NEW ISSUE - BOOK-ENTRY ONLY NOT RATED LIMITED OFFERING

Transcription

1 NEW ISSUE - BOOK-ENTRY ONLY NOT RATED LIMITED OFFERING In the opinion of Greenspoon Marder, P.A., Bond Counsel to the Authority, assuming compliance by the Authority and the Borrower with certain tax covenants described herein, under existing law, interest on the Series 2014A Bonds is excluded from gross income of the owners thereof for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the Code ), and interest on the Series 2014A Bonds is not an item of tax preference under Section 57 of the Code for purposes of computing the alternative minimum tax. In the case of certain corporate holders of the Series 2014A Bonds, interest on the Series 2014A Bonds will be included in the calculation of the federal alternative minimum tax as a result of the inclusion of interest on the Series 2014A Bonds in adjusted current earnings. Interest on the Series 2014B Bonds is not excludible from gross income for income tax purposes. See TAX MATTERS herein. PUBLIC FINANCE AUTHORITY $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B Dated: Date of Delivery Due: May 1, as shown on the inside cover page hereof Price: 100% The Public Finance Authority, a unit of government and a body corporate and politic of the State of Wisconsin (the Authority ), is issuing its $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project), Series 2014A (the Series 2014A Bonds ) and $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Academy Project), Taxable Series 2014B (the Series 2014B Bonds ), which together with the Series 2014A Bonds are collectively referred to herein as the Bonds ) and will loan the proceeds of the Bonds to the Palm Beach Maritime Museum, Inc. d/b/a Palm Beach Maritime Academy, a Florida non-profit corporation (the Borrower ). The Borrower has been granted a charter by the School Board of Palm Beach County, Florida (the School Board ) to operate the Palm Beach Maritime Academy charter school (the Palm Beach Maritime Academy ). The Bonds are being issued only in fully registered form, without coupons, in denominations of $100,000 or integral multiples of $5,000 in excess thereof. The Bonds, when issued, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company ( DTC ), New York, New York. Purchases of beneficial interests in the Bonds will be made in book-entry only form. Accordingly, principal of and interest on the Bonds will be paid from the sources identified below by the Trustee (hereinafter defined), directly to DTC as the registered owner thereof. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursement of such payments to the beneficial owners is the responsibility of DTC Participants and the Indirect Participants, as more fully described herein. Any purchaser as a beneficial owner of a Bond must maintain an account with a broker or dealer who is, or acts through, a DTC Participant to receive payment of the principal of and interest on such Bonds. See DESCRIPTION OF THE BONDS Book-Entry Only System herein. For further information concerning the Authority, see THE AUTHORITY herein. The Bonds are being issued pursuant to Section of the Wisconsin Statutes and a Trust Indenture (the Indenture ) dated as of June 1, 2014, between the Authority and U.S. Bank National Association, as trustee (the Trustee ). Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Indenture. See APPENDIX B Form of the Indenture. The Authority will lend the proceeds of the Bonds to the Borrower pursuant to a Loan Agreement dated as of June 1, 2014 (the Loan Agreement ) between the Authority and the Borrower. The Series 2014A Bonds are being issued to (1) finance a portion of the cost to construct, equip and acquire the Borrower s two charter school facilities in Lantana, Palm Beach County, Florida (collectively, the Facility ), (2) refund a portion of the principal amount of the Authority s $1,000,000 Education Revenue Bonds (Palm Beach Academy Project), Series 2014A (the Refunded Bonds ), (3) make a deposit into the Debt Service Reserve Fund, (4) fund capitalized interest with respect to the Series 2014A Bonds and (5) pay a portion of the cost of issuance with respect to the Series 2014A Bonds. The Series 2014B Bonds are being issued to (1) finance a portion of the cost to construct, equip and acquire the Facility, (2) refund a portion of the Refunded Bonds, (3) make a deposit into the Debt Service Reserve Fund, (4) fund capitalized interest with respect to the Series 2014B Bond, and (5) pay a portion of the costs of issuance of the Bonds. See ESTIMATED SOURCES AND USES OF PROCEEDS OF THE BONDS. The Bonds are payable solely from the assets and revenues pledged to the payment thereof under the Indenture. The Borrower s obligation to repay the loan of the proceeds of the Bonds is secured by the Borrower s two promissory notes to the Authority in the same aggregate principal amount as the Bonds (the Notes ). The Notes are secured by a pledge of and lien on the Gross Revenues and certain funds and accounts created under the Indenture (the Trust Estate ). The Borrower s obligation to repay the loan of the proceeds of the Bonds is secured by a Guaranty Agreement dated as of June 1, 2014 (the Guaranty Agreement ) from Palm Beach Maritime Foundation, Inc., a Maryland non-profit corporation (the Guarantor ) to the Trustee. The Borrower s obligation to repay the loan of the proceeds of the Bonds is also secured by a Mortgage and Security Agreement dated as of June 1, 2014 (the Mortgage and Security Agreement ) from the Borrower to the Trustee. The Authority has assigned to the Trustee (1) all right, title and interest in and to the Notes, and (2) all right, title and interest in and to the Loan Agreement (except for certain Unassigned Rights defined therein), and the Trust Estate all as more fully described under SECURITY AND SOURCES OF PAYMENT FOR THE BONDS. The Bonds are subject to optional, mandatory sinking fund and extraordinary mandatory and extraordinary optional redemption, as more fully described herein. See DESCRIPTION OF THE BONDS Redemption Provisions. THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE TRUST ESTATE (AS DEFINED IN THE INDENTURE). EXCEPT FROM SUCH SOURCE, NONE OF THE AUTHORITY, ANY MEMBER, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THE BONDS SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST THEREON OR ANY COSTS INCIDENTAL THERETO. THE BONDS DO NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE, IN ANY MANNER, ANY MEMBER, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THE BONDS TO LEVY ANY TAX OR TO MAKE ANY APPROPRIATION FOR PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST THEREON OR ANY COSTS INCIDENTAL THERETO. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF ANY MEMBER, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THE BONDS, NOR THE FAITH AND CREDIT OF THE AUTHORITY, SHALL BE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON, THE BONDS OR ANY COSTS INCIDENTAL THERETO. THE AUTHORITY HAS NO TAXING POWER. The Bonds are not rated, may not be appropriate for some investors and are subject to certain risks. See CERTAIN BONDHOLDERS RISKS herein. There are restrictions on who may purchase the Bonds. In addition, this Limited Offering Memorandum only contains limited information regarding the Bonds and is not to be considered a complete description of the matters necessary for the making of an informed investment decision. Additional information may be obtained from the Borrower at the address contained herein. Each initial purchaser of the Bonds will be required to execute and deliver an investment letter in the form attached to this Limited Offering Memorandum as APPENDIX F. See RESTRICTIONS ON OWNERSHIP AND TRANSFER OF BONDS herein. POTENTIAL INVESTORS ARE SOLELY RESPONSIBLE FOR EVALUATING THE MERITS AND RISKS OF AN INVESTMENT IN THE BONDS. SEE SUITABILITY FOR INVESTMENT HEREIN. THE BONDS WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT ), OR ANY SECURITIES LAW OF ANY STATE IN THE UNITED STATES OF AMERICA. THE BONDS ARE ONLY BEING OFFERED AND SOLD TO QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT). THE BONDS ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND RESALE AS SET FORTH IN THE INDENTURE AND DESCRIBED HEREIN, AND FURTHER MAY NOT BE TRANSFERRED OR SOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. EACH INVESTOR, AT THE TIME OF DELIVERY OF THE BONDS WILL BE REQUIRED TO EXECUTE A QUALIFIED INVESTOR LETTER IN THE FORM ATTACHED HERETO AS APPENDIX F WHEREBY THEY WILL REPRESENT, AMONG OTHER THINGS, THAT THEY ARE A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF THE SECURITIES ACT. This cover page contains certain information for quick reference only. It is not a summary of the Bonds. All summaries of documents and agreements in this Limited Offering Memorandum are qualified in their entirety by reference to such documents and agreements, and all summaries of the Bonds are qualified in their entirety by reference to the form included in the aforesaid documents and agreements. The Bonds will be delivered when, as and if issued by the Authority, subject to prior sale, withdrawal or modification of the offer without notice and the receipt of the opinion of Greenspoon Marder, P.A., West Palm Beach, Florida, Bond Counsel, as to the validity of the Bonds and the excludability of interest on the Series 2014A Bonds from gross income for federal income tax purposes. von Briesen & Roper, s.c., Milwaukee, Wisconsin is serving as Counsel to the Authority. Edwards Wildman Palmer LLP, West Palm Beach, Florida is serving as Counsel to the Underwriter. Law Offices of Levi Williams, P.A., Fort Lauderdale, Florida is serving as Counsel to the Borrower and the Guarantor. It is expected that the Bonds will be delivered in book-entry form through the facilities of DTC, New York, New York on or about June 26, Dated: June 19, 2014

2 SERIES 2014 BONDS MATURITIES AND CUSIP NUMBERS $3,000, % Term Series 2014A Bonds Due May 1, CUSIP : 74443DAJ0 $18,000, % Term Series 2014A Bonds Due May 1, CUSIP : 74443DAG6 $3,640, % of Term Series 2014B Bonds Due May 1, CUSIP : 74443DAH4 Copyright 2014, American Bankers Association. CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by the CUSIP Service Bureau, managed on behalf of the American Bankers Association by Standard & Poor s. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers have been assigned by an independent company not affiliated with the Authority and are included solely for the convenience of the registered owners of the applicable Bonds. None of the Authority, the Borrower or the Underwriter is responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the applicable Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance and other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.

3 This Limited Offering Memorandum does not constitute an offer to sell the Bonds in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. No dealer, salesman or other person has been authorized by the Authority, the Borrower or the Underwriter to give any such other information or to make any representations other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the Authority, the Borrower, the Underwriter, or any other person. Nothing contained herein shall be construed to be an endorsement by the Authority or the Borrower of the feasibility of the Project or of the investment quality of the Bonds. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE SECURITIES OFFERED HEREBY, INCLUDING THE MERITS AND RISKS INVOLVED. THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES ACTS OF ANY STATE DUE TO EXEMPTIONS FROM REGISTRATION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES AUTHORITY ENDORSED THE MERITS OF THIS OFFERING OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The information set forth herein has been obtained from the Authority and the Borrower, The Depository Trust Company and other sources, that are believed to be reliable, but it is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation of the Underwriter, the Authority or the Borrower as to information from other sources. References herein to laws, rules, regulations, resolutions, agreements, reports and other documents do not purport to be comprehensive or definitive. All references to such documents are qualified in their entirety by reference to the particular document, the full text of which may contain qualifications of and exception to statements made herein. The information and the expressions of opinion herein are subject to change without notice, and neither the delivery of this Limited Offering Memorandum nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Borrower or in the Facility since the date hereof or the earliest date as of which such information is given. This Limited Offering Memorandum has been prepared solely for an offering to certain qualified institutional buyers without general solicitation, or advertising. Each initial purchaser will be required to sign an investor letter stating that such buyer is a qualified institutional buyer as defined in Rule 144A of the Securities Act of 1933, as amended. A form of the investor letter is attached to this Limited Offering Memorandum as APPENDIX F. The Underwriter has provided the following sentence for inclusion in this Limited Offering Memorandum. The Underwriter has reviewed the information in this Limited Offering Memorandum in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy of completeness of such information. This Limited Offering Memorandum contains certain forward-looking statements (as such term is defined in the Securities Act of 1933, as amended) concerning the Borrower. These statements are based upon beliefs of certain officers of the Borrower and others as well as a number of assumptions and estimates which are inherently subject to significant uncertainties, many of which are beyond the control of the Borrower. Future events may differ materially from those expressed or implied by such forward-looking statements. The words anticipates, believes, estimates, expects, plans, intends, projections and similar expressions, as they relate to the Borrower are intended to specifically identify forward-looking statements. Such statements reflect the current views of the Borrower with respect to future events and are subject to certain risks, uncertainties and assumptions. The Borrower will undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, there can be no assurances that the events described or implied in the forward-looking statements contained in this Limited Offering Memorandum will in fact occur. RESTRICTION ON DENOMINATIONS The purchase of the Bonds is suitable only for participants of substantial financial means who have no need for liquidity in their investment and who understand and can afford the financial and other risks of this investment. To help prevent purchase of Bonds by investors who may not be appropriate investors, the Bonds will be issued in denominations of $100,000 and integral multiples of $5,000 in excess thereof. THIS LIMITED OFFERING MEMORANDUM SHALL NOT CONSTITUTE A CONTRACT BETWEEN THE UNDERWRITER OR THE BORROWER AND ANY OWNER OF THE BONDS. U.S. Bank National Association, by acceptance of its duties as Trustee under the Trust Indenture, has not reviewed this Limited Offering Memorandum and has made no representations as to the information contained herein, including but not limited to, any representations as to the financial feasibility or related activities.

4 TABLE OF CONTENTS Page INTRODUCTION... 1 DESCRIPTION OF THE BONDS... 2 General Description... 2 Book-Entry Only System... 2 Redemption Provisions... 5 Optional Redemption... 5 Mandatory Sinking Fund Redemption... 5 Extraordinary Mandatory Redemption... 7 Authorization to Purchase Bonds... 8 ESTIMATED SOURCES AND USES OF PROCEEDS OF THE BONDS... 9 DEBT SERVICE REQUIREMENTS SECURITY FOR AND SOURCES OF PAYMENT OF THE BONDS Trust Estate Pledge of and Security Interest in Gross Revenues Loan Repayments Guaranty Agreement Mortgage and Security Agreement Additional Bonds Debt Service Reserve Fund THE AUTHORITY Formation and Governance Powers Local Approvals TEFRA Approvals State Pledge Board of Directors Special Limited Obligations Other Obligations Limited Involvement Authority Contact Disclosure Regarding Litigation Affecting the Bonds PALM BEACH MARITIME ACADEMY CHARTER SCHOOL THE BORROWER AND THE GUARANTOR THE CHARTER... 17

5 Forming a Charter School Borrower s Charter Eligible Students Operation of Charter Schools Renewal and Termination of the Charter THE FACILITY AND THE PROJECT Lantana Lantana CERTAIN RISK FACTORS Debt Service Coverage State Revenues Gross Revenues and Enrollment Priority of Security, Enforceability of Remedies Liquidation of Security May Not Be Sufficient in the Event of a Default Termination, Revocation or Non Renewal or of Charter; Pending Approval of High School Charter Taxation of Nonprofit Organizations Possible Changes in the Borrower s Tax Status Hazardous Materials Other Possible Risk Factors RESTRICTIONS ON OWNERSHIP AND TRANSFER OF BONDS SUITABILITY FOR INVESTMENT TAX MATTERS Exclusion of Interest on the Series 2014A Bonds From Gross Income for Federal Tax Purposes Additional Federal Income Tax Consequences Changes in Federal Tax Law NO RATING LIMITED OFFERING LEGAL MATTERS MISCELLANEOUS... 26

6 APPENDICES APPENDIX A: Certain Information Regarding the Borrower and Palm Beach Maritime Academy... A-1 APPENDIX B: Form of the Indenture...B-1 APPENDIX C: Form of the Loan Agreement...C-1 APPENDIX D: Form of the Mortgage and Security Agreement... D-1 APPENDIX E: Proposed Form of Opinion of Bond Counsel... E-1 APPENDIX F: Form of Qualified Investor Letter... F-1 APPENDIX G: Charter... G-1 APPENDIX H: Environmental Site Assessment Reports Relative to the Facilities... H-1 APPENDIX I: Form of Guaranty Agreement... I-1 APPENDIX J: Report of Feasibility Consultant... J-1 APPENDIX K: Audited Financial Statements of Palm Beach Maritime Academy for the Fiscal Years Ended June 30, 2013 and June 30, K-1

7 LIMITED OFFERING MEMORANDUM PUBLIC FINANCE AUTHORITY $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B INTRODUCTION The purpose of this Limited Offering Memorandum, including the cover page and Appendices hereto, is to provide certain information regarding the above referenced bonds (the Bonds ). Accordingly, there follows in this Limited Offering Memorandum brief descriptions of the Authority, the Borrower, the Guarantor, the Facility and the Project together with certain information about the terms of the Bonds, the Indenture and the Loan Agreement. All references herein to the Indenture and the Loan Agreement are qualified in their entirety by reference to such documents and all references to the Bonds are qualified by reference to the definitive form thereof and the information with respect thereto contained in the Indenture. Copies of the Indenture, the Loan Agreement, the Mortgage and Security Agreement and the Guaranty Agreement, as executed, are available upon request to the Borrower at the address set forth below. All capitalized terms not otherwise defined in this Limited Offering Memorandum shall have the meanings assigned to them in the Indenture. The Authority has furnished only the information included herein under the caption THE AUTHORITY. The Authority assumes no responsibility for the accuracy or completeness of any other information in this Limited Offering Memorandum. POTENTIAL INVESTORS ARE SOLELY RESPONSIBLE FOR EVALUATING THE MERITS AND RISKS OF AN INVESTMENT IN ANY SERIES OF THE BONDS. SEE SUITABILITY FOR INVESTMENT HEREIN. This Limited Offering Memorandum only contains limited information regarding the Bonds and is not to be considered a complete description of the matters necessary for the making of an informed investment decision. Additional information may be obtained from the Borrower at the following address: William E. Burckart, II Palm Beach Maritime Museum & Academy 4512 N. Flagler Drive, Suite 206 West Palm Beach, FL (561) (561) Fax maritimepb@aol.com 1

8 The full text of the form of the Indenture appears as Appendix B hereto and the full text of the form of the Loan Agreement appears as Appendix C hereto. General Description DESCRIPTION OF THE BONDS The Bonds will be dated, will bear interest at the rates per annum and, subject to the redemption provisions set forth below, will mature on the dates and in the amounts set forth on the inside cover page of this Limited Offering Memorandum. Interest on the Bonds is to be computed on the basis of a 360-day year consisting of twelve thirty-day months and will be payable on May 1 and November 1, commencing November 1, The interest on the Bonds may be increased under certain circumstances set forth in the Indenture. See Appendix B FORM OF THE INDENTURE. U.S. Bank National Association, Fort Lauderdale, Florida will serve as the initial Trustee, registrar and paying agent for the Bonds. The Bonds are issuable as fully registered bonds, without coupons, in denominations of $100,000 or integral multiples of $5,000 in excess of $100,000. Each Series of the Bonds will be initially issued in the form of a single fully-registered certificate. Upon initial issuance, the ownership of the Bonds will be registered in the bond register kept by the Trustee in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ( DTC ). See DESCRIPTION OF THE BONDS Book-Entry Only System below. Book-Entry Only System Subject to the policies and procedures of DTC (or any successor securities depository), the Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event bond certificates will be printed and delivered. The following contains a description of the procedures and operations of DTC and is based upon information provided by DTC. Neither the Authority, the Borrower nor the Underwriter have independently investigated or verified such procedures and operations and assume no responsibility for the accuracy or completeness of the description thereof. DTC, New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered certificate for each of the Bonds will be issued, as set forth on the cover page of this Limited Offering Memorandum, in the aggregate principal amount of such Bond, and will be deposited with DTC. DTC, the world s largest depository, is a limited purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues and money market instruments from over one hundred (100) countries that DTC s Participants ( Direct 2

9 Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). The Direct Participants and the Indirect Participants are collectively referred to as the DTC Participants. DTC has Standard & Poor s rating: AA+. The DTC Rules applicable to DTC Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participant s records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmation providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Trustee and request that copies of notices be provided directly to them. 3

10 Redemption notices shall be sent by the Trustee to DTC. If less than all of the Bonds within a series or maturity of a series are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such series or maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds and principal and interest payments on the Bonds will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Authority or the Trustee on the payment date in accordance with their respective holdings shown on DTC s records. Payments by Direct Participants or Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, nor its nominee, the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and principal and interest payments on the Bonds, as applicable, to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. Subject to the policies and procedures of DTC (or any successor securities depository), the Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bonds certificates will be printed and delivered. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE HOLDER OF THE BONDS OR REGISTERED OWNERS OF THE BONDS SHALL MEAN DTC AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. The Authority and the Borrower can make no assurances that DTC will distribute payments of principal of, redemption price, if any, or interest on the Bonds to the Direct Participants, or that Direct and Indirect Participants will distribute payments of principal of, redemption price, if any, or interest on the Bonds or redemption notices to the Beneficial Owners of such Bonds or that they will do so on a timely basis, or that DTC or any of its Participants will act in a manner described in this Limited Offering Memorandum. Neither the Authority nor the Borrower is responsible or liable for the failure of DTC to make any payment to any Direct Participant or failure of any Direct or Indirect 4

11 Participant to give any notice or make any payment to a Beneficial Owner in respect to the Bonds or any error or delay relating thereto. The rights of holders of beneficial interests in the Bonds and the manner of transferring or pledging those interests are subject to applicable state law. Holders of beneficial interests in the Bonds may want to discuss the manner of transferring or pledging their interest in the Bonds with their legal advisors. NONE OF THE AUTHORITY, THE TRUSTEE OR THE BORROWER SHALL HAVE ANY OBLIGATION WITH RESPECT TO ANY DEPOSITORY PARTICIPANT OR BENEFICIAL OWNER OF THE BONDS DURING SUCH TIME AS THE BONDS ARE REGISTERED IN THE NAME OF A SECURITIES DEPOSITORY PURSUANT TO A BOOK- ENTRY ONLY SYSTEM OF REGISTRATION. Redemption Provisions Optional Redemption The Series 2014A Bonds will be subject to optional redemption, by the Authority, prior to maturity, on or after May 1, 2024, at the direction of the Borrower, in whole at any time, or in part on any Interest Payment Date, out of moneys deposited with or held by the Trustee for such purpose, at a price equal to par plus accrued interest to the redemption date. The Series 2014B Bonds are not subject to optional redemption. Mandatory Sinking Fund Redemption The Series 2014A Bonds maturing on May 1, 2029 are subject to redemption, in part, by lot, from mandatory sinking fund payments deposited in the Debt Service Fund on May 1, 2015 and on each May 1, from and after May 1, 2018 to and including May 1, 2029, at the principal amount thereof plus accrued interest, if any, to the date of redemption (without premium), as follows: 5

12 Mandatory Sinking Fund Payment Date (May 1) Mandatory Sinking Fund Payment 2015 $1,000, , , , , , , , , , , , ,000 Maturity. The Series 2014A Bonds maturing on May 1, 2040 are subject to redemption, in part, by lot, from mandatory sinking fund payments deposited in the Debt Service Fund on each May 1, from and after May 1, 2030 to and including May 1, 2040, at the principal amount thereof plus accrued interest, if any, to the date of redemption (without premium), as follows: Mandatory Sinking Fund Payment Date (May 1) Mandatory Sinking Fund Payment 2030 $1,140, ,220, ,305, ,400, ,495, ,600, ,710, ,830, ,960, ,095, ,245,000 Maturity. 6

13 The Series 2014B Bonds are subject to redemption, in part, by lot, from mandatory sinking fund payments deposited in the Debt Service Fund on each May 1, from and after May 1, 2015 to and including May 1, 2017, at the principal amount thereof plus accrued interest, if any, to the date of redemption (without premium), as follows: Mandatory Sinking Fund Payment Date (May 1) Mandatory Sinking Fund Payment 2015 $600, ,000, ,040,000 Maturity. In the event of a partial redemption of Bonds through extraordinary mandatory redemption or optional redemption, future mandatory sinking fund installments will be eliminated or reduced in inverse order of sinking fund installment date. Extraordinary Mandatory Redemption The Bonds shall be subject to extraordinary mandatory redemption, and shall be redeemed prior to maturity, upon a Determination of Taxability, within 180 days of the date of such Determination of Taxability on a date selected by the Borrower, specified in a notice in writing delivered to the Trustee at least forty-five (45) days prior to the redemption date. Provided, that if the Borrower fails to give such notice, the Bonds shall be redeemed on the 181 st day following the Determination of Taxability. The Series 2014A Bonds being redeemed before maturity in accordance with this section shall be redeemed at a redemption price equal to one hundred percent (100%) of the principal amount of the Series 2014A Bonds being redeemed, together with accrued interest (at the Taxable Rate to the extent applicable) to the date of redemption. The Series 2014B Bonds being redeemed before maturity in accordance with this section shall be redeemed at a redemption price equal to the principal amount of the Series 2014B Bonds being redeemed, together with accrued interest to the date of redemption. Extraordinary Optional Redemption. If there should occur any event described in Section 7.1 (relating to casualty loss or condemnation) of the Loan Agreement which permits the redemption of the Bonds, the Bonds may, in certain circumstances, and upon the satisfaction of certain conditions, as set forth in Section 7.1 of the Loan Agreement, be subject to redemption at any time in whole or in part at a redemption price equal to the principal amount of the Bonds being redeemed, together with accrued interest to the date of redemption. Selection of Bonds for Redemption Whenever provision is made for the redemption of less than all of the Bonds, the Trustee will select the Bonds to be redeemed, from the Outstanding Bonds not previously called for redemption, by lot 7

14 within a maturity and, if from more than one maturity, in inverse order of maturity or in such other order of maturity as shall be specified in a request of the Borrower. Notice of Redemption (a) Notice of redemption shall be given by the Trustee to the Owners of all Bonds to be redeemed, by mail not less than thirty (30) days prior to the date fixed for redemption, at their addresses appearing on the books of registry. Notice of any redemption must be given either (i) by first class mail by the United States Postal Service, postage prepaid, to the Registered Owner thereof at its address which appear on the registration records of the Trustee on the date of mailing, or (ii) by actual delivery to the Registered Owner or its representatives evidenced by receipt signed by such Owner or the representatives. (b) Any redemption for which notice is given under Article IV of the Indenture may state that (i) it is conditioned upon the deposit of moneys, in an amount equal to the amount necessary to effect the redemption, with the Trustee or a fiduciary institution acting as escrow agent no later than the redemption date, or (ii) the Authority, on behalf of the Borrower, retains the right to rescind such notice at any time prior to the scheduled redemption date (in either case, a Conditional Redemption ), and such notice and optional redemption shall be of no effect if such moneys are not so deposited or if the notice is rescinded as described in this subsection. Any such notice of Conditional Redemption may be rescinded at any time prior to the redemption date if the Borrower delivers a written direction to the Trustee directing the Trustee to rescind the redemption notice. The Trustee shall give prompt notice of such rescission to the affected Owners in the same manner as notices of redemption are given hereunder. Any Bonds subject to a Conditional Redemption where redemption has been rescinded shall remain Outstanding, and neither the rescission nor the failure by the Borrower to make such funds available shall constitute an Event of Default hereunder. The Trustee shall give prompt notice to the affected Owners that the redemption did not occur and that the Bonds called for redemption and not so paid remain Outstanding. (c) Notice of redemption having been given as provided in subsection (a) or (b) above and all conditions precedent, if any, specified in such notice having been satisfied, the Bonds or portions thereof so to be redeemed shall become due and payable on the date fixed for redemption at the redemption price specified therein plus any accrued interest to the redemption date, and upon presentation and surrender thereof at the place specified in such Notice, such Bonds or portions thereof shall be paid at the redemption price, plus any accrued interest to the redemption date. On and after the redemption date (unless funds for the payment of the redemption price and accrued interest shall not have been provided to the Trustee), (i) such Bonds shall cease to bear interest and (ii) such Bonds shall no longer be considered as Outstanding under the Indenture. Authorization to Purchase Bonds At the election of the Borrower upon a redemption in whole of the Bonds, if and only if the Borrower obtains a Favorable Opinion of Bond Counsel, by written notice to the Trustee, given not less than forty-five (45) days in advance of the proposed redemption date, the Bonds will be deemed tendered for purchase in lieu of the redemption on such date and will be purchased by funds provided to the Trustee by the Borrower. The purchase price of Bonds so purchased in lieu of redemption shall be the Optional Redemption Price and shall be payable on the date of redemption 8

15 thereof. Bonds so purchased in lieu of redemption shall be registered to or upon the direction of the Borrower. ESTIMATED SOURCES AND USES OF PROCEEDS OF THE BONDS Sources of Funds Series 2014A Bonds Series 2014B Bonds Total Bonds Principal Amount $21,000,000 $3,640,000 $24,640,000 Total Sources $21,000,000 $3,640,000 $24,640,000 Use of Funds* Deposit to General Account of the Project Fund Deposit to Debt Service Reserve Fund Refund Refunded Bonds Deposit to Capitalized Interest Account Deposit to Costs of Issuance Account** Underwriter s Discount $16,017,830 2,100,000 1,000,000 1,462, ,000 $2,270, , , , , ,350 $18,288,227 2,464,000 1,100,000 1,686, , ,350 $21,000,000 $3,640,000 $24,640,000 Total Uses $21,000,000 $3,640,000 $24,640,000 * References are to Funds and Accounts established under Indenture. ** The Borrower shall be responsible for payment of all costs of issuance in excess of the amounts available from the proceeds of the Bonds 9

16 DEBT SERVICE REQUIREMENTS The following table shows the annual principal and interest requirements on the Bonds. Series 2014A Bonds Series 2014B Bonds Year Ending May 1 Principal Interest Total Principal Interest Total 2015 $ 1,000,000 $1,232,708 $2,232,708 $ 600,000 $192,743 $792, ,390,000 1,390,000 1,000, ,000 1,190, ,390,000 1,390,000 2,040, ,500 2,167, ,000 1,390,000 1,460, ,000 1,385,450 1,480, ,000 1,379,275 1,504, ,000 1,371,150 1,526, ,000 1,361,075 1,546, ,000 1,349,050 1,539, ,000 1,336,700 1,526, ,000 1,324,350 1,514, ,000 1,312,000 1,512, ,000 1,299,000 1,499, ,000 1,286,000 1,486, ,000 1,273,000 1,473, ,140,000 1,260,000 2,400, ,220,000 1,180,200 2,400, ,305,000 1,094,800 2,399, ,400,000 1,003,450 2,403, ,495, ,450 2,400, ,600, ,800 2,400, ,710, ,800 2,398, ,830, ,100 2,399, ,960, ,000 2,401, ,095, ,800 2,398, ,245, ,150 2,402,150 Total $21,000,000 $28,484,308 $49,484,308 $3,640,000 $510,243 $4,150,243 Trust Estate SECURITY FOR AND SOURCES OF PAYMENT OF THE BONDS The Bonds shall be secured by the Trust Estate, which is stated in the Indenture to consist of: (a) All moneys from time to time paid by the Borrower pursuant to the terms of the Loan Documents and all right, title and interest of the Authority (including, but not limited to, the right to enforce any of the terms thereof) under and pursuant to and subject to the provisions of the Loan Agreement (but excluding the Authority s Unassigned Rights as defined in the Loan Agreement and any payments made by the Borrower to meet the rebate requirements of Section 148(f) of the Code); and (b) All other moneys and securities from time to time held by the Trustee under the terms of this Indenture, excluding amounts required to be rebated to the United States Treasury under Section 148(f) of the Code, whether or not held in the Rebate Fund; and (c) The proceeds of refunding bonds of the Authority, if and when issued; and 10

17 and (d) All right, title and interest of the Authority, if any, in the Security Property; (e) Any and all property (real, personal or mixed) of every kind and nature from time to time hereafter, by delivery or by writing of any kind, pledged, assigned or transferred as and for additional security hereunder to the Trustee, which the Trustee is hereby authorized to receive at any and all times and to hold and apply the same subject to the terms of this Indenture. Pledge of and Security Interest in Gross Revenues In the Loan Agreement, the Borrower pledges and grants to the Authority a security interest in favor of the Authority in the Gross Revenues, in consideration of the loan and as security for the loan repayments to be made by Borrower under the Loan Agreement and under the Notes for the payment of the Bonds, and as security for the performance of all of the other obligations, agreements and covenants of Borrower to be performed and observed under the Loan Agreement. Gross Revenues means all of the Facility s revenues, receipts and income, from all sources of whatsoever nature, provided, however, that the term Gross Revenues shall not include (i) gifts, grants, bequests, donations and contributions made to the Borrower or the Facility, which are specifically designated at the time of the making thereof by the donor or grantor thereof as being for certain specified purposes which are inconsistent with the application thereof to the payment of the Loan Payments, and (ii) any amounts collected by the Borrower or the Facility that constitute sales taxes or other monies which are required by law to be paid over to any governmental entity. The primary source of revenues of the Borrower include: (i) funds apportioned to the Borrower from the School Board of Palm Beach County (the School Board ) in accordance with a statutory formula based on the number of weighted full-time equivalent students ( FTEs ) attending the Facility (the School Board Revenues ), and (ii) state revenues allocated to the Borrower. Such Revenues are broken down into two primary components, Operating Revenues and Capital Funds, each of which is described below. Operating Revenues. A charter school may not charge tuition or fees, except those fees normally charged by other public schools. Instead, a charter school receives funding through the sponsor., i.e., the School Board. Students enrolled in a charter school, regardless of sponsorship, are funded in the same manner as students enrolled in other public schools in the school district. The amount of School Board Revenues available to the Borrower is calculated by (i) dividing (a) the sum of (1) the school district s operating funds from the Florida Educational Finance Program ( FEFP ), and (2) the school district s operating funds from the General Appropriations Act, including gross state and local funds, discretionary lottery funds and funds from the school district s current operating discretionary millage levy, by (b) the total FTEs in the school district, and (ii) multiplying the result by the FTEs for the charter school. See CERTAIN RISK FACTORS - State Revenues herein. Total funding for each charter school is subject to recalculation during the year to reflect revised calculations by the State of Florida under the FEFP and the actual full-time equivalent students reported by the charter school during the survey periods designated by the Florida Department of Education ( FDOE ). 11

18 Capital Funds. If a charter school serves students in facilities not provided by the charter school s sponsor (such as the Facility), the charter school may be eligible to receive funds appropriated for charter school capital outlay purposes. Section , et seq., Florida Statutes requires the FDOE to request in its annual legislative budget capital outlay funding for charter schools based on the projected number of students to be served in all charter schools. A charter school s governing body may use charter school capital outlay funds for any capital outlay purpose that is directly related to the functioning of the charter school, including the purchase of real property; construction, renovation, repair and maintenance of school facilities; purchase, leasepurchase or lease of permanent or relocatable school facilities; or the purchase of vehicles to transport students to and from the charter school or to pay the principal portion of any debt or other obligation, including the Bonds, incurred by the charter school to finance such capital improvements. Loan Repayments The Loan Agreement provides that the Borrower shall collect the Gross Revenues and deposit the Gross Revenues into an operating account maintained by the Borrower and requires the Borrower to pay, on or before the 20 th day of each month an amount necessary for the payment of the amounts described in (a) through (e) below to the Trustee. The Trustee is required to deposit all monies so received and any other Gross Revenues received by the Trustee into the Revenue Fund. Such monies so received and Gross Revenues received by the Trustee shall be applied by the Trustee, subject to Section 6.07(b) of the Indenture, in the order of priority set forth below: (a) First, monthly upon receipt, for deposit into the Interest Account of the Debt Service Fund, an amount equal to one-sixth of that portion of the next interest payment coming due on the Bonds; (b) Second, monthly upon receipt for deposit into the Principal Account of the Debt Service Fund, an amount equal to one-twelfth of the next principal or mandatory sinking fund redemption payment coming due on the Bonds (provided, that through and including April 20, 2015, such amount shall be one-tenth of the next principal or mandatory sinking fund redemption payment coming due on the Bonds); provided that the Borrower may credit against any such deposits to the Debt Service Fund required pursuant to clauses (a) and (b) above on any date (i) amounts deposited into the Capitalized Interest Account out of the proceeds of the Bonds due to be paid within the next thirty (30) days and any payment due to the Rebate Analyst, (ii) any payments of principal of or interest on the Bonds paid on or immediately preceding such date other than with funds held for the credit of the Debt Service Fund and (iii) any amounts held in the Debt Service Fund as income from the investment of amounts on deposit pursuant to the Indenture; (c) Third, for deposit into the Rebate Fund, the amount of any rebatable arbitrage pursuant to the Indenture; (d) Fourth, commencing the month next following the month in which there shall have occurred any transfer from, or decline in value of, the Debt Service Reserve Fund, for deposit into the Debt Service Reserve Fund, an amount equal to one-sixth of the amount needed to restore the balance therein to the Debt Service Reserve Fund Requirement; 12

19 (e) Fifth, upon receipt, payment of Additional Payments due to be paid within the next thirty (30) days and any payment due to the Rebate Analyst; and (f) After the payments in (a), (b), (c), (d) and (e) above have been made, the Trustee shall send to the Borrower any remaining balance in the Revenue Fund to be used by the Borrower to pay Operating Expenses for such month. Guaranty Agreement Pursuant to the Guaranty Agreement, the Guarantor will unconditionally and irrevocably guarantee to the Trustee all amounts due or to become due from the Borrower to the Authority under the Loan Agreement and the Notes. See APPENDIX I FORM OF GUARANTY AGREEMENT. Mortgage and Security Agreement Pursuant to the Mortgage and Security, the Borrower has agreed to mortgage certain property to the Trustee. See APPENDIX D Form of the Mortgage and Security Agreement. Additional Bonds Under the Indenture, no bonds, or other obligations, other than or in addition to the Bonds, may be issued and secured thereunder. Debt Service Reserve Fund The Indenture establishes a debt service reserve fund with respect to the Bonds (the Reserve Fund ). The Debt Service Reserve is to be held by the Trustee in trust in favor of the Holders of the Bonds only, to be applied solely for the purposes specified in the Indenture, and is pledged to secure the payment of principal of, redemption premium, if any, Sinking Fund Installments and interest on the Bonds. The Debt Service Reserve Requirement with respect to the Bonds is $2,464,000. Formation and Governance THE AUTHORITY In early 2010, both houses of the Wisconsin Legislature passed 2009 Wisconsin Act 205 (the Act ) which was signed into law by the Governor of the State of Wisconsin (the State ) on April 21, The Act added Section (the Statute ) to the Wisconsin Statutes providing the authority for two or more political subdivisions to create a commission to issue bonds under that Section of the Wisconsin Statutes. Before an agreement for the creation of such a commission could take effect, the Act required that such agreement be submitted to the Attorney General of the State of Wisconsin to determine whether the agreement is in proper form and compatible with the laws of the State. The Authority was formed upon execution of a Joint Powers Agreement dated as of June 30, 2010, as amended by an Amended and Restated Joint Exercise of Powers Agreement Relating to the Public Finance Authority, dated September 28, 2010 (as so amended and restated, the Joint Powers Agreement ), among Adams County, Wisconsin, Bayfield County, Wisconsin, Marathon County, Wisconsin, Waupaca County, Wisconsin and the City of Lancaster, Wisconsin (each a Member and, collectively, the Members ). The Joint Powers Agreement was approved by the Attorney 13

20 General on September 30, The Act provides that only one commission may be formed thereunder. Pursuant to the Statute, the Authority is a unit of government and a body corporate and politic separate and distinct from, and independent of, the State of Wisconsin and the Members. The Authority was established by local governments, primarily for local governments, for the public purpose of providing local governments a means to efficiently and reliably finance projects that benefit local governments, nonprofit organizations, and other eligible private borrowers in the State and throughout the country. Powers Under the Statute, the Authority has all of the powers necessary or convenient to any of the purposes of the Act, including the power to issue bonds, notes or other obligations or refunding obligations to finance or refinance a project, make loans to, lease property from or to enter into agreements with a participant or other entity in connection with financing a project. The proceeds of bonds issued by the Authority may be used for a project in the State of Wisconsin or any other state or territory of the United States and, outside the United States if a participating borrower is incorporated and maintains its principal place of business in, the United States or its territories. The Statute defines project as any capital improvement, purchase of receivables, property, assets, commodities, bonds or other revenue streams or related assets, working capital program, or liability or other insurance program, located within or outside of the State. Local Approvals Under Subsection (11)(a) of the Statute, financing for all capital improvement projects outside the State, requires approval from the governing body or highest-ranking executive or administrator of at least one political subdivision within whose boundaries the capital improvement project is located. The Palm Beach County Board of County Commissioners approved the financing of the Project through the issuance of the Bonds on April 15, TEFRA Approvals Under Section 147(f) of the Internal Revenue Code of 1986, as amended (the Code ), the issuance of the Bonds must be approved by (i) the Authority and (ii) the governing body or an appropriate elected official of the jurisdiction in which the Project to be financed with the proceeds of such Bonds is located, in each case after giving proper notice of and conducting a public hearing at which a reasonable opportunity to be heard is given to persons wishing to express their views on the merits of the Project, its location, the issuance of the Bonds or related matters. Approvals under Code Section 147(f) were granted (i) on behalf of the Authority by an appropriate elected official of Marathon County, Wisconsin after a public hearing held on April 14, 2014, and (ii) Palm Beach County, Florida, following a public hearing held on April 15, State Pledge Subsection (12) of the Statute provides that the State of Wisconsin pledges to and agrees with the Bondholders, and persons that enter into contracts with a commission under the Statute, that the State will not limit, impair, or alter the rights and powers vested in a commission by the Statute before the commission has met and discharged the Bonds and any interest due on the Bonds and has 14

21 fully performed its contracts, unless adequate provision is made by law for the protection of the Bondholders or those entering into contracts with the Authority. Board of Directors The Board of Directors of the Authority (the Board ) consists of seven directors (each a Director and collectively, the Directors ), a majority of which are required to be public officials or current or former employees of a political subdivision located in the State. The Directors serve staggered three-year terms. The Directors are selected by majority vote of the Board based upon nomination from the organization that nominated the predecessor Director. Four Directors are nominated by the Wisconsin Counties Association, and one Director is nominated from each of the National League of Cities, the National Association of Counties and the League of Wisconsin Municipalities. Directors and alternate Directors may be removed and replaced at any time by the Board upon recommendation of the applicable organization that nominated such Director. As of the date of this Limited Offering Memorandum there is one vacant Board seat (representing the nominee of the National League of Cities). The current incumbent Directors are: Name Title Term Expires Position William Kacvinsky Chair 05/31/15 Bayfield County, Wisconsin, Board Chair Jerome Wehrle Vice Chair 05/31/15 Mayor, City of Lancaster, Wisconsin Heidi Dombrowski Treasurer 05/31/16 Waupaca County, Wisconsin, Finance Director John West Secretary 05/31/16 Adams County, Wisconsin, Supervisor Del Twidt Member 05/31/16 Buffalo County, Wisconsin Michael Gillespie Member 05/31/17 Former Chair, Madison County, Alabama Board of Commissioners Special Limited Obligations THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE TRUST ESTATE. EXCEPT FROM SUCH SOURCE, NONE OF THE AUTHORITY, ANY MEMBER, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THE BONDS SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST THEREON OR ANY COSTS INCIDENTAL THERETO. THE BONDS DO NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE, IN ANY MANNER, ANY MEMBER, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THE BONDS TO LEVY ANY TAX OR TO MAKE ANY APPROPRIATION FOR PAYMENT OF THE PRINCIPAL OF, 15

22 PREMIUM, IF ANY, OR INTEREST THEREON OR ANY COSTS INCIDENTAL THERETO. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF ANY MEMBER, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THE BONDS, NOR THE FAITH AND CREDIT OF THE AUTHORITY, SHALL BE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON, THE BONDS OR ANY COSTS INCIDENTAL THERETO. THE AUTHORITY HAS NO TAXING POWER. Other Obligations The Authority has in the past and expects in the future to sell and deliver obligations other than the Bonds, which other obligations are and will be secured by instruments separate and apart from the Bond Agreement and the Bonds. The holders of such obligations of the Authority will have no claim on the security for the Bonds, and the owners of the Bonds will have no claim on the security for such other obligations issued by the Authority. Limited Involvement The Authority has not reviewed any feasibility study or other financial analysis of the Project and has not undertaken to review or approve expenditures for the Project, or to obtain any financial statements of the Borrower or the Guarantor. The Authority has not reviewed this Limited Offering Memorandum and is not responsible for any information contained herein except for the information in this section. Authority Contact The Authority may be contacted at: Mr. Scott Carper, Public Finance Authority, c/o the Wisconsin Counties Association, 22 E. Mifflin Street, Suite 900, Madison, Wisconsin, 53703; Phone: (925) ; Disclosure Regarding Litigation Affecting the Bonds To the knowledge of the Authority, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending against the Authority seeking to restrain or enjoin the sale or issuance of the Bonds, or in any way contesting or affecting any proceedings of the Authority taken concerning the sale thereof, the pledge or application of any moneys or security provided for the payment of the Bonds, the validity or enforceability of the documents executed by the Authority in connection with the Bonds, the completeness or accuracy of this Limited Offering Memorandum or the existence or powers of the Authority relating to the sale of the Bonds. PALM BEACH MARITIME ACADEMY CHARTER SCHOOL Palm Beach Maritime Academy currently operates one charter school located on two sites in the Town of Lantana, Palm Beach County, Florida, which consist of Lantana 1 (K-5) located at 1518 W. Lantana Road and Lantana 2 (6-10) at 600 S. East Coast Avenue. SEE APPENDIX A CERTAIN INFORMATION REGARDING THE BORROWER AND PALM BEACH MARITIME ACADEMY. 16

23 THE BORROWER AND THE GUARANTOR The Borrower is a Florida non-profit corporation. The Borrower was incorporated on May 20, 1974 under the name Ocean Learning Institute, Inc., and changed its name to Palm Beach Maritime Museum, Inc. on July 7, The Borrower is a Section 501(c)(3) organization under the Code. The Guarantor is a Maryland non-profit corporation authorized to do business in Florida. The Guarantor was incorporated on May 31, 1979 under the name American Clipper Trust, Inc., and changed its name to Palm Beach Maritime Foundation, Inc. on May 11, The Guarantor is a Section 501(c)(3) organization under the Code. Forming a Charter School THE CHARTER Charter schools are public schools that are granted limited autonomy by a school board in exchange for a time-limited charter or contract for student achievement. The charter contract serves as the mission statement and contains curriculum guidelines, governance policies and general goals. The character of charter legislation varies from state to state. The State of Florida first adopted its charter school legislation in 1996, which now is contained in Chapter , et seq., Florida Statutes (the Charter School Legislation ). Charter schools are considered part of the State s program of public education and are fully recognized as public schools. Upon approval of a charter application, the initial startup date must commence with the beginning of the public school calendar for the district in which the charter is granted unless the school district board otherwise permits. The terms and conditions for the operation of a charter school are set forth in a written charter agreement between the governing body of the charter school and the sponsor. The written charter agreement must be agreed upon within six months after approval of the charter application and following a public hearing to ensure community input. Generally, the initial term of a charter can be for 3, 4 or 5 years. However, in order to facilitate access to long-term financial resources for charter school construction, charter schools operated by a municipality or other public entity as provided by law are eligible for up to a 15-year charter. In addition, charter schools operated by a private, not-for-profit corporation which is exempt from federal income taxation pursuant to Section 501(c)(3) of the Code are eligible for up to a 15-year charter, subject to approval by the district school board. A charter may be renewed every 5 school years, provided that a program review indicates that the goals set forth in the charter contract have been successfully accomplished and that none of the grounds for nonrenewal exist. In order to further facilitate long-term financing, charter schools operating for a minimum of 2 years and demonstrating exemplary academic programming and fiscal management are eligible for a 15- year charter renewal. However, all charters are subject to annual review and may be terminated during the term of the charter for specific good cause. Borrower s Charter The Borrower s current Charter provides for a term of 15 years commencing with the school year subject to meeting the renewal requirements described below under the subheading 17

24 Renewal and Termination of the Charter. The Charter also sets forth the terms and conditions under which the Borrower will operate. During the term of the Charter or any renewal thereof, the School Board or the Borrower s governing board may terminate the Charter in accordance with the procedures provided therein and specified in the Charter School Legislation. See THE CHARTER - Renewal and Termination of the Charter herein. The Borrower s Charter covers grades K through 8 with a maximum student enrollment of 1,650 students permitted for such grades. The Borrower was approved by The School District of Palm Beach County to expand its high school curriculum to accommodate approximately 2,000 students. The Borrower is currently in negotiations with the School Board for an additional charter to cover grades 9 through 12. The current draft of such proposed charter (the High School Charter ) can be found in APPENDIX G Charter. If approved in its current form, the proposed High School Charter would run for a period of 5 years with a maximum student enrollment of 2,125 for grades 9 through 12. Eligible Students Charter schools are open to any student covered in an interdistrict agreement or residing in the school district in which the charter school is located. In addition, a charter school may give enrollment preference to a sibling of a student enrolled in the charter school, to the child of a member of the governing board of the charter school, or to a child of an employee of the charter school. The charter school must enroll all eligible students who submit a timely application, unless the number of applicants exceeds the capacity of the program, class, grade level or building. In such a case, all applicants must have an equal chance of being admitted through a random selection process. A charter school may limit enrollment to target certain student populations including: students within specific age groups or grade levels; students considered at risk of dropping out of school or academic failure; students enrolling in certain charter programs; students residing within a reasonable distance of the charter school (subject to certain racial/ethnic balance provisions); students who meet reasonable academic, artistic, or other eligibility standards established by the charter school and included in its application (subject to certain state law and anti-discrimination provisions); and students articulating from one charter to another pursuant to an articulation agreement between the charter schools which has been approved by the sponsor. For the past school year, the Borrower enrolled approximately 1,035 students. Operation of Charter Schools In addition to the annual financial audit, the Charter and the Charter School Legislation require the Borrower to submit an annual progress report to the School Board which includes, among other elements: Borrower s progress towards achieving goals outlined in the Charter; information required in the School Board s annual report, financial records of the Borrower including all revenue and expenditures; salary and benefit levels of the Borrower s employees; comparative student performance data; and other information required under the State system of school improvement and educational accountability. The Charter also provides that the Borrower will conduct a program cost report, prepare an annual financial report in the format required by the FDOE and provide such information to the School Board. 18

25 Renewal and Termination of the Charter The Charter School Legislation provides that at any point during and at the end of the term of a charter, the sponsor may choose to terminate or not to renew the charter for any of the following reasons: (i) failure to meet the requirements for student performance stated in the charter; (ii) failure to meet generally accepted standards of fiscal management; (iii) violation of law; and (iv) other good cause shown. The sponsor must provide written notification to the governing body of the charter school at least 90 days prior to not renewing or terminating a charter and the grounds for the proposed action. The governing body of the charter school may request an informal hearing within 14 calendar days after receiving the notice. After receiving a request for an informal hearing, the sponsor must conduct the informal hearing within 30 calendar days. After receiving the sponsor s decision to terminate or refusal to renew the charter, the charter school s governing body may appeal the decision to the FDOE within 14 calendar days. However, a sponsor may terminate a charter immediately if the sponsor determines that good cause has been shown or if the health, safety or welfare of the students is threatened. In such a case, the school district in which the charter school is located shall assume operation of the school. After receiving the sponsor s decision to immediately terminate the charter without a hearing, the charter school s governing body may appeal the decision to the FDOE within 14 calendar days. Under the terms of the Charter, if the Charter is dissolved, terminated, or not renewed, then all of the charter school s unencumbered funds and property and improvements, furnishings and equipment which were purchased with public funds shall automatically revert to full ownership to the School Board, subject to complete satisfaction of any lawful liens or encumbrance, in accordance with Section Florida Statutes. Any property and improvements, furnishings, and equipment purchased from other funding sources which have not been reimbursed by public funds shall be the property of the charter school if the Charter terminates or is not renewed. Any assets existing at the time of termination or non-renewal of the Charter that have been funded by both public and nonpublic funds shall be equitably divided between the parties. The charter school shall be responsible for its own debts and obligations and shall not pledge the full faith and credit of the School Board in regard to any debt. The School Board is not responsible for the debt of the Borrower. THE FACILITY AND THE PROJECT The Borrower currently operates two charter schools in Palm Beach County - (i) Lantana 1 at 1518 Lantana Road Lantana, Florida, and (ii) Lantana 2 at 600 South East Coast Avenue, Lantana Florida (collectively, the Facility ). The proceeds of the Bonds will be used to provide (1) financing to the Borrower for its acquisition, construction and equipping of the Facility, (2) establish a Reserve Account within the Debt Service Reserve Fund, (3) fund capitalized interest, (4) refund the Refunded Bonds (hereinafter, the Project ) and (5) pay the costs of issuance of the Bonds. Lantana 1 The Lantana 1 Facility to be acquired is located at 1518 West Lantana Road containing approximately 49,770 square feet of building area situated on a land area of approximately 5.01 acres, consisting of a one-story 38,588 square feet building ( Palm Beach Maritime 19

26 Academy ), a 6,636 square feet Dollar General store ( Dollar General ) and a McDonald s outparcel of 4,546 square feet ( McDonald s ). Palm Beach Maritime Academy has been leasing its Lantana 1 Facility space from an unrelated third party for three years. Palm Beach Maritime Academy plans to use the proceeds of the Bonds to purchase the Lantana 1 Facility for a cost of $8,600,000. The Palm Beach Maritime Academy will continue to operate as a K-5 school in its current facility, while the Dollar General building will be converted and improved into additional classroom space. The McDonald s will continue to operate as a tenant under a long-term ground lease, but the Borrower does not receive the lease payments. Lantana 2 The Lantana 2 Facility to be acquired is located at 600 South East Coast Avenue, consisting of three buildings containing approximately 9,070 square feet of building area for building 1, approximately 23, 907 square feet of area for building 2 and approximately 7,470 square feet of area for building 3. The Lantana 2 Facility is sited on a land area of approximately 5.01 acres. Palm Beach Maritime Academy has been leasing its Lantana 2 Facility space from an unrelated third party for one year. Palm Beach Maritime Academy plans to use the proceeds of the Bonds to purchase the Lantana 2 Facility for a total cost of $8,000,000. $2,500,000 of the purchase price of Lantana 2 will be used by the seller to finance the construction of a 20,000 square feet addition to the existing improvements for the purpose of adding additional classrooms. CERTAIN RISK FACTORS A PURCHASER OF THE BONDS IS SUBJECT TO CERTAIN RISKS. EACH PROSPECTIVE INVESTOR IN THE BONDS IS ENCOURAGED TO READ THIS LIMITED OFFERING MEMORANDUM IN ITS ENTIRETY. PARTICULAR ATTENTION SHOULD BE GIVEN TO THE FACTORS DESCRIBED BELOW WHICH, AMONG OTHERS, COULD AFFECT THE MARKET PRICE OF THE BONDS TO AN EXTENT THAT CANNOT BE DETERMINED. IN ADDITION, THIS LIMITED OFFERING MEMORANDUM ONLY CONTAINS LIMITED INFORMATION REGARDING THE BONDS AND IS NOT TO BE CONSIDERED A COMPLETE DESCRIPTION OF THE MATTERS NECESSARY FOR THE MAKING OF AN INFORMED INVESTMENT DECISION. ADDITIONAL INFORMATION MAY BE OBTAINED FROM THE BORROWER AT THE ADDRESS SET FORTH UNDER THE CAPTION INTRODUCTION. Debt Service Coverage The forecasts contained in the Market Feasibility Study for Palm Beach Maritime Academy, Lantana, Florida (the Feasibility Report ) prepared by Fishkind & Associates, Inc. (the Feasibility Consultant ) are forward-looking statements based on certain assumptions made by the Feasibility Consultant. As stated in the Feasibility Report, there usually will be differences between the forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. Such a variation could have a material adverse effect on the Borrower s ability to pay debt service on the Bonds. In addition, the Debt Service Coverage Table covers the years 2015 through 2018, consequently the forecast does not cover the entire period 20

27 during which the Bonds may be outstanding. The Borrower assumes no obligation for updating the forecasts. BECAUSE THERE IS NO ASSURANCE THAT ACTUAL EVENTS WILL CORRESPOND WITH THE ASSUMPTIONS MADE, NO REPRESENTATION CAN BE MADE THAT THE FORECASTS IN THE FEASIBILITY REPORT WILL CORRESPOND WITH THE RESULTS ACTUALLY ACHIEVED IN THE FUTURE. ACTUAL OPERATING RESULTS MAY BE AFFECTED BY MANY UNCONTROLLABLE FACTORS, INCLUDING, BUT NOT LIMITED TO, INCREASED COSTS, EMPLOYEE RELATIONS, GOVERNMENTAL CONTROLS, CHANGES IN GOVERNMENTAL REGULATIONS APPLICABLE TO CHARTER SCHOOLS, CHANGES IN DEMOGRAPHIC TRENDS AND GENERAL ECONOMIC CONDITIONS. State Revenues A large portion of the Borrower s operational funding is derived from the School Board s State revenue sources. A significantly large percentage of such state revenues is generated from the levy of the state sales tax. The amounts budgeted for distribution from the State to the School Board are subject to change in the event that projected revenues are not realized. The State has experienced some significant shortfalls in sales tax revenues in recent years which have resulted in cuts to school budgets. See APPENDIX J Report of Feasibility Consultant. Gross Revenues and Enrollment The amount of Gross Revenues generated by the Borrower and available to pay debt service on the Bonds is dependent upon the number and type of FTEs attending the Borrower s Charter School and the amount of funding available to the Borrower based on such FTEs. There is no assurance that the Borrower will be able to attract sufficient students or funding sufficient to pay debt service on the Bonds. Priority of Security, Enforceability of Remedies The Bonds are payable from the payments to be made under the Loan Agreement. The Bonds are secured by a Mortgage and Security Agreement on the land and building comprising the Facility and an assignment of security interests in the personal property comprising the Facility. A security interest in the gross revenues of the Borrower derived from the Facility has been granted to the Authority pursuant to the Loan Agreement and assigned to the Trustee pursuant to the Indenture. In addition, the effectiveness of the security interest granted in those receipts may be limited if the proceeds thereof are commingled with other moneys not subject to such security interest and if the Trustee does not take possession of cash constituting such receipts or the proceeds thereof. The practical realization of value from these properties upon any default will depend upon the exercise of various remedies specified by the Loan Agreement and Indenture. These and other remedies may, in many respects, require judicial actions, which are often subject to discretion and delay. Under existing law (including particularly the U.S. Bankruptcy Code), the remedies specified by the Loan Agreement and Indenture may not be readily available or may be limited. A court may decide not to order the specific performance of the covenants contained in the Loan Agreement and 21

28 Indenture. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by state and federal laws, rulings and decisions affecting remedies, and by bankruptcy, reorganization, or other laws affecting the enforcement of creditors rights generally. Liquidation of Security May Not Be Sufficient in the Event of a Default Because the Borrower has no significant assets other than its interest in the Facility, the Trustee and the Authority must look solely to the Facility and the other security for the Bonds to pay and satisfy the Bonds in accordance with their terms. The Bondholders are dependent, primarily, upon the success of the Facility and the value of its assets for the payment of the principal, premium, if any, and interest on the Bonds. In the event the revenues from the Facility are insufficient to pay the Bonds, then, after the other security for the Bonds and any other assets of the Borrower have been exhausted, the Bondholders will have no person to pursue for any deficiency which may exist. The exercise of remedies under the Mortgage and Security Agreement will be subject to Permitted Encumbrances. Termination, Revocation or Non Renewal or of Charter; Pending Approval of High School Charter In the event the Charter is revoked, terminated or not renewed, the Trustee must look to the Facility to satisfy the Bonds in the event sufficient monies are not available to make scheduled payments on the Bonds. Consequently, as explained above under the subheading Liquidation of Security May Not Be Sufficient in the Event of Default, the Trustee may not be able to obtain an amount sufficient to satisfy amounts due on the Bonds. Additionally, as discussed earlier under the caption THE CHARTER Borrower s Charter, the School Board has approved the Borrower to expand its high school curriculum to accommodate approximately 2,000 students, and an additional charter to cover grades 9 through 12 is currently pending. Failure to approve the High School Charter would adversely impact the financial projections set forth in the Feasibility Report. Taxation of Nonprofit Organizations The Subcommittee on Oversight and Investigation of the Committee on Ways and Means of the U.S. House of Representatives has held public hearings on the issue of unfair competition between nonprofit and for-profit organizations. Similar hearings have been conducted by certain state legislative bodies. These hearings have focused on the need for changes in the law relating to the taxation of nonprofit organizations in connection with revenue producing activities in which they are engaged. In addition, taxing authorities in certain state and local jurisdictions have recently sought to impose or increase taxes related to the properties and operations of nonprofit organizations, particularly where such authorities have been dissatisfied with the amount of service provided to indigent persons. There can be no assurance that future changes in the law, rules, regulations and policies relating to the taxation of nonprofit organizations will not have a material adverse effect upon the revenues of the Borrower. 22

29 Possible Changes in the Borrower s Tax Status The possible modification or repeal of certain existing federal income or state tax laws or other loss by the Borrower of the present advantages of certain provisions of the federal income or state tax laws could materially and adversely affect the status of the Borrower, and thereby the revenues of the Borrower. As an exempt organization, the Borrower is subject to a number of requirements affecting its operations. The failure of the Borrower to remain qualified as an exempt organization would affect the funds available to the Borrower for payments under the Loan Agreement. Failure of the Borrower to comply with certain requirements of the Code, or adoption of amendments to the Code to restrict the use of tax-exempt bonds for facilities such as the Facility, could cause interest on the Series 2014A Bonds to be included in the gross income for federal income tax purposes of the Owners or former Owners. The tax exempt status of the Series 2014A Bonds is based on the continued compliance by the Authority and the Borrower with certain covenants contained in the Loan Agreement and Indenture and in certificates executed by the Authority and the Borrower in connection therewith. These covenants relate generally to arbitrage limitations, rebate of certain excess investment earnings to the federal government, restrictions on the amount of issuance costs financed with the proceeds of the Series 2014A Bonds and maintenance of the Borrower s tax exempt status. Failure to comply with any of these covenants may result in the treatment of interest on the Series 2014A Bonds as taxable income to the Owners thereof, retroactive to their date of issuance. See TAX MATTERS herein. Hazardous Materials A recent sampling of the property indicated that constituents analyzed for groundwater contamination on the Lantana 2 site are below laboratory detectable levels although certain heavy metals were detected. However, no assurance can be given that environmental conditions will not change or in the future exist at either the Lantana 1 or Lantana 2 which could become the subject of enforcement actions by governmental agencies. See APPENDIX H: Environmental Site Assessment Reports Relative to the Facility. Other Possible Risk Factors Regulatory and other changes resulting from the factors mentioned above, among others, or the occurrence of other unanticipated events, could have a material adverse effect on the Borrower s operations. The occurrence of any of the following events, or other unanticipated events, could adversely affect the operations of the Borrower: (a) Establishment of mandatory governmental wage, rent or price controls; (b) Inability to control increases in operating costs, including salaries, wages and fringe benefits, supplies and other expenses; (c) Unionization, employee strikes and other adverse labor actions which could result in a substantial increase in expenditures without a corresponding increase in revenues; and 23

30 (d) Adoption of other federal, state or local legislation or regulations having an adverse effect on the future operating or financial performance of the Borrower. RESTRICTIONS ON OWNERSHIP AND TRANSFER OF BONDS Each initial purchaser of the Bonds will be required to execute a qualified investor letter in the form attached hereto as Appendix F. THE BONDS ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND RESALE AND MAY NOT BE TRANSFERRED OR SOLD EXCEPT AS PERMITTED BY THE INDENTURE AND PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. See FORM OF QUALIFIED INVESTOR LETTER in Appendix F hereto. SUITABILITY FOR INVESTMENT This offering is limited to qualified institutional buyers. Investment in the Bonds poses certain economic risks. Prospective investors in the Bonds should have such knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of an investment in the Bonds and have the ability to bear the economic risks of such prospective investment, including a complete loss of such investment. SERIES 2014A BONDS TAX MATTERS Exclusion of Interest on the Series 2014A Bonds From Gross Income for Federal Tax Purposes The Internal Revenue Code of 1986, as amended (the Code ), imposes certain requirements that must be met on a continuing basis subsequent to the issuance of the Series 2014A Bonds in order to assure that interest on the Series 2014A Bonds will be excluded from gross income for federal income tax purposes under Section 103 of the Code. Failure of the Authority or the Borrower to comply with such requirements may cause interest on the Series 2014A Bonds to lose the exclusion from gross income for federal income tax purposes, retroactive to the date of issuance of the Series 2014A Bonds. The Authority and the Borrower have covenanted to comply with the provisions of the Code applicable to the Series 2014A Bonds and have covenanted not to take any action or fail to take any action that would cause the interest on the Series 2014A Bonds to lose the exclusion from gross income under Section 103 of the Code. Assuming the Authority and the Borrower comply with their covenants with respect to the Code, Greenspoon Marder, P.A., Bond Counsel to the Authority, is of the opinion that, under existing law, interest on the Series 2014A Bonds is excluded from gross income of the owners thereof for federal income tax purposes pursuant to Section 103 of the Code, and interest on the Series 2014A Bonds is not an item of tax preference under Section 57 of the Code for purposes of computing alternative minimum tax. 24

31 Additional Federal Income Tax Consequences In the case of certain corporate holders of the Series 2014A Bonds, interest on the Series 2014A Bonds will be included in the calculation of the alternative minimum tax as a result of the inclusion of interest on the Series 2014A Bonds in adjusted current earnings of certain corporations. Prospective purchasers of the Series 2014A Bonds should be aware that ownership of, accrual or receipt of interest on or disposition of tax-exempt obligations, such as the Series 2014A Bonds, may have additional federal income tax consequences for certain taxpayers, including, without limitation, taxpayers eligible for the earned income credit, recipients of certain Social Security and certain Railroad Retirement benefits, taxpayers that may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, financial institutions, property and casualty companies, foreign corporations and certain S corporations. Bond Counsel expresses no opinion regarding any federal tax consequences other than its opinion with regard to the exclusion of interest on the Series 2014A Bonds from gross income pursuant to Section 103 of the Code and interest on the Series 2014A Bonds not constituting an item of tax preference under Section 57 of the Code. Prospective purchasers of the Series 2014A Bonds should consult their tax advisors with respect to all other tax consequences (including, but not limited to, those listed above) of holding the Series 2014A Bonds. Prospective purchasers of the Series 2014A Bonds may also wish to consult with their tax advisors with respect to the need to furnish certain taxpayer information in order to avoid backup withholding. The Internal Revenue Service (the Service ) has an ongoing program of auditing state and local government obligations, which may include randomly selecting bond issues for audit, to determine whether interest paid to the holders is properly excludable from gross income for federal income tax purposes. It cannot be predicted whether the Series 2014A Bonds will be audited. If an audit is commenced, under current Service procedures the holders of the Series 2014A Bonds may not be permitted to participate in the audit process, and the value and liquidity of the Series 2014A Bonds may be adversely affected. Changes in Federal Tax Law Federal, state or local legislation, administrative pronouncements or court decisions may affect the tax-exempt status of interest on the Series 2014A Bonds, gain from the sale or other disposition of the Series 2014A Bonds, the market value of the Series 2014A Bonds, or the marketability of the Series 2014A Bonds, or otherwise prevent the owners of the Series 2014A Bonds from realizing the full current benefit of the exclusion from gross income of the interest thereon. For example, federal legislative proposals have been made in recent years that would, among other things, limit the exclusion from gross income of interest on obligations such as the Series 2014A Bonds for higher-income taxpayers. If enacted into law, such proposals could affect the tax exemption of interest on the Series 2014A Bonds or the market price for, or marketability of, the Series 2014A Bonds. Prospective purchasers of the Series 2014A Bonds should consult their own tax advisers regarding such matters. 25

32 SERIES 2014B BONDS Interest on the Series 2014B is not excludible from gross income for federal income tax purposes. NO RATING No application for a rating has been made to any rating agency. LIMITED OFFERING Hapoalim Securities USA, Inc., as Underwriter for the Borrower, will agree to purchase the Bonds at a price equal to $23,900,650 (representing the par amount of the Bonds, less an underwriting discount of $739,350). The Bonds may be offered and sold only to qualified institutional buyers. Each initial purchaser of the Bonds will be required to certify that it is a qualified institutional buyer by executing and delivering an investor letter in the form attached hereto as Appendix F. LEGAL MATTERS Certain legal matters related to the authorization, sale and delivery of the Bonds are subject to the approval of Greenspoon Marder, P.A., West Palm Beach, Florida, Bond Counsel. Greenspoon Marder, P.A. in its capacity as bond counsel, has not undertaken to verify and therefore expresses no opinion as to the accuracy, completeness or sufficiency of any of the information or statements contained herein or in any appendices hereto. Certain legal matters will be passed upon by the Authority by its counsel, von Briesen & Roper, s.c., Milwaukee, Wisconsin. Edwards Wildman Palmer LLP, West Palm Beach, Florida is serving as counsel to the Underwriter. Certain legal matters will be passed upon for the Borrower and the Guarantor by their counsel, Law Offices of Levi Williams, P.A. MISCELLANEOUS Any statements made in this Limited Offering Memorandum involving matters of opinion or estimates, whether or not expressly so stated, are set forth as such and not as representations of fact, and no representations are made that any of the estimates will be realized. The references herein to the Bonds and other documents referred to herein are brief summaries of certain provisions thereof. Such summaries do not purport to be complete and reference is made to such documents for full and complete statements of such provisions. This Limited Offering Memorandum has been prepared in connection with the sale of the Bonds and may not be reproduced or used, as a whole or as a part, for any purpose. This Limited Offering Memorandum is not to be construed as a contract with the purchaser or the Holders or Beneficial Owners of any of the Bonds. 26

33 This Limited Offering Memorandum has been duly authorized, executed and delivered by the Borrower. PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY By: /s/ William E. Burckart, II Chairman 27

34 [This Page Is Intentionally Left Blank.]

35 APPENDIX A CERTAIN INFORMATION REGARDING THE BORROWER AND PALM BEACH MARITIME ACADEMY A-1

36 Overview Palm Beach Maritime Museum, Inc. (the Borrower ) is a non-profit company formed under the laws of the State of Florida and an organization described in section 501(c)(3) of the Internal Revenue Code. General The Borrower evolved from its precursor, the Ocean Learning Institute which was founded in The name change in 1992 reflected the expanded purpose of the organization, the establishment of a maritime museum with a comprehensive presentation of maritime history and technology. Under its umbrella, the Borrower established the Palm Beach Maritime Academy in 1999 (which opened in 2000), a K-8 tuition free public charter schools, which has added 9 th grade and is now located in Lantana, Florida, with approximately 1,035 students, and has been designated a High Performing Charter School by the Florida Department of Education. The Academy consists of two sites: Lantana 1 (K-5) at 1518 W. Lantana Road, and Lantana 2 (6-9) at 600 S. East Coast Avenue. It is the Borrower s plan to add the 10 th grade to its Lantana 2 location in the upcoming 2014/2015 school year. Over the past decade the Palm Beach Maritime Museum, Inc. has been successful in establishing its division Palm Beach Maritime Academy as a high performing charter school for elementary and middle school students by focusing their attention on a broad spectrum of maritime affairs and activities, including science, technology, engineering, art and mathematics (STEAM). The most significant part of the experiential curriculum is the ability of the academy s young students to visit the diversified marine environments of the museum s principal sites in the Lake Worth Lagoon and on Peanut Island, at the same time witnessing all of the activities going on in the State of Florida s fourth major port. Peanut Island sits in the middle of the Port of Palm Beach, accessible only by water, providing a great opportunity for controlled educational field trips. The maritime focus and hands-on experience provided by the academy s curriculum s experiential component, along with a team effort by the academy s faculty has elevated a very diversified demographic at the lower end of the economic spectrum to a high performing K-8 charter school. Palm Beach Maritime Academy has been encouraged to expand its program to appropriate facilities and locations around the State of Florida. The Borrower was approved by The School District of Palm Beach County to expand its high school curriculum to accommodate approximately 2,000 students and its charter for the high school is currently pending. Charter schools are tuition free public schools that offer choice for parents and students and place the highest priority on providing a better quality education. Charter schools are funded much like public schools, but each charter school is governed by an independent board of directors. No student is required to attend any of the schools, and the parents must choose to send their students to the schools. As a community school of choice for teachers, parents and students, the Borrower s mission is to use a maritime theme to inspire and give hands-on memorable experience to its students focused on a broad spectrum of maritime subjects encompassed by STEAM. A-2

37 Governing Body Governance and Management Palm Beach Maritime Museum, Inc. d/b/a Palm Beach Maritime Academy The Borrower powers and affairs of the Borrower are vested in, exercised, conducted and controlled by a Board of Trustees. The number of Trustees shall be no less than three (3). Each Trustee holds office until his successor is elected. A Trustee need not be a resident of the State of Florida and may hold office so long as he performs his duties to the Borrower. The Board of Trustees is empowered to elect officers and appoint officers, committees and boards as may be necessary for the functioning of the Borrower. Conflict of Interest Policy There exists between the Borrower and its board, officers, and management employees and the public a fiduciary duty, which carries with it a broad and unbending duty of loyalty and fidelity. The board, officers, and management employees have the responsibility of administering the affairs of the Borrower honestly and prudently, and of exercising their best care, skill, and judgment for the sole benefit of the Borrower. Those persons shall exercise the utmost good faith in all transactions involved in their duties, and they shall not use their positions with the Borrower or knowledge gained therefrom for their personal benefit. The interests of the organization must be the first priority in all decisions and actions. Notwithstanding the above, from time to time, the Borrower may conduct business transactions with organizations or corporations with which one or more members of the board may be affiliated. The Borrower has a conflict of interest policy which requires that any such duality of interest or possible conflict of interest on the part of any member of the board, officers or management employees be disclosed and be made a matter of record. In addition to disclosure, the policy requires that additional specified steps be taken, as appropriate, to assure that the conflict does not impact objective deliberation or any vote. Management Structure Palm Beach Maritime Museum, Inc. (PBMM) PBMM has had an IRS 501(c)(3) status since 1974 and has been operating the Academy, since At this time, PBMM anticipates entering into a management arrangement relative to the Academy with Palm Beach Maritime Foundation, Inc. Additionally, PBMM expects to transfer to Palm Beach Maritime Foundation, Inc. its Lake Worth Lagoon Education Center located in Currie Park in West Palm Beach, FL and certain facilities located on Peanut Island in Palm Beach County. Palm Beach Maritime Museum, Inc. Board of Trustees/Governing Board William E. Burckart, II - Chairman Mr. Burckart is a real estate broker and has built his brokerage business into a leading force in the local commercial development industry. He was a partner in developing the Jupiter Farms Center anchored by Publix. He served on the Village of Tequesta Council from 1988 until 1996, retiring as the Vice-Mayor. He is a member of the Board of A-3

38 Trustees of the Perry Institute for Marine Science. Mr. Burckart has been very involved with assuring appropriate environmental protection for the Loxahatchee, Jupiter-Tequesta region. R. Scott Shelley - Member Mr. Shelley is a South Florida resident for 22 years. Since 2000 Scott has operated an independent advisory practice with a focus on Financial Risk Management and Asset Protection planning. He holds a Series 7, 63 & 65 FINRA license & State insurance licenses in Florida and several other states. Scott began his financial career as a stock broker in 1995 after attending Nova University. Prior to opening his own practice Scott worked for a national estate planning company and John Hancock Financial Services. Steve Bolin - Member Mr. Bolin is a consultant to major Oil and Gas Production Company headquartered in Houston TX to provide technical direction as well as solutions development and implementation. He has 24 years overall information systems management, design, development and support experience in medium to large scale projects and extensive management experience overseeing personnel, budgets, proposals as well as systems development and support projects. School Key Administrators Marie Turchiaro- Principal for Palm Beach Maritime Academy Ms. Marie Turchiaro has been the Principal of Palm Beach Maritime Academy for 13 years. She began her career as a teacher in New York City, then moved to Florida where she was a teacher, Assistant Principal, and Principal in Broward County. Ms. Turchiaro graduated from Lehman College in the Bronx with a Bachelor of Arts Degree in Music and Education. She received her Master of Science Degree in Education and her Professional Diploma in School Administration and Supervision from the College of New Rochelle, New York. Her Florida professional certifications include Educational Leadership, Elementary Education, and Specific Learning Disabilities In 2005, Ms. Turchiaro was named a Turn-Around Principal by the Florida Department of Education for improving the school grade by two letters. Since then, the school has received numerous A ratings and nothing lower than a B rating. In 2012 Ms. Turchiaro received the distinguished Florida Art Educators' Association Principal of the Year award for working towards a full incorporation of art into the PBMA curriculum. Lead Assistant Principals Ms. Nancy Swenson has been an Assistant Principal at PBMA for 13 years. She has her Bachelor s Degree in Education from Florida Atlantic University, her Master of Science Degree in Educational Leadership from Nova Southeastern University and is currently enrolled in the Instructional Leadership Doctoral Program at Nova Southeastern University. She holds Florida Professional Certification in Educational Leadership, Reading, and Elementary Education. Ms. Jennifer Eisenhauer has been an Assistant Principal at Palm Beach Maritime Academy and taught 7 th and 8 th Grade Reading at PBMA from 2003 to Before working at PBMA she taught English at Nova School in Kofu, Japan. Ms. Eisenhauer is a National Board Certified Teacher of Language Arts for Early Adolescence. Additionally, she holds Florida Certification in Educational A-4

39 Leadership, Language Arts (grades 6-12), ESOL, and Reading Endorsement. Ms. Eisenhauer obtained a Bachelor of Arts as well as a Master of Arts in English Education from the University of Central Florida. She also holds a Master of Education in Educational Leadership from the University of West Florida. Mr. Reno Boffice is an Assistant Principal at Lantana 2. Prior to his arrival at PBMA, Mr. Boffice was director of a private school serving grades Pre-K through 8 from 2009 through He was the principal at GSTAR for 6 years. He began his career in education at Roosevelt Middle School where he taught social studies for grades 6 through 8 for 8 years. Mr. Boffice has a B.A. in Psychology and a M.A. in Educational Leadership and Administration. He has his Florida certification for Social Studies 5-9, 6-12 and Educational Leadership. Mr. Boffice was born in Montreal, Canada and is fluent in both French and Italian. Ms. Jackie Terrazas is currently an Assistant Principal at PBMA. She holds a Masters degree in Educational Leadership from Barry University, and Bachelors of Fine Arts degree in Music Education with a minor in Elementary Education from Florida Atlantic University. She has over 20 years professional experience in education, including 17 years with the Diocese of Palm Beach County. She has been an assistant principal for 7 years, served as an Instructional Coach, Dean of Discipline, AP & Dual Credit Coordinator, Chairperson for the Florida Catholic Conference School Improve Pan, and Lead Teacher through the School District of Palm Beach County. Teachers and Staff Palm Beach Maritime Academy administration gives a great deal of attention to hiring competent teachers. The facility is highly credentialed with degrees in Quantum Physics, History, and Environmental Studies. All teachers hold either Bachelors Degrees or Advanced Degrees. The Academy s middle school reading teacher is Nationally Board Certified in Language Arts. The below table shows the breakdown of teachers per their highest degrees as well as the teacher retention rate. Teachers Total Teachers 67 Teachers with B.S. or B.A. 67 Teachers with a Master's Degree 19 Non-Teaching Employees 11 Total Employees Teacher Retention Ratio 89% A-5

40 Student to Teacher Ratio K-3 18: : :1 Title I Status Palm Beach Maritime Academy has been designated a Title I school and has been for the past seven years. Currently 70% of the Academy s students are on free and reduced lunch and fall into the category of economically disadvantaged. John C. Grant-Chairman Palm Beach Maritime Foundation Board John Grant has made a career of the development and executive management of marine technology related companies and other activities. In January 2000, he opened the Palm Beach Maritime Academy, which is a K-8 public Charter School, within the framework of PBMM. John Grant is a 1956 graduate of the U.S. Naval Academy with graduate study at George Washington University. Significant experience includes: 5th Division Officer USS Iowa for Strike Back and the first Lebanese war '56-'58; Gun Boss of USS Stormes DD780 '58-'59; instructor in physics and electrical engineering USNA '59-'61. In 1961 he became one of the Founders and V.P. of Trident Engineering, an Annapolis firm; Mr. Grant was also founder, V.P. of Marketing, The Geraldines, Ltd., which was sold and became an anti-submarine warfare division of Bell Aerospace Corporation; Product Line Manager, Underwater Systems Laboratory, ACF Industries; Program Manager, USN Marine Engineering Laboratory and Boiler Turbine Laboratory; Plank Owner, Head, Ranger User Division, Atlantic Undersea Test and Evaluation Center-established and ran program management office, which included T&E for the MK48 torpedo; Founder, Director, Ocean Measurements, Inc.; Founder, Ocean Learning Institute, which later became Palm Beach Maritime Museum in Other accomplishments include restoration of the Sequoia and the educational film production of Man in the Sea and The Great Sea Farm, which won the Cine Golden Eagle and Best Educational Film of Melbourne Smith - Member Melbourne Smith is the Marine Superintendent for Palm Beach Maritime Museum. He is founder and President of International Historical Watercraft Society, Inc. since 1975 and Advisory Board Chairman for National Maritime Historical Society. He is a former Royal Canadian Sea Cadet and a licensed Sailing Master (Home Trade, Canada). Smith also taught celestial navigation as a commissioned officer in Defensa Nacional de Guatemala and began boatbuilding in British Honduras. Melbourne Smith, the designer and builder of Pride of Baltimore, setting off a wave of A-6

41 patriotism in the malaise of the seventies, has designed and built a number of successful tall ships, including Niagara for the State of Pennsylvania and Privateer Lynx and Californian. Dave Roy - Member Born in Cleveland, Ohio, Mr. Roy moved to the Palm Beach area in 1979 where he attended Palm Beach Public Elementary and Middle Schools. He then attended Twin Lakes High School in downtown West Palm Beach. During High School, Mr. Roy was an accomplished competitor in Forensics (debating), Governor of the American Legion Boys State, and a recipient of the Pathfinder Award in debating from the Palm Beach Post. Mr. Roy began working in the legal field shortly after high school, initially for a local private attorney and then for State Attorney David Bludworth. Mr. Roy attended Miami University in Oxford, Ohio (where he was President of the Pre-Law Society). He returned to Florida and graduated from Palm Beach Atlantic College (now University). After graduating from Palm Beach Atlantic College, he attended the University of Miami School of Law where he became the Editor-in-Chief of the University of Miami School of Law newspaper, The Res Ipsa Loquitur. Upon graduation from Law School in 1996, Mr. Roy was admitted to the Florida Bar. In addition, that same year, he was also admitted to the Federal District Court for the Southern District of Florida and then licensed in Federal Bankruptcy Court for the Southern District of Florida. Mr. Roy has extensive experience in Civil Litigation, Family Law, Criminal Defense, Real Estate Transactions, Foreclosure Defense and Bankruptcy. He is a member of the Palm Beach County Bar Association, the Florida Association of Criminal Defense Lawyers and the Palm Beach County Justice Association. Mr. Roy is the founding member and sole shareholder of ROY & ASSOCIATES, P.A. Mr. Roy started his own law practice shortly after graduating from the University of Miami School of Law. The first personal injury lawsuit that Mr. Roy was hired to litigate when he began his practice settled for $1.7 Million. He has also settled many other cases, including a serious bodily injury lawsuit for $2 Million. Mr. Roy lives in West Palm Beach, Florida and has two young daughters. He enjoys golf, racquetball and travel. Gary S. Troast - Member Mr. Troast has been involved in the commercial real estate industry for the past 22 years, completing transactions totaling over $500 million. His experience includes brokerage, development, property management, and acquisitions. After graduating from Bucknell University, Gary spent 5 years in the hospitality industry with ITT Sheraton Hotels. He has served on his community s Property Owner s Association Board since 2008 including two years as president. He is a licensed real estate agent in New Jersey and maintains a 100 Ton U.S. Merchant Marine Master License. Gary lives in Jupiter, Florida with his wife Alix and daughters, Olivia and Emma. A-7

42 Palm Beach Maritime Foundation Management Team John C. Grant-Chief Executive Officer, Mr. Grant s biography is summarized above under the caption Palm Beach Maritime Board. Daniel Rishavy - Financial Consultant Dan Rishavy, is the Chief Executive Officer of EDU-LINK, a CMO that was formed in connection with its agreement with the Palm Beach Maritime Academy. Mr. Rishavy was Chief Operating Officer at Charter Schools USA in , and has been providing contracted administrative services to charter schools since Mr. Rishavy earned a Master of Finance, and is expert at fund accounting and financial planning and analysis. He is an expert in charter school financial management, instructional technology and academic data analysis. He has completed coursework for an MBA, with an emphasis in marketing. He has been enrolled in the Nova Southeastern University Master s program for Curriculum Development and Instructional Technology. He is expert in the effective utilization of Instructional Response Systems for formative assessment that promotes best practices in the classroom use of this technology. Patricia Peretz Aguiar - Marketing and Development Patricia Aguiar (partner at EDU-LINK) is an established developer and manager of charter schools. She currently is working with the Palm Beach Maritime Academy on its marketing and development strategy. Prior, she helped develop Hollywood Arts Academy in the city of Hollywood, Florida in 2004, a K-8 operated by Charter Schools USA. She will conceive, implement marketing strategies and build partnerships with established local developers and financing companies. She has a MBA from Gama Filho University in Rio de Janeiro in Brazil. PBMA Charter Renewals Palm Beach Maritime Academy s original charter was effective in In 2004, the school again received an excellent district review and, due to new legislation, was able to apply to the Palm Beach County School Board for a charter extension. PBMA did apply and the extension was granted. Therefore, the original charter expired in 2012 and the school received a new 15 year charter, which expires in A separate charter related to the high school is currently pending. The Schools Lantana 1 / Lantana 2 Palm Beach Maritime Academy currently operates one charter school located on two sites in the Town of Lantana, Palm Beach County, Florida, which consist of Lantana 1 (K-5) located at 1518 W. Lantana Road, and Lantana 2 (6-10) at 600 S. East Coast Avenue. Academics Palm Beach Maritime Academy s curriculum incorporates the formal performance based on Florida State Standards, emphasizing reading, writing, science and mathematics, as well as the arts and physical education, describe in greater detail below: Reading: All students in the elementary grades will receive a 90-minute reading block including a minimum 60-minute math block per day. Level 1 and 2 students in grades 3 and A-8

43 4 receive 30 minutes of supplementary academic instruction per day. All of the Academy s middle school students will receive a full period of dedicated instruction in reading as described above in addition to a full period of language arts, which concentrates more on the elements of writing. Reading and language arts teachers collaborate regularly to insure alignment of coursework, as writing pieces are often based upon the literature covered in reading. Language arts teachers are also charged with helping students hone arguments and summative writing skills as they are assigned in other curriculum areas, as this skill is intrinsic to Common Core. Implementation of a school based team and the Multi-tiered System of Support (MTSS) model will be utilized to assist struggling students. Teachers will donate one hour per week for after school tutoring. Teachers are paid for additional tutoring hours through operating funds. In keeping with Common Core, students are and will continue to be engaged in and exposed to a variety of teaching methodologies. They will learn to read and interpret with an increased eye towards nuances in literature, and increased group work will help facilitate sharing of ideas among students. More practice will be given in essay response across the curriculum, and students will be exposed to computer-based testing. Students will access computer labs and classroom computers through ongoing instruction and assessment activities. In reading, PBMA has adopted Scholastic for grades K-5 for the school year. Massive amounts of on-going teacher training is involved due to the vast differences between this and basal readers. The model school chose Scholastic as it is closely aligned with Common Core, provides leveled readers in support of balanced literacy, and encompasses a combination of reading and writing activities aligned with Common Core. Scholastic s cross-curricular base supports the teaching methodologies that have always been espoused and proven to be successful at PBMA. Most importantly, the program allows students to investigate their personal interests by finding their Just Right Books and to select a variety of genres in keeping with their instructional and independent reading levels. Mathematics: The Academy s adopted Math textbooks and technological support provide for the needs of all learners with an online study and assessment component, additional teacher support, and a wide variety of approaches to remediation and enrichment. For the last two years 100% of the school s 8th graders taking Algebra 1 passed the Algebra EOC and earned a high school credit. The school will continue to deliver intensive math instruction with all level 1 students and level 2 students as a pull-out program. These students will be taught in a dedicated classroom to give them the time and the extra help necessary to succeed as long as the budget permits. Supplemental materials will continue to include Houghton Mifflin Harcourt On-Core Mathematics for grades 6-8 and Common Core Clinics Mathematics in grades 3-5; the school may change curriculum if curriculum is supported by data or better aligns with standards and student needs. Social Studies: In social studies, all teachers will continue to infuse ELA/Literacy skills throughout their curriculum. Social studies lends itself to non-fictional reading, and the social studies and reading teachers work together to develop assignments targeted to both acquiring knowledge in the content area, but also to practicing skills learned in reading. For example, 7 th grade Civics students might be asked to read a piece on the British system of A-9

44 government while studying the U.S. system of checks and balances. Having read both selections, they would then be asked to compare and contrast and to determine the strengths and weakness of each system as they see it. This would involve the incorporation of reading in the content area with specific attention to the skill of comparing and contrasting, making inferences, constructing a summary of each system, deciding which they feel has more merit, and defending their argument. Social studies teachers are charged with increasing students vocabulary and teaching them to be critical thinkers and prolific readers of nonfiction. Literacy skills are integrated throughout the social studies curriculum with reading and writing, and assist students in thematically connected curriculum presentations. For example, when the 4th grade students were studying about Florida history formal study was infused with a visit from the local Mayor. The mayor presented his lesson about local Florida history, which the students greatly enjoyed. The classroom teacher then integrated activities such as writing a letter of thanks in the proper format, researching other towns, comparing and contrasting elements of the other towns such as size, demographics and so forth, including comprehension skills, writing a short summative piece about the presentation, and discussing the artwork of the period during their art class. The unit also incorporated a field trip to a related location; again, based on the field trip, the above and additional skills would be delivered through content area lessons. These are just a few examples of field trips that have been incorporated into the curriculum and which have add exponentially to the students experiential learning, and of PBMAs commitment of fostering student learning through a connection to their everyday lives and communities. Science: The school s science core curriculum in the elementary grades is taught using Harcourt Brace; in the middle school, Holt is used. In keeping with the school s maritime theme, teachers work together to apply the Common Core State Standards through maritime studies, marine science, and experiential learning. However, science instruction is delivered utilizing a variety of modalities including classroom lecture and discussion, technology, field trips, participation in community activities, guest speakers and programs. Examples of experiential instruction PBMA has used to enhance science learning includes trips to Peanut Island, the Coast Guard Station, the Palm Beach Science Museum, the Everglades, Loggerhead Marine Sanctuary, among many other local venues. PBMA also participates in a variety of STEM and maritime related extracurricular activities such as an annual science fail, an underwater robotics competition and the plywood regatta. Within the classroom, science teachers assist with vocabulary development, reading and writing skills, and math skills within their content area instruction, thus fostering a unification of all content areas. The use of GIZMOs, a virtual lab computer program, is also used by the Academy s 4 th -8 th grade students. Many of the Academy s middle school science teachers at PBMA have a background maritime or marine biology. The Academy s 8 th grade science teacher was selected for the NOAA Teacher at Sea program and travelled on a NOAA research vessel. This teacher also received the Loggerhead Marine Life Center s Blue Friend of the Year Award for his work with the Academy s students, the community and the environment. Seminole Maritime Academy intends to continue in this vein. Art and Physical Education: Students will physical education for 30 minutes daily in the elementary grades and for a full semester in grades 6, 7 and 8 as required. Health components will be integrated as per State standards. While following the State-mandated benchmarks PE/Elementary teachers will also infuse the mission of Common Core in a A-10

45 variety of ways, including summative pieces that will, for example, explain the rules of a sport or the health benefits of not smoking, or in argument pieces, like defending why a throw was made to first base instead of to second for a double play. PE teachers will also attend Professional Learning Team meetings to discuss areas of possible integration across content areas as well as to support core teachers with implementation of Common Core. Art will continue to be integrated through the core subject areas, and the Academy s maritime theme is interwoven through all subjects. As a basis for the move to Common Core State Standards, art teachers will also be trained in teaching students to write essays and brief writing pieces based on a variety of artwork from the work of the Masters all the way through text features in various subject areas and art will continue to be integrated throughout the curriculum. The art teachers attend Professional Learning Community meetings and discuss on an individual basis core teachers units of study in order to better integrate their course. The school Principal was named the Florida Art Association s 2012 Principal of the Year for supporting art education with an emphasis on cross curricular integration, and one of the art teachers was named Beginning Teacher of the Year by the School District of Palm Beach County. Art will continue to be woven throughout the curriculum in conjunction with maritime and marine science. In all subject areas and on all grade levels, teachers can refer students to the school-based team where data is collected and analyzed by a team of school personnel. Parents are contacted and invited to the meeting, and the team decides whether and what initial interventions will be necessary to assist the students in the area of concern. These interventions might include additional time in the weak area, additional computer time, working with another teacher for a short part of the school day, additional work in the particular subject area. The teacher delivers the interventions and collects data regarding the level of success over the period of time determined by the team, and another meeting takes place, to which the parent is invited. The team reviews the data and determines if additional intervention is necessary. At this stage, should the child continue to be unsuccessful, a more intensive approach might be recommended, for example one-on-one instruction. Again the intervention is delivered, monitored, and charted; the team meets and the parent is invited. If the child is successful and the goals have been met, nothing further is needed. If the goals have not been met and the child continues to be unsuccessful, the team might decide to request consent for screening for a possible learning disability. High School This year, PBMA expanded to include a 9 th grade, and plans for a 10 th grade in are underway. In order to facilitate an appropriate learning experience for all students, we initiated an honors program for students in grades 5-8; these students, if appropriate, will track in to Advanced Placement classes. Students who are average to above average learners will receive instruction based on their level, and students with difficulty will continue to receive remediation. We are looking at expanding the Academy s maritime/marine science/steam program with dedicated electives in high school and have been working with a consultant to ensure that college-bound students receive proper credit and so that those looking to go into industry will have a knowledge-based background. We are hoping to add a Biology lab next year, a Chemistry lab the following year, and Physics the next to give the Academy s students an education that is cutting-edge. We also hope to improve the A-11

46 Academy s technology and to add staff knowledgeable in this area to facilitate the Academy s students always having the best education has to offer. Awards and Recognition In 2011, Palm Beach Maritime Academy was one of the first Charter Schools to be designated High Performing under the new Charter School legislation. For the school year, PBMA has consistently received an A rating or B rating and have made Adequate Yearly Progress under No Child Left Behind. In addition to promoting school-wide achievement and proficiency in reading, writing, math, and science, Palm Beach Maritime Academy also encourages students to participate in outside contests, competitions, fairs, and exhibits in both academic and non-academic areas. These programs not only motivate students by setting higher goals, but also challenge them in a larger context. Below is a list of individual and team successes of PBMA students. School Awards: 2013 Awarded Green School of Promise by Green School Recognition Program First Place in Florida for the Great American Can Roundup School Challenge ($ prize) 2009 Recognized by Ocean Conservancy for ongoing participation in the International Coastal Cleanup 2010 Loggerhead Marinelife Center Go Blue Awards Finalist for Blue Business of the Year Award Student Awards: 2014 Beneath The Waves - Youth Making Ripples Competition Finalists and awarded Certificates of Achievement (9th graders: Hannah Vance and Bailey Anderson for their short film "Shipwrecked" about the plight of North Atlantic Right Whales being injured by maritime traffic) th Annual Dania Beach Plywood Regatta 1st Place Beginner Division Champions (with 8th grade team) 2014 MATE 10th Annual Florida Regional Remote Operated Vehicle (ROV) Competition 1st and 2nd Place Scout Division th Annual Dania Beach Plywood Regatta 1st and 2nd place Beginner Division, Sponsor: Marine Industries Association of South Florida (MIASF); also scholarship recipient of $ A-12

47 2012 8th grader Peter Rawlik won the Mission Control Essay Contest and a chance to speak live to astronauts aboard the International Space Station th Annual (MATE) Marine Advanced Technology Education Florida Regional ROV (Remote Operating Vehicle) Competition - 1st Place Scout Division 2012 RBMA (Riviera Beach Maritime Academy) ROV Competition - 1st and 2nd place th Annual Dania Beach Plywood Regatta 2nd place Beginner Division - Sponsor MIASF; $500 scholarship recipient 2011 RBMA ROV Competition 1st and 2nd place 2009, 2010, 2011 Florida History through Art sponsored by the Norton Museum 1 st place Faculty Awards 2012 Marie Turchiaro, Principal of the Year, Florida Art Educators Association 2012, Nikki Bruno, Finalist, Palm Beach County Beginning Teacher of the Year 2011 Steve Allen, Loggerhead MarineLife Center Blue Friend of the Year Carlee Consagra, Teacher of the Year Elementary Division, Palm Beach Council of Teachers of Mathematics 2011 Carlee Consagra, Finalist, Mentor of the Year, Palm Beach County 2011 Steve Allen selected for the NOAA Teacher at Sea program 2010 Carly Mejeur, Palm Beach County Beginning Teacher of the Year (1 st ever from a Charter School) 2005 Marie Turchiaro, Turn-Around Principal, Florida Department of Education Student Population and State Support There follows a chart showing the student population by zip code and a recent example of State support for the schools. A-13

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53 APPENDIX B FORM OF TRUST INDENTURE (Form of Trust Indenture expected to be delivered in substantially the following form)

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55 TABLE OF CONTENTS Page Article I. DEFINITIONS AND CONSTRUCTION... 3 TRUST INDENTURE between PUBLIC FINANCE AUTHORITY and U.S. BANK NATIONAL ASSOCIATION, as Trustee Dated as of June 1, 2014 Relating to: PUBLIC FINANCE AUTHORITY $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A and $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B Section 1.01 Definitions Section 1.02 Construction Article II. REPRESENTATIONS AND COVENANTS OF THE AUTHORITY Section 2.01 Representations by the Authority Section 2.02 Covenants of the Authority Article III. AUTHORIZATION AND ISSUANCE OF BONDS Section 3.01 Authorization of Bonds Section 3.02 Conditions Precedent to Delivery of Bonds Section 3.03 Registered Bonds Section 3.04 Loss, Theft, Destruction or Mutilation of Bonds Section 3.05 Terms of Bonds General Section 3.06 Book Entry Only System Section 3.07 Maturity Dates of and Section 3.08 Execution; Authentication of Bonds Section 3.09 Negotiability, Transfer and Registry of Bonds Section 3.10 Ownership of Bonds Section 3.11 Payments on Bonds Due on Non-Business Days Section 3.12 Regulations with Respect to Exchanges and Transfers of Bonds Section 3.13 Issuance of Additional Bonds Article IV. REDEMPTION OF BONDS Section 4.01 Optional Redemption Section 4.02 Extraordinary Mandatory Redemption Section 4.03 Extraordinary Optional Redemption Section 4.04 Mandatory Sinking Fund Redemption Section 4.05 Purchase in Lieu of Redemption Section 4.06 Notice of Redemption Section 4.07 Selection of Bonds To Be Redeemed Section 4.08 Partial Redemption of Bonds Article V. RESERVED Article VI. REVENUE AND FUNDS Section 6.01 Source of Payment for Bonds: Section 6.02 Section Creation of Funds; Deposit of Revenues Section 6.03 Project Fund Section 6.04 Use of Moneys in the Costs of Issuance Account Section 6.05 Use of Moneys in the Insurance and Condemnation Proceeds Account Section 6.06 Debt Service Fund Section 6.07 Revenue Fund Section 6.08 Debt Service Reserve Fund Section 6.09 Redemption Fund Section 6.10 Rebate Fund Section 6.11 Money to be Held in Trust Section 6.12 Amounts Remaining in Funds Section 6.13 Tax Covenants Section 6.14 Records Section 6.15 Reports From the Trustee Section 6.16 Nonpresentment of Bonds Section 6.17 Investment of Monies Section 6.18 Security Advice Waiver Article VII. DEFAULT PROVISIONS; REMEDIES Section 7.01 Events of Default Section 7.02 Acceleration; Annulment of Acceleration Section 7.03 Additional Remedies and Enforcement of Remedies Section 7.04 Application of Revenues and Other Moneys After Default Section 7.05 Remedies Not Exclusive Section 7.06 Remedies Vested in Trustee and Majority Bondholders Section 7.07 Individual Bond Owners Action Restricted Section 7.08 Termination of Proceedings Section 7.09 Waiver and Non-Waiver of Event of Default Section 7.10 Majority Bondholders Control Proceedings Section 7.11 Interest on Unpaid Amounts and Default Rate for Nonpayment Section 7.12 No Obligation to Enforce Assigned Rights Section 7.13 No Impairment of Ability to Enforce Unassigned Rights Article VIII. CONCERNING THE TRUSTEE Section 8.01 Trustee; Appointment and Acceptance of Duties Section 8.02 Responsibilities of Trustee Section 8.03 Evidence on Which Trustee May Act Section 8.04 Compensation Section 8.05 Certain Permitted Acts Section 8.06 Resignation of Trustee Section 8.07 Removal of Trustee Section 8.08 Appointment of Successor Trustee; Temporary Trustee Section 8.09 Transfer of Rights and Property to Successor Trustee Section 8.10 Merger or Consolidation of Trustee Section 8.11 Co-Trustees Section 8.12 Dissemination Agent Article IX. AMENDMENTS AND SUPPLEMENTAL INDENTURES; AMENDMENTS OF BOND DOCUMENTS Section 9.01 Section 9.02 Section 9.03 Section 9.04 Section 9.05 Section 9.06 Section 9.07 Supplemental Indentures Not Requiring Consent of Owners of Bonds Supplemental Indentures Requiring Consent of Majority Bondholders Reliance on Opinion of Counsel Consents Required Amendments of Loan Documents Not Requiring Consent of Owners of Bonds Amendments of Loan Documents Requiring Consent of the Majority Bondholders Reliance on Opinion of Counsel Article X. DISCHARGE Section Section Section Discharge of Indenture Discharge by Delivery Discharge by Deposit Article XI. MISCELLANEOUS Section Section Section Section Section Section Section Section Section Section Section Section Section Evidence of Signatures of Bond Owners and Ownership of Bonds Bonds Not an Obligation of the State or Any Political Subdivision Preservation and Inspection of Documents Parties Interested Herein No Recourse on the Bonds No Personal Liability of Authority Officials Severability of Invalid Provisions Successors Notices, Demands and Requests Applicable Law Table of Contents and Section Headings Not Controlling Exclusion of Bonds Effective Date Exhibit "A-1" Form of Series 2014A Bond... A-1 Exhibit "A-2" Form of Taxable Series 2014B Bond... A-9 Exhibit "B" Form of Qualified Investor Letter...B-1 B-1

56 TRUST INDENTURE This TRUST INDENTURE dated as of June 1, 2014 (as the same may be amended, modified or supplemented from time to time, this Indenture ), by and between PUBLIC FINANCE AUTHORITY, a unit of government and a body corporate and politic under the laws of the State of Wisconsin (together with its successors and assigns, the Authority ) and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as trustee (together with any successor trustee hereunder and their respective successors and assigns, the Trustee ), W I T N E S S E T H: WHEREAS, the Authority is authorized under Sections , and of the Wisconsin Statutes, as amended, commonly known as the Joint Exercise of Powers Law (the Act ) and a resolution duly adopted by the Authority to issue its $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A (the Series 2014A Bonds ) and its $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B (the Series 2014B Bonds and, collectively with the Series 2014A Bonds, the Bonds ) under this Indenture and to loan the proceeds thereof to Palm Beach Maritime Museum, Inc. d/b/a Palm Beach Maritime Academy, a Florida non-profit corporation (the Borrower ), under a Loan Agreement of even date herewith (the Loan Agreement ), between the Authority and the Borrower, to provide funds to (a) acquire two charter schools (the Facility ) operated by the Borrower which are located within the territorial limits of the Town of Lantana located in Palm Beach County, Florida (together, the Project Jurisdiction ), (b) construct, equip and make certain renovations and capital improvements to the Facility, (c) refund the Authority s $1,000,000 Education Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A (the Refunded Bonds ), (d) fund a Debt Service Reserve Fund for the Bonds, (e) pay capitalized interest on the Bonds and (f) pay the costs of issuance of the Bonds (collectively, the Project ); and WHEREAS, pursuant to the Loan Agreement between the Authority and the Borrower, the Authority has agreed to issue the Bonds and lend the proceeds thereof to the Borrower (the Loan ) and the Borrower has agreed to (i) apply the proceeds of the Loan to pay the costs of the Project, (ii) pay the principal of, premium, if any, and interest on the Bonds when due (whether at maturity, by redemption, acceleration or otherwise), and (iii) observe the other covenants and agreements and make the other payments set forth therein; and WHEREAS, the Borrower has delivered to the Authority two Promissory Notes dated the date of issuance of the Bonds, one in an original principal amount equal to the aggregate original principal amount of the Series 2014A Bonds (as the same may be amended, supplemented or modified from time to time, the Series 2014A Note ) and the other one in an original principal amount equal to the aggregate original principal amount of the Series 2014B Bonds (as the same may be amended, supplemented or modified from time to time, the Series 2014B Note and, collectively with the Series 2014A Note, the Notes ), which evidences its obligation to repay the Loan and the Authority has made the Loan to the Borrower, subject to the terms and conditions of the Loan Agreement and this Indenture; and WHEREAS, the obligations of the Borrower under the Loan Agreement and the Notes are secured by a Mortgage and Security Agreement dated as of the date hereof (as the same may be modified, amended or supplemented from time to time, the Mortgage ) from the Borrower to the Trustee, by a Guaranty Agreement dated as of the date hereof (as the same may be modified, amended or supplemented from time to time, the Guaranty Agreement ), from Palm Beach Maritime Foundation, Inc., a Maryland non-profit corporation (the Guarantor ) to the Trustee, and by the other Loan Documents (as defined herein). NOW, THEREFORE, in consideration of the premises and the mutual promises, representations and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: GRANTING CLAUSES The Authority, in consideration of the premises, the acceptance by the Trustee of the trusts hereby created, the purchase and acceptance of the Bonds by the Owners (as defined herein) thereof, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to secure the payment of the principal of, redemption premium, if any, and interest on the Bonds according to their tenor and effect, and to secure the performance and observance by the Authority of all the covenants, agreements and conditions herein and in the Bonds contained, does hereby transfer, pledge and assign, without recourse, to the Trustee and its successors and assigns in trust forever, and does hereby grant a security interest unto the Trustee and its successors in trust and its assigns, in and to all and singular the property described in paragraphs (a), (b), (c), (d) and (e) below (said property being herein referred to as the Trust Estate ), to wit: (a) All moneys from time to time paid by the Borrower pursuant to the terms of the Loan Documents and all right, title and interest of the Authority (including, but not limited to, the right to enforce any of the terms thereof) under and pursuant to and subject to the provisions of the Loan Agreement (but excluding the Authority s Unassigned Rights and any payments made by the Borrower to meet the rebate requirements of Section 148(f) of the Code); and (b) All other moneys and securities from time to time held by the Trustee under the terms of this Indenture, excluding amounts required to be rebated to the United States Treasury under Section 148(f) of the Code, whether or not held in the Rebate Fund, and amounts held in the Costs of Issuance Account of the Project Fund; and (c) The proceeds of refunding bonds of the Authority, if and when issued; and (d) Any right, title or interest of the Authority in the Security Property; and (e) Any and all property (real, personal or mixed) of every kind and nature from time to time hereafter, by delivery or by writing of any kind, pledged, assigned or transferred as and for additional security hereunder to the Trustee, which the Trustee is hereby authorized to receive at any and all times and to hold and apply the same subject to the terms of this Indenture. TO HAVE AND TO HOLD, all and singular, the Trust Estate with all rights and privileges hereby transferred, pledged, assigned and/or granted or agreed or intended so to be, to the Trustee and its successors and assigns in trust forever; IN TRUST NEVERTHELESS, upon the terms and conditions herein set forth for the equal and proportionate benefit, security and protection of all present and future Owners of the Bonds Outstanding, without preference, priority or distinction as to participation in the lien, benefit and protection of this Indenture of one Bond over or from the others, except as herein otherwise expressly provided; PROVIDED, NEVERTHELESS, and these presents are upon the express condition, that if the Authority or its successors or assigns shall well and truly pay or cause to be paid the principal of and premium, if any, on such Bonds with interest, according to the provisions set forth in the Bonds, or shall provide for the payment or redemption of such Bonds by depositing or causing to be deposited with the Trustee the entire amount of funds or securities requisite for payment or redemption thereof when and as authorized by the provisions of Article X, and shall also pay or cause to be paid all other sums payable hereunder by the Authority, then these presents and the estate and rights hereby granted shall cease, terminate and become void, and thereupon the Trustee, on payment of its lawful charges and disbursements then unpaid, on demand of the Authority and upon the payment by the Authority of the cost and expenses thereof, shall duly execute, acknowledge and deliver to the Authority such instruments of satisfaction or release as may be necessary or proper to discharge this Indenture of record, and if necessary shall grant, reassign and deliver to the Authority all and singular the property, rights, privileges and interests by it hereby granted, conveyed and assigned, and all substitutes therefor, or any part thereof, not previously disposed of or released as herein provided; otherwise this Indenture shall be and remain in full force; THIS INDENTURE FURTHER WITNESSETH, and it is hereby expressly declared, covenanted and agreed by and between the parties hereto, that all Bonds issued and secured hereunder are to be issued, authenticated and delivered and that all the Trust Estate is to be held and applied under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as hereinafter expressed, and the Authority does hereby agree and covenant with the Trustee, for the benefit of the respective Owners from time to time of the Bonds as follows: ARTICLE I. DEFINITIONS AND CONSTRUCTION Section 1.01 Definitions. The following capitalized terms, as used in this Indenture, shall have the meanings specified below unless the context otherwise shall require. All other capitalized terms which are defined in the Loan Agreement and not defined herein shall have the respective meanings ascribed to them in the Loan Agreement. Accounts means the accounts established pursuant to Article VI hereof. Act means Sections , and of the Wisconsin Statutes, as amended, and other applicable provisions of law. Additional Payments means those amounts described in, and payable pursuant to, Section 5.19 of the Loan Agreement Advances means payments of Project Costs from the Project Fund, including Costs of Issuance, made by the Trustee after receipt and approval of a properly completed Requisition. Affiliates or Affiliate means, if with respect to a corporation, (i) any officer or director thereof and any Person who, directly or indirectly, the beneficial owner of more than 10% of any class of shares or other equity security, or (ii) any Person who, directly or indirectly, controls or is controlled by or is under common control with such corporation. Control (including the correlative meanings of controlled by and under common control with ) means effective power, directly or indirectly, to direct or cause the direction of the management and policies of such Person; if, with respect to a partnership or venture, any (i) general partner, (ii) general partner of a general partner, (iii) partnership with a common general partner, or (iv) coventure thereof, and if any general partner or co-venture is a corporation, any Person who is an affiliate as defined above of such corporation; and, if with respect to a limited liability company, (i) any member or (ii) any Person who is an Affiliate. Annual Debt Service Requirements means, for any given Fiscal Year, the amount that will be required for the payment of total debt service, including principal and interest, on the Bonds during such Fiscal Year. Authority means the Public Finance Authority, together with its successors and assigns. Authority Documents means this Indenture, the Loan Agreement, the assignment of the Notes and any other agreement, certificate, contract or instrument to be executed by the Authority in connection with the issuance of the Bonds. Authority s Administration Fee means an annual amount equal to 0.03 percent of the outstanding principal amount of the Bonds paid semi-annually to the Authority at the Remittance Address in accordance with Section 5.19 of the Loan Agreement. Authority Indemnified Party or Authority Indemnified Parties means the Authority and the Members and each and all of their respective past, present, and future directors, governing members, board members, trustees, commissioners, elected or appointed officials, officers, attorneys, advisors, employees and agents (including counsel and financial advisers), individually and collectively. Authority s Unassigned Rights means the rights of the Authority under Sections 5.15, 5.19, and 6.4 of the Loan Agreement, and the Authority s rights under the Loan Agreement and this Indenture to (a) inspect books and records, (b) give or receive notices, approvals, consents, requests, and other communications, (c) receive payment or reimbursement for expenses (including, without limitation, Additional Payments as provided herein), (d) receive payment of the Authority s Administration Fee, (e) immunity from and limitation of liability, and (f) indemnification from liability by the Borrower; and, further, to enforce, in its own name and on its own behalf, those provisions hereof and any other document, instrument or agreement entered into with respect to the Bonds that provides generally for the foregoing enumerated rights or any similar rights of the Authority. 5 3 B-2 5 4

57 Authorized Authority Representative means any person designated by resolution of the Authority (whether such resolution is adopted in connection with the issuance of the Bonds or otherwise) as an Authorized Signatory empowered to, among other things, execute and deliver on behalf of the Authority this Indenture, the Authority Documents and the Bonds. Authorized Borrower Representative means the person or persons appointed in accordance with Section 7.2 of the Loan Agreement, or, in each case, such other person at any time designated by the Borrower to act on behalf of the Borrower, as evidenced by a written certificate delivered to the Authority, the Trustee, and the Majority Bondholders, containing the specimen signature of such person and signed by an authorized representative of the Borrower. Such certificate may designate an alternate or alternates, each of whom shall be entitled to perform all duties and exercise all powers of an Authorized Borrower Representative. Authorized Denomination means, with respect to the Bonds, but subject to the provisions of Section 4.08 hereof, $100,000 or any integral multiple of $5,000 in excess thereof. Available Cash means for, and as calculated as at the end of, any month, fiscal quarter, or Fiscal Year, as applicable, fifty percent (50%) of the amount by which net revenues exceeded total expenses (as determined using Generally Accepted Accounting Principles) for such month, fiscal quarter, or Fiscal Year, as the case may be. "Beneficial Owner" means, during any period the Bonds are registered under a book entry only system, any purchaser of a Bond and others who acquire a beneficial ownership interest in a Bond held by The Depository Trust Company, New York, New York, through its nominee Cede & Co, and any successor securities depository pursuant to which the Bonds are held in book-entry only form. Bondholder or Holder or Owner or Owners or any similar term means the registered owner of any Bond. Bond Counsel means Greenspoon Marder, P.A., or any other law firm approved by the Authority and acceptable to the Trustee, having a national reputation in the field of municipal law, whose legal opinions are generally accepted by purchasers of municipal bonds. Bond Documents means this Indenture and the Loan Documents. Bond Payment Date means each Interest Payment Date, the Maturity Date, and each date on which principal or redemption price or interest shall be payable on any of the Bonds according to their respective terms. Bond Year means a period of 12 consecutive months beginning on May 1 in any calendar year in which Bonds are Outstanding and ending on the last day of April of the next following year, except that the initial Bond Year shall begin on the Closing Date and end on April 30, Bonds means collectively the Series 2014A Bonds and the Series 2014B Bonds. Borrower means Palm Beach Maritime Museum, Inc. d/b/a Palm Beach Maritime Academy, a Florida non-profit corporation. Borrower s Tax Certificate means the Borrower s Tax Representation Letter executed by the Borrower on the Closing Date and delivered to the Authority in which the Borrower certifies various facts relating to the Project which bear on the exclusion of interest on the Series 2014A Bonds from gross income for purposes of federal income taxation. Business Day means any day other than a Saturday, Sunday or legal holiday in the State observed as such by the Trustee. Capital Expenditures means capital expenditures determined in accordance with generally accepted accounting principles relating to the repair, renovation or replacement of the Facility. Capitalized Interest Account means the account thus called, which the Trustee will establish in the Debt Service Fund pursuant to Section 6.02 of this Indenture. Charter School Contract means the Charter School Contract between the Borrower and the School Board of Palm Beach County dated December 5, 2012 for the operation of the Facility, as amended and supplemented. Closing Date means the date of the issuance and delivery of fully executed and authenticated Bonds. Code means the Internal Revenue Code of 1986, as amended, and the applicable Regulations of the United States Treasury Department promulgated thereunder. Computation Date has the meaning given to that term in the Tax Certificate. Costs means all reasonable or necessary costs and expenses of the Project that are permitted under the Act and the Code to be paid out of proceeds of the Bonds, as more particularly set forth in the Borrower s Tax Certificate. Costs of Issuance Account means the account within the Project Fund created pursuant to Section 6.02 of this Indenture. Costs of Issuance means with respect to the Bonds all costs that are treated as issuance costs within the meaning of Section (b) of the Regulations, including, but not limited to, (a) underwriter s spread (whether realized directly or derived through purchase of the Bonds at a discount below the price at which they are expected to be sold to the public); (b) counsel fees (including bond counsel, underwriter s counsel, Authority s counsel, Trustee s counsel and Borrower s counsel, as well as any other specialized counsel fees) incurred in connection with the issuance of the Bonds; (c) financial advisory and feasibility consultant fees incurred in connection with the issuance of the Bonds; (d) rating agency fees, if any; (e) Trustee fees incurred in connection with the issuance of the Bonds; (f) paying agent and certifying and authenticating agent fees related to issuance of the Bonds; (g) accountant fees related to the issuance of the Bonds; (h) printing costs of the Bonds and of the preliminary and final offering materials; (i) publication costs associated with the financing proceedings; and (j) costs of engineering and feasibility studies necessary to the issuance of the Bonds; provided, that bond insurance premiums and certain credit enhancement fees, to the extent treated as interest expense under the Regulations, shall not be treated as Costs of Issuance. Date of Taxability means the earliest date as of which interest on the Series 2014A Bonds shall have been determined to be includable in the gross income of any Holder or prior Holder as a result of a Determination of Taxability. Days Cash on Hand means the number determined, as of the last day of any fiscal quarter of the Borrower, by (a) multiplying (i) the number of days in such fiscal quarter by (ii) the amount of cash, cash equivalents or other short term investments of the Borrower as of such last day, and (b) dividing the product obtained pursuant to the foregoing clause (a) by an amount equal to (i) the Facility's actual Operating Expenses for such fiscal quarter, minus (ii) the sum of any bad debts included in such Operating Expenses, plus all depreciation and amortization attributed to the Facility for such fiscal quarter. Debt Service Coverage Ratio Covenant means the covenant of the Borrower, which is set forth in Section 5.9(c) of the Loan Agreement, to maintain a Debt Service Coverage Ratio on the Bonds of at least 110%. Debt Service Coverage Ratio means the ratio of Funds Available for Debt Service to the Annual Debt Service Requirements on the Bonds for the Fiscal Year for which such calculation is being made. Debt Service Fund means the fund thus called, which the Trustee will establish pursuant to Section 6.02 hereof. Debt Service Reserve Fund means the fund thus called, which the Trustee will establish pursuant to Section 6.02 hereof. Debt Service Reserve Fund Requirement means the amount of $2,464,000 with respect to the Bonds, which amount is not greater than the least of (1) the maximum Annual Debt Service Requirements on the Bonds, (2) ten percent (10%) of the proceeds of the Bonds, or (3) one hundred twenty five percent (125%) of the average Annual Debt Service Requirements on the Bonds. Default or Event of Default means any event of default specified in Section 7.1 of this Indenture, any event of default specified in Section 6.1 of the Loan Agreement and any event of default specified in Section 5.1 of the Mortgage. Default Rate means means (i) with respect to the Series 2014A Bonds, the applicable interest rate set forth in Section 3.07 hereof, plus ten (10%) percent, and (ii) with respect to the Series 2014B Bonds, the applicable interest rate set forth in Section 3.07 hereof, plus ten (10%) percent; provided, however, that such rate shall in no event exceed the Maximum Rate. Determination of Taxability means one of the following: (a) The delivery to the Authority of a Proposed Adverse Determination (the Adverse Determination ) in connection with an examination of the Series 2014A Bonds by the Internal Revenue Service (the IRS ) asserting that the interest on the Bonds is included in the gross income of the Holder unless, prior to the effective date of such Adverse Determination, Borrower files with the Trustee evidence of the filing of a timely appeal with the IRS. In the event the final administrative or judicial determination of the Adverse Determination is adverse, the Adverse Determination will be effective 30 days after the entry of such final administrative or judicial determination; (b) The delivery of written notice (the Taxability Notice ) by a Holder to the Authority, the Borrower and the Trustee declaring that the IRS has issued to the Holder a proposed deficiency letter ( Deficiency Letter ), the effect of which (in the opinion of the Holder) is to assert that the interest on the Series 2014A Bonds is included in the gross income of such Holder, unless, prior to the effective date of such Deficiency Letter, the Borrower agrees in writing to participate in and defend a final judicial determination to affirm that the interest on the Series 2014A Bonds is excluded from gross income. In the event the final judicial determination is adverse, the Taxability Notice will be effective 30 days after the entry of such final judicial determination; (c) The delivery of written notice (the Event Notice ) to the Borrower by the Authority, the Trustee or the Majority Bondholders declaring that a change in law or fact, or the interpretation thereof, or the occurrence or recognition of a fact, circumstance or situation which causes or could cause the loss of the exclusion from gross income provided under Section 103(a) of the Code for interest on the Series 2014A Bonds (the Event of Taxability ) has occurred on a specified date (other than by reason of any of the events described in the foregoing subparagraphs (a), and (b)) and describing the Event of Taxability, such Event Notice to become effective 30 days after delivery unless prior thereto the Borrower, on behalf of the Authority, the Trustee or the Majority Bondholders (i) (A) agrees in writing to seek a private letter ruling or other written determination (hereinafter, referred to as the Ruling ) from the IRS affirming that the interest on the Series 2014A Bonds is excluded from gross income and will remain unaffected by the Event of Taxability described in the Event Notice or (B) agrees, in writing, to take a specific remedial action with respect to the Series 2014A Bonds pursuant to Treasury Regulation to preserve the exclusion from gross income of interest on the Series 2014A Bonds and (B) procures an opinion from Bond Counsel, at the Borrower s cost, to the effect that there is a substantial and valid legal basis for the position that the interest on the Series 2014A Bonds has been, is and will remain tax-exempt, and (I) counsel has no reason to believe that the IRS will decline to consider the ruling request for procedural or technical reasons, and no knowledge or reason to believe that the IRS has indicated a position not to rule favorably on similar questions or would not rule favorably or (II) counsel has no reason to believe that the proposed remedial action would not be sufficient to preserve the exclusion from gross income of the interest on the Series 2014A Bonds. In the event the Ruling is adverse, the Event Notice will be effective 30 days after the receipt of such adverse determination; (d) In order to stay the Determination of Taxability under paragraphs (a), (b) or (c) above, the Borrower must agree in writing to reimburse and fully indemnify and hold harmless the Authority, the Trustee and the Holders from and against any and all 5 7 B-3 5 8

58 liability, damage, loss, cost or expense (including attorneys fees) which the Authority, the Trustee or the Holders may incur as the result of the examination, litigation, ruling or remedial action and further agrees to pay on demand all costs and expenses which the Authority, the Trustee or the Holders may incur in connection with the examination, litigation, ruling or remedial action and to furnish such bond, letter of credit or other form of security as the Authority or the Trustee may reasonably request from time to time to secure the Authority s, the Trustee s or the Holders obligations with respect to the Series 2014A Bonds, including without limitation, any potential increases in interest, whether prospective or retroactive, and any potential taxes, closing agreement amount, penalties or related interest. Dissemination Agent means U.S. Bank National Association, in its capacity as dissemination agent with respect to the information provided by the Borrower pursuant to Section 5.18 of the Loan Agreement, or any successor Dissemination Agent appointed hereunder. DTC means The Depository Trust Company, New York, New York. Eminent Domain means the taking of title to, or the temporary use of, the Facility or any part thereof pursuant to eminent domain or condemnation proceedings, or any voluntary conveyance of any part of the Facility during the pendency of, or as a result of a threat of, such proceedings. Environmental Law means any federal, state or local law, statute, code, ordinance, regulation, requirement or rule relating to dangerous, toxic or hazardous pollutants, Hazardous Substances, chemical waste, materials or substances. Event Notice shall have the meaning set forth in clause (c) of the definition of Determination of Taxability. Facility means: (i) the two charter schools operated by the Borrower in the Project Jurisdiction; (ii) all other property, real, personal and mixed related to the Borrower s interest in such charter schools; and (iii) all franchises, rights-of-way, privileges, easements, licenses, rights and other interests related to the Borrower s interest in such charter schools. Favorable Opinion of Bond Counsel means, with respect to any action the taking of which requires such an opinion, an unqualified opinion of Bond Counsel to the effect that such action will not impair the exclusion of interest on the Series 2014A Bonds from gross income for purposes of federal income taxation (subject to the inclusion of any exceptions contained in the opinion delivered upon the original issuance of the Series 2014A Bonds). Funds means the funds established pursuant to Section 6.02 hereof. Fiscal Year means the period of 12 consecutive months beginning on July 1 in any calendar year and ending on June 30 of the next succeeding calendar year, or such other fiscal year as the School Board of Palm Beach County may adopt as the reporting period for charter schools. Funds Available for Debt Service means, in any period, the Borrower's net income for such period, calculated in accordance with Generally Accepted Accounting Principles minus the Borrower s operating expenses for such period, plus, to the extent taken as an expense item in the calculation of such net income, depreciation and amortization, interest on the Bonds, amortization of discount and financing expenses incurred in connection with the issuance of the Bonds, and other non-cash expense deducted in accordance with Generally Accepted Accounting Principles. General Account means the account within the Project Fund created pursuant to Section 6.02 of this Indenture. Generally Accepted Accounting Principles means the principles that are (a) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time, and (b) consistently applied with past financial statements of the Borrower adopting the same principles; provided that a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in Generally Accepted Accounting Principles) as to financial statements in which such principles have been properly applied. Government Obligations means direct obligations of, or obligations guaranteed unconditionally as to full and timely payment of the principal thereof and the interest thereon by, the United States of America (including any investments in pools of such obligations) or evidences of ownership of proportionate interests in future interest and principal payments on such obligations held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor on such obligations, and which underlying obligations are not available to satisfy any claim of the custodian or any Person claiming through the custodian or to whom the custodian may be obligated. Governmental Authority means the United States, the State, Palm Beach County, Florida, the Town of Lantana, Florida, the Palm Beach County School Board and any political subdivision, agency, department, commission, board, bureau, authority or instrumentality of either of them, including any local authorities, or any other entity exercising executive, legislative, judicial, regulatory or administrative functions of government, which has jurisdiction over the Land or the construction and operation of the Facility thereon. Gross Revenues means all of the Facility s revenues, receipts and income, from all sources of whatsoever nature; provided, however, that the term Gross Revenues shall not include (i) gifts, grants, bequests, donations and contributions made to the Borrower or the Facility, which are specifically designated at the time of the making thereof by the donor or grantor thereof as being for certain specified purposes which are inconsistent with the application thereof to the payment of the Loan Payments, and (ii) any amounts collected by the Borrower or the Facility that constitute sales taxes or other monies which are required by law to be paid over to any governmental entity. Guarantor means Palm Beach Maritime Foundation, Inc., a Maryland non-profit corporation. Guaranty Agreement means the Guaranty Agreement, dated as of the date hereof, from the Guarantor to the Trustee, pursuant to which the Guarantor will guarantee the prompt payment and performance, as and when due, of all the Borrower's obligations under the Loan Agreement and the Notes. Hazardous Substances means (i) any oil, flammable substance, explosives, radioactive materials, hazardous wastes or substances, toxic wastes or substances or any other wastes, materials or pollutants which (a) pose a hazard to the Facility or to persons on or about the Facility or (b) cause the Facility to be in violation of any Environmental Law; (ii) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls, or radon gas; (iii) any chemical, material or substance defined as or included in the definition of waste, hazardous substances, hazardous wastes, hazardous materials, extremely hazardous waste, restricted hazardous waste, or toxic substances or words of similar import under any Environmental Law including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act ( CERCLA ), 42 USC 9601 et seq.; the Resource Conservation and Recovery Act ( RCRA ), 42 USC 6901 et seq.; the Hazardous Materials Transportation Act, 49 USC 1801 et seq.; the Federal Water Pollution Control Act, 33 USC 1251 et seq.; (iv) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority or agency or may or could pose a hazard to the health and safety of the occupants of the Facility or the owners and/or occupants of property adjacent to or surrounding the Facility, or any other person coming upon the Facility or adjacent property; or (v) any other chemical, materials or substance which may or could pose a hazard to the environment. Improvements means all buildings and other improvements and additions thereto now erected or hereafter constructed or placed upon the Land or any part thereof. Indebtedness means all obligations, contingent and otherwise, that in accordance with Generally Accepted Accounting Principles should be classified upon the obligor's balance sheet as liabilities, or to which reference should be made by footnote thereto, including in any event and whether or not so classified: (a) all debt and similar monetary obligations, whether direct or indirect; (b) all liabilities secured by any mortgage, deed of trust, pledge, security interest, lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed; (c) all liabilities under capitalized leases; and (d) all guaranties, endorsements and other contingent obligations whether direct or indirect in respect of indebtedness of others, including the obligations to reimburse the Authority in respect of any letters of credit. Indenture means this trust indenture, dated as of June 1, 2014, by and between the Authority and the Trustee, entered into in connection with the issuance, delivery and payment of the Bonds and the security therefore, as said indenture may be amended or supplemented from time to time. Independent Architect means an Independent Person (i) authorized to engage in the practice of architecture by the laws of the State, and (ii) employed by the Borrower from time to time to pass upon those matters required by the Indenture, the Loan Agreement or the Mortgage to be passed upon by an Independent Architect. Independent Consultant means an Independent Person acceptable to the Underwriter that is (i) experienced in matters related to the operation of charter schools, and (ii) employed by the Borrower from time to time to pass upon those matters required by the Indenture, the Loan Agreement or the Mortgage to be passed upon by an Independent Consultant. Independent Engineer means an Independent Person (i) authorized to engage in the profession of engineering by the laws of the State, and (ii) employed by the Borrower from time to time to pass upon those matters required by the Indenture, the Loan Agreement or the Mortgage to be passed upon by an Independent Engineer. Independent Person means a Person designated by the Borrower and not an employee or an affiliate of the Borrower. Independent Public Accountant means an Independent Person (i) authorized to engage in the practice of public accounting by the laws of the State, and (ii) employed by the Borrower from time to time to pass upon those matters required by the Indenture or the Loan Agreement to be passed upon by an Independent Public Accountant. Insurance and Condemnation Proceeds Account means the account within the Project Fund created pursuant to Section 6.02 of this Indenture. Insurance Proceeds means the total proceeds of insurance actually paid or payable by an insurance company in respect of the required insurance on the Facility, less the actual costs incurred, including reasonable attorneys' fees, in the collection of such proceeds. Interest Account means the account thus called, which the Trustee will establish in the Debt Service Fund pursuant to Section 6.02 of this Indenture. Interest Payment Date means each May 1 and November 1, commencing November 1, Investment Securities means any of the following that at the time are lawful investments under the laws of the State and applicable banking regulations for the money held under this Indenture: (a) Government Obligations; (b) direct and general obligations of any state of the United States of America or any municipality or political subdivision of such state, or obligations of any corporations, if such obligations are rated in one of the two highest rating categories (without regard to gradations within any such categories) by Standard & Poor s ( S&P ) or Moody s Investors Service ( Moody s ), or upon the discontinuance of either or both of such rating services, any other nationally recognized rating service; 5 11 B

59 (c) negotiable or nonnegotiable certificates of deposit, time deposits, or other similar banking arrangements, issued by any nationally- or state-chartered bank or trust company (including the Trustee) or any savings and loan association, if either (i) the long-term obligations of such bank or trust company are rated in one of the two highest rating categories (without regard to gradations within any such categories) by S&P or Moody s, or, upon the discontinuance of either or both of such rating services, any other nationally recognized rating service or (ii) the deposits are continuously secured as to principal, but only to the extent not insured by the Federal Deposit Insurance Corporation, or similar corporation chartered by the United States of America, (1) by lodging with a bank or trust company, as collateral security, obligations described in paragraph (a) or (b) above or, with the approval of the Trustee, other marketable securities eligible as security for the deposit of trust funds under applicable regulations of the Comptroller of the Currency of the United States of America or applicable state law or regulations, having a market value (exclusive of accrued interest) not less than the amount of such deposit, or (2) if the furnishing of security as provided in clause (1) of this paragraph is not permitted by applicable law, in such manner as may then be required or permitted by applicable state or federal laws and regulations regarding the security for the deposit of trust funds; (d) repurchase agreements with respect to obligations listed in paragraph (a) or (b) above if entered into with a nationally or state-chartered bank, trust company or a broker or dealer (as defined by the Securities Exchange Act of 1934 as amended) that is a member of the Securities Investors Protection Corporation if (i) such obligations that are the subject of such repurchase agreement are delivered to the Trustee or are supported by a safekeeping receipt issued by depository satisfactory to the Trustee, provided that such repurchase agreement must provide that the value of the underlying obligations shall be maintained at current market value, calculated no less frequently than monthly, of not less than the repurchase price, (ii) a prior perfected security interest in the obligations that are the subject of such repurchase agreement has been granted to the Trustee, and (iii) such obligations are free and clear of any adverse third-party claims; (e) commercial paper maturing in 270 days or less and rated in the highest rating category by two nationally recognized rating services; (f) money market mutual funds (including funds for which the Trustee or any of its affiliates is an investment manager or advisor) invested solely in obligations listed in paragraphs (a), (b) or (c) above including any mutual fund for which the Trustee, or an Affiliate of the Trustee, serves as investment manager, administrator, shareholder, servicing agent and/or custodian, and receives fees from such funds for services rendered; (g) investment agreements with any nationally- or state-chartered bank, financial institution, insurance company or trust company that has long-term debt obligations rated in one of the three highest categories (without regard to gradations within any such categories) by a nationally recognized rating agency. Should the issuer s or guarantor s credit quality be downgraded below A, the Trustee must have withdrawal rights; (h) certificates or receipts issued by any nationally or state-chartered bank, trust company or broker or dealer (as defined by the Securities Exchange Act of 1934, as amended) that is a member of the Securities Investors Protection Corporation, organized and existing under the laws of the United States of America or any state thereof, the outstanding unsecured long-term debt of which is rated in either of the two highest rating categories (without regard to gradations within any such categories) by S&P or Moody s, or, upon the discontinuance of either rating service, any other nationally recognized ratings service, in the capacity of custodian, which certificates or receipts evidence ownership or a portion of the principal of or interest on Government Obligations held (which may be in book entry form) by such bank, trust company or broker or dealer (as defined by the Securities Exchange Act of 1934, as amended) as custodian; and (i) tax-exempt obligations (as defined in Section 150(a)(6) of the Code and that are not investment property as defined in Section 148(b)(2) of the Code) rated in one of the two highest rating categories (without regard to gradations within any such categories) by S&P or Moody s, or upon the discontinuance of such ratings service, any other nationally recognized ratings service; provided that Investment Securities shall not include a financial instrument, commonly known as a derivative, whose performance is derived, at least in part, from the performance of any underlying asset, including, without limitations, futures, options on securities, options on futures, forward contracts, swap agreements, structured notes and participations in pools of mortgages or other assets. Joint Exercise Agreement is as defined in the first whereas clause of the Loan Agreement. Land means the real property on which the Facility is located. Legal Requirements means any legal requirements, including any local, state or federal statute, law, ordinance, code, rule or regulation, now or hereinafter in effect (including environmental laws) or order, judgment, decree, injunction, permit, license, authorization, certificate, franchise, approval, notice, demand, direction or determination, of any Governmental Authority. Lien means any interest in the Facility or any part thereof or any right therein, including without limitation any rents, issues, profits, proceeds and revenues therefrom, securing an obligation owed to, or a claim by, any Person, whether such interest is based on the common law, statute or contract, and including but not limited to the lien and security interest arising from a mortgage, deed of trust, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The term Lien shall also include any and all reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting the Facility or any part thereof or any interest therein. Limited Offering Memorandum means the Limited Offering Memorandum, dated June, 2014, relating to the Bonds. less than 1.10:1.00. Liquidity Covenant means the covenant, which is set forth in Section 5.09(d) of the Loan Agreement, to require the Borrower to have, at the end of each of its fiscal quarters, at least forty five (45) Days Cash on Hand. Loan Agreement means the Loan Agreement, dated as of the date hereof, between the Borrower and the Authority, as amended and supplemented. Loan Amount means an amount equal to the original principal amount of the Bonds. Loan Documents means, collectively, the Bonds, the Loan Agreement, the Notes, the Mortgage and the Guaranty Agreement together with all other documents or instruments executed by the Borrower which evidence or secure the Borrower s indebtedness under such documents and all other documents and instruments delivered simultaneously herewith or required under the Loan Documents to be delivered during the term of the Loan. Loan Payments means all of the payments which the Borrower is obligated to make to the Authority pursuant to the Loan Agreement, which payments are required to be in amounts sufficient to permit the Authority to make all required payments of debt service on the Bonds. Majority Bondholders means the Holders of more than fifty percent (50%) in aggregate principal amount of Bonds owned by those Bondholders who responded to a poll conducted by the Trustee or another Bondholder (or, if the Bonds are registered in a book entry form of ownership, conducted by the securities depository), provided that such responding Bondholders constitute the owners of at least thirty-five percent (35%) of the aggregate principal amount of all Bonds Outstanding at the time of such poll. Management Report means a report prepared by an Independent Consultant as set forth in Section 5.9 of the Loan Agreement. Management Agreement means the agreement for the management of the Facility between the Borrower and the Guarantor dated June, 2014, as amended and supplemented, and any successor agreement for the management of the Facility. Management Fee means the compensation payable to the manager of the Facility pursuant to the Management Agreement. Maturity Date means, with respect to the Series 2014A Bonds, May 1, 2040, and with respect to the Series 2014B Bonds, May 1, Maximum Rate means eighteen percent (18%) per annum. Member means the parties to the Joint Exercise Agreement and any former, current or political subdivision designated in the future from time to time as a member of the Authority pursuant to the Joint Exercise Agreement. Minimum Coverage Ratio means a Debt Service Coverage Ratio on the Bonds of not Minimum Liquidity Requirement means Days Cash on Hand in an amount not less than 100% of that which is required by the Liquidity Covenant. Minimum Trade Payables Requirement means that no more than 10% of the Borrower's Trade Payables shall be outstanding for in excess of thirty (30) days Mortgage means the Mortgage and Security Agreement, dated as of the date hereof, pertaining to the Security Property, executed and delivered by the Borrower to the Trustee, together with all supplements thereto. Net Proceeds when used with respect to any insurance proceeds or award resulting from, or other amount received in connection with, Eminent Domain, means the gross proceeds from such proceeds, award or other amount, less all expenses (including attorneys fees) incurred in the realization thereof. Notes means, collectively, the Series 2014A Note and the Series 2014B Note. Notice Address means, with respect to the Authority: Public Finance Authority c/o Wisconsin Counties Association 22 East Mifflin Street, Suite 900 Madison, WI Attention: Scott Carper and Phil Letendre With respect to the Borrower: Palm Beach Maritime Museum, Inc. d/b/a Palm Beach Maritime Academy 4512 N. Flagler Drive, Suite 206 West Palm Beach, FL Attention: John Grant, President and CEO With respect to the Trustee and the Dissemination Agent: U. S. Bank National Association Corporate Trust Services 550 West Cypress Creek Road, Suite 380 Ft. Lauderdale, FL Attention: Amanda Bhim, Assistant Vice President With respect to the Underwriter: Hapoalim Securities USA, Inc. One Battery Park Plaza, 2nd Floor New York, NY B

60 Attention: Edward Chan, Managing Director Obligor(s) means the Borrower and the Guarantor. Operating Expenses means, in the aggregate, for any period, all current expenses of the ownership, operation and maintenance of the Facility for such period, as determined on an accrual basis, including but not limited to fees and expenses of the manager of the Facility under the Management Agreement, legal and accounting fees and expenses, but excluding, however, (a) any trustee, servicing, administration and other fees due in connection with the Bonds, (b) all principal and interest due under the Bonds, this Indenture or the Borrower Documents, (c) any expenses for repairs or improvements which have been or will be paid from amounts on deposit in the reserves established under this Indenture, and (d) depreciation, amortization and other noncash expenses with respect to such period. Optional Redemption Account means the account thus called, which the Trustee will establish in the Debt Service Fund pursuant to Section 6.02 of this Indenture. Organizational Documents means for any corporation, partnership, trust, limited liability company, limited liability partnership, unincorporated association, business or other legal entity, the documents pursuant to which such entity has been established or organized, as such documents may be amended from time to time as permitted by the Loan Agreement. Outstanding means, as of any particular date, all Bonds authenticated and delivered under this Indenture except (i) any Bond canceled by the Trustee (or delivered to the Trustee for cancellation) as or before such date, (ii) any Bond for the payment of the principal or Redemption Price of and interest on which provision shall have been made as provided in Section 9.01 of this Indenture, and (iii) any Bond in lieu of or in substitution for which a new Bond shall have been authenticated and delivered pursuant to Article III or Article IV of this Indenture. Permitted Encumbrances means: (a) Any lien arising by reason of any good faith deposit with the Borrower in connection with any lease of real estate, bid or contract (other than any contract for the payment of money), any deposit by the Borrower to secure any public or statutory obligation, or to secure, or in lieu of, any surety, stay or appeal bond, and any deposit as security for the payment of taxes or assessments or other similar charges; (b) Any lien arising by reason of any deposit with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation for any purpose at any time as required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license or to enable the Borrower to maintain self-insurance or to participate in any funds established to cover any insurance risk or in connection with workers compensation, unemployment insurance, any pension or profit-sharing plan or other social security, or to share in the privileges or benefits required for the participation of the Borrower in such arrangements; (c) Any judgment lien against the Borrower, so long as such judgment is being contested in good faith and is fully bonded, fully covered by a letter of credit or other surety, or covered by insurance or has otherwise been disclosed in the Limited Offering Memorandum; (d) Any right reserved to or vested in any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or provision of law affecting any property of the Borrower; any lien on any property of the Borrower for taxes, assessments, levies, fees, water and sewer rents or charges and other governmental and similar charges and any lien of any mechanic, materialman, laborer, supplier or vendor for work or services performed or materials furnished in connection with such property that is not due and payable or that is not delinquent or the amount or validity of which is being contested and execution thereon stayed; (e) The Indenture, the Loan Agreement and the Mortgage; and any lien or encumbrance disclosed in the Title Policy and permitted to be excepted from coverage under the Title Policy by counsel to the Underwriter, provided that such lien or encumbrance is not extended, renewed or modified to apply to any property of the Borrower not subject to such lien or encumbrance on the date such policy is delivered, unless the lien or encumbrance, as so extended, renewed or modified, otherwise qualifies as a Permitted Encumbrance without reference to this clause; (f) Mortgage; Any lease permitted under the terms of the Loan Agreement or the (g) Any lien placed upon any tangible real or tangible personal property being acquired by the Borrower to secure all or a portion of the purchase price thereof and any landlord s lien under any lease permitted under the Loan Agreement or the Mortgage; (h) Such easements, rights-of-way, servitudes, restrictions and other defects, liens and encumbrances which shall not materially impair the use of the Facility for its intended purposes or the value of the Facility as evidenced by a certificate of an Independent Engineer delivered to the Trustee; (i) Such easements, servitudes, restrictions, licenses, restrictive covenants, rights-of-way (including the dedication of public highways or public or private utility easements) as may be required by governmental authorities or utility providers in connection with the construction of, or the furnishing of utilities to, the Facility, as described in a certificate signed by an Authorized Borrower Representative; and (j) Any banker s lien arising in connection with the establishment and maintenance of depository bank accounts in the ordinary course of business. Person means any natural person, firm, association, corporation, company, trust, partnership, government or an agency or a political subdivision thereof or other entity. Personal Property means all materials, furnishings, fixtures, furniture, machinery, equipment and all items of tangible or intangible personal property now or hereafter owned or acquired by the Borrower in which the Trustee has been or will be granted an interest to secure the obligations of the Borrower under the Loan Documents. Plans and Specifications means any plans and specifications for a project or a portion thereof to be prepared by an Independent Architect with proceeds of the Bonds. Principal Account means the account thus called, which the Trustee will establish in the Debt Service Fund pursuant to Section 6.02 of this Indenture. Project means that certain project which consists of: (a) acquisition of the Facility by the Borrower, (b) construction, equipping and making certain renovations and capital improvements to the Facility, (c) refunding the principal amount outstanding of the Refunded Bonds, (d) funding a Debt Service Reserve Fund for the Bonds, (e) paying capitalized interest on the Bonds, and (f) paying the costs of issuance of the Bonds. Project Approvals means all approvals, consents, waivers, orders, agreements, authorization, permits and licenses required under applicable Legal Requirements or under the terms of any restriction, covenant or easement affecting the Facility, or otherwise necessary or desirable for the ownership, acquisition, construction, equipping, use and operation of the Facility and the Improvements, whether obtained from a Governmental Authority or any other Person. Project Fund means the fund created pursuant to Section 6.02 of this Indenture. Project Jurisdiction means Palm Beach County, Florida and the Town of Lantana, Florida. Rating Agency means each of Standard & Poor s Ratings Group, a Standard & Poor s Financial Services LLC business, Moody s Investors Service, Inc., Duff & Phelps Credit Rating Co. and Fitch Ratings, Inc. or any other nationally-recognized statistical rating agency which has been approved by the Trustee. Rebate Analyst means any person, chosen by the Borrower and at the expense of the Borrower, qualified and experienced in the calculation of rebate payments under Section 148 of the Code and compliance with the arbitrage rebate regulations promulgated under the Code, which is engaged for the purpose of determining the amount of required deposits to the Rebate Fund, if any. Rebate Fund means the fund created by the Authority pursuant to Section 6.02 of this Indenture. Record Date means the fifteenth day of the calendar month preceding any Interest Payment Date. Redemption Date means the date fixed, pursuant to Article IV of this Indenture, for the redemption of any Bonds. Redemption Fund means the fund created by the Authority pursuant to Section 6.02 of this Indenture. Redemption Price means the principal amount of any Bond or any portion thereof, plus the applicable premium, if any, payable upon redemption thereof pursuant to this Indenture. Refunded Bonds means the Authority s $1,000,000 Education Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A. Refunded Bonds Indenture means the Trust Indenture between the Trustee and the Authority, dated as of April 30, 2014, related to the Refunded Bonds. Regulations means any proposed, temporary, or final Income Tax Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are applicable to the Bonds. Any reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to supplement, amend or replace the specific Regulation referenced. Remittance Address means, (i) for payment of the Authority s Administration Fee by check, Public Finance Authority #419, P.O. Box 2088, Milwaukee, Wisconsin (reference invoice number, project identification and name), or (ii) for payment of the Authority s Administration Fee by wire transfer, pursuant to written instructions provided by the Authority from time to time. Requisition means a requisition in the form attached to the Loan Agreement as Exhibit B, together with all invoices, bills of sale, schedules and other submissions required for the making of an advance from Project Fund. Resolution means the resolution authorizing the issuance of the Bonds adopted by the Authority on June, Revenue Fund means the fund created by the Authority pursuant to Section 6.02 of this Indenture. Security Property means the Land and all buildings, structures and improvements now or hereafter situated thereon, including, without limitation, the Facility; all furniture, fixtures and equipment located thereon and therein; and all other items of real or personal property described in the Granting Clauses of the Mortgage and included in the term Security Property as used and defined in the Mortgage. Series 2014A Bonds means the Authority s $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A. Series 2014B Bonds means the Authority s $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B. Series 2014A Note means the Borrower s promissory note to the Authority in the form attached as Exhibit A-1 to the Loan Agreement, in an original principal amount equal to the aggregate original principal amount of the Series 2014A Bonds, as the same may be amended, 5 19 B

61 supplemented or modified from time to time. Series 2014B Note means the Borrower s promissory note to the Authority in the form attached as Exhibit A-2 to the Loan Agreement, in an original principal amount equal to the aggregate original principal amount of the Series 2014B Bonds, as the same may be amended, supplemented or modified from time to time. State means the State of Florida. Supplemental Indenture means any amendment or supplement to this Indenture, executed by the Authority and the Trustee in accordance with Article IX of this Indenture. Tax Certificate means the Arbitrage Certificate of the Authority dated the Closing Date relating to certain federal tax matters in respect of the Bonds, together with the Borrower's Tax Representation Letter. Taxable Rate means, with respect to the Series 2014A Bonds, the applicable interest rate set forth in Section 3.07 hereof, plus ten percent (10%). Taxes means all taxes, utility service fees, assessments and other governmental or municipal or public or private dues, charges and levies and any prior liens (including federal tax liens) for any of the foregoing, which are or may be levied, imposed or assessed upon the Security Property or any part thereof, or any leases pertaining thereto, or upon the rents, issues, income or profits thereof, whether any or all of the aforementioned be levied directly or indirectly or as excise taxes or as income taxes. Title Insurance Company means Attorneys Title Insurance Fund, Inc. Title Policy means an ALTA standard form title insurance policy issued by the Title Insurance Company for the benefit of the Trustee and its successors and assigns, as their interests may appear (with such reinsurance or co-insurance as the Underwriter may require, any such reinsurance to be with direct access endorsements) insuring the priority of the Mortgage and that the Borrower holds marketable fee simple title to the Facility, subject only to such exceptions as the Underwriter may approve, and containing such endorsements and affirmative insurance as the Underwriter in its reasonable discretion may require. Trade Payables means amounts due vendors of goods and services to the Facility, but excluding payroll, payroll-related costs, accrued real estate taxes and amounts being contested in good faith by appropriate proceedings. Trade Payables Covenant means the covenant of the Borrower, which is set forth in Section 5.09(e) of the Loan Agreement, that, as calculated at the end of each fiscal quarter, beginning with the fiscal quarter ending September 30, 2014, no more than 10% of the Facility s Trade Payables (exclusive of Trade Payables to vendors who have agreed to defer payment until the Facility has received relevant reimbursement) will be outstanding for in excess of 30 days. Trust Estate is as defined in the Granting Clauses of this Indenture. Trustee means U.S. Bank National Association, a national banking association, appointed pursuant to Section 8.01 of this Indenture as trustee for the Bonds and any other corporation or association that may at any time be substituted in its place pursuant to this Indenture, and their successors. Trustee Expenses means the fees and expenses of the Trustee set forth in Section 8.04 of this Indenture. Underwriter means Hapoalim Securities USA, Inc., the initial underwriter for the Bonds, provided however, that (i) in the event that such firm ceases active business leaving no successor, the provisions of this Indenture and the Loan Agreement that relate to the Underwriter shall no longer be in force and effect and (ii) in the event that any firm or corporation succeeds to the business of the Underwriter by assignment, merger or otherwise, such firm or corporation shall be deemed to be the Underwriter. Section 1.02 Construction. In this Indenture, unless the context otherwise requires: (a) Articles and Sections referred to by number shall mean the corresponding Articles and Sections of this Indenture. (b) The terms hereby, hereof, hereto, herein, hereunder and any similar terms refer to this Indenture, and the term hereafter shall mean after, and the term heretofore shall mean before, the date of execution of this Indenture. (c) Words of the masculine gender shall mean and include correlative words of the female and neuter genders, and words importing the singular number shall mean and include the plural number and vice versa. (d) Words importing the redemption of a Bond or the calling of a Bond for redemption do not include or connote payment of such Bond at its stated maturity or the purchase of such Bond. (e) References in this Indenture to particular sections of the Code, the Act or any other legislation shall be deemed to refer also to those sections as amended and to any successor sections thereto or other redesignation for codification purposes. (f) The terms receipt, received, recovery, recovered and any similar terms, when used in this Indenture with respect to moneys or payments due the Authority, shall be deemed to refer to the passage of physical possession and control of such moneys and payments to the Authority, the Owners of the Bonds or the Trustee on its behalf. ARTICLE II. REPRESENTATIONS AND COVENANTS OF THE AUTHORITY Section 2.01 Representations by the Authority. The Authority represents and warrants to the Trustee and the Owners of the Bonds as set forth in this Section Provided, however, that as to all matters of law the Authority is relying on the advice of Bond Counsel; and provided further, that no Authority Indemnified Party shall be individually liable for the breach of any representation, warranty or agreement contained herein. (a) The Authority is a commission under the Act and a unit of government and body corporate and politic organized and existing under the laws of the State of Wisconsin and has full power and authority to adopt the Resolution, to enter into and to perform its obligations under the Authority Documents; and when executed and delivered by the respective parties thereto, the Authority Documents will constitute the legal, valid and binding obligations of the Authority enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitation on legal remedies against joint powers commissions in the State of Wisconsin. (b) By official action of the Authority prior to or concurrently with the acceptance hereof, the Authority has authorized and approved the execution and delivery of the Authority Documents and the consummation by the Authority of the transactions contemplated thereby. (c) To the knowledge of the Authority, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending against the Authority seeking to restrain or enjoin the sale or issuance of the Bonds, or in any way contesting or affecting any proceedings of the Authority taken concerning the sale thereof, the pledge or application of any moneys or security provided for the payment of the Bonds, in any way contesting the validity or enforceability of the Authority Documents or contesting in any way the existence or powers of the Authority relating to the sale of the Bonds. (d) The execution and delivery by the Authority of the Authority Documents and compliance with the provisions on the Authority s part contained therein will not conflict with or constitute a material breach of or default under any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Authority is a party or is otherwise subject, nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the Authority under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the Authority Documents. (e) The Authority has, pursuant to the Resolution, found and determined that the financing and refinancing of the Project is in furtherance of the purposes for which the Authority was organized under the Act. THE AUTHORITY MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROJECT, THE FACILITY, OR ANY PORTION THEREOF, INCLUDING WITHOUT LIMITATION, THE HABITABILITY THEREOF; THE MERCHANTABILITY OR FITNESS THEREOF FOR ANY PARTICULAR PURPOSES; THE DESIGN OR CONDITION THEREOF; THE WORKMANSHIP, QUALITY, OR CAPACITY THEREOF; LATENT DEFECTS THEREIN; THE VALUE THEREOF; FUTURE PERFORMANCE OR THE COMPLIANCE THEREOF WITH ANY LEGAL REQUIREMENTS. Section 2.02 Covenants of the Authority. The Authority hereby agrees with the Owners from time to time of the Bonds that, so long as the Bonds remain unpaid: (a) The Authority will pay or cause to be paid the principal of and the interest on the Bonds as the same become due, but solely to the extent provided in Section hereof. (b) The Authority will do, execute, acknowledge, when appropriate, and deliver from time to time at the request of the Owners of the Bonds or the Trustee and at the expense of the Borrower, after payment of such expenses, such further acts, instruments, financing statements and other documents as are necessary or desirable, and within the legal power of the Authority, to better assure, transfer, pledge or assign to the Trustee, and grant a security interest unto the Trustee in and to the Trust Estate and the other properties and revenues herein described and otherwise to carry out the intent and purpose of the Authority Documents and the Bonds. ARTICLE III. AUTHORIZATION AND ISSUANCE OF BONDS Section 3.01 Authorization of Bonds. There are hereby authorized to be issued by the Authority the Bonds to be known and designated as Public Finance Authority $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A and Public Finance Authority $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B. The Bonds shall be issued for the sole purpose of making the Loan by depositing the net proceeds of the Bonds pursuant to Section 6.02(d) hereof. Section 3.02 Conditions Precedent to Delivery of Bonds. The Trustee shall authenticate the Bonds and deliver them to or for the account of the original purchasers thereof as shall be directed by the Authority as hereinafter in this Section provided. Prior to the initial delivery of the Bonds, there shall be filed with the Trustee: (a) Executed counterparts of this Indenture, the Loan Agreement, the Guaranty and the Mortgage; (b) A certified copy of the Resolution; (c) Evidence of the payment of the purchase price of the Bonds; (d) An opinion of Bond Counsel substantially to the effect that the Bonds constitute legal, valid and binding limited obligations of the Authority and that under existing statutes, regulations, published rulings and judicial decisions, the interest on the Series 2014A Bonds is not includable in gross income for federal income tax purposes; 5 23 B

62 (e) A certificate of the appropriate official of the Authority attesting to the incumbency of the directors, officers or members of the Authority and to such other matters as Bond Counsel may require; (f) Internal Revenue Service Form 8038 completed by the Authority with respect to the Series 2014A Bonds; (g) An opinion of counsel for the Borrower to the effect that the documents specifically mentioned in the definition of Loan Documents and to which the Borrower is a party have been duly authorized, executed and delivered by the Borrower and are valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, subject to customary qualifications and exceptions; (h) A request and authorization to the Trustee on behalf of the Authority and signed by an Authorized Authority Representative to authenticate and deliver the Bonds in such specified denominations as permitted herein to the original purchaser or purchasers therein identified upon payment to the Trustee, but for the account of the Authority, of a specified sum of money; (i) An opinion of counsel to the Authority in form and substance acceptable to Bond Counsel and the Underwriter; and (j) A qualified investor letter from each original purchaser of the Bonds in substantially the form attached hereto as Exhibit B ; (k) The commitment to issue title insurance, as approved by the Underwriter (as evidenced by the payment for the Bonds) with the Title Policy to follow as soon as thereafter possible; and (l) Such other documents as the Underwriter or Bond Counsel may require; provided that this condition shall be deemed met upon the delivery of the opinion of Bond Counsel described by paragraph (d) of this Section Section 3.03 Registered Bonds. The Bonds shall be in fully registered form and shall be payable in accordance with the provisions hereof and of the Bonds to the registered Owner thereof as shown on the records maintained by the Trustee. Section 3.04 Loss, Theft, Destruction or Mutilation of Bonds. In the event a Bond is mutilated, lost, stolen or destroyed, the Authority may execute and the Trustee may authenticate and deliver a new Bond of the same Series bearing the same number, if any, as the mutilated, destroyed, lost or stolen Bond and bearing a notation indicating the principal amount outstanding, in exchange for the mutilated Bond, or in substitution for a Bond so destroyed, lost or stolen. In every case of exchange or substitution, the applicant shall furnish to the Authority and the Trustee (i) such security or indemnity as may be required by them to save them harmless from all risks, however remote, and (ii) evidence to their satisfaction of the mutilation, destruction, loss or theft of a Bond and of the ownership thereof. Upon the issuance of a Bond upon such exchange or substitution, the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses, including counsel fees, of the Authority and the Trustee. In case a Bond shall become mutilated or be destroyed, lost or stolen, the Trustee may, instead of authenticating a Bond in exchange or substitution therefor, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Bond) if the applicant for such payment shall furnish to the Authority and the Trustee such security or indemnity as it may require to save it harmless and evidence satisfactory to the Authority of the mutilation, destruction, loss or theft of the Bond and of the ownership thereof. Section 3.05 Terms of Bonds General. (a) Registration; Denomination. The Bonds shall be issuable initially in Authorized Denominations as specified by the Underwriter. Thereafter, the Bonds shall be issuable in any Authorized Denomination required to effect registrations of transfers, exchanges or redemptions permitted or required by this Indenture. The Bonds shall be substantially in the form of Exhibit A-1 and Exhibit A-2 attached hereto, with such amendments and changes as the officer executing the same shall deem appropriate. The Bonds may be in typewritten or lithographical form; provided, however, that the Bonds must be in certificated form unless a book-entry only system is elected as provided for in Section 3.06 hereof. (b) Date and Maturity. The Bonds shall be dated the Closing Date. The Bonds shall bear interest from the date of issuance thereof until paid in full, payable for the periods, in the amounts and as provided in Section 3.07 hereof. The Bonds shall mature on the Maturity Date, unless sooner redeemed or accelerated. (c) Payment. The principal of and premium, if any, and interest on the Bonds shall be payable in lawful money of the United States of America by check or draft of the Trustee. Payments of interest and of principal upon redemption pursuant to Article IV hereof shall be mailed by first class mail to the Owners of the Bonds at their addresses appearing on the records of the Trustee on the Record Date; provided, however, that the payment to any Owner holding at least $1,000,000 of Bonds shall, upon written request of such Owner received at least ten (10) Business Days prior to the Record Date, be transmitted by the Trustee by wire transfer to the account specified in such request, which account must be in the United States. Payment of the principal (other than upon redemption pursuant to Article IV hereof) of and premium, if any, on a Bond shall only be made upon surrender of such Bond at the designated corporate trust office of the Trustee. (d) Numbers and Legends. The Series 2014A Bonds shall be numbered from RA-1 upward and the Series 2014B Bonds shall be numbered from RB-1 upward. The Bonds shall bear such descriptive or restrictive legends as the Authority shall deem appropriate. Section 3.06 Book Entry Only System. (a) The ownership of each Bond shall initially be registered in the registration books kept by the Trustee in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ). The Bonds shall be issued in the form of a single fully registered Bond for each stated maturity of each Series of the Bonds set forth in Section 3.01 hereof. Such Bonds will be numbered consecutively RA-1 or RB-1 and upward for each Series, as appropriate, and may be in typewritten form. Such Bonds are exchangeable for Bonds of other denominations of the same Series pursuant to Section 3.09 hereof. (b) With respect to Bonds registered in the registration books kept by the Trustee in the name of Cede & Co., as nominee of DTC, the Authority and the Trustee shall have no responsibility or obligation to any DTC participant or to any person on behalf of which a DTC participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the Authority and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC participant or any other Person, other than a Bondholder, as shown in the registration books kept by the Trustee, of any notice with respect to the Bonds, including any notice of redemption, or (iii) the payment to any DTC participant or any other person, other than a Bondholder, as shown in the registration books kept by the Trustee, of any amount with respect to principal of, premium, if any or interest on the Bonds. The Authority and the Trustee shall treat and consider the person in whose name each Bond is registered in the registration books kept by the Trustee as the holder and absolute owner of such Bond for the purpose of payment of principal, premium, if any and interest with respect to such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Trustee shall pay all principal, premium, if any of and interest on the Bonds only to or upon the order of the respective Bondholders, as shown in the registration books kept by the Trustee, or their respective attorneys duly authorized in writing, as provided in Section 3.09 hereof, and all such payments shall be valid and effective to fully satisfy and discharge the Authority's obligations with respect to payment of principal of, premium, if any and interest on the Bonds to the extent of the sum or sums so paid. No person other than a Bondholder, as shown in the registration books kept by the Trustee, shall receive a certificated Bond evidencing the obligation of the Authority to make payments of principal, premium, if any and interest pursuant to this Indenture. Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., the word Cede & Co. in this Indenture shall refer to such new nominee of DTC. (c) (i) DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving notice to the Authority, the Trustee and the Borrower and discharging its responsibilities with respect thereto under applicable law. (ii) The Authority shall, at the request of the Borrower, terminate the services of DTC with respect to the Bonds if the Borrower represents to the Authority that: (A) Bonds, or DTC is unable to discharge its responsibilities with respect to the (B) a continuation of the requirements that the Bonds be registered in the registration books kept by the Trustee in the name of Cede & Co., or any other nominee of DTC, is not in the best interest of the Beneficial Owners. (iii) Upon receipt by the Trustee of written notice from DTC to the effect that DTC is unable or unwilling to discharge its responsibilities set forth herein, the Authority shall issue and the Trustee shall transfer and exchange Bonds as requested in writing by DTC in appropriate amounts and in Authorized Denominations, and whenever DTC requests the Authority and the Trustee to do so, the Trustee and the Authority will, at the expense of the Borrower, cooperate with DTC in taking appropriate action after reasonable notice (A) to arrange for a substitute bond depository willing and able upon reasonable and customary terms to maintain custody of the Bonds or (B) to make available for transfer and exchange Bonds registered in whatever name or names and in whatever Authorized Denominations as DTC shall designate, in accordance with the provisions of this Indenture. Upon discontinuance, for any reason, of DTC s services with respect to the Bonds, DTC shall be responsible for providing a list of the DTC participants (and a contact at each) to the Trustee in order that the DTC participants may provide the Trustee with a list of the Beneficial Owners in order that the Beneficial Owner may receive a certified Bond or notice of the substitute securities depository willing to undertake the functions of DTC as provided in this Indenture. (d) Notwithstanding any other provision of this Indenture to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, in accordance with DTC Regulations. Section 3.07 Maturity Dates of and Interest on the Bonds. (a) The Series 2014A Bonds shall bear interest on the Outstanding principal amount thereof, payable on each Interest Payment Date, at the rates of interest set forth below, and shall mature on May 1 of each year in accordance with the following schedule, unless paid earlier upon redemption or acceleration. Interest shall be computed on the basis of a 360-day year of twelve 30-day months interest shall be paid at the applicable interest rate for any Series 2014A Bond. May 1 of Year Principal Amount Interest Rate $ 3,000,000 18,000, % 7.00 In the event of a Determination of Taxability the interest rate on the Series 2014A Bonds shall increase to the Taxable Rate, retroactively to the date interest on the Series 2014A Bonds first became included in the gross income of the affected Owner for federal income tax purposes. After a Determination of Taxability and upon demand of any Holder or prior Holder of the Bonds, the Authority shall pay to such Holder or prior Holder, but only from amounts provided by the Borrower pursuant to Section 5.19 of the Loan Agreement, such additional amount as shall be necessary to provide that interest on the Series 2014A Bonds shall have been payable at the Taxable Rate from the Date of Taxability. Upon a Determination of Taxability, the Authority shall also pay, but only from amounts provided by the Borrower pursuant to Section 5.19 of the Loan Agreement, to such Holder or to any prior Holder upon demand of such Holder or prior Holder any taxes, interest, penalties or 5 27 B

63 other charges assessed against or payable by such Holder or prior Holder and attributable to such Determination of Taxability and all reasonable administrative, out-of-pocket and other expenses incurred by the such Holder or prior Holder that are attributable to such event, including, without limitation, the costs incurred by such Holder or prior Holder to amend any of its tax returns, notwithstanding the repayment of the entire principal amount of the Bonds or any transfer or assignment of the Bonds. (b) The Series 2014B Bonds shall bear interest on the Outstanding principal amount thereof, payable on each Interest Payment Date, at the rates of interest set forth below, and shall mature on May 1 of each year in accordance with the following schedule, unless paid earlier upon redemption or acceleration. Interest shall be computed on the basis of a 360-day year of twelve 30-day months interest shall be paid at the applicable interest rate for any Series 2014B Bond. May 1 of Year Principal Amount Interest Rate 2017 $ 3,640, % (c) Notwithstanding the foregoing, from and after the occurrence of an Event of Default, until such time as such Event of Default has been remedied or otherwise waived by the Majority Bondholders, the Bonds shall bear interest at the Default Rate. To the extent permitted by law, interest shall accrue on any overdue payment of interest or principal at the Default Rate. Section 3.08 Execution; Authentication of Bonds. (a) The Bonds shall be executed on behalf of the Authority by the manual or facsimile signature of an Authorized Authority Representative and its corporate seal (or a facsimile thereof) shall be thereunto affixed, imprinted, engraved or otherwise reproduced. (b) In case any officer of the Authority whose signature or whose facsimile signature shall appear on any Bonds shall cease to be such officer before the delivery of such Bonds, such signature or such facsimile shall nevertheless be valid and sufficient for all purposes, the same as if such officer had remained in office until such delivery, and also any Bond may be signed by such persons as at the actual time of the execution of such Bond shall be the proper officers to sign such Bond although at the date of such Bond such persons may not have been such officers. (c) No Bond shall be valid or become obligatory for any purpose or shall be entitled to any right or benefit under this Indenture unless there shall be endorsed on such Bond a certificate of authentication in the form set forth in such Bond duly executed by the Trustee, by the manual signature of an authorized signatory thereof, and such certificate of the Trustee upon any Bond executed on behalf of the Authority shall be conclusive evidence that the Bond so authenticated has been duly issued under this Indenture and that the Owner thereof is entitled to the benefits of this Indenture. Section 3.09 Negotiability, Transfer and Registry of Bonds. (a) All the Bonds issued under this Indenture shall be negotiable, subject to the provisions for registration and registration of transfer contained in this Indenture and in the Bonds. So long as this Indenture remains in force, the Trustee, as registrar, shall maintain and keep books for the recordation of the taxpayer identification number of each of the Owners of the Bonds and the registration, registration of transfer and exchange of Bonds. The transfer of each Bond shall be registrable only upon such books of registration. The Trustee is hereby appointed registrar, to act as agent of the Authority for the registration and registration of transfer of Bonds and the maintenance of the books of registration. The Authority may appoint a successor registrar upon notice by mail to the Owners of the Bonds. (b) Subject to Section 3.06 hererof, upon a partial redemption of the Bonds, the Authority shall execute and the Trustee shall authenticate and deliver new Bonds representing the unredeemed portion of the Bonds to be so redeemed in part, in exchange for the Bonds to be so tendered or redeemed in part. Surrender of Bonds for execution, authentication and delivery of new Bonds shall not be a precondition to the partial redemption of Bonds pursuant to Section 4.07 hereof. If a Bond shall be transferred in part, such Bond shall be delivered to the Trustee, and the Trustee shall, on behalf of the Authority, deliver two Bonds in replacement therefor, of the same Series, having the same maturity and interest provisions and in the same aggregate principal amount as the Bond so delivered. (c) Subject to Section 3.06 hererof, upon surrender of the Bonds at the designated corporate trust office of the Trustee with a written instrument of transfer satisfactory to the Trustee, duly executed by the Owner or his attorney duly authorized in writing, such Bonds may, at the option of the Owner thereof, be exchanged for an equal aggregate principal amount of Bonds of the appropriate Series in any other Authorized Denominations. (d) The Borrower shall bear all costs in connection with any registration of transfer or exchange of Bonds, including the fees and expenses of Bond Counsel and the Trustee and of any required indemnity for the Authority and the Trustee; provided that the costs of any tax or other governmental charge imposed upon such transfer or exchange shall be borne by the Owner of each Bond. (e) The Bonds may only be transferred to (i) a Qualified Institutional Buyer, as defined in Rule 144A under the Securities Act of 1933, as amended, or (ii) an Accredited Investor, as defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended, and the Bonds will carry a legend to such effect. (f) The Trustee shall have no responsibility for monitoring the transfer restrictions set forth herein while the Bonds are held in a book-entry only system of registration. Section 3.10 Ownership of Bonds. The Authority, the Trustee and any other person may treat the registered owner of any Bond as the absolute owner thereof, whether such Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal or redemption price of and interest on such Bond and for all other purposes whatsoever, and payment of the principal or redemption price, if any, of and interest on any such Bond shall be made only to, or upon the order of, such registered owner. All such payments to such registered owner shall be valid and effectual to satisfy and discharge the liability of the Authority upon such Bond to the extent of the sum or sums so paid, and neither the Authority nor any Trustee shall be affected by any notice to the contrary. Section 3.11 Payments on Bonds Due on Non-Business Days. In any case where any Bond Payment Date shall be a day other than a Business Day, then payment of the Bonds need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the Bond Payment Date, and no interest shall accrue for the period after such date. Section 3.12 Regulations with Respect to Exchanges and Transfers of Bonds. Subject to Section 3.06 herein, all Bonds surrendered in any exchanges or registration of transfers shall forthwith be canceled. For every such exchange or registration of transfer of Bonds, there shall be made a charge sufficient to pay any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer, which sum or sums shall be paid by the Owner requesting such exchange or registration of transfer as a condition precedent to the exercise of the privilege of making such exchange or registration of transfer. The Trustee shall not be obligated to (i) authenticate, exchange or register the transfer of any Bond during a period beginning at the opening of business 15 days next preceding any selection of Bonds to be redeemed and ending at the close of business on the date of the first giving of notice of such redemption, or (iii) register the transfer of or exchange any Bonds called or being called for redemption in whole or in part. Section 3.13 Issuance of Additional Bonds. No bonds other than the Bonds shall be issued and secured hereunder. Section 4.01 ARTICLE IV. REDEMPTION OF BONDS Optional Redemption. (a) The Series 2014A Bonds will be subject to optional redemption by the Authority, prior to maturity, on or after May 1, 2024, at the direction of the Borrower, in whole at any time, or in part on any Interest Payment Date, out of moneys deposited with or held by the Trustee in the Optional Redemption Account for such purpose, upon payment of a redemption price equal to 100% of the principal amount thereof, plus interest accrued to the date fixed for redemption. (b) The Series 2014B Bonds are not subject to optional redemption by the Authority prior to maturity Section 4.02 Extraordinary Mandatory Redemption. The Bonds shall be subject to extraordinary mandatory redemption, and shall be redeemed prior to maturity, upon a Determination of Taxability, within 180 days of the date of such Determination of Taxability on a date selected by the Borrower, specified in a notice in writing delivered to the Trustee at least forty five (45) days prior to the redemption date. Provided, that if the Borrower fails to give such notice, the Bonds shall be redeemed on the 181st day following the Determination of Taxability. The Series 2014A Bonds being redeemed before maturity in accordance with this section shall be redeemed at a redemption price equal to the principal amount of the Series 2014A Bonds being redeemed, together with accrued interest (at the Taxable Rate to the extent applicable) to the date of redemption. The Series 2014B Bonds being redeemed before maturity in accordance this section shall be redeemed at a redemption price equal to the principal amount of the Series 2014B Bonds being redeemed, together with accrued interest to the date of redemption. Section 4.03 Extraordinary Optional Redemption. If there should occur any event described in Section 7.1 of the Loan Agreement which permits the redemption of the Bonds, the Bonds may, in certain circumstances, and upon the satisfaction of certain conditions, as set forth in Section 7.1 of the Loan Agreement, be subject to redemption at any time in whole or in part at a redemption price equal to the principal amount of the Bonds being redeemed, together with accrued interest to the date of redemption. Section 4.04 Mandatory Sinking Fund Redemption. (a) The Series 2014A Bonds maturing May 1, 2029, will be subject to mandatory sinking fund redemption prior to maturity, on May 1 of the years and in the amounts set forth in the following table, at a redemption price equal to 100% of the principal amount thereof plus interest accrued to the date fixed for redemption: May 1 of Year (Maturity) Amount to be Redeemed $ 1,000,000 70,000 95, , , , , , , , , , ,000 The Series 2014A Bonds maturing May 1, 2040, will be subject to mandatory sinking fund redemption prior to maturity, on May 1 of the years and in the amounts set forth in the following table, at a redemption price equal to 100% of the principal amount thereof plus interest accrued to the date fixed for redemption: May 1 of Year Amount to be Redeemed 2030 $ 1,140, B

64 (Final Maturity) 1,220,000 1,305,000 1,400,000 1,495,000 1,600,000 1,710,000 1,830,000 1,960,000 2,095,000 2,245,000 (b) The Series 2014B Bonds will be subject to mandatory sinking fund redemption prior to maturity, on May 1 of the years and in the amounts set forth in the following table, at a redemption price equal to 100% of the principal amount thereof plus interest accrued to the date fixed for redemption: May 1 of Year (Final Maturity) Amount to be Redeemed $ 600,000 1,000,000 2,040,000 (c) In the event of a partial redemption of Bonds through extraordinary mandatory redemption or optional redemption, future mandatory sinking fund installments will be eliminated or reduced in inverse order of sinking fund installment date. Section 4.05 Purchase in Lieu of Redemption. At the election of the Borrower upon a redemption in whole of the Bonds, if and only if the Borrower obtains a Favorable Opinion of Bond Counsel, by written notice to the Trustee, given not less than forty-five (45) days in advance of the proposed redemption date, the Bonds will be deemed tendered for purchase in lieu of the redemption on such date and will be purchased by funds provided to the Trustee by the Borrower. The purchase price of Bonds so purchased in lieu of redemption shall be the Optional Redemption Price and shall be payable on the date of redemption thereof. Bonds so purchased in lieu of redemption shall be registered to or upon the direction of the Borrower. Section 4.06 Notice of Redemption. (a) Notice of redemption shall be given by the Trustee to the Owners of all Bonds to be redeemed, by mail not less than thirty (30) days prior to the date fixed for redemption, at their addresses appearing on the books of registry. Provided, that the Trustee shall not be required to send out any notice of the redemption of Bonds pursuant to Section or 4.03 hereof unless the Authority (at the Borrower s direction) or the Borrower has provided written direction to the Trustee to give such notice at least fifteen (15) days prior to the date such notice is required to be given, or such lesser period of time as is acceptable to the Trustee in the Trustee s sole discretion. Notice of any redemption must be given either (i) by first class mail by the United States Postal Service, postage prepaid, to the Registered Owner thereof at its address which appear on the registration records of the Trustee on the date of mailing, or (ii) by actual delivery to the Registered Owner or its representatives evidenced by receipt signed by such Owner or the representatives. Receipt of such notice of redemption shall not be a condition precedent to such redemption, and failure so to notify any of such registered Owners shall not affect the validity of the proceedings for the redemption of the Bonds. (b) Any redemption for which notice is given under this Article IV may state that (i) it is conditioned upon the deposit of moneys, in an amount equal to the amount necessary to effect the redemption, with the Trustee or a fiduciary institution acting as escrow agent no later than the redemption date, or (ii) the Authority, on behalf of the Borrower, retains the right to rescind such notice at any time prior to the scheduled redemption date (in either case, a Conditional Redemption ), and such notice and optional redemption shall be of no effect if such moneys are not so deposited or if the notice is rescinded as described in this subsection. Any such notice of Conditional Redemption may be rescinded at any time prior to the redemption date if the Borrower delivers a written direction to the Trustee directing the Trustee to rescind the redemption notice. The Trustee shall give prompt notice of such rescission to the affected Owners in the same manner as notices of redemption are given hereunder. Any Bonds subject to a Conditional Redemption where redemption has been rescinded shall remain Outstanding, and neither the rescission nor the failure by the Borrower to make such funds available shall constitute an Event of Default hereunder. The Trustee shall give prompt notice to the affected Owners that the redemption did not occur and that the Bonds called for redemption and not so paid remain Outstanding. (c) Notice of redemption having been given as provided in subsection (a) or (b) of this section and all conditions precedent, if any, specified in such notice having been satisfied, the Bonds or portions thereof so to be redeemed shall become due and payable on the date fixed for redemption at the redemption price specified therein plus any accrued interest to the redemption date, and upon presentation and surrender thereof at the place specified in such Notice, such Bonds or portions thereof shall be paid at the redemption price, plus any accrued interest to the redemption date. On and after the redemption date (unless funds for the payment of the redemption price and accrued interest shall not have been provided to the Trustee), (i) such Bonds shall cease to bear interest and (ii) such Bonds shall no longer be considered as Outstanding under this Indenture. Section 4.07 Selection of Bonds To Be Redeemed. If fewer than all of the Outstanding Bonds which are stated to mature on different dates are called for redemption at one time, the Borrower shall designate the Series, amounts and those maturities of the Bonds which are to be called. If fewer than all of the Bonds of a single maturity are to be redeemed, the selection of Bonds to be redeemed, or portions thereof in $5,000 or any integral multiple thereof, shall be made by lot by the Trustee; provided that, if less than all of an outstanding Bond of one maturity in a book entry system is to be called for redemption, the Trustee shall give notice to DTC or the nominee of DTC that is the Holder of such Bond, and the selection of the beneficial interests in that Bond to be redeemed shall be at the sole discretion of DTC and its participants. In the case of a partial redemption of Bonds by lot when Bonds of denominations greater than $5,000 are then Outstanding, each $5,000 unit of principal thereof shall be treated as though it were a separate Bond of the denomination of $5,000. If it is determined that one or more, but not all, of the $5,000 units of the outstanding principal amount represented by a Bond are to be called for redemption, upon notice of redemption of a $5,000 unit thereof, the Holder of that Bond shall surrender the Bond to the Trustee (i) for payment of the redemption price of the $5,000 unit called for redemption (including without limitation, premium, if any, and interest accrued to the date fixed for redemption); and (ii) for issuance, without charge to the Holder thereof, of a new Bond or Bonds, of any authorized denomination or denominations in an aggregate principal amount equal to the unmatured and unredeemed principal of, and bearing interest at the same rate and maturing on the same date or dates as, the Bond surrendered Section 4.08 Partial Redemption of Bonds. Subject to Section 3.06 hereof, in case part but not all of a Bond shall be selected for redemption, upon presentation and surrender at the designated corporate trust office of the Trustee of such Bond by the Owner thereof or his attorney duly authorized in writing (with due endorsement for transfer or accompanied by written instrument of transfer in form satisfactory to the Trustee) the Authority shall execute and the Trustee shall authenticate and deliver to or upon the order of such Owner, without charge therefor, for the unredeemed portion of the principal amount of the Bond so surrendered, a Bond or Bonds, at the option of such Owner, of any Authorized Denomination of the same Series, or if less than the minimum Authorized Denomination, an amount necessary to equal the unredeemed portion of the principal amount of the Bond. For all purposes of this Indenture (including exchange and transfer), the Bond so issued in less than a minimum Authorized Denomination shall be deemed to have been issued in an Authorized Denomination. Bonds so presented and surrendered shall be canceled in accordance with this Indenture. Section 6.01 ARTICLE V. RESERVED ARTICLE VI. REVENUE AND FUNDS Source of Payment for Bonds: The Bonds, together with interest thereon, are not general or moral obligations of the Authority but are limited obligations payable solely and only from the Trust Estate, including investments thereof and the proceeds of such investments, if any, but not including moneys in the Rebate Fund or the Costs of Issuance Account of the Project Fund. The Trust Estate with respect to the Bonds, including investments thereof and the proceeds of such investments, if any, but not including moneys on deposit in the Rebate Fund or the Costs of Issuance Account of the Project Fund, are hereby pledged and assigned as security for the payment of the Bonds and shall be used for no other purpose than to pay the principal of and interest on the Bonds, in the order and priority expressly authorized in this Indenture. THE BONDS, THE INTEREST THEREON, AND ANY COSTS INCIDENTAL THERETO ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE TRUST ESTATE, AND DO NOT CONSTITUTE A DEBT OR LIABILITY OF THE AUTHORITY, ANY MEMBER, THE STATE OF WISCONSIN, OR ANY POLITICAL SUBDIVISION THEREOF, OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THE BONDS. THE BONDS DO NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE, IN ANY MANNER, ANY MEMBER, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF, OR ANY POLITICAL SUBDIVISION APPROVING ISSUANCE OF THE BONDS TO LEVY ANY TAX OR TO MAKE ANY APPROPRIATION FOR PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS OR ANY COSTS INCIDENTAL THERETO. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF ANY MEMBER, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THE BONDS, NOR THE FAITH AND CREDIT OF THE AUTHORITY, SHALL BE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON, THE BONDS OR ANY COSTS INCIDENTAL THERETO. THE AUTHORITY HAS NO TAXING POWER. Section 6.02 Section Creation of Funds; Deposit of Revenues. (a) There are hereby created by the Authority and ordered established the following funds to be held by the Trustee: (i) the Project Fund, and therein: (A) a General Account; (B) a Costs of Issuance Account; and (C) an Insurance and Condemnation Proceeds Account; (ii) the Debt Service Fund; and therein: (A) a Principal Account; (B) an Interest Account; (C) a Capitalized Interest Account; and (D) an Optional Redemption Account; (iii) the Revenue Fund; (iv) the Debt Service Reserve Fund; (v) the Redemption Fund; and (vi) the Rebate Fund. (b) All the Funds and Accounts created by subsection (a) of this Section 6.02 shall be held by the Trustee in trust for application only in accordance with the provisions of this 5 35 B

65 Indenture. Each Fund and Account shall be maintained by the Trustee as a separate and distinct trust fund or account to be held, managed, invested, disbursed and administered as provided in this Indenture. All moneys deposited in the Funds and Accounts shall be used solely for the purposes set forth in this Indenture. The Trustee shall keep and maintain adequate records pertaining to each Fund and Account, and all disbursements therefrom. (c) The Trustee shall be entitled to establish other trust funds and accounts as the Trustee shall deem necessary in order to properly administer the Trust Estate. (d) On the Closing Date the proceeds of the sale of the Bonds ($23,900,650) shall be applied as follows: (i) $ of the proceeds of the sale of the Bonds, comprised of $ from the proceeds of the Series 2014A Bonds and $ from the proceeds of the Series 2014B Bonds, shall be deposited in the Costs of Issuance Account of the Project Fund; (ii) $ of the proceeds of the sale of the Bonds, comprised of $ from the proceeds of the Series 2014A Bonds and $ from the proceeds of the Series 2014B Bonds, shall be deposited with U.S. Bank National Association, in its capacity as trustee for the Refunded Bonds, and applied, along with any moneys designated in Section 6.02(e) hereof, to redeem the Refunded Bonds in their entirety; (iii) $ of the proceeds of the sale of the Bonds, comprised of $ from the proceeds of the Series 2014A Bonds and $ from the proceeds of the Series 2014B Bonds, shall be deposited into the Debt Service Reserve Fund. (iv) $ of the proceeds of the sale of the Bonds, comprised of $ from the proceeds of the Series 2014A Bonds and $ from the proceeds of the Series 2014B Bonds, shall be deposited into the General Account of the Project Fund. (v) $ of the proceeds of the sale of the Bonds, comprised of $ from the proceeds of the Series 2014A Bonds and $ from the proceeds of the Series 2014B Bonds, shall be deposited into the Capitalized Interest Account of the Debt Service Fund. (e) Also on the Closing Date, the Authority will direct U.S. Bank National Association to apply moneys held by it in its capacity as trustee under the Refunded Bonds Indenture as follows: (i) $ held in the Debt Service Fund under the Refunded Bonds Indenture shall be applied to redeem the Refunded Bonds. (f) Also on the Closing Date, the Borrower shall pay, from its own funds, all costs of issuance of the Bonds not paid out of the moneys deposited into the Costs of Issuance Account. Section 6.03 Project Fund. (a) The amounts specified in Section 6.02(d)(iv) hereof shall be deposited in the General Account of the Project Fund. All condemnation awards and insurance proceeds if and when received shall be deposited in an account to be created and known as the Insurance and Condemnation Proceeds Account of the Project Fund. Any other funds directed by the Authority to be deposited in the Project Fund which are not required to be otherwise deposited or disbursed shall be so deposited by the Trustee upon receipt of funds and such direction. (b) Subject to Section 3.6 of the Loan Agreement, funds in the General Account of the Project Fund shall be disbursed by the Trustee for Costs of the Project upon receipt of a properly completed Requisition executed by the Borrower. Condemnation awards and insurance proceeds to be used for construction or repair to the Facility shall be disbursed pursuant to a Requisition submitted by Borrower. The Borrower may submit one (1) Requisition per calendar month. The Trustee shall endeavor to pay the initial Requisitions on the Closing Date or as soon as possible thereafter, and to pay all future Requisitions within ten (10) calendar days of receipt. (c) Any funds remaining in the General Account of the Project Fund upon completion of the Project shall be transferred to the Debt Service Fund for the payment of the Bonds on the next succeeding Interest Payment Date(s), with such moneys being used first to pay interest on the Series 2014A Bonds, next to pay principal on the Series 2014A Bonds, next to pay interest on the Series 2014B Bonds, and next to pay principal on the Series 2014B Bonds. Provided, however, that such moneys may be used by the Borrower for any lawful purpose for which it receives an Opinion of Bond Counsel to the effect that such use will not adversely affect the exclusion of the interest on the Series 2014A Bonds from gross income for federal income tax purposes. Section 6.04 Use of Moneys in the Costs of Issuance Account. (a) The amounts specified in Section 6.02(d)(i) shall be deposited in the Costs of Issuance Account of the Project Fund. (b) Moneys in the Costs of Issuance Account of the Project Fund shall be used to pay Costs of Issuance. (c) The Trustee shall disburse funds in the Costs of Issuance Account upon receipt of a properly completed and executed Requisition from Borrower on the Closing Date or within ten (10) calendar days of receipt thereafter. (d) Ninety (90) days after the Closing Date, the Costs of Issuance Account shall be dissolved and any funds remaining in the Costs of Issuance Account, including interest earnings thereon, shall be transferred to the General Account of the Project Fund. Section 6.05 Use of Moneys in the Insurance and Condemnation Proceeds Account. (a) The Trustee shall administer the Insurance and Condemnation Proceeds Account as provided in this Section and in accordance with the Loan Agreement (b) If the amount of net proceeds which is deposited into the Insurance and Condemnation Proceeds Account is sufficient for the necessary repair and/or replacement of the Facility, as certified in writing to the Borrower and the Trustee by an Independent Architect or an Independent Engineer, the Trustee shall disburse amounts from the Insurance and Condemnation Proceeds Account for such purpose upon receipt of a Requisition requesting disbursement from the Insurance and Condemnation Proceeds Account. (c) If the amount of net proceeds which is deposited into the Insurance and Condemnation Proceeds Account is insufficient for the necessary repair and/or replacement of the Facility, the Borrower may, within 45 days of the date of the initial deposit of net proceeds or condemnation award, deposit into the Insurance and Condemnation Proceeds Account the amount needed for the completion of all necessary repair and/or replacement of the Facility, as certified in writing to the Borrower and the Trustee by an Independent Architect or an Independent Engineer. Upon such deposit, the Trustee shall disburse amounts from the Insurance and Condemnation Proceeds Account for such purpose upon receipt of a Requisition requesting disbursement from the Insurance and Condemnation Proceeds Account. (d) If the amount of net proceeds deposited into the Insurance and Condemnation Proceeds Account is insufficient for the complete repair and/or replacement of the Facility as certified in writing to the Borrower and the Trustee by an Independent Architect or an Independent Engineer licensed, and the Borrower does not, within 45 days of the date of such deposit of net proceeds or condemnation award, deposit into the Insurance and Condemnation Proceeds Account the amount needed to complete the repair and/or replacement of the Facility, the Trustee shall transfer the entire amount on deposit in the Insurance and Condemnation Account into the Redemption Fund. Such amount shall be utilized for the redemption of Bonds pursuant to Section 4.03 hereof. (e) If the amounts on deposit in the Insurance and Condemnation Proceeds Account are proposed to be used for purposes other than the then current use of the Facility, or are proposed to be used at a different location than the then current location of the Facility, the Borrower shall provide the Trustee with an opinion of Bond Counsel to the effect that such use of such proceeds will not adversely affect the excludability of interest on the Series 2014A Bonds from gross income for federal tax purposes. Section 6.06 Debt Service Fund. (a) The Trustee shall deposit in the Debt Service Fund when and as received; (i) all amounts transferred from the Revenue Fund for debt service pursuant to Section 4.2(a), 4.2(b) and 7.2(a) of the Loan Agreement; (ii) all amounts transferred from the General Account of the Project Fund pursuant to Section 6.03(c) hereof; (iii) all amounts transferred from the Debt Service Reserve Fund pursuant to Section 6.08 hereof; (iv) the amounts specified in Section 6.02(d)(v) hereof, for deposit to the Capitalized Interest Account; and (v) any additional security to be deposited in the Debt Service Fund or any other amounts received by the Trustee that are subject to the lien and pledge of the Indenture with respect to the Bonds. (b) All amounts deposited in the Debt Service Fund shall be applied accordingly: (i) Principal Account. The Trustee shall deposit into the Principal Account an amount which, together with the amount then on deposit in the Principal Account, is sufficient to pay the principal installment becoming due and payable on the Bonds on the next Interest Payment Date, whether upon the maturity of Bonds or upon earlier redemption. (ii) Interest Account. The Trustee shall deposit into the Interest Account all amounts received by the Trustee pursuant to Section 4.2(a) of the Loan Agreement. (iii) Capitalized Interest Account. The Trustee shall deposit into the Interest Account all amounts received by the Trustee pursuant to Section 6.06(a)(iv) above. Such amounts shall be used to pay the interest on the Bonds through July 1, (iv) Optional Redemption Account. The Trustee shall deposit into the Optional Redemption Account all amounts received by the Trustee pursuant to Section 7.2(a) of the Loan Agreement. Section 6.07 Revenue Fund. (a) There shall be deposited in the Revenue Fund all revenues received by the Trustee for such purpose, including (i) all amounts paid to the Trustee under the Loan Agreement, (ii) all other amounts required to be so deposited pursuant to the terms hereof, including investment earnings thereon, (iii) any amounts derived from the Loan Agreement to be applied to payment of amounts intended to be paid from the Revenue Fund, (iv) all Loan Payments, and (v) such other money as is delivered to the Trustee by or on behalf of the Borrower with directions for deposit of such money in the Revenue Fund. (b) of priority: Money on deposit in the Revenue Fund shall be disbursed in the following order (i) to the payment of the amounts, at the times and in the order of priority, set forth in Section 4.2 (a) through (f) of the Loan Agreement; (ii) RESERVED; and (iii) To the extent not paid pursuant to Section 4.2(e) of the Loan Agreement, to the payment of any other properly documented expenses not yet paid, including the Authority s Administrative Fee, Trustee Expenses, and any unpaid Rebate Analyst Fees, and for any other purpose which is to be paid from the Revenue Fund B

66 Section 6.08 Debt Service Reserve Fund. (a) There shall be deposited in the Debt Service Reserve Fund (i) the initial deposits provided in Section 6.02(d)(iii) hereof, (ii) moneys transferred from the Revenue Fund pursuant to Section 6.07 hereof, (iii) moneys paid by the Borrower pursuant to the Loan Agreement for deposit into the Debt Service Reserve Fund and (iv) any other moneys received by the Trustee with directions to deposit the same in the Debt Service Reserve Fund. (b) Amounts on deposit in the Debt Service Reserve Fund shall be used to pay the principal of and interest on the Bonds when due, on any Interest Payment Date to the extent moneys on deposit in the Debt Service Fund are insufficient for such purpose. (c) Moneys on deposit in the Debt Service Reserve Fund shall be transferred to the Principal Account for the purpose of paying the last maturing principal of the Bonds, or if all the Bonds are being redeemed, to the Optional Redemption Account for redemption of such Bonds, or if less than all of the Bonds are being redeemed and as a result of such refunding the amount on deposit in the Debt Service Reserve Fund will exceed the Debt Service Reserve Fund Requirement, such amounts on deposit in the Debt Service Reserve Fund in excess of the Debt Service Reserve Fund Requirement shall be transferred to the Redemption Account. (d) If the amount on deposit in the Debt Service Reserve Fund exceeds the Debt Service Reserve Fund Requirement, such amounts on deposit in the Debt Service Reserve Fund in excess of the Debt Service Reserve Fund Requirement shall be transferred to the Revenue Fund. (e) All interest income derived from the investment of amounts on deposit in the Debt Service Reserve Fund shall be retained in the Debt Service Reserve Fund to the extent that the amount on deposit therein is less than the Debt Service Reserve Fund Requirement, and thereafter shall be deposited into the Revenue Fund on the Business Day after each Interest Payment Date. The Trustee shall value the Debt Service Reserve Fund as of each Interest Payment Date at the lesser of market value or cost. Section 6.09 Redemption Fund. The Trustee shall deposit into the Redemption Fund all amounts transferred from the applicable Fund / Account attributable to the receipt by the Trustee of payments by the Borrower which have been designated by the Borrower to be used for redemption of the Bonds, including payments representing (i) casualty insurance proceeds or condemnation awards following a partial or total destruction or condemnation of the Facility (or transfer of title under threat of condemnation); (ii) other amounts received upon the occurrence of an event of default; (iii) prepayments on the Bonds made without notice; or (iv) any other reason other than for an optional redemption or mandatory sinking fund redemption of the Bonds. The Trustee shall use such amounts, as soon as practicable after each such deposit. Section 6.10 Rebate Fund. The Rebate Fund will be separate from any other fund established and maintained under the Indenture or under any laws governing the creation and use of funds by the Authority. There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to this Indenture. Money deposited in the Rebate Fund shall be held by the Trustee in trust without investment for payment to the federal government for the United States of America, and neither the Authority nor the Owners of the Bonds shall have any rights in or claim to such money. Unless the Borrower has met one of the exceptions to arbitrage rebate contained in section 148 of the Code (as certified in writing to the Trustee by an Authorized Borrower Representative), the Borrower shall retain a Rebate Analyst, and shall pay the Rebate Analyst Fee and any fees and expenses in excess of the Rebate Analyst Fee and the following provisions shall apply: Pursuant to Section 5.14(h) of the Loan Agreement, on or prior to each Computation Date, the Borrower shall cause the Rebate Analyst to compute, and deliver to the Trustee written notice of and direction regarding the amount of any transfer or deposit to the Rebate Fund (or, if there has been negative arbitrage in any Fund or Account other than the Rebate Fund, the amount of any withdrawal from the Rebate Fund) which is necessary to cause the aggregate amount transferred to or otherwise deposited in such Fund to equal the Rebate Amount. If a deposit to the Rebate Fund is required in accordance with the written direction of the Rebate Analyst, the Borrower shall pay such amount and upon receipt of such amount from the Borrower, the Trustee shall deposit it in the Rebate Fund for the benefit of the Authority. If the computations of the Rebate Analyst show that a withdrawal may be made from the Rebate Fund on account of negative arbitrage, the Trustee shall, upon receipt of a Favorable Opinion of Bond Counsel to the effect that such withdrawal will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Series 2014A Bonds, and in accordance with the written directions of the Borrower and the Rebate Analyst, withdraw such amount from the Rebate Fund and transfer such amount to the Revenue Fund. Records of the actions required to be taken by the Trustee by this Section must be retained by the Trustee until six (6) years after the last Series 2014A Bond is no longer Outstanding. Not later than fifty-five (55) days after each Computation Date, the Trustee shall, at the written direction of the Rebate Analyst, pay to the United States government the amount specified to the Trustee in writing by the Rebate Analyst as required to be rebated to the United States from funds on deposit in the Rebate Fund or from funds provided by the Borrower. Not later than the date of the final retirement of the Series 2014A Bonds, the Rebate Analyst shall specify in writing to the Trustee and the Borrower the amount required to be rebated to the United States Treasury, whereupon the Borrower shall deposit with the Trustee pursuant to Section 5.14(h) of the Loan Agreement such amount, if any, as is necessary to bring the balance in the Rebate Fund to the required level and, upon receipt of such funds from the Borrower, the Trustee shall pay to the United States Treasury 100% of the balance remaining in the Rebate Fund; provided that such final payment shall be made no later than fifty-five (55) days after the final retirement of the Series 2014A Bonds. Each payment required to be paid to the United States Treasury pursuant to this Section shall be filed with the then appropriate Internal Revenue Service Center as determined by the Borrower. Each payment shall be accompanied by a copy of the IRS Form 8038 completed as of the Closing Date and filed with the IRS with respect to the Series 2014A Bonds and a statement or computation prepared by the Rebate Analyst and furnished to the Trustee by the Borrower summarizing the determination of the amount to be paid to the United States Treasury. The Trustee may conclusively rely on all certifications and computations received from the Rebate Analyst. The requirements of this Section shall be amended or supplemented as may be required or permitted, in the opinion of Bond Counsel addressed and delivered to the Authority, the Trustee and the Borrower, in order to comply with section 148 of the Code and the Regulations. Section 6.11 Money to be Held in Trust. All money required to be deposited with or paid to the Trustee for account of any fund established under any provision of this Indenture shall be held by the Trustee in trust, and, except for (a) the Rebate Fund, (b) money deposited with or paid to the Trustee for the redemption of Bonds, notice of the redemption of which has been duly given, and (c) the moneys held in the Costs of Issuance Account, shall, while held by the Trustee, constitute part of the Trust Estate and be subject to the security interest created hereby. Section 6.12 Amounts Remaining in Funds. After full payment (or provision for payment) of the Bonds and the Rebate Amount and discharge of this Indenture, payment of the Trustee Expenses (and the fees of counsel to the Trustee) and the charges, expenses of the Trustee and the Authority, and all other amounts required to be paid hereunder, all amounts thereafter remaining in any fund shall be paid to the Borrower. Section 6.13 Tax Covenants. (a) Authority s Covenants. The Authority covenants and agrees that until the final maturity of the Series 2014A Bonds, based upon the Borrower's covenants in Section 5.14 of the Loan Agreement, it will not knowingly use any money on deposit in any fund or account maintained in connection with the Series 2014A Bonds, whether or not such money was derived from the proceeds of the sale of the Series 2014A Bonds or from any other source, in a manner that would cause the Series 2014A Bonds to be arbitrage bonds, within the meaning of Section 148 of the Code. In the event the Borrower notifies the Authority that it is necessary to restrict or limit the yield on the investment of moneys held by the Trustee pursuant to this Indenture, or to use such moneys in any certain manner to avoid the Series 2014A Bonds being considered arbitrage bonds, the Borrower shall deliver to the Trustee a written order containing appropriate instructions, in which event the Trustee shall, at the Borrower s sole expense, take such action as so directed by the Authority to restrict or limit the yield on such investment or to use such moneys in accordance with such order. The Authority shall not knowingly use or knowingly permit the use of any proceeds of the Series 2014A Bonds or any other funds of the Authority within its control, directly or indirectly, in any manner, and shall not knowingly take or knowingly permit to be taken any other action or actions which would result in any of the Series 2014A Bonds being treated other than as an obligation described in Section 103(a) of the Code. The Authority will not knowingly take any action which would result in any of the Series 2014A Bonds being treated as federally guaranteed within the meaning of Section 149(b) (2) of the Code. For purposes of this Section 6.13(a) the Authority s compliance shall be based solely on matters within the Authority's control and no acts, omissions or directions of the Borrower, the Trustee or any other Persons shall be attributed to the Authority. Unless a Favorable Opinion of Bond Counsel is rendered, the Authority hereby covenants that it will request the Borrower to: (i) expend all proceeds of the Series 2014A Bonds and the investment income thereon (excluding amounts in the Rebate Fund) within three (3) years of the Closing Date; and (ii) make the payments (but only from the sources and subject to the limitations described in Section 6.08 hereof), if any, required to be made to the United States pursuant to the Code in order to establish or maintain the exclusion from gross income of interest on the Series 2014A Bonds for purposes of federal income taxation. In this regard, the Authority will cause the Borrower to maintain books and records complying with any related requirements of the Code. Any Authorized Signatory is authorized and directed to provide certifications of facts and estimates that are material to the reasonable expectations of the Authority as of the date of delivery of the Series 2014A Bonds. In complying with the foregoing covenants, the Authority may rely from time to time upon an opinion of Bond Counsel to the effect that any action by the Authority or reliance upon any interpretation of the Code or the Regulations contained in such opinion will not cause interest on the Bonds to be includable in gross income for federal income tax purposes under existing law. (b) Trustee s Covenants. The Trustee agrees that it will invest funds held under this Indenture as may be instructed by the Authorized Borrower Representative in writing in accordance with Section 6.17 hereof in Investment Securities. The Trustee shall have no liability for investments which would cause the Series 2014A Bonds to be classified as arbitrage bonds within the meaning of Sections 103(b) and 148 of the Code or would cause the interest on the Bonds to be includable in gross income for federal income tax purposes, so long as the Trustee follows the written directions of the Borrower, the Authority or the Rebate Analyst or invests in the investments described in this Section. The Trustee further covenants that should the Authority or the Borrower file with the Trustee (it being understood that neither the Authority nor the Borrower has an obligation to so file), or should the Trustee receive, an opinion of Bond Counsel to the effect that any proposed investment or other use of proceeds of the Series 2014A Bonds would cause the Series 2014A Bonds to become arbitrage bonds, then the Trustee will, to the extent within its control, comply with any written instructions of the Borrower or Bond Counsel regarding such investment or use so as to prevent the Series 2014A Bonds from becoming arbitrage bonds, and the Trustee will bear no liability to the Authority, the Borrower or the Owners for investments or use made in accordance with such instructions. (c) To the extent that published rulings of the Internal Revenue Service, or amendments to the Code or the Regulations require modification of the covenants of the Authority or the Trustee which are set forth in this Indenture or which are necessary for interest on the Series 2014A Bonds to be excludable from gross income for federal income tax purposes, the Trustee and the Authority will, to the extent within their control, solely at the Borrower s expense and, in the case of the Trustee, subject to Article VIII hereof, comply with such modifications upon the direction of Bond Counsel specifying such modification. Section 6.14 Records. The Trustee shall keep and maintain adequate records pertaining to the funds and accounts established hereunder, including all deposits to and disbursements from said funds and accounts. The Trustee shall retain in its possession for six (6) years after the 5 43 B

67 Bonds have been paid in full all certifications and other documents presented to it, all such records and all records of principal, interest and premium paid on the Bonds, subject to the inspection of the Borrower, the Authority and the Owners of the Bonds and their representatives at all reasonable times and upon reasonable prior notice. Section 6.15 Reports From the Trustee. The Trustee shall, on or before the tenth (10th) day of each month file with the Borrower and the Underwriter a statement setting forth in respect to the preceding calendar month: (a) the amount withdrawn or transferred by it and the amount deposited within or on account of each Fund and Account held by it under the provisions of this Indenture, including the amount of investment income on each Fund and Account; (b) the amount on deposit with it at the end of such month to the credit of each Fund and Account; (c) a brief description of all obligations held by it as an investment of moneys in each such Fund and Account; (d) the amount applied to the purchase or redemption of Bonds; and (e) any other information which the Borrower may reasonably request and to which the Trustee has access in the ordinary course of its operations. Upon the written request of any Owner or Owners of twenty-five percent (25%) or more in aggregate principal amount of Bonds then Outstanding, the Trustee, at the cost of the Borrower, shall provide a copy of such statement to such Owners. All records and files pertaining to the Trust Estate shall be open at all reasonable times to the inspection of the Majority Bondholders and their agents and representatives upon reasonable prior notice. Section 6.16 Nonpresentment of Bonds. In the event any Bond shall not be presented for payment when the principal thereof becomes due, either at maturity or otherwise, or at the date fixed for redemption thereof, if funds sufficient to pay such Bond shall have been made available to the Trustee, all liability of the Authority to the owner thereof for the payment of such Bond, shall forthwith terminate and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such funds in trust, without liability for interest thereon, for the benefit of the owner of such Bond, who shall thereafter be restricted exclusively to such funds for any claim of whatever nature on his part under this Indenture or on or with respect to said Bond. If any Bond shall not be presented for payment within four years following the date when such Bond becomes due, whether by maturity or otherwise, the Trustee shall, at the request of the Borrower, repay to the Borrower the funds theretofore held by it for payment of such Bond, and such Bond shall, subject to the defense of any applicable statute of limitation, thereafter be an unsecured obligation of the Borrower and the owner thereof shall be entitled to look only to the Borrower for payment, and then only to the extent of the amount so repaid, and the Borrower shall not be liable for any interest thereon and shall not be regarded as a trustee of such money. Section 6.17 Investment of Monies. Moneys held in each of the funds and accounts under this Indenture shall be invested and reinvested by the Trustee at the written direction of an Authorized Borrower Representative (or, after the occurrence of and during the continuation of an Event of Default, at the written direction of the Majority Bondholders) in accordance with the provisions of this Indenture in Investment Securities which mature or are subject to redemption by the owner thereof prior to the date such funds are expected to be needed. The Trustee may make any investments permitted by the provisions of this Section through its own bond department or short-term investment department and may pool moneys for investment purposes. Any such Investment Securities shall be held by or under the control of the Trustee and shall be deemed at all times a part of the fund or account in which such moneys are originally held. The interest accruing on each fund or account and any profit realized from such Investment Securities (other than the Debt Service Reserve Fund and any amounts required to be deposited in the Rebate Fund hereof and other than interest accrued on amounts in the Costs of Issuance Account of the Project Fund, which shall be transferred to the Revenue Fund) shall be credited to such fund or account, and any loss resulting from such Investment Securities shall be charged to such fund or account. The Trustee shall sell or present for redemption and reduce to cash a sufficient amount of such Investment Securities whenever it shall be necessary to provide moneys in any fund or account for the purposes of such fund or account and the Trustee shall not be liable for any loss resulting from such investments. To the extent that the Trustee has not received written instructions from the Borrower regarding investment of moneys, the Trustee shall invest such moneys pursuant to standing written instructions delivered to the Trustee by the Authorized Borrower Representative upon the original issuance of the Bonds, as such instructions may be amended from time to time. The Trustee shall not be responsible for any losses or the tax consequences on investments made in accordance with this Section. Section 6.18 Security Advice Waiver. The Authority and the Borrower acknowledge that regulations of the Comptroller of the Currency grant the Authority and the Borrower the right to receive brokerage confirmations of security transactions as they occur. The Authority and the Borrower specifically waive receipt of such confirmations to the extent permitted by law and acknowledge that they will receive periodic cash transactions statements, which will detail all investment transactions made by the Trustee hereunder. ARTICLE VII. DEFAULT PROVISIONS; REMEDIES Section 7.01 Events of Default. Each of the following events is hereby declared an Event of Default under this Indenture: (a) The failure to pay any installment of principal or the redemption price of any Bond when and as the same shall become due and payable, whether at maturity or by call for redemption or otherwise; (b) The failure to pay any installment of interest on any Bond when and as the same shall become due and payable; (c) The failure by the Authority to perform or observe any other covenant, agreement or condition on its part contained in this Indenture or in the Bonds, and such failure shall continue for a period of sixty (60) days after written notice thereof to the Authority by the Trustee or by the Owners of not less than twenty-five percent (25%) in principal amount of the Bonds Outstanding (with a copy to the Trustee); and (d) Section 7.02 An Event of Default shall have occurred under any of the Loan Documents. Acceleration; Annulment of Acceleration. (a) Except as otherwise provided in this Article, and except for the Authority s right to enforce its Authority s Unassigned Rights by an action for specific performance, actions to be taken in respect of an Event of Default shall be directed in writing by the Majority Bondholders. (b) Upon the occurrence and during the continuance of an Event of Default, the Trustee, if so directed in writing by the Majority Bondholders, shall declare all Bonds Outstanding immediately due and payable; then such Bonds shall become and be immediately due and payable, anything in the Bonds or in this Indenture to the contrary notwithstanding. In such event, there shall be due and payable on the Bonds an amount equal to the total principal amount of all such Bonds, plus all interest accrued thereon and which will accrue thereon to the date of payment and all unpaid interest on the Bonds on the date of payment. (c) At any time after the principal of the Bonds shall have been so declared to be due and payable and before the entry of final judgment or decree in any suit, action or proceeding instituted on account of such default, or before the completion of the enforcement of any other remedy under this Indenture, the Trustee, if so directed in writing by the Majority Bondholders, shall annul such declaration and its consequences with respect to any Bonds not then due by their terms. In such event, the Authority, the Borrower, the Trustee and all of the Owners shall be restored to the same position as before the occurrence of the Event of Default. No such annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon. Section 7.03 Additional Remedies and Enforcement of Remedies. Upon the occurrence and continuation of any Event of Default, the Trustee, if and to the extent directed in writing by the Majority Bondholders, may proceed forthwith to protect and enforce its rights and the rights of the Owners under the Act, the Bonds and this Indenture by such suits, actions or proceedings as the Majority Bondholders, in their sole discretion, shall deem expedient. Section 7.04 Application of Revenues and Other Moneys After Default. (a) If an Event of Default shall occur and shall not have been remedied within thirty (30) days, the Trustee shall transfer to the Revenue Fund (i) forthwith, all moneys and securities then held in any other Fund or Account under this Indenture other than amounts held in the Rebate Fund and the Costs of Issuance Account and (ii) as promptly as practicable after receipt thereof, all revenues and other payments or receipts pledged under this Indenture and all proceeds realized as a result of remedial action under the Loan Documents. (b) During the continuation of an Event of Default, the Trustee shall apply such moneys, securities, revenues, payments and receipts and the income therefrom as follows and in the following order: (i) To the payment of Trustee Expenses; (ii) To the payment of the interest and principal installments or redemption price then due and payable on the Bonds, as follows: (A) Unless the principal of all of the Bonds shall have become or have been declared due and payable; First: To the payment to the persons entitled thereto of all installments of interest then due and payable in the order of the maturity of such installments, with interest on such installments of interest, to the extent permitted by law, at the rate of such interest from the respective dates upon which such installments became due and payable, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, together with interest thereon, first, to the extent permitted by law, of the interest on such installment, ratably, according to the amount of such interest due on such date, and then to the payment thereof ratably, according to the amounts due thereon to the persons entitled thereto, without any discrimination or preference, except as to any difference in the respective rates of interest specified in the Bonds; and Second: To the payment to the persons entitled thereto of the unpaid principal installments or redemption price of any Bonds which shall have become due and payable, whether at maturity or by call for redemption (other than Bonds deemed to have been paid in accordance with Article X hereof), in the order of their due dates with interest on the principal amount of such Bonds at the respective rates specified therein from the respective dates upon which such Bonds became due and payable and if the amounts available shall not be sufficient to pay in full all the Bonds due and payable on any date, together with such interest, then to the payment first of such interest, ratably, according to the amount of such interest due on such date, and then to the payment of such principal and premium, if any, thereof ratably, according to the amounts of principal installments or redemption price due on such date, to the persons entitled thereto, without any discrimination or preference, except as to any difference in the respective rates of interest specified in the Bonds. (B) If the principal of all of the Bonds shall have become or have been declared due and payable, to the payment of the principal and interest (including, to the extent permitted by law, interest on any overdue installment of principal) then due and unpaid upon the Bonds without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the 5 47 B

68 persons entitled thereto without any discrimination or preference (except as to any difference as to the respective rates of interest specified in the Bonds); and (iii) To the payment of the amounts required to reimburse the Owners of the Bonds and the Authority for any legal or other out of pocket costs incurred by them and attributable to the enforcement of this Indenture, the Bonds and the Loan Agreement. (iv) Notwithstanding anything contained herein to the contrary, the Majority Bondholders may by written notice to the Trustee direct the application of funds other than in the manner set forth above (except that the priority of payment of Trustee's and Authority s fees and expenses shall not be altered), including, without limitation, the application of funds between the principal of or interest on the Bonds. Any such determination by the Majority Bondholders shall be deemed conclusive, and the Authority and the Trustee shall have no liability for the tax consequences of said determination. (c) Upon an Event of Default, the Trustee shall have a first lien with right of payment prior to payment on account of principal of and premium, if any, and interest on any Bond, upon the Trust Estate for any fees, charges and expenses incurred by it. When the Trustee incurs expenses or renders services after the occurrence of an Event of Default, such expenses and the compensation for such services are intended to constitute expenses of administration under any federal or state bankruptcy, insolvency, arrangement, moratorium, reorganization or other debtor relief law. Section 7.05 Remedies Not Exclusive. No remedy by the terms of this Indenture conferred upon or reserved to the Trustee or the Owners of the Bonds is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Indenture or existing at law or in equity or by statute (including the Act) on or after the date of adoption of this Indenture. Section 7.06 Remedies Vested in Trustee and Majority Bondholders. All rights of action (including the right to file proof of claims) under this Indenture or under any of the Bonds may be enforced by the Trustee (at the direction of the Majority Bondholders) or the Majority Bondholders without the possession of any of the Bonds or the production thereof in any trial or other proceedings relating thereto. Subject to the rights of the Majority Bondholders to direct proceedings hereunder, any such suit or proceeding instituted by the Trustee shall be brought in its name under the authority herein granted without the necessity of joining as plaintiffs or defendants any Owners of the Bonds. Any recovery of judgment shall be for the equal benefit of the Owners of the Outstanding Bonds. Section 7.07 Individual Bond Owners Action Restricted. (a) No Owner of any Bond other than the Majority Bondholders, shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of this Indenture or for the execution of any trust under this Indenture or for any remedy under this Indenture. (b) Nothing contained in this Indenture, however, shall affect or impair, or be construed to affect or impair, the right of the Owner of any Bond (i) to receive payment of the principal of or interest on such Bond on or after the due date thereof or (ii) to institute suit for the enforcement of any such payment on or after such due date; provided, however, no Owner of any Bond may institute or prosecute any such suit or enter judgment therein, if, and to the extent that, the institution or prosecution of such suit or the entry of judgment therein, under applicable law, would result in the surrender, impairment, waiver or loss of the lien of this Indenture on the moneys, funds and properties pledged under this Indenture for the equal and ratable benefit of all Owners of the Bonds appertaining thereto. Section 7.08 Termination of Proceedings. In case any proceeding taken by the Majority Bondholders or by the Trustee at the written direction of the Majority Bondholders on account of any Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Owners of the Bonds, the Authority, the Trustee, the Borrower and the Owners of the Bonds shall be restored to their former positions and rights under this Indenture, and all rights, remedies and powers of the such parties shall continue as if no such proceeding had been taken Section 7.09 Waiver and Non-Waiver of Event of Default. (a) No delay or omission of the Trustee, or the Owners of the Bonds to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein. Every power and remedy given by this Article VII to any party may be exercised from time to time and as often as may be deemed expedient. (b) In case of any waiver by the Trustee, acting upon the written direction of the Majority Bondholders, of an Event of Default under this Indenture, the Authority, the Trustee and the Owners of the Bonds shall be restored to their former positions and rights under this Indenture, respectively, but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon. Section 7.10 Majority Bondholders Control Proceedings. If an Event of Default shall have occurred and be continuing, notwithstanding anything in this Indenture to the contrary other than for the ability of the Authority to enforce its Authority s Unassigned Rights by an action for specific performance, the Majority Bondholders shall have the right, at any time, by an instrument in writing executed and delivered to the Trustee, to direct the method and place of conducting any proceedings to be taken in connection with the enforcement of the terms and conditions of this Indenture or any other proceedings under this Indenture; provided, however, that such direction is in accordance with law and the provisions of this Indenture; provided that nothing in this Section 7.10 shall impair the right of the Trustee in its discretion to take any other action under this Indenture which it may deem proper and which is not inconsistent with such direction by the Majority Bondholders. Section 7.11 Interest on Unpaid Amounts and Default Rate for Nonpayment. In the event that principal, redemption premium or interest payable on the Bonds is not paid when due, there shall be payable on the amount not timely paid, on each Interest Payment Date, interest at the Default Rate, to the extent permitted by law. This interest shall accrue at the Default Rate until the unpaid amount, together with interest thereon, shall have been paid in full Section 7.12 No Obligation to Enforce Assigned Rights. Notwithstanding anything to the contrary in this Indenture, the Authority shall have no obligation to and instead the Trustee may (at the direction of the Majority Bondholders), without further direction from the Authority, take any and all steps, actions and proceedings, to enforce any or all rights of the Authority under this Indenture and the Loan Agreement (other than the Unassigned Rights), including, without limitation, the rights to enforce the remedies upon the occurrence and continuation of an Event of Default and the obligations of the Borrower under the Loan Agreement. Section 7.13 No Impairment of Ability to Enforce Unassigned Rights. No provision of this Indenture or the Loan Agreement shall be deemed or construed as limiting or impairing in any way the Authority s right to enforce the Unassigned Rights, or any Authority Indemnified Party to enforce his, her or its rights under this Indenture or the Loan Agreement (including, without limitation, the rights to indemnification or exculpation from personal liability) notwithstanding the existence or continuance of a default or Event of Default, the pendency of any enforcement proceeding by the Trustee or the Owners, and notwithstanding the waiver by the Trustee or the Owners of any default or Event of Default hereunder or thereunder. Section 8.01 ARTICLE VIII. CONCERNING THE TRUSTEE Trustee; Appointment and Acceptance of Duties. (a) The Authority hereby appoints U.S. Bank National Association as trustee hereunder. The Trustee shall signify its acceptance of the duties and obligations imposed upon it by this Indenture by executing this Indenture. (b) Unless otherwise provided, the designated corporate trust office of the Trustee is designated as the respective offices or agencies of the Trustee for the authentication and delivery of Bonds. Section 8.02 Responsibilities of Trustee. (a) The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent corporate indenture trustee would exercise or use under similar circumstances. (b) The Trustee may execute any of the trusts hereof or powers hereunder and perform any of its duties by or through attorneys, agents, receivers or employees but shall be answerable for the conduct of the same in accordance with the standards specified above and in subsection (g) of this Section, and shall be entitled to act upon an opinion of counsel concerning all matters of the trust hereof and its duties hereunder, and may in all cases pay such reasonable compensation to all such attorneys, agents, receivers and employees as may reasonably be employed in connection with the trusts hereof. The Trustee may act upon an opinion of counsel and shall not be responsible for any loss or damage resulting from any action or nonaction taken by or omitted to be taken in good faith in reliance upon such opinion of counsel. (c) The Trustee shall not be responsible for any recital herein or in the Bonds (except in respect to the certificate of authentication of the Trustee endorsed on the Bonds), or for insuring the Facility or collecting any insurance moneys or for the validity of the execution by the Authority of this Indenture or of any supplements hereto or instruments of further assurance, or for the sufficiency of the security for the Bonds issued hereunder or intended to be secured hereby, or for the value of or title to the Facility, and the Trustee shall not be bound to ascertain or inquire as to the performance or observance of any covenants, conditions or agreements on the part of the Authority, or on the part of the Borrower, except as hereinafter set forth; but the Trustee may require of the Borrower full information and advice as to the performance of the covenants, conditions and agreements as to the condition of the Facility contained herein or in the Loan Agreement. The Trustee shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with Section 6.17 hereof. (d) The Trustee shall not be accountable for the use of any Bonds authenticated or delivered hereunder. The Trustee may become the registered owner of the Bonds with the same rights which it would have if not Trustee. (e) The Trustee shall be protected in acting upon any notice, request, consent, certificate, order, affidavit, letter, telegram or other paper or document reasonably believed to be genuine and correct and to have been signed or sent by the proper person or persons. Any action taken by the Trustee pursuant to this Indenture upon the request or the consent of the Authority or any person who at the time of making such request or giving such consent is the registered owner of any Bonds shall be conclusive and binding upon all future owners of the same Bond and upon Bonds issued in place thereof. (f) As to the existence or nonexistence of any fact or as to the sufficiency or validity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a certificate signed on behalf of the Authority by an Authorized Authority Representative or on behalf of the Borrower by an Authorized Borrower Representative or such other person as may be designated for such purpose by the Authority or the Borrower as sufficient evidence of the facts therein contained, and prior to the occurrence of a default of which the Trustee has been notified as provided in subsection (h) of this Section, or of which by said subsection it is deemed to have notice, shall also be at liberty to accept a similar certificate to the effect that any particular dealing, transaction or action is necessary or expedient, but may at its discretion secure such further evidence deemed necessary or advisable, but shall in no case be bound to secure the same. (g) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty, and the Trustee shall not be answerable for other than its gross negligence or willful default and shall not be answerable for any negligent act of its attorneys, agents or receivers which have been selected by the Trustee with due care, subject to Section 8.02(a) hereof B

69 (h) The Trustee shall not be required to take notice or be deemed to have notice of any default hereunder, except failure by the Borrower to cause to be made any of the payments to the Trustee required to be made hereunder, unless an officer in the trust department of the Trustee has actual notice thereof or the Trustee shall be specifically notified in writing of such default by the Authority or the Registered Owners of at least a majority in aggregate principal amount of Bonds then Outstanding and all notices or other instruments required by this Indenture to be delivered to the Trustee, must, in order to be effective, be delivered at the Notice Address of the Trustee, and, in the absence of such notice so delivered, the Trustee may conclusively assume that there is no default except as aforesaid. (i) All moneys received by the Trustee shall, until used or applied or invested as herein provided, be held in trust in the manner and for the purposes for which they were received but need not be segregated from other funds except to the extent required by this Indenture or law. The Trustee shall not be under any liability for interest on any moneys received hereunder except such as may be agreed upon. (j) At any and all reasonable times the Trustee, and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right, but shall not be required, to inspect any and all of the Trust Estate, including all books, papers and records of the Authority pertaining to the Facility and the Bonds. (k) The Trustee shall not be required to give any bond or surety in respect of the execution of the said trusts and powers or otherwise in respect of the premises. (l) Notwithstanding anything in this Indenture contained, the Trustee shall have the right, but shall not be required, to demand in respect of the authentication of any Bonds, the withdrawal of any cash, the release of any property or any action whatsoever within the purview of this Indenture, any showings, certificates, opinions, appraisals or other information or corporate action or evidence thereof, in addition to that by the terms hereof required, as a condition of such action by the Trustee deemed desirable for the purpose of establishing the right of the Authority or the Borrower to the authentication of any Bonds, the withdrawal of any cash, the release of any property, or the taking of any other action by the Trustee. (m) Before taking any action under Article VIII hereof, the Trustee may require that reasonable indemnity or other assurances be furnished to it for the reimbursement of all expenses which it may incur and to protect it against all risk and liability by reason of any action so taken, including without limitation any and all environmental liability, and except only any liability which may result from its negligence or willful default. The Trustee may take action without requiring such indemnification or other assurances and in such event, the Trustee shall be entitled to indemnification by the Borrower pursuant to Section 5.15 of the Loan Agreement and to reimbursement of its fees and expenses pursuant to Section 8.04 hereof. (n) The Trustee shall have no responsibility with respect to any information, statement or recital in any official statement, offering memorandum or other disclosure prepared or distributed in connection with the Bonds. (o) The Trustee shall not be liable for actions taken by it hereunder or under the Loan Documents at the written direction of the Majority Bondholders and the Trustee shall not otherwise be liable in connection with the performance of its duties under this Indenture except for its own gross negligence or willful misconduct. Section 8.03 Evidence on Which Trustee May Act. (a) The Trustee, upon receipt of any notice, resolution, request, consent, order, certificate, report, opinion, bond, or other paper or document furnished to it pursuant to any provision of this Indenture, shall examine such instrument to determine whether it conforms to the requirements of this Indenture and shall be protected in acting upon any such instrument believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may, at the Borrower s sole expense, consult with counsel selected by it in respect of any action taken or suffered by the Trustee under this Indenture. (b) Except as otherwise expressly provided in this Indenture, any request, order, notice or other direction required or permitted to be furnished pursuant to any provision of this Indenture by the Authority to the Trustee shall be sufficiently executed if executed in the name of the Authority by an Authorized Authority Representative. Section 8.04 Compensation. The Authority shall cause the Borrower to pay to the Trustee from time to time reasonable compensation for all services rendered under this Indenture and also all reasonable expenses, charges, counsel fees and other disbursements, including those of its attorneys, agents, and employees, incurred in and about the performance of their powers and duties under this Indenture. The Trustee shall have a first lien on the Trust Estate with right of payment prior to payment of, the principal of, and interest on, the Bonds for the foregoing advances, fees, costs and expenses incurred. The removal or resignation of the Trustee pursuant to this Indenture shall be without prejudice to the rights of the Trustee under this Section 8.04 to charge and be reimbursed for the foregoing advances, fees and expenses theretofore incurred hereunder. Extraordinary fees are payable to the Trustee for duties or responsibilities not expected to be incurred at the outset of the transaction, not routine or customary, and not incurred in the ordinary course of business. Payment of extraordinary fees is appropriate where particular inquiries, events or developments are unexpected, even if the possibility of such things could have been identified at the inception of the transaction. Section 8.05 Certain Permitted Acts. The Trustee may become the owner of any Bonds with the same rights it would have if it were not the Trustee. To the extent permitted by law, the Trustee may act as depository for, and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Owners of the Bonds or to effect or aid in any reorganization growing out of the enforcement of the Bonds or this Indenture, whether or not any such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding. Section 8.06 Resignation of Trustee. The Trustee may resign at any time and be discharged of the duties and obligations created by this Indenture by giving not less than thirty (30) days' written notice to the Borrower, the Authority and the Owners of the Bonds, and such resignation shall take effect upon the day specified in such notice unless previously a successor shall have been appointed as provided in Section 8.08 of this Indenture, in which event such resignation shall take effect immediately on the appointment of and acceptance of duties by such successor. Section 8.07 Removal of Trustee. The Trustee may be removed at any time by an instrument or concurrent instruments in writing, filed with the Trustee, and signed by the Authority or by the Majority Bondholders or their attorneys-in-fact duly authorized with the consent of the Authority. Section 8.08 Appointment of Successor Trustee; Temporary Trustee. In case at any time the Trustee shall resign or shall be removed or shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or if a receiver, liquidator or conservator of the Trustee, or of its property, shall be appointed, or if any public officer shall take charge or control of the Trustee, or of its property or affairs, either the Authority or the Majority Bondholders shall appoint a successor Trustee. Provided, that so long as there is not at the time a payment default (as such term is described in Section 6.1 of the Loan Agreement), the appointment of a successor trustee shall be subject to the written consent of the Borrower. In the event the Authority, Borrower or Majority Bondholders fail to appoint a successor, the Trustee may petition a court of competent jurisdiction for appointment of a successor trustee. Section 8.09 Transfer of Rights and Property to Successor Trustee. Any successor Trustee appointed under this Indenture shall execute, acknowledge and deliver to its predecessor, and also to the Authority, and to any Bond Owner which shall request the same, an instrument accepting such appointment and thereupon such successor Trustee, without any further act, deed or conveyance, shall become fully vested with all moneys, estates, properties, rights, powers, duties and obligations of such predecessor Trustee, with like effect as if originally named; but the Trustee ceasing to act nevertheless, shall execute, acknowledge and deliver such instruments of conveyance and further assurance and do such other things as reasonably may be required for more fully and certainly vesting and confirming in such successor all the right, title and interest of the predecessor Trustee in and to any property held by it under this Indenture, and shall pay over, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions set forth in or pursuant to this Indenture. Should any deed, conveyance or instrument in writing from the Authority be required by such successor Trustee for more fully and certainly vesting in and confirming any such estates, rights, powers and duties, any and all such deeds, conveyances and instruments in writing, on request and so far as may be authorized by law, shall be executed, acknowledged and delivered by the Authority. Section 8.10 Merger or Consolidation of Trustee. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it may be party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such company shall be a bank or trust company organized under the laws of any state of the United States or a national banking association, and shall be authorized by law to perform all the duties imposed upon it by this Indenture, shall be the successor to the Trustee without the execution or filing of any paper or the performance of any further act. Provided, that so long as there is not at the time a Payment Default, if the then serving Trustee is not the survivor of such merger, conversion, consolidation or sale, then such successor shall not become the trustee if Borrower shall have objected to such successor Trustee in writing within thirty (30) days of its receipt of written notice of such merger, conversion, consolidation or sale. Borrower shall be deemed to have consented to such successor Trustee if Borrower does not object in writing within such thirty (30) day period. Section 8.11 Co-Trustees. At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Estate may at the time be located, the trustee shall have the power to appoint and, upon the reasonable request of the Trustee, the Authority shall for such purpose join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint one or more persons either to act as co-trustee or co-trustees, jointly with the Trustee, of all or any part of the Trust Estate, or to act as separate trustee or separate trustees of all or any part of the Trust Estate, and to vest in such person or persons, in such capacity, such right to the Trust Estate or any part thereof, and such rights, powers, duties, trustees or obligations as the Trustee may consider necessary or desirable, subject to the remaining provisions of this Section (a) The Authority shall execute, acknowledge and deliver all such instruments as may be required by any such co-trustee or separate trustee for more fully confirming such title, rights, powers, trusts, duties and obligations to such co-trustee or separate trustee. (b) Every co-trustee or separate trustee shall, to the extent permitted by law but to such extent only, be appointed subject to the following terms, namely: (i) All rights, powers, trusts, duties and obligations conferred by this Indenture upon the Trustee with respect to the custody, control or management of moneys, papers, securities and other personal property shall be exercised solely by the Trustee. (ii) All rights, powers, trusts, duties and obligations conferred by this or imposed upon the trustees shall be conferred or imposed upon and exercised or performed by the Trustee, except to the extent that, under the law of any jurisdiction in which any particular act or acts are to be performed, the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such act or acts shall be performed by such co-trustee or co-trustees or separate trustee or separate trustees. (iii) Any consent required by the Trustee or any co-trustee or separate trustee to take or to refrain from taking any action hereunder shall not be unreasonably withheld or delayed. (iv) Any co-trustee or separate trustee may delegate to the Trustee the exercise of any right, power, trust, duty or obligation, discretionary or otherwise. (v) No trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. (vi) Any demand, request, direction, appointment, removal, notice, consent, waiver or other action in writing delivered to the Trustee shall be deemed to have been delivered to each co-trustee or separate trustee B

70 (vii) Any moneys, papers, securities or other items of personal property received by any such co-trustee or separate trustee hereunder shall forthwith, so far as may be permitted by law, be turned over to the Trustee. (c) Upon the acceptance in writing of such appointment by any such co-trustee or separate trustee, such co-trustee or separate trustee shall be vested with such interest in and to the Trust Estate or any part thereof, and with such rights, powers, duties or obligations, as shall be specified in the instrument of appointment jointly with the Trustee (except insofar as local law makes it necessary for any such co-trustee or separate trustee to act alone) subject to all the terms of this Indenture. Every such acceptance shall be filed with the Trustee and the Authority. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Trustee its or his or her attorney-in-fact and agent, with full power and authority to do all acts and things and to exercise all discretion on its or his or her behalf and in its or his or her name. Section 8.12 Dissemination Agent. U.S. Bank National Association has been appointed by the Borrower to be the initial Dissemination Agent hereunder, and U.S. Bank National Association hereby accepts such appointment. The Dissemination Agent shall disseminate to the Municipal Securities Rulemaking Board s Electronic Municipal Market Access System ( EMMA ) the information provided to the Dissemination Agent by the Borrower pursuant to Section 5.18(a), (c) and (d) of the Loan Agreement, within ten (10) days of the receipt of such information by the Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Section 8.12, and all of the provisions of Article VIII hereof shall apply to the Dissemination Agent, except such provisions as may expressly conflict with this Section The Dissemination Agent shall have no obligation to make disclosure about the Bonds, the Authority, the Borrower, the Facility or any other matter except as expressly set forth in this Section The fact that the Dissemination Agent and the Trustee, or any affiliate thereof, may have any fiduciary or banking relationship with the Authority, the Borrower, any manager of the Facility or any person with whom the Authority or the Borrower contracts in connection with the Facility, apart from the relationship created by this section, shall not be construed to mean (whether or not an Event of Default has occurred or is continuing) that (i) the Dissemination Agent has actual knowledge of any event or condition except in its capacity as Trustee hereunder when deemed pursuant hereto to have such actual knowledge, or (ii) the Dissemination Agent has any duties or obligations under the Indenture other than those expressly set forth in this Section The Dissemination Agent may resign or be removed in the same manner as the Trustee may resign or be removed as provided in this Article VIII. ARTICLE IX. AMENDMENTS AND SUPPLEMENTAL INDENTURES; AMENDMENTS OF BOND DOCUMENTS Section 9.01 Supplemental Indentures Not Requiring Consent of Owners of Bonds. The Authority and the Trustee may, without the consent of, or notice to, the Owners of any Bonds, execute one or more Supplemental Indentures for any one or more of the following purposes: (a) to cure any ambiguity or formal defect or omission in this Indenture; (b) to grant to or confer any additional benefits, rights, remedies, powers or authorities that may lawfully be granted to or conferred upon the Owners of the Bonds or the Trustee, or to make any change which is not to the prejudice of the Owners of the Bonds, as evidenced by an opinion of counsel delivered to the Trustee; (c) to subject to the pledge and lien of this Indenture additional revenues, properties and collateral; (d) to evidence the appointment of a co-trustee or the succession of a new Trustee; or (e) to modify, amend or supplement the provisions of this Indenture or any Supplemental Indenture relating to the holding or investing by the Trustee of moneys hereunder or thereunder in such manner as the Authority may deem necessary or desirable to maintain the exclusion from gross income for purposes of federal income taxation of interest on the Bonds. Section 9.02 Supplemental Indentures Requiring Consent of Majority Bondholders. (a) Exclusive of Supplemental Indentures covered by Section 9.01 of this Indenture and subject to the terms and provisions contained in this Section 9.02, and not otherwise, the Majority Bondholders shall have the right, from time to time, anything contained in this Indenture to the contrary notwithstanding, to consent to and approve the execution and delivery by the Authority and the Trustee of one or more Supplemental Indentures for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture or in any Supplemental Indenture; provided, however, that nothing in this Section 9.02 contained shall permit, or be construed as permitting, without the consent of the Owners of the Bonds adversely affected thereby, (i) an extension of the maturity date of the principal of or the interest on some but less than all of the Bonds Outstanding, (ii) a reduction in the principal amount of, or the rate of interest on, some but less than all of the Bonds Outstanding, (iii) a privilege or priority of any Bond or Bonds over any other Bond or Bonds (iv) a reduction in the percentages of the Owners of the Outstanding Bonds required for consent to such Supplemental Indenture, (v) the creation of any lien securing any of the Bonds other than a lien ratably securing all of the Bonds at any time Outstanding or (vi) any reduction of the trusts, powers, rights, obligations, duties, remedies, immunities and privileges of the Trustee. (b) If at any time the Authority and the Trustee shall desire to execute and deliver a Supplemental Indenture for any of the purposes of this Section 9.02, the Trustee shall, upon being satisfactorily indemnified with respect to fees and expenses, cause notice of the proposed execution of such Supplemental Indenture to be mailed by registered or certified mail to each Owner of the Bonds. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that copies thereof are on file at the designated corporate trust office of the Trustee for inspection by all Owners of the Bonds. If within 60 days or such longer period as shall be prescribed by the Authority following the giving of such notice, the Majority Bondholders shall have consented to and approved the execution thereof as herein provided, no Owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Authority from adopting the same or from taking any action pursuant to the provisions thereof. Subject to Section 9.04 hereof, upon the execution of any such Supplemental Indenture as in this Section 9.02 permitted and provided, this Indenture shall be and be deemed to be modified and amended in accordance therewith. Section 9.03 Reliance on Opinion of Counsel. The Trustee shall be entitled to rely upon an opinion of Bond Counsel stating that a Supplemental Indenture is authorized or permitted by this Indenture, and prior to the execution and delivery of any Supplemental Indenture, the Trustee, and the Authority shall be furnished with an opinion of Bond Counsel stating that the provisions of such Supplemental Indenture will not cause the interest on the Bonds to be includable in gross income for purposes of federal income taxation. Section 9.04 Consents Required. Anything herein to the contrary notwithstanding, a Supplemental Indenture described in Section 9.02 hereof which affects adversely any rights of the Borrower, the Authority or the Trustee shall not become effective unless and until the affected party shall have consented in writing to the execution and delivery of such Supplemental Indenture. In this regard, the Trustee shall cause notice of the proposed execution and delivery of any Supplemental Indenture together with a copy of the proposed Supplemental Indenture to be mailed as provided in Section 4.05 with respect to the redemption of Bonds to the Borrower at least ten (10) days before the date of its proposed execution and delivery. Section 9.05 Amendments of Loan Documents Not Requiring Consent of Owners of Bonds. The Trustee and the Borrower may, without the consent of or notice to any of the Owners of Bonds but with, in all cases, a Favorable Opinion of Bond Counsel, enter into any amendment, change or modification of any of the Loan Documents as may be required (a) by the provisions of the Loan Agreement or this Indenture, (b) for the purpose of curing any ambiguity or formal defect or omission therein, (c) so as to add additional rights and remedies for the benefit of Owners of the Bonds, (d) to accomplish the purposes of a Supplemental Indenture authorized by Section 9.01 hereof, or (e) in connection with any other change therein is not to the prejudice of the Trustee or the Owners of the Bonds, as evidenced by an opinion of counsel delivered to the Trustee. Section 9.06 Amendments of Loan Documents Requiring Consent of the Majority Bondholders. Except for the amendments, changes or modifications as provided in Section 9.05 hereof, neither the Trustee nor the Borrower shall enter into any other amendment, change or modification of the Loan Documents without the mailing of notice and the written approval or consent of the Majority Bondholders and an approving opinion of Bond Counsel. If at any time the Trustee and the Borrower shall desire the consent to any such proposed amendment, change or modification, the Trustee shall, upon being satisfactorily indemnified with respect to fees and expenses, cause notice of such proposed amendment, change or modification to be mailed to all Owners in the same manner as provided in Section 4.05 with respect to redemption of Bonds. Such notice shall briefly set forth the nature of such proposed amendment, change or modification and shall state that copies of the instrument embodying the same are on file at the designated corporate trust office of the Trustee for inspection by all Owners of Bonds. If, within sixty (60) days, or such longer period as shall be prescribed by the Authority as the case may be, following the mailing of such notice, the Majority Bondholders shall have consented to and approved the execution thereof as hereto provided, no Owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Borrower or the Authority or the Trustee as the case may be, from executing the same or from taking any action pursuant to the provisions thereof. The Authority, or the Trustee as the case may be, shall have the right to extend from time to time the period within which such consent and approval may be obtained from Owners of the Bonds. Upon the execution of any such amendment, change or modification as in this Section permitted and provided, the Authority Documents shall be and be deemed to be modified, changed and amended in accordance therewith. Section 9.07 Reliance on Opinion of Counsel. The Authority and the Trustee may rely upon an opinion of Bond Counsel to the effect that any proposed amendment, change or modification to the Loan Documents will comply with the provisions of this Article IX. Prior to requesting a consent to any proposed amendment, the Authority or the Trustee, as the case may be, shall present the Trustee or the Authority, as the case may be, or the Trustee shall have received, as the case may be, an opinion of Bond Counsel that the provisions of such amendment will not cause interest on the Series 2014A Bonds to be includable in gross income for purposes of federal income taxation. ARTICLE X. DISCHARGE Section Discharge of Indenture. If the Authority shall pay, or there shall otherwise be paid, to the Owners of all Bonds the principal or redemption price, if applicable, and interest due thereon, at the times and in the manner stipulated therein and in this Indenture and if all Trustee Expenses shall be paid in full, then the pledge of revenues, other moneys and securities under this Indenture and all covenants, agreements and other obligations of the Authority to the Owners of Bonds, shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Trustee shall cause an accounting for such period or periods as shall be requested by the Authority to be prepared and filed with the Authority and, upon the request of the Authority, shall execute and deliver to the Authority all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver as provided in Article VI hereof all moneys or securities held by them pursuant to this Indenture (except as otherwise specified in Section 6.10) after the payment of principal or redemption price, if applicable, of or interest on Bonds. Notwithstanding the foregoing, upon such discharge the provisions of this Indenture relating to the Rebate Fund shall continue in effect. Section Discharge by Delivery. The obligation to pay the principal of and premium, if any, and interest on all or any portion of the Bonds (the Bond Obligations ) may be discharged by the delivery of the Bonds to the Trustee accompanied by written direction from the Owner(s) thereof to cancel such Bonds without payment (except as provided hereafter in this Section 10.02), and upon such delivery, such Bond Obligations shall be canceled and deemed paid. In the event only a portion of the Bond Obligations shall be canceled and deemed paid pursuant to the terms of this Section 10.02, those Bond Obligations which are not so canceled 5 59 B

71 and deemed paid shall remain Outstanding for all purposes of this Indenture; provided that if all Bonds Outstanding shall be delivered to the Trustee in accordance with the terms of this Section and all of the requirements for the discharge of the Indenture (other than the payment of Bond Obligations) shall be satisfied in full, then the Trustee shall discharge and release the lien of this Indenture, deliver to the Owner(s) of the Bonds all moneys and securities held by the Trustee pursuant to this Indenture (except as otherwise specified in Section 6.10 hereof) up to an amount necessary to pay in full all of the principal of and interest on the Bonds through such cancellation and any other amounts due under the Loan Documents, and execute and deliver and such releases or other instruments requisite to release the lien hereof. Section Discharge by Deposit. The obligation to pay the principal, premium, if any, and interest on all or a portion of the Bonds may be discharged if the Authority or the Borrower has deposited or caused to be deposited, as trust funds, with the Trustee cash and/or Investment Securities of the type described in clause (a) of the definition of that term which do not permit the redemption thereof at the option of the Authority thereof, the principal of and premium, if any, and interest on which when due (or upon the redemption thereof at the option of the holder), will, without reinvestment, provide cash which together with the cash, if any, on deposit with the Trustee at the same time and available therefor, shall be sufficient, to pay and discharge the entire indebtedness on Bonds not theretofore canceled by the Trustee or delivered to the Trustee for cancellation by the payment of interest on and principal (and premium, if any) of the Bonds which have become due and payable or which shall become due at their stated maturity or redemption date, as the case may be (the Defeasance Collateral ), and which are to be discharged under the provisions hereof, and has made arrangements satisfactory to the Trustee for the giving of irrevocable notice of redemption, if any, by the Trustee in the name, and at the expense, of the Borrower. In addition, to discharge the obligation to pay the principal of and premium, if any, and interest on the Bonds pursuant to this Section 10.03, the Authority or the Borrower must (i) obtain an opinion of Bond Counsel to the effect that all actions have been taken to cause the defeasance of this Indenture and such actions will not adversely affect the excludability of interest on the Series 2014A Bonds for federal income tax purposes under existing law, and (ii) provide written notice to the Bondholders of such discharge at least thirty (30) days in advance. ARTICLE XI. MISCELLANEOUS Section Evidence of Signatures of Bond Owners and Ownership of Bonds. (a) Any request, consent, revocation of consent or other instrument that this Indenture may require or permit to be signed and executed by the Bond Owners may be in one or more instruments of similar tenor, and shall be signed or executed by such Owners in person or by their attorneys appointed in writing. The fact and date of the execution by any Owner of the Bonds or his attorney of such instruments may be proved by a guaranty of the signature thereon by a bank, trust company or national banking association or by the certificate of any notary public or other officer authorized to take acknowledgments of deeds, that the person signing such request or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer. Where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such corporation, association or partnership, such signature guaranty, certificate or affidavit also shall constitute sufficient proof of his authority. (b) The ownership of Bonds and the amount, numbers and other identification, and date of holding the same, shall be proved by the registry books maintained by the Trustee. (c) Any request or consent by the Owner of any Bond shall bind all future owners of such Bond in respect of anything done or suffered to be done by the Authority or any Trustee in accordance therewith. Section Bonds Not an Obligation of the State or Any Political Subdivision. NOTWITHSTANDING ANYTHING HEREIN CONTAINED TO THE CONTRARY. THE BONDS, THE INTEREST THEREON, AND ANY COSTS INCIDENTAL THERETO ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE TRUST ESTATE, AND DO NOT CONSTITUTE A DEBT OR LIABILITY OF THE AUTHORITY, ANY MEMBER, THE STATE OF WISCONSIN, OR ANY POLITICAL SUBDIVISION THEREOF, OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THE BONDS. THE BONDS DO NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE, IN ANY MANNER, ANY MEMBER, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF, OR ANY POLITICAL SUBDIVISION APPROVING ISSUANCE OF THE BONDS TO LEVY ANY TAX OR TO MAKE ANY APPROPRIATION FOR PAYMENT OF THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS OR ANY COSTS INCIDENTAL THERETO. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF ANY MEMBER, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THE BONDS, NOR THE FAITH AND CREDIT OF THE AUTHORITY, SHALL BE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON, THE BONDS OR ANY COSTS INCIDENTAL THERETO. THE AUTHORITY HAS NO TAXING POWER. Section Preservation and Inspection of Documents. All documents received by any Trustee under the provisions of this Indenture shall be retained in its possession and shall be subject at all reasonable times and upon reasonable prior notice to the inspection of the Authority, any other Trustee, and any Owner of the Bonds and their agents and their representatives, any of whom may make copies thereof. Section Parties Interested Herein. Nothing in this Indenture expressed or implied is intended or shall be construed to confer upon, or to give to, any person, other than the Authority, the Trustee, the Borrower and the Owners of the Bonds, any right, remedy or claim under or by reason of this Indenture or any covenant, condition or stipulation of this Indenture; and all the covenants, stipulations, promises and agreements in this Indenture shall be for the sole and exclusive benefit of the Authority, the Trustee, the Borrower and the Owners of the Bonds. Section No Recourse on the Bonds. No recourse shall be had for the payment of the principal of, premium, if any, interest on relating to any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained herein, against any past, present or future member, director, officer, employee or agent of the Authority, under any rule of law or equity or statutory or constitutional provision, or by the enforcement of any assessment or penalty or otherwise. Section No Personal Liability of Authority Officials. No covenant or agreement contained in the Bonds or in this Indenture shall be deemed to be the covenant or agreement of any Authority Indemnified Party, and no Authority Indemnified Party (including any Authorized Signatory) shall be liable personally on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof. No recourse shall be had for the enforcement of any obligation, promise or agreement of the Authority contained herein or in the other Bond Documents to which the Authority is a party or for any claim based hereon or thereon or otherwise in respect hereof or thereof against any Authority Indemnified Party, either directly or through the Authority or any successor entity whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise. No personal liability whatsoever shall attach to, or be incurred by, any Authority Indemnified Party, either directly or through the Authority or any successor entity, under or by reason of any of the obligations, promises or agreements entered into between the Authority and the Borrower, whether herein contained or to be implied herefrom as being supplemental hereto; and all personal liability of that character against every such Authority Indemnified Party as a condition of, and as part of the consideration for, the execution of this Loan Agreement, is expressly waived and released. Notwithstanding any other provision of this Loan Agreement, the Authority shall not be liable to the Borrower or the Underwriter or any other person for any failure of the Authority to take action under the Bond Documents unless the Authority (a) is requested in writing by an appropriate person to take such action, (b) is assured of payment of, or reimbursement for, any reasonable expenses in such action, and (c) is afforded, under the existing circumstances, a reasonable period to take such action. In acting under the Bond Documents, or in refraining from acting under the Bond Documents, the Authority may conclusively rely on the advice of its counsel. Section Severability of Invalid Provisions. If any one or more of the covenants or agreements provided in this Indenture on the part of the Authority or any Trustee to be performed should be contrary to law, then such covenant or covenants or agreement or agreements shall be deemed severable from the remaining covenants and agreements, and in no way shall affect the validity of the other provisions of this Indenture. this Indenture by or on behalf of the Authority shall bind and inure to the benefit of said successor whether so expressed or not. Section Notices, Demands and Requests. Except as otherwise provided in Section 4.05, all notices, demands and requests to be given or made under this Indenture to or by the Authority or the Trustee shall be in writing and shall be sufficiently given and shall be deemed given (a) three (3) days after mailing by certified mail, first-class, postage prepaid; (b) the Business Day after sending by expedited overnight delivery service; or (c) the date of receipt if delivered by personal delivery. Either the Authority or the Trustee may change the Notice Address listed for it at any time upon written notice of such change sent by United States mail, postage prepaid, to the other party, which charge shall be effective upon receipt. Section Applicable Law. This Indenture shall be governed by the applicable laws of the State of Wisconsin. All claims of whatever character arising out of this Indenture, or under any statute or common law relating in any way, directly or indirectly, to the subject matter hereof or to the dealings between the Authority and any other party hereto, if and to the extent that such claim potentially could or actually does involve the Authority, shall be brought in any state or federal court of competent jurisdiction located in the County of Dane in the State of Wisconsin. By executing and delivering this Indenture, each party hereto irrevocably: (i) accepts generally and unconditionally the exclusive jurisdiction and venue of such courts in respect of any claim described in the preceding sentence; (ii) waives any defense of forum non conveniens; and (iii) agrees not to seek removal of such proceedings to any court or forum other than as specified above. The foregoing shall not be deemed or construed to constitute a waiver by the Authority of any prior notice or procedural requirements applicable to actions or claims against or involving political subdivisions of the State of Wisconsin that may exist at the time of and in connection with such matter. Section Table of Contents and Section Headings Not Controlling. The Table of Contents and the headings of the several Articles and Sections of this Indenture have been prepared for convenience of reference only and shall not control, affect the meaning of, or be taken as an interpretation of any provision of this Indenture. Section Exclusion of Bonds. Bonds owned or held by or for the account of the Authority, the Borrower or the Guarantor shall not be deemed Outstanding for the purpose of consent or other action or any calculation of Outstanding Bonds provided for in this Indenture, and the Authority, the Borrower and the Guarantor shall not be entitled with respect to such Bonds to give any consent or take any other action provided for herein, unless all of the Outstanding Bonds are then owned by such person. Section Effective Date. This Indenture shall take effect immediately upon the execution and delivery by all of the parties hereto. [Execution Pages Follow] Section Successors. Whenever in this Indenture the Authority is named or referred to, it shall be deemed to include any Person that may by law succeed to the principal functions and powers of the Authority under the Act, and all the covenants and agreements contained in 5 63 B

72 IN WITNESS WHEREOF, the parties hereto have caused this Trust Indenture to be executed by their duly authorized officers all as of the date and year first set forth above. EXHIBIT A-1 Form of Series 2014A Bond PUBLIC FINANCE AUTHORITY By: THIS BOND HAS BEEN AUTHORIZED AND ISSUED PURSUANT TO THE LAWS OF THE STATE OF WISCONSIN, INCLUDING PARTICULARLY SECTION OF THE WISCONSIN STATUTES, AS AMENDED. BONDS ISSUED UNDER SECTION SHALL NOT BE INVALID FOR ANY IRREGULARITY OR DEFECT IN THE PROCEEDINGS FOR THEIR SALE OR ISSUANCE. [SEAL] Name: Title: Authorized Signatory THIS BOND MAY NOT BE TRANSFERRED BY THE REGISTERED OWNER HEREOF TO ANY PERSON OTHER THAN (I) TO A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT OF 1933, AS AMENDED); OR (II) TO AN ACCREDITED INVESTOR (AS DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1933, AS AMENDED). U.S. BANK NATIONAL ASSOCIATION By: Amanda Bhim, Assistant Vice President THIS BOND IS A LIMITED OBLIGATION OF THE AUTHORITY PAYABLE SOLELY FROM THE TRUST ESTATE AND IS NOT A DEBT OR LIABILITY OF ANY MEMBER (AS DEFINED IN THE INDENTURE), THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THIS BOND. THIS BOND DOES NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE, IN ANY MANNER, ANY MEMBER, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THIS BOND TO LEVY ANY TAX OR TO MAKE ANY APPROPRIATION FOR PAYMENT OF PRINCIPAL OF OR PREMIUM, IF ANY, OR THE INTEREST ON THIS BOND OR ANY COSTS INCIDENTAL THERETO. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF ANY MEMBER, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THIS BOND, NOR THE FAITH AND CREDIT OF THE AUTHORITY, SHALL BE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON, THIS BOND OR ANY COSTS INCIDENTAL THERETO. THE AUTHORITY HAS NO TAXING POWER. LEGEND FOR BONDS REGISTERED TO CEDE & CO. Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation ( DTC ), to the Authority or its agent for registration of transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein :5 S :5 A-1 R- UNITED STATES OF AMERICA STATE OF WISCONSIN PUBLIC FINANCE AUTHORITY FIRST MORTGAGE EDUCATIONAL FACILITY REVENUE BONDS (PALM BEACH MARITIME ACADEMY PROJECT) SERIES 2014A Maturity Date Dated Date Interest Rate CUSIP # May 1, June, 2014 % 74443D $ REGISTERED OWNER: PRINCIPAL AMOUNT: Public Finance Authority, a Wisconsin joint powers commission and unit of government and a body corporate and politic under the laws of the State of Wisconsin (together with its successors and assigns, the Authority ), for value received, promises to pay, subject to the provisions hereof and of the Indenture, to the Registered Owner named above on the Maturity Date specified above, or upon earlier redemption as described herein, the Principal Amount shown above plus interest thereon from the Dated Date, as paid or duly provided for on the Maturity Date hereof or on any earlier redemption date (subject to the right of prior redemption hereinafter described), upon presentation and surrender of this Bond at the designated corporate trust office of the U.S. Bank National Association, or a duly appointed successor, as Trustee, paying agent and registrar, and to pay interest on said principal sum, but solely from the revenues and receipts hereinafter specified and not otherwise, to the registered owner hereof (the Bondholder ) from the later of the Dated Date shown hereon or the most recent Interest Payment Date to which interest has been paid or duly provided for until the payment of said principal sum in full, at the Interest Rate specified above on each May 1 and November 1, beginning November 1, 2014 (each, an Interest Payment Date ). Payments of interest and of principal upon redemption pursuant to the Indenture hereof shall be mailed by first class mail to the Bondholder at the addresses appearing on the records of the Trustee on the Record Date (the 15th day of the month preceding the Interest Payment Date); provided, however, that the payment to any Bondholder holding at least $1,000,000 principal amount of Bonds (hereinafter mentioned) shall, upon written request of such Bondholder received by the Trustee at least ten (10) Business Days prior to the Record Date, be transmitted by the Trustee by wire transfer to the account specified in such request, which account must be in the United States. This Bond is the one of a duly authorized issue of bonds limited in aggregate principal amount to $24,640,000. The Bonds are being issued in two series - $21,000,000 aggregate principal amount of the Authority s First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project), Series 2014A, of which this Bond is a part (the Series 2014A Bonds) and $3,640,000 aggregate principal amount of the Authority s First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project), Taxable Series 2014B (the Series 2014B Bonds and, collectively with the Series 2014A Bonds, the Bonds ). The Bonds are issued under and pursuant to Sections , and of the Wisconsin Statutes, as amended (the Act ) and a Trust Indenture, dated as of June 1, 2014 (as amended and supplemented from time to time, the Indenture ), between the Authority and U.S. Bank National Association, as trustee (together with its successors and assigns in such capacity, the Trustee ). Reference is hereby made to the Indenture for a description of the rights, duties and obligations of the Authority, the Trustee and the Owner of this Bond, the terms upon which the Bond is issued, a description of the property and interests pledged for the payment of this Bond, the claims of this Bond against such property and interests, the terms upon which such property and interest are pledged and the terms and conditions upon which this Bond will be deemed to be paid, at or prior to maturity or redemption of this Bond, if any, upon the making of provision for the payment thereof in the manner set forth in the Indenture. The terms and provisions contained in the Indenture are hereby incorporated herein by reference and the owner of this Bond, by purchase hereof, assents to all of such terms and provisions. All capita1ized, undefined terms used herein will have the meanings ascribed to them in the Indenture. The Bonds are being issued to provide funds to (a) acquire two charter schools (the Facility ) operated by the Borrower which are located within the territorial limits of the Town of Lantana located in Palm Beach County, Florida (together, the Project Jurisdiction ), (b) equip and make certain renovations and capital improvements to the Facility, (c) refund the Authority s $1,000,000 Education Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A (the Refunded Bonds ) (d) fund a Debt Service Reserve Fund for the Bonds, (e) pay capitalized interest on the Bonds, and (f) pay the costs of issuance of the Bonds (collectively, the Project ). Simultaneously with the issuance of the Bonds, the Authority will enter into a Loan Agreement with the Borrower (the Loan Agreement ), pursuant to which the Authority has loaned the proceeds of the Bonds to the Borrower, and the Borrower has issued its two promissory notes, each dated the date hereof (the Notes ) to the Authority, which has assigned its interest in the Notes to the Trustee, and the Borrower will be obligated to make Loan Payments (as defined in the Indenture) to the Trustee as assignee of the Authority in an aggregate amount equal to the principal amount of the Bonds, plus accrued interest. UNDER, BUT EXCEPT AS SET FORTH IN, THE INDENTURE, THE AUTHORITY HAS PLEDGED ALL AMOUNTS ON DEPOSIT IN THE FUNDS AND ACCOUNTS (EXCEPT FOR THE REBATE FUND AND THE COSTS OF ISSUANCE ACCOUNT OF THE PROJECT FUND) TO THE PAYMENT OF THE BONDS. Upon the occurrence of a Determination of Taxability, then, from and after the Date of Taxability, the Series 2014A Bonds shall bear interest at the Taxable Rate. After a Determination of Taxability and upon demand of any Holder or any prior Holder of the Bonds, the Authority shall pay to such Holder or prior Holder, but only from amounts provided by the Borrower pursuant to Section 5.19 of the Loan Agreement, such additional amount as shall be necessary to provide that interest on the Series 2014A Bonds shall have been payable at the Taxable Rate from the Date of Taxability :5 A-2 B :5 A-3

73 Upon a Determination of Taxability, the Authority shall also pay, but only from amounts provided by the Borrower pursuant to the Loan Agreement, to such Holder or to any prior Holder upon demand of such Holder or prior Holder any taxes, interest, penalties or other charges assessed against or payable by such Holder or prior Holder and attributable to such Determination of Taxability and all reasonable administrative, out-of-pocket and other expenses incurred by such Holder or prior Holder that are attributable to such event, including, without limitation, the costs incurred by such Holder or prior Holder to amend any of its tax returns, notwithstanding the repayment of the entire principal amount of the Series 2014A Bonds or any transfer or assignment of the Series 2014A Bonds. Notwithstanding the foregoing, from and after the occurrence of an Event of Default, until such time as such Event of Default has been remedied or otherwise waived by the Holders, the Bonds shall bear interest at the Default Rate. To the extent permitted by law, interest shall accrue on any overdue payment of interest or principal at the Default Rate. Optional Redemption. The Series 2014A Bonds will be subject to optional redemption by the Authority, prior to maturity, on or after May 1, 2024, at the direction of the Borrower, in whole at any time, or in part on any Interest Payment Date, out of moneys deposited with or held by the Trustee for such purpose, upon payment of a redemption price equal to 100% of the principal amount thereof, plus interest accrued to the date fixed for redemption. Extraordinary Mandatory Redemption. The Bonds shall be subject to extraordinary mandatory redemption, and shall be redeemed prior to maturity, upon a Determination of Taxability, within 180 days of the date of such Determination of Taxability on a date selected by the Borrower, specified in a notice in writing delivered to the Trustee at least forty five (45) days prior to the redemption date. Provided, that if the Borrower fails to give such notice, the Bonds shall be redeemed on the 181st day following the Determination of Taxability. The Series 2014A Bonds being redeemed before maturity in accordance this section shall be redeemed at a redemption price equal to the principal amount of the Series 2014A Bonds being redeemed, together with accrued interest (at the Taxable Rate to the extent applicable) to the date of redemption. The Series 2014B Bonds being redeemed before maturity in accordance this section shall be redeemed at a redemption price equal to the principal amount of the Series 2014B Bonds being redeemed, together with accrued interest to the date of redemption. Extraordinary Optional Redemption. If there should occur any event described in Section 7.1 of the Loan Agreement which permits the redemption of the Bonds, the Bonds may, in certain circumstances, and upon the satisfaction of certain conditions, as set forth in Section 7.1 of the Loan Agreement, be subject to redemption at any time in whole or in part at a redemption price equal to the principal amount of the Bonds being redeemed, together with accrued interest to the date of redemption. Mandatory Sinking Fund Redemption. The Series 2014A Bonds maturing May 1, 2029, will be subject to mandatory sinking fund redemption prior to maturity, on May 1 of the years and in the amounts set forth in the following table, at a redemption price equal to 100% of the principal amount thereof plus interest accrued to the date fixed for redemption: May 1 of Year (Maturity) Amount to be Redeemed $ 1,000,000 70,000 95, , , , , , , , , , ,000 The Series 2014A Bonds maturing May 1, 2040, will be subject to mandatory sinking fund redemption prior to maturity, on May 1 of the years and in the amounts set forth in the following table, at a redemption price equal to 100% of the principal amount thereof plus interest accrued to the date fixed for redemption: May 1 of Year (Final Maturity) Amount to be Redeemed $ 1,140,000 1,220,000 1,305,000 1,400,000 1,495,000 1,600,000 1,710,000 1,830,000 1,960,000 2,095,000 2,245,000 In the event of a partial redemption of Bonds through extraordinary mandatory redemption or optional redemption, future mandatory sinking fund installments will be eliminated or reduced in inverse order of sinking fund installment date. Any optional redemption of this Bond may be rescinded if the Trustee does not hold sufficient money to redeem this Bond on the redemption date :5 A :5 A-5 If provision is made for the payment and redemption of this Bond in accordance with the Indenture, this Bond will thereupon cease to be entitled to the lien of the Indenture and will cease to bear interest from and after the date fixed for redemption. In the event the Bond is called for redemption, the Trustee will give notice of the redemption of this Bond, not less than thirty (30) days prior to the date fixed for redemption. Notice of any redemption must be given either (i) by first class mail by the United States Postal Service, postage prepaid, to the Registered Owner thereof at its address which appear on the registration records of the Trustee on the date of mailing, or (ii) by actual delivery to the Registered Owner or its representatives evidenced by receipt signed by such Owner or the representatives. The Bonds are issuable in the form of fully registered Bonds without coupons in an Authorized Denomination. This Bond will be registered on the records of the Authority to be kept for that purpose by the Trustee, who will act as bond registrar with respect to the Bonds, at its designated corporate trust office. Upon surrender for registration of transfer of this Bond at its designated corporate trust office, the Trustee will enter the name and address of the transferee upon the registration records of the Authority and will deliver such Bond to the transferee, or, upon request of the transferee, will deliver a new fully authenticated and registered Bond in the name of the transferee, such new Bond to be of the same Series, of an Authorized Denomination and of the same maturity and interest rate which the Registered Owner is entitled to receive. The Bond presented for registration of transfer, exchange, redemption or payment (if so required by the Authority or the Trustee), must be accompanied by a written instrument or instruments of transfer, in form and with guaranty of signature as set forth hereon or as may be satisfactory to the Trustee, duly executed by the Registered Owner or by its duly authorized attorney. The Trustee may require payment from the Owner of a sum sufficient to cover any tax or other governmental fee or charge that may be imposed in relation thereto. Such taxes, fees and charges must be paid before any such new Bond will be delivered. The Authority and the Trustee are not required to register the transfer of this Bond if it has been called or is being called for redemption. The Authority and the Trustee shall deem and treat the Person in whose name this Bond is registered on the registration records of the Authority maintained by the Trustee as the absolute owner hereof for all purposes, whether or not this Bond is overdue; and neither the Authority nor the Trustee will be affected by any notice to the contrary. The stated maturity of this Bond may be accelerated upon the occurrence of certain Events of Default as defined in the Indenture. The Registered Owner of this Bond has no right to enforce the provisions of the Indenture, or to institute action to enforce the covenants therein, or to take any action with respect to any default under the Indenture, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture. as if done on the nominal date provided herein or in the Indenture, and no interest will accrue for the period after such nominal date. THIS BOND SHALL NOT BE VALID OR BECOME OBLIGATORY for any purpose or be entitled to any benefit or security under the Indenture unless the Certificate of Authentication hereon has been executed by the Trustee by manual signature. NEITHER THE MEMBERS OF THE AUTHORITY NOR ANY OFFICIAL EXECUTING THIS BOND NOR ANY OTHER AUTHORITY INDEMNIFIED PARTY SHALL BE LIABLE PERSONALLY ON THIS BOND OR BE SUBJECT TO ANY PERSONAL LIABILITY OR ACCOUNTABILITY BY REASON OF THE ISSUANCE THEREOF. THE OWNER OF THIS BOND AS A CONDITION OF THE PURCHASE OF THIS BOND HEREBY ACKNOWLEDGES THAT SUCH OWNER HAS AGREED TO THE FOREGOING CONDITION OF OWNERSHIP OF THIS BOND. IN WITNESS WHEREOF, the Public Finance Authority has caused this Bond to be signed by the manual or facsimile signature of an Authorized Signatory as of the date set forth above. [SEAL] PUBLIC FINANCE AUTHORITY By: Authorized Signatory CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the Indenture referred to herein. Date of Authentication: U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory If the date for making any payment hereunder or under the Indenture or the last date for performance of any act or the exercising of any right, as provided in the Indenture, is not a Business Day, such payment may, unless otherwise provided in the Indenture, be made or act performed or right exercised on the next succeeding Business Day with the same force and effect :5 A-6 B :5 A-7

74 FORM OF ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto (Please print or typewrite Name and Address, including Zip Code, and Federal Taxpayer Identification or Social Security Number of Assignee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints Attorney to register the transfer of the within Bond on the records kept for registration thereof, with full power of substitution in the premises. Dated: Signature guaranteed by: EXHIBIT A-2 Form of Taxable Series 2014B Bond THIS BOND HAS BEEN AUTHORIZED AND ISSUED PURSUANT TO THE LAWS OF THE STATE OF WISCONSIN, INCLUDING PARTICULARLY SECTION OF THE WISCONSIN STATUTES, AS AMENDED. BONDS ISSUED UNDER SECTION SHALL NOT BE INVALID FOR ANY IRREGULARITY OR DEFECT IN THE PROCEEDINGS FOR THEIR SALE OR ISSUANCE. THIS BOND MAY NOT BE TRANSFERRED BY THE REGISTERED OWNER HEREOF TO ANY PERSON OTHER THAN (I) TO A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT OF 1933, AS AMENDED); OR (II) TO AN ACCREDITED INVESTOR (AS DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1933, AS AMENDED). NOTICE: Signatures must be guaranteed pursuant to law. NOTICE: The signature to this Assignment must correspond with the name as it appears on the face of the within Bond in every particular, without alteration or enlargement alteration or enlargement change whatsoever. THIS BOND IS A LIMITED OBLIGATION OF THE AUTHORITY PAYABLE SOLELY FROM THE TRUST ESTATE AND IS NOT A DEBT OR LIABILITY OF ANY MEMBER (AS DEFINED IN THE INDENTURE), THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THIS BOND. THIS BOND DOES NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE, IN ANY MANNER, ANY MEMBER, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THIS BOND TO LEVY ANY TAX OR TO MAKE ANY APPROPRIATION FOR PAYMENT OF PRINCIPAL OF OR PREMIUM, IF ANY, OR THE INTEREST ON THIS BOND OR ANY COSTS INCIDENTAL THERETO. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF ANY MEMBER, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THIS BOND, NOR THE FAITH AND CREDIT OF THE AUTHORITY, SHALL BE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON, THIS BOND OR ANY COSTS INCIDENTAL THERETO. THE AUTHORITY HAS NO TAXING POWER. LEGEND FOR BONDS REGISTERED TO CEDE & CO. Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation ( DTC ), to the Authority or its agent for registration of transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein :5 A :5 A-9 R- UNITED STATES OF AMERICA STATE OF WISCONSIN PUBLIC FINANCE AUTHORITY FIRST MORTGAGE EDUCATIONAL FACILITY REVENUE BONDS (PALM BEACH MARITIME ACADEMY PROJECT) TAXABLE SERIES 2014B Maturity Date Dated Date Interest Rate CUSIP # $ May 1, 2017 June, % 74443DAH4 REGISTERED OWNER: PRINCIPAL AMOUNT: Public Finance Authority, a Wisconsin joint powers commission and unit of government and a body corporate and politic under the laws of the State of Wisconsin (together with its successors and assigns, the Authority ), for value received, promises to pay, subject to the provisions hereof and of the Indenture, to the Registered Owner named above on the Maturity Date specified above, or upon earlier redemption as described herein, the Principal Amount shown above plus interest thereon from the Dated Date, as paid or duly provided for on the Maturity Date hereof or on any earlier redemption date (subject to the right of prior redemption hereinafter described), upon presentation and surrender of this Bond at the designated corporate trust office of the U.S. Bank National Association, or a duly appointed successor, as Trustee, paying agent and registrar, and to pay interest on said principal sum, but solely from the revenues and receipts hereinafter specified and not otherwise, to the registered owner hereof (the Bondholder ) from the later of the Dated Date shown hereon or the most recent Interest Payment Date to which interest has been paid or duly provided for until the payment of said principal sum in full, at the Interest Rate specified above on each May 1 and November 1, beginning November 1, 2014 (each, an Interest Payment Date ). Payments of interest and of principal upon redemption pursuant to the Indenture hereof shall be mailed by first class mail to the Bondholder at the addresses appearing on the records of the Trustee on the Record Date (the 15th day of the month preceding the Interest Payment Date); provided, however, that the payment to any Bondholder holding at least $1,000,000 principal amount of Bonds (hereinafter mentioned) shall, upon written request of such Bondholder received by the Trustee at least ten (10) Business Days prior to the Record Date, be transmitted by the Trustee by wire transfer to the account specified in such request, which account must be in the United States. This Bond is the one of a duly authorized issue of bonds limited in aggregate principal amount to $24,640,000. The Bonds are being issued in two series - $21,000,000 aggregate principal amount of the Authority s First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project), Series 2014A (the Series 2014A Bonds ), and $3,640,000 aggregate principal amount of the Authority s First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project), Taxable Series 2014B, of which this Bond is a part (the Series 2014B Bonds and, collectively with the Series 2014A Bonds, the Bonds ). The Bonds are issued under and pursuant to Sections , and of the Wisconsin Statutes, as amended (the Act ) and a Trust Indenture, dated as of June 1, 2014 (as amended and supplemented from time to time, the Indenture ), between the Authority and U.S. Bank National Association, as trustee (together with its successors and assigns in such capacity, the Trustee ). Reference is hereby made to the Indenture for a description of the rights, duties and obligations of the Authority, the Trustee and the Owner of this Bond, the terms upon which the Bond is issued, a description of the property and interests pledged for the payment of this Bond, the claims of this Bond against such property and interests, the terms upon which such property and interest are pledged and the terms and conditions upon which this Bond will be deemed to be paid, at or prior to maturity or redemption of this Bond, if any, upon the making of provision for the payment thereof in the manner set forth in the Indenture. The terms and provisions contained in the Indenture are hereby incorporated herein by reference and the owner of this Bond, by purchase hereof, assents to all of such terms and provisions. All capita1ized, undefined terms used herein will have the meanings ascribed to them in the Indenture. The Bonds are being issued to provide funds to (a) acquire two charter schools (the Facility ) operated by the Borrower which are located within the territorial limits of the Town of Lantana located in Palm Beach County, Florida (together, the Project Jurisdiction ), (b) equip and make certain renovations and capital improvements to the Facility, (c) refund the Authority s $1,000,000 Education Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A (the Refunded Bonds ) (d) fund a Debt Service Reserve Fund for the Bonds, (e) pay capitalized interest on the Bonds, and (f) pay the costs of issuance of the Bonds (collectively, the Project ). Simultaneously with the issuance of the Bonds, the Authority will enter into a Loan Agreement with the Borrower (the Loan Agreement ), pursuant to which the Authority has loaned the proceeds of the Bonds to the Borrower, and the Borrower has issued its two promissory notes, each dated the date hereof (the Notes ) to the Authority, which has assigned its interest in the Notes to the Trustee, and the Borrower will be obligated to make Loan Payments (as defined in the Indenture) to the Trustee as assignee of the Authority in an aggregate amount equal to the principal amount of the Bonds, plus accrued interest. UNDER, BUT EXCEPT AS SET FORTH IN, THE INDENTURE, THE AUTHORITY HAS PLEDGED ALL AMOUNTS ON DEPOSIT IN THE FUNDS AND ACCOUNTS (EXCEPT FOR THE REBATE FUND AND THE COSTS OF ISSUANCE ACCOUNT OF THE PROJECT FUND) TO THE PAYMENT OF THE BONDS. Notwithstanding the foregoing, from and after the occurrence of an Event of Default, until such time as such Event of Default has been remedied or otherwise waived by the Holders, the Bonds shall bear interest at the Default Rate. To the extent permitted by law, interest shall accrue on any overdue payment of interest or principal at the Default Rate. Extraordinary Mandatory Redemption. The Bonds shall be subject to extraordinary mandatory redemption, and shall be :5 A-10 B :5 A-11

75 redeemed prior to maturity, upon a Determination of Taxability, within 180 days of the date of such Determination of Taxability on a date selected by the Borrower, specified in a notice in writing delivered to the Trustee at least forty five (45) days prior to the redemption date. Provided, that if the Borrower fails to give such notice, the Bonds shall be redeemed on the 181st day following the Determination of Taxability. The Series 2014A Bonds being redeemed before maturity in accordance this section shall be redeemed at a redemption price equal to the principal amount of the Series 2014A Bonds being redeemed, together with accrued interest (at the Taxable Rate to the extent applicable) to the date of redemption. The Series 2014B Bonds being redeemed before maturity in accordance this section shall be redeemed at a redemption price equal to the principal amount of the Series 2014B Bonds being redeemed, together with accrued interest to the date of redemption. Extraordinary Optional Redemption. If there should occur any event described in Section 7.1 of the Loan Agreement which permits the redemption of the Bonds, the Bonds may, in certain circumstances, and upon the satisfaction of certain conditions, as set forth in Section 7.1 of the Loan Agreement, be subject to redemption at any time in whole or in part at a redemption price equal to the principal amount of the Bonds being redeemed, together with accrued interest to the date of redemption. Mandatory Sinking Fund Redemption. The Series 2014B Bonds will be subject to mandatory sinking fund redemption prior to maturity, on May 1 of the years and in the amounts set forth in the following table, at a redemption price equal to 100% of the principal amount thereof plus interest accrued to the date fixed for redemption: May 1 of Year (Final Maturity) Amount to be Redeemed $ 600,000 1,000,000 2,040,000 In the event of a partial redemption of Bonds through extraordinary mandatory redemption or optional redemption, future mandatory sinking fund installments will be eliminated or reduced in inverse order of sinking fund installment date. Excluding Extraordinary Optional Redemption, the Series 2014B Bonds are not subject to optional redemption prior to maturity. Any optional redemption of this Bond may be rescinded if the Trustee does not hold sufficient money to redeem this Bond on the redemption date. If provision is made for the payment and redemption of this Bond in accordance with the Indenture, this Bond will thereupon cease to be entitled to the lien of the Indenture and will cease to bear interest from and after the date fixed for redemption. In the event the Bond is called for redemption, the Trustee will give notice of the redemption of this Bond, not less than thirty (30) days prior to the date fixed for redemption. Notice of any redemption must be given either (i) by first class mail by the United States Postal Service, postage prepaid, to the Registered Owner thereof at its address which appear on the registration records of the Trustee on the date of mailing, or (ii) by actual delivery to the Registered Owner or its representatives evidenced by receipt signed by such Owner or the representatives. The Bonds are issuable in the form of fully registered Bonds without coupons in an Authorized Denomination. This Bond will be registered on the records of the Authority to be kept for that purpose by the Trustee, who will act as bond registrar with respect to the Bonds, at its designated corporate trust office. Upon surrender for registration of transfer of this Bond at its designated corporate trust office, the Trustee will enter the name and address of the transferee upon the registration records of the Authority and will deliver such Bond to the transferee, or, upon request of the transferee, will deliver a new fully authenticated and registered Bond in the name of the transferee, such new Bond to be of the same Series, of an Authorized Denomination and of the same maturity and interest rate which the Registered Owner is entitled to receive. The Bond presented for registration of transfer, exchange, redemption or payment (if so required by the Authority or the Trustee), must be accompanied by a written instrument or instruments of transfer, in form and with guaranty of signature as set forth hereon or as may be satisfactory to the Trustee, duly executed by the Registered Owner or by its duly authorized attorney. The Trustee may require payment from the Owner of a sum sufficient to cover any tax or other governmental fee or charge that may be imposed in relation thereto. Such taxes, fees and charges must be paid before any such new Bond will be delivered. The Authority and the Trustee are not required to register the transfer of this Bond if it has been called or is being called for redemption. The Authority and the Trustee shall deem and treat the Person in whose name this Bond is registered on the registration records of the Authority maintained by the Trustee as the absolute owner hereof for all purposes, whether or not this Bond is overdue; and neither the Authority nor the Trustee will be affected by any notice to the contrary. The stated maturity of this Bond may be accelerated upon the occurrence of certain Events of Default as defined in the Indenture. The Registered Owner of this Bond has no right to enforce the provisions of the Indenture, or to institute action to enforce the covenants therein, or to take any action with respect to any default under the Indenture, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture. If the date for making any payment hereunder or under the Indenture or the last date for performance of any act or the exercising of any right, as provided in the Indenture, is not a Business Day, such payment may, unless otherwise provided in the Indenture, be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided herein or in the Indenture, and no interest will accrue for the period after such nominal date. THIS BOND SHALL NOT BE VALID OR BECOME OBLIGATORY for any purpose or be entitled to any benefit or security under the Indenture unless the Certificate of Authentication hereon has been executed by the Trustee by manual signature :5 A :5 A-13 NEITHER THE MEMBERS OF THE AUTHORITY NOR ANY OFFICIAL EXECUTING THIS BOND NOR ANY OTHER AUTHORITY INDEMNIFIED PARTY SHALL BE LIABLE PERSONALLY ON THIS BOND OR BE SUBJECT TO ANY PERSONAL LIABILITY OR ACCOUNTABILITY BY REASON OF THE ISSUANCE THEREOF. THE OWNER OF THIS BOND AS A CONDITION OF THE PURCHASE OF THIS BOND HEREBY ACKNOWLEDGES THAT SUCH OWNER HAS AGREED TO THE FOREGOING CONDITION OF OWNERSHIP OF THIS BOND. IN WITNESS WHEREOF, the Public Finance Authority has caused this Bond to be signed by the manual or facsimile signature of an Authorized Signatory as of the date set forth above. PUBLIC FINANCE AUTHORITY FORM OF ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto (Please print or typewrite Name and Address, including Zip Code, and Federal Taxpayer Identification or Social Security Number of Assignee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints Attorney to register the transfer of the within Bond on the records kept for registration thereof, with full power of substitution in the premises. Dated: Signature guaranteed by: By: Authorized Signatory [SEAL] CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the Indenture referred to herein. NOTICE: Signatures must be guaranteed pursuant to law. NOTICE: The signature to this Assignment must correspond with the name as it appears on the face of the within Bond in every particular, without alteration or enlargement alteration or enlargement change whatsoever. Date of Authentication: U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory :5 A-14 B :5 A-15

76 EXHIBIT B FORM OF QUALIFIED INVESTOR LETTER :5 B-1 B-22

77 APPENDIX C FORM OF LOAN AGREEMENT (Form of Loan Agreement expected to be delivered in substantially the following form)

78 [This Page Is Intentionally Left Blank.]

79 TABLE OF CONTENTS Page :5 LOAN AGREEMENT by and between PUBLIC FINANCE AUTHORITY and PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY Dated as of June 1, 2014 Relating to: PUBLIC FINANCE AUTHORITY $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A and $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B The amounts payable to the Public Finance Authority (the Authority ) and other rights of the Authority (except for Authority s Unassigned Rights, as defined in the hereinafter described Indenture) under this Loan Agreement have been pledged and assigned to U.S. Bank National Association, as trustee (the Trustee ) under the Trust Indenture between the Authority and the Trustee dated as of the dated date hereof. Article I - DEFINITIONS... 3 Section 1.1 Definitions... 3 Article II - REPRESENTATIONS AND COVENANTS... 3 Section 2.1 Representations by the Authority... 3 Section 2.2 Representations by the Borrower Section 2.3 Covenants by the Borrower Article III - LOAN OF BOND PROCEEDS; ADVANCES Section 3.1 Issuance of Bonds and Delivery of Note and other Loan Documents Section 3.2 Requisition Section 3.3 Use of Proceeds; Completion of the Project Section 3.4 Project Documents Section 3.5 Changes to the Project Section 3.6 Borrower to Pay Excess Costs Section 3.7 Laborers, Subcontractors and Materialmen Article IV - LOAN REPAYMENTS Section 4.1 Loan Repayments and Other Amounts Section 4.2 Loan Repayments Section 4.3 Security Interest in Gross Revenues; Payments Pledged and Assigned Section 4.4 Obligations of Borrower Hereunder Unconditional Article V SPECIAL COVENANTS OF THE BORROWER Section 5.1 Maintenance of Status, Records and Accounts Section 5.2 Financial Statements and Information Section 5.3 Insurance Section 5.4 Liens and Other Charges Section 5.5 Inspection of Project and Books, Appraisals Section 5.6 Compliance with Laws, Contracts, Licenses, and Permits Section 5.7 Further Assurances Section 5.8 Notices Section 5.9 Solvency; Adequate Capital Section 5.10 Merger, Consolidation, Conversion and Disposition of Assets Section 5.11 Sale and Leaseback Section 5.12 Tax-Exempt Status of the Series 2014A Bonds Section 5.13 No Arbitrage Bonds Section 5.14 Arbitrage Rebate Section 5.15 Indemnification Section 5.16 Agreements Between Borrower and its Affiliates :5 Section 5.17 Affiliated Entities; Advance of Funds Section 5.18 Continuing Disclosure Section 5.19 Additional Payments Section 5.20 Management of the Facility Section 5.21 Charter School Contract Section 5.22 Other Debt Section 5.23 Maintenance of Facility Section 5.24 Payment of Taxes Article VI - EVENTS OF DEFAULT AND REMEDIES Section 6.1 Section 6.2 Section 6.3 Section 6.4 Section 6.5 Section 6.6 Section 6.7 Events of Default Remedies on Default No Remedy Exclusive Agreement to Pay Fees and Expenses of Counsel No Additional Waiver Implied by One Waiver; Consents to Waivers Remedies Subject to Applicable Law Authority s Unassigned Rights Article VII - PREPAYMENT OF LOAN Section 7.1 Section 7.2 Section 7.3 Insurance; Damage, Destruction or Condemnation of the Facility Borrower s Option and Obligation to Prepay Termination of Loan Agreement Article VIII - MISCELLANEOUS Section 8.1 General Provisions Section 8.2 Authorized Borrower Representative Section 8.3 Binding Effect Section 8.4 Execution in Counterparts Section 8.5 Amendments, Changes and Modifications Section 8.6 Severability Section 8.7 Survival Section 8.8 Notices Section 8.9 Applicable Law Section 8.10 Debtor Creditor Relationship Section 8.11 Maximum Rate; Total Interest Section 8.12 Terms of this Agreement Section 8.13 Third-Party Beneficiaries Section 8.14 Entire Agreement EXHIBIT A-1 FORM OF SERIES 2014A PROMISSORY NOTE A-1 EXHIBIT A-2 FORM OF SERIES 2014B PROMISSORY NOTE A-5 EXHIBIT B FORM OF REQUISITION.B-1 EXHIBIT C AUTHORIZED BORROWER REPRESENTATIVE CERTIFICATE C-1 LOAN AGREEMENT This LOAN AGREEMENT, dated as of June 1, 2014 (the Agreement ), by and between the PUBLIC FINANCE AUTHORITY, a unit of government and a body corporate and politic under the laws of the State of Wisconsin (together with its successors and assigns, the Authority ), and PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY, a Florida non-profit corporation (the Borrower ), W I T N E S S E T H: WHEREAS, the Authority was organized as a commission under and pursuant to Sections , and of the Wisconsin Statutes, as amended commonly known as the Joint Exercise of Powers Law (the Act ) and exists by virtue of that certain Amended and Restated Joint Exercise of Powers Agreement Relating to the Public Finance Authority, dated September 28, 2010, by and among Adams County, Wisconsin; Bayfield County, Wisconsin; Marathon County, Wisconsin; Waupaca County, Wisconsin; and the City of Lancaster, Wisconsin, as such agreement may be amended from time to time (the Joint Exercise Agreement ); and WHEREAS, the Authority is authorized and empowered under the Act and by the Joint Exercise Agreement to, among other things, issue bonds, notes or other evidences of indebtedness in connection with, and to make loans to assist in the financing and refinancing of, projects (as defined in the Act) located inside and outside of the State of Wisconsin; and WHEREAS, the Borrower has applied for the financial assistance of the Authority for the purpose of financing (a) the acquisition of two charter schools (the Facility ) operated by the Borrower which are located within the territorial limits of the Town of Lantana located in Palm Beach County, Florida (together, the Project Jurisdiction ), (b) the construction, equipping and making of certain renovations and capital improvements to the Facility, (c) the refunding of the Authority s $1,000,000 Education Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A (the Refunded Bonds ), (d) the funding of a debt service reserve fund for the Bonds (as defined herein), (e) paying capitalized interest on the Bonds and (f) paying costs of issuance of the Bonds (collectively, the Project ); and WHEREAS, the Authority has authorized the issuance of its $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A (the Series 2014A Bonds ) and its $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B (the Series 2014B Bonds and, collectively with the Series 2014A Bonds, the Bonds ), under a Trust Indenture of even date herewith (the Indenture ) between the Authority and U.S. Bank National Association, as trustee (together with any successor, the Trustee ), to provide funds to the Borrower for such purposes; and WHEREAS, the Borrower has engaged Hapoalim Securities USA, Inc. (the Underwriter ) to purchase and underwrite the Bonds; and WHEREAS, the Authority will loan the proceeds of the sale of the Bonds to the Borrower for the purposes described above; and :5 C :5 1

80 WHEREAS, the Authority has duly entered into this Agreement with the Borrower to specify the terms and conditions of such loan and of the payment by the Borrower to the Authority of amounts sufficient for the payment of the principal of and premium, if any, and interest on the Bonds and certain related expenses; and WHEREAS, the Borrower agrees to repay such loan from the Authority on the terms and conditions hereinafter set forth; and WHEREAS, simultaneously with the issuance of the Bonds, the Borrower will execute and deliver to the Authority two promissory notes dated the date of issuance of the Bonds, one in an original principal amount equal to the aggregate original principal amount of the Series 2014A Bonds (as the same may be amended, supplemented or modified from time to time, the Series 2014A Note ) and the other one in an original principal amount equal to the aggregate original principal amount of the Series 2014B Bonds (as the same may be amended, supplemented or modified from time to time, the Series 2014B Note and, collectively with the Series 2014A Note, the Notes ), to evidence its obligations thereunder to make payments sufficient to pay the Bonds, and the Authority will assign the Notes to the Trustee to secure the Bonds; and WHEREAS, the Borrower operates the Facility in the Project Jurisdiction; and the Authority, based on representations of the Borrower but without independent investigation, has found and determined that the financing and refinancing of the Project will promote significant economic, cultural and community development opportunities, including the creation or retention of employment, the stimulation of economic activity and the promotion of improvements in the health, safety and welfare of persons in the Project Jurisdiction; and WHEREAS, the Authority and the Borrower desire to set forth the terms and conditions with respect to such financing; WHEREAS, all things necessary to constitute this Loan Agreement a valid and binding agreement by and between the parties hereto in accordance with the terms hereof have been done and performed, and the creation, execution and delivery of this Loan Agreement have, in all respects, been duly authorized; and WHEREAS, the obligations of the Borrower under this Loan Agreement will be secured by, among other things, a Guaranty Agreement from Palm Beach Maritime Foundation, Inc., a Maryland non-profit corporation (the Guarantor ), dated as of the date hereof (as the same may be modified, amended or supplemented from time to time, the Guaranty Agreement ) to the Trustee, by a Mortgage and Security Agreement, dated as of the date hereof (as the same may be modified, amended or supplemented from time to time, the Mortgage ) from the Borrower to the Trustee and by the other Loan Documents (as defined in the Indenture). NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: ARTICLE I - DEFINITIONS Section 1.1 Definitions. All capitalized terms used herein and not defined herein shall have the meanings ascribed thereto in the Indenture, unless otherwise expressly provided or unless the context otherwise shall require. The singular shall include the plural and the masculine shall include the feminine and neuter shall include the masculine or feminine. ARTICLE II - REPRESENTATIONS AND COVENANTS Section 2.1 Representations by the Authority. The Authority hereby represents and warrants to, and agrees with, the Borrower as set forth in this Section 2.1. Provided, however, that as to information furnished by the Borrower pursuant to this Agreement, the Authority is relying solely on such information in making Authority s representations and agreements, and as to all matters of law the Authority is relying on the advice of Bond Counsel; and provided further, that no Authority Indemnified Party shall be individually liable for the breach of any representation, warranty or agreement contained herein. (a) The Authority is a commission under the Act and a unit of government and body corporate and politic organized and existing under the laws of the State of Wisconsin and has full power and authority to adopt the Resolution, to enter into and to perform its obligations under the Authority Documents; and when executed and delivered by the respective parties thereto, the Authority Documents will constitute the legal, valid and binding obligations of the Authority enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitation on legal remedies against governmental units and joint powers commissions in the State of Wisconsin. (b) By official action of the Authority prior to or concurrently with the acceptance hereof, the Authority has authorized and approved the execution and delivery of the Authority Documents and the consummation by the Authority of the transactions contemplated thereby. (c) To the knowledge of the Authority, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending against the Authority seeking to restrain or enjoin the sale or issuance of the Bonds, or in any way contesting or affecting any proceedings of the Authority taken concerning the sale thereof, the pledge or application of any moneys or security provided for the payment of the Bonds, in any way contesting the validity or enforceability of the Authority Documents or contesting in any way the existence or powers of the Authority relating to the sale of the Bonds. (d) The execution and delivery by the Authority of the Authority Documents and compliance with the provisions on the Authority s part contained therein will not conflict with or constitute a material breach of or default under any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Authority is a party or is otherwise subject, nor will any such execution, delivery, : :5 3 adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the Authority under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the Authority Documents. (e) The Authority has, pursuant to the Resolution, found and determined that the financing and refinancing of the Project is in furtherance of the purposes for which the Authority was organized under the Act. THE AUTHORITY MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROJECT, THE FACILITY, OR ANY PORTION THEREOF, INCLUDING WITHOUT LIMITATION, THE HABITABILITY THEREOF; THE MERCHANTABILITY OR FITNESS THEREOF FOR ANY PARTICULAR PURPOSES; THE DESIGN OR CONDITION THEREOF; THE WORKMANSHIP, QUALITY, OR CAPACITY THEREOF; LATENT DEFECTS THEREIN; THE VALUE THEREOF; FUTURE PERFORMANCE OR THE COMPLIANCE THEREOF WITH ANY LEGAL REQUIREMENTS. Section 2.2 Representations by the Borrower. The Borrower makes the following representations and warranties as of and from the date of the execution and delivery of this Agreement as the basis for the undertakings on its part herein contained: (a) The Borrower is, and at all times will be, duly organized, validly existing and in good standing as a corporation not for profit under the laws of the State of Florida and an organization described in Section 501(c)(3) of the Code. The Borrower has, and will at all times have, all requisite power to own its property and conduct its business as now conducted and as presently contemplated, to execute and deliver the Loan Documents and to perform its duties and obligations hereunder and thereunder. (b) The execution, delivery and performance of this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby (i) are within the authority of the Borrower, (ii) have been duly authorized by all necessary proceedings on the part of the Borrower, (iii) do not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which the Borrower is subject or any judgment, order, writ, injunction, license or permit applicable to the Borrower, (iv) do not conflict with any provision of the Organizational Documents of the Borrower, and (v) do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained and the filing of certain of the Loan Documents in the appropriate public records. (c) The execution and delivery of this Agreement and the other Loan Documents, when assigned to the Trustee pursuant to the Indenture, will result in valid and legally binding obligations of the Borrower enforceable against the Borrower by the Trustee in accordance with the respective terms and provisions hereof and thereof, and the Authority s Unassigned Rights constitute the legal, valid, and binding agreements of the Borrower enforceable against the Borrower by the Authority in its own right (or, in the case of indemnification of any Authority Indemnified Party, by such Authority Indemnified Party in his, her or its own right) in accordance with their terms except in each case as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors rights, and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. (d) After the Borrower acquires the Facility with the proceeds of the Bonds, the Borrower at all times will hold, fee simple title to the Land, subject only to the Permitted Encumbrances. The Borrower and the Guarantor possess, and will at all times possess, all franchises, patents, copyrights, trademarks, trade names, licenses and permits and approvals, and rights in respect of the foregoing, adequate for the conduct of their respective businesses substantially as now conducted or as they are intended to be conducted with respect to the Facility and otherwise, without known conflict with any rights of others. (e) The Borrower is not subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future to have a materially adverse effect on the business assets or financial condition of the Borrower. The Borrower is not, and will not be, a party to any contract or agreement that has or is expected, in the judgment of the Borrower's Board of Directors, to have any materially adverse effect on the business or financial condition of the Borrower. (f) The Borrower is not and will not at any time be, in violation of any provision of its Organizational Documents or any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could result in the imposition of substantial penalties or adversely affect the financial condition, properties or business of the Borrower. (g) The Borrower (i) has made or filed, and will make or file in a timely fashion, all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid, and will pay when due, all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings, (iii) has set aside, and will at all times set aside, on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the period to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers, members or trustees of the Borrower know of no basis for any such claim. The Borrower has filed, and will continue to file, all of such tax returns, reports, and declarations either (x) separately from any Affiliate or (y) if part of a consolidated filing, as a separate member of any such consolidated group. (h) All components of the Facility and the Project will be located wholly within the boundaries of the Project Jurisdiction. (i) None of the Authority or any member, official or employee of the Authority has any interest, financial, employment or other, in the Borrower, the Facility or the transactions contemplated hereby :5 4 C :5 5

81 (j) There is no Event of Default on the part of the Borrower under this Agreement or any other Loan Document, or any Organizational Document, and no event has occurred and is continuing which after notice or passage of time or both would give rise to a default under any thereof. The Borrower has received no notices of and has no knowledge of any violations of any Legal Requirements or Project Approvals. (k) The certifications, representations, warranties, statements, information and descriptions contained in the Loan Documents and in the Borrower's Tax Certificate, as of the date of the first authentication and delivery of the Bonds, are and will be true, correct and complete, do not and will not contain any untrue statement or misleading statement of a material fact, and do not and will not omit to state a material fact required to be stated therein or necessary to make the certifications, representations, warranties, statements, information and descriptions contained therein, in light of the circumstances under which they were made, not misleading. The estimates and the assumptions contained in the Loan Documents and in the Borrower's Tax Certificate, as of the date of the first authentication and delivery of the Bonds, are reasonable and based on the best information available to the Borrower. Each of the certifications, representations, warranties, statements, information and descriptions contained in the Borrower's Tax Certificate is hereby incorporated into this Agreement by reference, as if fully set forth herein. (l) The Borrower has furnished to the Authority in the Borrower's Tax Certificate all information necessary for the Authority to file an IRS Form 8038 with respect to the Bonds, and all of such information is and will be on the date of filing, true, complete and correct. (m) The Borrower is not contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency law or the liquidation of all or a major portion of its property, and the Borrower has no knowledge of any Person contemplating the filing of any such petition against it. (n) The Borrower is not an employee benefit plan, as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and none of the assets of the Borrower constitutes or will constitute plan assets of one or more such plans within the meaning of 29 C.F.R. Section (o) No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose that would be inconsistent with such Regulation U or any other Regulation of such Board of Governors, or for any purpose prohibited by Legal Requirements or any Loan Document. (p) The Borrower is not (i) an investment company or a company controlled by an investment company, within the meaning of the Investment Company Act of 1940, as amended; (ii) a holding company or a subsidiary company of a holding company or an affiliate of either a holding company or a subsidiary company within the meaning of the Public Utility Holding Company Act of 1935, as amended; or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money. (q) The Borrower has not entered into this Loan Agreement or any other Loan Document with the actual intent to hinder, delay, or defraud any creditor, and the Borrower has received reasonably equivalent value in exchange for its obligations under the Loan Documents. Giving effect to the transactions contemplated by the Loan Documents, the fair saleable value of the Borrower s assets exceeds and will, immediately following the execution and delivery of the Loan Documents, exceed the Borrower s total liabilities, including subordinated, unliquidated, disputed or contingent liabilities. The fair saleable value of the Borrower s assets is and will, immediately following the execution and delivery of the Loan Documents, be greater than the Borrower's probable liabilities, including maximum amount of its contingent liabilities or its debts as such debts become absolute and matured. The Borrower s assets do not and, immediately following the execution and delivery of the Loan Documents, will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. The Borrower does not intend to, and does not believe it will, incur debts and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of the Borrower). (r) All information regarding the Borrower, the Facility or the Project delivered to the Authority or the Underwriter is true and correct in all material respects and all financial information fairly presents the financial condition and results of operations of the Borrower and the Obligors for the periods to which such financial information relates, and discloses all liabilities and contingent liabilities of the Borrower or the Obligors. (s) There are no actions, suits, proceedings or investigations of any kind pending or threatened against the Borrower before any court, tribunal or administrative agency or board or any mediator or arbitrator that, if adversely determined, might, either in any case or in the aggregate, adversely affect the business, assets or financial condition of the Borrower, or result in any liability not adequately covered by insurance, or for which adequate reserves are not maintained on the balance sheet of the Borrower, or which question the validity of this Agreement or any of the other Loan Documents, any action taken or to be taken pursuant hereto or thereto, or any lien or security interest created or intended to be created pursuant hereto or thereto, or which will adversely affect the ability of the Borrower to construct, use and occupy the Facility or to pay and perform its obligations hereunder in the manner contemplated by this Agreement, any of the other Loan Documents. (t) All utility services necessary and sufficient for the Project and continued operation of the Facility are presently, and will at all times be, available through dedicated public rights of way or through perpetual private easements with respect to which the Mortgage creates a valid and enforceable first lien. (u) The rights of way for all roads necessary for the full utilization of the Facility for its intended purposes have either been acquired by the appropriate Governmental Authority or have been dedicated to public use and accepted by such Governmental Authority. All such roads shall have been completed, or all necessary steps have been taken by the Borrower and such Governmental Authority to assure the complete construction and installation thereof prior to the date upon which access to the Facility via such roads will be necessary, and the right to use all such roads, or suitable substitute rights of way, shall be maintained at all times for the Facility : :5 7 All curb cuts, driveways and traffic signals shown on the Plans and Specifications are existing or have been fully approved by the appropriate Governmental Authority and after the completion thereof, shall be maintained at all times for the Facility. (v) The acquisition, redevelopment planning, redevelopment, construction, renovation, equipping, use and occupancy of the Facility will at times comply with all Legal Requirements. The Borrower will give all notices to, and take all other actions with respect to, such Governmental Authorities as may be required under applicable Legal Requirements to construct the Improvements and to use, occupy and operate the Facility. (w) No part of the Land is located in an area identified by the Federal Emergency Management Agency as an area having special flood hazard or to the extent any part of the Land is an area identified as an area having special flood hazard, adequate flood insurance has been obtained by the Borrower. (x) The Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority, the violation of which might materially adversely affect the condition (financial or otherwise) or business of the Borrower. There has not been and shall never be committed by the Borrower or any other Person in occupancy of or involved with the operation or use of the Facility any act or omission affording any Governmental Authority the right of forfeiture as against the Facility or any part thereof any monies paid in performance of the Borrower's obligations under any Loan Document. (y) Each Requisition submitted by the Borrower shall contain an affirmation that the foregoing representations and warranties remain true and correct as of the date hereof executed by the Borrower. (z) No written information, exhibit or report furnished to the Authority by the Borrower in its application for financing or by the Borrower or its representatives in connection with the negotiation of this Loan Agreement or the Indenture, or any other Loan Document regardless of whether the Authority is a party thereto (including any financial statements, whether audited or unaudited, and any other financial information provided in connection therewith) contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representation in this paragraph (z) is made only to the Authority and may not be relied upon by any other Person. (aa) The surveys for the Facility delivered to the Title Insurance Company do not fail to reflect any material matter of survey affecting the Facility or the title thereto. Section 2.3 Covenants by the Borrower. The Borrower hereby covenants and agrees that, on and after the Closing Date, it will: (a) Promptly give written notice of any intended refinancing of the Bonds to the Authority, the Trustee and the Underwriter; (b) Comply with all laws, ordinances, orders, rules, statutes and regulations of Governmental Authorities and promptly furnish the Authority, the Trustee and the Underwriter, with reports of any official searches made by any Governmental Authority and any claims of violations thereof; (c) Permit the Authority, the Trustee and the Underwriter (or their representatives) to enter upon the Land and inspect the Facility; (d) Cause the satisfaction of all conditions of this Agreement and the other Loan Documents to be performed by or imposed upon the Borrower; (e) Indemnify the Authority, the Trustee and the Underwriter against claims of brokers arising by reason of the execution hereof or the consummation of the transactions contemplated hereby; (f) Facility; Comply with all restrictions, covenants and easements affecting the Land or the (g) Make all payments and observe and perform all covenants, conditions and agreements required to be paid, observed or performed by the Borrower under this Agreement (including without limitation the payments specified in Section 4.2 hereof), the Authority Documents and the other Loan Documents and all other documents, instruments or agreements which may at any time, or from time to time, be entered into by the Borrower with respect to the Project or the Facility or the operation, occupancy or use thereof, and take all steps necessary to require any successor owner or owners of the Facility; (h) Take, or require to be taken, such acts as may be required of it under applicable law or regulation in order that the interest on the Series 2014A Bonds continues to be excludable from gross income for purposes of federal income taxation, and refrain from taking any action which would adversely affect the exclusion from gross income of interest on the Series 2014A Bonds from federal income taxation; (i) Perform and satisfy all the duties and obligations of the Borrower set forth and specified in the Indenture as duties and obligations of the Borrower, including those duties and obligations which the Indenture requires this Agreement or the other Loan Documents to impose upon the Borrower; (j) Confirm and assure that the Facility, equipment, buildings, plans, offices, apparatus, devices, books, contracts, records, documents and other papers relating thereto shall at all times be maintained in reasonable condition for proper audit and shall be subject to examination and inspection at any reasonable time by the Trustee, the Authority or the Underwriter or the duly authorized agent of any of them and shall keep copies of all written contracts or other instruments which affect the Facility, all or any of which shall be subject to inspection and examination by the Trustee, the Authority, the Underwriter, or the duly authorized agent of any of them; (k) the Trustee; Not make or suffer any substantial changes to the Facility without the approval of :5 8 C :5 9

82 (l) Assure and confirm that the representations and warranties hereby made by it in Section 2.2 will be true and correct continuously throughout the term of this Agreement; (m) Immediately notify the Authority, the Trustee, and the Underwriter in writing of any (i) default by the Borrower in the performance or observance of any covenant, agreement, representation, warranty or obligation of the Borrower set forth in this Agreement or any other Loan Documents or (ii) any event or condition which with the lapse of time or the giving of notice, or both would constitute an Event of Default under this Agreement or any other Loan Documents; (n) Cooperate fully with the Authority and the Trustee with respect to its compliance and oversight requirements and will cause the Manager of the Facility to comply; and (o) Make no changes in the Facility which would have the effect of impairing the effective use or character of the Facility as contemplated by this Agreement or the other Loan Documents. Section 3.1 ARTICLE III- LOAN OF BOND PROCEEDS; ADVANCES Issuance of Bonds and Delivery of Note and other Loan Documents. (a) In order to finance a portion of the Costs, the Authority has, consistent with the Act, issued and caused the Trustee to authenticate and deliver the Bonds pursuant to the Indenture to the Owners and has loaned the proceeds received from the sale of the Bonds to the Borrower, by causing such amounts to be deposited as provided herein, subject to the terms and conditions of the Indenture and this Agreement, including the terms and conditions thereof and hereof governing the disbursement of proceeds of the Loan. (b) The Authority has authorized and directed the Trustee to make disbursements from the Project Fund created pursuant to the Indenture to pay or to reimburse the Borrower for the Costs of the Project, subject to the conditions of the Indenture and this Agreement. Upon receipt of a signed Requisition the Trustee is authorized to act thereon without further inquiry, and, except for negligence after notice of facts to the contrary or willful misconduct of the Trustee, the Borrower shall hold the Trustee harmless against any and all losses, claims or liabilities incurred in connection with the Trustee's making disbursements from the Project Fund. Neither the Trustee nor the Authority shall be responsible for the application by the Borrower of monies properly disbursed from the Project Fund. Section 3.2 Requisition. At such time as the Borrower shall desire to obtain an advance from the Project Fund, the Borrower shall complete, execute and deliver a Requisition to the Trustee. Each Requisition shall be signed on behalf of the Borrower, shall be in the form attached as Exhibit B hereto and shall state with respect to each disbursement to be made: (a) the number of the Requisition, (b) the amount to be disbursed and the sources of such requested disbursements by account of the Project Fund, (c) that each obligation described therein is a Project Cost, has been properly incurred and has not been the basis for any previous disbursement, (d) that the expenditure of such disbursement when added to all previous disbursements will result in (i) not less than 95% of all disbursements from proceeds of the Series 2014A Bonds having been used to pay or reimburse the Borrower for Costs and (ii) not more than 2% of amounts paid from proceeds of the Series 2014A Bonds having been applied to Costs of Issuance. The Trustee may rely conclusively on the statements and certifications contained in any Requisition. Payments shall be made by the Trustee by wire transfer or as otherwise provided in each Requisition, on the date or dates specified in each Requisition, or as soon thereafter as possible. Section 3.3 Use of Proceeds; Completion of the Project. The Borrower shall expend the proceeds of the Bonds in accordance with Section 6.02(d) of the Indenture. The Borrower shall comply with all of the provisions and shall perform all obligations of the Borrower set forth in the Indenture with respect to the undertaking and completion of the Project. The Borrower shall cause the Project to be completed with reasonable dispatch, and shall provide (from its own funds if required) all moneys necessary to complete the Project substantially in accordance with the Plans and Specifications therefore. The Borrower will use the proceeds of the Bonds solely for the purpose of paying for Costs of the Project. The completion of the Project shall be evidenced to the Trustee by a certificate signed by an Authorized Representative of the Borrower delivered to the Trustee within 60 days of the date of completion of the Project, which date of completion shall not be later than December 31, 2015 without an Opinion of Bond Counsel to the effect that such later date will not adversely affect the exclusion of the interest on the Series 2014A Bonds from gross income for federal income tax purposes. Section 3.4 Project Documents. The Borrower shall procure and maintain in its files and available for inspection by the Authority, the Trustee or the Underwriter, upon request, copies of the following documents at such time as such documents become available and in any event by the time work is commenced on the portion of the Project to which they relate: (a) Plans and Specifications. All available preliminary and final plans and specifications for the Project. (b) Construction Contracts. Any architect's and general contractor's contracts for the Project and all prime subcontractor's contracts and purchase orders for any equipment included in the Project. (c) Licenses and Permits. All required licenses, permits and approvals required or necessary for the acquisition, construction and equipping of the Project from any governmental agency as may be necessary for such work. Section 3.5 Changes to the Project. The Borrower may make, authorize or permit such changes to the Project as it may reasonably determine to be necessary or desirable; provided, however, that no such change shall be made to the Project that would cause a material change in the scope, nature, or function of the Project, unless the Borrower shall file with the Authority, the Underwriter and the Trustee: (a) a certificate of an Authorized Borrower Representative to the effect that the Project will, after such change, continue to constitute facilities authorized and permitted to be : :5 11 financed under the Act, and such change will not result in any property of the Borrower being used for any purpose prohibited by this Agreement or otherwise result in the Borrower failing to comply with any provisions of this Agreement; and (b) an Opinion of Bond Counsel addressed to the Trustee and the Authority to the effect that such change or amendment will not adversely affect the exclusion of the interest on the Series 2014A Bonds from gross income for federal income taxation purposes. If, as determined by an Independent Engineer or Independent Architect, any change would render materially inaccurate the description of the Project in the Indenture, there shall be delivered to the Trustee a certificate of an Authorized Borrower Representative containing a revised description of the Project that reflects the change in the Project. Section 3.6 Borrower to Pay Excess Costs. The Borrower will pay when due all Costs of the Project in excess of the proceeds of the Bonds, regardless of the amount. If at any time, the Borrower shall determine that the remaining undisbursed portion of the General Account of the Project Fund, and any other sums previously deposited or to be deposited by the Borrower in connection with the Project, is or will be insufficient to complete the Project, to pay all other Costs, to pay all interest accrued or to accrue on the Bonds from and after the date hereof, and to pay all other sums due or to become due under the Loan Documents (or any budget category or line item), regardless of how such condition may be caused, the Borrower will, within ten (10) days after such determination, deposit with the Trustee for credit to the General Account of the Project Fund amount sufficient to remedy the insufficiency, and sufficient to pay and discharge in full any liens for labor and materials alleged to be due and payable at the time in connection with the Costs of the Project, and, no further disbursements from the General Account of the Project Fund shall be made by the Trustee unless the amounts on deposit in the General Account of the Project Fund are sufficient to complete the Project, such sufficiency to be evidenced by a certificate of an Authorized Borrower Representative. All such deposited sums shall constitute additional security under the Loan Documents and, prior to the occurrence of a Default, shall be disbursed by the Trustee in the same manner as disbursements under the Indenture before any further disbursements from the General Account of the Project Fund shall be made by the Trustee; provided that following such deposit, the Trustee shall continue to make disbursements from the General Account of the Project Fund pursuant to the terms of the Indenture. In addition, the Borrower agrees to pay any Costs of Issuance which are not being paid with the proceeds of the sale of the Bonds either by paying any or all of such costs directly or by depositing the same with the Trustee for deposit in the Costs of Issuance Account of the Project Fund. Any monies so deposited with the Trustee shall be disbursed by the Trustee in accordance with Section 6.04 of the Indenture. Section 3.7 Laborers, Subcontractors and Materialmen. RESERVED (a) Loan Payments. The Authority agrees, upon the terms and subject to the conditions hereinafter set forth and upon the terms and conditions in the Indenture, to loan the proceeds of the Bonds to the Borrower. Concurrently with the sale and delivery of the Bonds, and to evidence further the obligation to repay the Loan in accordance with the provisions of this Agreement, the Borrower will execute and deliver to the Authority the Notes substantially in the form attached hereto as Exhibit A-1 and Exhibit A-2 in connection with the Loan, in addition to the other Loan Documents. The Borrower shall make Loan Payments in accordance with the Indenture and this Loan Agreement. (b) The Borrower agrees to pay all fees, charges and expenses of the Trustee, and the fees and expenses of counsel to the Authority, Bond Counsel, the Underwriter's Counsel and counsel to the Trustee, as and when the same become due. The Borrower also agrees to pay the printing and engraving costs of the Bonds, including any certificates required to be prepared for use in connection with any exchanges of Bonds for the cost of which Owners are not liable. (c) The Borrower agrees to pay all Costs of Issuance (in addition to those Costs of Issuance otherwise required to be paid by this Section 4.1). (d) The Borrower agrees to pay, as and when the same become due, to the Authority, or the Trustee any extraordinary expenses, including, without limitation, any costs of litigation, which may be incurred by the Authority, or the Trustee in connection with this Agreement, the Indenture the other Loan Documents or the Bonds, including the costs and fees of any attorneys or other experts retained by the Authority or the Trustee in connection therewith. (e) In the event the Borrower shall fail to make any of the payments required in this Article IV, the payment so in default shall continue as an obligation of the Borrower until the amount in default shall have been fully paid and the Borrower will continue to pay all amounts due hereunder during such time until paid. (f) In addition to the foregoing provisions of this Section 4.1, the Borrower agrees to pay to the Trustee, if and to the extent necessary, such additional sums as shall be required to permit the Trustee to pay, as and when due, the principal of and premium, if any, and interest on the Bonds. Section 4.2 Loan Repayments. The Borrower shall collect the Gross Revenues and deposit the Gross Revenues into an operating account maintained by the Borrower. The Borrower shall pay to the Trustee from such operating account, on or before the 20th day of each month, an amount necessary for the payment of the amounts described in subsections (a) through (e) of this Section 4.2. The Trustee shall deposit all monies so received and any other Gross Revenues received by the Trustee into the Revenue Fund. Such monies and any other Gross Revenues received by the Trustee shall be applied by the Trustee, subject to Section 6.07(b) of the Indenture, in the order of priority set forth below: Section 4.1 ARTICLE IV - LOAN REPAYMENTS Loan Repayments and Other Amounts. (a) First, monthly upon receipt, for deposit into the Interest Account of the Debt Service Fund, an amount equal to one-sixth of that portion of the next interest payment coming due on the Bonds; :5 12 C :5 13

83 (b) Second, monthly upon receipt, for deposit into the Principal Account of the Debt Service Fund, an amount equal to one-twelfth of the next principal or mandatory sinking fund redemption payment coming due on the Bonds (provided, that through and including April 20, 2015, such amount shall be one-tenth of the next principal or mandatory sinking fund redemption payment coming due on the Bonds); provided that the Borrower may credit against any such deposits to the Debt Service Fund required pursuant to clauses (a) and (b) above on any date (i) amounts deposited into the Capitalized Interest Account out of the proceeds of the Bonds, (ii) any payments of principal of or interest on the Bonds paid on or immediately preceding such date other than with funds held for the credit of the Debt Service Fund and (iii) any amounts held in the Debt Service Fund as income from the investment of amounts on deposit pursuant to the Indenture; (c) Third, for deposit into the Rebate Fund, the amount of any rebatable arbitrage determined pursuant to Section 5.14 hereof; (d) Fourth, commencing the month next following the month in which there shall have occurred any transfer from, or decline in value of, the Debt Service Reserve Fund, for deposit into the Debt Service Reserve Fund, an amount equal to one-sixth of the amount needed to restore the balance therein to the Debt Service Reserve Fund Requirement; (e) Fifth, upon receipt, payment of Additional Payments and Trustee Expenses due to be paid within the next thirty (30) days and any payments due to the Rebate Analyst; and (f) After the payments in (a), (b), (c), (d) and (e) above have been made, the Trustee shall pay to the Borrower any remaining balance in the Revenue Fund, to be used by the Borrower to pay Operating Expenses. Section 4.3 Security Interest in Gross Revenues; Payments Pledged and Assigned. The Borrower hereby pledges and grants to the Authority a security interest in favor of the Authority in the Gross Revenues, in consideration of the loan and as security for the Loan Payments to be made by Borrower hereunder and under the Note for the payment of the Bonds, and as security for the performance of all of the other obligations, agreements and covenants of Borrower to be performed and observed hereunder. Except as provided in the following sentence, the Borrower shall not be required to pay Gross Revenues to the Trustee. However, if an Event of Default has occurred and is continuing, upon the written request of the Majority Bondholders the Borrower shall pay all Gross Revenues to the Trustee for deposit to the Revenue Fund. It is understood and agreed that the Loan Documents and certain other documents and property (except the Authority s Unassigned Rights) and all payments required to be made by the Borrower pursuant hereto (except payments to be made to the Authority in respect of its Authority s Unassigned Rights) have been assigned to the Trustee simultaneously herewith pursuant to the Indenture as and for security for the Bonds. The Borrower hereby consents to such assignment and recognizes the assignee of the Authority, or any further assignee, to the extent of the assignment, as the Authority for purposes of said documents and property. Section 4.4 Obligations of Borrower Hereunder Unconditional. The obligations of the Borrower to make any payments required by the terms of this Agreement and the other Loan Documents, including, without limitation, the payments required in Sections 4.1 and 4.2 hereof, and to perform and observe the other covenants and agreements on its part contained herein and in the other Loan Documents shall be absolute and unconditional and shall not be subject to any defense (other than payment) or any right of set off, counterclaim, abatement or otherwise and, until such time as the principal of and interest and premium, if any, on the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture; the Borrower (i) will not suspend or discontinue, or permit the suspension or discontinuance of, any payments provided for herein or in the other Loan Documents, (ii) will perform and observe all of its other covenants and agreements contained herein and in the other Loan Documents and (iii) will not suspend the performance of its obligations hereunder and under the other Loan Documents for any cause including without limiting the generality of the foregoing, failure to complete the Project or any portion thereof, any acts or circumstances that may constitute failure of consideration, failure of or a defect of title to the Facility or any part thereof, eviction or constructive eviction, destruction of or damage to the Facility, commercial frustration of purpose, any change in the tax or other laws or administrative rulings of or administrative actions by the United States of America or the State or any political subdivision of either, or any failure of the Authority to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with this Agreement or the other Loan Documents. The Borrower may, at its own cost and expense, prosecute or defend any action or proceeding or take any other action involving third persons which the Borrower deems reasonably necessary in order to secure or protect its rights hereunder. ARTICLE V SPECIAL COVENANTS OF THE BORROWER Section 5.1 Maintenance of Status, Records and Accounts. The Borrower and the Guarantor will (a) remain in good standing in its jurisdiction of formation and in any other in which it conducts its business, (b) keep true and accurate records and books of account in which full, true and correct entries will be made of all dealings or transactions of or in relation to its business and affairs in accordance with Generally Accepted Accounting Principles, which records and books will not be maintained on a consolidated basis with those of any other Person, including any Affiliate of the Borrower and (c) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation and amortization of its properties, contingencies, and other reserves, all of which accounts shall not be commingled with accounts of any other Person, including any or Affiliate of the Borrower. Section 5.2 Financial Statements and Information. Until the Bonds have been paid in full, the Borrower and Guarantor shall each furnish or cause to be furnished to the Trustee and to each Beneficial Owner requesting such information the following information in writing: (a) (Borrower only) Within ninety (90) days after the last day of each Fiscal Year, a complete audit report and opinion certified by an Independent Public Accountant reasonably acceptable to the Underwriter, which report and opinion shall be based upon an examination made in accordance with Generally Accepted Accounting Principles, covering its operations with respect to the Facility for such Fiscal Year and containing a balance sheet, income statement, : :5 15 results of operations and statement of cash flows and other pertinent information as at the end of such Fiscal Year, showing, in each case, in comparative form the figures for the preceding Fiscal Year; (b) Within forty five (45) days after the end of each fiscal quarter, a balance sheet, income statement and statement of cash flows and other pertinent information, showing its financial and operating condition at the close of such fiscal quarter, the results of operations for such fiscal quarter, the results of operations for the Fiscal Year through the end of such fiscal quarter and a calculation of the performance covenants set forth in Section 5.9(c), (d) and (e) hereof (and in the case of the Borrower providing separately such information with respect to the Facility), certified as being true and correct, subject to normal year end closing adjustments, by its chief financial officer; (c) Within forty five (45) days after the last day of each fiscal quarter, a certificate of its chief financial officer certifying that (i) to the best of his or her knowledge, no event has occurred that, with the giving of notice or the passage of time or both, would constitute and Event of Default, (ii) the unaudited quarterly financial statements for such fiscal quarter (A) have been prepared in accordance with Generally Accepted Accounting Principles on substantially the same basis as its audited financial statements, and (B) are true, correct and complete to the best of his or her knowledge, and (iii) any and all property/casualty insurance premiums, IRS payroll taxes and other governmental or municipal charges have been paid before becoming delinquent or subject to interest or penalties; (d) Notices of specified events required under Section 5.18 hereof; and (e) Telephonic updates from the executive director of the Borrower, which telephonic updates shall be held annually if there is at the time no Event of Default, quarterly if there is at the time an Event of Default, and on a more frequent basis (but not to exceed monthly), upon the reasonable request of the Beneficial Owners of $1,000,000 or more of the Bonds. Calls shall provide the Beneficial Owners with the opportunity to ask questions of the Borrower regarding the Borrower, the Guarantor, the Project and the Facility. Such calls are for the benefit of the Beneficial Owners, and the Trustee may, but is in no way obligated, to participate as well. (f) Monthly construction status reports on the addition to the Facility being financed out of the proceeds of the Bonds. Such reports shall be provided no later than the 20 th day of each month, beginning August 20, 2014, and ending upon the completion of the Project. Section 5.3 Insurance. The Borrower shall maintain insurance of such type and in amounts as is customarily carried, and against such risks as are customarily insured against, by businesses of like size and character in the State, including but not limited to the following: (a) Insurance upon the repair or replacement basis in an amount of not less than 100% of the then actual cost of replacement (excluding costs of replacing excavations and foundations but without deduction for depreciation) of the Facility against loss or damage by fire, lighting, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, aircraft, vehicles, and smoke and such other risks as are not or hereafter included in the uniform standard extended coverage endorsement in common use for similar structures (including vandalism and malicious mischief); (b) Business interruption insurance (also referred to as use and occupancy insurance or rental income insurance ) in an amount not less than the principal and interest payments required in respect of the Bonds for the next succeeding twelve (12) months, covering loss of revenues and other income by the Borrower by reason of total or partial suspension of, or interruption in the operation of the Facility caused by damage or destruction of the Facility; (c) Boiler explosion insurance or steam boilers, if any, pressure vessels, and pressure piping in an amount no less than 100% of the actual cost of repair or replacement of the Facility (with deductible provisions not to exceed $1,000 in any one occurrence) provided, that such insurance need not be taken out until steam boilers, pressure vessels, or pressure piping have been installed in the Facility; (d) Comprehensive general liability insurance providing insurance (with deductible provisions not exceeding $5,000) to the extent of not less than $500,000 per occurrence against liability for personal and bodily injury including death resulting therefrom, $100,000 per occurrence for damage to property, including loss of use thereof, occurring on or in any way related to the Facility or any part thereof, with excess liability or umbrella insurance for claims under such coverage in the aggregate of not less than $2,000,000; and (e) (f) Worker s compensation coverage as required by the laws of the State. All insurance required by the Charter School Contract. Proceeds of insurance required by (a) and (c) in excess of $25,000 will be paid to the Trustee and deposited into the Insurance and Condemnation Proceeds Account of the Project Fund and disbursed by it in accordance with written instructions from the Borrower for the restoration of the Facility except as otherwise provided in Section 7.1 hereof. All policies of insurance shall provide for payment to the Borrower and the Trustee as their respective interests may appear, and the policies required by (a), (b), (c) and (d) shall name the Trustee as mortgagee. The Trustee shall have no duty to review the insurance required by this Section 5.3 (or the certificates thereof) or to inquire as to the compliance thereof with this Section 5.3. Such insurance requirements may be modified from time to time at the written request of the Borrower to the Underwriter, which request shall be granted if the Underwriter is provided with evidence reasonably satisfactory to it that the modified requirements are commercially reasonable for facilities similar to the Facility and is approved by the Underwriter. If any such insurance shall expire or be canceled, or become void or voidable by reason of the breach of any condition of coverage, or if any coverage is unsatisfactory by reason of the failure or impairment of the capital of any insurance carrier, the Borrower shall promptly purchase new insurance :5 16 C :5 17

84 (g) Not later than ninety (90) days after the end of each Fiscal Year, the Borrower shall deliver to the Trustee a certificate in the form of Exhibit C hereto, signed by an Authorized Borrower Representative. The Trustee shall be entitled to rely upon said certificate as to the Borrower s compliance with the insurance requirements set forth herein without further inquiry. If the Borrower fails to obtain or maintain at least the minimum insurance required under this Agreement, it shall immediately notify the Trustee, the Authority and the Underwriter in writing of such failure. The Trustee makes no representation as to, and shall have no responsibility for, the sufficiency or adequacy of the insurance or the issuing insurer(s). (h) If the Borrower fails to provide, maintain, keep in force or deliver to the Trustee the policies of insurance and certificates required by this Agreement, the Trustee may (but shall have no obligation to) procure such insurance, and the Borrower will pay all premiums thereon promptly on demand by the Trustee and until such payment is made by the Borrower, the amount of all such premiums shall bear interest at the Default Rate. Section 5.4 Liens and Other Charges. The Borrower will duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue all claims for labor, materials, or supplies that if unpaid might by law become a lien or charge upon any of its property. Section 5.5 Inspection of Project and Books, Appraisals. (a) The Borrower shall permit the Authority, the Trustee and the Underwriter, at the Borrower s cost and expense, to visit and inspect the Facility and will cooperate with the Trustee, the Authority and the Underwriter during such inspections; provided that this provision shall not be deemed to impose on the Trustee, the Authority and the Underwriter any obligation to undertake such inspections. (b) The Borrower and the Guarantor shall permit the Authority the Trustee and the Underwriter, at the Borrower s or Guarantor s cost and expense (as applicable), to examine the books of account of the Borrower and the Facility and of the Guarantor (and to make copies thereof and extracts therefrom) and to discuss the affairs, finances and accounts of the Borrower and the Facility and of the Guarantor with, and to be advised as to the same by, its officers, members, or trustees, all at such reasonable times and intervals as the Trustee, the Authority and the Underwriter may reasonably request; provided that so long as no Event of Default shall have occurred and be continuing, the Borrower shall only be obligated to pay the expenses associated with one (1) such investigation during any twelve (12) month period. (c) The costs and expenses incurred by the Authority, the Trustee or the Underwriter in performing such inspections shall be paid by the Borrower promptly upon billing or request by the Authority, the Trustee or the Underwriter for reimbursement. Section 5.6 Compliance with Laws, Contracts, Licenses, and Permits. The Borrower will comply with (a) all Legal Requirements, (b) the provisions of its Organizational Documents, (c) all agreements and instruments by which it or any of its properties may be bound, and all restrictions, covenants and easements affecting the Project or the Facility, (d) all applicable decrees, orders and judgments, and (e) all licenses and permits required by applicable laws and regulations for the conduct of its business or the ownership, use or operation of its properties, including all Project Approvals. Section 5.7 Further Assurances. (a) Regarding Preservation of Collateral. The Borrower will execute and deliver to the Trustee, the Authority and the Underwriter such further documents, instruments, assignments and other writings, and will do such other acts necessary or desirable, to preserve and protect the collateral including, without limitation, the Security Property, at any time securing or intended to secure the obligations of the Borrower under the Loan Documents, as the Trustee, the Authority and the Underwriter may require. (b) Regarding this Agreement. The Borrower will cooperate with, and will do such further acts and execute such further instruments and documents as the Trustee, the Authority and the Underwriter shall reasonably request to carry out to their satisfaction the transactions contemplated by this Agreement and the other Loan Documents. (c) Requests for Approvals. All requests of the Borrower for Trustee consents, approvals, waivers or similar actions hereunder or under any Loan Documents shall be submitted in writing to the party of whom action is requested, executed by an Authorized Borrower Representative, accompanied by such reasonable back-up documentation as the Trustee may request and accompanied by a certification of the Borrower to the effect that no Default or Event of Default has occurred and is continuing under the Loan Documents. Section 5.8 Notices. The Borrower will promptly notify the Trustee, the Authority and the Underwriter in writing of (i) the occurrence of any Default or Event of Default; (ii) the occurrence of any other event which may have an adverse effect on the Project, the Facility, or the business or financial condition of the Borrower; or (iii) the receipt by the Borrower of any notice of default or notice of termination with respect to any contract or agreement relating to the ownership, construction, operation, or use of the Facility, including but not limited to the Charter School Contract. Section 5.9 (a) Solvency; Adequate Capital. The Borrower and the Guarantor agree that: Each will remain solvent and pay all of its indebtedness as the same becomes due. (b) Each will maintain adequate capital for the normal obligations reasonably foreseeable for a business of its size and character and in light of its contemplated business operations and will not make any dividend payments or other distributions. (c) The Facility will produce Funds Available for Debt Service in an amount at least equal to 110% of the Annual Debt Service Requirements on the Bonds for each Fiscal Year, beginning with the Fiscal Year ending June 30, As used herein, (1) Debt Service Coverage Ratio on the Bonds means the ratio of Funds Available for Debt Service to Annual Debt Service Requirements on the Bonds for the Fiscal Year for which such calculation is being made; and (2) Funds Available for Debt Service means in any period the Borrower s net income for such period, calculated in accordance with Generally Accepted Accounting Principles, minus the Borrower s operating expenses for such period, plus, to the extent taken as : :5 19 an expense item in the calculation of such net income, depreciation and amortization, interest on the Bonds, amortization of discount and financing expenses incurred in connection with the issuance of the Bonds, and other non-cash expense deducted in accordance with Generally Accepted Accounting Principles. (d) The Facility will have, at the end of each of its fiscal quarters, beginning with the fiscal quarter ending June 30, 2015, at least forty five (45) Days Cash on Hand. (e) For each fiscal quarter, as calculated at the end of each such fiscal quarter, beginning with the fiscal quarter ending September 30, 2014, no more than 10% of the Facility's Trade Payables (exclusive of Trade Payables to vendors who have agreed to defer payment until the Facility has received relevant reimbursement) will be outstanding for in excess of thirty (30) days. (f) The Borrower shall furnish a report, attested to by its chief executive officer (unless such report is prepared by a government agency), to the Trustee, the Underwriter and each Beneficial Owner that has requested financial information pursuant to Section 5.2 hereof, by the third Business Day after the 10th day of each month, or the third Business Day after receipt by the Borrower of such report by the Palm Beach County School District, whichever is later, showing the enrollment of the schools as of the last day of the prior month. If the enrollment of the schools as of the last day of the prior month is less than the greater of (i) 1,143 FTE or (ii) 90% of the enrollment forecast for such month in the Market Feasibility Study attached as an appendix to the Limited Offering Memorandum, the Borrower cause to be provided the Management Report described in Section 5.9(g). (g) If the Borrower fails to meet the Debt Service Coverage Ratio on the Bonds required by Section 5.9(c), the Days Cash on Hand required by Section 5.9(d), the Trade Payables covenant required by Section 5.9(e), or the enrollment levels required by Section 5.9(f), the Borrower will engage, within 30 days following the Borrower's failure to meet any such requirement, an Independent Consultant to provide a Management Report that sets forth, in detail, the reasons why the Facility failed to attain the covenant or covenants in question, and the specific plan of correction with regard to compliance with such covenants. Upon completion of the Management Report, the Borrower shall forward a copy to the Trustee, the Underwriter and each Beneficial Owner that has requested financial information pursuant to Section 5.2 hereof. So long as the Borrower shall submit such a Management Report and, shall, to the extent practicable, carry out the corrective active set forth therein, it shall not be an Event of Default hereunder and such covenants will be deemed to have been complied with, so long as (a) the Debt Service Coverage Ratio on the Bonds does not fall below 1.00 to 1 (the Minimum Coverage Ratio ) for two consecutive calendar quarters, (b) the Facility shall not have less than forty five (45) Days Cash on Hand (the Minimum Liquidity Requirement ) for two consecutive calendar quarters, (c) no more than 10% of the Facility's Trade Payables shall outstanding for in excess of thirty (30) days for any two consecutive fiscal quarters and (d) the enrollment is not less than the greater of (i) 1,143 FTE or (ii) 90% of the enrollment forecast in the Market Feasibility Study attached as an appendix to the Limited Offering Memorandum for two consecutive months. Section 5.10 Merger, Consolidation, Conversion and Disposition of Assets. (a) The Borrower and the Guarantor will not become a party to any merger or consolidation, or agree to or effect any asset acquisition or stock acquisition. (b) The Borrower and the Guarantor will not convert into any other type of entity. (c) The Borrower and the Guarantor will not seek the dissolution or winding up, in whole or in part, of the Borrower or the Guarantor or voluntarily file, or consent to the filing of, a petition for bankruptcy, reorganization, assignment for the benefit of creditors or similar proceedings. Section 5.11 Sale and Leaseback. The Borrower will not enter into any arrangement, directly or indirectly, whereby the Borrower shall sell or transfer any property owned by it in order then or thereafter to lease such property or lease other property that the Borrower intends to use for substantially the same purpose as the property being sold or transferred. Section 5.12 Tax-Exempt Status of the Series 2014A Bonds. For purposes of this Section and Sections 5.13 and 5.14 hereof, all terms not otherwise defined herein or in the Indenture shall have the meanings assigned to them for purposes of Section 148 of the Code and the Regulations promulgated thereunder. For so long as any Series 2014A Bonds remain outstanding, the Borrower hereby covenants as follows: (a) It will comply with, and timely make or cause to be made all filings required by, all effective rules, rulings or regulations promulgated by the Department of the Treasury or the Internal Revenue Service; (b) It will continue to conduct its operations in a manner that will result in its continuing to qualify as an organization described in Section 501(c)(3) of the Code including but not limited to the timely filing of all returns, reports and requests for determination with the Internal Revenue Service and the timely notification of the Internal Revenue Service of all changes in its organization and purposes from the organization and purposes previously disclosed to the Internal Revenue Service; (c) It will not divert any substantial part of its income for a purpose or purposes other than those for which it is organized and operated; (d) It will not use, invest, direct or approve the investment of the proceeds of the Series 2014A Bonds or any other amounts held by the Trustee under the Indenture or any investment earnings thereon in a manner that will result in the Series 2014A Bonds becoming private activity bonds (other than qualified 501(c)(3) bonds ) within the meaning of Sections 141 and 145 of the Code; (e) It will not use or permit to be used more than five percent (5%) of the proceeds of the Series 2014A Bonds, including all investment income earned on such proceeds directly or indirectly prior to substantial completion of the Project, in any trade or business carried on by any Person that is not an organization described in Section 501(c)(3) of the Code or a governmental unit as that term is used in Section 145 of the Code ( an Exempt Person ). For purposes of the preceding sentence, use of the proceeds of the Project by an organization described in Section 501(c)(3) of the Code with respect to an unrelated trade or business, :5 20 C :5 21

85 determined in accordance with Section 513(a) of the Code and use of proceeds to pay costs associated with the issuance of the Series 2014A Bonds, do not constitute a use by an Exempt Person; (f) It will not use or permit the use of any portion of the proceeds of the Series 2014A Bonds, including all investment income earned on such proceeds, directly or indirectly, to make or finance loans to Persons who are not Exempt Persons; (g) It has not entered into, and will not enter into, any arrangement with any Person (other than an Exempt Person) which provides for such Person or organization to manage, operate, or provide services with respect to the property financed or refinanced with the proceeds of the Series 2014A Bonds (a Management Contract ), unless the guidelines set forth in Revenue Procedure (or any new, revised or additional guidelines applicable to Management Contracts) (the Guidelines ), are satisfied, except to the extent it obtains a private letter ruling from the Internal Revenue Service or an Opinion of Bond Counsel which allows for a variation from the Guidelines. (h) It will not cause the Series 2014A Bonds to be treated as federally guaranteed obligations for purposes of Section 149 of the Code, as may be modified in any applicable rules, rulings, policies, procedures, regulations or other official statements promulgated or proposed by the Department of the Treasury or the Internal Revenue Service with respect to federally guaranteed obligations described in Section 149 of the Code. For purposes of this paragraph, the Series 2014A Bonds shall be treated as federally guaranteed if (i) all or any portion of the principal or interest is or will be guaranteed directly or indirectly by the United States of America or any agency or instrumentality thereof, or (ii) 5% or more of the proceeds of the Series 2014A Bonds will be (A) used in making loans the payment of principal or interest with respect to which is to be guaranteed in whole or in part by the United States of America or any agency or instrumentality thereof, or (B) invested directly or indirectly in federally insured deposits or accounts, and (iii) such guarantee is not described in Section 149(b)(3) of the Code; (i) The net proceeds of the Series 2014A Bonds and any investment earnings thereon shall be applied solely for the purposes set forth in this Loan Agreement and in the Indenture and no amount of net proceeds of the Series 2014A Bonds in excess of two percent (2%) of the aggregate face amount of the Series 2014A Bonds will be expended to pay Costs of Issuance of the Series 2014A Bonds, as required by Section 147(g) of the Code. (j) It will not use or invest, or approve the use or investment of, the proceeds of the Series 2014A Bonds or any other amounts held by the Trustee under the Indenture or any investment earnings thereon in a manner that will violate the provisions of Section 149(d)(3) or (4) of the Code; (k) The average maturity of the Series 2014A Bonds (excepting that portion, if any, allocable to the refunding of the Refunded Bonds) will not exceed one hundred twenty percent (120%) of the reasonably expected economic life of any property the cost of which was financed or refinanced with the net proceeds of the Series 2014A Bonds, taking into account the respective cost of each item comprising such property which was financed with the net proceeds of the Series 2014A Bonds. For purposes of the preceding sentence, the reasonably expected economic life of each item of property shall be determined as of the later of (i) the date on which the Series 2014A Bonds are issued or (ii) the date(s) on which such item of property is placed in service (or expected to be placed in service). In addition, land shall not be taken into account in determining the reasonably expected economic life of such property, except that, in the event twenty five percent (25%) or more of the proceeds of the Series 2014A Bonds have been expended for land, such land shall be treated as having an economic life of thirty (30) years and shall be taken into account for purposes of determining the reasonably expected economic life of such property; The maturity of any of the Series 2014 Bonds allocable to the refunding of the Refunded Bonds will not exceed thirteen (13) months from the date of issuance of the Refunded Bonds (April 30, 2014); (l) No amount of the proceeds of the Series 2014A Bonds will be used, directly or indirectly, to provide any airplane, sky box or other private luxury box, facility primarily used for gambling, store the principal business of which is the sale of alcoholic beverages for consumption off premises or health club facility (except a health club facility related to the Section 501(c)(3) exempt purposes of the Borrower); (m) the Code; It will comply with the information reporting requirements of Section 149(e)(2) of (n) All of the property which is to be provided with the net proceeds of the Series 2014A Bonds shall be owned by an Exempt Person, as required by Section 145(a) of the Code and no portion of such property shall be used to provide residential rental property for family units (within the meaning of Section 145(d) of the Code); (o) No other governmental obligations shall be sold within fifteen (15) days of the Series 2014A Bonds pursuant to the same plan of financing as the Bonds that are reasonably expected to be paid from the same source of funds as the Series 2014A Bonds; (p) The information to be furnished by the Borrower in the Borrower Tax Certificate and to be used and relied upon by the Authority in preparing the certification pursuant to Section 148 of the Code and information statement (Form 8038) pursuant to Section 149(e) of the Code is accurate and complete as of the date of the issuance of the Series 2014A Bonds; and (q) It will require, in connection with any lease or grant by the Borrower of the use of any portion of the Facility that the lessee, sublessee, manager or other user of any portion of the property financed by the Series 2014A Bonds shall agree not to violate the covenants set forth in this section and not to use that portion of the Facility in any manner which would violate the covenants set forth in this section; (r) Not more than 50% of the proceeds of the Series 2014A Bonds will be invested in Nonpurpose Investments having a substantially guaranteed yield for four years or more within the meaning of Section 149(g)(3)(A)(ii) of the Code, and the Borrower reasonably expects that at least 85% of the spendable proceeds of the Series 2014A Bonds will be used to carry out the governmental purposes of the Series 2014A Bonds within the three-year period beginning on the Closing Date : :5 23 (s) Subsequent to the issuance of the Series 2014A Bonds and prior to their payment in full (or provision for the payment thereof having been made in accordance with the provisions of the Indenture), this Section 5.12 and Section 5.13 of this Agreement may not be amended, changed, modified, altered or terminated except as permitted herein and by the Indenture and with the written consent of the Authority. Anything contained in this Agreement or the Indenture to the contrary notwithstanding, the Authority and the Borrower hereby agree to amend this Agreement and, if appropriate, the Indenture, to the extent required, in the Opinion of Bond Counsel, in order for interest on the Series 2014A Bonds to remain excludable from gross income for federal income tax purposes. The party requesting such amendment shall notify the other parties to this Agreement and the Trustee of the proposed amendment and send a copy of such requested amendment to Bond Counsel and the Trustee. After review of such proposed amendment, Bond Counsel shall render to the Trustee an opinion as to the effect of such proposed amendment upon the includability of interest on the Series 2014A Bonds in the gross income for federal income tax purposes. The Borrower shall pay all reasonable and necessary fees and expenses incurred with respect to such amendment. The Borrower, the Authority and where applicable, the Trustee per written instructions from the Authority shall execute, deliver and, if applicable, the Borrower shall file of record, any and all documents and instruments necessary to effectuate the intent of this Section. A copy of such amendment shall be provided to the Underwriter by the Borrower. (t) Neither it, nor any Person related to it within the meaning of Section 147(a)(2) of the Code and Section (b) of the Regulations, pursuant to an arrangement, formal or informal, shall purchase the Series 2014A Bonds in an amount related to the amount of all sums due the Authority under the Loan Agreement. Section 5.13 No Arbitrage Bonds. The Borrower shall not take any action or omit to take any action with respect to the gross proceeds of the Series 2014A Bonds or of any amounts expected to be used to pay the principal thereof or the interest thereon which, if taken or omitted, respectively, would cause any bond to be classified as an arbitrage bond within the meaning of Section 148 of the Code. Except as provided in the Indenture and this Agreement, the Borrower shall not pledge or otherwise encumber, or permit the pledge or encumbrance of, any money, investment, or investment property as security for payment of any amounts due under this Agreement or the Indenture relating to the Series 2014A Bonds, shall not establish any segregated reserve or similar fund for such purpose and shall not prepay any such amounts in advance of the redemption date of an equal principal amount of the Series 2014A Bonds, unless in each case in the Opinion of Bond Counsel, such action will not adversely affect the excludability of interest on any Series 2014A Bond from the gross income, as defined in Section 61 of the Code, of the owner thereof for federal income tax purposes. The Borrower shall not, at any time prior to the final maturity of the Series 2014A Bonds, direct or permit the Trustee to invest gross proceeds in any investment (or to use gross proceeds to replace money so invested), if as a result of such investment the yield of all investments acquired with gross proceeds (or with money replaced thereby) on or prior to the date of such investment exceeds the yield of the Series 2014A Bond to their stated maturity, except as permitted by Section 148 of the Code and Regulations thereunder. 148 and the rules and regulations of the United States Treasury Department thereunder relating to the Series 2014A Bonds and the interest thereon, including the employment of a Rebate Analyst for the calculation of rebatable amounts to the United States Treasury Department. The Borrower agrees that it will cause the Rebate Analyst to calculate the rebatable amounts in accordance with Section The Borrower agrees that it will pay all reasonable costs associated therewith. Section 5.14 Arbitrage Rebate. The Borrower agrees to take all steps necessary to compute and pay any rebatable arbitrage in accordance with Section 148(f) of the Code and Section 6.07 of the Indenture including: (a) Delivery of Documents and Money on Computation Dates. The Borrower will deliver to the Trustee, within 55 days after each Computation Date: (i) a statement, signed by the Borrower, stating the Rebate Amount as of such Computation Date; and (ii) (1) if such Computation Date is not the Final Computation Date, an amount that, together with any amount then held for the credit of the Rebate Fund, is equal to at least 90% of the Rebate Amount as of such Computation Date, less any previous rebate payments made to the United States (as that term is used in Section (f)(1) of the Regulations), or (2) if such Computation Date is the Final Computation Date, an amount that, together with any amount then held for the credit of the Rebate Fund, is equal to the Rebate Amount as of such Final Computation Date, less any previous rebate payments made to the United States (as that term is used in Section (f)(1) of the Regulations); and (iii) an Internal Revenue Service Form 8038-T properly signed and completed as of such Computation Date. (b) Correction of Underpayments. If the Borrower shall discover or be notified as of any date that any payment paid to the United States Treasury pursuant to this Section 5.14 of an amount described in Section 5.16(h)(i)(A) or (B) above shall have failed to satisfy any requirement of Section of the Regulations (whether or not such failure shall be due to any default by the Borrower, the Authority or the Trustee), the Borrower shall (1) pay to the Trustee (for deposit to the Rebate Fund) and cause the Trustee to pay to the United States Treasury from the Rebate Fund the underpayment of the Rebate Amount, together with any penalty and/or interest due, as specified in Section (h) of the Regulations, within 175 days after any discovery or notice and (2) deliver to the Trustee an Internal Revenue Service Form 8038-T completed as of such date. If such underpayment of the Rebate Amount, together with any penalty and/or interest due, is not paid to the United States Treasury in the amount and manner and by the time specified in the Regulations the Borrower shall take such steps as are necessary to prevent the Bonds from becoming arbitrage bonds, within the meaning of Section 148 of the Code. The Borrower further covenants and agrees that it will comply with and will take all action reasonably required to ensure compliance with all applicable requirements of said Section :5 24 C :5 25

86 (c) Records. The Borrower shall retain all of its accounting records relating to the funds established under the Indenture and all calculations made in preparing the statements described in this Section for at least six years after the date the last Bond is retired. (d) Costs. The Borrower agrees to pay all of the fees and expenses of a nationally recognized Bond Counsel, the Rebate Analyst, a certified public accountant and any other necessary consultant employed by the Borrower, the Trustee or the Authority in connection with computing the Rebate Amount. (e) No Diversion of Rebatable Arbitrage. The Borrower will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Series 2014A Bonds which is not purchased at fair market value or includes terms that the Borrower would not have included if the Series 2014A Bonds were not subject to Section 148(f) of the Code. (f) Modification of Requirements. If at any time during the term of this Agreement, the Authority, the Trustee or the Borrower desires to take any action which would otherwise be prohibited by the terms of this Section, such Person shall be permitted to take such action if it shall first obtain and provide to the other Persons named herein an opinion of Bond Counsel to the effect that such action shall not adversely affect the exclusion of interest on the Series 2014A Bonds from gross income for federal income tax purposes and shall be in compliance with the laws of the State and the terms of this Agreement. (g) Conduit Issuer. Because the Authority is issuing the Bonds on behalf of and for the benefit of the Borrower, and is only serving as a conduit issuer, the Borrower agrees to assume sole and exclusive responsibility for complying with the foregoing requirements (including the retention of a qualified Rebate Analyst, if necessary), and the Borrower hereby acknowledges that its responsibilities under this Section 5.14 are absolute and unconditional. Section 5.15 Indemnification. To the fullest extent permitted by law, the Borrower agrees to indemnify, hold harmless and defend the Authority Indemnified Parties, the Trustee, the Dissemination Agent, the Underwriter and the officers, directors, officials, employees, attorneys and agents of the Trustee and Underwriter (collectively, with the Authority Indemnified Parties, the Indemnified Parties ), against any and all losses, damages, claims, actions, liabilities, fees, charges, costs and expenses of any conceivable nature, kind or character (including, without limitation, reasonable fees and expenses of attorneys, accountants, consultants and other professionals, litigation and court costs, amounts paid in settlement and amounts paid to discharge judgments) ( Losses ) to which the Indemnified Parties, or any of them, may become subject under or any statutory law (including federal or state securities laws) or at common law or otherwise, arising out of or based upon or in any way relating to: (a) the Bonds, this Agreement, the Indenture, the Loan Documents or the Tax Certificate or the execution or amendment hereof or thereof or in connection with transactions contemplated hereby or thereby, including the issuance, sale or resale of the Bonds; (b) the performance and observance by or on behalf of the Authority of those things on the part of the Authority agreed to be performed or observed hereunder or under the Authority Documents; (c) any act or omission of the Borrower or any of its agents, contractors, servants, employees, tenants or licensees in connection with the Facility or the Project, the operation of the Facility, or the condition, environmental or otherwise, occupancy, use, possession, conduct or management of work done in or about, or from the planning, design, acquisition, installation or construction of, the Facility or any part thereof; (d) any lien or charge upon payments by the Borrower to the Authority and the Underwriter hereunder, or any taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments, impositions and other charges imposed on the Authority or the Underwriter in respect of any portion of the Project or the Facility; (e) any violation of any Environmental Law with respect to, or the release of any Hazardous Substances from, the Facility or any part thereof; (f) the defeasance and/or redemption, in whole or in part, of the Bonds; (g) any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact contained in any offering or disclosure document or disclosure or continuing disclosure document for the Bonds or any of the documents relating to the Bonds, or any omission or alleged omission from any offering or disclosure document or disclosure or continuing disclosure document for the Bonds of any material fact necessary to be stated therein in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading; (h) any declaration of taxability of interest on the Series 2014A Bonds, or allegations that interest on the Series 2014A Bonds is taxable or any regulatory audit or inquiry regarding whether interest on the Series 2014A Bonds is taxable; (i) the Underwriter s acceptance or administration of this Agreement, or the exercise or performance of any of its powers or duties hereunder or under any of the documents relating to the Bonds to which it is a party; and (j) any injury to or death of any Person or damage to property in or upon the Project or growing out of or connected with the use, nonuse, condition or occupancy of the Facility; except (A) in the case of the foregoing indemnification of the Underwriter, the Trustee or any of their respective officers, members, directors, officials, employees, attorneys and agents, to the extent such damages are caused by the gross negligence or willful misconduct of such Indemnified Party; or (B) in the case of the foregoing indemnification of the Authority Indemnified Parties, to the extent such damages are caused by the willful misconduct of such Authority Indemnified Party. THE BORROWER ACKNOWLEDGES AND AGREES THAT THE AUTHORITY AND THE AUTHORITY INDEMNIFIED PARTIES SHALL BE INDEMNIFIED : :5 27 HEREUNDER WITH RESPECT TO LOSSES ARISING FROM THE AUTHORITY S OR ANY OTHER AUTHORITY INDEMNIFIED PARTY S RESPECTIVE OWN NEGLIGENCE OF ANY KIND OR DEGREE OR BREACH OF CONTRACTUAL DUTY, EXCEPT INSOFAR AS SUCH LOSSES ARISE FROM THE WILLFUL MISCONDUCT OF THE AUTHORITY OR OTHER AUTHORITY INDEMNIFIED PARTY SEEKING INDEMNIFICATION. In the event that any action or proceeding is brought against any Indemnified Party with respect to which indemnity may be sought hereunder, the Borrower, upon written notice from the Indemnified Party, shall assume the investigation and defense thereof, including the employment of counsel selected by the Indemnified Party, and shall assume the payment of all expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion; provided that the Indemnified Party shall have the right to review and approve or disapprove any such compromise or settlement. Each Indemnified Party shall have the right to employ separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and the Borrower shall pay the reasonable fees and expenses of such separate counsel; provided, however, that such Indemnified Party may only employ separate counsel at the expense of the Borrower if in the judgment of such Indemnified Party a conflict of interest exists by reason of common representation or if all parties commonly represented do not agree as to the action (or inaction) of counsel. The rights of any persons to indemnity hereunder and rights to payment of fees and reimbursement of expenses shall survive and remain valid and in full force and effect notwithstanding (i) repayment in full of the loan evidenced by the Notes, (ii) the final payment, redemption or defeasance of the Bonds, or (iii) the termination of this Agreement. In addition to and without in any way limiting its obligations to pay the expenses of and indemnify the Indemnified Parties as hereinabove provided, the Borrower shall pay, upon the closing of the issuance of the Bonds and as a condition thereto: (i) to the Authority the Authority s issuance fee in the amount of $42,125 less, if applicable, any application fee heretofore paid by the Borrower to the Authority; and (ii) attorney s fees incurred by the Authority in connection with the issuance of the Bonds. This indemnification covenant shall survive repayment of the Loan and the Bonds. Section 5.16 Agreements Between Borrower and its Affiliates. The Borrower shall not enter into any agreement, written or otherwise, directly or indirectly relating to the Project or the Facility with an Affiliate of the Borrower without the prior written consent of the Trustee. Section 5.17 Affiliated Entities; Advance of Funds. The Borrower is permitted to lend, contribute or otherwise advance monies that constitute Gross Revenues or other Security Property for the benefit of permitted business undertakings of the Borrower other than the Facility or for any one or more of the Borrower s Affiliates, upon satisfaction of all of the following terms and conditions: (a) No Default or Event of Default shall have occurred and shall be continuing; (b) The Debt Service Reserve Fund shall be funded to the extent required by the provisions of this Loan Agreement; (c) During each of the twelve most recent months, the Borrower shall have remitted to the Trustee monies sufficient for the Trustee to have made all payments and deposits described in Sections 4.2 (a) through (e) hereof; and (d) No such loan, contribution or other advance of monies will exceed an amount equal to 50% of the Borrower s Available Cash held by the Borrower in funds or accounts established outside of the Indenture. Section 5.18 Continuing Disclosure. (a) The Borrower hereby appoints U.S. Bank National Association to be the initial Dissemination Agent, and U.S. Bank National Association has, in the Indenture, accepted such appointment. The Borrower and the Guarantor hereby agree to provide or cause to be provided to the Dissemination Agent, the Underwriter and each Beneficial Owner that has requested financial information pursuant to Section 5.2 hereof, within ninety (90) following the end of each of its respective Fiscal Years, commencing with the Borrower s Fiscal Year ending June 30, 2014, annual financial information and operating data concerning the Borrower, the Guarantor, the Project and the Facility, consistent with the financial information and operating data included in the Limited Offering Memorandum, and, if not included with the annual financial information, then, when and if available, audited financial statements prepared in accordance with Generally Accepted Accounting Principles. If audited financial statements are not available at the time of required filings as set forth above, unaudited financial statements shall be filed pending the availability of audited financial statements. (The information required to be disclosed in this Section 5.18 shall be referred to herein as the Annual Report ). In addition, if not included in the Limited Offering Memorandum, such information shall include historical information on student enrollment, waiting lists and retention, teacher retention, grants awarded, test results, Gross Revenues and Operating Expenses. (b) RESERVED (c) The Borrower agrees to provide to the Dissemination Agent, the Underwriter and each Beneficial Owner, in a timely manner not in excess of ten (10) business days after the occurrence of the event, notice of the occurrence of any of the following events with respect to the Bonds: (i) (ii) (iii) difficulties; (iv) difficulties; principal and interest payment delinquencies; non-payment related defaults, if material; unscheduled draws on debt service reserves reflecting financial unscheduled draws on credit enhancements reflecting financial :5 28 C :5 29

87 (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701 TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (vii) (viii) (ix) modifications to rights of holders of the Bonds, if material; Bond calls, if material, and tender offers; defeasances; (x) release, substitution, or sale of any property securing repayment of the Bonds, if material; (xi) rating changes; (xii) bankruptcy, insolvency, receivership or similar event of the Borrower or the Guarantor; (xiii) the consummation of a merger, consolidation, or acquisition involving the Borrower or the Guarantor or the sale of all or substantially all of the assets of the Borrower or the Guarantor, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (xiv) the appointment of a successor or additional trustee or the change of name of a trustee, if material. (d) The Borrower and the Guarantor agree to provide or cause to be provided, in a timely manner to the Dissemination Agent, the Underwriter and each Beneficial Owner written notice of their failure to provide the Annual Report described in Section 5.18(a) above on or prior to the date set forth therein. (e) The Borrower and the Guarantor agree that their undertaking pursuant to this Section 5.18 is intended to be for the benefit of the Holders and Beneficial Owners and shall be enforceable by any Holder or Beneficial Owner, and any failure by the Borrower or the Guarantor to comply with the provisions of this undertaking shall not be an Event of Default hereunder. (f) Any voluntary inclusion by the Borrower or the Guarantor of information in its annual report or supplemental information that is not required hereunder shall not expand the obligations of the Borrower or the Guarantor hereunder and the Borrower or Guarantor shall have no obligation to update such supplemental information or include it in any subsequent report. Section 5.19 Additional Payments. In addition to repaying the Bonds and the Notes, the Borrower shall also pay to the Authority, the Trustee or the Beneficial Owners, as the case may be, Additional Payments, as follows: (a) All taxes and assessments of any type or character charged to the Authority, the Trustee or the Beneficial Owners affecting the amount available to the Authority, the Trustee or the Beneficial Owners from payments to be received hereunder or in any way arising due to the transactions contemplated hereby (including taxes and assessments assessed or levied by any public agency or governmental authority of whatsoever character having power to levy taxes or assessments) but excluding franchise taxes based upon the capital and/or income of the Beneficial Owners and taxes based upon or measured by the net income of the Beneficial Owners; provided, however, that the Borrower shall have the right to protest any such taxes or assessments and to require the Authority, the Trustee or the Beneficial Owners, at the Borrower s expense, to protest and contest any such taxes or assessments levied upon them and that the Borrower shall have the right to withhold payment of any such taxes or assessments pending disposition of any such protest or contest unless such withholding, protest or contest would adversely affect the rights or interests of the Authority, the Trustee or the Beneficial Owners; (b) The reasonable fees and expenses of such accountants, consultants, attorneys and other experts as may be engaged by the Authority, the Trustee or the Beneficial Owners to prepare audits, financial statements, reports, opinions or provide such other services required under this Agreement or the Loan Documents, including, but not limited to, any audit or inquiry by the Internal Revenue Service or any other governmental body; and (c) The Authority s Administration Fee and the reasonable fees and expenses of the Authority or any agent or attorney selected by the Authority to act on its behalf in connection with this Agreement, the Bond Documents or the Bonds, including, without limitation, any and all reasonable expenses incurred in connection with the authorization, issuance, sale and delivery of the Bonds or in connection with any litigation, investigation, inquiry or other proceeding which may at any time be instituted involving this Loan Agreement, the Bond Documents or the Bonds or any of the other documents contemplated thereby, or in connection with the reasonable supervision or inspection of the Borrower, its properties, assets or operations or otherwise in connection with the administration of this Loan Agreement and the Bond Documents. Such Additional Payments shall be billed to the Borrower by the Authority, the Trustee or the Beneficial Owners from time to time, together with a statement certifying that the amount billed has been incurred or paid by the Authority, the Trustee or the Beneficial Owners for one or more of the above items. After such a demand, amounts so billed shall be paid by the Borrower within thirty (30) days after receipt of the bill by the Borrower. Notwithstanding the foregoing, the Authority shall not be required to submit a bill to the Borrower for payment of the Authority s Administration Fee. Such annual fee shall be calculated and shall be due and payable in arrears on a semiannual basis with the first payment due on the six-month anniversary of the Closing Date and subsequent payments due on the same day every sixth (6th) month thereafter. The amount of each semiannual payment shall be based on the principal amount of the Bonds outstanding as of the last day of the calendar month preceding each semiannual payment date times 0.03 percent times one-half (1/2) : :5 31 Section 5.20 Management of the Facility. The Borrower agrees that the Facility will be managed by the Management Agreement between the Borrower and the Guarantor. Upon the occurrence of an Event of Default, the Management Agreement will be collaterally assigned to the Trustee, with the consent of the Guarantor and the School Board of Palm Beach County, in a form reasonably acceptable to the Trustee. The Management Agreement shall contain a provision deferring payment of management fees if and to the extent that the Gross Revenues for any monthly period are less than the amounts required to be paid by the Borrower pursuant to Sections 4.2(a) and 4.2(b) hereof. Section 5.21 Charter School Contract. The Borrower shall comply at all times with the Charter School Contract. The Borrower represents and warrants that, per the Charter School Contract, (i) the Borrower s charter to operate the Facility was renewed for a 15 year term beginning July 1, 2012, (ii) such charter has been and is currently in good standing, and (iii) neither the Borrower nor the Guarantor is aware of any event or circumstance that could lead to such charter ceasing to be in good standing. The Borrower shall deliver to the Trustee, the Underwriter and each Beneficial Owner that has requested financial information pursuant to Section 5.2 hereof, within ten (10) days of receipt thereof any order, citation or directive from the Palm Beach County School District terminating or amending the Charter School Contract, determining that the Palm Beach County School District will not renew or extend the Charter School Contract at the end of the current or any future term, or any change in the Palm Beach County School District s status as the authorizer/sponsor of said Charter School Contract. The Trustee shall have no duty to review any such order, citation or directive or to monitor the Borrower s proposed corrective action. Section 5.22 Other Debt. The Borrower and the Guarantor each represents and warrants that none of its existing debt is secured by the Facility or any part thereof. Until the payment of the Bonds in full, the Borrower will not incur any additional indebtedness secured by a lien on or interest in the Security Property (other than trade debt in the ordinary course of business or capital leases secured only by the leased equipment). Maintenance of Facility. The Borrower agrees that at all times until payment of the Bonds in full, the Borrower will, at the Borrower's own expense, maintain, preserve and keep the Facility or cause the Facility to be maintained, preserved and kept, with the appurtenances and every part and parcel thereof, in good repair, working order and condition, ordinary wear and tear, obsolescence in spite of repair and acts of God excepted, and that the Borrower will from time to time make or cause to be made all necessary and proper repairs, replacements and renewals deemed proper and necessary by it. The Borrower will maintain all licenses and approvals necessary to operate the Facility as a charter school. The Borrower shall deliver to the Trustee, the Underwriter and each Beneficial Owner that has requested financial information pursuant to Section 5.2 hereof, within ten (10) days of receipt thereof any order, citation or directive from any regulatory or licensing agency requiring correction of any deficiency in the condition or operation of the Facility, together with an explanation by the Borrower of its proposed corrective action. The Trustee shall have no duty to review any such order, citation or directive or to monitor the Borrower s proposed corrective action. Section 5.24 Payment of Taxes. The Borrower will pay or cause to be paid, until payment of the Bonds in full, as the same respectively become due, all taxes and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Facility or any part thereof, including, without limiting the generality of the foregoing, any taxes levied upon the Facility which, if not paid, will become a charge on the amounts derived from the Facility prior to or on a parity with the charge thereon and the pledge or assignment thereof to be created and made herein, or a lien against the Facility, or any interest therein on the revenues derived therefrom or hereunder, all utility and other charges incurred in the operation, maintenance, use, occupancy and upkeep of the Facility and all assessments and charges lawfully made by any governmental body for public improvements that may be secured by a lien on the Facility; provided, however, that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the Borrower shall be obligated to pay only such installments as are required to be paid until the Maturity Date. The Borrower may, at the Borrower's expense and in the Borrower's name, in good faith contest any such taxes, assessments and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom If the Borrower shall fail to pay any of the foregoing items required by this Section to be paid by the Borrower, the Holders may (but shall be under no obligation to) pay the same, and any amounts so advanced therefor by the Holders shall become an additional obligation of the Borrower to the party making the advancement, which amounts, together with interest thereon at the Default Rate, the Borrower agrees to pay. ARTICLE VI - EVENTS OF DEFAULT AND REMEDIES Section 6.1 Events of Default. The following shall be Events of Default under this Agreement, and the term Event of Default shall mean, whenever it is used in this Agreement, any one or more of the following events: (a) Failure by the Borrower to pay any amounts required to be paid on the Notes or under Section 4.2 (a) or (b) hereof when due; or (b) Any failure by the Borrower to pay as and when due and payable any other sums to be paid by the Borrower under this Agreement and the continuation of such failure for a period of five (5) days after the same are due; or (c) Any breach by the Borrower of any representation or warranty made in this Agreement or any Requisition or any failure by the Borrower to observe and perform any covenant, condition or agreement on its part to be observed or performed hereunder, other than as referred to in subsections (a) or (b) of this Section, for a period of thirty (30) days after written notice specifying such breach or failure and requesting that it be remedied, is given to the Borrower by the Trustee or the Majority Bondholders; provided, however, that in the event such breach or failure be such that it can be corrected but cannot be corrected within said 30 day period, the same shall not constitute an Event of Default hereunder if (x) corrective action is instituted by the Borrower or on behalf of the Borrower within said 30 day period and is being diligently pursued and (y) in the opinion of Bond Counsel delivered to the Trustee and the Underwriter, failure to correct such breach or failure indefinitely (or such shorter time as shall be established as a limitation on the period of time during which correction may be pursued) will :5 32 C :5 33

88 not adversely affect the exclusion from gross income of interest on the Series 2014A Bonds for federal income taxation purposes or violate State law; or (d) Any Event of Default (as defined or otherwise set forth in the Indenture or any of the Loan Documents) shall have occurred and shall remain uncured beyond any applicable curative period provided in the applicable document; or (e) The Borrower shall make any new or additional mortgage of the Facility or otherwise encumbers the Borrower s interest in the Facility or the Gross Revenues or creates, permits or suffers any lien, claim, charge or encumbrance of any kind (including a mechanic's lien), other than a Permitted Encumbrance, to be recorded against the Facility and, in the case of a judgment or mechanic's lien only, such matter is not cured or removed (by bonding or otherwise) within twenty (20) days after notice thereof from the Trustee or the Majority Bondholders to the Borrower; or (f) Any dissolution, termination, partial or complete liquidation, merger or consolidation of the Borrower or the Guarantor, or any sale, transfer or other disposition of the Facility or of all or substantially all of the assets of the Borrower or the Guarantor; or (g) Any failure by the Borrower to obtain any Project Approvals, or the revocation or other invalidation of any Project Approvals previously obtained; or (h) Any failure by Borrower to pay at maturity, or within any applicable period of grace, any Indebtedness, or any failure to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing any Indebtedness, for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; or (i) Any Obligor shall file a voluntary petition in bankruptcy under Title 11 of the United States Code, or an order for relief shall be issued against any such Obligor in any involuntary petition in bankruptcy under Title 11 of the United States Code, or any such Obligor shall file any petition or answer seeking or acquiescing in any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under any present or future federal, state or other law or regulation relating to bankruptcy, insolvency or other relief of debtors, or such Obligor shall seek or consent to or acquiesce in the appointment of any custodian, trustee, receiver, conservator or liquidator of such Obligor, or of all or any substantial part of its respective property, or such Obligor shall make an assignment for the benefit of creditors, or such Obligor shall give notice to any governmental authority or body of insolvency or pending insolvency or suspension of operation; or (j) An involuntary petition in bankruptcy under Title 11 of the United States Code shall be filed against any Obligor and such petition shall not be dismissed within sixty (60) days of the filing thereof; or (k) A court of competent jurisdiction shall enter any order, judgment or decree approving a petition filed against any Obligor seeking any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any present or future federal, state or other law or regulation relating to bankruptcy, insolvency or other relief for debtors, or appointing any custodian, trustee, receiver, conservator or liquidator of all or any substantial part of its property; or (l) Any uninsured final judgment for an amount in excess of $25,000 shall be rendered against any Obligor and shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty (30) days, whether or not consecutive; or (m) Any of the Loan Documents shall be canceled, terminated, revoked or rescinded otherwise than in accordance with the terms thereof or with the express prior approval of Bond Counsel and either the Trustee or the Majority Bondholders, or any action at law, suit in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents, shall be commenced by or on behalf of any Obligor which is a party thereto, or any of their respective stockholders, partners or beneficiaries, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof; or (n) Any action or failure to take action by the Borrower which adversely affects the exclusion from gross income of interest on the Series 2014A Bonds; or (o) Any Obligor shall be indicted for a federal crime, a punishment for which could include the forfeiture of any of its assets; or (p) Any refusal by the Title Insurance Company to insure that any advance is secured by the Mortgage as a valid first priority lien and security interest on the Facility and the continuation of such refusal for a period of twenty (20) days after notice thereof by Trustee, to the Borrower; or (q) Any cessation at any time in completion of the Project for more than twenty (20) consecutive days except for strikes, acts of God, fire or other casualty, or other causes entirely beyond the Borrower's control, or any cessation at any time in completion of the Project for more than sixty (60) consecutive days, regardless of the cause thereof. Section 6.2 Remedies on Default. (a) Whenever any Event of Default referred to in Section 6.1 hereof shall have occurred and be continuing, the Trustee, at the written direction of the Majority Bondholders and subject to the provisions of the Indenture, shall: (i) declare the obligations of the Trustee to make disbursements from the Project Fund to be terminated, whereupon such obligations shall terminate; and (ii) by notice in writing to the Borrower, have reasonable access to and inspect, examine and make copies of the books and records and any and all accounts, data and income tax and other tax returns of Borrower at such times as deemed reasonably necessary in the opinion of the Majority Bondholders; and : :5 35 (iii) by notice in writing to the Borrower declare the unpaid indebtedness under the Loan Documents to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable; and (iv) take whatever action at law or in equity or under any of the Loan Documents as may appear necessary or desirable to collect the payments and other amounts then due and thereafter to become due hereunder or thereunder or under the Note, or to exercise any right or remedy or to enforce performance and observance of any obligation, agreement or covenant of the Borrower under this Loan Agreement, the Notes or any other Loan Document. Notwithstanding the foregoing, the Authority may take action hereunder or direct the Trustee to take action hereunder, but only if the default is a default in the satisfaction of an Authority s Unassigned Right and subject in all respects to Section 6.7 hereof. (b) Any amounts collected pursuant to action taken under this Section (other than amounts collected by the Authority pursuant to the Authority s Unassigned Rights) shall, after the payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities and advances incurred or made by the Trustee, or Majority Bondholders and their respective Counsel, be paid into the Revenue Fund (unless otherwise provided in this Agreement) and applied in accordance with the provisions of the Indenture. No action taken pursuant to this Section 6.2 shall relieve the Borrower from the Borrower's obligations pursuant to Sections 4.1 and 4.2 hereof. Section 6.3 No Remedy Exclusive. No remedy conferred herein or in any other Loan Document upon or reserved to the Trustee or the Majority Bondholders is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Trustee or the Majority Bondholders to exercise any remedy reserved to it herein or in any other Loan Document, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Section 6.4 Agreement to Pay Fees and Expenses of Counsel. If an Event of Default shall occur under this Agreement or the other Loan Documents and the Authority, the Trustee, or the Majority Bondholders should employ counsel or incur other expenses for the collection of the indebtedness or the enforcement of performance or observance of any obligation or agreement on the part of the Borrower herein or therein contained, the Borrower agrees that it will on demand therefor pay to any such party, or, if so directed by any such party, to its counsel, the fees of such Counsel and all other out-of-pocket expenses incurred by or on behalf of the Authority, the Trustee, or the Majority Bondholders. Section 6.5 No Additional Waiver Implied by One Waiver; Consents to Waivers. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver shall be effective unless in writing and signed by the party making the waiver. Section 6.6 Remedies Subject to Applicable Law. All rights, remedies, and powers provided by this Article may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of law in the State, and all the provisions of this Article are intended to be subject to all applicable mandatory provisions of law which may be controlling in the State and to be limited to the extent necessary so that they will not render this Agreement invalid, unenforceable, or not entitled to be recorded, registered, or filed under the provisions of any applicable law. Section 6.7 Authority s Unassigned Rights. (a) Notwithstanding anything to the contrary contained herein, and notwithstanding the existence or continuance of an Event of Default, the pendency of any enforcement proceeding by the Trustee or the Owners, and notwithstanding the waiver by the Trustee or the Owners of any Event of Default hereunder or thereunder, the Authority may enforce the Authority s Unassigned Rights under the Loan Documents and exercise the permitted remedies with respect thereto against the Borrower. (b) In the event of a default in respect of Authority s Unassigned Rights which remains uncured after written notice thereof to the Borrower and the Majority Bondholders, nothing in this Section shall restrict or in any way limit the right of the Authority or any other Authority Indemnified Party to take any action available or at law or in equity in order to enforce the Authority s Unassigned Rights hereunder, or any right belonging to any Authority Indemnified Party hereunder so long as neither the Authority nor any other Authority Indemnified Party, as the case may be, takes any action to declare the outstanding balance of the Bonds or the Loan Documents to be due on account of such default, and so long as neither the Trustee nor the Authority takes any action to foreclose any liens upon or security interests or to enforce any other similar remedy against any of the property described in the Mortgage or to enforce any other similar remedy which would cause such liens or security interests to be discharged or materially impaired thereby. ARTICLE VII- PREPAYMENT OF LOAN Section 7.1 Insurance; Damage, Destruction or Condemnation of the Facility. The Borrower shall apply the proceeds of any condemnation award or insurance proceeds as provided in Article III of the Mortgage, including, as provided therein, the use of such proceeds for the extraordinary optional redemption of the Bonds pursuant to Section 4.03 of the Indenture. Section 7.2 Borrower s Option and Obligation to Prepay. (a) Provided no Event of Default shall have occurred and be continuing, at any time and from time to time, the Borrower may deliver moneys to the Trustee and direct the Trustee to use the moneys so delivered for the purpose of purchasing Series 2014A Bonds or of calling Series 2014A Bonds for optional redemption in accordance with the applicable provisions of the Indenture providing for optional redemption at the redemption price stated in the Indenture. The :5 36 C :5 37

89 amount so delivered by the Borrower shall be not less than the sum of (i) the principal amount of Bonds to be called or purchased, (ii) any applicable premium and (iii) accrued interest through the proposed date of redemption of purchase; provided, that with respect to (iii) such amount shall be reduced by the amount then on deposit in the Interest Account allocable to the principal amount of Bonds to be called or purchased. Pending application for those purposes, any moneys so delivered shall be deposited by the Trustee into the Optional Redemption Account in the Debt Service Fund until applied in accordance with the provisions of the Indenture, but delivery of those moneys shall not operate to abate or postpone Loan Payments and additional payments otherwise becoming due or to alter or suspend any other obligations of the Borrower under this Loan Agreement. (b) The Borrower shall have the option to terminate this Loan Agreement on any date during the term of this Loan Agreement by causing the redemption, purchase or defeasance in whole of all Outstanding Bonds in accordance with the terms set forth in the Indenture. As a condition precedent to the termination of this Loan Agreement, pursuant to Section 7.3 hereof, the Borrower shall pay to the Trustee, in consideration thereof, in legal tender, advance Loan Payments for deposit in the Debt Service Fund (if payment in full of the principal of, and interest on, all the Outstanding Bonds, and the interest thereon at maturity or upon earlier redemption has not yet been made) equal to the sum of the following: (1) an amount which, when added to the amount on deposit in the Debt Service Fund and the Debt Service Reserve Fund and available therefor, will be sufficient to redeem, purchase or defease the Outstanding Bonds in accordance with the provisions of the Indenture, including, without limitation, the principal of, together with interest to maturity or redemption date (as the case may be) on, the Outstanding Bonds; and (2) expenses of redemption, the fees and expenses of the Authority, the Trustee Expenses and all other amounts due and payable under this Loan Agreement or the Indenture on or before such date. (c) If, as provided in the Bonds and the Indenture, the Bonds become subject to extraordinary mandatory redemption because interest on any of the Series 2014A Bonds is determined to be included for federal income tax purposes in the gross income of the Holder of any Series 2014A Bonds, the Borrower shall deliver to the Trustee, on or prior to the date required by the Indenture, the moneys needed to pay the Bonds to be redeemed in accordance with the mandatory redemption provisions relating thereto set forth in the Series Bonds and the Indenture. Section 7.3 Termination of Loan Agreement. After full payment of the Bonds or provision for the payment in full thereof having been made in accordance with Article X of the Indenture, the Borrower shall terminate this Loan Agreement by paying the fees and expenses of the Authority, the Trustee Expenses and all other amounts due and payable under this Loan Agreement and the other Loan Documents, together with any amounts required to be rebated to the federal government pursuant to the Indenture or the Arbitrage Rebate Covenants, and by giving the Authority notice in writing of such termination and thereupon such termination shall forthwith become effective, subject, however, to the survival of the obligations of the Borrower to pay any Rebate Amounts required by Sections 5.14 hereof and the provisions of Section 5.15 hereof. ARTICLE VIII- MISCELLANEOUS Section 8.1 General Provisions. The following provisions shall be applicable at all times throughout the term of this Agreement: (a) All documentation and proceedings deemed by the Authority or the Underwriter to be necessary or required in connection with this Loan Agreement and the documents relating hereto shall be subject to the prior approval of, and must be satisfactory to, the Authority or the Underwriter both as to form and substance. This includes but is not limited to the Loan Documents, surveys, appraisals, financial statements, title reports and policies, letters of credit, leases, bonds, insurance policies and all other writings or instruments required by Authority or the Underwriter. In addition, the persons or parties responsible for the execution and delivery of and signatories to, all of such documentation, including but not limited to corporate officers or partners, sureties and insurers, shall be acceptable to, and subject to the approval of the Authority or the Underwriter. The Authority or the Underwriter shall receive copies of all documents which they may require in connection with this transaction. (b) The Authority, the Trustee or the Underwriter shall, at all times, be free (but shall not be obligated) to establish independently to their respective satisfaction and in their respective absolute discretion the existence or nonexistence of any fact or facts the existence of which is a condition of this Agreement or any other Loan Document. (c) Recourse on the Bonds and on the instruments and documents executed and delivered by or on behalf of the Authority in connection with the transactions contemplated hereby may be had only against the Trust Estate (and not against any moneys due or to become due to the Authority pursuant to the Authority s Unassigned Rights). No recourse shall be had for the payment of the principal of and premium, if any, or interest on, the Bonds, or for any claim based thereon or on this Agreement or any other Loan Document, any Authority Document or any instrument or document executed and delivered by or on behalf of the Authority in connection with the transactions contemplated hereby, against the Authority or any member, commissioner, officer, employee or other elected or appointed official, past, present or future, of the Authority or any successor body, as such, either directly or through the Authority or any such successor body, under any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or by any legal or equitable proceeding or otherwise and all such liability of the Authority or any such incorporation, member, commissioner, officer, director, employee, any other elected or appointed official or trustee as such is hereby expressly waived and released as a condition of and consideration for the adoption of the resolution authorizing the execution of the Authority Documents and issuance of the Bonds and the delivery of other documents in connection herewith. No member, commissioner, officer, employee or other elected or appointed official past, present or future, of the Authority or any successor body shall be personally liable on the Authority Documents, the Bonds or any other documents in connection herewith, nor shall the issuance of the Bonds be considered as misfeasance or malfeasance in office. The Bonds and the undertakings of the Authority under the Authority Documents do not constitute a pledge of the general credit or taxing power of the : :5 39 Authority, the State of Wisconsin, or any political subdivision thereof, do not evidence and shall never constitute a debt of the State of Wisconsin or any political subdivision thereof (other than the Authority), and shall never constitute nor give rise to a pecuniary liability of the State of Wisconsin or any political subdivision thereof. The Authority has no taxing power. Section 8.2 Authorized Borrower Representative. The Borrower shall, by certificate delivered at Closing, designate an Authorized Borrower Representative or Authorized Borrower Representatives for the purpose of taking all actions and making all certificates required to be taken and made by the Authorized Borrower Representative under the provisions of the Loan Documents. Whenever under the provisions of any Loan Document the approval of the Borrower is required or any party is required to take some action at the request of the Borrower, such approval or such request shall be made by the Authorized Borrower Representative, unless otherwise specified in this Agreement, and the Authority, the Trustee, and the Majority Bondholders shall be authorized to act on any such approval or request, and the Borrower shall have no complaint against any such party as a result of any such action taken in conformity with such approval or request by the Authorized Borrower Representative. Section 8.3 Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the Authority, the Trustee and the Borrower and their respective successors and permitted assigns. The Owners of the Bonds shall be beneficiaries of this Agreement. Section 8.4 Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument; provided, however, that for purposes of perfecting a lien or security interest in this Agreement by the Trustee, whether under Article 9 of the Uniform Commercial Code of the State or otherwise, only the counterpart delivered to, and receipted by, the Trustee shall be deemed the original. Section 8.5 Amendments, Changes and Modifications. Subsequent to the issuance of the Bonds and prior to payment or provision for the payment of the Bonds in full (including interest and premium, if any, thereon) in accordance with the provisions of the Indenture and except as otherwise provided herein, the Loan Documents may not be amended, changed, modified, altered or terminated by the Authority or the Borrower except in compliance with Article IX of the Indenture by a written instrument executed by the parties thereto. Section 8.6 Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof and such invalid or unenforceable provision shall be deemed no longer to be contained in this Agreement. Section 8.7 Survival. Notwithstanding repayment in full of the loan evidenced by the Note, the final payment, redemption or defeasance of the Bonds, or the termination of this Agreement (and, in the case of the Underwriter, any sale or transfer of the Bonds permitted hereby), all provisions in this Agreement concerning (i) the tax-exempt status of the Series 2014A Bonds (including, but not limited to provisions concerning rebate), (ii) the interpretation of this Agreement, (iii) the governing law, jurisdiction and venue, (iv) the Authority s right to rely on written representations of others contained herein or in any other certificate or document, regardless of whether the Authority is a party thereto, (v) the immunity indemnification rights and lack of pecuniary liability of the Authority Indemnified Parties, and (vi) any other provision of this Agreement not described or enumerated above that expressly provides for its survival shall survive and remain in full force and effect. Section 8.8 Notices. All notices, demands, requests, consents, approvals, certificates or other communications hereunder shall be sufficiently given and shall be deemed given (a) three days after mailing by certified mail, first-class postage prepaid, (b) the Business Day after sending by expedited overnight delivery service, and (c) the date of receipt if delivered by person delivery. A duplicate copy of each notice, certificate or other communication given hereunder by either the Authority or the Borrower to the other shall also be given to the Trustee, and the Underwriter. The Authority, the Borrower, the Underwriter and the Trustee may, by ten days prior written notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. No notice need be given to any party if such party is no longer a party to the transactions contemplated by this Agreement. Section 8.9 Applicable Law. This Agreement shall be governed by the applicable laws of the State of Wisconsin. All claims of whatever character arising out of this Agreement, or under any statute or common law relating in any way, directly or indirectly, to the subject matter hereof or to the dealings between the Authority and any other party hereto, if and to the extent that such claim potentially could or actually does involve the Authority, shall be brought in any state or federal court of competent jurisdiction located in the County of Dane in the State of Wisconsin. By executing and delivering this Agreement, each party hereto irrevocably: (i) accepts generally and unconditionally the exclusive jurisdiction and venue of such courts in respect of any claim described in the preceding sentence; (ii) waives any defense of forum non conveniens; and (iii) agrees not to seek removal of such proceedings to any court or forum other than as specified above. The foregoing shall not be deemed or construed to constitute a waiver by the Authority of any prior notice or procedural requirements applicable to actions or claims against or involving political subdivisions of the State of Wisconsin that may exist at the time of and in connection with such matter. Section 8.10 Debtor Creditor Relationship. It is expressly understood and agreed that the relationship between the Authority and the Borrower established by the transaction contemplated by this Agreement and by all of the other Loan Documents is exclusively that of creditor or lender, on the part of the Authority, and debtor or borrower, on the part of the Borrower and is in no way to be construed as a partnership or joint venture of any kind. It is further understood that all payments by the Borrower under the Loan Documents shall be exclusively on account of the said debtor/creditor relationship. Section 8.11 Maximum Rate; Total Interest. This Agreement is subject to the express condition, and it is agreed, that at no time shall payments hereunder, under the Notes or under the other Loan Documents that are or are construed to be payments of interest on the unpaid principal amount of the Loan reflect interest that is borne at a rate in excess of the Maximum Rate, and the Borrower shall not be obligated or required to pay, nor shall the Authority be permitted to charge or collect, interest borne at a rate in excess of the Maximum Rate. If by the terms of this Agreement or the other Loan Documents the Borrower is required to make such :5 40 C :5 41

90 payments reflecting interest borne at a rate in excess of the Maximum Rate, such payments shall be deemed to be reduced immediately and automatically to reflect the Maximum Rate. Any such excess payment previously made shall be immediately and automatically applied to the unpaid balance of the principal sum of the Loan and not to the payment of interest thereon. This Agreement is also subject to the condition that amounts paid hereunder representing late payment or penalty charges or the like shall only be payable to the extent permitted by law. Section 8.12 Terms of this Agreement. This Agreement shall be in full force and effect from its date to and including such date as all of the Bonds issued under the Indenture shall have been fully paid or retired in accordance with their terms and the terms of the Indenture (or provision for such payment shall have been made as provided in the Indenture), except, however, that the covenants and provisions relating to the Authority s Unassigned Rights of the Authority, the covenants relating to the preservation of exclusion from gross income of interest on the Series 2014A Bonds for purposes of federal income taxation and provisions stated to survive termination shall survive the termination hereof. Section 8.13 Third-Party Beneficiaries. It is not intended by any provision of this Agreement to establish in favor of the public or any member thereof, other than as expressly provided herein, the rights of a third-party beneficiary hereunder, or to authorize anyone not a party to this Agreement to maintain a suit for personal injuries or property damage pursuant to the terms or provisions hereof. The duties, obligations and responsibilities of the parties to this Agreement with respect to third parties shall remain as imposed by law. Notwithstanding the foregoing, it is specifically agreed between the parties that each of the Authority Indemnified Parties is a third-party beneficiary of this Agreement, entitled to enforce in his, her or its name each of the covenants and provisions of this Agreement under which such Authority Indemnified Party has specific rights or immunities. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their respective names, all as of the date first above written. PUBLIC FINANCE AUTHORITY By: Authorized Signatory PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY, as Borrower By: Name: Title: Section 8.14 Entire Agreement. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS CONTAIN THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND ALL PRIOR AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATIVE HERETO AND THERETO WHICH ARE NOT CONTAINED HEREIN OR THEREIN ARE SUPERSEDED AND TERMINATED HEREBY, AND THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO : :5 43 The undersigned Guarantor agrees to comply with the obligations imposed on it in the within Agreement, this day of June, PALM BEACH MARITIME FOUNDATION, INC., as Guarantor By: Name: Title: EXHIBIT A-1 FORM OF SERIES 2014A PROMISSORY NOTE PROMISSORY NOTE PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY SERIES 2014A Interest Rate: As provided in the Loan Agreement Referenced Below, subject to modification as provided in the Indenture referenced below Maturity Date: May 1, 2040 Dated Date: June, 2014 Principal Amount: $21,000,000 PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY, a Florida non-profit corporation (the Borrower ), which term includes any successor corporation under the Loan Agreement or Indenture hereinafter referred to), for value received, hereby promises to pay to the PUBLIC FINANCE AUTHORITY, or registered assigns, the Principal Amount set forth above and to pay interest thereon from the Dated Date set forth above, or from the date to which interest has been paid or duly provided for, in each case as provided in Section 4.2 of the Loan Agreement referenced below, and on such other dates as may be required by said Loan Agreement (each such date on which payment is due, an Interest Payment Date ), until the principal hereof is paid or made available for payment. 1. Description of Note. This Promissory Note (this Note ) secures the Public Finance Authority $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A (the Series 2014A Bonds ), and is issued under that certain Loan Agreement, dated as of June 1, 2014 (as amended from time to time, the Loan Agreement ), by and between the Borrower and the Public Finance Authority (the Authority ). The Authority s rights under the Loan Agreement, except for certain Authority s Unassigned Rights (as defined in the Indenture) have been assigned to U.S. Bank National Association, as Trustee (together with any successor, the Trustee ) pursuant to that certain Trust Indenture dated as of June 1, 2014 (the Indenture ), between the Authority and the Trustee to which Indenture and all indentures supplemental thereto reference is made for a statement of the respective rights thereunder of the Borrower, the Trustee and the Holders of the Bonds. This Note has been issued to evidence the obligation of the Borrower to repay a loan from the Authority of the proceeds of the Bonds pursuant to the Loan Agreement. 2. Payment. All payment of the principal of, interest on, and premium, if any, on account of this Note will, as provided in the Loan Agreement, be punctually paid to the Trustee :5 44 C :5 B-1

91 If the specified date for any such payment shall not be a Business Day (as defined in the Indenture) then such payment may be made on the next Business Day without additional interest and with the same force and effect as if made on the specified date for such payment. All such payments shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Prepayment. This Note may be prepaid only in accordance with the terms and conditions set forth in the Loan Agreement. IN WITNESS WHEREOF, the Borrower has caused this Promissory Note to be duly executed. PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY 4. Certain Rights of Holders. If an Event of Default under the Loan Agreement shall occur, the principal of this Note may be declared due and payable in the manner and with the effect provided in the Loan Agreement. No reference herein to the Loan Agreement and no provision of this Note or of the Loan Agreement shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of this Note at the times, place, and rate, and in the coin or currency, herein prescribed from the sources herein described. By: John Grant, President and CEO 5. No Recourse. No recourse shall be had for the payment of the principal of or premium, if any, or interest on this Note, or for any claim based hereon, or otherwise in respect hereof or of the Loan Agreement or the Indenture, to or against any incorporator, director, officer or employee, past, present or future, as such, of the Borrower or of any predecessor or successor corporation, either directly or through the Borrower or any such predecessor or successor corporation, under and by virtue of any constitution or statute or rule of law or by the enforcement of any assessment or penalty, or otherwise, all such liability of incorporators, directors, officers and employees, as such, being waived and released by the holder and owner hereof by the acceptance of this Note; all as more fully provided in the Loan Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] :5 A :5 A-3 ASSIGNMENT EXHIBIT A-2 FORM OF TAXABLE SERIES 2014B PROMISSORY NOTE For value received this date of June, 2014, the undersigned hereby assigns to U.S. Bank National Association, Trustee under that certain Trust Indenture, dated as of June 1, 2014, between the Trustee and the undersigned, the within Promissory Note and all its rights thereunder without recourse or warranty, except warranty of good title and warranty that the Authority has not assigned this Promissory Note to a person other than the Trustee and that the principal amount of $21,000,000 remains unpaid under this Promissory Note. PUBLIC FINANCE AUTHORITY By: Name: Title: Authorized Signatory PROMISSORY NOTE PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY TAXABLE SERIES 2014B Interest Rate: As provided in the Loan Agreement Referenced Below, subject to modification as provided in the Indenture referenced below Maturity Date: May 1, 2017 Dated Date: June, 2014 Principal Amount: $3,640,000 PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY, a Florida non-profit corporation (the Borrower ), which term includes any successor corporation under the Loan Agreement or Indenture hereinafter referred to), for value received, hereby promises to pay to the PUBLIC FINANCE AUTHORITY, or registered assigns, the Principal Amount set forth above and to pay interest thereon from the Dated Date set forth above, or from the date to which interest has been paid or duly provided for, in each case as provided in Section 4.2 of the Loan Agreement referenced below, and on such other dates as may be required by said Loan Agreement (each such date on which payment is due, an Interest Payment Date ), until the principal hereof is paid or made available for payment. 1. Description of Note. This Promissory Note (this Note ) secures the Public Finance Authority $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B (the Series 2014B Bonds ), and is issued under that certain Loan Agreement, dated as of June 1, 2014 (as amended from time to time, the Loan Agreement ), by and between the Borrower and the Public Finance Authority (the Authority ). The Authority s rights under the Loan Agreement, except for certain Authority s Unassigned Rights (as defined in the Indenture) have been assigned to U.S. Bank National Association, as Trustee (together with any successor, the Trustee ) pursuant to that certain Trust Indenture dated as of June 1, 2014 (the Indenture ), between the Authority and the Trustee to which Indenture and all indentures supplemental thereto reference is made for a statement of the respective rights thereunder of the Borrower, the Trustee and the Holders of the Bonds. This Note has been issued to evidence the obligation of the Borrower to repay a loan from the Authority of the proceeds of the Bonds pursuant to the Loan Agreement. 2. Payment. All payment of the principal of, interest on, and premium, if any, on account of this Note will, as provided in the Loan Agreement, be punctually paid to the Trustee :5 A-4 C :5 A-5

92 If the specified date for any such payment shall not be a Business Day (as defined in the Indenture) then such payment may be made on the next Business Day without additional interest and with the same force and effect as if made on the specified date for such payment. All such payments shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Prepayment. This Note may be prepaid only in accordance with the terms and conditions set forth in the Loan Agreement. 4. Certain Rights of Holders. If an Event of Default under the Loan Agreement shall occur, the principal of this Note may be declared due and payable in the manner and with the effect provided in the Loan Agreement. No reference herein to the Loan Agreement and no provision of this Note or of the Loan Agreement shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of this Note at the times, place, and rate, and in the coin or currency, herein prescribed from the sources herein described. 5. No Recourse. No recourse shall be had for the payment of the principal of or premium, if any, or interest on this Note, or for any claim based hereon, or otherwise in respect hereof or of the Loan Agreement or the Indenture, to or against any incorporator, director, officer or employee, past, present or future, as such, of the Borrower or of any predecessor or successor corporation, either directly or through the Borrower or any such predecessor or successor corporation, under and by virtue of any constitution or statute or rule of law or by the enforcement of any assessment or penalty, or otherwise, all such liability of incorporators, directors, officers and employees, as such, being waived and released by the holder and owner hereof by the acceptance of this Note; all as more fully provided in the Loan Agreement. IN WITNESS WHEREOF, the Borrower has caused this Promissory Note to be duly executed. PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY By: Name: Title: [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] :5 A :5 A-7 ASSIGNMENT For value received this date of June, 2014, the undersigned hereby assigns to U.S. Bank National Association, Trustee under that certain Trust Indenture, dated as of June 1, 2014, between the Trustee and the undersigned, the within Promissory Note and all its rights thereunder without recourse or warranty, except warranty of good title and warranty that the Authority has not assigned this Promissory Note to a person other than the Trustee and that the principal amount of $3,640,000 remains unpaid under this Promissory Note. PUBLIC FINANCE AUTHORITY By: Name: Title: Authorized Signatory EXHIBIT B FORM OF REQUISITION Requisition No. Date:, 2014 To: Attn: U.S. Bank National Association, as trustee (the Trustee ), under a Trust Indenture dated as of June 1, 2014 between the Trustee and the Public Finance Authority (the Authority ), relating to the Authority s $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A (the Series 2014A Bonds ) and $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B (the Series 2014B Bonds and, collectively with the Series 2014A Bonds, the Bonds ). Corporate Trust Department, Trustee The undersigned Authorized Borrower Representative designated pursuant to the terms of the aforesaid Loan Agreement of even date therewith (the Loan Agreement ) relating to the Bonds identified above by and between PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY (the Borrower ) and the Authority, hereby requests that there be paid from the Account in the Project Fund (the Account ) the sum set forth below, and in that connection with respect to the use of the proceeds of the BONDS, I HEREBY CERTIFY, as follow: 1. An obligation in each of the amounts set forth below has been incurred in connection with the Project (as defined in the Indenture), and such obligation or amount represents a cost of the Project or (for a Costs of Issuance Account draw) a cost of issuance of the Bonds or (for an Insurance and Condemnation Proceeds Account Draw) a cost for the repair and/or replacement of the Facility. 2. Each requested payment is a proper charge against the Fund, pursuant to the Indenture, has not been the basis of any previous withdrawal from the Fund, and the payee, purpose and amount of such obligation are described below: Payee Name and Address Purpose Account Amount 3. The undersigned has no notice of any vendors', materialmen's, mechanics', suppliers' or other similar liens or rights to liens, chattel mortgages or conditional sales contracts, :5 A-8 C :5

93 or other contracts or obligations which should be satisfied or discharged before payment of the above-described obligations is made. 4. All of the provisions of the Loan Agreement are incorporated herein by reference and capitalized terms used herein are not defined shall have the meanings assigned to them in the Indenture. The following provisions (5-8) apply with respect to disbursements from the General Account of the Project Fund: 5. The payments to be made to the payees set forth above are for the costs described above that (a) have been made or incurred by the Borrower and, if payment to the Borrower is requested, have been paid by the Borrower or, if payment to the Borrower is not requested, are currently due to the persons to whom payment is requested, (b) are valid Project Costs (other than any costs of issuing the Bonds) for the Project and are proper charges against the General Account of the Project Fund, and (c) that the expenditure of such disbursement when added to all previous disbursements will result in (i) not less than 95% of all disbursements from proceeds of the Series 2014A Bonds having been used to pay or reimburse the Borrower for Costs and (ii) not more than 2% of amounts paid from proceeds of the Series 2014A Bonds having been applied to Costs of Issuance. No part thereof was included in any other request previously filed with the Trustee. 6. The amount remaining in the General Account of the Project Fund is sufficient to pay all remaining Project Costs reasonably anticipated in connection with the completion of the Project. 7. All necessary permits and approvals required for the portion of the work on the Project for which payment is requested have been issued and are full force and effect. 8. There has not been filed with or served upon the Borrower any notice of any lien, right to a lien or attachment upon or claim affecting the right of any person, firm or corporation to receive payment of the respective amounts stated in this request which has not been released or will not be released simultaneously with the payment of such obligation, except to the extent any such lien is being contested in accordance with the provisions of the Loan Agreement. The following provisions (9-12) apply with respect to disbursements from the Insurance and Condemnation Proceeds Account: 9. The payments to be made to the payees set forth above are for the costs described above that (a) have been made or incurred by the Borrower and, if payment to the Borrower is requested, have been paid by the Borrower or, if payment to the Borrower is not requested, are currently due to the persons to whom payment is requested, (b) are valid costs of repair or replacement of the Facility, and (c) no part thereof was included in any other request previously filed with the Trustee. writing (attached hereto) by an Independent Architect or an Independent Engineer 11. All necessary permits and approvals required for the portion of the work on the Facility for which payment is requested have been issued and are full force and effect. 12. There has not been filed with or served upon the Borrower any notice of any lien, right to a lien or attachment upon or claim affecting the right of any person, firm or corporation to receive payment of the respective amounts stated in this request which has not been released or will not be released simultaneously with the payment of such obligation, except to the extent any such lien is being contested in accordance with the provisions of the Loan Agreement 13. All of the Borrower s representations, covenants and warranties contained in the Loan Documents were true and accurate in all material respects as of the date made, and remain true and accurate in all material respects as of the date of this requisition, and the Borrower has fully and satisfactorily performed all of its covenants and obligations to date required under the Loan Documents. 14. This request for payment contains no items representing payment on account of any retained percentage entitled to be retained by the Borrower at the date hereof. 15. Attached hereto as Attachment A are invoices and/or statements relating to the payments being requested and, if any of them have been paid by the Borrower, evidence of payment thereof. 16. Attached hereto as Attachment B are lien waivers, for all services and materials included in the costs for which payment is hereby requested [only required for requisitions for improvements to the Land or the Improvements] 17. This Requisition does not request reimbursement for any payment or payments for any obligations originally paid or incurred, for federal income tax purposes more than sixty (60) days before April 3, 2014 (the date the Borrower s governing body adopted its resolution indicating its official intent to be reimbursed for those payments from proceeds of tax-exempt obligations). 18. The Borrower understands that the Owners of the Bonds are relying on the certifications herein with regard to and in connection with approving the disbursement requested hereby. PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY By: Name: Title: 10. The amount of net proceeds in the Insurance and Condemnation Proceeds Account is sufficient for the necessary repair and/or replacement of the Facility, as certified in : :5 EXHIBIT C AUTHORIZED BORROWER REPRESENTATIVE CERTIFICATE Reference is made to that certain Loan Agreement dated as of [June 1, 2014] (the "Loan Agreement"), by and between the Public Finance Authority (the "Authority") and Palm Beach Maritime Museum, Inc. d/b/a Palm Beach Maritime Academy (the "Borrower") relating to Public Finance Authority First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A and First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B. The undersigned Authorized Borrower Representative hereby certifies that: (i) I have read all relevant sections of the Loan Agreement relating to insurance and the definitions relating thereto; (ii) I have made such examination or investigation as is necessary or appropriate in order to make the statements contained herein; (iii) I have made such examination or investigation as is necessary to enable me to express an informed opinion as to whether or not the terms, conditions and covenants in the Loan Agreement with respect to insurance matters have been complied with; and (iv) Based on examination and review of the Loan Agreement, all of the terms, conditions and covenants set forth in the Loan Agreement as they relate to insurance matters have been satisfied and all insurance policies and provisions required by the Loan Agreement are in full force and effect. THIS PAGE INTENTIONALLY LEFT BLANK IN WITNESS WHEREOF, the undersigned has executed this Authorized Borrower Representative Certificate this day of, 20_. Palm Beach Maritime Museum, Inc. d/b/a Palm Beach Maritime Academy By: Name: Title: :5 C-15

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95 APPENDIX D FORM OF THE MORTGAGE AND SECURITY AGREEMENT (Form of Mortgage and Security expected to be delivered in substantially the following form)

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97 Prepared by and return to: Morris G. (Skip) Miller, Esq. Greenspoon Marder, P.A. 250 South Australian Avenue, Suite 700 West Palm Beach, FL (561) MORTGAGE AND SECURITY AGREEMENT from PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY Borrower to U.S. BANK NATIONAL ASSOCIATION, as Trustee Mortgagee Dated as of June 1, 2014 Relating to: PUBLIC FINANCE AUTHORITY $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B TABLE OF CONTENTS Page ARTICLE 1. - CERTAIN DEFINITIONS... 4 SECTION 1.1 Due and Payable... 5 SECTION 1.2 Environmental Law... 5 SECTION 1.3 Environmentally Sensitive Area... 5 SECTION 1.4 Event of Default... 5 SECTION 1.5 Governmental Authority... 5 SECTION 1.6 Hazardous Substances... 5 SECTION 1.7 Impositions... 6 SECTION 1.8 Indebtedness... 6 SECTION 1.9 Land... 6 SECTION 1.10 Permitted Encumbrances... 6 SECTION 1.11 Spill... 6 SECTION 1.12 State... 6 SECTION 1.13 Threat of Spill... 7 ARTICLE 2. - PARTICULAR COVENANTS OF BORROWER... 7 SECTION 2.1 Payment of Indebtedness... 7 SECTION 2.2 Warranty of Title... 7 SECTION 2.3 No Defaults... 7 SECTION 2.4 To Pay Impositions... 7 SECTION 2.5 To Maintain Priority of Lien SECTION 2.6 To Pay Recording Fees, Taxes and Other Charges SECTION 2.7 Maintenance of Mortgaged Property; Covenants Against Waste; Inspection by Mortgagee SECTION 2.8 After-Acquired Property SECTION 2.9 Further Assurances SECTION 2.10 Status of Borrower SECTION 2.11 Recorded Instruments SECTION 2.12 Environmental Provisions SECTION 2.13 Mold Coverage ARTICLE 3. - CASUALTY AND CONDEMNATION SECTION 3.1 Net Proceeds SECTION 3.2 Net Awards SECTION 3.3 Application of Net Proceeds and Net Awards ARTICLE 4. SECURITY AGREEMENT UNDER UNIFORM COMMERCIAL CODE SECTION 4.1 Security Agreement ARTICLE 5. - EVENTS OF DEFAULT AND REMEDIES SECTION 5.1 Events of Default Defined SECTION 5.2 Remedies SECTION 5.3 Foreclosure SECTION 5.4 Remedies Cumulative; No Waiver; Etc SECTION 5.5 No Merger ARTICLE 6. - PROVISIONS OF GENERAL APPLICATION SECTION 6.1 Modifications SECTION 6.2 Notices SECTION 6.3 Mortgagee's Rights to Perform Borrower's Covenants SECTION 6.4 Additional Sums Payable by Borrower SECTION 6.5 Captions SECTION 6.6 Successors and Assigns SECTION 6.7 Gender and Number SECTION 6.8 Severability SECTION 6.9 Subrogation SECTION 6.10 Incorporation of the Loan Documents SECTION 6.11 Controlling Law SECTION 6.12 Indemnity SECTION 6.13 Purpose of Loan SECTION 6.14 Mortgagee's Rights and Responsibilities EXHIBIT A Legal Description MORTGAGE AND SECURITY AGREEMENT THIS MORTGAGE AND SECURITY AGREEMENT (as the same may be amended, modified or supplemented from time to time, this Mortgage ) is made as of this 1 st day of June, 2014, from PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY, a Florida not for profit corporation, whose address is 4512 N. Flagler Drive, Suite 206, West Palm Beach, Florida ( Borrower ), in favor of U.S. BANK NATIONAL ASSOCIATION, a national banking association, as trustee, whose address is 550 West Cypress Creek Road, Suite 380, Fort Lauderdale, Florida (together with its successors and assigns, the Trustee or the Mortgagee ). W I T N E S S E T H: WHEREAS, Public Finance Authority is a unit of government and a body corporate and politic under the laws of the State of Wisconsin (the Authority ), organized as a commission under and pursuant to Sections , and of the Wisconsin Statutes, as amended commonly known as the Joint Exercise of Powers Law (the Act ) and exists by virtue of that certain Amended and Restated Joint Exercise of Powers Agreement Relating to the Public Finance Authority, dated September 28, 2010, by and among Adams County, Wisconsin; Bayfield County, Wisconsin; Marathon County, Wisconsin; Waupaca County, Wisconsin; and the City of Lancaster, Wisconsin, as such agreement may be amended from time to time (the Joint Exercise Agreement ); and WHEREAS, the Authority is authorized and empowered under the Act and by the Joint Exercise Agreement to, among other things, issue bonds, notes or other evidences of indebtedness in connection with, and to make loans to assist in the financing and refinancing of, projects (as defined in the Act) located inside and outside of the State of Wisconsin; and WHEREAS, by proceedings adopted pursuant to and in accordance with the Act, the Authority has authorized the issuance of its $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A (the Series 2014A Bonds ), and its $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B (the Series 2014B Bonds and, together with the Series 2014A Bonds, the Bonds ) pursuant to a Trust Indenture dated as of even date herewith (as the same may be modified, amended or supplemented from time to time, the Indenture ) between the Authority and the Trustee; and WHEREAS, Borrower proposes to borrow an amount equal to the principal amount of the Bonds (the Loan Amount ) from the Authority pursuant to that certain Loan Agreement dated as of even date herewith (as the same may be amended, modified or supplemented from time to time, the Loan Agreement ) by and between the Authority and the Borrower; and D-1 1

98 WHEREAS, Borrower has executed and delivered to the Authority, and the Authority has assigned to the Trustee, those certain promissory notes dated as of even date herewith (as the same may be amended, modified or supplemented from time to time, the Notes ), which evidence, in the aggregate, the loan in the Loan Amount (the Loan ) being made pursuant to the Loan Agreement; and WHEREAS, the proceeds of the Loan will be utilized by Borrower for the purpose of financing (a) the acquisition of two charter schools (the Facility ) operated by the Borrower which are located within the territorial limits of the Town of Lantana located in Palm Beach County, Florida (together, the Project Jurisdiction ), (b) the construction, equipping and making of certain renovations and capital improvements to the Facility, (c) the refunding of the Authority s $1,000,000 Education Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A (the Refunded Bonds ), (d) the funding of a debt service reserve fund, (e) paying capitalized interest, and (f) paying costs of issuance (collectively, the Project ); and WHEREAS, the Notes provide that the Loan matures on the final maturity date of the Bonds (the Maturity Date ), upon which date all of the outstanding and unpaid principal and interest under the Notes will be due and payable; and WHEREAS, the Hapoalim Securities USA, Inc. (the Underwriter ) has required that this Mortgage be executed and delivered as a condition to the Underwriter s purchase of the Bonds. NOW, THEREFORE, in consideration of the sum of TEN DOLLARS ($10.00) and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, in order to secure the payment of the Indebtedness (as hereinafter defined), together with the interest thereon, at the rates and payable at the time and in the manner specified in the Loan Documents (as hereinafter defined), and any other sums payable under the Loan Documents; and to secure the performance and observance of all the provisions of the Loan Documents, including, without limitation, the repayment to Mortgagee as assignee of the Authority of the Loan and any other sums advanced by Mortgagee hereunder or under any other Loan Document, the Borrower hereby grants, bargains, sells, warrants, conveys, assigns, sets over and confirms to Mortgagee, and grants to Mortgagee a security interest in, all of the following (all of which is hereinafter collectively referred to as the Mortgaged Property ): GRANTING CLAUSES: I. All of Borrower's right, title and interest in and to that certain real property located in the Town of Lantana, Florida and more fully described on Exhibit A attached hereto as more fully defined hereinafter, (the Land ) including all and singular, the easements, rights, privileges, tenements, hereditaments and appurtenances (including air rights) thereunto belonging or in any way appertaining thereto, and the reversion and the remainder thereof; and all of the estate, right, title, interest, claim or demand of Borrower therein and in and to any land lying in the bed of any street, road or avenue, open or proposed, thereof, either at law or in equity, in possession or expectancy, now or 2 hereafter acquired and in all stripes and gores therein or adjoining thereto, the air space and right to use said air space thereinabove and all rights of ingress and egress by motor vehicles to parking facilities thereon or therein; II. All of the right, title and interest of Borrower in and to (i) all buildings and other improvements and additions thereto now erected or hereafter constructed or placed upon the Land or any part thereof (the Improvements ); (ii) the name or names, if any, as may now or hereafter be used for each Improvement or otherwise in connection with the Land, and the books and records and good will associated with the Improvements and the Land, and all licenses, permits, approvals in connection with the construction and operation of the Improvements; and (iii) all personal property of the Borrower located on the Land including, without limitation, apparatus, interior improvements, appurtenances, heating, electrical, mechanical, lighting, plumbing, ventilating, air conditioning, refrigerating, incinerating and elevator equipment and systems, medical equipment, beds, call systems, sprinkler systems and other fire prevention and extinguishing apparatus and materials, motors, machinery, pipes, appliances, fittings, fixtures, equipment and building materials of every kind and nature whatsoever now or hereafter attached to or placed in or upon the Land or the Improvements, or any part thereof, or used or procured for use in connection with the operation of the Land or the Improvements or any business conducted thereon, all of the foregoing items set forth in this clause (iii), except as aforesaid, hereinafter collectively called the Equipment ; III. All right, title and interest of Borrower in and to all screens, awnings, shades, blinds, curtains, draperies, carpets, rugs, furniture, furnishings, decorations, chattels and other personal property now or hereafter in, on or at said Land, all of the foregoing, except as aforesaid, hereinafter collectively called the Furnishings ; IV. All right, title and interest of Borrower in and to all unearned premiums, accrued, accruing or to accrue under insurance policies now or hereafter obtained, or caused to be obtained, by Borrower and Borrower's interest in and to all proceeds of the conversion, voluntary or involuntary, of the Mortgaged Property or any part thereof into cash or liquidated claims, including, without limitation, proceeds of casualty insurance, title insurance or any other insurance maintained on the Land, the Improvements, the Equipment or the Furnishings or any part of either thereof (collectively, Proceeds ) and all awards and other compensation (collectively Awards ) heretofore and hereafter made to the present and all subsequent owners of the Land, the Improvements, the Equipment or the Furnishings or any part of either thereof by any governmental or other lawful authorities for the taking by eminent domain, condemnation or otherwise, of all or any part thereof or any easement or other right therein, including Awards for any change of grade of streets, all of which Proceeds and Awards are hereby assigned to Mortgagee; V. All rights under any easement or related agreements and all royalties and rights appertaining to the use and enjoyment of the Land, including, without limitation, alley, vault, drainage, mineral, ditch, reservoir, water, oil and gas rights, together with any and all other rights, privileges and interests appurtenant thereto or used in connection with the Land or the Improvements, whether existing now or hereafter acquired; 3 VI. All construction contracts, subcontracts, architectural agreements, development agreements, service agreements, labor, material and payment bonds, guarantees and warranties, plans and specifications, and permits and approvals relating to the construction of the Improvements, whether now or hereinafter existing; VII. All books, records and good will associated with the Land and the Improvements, all logos, trademarks and tradenames used in connection with the Land and the Improvements, all management contracts now in effect or hereafter entered into, and all extensions, renewals and replacements thereof, and all permits, licenses and approvals for the operation of the Improvements; VIII. All extensions, improvements, betterments, substitutions and replacements of, and all additions and appurtenances to, the Land, the Improvements, the Equipment and the Furnishings, hereafter acquired by or released to Borrower or constructed, assembled or placed on the Land, and all conversions of the security constituted thereby immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further mortgage, conveyance, assignment or other act by Borrower, shall become subject to the lien of this Mortgage as fully and completely, and with the same effect, as though now owned by Borrower and specifically described herein; IX. All of the Facility s revenues, receipts and income, from all sources of whatsoever nature; but not including (i) gifts, grants, bequests, donations and contributions made to the Borrower or the Facility, which are specifically designated at the time of the making thereof by the donor or grantor thereof as being for certain specified purposes which are inconsistent with the application thereof to the payment of the payments required to be made by the Borrower pursuant to the Loan Agreement, and (ii) any amounts collected by the Borrower or the Facility that constitute sales taxes or other monies which are required by law to be paid over to any governmental entity. TO HAVE AND TO HOLD the Mortgaged Property, together with all rights, hereditaments and appurtenances in any wise appertaining or belonging thereto, unto the Mortgagee, its successors and assigns, forever for the uses set forth herein, and Borrower hereby binds itself and its successors and assigns to warrant and forever defend the Mortgaged Property unto the Mortgagee, its substitutes or successors and assigns, against the claim or claims of all persons claiming or to claim the same or any part thereof. ARTICLE 1. - CERTAIN DEFINITIONS In addition to other definitions contained herein, the following terms shall have the meanings set forth below, unless the context of this Mortgage otherwise requires. All other capitalized terms used herein which are defined in either the Indenture or the Loan Agreement, and not defined herein, shall have the respective meanings ascribed thereto in the Indenture or Loan Agreement, unless otherwise expressly provided or unless the context otherwise requires. 4 D-2 SECTION 1.1 Due and Payable (i) when used with reference to the principal of, premium or interest on the Indebtedness, or when referring to any and all other sums secured by this Mortgage or any other of the Loan Documents shall mean due and payable, whether at the monthly or other date of payment or at the date or maturity specified in the Notes, the Loan Agreement, this Mortgage or other Loan Documents or by acceleration or call for prepayment as provided in the Notes, the Loan Agreement, this Mortgage or the other Loan Documents, and (ii) when used with reference to Impositions, shall mean the last day upon which any such charge may be paid without penalty or interest and without becoming a lien upon the Mortgaged Property. SECTION 1.2 Environmental Law shall mean means any federal, state or local law, statute, code, ordinance, regulation, requirement or rule relating to dangerous, toxic or hazardous pollutants, Hazardous Substances, chemical waste, materials or substances. SECTION 1.3 Environmentally Sensitive Area shall mean (i) a wetland or other water of the United States for purposes of the Clean Water Act or other similar area regulated under any State Environmental Law, (ii) a floodplain or other flood hazard area as defined pursuant to any applicable State Environmental Law, (iii) a portion of the coastal zone for purposes of the Federal Coastal Zone Management Act, or (iv) any other area, development of which is specifically restricted under applicable Environmental Law by reason of its physical characteristics or prior use. SECTION 1.4 Event of Default shall mean each of the events and circumstances described as such in Section 5.1 hereof. SECTION 1.5 Governmental Authority means any federal, state, county, municipal or local government or any department, commission, board, legislature or office thereof, having or claiming jurisdiction over the Mortgaged Property. SECTION 1.6 Hazardous Substances means (i) any oil, flammable substance, explosives, radioactive materials, hazardous wastes or substances, toxic wastes or substances or any other wastes, materials or pollutants which (a) pose a hazard to the Mortgaged Property or to persons on or about the Mortgaged Property or (b) cause the Mortgaged Property to be in violation of any Environmental Law; (ii) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls, or radon gas; (iii) any chemical, material or substance defined as or included in the definition of waste, hazardous substances, hazardous wastes, hazardous materials, extremely hazardous waste, restricted hazardous waste, or toxic substances or words of similar import under any Environmental Law including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act ( CERCLA ), 42 USC 9601 et seq.; the Resource Conservation and Recovery Act ( RCRA ), 42 USC 6901 et seq.; the Hazardous Materials Transportation Act, 49 USC 1801 et seq.; the Federal Water Pollution Control Act, 33 USC 1251 et seq.; (iv) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority or agency or may or could pose a hazard to the 5

99 health and safety of the occupants of the Mortgaged Property or the owners and/or occupants of property adjacent to or surrounding the Mortgaged Property, or any other person coming upon the Mortgaged Property or adjacent property; or (v) any other chemical, materials or substance which may or could pose a hazard to the environment. SECTION 1.7 Impositions shall mean all duties, taxes, water and sewer rents, rates and charges, assessments (including, but not limited to, all assessments for public improvement or benefit), charges for public utilities, excises, levies, licenses and permit fees and other charges, ordinary or extraordinary, whether foreseen or unforeseen, of any kind and nature, whatsoever, which prior to or during the term of this Mortgage will have been or may be laid, levied, assessed or imposed upon or become due and payable out of or in respect of, or become a lien on the Mortgaged Property, or any part thereof or appurtenances thereto, or which are levied or assessed against the rent and income received by Borrower by virtue of any present or future law, order or ordinance of the United States of America or of any state, county or local government or of any department, office or bureau thereof or of any other Governmental Authority. SECTION 1.8 Indebtedness shall mean and include the Loan Amount together with all interest thereon, as evidenced by the Notes and the Loan Agreement, any other payments due to Mortgagee and/or the Authority under this Mortgage, the Notes, the Loan Agreement or any other Loan Document, all costs of collection in connection with the Loan, and all other sums, charges, obligations and liabilities of Borrower due or to become due at any time to Mortgagee under this Mortgage, the Notes, the Loan Agreement or any other Loan Document. SECTION 1.9 Land shall mean that certain parcel of land more particularly described in Exhibit A attached hereto and incorporated herein, including all and singular, the easements, rights, privileges, tenements, hereditaments and appurtenances (including air rights) thereunto belonging or in any way appertaining thereto, and the reversion and the remainder thereof; and all of the estate, right, title, interest, claim or demand of Borrower therein and in and to any land lying in the bed of any street, road or avenue, open or proposed, thereof, either at law or in equity, in possession or expectancy, now or hereafter acquired and in all strips and gores therein or adjoining thereto, the air space and right to use said air space thereinabove and all rights of ingress and egress by motor vehicles to parking facilities thereon or therein. SECTION 1.10 Permitted Encumbrances shall mean, collectively, those liens, easements, rights of way, covenants, restrictions, encumbrances and other matters affecting title to the Mortgaged Property set forth in Schedule B of the Title Policy and permitted to be excepted from coverage under the Title Policy by counsel to the Underwriter, and other Permitted Encumbrances as defined in the Indenture. SECTION 1.11 Spill shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, storing, escaping, leaching, dumping, discarding, burying, abandoning, or disposing into the environment. SECTION 1.12 State shall mean the state in which the Land is located. 6 SECTION 1.13 Threat of Spill shall mean a substantial likelihood of a Spill which requires action to prevent or mitigate damage to the environment which may result from such Spill. ARTICLE 2. - PARTICULAR COVENANTS OF BORROWER Borrower covenants and agrees as follows: SECTION 2.1 Payment of Indebtedness. Borrower shall duly and punctually pay to Mortgagee, as and when Due and Payable, the Indebtedness. SECTION 2.2 Warranty of Title. Borrower warrants that (a) it is the lawful owner of fee title to the Land; (b) it has good, marketable, insurable and indefeasible fee title to the Land and to the remainder of the Mortgaged Property; (c) the Mortgaged Property is free and clear of all deeds of trust, mortgages, liens, charges and encumbrances whatsoever except for the Permitted Encumbrances; (d) it will maintain and preserve the lien and priority of this Mortgage until the Indebtedness has been paid in full and all other obligations owing to Mortgagee by Borrower in connection with the Loan have been satisfied; (e) it has good right and lawful authority to mortgage and assign the Mortgaged Property as provided in and by this Mortgage and (f) except for the Permitted Encumbrances, it will warrant and defend the same against any and all claims and demands whatsoever. SECTION 2.3 No Defaults. Borrower represents and warrants that no Event of Default exists under the provisions of this Mortgage, the Notes, the other Loan Documents or the performance of any of the terms, covenants, conditions or warranties hereof on the part of Borrower to be performed or observed. SECTION 2.4 To Pay Impositions. Borrower will pay or cause to be paid, as and when Due and Payable, all Impositions levied upon the Mortgaged Property or any part thereof and, within five (5) days after the payment thereof, will deliver to Mortgagee receipts evidencing the payment of all such Impositions. Notwithstanding the foregoing, if by law, any Imposition may at the option of the taxpayer be paid in installments (whether or not interest shall accrue on the unpaid balance thereof), Borrower shall have the right, provided that no Event of Default shall then exist under this Mortgage or any other of the Loan Documents, to exercise such option and to cause to be paid or to pay the same (and any accrued interest on the unpaid balance of such Imposition) in installments as they fall due and before any fine, penalty, further interest or cost may be added thereto. SECTION 2.5 To Maintain Priority of Lien. Borrower will maintain this Mortgage as a valid first mortgage lien on the Mortgaged Property, and Borrower will not, directly or indirectly, create or suffer or permit to be created, or to stand against the Mortgaged Property or any portion thereof, and will promptly discharge, any lien or charge whatsoever other than the Permitted Encumbrances, whether prior to, upon a parity with, or junior to the lien of this Mortgage; provided, however, that nothing herein contained shall require Borrower to pay or cause to be paid any Imposition prior to the 7 time the same shall become Due and Payable. Borrower will keep and maintain the Mortgaged Property, and every part thereof, free from all liens of persons supplying labor and materials in connection with the construction, alteration, repair, improvement or replacement of the Improvements, the Equipment or the Furnishings. If any such liens shall be filed against the Mortgaged Property, or any part thereof, Borrower shall immediately release or discharge the same of record, by payment, bonding or otherwise, or otherwise provide security satisfactory to Mortgagee in Mortgagee's sole discretion (acting upon the direction of the Majority Bondholders), within fifteen (15) days after the filing thereof. In the event that Borrower fails to make payment of or bond such liens, Mortgagee shall, at the direction of the Majority Bondholders, make payment thereof, and any amounts paid as a result thereof, together with interest thereon at the Default Rate from the date of payment by Mortgagee, shall be immediately due and payable by Borrower to Mortgagee and until paid shall be added to and become a part of the Indebtedness and shall have the benefit of the lien hereby created as a part thereof prior to any right, title or interest in or claim upon the Mortgaged Property attaching or accruing subsequent to the lien of this Mortgage. Borrower shall exhibit to Mortgagee, upon request, all receipts or other satisfactory evidence of the payment of taxes, assessments, charges, claims, liens or any other item which, if unpaid, may cause any such lien to be filed against the Mortgaged Property. SECTION 2.6 To Pay Recording Fees, Taxes and Other Charges. Borrower will pay all filing, registration or recording fees, and all costs and expenses of Mortgagee, including without limitation, attorneys' fees and disbursements, title insurance premiums, search fees and survey costs, incident to or in connection with the preparation, execution, delivery or acknowledgment of this Mortgage, any mortgage supplemental hereto, any security instrument with respect to any collateral relating to the Loan and any instrument of further assurance, and all federal, state, county and municipal stamp taxes and other taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of the Notes, this Mortgage, any mortgage supplemental hereto, any security instrument with respect to any collateral relating to the Loan, the other Loan Documents or any instrument of further assurance. SECTION 2.7 Maintenance of Mortgaged Property; Covenants Against Waste; Inspection by Mortgagee. Borrower will not commit or permit waste on the Mortgaged Property and will keep and maintain at its own expense the Improvements, the Equipment and the Furnishings in such condition and state of repair that each of the same shall meet or surpass the customary standards in the general area set by buildings of similar type, age and function for attractiveness of appearance, cleanliness and general soundness of condition. Borrower will neither do nor permit to be done anything to the Mortgaged Property that may impair the value thereof or which may violate any covenant, condition or restriction affecting the same, or any part thereof, or permit any change therein or in the condition or use thereof which could increase the danger of fire or other hazard arising out of the construction or operation thereof. The Improvements shall not be removed, demolished or altered (except for tenant improvements), without the prior written consent of Mortgagee. The Equipment and Furnishings shall not be removed without the prior written consent of the Mortgagee (which consent shall be conditioned upon receipt of a certificate of an Independent Consultant to the effect that such removal 8 D-3 will not adversely affect the operation of the Facility for its intended purpose), except where appropriate replacements free of superior title, liens or claims are immediately made having a value at least equal to the value of the items removed. Mortgagee and its authorized employees and agents, may, but shall not be obligated to, enter and inspect the Mortgaged Property at any time during usual business hours, and Borrower shall, within twenty (20) days after demand by Mortgagee (or immediately upon demand in case of emergency), make such repairs, replacements, renewals or additions, or perform such items of maintenance, to the Mortgaged Property as the Borrower may, in its sole discretion, require in order to cause the Mortgaged Property to comply with the above standards. SECTION 2.8 After-Acquired Property. All right, title and interest of Borrower in and to all improvements, betterments, renewals, substitutes and replacements of, and all additions, accessions and appurtenances to, the Mortgaged Property hereafter acquired, constructed, assembled or placed by Borrower on the Land, and all conversions of the security constituted thereby, immediately upon such acquisition, construction, assembly, placement or conversion, as the case may be, and in each such case without any further mortgage, conveyance or assignment or other act of Borrower, shall become subject to the lien of this Mortgage as fully and completely, and with the same effect, as though now owned by Borrower and specifically described in the Granting Clauses hereof, but at any time and at all times Borrower, on demand, will execute, acknowledge and deliver to Mortgagee any and all such further assurances, mortgages, conveyances or assignments thereof as required for the purpose of expressly and specifically subjecting the same to the lien of this Mortgage. SECTION 2.9 Further Assurances. Borrower shall, at its sole cost and without expense to Mortgagee, on demand, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers and assurances for better assuring, conveying, assigning, transferring and confirming unto Mortgagee the property and rights hereby mortgaged or assigned or intended now or hereafter so to be, or which Borrower may be or may hereafter become bound to convey, mortgage or assign to Mortgagee, or for carrying out the intention or facilitating the performance of the terms of this Mortgage, or for filing, registering or recording this Mortgage. SECTION 2.10 Status of Borrower. Borrower shall not without the prior written consent of the Mortgagee: (1) change its name; or (2) change its state of organization through dissolution, merger, transfer of assets or otherwise. SECTION 2.11 Recorded Instruments. Borrower will promptly perform and observe, or cause to be performed and observed, all of the terms, covenants and conditions of all instruments of record affecting the Mortgaged Property. Borrower shall do or cause to be done all things required to preserve intact and unimpaired and to renew any and all rights-of-way, easements, grants, appurtenances, privileges, licenses, franchises and other interest and rights in favor of or constituting any portion of the Mortgaged Property. Borrower will not, without the prior written consent of the Mortgagee, initiate, join in or consent to any private restrictive covenant or other public 9

100 or private restriction as to the use of the Mortgaged Property (which consent shall be conditioned upon receipt of a certificate of an Independent Consultant to the effect that such consent or joinder will not adversely affect the operation of the Facility for its intended purpose). Borrower shall, however, comply with all lawful restrictive covenants and zoning ordinances and other public or private restrictions affecting the Mortgaged Property. SECTION 2.12 Environmental Provisions. Borrower hereby represents, warrants and covenants that to its knowledge: (a) no condition, activity or conduct exists on or in connection with the Mortgaged Property which constitutes a violation of any Environmental Law; (b) there has been no Spill or Threat of Spill of any Hazardous Substances on, upon, into or from the Mortgaged Property nor, to the best of Borrower's knowledge, a Spill which, through soil or groundwater migration, could reasonably be expected to come to be located on the Mortgaged Property; (c) there are no existing or closed underground or aboveground storage tanks on the Mortgaged Property; (d) there are no existing or closed sanitary landfills, solid waste disposal sites, or hazardous waste treatment, storage or disposal facilities on or affecting the Land; (e) no notice has been issued to Borrower by any agency, authority, or unit of government that Borrower has been identified as a potentially responsible party under any Environmental Law; (f) no portion of the Mortgaged Property constitutes an Environmentally Sensitive Area; (g) there exists no investigation, action, proceeding, or claim by any agency, authority, or unit of government or by any third party which could result in any liability, penalty, sanction, or judgment under any Environmental Law with respect to any condition, use or operation of the Mortgaged Property; (h) there has been no claim by any party that any use, operation, or condition of the Mortgaged Property has caused any nuisance or any other liability or adverse condition on any other property; and (i) Borrower need not obtain any permit or approval for any part of the Project and need not notify any federal, state or local governmental authority having jurisdiction of the Project regarding any part of the Project pursuant to any Environmental Law Borrower shall: (a) comply with and cause all activities at the Mortgaged Property to comply with all Environmental Laws; (b) not store or dispose of (except in compliance with all Environmental Laws pertaining thereto), nor Spill or allow the Spill of any Hazardous Substances on the Property (c) neither directly nor indirectly transport or arrange for the transport of any Hazardous Substances (except in compliance with all Environmental Laws pertaining thereto); (d) neither install nor permit to be installed any temporary or permanent tanks for storage of any liquid or gas above or below ground except after obtaining written permission from the Trustee to do so (which permission shall be conditioned upon receipt of a certificate of an Independent Consultant to the effect that such installation or permit will not adversely affect the operation of the Facility for its intended purpose) and in compliance with Environmental Laws; and (e) comply with all terms and conditions of all permits, authorization, 10 approvals, waivers, judgments or decrees or notices from governmental authorities issued or sent pursuant to Environmental Law Borrower, promptly upon the written request of Mortgagee from time to time, shall provide Mortgagee, at Borrower's sole cost and expense, with an environmental site assessment or environmental audit report, or an update of such an assessment or report; and In the event of any Spill or Threat of Spill of any Hazardous Material affecting the Mortgaged Property, whether or not the same originates or emanates from the Mortgaged Property or any contiguous real estate, or if Borrower otherwise shall fail to comply with any of the requirements of Environmental Law, Mortgagee may at its election and at the direction of the Majority Bondholders, but without the obligation so to do, give such notices, cause such work to be performed at the Mortgaged Property and take any and all other actions in order to remedy said Spill or the conditions constituting a Threat of Spill or cure said failure of compliance and any amounts paid as a result thereof, together with interest thereon at the Default Rate from the date of payment by Mortgagee, shall be immediately due and payable by Borrower to Mortgagee and until paid shall be added to and become a part of the Indebtedness and shall have the benefit of the lien hereby created as a part thereof prior to any right, title or interest in or claim upon the Mortgaged Property attaching or accruing subsequent to the lien of this Mortgage. SECTION 2.13 Mold Coverage. In the event that Borrower is covered by a commercial general liability insurance policy which contains an exclusion for loss or damage caused by mold, dangerous fungi, bacterial or microbial matter, contamination or pathogenic organisms that reproduces through the release of spores or the splitting of cells (collectively, Mold ) or a property insurance policy which contains an exclusion for loss or damage caused by Mold, in connection with another covered peril (e.g., Mold in connection with water damage caused by a storm or fire), Borrower shall demonstrate that such insurance without the aforementioned exclusions is not available at ordinary and customary insurance rates and either: (i) Borrower shall demonstrate that the potential risk for loss or damage caused by Mold at the Mortgaged Property is minimal because of precautionary measures or techniques to be utilized in the construction or rehabilitation of the Improvements, including without limitation, the use of vapor barriers or other liners to limit the growth and reproduction of Mold; or (ii) Borrower shall implement a moisture management and control program (the Moisture Management Program ) for the Improvements at the Mortgaged Property to prevent the occurrence of Mold, at on or under the Mortgaged Property which Moisture Management Program shall include, at a minimum: (a) periodic inspections of the Improvements at the Mortgaged Property for Mold, (b) removing or cleaning up any Mold and in a manner consistent with best industry practices and utilizing an experienced remediation contractor acceptable to and approved by Mortgagee, and (c) in the event that the Mold identified at the Improvements at the Mortgaged Property cannot be removed or cleaned from any impacted building materials (e.g., porous materials such as carpeting, certain types of ceiling materials, etc.) and/or equipment, removing all such impacted building materials 11 and/or equipment from the Mortgaged Property, all in accordance with the procedures set forth in the United States Environmental Protection Agency's ( EPA ) guide entitled Mold Remediation in Schools and Commercial Buildings, EPA No. 402-K-Ol-OOl, dated March 2001 and in a manner consistent with best industry practices and utilizing an experienced remediation contractor. Borrower further covenants and agrees that, in connection with any mold remediation undertaken by or on behalf of Borrower hereunder, the source (e.g., leaking pipe, water damage, water infiltration, etc.) of any Mold at the Improvements at the Mortgaged Property shall be promptly identified and corrected to prevent the occurrence or re-occurrence of any Mold. ARTICLE 3. - CASUALTY AND CONDEMNATION SECTION 3.1 Net Proceeds If any of the Improvements, Equipment or Furnishings shall be damaged or destroyed, in whole or part, by fire or other casualty, Borrower shall give prompt notice thereof to the Mortgagee. The Trustee is hereby authorized and empowered by Borrower to settle, adjust or compromise in a commercially reasonable manner any and all claims for loss, damage or destruction under any policy of insurance Any Proceeds in excess of $25,000 received as payment for any loss under any insurance policies required to be maintained by Borrower in accordance with this Section shall be paid over to the Trustee for deposit into the Insurance and Condemnation Proceeds Account of the Project Fund. For the purposes of this Mortgage, Net Proceeds shall mean any proceeds actually received as payment for any loss less all costs and expenses, including, without limitation, all architects', attorneys', engineers' and other consultants' and professionals' fees and disbursements incurred by Mortgagee in connection with the casualty in question, and which shall be paid by Trustee out of the proceeds deposited upon receipt of invoices. The Trustee shall cause such Net Proceeds to be applied as provided in Section 4.03 of the Indenture and Section 3.3 hereof In the event of the happening of any casualty of any kind or nature, ordinary or extraordinary, foreseen or unforeseen (including any casualty for which insurance was not obtainable), resulting in damage to or destruction of the Mortgaged Property or any part thereof, the Borrower promptly, whether or not the Net Proceeds, if any, shall be sufficient for the purpose, commence and diligently continue to restore, repair and rebuild the Mortgaged Property as nearly as possible to its value, condition and character immediately prior to such damage or destruction. SECTION 3.2 Net Awards Borrower shall promptly notify Mortgagee if Borrower shall become aware of the threat or institution of any proceeding or negotiations for the taking of the Mortgaged Property, or any part thereof, whether for permanent or 12 D-4 temporary use and occupancy in condemnation or by the exercise of the power of eminent domain or by agreement of interested parties in lieu of such condemnation (all the foregoing herein called a taking ); shall keep Mortgagee currently advised, in detail, as to the status of such proceedings or negotiations and will promptly give to Mortgagee copies of all notices, pleadings, judgments, determinations and other papers received or delivered by Borrower therein. Mortgagee shall have the right to appear and participate therein and may be represented by counsel of its choice. Borrower will not, without the Trustee's prior written consent, which consent shall be conditioned upon written direct of the Majority Bondholders, enter into any agreement for the taking of the Mortgaged Property, or any part thereof, with anyone authorized to acquire the same by eminent domain or in condemnation In the event of any such taking, the awards in excess of $25,000 payable in connection therewith are hereby assigned to Mortgagee and shall be paid to the Trustee for deposit into the Insurance and Condemnation Proceeds Account of the Project Fund. For the purposes of this Mortgage, Net Awards shall mean any awards actually received by the Borrower less all costs and expenses, including, without limitation, all architects', attorneys', engineers' and other consultants' and professionals' fees and disbursements incurred by Mortgagee in connection with the taking in question, and which shall be paid by Trustee out of such awards upon receipt of invoices. The Trustee shall cause such Net Awards to be applied as provided in Section 4.03 of the Indenture and Section 3.3 hereof In the event of the happening of any permanent taking, the Borrower shall promptly, whether or not the Net Awards, if any, shall be sufficient for the purpose, commence and diligently continue to restore, repair and rebuild the portion of the Mortgaged Property not subject to the taking as nearly as possible to its value, condition and character immediately prior to such taking. SECTION 3.3 Application of Net Proceeds and Net Awards. Notwithstanding any provision hereof to the contrary, in the event the Improvements, Equipment or Furnishings are damaged or destroyed by fire or other casualty or in the event of a temporary or partial taking in condemnation of a portion of the Land or Improvements, the Borrower shall make the Net Awards or Net Proceeds, as the case may be, payable in connection therewith available to pay for or to reimburse Borrower for costs and expenses actually incurred by Borrower in the repair and restoration of the Mortgaged Property or to be released to Borrower, provided each of the following conditions is fully satisfied: (a) the Net Awards or Net Proceeds, as the case may be, are paid to the Trustee and deposited into the Insurance and Condemnation Proceeds Account of the Project Fund; (b) if restoration is contemplated, any plans, specifications, construction contracts, architect's agreements and all other material agreements 13

101 relating to the restoration shall be approved by an Independent Architect or an Independent Engineer in writing; (c) if restoration is contemplated, the Net Awards or Net Proceeds, as the case may be, are sufficient in the judgment of and based on a certificate from an Independent Architect or Independent Engineer, or, in the event of an insufficiency, Borrower pays to the Trustee, for deposit into the appropriate account of the Project Fund, cash in an amount equal to the insufficiency as set forth in such certificate; (d) no Event of Default under the Bonds, the Indenture or the Loan Documents shall have occurred and be continuing; (e) if restoration is contemplated, the Borrower provides the Trustee with a certificate of an Independent Consultant to the effect that the Improvements, Equipment and Furnishings are capable of being fully restored by the earlier of (i) the date which is twelve (12) months from the occurrence of the loss or damage or (ii) the Maturity Date; (f) if restoration is contemplated, a release of lien with respect to all restoration work theretofore performed is delivered to the Mortgagee from all contractors and materialmen; (g) the Trustee shall receive an official search or a certificate of title from a title insurance company showing that there has not been filed any vendor's, mechanic's, laborer's or materialman's statutory or other lien affecting the Mortgaged Property which has not been satisfied and discharged of record, except such as will be discharged upon payment of the amount then requested to be disbursed; (h) Borrower shall deliver to Mortgagee an opinion of Bond Counsel to the effect that restoration of the Mortgaged Property with the Net Awards or Net Proceeds or the release of Net Awards or Net Proceeds to Borrower, as the case may be, will not adversely affect the exclusion from gross income of interest on the Series 2014A Bonds for purposes of federal income taxation. Upon completion of the restoration, as certified by an Independent Engineer or Independent Architect, any excess Net Awards or Net Proceeds, as the case may be, and accrued interest (if any) in the Insurance and Condemnation Proceeds Account of the Project Fund shall be, at the option of the Trustee, either (a) disbursed to Borrower or (b) applied to the redemption of Bonds; provided, however, any excess Net Awards or Net Proceeds shall be applied to the redemption of Bonds unless Borrower shall deliver to Mortgagee an opinion of Bond Counsel to the effect that the alternative proposed application of such Net Proceeds or Net Awards will not adversely affect the exclusion from gross income of interest on the Series 2014A Bonds for purposes of federal income taxation. ARTICLE 4. SECURITY AGREEMENT UNDER UNIFORM COMMERCIAL CODE SECTION 4.1 Security Agreement. It is the intent of the parties hereto that this Mortgage shall constitute a Security Agreement within the meaning of the Uniform Commercial Code of the State (the UCC ) with respect to so much of the Mortgaged Property as is considered or as shall be determined to be of the type in which a security interest can be created under Article 9 of the UCC, together with all replacements thereof, substitutions therefor or additions thereto (the Collateral ), and that a security interest shall attach thereto for the benefit of Mortgagee to secure the Indebtedness and all other sums and charges which may become due hereunder or under the Loan Documents. Borrower hereby authorizes Mortgagee to file financing and continuation statements and all amendments thereto with respect to the Collateral without the signature of Borrower, if same is lawful; otherwise Borrower agrees to execute such financing and continuation statements and all amendments thereto as Mortgagee may request. If there shall exist an Event of Default under this Mortgage, Mortgagee, pursuant to the appropriate provisions of the UCC, shall have the option of proceeding as to both real and personal property in accordance with its rights to both real and personal property, in which event the default provisions of the UCC shall not apply. The parties agree that, in the event Mortgagee proceeds with respect to the Collateral separately from the real property, unless a greater period shall then be mandated by the UCC, five (5) business days' notice of the sale of the Collateral shall be reasonable notice. The expenses of retaking, holding, preparing for sale, selling and the like incurred by Mortgagee shall be assessed against Borrower and shall include, but shall not be limited to, attorneys' fees, disbursements and other legal expenses incurred by Mortgagee. Borrower agrees that it will not remove or permit to be removed from the Mortgaged Property any of the Collateral without the prior written consent of Mortgagee (which consent shall be conditioned upon receipt of a certificate of an Independent Consultant to the effect that such removal will not adversely affect the operation of the Facility for its intended purpose) unless appropriate replacements free of superior title, liens or claims are immediately made having a value at least equal to the value of the items removed. All replacements, renewals and additions to the Collateral shall be and become immediately subject to the security interest of this Mortgage and the provisions of this Article. Borrower warrants and represents that all Collateral now is, and that replacements thereof, substitutions therefor or additions thereto, unless Mortgagee otherwise consents in writing (which consent shall be conditioned upon receipt of a certificate of an Independent Consultant to the effect that the existence of such liens, encumbrances or security interests will not adversely affect the Borrower s ability to use such Collateral for its intended purpose), shall be free and clear of liens, encumbrances or security interests of others created after the date hereof. From the date of its recording, this Mortgage shall be effective as a financing statement filed as a fixture filing with respect to all goods constituting part of the Collateral which are or are to become fixtures related to the real estate described herein. For this purpose, the following information is set forth: A. Name and Address of Debtor: Palm Beach Maritime Museum, Inc. d/b/a Palm Beach Maritime Academy 4512 N. Flagler Drive, Suite 206 West Palm Beach, FL Attention: John Grant, President and CEO Telephone : (561) Facsimile: (561) B. Name and Address of Secured Party: U. S. Bank National Association Corporate Trust Services 550 West Cypress Creek Road, Suite 380 Ft. Lauderdale, FL Attention: Amanda Bhim, Assistant Vice President Telephone: (954) Facsimile: (954) C. This document covers goods which are or are to become fixtures. D. State of Debtor's Organization: Florida ARTICLE 5. - EVENTS OF DEFAULT AND REMEDIES SECTION 5.1 Events of Default Defined. The entire amount of the Indebtedness shall become due, at the option of Mortgagee, upon the written direction of the Majority Bondholders, subject to any prepayment premium or penalty provided for in the Loan Agreement, upon the happening of any of the following events (each, individually, an Event of Default and collectively, Events of Default ): if Borrower shall fail or neglect to comply with or otherwise perform, keep or observe any other term, provision, condition, covenant, warranty or representation contained in this Mortgage that is required to be complied with or otherwise performed, kept or observed by Borrower beyond any notice, grace or cure period expressly provided in this Mortgage; or if an Event of Default as defined in any of the Loan Documents shall have occurred. SECTION 5.2 Remedies. Upon the occurrence of any Event of Default hereunder, Mortgagee, upon the written direction of the Majority Bondholders, may without notice, presentment, demand or protest, notice of intent to accelerate, or notice of acceleration all of which are hereby expressly waived by Borrower to the extent permitted by applicable law, take such action as directed in writing by the Majority Bondholders, to protect and enforce its rights in and to the Mortgaged Property, including, but without limiting the generality of the foregoing, the following actions, each of which may be pursued concurrently or otherwise, at such time and in such manner as 16 D-5 Mortgagee, upon the written direction of the Majority Bondholders, may determine, in their sole discretion, without impairing or otherwise affecting the other rights and remedies of Mortgagee hereunder, under the other Loan Documents, or at law or in equity: declare the entire amount of the principal sum of the Notes then outstanding and any other amounts payable under any Loan Documents, together with all accrued and unpaid interest thereon, to be immediately due and payable, and upon such declaration the outstanding principal sum of the Notes, the said amounts payable under the Loan Documents and said accrued and unpaid interest amounts shall become and be immediately due and payable, anything in the Notes, this Mortgage or the Loan Documents to the contrary notwithstanding; after such proceedings as may be required by any applicable law or ordinance, either in person, or by its agents or attorneys, or by a courtappointed receiver, enter into and upon all or any part of the Mortgaged Property and each and every part thereof and exclude Borrower, its agents and servants wholly therefrom; and having and holding the same, use, operate, manage and control the Mortgaged Property and conduct the business thereof, either personally or by its superintendents, managers, agents, servants, attorneys or the receiver; and upon every such entry, Mortgagee, at the expense of the Mortgaged Property, from time to time, either by purchase repairs or construction, may maintain and restore the Mortgaged Property and, likewise may make all necessary or proper repairs, renewals and replacements and such alterations, betterments, additions and improvement thereto and thereon as it may deem advisable; and in every such case Mortgagee shall have the right, but not the obligation, to manage and operate the Mortgaged Property and to carry on the business thereof and exercise all rights and powers of Borrower as Borrower's attorney-in-fact, or otherwise as it shall deem best; shall apply the moneys arising as aforesaid, first to the payment of the Indebtedness, whether or not then matured; next, to the payment of any other sums required to be paid by Borrower under this Mortgage; and the balance, if any, shall be turned over to Borrower or such other Person as may be lawfully entitled thereto; or with or without entry, personally or by its agents or attorneys insofar as applicable: (a) foreclose this Mortgage in accordance with the laws of the State and the provisions hereof, for the entire Indebtedness or for any portion of the Indebtedness or any other sums secured hereby which are then due and payable, subject to the continuing lien of this Mortgage for the balance of the Indebtedness not then due; or (b) take such steps to protect and enforce its rights whether by action, suit or proceeding in equity or at law for the specific performance of any covenant, condition or agreement in the Notes, this Mortgage or any other Loan Document or in aid of the execution of any power herein 17

102 granted, or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy or otherwise as Mortgagee, upon the written direction of the Majority Bondholders, shall elect. SECTION 5.3 Foreclosure: No Marshaling of Assets; One Tract; Appointment of Receiver In the case of a foreclosure sale, all of the Mortgaged Property may be sold in one parcel, notwithstanding that the proceeds of such sale exceed or may exceed the Indebtedness. Moreover, Mortgagee shall not be required to proceed hereunder before proceeding against any other security, shall not be required to proceed against other security before proceeding hereunder, and shall not be precluded from proceeding against any or all of any security in any order or at the same time. In the event that this Mortgage is foreclosed, Borrower hereby waives and releases any right to have the Mortgaged Property or any part thereof marshaled, and Borrower and Mortgagee have jointly agreed that the Mortgaged Property is one project and one tract for all purposes legal, economic and all other. Borrower for itself, its successors and assigns irrevocably waives any right it may have in the event of foreclosure to request that the Mortgaged Property be sold as separate tracts pursuant to any applicable law or statute Mortgagee, in any action to foreclose this Mortgage or otherwise upon the occurrence of an Event of Default, shall be entitled (and, to the extent permitted under the laws of the State, without notice, without regard to the adequacy of any security for the Indebtedness and without regard to the solvency of any Person, partnership or entity liable for the payment thereof) to the appointment of a receiver of the Mortgaged Property Borrower agrees, to the full extent that it may lawfully do so, that in any foreclosure or other action brought by Mortgagee hereunder, it will not at any time insist upon or plead or in any way take advantage of any appraisement, valuation, stay, extension, redemption or moratorium law now or hereafter in force and effect so as to prevent, hinder or delay the enforcement of the provisions of this Mortgage or any right or remedies Mortgagee may have hereunder or by law. SECTION 5.4 Remedies Cumulative; No Waiver; Etc No remedy herein conferred upon or reserved to Mortgagee is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative, and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission of Mortgagee to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or any acquiescence therein; and every power and remedy given by this Mortgage to Mortgagee may be exercised from time to time as often as may be deemed expedient by Mortgagee. Nothing in this 18 Mortgage, in the Notes or in any other Loan Document shall affect the obligation of Borrower to perform its obligations under the Loan Documents, including its payment obligations, in the manner and at the time and place therein respectively expressed A waiver in one or more instances of any of the terms, covenants, conditions or provisions hereof, of the Notes or of any other Loan Document shall apply to the particular instance or instances and at the particular time or times only, and no such waiver shall be deemed a continuing waiver, but all of the terms, covenants, conditions and other provisions of this Mortgage, of the Notes and of the other Loan Documents shall survive and continue to remain in full force and effect; and no waiver shall be effective unless in writing, dated and signed by Mortgagee To the extent permitted by the laws of the State, Borrower hereby waives and renounces all homestead and similar exemption rights with respect to the Mortgaged Property provided for by the Constitution and the laws of the United States and the State as against the collection of the Notes, or any part thereof, and any amounts payable under the Notes or the other Loan Documents; and Borrower agrees that where, by the terms of this Mortgage or the Notes and the other Loan Documents secured hereby, a day is named or a time fixed for the payment of any sum of money or the performance of any agreement, the day and time stated enters into the consideration and is of the essence of the whole agreement between Borrower and Mortgagee. SECTION 5.5 No Merger. It is the intention of the parties hereto that if Mortgagee shall at any time hereafter acquire title to all or any portion of the Mortgaged Property, then and until the Indebtedness has been paid in full, the interest of Mortgagee hereunder and the lien of this Mortgage shall not merge or become merged in or with the estate and interest of Mortgagee as the holder and owner of title to all or any portion of the Mortgaged Property and that, until such payment, the estate of Mortgagee in the Mortgaged Property and the lien of this Mortgage and the interest of Mortgagee hereunder shall continue in full force and effect to the same extent as if Mortgagee had not acquired title to all or any portion of the Mortgaged Property. If, however, Mortgagee shall consent in writing, which consent shall be conditioned upon written direction of the Majority Bondholders, to such merger or such merger shall nevertheless occur without its consent, then this Mortgage shall attach to and cover and be a lien upon the fee title or any other estate, title or interest in the premises demised under the leasehold estate acquired by the fee owner and the same shall be considered as granted, released, assigned, transferred, pledged, and set over to Mortgagee and the lien hereof spread to cover such estate with the same force and effect as though specifically herein granted, released, assigned, transferred, pledged, set over and spread. ARTICLE 6. - PROVISIONS OF GENERAL APPLICATION SECTION 6.1 Modifications. No change, amendment, modification, cancellation or discharge hereof, or any part hereof, shall be valid unless in writing, dated 19 and signed by the party against whom such change, amendment, modification, cancellation or discharge is sought to be enforced. In addition, this Mortgage shall only be changed, amended, modified, cancelled or discharged except in accordance with Article IX of the Indenture. SECTION 6.2 Notices. All notices, demands, requests, consents, approvals, certificates, or other communications (hereinafter collectively called Notices ) shall be sufficiently given and shall be deemed given in accordance with the provisions of Section 8.8 of the Loan Agreement. SECTION 6.3 Mortgagee's Rights to Perform Borrower's Covenants. If Borrower shall fail to pay or cause payment to be made to Mortgagee in accordance with the terms of this Mortgage, or to perform or observe any other term, covenant, condition or obligation required to be performed or observed by Borrower under this Mortgage, the Notes or any other Loan Document, without limiting any other provision of this Mortgage, and without waiving or releasing Borrower from any obligation or default hereunder, without notice to Borrower, Mortgagee (or any receiver of the Mortgaged Property) shall have the right, but not the obligation, to make any such payment, or to perform any other act or take any appropriate action, including, without limitation, entry on the Mortgaged Property and performance of work thereat, as it, in its sole discretion, may deem necessary to cause such other term, covenant, condition or obligation to be performed or observed on behalf of Borrower or to protect the security of this Mortgage. All monies expended by Mortgagee in exercising its rights under this Section (including, but not limited to, legal expenses and disbursements), together with interest thereon at the Default Rate from the date of each such expenditure, shall be paid by Borrower to Mortgagee forthwith upon demand by Mortgagee, secured by this Mortgage and added to and deemed part of the Indebtedness with the benefit of the lien hereby created as a part thereof prior to any right, title or interest in or claim upon the Mortgaged Property attaching or accruing subsequent to the lien of this Mortgage. SECTION 6.4 Additional Sums Payable by Borrower. All sums which, by the terms of this Mortgage or the Notes or the other Loan Documents secured hereby, or by the instruments executed and delivered by Borrower to Mortgagee as additional security for this Mortgage, the Notes or the other Loan Documents, are payable by Borrower to Mortgagee shall, together with the interest thereon provided for herein or in the Notes or the other Loan Documents, be secured by this Mortgage and added to and deemed part of the Indebtedness and shall have the benefit of the lien hereby created as a part thereof prior to any right, title or interest in or claim upon the Mortgaged Property attaching or accruing subsequent to the lien of this Mortgage, whether or not the provision which obligates Borrower to make any such payment to Mortgagee specifically so states. SECTION 6.5 Captions. The captions herein are inserted only as a matter of convenience and for reference, and in no way define, limit, enlarge or describe the scope or intent of this Mortgage or the construction of any provision hereof. SECTION 6.6 Successors and Assigns. The covenants and agreements contained in this Mortgage shall run with the land and bind Borrower, the heirs, 20 D-6 executors, administrators, principals, legal representatives, successors and assigns of Borrower and each person constituting Borrower and all subsequent owners of the Mortgaged Property, or any part thereof, and shall inure to the benefit of Mortgagee, its successors and assigns and all subsequent beneficial owners of this Mortgage. SECTION 6.7 Gender and Number. Wherever the context of this Mortgage so requires, the neuter gender includes the masculine or feminine gender and the singular number includes the plural. SECTION 6.8 Severability. In case any one or more of the provisions contained in this instrument shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, but this Mortgage shall be construed as if such invalid, illegal or unenforceable provision had never been included. SECTION 6.9 Subrogation. Should the proceeds of the Loan be used directly or indirectly to pay off, discharge, or satisfy, in whole or in part, any prior lien or encumbrance upon the Mortgaged Property or any part thereof, then Mortgagee shall be subrogated to such other lien or encumbrance and to any additional security held by the holder thereof and shall have the benefit of the priority of all of the same. SECTION 6.10 Incorporation of the Loan Documents. This Mortgage and the Notes secured hereby have been executed and delivered to secure monies advanced or to be advanced to Borrower to be used in accordance with the Loan Documents, the provisions of which, including, but not limited to, the usury savings provisions in the Notes and the Loan Agreement, as the same may be amended, modified or supplemented from time to time, are incorporated herein by reference with the same force and effect as if herein fully set forth. SECTION 6.11 Controlling Law. This Mortgage shall be governed by, and construed and enforced in accordance with, the laws of the State, without giving effect to conflict of laws principles, except as required by mandatory provisions of law and except to the extent that the UCC provides that the validity or perfection of the security interests hereunder, or remedies hereunder in respect of any particular collateral, are governed by the laws of a jurisdiction other than the laws of the State. SECTION 6.12 Indemnity. BORROWER SHALL INDEMNIFY, DEFEND, PROTECT AND HOLD HARMLESS MORTGAGEE, ITS PARENT, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES, AGENTS, SUCCESSORS, AND ASSIGNS FROM AND AGAINST ANY AND ALL LIABILITY, DAMAGE, LOSS, COST, OR EXPENSE (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND EXPENSES), ACTION, PROCEEDING, CLAIM OR DISPUTE INCURRED OR SUFFERED BY THE FOREGOING PARTIES SO INDEMNIFIED WHETHER OR NOT AS THE RESULT OF THE NEGLIGENCE OF ANY PARTY SO INDEMNIFIED, BUT EXCEPTING ANY RESULT CAUSED BY THE GROSS NEGLIGENCE OF THE MORTGAGEE, THEIR RESPECTIVE PARENTS, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES, 21

103 REPRESENTATIVES, AGENTS, SUCCESSORS, AND ASSIGNS OR WILLFUL MISCONDUCT OF ANY PARTY INDEMNIFIED HEREUNDER, WHETHER VOLUNTARILY OR INVOLUNTARILY INCURRED OR SUFFERED, IN RESPECT OF THE FOLLOWING: (i) ANY LITIGATION CONCERNING THIS MORTGAGE, THE OTHER LOAN DOCUMENTS OR THE MORTGAGED PROPERTY, OR ANY INTEREST OF BORROWER OR MORTGAGEE THEREIN, OR THE RIGHT OF OCCUPANCY THEREOF BY BORROWER OR MORTGAGEE, WHETHER OR NOT ANY SUCH LITIGATION IS PROSECUTED TO A FINAL, NON-APPEALABLE JUDGMENT; (ii) ANY DISPUTE, INCLUDING DISPUTES AS TO THE DISBURSEMENT OF PROCEEDS OF THE BONDS NOT YET DISBURSED, AMONG OR BETWEEN ANY OF THE CONSTITUENT PARTIES, OR AMONG OR BETWEEN ANY EMPLOYEES, OFFICERS, DIRECTORS OF BORROWER; (iii) ANY ACTION TAKEN OR NOT TAKEN BY MORTGAGEE WHICH IS ALLOWED OR PERMITTED UNDER THIS MORTGAGE OR ANY OF THE OTHER LOAN DOCUMENTS RELATING TO BORROWER, THE MORTGAGED PROPERTY, ANY CONSTITUENT PARTIES OR OTHERWISE IN CONNECTION WITH THE LOAN DOCUMENTS, INCLUDING WITHOUT LIMITATION, THE PROTECTION OR ENFORCEMENT OF ANY LIEN, SECURITY INTEREST OR OTHER RIGHT, REMEDY OR RECOURSE CREATED OR AFFORDED BY THIS MORTGAGE OR THE OTHER LOAN DOCUMENTS; (iv) ANY ACTION BROUGHT BY MORTGAGEE AGAINST BORROWER UNDER THIS MORTGAGE OR THE OTHER LOAN DOCUMENTS, WHETHER OR NOT SUCH ACTION IS PROSECUTED TO A FINAL, NON-APPEALABLE JUDGMENT; AND (v) ANY AND ALL LOSS, DAMAGE, COSTS, EXPENSE, ACTION, CAUSES OF ACTION, OR LIABILITY (INCLUDING ATTORNEYS' FEES AND COSTS) DIRECTLY OR INDIRECTLY ARISING FROM OR ATTRIBUTABLE TO THE USE, GENERATION, MANUFACTURE, PRODUCTION, STORAGE, RELEASE, THREATENED RELEASE, DISCHARGE, DISPOSAL, OR PRESENCE OF A HAZARDOUS SUBSTANCE ON, IN, UNDER OR ABOUT THE MORTGAGED PROPERTY, WHETHER KNOWN OR UNKNOWN AT THE TIME OF THE EXECUTION HEREOF, INCLUDING WITHOUT LIMITATION (A) ALL FORESEEABLE CONSEQUENTIAL DAMAGES OF ANY SUCH USE, GENERATION, MANUFACTURE, PRODUCTION, STORAGE, RELEASE, THREATENED RELEASE, DISCHARGE, DISPOSAL, OR PRESENCE, AND (B) THE COSTS OF ANY REQUIRED OR NECESSARY ENVIRONMENTAL INVESTIGATION OR MONITORING, ANY REPAIR, CLEANUP, OR DETOXIFICATION OF THE MORTGAGED PROPERTY, AND THE PREPARATION AND IMPLEMENTATION OF ANY CLOSURE, REMEDIAL, OR OTHER REQUIRED PLANS. MORTGAGEE MAY EMPLOY AN ATTORNEY OR ATTORNEYS TO PROTECT OR ENFORCE ITS RIGHTS, REMEDIES AND RECOURSES UNDER THIS MORTGAGE AND THE OTHER LOAN DOCUMENTS, AND TO ADVISE AND DEFEND MORTGAGEE AND/OR TRUSTEE WITH RESPECT TO ANY SUCH ACTIONS AND OTHER MATTERS. BORROWER SHALL REIMBURSE MORTGAGEE FOR THEIR RESPECTIVE ATTORNEYS' FEES AND EXPENSES (INCLUDING EXPENSES AND COSTS FOR EXPERTS) IMMEDIATELY UPON RECEIPT OF A WRITTEN DEMAND THEREFOR, WHETHER ON A MONTHLY OR OTHER TIME INTERVAL, AND WHETHER OR NOT AN ACTION IS ACTUALLY COMMENCED OR CONCLUDED. ALL OTHER REIMBURSEMENT AND INDEMNITY OBLIGATIONS HEREUNDER SHALL BECOME DUE AND PAYABLE WHEN ACTUALLY INCURRED BY MORTGAGEE. ANY PAYMENTS NOT MADE WITHIN TEN (10) DAYS AFTER WRITTEN DEMAND THEREFOR SHALL BEAR INTEREST AT THE DEFAULT RATE FROM THE DATE OF SUCH DEMAND UNTIL FULLY PAID. THE PROVISIONS OF THIS SECTION 6.12 SHALL SURVIVE REPAYMENT OF THE INDEBTEDNESS AND PERFORMANCE OF THE OBLIGATIONS, THE RELEASE OF THE LIEN OF THIS MORTGAGE, ANY FORECLOSURE (OR ACTION IN LIEU OF FORECLOSURE), THE TRANSFER BY BORROWER OF ANY OR ALL OF ITS RIGHT, TITLE AND INTEREST IN OR TO THE PROPERTY AND THE EXERCISE BY MORTGAGEE OF ANY AND ALL REMEDIES SET FORTH HEREIN OR IN THE LOAN DOCUMENTS. SECTION 6.13 Purpose of Loan. This Mortgage is given pursuant to the Loan Documents and secures Borrower's obligations to pay the Indebtedness as described herein and as advanced under the Loan Documents, for the purchase of the Land and for the renovation of the Improvements thereon, among other purposes set forth in the Loan Documents. SECTION 6.14 Mortgagee's Right and Responsibilities. Except as explicitly set forth herein, all rights, duties, responsibilities and conditions to action of the Mortgagee hereunder shall be subject to and governed by Article VIII of the Indenture, as if such Article VIII makes specific reference to this Mortgage. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, Borrower has duly executed this Mortgage as of the day and year first above written. EXHIBIT A LEGAL DESCRIPTION PALM BEACH MARITIME MUSEUM, INC. D/B/A PALM BEACH MARITIME ACADEMY, as Borrower By: John Grant, President and CEO Signed, sealed and delivered in the presence of: Witness Print Name Witness Print Name STATE OF FLORIDA ) ) SS. COUNTY OF PALM BEACH ) I hereby certify that the foregoing instrument was acknowledged before me this day of, 2014, by as of Palm Beach Maritime Museum, Inc. d/b/a Palm Beach Maritime Academy on behalf of said corporation. He [ ] is personally known to me or [ ] has produced as identification. (NOTARY SEAL) Sign: Notary Public Print: My commission expires: :4 24 D :4 25

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105 APPENDIX E FORM OF OPINION OF BOND COUNSEL

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107 APPENDIX E Public Finance Authority Madison, Wisconsin FORM OF OPINION OF BOND COUNSEL June, 2014 Re: Public Finance Authority $21,000,000 Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A and $3,640,000 Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B Dear Sirs and Madams: We have acted as bond counsel in connection with the issuance by the Public Finance Authority (the Authority ) of its $21,000,000 Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A (the Series 2014A Bonds ) and its $3,640,000 Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B (the Series 2014B Bonds and, collectively with the Series 2014A Bonds, the Bonds ), initially issued and delivered on this date pursuant to the Constitution and laws of the State of Wisconsin, including particularly Sections , and of the Wisconsin Statutes, as amended, commonly known as the Joint Exercise of Powers Law (the Act ), a resolution adopted by the Authority on June 19, 2014 (the Bond Resolution ), and a Trust Indenture dated as of June 1, 2014 (the Indenture ) between the Authority and U.S. Bank National Association, as trustee (the Trustee ). The Bonds are payable solely out of loan payments and other amounts to be paid to the Authority by Palm Beach Maritime Museum, Inc. d/b/a Palm Beach Maritime Academy, Inc., a Florida non-profit corporation (the Borrower ) pursuant to a Loan Agreement by and between the Authority and the Borrower dated as of June 1, 2014 (the Loan Agreement ). The Borrower will use the proceeds of the Bonds to (a) acquire two charter schools (the Facility ) operated by the Borrower in the Town of Lantana, Palm Beach County, Florida, (b) construct, equip and make certain renovations and capital improvements to the Facility, (c) refund the Authority s outstanding $1,000,000 Education Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A, (d) fund a Debt Service Reserve Fund for the Bonds, (e) pay capitalized interest on the Bonds, and (f) pay the costs of issuance of the Bonds (collectively, the Project ). All capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Indenture. We have examined the Act, the Bond Resolution, the Indenture, the Loan Agreement and such certified copies of the proceedings of the Authority and the Borrower and such other documents as we have deemed necessary to render the opinions herein. As to questions of fact material to our opinions, we have relied upon representations and certifications of the Authority and the Borrower E-1

108 contained in such documents and in the certified proceedings and other certifications of public officials and others furnished to us without undertaking to verify such representations. Reference is made to the opinion of even date herewith, upon which we have relied with your consent, of von Briesen & Roper, s.c., counsel to the Authority, with respect to the matters set forth in said opinion. Reference is also made to the opinions of even date herewith, upon which we have relied with your consent, of Law Offices of Levi Williams, P.A., counsel to the Borrower and Law Offices of Levi Williams, P.A., counsel to Palm Beach Maritime Foundation, Inc. (the Foundation ), with respect to the matters set forth in said opinions. To the extent that the opinions expressed herein are made in reliance on said opinions, our opinions are subject to the same limitations and qualifications expressed in said opinions, in addition to the limitations and qualifications expressed herein. We have not been engaged or undertaken to review the accuracy, completeness or sufficiency of the Limited Offering Memorandum of the Borrower dated June 19, 2014 (the Limited Offering Memorandum ) or other offering material relating to the Bonds (except to the extent, if any, stated in the Limited Offering Memorandum) and we express no opinion herein relating thereto. Based on the foregoing, we are of the opinion that: 1. The Bond Resolution has been duly adopted by the Authority and constitutes a valid and binding obligation of the Authority enforceable against the Authority in accordance with its terms. 2. The Indenture and the Loan Agreement have each been duly executed and delivered by the Authority, and each constitutes a valid and binding obligation of the Authority enforceable against the Authority in accordance with its terms. 3. The issuance and sale of the Bonds have been duly authorized by the Authority and the Bonds constitute valid and binding limited obligations of the Authority payable in accordance with, and as limited by, the terms of the Indenture. THE BONDS, THE INTEREST THEREON, AND ANY COSTS INCIDENTAL THERETO ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE TRUST ESTATE, AS DEFINED IN THE INDENTURE, AND DO NOT CONSTITUTE A DEBT OR LIABILITY OF THE AUTHORITY, ANY MEMBER OF THE AUTHORITY, THE STATE OF WISCONSIN, OR ANY POLITICAL SUBDIVISION THEREOF, OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THE BONDS. THE BONDS DO NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE, IN ANY MANNER, ANY MEMBER OF THE AUTHORITY, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF, OR ANY POLITICAL SUBDIVISION APPROVING ISSUANCE OF THE BONDS TO LEVY ANY TAX OR TO MAKE ANY APPROPRIATION FOR PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS OR ANY COSTS INCIDENTAL THERETO. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF ANY MEMBER OF THE AUTHORITY, THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF OR ANY POLITICAL SUBDIVISION APPROVING THE ISSUANCE OF THE BONDS, NOR THE FAITH AND CREDIT OF THE AUTHORITY, SHALL BE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON, THE BONDS OR ANY E-2

109 4. Under existing statutes, regulations, rulings and judicial decisions, interest on the Series 2014A Bonds is excluded from gross income for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is not taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on certain corporations under the Internal Revenue Code of 1986, as amended (the Code ). Ownership of the Series 2014A Bonds may result in collateral federal tax consequences to certain taxpayers. We express no opinion regarding other federal tax consequences resulting from the ownership, receipt or accrual of interest on, or disposition of, the Series 2014A Bonds. The opinion set forth in the preceding paragraph assumes continuing compliance by the Authority and the Borrower with certain requirements of the Code that must be met after the date of the issuance of the Series 2014A Bonds in order for interest on the Bonds to be excluded from gross income for federal income tax purposes. The failure to meet these requirements may cause interest on the Series 2014A Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Series 2014A Bonds. The Authority and the Borrower have covenanted in the Indenture and the Loan Agreement, respectively, to take the actions necessary to comply with such requirements and to refrain from taking any action that would cause the interest on the Series 2014A Bonds to be included in gross income for federal income tax purposes. 5. Interest on the Series 2014B Bonds is not excluded from gross income for federal income tax purposes. We are members of the Florida Bar and do not hold ourselves out as experts on, nor are we, in rendering our opinion herein, passing upon any matter of the laws of any jurisdiction other than the laws of the United Sates and the States of Florida and Wisconsin. The opinions set forth above are expressly limited to, and we opine only with respect to, the laws of the States of Florida and Wisconsin and the United States of America. We are not licensed to practice law in the State of Wisconsin. Accordingly, with respect to matters of Wisconsin law, our opinion is given solely in reliance upon the aforementioned opinion of von Briesen & Roper, s.c.. This opinion is qualified to the extent that the rights of the holders of the Bonds and the enforceability of the Bonds, the Bond Resolution, the Indenture and the Loan Agreement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally, now or hereafter in effect, and by the exercise of judicial discretion in appropriate cases in accordance with equitable principles. Sincerely, GREENSPOON MARDER, P.A. E-3

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111 APPENDIX F FORM OF QUALIFIED INVESTOR LETTER

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113 APPENDIX F FORM OF QUALIFIED INVESTOR LETTER Public Finance Authority c/o Wisconsin Counties Association 22 E. Mifflin Street, Suite 900 Madison Wisconsin U.S. Bank National Association Global Corporate Trust Services 550 West Cypress Creek Road, Suite 380 Fort Lauderdale, FL Hapoalim Securities USA, Inc. One Battery Park Plaza, 2nd Floor New York, NY $21,000,000 PUBLIC FINANCE AUTHORITY (WISCONSIN) FIRST MORTGAGE EDUCATIONAL FACILITY REVENUE BONDS (PALM BEACH MARITIME ACADEMY PROJECT) SERIES 2014A $3,640,000 PUBLIC FINANCE AUTHORITY (WISCONSIN) FIRST MORTGAGE EDUCATIONAL FACILITY REVENUE BONDS (PALM BEACH MARITIME ACADEMY PROJECT) Taxable SERIES 2014B Ladies and Gentlemen: On the date hereof, in connection with its purchase of the above-captioned bonds (the Bonds ) issued pursuant to the Trust Indenture dated as of June 1, 2014 (the Indenture ), by and between the Public Finance Authority (the Authority ) and U.S. Bank National Association, as Trustee, the undersigned does hereby certify as follows: (a) The undersigned is a qualified institutional buyer ( QIB ) within the meaning of Rule 144A promulgated under the Securities Act of 1933, as amended (the Securities Act ). (b) The undersigned has received and read the Investor Packet consisting of (i) the Limited Offering Memorandum; (ii) Trust Indenture; (iii) Loan Agreement; (iv) the Mortgage and Security Agreement; (v) opinions of Bond Counsel; (vi) Feasibility Report; (vii) Charter; (viii) Summary of Appraisal, prepared by Richard A Sorta, State Certified General Appraiser # and CBRE, Inc.; (ix) Audited Financial Statements of the Borrower for fiscal years ended 2012 and 2013; (x) Summaries of the Phase I Report relative to the Lantana I Site and the Phase II reports relative to the Lantana II Site; (xi) the Guaranty Agreement and (xii) certain commendation letters from the Florida Department of Education and Office of the Governor of the State of Florida. (c) The undersigned is purchasing the Bonds for investment, in the ordinary course of business, and has no present intention to resell the Bonds. (d) The undersigned agrees that it will offer, sell or otherwise transfer the Bonds only: (i) in compliance with the restrictions on transfer set forth in the Trust Indenture; and (ii) in addition, (A) for so F-1

114 long as the Bonds are eligible for resale pursuant to Rule 144A, to a person who the seller reasonably believes is a QIB that purchases for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A, (B) in a transaction meeting the requirements of Rule 144 under the Securities Act or (C) in accordance with another exemption from the registration requirements of the Securities Act. (e) The undersigned acknowledges that (i) in connection with its investment decision with respect to the Bonds, it has either been supplied with or been given access to information to which a reasonable investor would attach significance in making investment decisions; (ii) it has had the opportunity to ask questions and receive answers from knowledgeable individuals concerning the Borrower and the Bonds and the security therefor; (iii) it has not relied upon the Authority for any information about the Borrower (including its financial position and prospects and ability to service the indebtedness under the Loan Agreement), the Guarantor, the Project or the Facility; (iv) the business of the Borrower involves certain economic variables and risks that could adversely affect the security for the Bonds; and (iv) the Bonds are limited obligations of the Authority payable solely from the funds and revenues pledged for their payment under the Indenture and the Authority is not directly, indirectly, contingently or morally obligated to use any other moneys or assets of the Authority for all or any portion of the principal of and interest on the Bonds or any costs incidental thereto. The undersigned is duly and legally authorized to purchase obligations such as the Bonds. Investor By Name: Title: F-2

115 APPENDIX G CHARTER (including the proposed Charter for the High School)

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134 PROPOSED DRAFT OF CHARTER CONTRACT FOR HIGH SCHOOL PALM BEACH MARITIME ACADEMY HIGH SCHOOL CHARTER SCHOOL CONTRACT Table of Contents Charter School Contract by and between THE SCHOOL BOARD OF PALM BEACH COUNTY, FLORIDA, A body corporate operating and existing under the Laws of the State of Florida [hereinafter referred to as the Sponsor or School Board ], AND PALM BEACH MARITIME MUSEUM, INC., A Florida non-profit corporation [hereinafter referred to as School Operator ] on behalf of PALM BEACH MARITIME ACADEMY HIGH SCHOOL [hereinafter referred to as the School ] I. GENERAL PROVISIONS A. Approved Application (renewals and amendments) Appendix A B. Term of Contract Effective Date Term of Contract Start-Up Date Submittal of Pre-Opening Checklist and Annual Checklist Charter Modification Charter Renewal Educational Program and Curriculum [as described in Section of C. Application] Non-Renewal/Cancellation and Termination D. 1. Non-Renewal Provisions a. Grounds for Non-Renewal Reasons for Non-Renewal Good Cause Additional Good Cause for Non-Renewal Process for Non-Renewal b..... c. Duties of Sponsor and School under Pendency of Appeal Ninety (90) Day Termination a. Grounds for Termination b. Process for Ninety (90) Day Termination c. Duties of Sponsor and School under Pendency of Appeal Immediate Termination a. Notice of Planned Immediate Termination b. Hearing Process c. District Operation the School Pending Appeal of Post-Termination Provisions a. Financial and Operational Records upon Termination or Expiration Student Records upon Termination or Expiration b. c. Property/Assets d. Debts upon Non-Renewal or Termination [Pursuant to Statute] School Debt Leases upon Non-Renewal or Termination e. f. Assets upon Non-Renewal or Termination g. Final Audit School Election to Terminate or Non-renew ACADEMIC ACCOUNTABILITY II.... A. Student Performance: Assessment and Evaluation Initial Year AM AM Palm Beach Maritime Academy High School Contract Page 2 of 74 a. Expected Outcomes b. Methods of Measurement c. Assessments (1) State-Required Assessments (2) Additional Assessments (3) Information for Sponsor Annual a. School Improvement Plan (required for D and F Schools) (1) Minimum Components of SIP (2) Deadline for Governing Board Approval (3) Monitoring Corrective Action b... c. Assessments (1) State-required Assessments (2) Additional Assessments (3) Evidence of Assessments B. Student Promotion School Student Promotion Policy Report Cards Other Assessment Tools as stated in approved Application Accreditation Data Process and Use Pursuant to Statute C. 1. Access to Facilities, Records, and Data Sponsor Use of Required Assessment Data Acceptable Use Policy STUDENTS III A. Eligible Students B. Grades Served C. Class Size (If Applicable) D. Annual Projected Enrollment [deadline for submission to Sponsor] Student Enrollment Minimum Enrollment Requirements Deferred Opening and Student Enrollment Required Instructional Minutes Enrollment Capacity Annual Capacity Determination E.... F. Admissions and Enrollment Plan Enrollment Procedures Maintenance of Student Records Required by Statute G. as 1. Student Education Records Transfer of Student Education Records Maintenance of Student Records upon Termination of Student s Enrollment at the School Transfer of Permanent Educational Records for Retention Transfer of Student Education Records Upon School s Termination H. Exceptional Student Education Non-Discriminatory Policy Sponsor s Responsibilities School Responsibilities Services Covered by Administrative Fee Due Process Hearing Student Code of Conduct I. J. Dismissal Policies and Procedures [as described Application] K. ELL Students FINANCIAL ACCOUNTABILITY IV: A. Revenue Basis for Funding as provided in statute [Section (17) (b)] a. Student Reporting b. Distribution of Funds Schedule c. Adjustments d. Millage Levy, if applicable e. Holdback/Proration Federal Funding a. Title I b. IDEA c. Federal Grants d. Other Federal Funds Charter School Capital Outlay Funds a. Application b. Distribution Other Revenue Sponsor Administrative B. Fee 1. 5% up to 250 Students % up to 250 Students High-Performing Charter Schools for 3. 5% for Virtual Charter Schools % up to 250 Students Un-Weighted ESE 5. Capital Outlay Generated through FEFP Funds Sponsor Use of Administrative Fee Access to Optional Sponsor Services Provision of School Lunches Medicaid School Match Program Participation C. D. Restriction on Charging Tuition E. Allowable Student Fees [as provided in statute] F. Budget Annual Budget a. Governing Board Approval Required b. Date to Submit to Sponsor Amended Budget Financial Records, Reports and Monitoring G. 1. Maintenance of Financial Records Financial and Program Cost Accounting and Reporting AM Palm Beach Maritime Academy High School Contract Page 3 of 74 AM Palm Beach Maritime Academy High School Contract Page 4 of 74 G-18

135 Palm Beach Maritime Academy High School Contract Page 5 of 74 AM for Florida Schools Financial Reports a. Monthly Financial Reports b. Annual Property Inventory c. Program Cost Report d. Annual Financial Audit e. Form 990, if applicable School s Fiscal Year [July 1 June 30] Financial Recovery and Corrective Action Plan as required by statute and State Board of Education Rule H. Financial Management of Schools [as described in Application] Financial Management and Oversight Responsibilities Accounting Contract Disbursement Authorization Accounting Policies and Procedures Reading Plan Allocations Additional Financial Requirements Utilization of the Sponsor Bank Transfer Information I. Description of Internal Audit Procedure [as described in Application] V. FACILITIES A. Prior Notification [if facility is not secured at time of contract] Deadline to Secure Facility Deadline to Submit Zoning Approvals and Certificate of Occupancy District Inspection of Facility B. Compliance with Building and Zoning Requirements Florida Building Code Florida Fire Prevention Code Applicable Laws, Ordinances, and Codes of Federal, State, and Local Governance Capacity of Facilities C. Location School s Street Address with folio number, if identified Temporary Facility [if applicable] Relocation [prior notification of Sponsor] Additional Campuses [if applicable] D. Prohibition to Affix Religious or Partisan Political Symbols, Statues, Artifacts, on or about the Facility E. (Select if Applicable) Specific Facility Requirements District Non-Conversion Owned Facility a. Definition b. Cost to School c. Maintenance Responsibilities d. Delineation of Common Areas (if applicable) Palm Beach Maritime Academy High School Contract Page 6 of 74 AM e. Liability (Insurance) Conversion Charters a. Ownership b. Repairs and Maintenance c. School s Responsibilities (e.g. cleaning and grounds) d. Construction by Sponsor e. Capital Outlay Projects f. Portables g. Liability (Insurance) F. Additions, Changes, and Renovations G. Disaster Preparedness Plan VI. TRANSPORTATION A. Cooperation Between Sponsor and School [pursuant to statute, parties shall cooperate to ensure transportation is not a barrier] B. Reasonable Distance C. School Shall Demonstrate Compliance with all Applicable Transportation Safety Requirements D. Fees VII. INSURANCE AND INDEMNIFICATION A. Indemnification of Sponsor by School Indemnification for Professional Liability Indemnity for Certain Specified Claims Notification of Third-Party Claim, Demand, or Other Action Survival B. Indemnification of School by Sponsor C. Sovereign Immunity D. Acceptable Insurers Acceptable Insurance Providers Insurance Provider Compliance Minimum Insurance Requirements E. Commercial and General Liability Insurance Liabilities Required Minimum Limits Deductible/Retention Occurrence/Claims Additional Insureds F. Automobile Liability Insurance Liabilities Covered Occurrence/Claims Minimum Limits Additional Insured G. Workers Compensation/Employers Liability Insurance Coverages Minimum Limits H. School Leader s Errors and Omissions Liability Insurance Form of Coverage Palm Beach Maritime Academy High School Contract Page 7 of 74 AM Coverage Limits Occurrence/Claims Fidelity Bond/Crime Coverage I. Property Insurance Structure Requirements Additional Requirements Business Personal Property Insurance ` J. Applicable to All Coverages Other Coverages Deductibles/Retention Liability and Remedies Subcontractors Waiver of Subrogation Provision(s) for Cure (90 days) Default upon Non-Compliance VIII. GOVERNANCE A. Public or Private Employer B. Governing Board Responsibilities C. Public Records D. Reasonable Access to Records by Sponsor E. Sunshine Law F. Reasonable Notice Notice of Governing Board Meetings Governing Board Meeting Requirements G. Identification of Governing Board Members H. Changes in Governing Board [Timely Notice to Sponsor] IX. EDUCATION SERVICE PROVIDER A. Education Service Provider Agreement School Will Use Services of ESP as described in Section 11 of Application [If an ESP Will be used] Submission of ESP Agreement Amendments to ESP Contract ESP Contract Amendments that Result in a Material Change to a Charter Require Contract Modification Change of ESP Requires Contract Modification X. HUMAN RESOURCES A. Hiring Practices Reporting Staffing Changes Non-Discriminatory Employment Practices Teacher Certification and Highly Qualified a. Remedy for Not Meeting Highly Qualified Fingerprinting and Background Screening B. Teacher Evaluation Requirements C. Principal Evaluation Requirements D. Employment Practices Statutory Prohibitions and Required Disclosure in Hiring Palm Beach Maritime Academy High School Contract Page 8 of 74 AM of Relatives of School Founders, Employees, etc Self-Reporting of Arrests Code of Ethics Personnel Policy Collective Bargaining Immigration Status Employee Discipline Employee Evaluation Other Employment Statutes E. Sponsor Training of School s Employees Participation and Cost for Training Activities a. Participation in Federally-Funded Training at No Cost b. Participation in Non-Federally-Funded Training at Pro-rata Cost, on Space Available Basis Use of Sponsor s System and Computer Software Program for Monitoring XI. REQUIRED REPORTS/DOCUMENTS A. Pre-Opening Policies and Procedures Manual List of Governing Board Members Facility [zoning, certificate of occupancy, fire inspection, etc.] Other B. Monthly Financial Statements, per State Board of Education Rule a. Date Due Other C. Quarterly Academic Performance Reports Other D. Annual Annual Student Achievement Report [pursuant to statute] Annual Audit Program Cost Report Annual Inventory Report [capital purchases with public funds] Policies and Procedures [if materially revised] Student Code of Conduct [if materially revised] Dismissal Policies and Procedures [if materially changed] Disaster Preparedness Plan Employee Handbook [if materially revised] Current List of Governing Board Members School s Parental Contract [if materially revised] Projected Enrollment [for subsequent school year] Capacity [for subsequent school year] School Calendar [for subsequent school year] Evidence of Insurance ESP Management Agreement [if materially changed] G-19

136 E. Other MISCELLANEOUS PROVISIONS XII. A. Impossibility B. Notice of Claims Time to Submit Notice of Cancellation Renewal/Replacement Drug-Free Workplace C D. Entire Agreement E. No Assignment Without Consent F. No Waiver G. Default Including Opportunity to Cure H. Survival Including Post-Termination of Charter I. Severability J. Third-Party Beneficiary K. Choice of Laws L. Notice M. Authority N. Conflict/Dispute Resolution and Alternative Dispute Resolution Process Citations O... P. Headings APPENDIX B APPENDIX C APPENDIX D APPENDIX E APPENDIX F APPENDIX G 19. Action Plan ARTICLES OF INCORPORATION and BYLAWS OF PALM BEACH MARITIME MUSEUM, INC. RESOLUTION AGREEMENT DESCRIPTION OF ESE SERVICES EVALUATION PROCESS/STUDENT SUCCESS STUDENT REPORT CARD CHARTER SCHOOL OPENING OF SCHOOL CHECKLIST APPENDICES APPENDIX A APPROVED APPLICATION Application Cover Sheet 1. Educational Plan 2. Target Population and Student Body 3. Educational Program Design 4. Curriculum 5. Student Performance, Assessment and Evaluation 6. Exceptional Student 7. English Language Learner 8. School Climate and Discipline 9. Governance 10. Management 11. Education Service Provider 12. Human Resources and Employment 13. Student Recruitment and Enrollment 14. Facilities 15. Transportation Service 16. Food Service 17. Budget, INCLUDING FIVE YEAR BUDGET 18. Financial Management and Oversight AM Palm Beach Maritime Academy High School Contract Page 9 of 74 AM Palm Beach Maritime Academy High School Contract Page 10 of 74 PALM BEACH MARITIME ACADEMY HIGH SCHOOL CHARTER SCHOOL CONTRACT THIS CHARTER SCHOOL CONTRACT [ Charter or Contract ] is executed by between the Palm Beach County School Board [ School Board or Sponsor ], and Palm Beach Maritime Museum, Inc., a Florida not-for-profit organization [School Operator], to establish and operate the Palm Beach Maritime Academy High School, a public charter school [ School ], pursuant to Section , Florida Statutes, a now or hereafter amended. WHEREAS, the Sponsor has the authority pursuant to Fla. Stat to grant to a non-for-profit organization a charter to operate a charter elementary/middle/high school within the School District; and WHEREAS, the School Operator is a Florida not-for-profit organization and desires to operate a high school charter school within the Palm Beach County, Florida School District ( District ) for the purposes set forth in Fla. Stat and in the School s Charter School Application, which is attached hereto as Appendix A and incorporated herein by reference; and WHEREAS, the Sponsor approved the School s Charter School Application on October 2, 2013; and WHEREAS, it is the intent of the parties that this Charter School Agreement [hereinafter referred to as the Charter or Contract ] shall serve as the charter for the operation of the School. NOW, THEREFORE, in consideration of the mutual covenants and terms set forth herein, which the parties agree are true and correct recitals, the parties agree as follows: SECTION I: GENERAL PROVISIONS This Charter is hereby authorized and granted to the School Operator on behalf of and solely for the benefit of the School, in accordance with the provisions of Fla. Stat , applicable State Board of Education rules relating to charter schools, and the terms and conditions of this Charter. A. Incorporations. 1. Recitals: The above recitations of facts set forth in the preceding whereas clauses are expressly incorporated herein and form a part of the terms of this Charter. 2. Approved Application: The Application (including any supplementation through additional materials submitted and accepted by the District and/or statements made by the applicant during the interview), approved by the School Board, is attached as Appendix A (the Application ). All attached appendices are incorporated and made a part of this Contract. If any provision with this Charter is inconsistent with Appendix A, the provisions of this Charter shall prevail. B. Term of Contract: 1. Effective Date: This Contract shall become effective upon approval by the Sponsor and the signing by both parties, whichever date is later. 2. Term: The term shall cover five (5) years commencing on July 1, 2014 ending on June 30, 2019, unless amended by the parties hereto or otherwise terminated in accordance with the provisions of this Charter. 3. Start-up Date [Same as District for initial start-up, flexible thereafter]: a. Deferral; Automatic Termination. In its sole discretion, the Sponsor may grant a one-year deferral from the initial opening date as stated in the approved Application (Appendix A), allowing the School to postpone the opening of the School for one school year upon good cause shown. During that year the School shall not enroll any students and shall not be eligible to receive any FTE funding from the Sponsor. If a deferral is granted, the Term of this Contract will be adjusted to reflect cancelation of the first year of the Term, July 1, 2015 through June 30, If a deferral is granted, the term of this Contract will be adjusted to reflect cancellation of one year of the term. If the School is granted the deferral but does not open after the one year, this School will notify the Sponsor and the parties shall negotiate additional deferral terms, or may agree to terminate. b. Start Up Date Consistent with Sponsor s School Year; Instructional Days and Minutes. For each school year, the initial start-up date of the School shall be consistent with the beginning of the Sponsor s public school calendar for each school year, unless otherwise agreed by both parties in writing. The School shall provide instruction for at least the number of days and the minimum number of instructional minutes required by law for other public schools. After the School s calendar is approved by the Sponsor, any subsequent modification must be approved by the Sponsor prior to implementation. 4. Submittal of Pre-Opening Checklist and Annual Check List: In order to operate a charter school, this School shall have Authorized Facilities, which comply with the requirements of Fla. Stat (18). All documents relevant to the School s acquisition or use of a facility for the operation of the School, including but not limited to the Building Code approvals, all necessary permits, licensing, certificate of occupancy, local jurisdictional code approvals (zoning approvals consistent with type of use, fire and health inspections), use approvals, occupational license (letter of exemption), deed and/or lease agreements, facility certification, and any other approvals required by the local government, shall be obtained and copies provided to the Sponsor and become attached hereto and incorporated herein by this reference upon receipt by the Sponsor, but no later than the dates specified for these items, in accordance with PBSD 2414 Charter School Opening of School Checklist (Appendix H hereto). [The checklist references the mandatory items.] If the required dates within the Checklist vary from those within this AM Palm Beach Maritime Academy High School Contract Page 11 of 74 AM Palm Beach Maritime Academy High School Contract Page 12 of 74 G-20

137 Contract, the dates on the Checklist control unless such dates are inconsistent with statutory requirements applicable to charter schools, in which case the statutory dates shall control. The School cannot open without providing the mandatory items needed to open a school. If the School is unable to provide the mandatory items to open the School, the School shall at its option either delay opening for the current year (provided the School will meet the required hours of instruction under Florida law), defer opening by one year (if this was to be the first year of operation) as approved by the Sponsor based upon good cause shown, or voluntarily terminate the Charter. 5. Charter Modification: a. Modification by Mutual Agreement. This Charter may not be modified during its term unless by mutual agreement in writing executed by both parties. In evaluating proposed modifications, the Sponsor will consider its need for conformity in the operation of other charter schools it sponsors. These modifications will be reviewed with the School prior to enactment, and then agreed to in writing and executed by both parties. If the modification involves changes to the grade levels, except as provided by law for high performing charter schools, the School must provide information acceptable to the Sponsor, including that relating to the curriculum, budget, facilities and staff. b. Modification by Operation of Law. In addition, this Charter shall be automatically modified to reflect any and all new mandates to any and all applicable Federal, State, and local regulations, rules, statutes, ordinances, and laws applicable to charter schools, and such modifications shall apply to the Sponsor and the School and any of its provisions supersede contrary language within this Charter. Whenever the Charter is amended, it shall be updated to comply with current State and Federal law and regulations applicable to charter schools. 6. Charter Renewal: a. Program Review Prior to Renewal. Prior to renewal of this Charter, the Sponsor shall perform a program review to determine the level of success of the School s current academic program, achievement of the goals and objectives required by State accountability standards and successful accomplishment of the criteria under Fla. Stat (7) (a) and (b), the viability of the organization, compliance with the terms of the Charter, and that none of the statutory grounds for nonrenewal exist. b. Conditions Precedent for Renewal. The School shall be required to follow the Sponsor s renewal process when seeking renewal. If the School meets the criteria for a renewal charter contract, then negotiations for a renewal charter shall commence under the timelines provided by State law. Renewals shall be for a term of five (5) years unless another statutorily allowed term is mutually agreed upon or required by law. Renewal terms shall be in accordance with Fla. Stat. sections (7)(a) and (b) and (8)(a), as amended from time to time, changes in State Board of Education rules as well as policies and procedures of the Palm Beach County School Board for which the School has agreed to be bound. C. Educational Program and Curriculum: [as described in Section 3 of Application]: Notwithstanding anything in this Section to the contrary, the School shall implement the educational program and curriculum as described in the approved Application in Section 3: Educational Program Design and Section 4: Curriculum Plan, of Appendix A. 1. Implementation. The School shall implement its educational and related programs as specified in the School s approved Application (Appendix A), including the School s curriculum, the instructional methods, any distinctive instructional techniques to be used, and the identification and acquisition of appropriate technologies needed to improve educational and administrative performance, which include a means for promoting safe, ethical, and appropriate uses of technology which comply with legal and professional standards. 2. Reading Program Requirements. The School shall ensure that reading is a primary focus of the curriculum and that resource, including a research-based reading program and applicable materials, are provided to identify and provide specialized instruction for students who are reading below grade level. Further, the curriculum and instructional strategies for reading shall be consistent with the Curriculum Plan set forth in its approved Application. 3. Revisions or Changes to School Curriculum. Updates, revisions, and/or changes to the curriculum programs described in the Application and as requested by the Sponsor as a condition of the Application s approval are incorporated as part of the approved Application included as Appendix A, Section 4 (Curriculum Plan), attached and incorporated hereto. Any request to change the School s curriculum must be submitted to the Sponsor in writing, comply with all applicable laws and be approved by the Sponsor before the changes are implemented, which approval by Sponsor shall not be unreasonably withheld, delayed or conditioned before the changes are implemented. 4. Blended Learning. The School may, but shall not be required to, implement blended learning courses which combine traditional classroom instruction and virtual instruction if stated within its Application or approved by the Sponsor. Students in a blended learning course must be full-time students of the School and receive the online instruction in a classroom setting at the School. Instructional personnel certified pursuant to Fla. Stat , who provide virtual instruction for blended learning courses may be employees of the School or may be under contract to provide instructional services to the School s students. At a minimum, such instructional personnel must hold an active State or School District certification under Fla. Stat or for the subject area of the blended learning course. The funding and performance accountability requirements for blended learning courses are the same as those for traditional courses. 5. Accountability. Charter schools are subject to the same accountability requirements as other public schools, including reports of student achievement information that link baseline student data to the School s performance projections identified in the charter. The School shall identify reasons for any difference between projected and actual student performance. 6. Academic Achievement. The School will establish the current incoming baseline standard of student academic achievement, the outcomes to be achieved, and the method of measurement that will be used. The School will employ appropriate instruments, with documented validity and reliability that will be used to measure and monitor growth of students, and collaborate as appropriate with outside professionals to develop and select the appropriate evaluative instruments. AM Palm Beach Maritime Academy High School Contract Page 13 of 74 AM Palm Beach Maritime Academy High School Contract Page 14 of Compliance with State Laws. The School agrees that its programs and operations shall ensure that its program is innovative and consistent with the State education goals established by Fla. Stat (5). 8. Nonsectarian. The governing board and the School agrees that its programs, admissions, employment practices, and operations shall be non-sectarian, in accordance with Fla. Stat (9)(a). The governing board and the School shall ensure that the school is not wholly or in part under the control or direction of any religious denomination and that no denomination tenet or doctrine shall be taught. 9. Non-discrimination. The governing board and the School shall not discriminate on the basis of race, gender, gender identity or expression, religion, national origin, ethnicity, sexual orientation, age, or disability against a student or employee, or violate the antidiscrimination provisions of Fla. Stat D. Non-Renewal/Cancellation and Termination: The parties agree to abide by all Federal and State laws, statutes, rules and regulations applicable to charter schools and also abide by the terms and conditions of this Charter. This Contract may be cancelled or terminated during its term for any lawful reason, including but not limited to, those specified in State law and this Contract. Notices of non-compliance, non-renewal, termination, cancellation, and default may be issued by the Sponsor s Superintendent or the Superintendent s designee. 1. Non-Renewal Provisions: a. Grounds for Non-Renewal (1) Reasons for Non-Renewal: Any of the reasons below would constitute a reasonable basis for the Sponsor to deny an application for renewal submitted by the School at the end of the Term. Notwithstanding the foregoing, the provisions of this Section shall not be deemed a waiver of any due process rights of the School existing under any applicable laws. (a) The School s failure to participate in the State s education accountability system created in Fla. Stat as required in this section, as such requirements may be modified by the 2012 waiver obtained by the State of Florida authorizing the bypass of the requirements of No Child Left Behind (NCLB); (b) The School s failure to meet generally accepted standards of fiscal management, including but not limited to evidence of fiscal emergency set forth in F.S. section ; (c) The School s violation of law; (d) Failure to make sufficient progress in attaining the student achievement objectives of the Contract and it is not likely that such objectives can be achieved before expiration of the Contract; and/or (e) Other good cause shown, including but not limited to, those defined in this Contract. (2) The School acknowledges that the Sponsor may assert, among other things, that the following factors constitute Good Cause for purposes of a non-renewal by Sponsor for other good cause shown above. Notwithstanding, the foregoing acknowledgment by the School shall not be deemed a waiver of any due process rights of the School existing under any applicable laws, nor does the acknowledgment by the School Comment [DH1]: Bruce, per the comment on Eagle Arts, please let me know if you are ok to incorporate the non-renewal/termination provisions from the latest draft of proposed template. constitute an agreement that such factors shall have occurred or would constitute good cause for non-renewal of this Charter: (a) failure to correct any material deficiency(ies) of which the Sponsor has provided written notice to the School: (b) failure to correct any deficiency(ies) that are detrimental to the health, safety, and/or welfare of the School s students as outlined in F.S (8)(d); (c) the School s demonstration of significant deficiency(ies) in its academic program to achieve the goals and objectives required by State accountability standards and accomplish the criteria under F.S (7)(a) and (b); (d) failure to comply with the terms and conditions of this Charter; (e) failure to implement a reading curriculum that is consistent with effective teaching strategies grounded in scientifically-based reading research, and approved by the Florida Department of Education; (f) substantially inadequate student performance as determined pursuant to Federal or State laws or standards or this Charter; (c) earning School grades of three (3) consecutive grades of D, or two (2) consecutive grades of D followed by F, or two (2) nonconsecutive grades of F within a three (3) year period or two (2) consecutive years of F, as determined by the Florida Education Code and relevant State Board of Education rules, unless the School meets one of the exceptions provided for in Fla. Stat (9) (n) (4); (d) failure to timely submit any plan or documentation as required by FAC 6A or in accordance with F.S and ; (e) failure to strictly comply with the issues stated in the Educational and/or Financial Action Plan or material findings based upon either the Mid-Year Review and/or the End-of-Year Review or an audit performed by either the Sponsor or an independent qualified CPA firm, provided such issues are based on the requirements of Florida law; (f) failure to deliver the instructional programs or curricula identified in the Application; (g) the School files for bankruptcy, is adjudicated bankrupt or insolvent, or is so financially impaired that the School cannot continue to operate and/or is no longer economically viable pursuant to the standards and criteria set forth in Fla. Stat or Rule 6A , Florida Administrative Code (F.A.C.); (h) failure to have an annual audit that complies with the requirements specified in this Contract or to repeatedly fail to timely submit required financial reports; AM Palm Beach Maritime Academy High School Contract Page 15 of 74 AM Palm Beach Maritime Academy High School Contract Page 16 of 74 G-21

138 (i) willfully or recklessly fails to manage public funds according to the law; (j) the School's failure to (1) cooperate with District representatives seeking to inspect and review the School's records, information, reports and assets; (2) consult with representatives of the District regarding any steps necessary to bring the School's books of account, accounting systems, financial procedures, and reports into compliance with state requirements; (3) permit the District representatives to review the School's operations, management, efficiency, productivity, and financing of functions and operation; or (4) provide periodic progress reports as required by any financial recovery plan issued pursuant to Fla. Stat ; (k) failure to comply with maximum class size restrictions as required by law, particularly if the non-compliance adversely impacts the Sponsor s compliance with State law; (l) failure to maintain insurance coverage as required by this Contract; (m) violation of any court order impacting the operations of the School; (n) criminal conviction on matters regarding the School by either the School s governing board, its members, collectively or individually, or by the management company contracted by the School; (o) receiving a determination of financial emergency, pursuant to Fla. Stat ; (p) failure to provide Exceptional Education Students (ESE) and English Language Learners (ELL) with programs and services in accordance with Federal, State, and local requirements; (q) failure to comply with the Florida Building Code and the Florida Fire Prevention Code, including referenced documents, applicable State laws and rules, and Federal laws and rules; (r) failure to comply with all applicable laws, ordinances, and codes of Federal, State, and local governance including Individuals with Disabilities Education Improvement Act (IDEA); (s) failure to obtain all necessary licenses, permits, zoning, use approval, facility certification, and other approvals required for use and continued occupancy of the facility as required by the local government or other governmental agencies, within the timelines specified by the Sponsor in this Contract or the checklist; (t) failure to maintain valid licenses, permits, use approval, facility certification, and any other approval as required by the local government or any other governmental bodies having jurisdiction at any time during the term of this Contract; (s) violation of those provisions of the Code of Ethics for Public Officers and Employees as required pursuant to Fla. Stat (26) for charter school governing board members and/or employees; (t) violation of the Family Educational Rights and Privacy Act (FERPA) (20 U.S.C g; 34 CFR Part 99) or student educational record privacy under Fla. Stat and , and 6A , F.A.C.); (u) any material violation of assessment administration and security procedures; (v) failure to cooperate with the Sponsor s Inspector General during an audit or investigation or to cooperate with the Sponsor during any of its monitoring activities; b. Process for Non Renewal: (1) Notification; Petition: At least ninety (90) days prior to the Sponsor s intent not to renew the Contract, the Superintendent or designee shall notify the Chair of the School s governing board in writing. The notice shall state in reasonable detail the grounds for the proposed nonrenewal and stipulate that the School s governing body may, within 14 calendar days after receiving the notice, request a hearing by filing a legally sufficient written request. The petition must be legally sufficient and timely under the terms and provisions of Fla. Stat (2) (c) and (5) (b) 4 and and , F.A.C. (2) Sufficiency of Petition/Hearing Request: If the General Counsel, on behalf of the School Board, determines that the petition/request for hearing is not legally sufficient or timely, the School Board, through its General Counsel, may deny/dismiss the petition or request for a hearing per Fla. Stat (2)(c). (3) Hearing: If the General Counsel, on behalf of the School Board, determines that the petition/request for hearing is legally sufficient and timely, the procedures within Fla. Stat (8)(b) shall apply for a hearing to be conducted by an administrative law judge assigned by the Division of Administrative Hearings. The hearing shall be conducted within 60 days after receipt of the request for a hearing (unless extensions are mutually agreed to by the parties) and in accordance with Fla. Stat and Chapter 120, F.S. The administrative law judge s recommended order shall be submitted to the School Board. A majority vote by the School Board shall be required to adopt or modify the administrative law judge s recommended order. The School Board shall issue a final order. (4) Final Order: The final order shall state the specific reasons for the School Board s decision. The School Board shall provide its final order to the School s governing board and the Department of Education no later than ten (10) calendar days after its issuance. The School s governing board may, within 30 calendar days after receiving the School Board s final order, appeal the decision pursuant to Fla. Stat (5) Actions of Governing Board: The decisions by the governing body to request a hearing and/or appeal must be made in a legally advertised AM Palm Beach Maritime Academy High School Contract Page 17 of 74 AM Palm Beach Maritime Academy High School Contract Page 18 of 74 public meeting with a quorum present. Minutes or adopted resolution documenting the action must be submitted to the Sponsor with the request for a DOAH hearing and be made available for public inspection. c. Duties of Sponsor and School under Pendency of Appeal (1) The School s governing board shall continue to operate the School during the time period prior to a determination to non-renew or terminate the Contract. In that event, all provisions of this Contract shall remain in effect. Absent action by the School Board to the contrary, the School is then closed, subject to negotiation between the Sponsor and the School. (2) Simultaneous with the closure of the School, the School shall follow the procedures set forth below in Section I, D, 3, c (2) and (3) and Section I, D, Ninety (90) Day Termination: a. Grounds for Termination: The Sponsor may choose to terminate the Contract during its Term for any of the reasons: (1) set forth as a reasonable basis for non-renewal in section 1(a)1. above. (2) The School acknowledges that the Sponsor may assert, among other things, that those factors described in section 1(a)2 shall constitute good cause for purposes of a termination of this Charter by the Sponsor for other good cause shown. Notwithstanding, the foregoing acknowledgment by the School shall not be deemed a waiver of any due process rights of the School, nor does the acknowledgment by the School constitute an agreement that such factors shall have occurred or would constitute good cause for termination of this Charter. b. School s Opportunity to Cure. The Sponsor may assert that noncompliance with any term and condition of this Charter may constitute good cause for termination or non-renewal of this Charter. In the event of such noncompliance by the School, the Sponsor or its designee will give a written notice to the School stating such deficiencies, and provide the School with a reasonable opportunity to cure the alleged non-compliance except for an emergency situation or grounds for immediate termination. Nothing in this Section is intended to waive the School s due process rights related to the ninety (90) days notice of termination (except for immediate termination) as provided for by Florida law, which shall occur subsequent to the written notice and opportunity to cure afforded the School by this Section. c. Process for Ninety-day Termination: (1) Notice; Petition: At least ninety (90) days prior to termination of the Contract, the Superintendent or designee shall notify the Chair of the School s governing board in writing. The notice shall state in reasonable detail the grounds for the proposed termination and stipulate that the School s governing body may, within 14 calendar days after receiving the notice, request a hearing by filing a legally sufficient written request with the School Board s Clerk. The petition must be legally sufficient and timely under the terms and provisions of Fla. Stat (2)(c) and (5)(b) 4 and and , F.A.C. (2) Sufficiency of Petition/Hearing Request; Final Order; Appeal: The remaining process is the same as for non-renewal as set forth above in Section I, D, 1, (b)(2)-(5), entitled Process for Non-Renewal. c. Duties of Sponsor and School under Pendency of Appeal: (1) The School s governing board shall continue to operate the School during the pendency of any appeal pursued by the School. In that event, all provisions of this Contract shall remain in effect. (2) Simultaneous with the closure of the School, the School shall follow the procedures set forth below in Section I, D, 3, c (2) and (3), and Section I, D, Immediate Termination: a. Notice of Planned Immediate Termination: (1) Health, Welfare and Safety of Students: This Contract may be terminated immediately if the Sponsor determines and sets forth in writing the particular facts and circumstances indicating there is good cause to believe that an immediate and serious danger to the health, safety, or welfare of the School s students exists. The Sponsor s determination may be made at any public meeting of the Sponsor. (2) Notification to School and State: The Sponsor shall notify the School s governing board, the School principal, and the Florida Department of Education. The Sponsor shall clearly identify the specific issues that resulted in the immediate termination and provide evidence of prior notification of issues resulting in the immediate termination when appropriate. b. Hearing Process: (1) Appeal: The School s governing board may, within ten (10) calendar days after receiving written notice from the Sponsor of its decision to terminate the Contract, pursuant to the procedure in Fla. Stat (8) (d), file a petition or request for hearing by filing the request with the Clerk of the Sponsor. The petition must be legally sufficient and timely as stated above within Section I, D, (2)(b)(1) of this Charter and the provisions of Fla. Stat (2)(c) and (5)(b) 4 and and , F.A.C. (2) Procedures; Time Period for Hearing; Final Order: The procedures set forth above in Section I, D (1)(b)(2-5) of this Charter apply to hearings following immediate terminations of charters under Fla. Stat (8)(d). This hearing will be conducted after the immediate termination occurs and the requested hearing must be expedited and the final order must be issued within sixty (60) days after the date of request. (3) Action of Governing Body: The decisions by the governing body to request a hearing and/or appeal must be made in a legally advertised public meeting of the governing board with a quorum present. Minutes or adopted resolution documenting the action must be submitted to the AM Palm Beach Maritime Academy High School Contract Page 19 of 74 AM Palm Beach Maritime Academy High School Contract Page 20 of 74 G-22

139 Sponsor with the request for a DOAH hearing and be made available for public inspection. c. District Operation of the School Pending Appeal: (1) Sponsor s Duties: Pursuant to Fla. Stat (8)(d), the Sponsor shall assume operation of the School throughout the pendency of the hearing under Fla. Stat (8), paragraphs (b) and (c), unless the continued operation of the School would materially threaten the health, safety, or welfare of the students. (2) School Access and Documentation Responsibilities: The School shall immediately give to the Sponsor all keys to the School s facilities, all security-system access codes and access codes for all computers in the School s facilities, all student, educational, and administrative records of the School, access to the School s bank accounts and public funds, storage facilities, all records, information, receipts, and documentation for all expenditures of public funds, including but not limited to, Federal grants such as Title I and charter school grants, and all public property. Any violation of this provision shall relieve the Sponsor of its duty to operate the School. (3) Removal of Funds or Property: The School shall not remove any funds or property purchased with either public or private funds until the Sponsor has a reasonable opportunity to determine whether the funds are public or private and whether the property was purchased with public or private funds. Under no circumstances shall the School remove any property or funds prior to the Sponsor s decision to immediately terminate. Any violation of this provision shall relieve the Sponsor of its duty to operate the School. (4) Disbursement of Funds: The Sponsor shall only disburse School funds in order to pay the normal expenses of the School as they accrue in the ordinary course of School business. The School is not required to use its own funding resources to operate the School. (5) Employees of the School: The School s instructional and operational employees may continue working in the School during the time that the Sponsor operates the School, at the Sponsor s option, but will not be considered employees of the Sponsor; any existing employment contracts that any School personnel may be with the School may not be assumed or transferred to the Sponsor or any entity created by the Sponsor during the assumption of operations of the School by the Sponsor or that entity, unless the Sponsor or its entity agree otherwise. The Sponsor reserves the right to take any appropriate personnel action regarding the School s employees. 4. Post-Termination Provisions: a. Financial and Operational Records Upon Termination or Expiration School Responsibilities: When a charter is not renewed or is terminated, pursuant to Fla. Stat (8) (e), the School shall be dissolved under the provision of law under which the School was organized. Copies of all administrative, operational, and financial records of the School shall be provided to the Sponsor on the date the termination/non-renewal takes effect. b. Student Records upon Termination or Expiration School Responsibilities: If the Contract is not renewed or is terminated, student records of the School shall be provided to the Sponsor on or before the date the termination/non-renewal takes effect. c. Property/Assets -- School Furniture, Fixtures, Equipment, and Funds: Any property, improvements, furnishings, and equipment purchased with public funds shall automatically revert and be peaceably delivered to the Sponsor (subject to any lawful liens and encumbrances). If the School s accounting records fail to clearly establish whether a particular asset was purchased with public funds or non-public funds, then it shall be presumed public funds were used and ownership of the asset shall automatically revert to the Sponsor. Property and assets purchased with public funds shall be defined as those goods purchased with grants and funds provided by a governmental entity. Funds provided by the School and used by an Education Service Provider/management company to purchase property and assets for the School are considered public funds. The School agrees that, in the event any public funds received by the School from or through the Sponsor are used to purchase or improve real property that any unencumbered funds and all equipment and property purchased with public education funds reverts to the ownership of the Sponsor upon termination or nonrenewal of this agreement. The reversion of such equipment, property, and furnishings shall focus on recoverable assets, but not on intangible or irrecoverable cost such as rental or leasing fees, normal maintenance, and limited renovations. If particular assets are attached to or incorporated in real or personal property of the Sponsor, however funded or whether approved by the Sponsor, which cannot be removed from the Sponsor s property without damage to the Sponsor s property, they shall become the property of the Sponsor. In such event, the Sponsor shall not have any obligation to reimburse or pay the School, its governing board, the vendor or donor of the property or anyone else, for such improvement, attachment or incorporated item and the School shall ensure that all contracts entered into by the School must contain written notice of such. d. Debts upon Non-Renewal or Termination [pursuant to statute] School Debt: The School shall be responsible for all debts of the School. The Sponsor may not assume the debt from any contracted services made between the governing body of the School, the Management Company, and/or third parties. e. Leases upon Non-Renewal or Termination: In the event that this Charter has expired or is terminated or non-renewed by the Sponsor, any and all leases existing between the Sponsor and the School shall be automatically cancelled. The School agrees that for any lease obtained by the School with any third party lessor shall use its best efforts to include a provision that will grant the Sponsor a right of first refusal to obtain the lease. In no event shall the Sponsor be responsible under any theory prior to the effective date of such assignment of a AM Palm Beach Maritime Academy High School Contract Page 21 of 74 AM Palm Beach Maritime Academy High School Contract Page 22 of 74 lease for any debts or obligations of the School incurred prior to such assignment, including but not limited to, all attorney s fees and costs incurred by the thirdparty lessor associated with the consummation of the assignment. f. Assets upon Non-Renewal or Termination: (1) See Section I, D, 4, c, above. (2) Unencumbered Funds: In the event the School ceased operations or is dissolved, or this Contract is not renewed or is otherwise terminated, any unencumbered public funds revert to the Sponsor per the provisions within Fla. Stat (8) (e). Upon the Sponsor s request, unencumbered public funds from the School, any improvements, furnishings, and equipment purchased with public funds, or financial or other records pertaining to the School, in the possession of any person, entity, or holding company other than the School, shall be held in trust until any appeal status is resolved. g. Final Audit: During the fiscal year in which termination or non-renewal occurs, the School shall maintain in its reserves sufficient funds necessary to cover the expenses for a final financial audit of the School. 5. School Election to Terminate or Non-renew: If the School elects to terminate or non-renew the Charter, it shall provide reasonable prior notice of the election to the Sponsor indicating the final date of operation. All post-termination provisions stated above apply. SECTION II: ACADEMIC ACCOUNTABILITY A. Student Performance: Assessment and Evaluation 1. Initial Year: a. Expected Outcomes: The educational goals and objectives for improving student achievement, including how much academic improvement students are expected to show each year, how student s progress and performance will be evaluated and the specific results to be attained are described in Section 5 of the Application: Student Performance, Assessment, and Evaluation, of Appendix A. b. Methods of Measurement: The methods used to identify the educational strengths and needs of students, and the educational goals and performance standards are those specified in the School s approved Application. c. Assessments: All School personnel involved with any aspect of the testing process must have knowledge of and abide by State and Sponsor policies, procedures, and standards regarding test administration, test security, test audits, and reporting of test results. The Sponsor shall provide to applicable School staff all services/support activities that are routinely provided to the Sponsor s staff regarding implementation of District and State-required assessment activities, e.g., procedures for test administration, staff training, dissemination, and collection of materials, monitoring, scoring, analysis, and summary reporting. The School shall designate a testing coordinator whose duties include training school staff such as proctors and school administrators relating to testing protocols and activities. The School shall permit the Sponsor to monitor and/or proctor all aspects of the School s test administration, and the School s testing coordinator shall attend all of the Sponsor s training sessions for the State- required assessments. The Sponsor, however, is not obligated to monitor and/or proctor. The Sponsor shall report to the Florida Department of Education any failure of the School to meet the established performance measures contained in this Charter. The School shall provide reasonable technological infrastructure to support all required online test administration. (1) State-required Assessments: Students shall participate in all State assessment programs. The School shall facilitate required alternate assessments and comply with State reporting procedures. (2) Additional Assessments: Students shall participate in all District assessment programs in which the District s students in comparable grades/schools participate and any other assessments as described in Section 5 of the Application: Student Performance, Assessment, and Evaluation. 2. Annual: a. School Improvement Plan: (1) Minimum Components of School Improvement Plan: (a) Timely Provision of SIP to Sponsor: The School will timely provide the Sponsor a School Improvement Plan (SIP) that is based on the goals and objectives required by Federal or State law or as stated within the Application (Appendix A) and complies with the guidelines provided by the Sponsor by the date due established by the State and/or Sponsor. The School Improvement Plan shall contain the School s measurable objectives for the subsequent school year. (b) Mutual Agreement Regarding SIP: The School agrees to the baseline standard of achievement, the outcomes to be achieved, and the methods of measurement that have been mutually agreed upon in the SIP. (c ) When SIP Required; SIP Criteria: A charter school earning a grade of D of F, pursuant to Fla. Stat (2), shall submit to the Sponsor its School Improvement Plan that meets the criteria as set forth in Fla. Stat (9)(n). The Plan must be aligned to Differentiated Accountability ("DA") and is prepared to raise student achievement. Upon approval by the Sponsor, the charter school shall implement the plan. The Sponsor shall have the authority to monitor the School's implementation of any school improvement plan during the following school year. The Sponsor may also consider any action recommended by the Florida Board of Education as part of any school improvement plan. (2) Deadline for Governing Board Approval: The governing board of the School shall review and approve the SIP prior to its submission. Comment [DH2]: Bruce, the client would like this to read reasonable instead of adequate due to challenges with the District s own system. It doesn t want to be held to a higher standard than the District. AM Palm Beach Maritime Academy High School Contract Page 23 of 74 AM Palm Beach Maritime Academy High School Contract Page 24 of 74 G-23

140 Minutes documenting SIP approval must be taken and made available for public inspection. (3) Monitoring: (a) Plan Developed and Monitored by Board: The School s governing board shall develop and monitor the implementation of the School Improvement Plan. Schools which fall under the State of Florida Differentiated Accountability Plan will comply with all requirements as they relate to the School Improvement Plan. The School will maintain, and have available for review, a textbook or digital textbook inventory for core courses which shall include title, date of adoption cycle, and number of texts available and in use. In accordance with Fla. Stat (9) (n), the Sponsor shall monitor the SIP for charter school earning a grade of D or F. b. Corrective Action: If the School earns three consecutive grades of D, two consecutive grades of D followed by a grade of F, or two nonconsecutive grades of F within a 3-year period, the School s governing board shall take corrective action as provided by and subject to the provisions in Fla. Stat (9) (n) and 6A , F.A.C. Per Fla. Stat (n)1, the director and a representative of the governing board of the School that has earned a grade of D or F pursuant to Fla. Stat (2) shall appear before the Sponsor to present information concerning each contract component having noted deficiencies. c. Assessments: Students shall participate in assessment programs as described in Section 5e of the Application: Student Performance, Assessment, and Evaluation. If an IEP for a student with disabilities or an EP for a student who participates in programs for the gifted, indicates accommodations or an alternate assessment for participation in a State assessment, the School will facilitate the accommodations or alternate assessment and comply with State reporting procedures. All School personnel involved with any aspect of the testing process must have knowledge of and abide by State and Sponsor policies, procedures, and standards regarding test administration, test security, test audits, and reporting of test results. The School shall designate a testing coordinator whose duties include training school staff such as proctors and school administrators relating to testing protocols and activities. Each designated test coordinator and administrator for the School shall hold current a Florida teacher certification. The Sponsor shall provide to applicable School staff all services/support activities that are routinely provided to the Sponsor s staff regarding implementation of District and Staterequired assessment activities, e.g., procedures for test administration, staff training, dissemination and collection of materials, monitoring, scoring, analysis, and summary reporting. The School shall permit the Sponsor to monitor and/or proctor all aspects of the School s test administration, and the School s testing coordinator shall attend all of the Sponsor s training sessions for the State- required Assessments. The Sponsor, however, is not obligated to monitor and/or proctor. The Sponsor shall report to the Florida Department of Education any failure of the School to meet the established performance measures contained in this Charter. In addition to evaluating the School s success in achieving the objectives stated in the School Improvement Plan, the School shall meet the State s student performance requirements as delineated in State Board of Education Rule 6A , Implementation of Florida s System of School Improvement and Accountability, based on Fla. Stat , , and This accountability criterion shall be based upon the assessment systems of the School, the Sponsor, and the State. The School shall use records and grade procedures that adequately provide the information required by the Sponsor. The grading and recording system used by the School must comply with the State s reporting guidelines and be approved by the Sponsor. If the School chooses to use an application other than the system in use by the Sponsor, it will be responsible for data entry directly for both daily attendance and all academic grades. Schools not uploading will be required to have a documented procedure in place for communicating attendance and grades to the data entry clerk, prior to the opening of schools. Schools that opt to use an alternative grade book system will be required to provide some form of prior year electronic audit trail. No IT support will be provided for schools that do not use the District s designated system. If applicable, the School shall provide each student with a current State adopted textbook or other current instructional materials in each core course, including but not limited to, mathematics, language arts, science, social studies, reading, and literature, pursuant to Fla. Stat (2)(a). These materials must be provided within the first 2 years of the effective date of the State s textbook adoption cycle. The School will maintain, and have available for review, a current textbook or digital textbook inventory for core courses which shall include title, date of adoption cycle, and number of texts available and in use. (1) State-required Assessments: Students at the School shall participate in all State assessment programs. The School shall facilitate required alternate assessments and comply with State reporting procedures. Including for the first year, the School will bear the costs associated with the provision of an appropriate facility/environment for testing. This facility/environment will AM Palm Beach Maritime Academy High School Contract Page 25 of 74 AM Palm Beach Maritime Academy High School Contract Page 26 of 74 need to be equipped with the technology to administer secure online assessments. (2) Additional Assessments: Students shall participate in all District assessment programs in which the District s students in comparable grades/schools participate and any other assessments as described in Section 5 of the Application: Student Performance, Assessment, and Evaluation. The School shall be responsible for all costs associated with assessments not mandated by the State or the Sponsor, or covered by Federal funding, such as Title I and IDEA. B. Student Promotion: 1. School Promotion Policy: The School will follow the student promotion policy consistent with the Section 5 of its approved Application unless otherwise agreed upon by both parties. The School may not implement any exemptions that are not approved by the Sponsor. 2. Report Cards: The School shall follow the Sponsor s report card distribution calendar. A copy of the School s report card shall be provided to the Sponsor in accordance the Opening and Annual Checklist, Appendix H. 3. Other Assessment Tools as Stated in Approved Application: In addition to those assessment tools identified in this Charter and in the Schools governing rules, the School will utilize all other assessment tools specified in the School s approved Application (Appendix A). 4. Accreditation: Secondary schools shall notify parents and students in writing in the student enrollment form, the Parent/Student Handbook, and the parent/student contract, if any, of the School s accreditation status and the implications of non-accreditation. This notification must also be displayed on the School s website. 5. Graduation: The School's policy for determining that a student has satisfied the requirements for graduation shall be consistent with the provisions of the Application, and Florida Law. C. Data Access and Use Pursuant to Statute: 1. Access to Facilities, Records, and Data: a. The School shall allow the Sponsor reasonable access to its and its ESP s facilities and records to review data sources, including collection and recording procedures, in order to assist the Sponsor in making a valid determination about the degree to which student performance requirements have been met as stated in the Contract, and required by Fla. Stat and The School agrees to allow, upon reasonable notice, the Sponsor s personnel and/or contractors to observe the School s operations to assess student performance. b. See also Section VIII, D below. 2. Sponsor Use of Required Assessment Data: The Sponsor shall use results from the State and District required assessment programs referenced in this Charter, the data elements included in the annual report, and any other information acquired by the Sponsor to provide the State Board of Education and Commissioner of Education the analysis and comparison of the School s student performance. 3. Acceptable Use Policy: All School employees and students are bound by all of the Sponsor s computer policies and standards regarding data privacy and system security. The School shall not access any of the Sponsor s student information unless and until the student enrolls in the School. SECTION III: STUDENTS A. Eligible Students: 1. The School shall be open to any student residing in Palm Beach County and to students in other districts with which inter-district agreements exist. The School agrees that it shall not violate the antidiscrimination provisions of Fla. Stat [ The Florida Educational Equity Act ] or any other State or Federal antidiscrimination law relating to student admissions, benefits or participation in any programs, services or activities. The School agrees to meet its obligations under Federal law, including in its registration and enrollment of students, to the extent the policies are consistent with the Agreement between the United States of America and the School District of Palm Beach County dated February 26, 2013 (the Resolution Agreement), attached and incorporated hereto as Appendix D. To the extent the School fails to meet its legal obligations under the Resolution Agreement, the Sponsor shall make efforts to work collaboratively with the School to remedy such deficiencies. Applicants to the School must be able to participate in all aspects of the School s curriculum, as set forth its approved Application, and must therefore meet the School s eligibility criteria which includes, but shall not be limited to, the following: Be independent in the areas of personal hygiene and toileting Possess the ability, physically or with adaptive equipment, to move from one location to another without staff assistance or supervision Possess the ability, physically or with adaptive equipment, to feed oneself independently Function independently without one-on-one supervision Demonstrate appropriate transitions during program hours Possess ability to adhere to the Sponsor s and School s codes of conduct Demonstrate satisfactory school attendance, including punctuality. B. Grades Served: 9-12 grades. C. Class Size: The School shall comply with class size restrictions as required by law. The School shall promptly reimburse the Sponsor for any penalties incurred by the Sponsor as a result of the School s non-compliance. D. Annual Projected Enrollment [deadline for submission to Sponsor]: The School may give enrollment preference to student populations as allowed by Fla. Stat (10)(d) and as specifically referenced in its approved Application. The School shall also serve as a feeder school for school for related charter school, Palm Beach Maritime Academy K-8, and it may give enrollment preferences to students advancing to the School from such charter school. AM Palm Beach Maritime Academy High School Contract Page 27 of 74 AM Palm Beach Maritime Academy High School Contract Page 28 of 74 G-24

141 1. Student Enrollment: The following is the student enrollment breakdown by year, as approved in the Application, Section 2B (Target Population and Student Body- Enrollment Projections), of Appendix A. a. Year 1: Grades 9 to 10th -- up to 808 students. b. Year 2: Grades 9 to 11th -- up to 1350 students. c. Year 3: Grades 9 to 12th -- up to 1850 students. d. Year 4: Grades 9 to 12th -- up to 2125 students. e. Year 5: Grades 9 to 12th -- up to 2125 students. If the School will be enrolling students beyond the above projected enrollment, the School shall provide notice to the Sponsor. For any year of this Charter, the School may provide a revised budget to demonstrate its ability to accommodate a number of students above the projected number of students set forth above, up to the maximum capacity of 2125 students. Disagreement between the School and the Sponsor relating to enrollment capacity will be resolved using the dispute resolution provisions in this Contract. As per Section Florida Statutes, a State designated high-performing charter school may increase its student enrollment once per school year by up to 15 percent more than the capacity identified in the Contract and expand grade levels to add grade levels not already served if any annual enrollment increase resulting from grade level expansion is within the limits established above. A high-performing charter school shall notify the Sponsor in writing if it intends to increase enrollment or expand grade levels the following year. The written notice shall specify the amount of the enrollment increase and the grade levels that will be added, as applicable. 2. Minimum Enrollment Requirements: The School s minimum enrollment for the first year of operation is 650. The parties agree that this is the minimum enrollment that will support the School s operations. A budget to support this minimum enrollment is provided in Section 19 (Action Plan) of the Application, Appendix A. If the School fails to meet the minimum enrollment set forth above, it will provide the Sponsor a revised budget within 30 days. 3. Deferred Opening and Student Enrollment: In the event the School defers opening, for good cause shown, the student enrollment breakdown in Paragraph 1 above will be adjusted to reflect the cancellation of the first year and the last Year 5 of this Contract will reflect the maximum capacity permitted. The last year of the term of the Contract, stated above in Section I, B, 2, does not change. 4. Required Instructional Minutes: Instructional minutes shall be a minimum of 300 minutes daily/1500 minutes weekly or in accordance with Florida Education Finance Program ( FEFP). 5. Enrollment Capacity: The enrollment capacity is contingent on the student capacity as stated on the valid Certificate of Occupancy (CO), Certificate of Use (CU), and/or Fire Permit for the School facility issued by the local governmental agency in whose jurisdiction the facility is located. Monthly FTE payments are limited to the maximum projected student enrollment, as listed in Paragraph 1 above for the school year. E. Annual Capacity Determination: Any change in the School s approved maximum school enrollment capacity must be achieved through amendment of this Charter approved by the School and Sponsor. Maximum school enrollment capacity shall not exceed the maximum capacity established by any applicable certificate of occupancy, certificate of use, fire permit, or applicable provision of Article IX, 1, of the Florida Constitution or any other law or rule that is applicable to the School. F. Admissions and Enrollment Plan: The School may give enrollment preferences to student populations as allowed by Fla. Stat (10) (d), as stated within its Application (Appendix A). The School shall implement the enrollment policies and procedures and any lottery process, as described in Section 13C (Student Recruitment and Enrollment Enrollment Policies and Procedures) of the Application, Appendix A. The School will serve students residing within the Palm Beach County School District as well as students covered under an inter-district agreement. The School shall enroll an eligible student who submits a timely application, unless the number of applications exceeds the capacity of a program, class, grade level, or building. All applicants shall be given an equal chance of being admitted through a random selection process. The School shall strive to achieve a racial/ethnic balance reflective of the community it serves or within the racial/ethnic range of other public schools in this School District. 1. Enrollment Procedures: a. The School is subject to compliance with the entry, health examinations, and immunization of Fla. Stat b. The School may not target a student population other than the one approved by the Sponsor. c. Students with disabilities who are enrolled in the School shall be provided programs that fully comply with all the requirements of the Individuals with Disabilities Education Improvement Act (IDEA), Section 504 of the Rehabilitation Act, and any other applicable Federal or State law. The School shall, at its own cost and expense and not that of the Sponsor, ensure that all due process requirements are complied with, shall ensure that there are legally compliant educational assessments of the needs of the students and shall remain liable for full and complete adherence to all such requirements. The School must fund all educational and related services provided to students pursuant to the IEP and will earn funding in accordance with Fla. Stat and/or other sources. Psychological and other appropriate re-evaluations are the responsibility of the School. The School will utilize all of the Sponsor s forms and procedures related to pre-referral activities, referral, evaluation, and re-evaluation for ESE eligibility, IEP development, and placement. The School will schedule and conduct IEP meetings pursuant to 34 CFR for each eligible ESE student enrolled in the School. The School shall ensure that appropriate personnel as defined by the IDEA and implementing regulations are in attendance at IEP meetings. d. The School shall provide ESE services as documented on the IEP. In the case of a parent choosing a charter school that cannot implement the student s IEP as presented, an IEP meeting must be convened upon the ESE student being AM Palm Beach Maritime Academy High School Contract Page 29 of 74 AM Palm Beach Maritime Academy High School Contract Page 30 of 74 accepted in the School. The IEP Team must review/revise the IEP and determine the student s educational needs. The IEP Team must clearly determine whether the student s IEP can be implemented at the School. Under no circumstances may the School discriminate against a student based on disability. e. Least Restrictive Environment: Students with disabilities will be educated in the least restrictive environment and will be segregated only if the nature and severity of the disability is such that the education in regular classes with the use of supplementary aids and services cannot be achieved satisfactorily. As it is the School s goal to place students in an environment where they can best flourish, those students with IEP s whose needs cannot be adequately addressed at the School will be appropriately referred by the IEP committee with a Sponsor s representative present. If a referral for a change of placement is considered, the School s staff will work together with the Sponsor to ensure that the needs of these children are met. School staff, which must include a certified Exceptional Education teacher, will work closely and as early as possible in the planning/development stages with the Sponsor s staff to discuss the needed services, including all related services and programs, of the student with disabilities at the School. Parents of students with disabilities will be afforded in their native language procedural safeguards, which include the areas of notice and consent, independent educational evaluations, confidentiality of student records, due process hearings and surrogate parents. f. Provision of School Information: The School shall provide all pertinent documents and school information to parents/guardians in English, Spanish, and Haitian Creole. g. Enrollment Consent: To enroll a student, the School must obtain proof of consent from the student s parent or guardian, or from the student if the student is eighteen (18) years of age or older. The School may not transfer an enrolled student to another charter school having a separate Master School Identification Number without first obtaining the written approval of the student s parents/guardians or the student who is 18 or older. The School must maintain appropriate enrollment and student application documentation. h. Record of Application and Enrollment: To the extent required by law, the School shall maintain a record of all the students who apply to the School, whether or not they are eventually enrolled. The information shall be made available to the Sponsor upon request. i. Enrollment Lottery and Wait List Documentation: The School shall maintain documentation of each enrollment lottery conducted in accordance with applicable laws, including any student wait lists that are generated in the course of that process. Student wait lists generated and maintained pursuant to law shall be made available to the Sponsor upon request. Lottery documentation shall clearly allow the Sponsor to verify that the random selection process utilized by the School was fair to all applicants. j. Student Information: The School may not request prior to enrollment, through the application or otherwise, information regarding the student s juvenile or disciplinary history or status, a student s Individual Education Plan (IEP) or other information regarding a student s special needs. G. Maintenance of Student Records as Required by Statute 1. Student Education Records: The School shall maintain both active and inactive education records for current/former students in accordance with Fla. Stat , , and and State Board of Education Rule 6A Transfer of Student Education Records: All student education records (both Category A, Permanent Information, and Category B, Temporary Information) of students leaving the School, whether by transfer to a traditional public school within the school system or withdrawal to attend another charter school, shall be transferred upon receipt of an official request from a receiving Palm Beach County public school or a Sponsor s charter school. 3. Maintenance of Student Records upon Termination of Student s Enrollment at the School: Upon termination of a student s enrollment at the School, all education records (both Category A, Permanent Information, and Category B, Temporary Information) of students leaving the School, but not transferring to a Sponsor s public school or charter school, shall be maintained at the School for three (3) years until the records are eligible for purging as allowed by law. 4. Transfer of Permanent Educational Records for Retention: Pursuant to State Board of Education Rule 6A and District procedures, the School shall purge and shred Category B temporary information for students who have transferred, withdrawn or graduated at least three (3) years ago. The School shall transfer Category A permanent information to the Sponsor s Records Management office for retention. This transfer shall occur in accordance with District procedures relating to the schedule and instructions for preparing student records for permanent retention. 5. Transfer of Student Education Records upon School s Termination: Upon termination of the School, all student education records and administrative records shall be transferred within five (5) business days by the School to the Sponsor s Records Management office for processing and maintenance, unless required sooner pursuant to applicable state or federal law. H. Exceptional Student Education 1. Non-Discrimination Policy: The School shall not discriminate against students with disabilities in placement, assessment, identification, and/or admission. Unless the School is specifically for students with disabilities, the School shall not request, through the School s application or otherwise, a student s IEP or other information regarding a student s special needs, nor shall the School access such information prior to the student s acceptance in the School. 2. Sponsor s Responsibilities: a. The Sponsor shall conduct initial psycho-educational evaluations of students referred for potential Special Education, Gifted, and 504 Placement, in accordance with Federal and State mandates. The Sponsor shall be responsible for all costs associated with these evaluations recommended and required under Federal and State mandates. In meeting this obligation, the School may utilize any duly licensed school psychologist. b. A representative of the Sponsor shall be invited to participate in all initial IEP meetings and those IEP meetings where a significant change of services or placement may be considered. The Sponsor retains the right to determine whether AM Palm Beach Maritime Academy High School Contract Page 31 of 74 AM Palm Beach Maritime Academy High School Contract Page 32 of 74 G-25

142 or not to send a representative to such meetings. In all meetings, the School shall appoint a Local Education Agency Representative (LEA Representative). 3. School Responsibilities: a. The School shall be responsible for all costs associated with re-evaluations recommended and required under Federal and State mandates. In meeting this obligation, the School may utilize any duly Florida-licensed school psychologist. The School shall provide ESE students with programs and services implemented in accordance with Federal, State, and local policies and procedures, specifically the IDEA, Section 504 of the Rehabilitation Act of 1973, and Fla. Stat , , (4)(1), and and Chapter 6A-6, F.A.C., relating to ESE students and students with disabilities. b. The School shall deliver all educational, related services and equipment indicated on the student s IEP, EP, or 504 Plan. The School shall also be responsible for providing related services and equipment, e.g., speech/language therapy, occupational therapy, physical therapy, counseling, assessment instruments, assistive technology devices, and therapeutic equipment. c. The School shall conduct the evaluations of the School s students referred for physical therapy (PT) and occupational therapy (OT) and speech and language (SL) services. After the student is determined eligible for these services and the initial IEP or 504 Plan is written, the School shall be responsible for providing required PT, OT, counseling, and SL services to the student and be provided by the School's staff or paid for by the School through a separate contract. The School shall ensure that PT, OT and SL therapists who perform the evaluations attend an IEP meeting to review the evaluations when eligibility for services is determined. The evaluation must include a review of the student s IEP, identification and development of PT, OT and SL goals and/or a treatment plan for the student. The School shall ensure that all therapists review and implement the student s initial IEP. The School shall ensure that all therapists providing services to the student participate in the student s annual and interim IEP meetings either in writing, by telephone, or in person. The School shall require all therapists providing services to the student to attend orientation and in-service training on delivery of school-based services and how to develop goals and benchmarks based upon educational theory. The Sponsor shall provide that orientation and in-service training at Sponsor s cost and expense. The Sponsor may conduct periodic reviews of the paperwork prepared by the OT, PT and SL therapists providing services to such students. The student s IEP goals and benchmarks related to these areas are to be updated by the student s treating therapist. d. The School shall comply with the requirements of the IDEA as it relates to the student s IEP, and the appropriate instructional personnel of the School shall attend all IEP meetings. e. Special Education students shall be educated in a least-restrictive environment as outlined in Section III.F.1.e, above and as provided in Section 6: Exceptional Students, of the approved Application, Appendix A. Students whose needs cannot be adequately addressed at the School as determined by an IEP Team meeting held after acceptance to the School, will be appropriately referred and the School staff will work together with the Sponsor to ensure that the needs of these students are met. g. If the School receives a complaint filed or becomes aware of an investigation with the Office of Civil Rights or any other governmental entity and the complaint or investigation relate to the School and could reasonably involve the Sponsor, the School shall within twenty four (24) hours notify the Sponsor and provide the Sponsor any documentation from the agency. The School shall fully cooperate with the Sponsor during the investigation and proceeding and provide the Sponsor any relevant information. 4. Services Covered by Administrative Fee: The Sponsor shall provide exceptional student education administration services to the School, as stated within Fla. Stat Due Process Hearing: a. A student, parent, or guardian who indicates that they wish to file for a due process hearing pursuant to Federal or State law and applicable rules shall be given the appropriate forms by the School. Any due process hearing shall be conducted in accordance with all applicable laws and regulations. b. Due process hearing requests shall be forwarded to the Sponsor s ESE Director and the District s General Counsel within twenty-four (24) hours of receipt. c. The Sponsor will select and assign an attorney from the Office of General Counsel at no cost to the School. The School may also hire an attorney at its cost to consult and cooperate with the Sponsor. Final decisions on legal strategies shall be made by the Sponsor s attorney. d. In cooperation with the assigned attorney, the School is responsible for scheduling resolution and mediation meetings as required under State and Federal law. e. The Sponsor shall ensure that: (1) the due process hearing is conducted pursuant to applicable State laws and rules; (2) a final decision is reached; and (3) a copy of the decision is mailed to the parties. f. Each party shall be responsible for its own attorneys fees and the costs associated with the administrative due process hearing, legal representation, discovery, court reporter, and interpreter will be split with each party bearing onehalf of such associated costs. In the event that the student, parents, or guardians prevail, either through a hearing or settlement, the School shall pay any and all attorneys fees, reimbursements, compensatory education and any other costs incurred, agreed upon or awarded. In the event the Sponsor determines that any of these costs or fees are owed by the School to the Sponsor, the Sponsor will provide the School with a bill and a calculation of the amounts owed. Within 30 calendar days the School will respond that it either agrees with the Sponsor or does not. If it does agree, the School will pay the Sponsor within 30 calendar days or agree to a payment plan with the Sponsor; otherwise, after 30 calendars days, the costs and fees will be automatically reduced by the Sponsor from the FTE funds passed through the Sponsor to the School, without any penalty of AM Palm Beach Maritime Academy High School Contract Page 33 of 74 AM Palm Beach Maritime Academy High School Contract Page 34 of 74 interest. If the School does not agree with the Sponsor s position, it will submit to the District within those 30 calendars days calculation. If the parties cannot agree on the calculation, the matter will be resolved in accordance with Section XIII (N)(4)(a)(4) of this Charter. If referred to DOAH, the decision of the administrative law judge will be considered final resolution of the matter. If the School does not pay the funds owed within 30 calendar days of agreement of the parties or the administrative law judge s order, then the costs and fees will automatically be reduced by the Sponsor from the FTE funds passed through the Sponsor to the School, without any penalty of interest. I. Student Code of Conduct: The School agrees to maintain a safe learning environment at all times. The School shall adopt a student code of conduct consistent with Section 8 of its approved Application and the Resolution Agreement, and its rule must be consistent with State local and federal law. A copy of the School s code of conduct will be provided in the Opening/Annual Checklist. The School further agrees that it will not engage in the corporal punishment of students. To the extent the School fails to meet its legal obligations under the Resolution Agreement, the Sponsor shall make efforts to work collaboratively with the School to remedy such deficiencies. The School agrees to comply with the Federal Gun Free Schools Act of 1994 and any other applicable State and/or Federal law pertaining to the health, safety and welfare of students. J. Dismissal Policies and Procedures [as described in Application]: 1. Parents/Guardians may withdraw a student from the School at any time. The student will be assigned to his/her area school in accordance with his/her Study Area Code (SAC). 2. Upon the School s decision to implement dismissal, the School shall refer the student to the District for appropriate placement with the District. Dismissal procedures shall be clearly defined in writing, shared with students and parents/guardians and provided to the District in accordance with the Opening Check List. 3. Involuntary Student Withdrawal: a. The School may withdraw a student involuntarily for failure to maintain eligibility standards or for violation of the School s Student Conduct Code, which must also be compliant with the IDEA, Section 504 of the Rehabilitation Act, and the Americans with Disabilities Act (ADA) for students with disabilities. b. The School may refer students to a District-funded alternative education program utilizing the Sponsor s procedures with the participation and approval of the Sponsor s designee. The referral must also be compliant with the IDEA, Section 504 of the Rehabilitation Act, and the Americans with Disabilities Act (ADA) for students with disabilities. (1) Expulsion or Referral to Alternative Education: (a) Only the School Board may expel a student. In the event that a student has been recommended to the School Board for expulsion by the Governing Board of the School, the School is responsible for providing academic and behavioral interventions for the student while awaiting the School Board s decision on the student s expulsion or may refer the student to a District alternative education site with the participation and approval of the Sponsor s designee. (b) If a student has been recommended for expulsion for commission of a serious breach of conduct and the student is withdrawn from the School by a parent/guardian, the student may be denied enrollment in a District school by the Sponsor or may be assigned to an alternative school in accordance with Sponsor s policies. The School may not withdraw or transfer a student involuntarily unless the withdrawal or transfer is accomplished through established procedures in its Code of Student Conduct. (c) If the student s actions lead to a recommendation for assignment to an alternative school or expulsion from the Sponsor s District, the School will cooperate in providing information and testimony needed in any legal proceeding. (d) Students will be assigned to an alternative school only through the process established by the Sponsor s Board Policy. c. Legal Costs: The School shall defend and pay all costs of any legal action related to dismissal of students for disciplinary reasons. Costs and fees incurred will be billed to the School for payment by the Sponsor s designee. Such costs and fees shall be paid within thirty (30) days of the billing date. If the parties cannot agree on such costs and fees, the matter will be resolved in accordance with Section XIII (N) (4) (a) (4) of this Charter. If referred to DOAH, the decision of the administrative law judge will be considered the final resolution of the matter. If the School does not pay the funds owed within 60 calendar days of agreement of the parties or the administrative law judge s order, then the costs and fees will be automatically reduced by the Sponsor from the FTE funds passed through the Sponsor to the School, without any penalty of interest, although the School may request and the parties agree to a payment plan. K. ELL Students: a. The School shall adopt the Sponsor s plan for English Language Learners, which can be found on the Sponsor s website, currently at: as it may from time-totime be amended. Students at the School who are English Language Learners (ELL) will be served by English for Speakers of Other Languages (ESOL) certified personnel. SECTION IV: FINANCIAL ACCOUNTABILITY A. Revenue 1. Basis for Funding: The Sponsor agrees to fund the School in accordance with Fla. Stat as it may from time-to-time be amended. Fla. Stat (17) (b) and , funding shall be the sum of District operating funds from the Florida Education Finance Program (FEFP) as provided in Fla. Stat and the General Appropriations Act, including gross State and local funds, discretionary lottery funds, and non-voted discretionary operating millage funds divided by total District funded weighted full-time equivalent (WFTE) students times the weighted full-time equivalent students of AM Palm Beach Maritime Academy High School Contract Page 35 of 74 AM Palm Beach Maritime Academy High School Contract Page 36 of 74 G-26

143 the School. If eligible, the School shall also receive its proportionate share of categorical program funds included in the FEFP. Upon request, the School shall provide the Sponsor with documentation that categorical funds received by the School were expended for purposes for which the categoricals were established by the Legislature. Total funding for the School shall be recalculated during the year to reflect revised calculations under the FEFP by the State and the actual weighted full-time equivalent students reported by the School during the full-time equivalent student survey periods designated by the Commissioner of Education. Summer School Provision: The School may choose to provide a summer school program using State Supplemental Academic Instruction (SAI) funds. If a student enrolled in the School attends any of the Sponsor s summer school programs, the School shall reimburse the Sponsor for the cost, as determined by the Sponsor, of each student s summer school program. If the School fails to comply with this provision, the Sponsor may deduct the appropriate amount from the School s subsequent FTE payments, without penalty of interest. a. Student Reporting: (1) School s Reporting: The School shall report its student enrollment to the Sponsor in accordance with Fla. Stat and the Sponsor s procedures. The School shall use the Sponsor s electronic data processing software system and procedures for the processing of student enrollment, attendance, FTE collection, assessment information, IEP s, LEP plans, 504 plans, and any other required individual student plan. The Sponsor shall provide the School with appropriate access to the Sponsor s data processing software system. The School shall provide and maintain hardware and related infrastructure. (2) Training by Sponsor: The Sponsor shall provide training for the School s personnel in the use of designated District applications necessary to respond to the statutory requirements of Fla. Stat including the annual report and the State/District required assessment program. The Sponsor s support for this function will be provided at cost and will not exceed the five percent (5%) administrative fee provided in the law. Access by the School to additional data processing applications, materials, or forms not required in the statute, but available through the Sponsor, may be negotiated separately by the parties. (3) Annual School Projection: The School shall project annually, the number of Full-Time Equivalent (FTE) students and the Florida Education Finance Program (FEFP) category that the School will serve each year. The School accepts responsibility for delivery actual FTE for each applicable FTE Survey period in accordance with the Sponsor guidelines for FTE reporting. (4) School Must Maintain Manual and Automated Records: The School shall maintain all manual and/or automated records required to support the earning of each FTE reported. This includes, but is not limited to, all data required by the Florida Department of Education, Auditor General, Special Programs, ESE, Vocational and Basic program audits, and includes the December 1 Child Count Data. (5) Sponsor s Right to Inspect Records: The Sponsor reserves the right to inspect the FTE records of the School and its ESP to ensure compliance with State reporting requirements. The Sponsor may audit FTE and supporting documentation. See also Section VIII, D below. Any discrepancies will be cause for adjustment to subsequent payments. Any loss of funds as a result of actual FTE/Financial or Program audit or findings of the Auditor General is the sole responsibility of the School. Amounts lost, as determined by the Sponsor s Chief Financial Officer or Operating Officer, Sponsor s auditor or Inspector General, Department of Education or findings of the Auditor General, will be automatically deducted, without penalty of interest, from the next payment and any future payments if needed to cover the loss. b. Distribution of Funds Schedule: (1) Number of and Time of Payments by Sponsor: The Sponsor shall calculate and submit twelve (12) monthly payments directly to the School. The first payment will be made by July 15. Subsequent payments will be made no later than the 15th of each month beginning with August 15. (2) Monthly Payment Calculations for First Year: For the first year of this Contract, monthly payments will be calculated as follows: July through November, the estimated FTE for the first period shall be based upon the estimated number of students in membership as determined by the number of student applications submitted to the Sponsor as of July 1 up to the projected enrollment (as readjusted monthly thereafter on the 1 st day of the month until the first FTE Survey) divided by 12 and adjusted retroactively for prior payments. December through March will be based upon actual October FTE survey and projected February FTE revenue, divided by seven (7) and adjusted retroactively for prior payments; and April through June payments will be based on actual October FTE and actual February FTE survey counts divided by three (3) and adjusted retroactively for prior period adjustments. (3) Monthly Payment Calculations for Second and Other Years: For the second year and following years of the Contract, monthly payments will be calculated as follows: July through September will be based on the School s average FTE for the prior fiscal year, divided by twelve (12); October through November will be based on the School s eleventh day count FTE enrollment for the fiscal year divided by nine (9) and adjusted retroactively for prior payments during those months; December through March will be based on Actual October and projected February FTE revenue divided by seven(7) and adjusted retroactively for prior payments; and AM Palm Beach Maritime Academy High School Contract Page 37 of 74 AM Palm Beach Maritime Academy High School Contract Page 38 of 74 April through June will be based on actual October and actual February FTE revenue, divided by three (3) and adjusted retroactively for prior period adjustments. In the event the School increases enrollment by ten percent (10%) or more from one academic year to the next, the Sponsor shall fund the School from July through November based on projected FTE. The School shall supply its projection by April 1 st prior to the fiscal year in which the School will expand its enrollment. (4) Adjustment of Payments: Payments may be adjusted for any amounts due the Sponsor for services provided and/or expenditures incurred on behalf of the School during the current or previous year, as well as for administrative oversight subject to the provisions of this section. In the event the School District determines that any other payments or costs are owed by the School to the Sponsor, the District will provide the School with a bill and a calculation of the amounts owed. Within 30 calendar days the School will respond that it either agrees with the Sponsor or does not. If it does agree, the School will pay the Sponsor within 30 calendar days or agree to a payment plan with the Sponsor; otherwise, after 30 calendar days, the costs and fees will be automatically reduced by the Sponsor from the FTE funds passed through the Sponsor to the School, without any penalty of interest. If the School does not agree with the Sponsor s position, it will submit to the District within those 30 calendar days its calculation. If the parties cannot agree on the calculation, the matter will be resolved in accordance with Section XIII (N) (4) (a) (4) of this Charter. If referred to DOAH, the decision of the administrative law judge will be considered the final resolution of the matter. If the School does not pay the funds owed within 30 calendar days of agreement of the parties or the administrative law judge s order, then the costs and fees will be automatically reduced by the Sponsor from the FTE funds passed through the Sponsor to the School, without any penalty of interest. (5) Adjustment of Payments: Payments shall be made within 10 working days of receipt of FTE funds, in accordance with Fla. Stat. Section (17)(e). Late payments by the Sponsor are subject to interest at the rate of one percent (1%) per month calculated on a daily basis until paid. (6) No Payments in Excess of School s Capacity: Payment shall not be made, without penalty of interest, for students in excess of the School s enrollment capacity and the School facility s valid capacity as determined by the School s Certificate of Occupancy, Certificate of Use, or Fire Permit or in excess of the projected enrollment for the school year (whichever is less). In the event that the required county and/or municipality facility permits do not indicate a facility capacity, the School must submit a letter from the architect of record certifying the capacity of the facility. c. Adjustments: Total funding shall be recalculated during the school year to reflect actual WFTE students reported by the School during the FTE student survey periods. In the event that the Sponsor exceeds the State cap for WFTE for Group 2 programs established by the Legislature, resulting in unfunded WFTE for the District, then the School s funding shall be reduced to reflect its proportional share of any unfunded WFTE. If the School submits data relevant to FTE funding that it is later determined through audit procedures to be inaccurate, the School shall be responsible for any reimbursement to the Sponsor for any errors, omissions, misrepresentations, or inaccurate projections. Should the Sponsor receive notice of an FTE funding adjustment, which it is attributable to error or substantial non-compliance by the School, the Sponsor shall deduct such assessed amount from the next available payment otherwise due to the School, without penalty of interest. In the event that the assessment is charged near the end or after the term of the Charter, no further payments are due and the Sponsor must receive reimbursement within thirty (30) days. d. Millage Levy, if applicable: In accordance with the provisions of Fla. Stat (9) (1), the School agrees that it shall not levy taxes or issue bonds secured by tax revenues. e. Holdback/Proration: In the event of a State holdback or a proration which changes District funding, the School s funding will be adjusted proportionately. The Sponsor will not be responsible for any liabilities incurred by the School in the event of a State holdback. 2. Federal Funding: In any program or service provided by the Sponsor which is funded by Federal or State grants, and for which funds follow the eligible student, the Sponsor agrees, upon adequate documentation from the School, that the same level of service will be provided, to distribute these funds to the School. The School shall receive all federal funding for which is eligible in the timeframe required by Federal law. a. Title I (1) Any Title I funds allocated to the School must be used to supplement the students greatest instructional needs that have been identified by a comprehensive needs assessment of the entire School and shall be spent in accordance with Federal regulations. The academic program funded through Title I shall include Reading, Language Arts, Mathematics, and Science. When determining eligibility for Title I, only students aged 5-17 that meet the Census criteria will be considered. For charter schools participating in any District Food Service Program, eligibility will be based on the percentage of students eligible for free/reduced priced lunch on a date certain. Charter schools not participating in the District Food Service Program will be required to submit District approved income verification data. The District annually determines the minimum required percentage to become a Title I school. (2) The per pupil allocation of Title I funds shall correlate with the District s allocation process for calculating per pupil allocations for all eligible Title I schools for the appropriate budget year. (3) Any furniture, equipment, or technological items purchased with Title I funds classified as Capitalized or Non-Capitalized remains the property of Title I. This property must be identified, labeled, and made readily available for Title I property audits. AM Palm Beach Maritime Academy High School Contract Page 39 of 74 AM Palm Beach Maritime Academy High School Contract Page 40 of 74 G-27

144 (4) If the School accepts Title I funds, activities in the areas of instructional support, parental involvement, and professional development must meet Federal requirement minimums. (5) The District s Title I staff will provide technical assistance and support in order to ensure that Title I guidelines are being followed at the School and that students are meeting high content and performance standards. (6) All documentation, including, but not limited to, Title I School Site Compliance documents, agendas, schedules, minutes, time sheets, receipts, invoices, purchase orders, rosters, etc., must be maintained at the School for a minimum of five years plus the current year as evidence to validate the use of Title I school allocations. If the School closes, all required documentation must be submitted to the District Director or designee of the Title I program. (7) Upon Title I designation, communication will be sent by the District s Director or designee of the Title I program directly to the School s Governing Board Chairperson. The School shall develop a Title I Schoolwide Plan and Budget. Required documents must be completed, approved by the Governing Board Chairperson, and submitted to the District s Director or designee of the Title I program by the required date. Upon approval by District s Director or designee of the Title I program, the reimbursement procedures may begin. (8) If the School is eligible for Title I funds, but does not accept them, they are still accountable for meeting all Title I compliance requirements. b. IDEA: Individuals with Disabilities Education Act (IDEA) funding for services provided to students with disabilities in the School will be provided in the same manner as for the Sponsor s other public schools, including proportional distribution based on relative enrollment of children with disabilities, and at the same time other Federal funds are distributed to the District s other public schools, consistent with the State s charter school law. c. Federal Grants: Federal grants received other than Title I and IDEA are allocated based on eligible students enrolled in the School. Funds or services shall be provided to charter schools in the same manner as is provided to schools operated by the Sponsor. The School may submit applications and secure funding for any Requests for Proposal issued by a Federal, State, or local public agency. If the Sponsor develops a District-wide grant, the School may be included in the District proposal in accordance with the school eligibility requirements and grant guidelines within the Request for Proposals. (1) Sharing of Funds: When grant proposals are developed by the Sponsor s staff using student or school counts that include the School s students, and the grant is awarded to the Sponsor, the pro-rata share of the dollars or services received from that grant shall be distributed to the School, if eligible, as defined in the budget developed for the grant. (2) Grant Reporting: The School shall submit quarterly Project Disbursement Reports for each grant to the Sponsor, supported by appropriate documents, including copies of invoices, timesheets, receipts, etc., to determine that grant funds are used and programs are operated in accordance with applicable Federal and State statutes, rules, and regulations. All grant recipients will also be subject to scheduled site visits to review records and observe operations. d. Other Federal Funds: (1) The Sponsor agrees to support the School in its efforts to secure grants by timely processing and submitting all documentation prepared by the School and necessary for the School s competition for grants and other monetary awards including, but not limited to, the Federal Start-up Grant and the Dissemination Grant. (2) When the funding source requires that the Sponsor serve as the fiscal agent for a grant, the School shall, prior to generating any paperwork to the funding agency, notify the Sponsor in writing of its intent to submit a grant application and attach a copy of the grant application and guidelines. e. Distribution of Federal Funds to School: Pursuant to Fla. Stat (17), unless otherwise mutually agreed to by the School and the Sponsor, and consistent with State and Federal rules and regulations governing the use and disbursement of Federal funds, the Sponsor shall reimburse the School on a monthly basis for all invoices submitted by the School for Federal funds available to the Sponsor for the benefit of the School, the School s students, and the School s students as public school student in the School District. Such Federal funds include, but are not limited to, Title I, Title II, and IDEA funds. To receive timely reimbursement for an invoice, the School must submit the invoice to the Sponsor at least 30 days before the monthly date of reimbursement set by the Sponsor. In order to be reimbursed, any expenditures made by the School must comply with all applicable State rules and Federal regulations, including, but not limited to, the applicable Federal Office of Management and Budget Circulars, the Federal Education Department General Administrative Regulations, and program-specific statutes, rules, and regulations. Such funds may not be made available to the School until a plan is submitted to the Sponsor for approval of the use of the funds in accordance with applicable Federal requirements. The Sponsor has 30 days to review and approve any plan submitted pursuant to this paragraph. 3. Charter School Capital Outlay Funds: a. Application: The School may be eligible for school capital outlay funding as per Fla. Stat (19) and Prior to release for a new charter school of capital outlay funds from the Sponsor to the School, the School must complete the State online capital outlay plan. If the School is non-renewed or terminated, any unencumbered funds and all equipment and property purchased with public funds shall revert to the ownership of the Sponsor as provided for in Fla. Stat (8)(e) and (f). b. Distribution: The Sponsor may make timely and efficient capital outlay payment to the School upon receipt of funds by the State. The Sponsor shall not certify capital outlay plans if it cannot attest to the School s eligibility. AM Palm Beach Maritime Academy High School Contract Page 41 of 74 AM Palm Beach Maritime Academy High School Contract Page 42 of Other Revenue: The School may secure funding from private institutions, corporations, businesses and/or individuals. The School shall notify the Sponsor, in writing, within 30 days of receipt of the funds. B. Sponsor Administrative Fee: 1. Five percent (5%) up to 250 Students: Pursuant to Fla. Stat (20) (a) 2, the administrative fee withheld by the Sponsor shall be five percent (5%) of available funds for the first 250 students, not including capital outlay funds, Federal and State grants, or any other funds, unless explicitly provided by law. 2. Two percent (2%) up to 250 Students for High-Performing Charter Schools: Pursuant to Florida Statutes, for High-Performing charter schools, as defined in Fla. Stat ,the Sponsor shall withhold a total administrative fee of up to 2 percent for enrollment up to and including 250 students per school. 3. Five percent (5%) for Virtual Charter Schools: Pursuant to Florida Statutes, the administrative fee withheld by the Sponsor shall be limited to five percent (5%) of available funds as defined in Fla. Stat (20)(a), not including capital outlay funds, Federal and State grants, or any other funds, unless explicitly provided by law. 4. Five percent (5%) up to 250 Students Un-Weighted ESE: Pursuant to Fla. Stat (20) (a) (2), the administrative fee withheld by the Sponsor shall be five percent (5%) of available funds for the first 250 un- weighted students when 75 percent (75%) or more of the students enrolled are exceptional students as defined in Fla. Stat (3). 5. Capital Outlay Generated through FEFP Funds: If the School has a population of 251 or more students, the difference between the total administrative fee calculation and the amount of the administrative fee withheld may be used for capital outlay purposes specified by law. The Sponsor shall not withhold an administrative fee from capital outlay funds unless explicitly authorized by law. 6. Sponsor Use of Administrative Fee: The administrative fee retained by the Sponsor pursuant to this Contract includes, among other things, a fee for academic and financial monitoring required of the Sponsor by law. At any time, the Sponsor may request reports on school operations and student performance and the School shall provide the reports in a timely manner. Any reports requested by Sponsor shall be subject to applicable laws. 7. Access to Optional Sponsor Services: Access by the School to services not required by law, but available through the Sponsor, may be negotiated separately by the parties. The Sponsor is not obligated to provide any services not required by law. 8. Provision of School Lunches: a. School Food Services: The provision of student food service at the School is the sole responsibility of the School and shall be provided according to applicable District, State and Federal rules and regulations. The School shall be solely responsible for complying with State and Federal reporting requirements. The School shall make lunch available to all students, consistent with the provisions in its approved Application, Section 16 (Food Service), of Appendix A. b. Meal Service Options and Definitions: The School shall provide food service by one of the following methods: (1) Entering into an agreement with the Florida Department of Agriculture and Consumer Services (FDACS), Food, Nutrition and Wellness division, to administer the National School Lunch and National School Breakfast Program at the School; and determine if the meals are to be hot or cold, bulk serving or individually packed. Under this option, the School shall complete and submit reimbursement claims to the FDACS; or (2) Enter into an agreement with a third party vendor to have food service provided either to the site of the School or pick-up, and determine if the meals are to be hot or cold, bulk serving or individually packed. Under this option, the School shall complete and submit reimbursement claims to the FDACS. (3) Enter into a separate agreement with the Sponsor to have food service provided to the School. c. Applicable Regulations: The School shall comply with all USDA and FDACS regulations that are applicable to its child nutrition program along with any District policies relating to the program, including but not limited to the sale of competitive foods and beverages. C. Medicaid School Match Program Participation: Under the Medicaid Certified School Match Program, the School may be eligible to seek reimbursement for certain services provided to Medicaid-eligible students who qualify for services under the IDEA, Part B or C. In order to seek reimbursements, the School shall follow the procedures established by the Agency for Health Care Administration for Medicaid-reimbursable services to eligible students at the School. D. Restriction on Charging Tuition: The School further agrees that it shall not charge any tuition to students enrolled in an FEFP funded program in any grade through twelve (12). E. Allowable Student Fees: 1. Use of Student Fees: The School shall not charge fees, except as allowed by law. Fees collected must be allocated directly to and spent only on the activity or material for which the fee is charged. 2. Fee Schedule: At least thirty (30) days prior to the beginning of each school year, the School shall provide the Sponsor with a comprehensive fee schedule for the school year. 3. Student Fee Documentation: The School shall maintain documentation supporting the collection of the approved fee schedule which will be available for the Sponsor to review. F. Budget 1. Annual Budget: The School shall provide reasonable proof of the ability to fund the initial startup and the on-going operation of the School. By July first of each year, the School s governing board shall provide to the Sponsor an updated annual budget for review, based upon enrollment projections (Appendix C) and, for the initial year of operation, a budget based upon minimum enrollment. Each budget shall include projected sources of revenue, both public and private, and planned expenditures covering the entire school year. AM Palm Beach Maritime Academy High School Contract Page 43 of 74 AM Palm Beach Maritime Academy High School Contract Page 44 of 74 G-28

145 a. Governing Board Approval Required: The School s governing board shall adopt and maintain an annual balanced budget. b. Date to Submit to Sponsor: The School shall annually transmit to the Sponsor a copy of the School s adopted budget on or before July first. If the Sponsor determines that the budget in inadequate, the Sponsor will provide a template for the School to timely complete and submit a budget acceptable to the Sponsor. 2. Amended Budget: The School shall provide a copy of the amended budget to the Sponsor within ten (10) days of its approval by the School s governing board. G. Financial Records, Reports, and Monitoring 1. Maintenance of Financial Records: The School shall use the standard State codification of accounts as contained in the DOE s Financial and Program Cost Accounting and Reporting for Florida Schools (Red Book), as it may be amended by the State, as a means of codifying all transactions pertaining to its operations. The accounting for Federal, State, and local funds shall be maintained according to existing guidelines, mandates, and practices, i.e., separate funds and bank accounts for Federal, State, and local funds as required under applicable statutes. The School s financial activities and reports shall be subject to the Florida Department of Education (DOE) Technical Assistance Paper No , located and incorporated into this Contract at: _TAP.pdf, as well as any subsequently issued directives by the State and other applicable Governmental Accounting Standards. 2. Financial and Program Cost Accounting and Reporting for Florida Schools: The School shall conduct an annual cost accounting in a form and manner consistent with generally accepted governmental accounting standards. The financial statements are to be prepared in accordance with Generally Accepted Accounting Principles using governmental accounting, regardless of corporate structure. 3. Financial Reports a. Monthly Financial Reports (1) The School shall submit monthly financial statements, as required by Fla. Stat (9) (g) and any applicable State Board of Education Rules, based on an accrual basis in the form prescribed by the Sponsor and Department of Education within thirty (30) days of every month s end. Those charter schools designated as High-Performing by the Commissioner of Education shall, as allowed by Florida Statutes, submit quarterly financial statements within thirty (30) days of the end of each quarter. (2) The financial statement reports must be submitted to the Sponsor in accordance to State Board of Education Rule 6A (3) The parties agree that the Sponsor, with ten (10) days notice, may reasonably request, subject to Fla. Stat (5) (b) (1) (j), and the School shall provide, documents on the School s financial operations beyond the monthly reports required by this Charter. Such reports shall be in addition to those required elsewhere in this Charter. The School shall not be in non-compliance for any report date delays if modified by the Sponsor or due to circumstances such as a natural disaster that is beyond the control of both parties. (4) Submission Process: The School shall submit all required financial statements to the Sponsor in the timeline and format prescribed by the Sponsor and/or State. b. Annual Property Inventory: The School shall submit to the Sponsor a cumulative listing of all capitalized property purchased with public and private funds, with the annual audited financial statements. The list shall include: (1) date of purchase; (2) item purchased; (3) cost of item; (4) tag number for tangible personal property; (5) estimated useful life; (6) date annual inventory was performed for tangible personal property; (7) funding source including whether funding was from public or private funds and specific funding used for example FEFP, capital outlay, Title I, IDEA, private grant, etc.; and (8) item location. c. Program Cost Report: The School shall provide to the Sponsor program cost report information by July 31 in the State-required format for inclusion in Sponsor s reporting in compliance with Fla. Stat and State Board of Education Rule 6A d. Annual Financial Audit: (1) An annual financial audit, required by Fla. Stat , requested and paid for by the School, shall be performed by a licensed Certified Public Accountant. The School shall use auditor selection procedures when selecting an auditor to conduct the annual financial audit pursuant to the processes described in Fla. Stat and , which includes, but is not limited to: the establishment of an audit committee and request for proposal (RFP) for audit services, public advertisement of RFP, and development of evaluation and selection criteria. The School may review the Florida Department of Education Technical Assistance Paper, No (Auditor Selection Process), located at: ditor_selection_tap.pdf. The audit shall be performed in accordance with Generally Accepted Auditing Standards; Government Auditing Standards, issued by the Comptroller General of the United States; U.S. Office of Management and Budget (OMB) Circular A-133, and Chapter , Rules of the Auditor General, State of Florida. The School shall provide the Sponsor with four (4) paper copies and one (1) electronic copy of the audit and the School s responses to the findings (response to Management letter), which shall be bound together in one complete report. In addition, two copies of the audit report (one must be electronic) must be submitted to the Auditor General within forty-five (45) days after delivery of the audit report to the School s governing body. The School shall provide the Sponsor with annual financial reports including a management letter, as of June 30 of each year for inclusion in the Sponsor s financial statements. These AM Palm Beach Maritime Academy High School Contract Page 45 of 74 AM Palm Beach Maritime Academy High School Contract Page 46 of 74 reports shall include a complete set of annual financial statements and accompanying notes, prepared in accordance with Generally Accepted Accounting principles and reflecting the revenue sources and expenditures by function and object in sufficient detail to allow for the Sponsor s analysis of the School s ability to meet financial obligations and timely repay debt. In addition, if the School is not part of a pre-existing nonprofit organization or municipality, the School s financial activities shall be accounted for using the governmental accounting model applicable for State and local governments and their component units, as per Government Accounting Standards Board (GASB) statement 34. The following timeline must be adhered to for submitting the School s financial reports: UNAUDITED STATEMENTS: NO LATER THAN AUGUST 1 OF EACH YEAR. AUDITED STATEMENTS: NO LATER THAN SEPTEMBER 30 OF EACH YEAR. No later than May 1 of each year, the School shall formally notify the Sponsor of the name, address, and phone number of the auditor engaged to perform the year-end audit and documentation of the auditor s current peer review. (2) Additional Monitoring: The Sponsor reserves the right to perform additional audits and investigations at its expense as part of the Sponsor s financial monitoring responsibilities as it deems necessary to ensure fiscal accountability and sound financial management. The School shall be responsible for reimbursement of any unauthorized or misappropriated funds. The Sponsor s School Police may accompany District officials in executing the Sponsor s monitoring responsibilities and other official business relating to this Charter. e. Form 990 (if applicable): The School will annually provide the Sponsor a copy of its Form 990, Return of Organization Exempt from Income Tax, and all schedules and attachments filed with the IRS by January 31. If the IRS does not require Form 990 to be filed, the School will provide the Sponsor with written confirmation from the IRS of such non-requirement. 4. School s Fiscal Year: The Schools fiscal year shall be from July 1 through June Financial Recovery and Corrective Action Plan as required by statute and State Board of Education Rule: If the School is found to be in a state of deteriorating financial condition or meets one or more of the conditions delineated in Fla. Stat , Determination of Financial Emergency, the School s governing board and the Sponsor shall develop a corrective action plan and file the plan with the Commissioner of Education within thirty (30) business days after notification is received in accordance with Fla. Stat If the governing board and the Sponsor are unable to agree on a corrective action plan, the Commissioner of Education shall determine the components of the plan. The governing board shall implement such plan. H. Financial Management of Schools [as described in Application] 1. Financial Management and Oversight Responsibilities: The School shall implement the financial management and oversight procedures, controls, and methods as described in Section 18 of Application: Financial Management and Oversight. 2. Accounting Contract: The School shall obtain the services of a qualified accountant to assist is compiling and maintaining financial records, reconciling bank statements, preparing financial reports, and obtaining an annual audit. On or before July 1 of each fiscal year, the School shall provide to the Sponsor a copy of the contract for such services. If the accountant is an employee of the School, a memorandum stating that fact along with a copy of the accountant s resume shall be forwarded to the Sponsor upon hiring. In addition, a qualified accountant shall have adequate experience in Governmental Accounting and not-for-profit and a representative of the School shall attend any financial training offered by the Sponsor. 3. Disbursement Authorization: All disbursements, above an established and approved threshold, of the School must contain two authorized signatures. The governing board must review and approve disbursement reports as least once a month. No check may be payable to either of the signatories. The School may establish a threshold amount for those checks that may contain one signature. The threshold must be included in the School s Bylaws and Accounting Reporting Policies and Procedures. 4. Accounting Policies and Procedures: The School shall include all Accounting Policies, Procedures, and Practices for maintaining complete records of all receipts and expenditures in its required submission pursuant to the Opening and Annual Checklist, Appendix H hereto. A copy of these policies must be available to the Sponsor during any additional audit or Mid-Year Reviews performed by the Sponsor. 5. Reading Plan Allocations: If the School does not comply with the core reading plan requirements specified in this Contract, the funds that would have been allocated to the School by the State and/or Sponsor for reading, shall remain with the Sponsor to serve low performing schools pursuant to the CRRP Guidelines. 6. Additional Financial Requirements: The Sponsor may require the School to comply with additional financial requirements mandated by the Florida Department of Education. 7. Utilization of the Sponsor: The School shall not suggest or represent to third parties, including, but not limited to, vendors, creditors, other business entities, or their representative, governmental entities, or other individuals, that the Sponsor will guarantee payment for any purchases made or debts incurred by the School, nor shall the School represent that the Sponsor will guarantee payment for any loans secured by the School, or that the Sponsor will lend its good faith and credit in order for the School to obtain a loan or other forms of credit. 8. Bank Transfer Information: The School shall submit a bank information form which will provide all necessary information for the School s bank account where payments from the Sponsor will be deposited. The bank account must be in the same legal name of the School, and the bank information form must be signed by the active governing board chair of the School. The Sponsor shall not send payments to a trust account or to any bank account other than one held and controlled by the School I. Description of Internal Audit Procedure: The School shall implement the financial controls and audit procedure described in the School s governing laws and rules, the provisions AM Palm Beach Maritime Academy High School Contract Page 47 of 74 AM Palm Beach Maritime Academy High School Contract Page 48 of 74 G-29

146 of this Contract, and the School s approved Application, as described in Section 18 of the Application: Financial Management and Oversight. SECTION V: FACILITIES A. Prior Notification [if facility is not secured at time of contract] 1. Deadline to Secure Facility: The School shall provide the Sponsor with documentation regarding the School s property interest (owner or lessee) in the property and facility where the School will operate and/or utilize facilities. If the School does not own the property and facility, the School shall provide a fully executed lease at least thirty (30) calendar days before the initial opening day of classes. For leased properties, the School shall obtain from the landlord, and provide to the Sponsor, an affidavit indicating the method by which the landlord is complying with the requirements of Fla. Stat regarding charter school exemption from ad valorem taxes. 2. Deadline to Submit Zoning Approvals and Certificate of Occupancy: a. The School will present proof of the appropriate facility certification (including all certificates that are required by applicable building codes) to the Sponsor no later than August 1 prior to the first year of operations, except to the extent a later date is permitted by law. If the School does not have the appropriate certifications by the required date prior to the first year of operation or the initial opening day of classes in a different facility, the School may defer opening for good cause shown by one year or delay opening of for the current year, provided the School will meet the required hours of instruction in accordance with Florida law. b. The School shall annually obtain for any owned or leased facility used to house the School, all permanent and temporary licenses, permits, use approval, facility certification, a fully executed lease, and any other approvals required by the local government or any other governmental bodies having jurisdiction at least fifteen (15) calendar days prior to the opening day of classes (although the time period is different for the opening year as stated above). In the event the School is unable to meet these requirements prior to the School s scheduled opening, the School shall at its option either (1) delay opening for the current year (provided the School will meet the required hours of instruction under Florida law); or (2) defer opening by one year if this was to be the first year of operation. If these options are not exercised, the Charter may be voluntarily terminated by the School. 3. District Inspection of Facility a. The School shall deliver to the Sponsor copies of any and all facility inspections performed at any time by local governments or any other governmental bodies having jurisdiction within fourteen (14) calendar days of the date of the inspection. Subsequent written proof of compliance with any violations arising from such inspections shall also be delivered to the Sponsor in a timely manner. b. The Sponsor may inspect the School facilities with reasonable notice at any time during the school year to ensure compliance with all applicable State laws, and building and zoning requirements. B. Compliance with Building and Zoning Requirements 1. Florida Building Code: Pursuant to Fla. Stat (18)(a), the School shall utilize facilities that comply with the Florida Building Code, pursuant to Chapter 553, except for State Requirements for Educational Facilities (SREF). However, if the School is located on School District property, its facilities must comply with SREF. The agency having jurisdiction for inspection of a facility and issuance of a certificate of occupancy shall be the local municipality or, if in an unincorporated area, the county governing authority. 2. Florida Fire Prevention Code: The School s facilities shall comply with the Florida Fire Prevention Code, pursuant to Chapter 633, F.S. 3. Applicable Laws, Ordinances, and Codes of Federal, State, and Local Governance: a. The School shall comply with all applicable laws, ordinances, and codes of Federal, State, and local governance, including the IDEA, the ADA, and Section 504 of the Rehabilitation Act. The School shall obtain all necessary licenses, permits, zoning, use approval, facility certification, and other approvals required for use and continued occupancy of the facility as required by the local government or other governmental agencies, and copies shall be provided to the Sponsor. b. The School s operation shall be subject to necessary local government approvals including site plan approval pursuant to Fla. Stat and if applicable, review of traffic studies/analysis. The School must also notify the local government of the need for traffic control and safety devices or the existence of hazardous conditions as per Fla. Stat (4) or (5) to ensure safe access to children/pedestrians walking to the School and may be required by the local government to construct sidewalks adjacent to the School s site. Zoning or other land use development orders approving the School use, if issued by the local government entity having jurisdiction over the area where the School property is located, shall satisfy the review requirements of Fla. Stat c. Subject to applicable exemptions, the School shall be responsible for all costs for, or associated with, complying with local ordinances, securing licenses, permits, zoning, use approval, facility certification, and other approvals, including, but not limited to, application fees, advertising costs, surveyor costs, plan review fees, permit costs and licensing costs, traffic analyses/studies, and any other additional charges or surcharges by the local government or other governmental agencies. d. At all times, the School shall display valid and current certificates required by building and fire enforcement authorities, health and sanitation enforcement authorities and all other applicable enforcement agencies. e. The School shall maintain valid licenses, permits, use approval, facility certification, and any other approvals as required by the local government or any other governmental bodies having jurisdiction at any time during the term of this Contract. f. Maintenance: The School shall ensure that its facilities are maintained in such a condition to protect the health and safety of the occupants. This includes, but is not limited to custodial services, sanitation, lawn care, electrical systems, AM Palm Beach Maritime Academy High School Contract Page 49 of 74 AM Palm Beach Maritime Academy High School Contract Page 50 of 74 plumbing systems, mechanical systems, indoor air quality, thermal comfort, fire alarm, communications systems and pest control. 4. Capacity of Facilities: a. The School shall not allow the enrollment at any time to exceed the number of students permitted by zoning capacity, certificates of use and/or occupancy, applicable laws and regulations for the facilities. The School may share facilities with other entity, so long as at no time will the combined total enrollment of all of the entities sharing any such facility exceeds the certificate of occupancy and or certificate of use capacities of the facility. b. Any change to the official capacity must be reported, in writing, to the Sponsor with appropriate supporting documentation, within thirty (30) days of change. C. Location 1. School s Street Address with Folio Number, if identified: a. The location of the School will be provided by the School to the Sponsor no later than July 15 of the year the School opens. If the location is not yet identified, the School has indicated that approval of the Charter by the School Board is necessary for it to raise working funds. b. Leased Facilities: If the School operates in leased facilities, the lease shall be for the term of this Contract, or in lieu thereof, the School shall present a lease with a plan to ensure a facility for the duration of the Contract. The lease shall be signed by a properly authorized member of the governing board, or its designee, as documented in corresponding properly attested official governing board meeting minutes and/or bylaws and provided to the Sponsor at the time the lease is submitted. In compliance with Fla. Stat , the School shall obtain from the landlord and provide to the Sponsor an affidavit from the owner of the leased property certifying that the property is exempt from ad valorem taxes and documenting how the School shall receive full benefit of the exemption. In compliance with Fla. Stat , the School shall obtain from the landlord and provide to the Sponsor an affidavit from the owner of the leased property which shall include the required disclosure information. 2. Temporary Facility, if applicable: The School will be housed at a temporary facility located at from to. Thereafter, the School will be located at the address indicated in Paragraph V, C, 1.a. above. 3. Relocation: a. The School may change or add facilities or locations at any time during the term of this Contract by providing at least thirty (30) days written notice to the Sponsor of the change or addition. The School shall provide the Sponsor with all appropriate approvals and inspections as were provided for the original facility. b. Emergencies: In unforeseen circumstances or emergencies, if the facility is damaged or unable to safely house students/personnel, the School must notify the Sponsor immediately and secure an alternative location to minimize interruption in instruction. The alternative location shall be subject to all facility requirements indicated in Section V of this Contract. c. If the School moves out of a facility that is shared with another charter school having a separate Master School Identification Number, the School must provide for an audit of all equipment, educational materials and supplies, curriculum materials, and other items purchased or developed with Federal charter school program grant funds, and such items must be transferred to the School s new location. The audit report must be submitted to the Department of Education within sixty (60) days after completion. 4. Additional Campuses, if applicable: The School may expand to additional campuses within Palm Beach County, including co-location with other schools, subject to the same requirements stated above for relocation, including notice, inspection and facility requirements. D. Prohibition to Affix Religious or Partisan Political Symbols, Statues, Artifacts on or about the Facility: The School shall not display any religious or partisan political symbols, statues, artifacts, etc., on or about the property and facilities where the School will operate. E. Additions, Changes, and Renovations: The School must provide notice and documentation of compliance with applicable State, County, or Municipal, code provisions relating to facility use prior to making additions changes or renovations to the facilities described in the original proposal. Documentation of compliance must be provided prior to use of the facility for student activities. F. Disaster Preparedness Plan: The School shall adopt a Disaster Preparedness Plan and send a copy of the plan to the Sponsor. SECTION VI: TRANSPORTATION A. Cooperation Between Sponsor and School: The School shall provide transportation to the School s students consistent with the requirements of Part I. E. of Chapter 1006, F.S. and Federal law, although it is anticipated that many parents will make private arrangements to transport student to the School or that some students will choose to drive themselves (subject to any policies developed by the School which would limit student parking by grade level or need). Any brochure, flyers or other multi-media and telecommunications information furnished/published by the School shall communicate that the School will provide transportation and the manner in which it will be made available to the School's students. The School shall provide transportation for students with disabilities enrolled in the School if required by the student s IEP or 504 Plan. The School may provide transportation through an agreement or contract with a private provider or parents. The School may contract with the Sponsor for student transportation services. Upon request by the School, the Sponsor shall provide transportation to the School s preschool students consistent with the requirements of Part I.E. of Chapter 1006, F.S. and Federal law. If transportation is contracted with the Sponsor, the Sponsor reserves the right to set the arrival and departure times for students as well as the fees for the costs to transport the students. In the event the Sponsor determines that any of these costs or fees are owed by the School to the Sponsor, the Sponsor will provide the School with a bill and a calculation of the amounts owed. Within 30 calendar days the School will respond that it either agrees with the Sponsor or does not. If it does agree, the School will pay the Sponsor within 30 calendar days or agree to a AM Palm Beach Maritime Academy High School Contract Page 51 of 74 AM Palm Beach Maritime Academy High School Contract Page 52 of 74 G-30

147 payment plan with the Sponsor; otherwise, after 30 calendar days, the costs and fees will be automatically reduced by the Sponsor from the FTE funds passed through the Sponsor to the School, without any penalty of interest. If the School does not agree with the Sponsor s position, it will submit to the District within those 30 calendar days its calculation. If the parties cannot agree on the calculation, the matter will be submitted to DOE for mediation. The mediator s conclusions will be considered the final resolution of the matter. If the School does not pay the funds owed within 30 calendar days of agreement of the parties or the mediator s conclusion, then the costs and fees will be automatically reduced by the Sponsor from the FTE funds passed through the Sponsor to the School, without any penalty of interest B. Reasonable Distance: The School shall ensure that transportation is not a barrier to equal access for all students residing within a reasonable distance of the School, which shall be in accordance with the rules of State Board of Education Rule 6A C. School Shall Demonstrate Compliance with all Applicable Transportation Safety Requirements: The School may contract with a Sponsor-approved private transportation firm. If using an approved private firm, the School must submit to the Sponsor the firm s name and a copy of the final transportation plan and contract and the proper documentation that the private provider has complied with all applicable Federal and State certifications and that all bus drivers and vehicles have been properly certified. This information must be submitted by the School to the Sponsor at least ten (10) working days prior to the opening day of classes. The School will provide the Sponsor, via the Transportation Services Department, an updated list each quarter of all School bus drivers providing commercial driver's license numbers, current license status and license expiration dates. The School must comply with all applicable transportation safety requirements, which include, but are not limited to, those mandated in 6A F.A.C. D. Fees: The School may not charge a fee for transportation to which the student is entitled pursuant to State law. Furthermore, the School shall promptly reimburse the Sponsor for any penalties incurred by the Sponsor as a result of the School's non-compliance with any local, state or Federal rule or regulation concerning school transportation as provided within this Section VI. If the School submits data relevant to FTE funding for transportation that is later determined through the audit procedure to be inaccurate, the School shall be responsible for any reimbursement to the Sponsor and/or State arising as a result of any errors or omissions, misrepresentations or inaccurate projections for which the School is responsible. If the Sponsor s Chief Financial Officer or Operating Officer, Sponsor s auditor or Inspector General, Department of Education or the Auditor General find that any transportation FTE funds were improperly paid to the School, the District will provide the information and calculation to the School. The School will have 30 calendar days to respond and absent an agreement, agreed modification or payment in full, the original amount determined to be owed will be automatically deducted, without penalty of interest, from the next payment and any future payments if needed to cover the loss and the method of future payments may be adjusted. SECTION VII: INSURANCE AND INDEMNIFICATION A. Indemnification of Sponsor by School: The Sponsor recognizes that F.S. section (12)(h) provides: For purposes of tort liability, the governing body and employees of a charter school shall be governed by Fla. Stat Consistent with that provision, nothing contained in this Charter is intended to serve as a waiver of sovereign immunity of any rights or limits to liability provided by Fla. Stat to the governing body or employees of the School. However, the School, to the extent immunity may be waived pursuant to Fla. Stat , agrees to indemnify, defend with competent counsel, and hold the Sponsor, its members, officers, and agents, harmless from any and all claims, actions, costs, expenses, damages, and liabilities, including reasonable attorney s fees, arising out of, connected with, or resulting from: (a) the negligence intentional wrongful act, misconduct or culpability of the School or the School s employees, contractors, subcontractors, or other agents in connection with and arising out of their services within the scope of this Contract; (b) the School s material breach of this Contract or violation of applicable Federal or State law; (c) any failure by the School to correct deficiencies found in casualty, safety, sanitation, and fire safety inspection; (d) the failure of the School s officers, directors, or employees to comply with any laws, statutes, ordinances, or regulations of any governmental authority or subdivision that apply to the operation of the School or the providing of educational services set forth in this Charter. However, the School shall not be obligated to indemnify the Sponsor against claims, damages, expenses, or liabilities to the extent these may result from the negligence of the Sponsor, its members, officers, or employees; (e) any professional errors or omissions, or claims of errors or omissions, by the School employees, agents, or by the School s governing body; or (f) any failure by the School to pay its employees, contractors, suppliers, subcontractors or any other creditors. 1. Indemnification for Professional Liability: The duty to indemnify for professional liability as insured by the School Leaders Errors and Omissions Liability Policy described in this Contract will continue in full force and effect notwithstanding the expiration or early termination of this Contract with respect to any claims based on facts or conditions which occurred prior to termination. In no way shall the School Leader s Errors and Omissions Liability Policy s three (3) year limitation on post termination claims of professional liability impair the Sponsor s claims to indemnification with respect to a claim for which the School is insured or for which the School should have been insured under Commercial General Liability Insurance. 2. Indemnity for Certain Specified Claims: The School shall also indemnify, defend and protect and hold the Sponsor harmless against all claims and actions brought against the Sponsor by reason of any actual or alleged infringement of patent or other proprietary rights in any material, process, software, machine or appliance used by the School, any failure of School to comply with provisions of the Individuals with Disabilities Education Act (IDEA), including failure to provide a Free Appropriate Public Education (FAPE) to an enrolled student AM Palm Beach Maritime Academy High School Contract Page 53 of 74 AM Palm Beach Maritime Academy High School Contract Page 54 of 74 or failure to furnish services provided for in a student's individual education plan, and any violation by School of the state's public records or open meetings laws. B. Indemnification of School by Sponsor: Nothing contained in this Charter is intended to serve as a waiver of sovereign immunity of any rights or limits to liability provided by Fla. Stat To the extent permitted by law under Fla. Stat , To the extent immunity may have been waived pursuant to Fla. Stat , Sponsor agrees to indemnify, defend with competent counsel, and hold the School, its members, officers and agents, harmless from any and all claims, actions, costs, expenses, damages and liabilities, including reasonable attorney s fees, arising out of or connected with or resulting from: (a) the negligence intentional wrongful act misconduct or culpability of the Sponsor and/or its employees, agents, and representatives in connection with and arising out of their services within the scope of this Contract. (b) disciplinary action or the termination of a Sponsor employee; (c) the debts accrued by Sponsor and/or non-payment of same; or (d) The Sponsor s material breach of this Contract or violation of law; (e) any failure by Sponsor to pay its suppliers or any subcontractors. (f) the failure of the Sponsor s officers, directors, or employees to comply with any laws, statutes, ordinances, or regulations of any governmental authority or subdivision that apply to the operation of the School or the providing of educational services set forth in this Charter. However, the Sponsor shall not be obligated to indemnify the School against claims, damages, expenses, or liabilities to the extent these may result from the negligence of the School, the School s governing body members, officers, employees, subcontractors, or others acting on the School s behalf; or (g) any professional errors or omissions, or claims of errors or omissions, by the Sponsor s employees or School Board members. C. General Indemnification Provisions. 1. Limitation on Indemnification. Neither party shall not be obligated to indemnify the other against claims, damages, expenses, or liabilities to the extent these may result from the negligence of the other party, its directors, officers, employees, and subcontractors. 2. Notification of Third-Party Claim, Demand, or Other Action: Each party shall notify the other party of the existence of any third-party claim, demand or other action giving rise to a claim for indemnification under this provision (a third-party claim ) and shall give each other a reasonable opportunity to defend the same at its own expense and with its own counsel, provided that each party shall at all times have the right to participate in such defense at its own expense. If, within a reasonable amount of time after receipt of notice of a third-party claim, the notified shall fail to undertake to defend, the other party shall have the right, but not the obligation, to defend and to compromise or settle (exercising reasonable business judgment) the third-party claim for the account and at the risk and expense of the notified party, for which the notified party agrees to assume. Each party shall make available to the other, at their expense, such information and assistance as the other shall request in connection with the defense of a third-party claim. This provision is subject to the indemnity rights as stated within this Section VII of the Charter. 3. Survival: The indemnity obligations of each party under this provision and elsewhere in the Contract shall survive the expiration or termination of this Contract. D. Sovereign Immunity Nothing in this Charter is intended to serve as a waiver of sovereign immunity of any rights or limits to liability provided by Fla. Stat E. Acceptable Insurers 1. Acceptable Insurance Providers: Insurance providers must be authorized by subsisting certificates of authority by the Department of Financial Services of the State of Florida, or an eligible surplus lines insurer, or a Florida Public Entity Insurance Pool or Trust under Florida Statutes. In addition, the insurer or re-insurer must have a Best s Rating of A or better and a Financial Size Category of III or better, according to the latest edition of Best s Key Rating Guide, published by A.M. Best Company. 2. Insurance Provider Compliance: If, during this period when and insurer is providing the insurance as required by this Contract, an insurer fails to comply with the foregoing minimum requirements, as soon as the School has knowledge of any such failure the School shall immediately notify the Sponsor and promptly replace the insurance with insurance provided by another insurer meeting the requirements. Such replacement insurance coverage must be obtained within twenty (20) days of cancellation or lapse of coverage. 3. Minimum Insurance Requirements: Without limiting any of the other obligations or liabilities of the School, the School shall, at the School s sole expense, procure, maintain, and keep in force the amounts and types of insurance conforming to the minimum requirements set forth in this Contract. Except as otherwise specified in this Contract, the insurance shall commence prior to the commencement of the opening of the School and shall be maintained in force, without interruption, until this Contract is terminated. F. Commercial and General Liability Insurance 1. Liabilities Required: School s insurance shall cover the School for those sources of liability (including without limitation, coverage for operations, Products/Completed Operations, independent contractors, and liability contractually assumed) which would be covered by the latest occurrence form edition of the standard Commercial General Liability Coverage Form (ISO Form CG 00 01), as filed for use in the State of Florida by the Insurance Services Office. In addition, the School s insurance shall cover Sexual and Physical Abuse & Molestation ($100,000/$300,000). 2. Minimum Limits: The minimum limits to be maintained by the School (inclusive of any amounts provided by an umbrella or excess policy) shall be $1 million per occurrence/$3 million annual aggregate (inclusive of up to $1 million for the annual aggregate provided by an umbrella or excess policy) for Commercial and General Liability insurance. 3. Deductible/Retention: Except with respect to coverage for Property Damage Liability, the Commercial General Liability coverage shall apply on a first-dollar basis without application of any deductible or self-insured retention. 4. Occurrence/Claims: The coverage for Property Damage Liability may be subject to a maximum deductible of $1,000 per occurrence. AM Palm Beach Maritime Academy High School Contract Page 55 of 74 AM Palm Beach Maritime Academy High School Contract Page 56 of 74 G-31

148 5. Additional Insureds: The School shall include the Sponsor and its members, officers, and employees as Additional Insureds on the required Commercial General Liability Insurance. The coverage afforded such Additional Insureds shall be no more restrictive than that which would be afforded by adding the Sponsor as an Additional Insured using the latest Additional Insured Owners, Lessees, or Contractors (Form B) Endorsement (ISO Form CG 20 10). The certificate of insurance shall be clearly marked to reflect The Sponsor (The School Board of Palm Beach County, Florida), its members, officers, employees, and agents as Additional Insured. G. Automobile Liability Insurance 1. Liabilities Covered: The School s insurance shall cover the School for those sources of liability which would be covered by Section II of the latest occurrence edition of the standard Business Auto Policy (ISO Form CA 00 01), including coverage for liability contractually assumed, as filed for use in the State of Florida by the Insurance Services Office. Coverage shall be included on all owned, un-owned, and hired autos used in connection with this Contract. 2. Occurrence/Claims: Subject to reasonable commercial availability, coverage shall be on an occurrence basis. If on a claims-made basis, the School shall maintain, without interruption, the Automobile Liability Insurance until four (4) years after termination of this Charter. 3. Minimum Limits: The minimum limits to be maintained by the School (inclusive of any amounts provided by an umbrella or excess policy) shall be $1 million per occurrence, and if subject to an annual aggregate, $3 million annual aggregate. 4. Additional Insured: The School shall include the Sponsor and its members, officers, employees, and agents as Additional Insureds on the required Liability Insurance. The Certificate of Insurance shall be clearly marked to reflect The School Board of Palm Beach County, its members, officers, employees, and agents as Additional Insureds [reference Additional Insured form number]. H. Workers Compensation/Employers Liability Insurance 1. Coverages: The School s insurance shall cover the School (and to the extent its subcontractors and its sub-subcontractors are not otherwise insured) for those sources of liability which would be covered by the latest edition of the standard Workers Compensation Policy, as filed for use in Florida by the National Council on Compensation Insurance, without restrictive endorsements. In addition to coverage for the Florida Workers Compensation Act, where appropriate, coverage is to be included for the Federal Employers Liability Act and any other applicable Federal or State law. 2. Minimum Limits: Subject to the restrictions found in the standard Workers Compensation Policy, there shall be no maximum limit on the amount of coverage for liability imposed by the Florida Workers Compensation Act or any other coverage customarily insured under Part One of the standard Workers Compensation Policy. The minimum amount of coverage for those coverages customarily insured under Part Two of the standard Workers Compensation Policy shall be: EL Each Accident: $500,000; EL Disease-Policy Limit: $500,000; EL Disease-Each Employee: $500,000. I. School Leader s Errors and Omissions Liability Insurance 1. Form of Coverage: The School shall provide School Leader s Errors and Omissions Liability Insurance and it shall be on a form acceptable to the Sponsor and shall cover the School for those sources of liability typically insured by School Leader s Error and Omissions Liability Insurance, arising out of the rendering or failure to render professional services in the performance of this Contract, including all provisions of indemnification, which are part of this Contract. 2. Coverage Limits: The minimum limits to be maintained by the School inclusive of any amounts provided by an umbrella or excess policy, shall be $1 million per claim/annual aggregate. 3. Occurrence/Claims: The insurance shall be subject to a maximum deductible not to exceed $25,000 per claim. If the insurance is on a claims-made basis, the School shall maintain, without interruption, the Professional Liability Insurance until three (3) years after termination of this Contract. 4. Fidelity Bond/Crime Coverage: The School shall purchase Employees Dishonesty/Crime Insurance for all Governing Board members and employees, including Faithful Performance of duty coverage for the School s administrators/principal and Governing Board with an insurance carrier authorized to do business in the State of Florida and coverage shall be in the amount of no less than one million ($500,000) dollars per loss /five hundred thousand ($500,000) dollars annual aggregate. J. Property Insurance 1. Structure Requirements: If the School is the owner and/or has a mortgage on the School site location, the School shall furnish on a form acceptable to the Sponsor, Property Insurance for the Building which is to include the structure as described in this Contract, including permanently installed fixtures, machinery and equipment, outdoor fixtures, and personal property to service the premises. If the Building is under construction, the School shall provide evidence of property insurance for the additions under construction and alterations, repairs, including materials, equipment, supplies, and temporary structures within 100 feet of the premises. 2. Additional Requirements: In addition, the School shall provide evidence of business personal property coverage to include furniture, fixtures, equipment, and machinery used in the School. 3. Business Personal Property Insurance: If the School leases the site location, then the School shall provide on a form acceptable to the Sponsor no later than thirty (30) calendar days prior to the opening of School, evidence of business personal property insurance, to include furniture, fixtures, equipment, and machinery used in the School. K. Applicable to All Coverages 1. Other Coverages: The insurance provided by the School shall apply on a primary basis and any other insurance or self-insurance maintained by the Sponsor or its members, officers, employees, or agents, shall be in excess of the insurance provided by or on behalf of the School. AM Palm Beach Maritime Academy High School Contract Page 57 of 74 AM Palm Beach Maritime Academy High School Contract Page 58 of Deductibles/Retention: Except as otherwise specified, the insurance maintained by the School shall apply on a first-dollar basis without application of deductible or selfinsurance retention. 3. Liability and Remedies: Compliance with the insurance requirements of this Contract shall not limit the liability of the School, its subcontractors, its sub-subcontractors, its employees or its agents to the Sponsor or others. Any remedy provided to the Sponsor or its members, officers, employees, or agents by the insurance shall be in addition to and not in lieu of any other remedy available under the Contract or otherwise. 4. Subcontractors: The School shall require its subcontractors and its subsubcontractors to maintain any and all insurance required by law. 5. Provisions(s) for Cure (90 days): The School shall cure any non-compliance within Article VII of the Charter. If required by Florida law, the Sponsor shall allow the School ninety (90) days to cure any non-compliance from the date when the non-compliance occurred, unless otherwise required by law. SECTION VIII: GOVERNANCE A. Public or Private Employer: 1. The parties to this Contract agree that the School shall select its own employees. The School shall be a private employer. Teachers and other staff on approved charter school leave from the Sponsor will be considered employees of the School and will not be covered by the contract between the Palm Beach County Classroom Teachers Association ( CTA ) and the School Board. B. Governing Board Responsibilities [pursuant to statute]: 1. Non-Profit Status: The School Operator shall organize and be operated by a stand-alone Florida non-membership nonprofit corporation, pursuant to Fla. Stat. Chapter 617 at all times throughout the term of this Contract. A limited liability corporation does not qualify as a non-profit organization for purposes of this Contract. If the School has been granted tax-exempt status, the School shall provide the Sponsor with a copy of correspondence from the Internal Revenue Service (IRS) granting tax-exempt status as a Section 501(c)(3) organization. The School s obligations regarding Form 990, Return of Organization Exempt from Income Tax, are set forth above in Section IV, G 3, e. Notwithstanding anything set forth in this Contract, the Sponsor does not covenant to extend or pledge its own tax-exempt status in any way for the use and benefit of the School. 2. Organizational Plan: This School shall implement the organizational plan as described in the approved Application. As stated in the By-Laws and the Articles of Incorporation, the Corporation shall be non-membership organization, and a board of directors shall manage its activities and affairs. Voting shall control the Corporation, and only directors shall vote. The officers may, from time to time, consist of a president, a vice-president, a treasurer, and a secretary. The Corporation s board of directors shall, according to its by-laws, initially select the governing board of the School. Members of the board of directors may serve on the governing board. 3. School Operations: The School s governing board shall be solely responsible for the operation of the School and exercise continuing oversight over the School s operations. The School s governing board will define and refine policies regarding educational philosophy, and oversee assessment and accountability procedures to assure that the School s student performance standards are met or exceeded. 4. Accountability: The School s governing board will be held accountable to its students, parents/guardians, and the community at large, through a continuous cycle of planning, evaluation, and reporting as required by law. 5. School Policy and Decision Making: The School s governing board, in consultation with School staff, shall be responsible for all policy decision-making of the School, including creating/adjusting the curriculum and developing and adopting an annual budget. 6. School Fiscal Agent: The governing board shall be the fiscal agent for the School and shall be involved from the inception in administrative functions, pursuant to such rules and policies as are developed by the governing board consistent with the standards for other public schools. 7. Parental Involvement Facilitator: The School s governing board must appoint a representative to facilitate parental involvement. The facilitator must provide access to information, assist parents and others with questions and concerns, and resolve disputes. The representative must reside within the geographical boundaries of the School District. The representative may be: a governing board member, School employee, or individual contracted to represent the governing board. If the governing board oversees multiple charter schools in this School District, the governing board must appoint a separate individual representative for each charter school in the District. The representative s contact information must be provided annually in writing to parents and posted prominently on the School s website. The Sponsor may not require that governing board members reside in this School District if the School complies with this paragraph. 8. Eligible Members of the Governing Body: Per Fla. Stat (26) (c), an employee of the charter school, or his or her spouse, or an employee of a charter management organization, or his or her spouse, may not be a member of the governing board of the charter school. 9. Governing Board Compensation: No member of the School s governing board shall receive compensation, directly or indirectly, from the School s operations, including but not limited to grant funds. 10. School/Parent Contract: The School agrees to submit any Parent Contracts, including amendments thereto, to the Sponsor. The School shall not use the Parent Contract to discriminate, involuntarily withdraw in violation of law, or create a financial burden or any other barrier to enrollment. At a minimum, communication to parents, including Parent Contracts, shall be provided English, Spanish, and Haitian-Creole, as appropriate. If a School/Parent Contract will be used, the School shall submit a copy of the contract to the Sponsor in accordance with the Opening and Annual Checklist. 11. Governing Board Reporting: The governing board shall periodically report the School s academic progress to all stakeholders as required by Fla. Stat (9) (p), as amended from time to time. 12. Governance Training: The School s governing board members shall participate in charter school governance training, facilitated by the Sponsor or an approved Florida Department of Education vendor, pursuant to State law. AM Palm Beach Maritime Academy High School Contract Page 59 of 74 AM Palm Beach Maritime Academy High School Contract Page 60 of 74 G-32

149 13. Employment of Relatives: The School and its employees shall comply with Fla. Stat (24) and other applicable State law prohibiting the employment of relatives. See Section X, D, 1 below. This Contract makes the following full disclosure of the identity of all relatives employed by the School who are related to the School owner, president, chairperson of the governing board of directors, superintendent, governing board member, principal, assistant principal, or any other person employed by the School who has equivalent decision-making authority per Fla. Stat (7) (a) (18): _ NONE. If the relative is employed after entry into this Contract, this full disclosure is still required by the School to the Sponsor. C. Public Records: The School shall comply with Fla. Stat. Chapter 119 (the Public Records Act) and all other applicable statutes pertaining to public records. D. Reasonable Access to Records by Sponsor: 1. The School shall provide the Sponsor access to public records, at no cost, related to the governing board. 2. The Sponsor s Office of Inspector General shall, upon reasonable notice given, have complete and unrestricted access to all papers, books, records, documents, information, personnel, processes (including meetings), data, computer hard drives, s, instant messages, facilities or other assets owned, borrowed, or used by the Sponsor or the School, which includes information regarding the School, as deemed necessary in performing investigative and/or audit activities and other requested information, including automated or electronic data, pertaining to the business of the School Board and/or School within the School s or its ESP s custody or control. 3. At all times the Sponsor s Office of Inspector General shall have access to any building or facility that is owned, operated or leased by or from the School Board and reasonable access with notice to any building or facility that is owned, operated or leased by the School and/or its ESP. 4. The School and all School employees and vendors as well as its ESP shall furnish the Sponsor s Inspector General with requested information and records within their custody or control for the purposes of conducting an investigation or audit, as well as provide reasonable assistance to the Inspector General in locating assets and obtaining records and documents as needed for an investigation or audit. The School shall be required to obtain from its vendors and its ESP information and documents relevant to the audit or investigation if requested by the Inspector General's office. 5. The Sponsor s Inspector General may also obtain information from the School and its ESP when such information is needed while conducting an audit or investigation. Furthermore, the School understands, acknowledges and agrees to abide by School Board Policy and that the Sponsor s Inspector General will have access to all financial and performance-related records, services, property and equipment purchased in whole or in part with public funds. 6. When investigating or auditing the School, and/or in the event information and response is needed from the School, this step may include meeting with the School and/or its ESP when the investigation or audit is near completion, and the School and its ESP must agree to maintain the confidentiality of any preliminary/draft report and the information contained therein pursuant to Fla. Stat (2) and shall enter into a written confidentiality agreement for the period until the investigation or audit is completed. The School s or its ESP s failure to enter such written confidentiality agreement shall be deemed to constitute the School s and ESP s waiver of the opportunity to respond to the investigation or audit preliminary report, and the investigation or audit shall be completed without their response. 7. The School Board s Inspector General or auditor has the right during an audit or investigation to interview the School's employees, vendors and consultants, make photocopies, and inspect any and all records at reasonable times. The right to initiate an audit or investigation will extend for three years after the completion date of the Agreement. E. Sunshine Law: The School s governing board meetings shall take place locally and in a physical location and facility that is easily accessible to the School s parents, students, and employees, be publicized in advance to the School community and be open to the public pursuant to Fla. Stat (the Sunshine Law): Parents/guardians shall be encouraged to attend. Notification shall be available in languages other than English, where appropriate, e.g., Spanish and Haitian-Creole. Notices of all governing board meetings must be posted at the School and at the location of the meeting. F. Reasonable Notice: 1. Notice of Governing Board Meetings: The governing board shall publish on the School s website a schedule of all governing board meetings for the School year including the date, time, and location of the meetings. By July 15 annually, the School shall provide the Sponsor the annual schedule of governing board meetings. The School shall provide reasonable notice to the Sponsor of any changes or cancellation of scheduled meetings. The Sponsor may post the schedule on the District s website. 2. Governing Board Meeting Requirements: a. The School s governing board must hold at least two public meetings per school year in the School District. The meetings must be noticed, open, and accessible to the public, and attendees must be provided an opportunity to receive information and provide input regarding the School s operations. The appointed parent representative and School principal or director, or his/her equivalent, must be physically present at each meeting. b. For those schools that are in their first year of operation or who have been declared to be in a state of financial emergency, and/or who have earned a School Grade of F or a School Grade of D, the governing board shall meet at least monthly. The governing boards for schools that do not meet any of the above criteria shall meet no less than four times per year. c. Per Fla. Stat (9) (p), the director and a representative of the governing body of a graded charter school that has submitted a school improvement plan or has been placed on probation under Fla. Stat (9) (o) shall appear before School Board at a public meeting at least once a year to present information regarding the corrective strategies that are being implemented by the School pursuant to the school improvement plan. The School Board shall communicate at the meeting, and in writing to the director, the services provided to the School to help the School address its deficiencies. d. If the District or the State concludes that the School has significant financial, governance or academic issues, the director and a representative of the governing AM Palm Beach Maritime Academy High School Contract Page 61 of 74 AM Palm Beach Maritime Academy High School Contract Page 62 of 74 body of the School shall appear before the School Board at a public meeting at least once a year to present information regarding the corrective strategies that are being implemented to address the issues. The School Board shall communicate at the meeting, and in writing to the director, the services and/or recommendations provided to the School to help the School address its deficiencies. G. Identification of Governing Board Members 1. The School shall establish a Charter School Governing Board of at least three members. A minimum of three members must be established prior to the execution of this Agreement and all necessary background checks and documentation must be provided to the Sponsor within thirty (30) days of the execution of this Charter. The current governing board members are: 1. William E. Burckart II 2. Scott Shelley 3. Steve Bowlin None are employees of the Sponsor or the management company of the School. 2. Parent Membership: The School s governing board shall be diverse and if the governing board shall include a parent member with full membership rights such parent member shall be a parent of a student enrolled in the School, and shall possess special skills, talents, and expertise that will support the educational and moral development of the School s students. 3. Governing Board Member Eligibility and Clearance: The School s governing board members shall be fingerprinted by the Sponsor prior to the approval of the School s Contract. Board members appointed to the governing board after the approval of the School s Contract must be fingerprinted within thirty (30) days of their appointment. The cost of fingerprinting shall be borne by the School or the governing board member. H. Changes in Governing Board: Any change in governing board membership must be reported to the Sponsor in accordance with the requirements of applicable law. SECTION IX: EDUCATION SERVICE PROVIDER A. Education Service Provider Agreement 1. The School is contemplating the use of an Education Service Provider/management company, as provided in Section 11 (Education Service Provider) of the Application, Appendix A. To the extent the Application contemplates entering into a contract with an Education Service Provider/management company and a contract has not already been entered to excluding the following, the contract between the School and Education Service Provider/management company shall provide for the following a. The contract between the School and the Education Service Provider/ management company (ESP) shall require that the ESP operate the School in accordance with the terms stipulated in this Contract and all applicable laws, ordinances, rules, and regulations. The contract between the School and the ESP shall allow the School the ability to terminate the contract with the ESP. b. Neither employees of the ESP nor members of the management company s employees families, as defined in Fla. Stat , shall sit on the School s governing board or serve as officers of the Corporation. c. The School Leader shall be employed by the School and evaluated by the School s governing board. The School Leader shall not own, operate, or serve as an officer of the management company that serves the School. d. The contract between the ESP and the School s governing board shall ensure that an arms-length, performance-based relationship exists between the governing board and the ESP. e. The contract between the School and the management company shall require that the management company disclose to the School and the Sponsor, any affiliations with individuals or entities (e.g., lessors, vendors, consultants, etc.) doing business with the School. f. The contract shall obligate the School to pay the ESP a reasonable, specific fee for services. g. The contract will include a clause that if the Sponsor s Inspector General s office is investigating or auditing the School, and/or in the event information and response is needed from the School, the ESP will agree to maintain the confidentiality of any preliminary/draft report and the information contained therein pursuant to Fla. Stat (2) and shall enter into a written confidentiality agreement for the period until the investigation or audit is completed. h. Any default or breach of the terms of this Contract by the management company shall constitute a default or breach by the School under the terms of the Contract between the School and Sponsor. 2. Submission of ESP Agreement: A contract between the (ESP) management company and the School shall be submitted to the Sponsor. 3. Amendments to ESP Contract [timely notice to sponsor]: All proposed amendments to the contract between the management company and the School shall be submitted to the Sponsor for review. A copy of the amended management agreement shall be provided to the Sponsor within five (5) days of execution. 4. ESP Contract Amendments that Result in a Material Change to a Charter Require Contract Modification: If the School and ESP amend their contract in a manner that results in a material change to the Charter, this Contract will require modification through the Contract amendment process. 5. Change of ESP Requires Contract Modification: If the School changes ESP companies, Contract modification is required. SECTION X: HUMAN RESOURCES A. Hiring Practices: The School shall implement the plan, policies, and procedures including how the School will determine whether any potential employees are related to ESP owners or employees or to governing board members, as described in the Section 12 of the approved Application: Human Resources. The School shall hire its own employees, and shall submit to the Sponsor annual written strategies the School will use to recruit, hire, train, and retain qualified staff. AM Palm Beach Maritime Academy High School Contract Page 63 of 74 AM Palm Beach Maritime Academy High School Contract Page 64 of 74 G-33

150 1. Reporting Staffing Changes: The School shall provide the Sponsor with the names and social security numbers of all applicants the School employs. The School shall provide the Sponsor copies of monthly payroll rosters as directed. The payroll rosters shall indicate the payroll period, hire date of employee, the number of days that each individual was paid for, and the daily rate of each salary or the total amount paid to each individual during that period. The parties agree that the School will use the Sponsor s specifically-designed charter school employee management system and procedures for processing staff information, and that the Sponsor shall ensure that any such system required for use by the School shall be running efficiently. 1 The Sponsor shall provide appropriate training to School personnel on the use of the electronic reporting facility and shall provide appropriate and specific feedback to the School regarding use of its system and deficiencies asserted by the Sponsor. 2. Non-Discriminatory Employment Practices: The governing board shall provide equal opportunity in employment, in accordance with Title VII and antidiscrimination rules and policies specifically made applicable to charter schools. The School agrees that its employment practices shall be nonsectarian and that it shall not violate the antidiscrimination provisions of Fla. Stat [ The Florida Educational Equity Act ] or any other State or Federal antidiscrimination law specifically made applicable to charter schools. 3. Teacher Certification and Highly Qualified: All instructional staff, including substitutes and paraprofessionals, employed by or under contract to the School shall be certified as required by Chapter 1012, F.S., and shall meet all requirements for highly qualified instructional personnel as defined by NCLB. The School may employ or contract with skilled selected non-certified personnel to provide instructional services or to assist instructional staff members as education paraprofessionals in the same manner as defined in Chapter 1012, F.S. Staff resumes/biographies shall be available to parents/guardians and community members upon request. The School shall provide continuing professional development programs for its teachers. a. Remedy for Not Meeting Highly Qualified: If the Schools fail to meet applicable requirements to employ certified and highly qualified staff, the School shall be responsible for reimbursement of any funding lost or other costs attributable as a result of the School s non-compliance. (1) The School shall not employ an individual for instructional services if the individual s certification or licensure as an educator is suspended or revoked by this or any other state. The School shall monitor teacher certification and ensure that teachers maintain their certification current at all times. Temporary instructors employed by the School must have a current substitute teaching certificate issued by the Sponsor. 1 The only School employees with access to PeopleSoft are the designated employee(s) at each location that key in the personal Information, job data information, DOE Survey 2,3, & 5 information for the employees at their location. They also add the Fire/Tornado Drill information in the Risk Management pages. Those are the only uses for PeopleSoft currently available to the School, although the Sponsor, at its discretion, could add other uses in the future. (2) The School shall not employ an individual who has resigned in lieu of disciplinary action or who has been dismissed by any school district. 4. Fingerprinting and Background Screening a. Pursuant to Fla. Stat (2)(a), , and , as well as 2005 HB 1877, the Jessica Lunsford Act, as applicable, the School shall fingerprint for Level 2 screening all applicants, for instructional and noninstructional positions, that the School is interested in employing. Additionally, the School agrees that each of its employees, representatives, agents, subcontractors, or suppliers who are permitted access on School grounds when students are present, who have direct contact with students or who have access to or control of School funds must meet Level 2 screening requirements as described in Fla. Stat and b. The Sponsor shall perform the processing of each applicant s fingerprints. The School or the applicant shall bear any and all costs associated with the required fingerprinting and Level 2 background screening. c. The School and its ESP (if the School has contracted with one) shall not hire employees for the School prior to the Sponsor s receipt and review of the fingerprinting and Level 2 background screening results of the School applicants from the Florida Department of Law Enforcement and the Federal Bureau of Investigation. Potential School and ESP employees shall submit official court dispositions for criminal offenses listed as part of their fingerprint results. Upon receipt of clearance through the screening process, the School District will issue the applicant an identification badge. The School District will notify the School of any applicants whose background screening reveals issues relating to disqualification from employment. The School shall not hire applicants whose fingerprint check and Level 2 screening results reveal non-compliance with standards of good moral character. d. The School shall conduct general drug screening on all applicants for instructional and non-instructional positions with the School, including contracted personnel in the manner set forth in School Board Policy 3.96 or Policy 3.961, as applicable. A negative drug screening result shall be a requirement and prerequisite for employment. The cost of drug screening shall be borne by the School or the applicant. B. Teacher Evaluation Requirements: Pursuant to Fla. Stat (16)(b)(7)), the School shall comply with Fla. Stat , relating to the substantive requirements for performance evaluations for instructional personnel. The School shall submit to the Sponsor a copy of its teacher evaluation instrument in accordance with the Opening/Annual Checklist. C. Principal Evaluation Requirements: Pursuant to Fla. Stat (16)(b)(7)), the School shall comply with Fla. Stat , relating to the substantive requirements for performance evaluations for school administrators. The School shall submit to the Sponsor a copy of its principal evaluation instrument in accordance with the Opening/Annual Checklist. D. Employment Practices 1. Statutory Prohibitions and Required Disclosure in Hiring of Relatives of School Founders, Employees, etc.: The School and its employees shall comply with Fla. Stat (24) and other applicable State law prohibiting the employment of relatives which prohibit the appointment, employment, promotion, or advancement, or AM Palm Beach Maritime Academy High School Contract Page 65 of 74 AM Palm Beach Maritime Academy High School Contract Page 66 of 74 the advocacy for appointment, employment, promotion, or advancement in or to a position in the School in which the personnel are serving or over which the personnel exercises jurisdiction or control of an individual who is a relative. 2. Self-Reporting of Arrests: The School shall require all instructional employees who hold Department of Education teaching certificates to self-report within 48 hours to appropriate authorities any arrest and final dispositions of such arrest other than minor traffic violations. 3. Code of Ethics: The School shall require that its instructional and school administrative employees abide by the guidelines set forth in Chapter 6B-1.001, F.A.C., Code of Ethics of the Education Profession in Florida, and Chapter 6B-1.006, F.A.C., Principles of Professional Conduct for the Education Profession in Florida and the code of ethics adopted by the governing board of the School pursuant to Fla. Stat (12) (g) Personnel Policy: The School shall comply with its policy for selecting and employing personnel. Such policy shall be submitted as provided in the Charter School Opening and Annual Checklist, attached hereto as Appendix H. The teachers, support staff, and contractual staff will be directly supervised by the Principal. 5. Collective Bargaining: As they are permitted by law, School employees shall have the option to bargain collectively and may collectively bargain as a separate unit or as part of the existing School District collective bargaining unit as determined by the structure of the School. 6. Immigration Status: The School shall employ only individuals legally authorized to work in the United States pursuant to Federal immigration laws and United States Citizenship and Immigration Services regulations. 7. Employee Discipline: The School shall be responsible for the investigation and discipline of its employees pursuant to its personnel policies as well as State law and rules and any applicable Federal laws. 8. Employee Evaluation: The School shall annually evaluate all instructional employees pursuant to State law. 9. Other Employment Statutes: The School shall comply with the following State employment statutes, to extent applicable to charter schools: a. Fla. Stat (1)(c), relating to compensation and salary schedules; b. Fla. Stat (5), relating to workforce reductions; and c. Fla. Stat , relating to contracts with instructional personnel hired on or after July 1, E. Sponsor Training of School s Employees 1. Participation and Cost for Training Activities a. Participation in Federally Funded Training at No Cost: The Sponsor shall provide Federally funded professional development activities to School employees at no cost to the School. b. Participation in Non-Federally Funded Training at Pro-Rata Cost, on Space Available Basis: The Sponsor shall provide professional development activities to School employees on a space available basis, which the School may participate in at its sole discretion. The School shall pay all additional costs associated with such activities in which it elects to participate, and the same rates and reimbursement calculations currently charged to the Sponsor. In the event School pays for such training, the School shall be provided access to all such materials made available to district employees. 2. Use of Sponsor s System and Computer Software Program for Monitoring a. The Sponsor s system is the official electronic mail system which assures public records retention and ediscovery in a stable and reliable fashion and is the system of record for District communication. Charter elementary schools are provided up to ten (10) accounts, charter middle schools are provided up to seventeen (17) accounts, and charter high schools are provided up to twentyfive (25) accounts. Additional accounts may be purchased by the School from the Sponsor at the Sponsor s cost. If a charter school has two levels of schools, then the District will provide the charter school the amount of accounts for the highest level. The Sponsor s system shall be monitored by the School during all normal business hours. This system is for school business and should not be used for personal or for any improper purpose. The charter-user s account can automatically forward messages to another address which can assist the School in the required monitoring of the Sponsor s system. The Sponsor s system is the sanctioned and primary means the Sponsor s staff and computer systems will communicate with School through . In addition to person-toperson communication, these accounts are also used by automated applications which deliver essential messages to the School and must be observed. This includes updates on technical assistance and other communications with the Sponsor. b. As part of the Sponsor s monitoring system, the School shall utilize and provide the information to the District s computer software program for charter schools. SECTION XI: REQUIRED REPORTS/DOCUMENTS The School shall provide all required reports and documents as specified in this Contract and/or as required by law. The reports include: A. Pre-Opening 1. Policies and Procedures Manual 2. List of Governing Board Members 3. Facility [zoning, certificate of occupancy, fire inspection, etc.] 4. Other B. Monthly 1. Financial Statements, per State Board of Education Rule a. Date Due 2. Other C. Quarterly 1. Academic Performance Reports 2. Other D. Annual 1. Annual Student Achievement Report [pursuant to statute] AM Palm Beach Maritime Academy High School Contract Page 67 of 74 AM Palm Beach Maritime Academy High School Contract Page 68 of 74 G-34

151 2. Annual Audit 3. Program Cost Report 4. Annual Inventory Report [capital purchases with public funds] 5. Policies and Procedures [if materially revised] 6. Student Code of Conduct [if materially revised] 7. Dismissal Policies and Procedures [if materially changed] 8. Disaster Preparedness Plan 9. Employee Handbook [if materially revised] 10 Current List of Governing Board Members 11. School s Parental Contract [if materially revised] 12. Projected Enrollment [for subsequent school year] 13. Capacity [for subsequent school year] 14. School Calendar [for subsequent school year] 15. Evidence of Insurance 16. ESP Management Agreement [if materially changed] Other: The Sponsor may require the School to provide additional E. reports and/or documents as necessary, subject to the provisions of Fla. Stat (5)(b)(1)(j). SECTION XIII: MISCELLANEOUS PROVISIONS A. Impossibility: Neither party shall be considered in default of this Contract if the performance of any section or all of this Contract is prevented, delayed, hindered, or otherwise made impracticable or impossible by reason of any strike, flood, hurricane, riot, fire, explosion, war, act of God, sabotage, accident, or any other casualty or cause beyond either party s control, and which cannot be overcome by reasonable diligence and without extraordinary expense. B. Notice of Claims: 1. Time to Submit: At least thirty (30) days prior to the initial opening day of classes, the School shall furnish the Sponsor with fully completed Certificate(s) of Insurance signed by an authorized representative of the insurer(s) providing all required coverages. 2. Notice of Cancellation: The School shall notify the Sponsor in writing of cancellation of insurance with ten (10) days of the cancellation. 3. Renewal/Replacement: Until such time as the insurance is no longer required to be maintained by the School, the School shall provide the Sponsor with evidence of the renewal or replacement of the insurance no less than thirty (30) days before the expiration or termination of the required insurance. Drug-Free Workplace: The School shall be a drug-free workplace. See Section X, C. A, 4, d above. Entire Agreement: D. This Contract shall constitute the full, entire, and complete agreement between the parties. All prior representations, understandings, and agreements whether written or oral are superseded and replaced by this Contract. This Contract may be altered, changed, added to, deleted from, or modified only through the voluntary, mutual consent of the parties in writing. Neither party will unreasonably withhold approval of any amendments proposed by the other party to this Agreement. Any amendment to this Contract shall require approval of the School Board and School s governing board. E. No Assignment Without Consent: This Contract shall not be assigned by either party. The School may, without the consent of the Sponsor, enter into contracts for services with an individual or group of individuals organized as a partnership or cooperative so long as the School remains ultimately responsible for those services as set forth in this Contract. F. No Waiver: No waiver of any provision of this Contract shall be deemed or shall constitute a waiver of any other provision unless expressly stated. The failure of either party to insist in any one or more instances upon the strict performance of any one or more of the provisions of this Contract shall not be construed as a waiver or relinquishment of the term or provision, and the same shall continue in full force and effect. No waiver or relinquishment to any provision of this Contract shall be deemed to have been made by either party unless in writing and signed by the parties. G. Default Including Opportunity to Cure: Non-compliance with any of the terms and conditions of this Contract may be asserted by the Sponsor to constitute good cause for termination or non-renewal. However, prior to termination or non-renewal, the Sponsor shall provide the School with written notice of any alleged non-compliance and a reasonable opportunity to cure the alleged non-compliance, except for an emergency situation or grounds for immediate termination. Nothing in this section is intended to waive the School s right to ninety (90) days notice of termination (except for immediate termination) as afforded by Florida law. H. Survival Including Post-Termination of Charter: All representations and warranties made in this Contract shall survive termination of this Contract. I. Severability: If any provision or any section of this Contract is determined to be unlawful, void, or invalid, that determination shall not affect any other provision or any section of any other provision of this Contract and all remaining provisions shall continue in full force and effect. J. Third-Party Beneficiary: This Contract is not intended to create any rights of a thirdparty beneficiary. This clause shall not be construed, however, as contrary to any statutory or constitutional right possessed by a member of the community, a student, or parent/guardian of a student of the School. K. Choice of Laws: This Contract is made and entered into in the State of Florida and shall be interpreted according to the laws of Florida, with venue in Palm Beach County. The parties mutually agree that the language and all parts of this Contract shall in all cases be construed as a whole according to its fair meaning, and not strictly for or against any of the parties. L. Notice: Every notice, approval, consent, or other communication authorized or required by this Contract shall not be effective unless it is in writing and sent postage prepaid by United States mail, directed to the other party at the address provided or such other address as either party may designate by notice from time to time. a. Notices to Palm Beach Maritime Museum, Inc. Palm Beach Maritime Museum, Inc. Governing Board Chairperson ` 4512 North Flagler Drive, Suite 206 West Palm Beach, FL With a copy to: Palm Beach Maritime Academy High School Principal/School Director 600 Coast Avenue Lantana, FL With a copy to: AM Palm Beach Maritime Academy High School Contract Page 69 of 74 AM Palm Beach Maritime Academy High School Contract Page 70 of 74 Deborah R. Hanley, Esq. Deborah R. Hanley, P.A W. Commercial Boulevard, Suite 103 Fort Lauderdale, FL A. Notices to the School Board of Palm Beach County The School Board of Palm Beach County, Florida Attn: Superintendent 3300 Forest Hill Blvd., Suite C-316 West Palm Beach, FL With a copy to: Office of General Counsel The School Board of Palm Beach County, Florida 3300 Forest Hill Blvd., Suite C-316 West Palm Beach, FL Notice may also be given by to the addresses provided by the parties subject to written confirmation of receipt. M. Authority: Each of the persons executing this Contract represent and warrant that they have the full power and authority to execute the Contract on behalf of the party for whom he or she signs and that he or she enters into this Contract of his or her own free will and accord and with his or her own judgment, and after consulting with anyone of his or her own choosing, including but not limited to his or her attorney. The School and the Sponsor both represent that they have been represented by legal counsel in connection with the negotiation and execution of this Contract and each is satisfied with the legal representation it received. N. Conflict/Dispute Resolution and Alternative Dispute Resolution Process 1. The parties have an obligation to cooperate with each other in the implementation of this Charter. It is agreed by both parties that every effort shall be made to resolve complaints, issues, or concerns by informal communications between the Sponsor and the School. 2. The School shall notify the Sponsor in writing the name of, mailing address, and telephone number of its contact person. Any change in this information shall be submitted in writing to the Sponsor in a timely fashion. 3. Contractual Conflicts: If a conflict arises out of the terms, construction, or rights or obligations contained in this Contract, the Sponsor or the School may either use the Dispute Resolution Procedure contemplated in the next paragraph or the process pursuant to Fla. Stat (6)(h). This provision does not apply to non-renewals or terminations. 4. Alternative Dispute Resolution Process a. Subject to the applicable provision of Fla. Stat as amended from time-to-time, all disagreements and disputes arising out of the terms, construction, or rights or obligations contained in this Contract which the parties are unable to resolve informally, except as to grounds for termination or nonrenewal, may be resolved according to the following Dispute Resolution Process, unless otherwise directed or provided for in the aforementioned statute. It is anticipated that a continuing practice of open communication between the Sponsor and the School will prevent the need for implementing a conflict/dispute resolution procedure. The Dispute Resolution Process is as follows: (1) STEP 1: The persons having responsibility for implementing this Charter for the grieving party will write to the other party to identify the problem, propose action to correct the problem and explain reasons for the proposed action. Informal discussion shall commence between representatives of the School and the Sponsor regarding the particular issues(s) in question. If the matter is not resolved at Step 1, either party may elect to forward the issue(s) to the next step. (2) STEP 2: Written notice by the Sponsor or the School outlining the nature of an identified problem in performance or operations not being met or completed to the satisfaction of either party. If the matter is not resolved at Step 2, either party may elect to forward the issue(s) to the next step. (3) STEP 3: A meeting between an authorized member of the Governing Board of the School and the Sponsor s representative to discuss the issue(s) and resolution of same, and any proposed modification or amendments to the terms and conditions of the Charter. If the matter is not resolved at Step 3, either party may elect to forward the issue(s) to the next step. (4) STEP 4: The issue will be forwarded to the Florida Department of Education to provide mediation services. The aforementioned process, not otherwise pre-empted by Fla. Stat shall be equally applicable to both parties to this Contract in the event of a dispute. The Department of Education shall provide mediation services for any dispute regarding this section subsequent to the approval of a charter application and for any dispute relating to the approved charter, except disputes regarding charter school application denials and except as to grounds for termination or non-renewal. Costs for the mediation shall be the responsibility and paid for by the losing party, unless agreed to otherwise. Pursuant to Fla. Stat (6) (h), if the Commissioner of Education determines that the dispute cannot be settled through mediation, the dispute may be appealed to an administrative law judge appointed by the Division of Administrative Hearings. The administrative law judge may rule on issues of equitable treatment of the School as a public school, whether proposed provisions of the Contract violate the intended flexibility granted charter schools by statute, or on any other matter regarding this section except a charter school application denial and except as to grounds for termination or non-renewal, and shall award the prevailing party reasonable attorney s fees and costs incurred to be paid by the prevailing party. b. School Stakeholder Conflicts: All conflicts between the School and the parents/legal guardians of the students enrolled at the School shall be handled by AM Palm Beach Maritime Academy High School Contract Page 71 of 74 AM Palm Beach Maritime Academy High School Contract Page 72 of 74 G-35

152 the School or its governing board. Evidence of each parent s /guardian s acknowledgement of the School s Parent Conflict Resolution Process shall be available for review upon request by the Sponsor. c. Contractual Priority: In the event of any conflict between the provisions of the body of this Contract and any Appendix, this Contract shall prevail. O. Citations: All citations of legal authority, including Sponsor s rules, shall refer to those in effect when this contract is executed, subject to any subsequent amendments. P. Headings: The headings of this Contract are for convenience and reference only and in no way define, limit, or describe the scope of the Contract and shall not be considered in the interpretation of the Contract or any provision hereof. IN WITNESS WHEREOF, the parties hereto have executed this Contract as of the day and year written below. ATTEST: Superintendent SCHOOL BOARD OF PALM BEACH COUNTY, FLORIDA, a Florida body corporate By: Chuck Shaw, Chair Date: Signatures are on the following page. Approved as to form and legal sufficiency Office of the General Counsel Date: PALM BEACH MARITIME MUSEUM, INC., a Florida Non-profit corporation ATTEST: By: William E. Burckart II, Board Chair Board Secretary Date: AM Palm Beach Maritime Academy High School Contract Page 73 of 74 AM Palm Beach Maritime Academy High School Contract Page 74 of 74 G-36

153 APPENDIX H ENVIRONMENTAL SITE ASSESSMENT REPORTS RELATIVE TO THE FACILITY (without attachments)

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172 March 18, 2013 Patricia Aguiar Palm Beach Maritime Academy 1518 Lantana Road Lantana, FL Subject: Phase II Environmental Site Assessment Report for the Property Parcel Control No Located at 600 East Coast Avenue Lantana, Palm Beach County, FL LandScience Project Number: Dear Ms. Aguiar, LandScience is pleased to submit the attached report on a Phase II Environmental Site Assessment (ESA) for the above referenced property. The Phase II ESA was conducted in general accordance with good commercial and customary practices with respect to the range of contaminants within the scope of the Comprehensive Environmental Response, Compensation, and Liability Act (i.e., Superfund) and petroleum products, as described in the American Society for Testing and Materials document Standard Practice for Environmental Site Assessments: Phase II Environmental Site Assessment Process (ASTM E ). LandScience appreciates the opportunity to assist you on this project. We look forward to providing you with our services again in the near future. Please feel free to contact us if you have questions concerning the report. Yours Very Truly, LandScience, Inc. Mauricio Pages Senior Project Geologist Rob Ludicke, M.Sc., REP # 5985 President NE 7th Ave, North Miami, Florida Tel Fax PHASE II ENVIRONMENTAL SITE ASSESSMENT REPORT For the PROPERTY (Parcel Control No ) Located at 600 East Coast Avenue Lantana, Palm Beach County, Florida Prepared for PALM BEACH MARITIME ACADEMY 1518 Lantana Road Lantana Florida Prepared by LANDSCIENCE, INC Northeast 7 th Avenue North Miami, Florida March 2013 LandScience Project No H-18

173 , March 2013 Phase II ESA Property Lantana, Palm Beach County, Florida TABLE OF CONTENTS Page LIST OF TABLES...iii LIST OF FIGURES...iii LIST OF APPENDICES...iii 1.0 INTRODUCTION Site Description Project Background Objectives and Scope of Work PHASE II ASSESSMENT ACTIVITIES Soil Boring Placement Soil Sampling, Field Screening, and Analysis Temporary Well Point Installation Groundwater Sampling and Analysis PHASE II ASSESSMENT RESULTS Soil Field Screening Results Soil Analytical Results Groundwater Analytical Results CONCLUSIONS AND RECOMMENDATIONS REFERENCES LIMITATIONS OF STUDY TABLES FIGURES APPENDICES ii , March 2013 Phase II ESA Property Lantana, Palm Beach County, Florida LIST OF TABLES Table 1. Summary of Groundwater Laboratory Analytical Results for Metals LIST OF FIGURES Figure 1. Site Location Map Showing Topography Figure 2. Site Plan Showing the Soil Boring and Temporary Well Point Locations LIST OF APPENDICES Appendix A Laboratory Analytical Report and Chain of Custody Record for Soil and Groundwater Samples Collected on March 11, 2013 Appendix B Qualifications of Consultant iii H-19

174 , March 2013 Phase II ESA Property Lantana, Palm Beach County, Florida 1.0 INTRODUCTION This report presents a summary of activities and results of a Phase II Environmental Site Assessment (ESA) conducted for the following property: Property Located at 600 East Coast Avenue Lantana, Palm Beach County, Florida The report presents the information gathered during the assessment, the methodologies utilized, and an evaluation of the information. It also includes our conclusions concerning environmental conditions at the above referenced property, and our recommendations for further environmental assessment, if necessary. Unless otherwise noted, the above referenced property will be referred to as the subject property throughout this report. This section presents a description of the subject property, the project background and objectives, and the scope of work performed. During March 2013, LandScience was authorized by Palm Beach Maritime Academy to conduct a Phase II ESA of the subject property. The Phase II ESA was conducted in accordance with LandScience s Proposal Number , dated March 4, 2013, and in general accordance with the American Society for Testing and Materials document Standard Practice for Environmental Site Assessments: Phase II Environmental Site Assessment Process (ASTM E ). Figure 1 is a portion of the U.S. Geological Survey (USGS) topographic quadrangle map, dated 2010, that shows the location and topography of the subject property. Figure 2 is a site plan that shows the approximate soil boring and temporary well point locations , March 2013 Phase II ESA Property Lantana, Palm Beach County, Florida 1.1 Site Description The subject property (Parcel Control No ), situated at the southeast corner of the intersection of East Coast Avenue and West Bloxham Street, is located within Section 3, Township 45 South, Range 43 East in Lantana, Palm Beach County, Florida. According to land calculations information obtained from the Palm Beach County Property Appraiser s Office, the subject property measures approximately 331,491.6 square feet (i.e., approximately 7.61 acres) in size. It is improved with three one-story buildings herein referred to as Building 1, Building 2, and Building 3. Building 1 located on the northwest corner of the subject property contained approximately 9,070 square feet of area; Building 2 located on northern central portions of the subject property contained approximately 23,907 square feet of area; and Building 3 located on central eastern portions of the subject property contained approximately 7,470 square feet of area. The remaining portions of the subject property consisted of asphalt paved parking areas, asphalt paved drive lanes, landscaped areas (overgrown at the time of the site visit), and a grassed field (located on the southern half of the subject property). At the time of the site visit, all three of the subject buildings were vacant and reportedly had been vacant for approximately one year. 1.2 Project Background Information obtained by LandScience during a Phase I ESA, conducted on the subject property during February 2013, determined that the subject property was previously occupied by the National Enquirer, a commercial newspaper printing facility, from circa 1974 through 2002, and previously maintained a one (1) 1,000-gallon underground storage tank (UST) of diesel fuel and a one (1) 1,000-gallon aboveground storage tank (AST) of diesel fuel associated with the emergency generator, which constitutes a historical on-site REC. Commercial newspaper printing facilities typically store and utilize hazardous chemicals and generate hazardous waste during their daily operations. Information on file with the Florida Department of 2 H-20

175 , March 2013 Phase II ESA Property Lantana, Palm Beach County, Florida Environmental Protection (FDEP) indicated the National Enquirer previously operated photograph processing laboratories within Building 1 and Building 2 at the subject property. Information obtained from the Florida Department of Environmental Protection (FDEP) indicated that after the removal of the former 1,000-gallon UST of diesel fuel during January 1990, and after the removal of the 1,000-gallon AST of diesel fuel during 2001, no soil and groundwater testing was conducted to confirm that the contents of the UST and AST had not negatively impacted the soil and/or groundwater of the subject property with petroleum hydrocarbon constituents at levels that will require further assessment and/or possible remediation. As a result, LandScience recommended that a Phase II ESA be conducted at the subject property. 1.3 Objectives and Scope of Work The Phase II ESA was conducted in general accordance with the American Society for Testing and Materials document Standard Practice for Environmental Site Assessments: Phase II Environmental Site Assessment Process (ASTM E ). The objectives of the Phase II ESA were to assess the current soil and groundwater quality of the subject property, and to assess if the soil and/or groundwater have been impacted by activities previously conducted by the newspaper printing facility and/or the former UST and AST at levels that would require further assessment and/or possible remediation. The scope of services for the Phase II ESA consisted of the following: The placement of up to ten (10) soil borings and ten (10) temporary well points at select locations of the subject property using a Geoprobe unit (i.e., direct-push methodology) , March 2013 Phase II ESA Property Lantana, Palm Beach County, Florida The collection of soil samples in two-foot intervals to the soil/groundwater interface from the soil borings for field screening of organic vapors using an organic vapor analyzer (OVA). The collection of four (4) representative soil samples for laboratory analysis of volatile organic compounds (VOCs) by EPA Method 8260B, polynuclear aromatic hydrocarbons (PAHs) by EPA Method 8270D, and for 13 Priority Pollutant metals by EPA Method The collection of groundwater samples from the temporary well points for laboratory analysis of VOCs by EPA Method 8260B, PAHs by EPA Method 8270D, and 13 Priority Pollutant metals by EPA Method H-21

176 , March 2013 Phase II ESA Property Lantana, Palm Beach County, Florida 2.0 PHASE II ASSESSMENT ACTIVITIES This section is a discussion of soil and groundwater assessment activities conducted at the subject property on March 11, Soil Boring Placement On March 11, 2013, a representative of LandScience supervised the placement of ten (10) soil borings, SB-1 through SB-10, in an effort to assess the current soil quality throughout the subject property. The approximate locations of the soil borings are shown on Figure Soil Sampling, Field Screening, and Analysis Soil borings, SB-1 through SB-10 were advanced to the soil/groundwater interface, a depth of approximately ten (10) feet below land surface (bls). Two discrete samples were collected at the zero to two-foot, two-foot to four-foot, four-foot to six-foot, six-foot to eight-foot, and eight-foot to ten-foot intervals from each boring using a four-foot Teflon sampling tube. The soil samples collected from the soil borings were screened in the field using an OVA. Prior to the collection of the soil samples, the sampler was decontaminated to reduce the potential for cross contamination. Soil samples were removed from the sample collection equipment and placed into clean, unused, plastic ziplock bags with a minimum of two (2) inches of space to allow head-space analysis. One (1) sample was screened for the presence of total organic vapors and one (1) sample was screened for the presence of methane/ethane vapors using a carbon filter. The difference between the two (2) measurements indicated the level of total non-methane/ethane in the head space. Discrete soil samples were collected at the seven-foot to nine-foot interval from soil borings, SB-1, SB-2, SB-4, and SB-10, using a four-foot Teflon sampling tube. The soil samples were introduced into pre-cleaned sample containers, placed on ice, and transported to Florida Spectrum Environmental Services, Inc., for laboratory analysis. The soil samples collected from soil borings, SB-1, SB-2, SB-4, and SB-10, were , March 2013 Phase II ESA Property Lantana, Palm Beach County, Florida analyzed for VOCs by EPA Method 8260B, PAHs by EPA Method 8270D, and for 13 Priority Pollutant metals by EPA Method Chain of custody documentation accompanied the samples to the laboratory. 2.3 Temporary Well Point Installation On March 11, 2013, LandScience observed the installation of ten (10) temporary well points, TW-1 through TW-10, to assess the current groundwater quality throughout the subject property. The approximate locations of the temporary well points are shown on Figure 2. In order to reduce the potential for cross contamination, installation equipment and well materials were decontaminated prior to the installation of each temporary well point. Each one-inch diameter temporary well point was advanced by a state-licensed well driller using a Geoprobe (i.e., direct push technology). Groundwater was encountered at approximately ten feet bls. Temporary well points, TW-1through TW-10, were advanced to fifteen (15) feet bls with a screened interval set at eleven to fifteen-feet bls [approximately five (5) feet into the water table]. 2.4 Groundwater Sampling and Analysis On January 17, 2013, a representative of LandScience collected groundwater samples from the newly installed temporary well points TW-1 and TW-2. Prior to sample collection, the well points were purged of a minimum of five (5) well volumes of groundwater using a low-flow peristaltic pump to promote collection of representative groundwater samples from the shallow saturated zone. Groundwater samples were collected by means of a peristaltic pump and introduced into pre-cleaned sample containers, placed on ice, and transported to Florida Spectrum Environmental Services, Inc., for laboratory analysis. The collected groundwater samples from temporary well points TW-1 and TW-2 were analyzed for VOCs by EPA Method 8260B, PAHs by EPA Method 8270D, and 13 Priority Pollutant metals by EPA Method Chain of custody documentation accompanied the samples to the laboratory. 6 H-22

177 , March 2013 Phase II ESA Property Lantana, Palm Beach County, Florida 3.0 PHASE II ASSESSMENT RESULTS 3.1 Soil Field Screening Results The results of the soil screening for the soil samples collected from soil borings, SB-1 through SB-10, were compared to the Florida Department of Environmental Protection (FDEP) non-contaminated criteria of less than ten (10) parts per million (ppm) as described in the FDEP s Guidelines for Assessment and Source Removal of Petroleum Contaminated Soil document, dated May The results of the field screening indicated that the OVA readings for the soil samples collected from borings, SB-1 through SB-10, were below the FDEP clean soil criteria of 10ppm. 3.2 Soil Analytical Results The laboratory analytical results indicated that the concentrations of the constituents tested in the soil samples collected from soil borings, SB-1, SB-2, SB-4, and SB-10, were either below the method detection limits, or below the soil cleanup target levels as established by the FDEP in FAC , Table II, Soil Cleanup Target Levels (SCTLs). The soil laboratory analytical results for metals are summarized on Table 1. A copy of the laboratory data report and chain of custody record are included in Appendix A. 3.3 Groundwater Analytical Results The laboratory analytical results indicated the following: TW-1 Chromium and lead concentrations were detected at levels which exceeded the groundwater cleanup target levels established by the FDEP in FAC , Table I, Groundwater and Surface Water Cleanup Target Levels (GCTLs), but were below the Table V, Natural Attenuation Default Concentrations (NADCs) , March 2013 Phase II ESA Property Lantana, Palm Beach County, Florida established for these compounds. The concentrations of the remaining constituents tested were either below the method detection limits, or the FDEP GCTLs. TW-2 Chromium concentrations were detected at levels which exceeded the FDEP GCTLs, but were below the FDEP NADCs. The concentrations of the remaining constituents tested were either below the method detection limits, or the FDEP GCTLs. TW-3 Arsenic, chromium, and lead concentrations were detected at levels which exceeded the FDEP GCTLs, but were below the FDEP NADCs. The concentrations of the remaining constituents tested were either below the method detection limits, or the FDEP GCTLs. TW-4 Arsenic, beryllium, cadmium, chromium, lead, and nickel concentrations were detected at levels which exceeded the FDEP GCTLs, but were below the FDEP NADCs. The concentrations of the remaining constituents tested were either below the method detection limits, or the FDEP GCTLs. TW-5 The concentrations of the constituents tested were either below the method detection limits and the FDEP GCTLs. TW-6 Arsenic, chromium, and lead concentrations were detected at levels which exceeded the FDEP GCTLs, but were below the FDEP NADCs. The concentrations of the remaining constituents tested were either below the method detection limits, or the FDEP GCTLs. 8 H-23

178 , March 2013 Phase II ESA Property Lantana, Palm Beach County, Florida TW-7 Chromium and lead concentrations were detected at levels which exceeded the FDEP GCTLs, but were below the FDEP NADCs. The concentrations of the remaining constituents tested were either below the method detection limits, or the FDEP GCTLs. TW-8 Arsenic, beryllium, chromium, lead, and nickel concentrations were detected at levels which exceeded the FDEP GCTLs, but were below the FDEP NADCs. The concentrations of the remaining constituents tested were either below the method detection limits, or the FDEP GCTLs. TW-9 Chromium and lead concentrations were detected at levels which exceeded the FDEP GCTLs, but were below the FDEP NADCs. The concentrations of the remaining constituents tested were either below the method detection limits, or the FDEP GCTLs. TW-8 Arsenic, beryllium, chromium, lead, and nickel concentrations were detected at levels which exceeded the FDEP GCTLs, but were below the FDEP NADCs. The concentrations of the remaining constituents tested were either below the method detection limits, or the FDEP GCTLs. The groundwater analytical results for metals are summarized on Table 2. A copy of the laboratory data report and chain of custody record are included in Appendix A , March 2013 Phase II ESA Property Lantana, Palm Beach County, Florida 4.0 CONCLUSIONS AND RECOMMENDATIONS This section summarizes conclusions based on the information obtained during the Phase II ESA of the property located at 600 East Coast Avenue, Lantana, Palm Beach County, Florida. The soil laboratory analytical results indicated that the soil in the areas tested has not been impacted by petroleum hydrocarbons, chlorinated solvents, or metals at levels that will require further assessment. The groundwater laboratory analytical results indicated that the groundwater in the areas tested has not been impacted by petroleum hydrocarbons or chlorinated solvents at levels that will require further assessment. However, heavy metal concentrations were detected in the groundwater samples collected from temporary well points, TW-1, TW-2, TW-3, TW-4, TW-6, TW-7, TW-8, TW-9, and TW-10, at levels that may require further assessment and/or remediation. The elevated heavy metal concentrations detected in the above mentioned temporary well points may be attributed to suspended sediments in the groundwater sample, which is typical of groundwater samples collected from temporary well points (i.e., samples collected from driller s sampling rod). Therefore, LandScience recommends that temporary groundwater monitoring wells be installed in four of the nine areas exhibiting the highest heavy metal concentrations and that groundwater samples be collected for laboratory analysis of 13 Priority Pollutant metals in order to confirm the results of this initial investigation. It has been the experience of LandScience that groundwater samples collected from temporary groundwater monitoring wells are more representative of groundwater conditions and may yield lower heavy metal concentrations since the samples would be collected through a sand filter pack which significantly reduces suspended particles in the groundwater samples. 10 H-24

179 , March 2013 Phase II ESA Property Lantana, Palm Beach County, Florida 5.0 REFERENCES Publications: USGS Topographic Quadrangle Map, scale 1:24,000, dated Reports Florida Department of Environmental Protection, December 2005, Chapter 62 of the Florida Administrative Code (FAC 62) Part 777 Florida Department of Environmental Protection, 1999, Guidelines for the Assessment and Source Removal of Petroleum Contaminated Soil Florida Department of Environmental Protection, October 2000, Petroleum Cleanup Preapproval Program, Standard Operating Procedures , March 2013 Phase II ESA Property Lantana, Palm Beach County, Florida 6.0 LIMITATIONS OF STUDY The assessment procedure was based on the client's agreement in a level of investigation considered to be prudent from a risk management philosophy and guided by common sense, professional judgment, and evaluation techniques being developed and used by governmental agencies for the investigation of properties subject to possible contamination. LandScience exercised the same degree of care and skill generally exercised by environmental professionals under similar circumstances and conditions. No other warranty is expressed or implied. Observations and conclusions presented are not scientific certainties, but are solely professional opinions based upon the information available to us which may be incomplete or inaccurate. The services provided herein are in no way intended to be legal advice and should not be relied upon in any way for legal interpretations. This study and report were prepared on the behalf of and exclusively for Executive National Bank, solely for their use and reliance in the environmental assessment of the site. In the event this report and the findings herein, in whole or in part, are to be disseminated or conveyed to any other party or entity or used or relied on by any other party or entity, Executive National Bank and LandScience will require an agreement on the part of said party or entity as to the provisions of the Limitation of Professional Liability and Limitation of Action found in the proposal agreement between Executive National Bank and LandScience. Those provisions are as follows: LIMITATION OF PROFESSIONAL LIABILITY and LIMITATION OF ACTION: The Client, it successors, assigns and all persons or entities receiving and/or relying upon this report or any portion thereof, agree to limit any and all total liability for claims, for damages, cost of defense, or expenses to be asserted against LandScience as a result of its preparation of this report to a sum not to exceed an aggregate limit up to a maximum of $1,000,000 for a period of one year following project initiation. After one year the limits of all liability will not exceed the amount paid to LandScience for its services. 12 H-25

180 March 25, 2013 Patricia Aguiar Palm Beach Maritime Academy 1518 Lantana Road Lantana, FL Subject: Supplemental Phase II Environmental Site Assessment Report for the Property Parcel Control No Located at 600 East Coast Avenue Lantana, Palm Beach County, FL LandScience Project Number: B Dear Ms. Aguiar, LandScience is pleased to submit the attached report on a Supplemental Phase II Environmental Site Assessment(ESA) for the above referenced property. The Phase II ESA was conducted in general accordance with good commercial and customary practices with respect to the range of contaminants within the scope of the Comprehensive Environmental Response, Compensation, and Liability Act (i.e., Superfund) and petroleum products, as described in the American Society for Testing and Materials document Standard Practice for Environmental Site Assessments: Supplemental Phase II Environmental Site Assessment Process (ASTM E ). LandScience appreciates the opportunity to assist you on this project. We look forward to providing you with our services again in the near future. Please feel free to contact us if you have questions concerning the report. Yours Very Truly, LandScience, Inc. Mauricio Pages Senior Project Geologist Rob Ludicke, M.Sc., REP # 5985 President NE 7th Ave, North Miami, Florida Tel Fax SUPPLEMENTAL PHASE II ENVIRONMENTAL SITE ASSESSMENT REPORT FOR THE PROPERTY (Parcel Control No ) Located at 600 East Coast Avenue Lantana, Palm Beach County, Florida Prepared for PALM BEACH MARITIME ACADEMY 1518 Lantana Road Lantana Florida Prepared by LANDSCIENCE, INC Northeast 7 th Avenue North Miami, Florida March 2013 LandScience Project No B H-26

181 B, March 2013 Supplemental Phase II ESA Property Lantana, Palm Beach County, Florida TABLE OF CONTENTS Page LIST OF TABLES...iii LIST OF FIGURES...iii LIST OF APPENDICES...iii 1.0 INTRODUCTION Site Description Project Background Objectives and Scope of Work SUPPLEMENTAL PHASE II ASSESSMENT ACTIVITIES Temporary Groundwater Monitoring Well Installation Groundwater Sampling and Analysis SUPPLEMENTAL PHASE II ASSESSMENT RESULTS Groundwater Analytical Results CONCLUSIONS AND RECOMMENDATIONS REFERENCES LIMITATIONS OF STUDY TABLES FIGURES APPENDICES ii B, March 2013 Supplemental Phase II ESA Property Lantana, Palm Beach County, Florida LIST OF TABLES Table 1. Summary of Groundwater Analytical Results for Metals LIST OF FIGURES Figure 1. Site Location Map Showing Topography Figure 2. Site Plan Showing Temporary Groundwater Monitoring Well Locations LIST OF APPENDICES Appendix A. Laboratory Analytical Reports and Chain of Custody Records for Groundwater Samples Collected on March 20, 2012 Appendix B. Qualifications of Consultant iii H-27

182 B, March 2013 Supplemental Phase II ESA Property Lantana, Palm Beach County, Florida 1.0 INTRODUCTION This report presents a summary of activities and results of a Supplemental Phase II Environmental Site Assessment (ESA) conducted for the following property: Property Located at 600 East Coast Avenue Lantana, Palm Beach County, Florida The report presents the information gathered during the assessment, the methodologies utilized, and an evaluation of the information. It also includes our conclusions concerning environmental conditions at the above referenced property, and our recommendations for further environmental assessment, if necessary. Unless otherwise noted, the above referenced property will be referred to as the subject property throughout this report. This section presents a description of the subject property, the project background and objectives, and the scope of work performed. During March 2013, LandScience was authorized by Palm Beach Maritime Academy to conduct a Supplemental Phase II ESA at the subject property. The Supplemental Phase II ESA was conducted in accordance with LandScience s Proposal Number , dated March 18, 2013, and in general accordance with the American Society for Testing and Materials document Standard Practice for Environmental Site Assessments: Phase II Environmental Site Assessment Process (ASTM E ). Figure 1 is a portion of the U.S. Geological Survey (USGS) topographic quadrangle map, dated 2010, that shows the location and topography of the subject property. Figure 2 is a site plan that shows the approximate temporary groundwater monitoring well locations B, March 2013 Supplemental Phase II ESA Property Lantana, Palm Beach County, Florida 1.1 Site Description The subject property (Parcel Control No ), situated at the southeast corner of the intersection of East Coast Avenue and West Bloxham Street, is located within Section 3, Township 45 South, Range 43 East in Lantana, Palm Beach County, Florida. According to land calculations information obtained from the Palm Beach County Property Appraiser s Office, the subject property measures approximately 331,491.6 square feet (i.e., approximately 7.61 acres) in size. It is improved with three one-story buildings herein referred to as Building 1, Building 2, and Building 3. Building 1 located on the northwest corner of the subject property contained approximately 9,070 square feet of area; Building 2 located on northern central portions of the subject property contained approximately 23,907 square feet of area; and Building 3 located on central eastern portions of the subject property contained approximately 7,470 square feet of area. The remaining portions of the subject property consisted of asphalt paved parking areas, asphalt paved drive lanes, landscaped areas (overgrown at the time of the site visit), and a grassed field (located on the southern half of the subject property). At the time of the site visit, all three of the subject buildings were vacant and reportedly had been vacant for approximately one year. 1.2 Project Background Information obtained by LandScience during a Phase I ESA, conducted on the subject property during February 2013, determined that the subject property was previously occupied by the National Enquirer, a commercial newspaper printing facility, from circa 1974 through 2002, and previously maintained a one (1) 1,000-gallon underground storage tank (UST) of diesel fuel and a one (1) 1,000-gallon aboveground storage tank (AST) of diesel fuel associated with the emergency generator, which constitutes a historical on-site REC. Commercial newspaper printing facilities typically store and utilize hazardous chemicals and generate hazardous waste during their daily operations. Information on file with the Florida Department of 2 H-28

183 B, March 2013 Supplemental Phase II ESA Property Lantana, Palm Beach County, Florida Environmental Protection (FDEP) indicated the National Enquirer previously operated photograph processing laboratories within Building 1 and Building 2 at the subject property. Information obtained from the FDEP indicated that after the removal of the former 1,000-gallon UST of diesel fuel during January 1990, and after the removal of the 1,000-gallon AST of diesel fuel during 2001, no soil and groundwater testing was conducted to confirm that the contents of the UST and AST had not negatively impacted the soil and/or groundwater of the subject property with petroleum hydrocarbon constituents at levels that will require further assessment and/or possible remediation. Based on this information, LandScience recommended that a Phase II ESA be conducted at the subject property. The results of the Phase II ESA, conducted on the subject property during March 2013, indicated that heavy metal impacted groundwater was identified in the vicinity of temporary well points, TW-1, TW-2, TW-3, TW-4, TW-6, TW-7, TW-8, TW-9, and TW-10, at levels which exceeded the state-established groundwater cleanup target levels. Based on this information, LandScience recommended that Supplemental PH II ESA activities be conducted in an effort to confirm the results of the initial investigation. 1.3 Objectives and Scope of Work The Supplemental Phase II ESA was conducted in general accordance with the American Society for Testing and Materials document Standard Practice for Environmental Site Assessments: Phase II Environmental Site Assessment Process (ASTM E ). The objectives of the Supplemental Phase II ESA were to confirm the results of the March Phase II ESA, which indicated that heavy metal impacted groundwater was present at the subject property at levels which required further assessment and/or remediation B, March 2013 Supplemental Phase II ESA Property Lantana, Palm Beach County, Florida The scope of services for the Supplemental Phase II ESA consisted of the following: The placement of four (4) shallow temporary groundwater monitoring wells in the vicinity of former temporary well points, TW-4, TW-6, TW-8, and TW-10 using a truck-mounted Geoprobe unit (i.e., direct-push methodology). The collection of groundwater samples from the temporary groundwater monitoring wells for laboratory analysis of arsenic, beryllium, cadmium, chromium, lead, and nickel by EPA Method The preparation of a Supplemental Phase II ESA summarizing all field activities, laboratory analytical results, and making appropriate recommendations. 4 H-29

184 B, March 2013 Supplemental Phase II ESA Property Lantana, Palm Beach County, Florida 2.0 SUPPLEMENTAL PHASE II ASSESSMENT ACTIVITIES This section is a discussion of the groundwater assessment activities conducted at the subject property on March 20, Temporary Groundwater Monitoring Well Installation On March 20, 2013, LandScience observed the installation of four (4) shallow temporary groundwater monitoring wells, TMW-1, TMW-2, TMW-3, and TMW-4, to confirm the results of the initial investigation in the area of former temporary well points, TW-4, TW-6, TW-8, and TW-10 at the subject property. Figure 2 illustrates the locations of the temporary groundwater monitoring wells. Shallow temporary groundwater monitoring wells, TMW-1, TMW-2, TMW-3, and TMW-4, were 3/4-inch diameter wells installed by using a truck-mounted Geoprobe unit (i.e., direct push technology). Prior to the installation of the groundwater monitoring wells, all drilling equipment and materials that may contact groundwater (i.e. development pump intake hose) were decontaminated to prevent any potential crosscontamination. The shallow temporary groundwater monitoring wells were installed to depths ranging between eighteen (18) and twenty-two (22) feet below land surface due to elevation changes at the subject property and set such that a minimum of two feet of well screen would remain above the water table. The shallow monitoring wells were constructed with 3/4-inch diameter Schedule 40 PVC, with10 feet of slotted well screen within a one-inch diameter stainless steel wire mesh filled with 6/20 silica sand, and a solid riser to approximately two feet above grade. After installation, the newly-installed temporary groundwater monitoring wells were developed with a peristaltic pump to remove fine grained sediments, ensuring a good hydraulic connection with the aquifer. All groundwater generated from well development was spread on impervious surfaces B, March 2013 Supplemental Phase II ESA Property Lantana, Palm Beach County, Florida 2.2 Groundwater Sampling and Analysis On March 20, 2013, a representative of LandScience collected groundwater samples from the newly installed temporary groundwater monitoring wells, TMW-1, TMW-2, TMW-3, and TMW-4. Prior to sample collection, the temporary groundwater monitoring wells were purged of a minimum of twenty gallons using a low-flow peristaltic pump to promote collection of representative groundwater samples from the shallow saturated zone. Upon collection, the groundwater samples were introduced into pre-cleaned sample containers, placed on ice, and transported to Florida Spectrum Environmental Services, Inc., for analysis. The collected groundwater samples from temporary groundwater monitoring wells, TMW-1, TMW-2, TMW-3, and TMW- 4 were analyzed for arsenic, beryllium, cadmium, chromium, lead, and nickel by EPA Method Chain of custody documentation accompanied the samples to the laboratory. 6 H-30

185 B, March 2013 Supplemental Phase II ESA Property Lantana, Palm Beach County, Florida 3.0 SUPPLEMENTAL PHASE II ASSESSMENT RESULTS 3.1 Groundwater Analytical Results The laboratory analytical results indicated that the concentrations of the constituents tested in the groundwater samples collected from temporary groundwater monitoring wells, TMW-1, TMW-2, TMW-3, and TMW-4, were either below the method detection limits, or the groundwater cleanup target levels as established by the FDEP in FAC , Table I, Groundwater and Surface Water Cleanup Target Levels (GCTLs). The historic and current groundwater laboratory analytical results are summarized on Table 1. Copies of the laboratory analytical report and chain of custody record are included in Appendix B B, March 2013 Supplemental Phase II ESA Property Lantana, Palm Beach County, Florida 4.0 CONCLUSIONS AND RECOMMENDATIONS This section summarizes conclusions based on the information obtained during the Supplemental Phase II ESA of the Property located at 600 East Coast Avenue, Lantana, Palm Beach County, Florida The groundwater laboratory analysis for the samples collected from temporary groundwater monitoring wells, TMW-1, TMW-2, TMW-3, and TMW-4, indicated that the groundwater in the areas sampled have not been impacted by heavy metals at levels that will require further assessment. Based on the most recent laboratory data, it is evident that the elevated heavy metal concentrations detected in the groundwater at the subject property during the initial investigation were due to suspended sediments in the groundwater samples and were not representative of site conditions. Based on this information, LandScience recommends no further action with regards to assessment of the groundwater at the subject property. Furthermore, LandScience recommends that the temporary groundwater monitoring wells be removed by a state-licensed well driller in an effort to prevent any misuse of the temporary groundwater monitoring wells which serve as a direct conduit to the groundwater. 8 H-31

186 B, March 2013 Supplemental Phase II ESA Property Lantana, Palm Beach County, Florida 5.0 REFERENCES Publications: USGS Topographic Quadrangle Map, scale 1:24,000, dated Reports Florida Department of Environmental Protection, December 2005, Chapter 62 of the Florida Administrative Code (FAC 62) Part 777 Florida Department of Environmental Protection, 1999, Guidelines for the Assessment and Source Removal of Petroleum Contaminated Soil Florida Department of Environmental Protection, October 2000, Petroleum Cleanup Preapproval Program, Standard Operating Procedures B, March 2013 Supplemental Phase II ESA Property Lantana, Palm Beach County, Florida 6.0 LIMITATIONS OF STUDY The assessment procedure was based on the client's agreement in a level of investigation considered to be prudent from a risk management philosophy and guided by common sense, professional judgment, and evaluation techniques being developed and used by governmental agencies for the investigation of properties subject to possible contamination. LandScience exercised the same degree of care and skill generally exercised by environmental professionals under similar circumstances and conditions. No other warranty is expressed or implied. Observations and conclusions presented are not scientific certainties, but are solely professional opinions based upon the information available to us which may be incomplete or inaccurate. The services provided herein are in no way intended to be legal advice and should not be relied upon in any way for legal interpretations. This study and report were prepared on the behalf of and exclusively for Palm Beach Maritime Academy solely for their use and reliance in the environmental assessment of the site. In the event this report and the findings herein, in whole or in part, are to be disseminated or conveyed to any other party or entity or used or relied on by any other party or entity, Palm Beach Maritime Academy and LandScience will require an agreement on the part of said party or entity as to the provisions of the Limitation of Professional Liability and Limitation of Action found in the proposal agreement between Palm Beach Maritime and LandScience. Those provisions are as follows: LIMITATION OF PROFESSIONAL LIABILITY and LIMITATION OF ACTION: The Client, it successors, assigns and all persons or entities receiving and/or relying upon this report or any portion thereof, agree to limit any and all total liability for claims, for damages, cost of defense, or expenses to be asserted against LandScience as a result of its preparation of this report to a sum not to exceed an aggregate limit up to a maximum of $1,000,000 for a period of one year following project initiation. After one year the limits of all liability will not exceed the amount paid to LandScience for its services. 10 H-32

187 APPENDIX I FORM OF GUARANTY AGREEMENT (Form of Guaranty Agreement expected to be delivered in substantially the following form)

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189 GUARANTY AGREEMENT THIS GUARANTY AGREEMENT (this Guaranty ) is dated as of June 1, 2014, and is made by Palm Beach Maritime Foundation, Inc., a Maryland non-profit corporation (the Guarantor ), for the benefit of U.S. Bank National Association, as trustee (the "Trustee") under the Trust Indenture, dated as of even date herewith (the Indenture ), between the Public Finance Authority (the Authority ) and the Trustee. GUARANTY AGREEMENT made by PALM BEACH MARITIME FOUNDATION, INC., as Guarantor for the benefit of U.S. BANK NATIONAL ASSOCIATION, as Trustee Dated as of June 1, 2014 RELATING TO: PUBLIC FINANCE AUTHORITY $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B RECITALS: A. Pursuant to the terms and conditions of a Loan Agreement, dated as of even date herewith (the Loan Agreement ), between the Authority and Palm Beach Maritime Museum, Inc. d/b/a Palm Beach Maritime Academy, a Florida non-profit corporation (the Borrower ), the Authority has agreed to issue its $21,000,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Series 2014A (the Series 2014A Bonds ) and its $3,640,000 First Mortgage Educational Facility Revenue Bonds (Palm Beach Maritime Academy Project) Taxable Series 2014B (the Series 2014B Bonds and, collectively with the Series 2014A Bonds, the Bonds ) and to loan the proceeds thereof to the Borrower. B. As a condition precedent to the Authority s issuance of the Bonds, and in consideration therefor, the Holders of the Bonds have required the execution and delivery of (i) this Guaranty by the Guarantor, (ii) certain other documents relating to the Bonds, including, but not limited to, (A) the Trust Indenture, (B) the Loan Agreement and (C) a Mortgage and Security Agreement, dated as of even date herewith (the Mortgage ), from the Borrower to the Trustee (collectively, the Bond Documents ). All terms not otherwise defined herein shall have the meanings set forth in the Indenture. C. The Borrower will, upon approval by the School Board of Palm Beach County, Florida, become a subsidiary of the Guarantor, and the Guarantor has a financial interest in the Project. Accordingly, the Guarantor has agreed to execute and deliver this Guaranty to the Trustee. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Guarantor hereby agrees as follows: 1. Guaranty of Payment. The Guarantor hereby unconditionally and irrevocably guarantees to the Trustee payment all amounts due or to become due from the Borrower to the Authority under the Loan Agreement and the Notes (including any such amounts that have been assigned under the Indenture by the Authority to the Trustee) when and as the same shall become due (collectively the Borrower s Obligations ). This Guaranty is a present and continuing guaranty of payment and not of collectability, and the Trustee shall not be required to prosecute collection, enforcement or other remedies against the Borrower or any other guarantor of the Borrower s Obligations, or to enforce or resort to any collateral for the repayment of the Borrower s Obligations or other rights or remedies pertaining thereto, before calling on the Guarantor for payment. If for any reason the Borrower fails or is unable to pay, punctually and fully, any of the Borrower s Obligations, the Guarantor shall immediately pay such obligations upon demand. One or more successive actions may be brought against the Guarantor, as often as the Trustee is directed to do so by the Majority Bondholders, until all of the Borrower s Obligations are paid and performed in full. 2. Representations and Warranties of The Guarantor. The following shall constitute representations and warranties of the Guarantor, and the Guarantor hereby acknowledges that the Authority intends to issue the Bonds in accordance with the Indenture in reliance thereon: :5 (a) (b) (c) The Guarantor is not in default and no event has occurred that with the passage of time and/or the giving of notice will constitute a default under any agreement to which the Guarantor is a party, the effect of which will impair performance by the Guarantor of its obligations under this Guaranty. Neither the execution and delivery of this Guaranty nor compliance with the terms and provisions hereof will violate any applicable law, rule, regulation, judgment, decree or order, or will conflict with or result in any breach of any of the terms, covenants, conditions or provisions of any indenture, mortgage, deed of trust, instrument, document, agreement or contract of any kind that creates, represents, evidences or provides for any lien, charge or encumbrance upon any of the property or assets of the Guarantor; or any other indenture, mortgage, deed of trust, instrument, document, agreement or contract of any kind to which the Guarantor is a party or to which the Guarantor or the property of the Guarantor may be subject. There is not any litigation, arbitration, governmental or administrative proceedings, actions, examinations, claims or demands pending, or to the Guarantor s knowledge, threatened that could materially adversely affect (i) performance by the Guarantor of its obligations under this Guaranty or (ii) except as previously disclosed to the Hapoalim Securities USA, Inc. (the Underwriter ) in writing, the financial condition of the Guarantor. Neither this Guaranty nor any statement or certification as to facts previously furnished or required to be furnished to the Trustee or the Underwriter by the Guarantor, contains any material inaccuracy or untruth in any representation, covenant or warranty or omits to state a fact material to this Guaranty. 3. Continuing Guaranty. The Guarantor agrees that payment of the Borrower s Obligations by the Guarantor shall be a primary obligation, shall not be subject to any counterclaim, set-off, abatement, deferment or defense based upon any claim that the Guarantor may have against the Authority, the Trustee, the Borrower, any other guarantor of the Borrower s Obligations or any other person or entity, and shall remain in full force and effect without regard to, and shall not be released, discharged or affected in any way by, any circumstance or condition (whether or not the Guarantor shall have any knowledge thereof), including without limitation: (a) any lack of validity (other than with respect to the Authority or the Trustee) or enforceability of any of the Bond Documents; 2 I :5 (b) any termination, amendment, modification or other change in any of the Bond Documents, including, without limitation, any modification of the interest rate(s) described therein; (c) any furnishing, exchange, substitution or release of any collateral securing repayment of the Borrower s Obligations, or any failure to perfect any lien in such collateral; (d) any failure, omission or delay on the part of the Borrower, the Guarantor, or any other guarantor of the Borrower s Obligations or the Authority or the Trustee to conform or comply with any term of any of the Bond Documents or any failure of the Trustee to give notice of any Event of Default (as defined in the Indenture); (e) any waiver, compromise, release, settlement or extension of time of payment or performance or observance of any of the obligations or agreements contained in any of the Bond Documents; (f) any action or inaction by the Authority or the Trustee under or in respect of any of the Bond Documents, any failure, lack of diligence, omission or delay on the part of the Authority or the Trustee to perfect, enforce, assert or exercise any lien, security interest, right, power or remedy conferred on it in any of the Bond Documents, or any other action or inaction on the part of the Authority or the Trustee; (g) any voluntary or involuntary bankruptcy, insolvency, reorganization, arrangement, readjustment, assignment for the benefit of creditors, composition, receivership, liquidation, marshalling of assets and liabilities or similar events or proceedings with respect to the Borrower, the Guarantor or any other guarantor of the Borrower s Obligations, as applicable, or any of their respective property or creditors, or any action taken by any trustee or receiver or by any court in any such proceeding; (h) any merger or consolidation of the Borrower into or with any entity, or any sale, lease or transfer of any of the assets of the Borrower, to any other person or entity; (i) any change in the membership or corporate governance of the Borrower or any change in the relationship between the Borrower, the Guarantor or any other guarantor of the Borrower s Obligations, or any termination of any such relationship; (j) any release or discharge by operation of law of the Borrower, the Guarantor or any other guarantor of the Borrower s Obligations from any obligation or agreement contained in any of the Bond Documents; or (k) any other occurrence, circumstance, happening or event, whether similar or dissimilar to the foregoing and whether foreseen or unforeseen, which 3

190 :5 4. Waivers. otherwise might constitute a legal or equitable defense or discharge of the liabilities of a guarantor or surety or which otherwise might limit recourse against the Borrower or the Guarantor to the fullest extent permitted by law. (a) The Guarantor expressly and unconditionally waives (i) notice of any of the matters referred to in Section 3 above, (ii) all notices which may be required by statute, rule of law or otherwise, now or hereafter in effect, to preserve intact any rights against the Guarantor, including, without limitation, any demand, presentment and protest, proof of notice of non-payment under any of the Bond Documents and notice of any Event of Default or any failure on the part of the Borrower, the Guarantor or any other guarantor of the Borrower s Obligations to perform or comply with any covenant, agreement, term or condition of any of the Bond Documents, (iii) any right to the enforcement, assertion or exercise against the Borrower, the Guarantor or any other guarantor of the Borrower s Obligations of any right or remedy conferred under any of the Bond Documents, (iv) any requirement of diligence on the part of any person or entity, (v) except as otherwise expressly provided in this Guaranty or the other Bond Documents, any claims based on allegations that Trustee has failed to act in a commercially reasonable manner or failed to exercise the Trustee s obligation of good faith and fair dealing, (vi) any requirement to exhaust any remedies or to mitigate the damages resulting from any default under any of the Bond Documents to the fullest extent permitted by law, and (vii) any notice of any sale, transfer or other disposition of any right, title or interest of the Authority or the Trustee under any of the Bond Documents. (b) Notwithstanding any provision in this Guaranty, any waiver of rights by the Guarantor shall only be to the extent permitted by law. 5. Disclosure Covenants. The Guarantor shall provide copies to the Trustee of any documents of the Guarantor described in Section 5.2 of the Loan Agreement, in the time and manner set forth therein. 6. GAAP Accounting. Unless stated otherwise, where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation, combination or other accounting computation is required to be made for the purposes of this Guaranty, the Loan Agreement or any agreement, document or certificate executed and delivered in connection with or pursuant to this Guaranty, such determination or computation shall be done in accordance with Generally Accepted Accounting Principles in effect on, at the sole option of the Guarantor (i) the date such determination or computation is made for any purpose of this Guaranty or (ii) the date of execution and delivery of this Guaranty if the Guarantor delivers a Certificate to the Trustee describing why then current Generally Accepted Accounting Principles is inconsistent with the intent of the parties on the date of execution and delivery of this Guaranty; provided that intercompany balances arid liabilities between the Borrower and the Guarantor shall be disregarded and that the requirements set forth herein shall prevail if 4 inconsistent with Generally Accepted Accounting Principles. For avoidance of doubt, it is the intent of the parties on the date of execution and delivery of this Guaranty that any operating lease, as defined by the Financial Accounting Standards Board on the date of execution and delivery of this Guaranty, and any renewal of such operating lease shall be governed in accordance with Generally Accepted Accounting Principles in effect on the date of execution and delivery of this Guaranty and shall not be treated as the incurrence of Indebtedness or the disposition of property. 7. Termination. The Guarantor shall be released from its obligations under this Guaranty, and this Guaranty shall terminate, upon the payment of all principal of, accrued interest and premium, if any, on the Bonds; provided, however, that payment of amounts due and payable but unpaid or any amounts that may become payable as a result of the exercise of remedies in respect of the Borrower Obligations under Section 6.2 of the Loan Agreement shall remain an obligation of the Guarantor hereunder until paid in full. 8. Subrogation Waiver. Until the Borrower s Obligations are paid in full and all periods under applicable bankruptcy law for the contest of any payment by the Guarantor or the Borrower as a preferential or fraudulent payment have expired, the Guarantor knowingly, and with advice of counsel, waives, relinquishes, releases and abandons all rights and claims to indemnification, contribution, reimbursement, subrogation and payment which the Guarantor may now or hereafter have by and from the Borrower and the successors and assigns of the Borrower, for any payments made by the Guarantor to the Trustee including, without limitation, any rights which might allow the Borrower, the Borrower s successors, a creditor of the Borrower, or a trustee in bankruptcy of the Borrower to claim in bankruptcy or any other similar proceedings that any payment made by the Borrower or the Borrower s successors and assigns to the Trustee was on behalf of or for the benefit of the Guarantor and that such payment is recoverable by the Borrower, a creditor or trustee in bankruptcy of the Borrower as a preferential payment, fraudulent conveyance, payment of an insider or any other classification of payment which may otherwise be recoverable from the Trustee. 9. Reinstatement. The obligations of the Guarantor pursuant to this Guaranty shall continue to be effective or automatically be reinstated, as the case may be, if at any time payment of any of the Borrower s Obligations or the Guarantor s obligations under this Guaranty is rescinded or otherwise must be restored or returned by the Trustee upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Guarantor or the Borrower or otherwise, all as though such payment had not been made. 10. Enforcement Costs. If: (a) this Guaranty is placed in the hands of one or more attorneys for collection or is collected through any legal proceeding; (b) one or more attorneys is retained to represent the Trustee in any bankruptcy, reorganization, receivership or other proceedings affecting creditors rights and involving a claim under this Guaranty, or (c) one or more attorneys is retained to represent the Trustee in any other proceedings whatsoever in connection with this Guaranty, then the Guarantor shall pay to the Trustee upon demand all fees, costs and expenses incurred by the Trustee in connection therewith, including, without limitation, reasonable attorney s fees, court costs and filing fees, in addition to all other amounts due hereunder : Successors and Assigns. This Guaranty shall inure to the benefit of the Trustee and its successors and assigns. The obligations of the Guarantor under this Guaranty are binding on the successors, assigns, estates, and future holders of the interests of the Guarantor under this Guaranty and the Bonds. It is agreed that the Guarantor s liability hereunder is several and independent of any other guarantees or other obligations at any time in effect with respect to the Borrower s Obligations or any part thereof and that the Guarantor s liability hereunder may be enforced regardless of the existence, validity, enforcement or non-enforcement of any such other guarantees or other obligations. 12. No Waiver of Rights. No delay or failure on the part of the Trustee to exercise any right, power or privilege under this Guaranty or any of the other Bond Documents shall operate as a waiver thereof, and no single or partial exercise of any right, power or privilege shall preclude any other or further exercise thereof or the exercise of any other power or right, or be deemed to establish a custom or course of dealing or performance between the parties hereto. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. No notice to or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in the same, similar or other circumstance. 13. Modification. The terms of this Guaranty may be waived, discharged, or terminated only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. This Guaranty shall only be amended, modified, waived or otherwise changed in accordance with Article IX of the Indenture. To Guarantor: To Trustee: Palm Beach Maritime Foundation, Inc N. Flagler Drive, Suite 206 West Palm Beach, Florida Attention: Chief Executive Officer U. S. Bank National Association Corporate Trust Services 550 West Cypress Creek Road, Suite 380 Ft. Lauderdale, FL Attention: Amanda Bhim, Assistant Vice President or to any other address as to any of the parties hereto, as such party shall designate in a written notice to the other party hereto. All notices sent pursuant to the terms of this Section 17 shall be deemed received (i) if personally delivered, then on the date of delivery, (ii) if sent by overnight, express carrier, then on the next federal banking day immediately following the day sent, or (iii) if sent by registered or certified mail, then on the earlier of the third federal banking day following the day sent or when actually received. [remainder of page intentionally left blank] 14. Joinder. Any action to enforce this Guaranty may be brought against the Guarantor without any reimbursement or joinder of the Borrower or any other guarantor of the Borrower s Obligations in such action. 15. Severability. If any provision of this Guaranty is deemed to be invalid by reason of the operation of law, or by reason of the interpretation placed thereon by any administrative agency or any court, the Guarantor and the Trustee (in the case of the Trustee, at the written direction of the Majority Bondholders) shall negotiate an equitable adjustment in the provisions of the same in order to effect, to the maximum extent permitted by law, the purpose of this Guaranty and the validity and enforceability of the remaining provisions, or portions or applications thereof, shall not be affected thereby and shall remain in full force and effect. 16. Governing Law; Forum and Venue. This Guaranty shall be construed in accordance with and governed by the Constitution and the laws of the State of Wisconsin (the State ) applicable to contracts made and performed in the State. 17. Notice. All notices, communications and waivers under this Guaranty shall be in writing and shall be (i) delivered in person or (ii) mailed, postage prepaid, either by registered or certified mail, return receipt requested, or (iii) by overnight express carrier, addressed in each case as follows: :5 6 I :5 7

191 IN WITNESS WHEREOF, Palm Beach Maritime Foundation, Inc., has executed this Guaranty Agreement as of the date first above written. Palm Beach Maritime Foundation, Inc., as Guarantor By: Its: [Guarantor s Signature Page to Guaranty Agreement] :5 S-1 I-3

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193 APPENDIX J REPORT OF FEASIBILITY CONSULTANT

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195 Market Feasibility Study for Palm Beach Maritime Academy Lantana, FL June 16, 2014 Prepared for Palm Beach Maritime Academy Prepared by Fishkind & Associates, Inc Corporate Blvd. Orlando, Florida J-1

196 Palm Beach Maritime Academy, Lantana, FL Table of Contents Section Title Page Executive Summary Introduction Background Organization National and Florida Economic Conditions National Economic Conditions Florida Economic Conditions Florida s History of Funding Public Education National Demographics and Student Population Palm Beach County & School District Overview Economic Overview of Palm Beach County Palm Beach County School District Overview Palm Beach Maritime Academy Market Analysis Project Student Demand Supply Analysis - Project Competition Enrollment Status New School Pipeline Palm Beach Maritime Academy Financial Analysis Recommendations and Conclusions Appendix 1 Palm Beach County Competitive Schools Map Appendix 2 Palm Beach County Schools 5-YR Capital Improvement Plan Appendix 3 Palm Beach County New Charter Schools Status Page i

197 Palm Beach Maritime Academy, Lantana, FL Executive Summary Florida & Palm Beach County Economic Status Florida has emerged from its worst postwar recession. While Florida faces increased competition from Georgia, North Carolina and Virginia; according to the U.S. Department of Commerce and Wells Fargo Securities analysis, Florida still ranks at the top with respect to its competitive advantage in more than 17 industries. The beginnings of real recovery in Florida emerged in 2011 with population growth over 200,000 in 2011 and Florida population growth has recovered with growth of 275,000 in 2013 and is forecast to be over 300,000 in 2014, which is consistent with the 30-year historic average of 300,000, making Florida one of the fastest growing states in the country. Population growth for 2015 and 2016 is estimated at over 300,000 a year. Since 2008, State of Florida student enrollment has increased from 2,628,754 to 2,720,074 (growth of 91,320), which is growth of 3.5 percent. Palm Beach County student enrollment increased from 170,745 in 2008 to 182,899 in 2013 (growth of 12,154), which is growth of 7.1 percent. Palm Beach County student enrollments have been strong and resumed in keeping with larger demographic trends and the improved jobs outlook. Palm Beach Maritime Academy Summary The Palm Beach Maritime Academy location is undersupplied with competitive schools within 5 miles. Public Elementary, Middle and High school performance ratings have been average with only 21 percent of all schools in the 5-mile market rating A. Student-age capture ratios needed to make the Palm Beach Maritime Academy a success are within the performance standards of successful charter schools within the Florida market. According to the past school year and as of June 2, 2014, Palm Beach Maritime Academy had an average annual enrollment of 1,036. Enrollment has grown 34 percent annually since Palm Beach Maritime Academy plans to continue growth of both its middle and high school grades. Based on current enrollment levels and projections, the charter school is well positioned to achieve its forecasted enrollment levels. The financial analysis reviewed by the Consultant forecasts an average per pupil revenue figure of $7,554 for 2015 through 2018, which results in an average debt service coverage (DSC) ratio over the first four years of 2.30 (when deferring the school administration fee prior to debt service). This DSC ratio also does not include accessing the school s forecasted unrestricted fund balance. Page 1

198 Palm Beach Maritime Academy, Lantana, FL 1.0 Introduction 1.1 Background Hapoalim Securities ( Client ) is investigating the market potential for one charter school. The Palm Beach Maritime Academy is located at 1518 Lantana Road, Lantana, Florida (K-5) and 600 SE Coast Avenue Lantana, Florida (grades 6-9) and will ultimately expand to a full K-12 set of facilities. The Client has asked Fishkind & Associates, Inc. ( Consultant ) to prepare a feasibility analysis for the Palm Beach Maritime Academy. This report is to be of suitable and appropriate quality to be used for the purposes of securing investment funding. The Consultant is one of Florida s premier economic consultants. The firm is Financial Advisor to many special taxing districts throughout the State, manages 50 special taxing districts in Florida and maintains detailed economic forecast databases for all of Florida s 67 counties. 1.2 Organization The market report that follows includes six (5) sections. Section 1 includes this Introduction. The second section of the report provides background as it pertains to the economy nationally and in Florida. Section 3 provides a detailed assessment of demographic trends nationally and how those trends impact the student population growth in Florida. Section 4 provides a detailed assessment of demographic trends in Palm Beach County and general information on the Palm Beach County School District. Section 5 focuses on the Palm Beach Maritime Academy market. Within Section 5, the following components will be evaluated: 1. Project Student Demand 2. School Competition 3. Competition Capacities and Grade History 4. New School Pipeline Information Section 6 provides a short-term financial analysis associated with the first four years of forecasted expansion activities. Lastly, Section 7 provides the Consultant s recommendations and conclusions regarding the project s feasibility. Page 2

199 Palm Beach Maritime Academy, Lantana, FL 2.0 National and Florida Economic Conditions 2.1 National Economic Conditions and Outlook Continuing its emergence from the Great Recession of 2009, the economic landscape has changed nationally and in Florida. Section 2.1 provides an overview and short-term national forecast. In addition, the Consultant provides additional sections detailing current conditions, physical characteristics and drivers of growth in Florida and Palm Beach County. The purpose of this section is to set the stage for understanding market projections which follow and are used to estimate student supply and demand in the subject markets. At the time of this report the U.S. economy is slowly emerging from the worst recession since the Great Depression. In fact some call this the Great Recession, and indeed it is. The recession officially began in December, 2007, and ended in June, Prior to the first quarter 2014, the economy had seen consistent economic growth as measured by GDP since the end of the recession. The second quarter of 2014 is expected to result in positive growth correcting for the downturn in the first quarter of Recessions are caused by imbalances building up during the boom phase causing capital to be misallocated. These imbalances are checked by sharp changes in risk tolerance. The reduction in risk tolerance is typically triggered by some key policy change (such as a tightening in monetary or fiscal policy) or an external shock which causes households, business and regulators to become suddenly more cautious. Recessions associated with financial crises tend to last longer and be deeper. Oil price shocks tend to magnify the contraction. The Great Recession was triggered by sharp shocks to the financial system and to energy markets. The 18 month peak-to-trough contraction of the Great Recession was the worst since the Depression. In the remaining six months of 2009, following the end of the recession, the national economy continued to lose jobs, despite overall economic growth as measured by Gross Domestic Product (GDP). However, since early 2010, the national economy has been adding jobs. Figure 1 presents the forecast for growth in real GDP and inflation. The recession is its most obvious feature. In line with previous financial type recessions ( and ) the depth of the recession is deep, the contraction long, and the recovery relatively modest. Despite the substantial amount of monetary fiscal stimulus applied to break the recession cycle, inflation remains modest due to the depth of the contraction. Page 3

200 Palm Beach Maritime Academy, Lantana, FL Figure 1. Growth in Real GDP and Inflation Source: Fishkind and Associates, Inc. Table 1 compares the Great Recession to the previous post war recessions. The severity of the Great Recession is obvious. This was the longest and deepest of all recessions. Table 1. Comparison of Post War Recessions Source: Fishkind and Associates, Inc. Page 4

201 Palm Beach Maritime Academy, Lantana, FL To break the recessionary cycle and to prevent the financial panic which erupted after the failure of Lehman Brothers from becoming a depression, the government embarked upon and continues an unprecedented program of fiscal and monetary stimulus. These aggressive policy actions have had their intended impact and prevented a full scale depression, leaving in its wake a deep and long recession. Furthermore, the financial panic was stemmed without a collapse in the banking system. However, there are some substantial consequences from these policy actions, some known and some unknown at this time. What is clear is that the stimulus has created a huge federal budget deficit. There is little confidence that the federal government can quickly reign in spending. This is setting up dynamics in financial markets which will lead to higher inflation and higher interest rates. Subsequently, the ongoing government stimulus programs have injected enough cash into the economy to drive bond prices up, resulting in low and steady interest rates over the short term. As Federal spending slows the support it provided for bond prices will disappear and will give way to lower bond prices and thus higher interest rates in the coming few years. It is clear that regardless of the capacity of Congress and the President to control federal spending, the Federal Reserve will embark on a tightening of monetary policy as it continues its policy to taper its bond purchasing activity as national employment stabilizes and continues to expand and levels deemed healthy. The Fed must absorb the liquidity it pumped into the system to stem the financial crisis. To do otherwise would risk accelerating inflation in much more rapid fashion leading to sharply higher long term interest rates. Despite the threat of inflation over the medium and short term, the Federal Reserve Board has recently committed to leaving short terms rates at or near zero for the foreseeable future. The inability of the federal government to reduce spending and thereby begin to control the deficit in 2014 would normally cause a collision in the bond market pushing up interest rates. However, economic growth is slow enough that demand for capital remains weak and thus longer term rates have not risen. The Fed will support this low rate environment through the end of 2014, given the slow pace of overall economic recovery, sluggish new job formations and continued weakness in the housing market. The Consultant s projection for interest rates is founded on these thoughts and is displayed below in Figure 2. While the Consultant expects short term rates to rise significantly beginning in mid 2014, it must be remembered that they are extraordinarily low rates as of today. Even at their peak, the funds rate is forecast to reach 5.0% with mortgage rates at 7.0%. Page 5

202 Palm Beach Maritime Academy, Lantana, FL Figure 2. Interest Rates Source: Fishkind and Associates, Inc. 2.2 Florida Economic Conditions and Outlook Florida has now emerged from its worst postwar recession. During the recession and early part of the recovery Florida has underperformed the nation by a wide margin for two main reasons. First, the specific structure of the Great Recession focused on finance and housing, which is particularly problematic for Florida. Second, Florida policies concerning land use, impact fees, insurance, and property taxation have made Florida less competitive and less attractive than it used to be. The combination has produced a terrible contraction that will not only be deeper in Florida, but will last longer than for the U.S. Figure 3 displays Florida s population growth from 1970 to 2013 showing the impacts of recessions (shaded areas). After deep recessions, such as those in and , it takes many years for Florida s population growth to return to its historical average (red line). Page 6

203 Palm Beach Maritime Academy, Lantana, FL Figure 3. Florida s Population Growth Florida Annual Change in Total Population ( ) 600, , , ,727 Population 300,000 Avg. Annual Pop Growth 294, , , , , , , , , , , , , , Year Series1 Source: Fishkind and Associates, Inc. *Note periods of recession are represented by shaded bars Despite the difficulties associated with Florida growth during the Great Recession and initial years following the Great Recession, Florida has been able to maintain its relative competitiveness. Florida remains highly competitive at the national level and is well positioned among states to see substantial employment gains as the real estate industry recovers and the state emerges from recession. This recent analysis from Wells Fargo shows the employment competitiveness among states (see Figure 4). Page 7

204 Palm Beach Maritime Academy, Lantana, FL Figure 4. Comparison of State Competitiveness The Consultant s analysis of the impacts of the Great Recession indicate that major metropolitan areas in Florida lost population during this recession due to dramatic and rapid job losses. This suggests as employment losses abate and job growth returns the major metros will be the first areas to see resurgence in population growth during the immediate post recession period. Over the past two years, Florida has seen its employment growth rebound Statewide (Figure 5), especially within the major metropolitan areas which were subjected to the employment losses during the Great Recession. Figure 5. Employment Growth in Florida by Category 60,000 50,000 40,000 30,000 20,000 10, ,000 20, ,200/+1.1% ,500/+1.5% ,600/+1.8% ,400/+2.9% YOY ,800/+3.3% Page 8

205 Palm Beach Maritime Academy, Lantana, FL Figure 6 presents the Florida forecast for growth in population and employment. In light of the particular type of recession during the period, Florida is recovering very slowly. As noted above, recessions that focus on financial and housing markets are particularly hard on Florida. Florida s population growth began decelerating in 2007 and employment was flat. With the onset of recession, economic conditions deteriorated markedly and remained very weak a full year after the end of the recession at the national level in The beginnings of real recovery in Florida emerged in 2011 and have seen consistent gains in both population and employment growth slowly returning to historic norms through Figure 6. Growth in Population and Employment in Florida 450, , , ,000 50,000 (50,000) (150,000) (250,000) (350,000) (450,000) (550,000) Population Change Employment Change Source: Fishkind and Associates, Inc. Historically, it has taken significant time for the U.S. economy to recover sufficiently and for housing markets in the traditional sending areas east of the Mississippi to recover enough, to generate higher levels of domestic net migration into Florida. Furthermore, given the structural changes in Florida s economy the recovery does not take growth as high as previously. Page 9

206 Palm Beach Maritime Academy, Lantana, FL Florida s housing markets, along with markets in Arizona, Nevada, and California, became significantly overbuilt in the few years prior to the recession. Florida s housing start information is documented in Figure 7. Housing starts soared well above the levels of new household formation in Florida beginning in Prices also registered sharp increases and the inventories of new unsold homes began piling up. Starts contracted sharply in 2006 and 2007, but it was too late. By then, household formations were dropping making a return to equilibrium all the more difficult. Unfortunately, the inventory reduction process was halted in 2009 as additional starts exceeded the levels of net negative household formations stemming from population and job loss. Compounding the housing problem is the high rate of residential foreclosure. This adds to inventory and drives prices down, making profitability of new deliveries much harder to achieve. As a result, starts have been slow to recover. This leaves a two to three year recovery horizon beginning in Figure 7. Housing Starts Compared to Household Formation 300, , , , ,000 50,000 0 (50,000) Source: Fishkind and Associates, Inc. Single Family Multifamily Households Page 10

207 Palm Beach Maritime Academy, Lantana, FL Figure 8 displays these trends for starts by focusing on the starts data alone. Starts moved only marginally higher in 2012 with the recovery continuing throughout the forecast horizon, albeit at a very slow pace. Figure 8. Housing Starts 300, , , , ,000 50, Single Family Multifamily Source: Fishkind and Associates, Inc. As a result of the disequilibrium in the residential marketplace fueled by speculative demand and subsequent sharp housing price declines, foreclosures spiked. Foreclosure filings of all types reached nearly 400,000 during 2009 (Figure 9). Legal challenges to the foreclosure process, poor record-keeping on the part of banks and mortgage companies and the overwhelming volume has slowed the process by which foreclosed units can be cleared from the market, thus keeping volumes high well into Market effects from foreclosures exerted downward pressure on home prices. This helped drive existing home prices to 2003 levels in Florida and kept prices depressed through As foreclosures fall and sales volume picks up, the weakness and downward pressure on prices has abated in most Florida markets. Page 11

208 Palm Beach Maritime Academy, Lantana, FL Figure 9. Foreclosure Filings 450, , , , , , , ,000 50, Foreclosures Source: Fishkind and Associates, Inc. Page 12

209 Palm Beach Maritime Academy, Lantana, FL 2.3 Florida s History of Funding Public Education The Consultant gathered data on Florida s total funding of education from 2002 through In addition, the Consultant gathered data on Florida s per student spending from 2000 through This data provides insight into how Florida currently and historically values education. Table 2 and Figure 11 summarize the total funding for education as reported in the budget for each fiscal year. Table 2. Florida Total Education Funding ( ) General Fund Revenue $10,841,636,902 $11,174,772,546 $12,319,178,138 $13,338,002,229 $14,137,070,542 $14,915,394,503 Trust Funds $4,026,783,302 $4,896,610,178 $4,491,576,190 $5,462,343,709 $7,455,024,342 $7,813,866,909 Total Education Funds $14,868,420,204 $16,071,382,724 $16,810,754,328 $18,800,345,938 $21,592,094,884 $22,729,261,412 Annual % Change 8.1% 4.6% 11.8% 14.8% 5.3% General Fund Revenue $12,941,720,096 $11,388,071,783 $12,501,292,218 $11,916,380,880 $12,689,501,891 $13,198,031,702 Trust Funds $6,594,484,154 $9,884,776,091 $10,013,882,139 $7,984,174,930 $7,596,932,715 $8,826,271,448 Total Education Funds $19,536,204,250 $21,272,847,874 $22,515,174,357 $19,900,555,810 $20,286,434,606 $22,024,303,150 Annual % Change -14.0% 8.9% 5.8% -11.6% 1.9% 8.6% Source: State of Florida Budgets Figure 11. Florida Total Education Funding ( ) $24,000,000,000 $23,000,000,000 $22,000,000,000 $21,000,000,000 $20,000,000,000 $19,000,000,000 $18,000,000,000 $17,000,000,000 $16,000,000,000 $15,000,000,000 $14,000,000, % 10.0% 5.0% 0.0% 5.0% 10.0% 15.0% Total Education Funds Annual % Change Source: State of Florida Budgets Page 13

210 Palm Beach Maritime Academy, Lantana, FL As the data indicates, Florida s education funding has increased from $14.8 billion in 2002 to $19.9 billion in 2011 and an estimated $22.0 billion in This represents a 48 percent increase in funding from 2002 to Due to the Great Recession, Florida has had to make many difficult budget decisions over the past four years and will continue to battle modest growth in overall State revenue. As a result, the education budget which represents an estimated 28 percent of the total Florida budget will be scrutinized each year with respect to its annual allocation of the total Florida budget. The Consultant also evaluated the historical education spending per pupil in Florida. Table 3 summarizes the State of Florida s education expenditures per pupil, the United States average education expense per pupil, and Florida s average annual change in education expenditures per pupil. Figure 12 graphs Florida s per pupil expenditures from 2000 through Table 3. Education Expenditures Per Pupil ( ) State or jurisdiction United States $6,912 $7,380 $7,727 $8,044 $8,310 $8,711 $9,145 $9,679 Florida $5,831 $6,170 $6,213 $6,439 $6,793 $7,215 $7,812 $8,567 FLA Annual % Growth 5.8% 0.7% 3.6% 5.5% 6.2% 8.3% 9.7% State or jurisdiction (est) United States $10,297 $10,190 $10,586 $10,770 $10,834 $10,938 $11,373 Florida $9,084 $8,761 $8,963 $8,983 $8,436 $8,539 $9,009 FLA Annual % Growth 6.0% -3.6% 2.3% 1.8% -6.1% 1.2% 5.5% Source: National Center for Education Statistics and National Education Association Figure 12. Education Expenditures Per Pupil ( ) $9,500 $9,000 $8,500 $8,000 $7,500 $7, % 4.0% 1.0% $6,500 $6, % $5,500 $5, (est) 11.0% Florida FLA Annual % Growth Source: National Center for Education Statistics and National Education Association Page 14

211 Palm Beach Maritime Academy, Lantana, FL As the data indicates, Florida s education expenses per pupil have increased dramatically since 2000, growing from $6,213 per pupil in 2002 to a forecasted $8,539 per pupil in For comparison purposes, the overall growth in Florida s education budget grew 48 percent from 2002 to The reported per pupil growth from 2002 to 2013 is 37 percent. 3.0 National Demographics and Student Population Why Did Florida s School Enrollment Fall? There are national demographic trends and economic factors specific to Florida that explain the surprising decline in school enrollments in Florida as well as the slowdown in enrollment growth statewide, in recent years. At the national level, there are demographic trends predicting increasing numbers of school age children and increasing enrollments beginning in Increasing enrollments will likely continue nationally for twenty years or more. These trends reflect the larger national demographic picture which contributed to a sharp slowdown in enrollments in Florida from and a short term decline in public school enrollments in Florida from 2006 through Job losses and rising unemployment during the recession were partly responsible for some population and enrollment loss in Florida during 2007 and However, steep declines in enrollment growth occurred earlier in Florida, during , a period of economic strength and record population growth. In addition, growth in Florida public school enrollments also slowed from This was due to a greater underlying national demographic trend. These demographic trends explain why such losses and declines in growth occurred in the face of unprecedented population growth. Similarly, these trends explain why enrollments and the numbers of school age children have now started to increase in Florida at a time when population growth in Florida is at its lowest. The projected increase in enrollments, which has now begun, is due to two factors. First is the birth of the echo echo boom generation and second is the increase in international immigration. The birth of the echo echo boom generation represents the grandchildren of the baby boomers. The large demographic ripple caused by the baby boom generation (born ) led to a spike in public school enrollments nationally during the period. As these students aged into adulthood, leaving the public school system, it led to a national decline in school age children from Nationally, public school enrollments declined in Thereafter, by 1982 the children of the baby boomers began to enter the school system, leading to a 14 year increase in school enrollments. Beginning as early as year 1996, some 14 years later, the echo boom generation aged out of the school system, leading to a national decline in school age children from (see Figure 13). Page 15

212 Palm Beach Maritime Academy, Lantana, FL Figure 13. Enrollment Periods of School Age Children in the United States 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 Baby Boom Baby Boom Echo 2,000,000 Source: Live U.S. Births By Year, National Center for Health Statistics. Note: Age of birth is offset 5 years to reflect enrollment periods; Fishkind & Associates, Inc. The timeframe is consistent with pronounced declines in the growth rate of Florida s school age population and public school enrollments. Florida experienced enrollment losses corresponding with national declines in school age children during Florida s enrollment losses and declines in enrollment growth occurred at a time of declining but relatively strong population growth statewide. The tail end of this phenomenon was amplified by the Great Recession and slow population growth during However, in 2009, despite a continued slowing of population growth in Florida, the number of public school enrollments increased statewide; a dramatic counter cyclical condition given the depth of recession and the weakest population growth in recent Florida history (see Figure 14). Figure 14. Florida Population Growth vs. Enrollment Growth 450,000 80, , ,000 60, ,000 40,000 Population 250, , ,000 population growth rate slows enrollment growth rate increases 20,000 0 Enrollment 100,000 50, ,000 40,000 population growth enrollment growth Source: Fishkind and Associates, Inc. Page 16

213 Palm Beach Maritime Academy, Lantana, FL Some ten to twelve years after the end of the echo boom enrollment peak, the echo echo boom generation will enter the school age cohort and begin moving through their school age years. This corresponds with year Because this generation is so large, like the baby boomers and the echo boomers, the echo echo boom generation will trigger substantial growth in the number of school age children. Coupled with this demographic boom is the increase in international migration. International families tend to be larger and have more children. This will add to the increase in the number of school age children nationally, amplifying the demographic effects of the echo echo boom generation entry into their school age years. This is of particular importance in Florida where threefourths of recent net population growth stems from international migration. Based on this analysis, the underlying trend expected to remain in evidence for the next 20 years or longer, is a steady increase in the number of school age children nationally. This is in contrast to declining numbers of U.S. born school age children and periodic declines in enrollment levels seen in the middle part of the last decade. These trends indicate growth in student enrollment nationally and in particular growth in student enrollment in Florida. The Consultant believes Florida has begun to see the inflection point in numerous local markets with respect to what is expected to be decades of student growth. It is against these underlying conditions the Consultant examined forecasted school-age children and student enrollment levels at the county level. 4.0 Palm Beach County and School District Overview 4.1 Economic Overview of Palm Beach County Palm Beach County s economy was seriously impacted by the Great Recession. Population growth dropped sharply in 2007 and population growth remained well below historic levels through Population growth rebounded in 2011; however, the increase in 2011 is over 50 percent below the population growth during the housing bubble year of The forecast shows population growth returning to historic growth levels in From 2007 through 2010, Palm Beach County lost an estimated 75,000 jobs. In 2013, it is estimated that Palm Beach County added 14,100 jobs. It is estimated that it will take a decade for Palm Beach County to replace the employment lost as a result of the Great Recession. With respect to construction, real estate and housing related employment, many of the construction and real estate related jobs created during the housing bubble will never come back. Page 17

214 Palm Beach Maritime Academy, Lantana, FL Palm Beach County was deeply impacted by the Great Recession. The main difference with respect to the overall employment picture is that construction, which has been a relative drag on the economy for the past four years, is finally showing signs of life. In addition, business/professional, education/health services and government are expanding. Manufacturing and finance are flat or slightly declining yearover-year through April of Figure 15. Changes in Payroll Employment by Sector In Palm Beach County 7,000 6,000 5,000 4,000 3,000 2,000 1, ,000 2, ,600/+0.5% ,500/+2.7% ,700/+2.1% ,100/+2.6% YOY ,300/+2.8% Source: Fishkind and Associates, Inc. The Consultant expects Palm Beach County s economy to improve over both the short and long-term as the national economy continues to slowly improve. The prospects for Palm Beach County economic expansion are good as it is a large and diverse economy that is a known quantity both nationally and internationally. It is projected that Palm Beach County population growth at or above 19,000 per year will continue through the end of the forecast period, however population growth of approximately 30,000 per year as seen during the bubble years is much less likely to occur. Figure 16 provides the forecast trajectory. Page 18

215 Palm Beach Maritime Academy, Lantana, FL Figure 16. Growth in Population and Employment in Palm Beach County 40,000 30,000 20,000 10,000 0 (10,000) (20,000) (30,000) (40,000) Population Change Employment Change Source: Fishkind and Associates, Inc. As was the case for the State, Palm Beach s housing markets began being over-supplied in 2004 with excess inventory building up (see Figure 17). Although starts contracted beginning in 2006, inventory built up. With slow growth and then little to no population growth through 2009, it will take the market a significant amount of time to absorb the inventory and then to support higher residential construction starts. The new normal began to unfold for housing markets in 2013 and will improve gradually through Total starts began the recovery slowly with 4,000 units annually in 2012 and are forecasted to increase to over 8,000 units annually through the forecast horizon (Figure 18). Excess inventory will be absorbed through the purchases of primary homes stemming from job growth and slow influx of retirees. The population associated with these sales is considered permanent residents and so with these population gains, excess housing inventory is still expected to fall. Page 19

216 Palm Beach Maritime Academy, Lantana, FL Figure 17. Housing Starts Compared to Household Formations In Palm Beach County 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 (2,000) (4,000) Single Family Multifamily Households Source: Fishkind and Associates, Inc. Figure 18. Palm Beach County Housing Starts 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, Single Family Multifamily Source: Fishkind and Associates, Inc. Page 20

217 Palm Beach Maritime Academy, Lantana, FL The speculation in Palm Beach s housing market was unsustainable. Foreclosures rose consistently from 2005 through 2008 and peaked during 2009 with over 28,000 filings (Figure 19). Rising population growth and stronger employment have allowed housing markets to begin recovering and bring down the foreclosure filings. However, the surge in foreclosures took a toll on home prices. Foreclosures are forecasted to stabilize through the forecast horizon. Figure 19. Foreclosures in Palm Beach County 30,000 25,000 20,000 15,000 10,000 5, Foreclosures Source: Fishkind and Associates, Inc. Figure 20 displays the latest data on closing volume and average prices paid for new and existing single family homes in Palm Beach County. While closing volumes for new homes remains depressed compared to earlier levels, the market appears to have stabilized and price declines have begun to level off. The existing home market provides an even better indication of current market conditions, because a closing in May 2014 reflects a contract written earlier this year. Closing volumes have rebounded from their low point and existing home prices have finally begun to firm. Page 21

218 Palm Beach Maritime Academy, Lantana, FL Figure 20. Closing Volume and Closing Prices for New and Existing Single Family Homes in Palm Beach County $700,000 35,000 $600,000 30,000 $500,000 25,000 $400,000 20,000 $300,000 15,000 $200,000 10,000 $100,000 5,000 $ New Single Family Closings New Single Family Price Existing Single Family Closings Existing Single Family Price Source: Fishkind and Associates, Inc. The data for Palm Beach County s condominium markets (new and existing) reflect these same trends. The Palm Beach County market saw an increase in condominium construction during the housing bubble. When the housing bubble burst, the condominium market was impacted dramatically. As the data indicates, the formerly new units constructed in 2007 and 2008 have been and are currently being absorbed into the market. In some cases these condominium complexes have been converted to apartment complexes and it is forecasted that the market will return to equilibrium in Figure 21 provides the history and forecast for closings and pricing of new and existing condominium units. Page 22

219 Palm Beach Maritime Academy, Lantana, FL Figure 21. Closing Volume and Closing Prices for New and Existing Condos in Palm Beach County $400,000 16,000 $350,000 14,000 $300,000 12,000 $250,000 10,000 $200,000 8,000 $150,000 6,000 $100,000 4,000 $50,000 2,000 $0 0 New Condo Closings New Condo Price Existing Condominium Closings Existing Condominium Price Source: Fishkind and Associates, Inc. As part of the county analysis, the Consultant also gathered historical K- 12 enrollments for Palm Beach County from 2003 through Table 4 summarizes the enrollment data and annual growth rates. Figure 22 summarizes the enrollment findings. Table 4. Palm Beach County Enrollment History ( ) PK-8 Enrollment 120, , , , , , , , , , , Enrollment 49,960 52,258 53,154 53,060 53,339 52,511 53,642 53,806 54,670 55,095 55,933 PK-12 Enrollment 170, , , , , , , , , , ,899 Annual % Change PK-8 Enrollment 2.8% 1.3% -0.1% -2.8% -0.7% 0.6% 1.0% 1.2% 1.1% 1.8% 2.1% 9-12 Enrollment 4.6% 4.6% 1.7% -0.2% 0.5% -1.6% 2.2% 0.3% 1.6% 0.8% 1.5% PK-12 Enrollment 3.3% 2.3% 0.5% -2.0% -0.3% -0.1% 1.3% 0.9% 1.3% 1.5% 1.9% Source: Florida DOE Page 23

220 Palm Beach Maritime Academy, Lantana, FL Figure 22. Palm Beach County Enrollment History ( ) 128,000 57,000 PK 8 Enrollment 126, , , , , ,000 55,000 53,000 51,000 49,000 47, Enrollment 114, ,000 PK 8 Enrollment 9 12 Enrollment Source: Florida DOE As the data shows, Palm Beach County saw its prek-12 enrollment increase dramatically from 2003 through The enrollment for grades 9-12 then flattened through 2008, while the enrollment for prek-8 declined through Both sets of student enrollment have increased since 2008 through The drop off from 2005 through 2007 is consistent with the discussion in Section 3.0, which discusses the national demographic trends associated with student enrollment and the temporary decline in school age populations. This data is encouraging showing enrollments improving from 2010 to 2013, and is highly consistent with the long range demographic outlook at the national level. What is particularly interesting is that the PK-8 enrollment has outpaced the high school (9-12) enrollments since This indicates that the PK- 8 growth is responsible for a larger share of student enrollment. Graphically this growth in the PK-8 population is pronounced starting in 2007 and continuing through 2013, while the 9-12 enrollment has been comparatively slower. The Consultant believes that this 2008 data point is the beginning of a long-term demographic trend toward improving student enrollment levels, especially as the Florida economy slowly improves and enrollment is supported by additional population growth. This inflection point of positive enrollment growth come at a time when the Census Bureau indicates population has declined and is lower than initially projected by the State of Florida. This decoupling of population growth and student enrollment growth is representative of the over-arching strength of the national demographic phenomenon associated with the echo echo boom generation. Page 24

221 Palm Beach Maritime Academy, Lantana, FL 4.2 Palm Beach County School District Overview As part of the economic overview, the Consultant conducted an assessment of the school district on the following factors: 1) District Size, 2) District Quality and School Choice Options. As of the Fall 2013, enrollment in the Palm Beach County School District totaled 182,899. Table 5 provides the top twenty-five counties in enrollment throughout the State of Florida. In 2012, charter school enrollment totaled 11,015 of the 179,494, which represented 6.1 percent of total enrollment within the County. The 2013 data indicates that charter school enrollment has increased to 15,272 with a total school enrollment of 182,899, which is 8.4 percent of total Palm Beach County enrollment. Table 5. Top 25 Florida County Public School Enrollment Totals TOTAL Rank DISTRICT MEMBERSHIP 1 MIAMI-DADE 356,241 2 BROWARD 262,680 3 HILLSBOROUGH 203,431 4 ORANGE 187,092 5 PALM BEACH 182,899 6 DUVAL 127,559 7 PINELLAS 103,391 8 POLK 97,971 9 LEE 87, BREVARD 71, PASCO 68, SEMINOLE 64, VOLUSIA 61, OSCEOLA 58, MANATEE 46, COLLIER 44, MARION 42, LAKE 41, SARASOTA 41, ESCAMBIA 40, ST. LUCIE 39, CLAY 35, LEON 33, ST. JOHNS 33, OKALOOSA 30,228 Source: FLDOE Fall 2012 Page 25

222 Palm Beach Maritime Academy, Lantana, FL 5.0 Palm Beach Maritime Academy Analysis 5.1 Project Student Demand As part of the student demand analysis, the Consultant gathered County level data, which highlights information on population, student population numbers, race profiles, and household income and housing data. In a similar fashion, the Consultant gathered demographic data associated with the 1, 3 and 5-mile radii around the site. Table 6 summarizes the Consultant s findings. Projections through year 2018 are based on Environmental Systems Research Institute (ESRI) s short term econometric forecast models. Table 6. Palm Beach Maritime Academy 1,3,5-Mile Radius Demographics 1 Mile 3 Mile 5 Mile Palm Beach Co. Population , , ,541 1,341, , , ,450 1,407,864 Growth ( ) 1.8% 3.9% 4.4% 4.9% 2013 Age Profile Age % 6, % 16, % 69, % Age % 6, % 15, % 71, % Age % 5, % 14, % 75, % Age % 3, % 8, % 37, % Total Population 11, , ,541 1,341,583 1 Mile 3 Mile 5 Mile Palm Beach Co Race White Alone 6, % 61, % 160, % 974, % Black Alone 3, % 23, % 51, % 233, % American Indian Alone % 2, % 3, % 6, % Asian Alone % 1, % 5, % 33, % Pacific Islander Alone % % % % Some Other Race Alone % 7, % 17, % 58, % Two or More Races % 3, % 8, % 33, % Hispanic Origin (Any Race) 2, % 31, % 80, % 278, % 2013 Avg. HH Income $52,212 $56,738 $59,237 $75, Housing Owner Occupied 2, % 21, % 56, % 376, % Renter Occupied 1, % 17, % 36, % 174, % Source: 2013 ESRI Page 26

223 Palm Beach Maritime Academy, Lantana, FL This data highlights the following when comparing the 5-mile project radius to the County. The 5-mile radius is projected to grow at a 4.4 percent rate when compared to the County s rate of 4.9 percent over the same period. The comparable growth rates for the 5-mile market and the County indicate that this particular market is still attractive and there is land available for development. When compared to the County, the 5-mile project radius shows a higher percentage of Hispanics and the average household income is lower at $59,237 when compared to the County s $75,667. Using the 5-mile population data combined with a detailed age profile, the Consultant forecasted student population by age (Table 7) through year Using this as the local pool of student, the Consultant estimated the necessary market capture to fill the projected charter school 1,728 K-12 student stations. Table 8 summarizes the Consultant s capture ratio findings. Table 7. 5-Mile Radius Local Pool of Student Demand Pop 5 MI 249, , , , , , ,027 5 MI Age ,205 40,559 40,920 41,280 40,982 41,976 42, % Age 5 3,246 3,275 3,304 3,333 3,355 3,389 3, % Age 6 3,246 3,275 3,304 3,333 3,252 3,389 3, % Age 7 3,246 3,275 3,304 3,333 3,206 3,389 3, % Age 8 3,246 3,275 3,304 3,333 3,245 3,389 3, % Age 9 3,246 3,275 3,304 3,333 3,251 3,389 3, % Age 10 3,246 3,275 3,304 3,333 3,320 3,389 3, % Age 11 2,997 3,023 3,050 3,077 3,255 3,129 3, % Age 12 2,997 3,023 3,050 3,077 3,143 3,129 3, % Age 13 2,997 3,023 3,050 3,077 3,156 3,129 3, % Age 14 2,997 3,023 3,050 3,077 3,078 3,129 3, % Age 15 2,997 3,023 3,050 3,077 2,943 3,129 3, % Age 16 2,747 2,771 2,796 2,820 2,873 2,868 2, % Age 17 2,997 3,023 3,050 3,077 2,905 3,129 3,156 Source: ESRI and Fishkind and Associates, Inc. Page 27

224 Palm Beach Maritime Academy, Lantana, FL Table 8. Necessary Market Capture for Palm Beach Maritime Academy Historical Forecast Grade Capture 1.3% 2.6% 3.2% 3.8% 4.1% 4.0% 4.1% K Age Age Age Age Age Age Age Age Age Age Age Age Age Total Source: ESRI and Fishkind and Associates, Inc. Based on the Consultant s estimates, the project will require market capture of 4.1 percent to fill its full allotment of K-12 student stations through the school year. The Consultant compared this to known market capture rate thresholds. Table 9 compares the market absorption rates. Table 9. Comparison of Market Capture Rates 5-Mile Site Market Capture Palm Beach Maritime Academy (K-12) 4.1% Target Average 13.1% Target Median 7.7% Source: CSUSA and Fishkind and Associates, Inc. As the data indicates, the project will require market captures which are consistent with national and Florida thresholds. As further discussed below, this indicates that the project is well positioned within the current and future market as it pertains to capturing its share of the local pool of student demand. Page 28

225 Palm Beach Maritime Academy, Lantana, FL 5.2 Supply Analysis - Project Competition Location of School Competition As part of the supply analysis, the Consultant gathered data on the public and other schools within 5 miles of the project site. The data collected includes enrollment, school capacity via the Florida Inventory of School Houses (F.I.S.H.), and grade history of competing schools. The first step in evaluating the market supply was mapping the location of the competing school facilities. Appendix 1 contains the map highlighting school location and Table 10 show the competing schools in relation to the Palm Beach Maritime Academy site. There are 40 schools within 5 miles of the project site. The mix of the schools is 23 elementary schools (K-5), 3 elementary/middle schools (K-8), 5 middle schools (6-8), 0 middle/high schools (6-12), 8 high schools and 1 ESE school (ESE exceptional student education- is for children with disabilities). It is important to note that the Consultant did not include adult education schools within the data set. Of these 40 schools, 8 are charter schools. With respect to distance, 3 schools are within one mile, 17 schools within one to three miles and the remaining 20 schools are between three and five miles away. Page 29

226 Palm Beach Maritime Academy, Lantana, FL Table 10. School Sites Within 5 Miles of Project Site ID School Name Address City State Zip Type 147 Palm Beach Maritime Academy 1518 W. Lantana Rd. Lantana FL K-8 11 Barton Elementary 1700 Barton Rd. Lake Worth FL Elementary 112 Lantana Community Middle 1225 W. Drew St. Lantana FL Middle 113 Lantana Elementary 710 W. Ocean Ave. Lantana FL Elementary 1 Academy for Positive Learning 1200 N. Dixie Hwy Lake Worth FL K-8 charter 31 Charter Schools of Boynton Beach 1425 Gateway Blvd Boynton Beach FL K-10 charter 64 Freedom Shores Elementary 3400 Hypoluxo Rd. Boynton Beach FL Elementary 83 Highland Elementary 500 Highland Ave. Lake Worth FL Elementary 85 Hope Learning (Noah's Ark International) 128 No. "C" Street Lake Worth FL Elementary charter 88 Imagine Schools-Chancellor Campus 3333 High Ridge Rd. Boynton Beach FL K-8 charter 97 JFK Charter School 4696 Davis Rd. Lake Worth FL Elementary charter 109 Lake Worth Community High 1701Lake Worth Rd. Lake Worth FL High 110 Lake Worth Middle 1300 Barnett Dr. Lake Worth FL Middle 123 Maverick's High at Palm Springs 3525 S. Congress Ave. Palm Springs FL High charter 130 North Grade Elementary 824 N. "K" St. Lake Worth FL Elementary 162 Quantum High School 1275 Gateway Blvd. Boynton Beach FL High charter 166 Riviera Beach Maritime Academy 550 Miner Rd. Boynton Beach FL Elementary 171 Royal Palm Beach Community High 6650 Lawrence Rd. Lantana FL ESE 174 S. D. Spady Elementary 6880 Lawrence Rd. Lantana FL High 180 Somerset Academy Boca 716 South "K" St. Lake Worth FL Elementary 186 South Tech Academy 6300 Seminole Dr. Lantana FL Elementary 25 Boynton Beach Community High 4975 Park Ridge Blvd. Boynton Beach FL High 34 Citrus Cove Elementary 8400 Lawrence Rd. Boynton Beach FL Elementary 35 Clifford O. Taylor/Kirklane Elementary 4200 Purdy Ln. Palm Springs FL Elementary 36 Congress Middle 101 S. Congress Ave. Boynton Beach FL Middle 45 Day Star Academy of Excellence 970 N. Seacrest Blvd. Boynton Beach FL Elementary charter 47 Diamond View Elementary 5300 Haverhill Rd. Greenacres FL Elementary 60 Forest Hill Community High 6901 Parker Ave. West Palm Bch FL High 62 Forest Park Elementary 1201 S.W. 3rd St. Boynton Beach FL Elementary 66 Galaxy Elementary 301 Galaxy Way Boynton Beach FL Elementary 75 Greenacres Elementary 405 Jackson Ave. Greenacres FL Elementary 77 G-Star School of Arts for Motion Picture&TV 2065 Prairie Rd. West Palm Bch FL High charter 81 Heritage Elementary 5100 Melaleuca Ln. Greenacres FL Elementary 82 Hidden Oaks Elementary 7685 S. Military Trail Lake Worth FL Elementary 90 Indian Pines Elementary 6000 Oak Royal Dr. Lake Worth FL Elementary 99 John I. Leonard High th Ave. N. Greenacres FL High 106 L. C. Swain Middle 5332Lake Worth Rd. Greenacres FL Middle 150 Palm Springs Elementary 101 Davis Rd. Lake Worth FL Elementary 160 Poinciana Elementary 1203 N. Seacrest Blvd. Boynton Beach FL Elementary 181 Somerset Academy Boca K S. Olive Ave. West Palm Bch FL Elementary 193 Tomorrow's Promise Community 5090 S. Haverhill Rd. Greenacres FL Middle Source: Palm Beach County Public Schools (red- 1-mile, green 1-3 mile and blue 3-5 mile) Page 30

227 Palm Beach Maritime Academy, Lantana, FL Capacity of School Competition The Consultant gathered enrollment data and compared Fall 2013 enrollments to the capacities associated with each school within 5 miles of the project site. Table 11 summarizes the school competition enrollment and capacity. Table 12 summarizes the information by school type. Table 11. School Competition Enrollment and Capacity ID School Name Type Capacity Total COFTE Utilization 11 Barton Elementary Elementary % 112 Lantana Community Middle Middle % 113 Lantana Elementary Elementary % 1 Academy for Positive Learning K-8 charter % 31 Charter Schools of Boynton Beach K-10 charter % 64 Freedom Shores Elementary Elementary % 83 Highland Elementary Elementary % 85 Hope Learning (Noah's Ark International) Elementary charter % 88 Imagine Schools-Chancellor Campus K-8 charter 1,001 1, % 97 JFK Charter School Elementary charter % 109 Lake Worth Community High High % 110 Lake Worth Middle Middle % 123 Maverick's High at Palm Springs High charter % 130 North Grade Elementary Elementary % 162 Quantum High School High charter % 166 Riviera Beach Maritime Academy Elementary % 171 Royal Palm Beach Community High ESE % 174 S. D. Spady Elementary High % 180 Somerset Academy Boca Elementary % 186 South Tech Academy Elementary 1,300 1, % 25 Boynton Beach Community High High % 34 Citrus Cove Elementary Elementary % 35 Clifford O. Taylor/Kirklane Elementary Elementary % 36 Congress Middle Middle % 45 Day Star Academy of Excellence Elementary charter % 47 Diamond View Elementary Elementary % 60 Forest Hill Community High High % 62 Forest Park Elementary Elementary % 66 Galaxy Elementary Elementary % 75 Greenacres Elementary Elementary % 77 G-Star School of Arts for Motion Picture and TV High charter 1,300 1, % 81 Heritage Elementary Elementary % 82 Hidden Oaks Elementary Elementary % 90 Indian Pines Elementary Elementary % 99 John I. Leonard High High % 106 L. C. Swain Middle Middle % 150 Palm Springs Elementary Elementary % 160 Poinciana Elementary Elementary % 181 Somerset Academy Boca K-5 Elementary % 193 Tomorrow's Promise Community Middle % Source: Palm Beach County Public Schools (red- 1-mile, green 1-3 mile and blue 3-5 mile) Page 31

228 Palm Beach Maritime Academy, Lantana, FL Table 12. School Competition Capacity Summary Schools No. Above Capacity % Capacity Net Total Under/ (Over) Capacity Elementary % 4,643 Elem/Mid % 377 Middle % 1,350 Mid/High % 0 High % 2,670 Total* % 9,040 *ESE school not included Source: Palm Beach County Public Schools The data indicates that the 39 schools within the 5-mile market have capacity at both the elementary and middle school level. The 3-mile market utilization rate is estimated at 76 percent which is consistent with the overall 5-mile utilization rate of 78 percent. The current utilization rates associated with the local competition makes the environment competitive for the establishing of a new school within the market. School Competition Grade History Palm Beach Maritime Academy has a strong performance history with it registering a grade of A in 2011 and 2012 and a grade of B in Performance of the 39 schools within 5 miles of the site is at a C level. Table 13 provides a detailed listing of the 3-year history of competing schools with the 5-mile radius. Table 14 summarizes the grade history of the competition for There are 7 schools operating as A schools, 5 operating as B schools, 21 others performing at a C level or worse and 6 schools with no grade information available. As the data indicates, 12 of the 39 schools are behaving at a B level or better with only 21 percent of reporting schools are performing at an A level. Page 32

229 Palm Beach Maritime Academy, Lantana, FL Table 13. Fall 2012 Grade Summary Grade Grade Grade ID School Name Type Palm Beach Maritime Academy K-8 B A A 11 Barton Elementary Elementary C D D 112 Lantana Community Middle Middle B A A 113 Lantana Elementary Elementary C B B 1 Academy for Positive Learning K-8 charter C B A 31 Charter Schools of Boynton Beach K-10 charter F D C 64 Freedom Shores Elementary Elementary A A A 83 Highland Elementary Elementary D C C 85 Hope Learning (Noah's Ark International) Elementary charter 88 Imagine Schools-Chancellor Campus K-8 charter B B A 97 JFK Charter School Elementary charter B B A 109 Lake Worth Community High High A B B 110 Lake Worth Middle Middle C C B 123 Maverick's High at Palm Springs High charter F 130 North Grade Elementary Elementary A A A 162 Quantum High School High charter 166 Riviera Beach Maritime Academy Elementary C B A 171 Royal Palm Beach Community High ESE C C C 174 S. D. Spady Elementary High A A A 180 Somerset Academy Boca Elementary 186 South Tech Academy Elementary B A D 25 Boynton Beach Community High High A B B 34 Citrus Cove Elementary Elementary A A A 35 Clifford O. Taylor/Kirklane Elementary Elementary D C C 36 Congress Middle Middle C B A 45 Day Star Academy of Excellence Elementary charter 47 Diamond View Elementary Elementary C B B 60 Forest Hill Community High High C C B 62 Forest Park Elementary Elementary D C C 66 Galaxy Elementary Elementary C D D 75 Greenacres Elementary Elementary C B A 77 G-Star School of Arts for Motion Picture and TV High charter A A A 81 Heritage Elementary Elementary D C B 82 Hidden Oaks Elementary Elementary B A A 90 Indian Pines Elementary Elementary C B B 99 John I. Leonard High High C C B 106 L. C. Swain Middle Middle C B A 150 Palm Springs Elementary Elementary C B A 160 Poinciana Elementary Elementary C B A 181 Somerset Academy Boca K-5 Elementary 193 Tomorrow's Promise Community Middle Source: Palm Beach County Public Schools *(red- 1-mile, green 1-3 mile and blue 3-5 mile) Page 33

230 Palm Beach Maritime Academy, Lantana, FL Table 14. School Competition Grade History Elementary Elem/Mid Middle Mid/High High Total A B C D F NA-Pending Total Source: Palm Beach County Public Schools The Consultant s analysis indicated that the overall school quality is average with a performance level of C and that the addition of an A or B school at the K-8 and highs school (9-12) level will exceed current market performance. With only 21 percent of the schools operating at an A performance level and 15 percent of the schools operating at a B performance or better, the Consultant believes a quality school will capture market share. High schools within the 5-mile radius show a higher performance level with 7 schools reporting grades for This data indicates that 4 high schools operated at an A level, 2 high schools operated at a C level and 1 high school operated at an F level. Based on current performance levels of high schools within the 5-mile market, the Consultant believes that the expansion of Palm Beach Maritime Academy into grades 9-12 will need to be highly competitive with its high school performance to maintain its own cohorts and capture additional students within the market. School Competition Free-Reduced Lunch Rate and Minority Rate The Consultant gathered free and reduced lunch rate data along with minority rate data as reported to the FLDOE. The Consultant compared Fall 2013 data for each school within 5 miles of the Palm Beach Maritime Academy. According to the data, the schools within the 5-mile radius show an overall free and reduced lunch rate of 79 percent and a minority rate of 82 percent. Table 15 provides a listing of each school s lunch rate and minority rate data within the 5-mile radius. Page 34

231 Palm Beach Maritime Academy, Lantana, FL Table 15. School Competition Free/Reduced Lunch Rate and Minority Rate Data (5-Mile Radius) Free or Reduced Minority ID School Name Type Lunch Rate Rate 147 Palm Beach Maritime Academy K Barton Elementary Elementary Lantana Community Middle Middle Lantana Elementary Elementary Academy for Positive Learning K-8 charter Charter Schools of Boynton Beach K-10 charter Freedom Shores Elementary Elementary Highland Elementary Elementary Hope Learning (Noah's Ark International) Elementary charter Imagine Schools-Chancellor Campus K-8 charter JFK Charter School Elementary charter Lake Worth Community High High Lake Worth Middle Middle Maverick's High at Palm Springs High charter North Grade Elementary Elementary Quantum High School High charter 166 Riviera Beach Maritime Academy Elementary Royal Palm Beach Community High ESE S. D. Spady Elementary High Somerset Academy Boca Elementary South Tech Academy Elementary Boynton Beach Community High High Citrus Cove Elementary Elementary Clifford O. Taylor/Kirklane Elementary Elementary Congress Middle Middle Day Star Academy of Excellence Elementary charter Diamond View Elementary Elementary Forest Hill Community High High Forest Park Elementary Elementary Galaxy Elementary Elementary Greenacres Elementary Elementary G-Star School of Arts for Motion Picture and TV High charter Heritage Elementary Elementary Hidden Oaks Elementary Elementary Indian Pines Elementary Elementary John I. Leonard High High L. C. Swain Middle Middle Palm Springs Elementary Elementary Poinciana Elementary Elementary Somerset Academy Boca K-5 Elementary 193 Tomorrow's Promise Community Middle Source: Palm Beach County Public Schools *(red- 1-mile, green 1-3 mile and blue 3-5 mile) Page 35

232 Palm Beach Maritime Academy, Lantana, FL 5.3 Enrollment Status As of June 2, 2014, Palm Beach Maritime Academy had an average annual enrollment of 1,036 students. Since the school year, Palm Beach Maritime Academy has increased its enrollment 34 percent annually through the school year. The forecasted growth of the school and expansion into high school grades 9-12 forecasts an average annual growth rate of 14 percent. Given the market demographics and past performance of the school indicates that the forecasted enrollment is reasonable through the school year. 5.4 New School Pipeline The Consultant reviewed the Palm Beach County Public School s 5-Year Capital Improvement Plan (Appendix 2). This report indicates that there are no new schools planned as part of the 5-Year Capital Improvement Plan through Year However, according to Palm Beach County Schools, there are ten reported charter schools set to open in Fall Appendix 3 details the schools. 6.0 Palm Beach Maritime Academy Financial Analysis The Client provided the Consultant historical and forecasted financials for the Palm Beach Maritime Academy. The historical data is for years 2009 through 2014 and forecasted enrollment, revenue and expense data for 2015 through The summary of financials is provided in Table 16 and Table 17. Table 18 summarizes the forecasted debt service and debt service coverage (DSC) ratios from 2015 through Page 36

233 Palm Beach Maritime Academy, Lantana, FL Table 16. Palm Beach Maritime Academy Historical Financials * Total Enrollment , % 18.9% 4.0% 101.6% 40.0% Revenues State Sources $1,941,286 $2,112,390 $2,555,064 $2,395,429 $4,787,696 $7,297,640 Local Sources $177,096 $168,432 $110,152 $165,161 $178,805 $349,061 State & Local subtotal $2,118,382 $2,280,822 $2,665,216 $2,560,590 $4,966,501 $7,646,701 Per Pupil Funding (state and local) $7,593 $7,680 $7,550 $6,977 $6,711 $7,381 State/Local Per Pupil $ growth 1.1% -1.7% -7.6% -3.8% 10.0% Federal Sources $0 $0 $74,376 $1,099 $365,717 $398,052 Developer Payments $250,000 $500,000 Total $2,118,382 $2,280,822 $2,739,592 $2,561,689 $5,582,218 $8,544,753 Per Pupil Funding (state-local-federal) $7,593 $7,680 $7,761 $6,980 $7,206 $7,765 Total Per Pupil $ growth (w/ Developer Payments) 1.1% 1.1% -10.1% 8.1% 9.3% Expenditures Instruction $1,109,373 $1,205,839 $1,333,764 $1,388,372 $2,904,162 $4,464,433 School Administration (3) $561,041 $615,589 $627,723 $639,888 $1,235,292 $1,355,810 Operation of Plant (1) $411,844 $414,318 $423,979 $571,279 $787,022 $1,781,484 Pupil Transportation Svcs $49,515 $47,199 $39,139 $56,735 $229,750 $330,478 XO Expenditures (2) $500,000 Depreciation & Amortization $7,938 $9,543 $55,126 $202,294 Interest $20,000 Total $2,131,773 $2,282,945 $2,432,543 $2,665,817 $5,711,352 $8,154,499 Excess of Revenue over Expenditures ($13,391) ($2,123) $307,049 ($104,128) ($129,134) $390,254 Beginning Fund Balance $17,930 $4,539 $2,416 $309,465 $205,337 $76,203 Accumulated Unrestricted Fund Balance $4,539 $2,416 $309,465 $205,337 $76,203 $466,457 Source: Palm Beach Maritime Academy (1) Includes annual lease payments of $0.3MM in 2010, $0.3MM in 2011, $0.4MM in 2012, $0.5MM in 2013, and $1.3MM in 2014 (2) Lease settlement expense (3) Annual charter school mngmt fee based on a pct of Gross Revenues. In 2014, there was a change in management company resulting in lower fee expense *unaudited financials Based on the historical data provided, enrollment levels have increased from 279 in 2009 to 1,036 in 2014; this represents an average annual growth rate of over 34 percent. With respect to state, local and federal revenue available over that same time period, the average total per pupil revenue from 2009 through 2014 was $7,497. With respect to forecasted growth, enrollment levels are projected to increase from 1,036 in 2014 to 1,728 in 2018; this represents an average annual growth rate of just under 14 percent. Given the overall improving statewide economy and continued improvement in the home prices, the Consultant believes there is upside for increased state and local spending on education in both the short-term and long-term. Page 37

234 Palm Beach Maritime Academy, Lantana, FL The Consultant estimates the total per pupil revenue data from 2015 through 2018, at $7,554 per pupil, which represents maintaining the historical average experienced by Palm Beach Maritime Academy from 2009 through The Consultant believes that the forecasted per pupil revenue of $7,554 is a reasonable estimate and consistent with both school and State of Florida trends. Based on the State of Florida per pupil revenue data in Section 2.3, the average growth rate with respect to budgeted per pupil revenue is essentially flat at 0.18 percent since 2009 while the Palm Beach Maritime Academy s per pupil revenue growth from 2015 through 2018 is -1.6 percent. Table 17 summarizes the impact with respect to funds available for debt service. Table 17. Palm Beach Maritime Academy Forecasted Financials Total Enrollment 1,187 1,443 1,595 1, % 21.6% 10.5% 8.3% Revenues State Sources $8,184,921 $10,001,484 $11,164,823 $12,268,004 Local Sources $310,621 $394,423 $441,717 $485,598 State & Local subtotal $8,495,542 $10,395,907 $11,606,540 $12,753,602 Per Pupil Funding (state and local) $7,157 $7,204 $7,277 $7,381 State/Local Per Pupil $ growth -3.0% 0.7% 1.0% 1.4% Federal Sources $351,359 $429,381 $477,923 $522,698 Developer Payments Total $8,846,901 $10,825,288 $12,084,463 $13,276,300 Per Pupil Funding (total) $7,453 $7,502 $7,576 $7,683 Total Per Pupil $ growth -9.6% 0.7% 1.0% 1.4% Expenditures Instruction $5,075,560 $6,251,413 $6,915,753 $7,546,117 School Administration (3) $806,412 $919,998 $951,326 $949,025 Operation of Plant (1) $656,396 $778,546 $919,562 $1,073,723 Pupil Transportation Services $418,000 $456,000 $494,000 $494,000 XO Expenditures (2) Depreciation & Amortization $266,998 $274,275 $224,968 $173,234 Interest $939,832 $1,598,900 $1,861,550 $1,859,950 Total $8,163,198 $10,279,132 $11,367,159 $12,096,049 Excess of Revenue over Expenditures $683,703 $546,156 $717,304 $1,180,251 Beginning Fund Balance $466,457 $1,150,160 $1,696,316 $2,413,620 Accumulated Unrestricted Fund Balance $1,150,160 $1,696,316 $2,413,620 $3,593,871 Source: Palm Beach Maritime Academy (1) Includes annual lease payments of $0.3MM in 2010, $0.3MM in 2011, $0.4MM in 2012, $0.5MM in 2013, and $1.3MM in 2014 (2) Lease settlement expense (3) Annual charter school mngmt fee based on a pct of Gross Revenues. In 2014, there was a change in management company resulting in lower fee expense Page 38

235 Palm Beach Maritime Academy, Lantana, FL Table 18. Palm Beach Maritime Academy Forecasted Debt Service Coverage Revenues Available for Debt Service $2,696,945 $3,339,329 $3,755,148 $4,162,460 Debt Service (4) $939,832 $1,598,900 $1,861,550 $1,859,950 Debt Service Cover (DSC) Ratio Avg DSC Ratio 2.30 Source: Palm Beach Maritime Academy and Hapoalim Securities, Inc. (4) Estimate based on $24MM bond issuance in 2014 at average interest rate of 7.00%, net of capitalized interest Table 18 estimates the average DSC ratio of 2.30 when deferring the school administration fee expenditures before debt service. This DSC ratio also does not factor in use of the school s unrestricted fund balance. 7.0 Recommendations and Conclusions The Palm Beach Maritime Academy location is undersupplied with competitive schools within 5 miles. Public Elementary and Middle school performance ratings have been average with only 21 percent of all schools in the 5-mile market rating A. The Consultant has conducted multiple charter school analyses throughout Florida and within other states in the South over the past two years. In the Consultant s experience, a median school-age capture rate of 7.7 percent and average school-age capture rate of 13.1 percent is acceptable. The forecasted average annual capture rate of 4.1 percent for the Palm Beach Maritime Academy meets both thresholds. The Consultant believes the capture ratios needed to make the expansion of the Palm Beach Maritime Academy a success are within market accepted performance standards. The Consultant s analysis for Palm Beach Maritime Academy indicates average annual forecasted enrollment growth of 14 percent, which is reasonable given the average annual growth of over 34 percent from 2009 through 2014 The financial analysis reviewed by the Consultant estimates an average per pupil revenue figure of $7,554 for 2015 through 2018, which results in an average DSC ratio over the first four years of 2.30 (when deferring school administration fees prior to debt service). The estimated DSC ratio also does not factor in the use of the school s forecasted unrestricted fund balance. The Consultant s specific market and financial analysis and over 25 years experience forecasting Florida population and employment markets at the County level make it confident to provide a recommendation to undertake the project. Page 39

236 APPENDIX 1

237 Site 1 Mile 3 Mile 5 Mile Miles Ü

238 APPENDIX 2

239 Balanced Version Summary of Estimated Capital Revenues Fiscal Years Estimated Revenue FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 State Sources Charter School Capital Outlay 3,691,561 3,200,000 3,200,000 3,200, ,200,000 3,200,000 CO & DS 1,119,048 1,119,048 1,119,048 1,119, ,119,048 1,119,048 COBI Bonds PECO Bonds - Const ,720, , PECO Bonds - Maintenance - - 3,572,824 4,188,123 4,624,551 4,624,551 Subtotal State Sources 4,810,609 4,319,048 9,612,550 9,090,141 8,943,599 8,943,599 Local Sources Property Values 133,036,112, ,661,344, ,207,798, ,976,110, ,015,155, ,295,761,279 Local Capital Improvement (1.5 mil) 191,572, ,672, ,659, ,405, ,101, ,145,896 Discretionary Capital Improvement ( FY13:.048 mil, FY14:.021 mil) 6,130,304 2,795, Fund Balance Carried Forward 311,903,190 54,759, Reserves - 18,508,328 9,378,593 2,442,183 - Restricted Reserve and Project Closeouts - - 4,574,898 6,264,718 4,379,806 4,379,806 Impact Fees 2,192,181 1,000,000 1,000,000 1,000,000 1,000,000 Interest Income 200, , ,000 1,000,000 1,000,000 1,000,000 Miscellaneous Revenue 5,415, Subtotal Local Sources 515,221, ,919, ,492, ,048, ,923, ,525,702 Other Revenue Sources Interfund Transfer QSCB Referendum Subtotal Other Revenue Sources TOTAL REVENUES 520,031, ,238, ,105, ,139, ,867, ,469,301 Page 1 of 10

240 Balanced Version Summary of Five Year Capital Plan Category Staff Recommended Budget for FY 2014 (including carryforward) Balanced Appropriations FY 2015 Balanced Appropriations FY 2016 Balanced Appropriations FY 2017 Balanced Appropriations FY 2018 Construction Projects Addition and Remodeling Projects 2,622, Modernization and Replacement Projects 69,221, New Schools Subtotal Construction Projects 71,843, Other Items Debt Service 148,000, ,000, ,000, ,000, ,000,000 Site Acquisition 1,104, , , , ,000 Capital Contingency 19,011, Restricted Reserve 21,727, Reserves for Future Years 27,886, Subtotal Construction Related Items 217,729, ,120, ,120, ,120, ,120,000 Non-Construction Equipment 2,582, ,215,000 Facilities 12,490,452 1,274,821 1,300,317 1,326,324 1,352,850 Security 7,406,136 2,750,972 2,966, , ,000 Education Technology 12,512, Technology 5,193, ,208,648 Transportation 3,632,289 2,880,000 2,880,000 2,880,000 3,130,000 Subtotal Non-Construction Projects 43,817,520 6,905,793 7,147,289 5,026,324 9,726,498 Transfers to General Fund Required Non-Construction Payments 11,440,009 11,440,000 11,440,000 11,440,000 11,440,000 Equipment Maintenance 4,637,586 5,125,000 5,125,000 5,125,000 5,125,000 Facilities Maintenance 38,875,608 39,886,956 40,928,645 42,001,584 43,106,712 Security Maintenance 2,131,606 2,195,554 2,261,421 2,329,263 2,399,141 Education Technology Maintenance 1,033,624 1,110,000 1,110,000 1,113,000 1,113,000 Technology Maintenance 22,757,916 22,130,798 22,772,366 23,433,181 24,113,821 TEN Maintenance 96,000 96,000 96,000 96,000 96,000 Transportation Maintenance 4,956,744 5,094,905 5,138,331 5,183,059 5,229,130 Subtotal Transfers to General Fund 85,929,093 87,079,213 88,871,763 90,721,088 92,622,804 Total Capital Budget 419,320, ,105, ,139, ,867, ,469,302 Page 2 of 10

241 Five Year Capital Plan FY FY 2018 Balanced Version Construction Projects Project Name Projected Carryforward to FY 2014 Staff Recommended Appropriation for FY 2014 (7/11/13) Staff Recommended Budget for FY 2014 (including carryforward) Balanced Appropriations FY 2015 Balanced Appropriations FY 2016 Balanced Appropriations FY 2017 Balanced Appropriations FY 2018 Addition and Remodeling Projects Banyan Creek Elem Core Addition 252, ,140 DD Eisenhower ES Demo for Playfields Energy Conservation-Green-LEED 101, ,475 FHESC Window Replacement 303, ,812 Galaxy ES Bldg. 11 & 12 Remodel (Ancillary Facility) - 500, ,000 Heritage Elem LEED EB 3, ,483 Indian Pines Elem Pre-K 4, ,746 Manatee Elem Addition 15, ,176 Pahokee High Remodeling 310, ,209 Palm Beach Lakes High Academy/Add Riviera Beach Preparatory Academy 148, ,025 Seminole Trails Elem Addition Transportation - South Addition 809, ,285 Transportation - West Central Remodel 10, ,447 West Tech Ed Center Modifications 5, ,830 Whispering Pines Elem Addition Phase II 157, ,221 Total Addition and Remodeling 2,122, , ,622, Modernization and Replacement Projects Galaxy Elem Modernization 5,074, ,074,687 Gladeview Elem Modernization 20,337, ,337,895 Gove Elem Modernization 3,690, ,690,647 North Palm Beach Elem Modernization 24,414, ,414,969 Northboro Elem Modernization 176, ,936 Rosenwald Elem Modernization 15,350, ,350,428 Royal Palm School Modernization 175, ,540 West Central Maintenance Facility West Central Transportation Facility Total Modernizations and Replacements 69,221, ,221, New Schools South Area Middle School of Arts (03-LL) at Plumosa ES Total New Schools Total Construction Projects 71,343, , ,843, Page 3 of 10

242 Five Year Capital Plan FY FY 2018 Balanced Version Other Items Project Name Projected Carryforward to FY 2014 Staff Recommended Appropriation for FY 2014 (7/11/13) Staff Recommended Budget for FY 2014 (including carryforward) Balanced Appropriations FY 2015 Balanced Appropriations FY 2016 Balanced Appropriations FY 2017 Balanced Appropriations FY Debt Service Lease Payments for Certificates of Participation - 148,000, ,000, ,000, ,000, ,000, ,000,000 Other Debt Items - - Total Required Debt Service - 148,000, ,000, ,000, ,000, ,000, ,000,000 Site Acquisition Lease of land for temporary West Central Transportation Facility - 120, , , , , ,000 Site Acquisition 984, ,087 - Total Site Acquisition 984, , ,104, , , , ,000 Contingency Capital Contingency 19,011, ,011,719 Restricted Reserve 21,727, ,727,235 Reserve for FY Reserve for FY 15 16,221, ,287, ,508,328 Reserve for FY 16 7,980, ,398, ,378,593 Reserve for FY 17 2,442, ,442,183 Total Contingency 64,940, ,127, ,068, Total Other Items 65,924, ,247, ,172, ,120, ,120, ,120, ,120,000 Page 4 of 10

243 Five Year Capital Plan FY FY 2018 Balanced Version Non-Construction Projects and Transfers Project Name Projected Carryforward to FY 2014 Staff Recommended Appropriation for FY 2014 (7/11/13) Staff Recommended Budget for FY 2014 (including carryforward) Balanced Appropriations FY 2015 Balanced Appropriations FY 2016 Balanced Appropriations FY 2017 Balanced Appropriations FY 2018 Required Non-Construction Payments Charter School Capital Outlay - 3,200, ,200,009 3,200,000 3,200,000 3,200,000 3,200,000 Property and Flood Insurance - 8,240, ,240,000 8,240,000 8,240,000 8,240,000 8,240,000 Total Required Non-Construction Payments - 11,440, ,440,009 11,440,000 11,440,000 11,440,000 11,440,000 Equipment Capital Projects: - AV Equipment Replacement Fund 15, , , ,000 Choice Furnishings 75, , ,000 75,000 Classroom Furnishings 227, ,322 County-Wide Custodial Equipment 11, , , ,000 County-Wide Equipment (FF&E) 1,027, , ,577, ,000 Musical Instruments 10, , , ,000 Subtotal Equipment Capital Projects 1,367, ,215, ,582, ,215,000 Transfers to General Fund: Destiny Library Software Update/Support - 108, ,861 Transfer for Copier Maintenance - 4,173, ,173,725 5,000,000 5,000,000 5,000,000 5,000,000 Transfer for Equipment Maintenance - 355, , , , , ,000 Subtotal Equipment Transfers - 4,637, ,637,586 5,125,000 5,125,000 5,125,000 5,125,000 Total Equipment 1,367, ,852, ,220,200 5,125,000 5,125,000 5,125,000 6,340,000 Page 5 of 10

244 Five Year Capital Plan FY FY 2018 Balanced Version Non-Construction Projects and Transfers (continued) Project Name Projected Carryforward to FY 2014 Staff Recommended Appropriation for FY 2014 (7/11/13) Staff Recommended Budget for FY 2014 (including carryforward) Balanced Appropriations FY 2015 Balanced Appropriations FY 2016 Balanced Appropriations FY 2017 Balanced Appropriations FY 2018 Facilities Capital Projects: Building Envelope - Verde ES Roof 100, ,766 Building Envelope - WT Dwyer High 550, ,000 Building Envelope Unassigned 550, ,000 Covered Walkways - Calusa ES 298, ,842 Covered Walkways - Other Projects 155, ,809 Covered Walkways - Verde Elem 253, ,012 Covered Walkways - Unassigned 244, ,389 Environmental Service Contracts 76, ,274, ,351,263 1,274,821 1,300,317 1,326,324 1,352,850 HVAC Renovations - Jupiter Farms ES 200, ,000 HVAC Renovations - Olympic Heights HS 40, ,409 HVAC Renovations - Other Projects 1, ,640 HVAC Renovations - William T Dwyer HS 587, ,145 HVAC - Unassigned 1,170, ,170,829 Interlocals/School Center Funds 65, ,339 Legal Settlements - Waterless Urinals 267, ,143 Minor Projects - E Bus Compound Rdwy Imprv 25, ,410 Minor Projects - Assigned 88, ,049 Minor Projects - Unassigned 238, ,621 Portables - Boynton Beach HS Relo 500, ,000 Portables - Calusa ES CSR 164, ,954 Portables - Assigned 70, ,990 Portables - Verde ES CSR 154, ,033 Portables - West Central Transportation 140, ,000 Portables - Unassigned 2,656, ,656,122 Relocatables - Leasing 3, ,719 Roof Replacement - Belle Glade ES 583, ,520 Roof Replacement - Cypress Trails ES 54, ,000 Roof Replacement - Pahokee HS Bldg 2 350, ,000 Roof Replacement - Pioneer Park ES 590, ,477 Roof Replacement - School Food Service - Roof Replacement - W.T. Dwyer HS - Roof Replacement - Olympic Hts HS - Roof Replacement - Pahokee MS/HS - Roof Replacement - FHESC - Roof Replacement - Okeeheelee MS - Roof Replacement - Plumosa ES - Roof Replacement - Washington ES - Roof Replacement - Transportation & Maintenance - Page 6 of 10

245 Five Year Capital Plan FY FY 2018 Balanced Version Non-Construction Projects and Transfers (continued) Project Name Projected Carryforward to FY 2014 Staff Recommended Appropriation for FY 2014 (7/11/13) Staff Recommended Budget for FY 2014 (including carryforward) Balanced Appropriations FY 2015 Balanced Appropriations FY 2016 Balanced Appropriations FY 2017 Balanced Appropriations FY 2018 Facilities (Continued) Roof Replacement - Wynnebrook ES - Roof Replacement - Carver MS - Roof Replacement - Odyssey MS - Roof Replacement - Waters Edge ES - Roof Replacement - Sabal Palm School - Roof Replacement - West Transportation - Roof Replacement - Rivera Beach Prep Academy - Roof Replacement - Pine Grove ES - Roof Replacement - Limestone Creek ES - Roof Replacement - Addison Mizner ES - Roof Replacement - J.C. Mitchell ES - Roof Replacement - Hammock Pointe ES - Roof Replacement - A.W. Dreyfoos SOA - Roof Replacement - Inlet Grove Charter - Roof Replacement - West Central Bus Compound - Roof Replacement - Unassigned 122, ,351 Safety - FHESC Halon Fire System Safety - Fire Alarm Repl-Crestwood MS Safety - Fire Alarm Repl-Grove Park ES 110, ,120 Safety - Lighting Replacement - Jupiter MS 91, ,040 Safety - Fire Alarm Repl-Loggers Run MS - - Safety - Fire Alarm Repl-Santaluces HS 67, ,895 Safety - Fire Alarm Repl-Spanish River HS 48, ,289 Safety - Fire Alarm Repl - Bear Lakes MS - Safety - Fire Alarm Repl - Belvedere ES - Safety - Fire Alarm Repl - Benoist Farms ES - Safety - Fire Alarm Repl - Crosspoint ES - Safety - Fire Alarm Repl - Eagles Landing MS - Safety - Fire Alarm Repl - Egret Lake ES - Safety - Fire Alarm Repl - Forest Hill HS - Safety - Fire Alarm Repl - FHESC - Safety - Fire Alarm Repl - Gladeview ES - Safety - Fire Alarm Repl - Indian Ridge - Safety - Unassigned 950, Traffic Project - Boca Raton Middle 183, ,000 Traffic Project - Everglades Elem 315, ,000 Village Academy - Pre-K 71, ,461 TS Isaac Recovery 24, ,815 Subtotal Facilities Capital Projects 12,166, ,274, ,490,452 1,274,821 1,300,317 1,326,324 1,352,850 Page 7 of 10

246 Five Year Capital Plan FY FY 2018 Balanced Version Non-Construction Projects and Transfers (continued) Project Name Projected Carryforward to FY 2014 Staff Recommended Appropriation for FY 2014 (7/11/13) Staff Recommended Budget for FY 2014 (including carryforward) Balanced Appropriations FY 2015 Balanced Appropriations FY 2016 Balanced Appropriations FY 2017 Balanced Appropriations FY Facilities (Continued) Transfers to General Fund: Transfer for ADA Compliance - 900, , , , , ,000 Transfer for BEMP Transfer for Environmental Control* - 807, , , , , ,143 Transfer for Maintenance of Facilities* - 32,688, ,688,228 33,668,875 34,678,941 35,719,309 36,790,889 Transfer for Capital Project Support* - 215, , , , , ,680 Transfer for Fire/Life/Safety - 957, , , , , ,000 Transfer for HVAC Maintenance 1,000, ,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Transfer for Maintenance Projects - 100, , , , , ,000 Transfer for Preventative Maintenance - 2,207, ,207,000 2,207,000 2,207,000 2,207,000 2,207,000 Transfer for TS Isaac Subtotal Facilities Transfers - 38,875, ,875,608 39,886,956 40,928,645 42,001,584 43,106,712 Total Facilities 12,166, ,149, ,366,060 41,161,777 42,228,962 43,327,908 44,459,562 Security Capital Projects: BDAs Card Access Systems 93, ,351 Mobile Computers for Police Cars 20, ,001 Open Sky Radio in Area 3 5, ,981 Open Sky Tower in Boca Raton 350, ,000 Portable Radios for New Officers 131, ,202 Radio Repeaters Radios for new Police Vehicles 17+7=24 144, ,000 School Bus Video Network System 114, , ,372 School Police Cars - 17 new 545, ,000 School Security Upgrades - 5,767, ,767,224 2,750,972 2,966, , ,000 Security Alarm Systems Service Vans - 2 replacement 31, ,000 Verde ES Security System 6, Video Surveillance Schools 53, ,987 Subtotal Security Capital Projects 274, ,138, ,406,136 2,750,972 2,966, , ,000 Transfers to General Fund: Transfer for Security* 2,131, ,131,606 2,195,554 2,261,421 2,329,263 2,399,141 Subtotal Security Transfers - 2,131, ,131,606 2,195,554 2,261,421 2,329,263 2,399,141 Total Security 274, ,270, ,537,742 4,946,526 5,228,393 3,149,263 3,219,141 Page 8 of 10

247 Five Year Capital Plan FY FY 2018 Balanced Version Non-Construction Projects and Transfers (continued) Project Name Projected Carryforward to FY 2014 Staff Recommended Appropriation for FY 2014 (7/11/13) Staff Recommended Budget for FY 2014 (including carryforward) Balanced Appropriations FY 2015 Balanced Appropriations FY 2016 Balanced Appropriations FY 2017 Balanced Appropriations FY 2018 Educational Technology Capital Projects: Classroom Technology - Assigned 8, ,290 Classroom Technology - Forest Hill HS Classroom Technology - Heritage ES 1, ,906 Classroom Technology - Lake Worth HS Classroom Technology - LCD (119 schools) - 6,615, ,615,000 Classroom Technology-Riviera Beach Prep Acadamy 230, ,430 Classroom Technology - Unassigned 67, Classroom Technology - LCD Adult Ed Cntr 17, ,463 Digital Divide 11, , ,882 Technology Tools 14, ,533, ,547,605 Subtotal Education Technology Projects 351, ,228, ,512, Transfers to General Fund: Transfer for Equipment Maintenance - 450, , , , , ,000 Transfer for Blackboard Engage (Edline and Gradequick) - 583, , , , , ,000 Subtotal Educational Technology Transfers - 1,033, ,033,624 1,110,000 1,110,000 1,113,000 1,113,000 Total Educational Technology 351, ,262, ,546,200 1,110,000 1,110,000 1,113,000 1,113,000 Technology Capital Projects: Application Monitoring , ,018 BYOD Computer Admin Refresh Computer Refresh 4.8 to1 173, ,103 3,208,648 Disaster Recovery , ,000 Disk Storage , ,000 District Server Refresh , ,102 Enterprise Learning Management (ELM) 228, ,434 Green Data Center Optimization - 194, ,750 Hardware/Software 3, ,498 Intrusion Prevention , ,000 IT Service Mgmt Upgrade , ,756 LIIS - Student Information Systems LIIS -Portal Project Mobile Device Management Pseries Consolidation SAN 5, ,250 School LAN Switch 1, , ,051 System Lifecycle Management Endpoint Security , ,690 TEN Broadcast on IP Infrastructure 590, ,500 Windows License FTE Model ,250, ,250,138 Wireless Infrastructure 85, , ,163 Subtotal Technology Projects 264, ,929, ,193, ,208,648 Page 9 of 10

248 Five Year Capital Plan FY FY 2018 Balanced Version Non-Construction Projects and Transfers (continued) Project Name Projected Carryforward to FY 2014 Staff Recommended Appropriation for FY 2014 (7/11/13) Staff Recommended Budget for FY 2014 (including carryforward) Balanced Appropriations FY 2015 Balanced Appropriations FY 2016 Balanced Appropriations FY 2017 Balanced Appropriations FY Technology (Continued) Transfers to General Fund: Transfer for Application Systems - 1,626, ,626, , , , ,528 Transfer for Business Operating Systems* - 1,523, ,523,156 1,568,851 1,615,916 1,664,394 1,714,325 Transfer for CAFM* - 1,121, ,121,027 1,154,658 1,189,298 1,224,976 1,261,726 Transfer for Data Warehouse* - 3,081, ,081,248 3,173,685 3,268,896 3,366,963 3,467,972 Transfer for ERP* - 3,362, ,362,353 3,463,224 3,567,120 3,674,134 3,784,358 Transfer for IT Security* - 1,832, ,832,416 1,887,388 1,944,010 2,002,330 2,062,400 Transfer for Portal Project - 46, ,554 46,554 46,554 46,554 46,554 Transfer for School Center Admin Technology - 322, , , , , ,112 Transfer for Secondary Tech Maintenance* - 3,130, ,130,656 3,224,576 3,321,313 3,420,952 3,523,581 Transfer for Technology Infrastructure* - 6,711, ,711,866 6,913,222 7,120,619 7,334,237 7,554,264 Subtotal Technology Transfers - 22,757, ,757,916 22,130,798 22,772,366 23,433,181 24,113,821 Total Technology 264, ,687, ,951,369 22,130,798 22,772,366 23,433,181 27,322,469 The Education Network (TEN) Transfers to General Fund: Transfer for TEN Maintenance - 96, ,000 96,000 96,000 96,000 96,000 Total TEN - 96, ,000 96,000 96,000 96,000 96,000 Transportation Capital Projects: Bus Routing System 250, ,000 Equipment Upgrades & Replacement - - Fleet & Fuel Management Software Upgrades - - Fuel Station Pump Replacement 14, ,102 GPS Hardware - Transportation 15, , ,000 School Buses Lease 2,872, ,872,628 2,880,000 2,880,000 2,880,000 2,880,000 Vehicles - District-Wide 180, , ,000 Subtotal Transportation Projects 209, ,422, ,632,289 2,880,000 2,880,000 2,880,000 3,130,000 Transfers to General Fund: Transfer for Transportation Maintenance* 4,356, ,356,744 4,380,275 4,404,512 4,429,476 4,455,189 Transfer for Contracted Transportation 600, , , , , ,941 Subtotal Transportation Transfers - 4,956, ,956,744 5,094,905 5,138,331 5,183,059 5,229,130 Total Transportation 209, ,379, ,589,033 7,974,905 8,018,331 8,063,059 8,359,130 - Sub-total Non-Construction Projects 14,633, ,208, ,841,773 6,905,793 7,147,289 5,026,324 9,726,498 Sub-total Non-Construction Transfers - 85,929, ,929,093 87,079,213 88,871,763 90,721,088 92,622,804 Total Non-Construction Projects and Transfers 14,633, ,137, ,770,866 93,985,006 96,019,052 95,747, ,349,302 Total Capital Budget 151,901, ,884, ,786, ,105, ,139, ,867, ,469,302 - Total Revenues 264,238, ,105, ,139, ,867, ,469,301 Balance/(Shortfall) (6,646,201.62) 0 (0) (0) (0) Page 10 of 10

249 APPENDIX 3

250 PENDING CHARTER SCHOOL OPENINGS SY CHARTER SCHOOL DELRAY BEACH GRADE ANTICIPATED ENROLLMENT K CONTACT INFO Richard Durr 1978 White Coral Way Wellington, FL R.Durr@Champs-Schools.org 2 LANTANA K Richard Durr 1978 White Coral Way Wellington, FL R.Durr@Champs-Schools.org 3 EAGLE ARTS ACADEMY C. Ron Allen 306 NE 2 nd St., 2 nd Floor Delray Beach, FL c.ron@kopmn.org 4 FRANKLIN ACADEMY C or D K Scott Sznitken 1120 SE 3 rd Ave. Fort Lauderdale, FL Sznitken.scott@floridacharter.org 5 INSPIRED 2 THINK VIRTUAL CHARTER SCHOOL, Inc. ONLINE ONLY Frank Bolanos Commerce Way Miami Lakes, FL frankbolanos@bellsouth.net Janet Marti janetmarti@aol.com 6 PBMA HIGH SCHOOL RENAISSANCE CHARTER SCHOOL at CENTRAL PALM 6810 S. Military Trail Lake Worth, FL RENAISSANCE CHARTER SCHOOL at CYPRESS 8151 Okeechobee Blvd. West Palm Beach, FL K K Dan Rishavy 4512 N. Flagler Dr. #206 West Palm Beach, FL maritimebp@aol.com Renaissance Charter School, Inc N. Federal Hwy. Ft. Lauderdale, FL dkelmanson@charterschoolsusa.com Renaissance Charter School, Inc N. Federal Hwy. Ft. Lauderdale, FL dkelmanson@charterschoolsusa.com

251 PENDING CHARTER SCHOOL OPENINGS SY RENAISSANCE CHARTER SCHOOL at WELLINGTON 3220 S. State Road 7 Wellington, FL K Renaissance Charter School, Inc N. Federal Hwy. Ft. Lauderdale, FL dkelmanson@charterschoolsusa.com TRANSITIONS ELEMENTARY School Address: 7719 S. Dixie Hwy West Palm Beach, FL K Diana Heller Parrothead1017@yahoo.com DEFERRED OPENINGS TO SY ACCLAIM ACADEMY AVANT GARDE ACADEMY, INC BEN GAMLA PREPARATORY K BEN GAMLA WEST PALM BEACH K FLORIDA FUTURES RIVIERA BEACH CAMPUS FLORIDA FUTURES WEST PALM BEACH CAMPUS FLORIDA HIGH SCHOOL FOR ACCELERATED LEARNING WPB II FLORIDA HIGH SCHOOL FOR ACCELERATED LEARNING WPB III PALM BEACH ACADEMY OF SCIENCE AND TECHNOLOGY K PIVOT Charter School Renaissance Charter Palm Beach K SOMERSET ACADEMY LAKES K Sports Leadership and Management Middle (SLAM) South Florida International Charter School The Early Career Academy West Palm Beach Municipal K University Preparatory Academy K 8 694

252 [This Page Is Intentionally Left Blank.]

253 APPENDIX K AUDITED FINANCIAL STATEMENTS OF PALM BEACH MARITIME ACADEMY FOR THE FISCAL YEARS ENDED JUNE 30, 2013 AND JUNE 30, 2012

254 [This Page Is Intentionally Left Blank.]

255 Audited Financial Statements and Supplementary Information Palm Beach Maritime Academy (A Division of the Palm Beach Maritime Museum, Inc.) June 30, 2013 and 2012 CALER, DONTEN, LEVINE, COHEN, PORTER & VEIL, P.A. CERTIFIED PUBLIC ACCOUNTANTS K-1

256 PALM BEACH MARITIME ACADEMY (A DIVISION OF THE PALM BEACH MARITIME MUSEUM, INC.) AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION June 30, 2013 and 2012 INDEPENDENT AUDITOR'S REPORT... 1 AUDITED FINANCIAL STATEMENTS Statements of Financial Position... 3 Statements of Activities... 4 Statements of Cash Flows... 5 Notes to Financial Statements... 6 SUPPLEMENTARY INFORMATION Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Management Letter School s Response to Findings... 23

257 CALER, DONTEN, LEVINE, COHEN, PORTER & VEIL, P.A. CERTIFIED PUBLIC ACCOUNTANTS WILLIAM K. CALER, JR., CPA LOUIS M. COHEN, CPA JOHN C. COURTNEY, CPA, JD DAVID S. DONTEN, CPA JAMES B. HUTCHISON, CPA JOEL H. LEVINE, CPA JAMES F. MULLEN, IV, CPA THOMAS A. PENCE, JR., CPA SCOTT L. PORTER, CPA MARK D. VEIL, CPA 505 SOUTH FLAGLER DRIVE, SUITE 900 WEST PALM BEACH, FL TELEPHONE (561) FAX (561) MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS Independent Auditor s Report To the Board of Trustees Palm Beach Maritime Museum, Inc. West Palm Beach, Florida Report on the Financial Statements We have audited the accompanying financial statements of Palm Beach Maritime Academy (the School, a division of the Palm Beach Maritime Museum, Inc., a not-for-profit organization) which comprise the statements of financial position as of June 30, 2013 and 2012, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1

258 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Palm Beach Maritime Academy as of June 30, 2013 and 2012, and the changes in its net assets and its cash flows for the years then ended in accordance with U.S generally accepted accounting principles. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 27, 2013, on our consideration of the School s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School s internal control over financial reporting and compliance. West Palm Beach, Florida September 27,

259 PALM BEACH MARITIME ACADEMY (A DIVISION OF THE PALM BEACH MARITIME MUSEUM, INC.) STATEMENTS OF FINANCIAL POSITION June 30, 2013 and 2012 ASSETS Cash and cash equivalents $ 196,042 $ 198,902 Accounts receivable 274,126 0 Contribution receivable from Palm Beach Maritime Museum, Inc. 38,000 50,000 Prepaid expenses 12,589 62,453 Property and equipment, net 410,520 36,259 Deposits 5,934 18,813 LIABILITIES AND NET ASSETS TOTAL ASSETS $ 937,211 $ 366,427 LIABILITIES Accounts payable $ 24,058 $ 26,134 Accrued expenses 287, ,275 Lease settlement obligation 300,000 0 Capital lease obligations 262,471 2,300 TOTAL LIABILITIES 873, ,709 NET ASSETS Unrestricted 63, ,718 TOTAL NET ASSETS 63, ,718 TOTAL LIABILITIES AND NET ASSETS $ 937,211 $ 366,427 See notes to financial statements. 3

260 PALM BEACH MARITIME ACADEMY (A DIVISION OF THE PALM BEACH MARITIME MUSEUM, INC.) STATEMENTS OF ACTIVITIES For the Years Ended June 30, 2013 and 2012 CHANGES IN UNRESTRICTED NET ASSETS REVENUE AND OTHER SUPPORT State and Federal sources Florida Education Finance Program (FEFP) funding $ 4,373,679 $ 2,135,618 Federal grant passed through local school district 365,717 1,099 State grants and other 414, ,811 5,153,413 2,396,528 Local sources Student fees 195, ,872 Contributions and other 232,858 2,289 Net assets released from restrictions 0 45, , ,161 TOTAL REVENUE AND OTHER SUPPORT 5,582,218 2,561,689 EXPENSES Instructional services 2,904,162 1,388,372 School administration 1,204, ,472 FEFP administrative fee expense 30,435 29,416 Pupil transportation services 229,750 56,735 Operation and maintenance services 854, ,057 Lease settlement expense 500,000 0 TOTAL EXPENSES 5,723,399 2,666,052 DECREASE IN UNRESTRICTED NET ASSETS (141,181) (104,363) CHANGES IN TEMPORARILY RESTRICTED NET ASSETS Net assets released from restrictions 0 (45,000) DECREASE IN TEMPORARILY RESTRICTED NET ASSETS 0 (45,000) DECREASE IN NET ASSETS (141,181) (149,363) Net assets at beginning of year 204, ,081 NET ASSETS AT END OF YEAR $ 63,537 $ 204,718 See notes to financial statements. 4

261 PALM BEACH MARITIME ACADEMY (A DIVISION OF THE PALM BEACH MARITIME MUSEUM, INC.) STATEMENTS OF CASH FLOWS For the Years Ended June 30, 2013 and OPERATING ACTIVITIES Decrease in net assets $ (141,181) $ (149,363) Adjustments to reconcile decrease in net assets to net cash provided by (used in) operating activities Depreciation 55,126 9,543 Write off of contribution receivable from Palm Beach Maritime Museum, Inc. 12,000 0 Changes in assets and liabilities Accounts receivable (274,126) 156 Prepaid expenses 49,864 (13,139) Deposits 12,879 1,137 Accounts payable (2,076) 6,390 Accrued expenses 153,870 5,317 Lease settlement obligation 300,000 0 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 166,356 (139,959) FINANCING ACTIVITIES Purchases of property and equipment (143,591) (37,272) Principal paid on capital lease obligation (25,625) (2,356) NET CASH USED IN FINANCING ACTIVITIES (169,216) (39,628) DECREASE IN CASH AND CASH EQUIVALENTS (2,860) (179,587) Cash and cash equivalents at beginning of year 198, ,489 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 196,042 $ 198,902 NONCASH FINANCING ACTIVITIES Equipment purchases under capital lease obligations $ 285,796 $ 0 See notes to financial statements. 5

262 PALM BEACH MARITIME ACADEMY (A DIVISION OF THE PALM BEACH MARITIME MUSEUM, INC.) NOTES TO FINANCIAL STATEMENTS June 30, 2013 and 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization: The Palm Beach Maritime Academy (the School ) is operated as a separate division of the Palm Beach Maritime Museum, Inc. (the Museum ), a Florida not-for-profit corporation established in 1974 to develop a marine art, science, and technology center to provide the general public with exhibits, programs and an archive to further knowledge and interest in marine science, technology and history. The School was approved as a Charter School by the School District of Palm Beach County (the District ) on July 28, 1999, pursuant to Florida Statutes. The School has one campus facility located in the Town of Lantana, Florida, and is approved by the District to educate approximately 920 students in kindergarten through eighth grade. The School served approximately 740 and 360 children in kindergarten through grade eight during the years ended June 30, 2013 and 2012, respectively. Basis of Presentation: The accompanying financial statements have been prepared on the accrual basis of accounting in conformity with the disclosure and display requirements of the Financial Accounting Standards Board as set forth in FASB ASC 958, Not-for-Profit Entities. These financial statements present only the operations of the School and do not include the activity of the Museum. As a division of the Museum, the operations of the School are transacted in the legal name of the Museum under the direction of the Museum Board of Trustees, doing business as the Palm Beach Maritime Academy. The statements of financial position of the School present the assets and liabilities utilized by the School in its operations and an asset or liability for the net assets, if any, due from or advanced by the Museum, respectively. In addition, the amount of expense allocated to the School for leases and certain services contracted by the Museum, is determined solely at the discretion of the Museum s management. Accordingly, these financial statements should be read in conjunction with the financial information of the Museum. The financial statements present balances and transactions of the School according to the existence or absence of donor-imposed restrictions. This has been accomplished by classification of net assets and transactions as temporarily restricted or unrestricted as follows: Temporarily restricted net assets are those whose use by the School has been limited by donors to a specific time period or purpose. Unrestricted net assets are resources generated from operations, unrestricted donations and satisfaction of temporary restrictions and are not subject to donor-imposed stipulations. Net assets of the restricted class are created only by donor-imposed restrictions on their use. All other net assets, including board-designated or appropriated amounts, are legally unrestricted, and are reported as part of the unrestricted class. The School had no temporarily or permanently restricted net assets at June 30, 2013 and Cash and Cash Equivalents: The School considers all amounts on deposit in checking, savings and money market accounts to be cash and cash equivalents. The cash and cash equivalents of the School are pooled with that of the Museum for purposes of federal deposit insurance and the amount of insured deposits at June 30, 2013 and 2012 is not determinable. Accounts Receivable: Accounts receivable consist of amounts due from the School District of Palm Beach County. The School does not require collateral for accounts receivable. An allowance for doubtful accounts is provided for receivables that are over six months past due and where there is a question as to 6

263 PALM BEACH MARITIME ACADEMY (A DIVISION OF THE PALM BEACH MARITIME MUSEUM, INC.) NOTES TO FINANCIAL STATEMENTS June 30, 2013 and 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) ultimate collectability. Management considers all receivables to be fully collectible and no allowance was provided. Receivables are written off when management has determined that the amount will not be collected. Collections on accounts previously written off are included in other support when received. Property and Equipment: Property and equipment over $500 purchased by the School is recorded at cost, if purchased, or if donated, at the fair value of the asset on the date of donation. There were no donated items of property and equipment with a value of more than $500 for the years ended June 30, 2013 and Property and equipment are depreciated using the straight-line method over the estimated useful lives of the related assets, which range from 5 to 10 years. Leasehold improvements and equipment held under capital lease are amortized over the related lease term and amortization expense is included with depreciation expense. Maintenance and repairs are charged to expense when incurred. Compensated Absences: Employees of the School do not accumulate unused vacation leave. Employees may accumulate unused sick leave depending on their job classification and length of service, although employees are not entitled to payment for accumulated sick leave upon termination or retirement. Accordingly, there was no accrued vacation or sick leave payable to employees at June 30, 2013 and Revenue Recognition: Substantially all of the School s revenue is from state sources received through the District. State revenue and grants are recognized in the period in which the related educational instruction is performed. Student fees for school services are recognized when the services are performed and other revenue is recognized when earned. The School recognizes contributions received as income in the period received. Contributions are reported as unrestricted or restricted depending on the existence of donor stipulations that limit the use of the support. The School reports gifts of equipment and other assets as restricted if they are received with donor stipulations that limit the use of the donated assets. The School did not receive any restricted contributions for the years ended June 30, 2013 and 2012, respectively. Expenses are recorded when incurred in accordance with the accrual basis of accounting. Grant Revenue: Grant revenue consists of state financial assistance passed through the District for the School s operation and the construction and renovation of School facilities. The District deducts an administrative fee of 5% from the Florida Education Finance Program (FEFP) funds for the first 250 students, which is presented as a separate expense in the statements of activities. Amounts received or receivable from grantor agencies may be subject to audit by those agencies and any disallowed expenses, including amounts already received, might constitute a liability of the School for return of those funds. Management believes that the School has met all requirements and objectives of the grantor agencies and considers it unlikely that any material amount of funds would be returned. In-Kind Contributions: The School records in-kind support for contributed professional services if the services received require specialized skills; are provided by individuals possessing those skills; and, would typically need to be purchased if not provided by donation. Amounts reflected in the financial statements as in-kind support are offset by like amounts included in expenses. There were no contributed services recognized as in-kind support for the years ended June 30, 2013 and The School also receives skilled, contributed time, which does not meet the two recognition criteria described above. The value of this contributed time is not reflected in the accompanying financial statements. 7

264 PALM BEACH MARITIME ACADEMY (A DIVISION OF THE PALM BEACH MARITIME MUSEUM, INC.) NOTES TO FINANCIAL STATEMENTS June 30, 2013 and 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Risk Management: The School is exposed to various risks of loss related to theft, damage to, and destruction of assets, errors and omission, injuries to employees and natural disasters. The School purchases commercial insurance for all material risks of loss to which the School is exposed, including general liability, property and workers compensation. Functional Allocation of Expenses: The costs of providing the various services the School offers have been summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Income Taxes: As a division of the Museum, the School is not a separate taxable entity and is included with the tax reporting by the Museum, which is exempt from federal and state income taxes as a public charity under Internal Revenue Code Section 501(c)(3). Fair Value of Financial Instruments: The School has adopted the provisions of FASB ASC 820, Fair Value Measurements and Disclosures, which establishes a framework for measuring fair value that provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described below: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets and liabilities in active markets that the entity has the ability to access at the measurement date. The types of financial instruments included in Level 1 are generally highly liquid investments with quoted prices on exchanges and over-the-counter markets with sufficient volume. Level 2: Inputs to the valuation methodology include the following:! Quoted prices for similar assets or liabilities in active markets.! Quoted prices for identical or similar assets or liabilities in inactive markets.! Inputs other than quoted prices that are observable for the assets or liabilities.! Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. These unobservable inputs reflect the entity s own estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques would typically include discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability. The fair value measurement of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. At June 30, 2013 and 2012 the School had no financial assets or liabilities measured at fair value on a recurring basis under FASB ASC

265 PALM BEACH MARITIME ACADEMY (A DIVISION OF THE PALM BEACH MARITIME MUSEUM, INC.) NOTES TO FINANCIAL STATEMENTS June 30, 2013 and 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Reclassifications: Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. Subsequent Events: The School has evaluated subsequent events through September 27, 2013, which is the date the financial statements were available to be issued. Estimates: Management uses estimates and assumptions in preparing financial statements in accordance with U.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenue and expenses. Actual results could vary from the estimates that were used. NOTE B - PROPERTY AND EQUIPMENT Property and equipment purchased by the School from its operating funds is summarized as follows: Leasehold improvements Equipment Furniture Less accumulated depreciation $ 35, ,002 1, ,220 (103,700) $ 19,427 64,125 1,281 84,833 (48,574) $ 410,520 $ 36,259 Depreciation expense for the years ended June 30, 2013 and 2012 was $55,126 and $9,543, respectively, and is included in School administration expenses. NOTE C - LEASE SETTLEMENT OBLIGATION The Museum leased classroom facilities for the School in West Palm Beach, Florida, under an operating lease expiring in May The West Palm Beach facilities were utilized by the School through July 31, 2012, after which the School moved to the new Lantana facilities (see Note H). The Museum and the landlord agreed to terminate the lease for the West Palm Beach facilities and the landlord leased the facilities to a new tenant. In connection with the termination of the lease, the Museum executed a promissory note to the landlord for $39,603, representing the excess of the rent payments due by the Museum over those payable by the new tenant through May Payments on the promissory note were due monthly and totaled $21,628 and $17,975 for the years ending June 30, 2013 and 2014, respectively. The Museum also entered into an agreement with the landlord to guarantee the payment of all rent due under the original lease for the period from August 1, 2012 through May 31, 2014, in the event of a default by the new tenant. During fiscal year 2013, the new tenant defaulted on its rent payments. The landlord sued the new tenant, the Museum and the Academy and was awarded a 9

266 PALM BEACH MARITIME ACADEMY (A DIVISION OF THE PALM BEACH MARITIME MUSEUM, INC.) NOTES TO FINANCIAL STATEMENTS June 30, 2013 and 2012 NOTE C - LEASE SETTLEMENT OBLIGATION (Continued) judgment of $658,431, which included the $39,603 promissory note. Thereafter, the parties entered into a settlement agreement in which the Museum and the landlord agreed to settle the judgment for $500,000, with the Museum paying $200,000 on or before June 20, 2013 and the balance of $300,000 being paid in 25 monthly payments of $12,000 starting July 20, 2013 through July The School has recorded the lease settlement obligation as a liability at June 30, The landlord of the new Lantana 2 Facility (see Note H) agreed to pay the initial $200,000 due on the settlement. The remaining payable of $300,000 is reported in the accompanying financial statements as a lease settlement obligation at June 30, NOTE D - CAPITAL LEASE OBLIGATIONS The School entered into several lease agreements for equipment with an original cost of $285,796 under a capital lease agreement expiring at various dates through April The lease agreements require monthly payments of $5,808 to $6,051 over 36 to 60 month periods, including interest from 8.1% to 11.9% per annum. The costs and accumulated amortization on all leased assets was $285,796 and $29,324 at June 30, 2013 and $11,000 and $9,166 at June 30, 2012, respectively. Total interest incurred and paid on the capital leases for the years ended June 30, 2013 and 2012 was $11,798 and $236, respectively, and is included in School administration expenses. Future minimum lease payments under the capital leases at June 30, 2013 are summarized as follows: Year Ending June 30, Amount Total minimum lease payments $ 72,615 72,615 71,156 69,700 36, ,196 Less amount representing interest (59,725) Present value of future minimum lease payments $ 262,471 NOTE E - RELATED PARTY TRANSACTIONS Facility Rentals and Maintenance: The Museum leases classroom facilities for the School in West Palm Beach and Lantana, Florida, under an operating lease expiring at various dates through September 2033 (See Note H). The leases provide for a monthly rental payment of approximately $85,225, including payment of common area expenses, such as utilities, repairs and maintenance. The monthly rental payment is adjusted annually. The Museum allocates all expenses related to this lease to the School. Rent expense for the years ended June 30, 2013 and 2012 was approximately $556,000 and $390,000, respectively, including common area expenses. 10

267 PALM BEACH MARITIME ACADEMY (A DIVISION OF THE PALM BEACH MARITIME MUSEUM, INC.) NOTES TO FINANCIAL STATEMENTS June 30, 2013 and 2012 NOTE E - RELATED PARTY TRANSACTIONS (Continued) In addition, certain operating expenses and payroll of the Museum are allocated to the School based on the estimated use of resources by the School and the time spent by Museum employees on School business. The annual allocated expenses recorded by the School for the years ended June 30, 2013 and June 30, 2012, were approximately $50,000 and $36,000, respectively, and are included in operation and maintenance services. Advances from Palm Beach Maritime Museum, Inc.: The Museum provides interest free advances to the School for operating expenses and costs incurred for the acquisition and construction of School facilities and equipment. There were no advances or repayments during the years ended June 30, 2013 or The Museum made an unrestricted promise to give of $100,000 to the School for the year ended June 30, As of June 30, 2012, the School had received $50,000 of the $100,000 promise to give from the Museum. The remaining $50,000 contribution receivable was written down to $38,000 at June 30, 2013 based on the fair value of a vessel that the Museum intends to provide to the School in fiscal year Palm Beach Maritime Foundation, Inc.: The Foundation was incorporated in Florida on May 23, 2011, for the primary purpose of soliciting donations for maritime projects, including the development of funding for the School. Two of the Museum s board members serve on the board of the Palm Beach Maritime Foundation, Inc. (the Foundation ), but do not represent a majority of the Foundation s board. NOTE F - TEMPORARILY NET ASSETS The School received contributions of $45,000 during the year ended June 30, 2011, for upgrades to the School s computer lab and for the purchase of equipment. The School spent the funds during fiscal year 2012 and $45,000 of temporarily restricted net assets were released from restrictions. NOTE G - RETIREMENT PLAN The School has a defined contribution retirement plan for substantially all of its employees. Contributions by the School are 2% of qualifying gross wages. Funding is through a group annuity contract with an insurance company. The School's total expense for the retirement plan for the years ended June 30, 2013 and 2012 was $25,244 and $16,701, respectively. NOTE H - COMMITMENTS AND CONTINGENCIES Operating Leases: The Museum is obligated under two operating lease agreements for classroom facilities for the School in Lantana, Florida (the Lantana facilities ). The significant provisions of these operating lease agreements are summarized as follows: Lantana 1 Facility: On June 30, 2011 the Museum signed a 20 year lease for a new School location in Lantana, Florida, consisting of approximately 38,000 square feet of space plus an outside playground area for children in kindergarten through grade eight. The lease commenced on 11

268 PALM BEACH MARITIME ACADEMY (A DIVISION OF THE PALM BEACH MARITIME MUSEUM, INC.) NOTES TO FINANCIAL STATEMENTS June 30, 2013 and 2012 NOTE H - COMMITMENTS AND CONTINGENCIES (Continued) September 2, 2011 and requires monthly payment of an annual minimum guaranteed rental of $0, $337,500, $495,000, $630,000 and $630,000 for the lease years ended September 1, 2012, 2013, 2014, 2015 and 2016, respectively. The minimum rent for the lease year ending September 1, 2016 is increased to $720,000 if approval is obtained by September 1, 2014 for 700 or more students at the facility. In addition, for each lease year ending after September 1, 2012 contingent rent is payable based on $75 per month per student, less the annual minimum guaranteed rent for the applicable year. Minimum guaranteed rent due for each lease year ending after September 1, 2016 will be increased by 3.0% and the contingent rental fee of $75 per student per month will be increased by 3.0% for each lease year ending after September 1, 2013 through the end of the lease on September 1, Required rent payments for this lease were approximately $587,000 for the year ended June 30, 2013, however, approximately $205,000 of the required rent was forgiven by the landlord for the year ended June 30, At the end of the initial lease term, the lease may be extended for two additional periods of ten years each at a mutually agreeable current market rent. The lease also requires payment of the tenant s prorata share of common area expenses for each lease year ending after September 1, The lease provides a $1,000,000 build-out allowance to convert the space to classroom facilities. The Museum has an option to purchase the property for $6.8 million during the initial four years of the lease term. The Museum also has a right of first refusal to purchase the property after the fourth year of the lease term for the same price and terms offered by another bona-fide purchaser. Lantana 2 Facility: On July 12, 2013 the Museum signed a 20 year lease for a new high school in Lantana, Florida, consisting of approximately 34,000 square feet of space. The School received conditional approval from the District to operate ninth grade classes at the Lantana 2 Facility pending approval by the District of the School s application for a fully operational high school with grades nine through twelve. The lease commenced on August 1, 2013 and requires monthly payment of an annual minimum guaranteed rental of $553,955 and $585,955 for the lease years ending July 31, 2014 and 2015, respectively. Thereafter the minimum guaranteed rental increases for lease years ending July 31, 2016 through 2033 based on the increase in the Based Student Allocation as determined annually by the Florida Department of Education. At the end of the initial lease term, the lease may be extended for four additional periods of five years each under the same terms and conditions, including the calculation of annual increases in the minimum guaranteed rental. The lease also requires the Museum to pay all expenses related to the operation, use, maintenance, repair, replacement and upkeep of the leased premises, including, but not limited to, insurance, taxes, utilities, security, waste removal, pest control, cleaning, landscaping and paving. The lease further provides an allowance of up to $500,000 for furniture, fixtures and equipment that will be purchased for the School s operations at the Lantana 2 Facility. The lease also provided an allowance of up to $250,000 for the settlement of a judgment related to unpaid rent at the School s former West Palm Beach facility (see Note C). The landlord paid $200,000 related to this settlement for fiscal year end June 30, 2013 and the lease provides that the balance of $50,000 may be applied toward any revenue shortfall of the School for the first lease year ending July 31, The Museum is legally obligated on the foregoing operating lease agreements and although there is no formal sublease agreement between the Museum and the School, the Museum expects the monthly lease payments will be passed through and paid by the School. 12

269 PALM BEACH MARITIME ACADEMY (A DIVISION OF THE PALM BEACH MARITIME MUSEUM, INC.) NOTES TO FINANCIAL STATEMENTS June 30, 2013 and 2012 NOTE H - COMMITMENTS AND CONTINGENCIES (Continued) The minimum future payments on the Lantana 1 and Lantana 2 Facility leases at June 30, 2013 are summarized as follows: Year Ending June 30, Amount $ 1,113,000 1,193,000 1,234,000 1,267,000 1,305,000 7,139,000 8,276,000 7,715, $ 29,242,000 Total rent expense for all facilities and equipment was approximately $619,000 and $390,000 for the years ended June 30, 2013 and 2012, respectively. Services Agreement: The Museum entered into a Services Agreement on February 21, 2012, with Edu- Link, LLC ( Edu-Link ), a joint venture of Educare Project and Development LLC and Link-Up, Incorporated, to provide consulting and support services to the School beginning July 1, Edu-Link will assist in the development and implementation of policies, procedures and programs to help the School meet its charter contract obligations in the areas of finance, administration, academic operations, compliance with local, state and federal regulations, program growth and sustainability, and marketing and enrollment support. The term of the Services Agreement is from July 1, 2012 through June 30, 2019 and may be renewed for additional three year terms upon consent of all parties. The agreement requires the School to pay Edu- Link a bi-weekly service fee equal to: (1) 9% of all state, local and federal revenue received by the School; (2) up to 9% of other revenue that Edu-Link is instrumental in securing for the School; and, (3) any reimbursable expenses incurred by Edu-Link. Revenue subject to the Edu-Link services fee excludes any revenue obtained from students, parents, and Board members. The service fees required under the agreement for the year ended June 30, 2013 were approximately $424,000 of which $287,000 was paid to Edu-Link and expensed for the year ended June 30, 2013 and approximately $137,000 was forgiven by Edu-Link for the year ended June 30, In addition, for the term of the Services Agreement and for a two year period following termination of the Services Agreement, the School shall give Edu-Link a first right of refusal to develop, build and manage any and all future charter school projects by the School. Consulting Agreement: On November 17, 2011 the School entered into a Consulting Agreement with Educare Project and Development LLC ( Educare ) to facilitate the issuance of a tax exempt bond issue by the School by the year The term of the agreement is from December 1, 2011 through November 1, 2013 and requires payment by the School to Educare of 3% of the total amount of any tax exempt bonds issued by the School. No tax exempt bonds have been issued through the fiscal year ended June 30, 2013.

270 PALM BEACH MARITIME ACADEMY (A DIVISION OF THE PALM BEACH MARITIME MUSEUM, INC.) NOTES TO FINANCIAL STATEMENTS June 30, 2013 and 2012 NOTE H - COMMITMENTS AND CONTINGENCIES (Continued) Employment Contracts: The School has employment agreements with three employees for services to be provided from July 1, 2012 through June 30, 2019 for one employee and from July 1, 2012 through June 30, 2017 for two other employees. Total compensation for the term of the agreements is approximately $1.5 million plus benefits, with a remaining commitment of $1,268,000 as of June 30, Charter School Contract: The School s current Charter School Contract ( Contract ) was approved by the District on March 28, 2012 for a 15 year term through June 30, 2027; however, the Contract may be terminated immediately or upon 90 days notice for specific grounds stated in the Contract or Florida Statutes. Early termination of the Contract would have significant adverse impacts on the School and would likely preclude its continued operation. Management believes that the School has met all requirements and objectives of the Contract and Florida Statutes and considers it unlikely that the Contract would be terminated prior to June 30,

271 SUPPLEMENTARY INFORMATION

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273 CALER, DONTEN, LEVINE, COHEN, PORTER & VEIL, P.A. CERTIFIED PUBLIC ACCOUNTANTS WILLIAM K. CALER, JR., CPA LOUIS M. COHEN, CPA JOHN C. COURTNEY, CPA, JD DAVID S. DONTEN, CPA JAMES B. HUTCHISON, CPA JOEL H. LEVINE, CPA JAMES F. MULLEN, IV, CPA THOMAS A. PENCE, JR., CPA SCOTT L. PORTER, CPA MARK D. VEIL, CPA 505 SOUTH FLAGLER DRIVE, SUITE 900 WEST PALM BEACH, FL TELEPHONE (561) FAX (561) MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards To the Board of Trustees Palm Beach Maritime Museum, Inc. West Palm Beach, Florida We have audited, in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Palm Beach Maritime Academy (the School, a division of the Palm Beach Maritime Museum, Inc., a not-for-profit organization) which comprise the statements of financial position as of June 30, 2013 and 2012, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements, and have issued our report thereon dated September 27, Internal Control Over Financial Reporting In planning and performing our audits of the financial statements, we considered the School s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the School s internal control. Accordingly, we do not express an opinion on the effectiveness of the School s internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the following paragraphs, we identified certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described below as items , , , and to be material weaknesses Duplicate Check Numbers and Missing Checks During our testing of internal controls over cash disbursements, we noted two disbursements out of the 25 disbursements selected for testing had checks issued with duplicate check numbers. We also noted the School s check printing process was changed from a computer numbered check to a pre-numbered check stock and in the process it appears the School skipped approximately 1,000 15

274 check numbers. As a result, the missing check numbers could not be definitively verified, although none of the missing numbers were identified as being cashed on the bank statements. Duplicate check numbers and missing check numbers indicate that internal controls over the cash disbursements process were not effective throughout the fiscal year, thereby creating an opportunity for unauthorized disbursements. Internal controls over cash disbursement should be designed to provide reasonable assurance that no unauthorized payments are made, all liabilities are timely paid, and payments are accurately recorded. These controls include accounting for the sequential order of checks as they are released. We recommend the use of pre-numbered check stock and the implementation of a policy of printing all disbursements in numerical sequential order and ensuring there is numerical control over all checks issued. Any voided checks should be defaced with the signature portion of the check removed and the check retained and accounted for in numerical sequence Capital Lease Obligations The School should have internal control systems in place to identify and document whether leases with terms greater than one year meet the criteria for treatment as a capital or operating lease. Capital leases should be recorded as capital assets with an offsetting liability for the net present value of the future minimum lease payments and the leased asset depreciated over its useful life. The School did not have internal controls in place to ensure that a proper classification of capital and operating leases was made pursuant to U.S. generally accepted accounting principles and as a result, capital leases totaling approximately $290,000 were not properly accounted for during the fiscal year. The effect of not recording the capital leases was an understatement of the School s assets and liabilities, an overstatement of the School s expenses and understatement of the change in net assets for the year. Payments on the capital leases were also recorded inconsistently to different general ledger expense accounts on a monthly basis and payments for maintenance contracts on copiers were recorded in the same general ledger account as the copier lease payments. We also noted the School did not obtain the necessary documentation, such as payment amortization schedules, to record the capital lease obligations. We recommend that the School develop internal controls to ensure that leases are identified and analyzed for proper classification and presentation as a capital or operating lease. The lease determination should be documented in writing and proper accounting treatment should be recorded in the general ledger. The documentation for the lease determination and amortization schedules should be reviewed and approved by management as part of the month end reconciliation process followed by the School Capital Assets During our testing of capital assets, we noted certain capital assets were acquired by capital lease or paid for by other parties, such as improvements by the School s landlord, and were not properly recorded in the general ledger accounting records. The School also did not maintain detailed capital asset records or schedules to properly account for or inventory capital assets purchased by the School. As a result, the necessary information to properly record depreciation expense and accumulated depreciation was not available until prepared as part of the annual audit. We recommend that the School develop and implement a detailed capital asset accounting system that will provide adequate documentation of capital assets by asset number, cost, date acquired, useful life, depreciation method, accumulated depreciation and depreciation expense. Further, capital assets acquired by the School should be tagged when purchased and inventoried during the fiscal year. We recommend that a formal capital asset accounting system be implemented by the School to ensure the proper identification, accounting and safeguarding of all capital assets. 16

275 General Ledger Reconciliation Procedures The QuickBooks general ledger and accounting software package used by the School currently allows transactions prior to the most recent bank reconciliation date to be entered or changed without documentation or approval. To improve internal control over the general ledger functions, we recommend that the Museum s controller be provided on-line access to the School s QuickBooks program and set the month-end closing date after the monthly bank reconciliation is approved. The closing date should be password protected by the Museum s controller so that changes cannot be made to transactions dated prior to the most recent bank reconciliation closing date. This approach will effectively lock down all reconciled transactions and prevent any unauthorized changes. Changes that must be made to prior transactions should be handled through journal entries in the current period Journal Entry Documentation and Approval Journal entries are being made in QuickBooks without any supporting documentation for the entry or documentation of approval of the journal entry. We recommend that anyone who makes an entry in QuickBooks, create either an electronic or paper record of that journal entry with supporting documentation. This supporting documentation should be stored in one place such as an electronic file on Dropbox or a printed document retained in a file cabinet at the School. The supporting documentation should be referenced to a specific journal entry so that it can be easily identified or retrieved. Each journal entry should be assigned a unique number so that it can be easily referenced and avoid duplication. All journal entries should be reviewed approved by a person other than the preparer before the entry is posted to the general ledger and the review and approval should be documented. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies described below as items , , and to be significant deficiencies Bank Reconciliation Approval Bank reconciliations were prepared electronically by the management company s (Edu-Link) accountant and ed to various managers and Board members for review and approval; however, there was no documentation, such as initials or signatures, that the reconciliations were reviewed and approved by anyone from the management company or the Board. We recommend that one senior management company representative be assigned the responsibility to review the bank reconciliations each month. The designated representative should be independent of the cash function and document review and approval of the reconciliations by signing and dating (either manually or digitally) the bank reconciliation Revenue Reconciliations The School did not have reconciliation schedules prepared for certain revenues. The School recorded revenues based on an estimate of the fourth student count instead of the actual student count as of the fiscal year end. This resulted in differences between the funding from the School District and the revenue recorded by the School. Also, the E-Rate revenue and receivable was based on an estimate although the School could not produce a schedule or other documentation showing how the amount was calculated. As a result, expenses paid by the grant were not recorded, grant revenue was understated by the amount that was paid directly to service providers on the school's behalf and the fees due to a consultant were not recorded. We recommend that the School prepare reconciliations for all significant revenue amounts and agree these reconciliations to the funding from third party payors such as the School District. 17

276 Accounting Policies and Procedures Manual During the course of our audit, we noted that the management company did not have a written Accounting Policies and Procedures Manual and certain internal control procedures were changed during the year with no documentation. For example, a Check Request Authorization was used to approve purchases from July to August 2012, then a signed batch listing document was used to approve purchases from August 2012 to January 2013 and from January to June 2013, signed invoices documented the approval for purchases. We recommend that the management company develop a written Accounting Policies and Procedures Manual that would document and inform employees of required procedures and policies for the School s operations. This manual would standardize the School s accounting processes and also minimize the time required to train new staff members with accounting responsibilities Record Retention There were instances during the course of the audit where certain documents that we requested, including invoices and checks, could not be located. In two of the instances, we noted that check copies were the only documentation available for disbursements or the provided documentation did not add up to the disbursed amount. Additionally, there was no approval noted for the payment of the check except for the signature of the Principal on the original check. We recommend that written record retention policies and procedures be developed and followed to ensure that all records are retained and properly filed. Compliance and Other Matters As part of obtaining reasonable assurance about whether the School s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain additional matters that we reported to the School in the accompanying Management Letter dated September 27, School s Response to Findings The School s response to the findings identified in our audit is described in the accompanying School s Response to Findings. The School s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the School s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School s internal control and compliance. Accordingly, this communication is not suitable for any other purpose West Palm Beach, Florida September 27,

277 CALER, DONTEN, LEVINE, COHEN, PORTER & VEIL, P.A. CERTIFIED PUBLIC ACCOUNTANTS WILLIAM K. CALER, JR., CPA LOUIS M. COHEN, CPA JOHN C. COURTNEY, CPA, JD DAVID S. DONTEN, CPA JAMES B. HUTCHISON, CPA JOEL H. LEVINE, CPA JAMES F. MULLEN, IV, CPA THOMAS A. PENCE, JR., CPA SCOTT L. PORTER, CPA MARK D. VEIL, CPA 505 SOUTH FLAGLER DRIVE, SUITE 900 WEST PALM BEACH, FL TELEPHONE (561) FAX (561) MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS Management Letter To the Board of Trustees Palm Beach Maritime Museum, Inc. West Palm Beach, Florida We have audited the financial statements of the Palm Beach Maritime Academy (the School, a division of the Palm Beach Maritime Museum, Inc., a not-for-profit organization) as of and for the years ended June 30, 2013 and 2012 and have issued our report thereon dated September 27, We conducted our audits in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. We have issued our Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards. Disclosures in that report, which is dated September 27, 2013, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with Chapter , Rules of the Auditor General, which governs the conduct of charter school and similar entity audits performed in the State of Florida. This letter includes the following information, which is not included in the aforementioned auditor s reports: 1. Section (1)(e)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. There were no findings and recommendations made in the preceding annual financial report. 2. Section (1)(e)2., Rules of the Auditor General, requires a statement be included as to whether or not the School has met one or more of the conditions described in Section (1), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that the School did not meet any of the conditions described in Section (1), Florida Statutes, as of and for the year ended June 20, Section (1)(e)3., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our audit, we have the following recommendations Teacher Employment Contracts Teacher employment contracts specify that teachers will be paid on a 26 pay period basis. However, during fiscal year 2013, teachers were paid on a 24 pay period basis. Confusion could result with the employees on how much pay they are to receive. Per discussion with management 19

278 company staff, the employment contracts were updated to reflect a 26 pay period fiscal year, however, the School did not change their amount of pay periods per year and left the pay cycle as a bi-monthly period. We recommend that the employment contracts be updated to be consistent with the actual number of pay periods the employees will be paid Salary Accrual The School initially recorded accrued salary payable based on the budgeted amounts. A true up was required to adjust the salary accrual and payroll expense based on actual salaries paid at fiscal year-end. We recommend that the School record accrued salaries based on the actual amounts paid rather than budgeted amounts Account Numbers The School changed its account numbers in fiscal year 2013 and added a significant number of new accounts. As a result, we noted that transactions were not recorded consistently due to the new account numbers. The additional accounts seem to add confusion to the transaction recording process and there was no mapping to correlate accounts from the prior year to the current year presentation. In addition, the lack of a written accounting policies and procedures manual with detailed descriptions of the nature and purpose of general ledger accounts was not available for reference by the management company s employees. We recommend that all general ledger accounts be documented in detail in a written accounting policies and procedures manual Cross Training Presently, the Finance Manager handles a significant amount of the accounting and operational functions for the School, including payroll, invoice approval, bank reconciliations, general ledger oversight, financial statement preparation, and reporting to the School District. The loss of this individual could have a significant adverse effect on the operations of the School. We recommend that individuals be cross trained so they are able to perform financial functions or serve as a backup should there be an extended absence or turnover of the finance manager. In addition, we recommend that a written accounting policies and procedures manual be developed to document all finance functions, including the key internal controls and responsibilities within each system Financial Oversight The School hired a management company (Edu-Link, LLC) to assist in the areas of finance, administration, academic operations, compliance and marketing/enrollment. Overall, the accounting records prepared by the management company reflected inadequate internal controls, reconciliation processes, reviews and approvals throughout the fiscal year. Key management company personnel were not always on-site at the School and the designated management company accountant was located in another state and could only be reached by telephone or . On-site School personnel were very helpful, but they had limited accounting knowledge, were not always familiar with transactions and would often refer us back to the financial manager, thereby adding to the difficulty of obtaining timely information. Many accounts were not properly reconciled, such as capital assets, accrued salaries, capital lease obligations, revenues, lease commitments and expenses and settlement payables and all these areas required year end audit adjustments. In addition, some account balances did not agree to specified contractual amounts and it was later determined that amounts were forgiven or contracts were being renegotiated (i.e. service fees and lease expenses). The net result was the internal accounting records of the School for the fiscal year ended June were not accurate or reliable and substantial time was necessary during the audit to correct these issues. Maintaining 20

279 accurate and reliable accounting records throughout the year is a critical component of internal control, as well as providing timely and accurate information for management decisions. We recommend that the Museum s Board of Trustees review the internal management structure and staffing with the management company to ensure that the proper internal controls are implemented in conjunction with adequate staffing to perform reconciliations, reviews and approvals of critical accounting information consistently throughout the fiscal year. The Board of Trustees should also consider exercising additional oversight, either directly or through a committee, to verify that identified deficiencies are adequately addressed in a timely manner by the management company. This will ensure the future accuracy, reliability and integrity of the accounting system and financial records for the School. 4. Section (1)(e)4., Rules of the Auditor General, requires that we address noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but which warrants the attention of those charged with governance. In connection with our audit, we did not have any such findings. 5. Section (1)(e)5., Rules of the Auditor General, requires that the name or official title of the School be disclosed in the management letter. The official title is the Palm Beach Maritime Academy, which operates as a separate division of the Palm Beach Maritime Museum, Inc., a Florida not-for-profit organization and the legal entity. 6. Pursuant to Sections (1)(e)6.a. and (11), Rules of the Auditor General, we applied financial condition assessment procedures to the School as of June 30, It is management s responsibility to monitor the School s financial condition, and our financial condition assessment was based in part on the representations made by management and the review of financial information provided by management Financial Condition Assessment We applied financial condition assessment procedures to the School as of June 30, 2013 using the financial condition assessment template on the Auditor General website for local governments to analyze trends over a five year period of the School s operations from 2009 through Based on this analysis, we determined that the overall trend in the School s financial condition for the three years from 2011 to 2013 was unfavorable. Specifically, the six following financial ratios that were applicable to the School all indicated an unfavorable trend: 1. Financial indicator 1 - Unrestricted net assets 2. Financial indicator 2 - Unrestricted net assets as a percentage of total expenses 3. Financial indicator 3(G) - Cash as a percentage of total liabilities 4. Financial indicator 5(G) - Total liabilities as a percentage of total revenue 5. Financial indicator 7 Revenue over (under) expenses as a percentage of total revenue 6. Financial indicator 10(G) Unrestricted net assets as a percentage of total revenue The School had a decrease in net assets of $(141,181) for the year ended June 30, 2013 as compared to a decrease in net assets of $(149,363) for the year ended June 30, 2012 and an increase in net assets of $351,665 for the year ended June 30, Total liabilities increased to $873,674 at June 30, 2013 from $161,709 at June 30, 2012 and $137,471 at June 30, For the year ended June 30, 2013, the School s management company and landlord waived accrued management fees and accrued rent of approximately $137,000 and $205,000, respectively, thereby reducing total liabilities and total expenses by approximately $342,000 as of and for the year ended June 30, Had these amounts not be waived or forgiven, the School would have had a deficit in net assets at June 30, In addition, the School s future minimum payments under 21

280 non-cancellable operating leases increased from $14,353,000 at June 30, 2012 to $29,242,000 at June 30, 2013 due to the addition of a new facility to accommodate the opening of a new high school. We recommend that the School s management review the future budgeted operations and take appropriate actions to return the School to a breakeven financial position as soon as possible. School s Response to Findings The School s response to the findings identified in our audit is described in the accompanying School s Response to Findings. The School s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, the School District of Palm Beach County, Florida, the Board of Trustees of the Palm Beach Maritime Museum, Inc., and the Board of Directors and management of the School and is not intended to be and should not be used by anyone other than these specified parties. West Palm Beach, Florida September 27,