PROFESSIONAL QUALIFICATIONS Continuing Education • Regular participates in continuing education in the fields of concentration.

Lecturer • Lectures nationally for all of the leading appraisal and accounting organizations, as well as many legal organizations, on business valuation and economic damages.

Organizations • The Institute of Business Appraisers, Inc. • American Society of Appraisers. • American Institute of Certified Public Accountants. • New Jersey Society of Certified Public Accountants. • New York State Society of Certified Public Accountants. • The American College of Forensic Examiners. • Florida Institute of Certified Public Accountants. • Collaborative Family Lawyers of South Florida • International Academy of Collaborative Professionals

Author • A CPA’s Guide to Valuing a Closely Held Business, American Institute of Certified Public Accountants (2001). • Understanding Business Valuation: A Practical Guide to Valuing Small to Medium-Sized Businesses, American Institute of Certified Public Accountants, First Edition (1998) Second Edition (2002). • Understanding Business Valuations for The Institute of Continuing Legal Education (1997).