Philadelphia Authority for Industrial Development

PRELIMINARY LIMITED OFFERING MEMORANDUM DATED MARCH 3, 2017

PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT $5,855,000* Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Series 2016A $720,000* Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Federally Taxable Series 2016B

THIS PRELIMINARY LIMITED OFFERING MEMORANDUM RELATES TO THE ABOVE- REFERENCED OBLIGATIONS (THE “BONDS”) AND SUPERSEDES AND REPLACES IN ITS ENTIRETY THE PRELIMINARY LIMITED OFFERING MEMORANDUM RELATING TO THE BONDS DATED NOVEMBER 18, 2016, AS SUPPLEMENTED ON DECEMBER 5, 2016.

* Preliminary; subject to change.

This Preliminary Limited Offering Memorandum and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time of formal award by the issuer. Under no circumstances shall this Preliminary Limited Offering Memorandum constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. also subjecttomandatoryandextraordinaryredemptionasdescribedherein.See“THEBONDS–RedemptionoftheSeries2017BondsPriorMaturity” payments tothebeneficialownersareresponsibilityofDirectParticipantsandIndirect(asdefinedherein),asmorefullydescribedherein. payments willbemadedirectlytoDTCorsuchnominee.DisbursementsofDirectParticipants(asdefinedherein)aretheresponsibilityDTC,anddisbursements ofsuch and interestontheSeries2017BondswillbepaidbycorporatetrustofficeofTrustee.SolongasDTCoritsnominee,Cede&Co.,isregisteredowner Bonds,such End MortgageandSecurityAgreementFixtureFilingexecutedbytheSchoolinfavorofTrustee,datedasMarch1,2017(the“Mortgage”). defined herein)oftheSchoolcomprisedprimarilyamountsreceivedfromDistrictPhiladelphia(the“SchoolDistrict”),andamortgagelienonFacilitiespursuant toanOpen- established by the Indenture (except the Rebate Fund and the Repair and Replacement Fund). The obligations of the School under the Loan Agreement are secured by the Pledged Revenues (as 2017 Bondsandotheramountsdescribedherein.See“SOURCESANDUSESOFFUNDS” certain renovationsandimprovementsthereto(the“Facilities”),tofundcapitalizedinterestonadebtservicereservefortheSeries2017Bonds,paycostsofissuing theSeries and SecurityAgreementdatedasofMarch1,2017,betweentheAuthoritySchool(the“LoanAgreement”)usedtofinancecostsacquiringinstructionalfacilities andmaking trustee (the“Trustee”).ProceedsoftheSeries2017BondswillbeloanedbyAuthoritytoHarambeeInstituteScienceandTechnologyCharterSchool,Inc.“School”)pursuantaLoan OFFERING OFBONDS”HEREIN. (THE “SECURITIESACT”),AND“QUALIFIEDINSTITUTIONALBUYERS,”ASDEFINEDINRULE144AUNDERTHESECURITIESACT.SEE“ELIGIBLEINVESTORS”“LIMITED Bonds willbemadeinbook-entryonlyform,minimumdenominationsof$25,000andintegralmultiples$5,000excessthereof.See“THEBONDS–Book-Entry-OnlySystem.” as nominee of The Depository Trust Company (“DTC”), New York, New York, which will act as securities depository for the Series 2017 Bonds. Purchases of beneficial interests inthe Series2017 Bonds, the“Series2017Bonds”)willbeissuedbyPhiladelphiaAuthorityforIndustrialDevelopment(the“Authority”)asregisteredbondsinbook-entryonlyformnameofCede&Co., School RevenueBonds(HarambeeInstituteofScienceandTechnologyCharterProject),FederallyTaxableSeries2017B(the“SeriesBonds,”togetherwiththe2017A * Preliminary; subjecttochange. of theSeries2017Bondsatrequestany holderthereof.ForinformationwithrespecttotheUnderwriter,see“UNDERWRITING” herein. Bonds inbook-entryformwillbeavailablefor deliveryagainstpaymentthereforonoraboutMarch15,2017. Philadelphia, Pennsylvania,asdisclosurecounsel. NationalCapitalResources,LLC,Philadelphia,Pennsylvania,hasactedasfinancial advisortotheSchool.ItisexpectedthatSeries2017 Philadelphia, Pennsylvania,ascounseltotheSchool;Dorsey&WhitneyLLP,Minneapolis, Minnesota,ascounseltotheUnderwriter;andZarwinBaumDeVitoKaplanSchaerToddyP.C., “Underwriter”) andsubjecttodeliverybyKutakRockLLP,Philadelphia,Pennsylvania(“Bond Counsel”),ofitsapprovingopinion.CertainlegalmatterswillbepasseduponbyKleinbardLLC, “RISK FACTORS”DESCRIBEDHEREIN. OFFERING MEMORANDUM TO OBTAIN INFORMATION ESSENTIAL TO AN INFORMED INVESTMENT DECISION, AND SHOULD GIVE PARTICULAR ATTENTION TO THE 2017 BONDSINVOLVESAHIGHDEGREEOFRISKANDTHESERIES AREASPECULATIVEINVESTMENT.INVESTORSMUSTREADTHISENTIRELIMITED FOR THEBONDS”AND“RISKFACTORS” HEREIN. AUTHORITY HAS NO TAXING POWER. SEE “SOURCES OF PAYMENT AND SECURITY PRINCIPAL ANDINTERESTWITHRESPECT TOTHESERIES2017BONDS. OTHER POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF POWER OFTHESCHOOLDISTRICT, THE COMMONWEALTH,CITYORANY OF THEAUTHORITYNORFULLFAITH ANDGENERALCREDITORANYTAXING POLITICAL SUBDIVISIONTHEREOF AND NEITHER THE FULLFAITHANDCREDIT “COMMONWEALTH”), THECITYOFPHILADELPHIA(THE“CITY”)ORANYOTHER OF THESCHOOLDISTRICT,COMMONWEALTHPENNSYLVANIA (THE AN OBLIGATION,EITHERGENERAL,SPECIAL,LEGAL,MORALOROTHERWISE, PENNSYLVANIA LEGISLATURE.THESERIES2017BONDSDONOTCONSTITUTE OF PHILADELPHIA PURSUANT TO ASTATUTORY FORMULA CREATED BY THE THE SCHOOL RECEIVES MOST OF ITS REVENUES FROM THE SCHOOL DISTRICT PRIMARY SOURCEOFREVENUESPLEDGEDPURSUANTTOTHEINDENTURE. THE AUTHORITYUNDERLOANAGREEMENT,WHICHPAYMENTSARE THE AUTHORITY PAYABLE SOLELY FROM AMOUNTS PAYABLE BY THESCHOOL TO Dated: DateofIssuance taxes inPennsylvaniaandinterestontheSeries2017Bondsisexemptfrompersonalincometaxcorporatenettax.See“TAXMATTERS”herein. in gross income for federal income tax purposes. Under the laws of Pennsylvania, as enacted and construed on the date hereof, the Series 2017 Bonds are exempt from personal property federal alternativeminimumtax.Theopinioncontainsgreaterdetail,andissubjecttoexceptions,asnotedin“TAXMATTERS”herein.InterestontheSeries2017BBondsincluded with respecttocorporations(asdefinedforfederalincometaxpurposes),suchinterestistakenintoaccountindeterminingadjustedcurrentearningsthepurposeofcomputing (a) isexcludiblefromgrossincomeforfederaltaxpurposes;and(b)notaspecific“itemofpreference”purposesthealternativeminimumtax,provided,however, NEW ISSUE—BOOK-ENTRYONLY In theopinionofBondCounsel,underexistinglaws,regulations,rulings,andjudicialdecisionssubjecttoconditionshereinafterdescribed,interestonSeries2017ABonds: The Series 2017A Bonds are subject to optional redemption beginning [______] 1, 20[__]*andtheSeries2017BBondsarenotsubjecttooptionalredemption.The2017 The Series2017ABondsaresubjecttooptionalredemptionbeginning[______] 1, Interest on theSeries 2017 Bondswillaccrue from thedate of deliveryand will bepayablesemi-annually on eachMarch1 and September1,commencing September 1,2017.* Principal of The BondsarelimitedobligationsoftheAuthoritypayableonlyoutcertainloanpaymentsreceivedfromSchoolunderLoanAgreementandotheramountsheldin the funds The Series2017BondswillbeissuedunderandpursuanttoaTrustIndenturedatedasofMarch1,(the“Indenture”),betweentheAuthorityU.S.BankNationalAssociation, THE SERIES 2017 BONDSWILLBE OFFERED AND SOLD ONLY TO “ACCREDITED INVESTORS,” AS DEFINED IN RULE501(a)UNDER THE SECURITIES ACT OF 1933, ASAMENDED The $5,855,000*CharterSchoolRevenueBonds(HarambeeInstituteofScienceandTechnologyProject),Series2017A(the“SeriesBonds”)the$720,000* The Underwriterintendstoengageinsecondary markettradingintheSeries2017Bonds,subjecttoapplicablesecuritieslaws.However, theUnderwriterisnotobligatedtorepurchaseany The Series2017Bondsareofferedwhen,asandifissuedbytheAuthorityreceived andacceptedbyHerbertJ.Sims&Co.,Inc.,Minneapolis,Minnesota,astheunderwriter(the THIS COVERPAGECONTAINSCERTAININFORMATIONFORQUICKREFERENCE ONLY.ITISNOTASUMMARYOFTHISISSUE.PURCHASETHESERIES THE SERIES2017BONDSAREASPECIALLIMITEDOBLIGATIONOF (Harambee InstituteofScienceandTechnologyCharterSchoolProject),FederallyTaxableSeries2017B (Harambee InstituteofScienceandTechnologyCharterSchoolProject),Series2017A THE DATE OF THIS PRELIMINARY LIMITED OFFERING MEMORANDUM IS MARCH 3, 2017

PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT

Charter SchoolRevenueBonds Charter SchoolRevenueBonds $5,855,000* $720,000* Due: Asshownoninsidecover NOT RATED

MATURITY SCHEDULE

Philadelphia Authority for Industrial Development

$______* Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Series 2017A

$______*__% Term Bonds Due [March] 1, 2022; Price: ____%; Yield __%; CUSIP† ______

$______*__% Term Bonds Due [March] 1, 2037; Price: ____%; Yield __%; CUSIP† ______

$______*__% Term Bonds Due [March] 1, 2052; Price: ____%; Yield __%; CUSIP† ______

$______* Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Taxable Series 2017B

$______*__% Term Bonds Due [March] 1, 2032; Price: ____%; Yield __%; CUSIP† ______

†® Registered Trademark 2015, American Bankers Association. CUSIP data herein is provided by Standard & Poor’s, CUSIP Services Bureau, a Standard & Poor’s Financial Services LLC. CUSIP numbers have been assigned by an independent company not affiliated with the Authority and are included solely for the convenience of the readers of this Limited Offering Memorandum and holders of the Bonds. Neither the Authority, the Academy nor the Underwriter is responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the Bonds or as indicated above. 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 of the Bonds.

* Preliminary; subject to change.

NO DEALER, BROKER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED BY THE AUTHORITY, THE SCHOOL OR THE UNDERWRITER TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS LIMITED OFFERING MEMORANDUM, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ANY OF THE FOREGOING. THE INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED FROM THE AUTHORITY (WITH RESPECT TO THE INFORMATION UNDER THE CAPTIONS “THE AUTHORITY” AND “LEGAL PROCEEDINGS – THE AUTHORITY” ONLY), THE SCHOOL, DTC AND OTHER SOURCES WHICH ARE BELIEVED TO BE ACCURATE AND RELIABLE, BUT NO REPRESENTATION, WARRANTY, OR GUARANTEE IS MADE AS TO THE ACCURACY OR COMPLETENESS OF ANY INFORMATION IN THIS LIMITED OFFERING MEMORANDUM. NOTHING CONTAINED IN THIS LIMITED OFFERING MEMORANDUM CONSTITUTES AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE SERIES 2017 BONDS BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER, SOLICITATION OR SALE. THE INFORMATION AND EXPRESSIONS OF OPINION HEREIN ARE SUBJECT TO COMPLETION AND AMENDMENT. NEITHER THE DELIVERY OF THIS LIMITED OFFERING MEMORANDUM NOR ANY STATEMENT NOR ANY SALE MADE HEREUNDER WILL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE SCHOOL SINCE THE DATE HEREOF OR THE DATE AS OF WHICH PARTICULAR INFORMATION IS GIVEN, IF EARLIER.

THE SERIES 2017 BONDS AND THE BENEFICIAL OWNERSHIP INTERESTS THEREIN MAY ONLY BE PURCHASED BY OR TRANSFERRED IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS, INCLUDING STATE SECURITIES LAWS. THE SERIES 2017 BONDS ARE BEING ISSUED WITHOUT REGISTRATION IN RELIANCE ON SECTION 3(A)(2) OF THE SECURITIES ACT OF 1933, AS AMENDED. THE SCHOOL WILL BE REQUIRED UNDER THE CONTINUING DISCLOSURE AGREEMENT (AS DEFINED HEREIN) TO FURNISH CERTAIN FINANCIAL AND OPERATING INFORMATION FOR AS LONG AS THE SERIES 2017 BONDS ARE OUTSTANDING.

THE SERIES 2017 BONDS WILL BE OFFERED AND SOLD ONLY TO “ACCREDITED INVESTORS,” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND “QUALIFIED INSTITUTIONAL BUYERS,” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT. SEE “ELIGIBLE INVESTORS” AND “LIMITED OFFERING OF BONDS” HEREIN.

This Limited Offering Memorandum contains forward-looking statements, which can be identified by the use of future tense or other forward-looking terms such as “may,” “intend, “will,” “expect,” “anticipate,” “plan,” “management believes,” “estimate,” “continue,” “should,” “strategy,” or “position” or the negatives of those terms or other variations of them or by comparable terminology. In particular, any statements, express or implied, concerning future receipts of funds or the ability to generate cash flow to service indebtedness are forward-looking statements. Investors are cautioned that reliance on any of these forward-looking statements involves risks and uncertainties and that, although the School’s management believes that the assumptions on which those forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate. As a result, the forward-looking statements based on those assumptions also could be incorrect, and actual results may differ materially from any results indicated or suggested by those assumptions. In light of these and other uncertainties the inclusion of a forward-looking statement in this Limited Offering Memorandum should not be regarded as a representation by the School that its plans and objectives will be achieved. All forward-looking statements are expressly qualified by the cautionary statements contained in this paragraph. The School does not undertake any duty to update any forward-looking statements. See “RISK FACTORS” herein.

SHORT STATEMENT

THE INFORMATION SET FORTH IN THIS SHORT STATEMENT IS A BRIEF OVERVIEW OF ONLY CERTAIN MATTERS CONTAINED IN THIS LIMITED OFFERING MEMORANDUM. THIS SHORT STATEMENT IS SUBJECT IN ALL RESPECTS TO MORE COMPLETE INFORMATION SET FORTH ELSEWHERE IN THIS LIMITED OFFERING MEMORANDUM, WHICH SHOULD BE READ IN ITS ENTIRETY, INCLUDING WITHOUT LIMITATION, THE APPENDICES HERETO.

CHARTER SCHOOL REVENUE BONDS AND THE PROJECT. The Series 2017 Bonds, in the aggregate principal amount of $[______]*, will be issued under and pursuant to a Trust Indenture dated as of March 1, 2017 (the “Indenture”), between the Philadelphia Authority for Industrial Development (the “Authority”) and U.S. Bank National Association, as trustee (the “Trustee”). Proceeds of the Series 2017 Bonds will be loaned by the Authority to Harambee Institute of Science and Technology Charter School, Inc. (the “School”) pursuant to a Loan and Security Agreement dated as of March 1, 2017, between the Authority and the School (the “Loan Agreement”) and used (a) to finance the costs of acquiring the approximately one-acre site and instructional facilities existing thereon (collectively, and as improved, the “Facilities”) which are currently leased by the School from Harambee Institute, Inc. (the “Institute”); (b) to finance certain renovations and improvements to the Facilities (the “Improvements”); (c) to repay a tax lien owed to the Internal Revenue Service (“IRS”) and amounts owed with respect to certain office equipment leased by the School and a judgment lien relating thereto (see “JUDGMENT LIENS” herein); (d) to fund six months’ capitalized interest on the Series 2017 Bonds; (e) to fund a debt service reserve fund for the Series 2017 Bonds; and (f) to pay costs of issuing the Series 2017 Bonds (collectively, the “Project”). See “SOURCES AND USES OF FUNDS” herein.

SECURITY FOR THE SERIES 2017 BONDS. The Bonds are limited obligations of the Authority payable only out of certain loan payments received from the School under the Loan Agreement and other amounts held in the funds established by the Indenture (except the Rebate Fund and the Repair and Replacement Fund). The obligations of the School under the Loan Agreement are secured by the Pledged Revenues (as defined herein) of the School comprised primarily of amounts received from the School District of Philadelphia (the “School District”), and a mortgage lien on the Facilities pursuant to an Open-End Mortgage and Security Agreement and Fixture Filing executed by the School in favor of the Trustee dated as of March 1, 2017 (the “Mortgage”), subject to certain limitations described herein and in the Loan Agreement, the Indenture, and the Mortgage.

THE SCHOOL’S PAYMENTS UNDER THE LOAN AGREEMENT ARE THE PRIMARY SOURCE OF THE REVENUES PLEDGED PURSUANT TO THE INDENTURE. THE SCHOOL RECEIVES MOST OF ITS REVENUES FROM THE SCHOOL DISTRICT PURSUANT TO A STATUTORY FORMULA CREATED BY THE PENNSYLVANIA LEGISLATURE. THE SERIES 2017 BONDS DO NOT CONSTITUTE AN OBLIGATION EITHER GENERAL, SPECIFIC, LEGAL, MORAL OR OTHERWISE, OF THE COMMONWEALTH OF PENNSYLVANIA (THE “COMMONWEALTH”), THE CITY OF PHILADELPHIA (THE “CITY”), THE SCHOOL DISTRICT, OR ANY OTHER POLITICAL SUBDIVISION THEREOF, AND NEITHER THE GENERAL CREDIT OF THE AUTHORITY NOR THE FULL FAITH AND CREDIT OR ANY TAXING POWER OF THE COMMONWEALTH, THE CITY, THE SCHOOL DISTRICT OR ANY OTHER POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF PRINCIPAL AND INTEREST WITH RESPECT TO THE SERIES 2017 BONDS. THE AUTHORITY HAS NO TAXING POWER. SEE “SOURCES OF PAYMENT AND SECURITY FOR THE BONDS” AND “RISK FACTORS” HEREIN.

THE LOAN AGREEMENT. The Loan Agreement requires the School to make loan payments in amounts sufficient to pay the principal, interest and premium, if any, coming due on the Series 2017 Bonds. See “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE AND THE MORTGAGE – The Loan Agreement.”

THE INDENTURE. The Indenture authorizes the Trustee to authenticate and deliver the Series 2017 Bonds. The Indenture establishes the following funds: the Bond Principal Fund, the Bond Interest Fund, the Debt Service Reserve Fund, the Costs of Issuance Fund, the Repair and Replacement Fund, the Project Fund, the Revenue Fund and the Rebate Fund. Pursuant to the Indenture, there shall be deposited into the Bond Principal Fund or the Bond Interest Fund, as appropriate, and as and when received (a) all loan payments by the School and other amounts payable pursuant to the Loan Agreement, (b) all moneys transferred to the Bond Principal Fund or Bond Interest

iii

Fund pursuant to the Indenture, (c) all other moneys deposited into the Bond Principal Fund or Bond Interest Fund pursuant to the Loan Agreement the Mortgage, or the Indenture, and (d) all other moneys received by the Trustee when accompanied by directions not inconsistent with the Loan Agreement or the Indenture that such moneys are to be paid into the Bond Principal Fund or Bond Interest Fund.

A Debt Service Reserve Fund with respect to the Series 2017 Bonds is established with the Trustee under the Indenture. The Debt Service Reserve Fund shall be funded by the proceeds of the Series 2017 Bonds in the amount of $[______]* (the “Debt Service Reserve Requirement”). The School shall also deposit in the Debt Service Reserve Fund all moneys required to be paid by the School to the Trustee for deposit in the Debt Service Reserve Fund pursuant to the Loan Agreement. In addition, the School shall deposit into the Debt Service Reserve Fund (a) all moneys transferred to the Debt Service Reserve Fund from the Bond Principal Fund or the Bond Interest Fund pursuant to the Indenture, (b) all other moneys required to be deposited pursuant to the Loan Agreement or the Indenture, and (c) all other moneys received by the Trustee when accompanied by directions not inconsistent with the Loan Agreement, the Mortgage or the Indenture that such moneys are to be paid into the Debt Service Reserve Fund. There also shall be retained in the Debt Service Reserve Fund interest and other income received on investments of Debt Service Reserve Fund moneys to the extent provided in the Indenture.

If at any time there are not sufficient funds in the Bond Principal Fund or Bond Interest Fund for the payment of principal of, premium, if any, and interest on the Series 2017 Bonds as the same become due, the Trustee shall withdraw from the Debt Service Reserve Fund and deposit in the Bond Principal Fund or Bond Interest Fund sufficient moneys which, when added to the moneys on deposit in the Bond Principal Fund and the Bond Interest Fund, will be sufficient to meet the payment of principal, premium, if any, and interest then due on the Series 2017 Bonds. See “SOURCES OF PAYMENT AND SECURITY FOR THE BONDS – The Debt Service Reserve Fund” herein and “APPENDIX D – DEFINITION OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE AND THE MORTGAGE – The Indenture.”

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL. The School is a Pennsylvania nonprofit corporation, a charter school authorized by the School District (in its capacity as authorizer, the “Authorizing Body”) under 24 P.S. §17-1701-A et seq. (the “Charter School Law”), and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). The School is governed by a volunteer board of trustees (the “Board of Trustees”). The School began operating in the fall of 1997 and currently serves grades K-8. The School attracts approximately 95% of its students from within a 10-mile radius of the School. For more information, see “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL” hereto.

THE CHARTER CONTRACT. The School operates under a charter contract with the Authorizing Body (the “Charter”). The School began operating under a charter contract between the School and the Authorizing Body effective July 1, 1997, which charter contract was renewed for five-year terms in 2001, 2006 and 2011. The Charter was renewed for another five-year term, with conditions, on July 1, 2016. The Charter expires June 30, 2021. However, the Charter may be terminated, suspended or revoked by the Authorizing Body prior to the expiration of its term in the event that the School fails to meet its obligations under the Charter or other applicable laws. The Authorizing Body could also determine not to renew the Charter at its expiration. The See “RISK FACTORS – Termination, Revocation or Non-Renewal of Charter” and “THE CHARTER CONTRACT” herein.

THE AUTHORIZING BODY. The School District, the Authorizing Body of the School, acts by and through the School Reform Commission (the “SRC”), the governing body appointed to be responsible for the operation, management and educational programs of the School District after the School District was declared “financially distressed” in 2001. The School District and the SRC together are responsible for overseeing the School, its governing body and its administration in complying with the terms of the Charter and applicable laws of the Commonwealth of Pennsylvania (the “Commonwealth”) and federal laws applicable to Commonwealth charter schools. The School District is coterminous with the City and, as of October 2016, had an enrollment of approximately 134,041 students not including charter school enrollment (approximately 64,867) and pre-k enrollment (approximately 8,765). More than 1.5 million people reside in the City. The School District has approximately 220 public schools (not including charter schools and alternative educational schools and programs),

* Preliminary; subject to change.

comprised of 150 elementary schools, 15 middle schools and 55 high schools. In addition, there are 88 brick and mortar charter schools in the School District, serving approximately 64,867 students. The adopted budget for 2016- 17 for the School District is approximately $2.8 billion.

THE FACILITIES AND THE IMPROVEMENTS. The School currently leases and intends to acquire from the Institute the Facilities located at 630 to 648 N. 66th Street in the City. The Facilities are comprised of two buildings totaling 38,260 square feet and have a capacity of approximately 745 students. The original Charter School Law did not permit Commonwealth charter schools to borrow funds to construct school buildings (the Charter School Law was subsequently revised to remove this prohibition), so in 2001, the Institute financed the acquisition and renovation of the Facilities with the intent to lease the space to the School and in 2004, the Institute constructed about $2.3 million worth of additional improvements to the Facilities. The School currently leases the Facilities from the Institute at a cost of $492,000 per year, due in monthly installments of $41,000, payable on or before the first day of each month, with a 10 day grace period. The Institute and the School have executed an Agreement of Sale to sell the Facilities to the School for $4,200,000. The School has ordered a real estate appraisal report with respect to the Facilities which will be available from the Underwriter prior to the pricing/sale of the Series 2017 Bonds. See “RISK FACTORS – Limited Nature of Real Estate Appraisal” herein. The School intends to use approximately $443,000 of the Bond proceeds to finance the Improvements to the Facilities. The Improvements include, among other things, a new roof, HVAC upgrades, a new stucco exterior, plumbing and electrical upgrades, classroom fixtures and technology upgrades. Contracts for the Improvements will be bid in accordance with the School’s Internal Control Policies and applicable laws. For a description of certain environmental risks associated with the Facilities, see “RISK FACTORS – Environmental Regulation” in the forepart of this Limited Offering Memorandum.

JUDGMENT LIENS. The School was audited by the IRS in 2011 for tax years 2008-2009 for the misclassification of independent contractors and failure to timely file IRS Form 1099s. The audit resulted in a balance due of an estimated $133,464.53, not including accrued penalties and interest due as a result of not paying taxes when due, and a federal tax lien on the Facilities against the School. All amounts still due with respect to this matter at closing will be paid from proceeds of the Series 2017 Bonds. A default judgment was also entered against the School in the amount of $24,568.11 for nonpayment under a lease with a copier leasing company, which resulted in a lien on the Facilities against the School. The School has been repaying amounts owed to the copier leasing company on a monthly basis. All amounts still due with respect to this matter at closing will be paid from proceeds of the Series 2017 Bonds. Other liens currently filed against the Facilities are against the Institute, as current owner, and satisfaction thereof is a condition precedent to settlement of the sale and purchase of Series 2017 Bonds.

ENROLLMENT. The School began operations in the fall of 1997 offering grades K-8 to 220 students. At the close of the 2015-16 school year, total enrollment was 532 students. As of February 23, 2017, total enrollment for the 2016-17 school year was 532, with a 2017-18 waitlist of approximately 356 students. See “RISK FACTORS – Limitation on Enrollment; Payment Dispute” herein. The following tables set forth data provided by the School regarding its historical and projected enrollment:

Historical and Projected Enrollment by Grade

11-12 12-13 13-14 14-15 15-16 16-171 17-182 18-192 19-202 20-212 Kindergarten 40 63 75 57 59 60 56 56 56 56 1st 51 55 81 83 56 54 50 52 52 52 2nd 48 53 53 82 79 52 54 53 54 54 3rd 46 54 54 56 80 79 54 54 54 54 4th 55 55 50 54 55 79 81 54 56 56 5th 53 56 52 52 52 49 81 81 58 58 6th 48 58 56 52 50 55 58 81 81 58 7th 50 51 59 51 52 53 58 58 81 81 8th 46 56 51 55 49 54 53 58 58 81 Total Enrollment 437 501 531 542 532 535 545 547 550 550

FUNDING. The School does not charge tuition, but instead receives funding from the School District for each student in the School who is a resident of the School District. The amount of funding is based on a statutory formula. The following table sets forth for the school years shown the per pupil payment that the School received from the School District:

Per Pupil Payments

2011-12 2012-13 2013-14 2014-15 2015-16 2016-173 School District Regular Education $ 8,773 $ 8,064 $ 8,417 $ 7,992 $ 7,738 $ 8,451 School District Special Education $ 19,423 $ 19,831 $ 22,307 $ 23,293 $ 23,697 $ 25,647

CASH-ON-HAND COVENANT. Pursuant to the terms of the Loan Agreement, the School covenants and agrees to maintain unrestricted Cash on Hand (as defined in “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE, AND THE MORTGAGE”) in the operating fund of the School (the “Operating Fund”) of at least 30 Days’ Cash on Hand, tested as of June 30 of each year, commencing June 30, 2017, until the Series 2017 Bonds are no longer outstanding (collectively, the “Cash on Hand Requirement”). Following each testing date, the School will provide the Trustee with a certification of having met the Cash on Hand Requirement no later than the earlier of the ensuing December 31 or three weeks after completion of the School’s audit for the previous Fiscal Year. Amounts on deposit in the Operating Fund may be used to pay Operating Expenses or may be used for any other lawful purpose.

1 As of February 23, 2017, total enrollment for the 2016-17 school year was 532. The 2016-17 through 2020-2021 enrollment numbers for all grades are projected and will fluctuate as students are added from the waiting list described in Table 4 of APPENDIX A hereto. The large waitlist numbers are a result of the limitation on enrollment of students in the School District (525 students). See "RISK FACTORS - Limitation on Enrollment; Payment Disputes" in the forepart of this Limited Offering Memorandum. 2 Projected.

3 On February 17, 2017, the School District announced a proposed mid-year amendment of the pupil rates paid to charter schools in the City for fiscal year 2016-17. Though such amendment is not yet certified by the Commonwealth Department of Education, the School anticipates, based upon communications received from the School District, that there will be a downward adjustment of approximately 4% for the regular education rates (a reduction of $341.87) and special education rates (a reduction of $1,032.55) for charter school students in the City. The School estimates that the financial impact on the School will be a reduction in annual revenues of approximately $220,000. The reduction in revenues is retroactive to the beginning of the 2016-17 school year such that overpayments will need to be recovered from the School by the School District. The School and the School District will be discussing repayment options. In an attempt to mitigate the loss of revenues, the School is planning to make mid-year budget adjustments. See “RISK FACTORS – Sufficiency of Revenues.”

If the Cash on Hand for any testing date is less than the Cash on Hand Requirement, then, upon the written direction of the Majority Bondholder, the School will promptly employ a Management Consultant to review and analyze the operations and administration of the School, inspect the Facilities, and submit to the School and Trustee written reports, and make such recommendations as to the operation and administration of the School as such Management Consultant deems appropriate, including any recommendation as to a revision of the methods of operation thereof. The School agrees to consider any recommendations by the Management Consultant and, to the fullest extent practicable, to adopt and carry out such recommendations. The School shall pay for all reasonable costs associated with such Management Consultant.

So long as the School is otherwise in full compliance with its obligations under the Loan Agreement, including following, to the fullest extent practicable, the recommendations of the Management Consultant, it shall not constitute an Event of Default under the Loan Agreement if the Cash on Hand for any testing date is less than the Cash on Hand Requirement. See “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE, AND THE MORTGAGE” hereto.

As of January 31, 2017, the School had 50 Days’ Cash on Hand.4 Over the past several years, however, School management has had to closely monitor cash flow in order to strengthen the cash position of the School. The auditor has previously noted a deficiency in cash on hand and the School District, as part of the latest Charter renewal process, raised concerns about the School having insufficient cash on hand.

DEBT SERVICE COVERAGE COVENANT. Pursuant to the Loan Agreement, commencing for the Fiscal Year ended June 30, 2017, as tested as of the last day of each Fiscal Year, the School must either: (A) have at least 60 Days’ Cash on Hand and Net Income Available for Debt Service with respect to the Fiscal Year then ended of at least 100% of the Principal and Interest Requirements on Long-Term Indebtedness (both as defined in “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE, AND THE MORTGAGE”); or (B) if the School has less than 60 Days’ Cash on Hand on the last day of a Fiscal Year, then Net Income Available for Debt Service with respect to the Fiscal Year then ended equal to at least 110% of the Principal and Interest Requirements on Long-Term Indebtedness. The School will provide certification of compliance with either (A) or (B) to the Trustee no later than the earlier of the ensuing December 31 or three weeks after completion of the School’s audit for the previous Fiscal Year.

If the School does not comply with either (A) or (B) described in the paragraph immediately hereinabove, then the Trustee shall give notice thereof to the Bondholders and, upon the written direction of the Majority Bondholder, the School will promptly employ an Management Consultant to review and analyze the operations and administration of the School, inspect the Premises, and submit to the School and Trustee written reports, and make such recommendations as to the operation and administration of the School as such Management Consultant deems appropriate, including any recommendation as to a revision of the methods of operation thereof. The School agrees to consider any recommendations by the Management Consultant and, to the fullest extent practicable, to adopt and carry out such recommendations.

So long as the School is otherwise in full compliance with its obligations under the Loan Agreement, including following, to the fullest extent practicable, the recommendations of the Management Consultant, it shall not constitute an Event of Default under the Loan Agreement if the Net Income Available for Debt Service for any Fiscal Year is less than 110% of the Principal and Interest Requirements on Long-Term Indebtedness for such Fiscal Year (as evidenced by the School’s audited financial statements for such Fiscal Year).

Notwithstanding the immediately preceding paragraph, regardless of whether the School has retained a Management Consultant, if at the end of the Fiscal Year ending June 30, 2017 or any subsequent Fiscal Year, the Net Income Available for Debt Service as of the end of such Fiscal Year is less than 100% of the Principal and Interest Requirements on Long-Term Indebtedness of such Fiscal Year (as evidenced by the School’s audited financial statements for such Fiscal Year), then the Trustee shall give notice thereof to the Bondholders and the Majority Bondholder, may either (A) direct the Trustee to declare an Event of Default under the Indenture and Loan

4 If the School had made its February rent payment before calculating days cash on hand as of January 31, 2017, days cash on hand would have been 47 days.

Agreement or (B) direct the Trustee to exercise one of more the of remedies permitted under the Loan Agreement and the Indenture.

The School has not historically measured debt service coverage. Upon issuance of the Bonds, the School’s only Long-Term Indebtedness other than the Bonds will be an operating lease for office equipment outstanding in the amount of $3,486. See “OTHER DEBT AND FUTURE FINANCINGS” herein.

FINANCIAL COVENANTS IN THE CHARTER. The Charter provides that, among other things, the Board of Trustees must ensure that the School maintains satisfactory short-term financial health and long-term financial sustainability during the term of the Charter, as measured annually by (a) a current ratio greater than 1, (b) 30 or more average days cash on hand, (c) a positive fund balance, (d) a positive net position, and (e) a debt-to- asset ratio of less than 0.92. Failure to comply with these conditions may be the basis for a revocation or nonrenewal of the Charter.

As of January 31, 2017, the School has (a) a current ratio of .77, (b) 50 days cash on hand5, (c) a fund balance of -.02, (d) a negative net position of 1.2, and (e) a debt-to-asset ratio of 1.06. See “RISK FACTORS – Termination, Revocation or Non-Renewal of Charter” herein.

ACADEMIC PERFORMANCE COVENANT. The School covenants and agrees in the Loan Agreement to maintain an overall performance tier in the top three levels on the School District’s School Progress Report (or similar academic performance reporting tool used by the School District) (the “SPR”) beginning with the SPR for the 2016-17 school year. In the event the School receives an overall performance tier in the lowest level on the SPR, then, the School will promptly retain, at its sole expense, an educational consultant to review and analyze the instructional program and curriculum of the School, and submit to the School and Trustee a compliance plan establishing benchmarks to assist the School in attaining an overall performance ranking in the top three levels on the SPR. The Borrower agrees to consider all reasonable recommendations by the educational consultant and, to the fullest extent practicable, to adopt and carry out such recommendations. So long as the School is otherwise in full compliance with its obligations under the Loan Agreement, including following, to the fullest extent practicable, the recommendations of the educational consultant, failure to satisfy the performance standard set forth in this paragraph shall not constitute an Event of Default under the Loan Agreement. See “CERTAIN COVENANTS OF THE SCHOOL – Academic Performance Covenant” and “RISK FACTORS – Termination, Revocation, or Non- Renewal of Charter” herein.

GENERAL FUND RESULTS AND FORECAST; DEBT SERVICE COVERAGE AND OPERATING FUND BALANCE. “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL” and “APPENDIX B – FOUR-YEAR FINANCIAL FORECAST” hereto include a financial forecast, financial results organized to facilitate year-to-year comparison, and debt service and projected debt service coverage for the Series 2017 Bonds. See also “APPENDIX C – AUDITED FINANCIAL STATEMENTS OF THE SCHOOL FOR FISCAL YEARS ENDING JUNE 30, 2016, 2015, AND 2014” hereto. The financial forecast and other projections included in this Limited Offering Memorandum, including the appendices, do not take into account a potential downward adjustment in per pupil revenues or budget adjustments made at the School level to mitigate the effect of such revenue loss. See “CHARTER SCHOOLS IN THE COMMONWEALTH – Funding For Charter Schools” and “RISK FACTORS – Sufficiency of Revenues” herein.

RISK FACTORS. THE PURCHASE OF THE SERIES 2017 BONDS INVOLVES A HIGH DEGREE OF RISK, INCLUDING, BUT NOT LIMITED TO, THE TERMINATION, NONRENEWAL, REVOCATION OR SUSPENSION OF THE SCHOOL’S CHARTER. CERTAIN OF THOSE RISKS ARE DESCRIBED HEREIN. PROSPECTIVE INVESTORS SHOULD REVIEW ALL OF THE INFORMATION IN THIS LIMITED OFFERING MEMORANDUM AND APPENDICES CAREFULLY PRIOR TO PURCHASING ANY OF THE SERIES 2017 BONDS, INCLUDING PARTICULARLY, BUT WITHOUT LIMITATION, THE SECTION ENTITLED “RISK FACTORS” HEREIN.

5 If the School had made its February rent payment before calculating days cash on hand as of January 31, 2017, days cash on hand would have been 47 days.

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TABLE OF CONTENTS

INTRODUCTION ...... 1 THE AUTHORITY ...... 2 THE SCHOOL ...... 3 THE CHARTER CONTRACT ...... 4 THE AUTHORIZING BODY, THE SCHOOL DISTRICT OF PHILADELPHIA ...... 4 ENROLLMENT ...... 6 THE SCHOOL’S FACILITIES AND THE IMPROVEMENTS ...... 7 JUDGMENT LIENS ...... 7 SOURCES AND USES OF FUNDS ...... 8 THE SERIES 2017 BONDS ...... 8 ELIGIBLE INVESTORS ...... 12 SOURCES OF PAYMENT AND SECURITY FOR THE BONDS ...... 12 CERTAIN COVENANTS OF THE SCHOOL ...... 18 CHARTER SCHOOLS IN THE COMMONWEALTH ...... 21 RISK FACTORS ...... 25 TAX MATTERS ...... 42 LEGAL MATTERS ...... 44 UNDERWRITING ...... 44 FINANCIAL ADVISOR ...... 44 LIMITED OFFERING OF BONDS ...... 44 CERTAIN RELATIONSHIPS AMONG TRANSACTION PARTICIPANTS ...... 44 LEGAL PROCEEDINGS ...... 45 CONTINUING DISCLOSURE ...... 45 BONDS NOT A DEBT OF COMMONWEALTH OR ANY POLITICAL SUBDIVISION, OTHER THAN A LIMITED OBLIGATION OF THE AUTHORITY ...... 46 NOT RATED ...... 46 OTHER DEBT AND FUTURE FINANCINGS ...... 46 FINANCIAL STATEMENTS ...... 46 MISCELLANEOUS ...... 47

APPENDIX A - HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL ...... A-1 APPENDIX B - FOUR-YEAR FINANCIAL FORECAST ...... B-1 APPENDIX C - AUDITED FINANCIAL STATEMENTS OF THE SCHOOL FOR FISCAL YEARS ENDING JUNE 30, 2016, 2015, AND 2014 ...... C-1 APPENDIX D - DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE, AND THE MORTGAGE ...... D-1 APPENDIX E - FORM OF OPINION OF BOND COUNSEL ...... E-1 APPENDIX F - FORM OF CONTINUING DISCLOSURE AGREEMENT ...... F-I APPENDIX G - BOOK-ENTRY-ONLY SYSTEM ...... G-I

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

THE DESCRIPTIONS OF THE DOCUMENTS IN THE LIMITED OFFERING MEMORANDUM ARE SUMMARIES THEREOF AND REFERENCE IS MADE TO THE ACTUAL DOCUMENTS FOR A COMPLETE UNDERSTANDING OF THE CONTENTS OF SUCH DOCUMENTS.

THE TRUSTEE ASSUMES NO RESPONSIBILITY FOR THIS LIMITED OFFERING MEMORANDUM AND HAS NOT REVIEWED OR UNDERTAKEN TO VERIFY ANY INFORMATION CONTAINED HEREIN.

IN MAKING ANY INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE SERIES 2017 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE INDENTURE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE SERIES 2017 BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF SECURITIES LAWS OF THE STATES IN WHICH THE SERIES 2017 BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE SERIES 2017 BONDS OR THE ACCURACY OR COMPLETENESS OF THIS LIMITED OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.

THE INFORMATION SET FORTH HEREIN HAS BEEN OBTAINED FROM THE AUTHORITY (WITH RESPECT TO THE INFORMATION UNDER THE CAPTIONS “THE AUTHORITY” AND “LEGAL PROCEEDINGS – THE AUTHORITY” ONLY), THE SCHOOL, THE DEPOSITORY TRUST COMPANY AND OTHER SOURCES THAT ARE BELIEVED TO BE RELIABLE AND HAS BEEN REVIEWED BY THE UNDERWRITER IN ACCORDANCE WITH AND AS A PART OF ITS RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT IT IS NOT GUARANTEED AS TO ACCURACY AND COMPLETENESS, AND IS NOT TO BE CONSTRUED AS A REPRESENTATION BY THE UNDERWRITER WHO HAS PROVIDED THIS SENTENCE FOR INCLUSION HEREIN. THE INFORMATION AND 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 THE IMPLICATION THAT THERE HAS BEEN NO CHANGE IN ANY OF THE INFORMATION SET FORTH HEREIN SINCE THE DATE HEREOF OR THE DATE AS OF WHICH PARTICULAR INFORMATION IS GIVEN, IF EARLIER.

THE AUTHORIZING BODY HAS NOT REVIEWED THIS LIMITED OFFERING MEMORANDUM, AND DOES NOT ASSUME ANY RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF ANY OF THE STATEMENTS CONTAINED IN THIS LIMITED OFFERING MEMORANDUM.

PRELIMINARY LIMITED OFFERING MEMORANDUM

PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT

$[______]* Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Series 2017A

and

$[______]* Charter School Revenue Bonds (Harambee Institute of Science and Technology Charier School Project), Federally Taxable Series 2017B

INTRODUCTION

This Limited Offering Memorandum (including the cover page and appendices) is provided to furnish information in connection with the issuance and sale by the Philadelphia Authority for Industrial Development (the “Authority”) of its $[______]* Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Series 2017A (the “Series 2017A Bonds”) and $[______]* Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Federally Taxable Series 2017B (the “Series 2017B Bonds,” and together with the Series 2017A Bonds, the “Series 2017 Bonds”). The Series 2017 Bonds will be limited obligations of the Authority as described under the caption “SOURCES OF PAYMENT AND SECURITY FOR THE BONDS” herein.

The Series 2017 Bonds will be issued under a Trust Indenture dated as of March 1, 2017 (the “Indenture”), between the Authority and U.S. Trust National Association, as trustee (the “Trustee”). Proceeds of the Series 2017 Bonds will be loaned by the Authority to Harambee Institute of Science and Technology Charter School, Inc. (the “School”) pursuant to a Loan and Security Agreement dated as of March 1, 2017, between the Authority and the School (the “Loan Agreement”) and used (a) to finance the costs of acquiring the approximately one-acre site and instructional facilities existing thereon (collectively, and as improved, the “Facilities”) which are currently leased by the School from Harambee Institute, Inc. (the “Institute”); (b) to finance certain renovations and improvements to the Facilities (the “Improvements”); (c) to pay certain judgments to remove liens so that the Mortgage will be a first lien on the Facilities (see “JUDGMENT LIENS” herein); (d) to fund six months’ capitalized interest on the Series 2017 Bonds; (e) to fund a debt service reserve fund for the Series 2017 Bonds; and (f) to pay costs of issuing the Series 2017 Bonds (collectively, the “Project”).

The Bonds are limited obligations of the Authority payable only out of certain loan payments received from the School under the Loan Agreement and other amounts held in the funds established by the Indenture (except the Rebate Fund and the Repair and Replacement Fund). The obligations of the School under the Loan Agreement are secured by the Pledged Revenues (as defined herein) of the School comprised primarily of amounts received from the School District of Philadelphia (the “School District”), and a mortgage lien on the Facilities pursuant to an Open-End Mortgage and Security Agreement and Fixture Filing issued by the School in favor of the Trustee dated as of March 1, 2017 (the “Mortgage”), subject to certain limitations described herein and in the Loan Agreement, the Indenture, and the Mortgage. The loan payments which are due and payable to the Authority under the Loan Agreement are expected to be sufficient to pay the principal of, premium, if any and interest on the Series 2017 Bonds when due.

* Preliminary; subject to change.

THE SERIES 2017 BONDS ARE PAYABLE SOLELY FROM AMOUNTS PAYABLE BY THE SCHOOL UNDER THE LOAN AGREEMENT, WHICH ARE THE PRIMARY SOURCE OF THE REVENUES PLEDGED PURSUANT TO THE INDENTURE. THE SCHOOL RECEIVES MOST OF ITS REVENUES FROM THE SCHOOL DISTRICT OF PHILADELPHIA (THE “SCHOOL DISTRICT”) PURSUANT TO A STATUTORY FORMULA CREATED BY THE PENNSYLVANIA LEGISLATURE AND THE LEGISLATURE MAY CHANGE THE FORMULA AT ANY TIME. THE SERIES 2017 BONDS DO NOT CONSTITUTE AN OBLIGATION, EITHER GENERAL, SPECIAL, LEGAL, MORAL OR OTHERWISE, OF THE COMMONWEALTH OF PENNSYLVANIA (THE “COMMONWEALTH”), THE CITY OF PHILADELPHIA (THE “CITY”), THE SCHOOL DISTRICT OR ANY OTHER POLITICAL SUBDIVISION THEREOF, AND NEITHER THE FULL FAITH AND CREDIT OF THE AUTHORITY NOR THE FULL FAITH AND CREDIT OR ANY TAXING POWER OF THE COMMONWEALTH, THE CITY, THE SCHOOL DISTRICT OR ANY OTHER POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF PRINCIPAL AND INTEREST WITH RESPECT TO THE SERIES 2017 BONDS. THE AUTHORITY HAS NO TAXING POWER. SEE “SOURCES OF PAYMENT AND SECURITY FOR THE BONDS” AND “RISK FACTORS” HEREIN.

For the definition of certain words and terms used in this Limited Offering Memorandum, see APPENDIX D hereto, titled “DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE, AND THE MORTGAGE.”

THE AUTHORITY

Powers and Duties

The Authority is a public instrumentality of the Commonwealth and a body corporate and politic, created by the City pursuant to the Economic Development Financing Law of the Commonwealth, the Act of August 23, 1967, P.L. 251, as amended (the “Act”), for the purpose of acquiring, holding, constructing, improving, maintaining, operating, owning, financing and leasing, either in the capacity of lessor or lessee, industrial, commercial or specialized development projects, all as permitted under the Act. A Certificate of Incorporation was issued to the Authority by the Secretary of the Commonwealth on December 27, 1967. A Certificate of Amendment evidencing the amendment of the Authority’s Articles of Incorporation, extending the term of existence of the Authority, was issued on September 21, 2011. The Authority’s existence will continue for 50 years from September 21, 2011.

Authority Board

The governing body of the Authority is a board consisting of five members appointed by the Mayor of the City. Members of the Authority’s board serve at the pleasure of the Mayor. The members of the Board are:

Name Position

Evelyn F. Smalls Chairperson Thomas A.K. Queenan Treasurer David L. Hyman, Esq. Secretary Anthony Simonetta Member Joseph Mee Member

Financing Program of the Authority

The Authority has a number of special obligation bond and note issues outstanding and may issue others from time to time. Each such issue is payable solely from revenues derived from the project being financed, from special funds established therefor or from other financing arrangements, is separately secured and is separate and independent from the Series 2017 Bonds as to sources of payment and security.

The Authority has experienced defaults with respect to certain obligations issued by it, by reason of nonpayment of debt service by the party receiving financing through the Authority. However, the Bonds are payable solely from the funds pledged under the Loan Agreement and Indenture and any other obligations issued by the Authority are payable solely from the funds specifically pledged for the payment of such other obligations. Accordingly, a default on another issue of obligations issued by the Authority would not constitute a default on the

Series 2017 Bonds. The Authority may from time to time enter into further transactions with other entities in connection with projects unrelated to the Project being financed by the Series 2017 Bonds. Such transactions will provide for the issuance of bonds or notes to be secured by sources of revenue or other security that are separate from the revenues and other security securing the Series 2017 Bonds.

At the time of delivery of the Series 2017 Bonds, the Authority will, among other things, confirm the assignment of all of its rights under the Loan Agreement to the Trustee (subject to certain reserved rights).

Certain Other Activities

In addition to its financing activities and as part of its economic development activities for the City, the Authority owns and manages certain industrial and commercial parks in the City. The City transferred to the Authority legal title to certain vacant land available for development in several industrial parks. The Authority also holds legal title to a portion of the land and buildings comprising the Philadelphia Naval Business Center, which represents the largest portion of the former Philadelphia Naval Shipyard previously owned and operated by the United States Department of Defense.

THE AUTHORITY HAS NOT PREPARED OR ASSISTED IN THE PREPARATION OF THIS LIMITED OFFERING MEMORANDUM, EXCEPT THE STATEMENTS UNDER THIS SECTION AND UNDER THE HEADING “LEGAL PROCEEDINGS – THE AUTHORITY” HEREIN AND, EXCEPT AS TO THOSE STATEMENTS, THE AUTHORITY IS NOT RESPONSIBLE FOR, AND DOES NOT REPRESENT OR WARRANT IN ANY WAY THE ACCURACY OR COMPLETENESS OF, ANY INFORMATION OR ANY STATEMENTS MADE HEREIN. ACCORDINGLY, EXCEPT AS AFORESAID, THE AUTHORITY DISCLAIMS RESPONSIBILITY FOR THE DISCLOSURE SET FORTH HEREIN MADE IN CONNECTION WITH THE OFFER, SALE, AND DISTRIBUTION OF THE BONDS.

The Authority’s address is 1500 Market Street, Suite 2600 West, Philadelphia, Pennsylvania 19102-2126.

THE SCHOOL

General

The School is a Pennsylvania nonprofit corporation, a charter school authorized by the School District (in its capacity as authorizer, the “Authorizing Body”) under 24 P.S. §17-1701-A et seq. (the “Charter School Law”), and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). The School is governed by a volunteer board of trustees (the “Board of Trustees”). The School began operating in the fall of 1997 and currently serves grades K-8. The School attracts approximately 95% of its students from within a 10-mile radius of the School. At the close of the 2015-16 school year, total enrollment was 532 students. As of February 23, 2017, total enrollment for the 2016-17 school year was 532, with a 2017-18 waitlist of approximately 356 students. The School is authorized to enroll up to 525 students in grades K-8 under its Charter. See “ENROLLMENT” and “RISK FACTORS – Limitation on Enrollment; Payment Dispute” herein. Since its opening, the School has leased the Facilities from Harambee Institute, Inc. (the “Institute”) at a cost of $492,000 per year, due in monthly installments of $41,000, payable on or before the first day of each month, with a 10 day grace period.

For additional information regarding the School, see “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL” hereto.

Harambee Institute, Inc.

The Institute is a Pennsylvania nonprofit corporation established in 1973 to conduct community-based education programs. After the passage of the Charter School Law in 1997, the Institute submitted a proposal to the School District for the approval and establishment of the School as a charter school under the Charter School Law, which proposal led to the creation of the School (one of the first five charter schools in the City when it was authorized to open in the fall of l997). The original Charter School Law did not permit Commonwealth charter schools to borrow funds to construct school buildings (the Charter School Law was subsequently revised to remove this prohibition), so in 2001, the Institute financed the acquisition and renovation of the Facilities with the intent to lease the space to the School. The Institute was previously an organization as described in Section 501(c)(3) of the

Code, but lost its status due to failure to make required filings with the IRS. The Institute has regained its status as a 501(c)(3) organization. Historically, certain members of the Board of Trustees were also directors of the Institute, but no such relationships currently exist, the respective boards now being completely independent.

Prior Difficulties

The School operated from 1997 to 2007 under its late founder, John Skief. After John Skief’s death in 2007, his son, Masai Skief, was put in the position of Chief Executive Officer of the School. In 2007 and 2008, the School’s Chief Financial Officer, Rhonda Sharif, was simultaneously employed as Chief Financial Officer and Business Manager at two other charter schools in addition to the School. During this time, Ms. Sharif claimed to have worked more than 365 days in each year, was reimbursed $101,587 for unspecified credit card expenses from the School, spent $52,694 of the School’s funds for a staff retreat in Ocean City, Maryland, and directed an aggregate of $7.5 million in construction contracts (from the School and two other charter schools) to a company owned by her husband. In 2010, City Controller Alan Butkovitz prepared a report on concerns with respect to charter schools in the City (the “Butkovitz Report”). Highlighted in the Butkovitz Report with respect to the School were unauthorized payments to Mr. Skief, Ms. Sharif’s conduct, and improper use of the Facilities on weekends. The prior owner of the Facilities had a liquor license for the Facilities which it had transferred to the Institute in 2002. The Institute used the Facilities as a nightclub and served alcohol until the Butkovitz Report brought the matter to the attention of the School District. The School District ordered that either the School or the nightclub cease operations immediately.

Management Changes

Subsequently, Ms. Sharif was terminated as the School’s Chief Financial Officer, the nightclub was closed, and in August of 2013, Mr. Skief resigned as Chief Executive Officer, and he subsequently pled guilty to two counts of wire fraud, and was found to have embezzled $79,000 from the Institute and $9,000 from a scholarship fund. In 2013, to address fiscal mismanagement, a new finance director was hired, the Board of Trustees assumed a more direct oversight of financial operations, a Manual of Finance Policies and Controls was adopted, and a Finance Committee was established. In 2014, as part of the School’s continuing effort to return the School to its original purpose, the School hired as its Chief Executive Officer, Sandra Dungee Glenn, the former chairperson of the School Reform Commission (the “SRC”). In July 2014, the School undertook a financial review by J. Miller and Associates, its auditor. The review noted concerns with the School’s procedures in the areas of cash receipts, cash disbursements, payroll processing, and case management. The review suggested policies and procedures to resolve those concerns, and the School believes that it has implemented those policies and procedures. Recent reports highlight ongoing struggles to meet School District standards. See “RISK FACTORS – Fiscal and Operational Control Issues” herein. For a more complete description of the School’s history, improvement plans, current vision and goals, curriculum and more, see “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL” hereto. The acquisition of the Facilities from the Institute is the culmination of the School’s efforts to achieve independence, regain its footing, and reaffirm its mission.

THE CHARTER CONTRACT

The School operates under a charter contract with the Authorizing Body (the “Charter”). The School began operating under a charter contract between the School and the Authorizing Body effective July 1, 1997, which charter contract was renewed for five year terms in 2001, 2006 and 2011. The Charter was renewed for another five year term, with certain conditions as further described herein, on July 1, 2016. See “RISK FACTORS – Termination, Revocation or Non-Renewal of Charter” herein. The Charter expires June 30, 2021. THE CHARTER MAY BE TERMINATED, SUSPENDED OR REVOKED BY THE AUTHORIZING BODY PRIOR TO THE EXPIRATION OF ITS TERM IN THE EVENT THAT THE SCHOOL FAILS TO MEET ITS OBLIGATIONS UNDER THE CHARTER OR OTHER APPLICABLE LAWS. THE AUTHORIZING BODY COULD ALSO DETERMINE NOT TO RENEW THE CHARTER AT ITS EXPIRATION. See “RISK FACTORS – Termination, Revocation or Non-Renewal of Charter” herein.

THE AUTHORIZING BODY, THE SCHOOL DISTRICT OF PHILADELPHIA

The School District, the Authorizing Body of the School, acts by and through the SRC. The School District and the SRC together are responsible for overseeing the School in complying with the terms of the Charter and

applicable laws of the Commonwealth and federal laws applicable to Commonwealth charter schools. The School District is coterminous with the City and, as of December 2015, had an enrollment of approximately 134,538 students not including charter school enrollment (approximately 63,441) and pre-k enrollment (approximately 8,849), and is the eighth largest in the nation by enrollment. More than 1.5 million people reside in the City. The School District has approximately 218 public schools (not including charter schools and alternative educational schools and programs), comprised of 149 elementary schools, 16 middle schools and 53 high schools. The adopted budget for 2016-17 for the School District is approximately $2.8 billion. The School District is also home to 88 charter schools in the School District.

State Takeover of the School District of Philadelphia; SRC and the Charter School Law

During the 2001-2002 school year, the School District experienced a substantial budgetary shortfall. The School District was declared “financially distressed” on December 22, 2001 under 24 P.S. §§6-691 to 6-695 (1959), as amended (the “Distress Law”) following negotiations between the Mayor of the City and the Governor of the Commonwealth. Pursuant to the Distress Law, and following the declaration of distress by the Commonwealth Secretary of Education (the “Secretary”), the SRC was established to govern the School District. The SRC was appointed on March 14, 2002. At that time, the powers of the school board of the School District were suspended and the SRC assumed governance of the School District.

The appointment of the SRC impacts charter schools in the School District. Under the Charter School Law, approval of charters, as well as revocations and renewals are made by the authorizing school district. Pursuant to the Distress Law, the SRC has assumed the authority to renew, suspend or revoke charters authorized by the School District. The SRC has assumed the role of oversight of operating charter schools in the School District. While the SRC retains its statutory authority, the SRC has delegated its procedural oversight duties to the School District.

The School District’s financial condition continued to decline between 2011 and 2013. The SRC reduced expenditures and made staff reductions. However, these retrenchments were insufficient to keep pace with revenue shortfalls. Thus, the SRC passed Resolution 1 of 2013 (“SRC-2013-1”), stating that the School District was in the midst of an untenable financial crisis. SRC-2013-1 suspended a number of sections of the Charter School Law, as well as “any applicable regulations,” on the grounds that the SRC “desire[d] to remove limitations on its power to suspend charters[.]” One category of suspended provisions concerned the nonrenewal or revocation of charters, in particular: Section 17-1729-A(a), which provides the causes and grounds for nonrenewal or revocation; Section 17- 1729-A(c), which requires that a public hearing be held regarding any decision to revoke or not renew a charter; Section 17-1729-A(d), which establishes a procedure for charter schools to appeal a School District’s revocation or nonrenewal determination to the State Charter School Appeal Board; and Section 17-1729-A(f), which clarifies that, while an administrative appeal is ongoing, a charter school’s charter remains in effect. SRC-2013-1 also suspended the provisions of 24 P.S. §17-1723-A(d)(1) of the Charter School Law which provides that a school district’s governing authority may not impose an enrollment cap on a charter school absent the charter school’s consent, permitting the SRC to place enrollment caps unilaterally on any charter school. Finally, SRC-2013-1 expanded the SRC’s authority to impose student performance targets on charter schools (the Charter School Law permits the imposition of student performance targets only when the charter school is in corrective action status) and eliminated the ability of charter schools to receive funding for enrolled students directly from the Commonwealth Department of Education (the “Department”). In February 2014, the SRC released a draft version of its “Proposed Charter Schools Policy” whereby it intended to implement the provisions of SRC-2013-1. Among other things, the Proposed Charter Schools Policy sets forth new reasons to revoke or nonrenew a charter that do not appear in the Charter School Law, including that a charter school failed to comply with SRC-imposed enrollment caps. See “RISK FACTORS – Limitation on Enrollment; Payment Dispute” herein.

Shortly after the release of the Proposed Charter Schools Policy, one charter school in the School District challenged the policy in court, maintaining that a delegation of unfettered power to the SRC is constitutional only if the General Assembly sets forth specific policies guiding the delegation and surrounding it with definite standards and limitations, none of which policies, standards or limitations were present when the Commonwealth Legislature appointed the SRC. In February 2016, the Commonwealth Supreme Court held that in adopting the Distress Law the Legislature properly sought to empower the SRC to take actions which it might deem necessary or convenient to

alleviate the School District’s ongoing financial crisis (the “West Philadelphia Case”).1 However, the Court held in the West Philadelphia Case that “[w]hile this is a salutary goal, the means chosen to effectuate it were extremely broad: the Legislature gave the SRC what amounts to carte blanche powers to suspend virtually any combination of provisions of the [Charter School Law]…” Ruling that the applicable portion of the Distress Law is unconstitutional, the Court found in the West Philadelphia Case that all actions of the SRC taken pursuant to its Proposed Charter School Policy are null and void and that the SRC has no power to suspend any portion of the Charter School Law without further standards and limitations being established to govern the power given to the SRC by the Distress Law. See “RISK FACTORS – Changes in Law” herein. On February 29, 2016, the SRC requested the Commonwealth Supreme Court reconsider its decision in the West Philadelphia Case. On April 4, 2016, the Court denied the SRC request. It is unclear whether the Commonwealth’s Legislature will seek to circumvent the Supreme Court’s decision by drafting legislation providing the SRC with other oversight powers to supplant those powers in the portion of the Distress Law deemed unconstitutional.

The School District, under the Charter School Law and the Distress Law, is not required to accept new charter school applications. For charter school renewals, charter schools must notify the School District of their intent to renew by July 28 of the year preceding the expiration of their charter; renewing charter schools are then required to submit a charter renewal application to the School District by August 31.

Current Financial Situation of the School District

In 2011, the Commonwealth was facing a budget deficit of about $4 billion, due in part to consequences of the recession. The final 2011 budget for the Commonwealth cut approximately $961 million from education, with roughly one-third of those cuts falling on the School District alone. Since 2012, the School District has been operating in deficit mode, closing 24 schools, eliminating music and art programs, laying off thousands of teachers, nurses, counselors and staff, and making substantial central office staffing cuts. As described above, the SRC passed SRC-2013-1 in 2013 stating that the School District was in the midst of an untenable financial crisis. In March of 2016, the School District adopted a plan assuming $440 million worth of new investments over five years. The long-term blueprint is contingent, however, on certain assumptions including the next state budget cycle and charter school enrollment growth. The five-year-plan projects the School District’s operating budget to increase from an estimated $2.715 billion in fiscal year 2018 (i.e., the period from July 1, 2017 to June 30, 2018) to a projected $2.967 billion in fiscal year 2021. Charter school expenditures are projected to increase by $121 million between fiscal years 2016 and 2017 due to increases in per pupil rates and enrollment growth. Budgetary problems at the School District may affect the School’s funding. See “RISK FACTORS – Dependence on Per Pupil Payments; Commonwealth Appropriation and School District Risk” herein.

ENROLLMENT

The School began operating in the fall of 1997 serving 220 students in grades K-8. The School attracts approximately 95% of its students from within a 10-mile radius of the School. At the close of the 2015-16 school year, total enrollment was 532 students. As of February 13, 2017, total enrollment for the 2016-17 school year was 532, with a 2017-18 waitlist of approximately 358 students. The School is authorized under its Charter to enroll up to 525 students in grades K-8. 100% of the School’s 525 students authorized under the Charter enrollment cap may reside in the School District, but the School does enroll students from outside of the School District in excess of its enrollment cap and may do so in the future. The large waitlist numbers are a result of the limitation on enrollment of students in the School District. See “RISK FACTORS – Limitation on Enrollment; Payment Dispute” herein.

For additional enrollment information, including historical and projected enrollment, waitlist numbers and student retention, see “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL” hereto.

1 West Philadelphia Achievement Charter Elementary School v. The School District of Philadelphia and School Reform Commission, 132 A.3d 957 (Pa. 2016) (holding that the provision of the Distress Law that gave the SRC the power to suspend the requirements of the Charter School Law and regulations of the State Board of Education (see 24 P.S. § 6-696(i)(3)) and led to the Commonwealth takeover of city schools in 2001 was unconstitutional).

THE SCHOOL’S FACILITIES AND THE IMPROVEMENTS

The School currently leases and intends to acquire from the Institute the Facilities located at 630 to 648 N. 66th Street in the City. The Facilities are comprised of two buildings totaling 38,260 square feet and have a capacity of approximately 745 students. The original Charter School Law did not permit Commonwealth charter schools to borrow funds to construct school buildings (the Charter School Law was subsequently revised to remove this prohibition), so in 2001, the Institute financed the acquisition and renovation of the Facilities with the intent to lease the space to the School and in 2004, the Institute constructed about $2.3 million worth of additional improvements to the Facilities. The School currently leases the Facilities from the Institute at a cost of $492,000 per year, due in monthly installments of $41,000, payable on or before the first day of each month, with a 10 day grace period. The Institute and the School have executed an Agreement of Sale to sell the Facilities to the School for $4,200,000. The School has ordered a real estate appraisal report with respect to the Facilities which will be available from the Underwriter prior to the pricing/sale of the Series 2017 Bonds. See “RISK FACTORS – Limited Nature of Real Estate Appraisal” herein.

The School intends to use approximately $443,000 of the Bond proceeds to finance the Improvements to the Facilities. The Improvements include, among other things, a new roof, HVAC upgrades, a new stucco exterior, plumbing and electrical upgrades, classroom fixtures and technology upgrades. Contracts for the Improvements will be bid in accordance with the School’s Internal Control Policies and applicable laws.

For a description of certain environmental risks associated with the Facilities, see “RISK FACTORS – Environmental Regulation” in the forepart of this Limited Offering Memorandum.

JUDGMENT LIENS

The School was audited by the IRS in 2011 for tax years 2008-2009 for the misclassification of independent contractors and failure to timely file IRS Form 1099s. The audit resulted in the assessment against the School of an estimated $133,464.53, not including accrued penalties and interest due as a result of not paying taxes when due, and a federal tax lien on the Facilities against the School. All amounts still due with respect to this matter at closing will be paid from proceeds of the Series 2017 Bonds. A default judgment was also entered against the School in the amount of $24,568.11 for nonpayment under a lease with a copier leasing company, which also resulted in a lien on the Facilities. The School has been repaying amounts owed to the copier leasing company on a monthly basis. All amounts still due with respect to this matter at closing will be paid from proceeds of the Series 2017 Bonds. Other liens currently filed against the Facilities are against the Institute, as current owner, and will be satisfied by the Institute prior to settlement of the sale and purchase of Series 2017 Bonds and/or with proceeds thereof, in order for the School to acquire clean title to the Facilities and subject them to the lien of the Mortgage.

SOURCES AND USES OF FUNDS*

The sources and uses of funds to pay for the Project and Project Costs are estimated to be as follows:

Sources of Funds: Series 2017A Series 2017B

Series 2017 Bond Proceeds $ $ Par Amount Net Original Issue (Discount) / Premium Total Sources: $ $

Uses of Funds: Purchase Price of Facilities $ Improvements* Real Estate Related Costs Debt Service Reserve Fund IRS Lien** Copier Lien Payoff** 6 Months’ Capitalized Interest Working Capital Cost of Issuance (including Underwriter’s discount)

Total Uses $ $

* See “THE SCHOOL’S FACILITIES AND THE IMPROVEMENTS” herein. ** See “JUDGMENT LIENS” herein.

THE SERIES 2017 BONDS

General

The Series 2017 Bonds will be issuable as fully registered bonds without coupons in minimum denominations of $25,000 or integral multiples of $5,000 in excess thereof (the “Authorized Denominations”). The Series 2017 Bonds will mature on the dates and in the amounts set forth on the inside cover page of this Limited Offering Memorandum, be subject to redemption prior to maturity, and bear interest until paid at the rates shown on the inside cover page of this Limited Offering Memorandum, payable semi-annually on March 1 and September 1 of each year, commencing on September 1, 2017* (each an “Interest Payment Date”).

The Series 2017 Bonds, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), and the Series 2017 Bonds are to be offered and sold upon original issuance only to “accredited investors” or “qualified institutional buyers.” See “ELIGIBLE INVESTORS, “LIMITED OFFERING OF BONDS” AND “RISK FACTORS – Resale of Series 2017 Bonds/Lack of Secondary Market” herein.

Interest on the Series 2017 Bonds will be computed on the basis of a 360-day year containing twelve 30- day months. Payments of principal of and premium, if any, with respect to the Series 2017 Bonds will be made upon surrender of the Series 2017 Bonds at the office of the Trustee. Payments of interest on the Series 2017 Bonds will be made by check or draft mailed on or before each Interest Payment Date to the registered owner thereof as of the fifteenth (15th) day of the calendar month immediately preceding any Interest Payment Date, or as otherwise specified in the Indenture (the “Record Date”), at his or her address as it last appears on the registration books of the Trustee irrespective of any transfer or exchange of the Series 2017 Bonds subsequent to the Record Date and prior to such Interest Payment Date.

* Preliminary; subject to change.

For the definition of certain words and terms used in this Limited Offering Memorandum, see “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE, AND THE MORTGAGE” hereto.

Redemption of Series 2017 Bonds Prior to Maturity

Optional Redemption*

The Series 2017A Bonds maturing on and after [March] 1, 20[__]*, are subject to redemption prior to maturity, at the option of the Authority at the direction of the School, as a whole at any time or in part from time to time in such order of maturities as selected by the School and within a maturity by lot, in such manner as the Trustee may determine, in denominations of $25,000 and integral multiples thereof, on [March] 1, 20[__]*, and on any date thereafter, upon payment of a redemption price equal to 100% of the principal amount thereof, plus interest accrued to the date of redemption.

The Series 2017B Bonds are not subject to optional redemption prior to maturity.

Mandatory Redemption of Term Bonds

The Series 2017A Bonds maturing in the years 2022, 2037 and 2052* are subject to mandatory sinking fund redemption at a redemption price equal to 100% of the principal amount thereof plus accrued interest thereon to the redemption date on the dates in the corresponding principal amounts set forth in the following table:

Term Bonds Maturing [March] 1, 2022

Date Principal Amount $

* Maturity Date

Term Bonds Maturing [March] 1, 2037

Date Principal Amount $

* Maturity Date

Term Bonds Maturing [March] 1, 2052

Date Principal Amount $

* Maturity Date

The Series 2017B Bonds maturing in 2032* are subject to mandatory sinking fund redemption at a redemption price equal to 100% of the principal amount thereof plus accrued interest thereon to the redemption date redemption date on the dates in the corresponding principal amounts set forth in the following table:

* Preliminary; subject to change.

Term Bonds Maturing [March] 1, 2032

Date Principal Amount $

* Maturity Date

Extraordinary Redemption

The Series 2017 Bonds are redeemable at the option and upon the written direction of the School in whole at any time or in part (only Net Proceeds of insurance or a condemnation award shall be used for a partial redemption of any Series 2017 Bonds pursuant to paragraphs (a) or (b) below) on any Interest Payment Date from and to the extent of funds on deposit under this Indenture and available for this purpose at a redemption price equal to the principal amount of each Bond redeemed and accrued interest to the redemption date upon the occurrence of any of the following events:

(a) The Facilities shall have been damaged or destroyed in whole or in part to such extent that, as expressed in a Consulting Architect's Certificate filed with the Trustee (i) the Facilities cannot reasonably be restored within a period of six consecutive months to the condition thereof immediately preceding such damage or destruction, or (ii) School or its lessee are thereby prevented from carrying on its normal operations for a period of six consecutive months, or (iii) the cost of restoration thereof would exceed the Net Proceeds of insurance carried thereon pursuant to the requirements of the Loan Agreement.

(b) Title to, or the temporary use of, all or any substantial part of the Facilities shall have been taken under the exercise of the power of eminent domain by any governmental authority, or person, firm or corporation acting under governmental authority or because of a defect in title.

(c) As a result of any changes in the Constitution of the Commonwealth or the Constitution of the United States of America or of legislative or administrative action (whether state or federal) or by final decree, judgment or order of any court or administrative body (whether state or federal) entered after the contest thereof by the School in good faith, the Loan Agreement or the Mortgage shall have become void or unenforceable or impossible of performance in accordance with the intent and purposes of the parties as expressed in the Loan Agreement, or unreasonable burdens or excessive liabilities shall have been imposed on the School in respect to the Facilities, including, without limitation, federal, state or other ad valorem, property, income or other taxes not being imposed on the date of the Loan Agreement. Redemption pursuant to this paragraph (c) shall be in whole only.

Mandatory Redemption upon Determination of Taxability

The Series 2017A Bonds are subject to mandatory redemption in whole at a redemption price equal to 103% of the principal amount thereof, plus accrued interest thereon to the date of redemption upon the occurrence of a Determination of Taxability. The redemption date shall be the earliest practicable date selected by the Trustee, after consultation with the School, but in no event later than six months following the Determination of Taxability.

“Determination of Taxability” means one of (a), (b) or (c):

(a) The delivery to the Authority of a “Proposed Adverse Determination” (the “Adverse Determination”) in connection with an examination of the Series 2017A Bonds by the IRS asserting that the interest on the Series 2017A Bonds is included in the gross income of the Registered Owners, such Adverse Determination to be effective 30 days after delivery, subject to a stay of such 30-day period for the action described below, if prior thereto the School files with the Trustee evidence of the filing of a timely appeal with the IRS or evidence that a Closing Agreement is being negotiated and delivers to the Trustee a copy of such Closing Agreement or evidence of a successful appeal from the IRS within one hundred eighty (180) days after the date of such Adverse

Determination, the failure of which shall constitute the occurrence of a Determination of Taxability on the date that is one hundred eighty (180) days after the date borne by such Adverse Determination.

(b) The delivery of written notice (the “Taxability Notice”) by a Registered Owner to the Authority and the School declaring that the IRS has issued to a Registered Owner a proposed deficiency letter (“30-day letter”), the effect of which (in the opinion of the Registered Owner) is to assert that the interest on the Series 2017A Bonds is included in the gross income of the Registered Owner, such Taxability Notice to be effective 30 days after the delivery, subject to a stay of such 30-day period for the period of litigation, if prior thereto the School agrees in writing to participate in and defend a final judicial determination to affirm that the interest on the Series 2017A 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 School by the Authority, the Trustee or a Registered Owner 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 2017A 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 School, on behalf of the Authority, the Trustee or the Registered Owner (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 2017A 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 2017A Bonds pursuant to Treasury Regulation §1.142-2 to preserve the exclusion from gross income of interest on the Series 2017A Bonds; and (C) procures an opinion from bond counsel acceptable to the Authority, at the School’s cost, to the effect that there is a substantial and valid legal basis for the position that the interest on the Series 2017A Bonds has been, is and will remain tax-exempt, and (1) 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 the IRS has indicated a position not to rule favorably on similar questions or would not rule favorably or (2) 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 2017A 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 School must agree in writing to reimburse and fully indemnify and hold harmless the Authority, the Trustee and the Registered Owners from and against any and all liability, damage, loss, cost or expense (including attorneys' fees) which the Authority, the Trustee or the Registered Owners 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 Registered Owners 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, the Trustee or the Registered Owners may reasonably request from time to time to secure the Authority, the Trustee or the Registered Owners obligations with respect to the Series 2017A Bonds, including without limitation, any potential increases in interest, whether prospective or retroactive, and any potential taxes, closing agreement amount, penalties or related interest.

Notices of Redemption

Notice of redemption shall be given by the Trustee at least 30 days prior to the date fixed for redemption by mail to the registered owner or owners at the registered addresses shown on the registration books kept by the Trustee. Failure of any owner to receive such notice shall not affect the redemption proceedings. No further interest on the Series 2017 Bonds or portions of Series 2017 Bonds called for redemption shall accrue after the date fixed for redemption, whether such Series 2017 Bonds are presented for redemption or not, provided funds are on hand with the Trustee to redeem the same.

Partial Redemptions

Upon surrender of any Series 2017 Bond for redemption in part only, the Authority shall execute and the Trustee shall authenticate and deliver to the Registered Owner thereof, the cost of which shall be paid by the School,

a new Bond or Bonds of the same Series and maturity and of authorized denominations, in an aggregate principal amount equal to that portion of the Series 2017 Bond not redeemed.

Book-Entry-Only System

Payments of principal of, premium, if any, and interest on the Series 2017 Bonds will be made directly to Cede & Co. by the Trustee, so long as Cede & Co. is the registered owner of the Bonds. Disbursement of such payments to the DTC Participants (as defined in APPENDIX G) is the responsibility of The Depository Trust Company, New York, New York (“DTC”), and disbursement of such payments to the purchasers of beneficial ownership interests in the Series 2017 Bonds is the responsibility of DTC Participants and Indirect Participants (as defined in APPENDIX G). For further information regarding Cede & Co., DTC and the book-entry only system, see “APPENDIX G – BOOK-ENTRY-ONLY SYSTEM” hereto.

ELIGIBLE INVESTORS

WHILE THE SERIES 2017 BONDS ARE NOT SUBJECT TO REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE UNDERWRITER (AS DEFINED HEREIN) HAS DETERMINED THAT THE SERIES 2017 BONDS ARE NOT SUITABLE FOR INVESTMENT BY PERSONS OTHER THAN “ACCREDITED INVESTORS” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR “QUALIFIED INSTITUTIONAL BUYERS” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT.

Prospective investors should have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Series 2017 Bonds and should have the ability to bear the economic risks of such prospective investment, including a complete loss of such investment.

THE SERIES 2017 BONDS SHOULD NOT BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A PERSON WHOM SUCH OFFEROR, SELLER, PLEDGOR OR OTHER PUTATIVE TRANSFEROR REASONABLY BELIEVES IS AN “ACCREDITED INVESTOR” OR “QUALIFIED INSTITUTIONAL BUYER” AS DESCRIBED HEREINABOVE. SEE “RISK FACTORS – Resale of Series 2017 Bonds/Lack of Secondary Market” herein.

Investment in the Series 2017 Bonds poses certain economic risks. No dealer, broker, salesman or other person has been authorized by the School or the Underwriter to give any information or make any representations, other than those contained in this Limited Offering Memorandum. Additional information will be made available to each prospective investor, including the benefit of a site visit to the School, and the opportunity to ask questions of the School, as such prospective investor deems necessary in order to make an informed decision with respect to the purchase of Series 2017 Bonds. Prospective investors are encouraged to request such additional information, visit the School, and ask such questions. Such requests should be directed to the Underwriter at: 8500 Normandale Lake Blvd., Suite 540, Bloomington, MN 55437-1069, Attention: Jay Hromatka, Executive Vice President, (952)-683- 7506.

SOURCES OF PAYMENT AND SECURITY FOR THE BONDS

The descriptions and summaries of the Loan Agreement, the Indenture and the Mortgage in the forepart of this Limited Offering Memorandum and in “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE, AND THE MORTGAGE” hereto do not purport to be comprehensive or definitive, and are qualified by reference to each document in its entirety. Copies of each document will be available for inspection at the designated office of the Trustee.

General

The Series 2017 Bonds are limited obligations of the Authority and are payable by the Authority solely from the Loan Payments due from the School under the Loan Agreement (as described below) and other funds pledged under the Indenture. The School has pledged to pay the Loan Payments due under the Loan Agreement from certain Pledged Revenues received by the School. The Series 2017 Bonds will be further secured by the Mortgage as more particularly described below.

THE SERIES 2017 BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY FROM AMOUNTS PAYABLE BY THE SCHOOL UNDER THE LOAN AGREEMENT, WHICH ARE THE PRIMARY SOURCE OF THE REVENUES PLEDGED THEREFOR PURSUANT TO THE INDENTURE AND THE LOAN AGREEMENT. THE SCHOOL RECEIVES MOST OF ITS REVENUES FROM THE SCHOOL DISTRICT PURSUANT TO A STATUTORY FORMULA CREATED BY THE PENNSYLVANIA LEGISLATURE AND THE LEGISLATURE MAY CHANGE THE FORMULA AT ANY TIME. THE SERIES 2017 BONDS DO NOT CONSTITUTE AN OBLIGATION, EITHER GENERAL, SPECIAL, LEGAL, MORAL OR OTHERWISE, OF THE COMMONWEALTH, THE CITY, THE SCHOOL DISTRICT OR ANY OTHER POLITICAL SUBDIVISION THEREOF, AND NEITHER GENERAL CREDIT OF THE AUTHORITY NOR THE FULL FAITH AND CREDIT OR ANY TAXING POWER OF THE COMMONWEALTH, THE CITY, THE SCHOOL DISTRICT OR ANY OTHER POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF PRINCIPAL AND INTEREST WITH RESPECT TO THE SERIES 2017 BONDS. THE AUTHORITY HAS NO TAXING POWER. SEE “SOURCES OF PAYMENT AND SECURITY FOR THE BONDS” AND “RISK FACTORS” HEREIN.

The Loan Agreement

Under the Loan Agreement, the Authority agrees to issue the Series 2017 Bonds and to lend the proceeds thereof to the School to finance the Project and the School is obligated unconditionally to repay the loan in amounts sufficient, together with available funds held under the Indenture, to provide for the timely payment of the principal of, premium, if any, and interest on the Series 2017 Bonds when due (whether by maturity, mandatory sinking fund redemption or acceleration) and to perform certain other obligations set forth therein. Among other things, the School will covenant (a) to manage the Facilities on a revenue-producing basis and (b) not to create, assume, incur or suffer to be created, assumed or incurred any Liens (other than Permitted Encumbrances) on all or any portion of the Facilities or the Pledged Revenues.

The Authority will assign certain of its rights and interests in the Loan Agreement, including certain of its rights to receive certain payment thereunder and certain of its rights and interests in the Pledged Revenues (subject to Permitted Encumbrances) to the Trustee for the benefit of the registered owners of the Series 2017 Bonds under the Indenture.

Pursuant to the terms of the Loan Agreement, the School has covenanted to execute and deliver the Mortgage to the Trustee, and will grant to the Authority a security interest, within the meaning of the Uniform Commercial Code of the Commonwealth and to the extent permitted by law, in the Pledged Revenues and all of its right, title and interest, if any, in the Funds and in certain accounts referred to in the Loan Agreement or in the Indenture, subject to Permitted Encumbrances. The Mortgage, liens and security interests created by the Indenture and the Loan Agreement are for the equal and ratable benefit of the Series 2017 Bonds. See “RISK FACTORS” for a discussion of certain limitations on the enforceability of the security for the Bonds. See “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE AND THE MORTGAGE – The Loan Agreement” hereto.

The School shall pay, from the amounts paid by the School District directly to the Trustee for deposit into the Revenue Fund, as repayment of the Loan, until the principal of, premium, if any, and interest on the Bonds (and any other sums due hereunder) shall have been paid or provision for the payment thereof shall have been made in accordance with the Indenture and transferred by the Trustee within one Business Day of receipt, (i) into the Bond Interest Fund on or before the first day of each month following the month in which the payment from the School District is received, during the term of the Loan Agreement, commencing in April 2017 (in respect of May 1, 2017), an amount (after taking into account any accrued and capitalized interest, if any, contained in the Bond Interest Fund) sufficient to pay 1/6th of the interest which will become due on the Bonds on the next succeeding interest

payment date, and (ii) into the Bond Principal Fund on or before the first day of each month following the month in which the payment from the School District is received, during the term of the Loan Agreement, commencing in April 2017 (in respect of May 1, 2017), and thereafter (taking into account, with respect to the final Loan Payment, any amount in the Debt Service Reserve Fund which will be used for such final Loan Payment), an amount sufficient to pay 1/12th the principal which will become due on the Bonds on the next succeeding principal payment date (whether at maturity, upon sinking fund redemption or otherwise); provided, however, that any amount in the Bond Interest Fund or the Bond Principal Fund in excess of the aggregate amount required to be held pursuant to Section 5.02(a) of the Loan Agreement shall be credited against the next succeeding Loan Payment due or otherwise transferred by the Trustee in accordance with the terms of the Indenture; provided further, in the event that the first full month following the month in which the Series 2017 Bonds are issued is not six months prior to the first interest payment date and twelve months prior to the first principal payment date, which is March 1, 2018, an amount equal to the Pro Rata Portion of the interest and principal, respectively, to come due on the Series 2017 Bonds shall be substituted for the 1/6th and 1/12th payments otherwise required prior to the first interest payment date and first principal payment date, respectively. On or before the mailing of any notice of redemption pursuant to Section 5.05 of the Indenture (other than a sinking fund redemption date), the School shall pay as repayment of the Loan for deposit into the Bond Principal Fund an amount of money which, together with other moneys available therefor in the Bond Principal Fund, is sufficient to pay the principal of and premium, if any, on the Bonds called for redemption and for deposit into the Bond Interest Fund an amount of money which, together with other moneys available therefor in the Bond Interest Fund, is sufficient to pay the interest accrued to the redemption date on the Bonds called for redemption. If by the Business Day on or nearest to the third day prior to any principal or interest payment date on the Bonds or the date any other amounts are payable on the Bonds the amount held by the Trustee in the Bond Principal Fund and the Bond Interest Fund is insufficient to make the required payments of principal of, premium, if any, and interest on the Bonds, the School shall upon notice of such deficiency from the Trustee forthwith pay or cause to be paid such deficiency as repayment of the Loan for deposit into the Bond Principal Fund or the Bond Interest Fund, as the case may be.

In the event any moneys in the Debt Service Reserve Fund are transferred to the Bond Principal Fund or the Bond Interest Fund pursuant to Section 3.07 of the Indenture or to the Rebate Fund pursuant to Section 3.18 of the Indenture, or in the event the Trustee has notified School of a deficiency in the Debt Service Reserve Fund pursuant to Section 3.07 of the Indenture, School will in 6 equal monthly installments, beginning on the first day of the month following the date on which such deficiency occurs and the first day of each month thereafter (in accordance with Section 3.09 of the Indenture), deposit or cause to be deposited moneys into the Debt Service Reserve Fund in an amount equal to the amount required to cause the total amount in the Debt Service Reserve Fund to equal the Debt Service Reserve Requirement.

The School shall pay or provide for the payment of all taxes and assessments, general or special, concerning or in any way related to the Facilities or any part thereof, during the term of this Agreement and any other governmental charges and impositions whatsoever, and all utility and other charges and assessments, in the manner, at the times and under the conditions more specifically provided in Section 6.02 of the Loan Agreement.

The School agrees to pay or cause to be paid to the Trustee the reasonable and necessary fees and expenses of the Trustee, including its attorney fees and expenses, as and when the same become due, upon submission of a statement therefor.

The School shall pay or cause to be paid to the Trustee for deposit to the Rebate Fund all amounts required to be paid pursuant to the Tax Certificate at the times and in the manner specified therein.

The School has heretofore paid the Authority an initial fee. The School agrees to pay or cause to be paid to the Authority any amounts required to reimburse the Authority for any expenses incurred by the Authority, whether out-of-pocket or internal, in connection with any litigation which may at any time be instituted involving the Loan Agreement, the Bonds or any of the other documents contemplated thereby, or incurred in connection with the Loan Agreement, the Indenture, the Bonds, the Tax Certificate, the purchase contract for the Bonds, the Facilities or any other instrument or action relating to the foregoing, including, but not limited to, fees and disbursements of attorneys of the Authority and termination fees. Such additional payment shall be billed to the School from time to time, by the Authority, together with a statement certifying that the amount billed has been paid or incurred and attaching reasonable supporting documentation indicating that the amount billed has been paid or incurred for one or more of the above items. After such a demand, amounts so billed shall be paid by the School within ten (10) days after

receipt of the bill by the School. The sum of such Annual Fee and initial fee shall at all times be in an amount which does not cause the School to violate the provisions of Section 4.08 of the Loan Agreement.

Unless the amount on deposit in the Repair and Replacement Fund on the first Business Day of any Fiscal Year equals or exceeds the Repair and Replacement Fund Requirement (in which event no additional deposits are required), commencing in the first month of said Fiscal Year School shall pay or cause to be paid to the Trustee monthly amounts of $2,083 (to the extent payment of such monthly amounts is not already being made) until the Repair and Replacement Fund Requirement ($250,000) is met. School shall not be required to pay or cause to be paid to the Trustee any amounts that would result in monies in excess of the Repair and Replacement Requirement being held in the Repair and Replacement Fund.

In the event the School should fail to make or cause to be made any of the payments required by this Section, the item or installment in default shall continue as an obligation of School until the amount in default shall have been fully paid, and School agrees to pay the same and, with respect to the payments required by subsections (a), (d) and (f) of Section 5.02 of the Loan Agreement, to pay interest at the Default Rate. See “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE AND THE, MORTGAGE” hereto for a description of certain provisions of the Loan Agreement and certain terms defined therein.

Pursuant to the Loan Agreement, the School has agreed to pay certain of its Pledged Revenues to the Authority, which has assigned the right to receive such Pledged Revenues to the Trustee for the Series 2017 Bonds. “Pledged Revenues” means all revenues, rentals, fees, third-party payments, receipts, contributions or other income derived from the Facilities, including the rights to receive such revenues (each subject to Permitted Encumbrances), all as calculated in accordance with sound accounting practices, including, but not limited to, any revenues received from rentals of the Facilities; proceeds derived from insurance, condemnation proceeds, accounts, contract rights and other rights and assets, whether now or hereafter owned, held or possessed by the School which are derived from the Facilities; and all donations, gifts, grants, bequests and contributions (including income and profits therefrom), to the extent not specifically restricted by the donor or maker thereof to a particular purpose inconsistent with their use for any of the payments required hereunder. Pledged Revenues shall not, however, include any administrative fee paid to the School by a lessee of the Facilities for the School’s administration of the Facilities.

The Indenture

The Series 2017 Bonds are to be issued pursuant to the Indenture. All Series 2017 Bonds issued thereunder shall be limited obligations of the Authority, payable solely from and secured solely from payments by the School under the Loan Agreement and the funds established under the Indenture. As security for its obligations under the Indenture, the Authority will assign to the Trustee the payments received or receivable by the Authority pursuant to the Loan Agreement (except for certain rights to the payment of expenses and indemnification), all funds held by the Trustee under the Indenture and all income derived from the investment of such funds.

Limited Obligation. Neither the Authority, the Commonwealth, the City, nor the School District shall be obligated to pay the Series 2017 Bonds or the interest thereon or other costs incident thereto, except that the Authority shall be obligated to make such payments solely from the security for the Series 2017 Bonds described below. See “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE AND THE MORTGAGE – The Indenture – Security” hereto. Neither the faith and credit of the Authority, the City nor the School District nor the taxing power of the City or the Commonwealth is pledged to the payment of the principal of, premium, if any, or the interest on, the Series 2017 Bonds. The Series 2017 Bonds are not general obligations of the Authority, but are limited obligations payable solely from certain amounts payable by the School under the Loan Agreement and other moneys pledged therefor under the Indenture. The Authority has no taxing power.

Additional Bonds. The Authority may (but is not required to) issue Additional Bonds secured by and payable solely from the Trust Estate, upon satisfaction of certain terms and conditions. The Loan Agreement contains limitations on the incurrence by the School of additional Indebtedness. See “CERTAIN FINANCIAL COVENANTS OF THE SCHOOL – Limitations on Indebtedness” herein.

Revenue Fund; Flow of Funds. The School has sent (or will have sent before settlement of the Series 2017 Bonds) a written notice to the School District which makes payments to the School that constitute nearly all of the School’s revenues (“School District Payments”) directing that all future School District Payments be paid directly to the Trustee for deposit to the Revenue Fund, and all amounts required to be paid by the School to the Trustee pursuant to Section 5.02 of the Loan Agreement and all other moneys required to be deposited into the Revenue Fund pursuant to the Loan Agreement shall be deposited therein and applied as follows:

All moneys held on deposit in the Revenue Fund shall be applied by the Trustee not later than the Business Day after receipt of the monthly payment from the School District, as described in below, commencing with the payment received in the month of [April 2017]:

FIRST, for deposit in the Bond Interest Fund (after taking into consideration earnings or other funds on deposit in the Bond Interest Fund) an amount equal to the Loan Payment paid by the School pursuant to Section 5.02 of the Loan Agreement for the payment of interest due on the next succeeding Interest Payment Date.

SECOND, for deposit in the Bond Principal Fund (after taking into consideration earnings or other funds on deposit in the Bond Principal Fund) an amount equal to the Loan Payment paid by the School pursuant to Section 5.02 of the Loan Agreement for the payment of the principal due on the Series 2017 Bonds on the next succeeding principal payment date for the Series 2017 Bonds.

THIRD, to the Debt Service Reserve Fund the amount required, if any, under Section 3.09 of the Indenture, to restore therein to the Debt Service Reserve Fund Requirement;

FOURTH, to the Repair and Replacement Fund, an amount equal to the Repair and Replacement Requirement in accordance with Section 3.18 of the Indenture;

FIFTH, with respect to the payment received in each [April], commencing [April 2018], and continuing until the full amount is so paid, to the Rebate Fund, any amount, as calculated by the Rebate Analyst and communicated to the Trustee, required of the School to be deposited in the Rebate Fund; and

SIXTH, provided all payments due pursuant to the Loan Agreement have been made or provided for, all amounts remaining on deposit in the Revenue Fund after the Trustee has made the disbursements required in FIRST through FIFTH above, shall be transferred to the School to pay its Operating Expenses or to be used for any other lawful purpose.

Debt Service Reserve Fund. The Indenture provides for the creation of the Debt Service Reserve Fund in the custody of the Trustee which Debt Service Reserve Fund is to be used (subject to any required rebate of investment earnings thereon to the United States of America) solely for the payment of principal of, premium, if any, and interest on, the Series 2017 Bonds in the event that moneys in the Bond Principal Fund and Bond Interest Fund are insufficient to make such payments when due, whether on an Interest Payment Date, sinking fund redemption date, maturity date or otherwise. The Debt Service Reserve Fund shall be required to be maintained in an amount equal to the Debt Service Reserve Fund Requirement. Upon issuance of the Series 2017 Bonds, Bond proceeds in the amount of $[______] will be deposited into the Debt Service Reserve Fund. The School may direct the Trustee as to the priority of use of cash or Investment Obligations on deposit in the Debt Service Reserve Fund. See “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE AND THE MORTGAGE” hereto for a description of terms and provisions of the Indenture applicable to the Debt Service Reserve Fund.

Repair and Replacement Fund. The Indenture provides for the creation of the Repair and Replacement Fund in the custody of the Trustee which Repair and Replacement Fund is to be used solely for paying the cost of extraordinary maintenance and replacements which may be required to keep the Facilities in sound condition, including but not limited to, replacement of equipment, replacement of any roof or other structural component, exterior painting and the replacement of heating, air conditioning, plumbing and electrical equipment and floor covering. The Repair and Replacement Fund shall be required to be maintained in an amount equal to the Repair and Replacement Fund Requirement, which is a maximum amount of $250,000 to be funded by $2,083 monthly deposits, commencing in July 2018. See “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND

SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE AND THE MORTGAGE” hereto for a description of terms and provisions of the Indenture and the Loan Agreement applicable to the Repair and Replacement Fund Requirement.

Investment Earnings. Any investments shall be held by or under the control of the Trustee and shall be deemed at all times a part of the Fund from which the investment was made. Any loss resulting from such investments shall be charged to such Fund. Any interest or other gain from any Fund from any investment or reinvestment pursuant to Section 6.01 of the Indenture realized shall be retained therein or shall be allocated and transferred as follows:

Any interest or other gain realized as a result of any investments or reinvestments of moneys in the Bond Principal Fund and the Bond Interest Fund shall be retained in the respective Fund unless a deficiency exists at the time such interest is received or other gain is realized in the Debt Service Reserve Fund, in which case such interest or other gain shall be paid into the Debt Service Reserve Fund forthwith.

Any interest or other gain realized as a result of any investments or reinvestments of moneys in the Debt Service Reserve Fund shall be credited to the Debt Service Reserve Fund if the amount therein is less than the Debt Service Reserve Requirement. If the amount in the Debt Service Reserve Fund is equal to or greater than the Debt Service Reserve Requirement immediately subsequent to any valuation required pursuant to Section 3.07 of the Indenture, such amount in excess of the Debt Service Reserve Fund Requirement shall be paid into the Bond Interest Fund.

Any interest or other gain realized as a result of any investments or reinvestments of moneys in the Project Fund shall be retained in the Project Fund unless a deficiency exists at the time such interest is received or other gain is realized in the Debt Service Reserve Fund, in which case such interest or other gain shall be paid in the Debt Service Reserve Fund forthwith.

Any interest or other gain realized as a result of any investments or reinvestments of moneys in the Costs of Issuance Fund shall be retained in the Costs of Issuance Fund.

Any interest or other gain realized as a result of any investment or reinvestment of moneys in the Repair and Replacement Fund shall be retained in the Repair and Replacement Fund unless a transfer is permitted pursuant to Section 3.15 of the Indenture.

Notwithstanding anything to the contrary contained in the foregoing, any interest or other gain from any Fund shall be transferred to the Rebate Fund to the extent required by the written direction of School pursuant to Section 4.07 of the Loan Agreement, except that no such transfer shall be made from any Fund if such transfer would cause the amount then on deposit in such Fund to be less than required by the provisions of this Indenture. Any interest or other gain realized as a result of any investments or reinvestments of moneys in the Rebate Fund shall be retained in the Rebate Fund.

Supplemental Indentures. The Registered Owners of not less than a majority in aggregate principal amount of the Series 2017 Bonds then Outstanding have the right, from time to time, to consent to and approve the execution by the Authority and the Trustee of such indenture or supplemental indentures as shall be deemed necessary or desirable by the Authority for the purpose of modifying, altering, amending, adding to, or rescinding, in any particular, any of the terms or provisions contained in the Indenture provided, however, that without the consent of the Registered Owners of not less than one hundred percent (100%) in aggregate principal amount of the Series 2017 Bonds at the time Outstanding and adversely affected thereby nothing shall permit, or be construed as permitting: (a) an extension of the maturity of, or a reduction of the principal amount of, or a reduction of the rate of, or extension of the time of payment of interest on, or a reduction of a premium payable upon any redemption of, any Series 2017 Bond; (b) the deprivation of the Registered Owner of any Series 2017 Bond then Outstanding of the lien created by the Indenture (other than when such Series 2017 Bond was initially issued); (c) a privilege or priority of any Series 2017 Bond or Series 2017 Bonds over any other Series 2017 Bond or Series 2017 Bonds; or (d) a reduction in the aggregate principal amount of the Series 2017 Bonds, if any, required for consent to such supplemental indenture or amendment to the Loan Agreement.

Acceleration. Upon the occurrence of certain events, payment of the principal of and accrued interest on the Series 2017 Bonds may be accelerated under the Indenture. See “RISK FACTORS” herein and “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE AND THE MORTGAGE – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – Remedies on Events of Default” hereto.

The Mortgage

The Mortgage secures all amounts owed by the School under the Loan Agreement, including amounts owed with respect to debt service on the Series 2017 Bonds. The Mortgage will also give the Trustee a security interest in, among other things, the portion of the Facilities consisting of real property and fixtures. See “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE AND THE MORTGAGE – The Mortgage” hereto.

CERTAIN COVENANTS OF THE SCHOOL

Pursuant to the Loan Agreement, the School has agreed to certain financial covenants. For more information on the covenants listed below and the definitions used below, see “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE, AND THE MORTGAGE – The Loan Agreement” hereto.

Limitations on Indebtedness. The School may incur Short-Term Indebtedness in an amount that does not exceed the lesser of 7.5% of the Gross Revenues of the School or $500,000 for the most recently completed Fiscal Year. Any Short-Term Indebtedness incurred by the School must be unsecured or subordinate to the lien of the Bondholders and may not be secured by any security interest in or lien against the Facilities. The School may incur Long-Term Indebtedness on parity with all other Long-Term Indebtedness (other than Long-Term Indebtedness incurred pursuant to the provisions described in the fourth succeeding paragraph) only as provided in the following paragraphs and only if the incurrence of such Long-Term Indebtedness will not cause the Rating Agency (or agencies), if there is one, then rating the Series 2017 Bonds, to lower or withdraw the existing applicable rating on Outstanding Bonds.

Subject to other provisions below, the School will not be permitted to incur Long-Term Indebtedness without the consent of the Majority Bondholder, except that without compliance with the next succeeding paragraph, the School may incur Long-Term Indebtedness for the purpose of (a) providing additional funds in order to complete the payment of costs of improvements or alterations for which Long-Term Indebtedness has already been issued or (b) refinancing the principal amount of any outstanding Long-Term Indebtedness, provided the Principal and Interest Requirements on Long-Term Indebtedness (including such requirements for the proposed Long-Term Indebtedness but excluding such requirements for the Long-Term Indebtedness to be refinanced thereby) for each Fiscal Year after the Fiscal Year in which the proposed Long-Term Indebtedness is to be incurred but before the final stated maturity of all then Outstanding Bonds will not exceed the amount of Principal and Interest Requirements on Long-Term Indebtedness that would have been available for each such Fiscal Year had such proposed Long-Term Indebtedness not been incurred.

Subject to the exceptions above, the School will not be permitted to incur Long-Term Indebtedness unless the School provides the Trustee with (A) an opinion or report of an independent certified public accountant to the effect that the Net Income Available for Debt Service for the next Fiscal Year immediately preceding the date on which such Long-Term Indebtedness is to be incurred for which audited financial statements are available, totals at least 100% of Maximum Principal and Interest Requirements on Long-Term Indebtedness (including such requirements for the proposed Long-Term Indebtedness, but excluding Eliminated Expenses) payable in any Fiscal Year, and (B) a forecast accompanied by an accountant’s examination report stating that the School’s estimated Net Income Available for Debt Service for each Fiscal Year beginning with the second Fiscal Year after the Fiscal Year in which any improvements being financed by such proposed Long-Term Indebtedness are to be placed-in-service, or if no improvements are to be financed thereby, beginning with the first Fiscal Year after the Fiscal Year in which the proposed Long-Term Indebtedness is to be incurred, will be at least 125% of the Maximum Principal and Interest Requirements on Long-Term Indebtedness (including such requirements for the proposed Long-Term Indebtedness, but excluding such requirements for any then outstanding Long-Term Indebtedness or bonds to be refunded (or refinanced) by the proposed Long-Term Indebtedness) for each Fiscal Year beginning with the second

Fiscal Year after the Fiscal Year in which any improvements being financed by such proposed Long-Term Indebtedness are to be placed-in-service, or if no improvements are to be financed thereby, beginning with the first Fiscal Year after the Fiscal Year in which the proposed Long-Term Indebtedness is to be incurred, but before the final stated maturity of all then outstanding Bonds.

The School may only incur Long-Term Indebtedness if the incurrence of such Long-Term Indebtedness will not cause the rating agency (or agencies) then rating the Bonds, if any, to lower or withdraw the existing applicable rating on the outstanding Bonds.

The School may incur Long-Term Indebtedness without regard to the limitations above if: (i) such Long- Term Indebtedness is secured solely by a security interest in personal property financed with such Long-Term Indebtedness; (ii) the aggregate payments required to be made by School in each Fiscal Year with respect to all Long-Term Indebtedness incurred as such purchase money indebtedness does not exceed the lesser of 7.5% of the Gross Revenue of the School, as defined in the most recent audited financial statements of the School, or $500,000 determined as of the date such Long-Term Indebtedness is to be incurred; (iii) such Long-Term Indebtedness amortizes over a period of not more than 60 months; and (iv) the School certifies that the incurrence of such Long- Term Indebtedness will not cause it to be in violation of the Loan Agreement.

Operating Fund; Cash-On-Hand Covenant. The School covenants and agrees to maintain unrestricted Cash on Hand (as defined in “APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE, AND THE MORTGAGE”) in the operating fund of the School (the “Operating Fund”) of at least 30 Days’ Cash on Hand, tested as of June 30 of each year, commencing June 30, 2017, until the Bonds are no longer outstanding (collectively, the “Cash on Hand Requirement”). Following each testing date, the School will provide the Trustee with a Certification of having met the Cash on Hand Requirement no later than the earlier of the ensuing December 31 or three weeks after completion of the School’s audit for the previous Fiscal Year. Amounts on deposit in the Operating Fund may be used to pay Operating Expenses (defined below) or may be used for any other lawful purpose. The foregoing is subject to the qualification that if applicable Commonwealth or federal laws or regulations, or the rules and regulations of agencies having jurisdiction, shall not permit the School to maintain the Cash on Hand Requirement, then the School shall, in conformity with the then prevailing laws, rules, or regulations, maintain its Cash on Hand equal to the maximum permissible level.

If the Cash on Hand for any testing date is less than the Cash on Hand Requirement, then, upon the written direction of the Majority Bondholder, the School will promptly employ a Management Consultant (as defined below) to review and analyze the operations and administration of the School, inspect the Facilities and other related facilities, and submit to the School and Trustee written reports, and make such recommendations as to the operation and administration of the School as such Management Consultant deems appropriate, including any recommendation as to a revision of the methods of operation thereof. The School agrees to consider any recommendations by the Management Consultant and, to the fullest extent practicable, to adopt and carry out such recommendations. The School shall pay for all reasonable costs associated with such Management Consultant.

As of January 31, 2017, the School had 50 Days’ Cash on Hand.6 Over the past several years, however, School management has had to closely monitor cash flow in order to strengthen the cash position of the School. The auditor has previously noted a deficiency in cash on hand and the School District, as part of the latest Charter renewal process, raised concerns about the School having insufficient cash on hand. See “RISK FACTORS – Fiscal and Operational Control Issues” herein.

Debt Service Coverage Covenant. Pursuant to the Loan Agreement, commencing for the Fiscal Year ended June 30, 2017, as tested as of the last day of each Fiscal Year, the School must either: (A) have at least 60

6 If the School had made its February rent payment before calculating days cash on hand as of January 31, 2017, days cash on hand would have been 47 days.

Days’ Cash on Hand and Net Income Available for Debt Service with respect to the Fiscal Year then ended of at least 100% of the Principal and Interest Requirements on Long-Term Indebtedness; or (B) if the School has less than 60 Days’ Cash on Hand on the last day of a Fiscal Year, then Net Income Available for Debt Service with respect to the Fiscal Year then ended equal to at least 110% of the Principal and Interest Requirements on Long-Term Indebtedness. The School will provide certification of compliance with either (A) or (B) to the Trustee no later than the earlier of the ensuing December 31 or three weeks after completion of the School’s audit for the previous Fiscal Year.

If the School does not comply with either (A) or (B) described in the paragraph immediately hereinabove, then the Trustee shall give notice thereof to the Bondholders, and upon the written direction of the Majority Bondholder, the School will promptly employ an Management Consultant to review and analyze the operations and administration of the School, inspect the Premises, and submit to the School and Trustee written reports, and make such recommendations as to the operation and administration of the School as such Management Consultant deems appropriate, including any recommendation as to a revision of the methods of operation thereof. The School agrees to consider any recommendations by the Management Consultant and, to the fullest extent practicable, to adopt and carry out such recommendations.

So long as the School is otherwise in full compliance with its obligations under the Loan Agreement, including following, to the fullest extent practicable, the recommendations of the Management Consultant, it shall not constitute an Event of Default under the Loan Agreement if the Net Income Available for Debt Service for any Fiscal Year is less than 110% of the Principal and Interest Requirements on Long-Term Indebtedness for such Fiscal Year (as evidenced by the School’s audited financial statements for such Fiscal Year).

Notwithstanding the immediately preceding paragraph, regardless of whether the School has retained a Management Consultant, if at the end of the Fiscal Year ending June 30, 2017 or any subsequent Fiscal Year, the Net Income Available for Debt Service as of the end of such Fiscal Year is less than 100% of the Principal and Interest Requirements on Long-Term Indebtedness of such Fiscal Year (as evidenced by the School’s audited financial statement for such Fiscal Year), then the Trustee shall give notice thereof to the Bondholders and the Majority Bondholder, may either (A) direct the Trustee to declare an Event of Default under the Indenture and Loan Agreement or (B) direct the Trustee to exercise one of more the of remedies permitted under the Loan Agreement and the Indenture.

The School has not historically measured debt service coverage. Upon issuance of the Bonds, the School’s only Long-Term Indebtedness other than the Bonds will be an operating lease for office equipment, outstanding in the amount of $3,486. See “OTHER DEBT AND FUTURE FINANCINGS” herein.

Capital Needs Assessment. The School agrees to prepare and deliver to the Trustee, on or before March 1, 2022, and on every fifth anniversary thereafter, a needs assessment for the ensuing five-year period with respect to the Facilities (the “Capital Needs Assessment”). The Capital Needs Assessment will include the projected costs of the required capital expenditures for such period identified in the Capital Needs Assessment. The School agrees to budget for and complete any capital repairs relating to the Facilities identified by the Capital Needs Assessment.

Additional Financial Covenants in the Charter. The Charter provides that, among other things, the Board of Trustees must ensure that the School maintains satisfactory short-term financial health and long-term financial sustainability during the term of the Charter, as measured annually by (a) a current ratio greater than 1, (b) 30 or more average days cash on hand, (c) a positive fund balance, (d) a positive net position, and (e) a debt-to-asset ratio of less than 0.92. Failure to comply with these conditions may be the basis for a revocation or nonrenewal of the Charter. See “RISK FACTORS – Termination, Revocation or Non-Renewal of Charter” herein.

Academic Performance Covenant. The School covenants and agrees in the Loan Agreement to maintain an overall performance tier in the top three levels on the School District’s School Progress Report (or similar academic performance reporting tool used by the School District) (the “SPR”) beginning with the SPR for the 2016- 17 school year. 7 In the event the School receives an overall performance tier in the lowest level on the SPR, then,

7 The School District’s annual School Progress Report uses four performance tiers: “Intervene” (0-24%), “Watch” (25-49%), “Reinforce” (50-74%), and “Model” (75-100%). In 2015-16, the School received a “Watch” ranking.

the School will promptly retain, at its sole expense, an educational consultant to review and analyze the instructional program and curriculum of the School, and submit to the School and Trustee a compliance plan establishing benchmarks to assist the School in attaining an overall performance ranking in the top three levels on the SPR. The Borrower agrees to consider all reasonable recommendations by the educational consultant and, to the fullest extent practicable, to adopt and carry out such recommendations. The Trustee has no duty or obligation to monitor the School’s compliance with any recommendations and the Trustee’s sole responsibility with respect to this issue is to communicate with the Bondholders about the School’s choice of educational consultant. Prior to retaining such educational consultant, the School shall communicate its proposed selection to the Trustee which shall then notify the Bondholders thereof; such proposal shall be deemed approved unless objected to by the holders of fifty-one percent (51%) or more in aggregate principal amount of the Bonds then Outstanding, within fifteen business days after the date of the Trustee’s notice to Bondholders of the School’s proposed selection.

So long as the School is otherwise in full compliance with its obligations under the Loan Agreement, including following, to the fullest extent practicable, the recommendations of the educational consultant, failure to satisfy the performance standard set forth in this paragraph shall not constitute an Event of Default under the Loan Agreement.

The Charter requires the School to maintain academic performance in the top two levels of the School District's academic accountability performance system. This academic performance covenant is different than and represents a lower standard than the Charter. This covenant allows the School to continue without an educational consultant until the School’s performance falls into the lowest level of performance. The School risks termination, revocation or non-renewal of its Charter at any time it is in the lowest two performance tiers (i.e., before it would be subject to the mandatory assistance of an educational consultant under the Loan Agreement). See “RISK FACTORS – Termination, Revocation, or Non-Renewal of Charter” herein.

CHARTER SCHOOLS IN THE COMMONWEALTH

General

A charter school is an independent, nonsectarian public school established and operated under a charter from a local Board of School Directors of the school district in which the charter school is located and provides instruction to any of grades kindergarten through 12. A charter school is usually created or organized by a combination of teachers, parents and community leaders or a community-based organization. Specific goals and operating procedures for charter schools are detailed in the charter contract between the authorizing school district or other sponsoring board and the charter school organizers. Charter schools in the Commonwealth are created pursuant to the Charter School Law. In 2001, the School District was designated as a district in financial distress, triggering the Commonwealth’s takeover of the School District from the City and the appointment of the SRC to oversee the affairs of the District. The SRC, as the governing body of the School District, acts as the Authorizing Body under the Charter. See “THE AUTHORIZING BODY, THE SCHOOL DISTRICT OF PHILADELPHIA” herein.

According to the Charter School Law, the purpose of a charter school is to permit the establishment and maintenance of schools that operate independently from the existing school district structure to accomplish the following:

• Improve pupil learning; • Increase learning opportunities for all pupils; • Encourage the use of different and innovative teaching methods; • Create new professional opportunities for teachers, including the opportunity to be responsible for the learning program at the school site; • Provide parents and pupils with expanded choices in the types of educational opportunities that are available within the public school system; and

See “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL – Academic Performance” hereto for more information about measures of academic performance.

• Establish accountability for charter schools to meet measurable academic standards and provide the charter schools with a method to determine accountability systems.

Elements of a Charter Application

Each charter application, at a minimum, must contain all of the following information:

• The name of the charter applicant; • The name of the proposed charter school; • Grade or age levels served by the charter school; • Proposed governance structure of the charter school including a description and method for the appointment or election of members of the board of trustees; • Mission statement and educational goals of the charter school as well as curriculum offered and methods of assessment; • Admissions policy and criteria for evaluation of admissions, in which enrollment must be open to all resident children in the Commonwealth; • Procedures regarding suspension and expulsion of pupils; • Information on the manner in which community groups will be involved in the charter school planning process; • Financial plan for the charter school including provisions for independent audits; • Procedures for review of parent complaints; • Description and address of the physical facility and the ownership thereof or lease arrangements; • School calendar; • Proposed faculty and professional development plan for the faculty; • Agreements with school district regarding extracurricular activities; • Criminal history of all individuals who have direct contact with students; • Child abuse clearance certificate for all individuals who have direct contact with students; and • A description on how the charter school will provide adequate liability and other appropriate insurance for the charter school, its employees and the charter school’s board of trustees.

Charter Term, Renewal or Termination

Generally, charters are effective in the Commonwealth for a period of no less than three and no more than five years. A charter may be renewed for five year periods upon reauthorization by the authorizing Board of Education (or in the School’s case, the SRC). For those charter schools authorized by the SRC, the SRC may renew a charter for a period of one (1) year if the SRC determines that there is insufficient data concerning a charter school’s academic performance to adequately assess that performance and determines that an additional year of performance data would yield sufficient data to assist the SRC in its decision whether to renew the charter for a period of five years. A one-year renewal is not considered an adjudication and may not be appealed to the State Charter School Appeal Board. No additional approvals from any other local Board of Education or any other Commonwealth Agency are required under the Charter School Law for any such renewal or extension.

If a school district considers nonrenewal or termination of a charter school’s charter, the chartering district must provide the charter school with a public hearing before a formal decision is made. The charter school and the non-renewing/terminating school district have an opportunity to present evidence at such hearing. The charter school may then appeal an adverse decision of the local school district to the State Charter School Appeal Board. The charter remains in effect until the State Charter School Appeal Board decides whether the decision to revoke or not renew the charter is appropriate. All decisions of the State Charter School Appeal Board are subject to review by the Commonwealth Court.

When a charter is revoked, not renewed, forfeited, surrendered or otherwise ceases to operate, the charter school shall be dissolved. After disposition of any liabilities and obligations of the charter school, any remaining assets of the charter school, both real and personal, shall be distributed on a proportional basis to the school entities with students enrolled in the charter schools for the last full or partial school year of the charter school. In no event shall such school entities or the Commonwealth be liable for any outstanding liabilities or obligations of the charter school. See “RISK FACTORS – Termination, Revocation, or Non-Renewal of Charter” herein.

Funding for Charter Schools

Charter schools do not charge tuition, but instead receive funding from the school district in which each charter school student lives based on a statutory formula. Pursuant to Section 1725-A(a)(5) of the Charter School Law, a student enrolled in a charter school is included in the average daily membership of the student’s school district of residence for the purpose of providing basic education funding payments and special education funding. The amount of per pupil funding received from resident school districts pursuant to the Charter School Law accounts for a significant majority of charter school funding, but charter schools are also eligible to receive revenues from sources other than the school district per pupil allocation. Such funding includes grants or other subsidies from the federal government. School districts are required to use prior-year budget expenditures when calculating their per pupil payment. For the 2012-13 school year, the Department created new procedures, contrary to the current statute, for calculating a school district per pupil payment. The new procedures, further described below, have generally resulted in lower per pupil payments.

The following table sets forth for the school years shown the per pupil payment that the School received from the School District:

Per Pupil Funding

2011-12 2012-13 2013-14 2014-15 2015-16 2016-178 School District Regular Education $ 8,773 $ 8,064 $ 8,417 $ 7,992 $ 7,738 $ 8,451 School District Special Education $ 19,423 $ 19,831 $ 22,307 $ 23,293 $ 23,697 $ 25,647

The rates used to calculate the amounts shown are subject to adjustment, depending on the outcome of budget deliberations at the School District, City and Commonwealth levels.

Under the Charter School Law, school districts are required to make payments to charter schools in twelve equal monthly payments by the fifth day of each month. If the applicable school district fails to make a payment to the applicable charter school, pursuant to Section 1725-(A)(a)(5) of the Charter School Law, the Secretary will deduct the amount of such failed payment from any and all state payments made to such school district after receipt of documentation from the applicable charter school and the applicable school district and make an adjudication as to whether to pay the amount directly to the applicable charter school. In January 2016, the Department announced that due to a 2012 Pennsylvania Commonwealth Court decision, it is no longer allowed to withhold money from a school district and give it to a charter school to settle claims from prior school years (as compared to a current school year) and that it would no longer allow charter schools to bill the Department directly for payments when there are enrollment disputes with school districts for prior school years.

According to guidelines developed by the Department, each school district completes the Form PDE-363 which is used to calculate the appropriate payment to charter schools for each enrolled regular education student and special education student. The current Form PDE-363 issued by the Department provides for several more deductions for school districts above and beyond the deductions outlined in the applicable statute; thus, there can be no assurance that the Department will not include additional required deductions that may have a material adverse effect on the ability of the School to make required payments under the Loan Agreement. See “RISK FACTORS – Dependence on Per Pupil Payments; Commonwealth Appropriation and School District Risk” herein.

8 On February 17, 2017, the School District announced a proposed mid-year amendment of the pupil rates paid to charter schools in the City for fiscal year 2016-17. Though such amendment is not yet certified by the Commonwealth Department of Education, the School anticipates, based upon communications received from the School District, that there will be a downward adjustment of approximately 4% for the regular education rates (a reduction of $341.87) and special education rates (a reduction of $1,032.55) for charter school students in the City. The School estimates that the financial impact on the School will be a reduction in annual revenues of approximately $220,000. The reduction in revenues is retroactive to the beginning of the 2016-17 school year such that overpayments will need to be recovered from the School by the School District. The School and the School District will be discussing repayment options. In an attempt to mitigate the loss of revenues, the School is planning to make mid-year budget adjustments. See “RISK FACTORS – Sufficiency of Revenues.”

Pursuant to Section 1725-A(a)(5) of the Charter School Law, a charter school may ask the Secretary to redirect a school district’s per pupil payments for the current year only when the applicable school district refuses to pay the charter school for educating students residing in such school district. Several charter schools within the School District have successfully used this alternative funding procedure in conjunction with their disputes with the School District relating to enrollment caps in order to receive current school year per pupil payments for students enrolled in excess of the enrollment caps established by the School District and contained in their respective charters. 9 See “RISK FACTORS – Delay in, Reduction, or Termination of Educational Funding” herein.

Commonwealth Court Decisions Affecting Charter School Funding

A series of lawsuits involving the Department, a charter school and the local school district were filed from 2008 to 2012 that raised issues such as, but not limited to, the underfunding of the charter school by the school district, alleged violations of the statutory funding formula by the school district and the Department, calculations used with regard to Form PDE-363, and the applicability of certain direct payment provisions.10 As a result of the aforementioned litigation, the Commonwealth Court recently determined that the Department may not withhold state subsidies from a school district for the current school year for a claim made by a charter school alleging underfunding in a previous school year. See also “THE AUTHORIZING BODY, THE SCHOOL DISTRICT OF PHILADELPHIA – State Takeover of the School District of Philadelphia; SRC and the Charter School Law” herein for a detailed description of a case relating to the powers of the SRC with respect to charter schools in the School District.

Other Laws Affecting Charter Schools

In June 2012, the Commonwealth enacted new legislation that expanded the Educational Improvement Tax Credit Program and created the Educational Opportunity Scholarship Tax Credit Program. This program provides tax credits to eligible businesses making contributions to certain organizations which provide scholarships to eligible students residing within the boundaries of a low achieving school to attend another public school outside of their home district or a private school. A low achieving school is a public elementary or secondary school ranking in the bottom fifteen percent (15%) of its designation as an elementary or secondary school based upon the Pennsylvania System of School Assessment (“PSSA”) tests. These scholarships could potentially enable students to attend a school other than the School.

The Auditor General of the Commonwealth recently said that the Charter School Law was “faulty” and that the Department’s processes relating to charter school payment are “protracted, inconsistent, confusing, and conflicting.” Audit findings showed that there were 857 charter school payment appeals filed with the Department by school districts during the period January 2011 through December 2015 when the Department made more than $1 billion in direct payments to charter schools. As of December 31, 2015, 701 of the appeals (82%) were unresolved. 374 of the appeals involve funds redirected from school districts to charter schools, and 327 appeals involve funds not redirected from school districts to charter schools.11

State Charter School Legislation

A variety of legislation has been previously introduced in the Pennsylvania General Assembly having the potential to affect charter schools. The legislation included provisions which would have: (1) converted the existing Charter Appeals Board to a statewide authorizing and appeals entity titled the State Charter Schools Entity Board (the “State Board”) to oversee charter schools, including the power to grant new charters and permit existing charter schools to petition to transfer their charter from their current school district to the State Board; (2) established a Charter School Entities Funding Advisory Committee to conduct a comprehensive review of charter school funding and make recommendations regarding funding formulas and reimbursement procedures for charter schools; (3) provided for direct payment of funding from the Department, with an option for a charter school to opt out; (4) extended the term of new charters from three to five years and renewals from five to ten years; (5) allowed for conversions of existing public schools to charter schools; (6) put additional ethical restrictions on members of a

9 http://thenotebook.org/articles/2013/12/13/state-has-paid-millions-to-charter-schools-since-src-suspended-the- code. 10 See Chester Cmty. Charter Sch. v. Dep't of Educ., 44 A.3d 715 (Pa. Commw. Ct. 2012). 11 http://www.poconorecord.com/news/20160904/auditor-general-calls-for-charter-school-funding-reform

charter school’s board and its administration, including restrictions on outside business relationships with the charter school or with other charter schools; (7) imposed certain restrictions with respect to management, operating or educational service contracts; (8) prohibited enrollment caps; (9) required annual independent audits and public disclosure; (10) limited unrestricted, unreserved fund balances at charters schools to 8% to 12% of budgeted expenditures, depending on budget size, with any excess to be refunded to the applicable school districts; (11) required charter schools that elect to issue debt to provide sufficient funds in escrow, and impose penalty for failure of charter schools to pay any indebtedness at the time payment is due; (12) established a searchable budget database providing certain information concerning taxpayer expenditures and investments by charter school entities; (13) required a system of evaluation of educators based on both educator and student performance; (14) provided a system for accepting students off of waiting lists and limit content and requirements contained in applications for admission; (15) allowed charter schools to enter into concurrent enrollment agreements with institutions of higher education; (16) established a standard application form for charter school applicants seeking to establish a charter school entity and for existing charter schools seeking charter renewal; (17) allowed a governing body of a higher education institution to authorize and operate a charter school; (18) reduced Commonwealth contribution on behalf of charter school employees enrolled in the Public School Employee’s Retirement System (“PSERS”) by 50%; (19) reduced the amount to be paid by a school district for each student enrolled in a cyber-charter school by 5%; (20) excluded 30% of employer’s share of retirement contribution from calculation of charter school entity funding; and (21) allowed multiple charter schools, which meet certain performance standards, to consolidate under the oversight of a single board of trustees. While the legislation ultimately did not pass, the specifics of the legislation illuminate some issues that could potentially be revisited in future legislation.

Other proposed legislation that was not enacted, among other things would have: (1) established a Charter School Funding Advisory Commission to examine the funding of “charter school entities”; (2) authorized two or more charter schools to consolidate into a multiple charter school organization, which would be authorized to operate the schools under the oversight of a single board; (3) authorized a public school district to deduct “food services” from the calculation of payments made to cyber-charter schools beginning in the 2015-16 school year; (4) required all charter school renewal applications to include an evaluation for teachers consisting of at least 4 rating categories of educator performance and multiple measures of student performance; (5) required the State Board of Education to establish a standard performance matrix to evaluate charter school entities according to objective criteria; (6) required the board to establish a standard application form for initial and renewal applications for charter school entities, including, but is not limited to, information relating to truancy policies and the entity’s plan to meet academic performance standards; (7) authorized a governing authority of a school district to renew a charter for five or ten years, depending on if the school satisfies the academic quality benchmark according to the performance matrix; (8) limited the “unassigned fund balance” of a charter school entity to between eight and twelve percent of the entity’s total budget, to be determined according to the entity’s total annual operations budget; (9) prohibited a charter school entity from using unassigned funds to pay bonuses and transferring unassigned funds to a charter school foundation; and (10) required a charter school entity to conduct an audit at the end of each fiscal year and provide the Department and the school district with a copy of its annual operations budget.

See “RISK FACTORS – Changes in Law” herein.

RISK FACTORS

This Limited Offering Memorandum contains summaries of certain portions of the Series 2017 Bonds, the Loan Agreement, the Indenture and the Mortgage. Such summaries and references are qualified in all respects by reference to such documents in their entirety. The following discussion of some of the risk factors associated with the Series 2017 Bonds is not, and is not intended to be, exhaustive, and such risks are not necessarily presented in the order of their magnitude.

This Limited Offering Memorandum does not describe all of the risks of an investment in the Series 2017 Bonds and the Underwriter disclaims any responsibility to advise prospective investors of such risks as they exist at the date of this Limited Offering Memorandum or as they change from time to time. Prospective investors should consult their own legal and tax advisors as to the risks entailed by an investment in the Series 2017 Bonds and the suitability of investing in the Series 2017 Bonds in light of their particular circumstances. Prospective investors should be able to bear the risks relating to an investment in the Series 2017 Bonds and should carefully consider, among other factors, the matters described below.

Fiscal and Operational Control Issues

In the past, the School has faced certain fiscal and operational control issues. Certain of these issues relate to its former Chief Executive Officer and Chief Financial Officer and the actions of the Institute. See “THE SCHOOL – Background” herein. In July 2014, the School undertook a financial review by J. Miller and Associates, its auditor. The review noted concerns with the School’s procedures in the areas of cash receipts, cash disbursements, payroll processing, and case management. A comparison of the School’s 2013 financial data with nine other charter schools in the District with similar enrollment revealed that on average, the School’s local source revenue (from the School District) and its other revenues, including contributions and other non-federal and non- state revenues, were below average. On average, the School also exceeded the group in average expenditures across all categories. The auditor also noted a deficiency in cash on hand.

In the 2015-16 Charter School Recommendation Report dated April 11, 2016, prepared by the School District as part of the School’s Charter renewal process, the School District concluded that the School does not meet standards regarding (1) student admissions policies; (2) sound financial health; and (3) fiscal management. Concerns were raised in the report about a variety of issues, including, but not limited to, admission for, identification of and progress monitoring for students with special needs, noncompliant clauses in the discipline policy, insufficient cash on hand, low current ratios and negative fund balances for each of fiscal years 2012 through 2015, and payments to the former president of the Board of Trustees in violation of applicable ethics laws.

The School has a federal tax lien outstanding, as well as a default judgment and lien against it with respect to an operating lease. See “JUDGMENT LIENS” herein. In 2012 and 2013, the School failed to make timely payments for its PSERS retirement contributions and ran operating deficits. See “RISK FACTORS – Pension Risk” herein. Audits for fiscal years 2012 and 2013 included findings related to material adjustments which normal procedures at the School level were unable to prevent, detect or correct in a timely manner. More recent audits have not identified material adjustments. See “APPENDIX C – AUDITED FINANCIAL STATEMENTS OF THE SCHOOL FOR FISCAL YEARS ENDING JUNE 30, 2016, 2015, AND 2014” and “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL – Pension Plans” hereto. The School is also currently facing allegations of overpayments of per-pupil aid arising out of the enrollment of students in excess of the School’s enrollment cap. See “RISK FACTORS – Limitation on Enrollment; Payment Dispute” herein. Administrative proceedings and special education compensatory claims against the School have also been filed against the School. See “LEGAL PROCEEDINGS – The School” herein for additional information. Additionally, the School has failed on multiple occasions to make timely lease payments. As of February 1, 2017, the School is current in its lease payments.

While the School believes that it has made administrative and policy changes that reduce the risk of a recurrence of these fiscal and operational control issues, no assurances can be made that similar fiscal and operational issues will not arise in the future. Several of the current members of the Board of Trustees were members of the Board of Trustees when certain of the above issues occurred. Such issues, if they arise again in the future, could materially adversely affect the financial ability of the School to make debt service payments on the Series 2017 Bonds, or could lead to termination or non-renewal of the Charter. See “RISK FACTORS – Termination, Revocation or Non-Renewal of Charter” herein. In order to facilitate timely debt service payments on the Series 2017 Bonds, the School has agreed under the Loan Agreement to direct the School District to pay all School District Payments directly to the Trustee for deposit into the Revenue Fund. All moneys held on deposit in the Revenue Fund will be applied by the Trustee, first, to payment of funding requirements of the Indenture, including payment of the Series 2017 Bonds, and amounts remaining on deposit in the Revenue Fund after authorized disbursements will then be transferred to the School to pay its Operating Expenses or to be used for any other lawful purpose. See “SOURCES OF PAYMENT AND SECURITY FOR THE BONDS – The Indenture – Revenue Fund; Flow of Funds.”

Speculative Investment; Absence of Rating

Purchase of the Series 2017 Bonds involves a high degree of risk, and the Series 2017 Bonds are a speculative investment. The Bonds are not rated by a nationally recognized rating agency. Typically, unrated bonds lack liquidity in the secondary market. Any investor who, because of financial condition, is unable to bear the loss of an investment in the Series 2017 Bonds, or who, because of investment policies or otherwise, does not desire to

assume, or have the ability to bear, the risks inherent with an investment in the Series 2017 Bonds, should not purchase the Series 2017 Bonds. See also “RISK FACTORS – Sufficiency of Revenues” below.

Sufficiency of Revenues

The Series 2017 Bonds are secured by and payable solely from revenues of the School pledged under the terms and conditions of the Indenture and as otherwise described therein. Based on present circumstances (i.e., its Charter and operating history), the School believes it will generate sufficient revenues to meet its obligations under the Indenture. However, the Charter may be terminated or not renewed, the permitted enrollment under the Charter may be reduced, or the basis of the assumptions utilized by the School to formulate this belief may otherwise change and no representation or assurance can be made that the School will continue to generate sufficient revenues to meet its obligations, including its obligation to make payments under the Loan Agreement.

If actual student enrollment is lower than forecasted or there are reductions in per pupil funding payable to the School from the School District, such actions could have an adverse effect on the financial condition of the School, including on its ability to pay debt service on the Series 2017 Bonds. On February 17, 2017, the School District announced a proposed mid-year amendment of the pupil rates paid to charter schools in the City for fiscal year 2016-17. Though such amendment is not yet certified by the Commonwealth Department of Education, the School anticipates, based upon communications received from the School District, that there will be a downward adjustment of approximately 4% for the regular education rates (a reduction of $341.87) and special education rates (a reduction of $1,032.55) for charter school students in the City. The School estimates that the financial impact on the School will be a reduction in annual revenues of approximately $220,000. The reduction in revenues is retroactive to the beginning of the 2016-17 school year such that overpayments will need to be recovered from the School by the School District. The School and the School District will be discussing repayment options. In an attempt to mitigate the loss of revenues, the School is planning to make mid-year budget adjustments. SEE “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL – Debt Service Coverage and Operating Fund Balance” hereto.

In an effort to attract and keep good teachers, the School decided to adopt a performance-based compensation program intended to reward outcomes and recognize staff who exceed expectations based on annual evaluations. The amount of bonuses available to staff will be determined on an annual basis based on considerations of the annual budget, recommendations of the CEO and formal approval by the Board of Trustees. The School’s Compensation Committee recommends that the Board of Trustees and School management make the bonus program a high priority during the budget process. Bonuses are not guaranteed and are not expected to be paid if payment would cause the School to be in violation of covenants relating to the Series 2017 Bonds, however, there can be no assurances made that bonuses paid or any other expenses incurred will not have a materially negative affect on the School’s finances or its ability to pay debt service on the Series 2017 Bonds. Future litigation, administrative proceedings and special education compensatory claims against the School could also have material adverse effects on the financial condition of the School. See “LEGAL PROCEEDINGS – The School” herein for a description of recent and ongoing legal proceedings.

Over the past several years, School management has had to closely monitor cash flow in order to strengthen the cash position of the School. As of January 31, 2017, the School has (a) a current ratio of .77, (b) 50 days cash on hand12, (c) a fund balance of -.02, (d) a negative net position of 1.2, and (e) a debt-to-asset ratio of 1.06. See “RISK FACTORS – Termination, Revocation or Non-Renewal of Charter” herein.

Pension Risk

Pursuant to the Charter, if the School fails to make timely payments to PSERS, which has happened in recent years, and such failure results in a reduction of the School District's basic education subsidy, the School District shall withhold such reduction in a future monthly per-pupil payment to the School. This reduction could materially negatively affect the School’s finances and its ability to pay debt service on the Series 2017 Bonds. See “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL –

12 If the School had made its February rent payment before calculating days cash on hand as of January 31, 2017, days cash on hand would have been 47 days.

Pension Plans” hereto for additional detail regarding the School and its pension obligations. See also “RISK FACTORS – Sufficiency of Revenues” herein.

Dependence on Per Pupil Payments; Commonwealth Appropriation and School District Risk

The School may not charge tuition and has no taxing authority. The primary source of revenue received by the School is its per pupil payment from the School District. The amount of per pupil aid received by the School is based upon its per pupil enrollment. The amount of per pupil funding to be paid to the School is subject to a formula set by the Commonwealth Legislature and is also based on the expenditures from the prior fiscal year of the School District.

The Commonwealth Legislature may decide at any time not to appropriate funds for payments to school districts in order to make per pupil payments, or may not appropriate funds in a sufficient amount, to enable the School District to pay the School amounts sufficient to pay debt service on the Series 2017 Bonds and to meet its general operating expenses. Similarly, the per pupil payment formula could be changed by the Commonwealth Legislature to result in reduced funding or not keep pace with expenses such that the aggregate per pupil payments to the School are inadequate to allow the School to pay its operating expenses and debt service on the Series 2017 Bonds. Recent Commonwealth budgets have significantly reduced the Commonwealth’s aid to local school districts, including the School District. No liability shall accrue to the Commonwealth in such event, and the Commonwealth will not be obligated or liable for any future payments or any damages in such event. In the event the Commonwealth were to withhold the payment of monies from the School District or in the event the School District were to withhold the payment of monies from the School for any reason, even a reason that is ultimately determined to be invalid or unlawful, it is likely the School would be forced to cease operations.

The Commonwealth per pupil funding formula for the School is based on the actual expenditure per pupil of the School District from the prior fiscal year. In recent years, the School District’s actual expenditures have varied from year to year, including decreases. The School District is facing various financial challenges which may negatively impact its per pupil spending. There can be no assurance that the School District’s expenditures will not be reduced in future years in an amount that would reduce per pupil payments and cause the School to be unable to pay debt service on the Series 2017 Bonds. Most recently, on February 17, 2017, the School District announced a proposed mid-year amendment of the pupil rates paid to charter schools in the City for fiscal year 2016-17. Though such amendment is not yet certified by the Commonwealth Department of Education, the School anticipates, based upon communications received from the School District, that there will be a downward adjustment of approximately 4% for the regular education rates (a reduction of $341.87) and special education rates (a reduction of $1,032.55) for charter school students in the City. The School estimates that the financial impact on the School will be a reduction in annual revenues of approximately $220,000. The reduction in revenues is retroactive to the beginning of the 2016-17 school year such that overpayments will need to be recovered from the School by the School District. The School and the School District will be discussing repayment options. In an attempt to mitigate the loss of revenues, the School is planning to make mid-year budget adjustments. See “RISK FACTORS – Sufficiency of Revenues.” See “THE AUTHORIZING BODY, THE SCHOOL DISTRICT OF PHILADELPHIA – Current Financial Situation of the School District” regarding financial distress of the School District.

The charter school funding laws and processes in the Commonwealth are uncertain and no assurances can be made that such funding laws and processes will not materially adversely affect the ability of the School to collect revenues sufficient to make payments on the Series 2017 Bonds. The Auditor General of the Commonwealth recently said that the Charter School Law was “faulty” and that the Department’s processes relating to charter school payment are “protracted, inconsistent, confusing, and conflicting.” Audit findings showed that there were 857 charter school payment appeals filed with the Department by school districts during the period January 2011 through December 2015 when the Department made more than $1 billion in direct payments to charter schools. As of December 31, 2015, 701 of the appeals (82%) were unresolved. 374 of the appeals involve funds redirected from school districts to charter schools, and 327 appeals involve funds not redirected from school districts to charter schools.13

13 http://www.poconorecord.com/news/20160904/auditor-general-calls-for-charter-school-funding-reform

Delay in, Reduction or Termination of Educational Funding

Any event that would cause a delay, reduction or elimination of per pupil payments from the School District or Commonwealth or federal grants would have a material adverse effect on the ability of the School to make debt service payments on the Series 2017 Bonds. See, for example, the expected downward adjustment in per pupil payments the School receives from the School District described in further detail in “RISK FACTORS – Dependence on Per Pupil Payments; Commonwealth Appropriation and School District Risk” hereto. Monthly payments are to be made to the charter school. If a school district fails to make a payment to a charter school as prescribed by the Charter School Law, the Secretary is required by law to deduct the amount, as documented by the School for the current year only, from any and all Commonwealth payments made to such school district after receipt of documentation from the School and such school district and an adjudication on such documentation. See “CHARTER SCHOOLS IN THE COMMONWEALTH – Alternative Funding Procedure” herein. There can be no assurances that delays in payments or reductions in funding will not occur as a result of such alternative funding procedures or that such alternative funding procedures will not materially adversely affect the School’s ability to make payments under the Loan Agreement sufficient to pay the debt service on the Bonds.

Limitation on Enrollment; Payment Dispute

The School is authorized under its Charter to enroll up to 525 students in grades K-8. Section 17-1723- A(d)(1) of the Charter School Law prohibits limits on a charter school’s enrollment unless the limitation is agreed to by the charter school as part of its written charter. The Charter was agreed to by the School, thus limiting enrollment to 525 students; however, the School takes the position that the Charter was signed under duress and that the Charter School Law prohibition on enrollment limits does not apply to students enrolled by the School who are residents of school districts other than the School District. Accordingly, 100% of the School’s 525 students authorized under the enrollment cap may reside in the School District, but the School does enroll students from outside of the School District in excess of its enrollment cap and may do so in the future. As of February 23, 2017, the School enrolled 20 students from outside the School District (and 512 students from within the School District), for a total of 7 students in excess of the School’s Charter enrollment cap. The School was paid and expects to continue to be paid for those 20 students by their resident school districts. Certain school districts have challenged payments to charter schools in the School District for students outside of the School District, and there can be no guaranty that payment for such students will continue to be received. See “CHARTER SCHOOLS IN THE COMMONWEALTH – Funding for Charter Schools” herein. The forecast included in “APPENDIX B – FOUR- YEAR FINANCIAL FORECAST” (the “Forecast”) uses an enrollment in excess of the cap of 525 given the history of the School enrolling students outside the School District above its enrollment cap of 525. The School has historically had no problems collecting payment from school districts other than the School District. The School has requested and will continue to request increase of the Charter enrollment cap by 50 or more students. The large waitlist numbers are a result of the limitation on enrollment, as the School only enrolls above its enrollment cap those students not residing in the School District.

The School is not the only school in the School District to take the position that a charter imposed enrollment cap is unenforceable and in fact, as of February 2014, more than 20 charter schools in the School District enrolled students in excess of their charters, one charter school by as many as 627 students.14 One such charter school, Walter Palmer Leadership Learning Partners Charter School (“Palmer”), was closed in December 2014 after a case relating to enrollment caps was decided by the Supreme Court of the Commonwealth in May 2014 (the “Palmer Case”). The Palmer Case overturned a series of lower trial court decisions, ruling that the schools, including Palmer, which were party to the case must obey the terms of their charter contracts signed with the Authorizing Body. Palmer maintained that the charter it signed with the Authorizing Body lacked “mutual assent.” The Supreme Court ordered Palmer to pay the Authorizing Body $1.5 million to make up for some of the students it enrolled above the enrollment cap, allowing the Authorizing Body to begin deducting $250,000 per month from its payments to Palmer. The Palmer Case was succeeded, but not overturned, by the West Philadelphia Case.

While the West Philadelphia Case invalidated significant portions of the SRC’s Charter School Policy (specifically the portions that sought to suspend the Charter School Law, including the provision prohibiting unilateral enrollment caps), it otherwise had no effect on existing Charter School Law or its application, meaning the

14 http://thenotebook.org/articles/2014/02/04/city-s-charter-enrollment-surpasses-67-000-many-charters-exceed- enrollment-caps

grounds for termination, nonrenewal and revocation of charters as set forth in the Charter School Law remain unchanged and applicable to School and the School, by enrolling in excess of the Charter enrollment cap, could potentially be in violation of its Charter if it is found that the School did, in fact, agree to the Charter terms when it signed. The School maintains that it did not agree to the Charter provisions. See “RISK FACTORS – Termination, Revocation or Non-Renewal of Charter” herein. The School is not currently involved in legal proceedings related to this issue, but legal proceedings with respect to these issues are pending. It is unclear what the outcome of the proceedings will be. If the West Philadelphia Case decision stands, charter schools that do not agree to enrollment caps cannot be barred from asking the Department to pay for additional students if the school district refuses to pay. See “CHARTER SCHOOLS IN THE COMMONWEALTH – Funding for Charter Schools” and “THE AUTHORIZING BODY, THE SCHOOL DISTRICT OF PHILADELPHIA – State Takeover of the School District of Philadelphia; SRC and the Charter School Law” herein.

The School is currently in a dispute with the Authorizing Body regarding certain deductions that were made by the Department from the February 2014 state payments to the School District. Specifically, the School District has contested the deduction and direct payment to the School of the amount of $91,436.27 for students enrolled by the School above the enrollment cap set forth in the Charter (the “Deduction”). Pursuant to a letter dated March 28, 2014, the School District objected to the Deduction, and the matter is awaiting the appointment of a hearing officer by the Department. Disputes of this nature generally take some time to resolve.

Changes in Law

The Commonwealth Legislature has amended the Charter School Law since it was first enacted in 1997 and the Charter School Law is subject to further modification by the Commonwealth Legislature, subject only to certain constitutional parameters. As part of such modification, the amount, timing and methodology for calculation of per pupil funding payments has changed significantly in recent years, and is subject to future legislative changes. Future amendments to the Charter School Law may adversely affect the School, for example, by reducing the maximum per pupil amount payable by the School District for students enrolled by the School, by changing the calculation of the per pupil funding amounts to something not based on School District expenditures, by limiting the amount of such per pupil payments or other educational funding that may be pledged to obligations such as the Series 2017 Bonds, by permitting the School District to withhold a percentage of the per pupil payments if the School is deemed not to be in compliance with its Charter or other applicable Commonwealth or federal laws, by decreasing the maximum length of the Charter’s term, by requiring the Commonwealth or School District to make an assessment of each the School’s effectiveness every year, by limiting the number of students for which per-pupil payments are paid, by mandating new facilities or programs which may cost more than has been projected, by revising the relative responsibilities between the School District and the Commonwealth for financing the School or by eliminating the authority for charter schools, including the School. See “THE AUTHORIZING BODY, THE SCHOOL DISTRICT OF PHILADELPHIA – State Takeover of the School District of Philadelphia; SRC and the Charter School Law” and “CHARTER SCHOOLS IN THE COMMONWEALTH – State Charter School Legislation” herein.

Termination, Revocation or Non-Renewal of Charter

The School is authorized under its Charter which confirms the status of the School as a charter school and provides for certain operating and performance requirements. The Charter also serves as the basis for the School to receive per-pupil funding from the School District. The term of the Charter is for a term of five (5) years commencing on July 1, 2016, and ending on June 30, 2021, unless revoked or not renewed, or surrendered sooner pursuant to the terms of the Charter. The Charter was renewed with conditions as further detailed herein. In the Loan Agreement, the School covenants to maintain its existence as a charter school for so long as the Series 2017 Bonds are outstanding. THE AUTHORIZING BODY HAS MADE NO SUCH COVENANT AND COULD TERMINATE, REVOKE OR NOT RENEW THE CHARTER AT ANY TIME, IN ACCORDANCE WITH THE TERMS OF THE CHARTER AND THE LAWS OF THE COMMONWEALTH.

The School District expressly reserves the right in the Charter to not renew the Charter at the end of its term or to revoke the Charter at any time during its term based on any of the following: 15

15 See 24 P.S. §17-1729-A.

• one or more material violations of any of the conditions, standards, or procedures contained in the Charter; • failure to meet the requirements for student performance set forth in Commonwealth law or failure to meet any performance standard contained in the Charter; • failure to meet generally accepted standards of fiscal management or audit requirements; • violation of the Charter School Law or any other law from which the School has not been exempted, including federal laws and regulations governing children with disabilities; or • the School has been convicted of fraud.

The Charter provides that the following are conditions for renewal of the Charter: (1) the achievement gap between students with special needs and overall student performance shall be no more than 21 percentage points in math and no more than 27 percentage points in English Language Arts by 2019-20; (2) the special education program must meet certain thresholds upon completion of cyclical monitoring; (3) the Board of Trustees must engage an external, non-affiliated party to provide annual trainings for the Board of Trustees16; and (4) the Board of Trustees must ensure that the School maintains satisfactory short-term financial health and long-term financial sustainability during the term of the Charter, as measured annually by: (a) a current ratio greater than 1, (b) 30 or more average days cash on hand, (c) a positive fund balance, (d) a positive net position, and (e) a debt-to-asset ratio of less than 0.92. Failure to comply with these Charter conditions may be the basis for a revocation or nonrenewal of the Charter.

AS OF THE 2015-2016 SCHOOL PERFORMANCE PROFILE (AS FURTHER DESCRIBED IN “RISK FACTORS – ACADEMIC PERFORMANCE”), THE SCHOOL HAD MET 0% OF THE REQUIRED GAP CLOSURE IN MATH AND ENGLISH LANGUAGE ARTS. AS OF JANUARY 31, 2017, THE SCHOOL HAS (A) A CURRENT RATIO OF .77, (B) 50 DAYS CASH ON HAND17, (C) A FUND BALANCE OF -.02, (D) A NEGATIVE NET POSITION OF 1.2, AND (E) A DEBT-TO-ASSET RATIO OF 1.06. THE SCHOOL IS NOT CURRENTLY IN COMPLIANCE WITH ITS CURRENT RATIO, FUND BALANCE, NET POSITION AND DEBT-TO-ASSET RATIO COVENANTS UNDER THE CHARTER. THESE FAILURES COULD BE THE BASIS FOR A REVOCATION OR NONRENEWAL OF THE CHARTER.

The charter also includes academic standards the School must satisfy. For example, for each year during the term of the Charter, the Charter School must achieve (i) academic success which is minimally defined as (a) meeting or exceeding the average proficiency of the School District-operated schools, charter schools, and peer group schools in math, reading/ELA and science on the PSSA or relevant exams for the same grade band, (b) showing evidence of improved student proficiency over the Charter term (an increasing trend), and (c) meeting or exceeding the statewide growth indicator on the Average Growth Index growth measure consistent with Department definitions;18 and (ii) a ranking in the top two levels of the School District's academic accountability performance system. 19 See “CERTAIN COVENANTS OF THE SCHOOL – Academic Performance Covenant” herein for a description of a covenant in the Loan Agreement whereby the School agrees to engage an educational consultant in the event the School falls into the bottom level of the School District’s academic accountability performance system

16 The School has engaged consultants to conduct a whole school review. The consultants have produced a report and recommendations that will be used to guide the selection of a Board of Trustees development consultant. The Board of Trustees continues to work with consultants to implement the recommendations. 17 If the School had made its February rent payment before calculating days cash on hand as of January 31, 2017, days cash on hand would have been 47 days. 18 Proficiency data is available as part of the annual School Performance Profile. The Pennsylvania Value Added Assessment System (PVAAS) Average Growth Index (AGI) is a measure of student growth across the tested grade levels in a district/school. AGI equal to or near 0 means that students made progress similar to the standard for PA Academic Growth, AGI greater than 0 means students exceeded the standard, and AGI below 0 means students did not meet the standard. See “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL – Academic Performance” hereto for more information about measures of academic performance. 19 The School District’s annual School Progress Report uses four performance tiers: “Intervene” (0-24%), “Watch” (25-49%), “Reinforce” (50-74%), and “Model” (75-100%). In 2015-16, the School received a “Watch” ranking. See “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL – Academic Performance” hereto for more information about measures of academic performance.

If the School achieves a ranking in the bottom two levels on the School District's academic accountability performance system for charter schools during any year of the Charter, the School District may require that the School meet certain specific student achievement targets and participate in ongoing progress monitoring.

ON THE 2016 PSSA EXAMS, 8.26%, 32.01% AND 40.78% OF THE SCHOOL’S STUDENTS SCORED PROFICIENT OR HIGHER IN MATH, READING AND SCIENCE, RESPECTIVELY. 18%, 32% AND 36% OF THE SCHOOL DISTRICT’S STUDENTS SCORED PROFICIENT OR HIGHER IN THE SAME TESTING SUBJECTS. THE SCHOOL DOES NOT MEET OR EXCEED AVERAGE SCHOOL DISTRICT PROFICIENCY IN MATH. FROM 2015 TO 2016, PSSA SCORES ARE NOT INCREASING AS REQUIRED UNDER THE CHARTER. FURTHERMORE, IN 2015-16, THE SCHOOL RECEIVED A “WATCH” RANKING OF 28% (SEE FOOTNOTE 11 DESCRIBING PERFORMANCE TIERS), WHICH PUTS THE SCHOOL IN THE BOTTOM TWO LEVELS ON THE SCHOOL DISTRICT’S ACADEMIC ACCOUNTABILITY PERFORMANCE SYSTEM. THE SCHOOL MAY BE SUBJECT TO ACHIEVEMENT TARGETS AND ADDITIONAL MONITORING, AND SUCH RANKING COULD POTENTIALLY JEOPARDIZE ITS CHARTER. See “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL – Academic Performance” hereto. THE CHARTER ALSO INCLUDES AN ENROLLMENT LIMIT WHICH THE SCHOOL IS NOT IN COMPLIANCE WITH. See “RISK FACTORS – Limitation on Enrollment; Payment Dispute” above. FAILURE TO COMPLY WITH THE FOREGOING AND OTHER STANDARDS, CONDITIONS AND REQUIREMENTS CONTAINED IN THE CHARTER MAY BE THE BASIS FOR A REVOCATION OR NONRENEWAL OF THE CHARTER.

The Charter School Law describes the procedure for revocation or nonrenewal. Any notice of revocation given by the Authorizing Body shall state the grounds for the revocation or nonrenewal and a date on which a public hearing with respect to the revocation will be held. The Authorizing Body shall conduct the public hearing, present evidence in support of the grounds for revocation or nonrenewal, and give the School reasonable opportunity to offer testimony before taking final action. Formal action revoking the charter must be taken by the Authorizing Body after the public has 30 days to provide comments to the Authorizing Body.

Pursuant to the Charter School Law, the School may appeal the Authorizing Body’s decision to the State Charter School Appeal Board. In the case of revocation, during the pendency of the appeal, the Charter would remain in effect. However, in the event that the health or safety of the School’s pupils, staff, or both is at serious risk, the Authorizing Body can hold an immediate hearing after which the Charter is terminated immediately.

The School District is currently pursuing revocation or non-renewal of two schools.20 The Charter may also be terminated or surrendered by mutual written agreement of the School and the Authorizing Body prior to the expiration of its term.

By enacting the Distress Law, the Legislature sought to empower the SRC to take actions which it might deem necessary or convenient to alleviate the School District’s ongoing financial crisis. While the actions of the SRC under the Distress Law have been ruled null and void and certain provisions of the law overturned as unconstitutional, it is possible that the Commonwealth Legislature will seek to enact new laws and authorize the SRC to take action with respect to Charter Schools similar to those in SRC-2013-1. There can be no assurances that future changes in the Charter School Law or the SRC’s application of its legislatively delegated authority will not have a material adverse effect on the School or the Charter, or cause the termination, revocation or nonrenewal of the Charter. See “THE AUTHORIZING BODY, THE SCHOOL DISTRICT OF PHILADELPHIA – State Takeover of the School District of Philadelphia, SRC and the Charter School Law” herein.

IN THE EVENT THAT THE SCHOOL’S CHARTER WERE TO BE TERMINATED, REVOKED, OR NOT RENEWED, THE ABILITY OF THE SCHOOL TO MAKE LOAN PAYMENTS UNDER THE LOAN AGREEMENT COMING DUE THEREAFTER WOULD BE MATERIALLY ADVERSELY AFFECTED.

The School has been faced with issues that could negatively affect its Charter. For example, the School is in a dispute with the Authorizing Body regarding certain deductions that were made by the Department from the

20 http://webgui.phila.k12.pa.us/offices/c/charter_schools/pending-nonrenewals/revocations

February 2014 state payments to the School District. Specifically, the School District has contested the deduction and direct payment to the School of the amount of $91,436.27 for students enrolled by the School above the enrollment cap set forth in the Charter (the “Deduction”). Pursuant to a letter dated March 28, 2014, the School District objected to the Deduction, and the matter is awaiting the appointment of a hearing officer by the Department. Disputes of this nature generally take some time to resolve. The School does not expect that the resolution of the Deduction will have a material adverse effect on the School’s finances or its ability to meet its obligations with respect to the Series 2017 Bonds. For additional information regarding the School and issues it has faced in recent years, see “RISK FACTORS – Fiscal and Operational Control Issues” herein and “Background” under “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL” hereto.

Economic and Other Factors

Future economic and other factors may adversely affect the School’s revenues and expenses and, consequently, the School’s ability to make debt service payments under the Loan Agreement. Among the factors that could have such adverse effects are: decreases in the number of students seeking to attend the School at optimum levels for each grade level; the ability of the School to provide the education desired and accepted by the population served; economic developments in the affected service area; diminution of the School’s reputation in its field; competition from other educational institutions, including other charter schools, private schools and public schools; lessened ability of the School to attract and retain qualified teachers and staff at salaries that permit payment of debt service and expenses; increased costs associated with technological advances; changes in government regulation of the education industry or in the Charter School Law or other Commonwealth laws; future claims for accidents at the School’s sites and the extent of insurance coverage for such claims; decrease in per- student funding amounts by the Commonwealth; and the occurrence of natural disasters such as floods.

Limited Operating History; Reliance on Projections

The ability of the School to make debt service payments when due is dependent on per-pupil payments to be received by the School from the School District as payment for educating students, as well as grants and other payments from the Commonwealth and the federal government. The School has only conducted operations since 1997. The projections of revenues and expenses contained in “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL” and “APPENDIX B – FOUR-YEAR FINANCIAL FORECAST” hereto were prepared by the School and have not been independently reviewed or verified by any other party. In particular, the Underwriter has not independently verified such projections, and makes no representations nor gives any assurances that such projections, nor the assumptions underlying them, are complete or correct. Further, the projections relate only to the fiscal years of the School ending June 30, 2017, through June 30, 2020, and consequently do not cover the entire period that the Series 2017 Bonds will be outstanding. The projections also include enrollment in excess of the School’s enrollment cap, which may not be raised. See “RISK FACTORS – Limitation on Enrollment; Payment Dispute” herein.

The projections of revenues and expenses contained in “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL” and “APPENDIX B – FOUR-YEAR FINANCIAL FORECAST” hereto do not take into account a potential downward adjustment in per pupil revenues or budget adjustments made at the School level to mitigate the effect of such revenue loss. See “CHARTER SCHOOLS IN THE COMMONWEALTH – Funding For Charter Schools” and “RISK FACTORS – Sufficiency of Revenues” herein.

The projections are derived from the actual operation of the School and from the School’s assumptions about future student enrollment and expenses. There can be no assurance that the actual enrollment revenues and expenses for the School will be consistent with the assumptions underlying the projections contained herein. Moreover, no guarantee can be made that the projections of revenues and expenses contained herein will correspond with the results actually achieved in the future because there is no assurance that actual events will correspond with the assumptions made by the School. Actual operating results may be affected by many factors, including, but not limited to, increased costs, lower than anticipated revenues (as a result of insufficient enrollment, reduced per-pupil payments from the School District or other federal or Commonwealth grants or payments, or otherwise), employee relations, changes in taxes, changes in applicable government regulation, changes in demographic trends, changes in elementary and secondary education generally, competition and changes in local or general economic conditions.

Refer to “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL” hereto to review certain of the projections and to consider the various factors that could cause actual results to differ significantly from projected results.

NO GUARANTEE CAN BE MADE THAT THE RESULTS ACTUALLY ACHIEVED IN THE FUTURE WILL CORRESPOND TO THE PROJECTIONS. ACTUAL OPERATING RESULTS MAY BE AFFECTED BY MANY FACTORS, INCLUDING, BUT NOT LIMITED TO, INCREASED COSTS, LOWER THAN ANTICIPATED REVENUES (AS A RESULT OF INSUFFICIENT ENROLLMENT, REDUCED PER-PUPIL PAYMENTS OR OTHER FEDERAL OR COMMONWEALTH GRANTS OR PAYMENTS, OR OTHERWISE), EMPLOYEE RELATIONS, CHANGES IN TAXES, CHANGES IN APPLICABLE GOVERNMENTAL REGULATION, CHANGES IN DEMOGRAPHIC TRENDS, CHANGES IN ELEMENTARY AND SECONDARY EDUCATION GENERALLY, COMPETITION AND CHANGES IN LOCAL OR GENERAL ECONOMIC CONDITIONS OR OTHER DIFFERENCES BETWEEN ASSUMPTIONS MADE BY THE SCHOOL AND THE ACTUAL CIRCUMSTANCES THAT OBTAIN.

The School’s Operation as a Charter School; No Tuition

The School is a Pennsylvania nonprofit corporation, a charter school the Charter School Law and an organization described in Section 501(c)(3) of the Code. Prior to the issuance of the Series 2017 Bonds, the School has had limited operating history as a charter school. The School has limited assets other than its interest in the Facilities. No assurance can be given that the School will be able to operate as a charter school in a manner that will generate sufficient revenues to meet the debt service requirements of the Series 2017 Bonds. A charter school may not charge tuition to a student attending the School. Charter schools primarily receive funding on a per-pupil basis from the local district to support their operations, based on a statutory funding formula. See “CHARTER SCHOOLS IN PENNSYLVANIA – Funding for Charter Schools” herein.

Since the School has limited assets other than its interest in the Facilities, its failure to derive revenues sufficient to meet its obligations under the Loan Agreement would materially impair the School’s ability to make Loan Payments or other payments under the Loan Agreement when due. If there is a shortfall in per-pupil payments, or any other revenues of the School, that renders the School unable to pay the Loan Payments in full, the failure to make Loan Payments in full would constitute an event of default under the Loan Agreement. See “SOURCES OF PAYMENT AND SECURITY FOR THE BONDS – The Loan Agreement” herein.

The Nature of the Forecast

The projected enrollment and the Forecast are based upon assumptions made by management of the School which are summarized in “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL” and “APPENDIX B – FOUR-YEAR FINANCIAL FORECAST” hereto. There are usually differences between forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. In addition, the Forecast relates only to the fiscal years of the School ending June 30, 2017, through June 30, 2020, and consequently does not cover the entire period that the Series 2017 Bonds may be outstanding. Prospective investors in the Series 2017 Bonds should read the Forecast in its entirety. The Forecast also includes enrollment in excess of the School’s enrollment cap, which may not be raised. See “RISK FACTORS – Limitation on Enrollment; Payment Dispute” herein.

REDUCED PER-PUPIL PAYMENTS OR OTHER FEDERAL OR COMMONWEALTH GRANTS OR PAYMENTS, OR OTHERWISE), EMPLOYEE RELATIONS, CHANGES IN TAXES, CHANGES IN APPLICABLE GOVERNMENTAL REGULATION, CHANGES IN DEMOGRAPHIC TRENDS, CHANGES IN ELEMENTARY AND SECONDARY EDUCATION GENERALLY, COMPETITION AND CHANGES IN LOCAL OR GENERAL ECONOMIC CONDITIONS OR OTHER DIFFERENCES BETWEEN ASSUMPTIONS MADE BY THE SCHOOL AND THE ACTUAL CIRCUMSTANCES THAT OBTAIN.

Assumptions Regarding Enrollment and Per-Pupil Payments and Other Revenues

The School has prepared the Forecast. The Forecast contains information material to a decision to purchase the Series 2017 Bonds and should be read by potential investors in its entirety. The Forecast contains: (a) forecasts of per-pupil funding from the School District and other sources of revenues, (b) projections of future student enrollment, (c) forecasts of expenditures, and (d) debt service requirements of the Series 2017 Bonds. The Forecast sets forth a number of assumptions on which the Forecast is based, including but not limited to, the projected enrollment of the School, an increase in the enrollment cap, and the per pupil amounts to be paid by the School District. Such assumptions are based on present circumstances and information currently available, which was furnished by the School, as well as other sources. Such information may be incomplete and may not necessarily disclose all material facts that might affect the School and the analysis contained in the Forecast. Accordingly, prospective investors should carefully evaluate the assumptions and other information in the Forecast in the light of the circumstances then prevailing. The Forecast has been included herein in reliance upon the knowledge and experience of the School. The accuracy of the Forecast is dependent on the occurrence of specified assumptions and other future events, which cannot be assured, and therefore, the actual results achieved during the period will vary from those forecast and those differences may be material and adverse. See “APPENDIX B – FOUR-YEAR FINANCIAL FORECAST” hereto. The Underwriter has not independently verified the statistical data included therein and makes no representations nor gives any assurances that such data are complete or correct. Further, the Underwriter makes no representations nor gives any assurances that the assumptions incorporated in the Forecast are valid. The ability of the School to achieve and maintain on a continuing basis financially sustaining levels of enrollment at the School is subject to a number of factors. The ability of the School to attract students on a continuing basis will be dependent on many factors including, but not limited to, the physical condition of the Facilities, the programs provided for students, and the supply of other traditional public schools, private schools and charter schools in the community in which the Facilities are located. In addition, the Forecast is only for the four fiscal years ending June 30, 2020, and consequently does not cover the entire period during which the Series 2017 Bonds may be outstanding.

Any event that would cause a delay, reduction or elimination of per-pupil aid payments from the School District would have a material adverse effect on the ability of the School to make payments due under the Loan Agreement, including, but not limited to Loan Payments, coming due thereafter. See “RISK FACTORS,” including the subsections captioned “Dependence on Per-Pupil Payments”; “Delay in, Reduction or Termination of Educational Funding”; and “Legislative and Nonappropriation Risk” herein.

Existing and Prospective Operations Generally

The revenues and expenses associated with the existing and prospective operations of the School will be affected by future events and conditions relating generally to, among other things, demand in the School’s service area for educational services, the ability of the School to continue to provide the kinds of facilities and educational services desired or required by the student population, economic developments in the affected service area, competition from existing or future facilities and providers, the ability of the School to maintain high enrollment levels in the Facilities and the ability to continue to receive per-pupil payments from the School District or other Commonwealth or federal grants or payments sufficient for the payment of all related costs of operation.

The School is a charter school and unlike traditional public schools, does not have an existing base of constituents from which pupils are drawn. At the close of the 2015-16 school year, total enrollment was 532 students. The Facilities have a capacity of approximately 745 students, but the Charter includes an enrollment cap of 525 students. See “RISK FACTORS – Limitation on Enrollment; Payment Dispute” for a more detailed description of enrollment cap issues.

The School will have to attract and maintain a large student population to generate revenue to pay operating costs and debt service. Per-pupil funding received by the School from the School District is allocated on a per pupil basis. The School is subject to competition from other schools in its service area providing similar or comparable services and no assurance can be given that the School will be able to attract and maintain students adequate in number to provide sufficient revenues to pay amounts due under the Loan Agreement. There are competing public schools, private schools and charter schools in the School’s service area and there can be no assurance that additional competing facilities will not be established or constructed in the future.

No assurances can be given that the School will continue to have funds for the payment of amounts due under the Loan Agreement. Accordingly, the likelihood that there will be sufficient funds to pay the principal of, premium, if any, and interest on the Series 2017 Bonds is dependent upon certain factors which include, but are not limited to, (a) the continuing need of the School for the Facilities, (b) the ability of the School to obtain funds (including per-pupil funding from the School District) to pay obligations associated with the Loan Agreement, (c) the demographic conditions within the service area of the School, and (d) the value of the Facilities and other assets of the School upon foreclosure sale under the Mortgage instituted by the Trustee pursuant to the Indenture and Mortgage and upon exercise of the remedies available under the Loan Agreement and the Indenture.

Competition for Students

The School competes for students with other charter schools, parochial schools, and the School District (which is the Authorizing Body), within the geographic boundaries of which the Facilities are located. The School’s students may come from anywhere within the Commonwealth. The School is located in the School District for purposes of calculating the School’s per-pupil payments, which are paid to the School by the School District, and draws virtually all of its students from the School District. As of December 2015, the School District directly operated 218 traditional public schools in the City with 134,538 students. The School District also authorized an additional 88 charter schools in the City, with 63,441students. See “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER – School Service Area and Competing Schools” hereto.

New Charter School Applications

In 2015, the SRC approved five of 39 applications for new charter schools. In 2016, the SRC approved three of 12.21 In 2017, the SRC approved one of three.22 Until 2015, the School District did not accept applications for new charter schools. The $2 per pack cigarette tax legislation passed in September 2014 (the “Cigarette Tax Legislation”) and gave the School District a new funding source, but required the School District to consider new charter school applications. Each application will go through a rigorous review, including public hearings and a public-comment period. After the public hearings, the SRC will vote publicly on the applications. The School District will assemble review teams of staff and outside education experts. It has cited its financial challenges as a reason to limit the number of new charter schools which can be approved. A public hearing on each proposal will be held within 45 days of submission, and School District staff will make a recommendation to the SRC, which by state law must vote within 75 days of the application’s first hearing. Rejected charter applicants will have the chance to appeal to the State Charter Appeals Board, another mandate of the Cigarette Tax Legislation which did not previously exist. The state cigarette tax, which has been generating about $50 million per year, is set to expire in 2019.

Although there are many students on charter school waiting lists, if new charter schools are approved, it is possible that such new charter schools will compete for students with the School. If such competition negatively affects the enrollment at the School, such competition could negatively adversely affect the financial condition of the School.

21 http://watchdog.org/257106/philadelphia-approves-3-new-charter-schools/ 22 http://www.westphillylocal.com/2017/02/09/src-approves-kipp-parkside-charter-school/

Charter Schools Generally

The operations of the School relate primarily to the ownership and operation of a charter school with a campus located in the City. Such operations are dependent on sufficient demand for the Facilities, adequate revenues from enrollment at the Facilities and control of expenses. A School may not charge tuition to a student attending the School. The operation of a charter school is highly regulated through its charter and by the charter school’s authorizing body and the Department. The failure of the School to meet the requirements of applicable regulations, termination, revocation or nonrenewal of the Charter by the School District or the SRC or the inability to secure a charter from another authorizing body would have a material adverse effect on the ability of the School to make payments under the Loan Agreement. See “RISK FACTORS – Termination, Revocation or Non-Renewal of Charter” and “– Changes in Law” herein.

Factors Associated with the School’s Operations and Education

There are a number of factors affecting elementary and secondary school education in general that could have an adverse effect on the School’s financial position and its ability to make payments required under the Loan Agreement. These factors include, but are not limited to, increasing costs of compliance with federal or Commonwealth regulatory laws or regulations, including, without limitation, laws or regulations concerning environmental quality, work safety and accommodating persons with disabilities; any unionization of the School’s work force with consequent impact on wage scales and operating costs of the School; the ability to attract a sufficient number of students; the ability of the School to secure School District approval to add additional enrollment; changes in existing statutes pertaining to the powers of the School; legislation or regulations which may affect program funding and disruption of the School’s operations by real or perceived threats against the School, its employees or students. The School cannot assess or predict the ultimate effect of these factors on its operations, financial results of its operations or its ability to make the Loan Payments and other payments due under the Loan Agreement.

Future Unionization of Academy Workforce

As of the date of this Limited Offering Memorandum, the workforce of the School is not unionized and the School is not aware of any active unionization efforts with respect to its employees. There are currently several charter schools in the State who have union teachers. In the event that the labor relations of the School and its employees change in the future and, if the employees of the School were to vote to unionize, then the operational costs of the School would likely rise, and such increase could be significant. If the employees of the School were to unionize, no assurance could be given that such change would not adversely affect the operational costs of the School.

Academic Performance

On August 20, 2013, the United States Department of Education granted a waiver to the Commonwealth from certain requirements of the federal No Child Left Behind Act of 2001 (“NCLB”), including the Adequate Yearly Progress (“AYP”) requirement. In 2012, the last year AYP was measured in the Commonwealth, the School made AYP. On September 8, 2015, the United States Department of Education renewed the Commonwealth’s waiver from certain requirements of the NCLB through the 2017-18 school year, including the AYP requirement. While the waiver is in effect, Title I schools in the Commonwealth (schools with high numbers or high percentages of children from low-income families that are able to receive federal financial assistance under Title I, Part A of the Elementary and Secondary Education Act, as amended), including the School, will be graded on four Annual Measurable Objectives (“AMO”). Based on a school’s success on the AMOs, schools will be rated “Reward”, “Focus”, or “Priority”. Schools in the “Focus” and “Priority” categories will be subject to corrective action. In 2013-14, the School was designated a “Focus” school, because it failed to make its AMOs in closing the achievement gap for all students and closing the achievement gap for historically underperforming students. The failure to make AMOs was the result of curriculum misalignment due to the changes in the state standards. When the Commonwealth adopted Pennsylvania Core Standards it created a gap in the curriculum and instructional resources the students had access to. Since the adoption of the Pennsylvania Core Standards the School has worked diligently to eliminate the gap identified in the curriculum and instructional materials to address the achievement gap that exists in the school.

In addition to the AMO grading system during the NCLB waiver period, all public schools in the Commonwealth will receive a School Performance Profile (“SPP”) score based on 100 points. This score will be considered the school’s academic performance score, and while not the criteria for determination of “Reward,” “Priority” or “Focus” status, it details student performance through scoring of multiple measures that define achievement. The SPP also includes supports to permit schools to access materials and resources to improve in defined areas related to achievement. The School received a score of 66.6/100 in 2012-13, 65.5/100 in 2013-14 and 46.0/100 in 2015-16. A score was not made available for the 2014-15 school year. The School Performance Profile score and the NCLB waiver are intended to strengthen requirements for Commonwealth assessments, accountability systems (such as the AMO grading system), and local support for school improvement. NCLB and the waiver also establish minimum qualifications for teachers and paraprofessionals.

In the event the School fails to meet the requirements of the waiver and the AMO and SPP grading and scoring system (or, if the waiver is terminated or not extended and AYP requirements return), poor academic performance or other non-compliance of the School may have a material adverse effect on the School, its Charter and its ability to make Loan Payments and other payments due under the Loan Agreement. The Charter also includes minimum requirements regarding academic performance standards. See “RISK FACTORS – Termination, Revocation or Non-Renewal of Charter” herein.

The School District also developed the SPR which scores and ranks the School and other schools in the School District in order to provide families and communities with information on the progress of schools towards City-wide educational goals. For a more detailed description of NCLB, AYP, AMOs, SPP and SPR, including efforts of the School to improve academic performance, see “Academic Performance” in “APPENDIX A – HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL” hereto.

No Taxing Authority

The School is a Commonwealth charter school and has no taxing power. The School does not possess the ability to assess ad valorem taxes now or in the future. As such, the School is completely dependent upon per-pupil revenues from the School District as well as Commonwealth and federal grants and other payments to pay amounts due under the Loan Agreement. Any event that would delay, reduce or eliminate funding from the School District, the Commonwealth, or the federal government would have a material adverse effect on the ability of the School to make Loan Payments and other payments under the Loan Agreement coming due thereafter. See “RISK FACTORS – Termination, Revocation or Non-Renewal of Charter” and “ – Delay in, Reduction or Termination of Educational Funding” herein.

Legislative and Nonappropriation Risk

Even though the Commonwealth is obligated under the Constitution of the Commonwealth to provide for the “maintenance and support of a thorough and efficient system of public education” in the Commonwealth, the Commonwealth is not obligated to continue to support public education via charter schools, to provide funds for public education in any specific amount, or to continue to provide a formula of per-pupil aid payable from local school districts similar to the formula currently in place. Any change in the Constitution of the Commonwealth, the Charter School Law or failure by the legislature of the Commonwealth to appropriate funds sufficient to fund the operation of charter schools or require per-pupil funding in an amount sufficient to fund the operation of charter schools could have a material adverse effect on the ability of the School to make Loan Payments and other payments under the Loan Agreement coming due thereafter.

Any event that would cause a delay, reduction or elimination of the per-pupil payments from the School District or other grants or payments from the Commonwealth or federal government would have a material adverse effect on the ability of the School to make any payments due under the Loan Agreement coming due thereafter. See “RISK FACTORS – Delay in, Reduction or Termination of Educational Funding” herein.

Results of a Termination of the Loan Agreement

In the event that the School should not generate revenues sufficient to pay amounts due under the Loan Agreement, an event of default will have occurred and the School’s indebtedness under the Loan Agreement may be accelerated and the Mortgage foreclosed by the Trustee.

A potential purchaser of the Series 2017 Bonds should not assume that it will be possible to obtain proceeds from the foreclosure of the Mortgage and the sale of the Facilities after a termination of the Loan Agreement and a foreclosure of the Mortgage, for an amount equal to the aggregate principal amount of the Series 2017 Bonds then outstanding plus accrued interest thereon. If the Facilities are sold pursuant to a foreclosure sale under the Mortgage (and there is no assurance that there would be any purchaser upon a foreclosure sale) for an amount less than the aggregate principal amount of and accrued interest on the Series 2017 Bonds, such partial payment may be the only payment to the Bondholders; upon such partial payment, no holder of any Series 2017 Bond shall have any further claim for payment from the Trustee, other than claims arising from the School’s pledges under the bond documents.

Resale of Series 2017 Bonds/Lack of Secondary Market

There can be no assurance that there will be a secondary market for the Series 2017 Bonds. There is no public market for the Series 2017 Bonds and none is expected to develop in the future. Therefore, investors should be aware that they might be required to bear the financial risks of an investment in the Series 2017 Bonds for an indefinite period of time. The Series 2017 Bonds should therefore be considered long-term investments in which funds are committed to maturity. THE SERIES 2017 BONDS SHOULD NOT BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A PERSON WHOM SUCH OFFEROR, SELLER, PLEDGOR OR OTHER PUTATIVE TRANSFEROR REASONABLY BELIEVES IS AN “ACCREDITED INVESTOR” OR “QUALIFIED INSTITUTIONAL BUYER” AS DESCRIBED HEREINABOVE.

Remedies May be Unenforceable

Remedies provided for in the Loan Agreement, the Mortgage and the Indenture may be unenforceable as a result of the application of principles of equity or of state and federal laws relating to bankruptcy, other forms of debtor relief, and creditors’ rights generally. Furthermore, it is not certain whether a court would permit the exercise of the remedies of repossession and sale or leasing with respect thereto. The enforcement of any remedies provided in the Loan Agreement, the Mortgage and the Indenture could prove both expensive and time consuming.

Bankruptcy proceedings by the School also could have adverse effects on the holders of the Series 2017 Bonds, including (a) delay in the enforcement of their remedies, (b) subordination of their claims to claims of those supplying goods and services to the School after initiation of bankruptcy proceedings and to the administrative expenses of bankruptcy proceedings, and (c) imposition without their consent of a plan of reorganization reducing or delaying payment of Series 2017 Bonds. The United States Bankruptcy Code (the “Bankruptcy Code”) contains provisions intended to ensure that, in any plan of reorganization not accepted by a least a majority of any class of secured creditors such as the holders of the Series 2017 Bonds, such class of creditors are treated fairly. The plan may, however, alter a secured creditor’s rights. Specifically, the Bankruptcy Code provides that debtors have three choices with respect to secured creditors: (i) the debtor may keep the collateral so long as the plan provides that the creditor retains its lien and receives payments equal to the present value of the secured claim; (ii) the debtor may surrender the collateral or its equivalent to the secured creditor, or (iii) the debtor can sell the collateral and use the proceeds to pay off the secured claim. To the extent that the collateral is not sufficient to secure the payment of the secured debt, the secured creditor is entitled to an unsecured claim for the deficiency. Like all aspects of the bankruptcy process, however, the ultimate result in any particular case may be affected significantly by judicial interpretation of the specific facts and circumstances of the case.

Collateral Insufficiency

In the event of a default under the Indenture or the Loan Agreement, the indebtedness thereunder may be accelerated and the Mortgage foreclosed by the Trustee. A potential purchaser of the Series 2017 Bonds should not assume that it will be possible to obtain proceeds from the foreclosure of the Mortgage and the sale of the Facilities or from the sale of personal property secured by the Mortgage after a foreclosure of the Mortgage, for an amount equal to the aggregate principal amount of the Series 2017 Bonds then outstanding plus accrued interest thereon. There are encumbrances on the Facilities, including a communication easement granting access rights and rights to maintain and construct communication equipment at the Facilities, which run with the land and may not be removed. Such risks include environmental matters, fire and other casualty, condemnation, increased taxes, changes in demand for the facilities, decline in local and general economic conditions and changing governmental regulations. If the Facilities are sold pursuant to a foreclosure sale under the Mortgage (and there is no assurance that there

would be any purchaser upon a foreclosure sale) for an amount less than the aggregate principal amount of and accrued interest on the Series 2017 Bonds, such partial payment may be the only payment to the Bondholders; upon such partial payment, no holder of any Series 2017 Bond shall have any further claim for payment from the Trustee, other than claims arising from the School’s pledge of revenues under the bond documents.

Limited Nature of Real Estate Appraisal

The Institute and the School have executed an Agreement of Sale dated August 17, 2016, to sell the Facilities to the School for $4,200,000. At the request of the School, an appraisal report, dated [______], 2017 (the “Appraisal”), was prepared by Cushman & Wakefield (the “Appraiser”). The School is using the Appraisal to inform its internal deliberations about the financing of the purchase price for the Facilities. The Appraisal evaluated the value of the Facilities as of its date and concluded that the “as-is” market value of the Facilities, under market conditions as of the date of the Appraisal, was $[______], as compared to a valuation of $3,600,000 set forth in the now superseded appraisal previously obtained by the School. Reference is made to the full Appraisal for the assumptions and basis on which such valuations were made. Copies of the Appraisal will be available from the Underwriter prior to the pricing and sale of the Series 2017 Bonds and from the Trustee following issuance of the Series 2017 Bonds. To the extent, if any, that the appraised value of the Facilities is less than $4,200,000, the difference will be financed with federally taxable bonds.

The value of the Facilities as indicated in the Appraisal is only the opinion of the Appraiser at the time that the Appraisal was completed. The actual value of the Facilities in the future will vary from conclusions in the Appraisal, which variance may be material and adverse. In the event of a foreclosure of the Mortgage, the value of the Facilities in such event cannot be determined and may be substantially less than the value indicated in the Appraisal. The Facilities, like other such buildings, require ongoing capital repairs and improvements to maintain their value and, although the School intends to maintain the Facilities in good condition and a Repair and Replacement Fund will be established pursuant to the Indenture, no assurance can be given that the School will have sufficient revenue to be able to maintain a regular capital improvements program for the Facilities in the future. See also “RISK FACTORS – Collateral Insufficiency” herein.

Inability to Liquidate or Delay in Liquidating the Facilities

An event of default that has occurred and is continuing gives the Trustee the right of possession of, and the right to sell, the Facilities pursuant to a foreclosure sale under the Mortgage. The Facilities are intended to be used for the public school purposes of the School and may not be readily adaptable to other uses. As a result, in the event of a sale of the Facilities, the number of uses that could be made of the property, and the number of entities that would be interested in purchasing the Facilities, could be limited, and the sale price would be thus affected. The location of the Facilities may also limit the number of potential purchasers. A potential purchaser of the Series 2017 Bonds should not anticipate that a sale of the Facilities could be accomplished rapidly, or at all, and no assurance can be made that the amount realized upon any sale of the Facilities would be fully sufficient to pay and discharge the Series 2017 Bonds. In particular, there can be no representation that the cost of the property included in the Facilities constitutes a realizable amount upon any forced sale thereof. Any sale of the Facilities would require compliance with the laws of the Commonwealth. Such compliance may be difficult, time-consuming and/or expensive. In the event the Trustee took possession of the Facilities, the Facilities might be subject to real estate taxation. Any delays in the ability of the Trustee to foreclose on the Mortgage would result in delays in the payment of the Series 2017 Bonds. See also “RISK FACTORS – Collateral Insufficiency” for risks relating to existing encumbrances.

Damage or Destruction of the Facilities

The Loan Agreement requires that the School’s property be insured against certain risks in certain amounts. There can be no assurance that the amount of insurance required to be obtained will be adequate or that the cause of any damage or destruction will be as a result of an insured risk. Further, there can be no assurance of the creditworthiness of the insurance companies from which the School will obtain the required insurance policies.

Future Need for the Facilities

Changes in economic, social or other conditions could affect demographics of the School and reduce the School’s ability, need or willingness to utilize the Facilities. Although the School must comply with an additional bonds test should it seek to finance facilities on parity with the Series 2017 Bonds, the School is not legally prohibited from construction of additional facilities at any time. Changes in future needs may have an adverse effect upon the willingness and ability of the School to budget money to pay its obligations under the Loan Agreement.

Determination of Taxability

If a Determination of Taxability were to occur, the Series 2017A Bonds would be subject to mandatory redemption, as a whole and not in part, at a redemption price equal to 103% of the principal amount thereof plus accrued interest to the date fixed for redemption, on the earliest practicable date selected by the Trustee, after consultation with the School, but in no event later than six months following the Determination of Taxability. Although the School would be required to prepay the Series 2017A Bonds as set forth in the Indenture, there can be no assurance that the School will possess the ability to make the required payment. See “THE SERIES 2017 BONDS – Redemption of Series 2017 Bonds Prior to Maturity – Mandatory Redemption Upon Determination of Taxability” herein.

Tax Exempt Status; IRS Audit

The tax exempt status of interest on the Series 2017A Bonds depends, among other things, upon maintenance by the School of its status as an organization described in Section 501(c)(3) of the Code. The maintenance of such status is contingent on compliance with general rules based on the Code, Treasury regulations and judicial decisions regarding the organization and operation of schools.

The School was audited by the IRS in 2011 for the tax years 2008-2009 for the misclassification of independent contractors and failure to timely file IRS Form 1099s. Further, the School failed to file the IRS Form 990 tax return for 2010 and 2014 by the due date.

The School could be subject to further scrutiny by the IRS. If the IRS were to find that the School has participated in activities in violation of certain regulations or rulings, the tax-exempt status of the School could be in jeopardy. Loss of tax-exempt status by the School potentially could result in loss of tax exemption of the Series 2017A Bonds and defaults in covenants regarding the Series 2017A Bonds likely would be triggered. Loss of tax- exempt status could also result in substantial tax liabilities on income of the School. For these reasons, loss of tax- exempt status of the School could have a material adverse effect on the financial condition and results of operations of the School. In addition, loss of tax-exempt status of the School could trigger a Determination of Taxability which, in turn, would cause a Determination of Taxability and subject the Series 2017A Bonds to mandatory redemption. See “THE SERIES 2017 BONDS – Redemption of Series 2017 Bonds Prior to Maturity – Mandatory Redemption Upon Determination of Taxability” herein.

Prepayment Risk

Under the Loan Agreement, on any business day on and after [______] 1, 20[__]*, the School has the option to prepay a portion of the Loan at a price equal to the principal amount of the Series 2017A Bonds to be redeemed plus accrued interest to the date of redemption and redemption premium, if any. In addition, the Series 2017 Bonds are subject to mandatory and extraordinary redemption as described in “THE BONDS – Redemption of Series 2017 Bonds Prior to Maturity” herein. Any such prepayment will be used to call Series 2017 Bonds ratably without preference among all Series 2017 Bonds then outstanding at a price equal to the amount of the principal of the Series 2017 Bonds to be redeemed plus accrued interest to the date of prepayment.

Value of Property May Fluctuate

The value of the Facilities at any given time will be directly affected by market and financial conditions which are not in the control of the parties involved in the transaction. Real property values can fluctuate

* Preliminary; subject to change.

substantially depending in large part on the state of the economy. There is nothing associated with the Facilities which would suggest that its value would remain stable or would increase if the general values of property in the community were to decline. Furthermore, because the Facilities are limited use buildings, any remedy exercised by the Trustee under the Mortgage could be expensive and time consuming. See “RISK FACTORS – Inability to Liquidate or Delay in Liquidating the Facilities” herein.

Key Management

The creation of, and the philosophy of teaching in, public school academies such as the School initially may reflect the vision and commitment of a few key persons who are on the Board of Trustees and/or who make up the upper management of the School (“Key Directors/Managers”). Loss of such Key Directors/Managers could adversely affect the School’s operations or financial results.

Environmental Regulation

A Phase I Environmental Site Assessment (“ESA”) on the Site was completed on August 29, 2016, by Hydro-environmental Technologies, Inc. (“HETI”). The ESA identified a recognized environmental condition (“REC”) arising from the presence of three underground storage tanks (“USTs”) which were removed or believed to be removed from 1989 to 1991. No post-removal assessment of soil groundwater quality was documented. The ESA noted a threat of release of oil or hazardous materials to the environment from the USTs. Available information does not indicate the presence of contamination, but the records also do not document any post-removal assessments of the USTs. Accordingly, the ESA recommended the performance of a limited subsurface assessment to investigate for the potential presence of petroleum contamination on all three apparent locations of the former USTs. The School engaged HETI to complete a limited subsurface investigation and in a report dated December 19, 2014, HETI found no appreciable contamination associated with USTs or their removal and recommended no further assessment. The ESA also identified a potential environmental concern related to lack of documentation of testing or abatement of asbestos containing materials, specifically in the older portions of the Facilities. Such materials were identified in flooring tiles and flooring adhesives located in the area presently used as the school cafeteria, but the area was extensively renovated in 2005-2006.

There are potential risks relating to environmental liability associated with ownership of or secured lending with respect to real property. When hazardous substances are found on real property, owners or secured lenders may be held liable for costs and other damages relating to such hazardous substances unless they comply with provisions of law designed to provide them with liability protection. The Trustee as mortgagee on behalf of the Bondholders may avoid such liability with respect to the Facilities, if it does not directly participate in the ownership or management of the Facilities.

TAX MATTERS

Federal

Series 2017A Bonds. In the opinion of Kutak Rock LLP, as bond counsel (“Bond Counsel”), under existing laws, regulations, rulings, and judicial decisions, interest on the Series 2017A Bonds is excludible from gross income for federal income tax purposes and is not a specific preference item for purposes of federal alternative minimum tax. The opinions described in the preceding sentence assume the accuracy of certain representations and continuing compliance by the Issuer, the Trustee and the School with certain covenants designed to satisfy the requirements of the Code that must be met subsequent to the issuance of the Series 2017A Bonds. The Issuer, the Trustee, and the School have covenanted to comply with such requirements. Failure to comply with such requirements could cause interest on the Series 2017A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2017A Bonds. Bond Counsel has expressed no opinion regarding other federal tax consequences arising with respect to the Series 2017A Bonds.

Notwithstanding Bond Counsel’s opinion that interest on the Series 2017A Bonds is not a specific preference item for purposes of the federal alternative minimum tax, such interest will be included in adjusted current earnings of certain corporations, and such corporations are required to include in the calculation of alternative minimum taxable income 75% of the excess of such corporations’ adjusted current earnings over their

alternative minimum taxable income (determined without regard to such adjustment and prior to reduction for certain net operating losses).

The accrual or receipt of interest on the Series 2017A Bonds may otherwise affect the federal income tax liability of the owners of the Series 2017A Bonds. The extent of these other tax consequences will depend upon such owner’s particular tax status and other items of income or deduction. Bond Counsel expresses no opinion regarding any such consequences. Purchasers of the Series 2017A Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States of America), property or casualty insurance companies, banks, thrifts or other financial institutions, certain recipients of social security or railroad retirement benefits, taxpayers otherwise entitled to claim the earned income credit, or taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax exempt obligations, should consult their tax advisors as to the tax consequences of purchasing or owning the Series 2017A Bonds.

Series 2017B Bonds. In the opinion of Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Series 2017B Bonds is NOT EXCLUDIBLE from gross income for federal income tax purposes under Section 103 of the Code. Interest on the Series 2017B Bonds will be fully subject to federal income taxation. Thus, owners of the Series 2017B Bonds generally must include interest on the Series 2017B Bonds in gross income for federal income tax purposes.

To ensure compliance with Treasury Circular 230, holders of the Series 2017B Bonds should be aware and are hereby put on notice that: (a) the discussion in this Limited Offering Memorandum with respect to U.S. federal income tax consequences of owning the Series 2017B Bonds is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer; (b) such discussion was written in connection with the promotion or marketing (within the meaning of Treasury Circular 230) of the transactions or matters addressed by such discussion; and (c) each taxpayer should seek advice based on its particular circumstances from an independent tax advisor.

Backup Withholding. As a result of the enactment of the Tax Increase Prevention and Reconciliation Act of 2005, interest on obligations such as the Series 2017 Bonds is subject to information reporting in a manner similar to interest paid on other investment obligations. Backup withholding may be imposed on payments made after March 31, 2007, to any bondholder who fails to provide certain required information including an accurate taxpayer identification number to any person required to collect such information pursuant to Section 6049 of the Code. The new reporting requirement does not in and of itself affect or alter the excludability of interest on the Series 2017A Bonds from gross income for federal income tax purposes or any other federal tax consequence of purchasing, holding or selling obligations such as the Series 2017 Bonds.

State Tax Exemption

In the opinion of Bond Counsel, under the laws of the Commonwealth, as enacted and construed on the date hereof, the Series 2017 Bonds are exempt from personal property taxes in the Commonwealth and interest on the Series 2017 Bonds is exempt from Pennsylvania personal income tax and Pennsylvania corporate net income tax.

Changes in Federal and State Tax Law

From time to time, there are legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to above or adversely affect the market value of the Series 2017 Bonds. An example is the American Jobs Act of 2011 (S. 1549), proposed by the President and introduced in the Senate on September 13, 2011. If enacted as introduced, a provision of S. 1549 would limit the amount of exclusions (including, tax-exempt interest) and deductions available to certain high income taxpayers for taxable years after 2012, and as a result could affect the market price or marketability of the Series 2017 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Series 2017 Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Series 2017 Bonds or the market value thereof would be impacted thereby. Purchasers of the Series 2017 Bonds should consult their tax

advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Series 2017 Bonds and Bond Counsel expresses no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation.

LEGAL MATTERS

Legal matters incident to the authorization, issuance and sale by the Authority of the Series 2017 Bonds will be passed upon by Bond Counsel. The proposed form of opinion of Bond Counsel is attached hereto as APPENDIX E. A copy of the approving opinion of Bond Counsel will be annexed to each of the Series 2017 Bonds. Certain legal matters will be passed upon for the School by Kleinbard LLC, Philadelphia, Pennsylvania, and for the Underwriter by Dorsey & Whitney LLP, Minneapolis, Minnesota, in its capacity as counsel to the Underwriter, and by Zarwin Baum DeVito Kaplan Schaer Toddy P.C., Philadelphia, Pennsylvania, in its capacity as Disclosure Counsel.

The legal opinions to be delivered concurrently with the delivery of the Series 2017 Bonds express the professional judgment of the attorneys rendering the opinions regarding the legal issues expressly addressed herein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of the result indicated by that expression of professional judgment, of the transaction on which the opinion is rendered, or of the future performance of parties to the transaction. The rendering of an opinion does not guarantee the outcome of any legal dispute that may arise out of the transaction.

UNDERWRITING

The Series 2017 Bonds are being purchased by Herbert J. Sims & Co., Inc., Minneapolis, Minnesota, as the underwriter (the “Underwriter”) pursuant to a bond purchase agreement at prices which, if the Series 2017 Bonds are sold at the prices and yields shown on the inside cover page, will result in Underwriter’s compensation of $[______]. The obligation of the Underwriter to accept delivery of the Series 2017 Bonds is subject to various conditions contained in the bond purchase agreement. The bond purchase agreement provides that the Underwriter will purchase all of the Series 2017 Bonds if any are purchased. The Series 2017 Bonds may be offered and sold to certain dealers, banks and others at prices lower than the initial offering prices, and such initial offering prices may be changed from time to time by the Underwriter.

FINANCIAL ADVISOR

National Capital Resources, LLC, Philadelphia, Pennsylvania, registered, as required, with both the SEC and the MSRB as a municipal advisor, has acted as financial advisor to the School.

LIMITED OFFERING OF BONDS

The Series 2017 Bonds have not been registered under the Securities Act, nor has the Indenture been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such acts.

THE SERIES 2017 BONDS ARE BEING OFFERED AND SOLD ONLY TO A LIMITED NUMBER OF SOPHISTICATED INVESTORS AND PURCHASERS WHO ARE “ACCREDITED INVESTORS” OR “QUALIFIED INSTITUTIONAL BUYERS.” SEE “ELIGIBLE INVESTORS” HEREIN.

CERTAIN RELATIONSHIPS AMONG TRANSACTION PARTICIPANTS

Disclosure Counsel previously served as counsel to the Institute on matters unrelated to the issuance of the Series 2017 Bonds, but has not done work for the Institute since 2014.

LEGAL PROCEEDINGS

The School

There is no litigation of any nature pending or, to the knowledge of the School, threatened, against the School to restrain or enjoin the issuance, sale, execution, or delivery of the Series 2017 Bonds or the application of the proceeds thereof toward the costs of the Project, or in any way contesting or affecting the validity of the Series 2017 Bonds or any proceedings of the School taken with respect to the issuance or sale thereof, or the pledge or application of any monies or security for the Series 2017 Bonds or the existence or powers of the School.

Beginning with the 2015-16 school year, the School became a sponsor of the National Food Service Program and the School Breakfast Program (the “Food Programs”). After a May 2016 administrative review of the School as required by federal regulations, the Department discovered the School had claimed more federal funds than it earned pursuant to the Food Programs, which created a fiscal overclaim of $7,197.37. The Department took fiscal action against the School and the School appealed. On September 29, 2016, judgment was entered against the School and the Department was authorized to reclaim the amount at issue. The School recently settled a special education compensatory claim with respect to a claim by the parent of a special education student that the School did not provide the required programming under the Individuals with Disabilities Education Act. The School has settled several other similar special education lawsuits in the past five years, at a cost to the School, after aggregating legal costs and settlement costs, of approximately $335,000. These settlements generally require the School to pay for the special education student to attend another school. The School has liability insurance with a deductible of $10,000 for legal fees to cover litigation expenses, and sets aside a reserve of $150,000 annually for this type of expense.

There is no other litigation pending or, to the knowledge of the School, threatened, against the School, wherein an unfavorable decision would adversely affect the ability of the School to carry out its obligations under the Loan Agreement or the Indenture or would have a material adverse impact on the financial position of the School.

The Authority

There is not now pending or, to the knowledge of the Authority, threatened any litigation restraining or enjoining the issuance or delivery of the Series 2017 Bonds or questioning or affecting the validity of the Series 2017 Bonds or the proceedings or authority under which they are to be issued. Neither the creation, organization nor existence of the Authority, nor the title of any of the present members or other officials of the Authority to their respective offices, is being contested. There is no litigation pending or, to the Authority’s knowledge, threatened which in any manner questions the right of the Authority to enter into the documents to be executed by the Authority in connection with the Series 2017 Bonds or to secure the Series 2017 Bonds in the manner provided in the Indenture or the Enabling Legislation.

CONTINUING DISCLOSURE

The School will execute and deliver a Continuing Disclosure Agreement (the “Continuing Disclosure Agreement”), with respect to the Series 2017 Bonds. The Continuing Disclosure Agreement is made for the benefit of the registered and beneficial owners of the Series 2017 Bonds and in order to assist the Underwriter in complying with its obligations pursuant to Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Continuing Disclosure Rule”). See “APPENDIX F – FORM OF CONTINUING DISCLOSURE AGREEMENT” hereto.

Pursuant to the Continuing Disclosure Agreement, the School will agree to provide, or cause to be provided, annually and quarterly to the Municipal Securities Rulemaking Board (the “MSRB”) certain quantitative financial information and operating data of the type specified in the Continuing Disclosure Agreement (the “Disclosure Information”); and to provide in a timely manner (not in excess of ten (10) business days) to the MSRB notice of the occurrence of certain events and of any failure to timely provide the Disclosure Information. The Continuing Disclosure Agreement does not require that information be provided to all registered owners of the Series 2017 Bonds, but rather requires only that such information be provided to the MSRB.

The Continuing Disclosure Agreement provides that failure of the School or the Dissemination Agent (as defined in the Continuing Disclosure Agreement) to comply with any of its provisions shall constitute a default thereunder and any party aggrieved thereby, including the owners of the Series 2017 Bonds, may take whatever action at law or in equity may appear necessary or appropriate to enforce performance and observation of any agreement or covenant contained therein. Direct, indirect, consequential and punitive damages shall not be recoverable for any such default and no event of default under the Continuing Disclosure Agreement constitutes a default or an event of default under the Indenture. The School has not previously entered into any undertaking pursuant to the Continuing Disclosure Rule. The School will engage Disclosure Services LLC to assist in the preparation and timely delivery to the Dissemination Agent of required filings under the Continuing Disclosure Agreement.

BONDS NOT A DEBT OF COMMONWEALTH OR ANY POLITICAL SUBDIVISION, OTHER THAN A LIMITED OBLIGATION OF THE AUTHORITY

The Series 2017 Bonds will not constitute or create any debt or debts, liability or liabilities on behalf of the Commonwealth, the City or any political subdivision thereof, other than a limited obligation of the Authority to the extent described herein, nor a loan of the credit of the Commonwealth or a pledge of the faith and credit of the Commonwealth, the City or of any such political subdivision, but will be payable solely from the funds provided therefor. The issuance of Series 2017 Bonds under the Indenture will not directly, indirectly or contingently obligate the Commonwealth, the City, or any political subdivision thereof to levy or to pledge any form of taxation whatever therefor, or to make any appropriation for their payment. The Authority has no taxing power.

NOT RATED

The Series 2017 Bonds have no rating because of the risks associated with an investment in the Series 2017 Bonds. As a result of the foregoing, the Series 2017 Bonds are believed to bear interest at higher rates than would prevail for bonds with comparable maturities and redemption provisions that have investment grade credit ratings. Nevertheless, Series 2017 Bonds should not be purchased by any investor who, because of financial condition, investment policies, or otherwise, does not desire to assume, or have the ability to bear, the risks inherent in an investment in the Series 2017 Bonds.

OTHER DEBT AND FUTURE FINANCINGS

The School has an outstanding balance of $3,486 on a 60-month office equipment lease signed in 2012 in the original amount of $128,460.00. The School makes monthly payments on the operating lease in the amount of $2,141.00. An order for approximately $7,000 was entered against the School on September 29, 2016, with respect to a fiscal claim by the Department. See “LEGAL PROCEEDINGS – The School” herein. The School is also disputing $91,436.27 allegedly owed to the School District. See “RISK FACTORS – Limitation on Enrollment; Payment Dispute” herein. The School may be required to repay approximately 4% of its per pupil revenue previously received from the School District for the 2016-17 school year. See “RISK FACTORS – Sufficiency of Revenues” herein. Other debt of the School, including amounts owed with respect to existing judgment liens will be satisfied with proceeds of the Series 2017 Bonds. See “JUDGMENT LIENS” herein.

At this time the School has no plans for future long-term financing other than issuance of the Series 2017 Bonds.

FINANCIAL STATEMENTS

The financial statements of the School, as of and for the years ended June 30, 2014, 2015 and 2016 included in this Limited Offering Memorandum have been audited by J. Miller & Associates LLC, independent certified public accountants, to the extent and for the periods indicated in their report thereon. The School is not aware of any facts that would make the audited financial statements misleading. See “APPENDIX C – AUDITED FINANCIAL STATEMENTS OF THE SCHOOL FOR FISCAL YEARS ENDING JUNE 30, 2016, 2015, AND 2014” hereto. J. Miller & Associates LLC, has consented to the use of its report in this Limited Offering Memorandum.

MISCELLANEOUS

The Series 2017 Bonds are intended to be exempt securities under the Securities Act, and the offer, sale and delivery of the Series 2017 Bonds does not require registration under the Securities Act or qualification of the Indenture under the Trust Indenture Act of 1939, as amended. The School has agreed that, during the course of the transaction and prior to the sale of the Series 2017 Bonds, potential investors may ask questions of and receive answers from its representatives concerning the terms and conditions of the offering and that potential investors may obtain from it any additional information necessary to verify the accuracy of the information furnished, in each case to the extent it possesses such information or can acquire it without unreasonable effort or expense. Any request for information may be directed to the Underwriter.

The School has furnished the information herein relating to itself. The Authority has furnished the information herein relating to itself. The Underwriter has furnished the information in this Limited Offering Memorandum with respect to the offering prices of the Series 2017 Bonds and the information under the caption “UNDERWRITING.”

All quotations from, and summaries and explanations of, the Loan Agreement, the Indenture, the Mortgage and other documents referred to herein do not purport to be complete, and reference is made to said documents for full and complete statements of their provisions. All references herein to the Series 2017 Bonds are qualified by reference to the definitive forms thereof and the information with respect thereto contained in the Indenture. This Limited Offering Memorandum shall not be construed as constituting an agreement with purchasers of the Series 2017 Bonds. The cover page, introductory statement and the attached appendices are part of this Limited Offering Memorandum. All information contained in this Limited Offering Memorandum, including the appendices, is subject to change and/or correction without notice and neither the delivery of this Limited Offering Memorandum nor any sale made hereunder creates any implication that the information contained herein is complete or accurate in its entirety as of any date after the date hereof or the date as of which any particular information is given, if earlier.

ANY STATEMENTS MADE IN THIS LIMITED OFFERING MEMORANDUM INVOLVING MATTERS OF OPINION OR ASSUMPTIONS OR ESTIMATES, WHETHER OR NOT SO EXPRESSLY STATED, ARE SET FORTH AS SUCH AND NOT AS REPRESENTATIONS OF FACT AND NO REPRESENTATION IS MADE THAT ANY OF THE ESTIMATES OR ASSUMPTIONS WILL BE REALIZED.

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL, INC.

By: Its: Board President

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APPENDIX A HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL

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APPENDIX A1

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL

THE SCHOOL

General

Harambee Institute of Science and Technology Charter School, Inc. (the “School”) is a Pennsylvania nonprofit corporation, a charter school under 24 P.S. §17-1701-A et seq. (the “Charter School Law”), and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”).

The School is governed by a volunteer board of trustees (the "Board”) and operates under a charter contract (the “Charter”) with The School District of Philadelphia (“School District”), its authorizing body, acting by and through the School Reform Commission (“SRC”). The Charter expires June 30, 2021 unless sooner terminated in accordance with the terms of the Charter or the Charter School Law (see discussion below under the caption “THE CHARTER CONTRACT”).

The School is in its twentieth year of operation and currently serves grades K-8. The School attracts a large majority of its students from within a 10-mile radius of the School. At the close of the 2015-16 school year, total enrollment was 532 students. As of February 23, 2017, total enrollment for the 2016-17 school year was 532, with a 2017-18 waitlist of approximately 356 students. The School is authorized to enroll up to 525 School District of Philadelphia students in grades K-8. (See discussion below under the caption “ENROLLMENT”).

Background

The School was one of the first four charter schools in the City of Philadelphia when it was authorized to open in the fall of 1997. Its late founder, John Skief, was determined for the School to instill a sense of identity, purpose and direction in its students, empowering them and their parents to improve the conditions in their community. The idea for the School grew out of a nonprofit launched in 1973 by John Skief and other community leaders called Harambee Institute, Inc. (the “Institute”). The Institute conducted community-based education programs in the 1970s and 1980s. After passage of the Charter School Law in 1997, the Institute submitted a proposal to the School District for the approval and establishment of the School as a charter school under the Charter School Law. Since the Charter School Law at the time did not permit a charter school to borrow to construct a school building, the Institute renovated and leased the facilities to the School under a triple net lease. The Institute currently has no staff and operates solely from fundraising and through the largesse of its board members.

Following the sudden death of John Skief in 2007, the Institute continued under a lack of stewardship, which led to consequences including the loss of its 501(c)(3) status, the misuse of the School's funds and property for personal gain and the eventual separation of the School from the Institute. The School now operates as a separate entity from the Institute, with no common board members, separate legal counsel

1 Information included in Appendix A of this Limited Offering Memorandum was obtained from the School unless otherwise noted.

A-1 and its own 501(c)(3) status. Following the Institute's sale of the Facilities to the School, the School will no longer have any affiliation or contractual arrangements with the Institute.

In 2007, John Skief's son, Masai Skief, was put in the position of Chief Executive Officer (“CEO”) of the School, though he had little administrative experience. In 2007 and 2008, the School's Chief Financial Officer (“CFO”), Rhonda Sharif, was simultaneously employed as CFO and business manager at two other charter schools in addition to the School. During this time, Ms. Sharif was reimbursed $101,587 for unspecified credit card expenses from the School, and spent $52,694 of the School's funds for a staff retreat in Ocean City, Maryland, and directed an aggregate of $7.5 million in construction contracts (from the School and two other charter schools) to a company owned by her husband. In 2010, City Controller Alan Butkovitz prepared a report on concerns with respect to Philadelphia charter schools (the “Butkovitz Report”). Highlighted in the Butkovitz Report with respect to the School were unauthorized payments to Mr. Skief, the information about the Ms. Sharif described above, concerns about a potential overpayment of rent to the Institute, a night club in the basement of the Facilities (as defined herein) that operated on weekends. Subsequent to the Butkovitz Report, Ms. Sharif was terminated, the nightclub was closed, and Mr. Skief pled guilty to two counts of wire fraud. In 2014, Mr. Skief was found to have embezzled $79,000 from the Institute and $9,000 from a scholarship fund. After the embezzlement was discovered, the Board responded by adopting a manual of Finance Policies and Controls establishing a Finance Committee. In April 2014, the School hired as CEO, Sandra Dungee Glenn, the former chairperson of the SRC.

In July 2014, the School undertook a financial review by J. Miller and Associates, its auditor. The review noted concerns with the School's procedures in the areas of cash receipts, cash disbursements, payroll processing and cash management. The review suggested policies and procedures to resolve those concerns, and the School believes that it has implemented those policies and procedures.

On July 11, 2014, an article in the Philadelphia Inquirer reported that the School had since made positive strides: “Butkovitz singled out Harambee Institute of Science and Technology Charter School in West Philadelphia, which he lambasted earlier because a nonprofit that owned the school’s building was operating a nightclub inside on weekends and its chief financial officer was collecting salaries from several charters. A review that Butkovitz’s office began in January 2014 found that the nightclub no longer existed and that the school had cut ties to its former chief financial officer.” A copy of the article and the Butkovitz Report are available from the Underwriter upon request. In October 2014, the City Controller’s Office issued the results of their follow-up review (the “Controller’s Follow-Up”) related to the Butkovitz Report. Selected conditions from the Butkovitz Report were analyzed to ascertain the status of those filings. Specifically, the Controller’s Follow-Up included the review of the following conditions:

• Use of property • Financial transactions • Lease arrangements • Multiple salaries • Related party transactions • Financial disclosure forms

The Controller’s Follow-Up indicated that the School had addressed many of the findings from the Butkovitz Report and took significant actions to correct those conditions. The School has continued to make improvements since 2014. Among the key financial control improvements are: (a) engaging the services of a highly qualified accountant who is on-site on a daily basis, (b) developing a two-tiered approval process for purchases and procurement, (c) improving processes for budget development and

A-2 monitoring, (d) streamlining systems and reporting to be more transparent, efficient and aligned with state reporting, (e) developing monthly closing and reconciliation procedures and (f) developing procedures for vendor engagement and payment management.

Mission Statement

The mission of the School is “Education for Self-Reliance.” The School fulfills its mission through the following objectives: • Instilling identity, purpose and direction in students

• Empowering students to believe they have the power to improve the conditions of the community

• Educating and empowering parents to fulfill their role in the education process

Vision Statement

“The School leaders and West Philadelphia community members who created and have contributed to the development of the School, envision an empowered community that both controls its resources and shapes its major institutions. To that end, determining how our children will be educated and supporting our families is the cornerstone of an empowered community.

In keeping with this vision, the School will dramatically redefine the roles and responsibilities of students, parents, teachers and the community. Citizenship, academic achievement and positive interaction will form the basis for all educational activities and community programs. This model is based on the conviction that when education and service take place in an appropriate cultural environment, an individual begins to accept learning and self-development as a personal responsibility.”

Educational Goals of the School

The specific educational goals of the School are as follows:

1) To provide a cultural-based educational program with an emphasis on science and technology.

2) To provide a system for ongoing teacher, staff and parent development that supports the educational needs of the student body and capitalizes on proven educational innovations.

3) To provide supportive services to students and their families to optimize the learning potential and achievement of each student.

4) To create and promote a cultural-based value system where students develop self-respect, self-reliance, citizenship, positive communication and problem-solving skills.

5) To create an educational environment in which students, teachers, parents and the community are viewed as equal partners in the process of learning.

6) To create a charter school that can serve as a hub for community activities including education, recreation, health, social services, and the arts.

A-3 Education Program and Teaching Methods

The School is a cultural-based model, designed to reshape the science and technology experiences of children in grades K-8. Within this learning environment, students will learn values, self-discipline, communication, problem-solving, and citizenship, as well as language arts, science, and mathematics. Furthermore, the curriculum will be taught by utilizing a thematic approach.

The educational process will encompass three broad phases: (a) didactic, (b) dialogic examination and analysis, and (c) synthesis and application. Each phase will contain corresponding strategies, content, and cognitive objectives.

The introduction of culture, taught using a thematic approach, allows students to connect with their African heritage, thereby creating a pedagogical frame of reference that is based in the child’s culture. Consequently, student learning is enhanced when the students can see a cultural/historical continuum as the students move through the phases of didactic content, analysis, synthesis, and application. The interaction between the teacher and student is characterized by a reciprocity that occasions intellectual discovery and development for all learning partners.

Parental Involvement / Parent Teacher Association at the School

Attendance at parent-teacher conferences was 75% in 2012-2013 and 80% in 2013-2014. The School’s parent population is actively involved in the Harambee Parent Association (“HPA”), which provides volunteers and funding to support school activities. During the monthly meetings, parents engage with a variety of subjects that promote positive involvement. These meetings are designed to provide a bridge that connects parent and school in the road to open and effective communication. The Harambee After School Academy hosts monthly meetings with parents and engages parents in surveys and focus groups to gather input from parents. Among the events of HPA for the last year were: Backpacks for Success School Supply Drive; The Fall Fundraiser; Family Fun Night; and Umjoa Karamu Festival.

Student and Community Demographics

Philadelphia, with a population of approximately 1,553,165, is the largest city in the Commonwealth of Pennsylvania.2 Founded in 1682 as the capital of Pennsylvania Colony, Philadelphia has historically served as a center of shipping, industry and railroads. Median household income in Philadelphia as of 2012 was $37,016, with 26.2% of the population living below the poverty line.2

Approximately 100% of the School’s students are African American and live in the City of Philadelphia. Approximately 60.2% are economically disadvantaged.

CURRICULUM

The School’s academic program is for students in grades K-8. The school design uses science and technology as cornerstones of learning. Within this technological and culturally enriched environment, students are exposed to learning that promotes self-discipline, citizenship, and problem-solving. The Pennsylvania Academic and Common Core Standards guide the ongoing development of the School’s curriculum.

2 Source: U.S. Census Bureau

A-4 There are two key principles infused throughout the School’s curriculum: Nguzo Saba and the Rule of Ma’at. Developed in 1965 by Dr. Ron Kaurenga, Ph.D., the Nguzo Saba was developed and proposed during the Black Cultural Revolution in the 1960s as a necessary minimum set of principles by which African-American people must live in order to begin to rescue and reconstruct their history and their lives. The Nguzo Saba, at the core of the annual Kwanzaa celebration, are social principles dealing with ways to relate to each other and to rebuild our lives in our own image. The principles of the Nguzo Saba are:

1. Umoja – Unity. To strive for and maintain unity in the family, community, nation, and race.

2. Kujichagulia - Self Determination. To define ourselves, name ourselves, and speak for ourselves instead of being defined and spoken for by others.

3. Ujima – Collective Work and Responsibility. To build and maintain our community together; to make our brothers’ and sisters’ problems our problems and to solve them together.

4. Ujamaa – Cooperative Economics. To build and maintain our own stores, shops, and other businesses and to profit together from them.

5. Nia – Purpose. To make as our collective vocation the building and development of our community in order to restore our people to their traditional greatness.

6. Kuumba – Creativity. To do always as much as we can in the way that we can in order to leave our community more beautiful and beneficial than we inherited it.

7. Imani – Faith. To believe with all our hearts in our parents, our teachers, our leaders, our people and the righteousness and victory of our struggle.

Ma’at was the ancient Egyptian concept of order, morality and justice which was deified as a goddess. Ma’at was seen as being charged with regulating the stars, seasons, and the actions of both mortals and the deities, after she had set the order of the universe from chaos at the moment of creation. The School encourages its students, teachers and parents to demonstrate many of the general Rules of Ma’at as another way to improve the conditions of our community.

These rules include:

• TRUTH: I will always seek to know what is correct and I will not lie or speak falsely of my family or my race.

• JUSTICE: I will always be fair in what I do and I will not cheat myself, my family or my race.

• RIGHTEOUSNESS: I will always be correct in what I do and I will not allow others to influence me to do wrong to myself, my family or my race.

• ORDER: I will respect the natural order of the universe and I will not separate myself from that which gives order to myself, my family or my race.

• BALANCE: I will strive to understand and respect the need to be complimentary and I will not be in conflict with myself, my family or my race.

A-5 • HARMONY: I will always be in rhythm with what is good and I will never be in opposition to what is good for me, my family or my race.

• RECIPROCITY: I will always strive to do the proper thing at the right time and I will not bring shame to myself, my family or my race.

Science

The School’s Science curriculum aligns the Pennsylvania Common Core Standards with the Next Generation Science Standards (the “NGSS”). The NGSS are based on the Framework for K–12 Science Education developed by the National Research Council.

• Science concepts will build coherently across K-12. The emphasis of the NGSS is a focused and coherent progression of knowledge from grade band to grade band, allowing for a dynamic process of building knowledge throughout a student’s entire K-12 scientific education.

• The NGSS focus on a smaller set of disciplinary core ideas that all students should know by the time they graduate from high school – focus involving deeper understanding and application of content than the often fact-driven standards currently in use in states and districts.

Key Milestones in the Development of the Next Generation Science Standards

Science and engineering are integrated into science education by raising engineering design to the same level as scientific inquiry in science classroom instruction at all levels, and by emphasizing the core ideas of engineering and technology.

The NGSS coordinate with English language arts and Mathematics Common Core State Standards. This allows an opportunity both for science to be a part of a child’s comprehensive education as well as ensuring an aligned pace of learning in all content areas. The three sets of standards overlap in meaningful and substantive ways.

Social Studies/Cultural Awareness Curriculum

The Social Studies/Cultural Awareness Curriculum will address the ten strands that form the framework of the Social Studies standards. They are as follows:

• Culture (Ritual and Routines of Child)

• Time, Continuity and Change

• People, Places, and Environment (Nationhood/Community)

• Individual Development and identity (Family/Nationbuilding)

• Individuals, Groups, and Institutions (Family/Nationbuilding)

• Power, Authority, and Governance

• Production, Distribution, and Consumption

A-6 • Science, Technology, and Society

• Global Connections (Nation-state/Community)

• Civic Ideals and Practices

• The Social Studies/Cultural Awareness Curriculum will provide a coordinated, systematic study drawing upon such disciplines as anthropology, archaeology, economics, geography, history, law, philosophy, political science, psychology, sociology and religion as well as appropriate content from the humanities, mathematics, and natural science. The Nguzo Saba and the Principles of Ma’at will be incorporated and applied through classroom and community projects and presentations. Students should be able to relate to curriculum through real-life experience and apply what is learned locally, nationally and globally.

• The four thematic topics to be addressed are: Origins, Family and Communities; Civil Rights; Science and Technology and Images in the Media.

Reading and Language Arts

The School’s Reading English Language Arts program follows the balanced literacy approach, incorporating all the major components necessary for reading and writing acquisition. Included are reading, writing, listening, speaking, and viewing through an Afrocentric scope and technology infusion. The balanced literacy program uses read aloud (modeled reading), shared reading, guided reading, and independent reading to foster reading independence.

Similarly, the School uses modeled writing (interactive writing), shared writing, guided writing, and independent writing to foster writing independence. The balanced literacy approach allows the School to provide various instructional strategies, in whole groups and small groups, with a variety of texts to improve phonological and phonemic awareness, decoding and phonics, vocabulary, fluency, and comprehension. Teachers use a variety of assessment tools to scaffold lessons and understand individual students’ needs. Some of the formal and informal assessment tools employed are: Illuminate Benchmark Assessment System, STAR 360 Assessment System, early literacy assessments, teacher observations, writing samples, and teacher created tests/quizzes.

Mathematics

In 2016, the School adopted Engage NY Mathematics as its primary mathematics program. This program was created to meet the shifts outlined in the Common Core Math Standards and teach students how to become mathematical thinkers. It is based strongly in number sense and creating models to represent thinking.

Health

The Health curriculum focuses on overall healthy habits (cleanliness, grooming, etc.), understanding of the various body parts and their functions, the importance of exercise to the body and the importance of healthy eating habits. There is a discussion of various illnesses and diseases and exposure to unhealthy habits (drugs, alcohol, etc.).

A-7 Physical Development

The Physical Development curriculum focuses on movement and strength building and engaging students in activities that promote fair play, teamwork and healthy habits through exercise.

Art

The Art curriculum focuses on integrating aesthetics and art history in an engaging, creative, and imaginative environment, students being active participants in all areas of artistic expression, utilizing their creativity, and students gaining appreciation of various Arts forms and artists through study and exposure.

Music

The Music curriculum focuses on a strong foundation in music history, knowledge and technical skills of music performance, demonstrating an understanding of the components of artistic performance, understanding elements of music, such as melody, harmony, rhythm, and pitch, as they are used in musical composition, analysis and performance, demonstrating an understanding of the roles and signs of music in various cultures and historical periods and utilizing musical knowledge and skills.

ACADEMIC IMPROVEMENT PLAN

In May 2015, the Board, the CEO, and other School stakeholders (including the HPA) completed a leadership reorganization that included the recruitment of a strong Principal/Instructional Leader (the "Principal"), Ms. Tennille Peeler. Ms. Peeler is an instructional leader who can re-design and grow the School academically by focusing on the development of staff, teachers, and most, importantly children. Her strong analytical capabilities, excellent project management skills, and great eye for detail are core qualities needed to lead a school and drive its vision of academic, social and emotional excellence. Through her various leadership roles, she has a proven track record of working across diverse sets of stakeholders. Ms. Peeler has successfully implemented data talks to set goals and drive results; creating strategic processes and systems to ensure that district targets were met to improve student outcomes

In 2015, the School redesigned its leadership structure. The CEO's direct reports now include the Principal for Curricular and Instructional Leadership with Ms. Peeler’s role including recruitment, leadership and development of a team of highly qualified, effective educators; supervise instructional methods; provide curricular and instructional leadership in the development, implementation, coordination, and assessment of the academic program to improve student achievement and meet student, school and state goals; plan, implement and refine professional development, aligned with school-wide, and/or individual classroom, priorities, to enhance the ability of teachers to meet the needs of students; and use school, teacher, and student level data to drive programmatic decisions.

Recruitment and Development: The 2015-16 contracts included a new teacher job description that clarified the goals and desired outcomes for teachers. An organization-wide compensation schedule and evaluation system was adopted by the Board in May 2015 that creates a fair, equitable, competitive, compensation structure and defines the process by which all employees are evaluated on an annual basis. Implementation of the new job description, evaluation system, and compensation structure resulted in the turnover of 10 staff members for the 2015-16 school year. With these changes, it is the leadership’s goal to attract and retain highly qualified and capable teachers to move the dial on student achievement.

A-8 With all of the changes noted above, currently at the School, 83% of the teaching staff are Highly Qualified Teachers ("HQT"). Knowing that the HQT expectation is entirely based on Commonwealth legislation and the School District's requirements, the School has developed certification plans for noncertified staff. These plans outline the details and timeline of each noncertified teacher’s pathway to becoming HQT. Staff members are aware that if there is failure to acquire compliant certification will result in termination of employment at the School. All certification plans are on file with the Principal and CEO and available for review.

Dimensions Proposed for Improving Instructional Leadership: The School will adapt the Danielson rubric. The School District, most other school districts in Pennsylvania and numerous charter schools utilize versions of Danielson. The Danielson’s rubric is available from the Pennsylvania Department of Education Standards Aligned System (SAS) website. The rubric delineates from Domains into reflective Components and further into the Elements that clearly define the Components that shape each Domain. In addition, through Teachscape ™ (also on SAS), there is a comprehensive and instructive tutorial on the use of the Danielson instrument, including videos, etc. The Pennsylvania Training and Technical Assistance Network offers free training sessions and many webinars for implementing Danielson. In addition, contained with the Department of Education's SAS’s Teacher Tools offers a plethora of courses anchored in Danielson’s work as well as in customized work such as Project-based Learning. These courses are online and Act 48 accredited. They will be utilized for individual, grade, topical and school- wide professional development. They are available for the school leader as well as the teachers.

Danielson can be used to build coherence between curriculum & assessment. It can zero in on strategic lesson planning and appropriate instructional strategies. It can help teachers develop “rigor.” Danielson can be a treasure for professional development competency needs of individual/groups of teachers, as well as alignment of all features of the educational program. The School will also continue a diligent search to find additional instruments that will support the vision and mission of the school with strong measures of alignment and accountability. The additional instruments can be used in addition to or in place of the Danielson in areas where there are gaps of expectations between the Danielson and the School's expectations.

Common Planning Time and Professional Development: The 2015-16 schedule was reworked so that teachers of the same grade are able to meet together at least twice weekly. The agendas for those common planning time consistently focus on the teaching of common curricular competencies and evaluating student learning using common formative assessments (being adopted currently). Connecting the curricular and assessment process structures will naturally engineer the sharing of effective instructional practices per content, skills and students and groups of students. Data indicating whole class and individual student academic and behavioral improvement will be monitored daily weekly as well by classroom teachers and school leaders. The instructional coach will be included in the monitoring, mentoring and feedback process after they have been trained and calibrated to provide effective feedback. The School's leaders are responsible for monitoring results at the conclusion of a defined unit of study.

The substitute teacher on staff and the specialist teachers are responsible for assisting in helping to create and facilitate a highly structured, outcome-based common planning time using student data as the starting point. The School is also working to provide an enrichment time for students within the same grade. The weekly enrichment time by grade will be guided and supervised by the substitute and specialist teachers, and counselor. The project-centered activities are continually being aligned to curricular competencies. The projects’ emphases are being designed as issue or problem-based, research in high schools and/or career, or service- centered in school and/or community. Parents and external partners will be invited (as appropriate) to engage, in hopes of enhancing the enrichment sessions and making them “real- world” based.

A-9 The School is working on the following “standards” being evident through the 2016-17 school year. These standards for improving are referenced from School Improvement Specialist Field Guide (2013), Deb Page, and each is overarching and applies to every classroom, across grades and school-wide.

1. Analyzing Data and Applying Critical Judgment Regarding Influencing Factors 2. Deriving Meaning and Engagement 3. Identifying Systemic Factors 4. Planning and Documenting 5. Organizing and Managing Efforts and Resources 6. Building Improvement through Collaboration 7. Building Expertise Capacity 8. Demonstrating Organizational Sensitivity 9. Monitoring, Adaptation and Accountability 10. Implementing for Sustainability

School-based data reveals that the following areas are considered high need priorities and are being addressed both through leadership and high quality, ongoing, job-embedded professional development:

1. Fostering a common understanding and a shared vision of the School's mission and goals ensuring equity for all students. 2. Ensuring a firm understanding of expected outcomes with a horizontal and vertical alignment as aligned to Pennsylvania Academic and Common Core Standards. 3. Identifying items for PSSA such as common, summative and formative assessments 4. Sharpening content and skill expertise of all teachers. 5. Implementing specific instructional strategies per grade, per differentiation support, per IEP, per ELL need, and per gifted and talented using a MTSS/RtII (multi-tiered systems support, Response to Instruction and Intervention) approach. 6. Monitoring, analyzing and using results of formative assessments to inform instruction. 7. Identifying and directly supporting academically under-performing students using MTSS/RtII. 8. Identifying and directly supporting academically high performing students. 9. Implementing outcome based professional development that is aligned to goals and expectations. 10. Collecting, interpreting, and using multiple data for specific and targeted purposes. 11. Teaching reading and writing as integral in all curricular disciplines with a true understanding of how one informs the other. 12. Using skills and competencies in science and varied technology to interconnect and inter-relate the different curricular areas. 13. Communicating high expectations for all students in academics and conduct through the Nguzo Saba 7 Principles. 14. Owning, relating and improving multiple data (relevant to students, relevant to faculty). 15. Collaborating with colleagues, parents and partners with purpose focused on student progress. Using the Nguzo Saba and Rules of Ma’at as the foundational principles, developing and sustaining a school-wide culture of respect, learning and productivity.

ADMINISTRATION AND STAFFING

The School employs administrators responsible for day-to-day operations and implementation of the educational program of the School.

Sandra Dungee Glenn, Chief Executive Officer. Ms. Dungee Glenn graduated from the Pennsylvania State University in 1978 with a Bachelor of Science degree in Health Planning and Administration. In 2000, Ms. Dungee Glenn was appointed to the Board of Education for the School District where she

A-10 served until her appointment as a Commissioner to the SRC. In September 2007, she was appointed Chair of the SRC. In 2009, following her tenure on the SRC, she was appointed to the Pennsylvania State Board of Education. In 2011, she was appointed to the U.S. Department of Education’s Excellence and Equity Commission.

Ms. Dungee Glenn’s experience in political and community organizing is also broad and deep. She served as Associate Director with the Philadelphia Area Project on Occupational Safety and Health and as Regional Director of Pennsylvania Citizen Action. She played leadership roles in local, state, and national elections from 1983 to 2001. Ms. Dungee Glenn was Pennsylvania State Director with the NAACP National Voter Fund, leading a statewide non-partisan voter mobilization campaign, and from 1991 to 1994 she served as Chief of Staff to then State Senator Chaka Fattah. As President of the American Cities Foundation (“ACF”), she manages ACF’s role as convener of national and local public policy forums with policy makers, educators, researchers, funders, business and community leaders. The nearly $10 million ACF raised over the years resulted in 10 major local initiatives, as well as several national and regional meetings and conferences.

Ms. Dungee Glenn’s career spans over 30 years in public policy, electoral politics, education, and community organizing. She is particularly skilled at creating public engagement strategies, managing political and institutional relationships, and shaping and managing public perception. She is a sought- after panelist and Keynote Speaker having addressed such audiences as the Congressional Black Caucus, Urban League, Environmental Protection Agency, National Science Foundation, Pennsylvania Association of Colleges of Teacher Education, Pennsylvania Economy League, School District, Philadelphia Alliance of Black School Educators, and other organizations. She is the recipient of numerous awards including the 2003 Leon J. Obermayer Distinguished Graduate Award; the Arts & Entertainment Network 2002 Biography Community Heroes Award; Women Making a Difference Award, 2001; the National Coalition of 100 Black Women, Inc., Pennsylvania Chapter Women of the Year Award; Rebuilding Together Good Neighbor Community Service Award; the Robert Wood Johnson Urban Health Initiative Fellowship in 2003; and recognition by the Philadelphia Tribune as a Most Influential African-American for the three consecutive years of 2007, 2008, and 2009.

Michelle Thornton, External Chief Financial Officer. As Managing Member of the Thornton Group, Michelle Thornton has over 20 years of experience in tax, accounting, and business management services. She earned a Bachelor of Science degree in Business Administration with a concentration in Finance from Drexel University. She also holds a certificate from Harvard Graduate School of Education for Educational Leadership. Within the past 15 years, the Thornton Group has serviced clients over a broad range of industries including education, sports, and a variety of profit and non-profit organizations.

Tennille Peeler, Principal. Prior to becoming Principal of the School, Tennille Peeler served as the Director of Educator Effectiveness/Race to the Top for the School District of Philadelphia. Ms. Peeler previously served the School District of Philadelphia in various other capacities, including curriculum development and implementation of instructional leadership initiatives. She also taught Math and Science for 5 years in a Philadelphia middle school where she development and implemented the first African American and Latino Scholars Program in the school's history and was the chairperson of the school's Equity Council. Ms. Peeler earned a Bachelor of Science Degree in Political Science and Africana Studies from the University of Pittsburgh in 2000 and completed a Masters of Arts in Teaching (MAT) in Elementary Education at the University of Pittsburgh in 2001. Ms. Peeler also earned a Master of Education (M.Ed.) degree and K-12 Principal/Administrative I Certification from Cabrini College in 2010.

A-11 The School employs the following professionals:

Table 1 Teacher Information

Description Number as of 2016-17 Number of teachers 25 Number of teachers who hold a bachelor’s degree 24 Number of special education teachers/paraprofessionals 3 Special Ed. 5 Paraprofessionals Number of classes not taught by highly qualified 7 educators (within the meaning of NCLB) The table below shows the percentage of teachers who return to the School the following year as compared to those who taught at the School in June of the prior year for school years 2014-15 through 2016-17.

Table 2 Teacher Retention Rate

Percent of Teachers Retained 2014-2015 2015-2016 2016-2017 From Prior School Year 86% 67% 73%

THE CHARTER CONTRACT

The School operates under its Charter with the School District, acting by and through the SRC. As the School’s authorizing body, the School District and SRC together are responsible for overseeing the School in complying with its Charter and with applicable Commonwealth and federal laws pertaining to Pennsylvania charter schools. The School’s Charter may be terminated, suspended or revoked by the School District prior to the expiration of the Charter term in the event that the School fails to meet its obligations under the Charter. The School District could also determine not to renew the Charter at its expiration.

For a description of certain risks related to the School and its Charter, and a summary of certain disputes between the School and the School District, see “RISK FACTORS – Termination, Revocation or Non- Renewal of Charter” and "Limitation on Enrollment; Payment Disputes" in the forepart of this Limited Offering Memorandum.

BOARD OF TRUSTEES

The governing body for the School consists of a seven-member Board. Members of the Board may be elected by majority vote of the Board for a four year term. Parent representatives (the President or Co- Presidents of the HPA) also serve on the Board and are re-affirmed each year or when a new President is elected. Board members may be removed by majority vote of the Board for cause. The Board sets policy required to implement Pennsylvania’s public school laws, e.g., educational goals, curriculum, standards of student conduct, and teacher qualifications. The Board also provides oversight and monitoring of all financial matters. Board members represent a wide range of business, professional, and community occupations:

A-12 Name Position Appointed to Board Term Expires Joseph T. Foster, Jr. President 2012 2020 Nina Brevard Secretary 2009 2018 Maurice Baynard, Ph.D. Chair, Education Cmte. 2014 2018 Marirose Roach Board Member 2010 2018 C. Renee Whitby Board Member 2012 2018 Lawrence Bell Treasurer 2014 2018 Crystal Dundas Board Member 2015 2019 Lakiesha Creighton Parent Rep. 2015 2017 Charise Jackson Parent Rep. 2015 2017

Joseph T. Foster, Jr., President. Mr. Foster is a retired teacher and educator with over 40 years of experience in education, both as a teacher and as an administrator, and in curriculum development. Mr. Foster retired from his position as Principal of Imhotep Institute Charter High School in 2012. Mr. Foster joined the Board in 2012. He holds a bachelor’s degree in Secondary Education and a certificate in Secondary Education from Cheyney University, and a master’s degree in Social Administration from Bryn Mawr University.

Nina Brevard, Secretary. Ms. Brevard is currently the Chief Executive Officer at Discovery Charter School in Philadelphia, a post she has held since earlier this year. She is also an adjunct professor at Lincoln University and St. Joseph’s University teaching Reading, Literature, and Education. She holds a B.S. in Elementary Education and a M.S. in Reading from Lincoln University, and a Curriculum and Instruction Supervision Certificate and M.Ed. with Principal Certification from St. Joseph’s University.

Maurice Baynard. Dr. Baynard is the co-founder of edIQ Learning, which provides targeted digital education solutions to underserved schools and individuals. He has a Master’s degree in Cell and Molecular Biology from the Medical College of Pennsylvania and a Ph.D. in Experimental Psychology from the School of Medicine at the University of Pennsylvania. Dr. Baynard has served as a lecturer and adjunct professor at several institutions in the Philadelphia area including Drexel, Pennsylvania State University, the University of the Sciences, and the University of Pennsylvania. He is active in the community, serving as managing director of the Philadelphia Society of Young Professionals, on the boards for the Association for The Advancement and Integration of Design and the Greater Philadelphia Region Louis Stokes Alliance for Minority Participation and as chair of the Mayor's SEPTA Citizen's Advisory Committee.

Marirose Roach. Ms. Roach is an attorney at Roach, Leite & Manyin in Philadelphia, where she practices in the area of Sports and Entertainment Law. She holds a bachelor’s degree and J.D. from Temple University. Ms. Roach was a dual sport Division I athlete at Temple University in track and field and soccer, and is involved in various community activities relating to sports and recreation – she is the founder of FootballHers, an organization created to advance the sport of football amongst young women, and has also played for the Philadelphia Liberty Belles and Keystone Assault, two women’s professional football teams. She is also on the Board of Directors of the Philadelphia Panthers football team.

C. Renee Whitby. Ms. Whitby is a retired educator with 40 years of experience in African-centered education. She was a member of the founding coalition for the School. Ms. Whitby holds a Bachelor’s degree from Temple University with certification in Early Childhood Education. She served as a teacher and administrator at the School from its opening in 1997 until her retirement in 2013. Ms. Whitby joined the Board in 2014.

A-13 Lawrence Bell. Mr. Bell is currently the owner and general manager of a business based in Chery Hill, NJ. From 1999 through 2010 he worked for the University of Pennsylvania where he was responsible for running several of their businesses in additional opportunities for local and minority businesses with the University. Prior to working at the University, Mr. Bell was the President of a non-profit organization known as the West Philadelphia Partnership. Mr. Bell is also the co-founder of the Philadelphia Enterprise Center, a premier business incubator and has an extensive financial background having worked for three Fortune 100 companies in areas such as Budgeting, Internal Audit and Financial Reporting. Mr. Bell attended Central High School in Philadelphia, PA, has a bachelor’s degree in Accounting from Temple University in Philadelphia and earned an MBA in Finance and Entrepreneurial Management from the Wharton School of the University of Pennsylvania. Mr. Bell also serves as Board Chair of Intercultural Family Services Inc., is a member of Omega Psi Phi Fraternity Inc., the Prince Hall Masonic Lodge of Pennsylvania and is a lifetime member of the National Black MBA Association.

Crystal Dundas. Ms. Dundas is the Program and Communications Officer for the Wells Fargo Regional Foundation. In that capacity, Ms. Dundas oversees the Foundation’s communications and media relations and serves as a Program Officer, reviewing grant proposals and making grant recommendations to the board. Ms. Dundas joined the Foundation in 2008 from UBS Financial Services where she served as grant manager for Wealth Management corporate contributions and UBS Foundation USA. Prior to her work at UBS, she spent four years running job readiness and financial literacy programs for youth in the City of Philadelphia. Crystal is the former co-chair of the Steering Committee of Emerging Practitioners in Philanthropy’s (EPIP) Philadelphia chapter. Ms. Dundas holds a Bachelor of Science degree in economics from the University of Pennsylvania’s Wharton School of Business.

Charise Jackson. Ms. Jackson is employed with the Council of Spanish Speaking Organizations of Philadelphia (Concilio) where she recruits, trains and certifies individuals to become foster parents. Ms. Jackson holds a Bachelor of Science degree in Education from Temple University. She is parent to a third grader attending the School.

Kiesha Creighton. Ms. Creighton is a trained nurse and currently a stay at home mother of five children. Ms. Creighton is a parent to two children attending the School.

THE SCHOOL’S FACILITIES AND THE IMPROVEMENTS

The School currently leases and intends to acquire from the Institute the site and facilities located at 630 to 648 N. 66th Street in the City (the “Facilities”), which Facilities were originally the Italian-American Bocce Club. The Facilities are comprised of two buildings totaling 38,260 square feet and have a capacity of approximately 745 students. The original Charter School Law did not permit Commonwealth charter schools to borrow funds to construct school buildings (the Charter School Law was subsequently revised to remove this prohibition), so in 2001, the Institute financed the acquisition and renovation of the Facilities with the intent to lease the space to the School and in 2004, the Institute constructed about $2.3 million worth of additional improvements to the Facilities. The School currently leases the Facilities from the Institute at a cost of $492,000 per year, due in monthly installments of $41,000, payable on or before the first day of each month, with a 10 day grace period. The Institute and the School have executed an Agreement of Sale dated August 17, 2016, to sell the Facilities to the School for $4,200,000. The School has ordered a real estate appraisal report with respect to the Facilities which will be available from the Underwriter prior to the pricing/sale of the Series 2017 Bonds. See “RISK FACTORS – Limited Nature of Real Estate Appraisal” in the forepart of this Official Statement.

A-14 exterior, plumbing and electrical upgrades, classroom fixtures and technology upgrades. Contracts for the Improvements will be bid in accordance with the School’s Internal Control Policies and applicable laws.

For a description of certain environmental risks associated with the Facilities, see “RISK FACTORS – Environmental Regulation” in the forepart of this Limited Offering Memorandum.

EXISTING JUDGMENTS

The School was audited by the IRS in 2011 for tax years 2008-2009 for the misclassification of independent contractors and failure to timely file IRS Form 1099s. The audit resulted in a balance due of an estimated $133,464.53, not including accrued penalties and interest due as a result of not paying taxes when due, and a federal tax lien on the Facilities against the School. All amounts still due with respect to this matter at closing will be paid from proceeds of the Series 2017 Bonds. A default judgment was also entered against the School in the amount of $24,568.11 for nonpayment under a lease with a copier leasing company, which resulted in a lien on the Facilities. The School has been repaying amounts owed to the copier leasing company on a monthly basis. All amounts still due with respect to this matter at closing will be paid from proceeds of the Series 2017 Bonds. Other liens currently filed against the Facilities are against the Institute, as current owner, and will be satisfied by the Institute prior to settlement of the Series 2017 Bonds in order for the School to acquire clean title to the Facilities.

For a more complete description of these and other risks relating to fiscal and operational control issues of the School, see “RISK FACTORS – Fiscal and Operational Control Issues” in the forepart of this Limited Offering Memorandum.

ENROLLMENT

The School began operations in the fall of 1997 offering grades K-8 to 220 students. As of February 23, 2017, total enrollment for the 2016-17 school year was 532, with a 2017-18 waitlist of approximately 356 students.3 The School is authorized under its Charter to enroll up to 525 students in grades K-8. See "RISK FACTORS – Limitation on Enrollment; Payment Disputes" in the forepart of this Limited Offering Memorandum. The following tables set forth data provided by the School regarding its historical and projected enrollment, as well as waitlist data:

3 As of February 23, 2017, total enrollment for the 2016-17 school year was 532. The 2016-17 through 2020-2021 enrollment numbers for all grades are projected and will fluctuate as students are added from the waiting list described in Table 4. The large waitlist numbers are a result of the limitation on enrollment of students in the School District (525 students). See "RISK FACTORS - Limitation on Enrollment; Payment Disputes" in the forepart of this Limited Offering Memorandum.

A-15 Table 3

Historical and Projected Enrollment by Grade

11-12 12-13 13-14 14-15 15-16 16-173 17-183 18-193 19-203 20-213 Kindergarten 40 63 75 57 59 60 56 56 56 56 1st 51 55 81 83 56 54 50 52 52 52 2nd 48 53 53 82 79 52 54 53 54 54 3rd 46 54 54 56 80 79 54 54 54 54 4th 55 55 50 54 55 79 81 54 56 56 5th 53 56 52 52 52 49 81 81 58 58 6th 48 58 56 52 50 55 58 81 81 58 7th 50 51 59 51 52 53 58 58 81 81 8th 46 56 51 55 49 54 53 58 58 81 Total Enrollment 437 501 531 542 532 535 545 547 550 550 Special Education Enrollment4 62 52 46 50 50 60 56 56 56 56

Table 4 Historical Waiting Lists By Grade5

Grade 2012-13 2013-14 2014-15 2015-2016 2016-2017 2017-20186 K 116 242 299 142 183 107 1 45 71 125 73 64 45 2 37 55 61 78 62 43 3 43 28 50 65 46 38 4 35 39 44 48 40 33 5 27 31 33 47 55 31 6 48 27 36 44 54 27 7 28 8 51 31 42 23 8 9 1 11 12 18 9 ______Total 388 502 710 540 564 356

4 Included total enrollment.

5 The School is authorized to enroll up to 525 students in grades K-8. The majority of waitlist students are from school districts other than the School District. The School is required to enroll students first from the School District. See "RISK FACTORS - Limitation on Enrollment; Payment Disputes" in the forepart of this Limited Offering Memorandum

6 As of March 1, 2017.

A-16 Table 5 Retention Rate

2014-15 2015-16 2016-17 No. of No. of No. of Returning Retention Returning Retention Returning Retention Grade Students Rate Students Rate Students Rate Kindergarten returning 68 90.3% 56 98.3% 59 100.0% to 1st 1st returning to 2nd 67 82.6% 70 84.3% 55 98.2% 2nd returning to 3rd 44 83.3% 74 90.2% 77 97.5% 3rd returning to 4th 44 83.6% 47 83.9% 79 98.7% 4th returning to 5th 46 92.2% 47 87.0% 52 94.5% 5th returning to 6th 43 82.7% 43 82.7% 45 86.8% 6th returning to 7th 49 87.5% 48 92.3% 47 94.0% 7th returning to 8th 51 86.4% 47 91.8% 51 98.0%

ACADEMIC PERFORMANCE

The No Child Left Behind Act, AYP, and AMOs

In compliance with the federal No Child Left Behind Act of 2001 (“NCLB”), schools identified for improvement for failing to make Adequate Yearly Progress (“AYP”) for two consecutive years must develop a two-year school improvement plan and submit the plan for review and approval. Schools, including the School, with high numbers or high percentages of children from low-income families are able to receive federal financial assistance under Title I, Part A of the Elementary and Secondary Education Act, as amended (“Title I schools” and “Title I funds”). Title I schools identified for failing to make AYP must also use at least 10 percent of their Title I funds for each of the next two years for professional development that directly addresses the achievement problems that caused the school to be identified for improvement, in addition to certain other requirements. Failure to make AYP for years subsequent to the second year carries further consequences under NCLB. On August 20, 2013, the United States Department of Education granted a waiver to the Commonwealth from certain requirements of NCLB. In 2012, the last year AYP was measured in Pennsylvania, the School made AYP.

On September 8, 2015, the United States Department of Education renewed the Commonwealth’s waiver from certain requirements of NCLB through the 2017-18 school year, including the AYP requirement. While the waiver is in effect, Title I schools in the Commonwealth, including charter schools such as the School, will be graded on four Annual Measurable Objectives (“AMO”). Those AMOs are

(1) Test Participation Rate – To meet this AMO, the School must achieve 95% participation on the PSSA tests and Keystone Exams.

(2) Graduation Rate/Attendance Rate – To meet this AMO, the School must achieve an 85% graduation rate or, if no graduation rate is applicable, an attendance rate of 90% or improvement from the previous year.

(3) Closing the Achievement Gap: All Students – The achievement gap is determined by comparing the percent of students who are proficient or advanced on the PSSA tests, Keystone Exams, or the Pennsylvania Alternate System of Assessment (“PASA”) in a

A-17 baseline year with 100% proficiency. The benchmark for closing the achievement gap is that 50% of the gap will be closed over a six-year period.

(4) Closing the Achievement Gap: Historically Underperforming Students – Using the same approach as for Closing the Achievement Gap: All Students, this AMO applies to a non- duplicated count of students with disabilities, economically disadvantaged students, and English Language Learners enrolled for a full academic year taking the PSSA tests, Keystone Exams or PASA.

Based on a school’s success on the AMOs, schools will be rated “Reward-High Achievement” or “Reward-High Progress” (for high performing schools), “Focus” (for schools in the lowest 10% of Title I schools for achievement gap, for schools with a graduation rate below 60%, or for schools with a test participation rate below 95%), or “Priority” (for schools in the lowest 5 percent of Title I schools or schools receiving school improvement grant funds). Schools in the “Focus” and “Priority” categories will be subject to corrective action. Schools not graded “Reward,” “Focus,” or “Priority” are considered “undesignated schools.” In 2013-14, the School was designated a “Focus” school, because it failed to make its AMOs in closing the achievement gap for all students and closing the achievement gap for historically underperforming students. “Focus” schools are required to review existing school improvement plans and implement meaning full interventions. The School has an Improvement Plan for the 2014 to 2017 school years.

To improve the academic performance of students, the School is implementing a new K-8 curriculum aligned with Pennsylvania Core Standards and Next Generation Science Standards; reorganizing instruction time to engage in school-wide balanced literacy instruction; investing in full-time instructional coaches for literacy and math; reorganizing the school day to provide common planning time for teachers; added additional hours for individualized and group professional development for teachers; and engaging strategic partners to support an extended school day program with project-based learning in the disciplines of STEM (science, technology, engineering, and mathematics), literacy, and the arts.

Pennsylvania System of School Assessment. The Pennsylvania System of School Assessment (“PSSA”) is an annual assessment administered in Commonwealth classrooms in grades 3 through 8 for English Language Arts (“ELA”) and Math, and in grades 4 through 8 for Science. Pennsylvania adopted more rigorous Pennsylvania Core Standards in late 2013 and the 2015 PSSA marks the first time the assessment was fully-aligned to the standards. The School had adopted a new, more rigorous curriculum in response to the changes in the PSSA, and the PSSA scores for the School in 2015 were also affected by the challenges of implementing this new curriculum. The new curriculum is intended to raise PSSA scores in future years. The table below shows PSSA proficiency rates (percent proficient or advanced rounded to nearest full percent) of students (by grade) for ELA, Math and Science for the School, the School District, and the Commonwealth.

A-18

Table 6A: Academic Performance – All Students School ELA Proficiency Rates (%) Math Proficiency Rates (%) Science Proficiency Rates Grade District (%) 2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016 Harambee 77 42 47 35 67 42 16 9 N/A N/A N/A N/A 3 School 44 40 33 30 46 44 19 22 N/A N/A N/A N/A District PA 73 70 62 61 77 75 49 54 N/A N/A N/A N/A Harambee 64 60 31 17 51 60 14 6 53 73 48 50 4 School 37 40 28 28 48 46 17 18 45 44 43 43 District PA 66 68 59 59 77 76 44 47 78 79 77 76 Harambee 34 35 60 15 46 24 13 6 N/A N/A N/A N/A 5 School 32 30 31 31 40 37 17 17 N/A N/A N/A N/A District PA 61 60 62 62 69 67 43 44 N/A N/A N/A N/A Harambee 56 54 38 45 36 53 15 17 N/A N/A N/A N/A 6 School 40 37 32 35 47 45 17 17 N/A N/A N/A N/A District PA 65 64 61 62 73 71 40 41 N/A N/A N/A N/A

Harambee 63 65 42 40 64 50 10 11 N/A N/A N/A N/A 7 School 46 50 34 34 52 51 15 18 N/A N/A N/A N/A District PA 70 72 59 62 76 75 33 37 N/A N/A N/A N/A Harambee 75 75 33 41 59 62 0 0 34 28 20 31 8 School 55 59 34 35 49 49 15 15 26 27 27 28 District PA 77 79 58 58 74 73 30 31 60 60 58 58 Harambee 59 55 41 32 53 48 11 8 N/A N/A N/A N/A 3rd – SDP 42 42 32 32 47 45 17 18 N/A N/A N/A 36 8th PA 69 69 60 60 74 73 40 42 N/A N/A N/A N/A Grade

School Progress Report. The School Progress Report (“SPR”) is a tool calculated by the School District to provide families and community members with information on the progress that schools are making towards citywide educational goals. Each school receives a score and a corresponding performance tier at the overall and domain levels. Each school also receives two rankings: one within all schools of the same grade configuration (City Rank) and one within a peer group of schools with similar student demographics (Peer Rank). The School’s overall SPR score was 48% in 2013-14, 47% in 2014-15 and 28% in 2015-16. The decline in the SPR achievement domain score in the 2014-15 school year from a score of 41% to 17% reflects the changes in the PSSA, discussed further above under “Pennsylvania System of School Assessment.” The School’s SPR achievement domain in the 2015-16 school year was 13%. The School believes that its rankings were affected by the challenges of implementing the School’s new, more rigorous curriculum in addition to the generally lower scores under the revised PSSA. Notably, other schools suffered similar declines and the School’s city-wide percentile ranking in the achievement domain was only reduced from the top 30% in 2013-14 to the top 36% in 2014-15. The achievement domain was reduced to the top 54% in 2015-16. The SPR calculations changed from the 2013-14 school year to the 2014-15 school year in certain categories related to PSSA scores, making it more difficult to gain points in those categories, and compounding the effect of lower PSSA scores. The

A-19 SPR uses four performance tiers: “Intervene” (0-24%), “Watch” (25-49%), “Reinforce” (50-74%), and “Model” (75-100%). In 2015-16, the School received a “Watch” ranking with a score of 28%. See “RISK FACTORS – Termination, Revocation or Non-Renewal of Charter” in the forepart of this Limited Offering Memorandum.

The table below shows 2016 PSSA proficiency rates (percent proficient or advanced rounded to nearest full percent) in ELA, Math and Science for students in the School, the School District and other schools within a close proximity of the School, as well as, and a summary of SPR results for the same schools:

Table 6B: Academic Performance – School Comparison (within 2.6 miles)

*Denotes charter schools. **PSSA Proficiency Rates based on grades 3-8 only.

2016 PSSA 2016 SPR

ELA Math Science Performance Proficiency Proficiency Proficiency City Rank Peer Rank Tier (%) Rates (%) Rates (%) Rates (%) Distance School (miles Grades from the 2015-16 2015-16 2015-16 2015-16 2015-16 2015-16 Served** School)

SDP N/A K- 12 32 18 36 N/A N/A N/A Harambee* 0 K - 8 32 8 41 28% 91 / 138 15 / 21 West Philadelphia Achievement* 0.4 K - 5 35 17 47 N/A N/A N/A Overbrook Educational Center 0.4 K - 8 44 16 36 62% 20 / 138 1 / 12 Lewis C. Cassidy Academics Plus 0.5 K - 6 13 4 30 7% 60 / 60 22 /22 Robert E. Lamberton School 0.6 K - 8 15 4 22 20% 108 / 138 11 / 12 Overbrook Elem. School 0.6 K - 6 40 15 53 32% 32 / 60 8 / 22 Dimner Beeber Middle School 0.9 7 - 8 13 2 8 21% 24 / 37 13 / 19 Samuel Gompers Elem. School 1.3 K - 6 24 6 48 10% 56 / 60 20 / 22 Edward Heston School 1.5 K -8 16 4 21 22% 101 / 138 10 / 20 John Barry Elem. School 1.5 K- 8 14 2 14 4% 135 / 138 18 / 20 Andrew Hamilton School 2 K - 8 29 11 22 39% 66 / 138 4 / 23 James Rhoads School 2.1 K - 8 15 7 18 14% 117 / 138 14 / 20 Discovery Charter School* 2.3 K - 8 44 15 45 45% 50 / 138 6 / 21 Global Leadership Academy* 2.3 K - 8 36 10 35 36% 71 / 138 10 / 21 Rudolph Blankenburg School 2.3 K - 8 12 3 19 7% 130 /138 21 / 23 Add B. Anderson School 2.3 K - 8 16 3 31 7% 133 / 138 20 / 21 Samuel B. Huey School 2.4 K - 8 14 2 17 21% 102 / 138 13 / 23 Middle Years Alternative 2.4 5 - 8 39 20 37 32% 14 / 37 4 / 14 Martha Washington School 2.6 K - 8 24 12 22 26% 95 / 138 10 / 23

A-20 The following table summarizes SPR results for the School and peer schools, as identified by the School District:

Table 7: Academic Performance – School Progress Report (Peer Schools)

*Denotes charter schools. 2015-2016 School Progress Report Peer Schools - Group 5 Performance School Tier City Rank Peer Rank (out of 138 (out of 21 Schools) Schools) Laboratory Charter of Community and Languages* N/A N/A N/A Northwood Academy Charter School* 68% 11 1 John S. Jenks School Academy for Arts & Science 35% 74 11 Harambee Institute of Science and Technology Charter 28% 91 15 Charles W. Henry School 56% 29 3 Thomas Mifflin School 37% 68 9 Ad Prima Charter School* 40% 64 7 Anna L. Lingelbach School 29% 87 14 General Philip Kearny School 12% 122 19 John F. McCloskey School 39% 65 8 Fitler Academics Plus School 46% 46 4 Global Leadership Academy Charter School* 36% 71 10 Anna B. Day School 23% 99 17 Math, Civics and Sciences Charter School* 64% 19 2 Khepera Charter School* 6% 134 21

School Performance Profile. On June 30, 2012, as part of the Commonwealth’s NCLB waiver and in addition to the AMO grades, the Commonwealth enacted new legislation (“Act 82”) which introduced the School Performance Profile (“SPP”) as a measure (ranging from 1-100) of the relative academic effectiveness of the Commonwealth’s public schools, including charter schools. The score is calculated for each individual school rather than for school districts as a whole. The SPP is released each fall.

Most of the score is based on the PSSA, as schools are graded on the percent of students scoring proficient, the closure of the achievement gap for all students, the closure of the achievement gap for historically underperforming students, and the increase in student test scores year over year. 10% of the score is based on other academic indicators, such as promotion rate and attendance.

The Building-Level Score was first adopted in 2012-13. The School received a score of 66.6/100 in 2012-13, 65.5/100 in 2013-14 and 46.0 in 2015-16.7

7 The Commonwealth did not release a Building – Level Score for the School for the 2014-15 school year.

A-21 Service Area and Competing Schools

All of the School’s students reside in the City of Philadelphia. Approximately 95% of the School’s students live within ten miles of the School.

The School competes for students mostly with traditional public schools, public school academies and charter schools within the area. The table below shows the School’s performance relative to schools within a 3 mile radius of the School:

Table 8. Harambee Institute of Science and Technology Charters School School Performance Profile/Comparison School Years 2012-13, 2013-14 and 2015-16 School Distance Type Grades 2015- 2012 2012-13 2013- 2013-14 2015 2015-16 (miles Offered 2016 -13 SPP 14 SPP -16 SPP from the Enrollment SPP Differential SPP Differential SPP Differential School) (1-100) to (1-100) to (1-100) to Harambee Harambee Harambee Harambee* 0.0 Charter K-8 5108 66.6 N/A 65.5 N/A 46.0 N/A West 0.4 Charter K-8 705 64.1 (2.5) 62.0 (3.5) 55.2 (9.2) Philadelphia Achievement* Overbrook 0.4 Public K-8 260 77.2 10.6 76.6 11.1 59.1 13.1 Educational Center Lewis C. 0.5 Public K-6 511 66.3 (0.3) 54.3 (11.2) 36.7 (9.3) Cassidy Academics Plus Robert E. 0.6 Public K-8 565 61.3 (5.3) 58.4 (7.1) 47.6 1.6 Lamberton School Overbrook 0.6 Public K-6 231 71.9 5.3 52.1 (13.4) 59.6 13.6 Elem. School Beeber Dimner 0.9 Public 7-8 189 48.0 (18.6) 54.3 (11.2) 47.7 1.7 Middle School Samuel 1.3 Public K-6 385 55.3 (11.3) 55.7 (9.8) 50.3 4.3 Gompers Elem. School Edward Heston 1.5 Public K-8 521 48.5 (18.1) 51.1 (14.4) 45.0 (1.0) School John Barry 1.5 Public K-8 774 53.8 (12.8) 56.6 (8.9) 37.5 (8.5) Elem. School Andrew 2.0 Public K-8 571 56.8 (9.8) 51.7 (13.8) 51.6 5.6 Hamilton School James Rhoads 2.1 Public K-8 491 56.0 (10.6) 44.7 (20.8) 41.5 (4.5) School Discovery 2.3 Charter K-8 755 66.3 (0.3) 69.8 4.3 56.1 10.1 Charter School* Global 2.3 Charter K-8 705 74.2 7.6 62.7 (2.8) 44.3 (1.7) Leadership Academy* Rudolph 2.3 Public K-8 521 52.2 (14.4) 49.0 (16.50) 40.4 (5.6) Blankenburg School

8 The 2015-2016 enrollment of the School as reported in the SPP data was determined as of October 1, 2015. The School's year-end enrollment for 2015-2016 was 532 students as indicated in Table 3, above.

A-22 Add B. 2.3 Public K-8 561 47.9 (18.7) 49.3 (16.2) 37.8 (8.2) Anderson School Samuel B. 2.4 Public K-8 524 44.4 (22.2) 53.1 (12.4) 43.8 (2.2) Huey School Middle Years 2.4 Public 5-8 239 62.3 (4.3) 66.2 0.7 54.5 8.5 Alternative Martha 2.6 Public K-8 437 53.2 (13.4) 53.1 (12.4) 54.3 8.3 Washington School

DISTRICT PER PUPIL PAYMENTS

The School’s principal source of revenue is a per-pupil payment from the school district in which the School’s students reside, based on a formula provided under the Charter School Law. The following table shows the per-pupil educational aid payments actually received by the School from the School District, which makes up 100% of the School’s per-pupil aid payments for the 2009-10 through 2016-17 school years. The payments are based on the School District’s actual student expenditures, which have been reduced in recent years. On February 17, 2017, the School District announced a proposed mid-year amendment of the pupil rates paid to charter schools in the City for fiscal year 2016-17. Though such amendment is not yet certified by the Commonwealth Department of Education, the School anticipates, based upon communications received from the School District, that there will be a downward adjustment of approximately 4% for the regular education rates (a reduction of $341.87) and special education rates (a reduction of $1,032.55) for charter school students in the City. The School estimates that the financial impact on the School will be a reduction in annual revenues of approximately $220,000. The reduction in revenues is retroactive to the beginning of the 2016-17 school year such that overpayments will need to be recovered from the School by the School District. The School and the School District will be discussing repayment options. In an attempt to mitigate the loss of revenues, the School is planning to make mid-year budget adjustments. See “RISK FACTORS – Sufficiency of Revenues,” “CHARTER SCHOOLS IN PENNSYLVANIA – Funding of Charter Schools” and “THE SCHOOL DISTRICT OF PENNSYLVANIA” in the Limited Offering Memorandum. Table 9 Per Pupil Aid Regular Education Special Education School Year Amount Change % Change Amount Change % Change 2009-10 $8,184 $97 1.19% $17,789 $131 0.74% 2010-11 8,608 424 5.00% 18,512 723 4.00% 2011-12 8,773 165 2.00% 19,423 911 5.00% 2012-13 8,064 -709 -8.00% 19,831 408 2.00% 2013-14 8,417 353 4.00% 22,307 2,476 12.00% 2014-15 7,996 -421 -5.00% 23,073 766 3.43% 2015-16 7,745 -251 -3.14% 23,720 647 2.80% 2016-179 8,451 706 9.16% 25,647 1,927 8.12%

FEDERAL/STATE FUNDING

Charter school students are similar to public school students with respect to eligibility for federal entitlement programs. Charter schools are also eligible for grants from the Commonwealth. A charter school may receive federal or Commonwealth grant funds directly from the Commonwealth by following

9 Reduction expected.

A-23 the same procedures that local school districts are required to follow. Federal funding for period ended June 30, 2015 and June 30, 2016 was $421,765 and $502,768, or approximately 7% and 9% respectively of the School’s current fiscal year’s annual revenue, and Commonwealth grants for June 30, 2015 and June 30, 2016 were $45,404 and $47,966, which represented 7% and less than 1% respectively of the School’s current fiscal year’s annual revenue. This decline in state sources was primarily due to the elimination of the Pension Reimbursement funds.

BUDGET PROCESS AND INFORMATION

The annual budgeting process involves key stakeholders including the CEO, the CFO, operations staff and the Board. The budget is prepared by the appropriate levels of management on an accrual basis for final approval by the Board.

Planning

The CFO in conjunction with the CEO establish guidelines, priorities and assumptions for preparation of the annual budget. These assumptions are communicated to other members of the management team. The CFO also establishes procedures, assumptions, budgeting formats and a timetable for budget preparation. The timetable, which begins no later than February of each year, results in the Board Finance Committee receiving the proposed budget in time to review and approve it before presentation to the full Board at its June board meeting.

Preparation

The CFO prepares initial projections of revenues and expenditures for planned services, projects and programs, considering historical data and future growth plans and factoring in any shifts or adjustments to staffing levels communicated by the Administrative Team and the CEO. After any adjustments or changes, the budget is ready for submission to the Finance Committee of the Board at least one month prior to the June Board meetings.

Approval

The Chair of the Finance Committee, along with the CEO, CFO and Principal present the proposed budget to the Board for final approval prior to the effective date of July 1.

Revisions

Based on monitoring events that occur during the year, if it is determined that a significant revision to the budget is required and appropriate, budget revisions may be initiated, reviewed and approved by the CEO and CFO or designee. Proposed budget revisions are submitted for approval to the Board. Approved budget revisions are communicated to all parties with budgetary responsibilities.

Control

Once the budget is approved by the Board before the start of the fiscal year, it is uploaded into the accounting software. The approved budget is incorporated into the purchasing process. Monthly budget reports are prepared, analyzed, and presented to the CEO and Board at monthly Board meetings. Prior to the monthly board meetings, the Finance Committee receives a detailed review of the budget and several other reports, including Budget-to-Actual Expense, Cash Flow Statements and Forecast Reports.

PENSION PLANS

The School contributes to the Public School Employees’ Retirement System (the System), a governmental cost-sharing multiple-employer defined benefit pension plan. The plan provides retirement

A-24 and disability benefits, legislatively mandated ad hoc cost-of-living adjustments, and healthcare insurance premium assistance to qualifying annuitants. The Public School Employees’ Retirement Code (PSERS) (Act No. 96 of October 2, 1975, as amended) (24 Pa. C.S. 8101-8535) assigns the authority to establish and amend benefit provisions to the System. The System issues a comprehensive annual financial report that includes financial statements and required supplementary information for the Plan. A copy of the report may be obtained on the PSERS website at www.psers.state.pa.usipublications/cafr/index.htm.

Funding Policy

The contribution policy is established in the Public School Employees’ Retirement Code and requires contributions by active members, employers, and the Commonwealth of Pennsylvania. For employees, there are several membership categories (called classes) based upon date of hire. Depending upon membership class, employee contributions can range from 5.25% - 10.3%. Employer contributions are based upon an actuarial valuation. For fiscal year ended June 30, 2015, the rate of employer’s contribution was 21.40% of covered payroll, and 25.84% for fiscal year ending June 30, 2016. The School’s contributions to the plan for the fiscal years ended June 30, 2015 totaled an estimated $516,500. In the School’s audited financial statements for the years ended June 30, 2012 and 2013, the School’s auditor noted that the School had not made its employer retirement contributions on a timely basis. The School believes that it is now current with the contributions. In the year ended June 30, 2015, the School implemented GASB 68 for its financial reporting. This accounting standard requires the School to report its proportionate share of the net pension liability based on employees at the School. The net pension liability for School employees is approximately $7,877,000 as of June 30, 2015. This amount is recorded on the governmental-wide audited financial statements. This represents the total benefit cost in the event that all employees of the School would retire at this time. While no action is required at this time, it is speculated that this information will result in the continued increase of the employer contribution rate in the plan.

FYE Employer Contribution Rate 2012-13 12.36% 2013-14 16.93% 2014-15 21.40% 2015-16 25.84% 2016-17 30.03%

In accordance with Act 29 of 1994, the Commonwealth of Pennsylvania will reimburse school entities for contributions made to the System in an amount based on the formula in Act 29 of 1994 that shall not be less than one-half of the school entities’ contributions. As of July 1, 2014, the reimbursement for contributions was eliminated for the 2014-2015 fiscal year. While it is expected to be restored, no further information has been announced by the Pennsylvania Department of Education as of yet. To offset the escalating cost of PSERS, the School is in the process of establishing a 403B plan for certain of its employees.

See "RISK FACTORS – Fiscal and Operational Control Issues" in the forepart of this Limited Offering Memorandum for more information about the School's history of timely PSERS payments. See also "RISK FACTORS – Pension Risk."

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A-25 GENERAL FUND RESULTS AND FORECAST

The following tables have been compiled from the School’s audited financial statements and the four year financial forecast, prepared by the School. They have been organized to facilitate year-to-year comparison. The projections of revenues and expenses contained in this Appendix A do not take into account a potential downward adjustment in per pupil revenues or budget adjustments made at the School level to mitigate the effect of such revenue loss. See “CHARTER SCHOOLS IN THE COMMONWEALTH – Funding For Charter Schools, ” “RISK FACTORS – Sufficiency of Revenues” in the forepart of this Limited Offering Memorandum, and “APPENDIX B” and “APPENDIX C” to this Limited Offering Memorandum.

A-26 A-27

A-28

A-29

A-30 DEBT SERVICE COVERAGE AND OPERATING FUND BALANCE

The following table shows the debt service and projected debt service coverage for the Series 2017 Bonds:

Base Case assumes 2.50% increases in per pupil aid, as directed by the School District of Philadelphia.

Base Case: 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020 Projected Enrollment 538 535 545 547 550 Change in Net Assets (Deficit) $ (343,372) $ 109,938 253,406$ 420,537$ 565,207$ Plus: Rent/Debt Service 495,000 492,000 543,200 540,612 543,025 Depreciation 199,837 203,834 263,834 328,801 438,801 Total Available for Debt Service $ 351,465 $ 805,772 $ 1,060,440 1,289,950$ $ 1,547,033 Projected Debt Service n/a 492,000 543,200 540,612 543,025 Annual Debt Coverage n/a 1.64 1.95 2.39 2.85 Projected MADS n/a 544,113 544,113 544,113 544,113 MADS Coverage n/a 1.48 1.95 2.37 2.84

Stress Test A assumes no change in per pupil aid and constant expenses compared to the Base Case.

Stress A: No Change in Per Pupil Funding 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020 Projected Enrollment 538 535 545 547 550

Change in Net Assets (Deficit) $ (343,372) $ 108,505 $ 108,022 125,013$ $ 113,833 Plus: Rent/Debt Service 495,000 492,000 543,200 540,612 543,025 Depreciation 199,837 203,834 263,834 328,801 438,801 Total Available for Debt Service $ 351,465 $ 804,339 $ 915,056 $ 994,426 $ 1,095,659

Projected Debt Service n/a 492,000 543,200 540,612 543,025 Annual Debt Coverage n/a 1.63 1.68 1.84 2.02 Projected MADS n/a 544,113 544,113 544,113 544,113 MADS Coverage n/a 1.48 1.68 1.83 2.01

Stress Test B assumes 2.50% increase in per pupil aid, holds expenses constant and decreases enrollment 1.0x actual debt service coverage.

Stress B: Breakeven Enrollment 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020 Projected Enrollment 538 535 487 463 441 Change in Net Assets (Deficit) $ (343,372) 109,938$ (248,947)$ (325,197)$ (426,663)$ Plus: Rent/Debt Service 495,000 492,000 543,200 540,612 543,025 Depreciation 199,837 203,834 263,834 328,801 438,801 Total Available for Debt Service 351,465$ 805,772$ 558,087$ 544,216$ 555,163$ Projected Debt Service n/a 492,000 543,200 540,612 543,025 Annual Debt Coverage n/a 1.64 1.03 1.01 1.02 Projected MADS n/a 544,113 544,113 544,113 544,113 MADS Coverage n/a 1.48 1.03 1.00 1.02

A-31

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APPENDIX B FOUR-YEAR FINANCIAL FORECAST

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Harambee Institute of Science and Technology Charter School

Budget Projections +2.5%

For the Fiscal Years ending June 30, 2017 through June 30, 2020

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Balance Sheet Projections +2.5%

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Cash Flow Projections +2.5%

For the Fiscal Years ending June 30, 2016 through June 30, 2020

Projected Audited

2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020

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APPENDIX C AUDITED FINANCIAL STATEMENTS OF THE SCHOOL FOR FISCAL YEARS ENDING JUNE 30, 2016, 2015, AND 2014

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HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL OF PHILADELPHIA, INC.

FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

YEAR ENDED JUNE 30, 2016

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL OF PHILADELPHIA, INC. TABLE OF CONTENTS YEAR ENDED JUNE 30, 2016 Page

INDEPENDENT AUDITOR’S REPORT 1

REQUIRED SUPPLEMENTARY INFORMATION

Management’s Discussion and Analysis 4

BASIC FINANCIAL STATEMENTS

Statement of Net Position (Deficit) 8

Statement of Activities 9

Balance Sheet – Governmental Fund 10

Reconciliation of the Balance Sheet of the Governmental Fund to the Statement of Net Position (Deficit) – General Fund 11

Statement of Revenues, Expenditures and Change in Fund Balance (Deficit) – Governmental Fund 12

Reconciliation of the Statement of Revenues, Expenditures and Change in Fund Balance (Deficit) of the Governmental Funds to the Statement of Activities – Governmental Fund 13

Statement of Net Assets – Proprietary Fund 14

Statement of Activities – Proprietary Fund 15

Statement of Cash Flows – Proprietary Fund 16

Notes to Financial Statements 17

SUPPLEMENTARY INFORMATION

Schedule of Revenues, Expenditures and Change in Fund Balance (Deficit) – Budget and Actual – General Fund 28

Schedule of Expenditures of Federal Awards 29

Notes to Schedule of Expenditures of Federal Awards 30

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 31

Report on Compliance for Each Major Programs and Report on Internal Control Over Compliance in Accordance with Uniform Guidance 33

Schedule of Findings and Questioned Costs 35

INDEPENDENT AUDITOR’S REPORT

Board of Trustees Harambee Institute of Science and Technology Charter School of Philadelphia, Inc. Philadelphia, Pennsylvania

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, and each major fund of Harambee Institute of Science and Technology Charter School of Philadelphia, Inc. (a nonprofit organization) as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise Harambee Institute of Science and Technology Charter School’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Harambee Institute of Science and Technology Charter School of Philadelphia’s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; 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 opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). 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 opinions.

-RKQ).HQQHG\%OYG6XLWH 3KLODGHOSKLD3$ TF Board of Trustees Harambee Institute of Science & Technology Charter School of Philadelphia, Inc.

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, and each major fund of Harambee Institute of Science & Technology Charter School of Philadelphia, Inc. as of June 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplemental Information’

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and the schedule of revenue, expenditures and changes in fund balance (deficit) – budget and actual – general fund, as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal and state awards is presented for purposes of additional analysis, as required by the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the financial statements as a whole.

Page | 2 Board of Trustees Harambee Institute of Science & Technology Charter School of Philadelphia, Inc.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated January 7, 2017, on our consideration of Harambee Institute of Science and Technology Charter School of Philadelphia, Inc.’s internal control over financial reporting and on our tests of its compliance with certain provisions of law, 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 the 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 Harambee Institute of Science and Technology Charter School of Philadelphia’s internal control over financial reporting and compliance.

J. Miller & Associates, LLC

J. MILLER & ASSOCIATES, LLC

Philadelphia, Pennsylvania January 7, 2017

Page | 3 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL MANAGEMENTS DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016

The Board of Trustees of Harambee Institute of Science & Technology Charter School of Philadelphia, Inc. (the School) offers readers of the School’s financial statements this narrative overview and analysis of the financial activities of the School for the fiscal year ended June 30, 2016. We encourage readers to consider the information presented here in conjunction with the School’s financial statements.

Financial Highlights Total revenues increased $23,372 to $5,973,225 primarily due to the federal sources related to the food services program.

At the close of the current fiscal year, on a government-wide basis, the School reports a net position of ($9,425,524).

At the close of the current fiscal year, on a governmental fund basis, the School reports a fund balance (deficit) of ($512,039) which represents a decreased from the prior fiscal year.

The School’s cash balance at June 30, 2016 was $333,667 representing an increase of $146,867 from June 30, 2015.

Overview of the Financial Statements The management’s discussion and analysis is intended to serve as an introduction to the School’s basic financial statements. The School’s financial statements as presented comprise four components: Management’s Discussion and Analysis (this section), the basic financial statements, budgetary comparison and Single Audit reporting requirements.

Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the School’s finances, in a manner similar to a private-sector business.

The statement of net position (deficit) presents information on all of the School’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position (deficit) may serve as a useful indicator of whether the financial position of the School is improving or deteriorating.

The statement of activities presents information showing how the School’s net position (deficit) changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows.

The government-wide financial statements report on the function of the School that is principally supported by subsidies from school districts whose constituents attend the School.

Fund Financial Statements A fund is a group of related accounts that are used to maintain control over resources that have been segregated for specific activities or purposes. The School, like governmental type entities, utilizes fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The School has two fund types, the governmental fund (general fund) and the proprietary fund.

Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.

Page | 4 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL MANAGEMENTS DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016

Overview of the Financial Statements (Continued)

Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.

Government-Wide Financial Analysis As noted earlier, net position (deficit) may serve over time as a useful indicator of a government’s financial position. In the case of the School, liabilities and deferred inflows of resources exceeded assets and deferred outflows of resources by $9,425,524 as of June 30, 2016.

Total Assets and Deferred Outflows of resources$ 1,759,120 Total Liabilities and Deferred Inflows of Resources 11,184,644

Total Net Position (Deficit) $ (9,425,524)

The School’s revenues are predominately from the School District of Philadelphia, based on the student enrollment.

REVENUES Local Educational Agencies $ 4,905,127 Other Local Sources 57,328 State Sources 91,186 Federal Sources 919,584

Total Revenues 5,973,225

EXPENDITURES Instruction 3,671,188 Instructional Staff Support 284,049 Administration Support 1,103,329 Pupil Health 78,855 Business Services 241,546 Operations and Maintenance 983,264 Food Services 328,939 Other Non-Instructional Support Services 163,072 Depreciation 207,723

Total Expenditures 7,061,965

Change in Net Position (Deficit) (1,088,740)

Net Position (Deficit), Beginning (8,336,784)

Net Position (Deficit), Ending $ (9,425,524)

Page | 5 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL MANAGEMENTS DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016

Government Fund The focus of the School’s governmental fund is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the School’s financing requirements. In particular, fund balance may serve as a useful measure of a government’s net resources available for spending for program purposes at the end of the fiscal year.

The School’s governmental fund, (the General Fund), reported an ending fund deficit of ($512,039). For the year ended June 30, 2016, the School’s expenditures of $5,801,902 exceeded revenues of $5,609,082 by $192,820.

General Fund Budgetary Highlights Actual revenues were less than budgeted by approximately $208,000 due to less revenue from local and state sources offset by more from federal sources. Actual expenditures were less than budgeted by $15,000 primarily due to less costs incurred for support services and other expenditures and financing uses offset by higher instruction costs.

Proprietary Fund The focus of the School’s proprietary fund is to provide information on the business-type activities of the School. The School’s proprietary fund reported net assets totaling $27,318 for the year ended June 30, 2016 and a result of revenues exceeding expenses.

Capital Asset and Debt Administration CAPITAL ASSETS As of June 30, 2016 the School’s investment in capital assets totaled $171,953 (net of accumulated depreciation) for its governmental activities and $40,338 (net of accumulated depreciation) for its business- type activities. This investment in capital assets includes leasehold improvements and classroom and office furniture and equipment.

Major capital asset purchases during the year included the following:

Capital expenditures of $49,285 for furniture and equipment (governmental activities) Capital expenditures of $48,224 for equipment (business-type activities)

LONG-TERM DEBT The School does not have any long-term debt.

Economic Factors and Next Year’s Budgets and Rates The School’s primary source of revenue, the student subsidy provided by the School District of Philadelphia, will have a rate increase for regular education from $7,737.80 to $8,486.87 and a rate increase for special education from $23,696.57 to $25,624.16 for the 2016-17 school year. In addition, the retirement contribution rate will increase from 25.84% to 30.03%.

Future Events that will Financially Impact the School In August 2016, the School entered into an agreement of sale with, a separate entity, Harambee Institute Inc., related to the facilities used by the School for $4.2 million. The Board of Trustee agreed to finance the sale through the issuance of $7.5 million of tax-exempt bonds. The bonds went to market the week of December 12, 2016. The estimated closing day is January 15, 2017.

Page | 6 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL MANAGEMENTS DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016

Contacting the School’s Financial Management The financial report is designed to provide interested parties a general overview of the School’s finances. Questions regarding any of the information provided in this report should be addressed to the Chief Executive Officer, Harambee Institute of Science & Technology Charter School of Philadelphia, Inc., 640 North 66th Street, Philadelphia, PA 19151.

Page | 7 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL STATEMENT OF NET POSITION JUNE 30, 2016

Governmental Business -Type Activities Activities Total ASSETS

CURRENT ASSETS Cash $ 333,667 $ - $ 333,667 State Subsidies Receivable 217,144 - 217,144 Federal Subsidies Receivable 211,962 - 211,962 School Districts Receivable 97,185 - 97,185 Due to/from Food Service - 40,780 40,780 Prepaid Expenses 22,515 - 22,515 Total Current Assets 882,473 40,780 923,253

CAPITAL ASSETS, NET 171,953 40,338 212,291

Total Assets 1,054,426 81,118 1,135,544

Deferred outflows of resources : Deferred outflows related to pensions 30,208 - 30,208 Contributions subsequent to measurement date 593,368 - 593,368 Total deferred outflows of resources 623,576 - 623,576

LIABILITIES

LIABILITIES Accounts Payable 772,928 - 772,928 Due to/from Food Service 40,780 - 40,780 Amount Due Taxing Agency 52,789 - 52,789 Accrued Salaries and Benefits Payable 528,015 - 528,015 Net Pension Liability 8,533,000 - 8,533,000

Total Liabilities 9,927,512 - 9,927,512

Long-term Liabilities - 53,800 53,800

Deferred inflows of resources: Deferred inflows related to pensions 1,203,332 - 1,203,332

NET POSITION (DEFICIT)

Net Investment in Capital Assets 171,953 40,338 212,291 Unrestricted (9,624,795) (13,020) (9,637,815)

Total Net Position (Deficit) $ (9,452,842) $ 27,318 $ (9,425,524)

See accompanying Notes to Financial Statements. Page | 8 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016

Net (Expense) Revenue and Changes in Net Program Revenues Position (Deficit) Charges Operating Total for Grants and Governmental Business-Type Functions Expenses Service Contributions Activities Activities Total Governmental Activities: Instruction $ 3,671,188 $ - $ 555,441 $ (3,115,747) $ - $ (3,115,747) Instructional Staff Support 284,049 - - (284,049) - (284,049) Administration Support 1,103,329 - - (1,103,329) - (1,103,329) Pupil Health 78,855 - - (78,855) - (78,855) Business Services 241,546 - - (241,546) - (241,546) Operations and Maintenance 983,264 - - (983,264) - (983,264) Food Services - - - - 35,204 35,204 Other Non-Instructional Support Services 163,072 - - (163,072) - (163,072) Depreciation 199,837 - - (199,837) (7,886) (207,723)

Total $ 6,725,140 $ - $ 555,441 (6,169,699) 27,318 (6,142,381)

General Revenues: Local Educational Agencies 4,905,127 - 4,905,127 State Grants and Reimbursements 91,186 - 91,186 All Other Revenue 57,328 - 57,328 Total General Revenues 5,053,641 - 5,053,641

Change in Net Position (Deficit) (1,116,058) 27,318 (1,088,740)

Net Position (Deficit) - Beginning of Year (8,336,784) - (8,336,784)

Net Position (Deficit) - End of Year $ (9,452,842) $ 27,318 $ (9,425,524)

See accompanying Notes to Financial Statements. Page | 9 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL BALANCE SHEET – GOVERNMENTAL FUND JUNE 30, 2016 General Fund

ASSETS

CURRENT ASSETS Cash $ 333,667 State Subsidies Receivable 217,144 Federal Subsidies Receivable 211,962 School District Receivable 97,185 Prepaid Expenses 22,515

Total Assets $ 882,473

LIABILITIES AND FUND BALANCE (DEFICIT)

LIABILITIES Accounts Payable $ 772,928 Due to Enterprise Fund - Food Service 40,780 Amount Due Taxing Agency 52,789 Accrued Salaries and Benefits Payable 528,015 Total Liabilities 1,394,512

FUND BALANCE (DEFICIT) Nonspendable to: Prepaid Expenses 22,515 Unassigned (534,554) Total Fund Balance (Deficit) (512,039)

Total Liabilities and Fund Balance (Deficit) $ 882,473

See accompanying Notes to Financial Statements. Page | 10 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUND TO THE STATEMENT OF NET POSITION JUNE 30, 2016

Total Fund Balance (Deficit) for Governmental Fund $ (512,039)

Total Net Position Reported for Governmental Activities in the Statement of Net Position (Deficit) is Different because:

Some liabilities, including net pension obligations, are not due and payable in the current period and therefore are not reported in the governmental fund

Net pension liability (8,533,000)

Deferred outflows and inflows of resources related to pensions are applicable to future periods and, therefore, are not reported in the governement fund

Deferred outflows of resources related to 623,576 Deferred inflows of resources related to pensions (1,203,332)

Capital assets used in governmental funds are not financial resources and, therefore, are not reported in the fund. Those assets consist of: Equipment 310,669 Leasehold Improvements 2,432,165 Accumulated Depreciation (2,570,881) 171,953

Total Net Position (Deficit) of Governmental Activities $ (9,452,842)

See accompanying Notes to Financial Statements. Page | 11 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE (DEFICIT) GOVERNMENTAL FUND YEAR ENDED JUNE 30, 2016

General Fund

REVENUES Local Educational Agency Assistance $ 4,905,127 Other Local Sources 57,328 State Sources 91,186 Federal Sources 555,441 Total Revenues 5,609,082

EXPENDITURES Instruction 3,035,056 Support Services 2,556,018 Non-Instructional Services 161,543 Capital Outlays 49,285 Total Expenditures 5,801,902

NET CHANGE IN FUND BALANCE (DEFICIT) (192,820)

Fund Balance (Deficit) - Beginning of Year (319,219)

FUND BALANCE (DEFICIT) - END OF YEAR $ (512,039)

See accompanying Notes to Financial Statements. Page | 12 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE (DEFICIT) OF GOVERNMENTAL FUND TO THE STATEMENT OF ACTIVITIES JUNE 30, 2016

Net Change in Fund Balance (Deficit) - Total Governmental Fund $ (192,820)

Amounts Reported for Governmental Activities in the Statement of Activities are Difference because:

The Governmental fund reports the school's pension contributions as expenditures. However, in the Statement of Activities, pension expense is base on the School's proportionate share of the PSERS retirement plan School pension contributions 593,368 School's proportionate share of PSERS pension expense (1,366,054)

The Governmental fund reports capital outlays as expenditures. However, in the statement of activities, assets are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period.

Capital Outlays 49,285 Depreciation Expense (199,837)

Change in Net Position (Deficit) of Governmental Activities $ (1,116,058)

See accompanying Notes to Financial Statements. Page | 13 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL STATEMENT OF NET ASSETS PROPRIETARY FUND JUNE 30, 2016

Enterprise Fund Food Service Fund ASSETS

Curent Assets: Due from General Fund $ 40,780

Total Curent Assets 40,780

Capital Assets, Net 40,338

TOTAL ASSETS $ 81,118

LIABILITIES AND NET ASSETS

Long-term payables $ 53,800

Net Assets Unrestricted 27,318

TOTAL LIABILITIES AND NET ASSETS $ 81,118

See accompanying Notes to Financial Statements. Page | 14 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL STATEMENT OF ACTVITIES PROPRIETARY FUND YEAR ENDED JUNE 30, 2016

Enterprise Fund Food Service Fund

REVENUES Food Services Revenues $ 364,143 Total Revenues 364,143

EXPENSES Food Service Management - Non Food Cost 170,489 Food Service Management - Food Costs 158,450 Depreciation 7,886 Total Expenses 336,825

CHANGE IN NET ASSETS 27,318

Net Assets - Beginning of Year -

Net Assets - End of Year $ 27,318

See accompanying Notes to Financial Statements. Page | 15 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL STATEMENT OF CASH FLOWS PROPRIETARY FUND YEAR ENDED JUNE 30, 2016

Enterprise Fund Food Service Fund

Cash Flows from Operating Actvities: Cash received from Federal Sources $ 272,768 Cash received from State Sources 16,925 Cash received from Other Ssources 453 Payment to suppliers (241,922) Net Cash Provided by Operating Activities 48,224

Cash Flows from Capitaland Related Financing Actvities: Purchase of equipment (48,224) Net Cash Used in Capital and Related Financing Activities (48,224)

Net Change in Cash -

Cash - Beginning of Year -

Cash - End of Year $ -

Reconciliation of Operating income to net cash from operating activities: Operating income $ 27,318

Adjustments to Reconcile Operating Income to Net Cash from Operating Activities: Depreciation 7,886 Changes in operatings assets and liabilities: Due from General Fund (40,780) Long-Term Payables 53,800

Net Cash Provided by Operating Activities $ 48,224

See accompanying Notes to Financial Statements. Page | 16 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Background Harambee Institute of Science & Technology Charter School of Philadelphia, Inc. is organized as a nonprofit corporation in Pennsylvania to operate a charter school in accordance with Pennsylvania Act 22 of 1997. A charter is granted for a five year period. The School’s existing charter extends through June 30, 2016.

Basis of Presentation The financial statements of the School have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing government accounting and financial reporting principles. The GASB has issued a codification of governmental accounting and financial reporting standards.

Government-Wide and Fund Financial Statements The government-wide financial statements (the statement of net position (deficit) and the statement of activities) report on the School as a whole. The statement of activities demonstrates the degree to which the direct expenses of the School are offset by program revenues.

The School has two major funds: government fund and proprietary fund. The government fund financial statements (balance sheet and statement of revenues, expenditures and changes in fund balance (deficit)) report on the School’s general fund. The proprietary funds financial statements (statement of net assets, statement of activities, and statement of cash flow) report on the School’s enterprise fund – food service fund.

Measurement Focus, Basis of Accounting and Financial Statement Presentation Government-wide Financial Statements: The statement of net position (deficit) and the statement of activities are prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred regardless of the timing of the related cash flows. Grants and similar items are recognized as soon as all eligibility requirements imposed by provider have been met.

Fund Financial Statements:

The Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the School considers revenues to be available if they are collected within 60 days of the end of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting.

The School reports the following major governmental fund:

General Fund – The General Fund is the operating fund of the School and accounts for all revenues and expenditures of the School.

Page | 17 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Measurement Focus, Basis of Accounting and Financial Statement Presentation, Continued

Fund Financial Statements (Continued)

Proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recognized in the period in which the transactions occur.

The School reports the following major proprietary fund:

Enterprise Fund – This fund accounts for the business-type activities of the food service fund.

Method of Accounting Accounting standards requires a statement of net position (deficit), a statement of activities and changes in net position (deficit). It requires the classification of net position (deficit) into three components – net investment in capital assets; restricted; and unrestricted. These calculations are defined as follows: Net investment in capital assets – This component of net position (deficit) consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. If there are significant unspent related debt proceeds at year-end, the portion of the debt attributable to the unspent proceeds are not included in the calculation of net investment in capital assets. Rather, that portion of the debt is included in the same net position (deficit) component as the unspent proceeds. The School presently has not incurred any related debt.

Restricted – This component of net position (deficit) consists of constraints placed on net position (deficit) use through external constraints imposed by creditors such as through debt covenants, grantors, contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation. The School presently has no restricted net position (deficit).

Unrestricted net position (deficit) – This component of net position (deficit) consists of net position (deficit) that do not meet the definition of “restricted” or “net investment in capital assets.”

In the fund financial statements, governmental funds report nonspendable portions of fund balance related to prepaid expenses, long term receivables, and corpus on any permanent fund. Restricted funds are constrained from outside parties (statute, grantors, bond agreements, etc.). Committed fund balances represent amounts constrained for a specific purpose by a governmental entity using its highest level of decision-making authority. Committed fund balances are established and modified by a resolution approved by the Board of Trustees. Assigned fund balances are intended by the School to be used for specific purposes, but are neither restricted nor committed. Unassigned fund balances are considered the remaining amounts.

Page | 18 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Method of Accounting (Continued) When expenditures are incurred for purposes for which both restricted and unrestricted fund balance are available, it is currently the School’s policy to use restricted first, then unrestricted fund balance. When expenditures are incurred for purposes for which committed, assigned, and unassigned amounts are available, it is currently the School’s policy to use committed first, then assigned, and finally unassigned amounts.

Budgets and Budgetary Accounting Budgets are adopted on a basis consistent with U.S. generally accepted accounting principles. An annual budget is adopted for the General Fund.

The Budgetary Comparison Schedule should present both the original and the final appropriated budgets for the reporting period. The School only has a general fund budget; therefore, the original budget was filed and accepted by the Labor, Education and Community Services Comptroller’s Office is the final budget as well. The budget is required supplementary information.

Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Concentration of Credit Risk The School maintains three accounts at one bank. At times, cash in bank may exceed FDIC insurable limits.

Cash The School’s cash is considered to be cash on hand and demand deposits.

Prepaid Expenses Prepaid expenses include payments to vendors for services applicable to future accounting periods such as insurance premiums.

Capital Assets Capital assets, which include leasehold improvements and furniture and equipment, are reported in the government-wide financial statements. All capital assets are capitalized at cost and updated for additions and retirements during the year. The School maintains a threshold level of $2,500 or more for capitalizing capital assets. The School does not possess any infrastructure. Improvements are capitalized; the cost of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset’s life are not. Capital assets of the School are depreciated using the straight-line method over the useful lives of the assets. Leasehold improvements are depreciated over the lesser of the useful lives of the improvements or the remaining lease term. The estimated useful life of furniture is seven years. The estimated useful life of equipment is three years.

Page | 19 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position (deficit) will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position (deficit) that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then.

In addition to liabilities, the statement of net position (deficit) will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position (deficit) that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time.

Income Tax Status The School is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Service Code. No provision for income taxes has been established, as the School has no unrelated business activity. Should the tax exempt status be challenged in the future, the School’s three most recent tax years are open for examination by the IRS.

NOTE 2 CASH

Deposits Custodial credit risk is the risk that in the event of a bank failure, the government’s deposits may not be returned to it. The School does not have a policy for custodial credit risk. As of June 30, 2016, the school had no custodial credit risk as its balances did not exceed federally insured limits.

NOTE 3 RECEIVABLES Receivables at June 30, 2016 consist of subsidies from federal and state authorities and other government units. All receivables are considered collectible due to the stable condition of the programs.

NOTE 4 CAPITAL ASSETS

Capital asset activity for the year ended June 30, 2016 is as follows:

Governmental Activities:

Balance Balance July 1, 2015 Additions Deletions June 30, 2015

Furniture and Equipment $ 310,669 $ - $ - $ 310,669 Leasehold Improvements 2,382,880 49,285 - 2,432,165 Subtotal 2,693,549 49,285 - 2,742,834 Less: Accumulated Depreciation 2,371,044 199,837 - 2,570,881 Capital Assets, Net $ 322,505 $ (150,552) $ - $ 171,953

Depreciation expense was $199,837 for the year ended June 30, 2016.

Page | 20 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 4 CAPITAL ASSETS (CONTINUED)

Business-Type Activities:

Balance Balance July 1, 2015 June 3, 2015 Equipment $ - $ 48,224 $ - $ 48,224 Subtotal - 48,224 - 48,224 Less: Accumulated Depreciation - 7,886 - 7,886 Capital Assets, Net $ - $ 40,338 $ - $ 40,338

Depreciation expense was $7,886 for the year ended June 30, 2016.

NOTE 5 REVENUE FROM LOCAL EDUCATIONAL AGENCIES

Charter schools are funded by the local public school district. The rate of funding per student is determined on an annual basis. For non-special education students the charter school receives for each student no less than the budgeted total expenditure per average daily membership of the prior school year as defined by the Act. For the year ended, June 30, 2016, the final rates for the School District of Philadelphia was $7,737.80 per year for regular education students and $23,696.57 for special education students. The annual rate is paid monthly by the School District of Philadelphia and is prorated if a student enters or leaves during the year. Total revenue from the School District of Philadelphia was $4,807,942 for the fiscal year ended June 30, 2016. Total revenue from other local districts was $97,185.

NOTE 6 GRANTS

The School participates in numerous state and federal grant programs, which are governed by various rules and regulations of the grantor agencies. Costs charged to the respective grant programs and reimbursement programs are subject to audit and adjustment by the grantor agencies; therefore, to the extent that the School has not complied with the rules and regulations governing the grants and reimbursement programs, refunds of any money received may be required and the collectability of any related receivable at June 30, 2016 may be impaired. In the opinion of the School, there are no significant contingent liabilities relating to compliance with the rules and regulations governing the respective grants; therefore, no provision has been recorded in the accompanying financial statements for such contingencies.

NOTE 7 PENSION PLAN

Plan description The Public School Employees’ Retirement System (PSERS) is a governmental cost-sharing multi- employer defined benefit pension plan that provides retirement benefits to public school employees of the Commonwealth of Pennsylvania. The members eligible to participate in PSERS include all full-time public school employees, part-time hourly public school employees who render at least 500 hours of service in the school year, and part-time per diem public school employees who render at least 80 days of service in the school year in any of the reporting entities in Pennsylvania. PSERS issues a publicly available financial report that can be obtained at www.psers.state.pa.us.

Page | 21 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 7 PENSION PLAN (CONTINUED)

Benefits provided

PSERS provides retirement, disability and death benefits. Members are eligible for monthly retirement benefits upon reaching (a) age 62 with at least 1 year credited service; (b) age 60 with 30 or more years of credited service; or (c) 35 or more years of service regardless of age. Act 120 of 2010 (Act 120) preserves the benefits of existing members and introduced benefit reductions for individuals who become new members on or after July 1, 2011. Act 120 created two new membership classes, Membership Class T-E (Class T-E) and Membership Class T-F (Class T-F). To qualify for normal retirement, Class T-E and Class T-F members must work until age 65 with a minimum of 3 years of service or attain a total combination of age and service that is equal to or greater than 92 with a minimum of 35 years of service. Benefits are generally equal to 2% or 2.5%, depending upon membership class, of the member’s final average salary (as defined in the Code) multiplied by the number of years of credited service. For members whose membership started prior to July 1, 2011, after completion of five years of service, a member’s right to the defined benefits is vested and early retirement benefits may be elected. For Class T-E and Class T-F members, the right to benefits is vested after ten years of service.

Participants are eligible for disability retirement benefits after completion of five years of credited service. Such benefits are generally equal to 2% or 2.5%, depending upon membership class, of the member’s final average salary (as defined in the Code) multiplied by the number of years of credited service, but not less than one-third of such salary nor greater than the benefit the member would have had at normal retirement age. Members over normal retirement age may apply for disability benefits.

Death benefits are payable upon the death of an active member who has reached age 62 with at least one year of credited service (age 65 with at least three years of credited service for Class T- E and Class T-F members) or who has at least five years of credited service (ten years for Class T-E and Class T-F members). Such benefits are actuarially equivalent to the benefit that would have been effective if the member had retired on the day before death.

Contributions

Member Contributions:

Active members who joined the System prior to July 22, 1983, contribute at 5.25% (Membership Class T-C) or at 6.50% (Membership Class T-D) of the member’s qualifying compensation.

Members who joined the System on or after July 22, 1983, and who were active or inactive as of July 1, 2001, contribute at 6.25% (Membership Class T-C) or at 7.5% (Membership Class T-D) of the member’s qualifying compensation.

Members who joined the system after June 30, 2001 and before July 1, 2011, contribute at 7.50% (automatic Membership Class T-D). For all new hires and for members who elected Class T-D membership, the higher contribution rates began with service rendered on or after January 1, 2002.

Page | 22 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 7 PENSION PLAN (CONTINUED)

Member Contributions (Continued):

Members who joined the System after June 30, 2011, automatically contribute at the Membership Class T-E rate of 7.50% of the member’s qualifying compensation. All new hires after June 30, 2011 who elect Class T-F membership, contribute at 10.30% (base rate) of the member’s qualifying compensation. Membership Class T-E and T-F are affected by a “shared risk” provision in Act 120 of 2010 that in future fiscal years could cause the Membership Class T- E contribution rate to fluctuate between 7.5% and 9.5% and Membership Class T-F contribution rate to fluctuate between 10.3% and 12.3%.

Employer Contributions

The School’s contractually required contribution rate for fiscal year ended June 30, 2016 was 25.84% of covered payroll, actuarially determined as an amount that, when combined with employee contributions, is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Contributions to the pension plan from the School were $593,368 for the year ended June 30, 2016.

Pension Liability, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

At June 30, 2016, the School reported a liability of $8,533,000 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by rolling forward the System’s total pension liability as of June 30, 2014 to June 30, 2015. The School’s proportion of the net pension liability was calculated utilizing the employer’s one-year reported covered payroll as it relates to the total one-year reported covered payroll. At June 30, 2015, the District’s proportion was .0197%, which decreased from .0199% as of June 30, 2014.

For the year ended June 30, 2016, the School recognized pension expense of $1,366,054. At June 30, 2016, the School reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources Difference between expected and $ - $ 28,000 actual experience Changes in assumptions - - Net differences between projected and actual earrings on pension - 351,400 plan investments Changes in proportion and differences 30,208 823,942 between School contributions and proportionate share contributions School contributions subsequent to - the measurement date 593,368 $ 623,576 $ 1,203,342

Page | 23 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 7 PENSION PLAN (CONTINUED)

$593,368 reported as deferred outflows of resources related to pensions resulting from School contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pension will be recognized in pension expense as follows:

Year ending June 30, Amount 2017 $ 344,946 2018 344,946 2019 344,946 2020 117,616 2021 14,167 $ 1,166,621

Actuarial assumptions

The total pension liability as of June 30, 2016 was determined by rolling forward the System’s total pension liability as of the June 30, 2014 actuarial valuation to June 30, 2015 using the following actuarial assumptions, applied to all periods included in the measurement:

Actuarial cost method Entry Age Normal – level % of pay Investment return 7.5%, includes inflation at 3.0% Salary increases Effective average of 5.5%, which reflects an allowance for inflation of 3%, real wage growth of 1%, and merit or seniority increases of 1.5% Mortality rates Based on the RP-2000 Combined Healthy Annuitant Tables (male and female) with age set back 3 years for both males and females. For disabled annuitants the RP-2000 Combined Disabled Tables (male and female) with age set back 7 years for males and 3 years for females.

The actuarial assumptions used in the June 30, 2014 valuation were based on the experience study that was performed for the five-year period ending June 30, 2010. The recommended assumption changes based on this experience study were adopted by the Board at its March 11, 2011 Board meeting, and were effective with the June 30, 2011 actuarial valuation.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which the best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.

The pension plan’s policy in regard to the allocation of invested plan assets is established and may be amended by the Board. Plan assets are managed with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the pension.

Page | 24 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 7 PENSION PLAN (CONTINUED)

Long-Term Target Expected Real Asset Class Allocation Rate of Return Public mrkets global equity 22.5% 4.8% Private markets (equity) 15.0% 6.6% Private real estate 12.0% 4.5% Global fixed income 7.5% 2.4% U.S. long treasuries 3.0% 1.4% TIPS 12.0% 1.1% High yield bonds 6.0% 3.3% Cash 3.0% 0.7% Absolute return 10.0% 4.9% Risk parity 10.0% 3.7% MLPs/Infrastucture 5.0% 5.2% Commodities 8.0% 3.1% Financing (LIBOR) -14.0% 1.1% 100%

The above was the Board’s adopted asset allocation policy and best estimates of geometric real rates of return for each major asset class as of June 30, 2015.

Discount rate

The discount rate used to measure the total pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rate and that contributions from employers will be made at contractually required rates, actuarially determined. Based on those assumptions, the pension plan’s fiduciary net pension was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the School’s proportionate share of the net pension liability to changes in the discount rate.

The following presents the net pension liability, calculated using a discount rate of 7.5%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1- percentage point lower (6.5%) or 1-percentage point higher (8.5%) than the current rate:

Current 1% Decrease Discount rate 1% Increase 6.50% 7.50% 8.50% School's proportionate share of net pension liability $ 10,518,000 $ 8,533,000 $ 6,865,000

Page | 25 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 7 PENSION PLAN (CONTINUED)

Pension plan fiduciary net pension

Detailed information about PSERS’ fiduciary net position is available in PSERS Comprehensive Annual Financial Report which can be found on the System’s website at www.psers.state.pa.us.

Payables to the pension plan

None.

NOTE 8 COMMITMENTS

The School leases its primary facility from the Harambee Institute Inc. (the “Institute”), which is a separate nonprofit organization from the School. The lease is dated February 6, 2006, was effective January 1, 2006 and extends through December 2016. There is an option to renew for an additional ten years. The lease also contains provisions for payment to cover the monthly cost of the outstanding mortgage on the property plus administrative and operating expenses. The rate is $41,000 per month. Rent expense for the year ended June 30, 2016 was $492,000.

Harambee Institute Inc. is indebted to Greenwich Investors XLVIII for a note on the facilities used by the School. The School is a guarantor on the note. The estimated balance of the mortgage is $3 million. The mortgage is currently in foreclosure due to non-compliance for reporting by Harambee Institute. The School is currently negotiating a purchase option which would include assuming the debt and ownership of the building.

The School is leasing copier equipment under various operating leases. Lease expense related to all equipment leases for the year ended June 30, 2016 was $60,009.

The minimum lease obligations for the next five years and the aggregate under the operating leases as of June 30, 2016 are as follows:

School Year Ending June 30, Facility Copiers Total 2017 $ 246,000 $ 28,680 $ 274,680 2018 - 1,743 1,743 Total $ 246,000 $ 30,423 $ 276,423

As of June 30, 2016, there is a balance owed to the IRS for an estimated $53,000 including interest and penalty as a result of an examination. This balance is reported as amount due taxing agency on the accompanying financial statements. The School was approved for a payment arrangement for $3,500 per month beginning in June 2014. Penalties and interest will continue to accrue until the balance is paid in full.

Page | 26 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 9 RISK MANAGEMENT

The School is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The School carries commercial insurance coverage for such risks.

There has been no significant reduction in insurance coverage from the previous year in any of the School’s policies. Settled claims resulting from these risks have not exceeded commercial insurance coverage in the past three years.

Page | 27 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2016 Over (Under) Budgeted Amounts Actual Final Original Final Amounts Budget REVENUES Local Educational Agency Assistance $ 5,182,170 $ 5,182,170 $ 4,905,127 $ (277,043) Other Local Sources 115,200 115,200 57,328 (57,872) State Sources 180,000 180,000 91,186 (88,814) Federal Sources 340,000 340,000 555,441 215,441 Total Revenues 5,817,370 5,817,370 5,609,082 (208,288)

EXPENDITURES Instruction 2,903,417 2,903,417 3,035,056 131,639 Support Services 2,733,203 2,733,203 2,556,018 (177,185) Non-Instructional Services 10,000 10,000 161,543 151,543 Other Expenditures and Financing Uses 170,750 170,750 49,285 (121,465) Total Expenditures 5,817,370 5,817,370 5,801,902 (15,468)

NET CHANGE IN FUND BALANCE (DEFICIT) $ - $ - (192,820) $ (192,820)

Fund Balance (Deficit) - Beginning of Year (319,219)

FUND BALANCE (DEFICIT) - END OF YEAR $ (512,039)

Page | 28 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS YEAR ENDED JUNE 30, 2016 Federal Grantor/ Federal Through Period Program Received (Deferred) Receipts or Federal Accrued or Pass-Through Grantor/ CFDA Grantor's Beginning/ or for Revenue Revenue Disbursements/ (Deferred) Program Title Number Number Ending Date Award the Year at 7/1/2015 Recognized Expenditures at 6/30/2016 U.S. Department of Education Pass-Through Pennsylvania Department of Education Title I - Improving Basic Programs 84.010 013-150849 10/11/14 -9/30/15$ 335,233$ 154,011 $ 154,011 $ - $ - $ - Title I - Improving Basic Programs 84.010 013-160849 7/20/2015-9/30/2016 321,828 259,896 - 321,828 321,828 61,932 Program Improvement - Set Aside 84.010 042-150849 7/30/2015-9/30/2016 76,653 57,490 - 76,653 76,653 19,163 Title I, Part A Cluster 471,397 154,011 398,481 398,481 81,095

Title II - Improving Teacher Quality 84.367 020-150849 10/11/14 -9/30/15 16,833 8,334 8,334 - - - Title II - Improving Teacher Quality 84.367 020-160849 7/20/2015-9/30/2016 16,458 13,291 - 16,458 16,458 3,167 Title II, Part A 21,625 8,334 16,458 16,458 3,167

21st Century Community Learning Centers AfterSchool84.287C 8 1/6/16-12/13/16 346,000 86,500 - 87,829 87,829 1,329

Pass-Through Philadelphia School District Individuals with Disabilities Education Act-B (IDEA) 84.027 N/A 9/1/15-6/30/16 52,673 - - 52,673 52,673 52,673 Special Education Cluster - - 52,673 52,673 52,673

Total U.S. Department of Education 579,522 162,345 555,441 555,441 138,264

U.S. Department of Agriculture Pass-Through Pennsylvania Department of Education National School Lunch Program - Lunch Hi/Low 10.555 362 7/1/15-6/30/16 213,901 171,854 - 213,900 213,900 42,046 School Breakfast Program - Reg/Needy Breakfast 10.553 365 7/1/15-6/30/16 132,564 104,277 - 132,565 132,565 28,288 Child Nutrition Cluster 276,131 - 346,465 346,465 70,334

Total U.S. Department of Agriculture 276,131 - 346,465 346,465 70,334

Total Federal Financial Assistance $ 855,653 $ 162,345 $ 901,906 $ 901,906 $ 208,598

PA Department of Agriculture Pass-Through Pennsylvania Department of Education Food Nutrition Service - Lunch N/A 362 7/1/15-6/30/16 9,725$ 7,899 $ - $ 9,725 $ 9,725 $ 1,826 Food Nutrition Service - Breakfast N/A 365 7/1/15-6/30/16 7,200 5,663 - 7,200 7,200 1,537 Total State Financial Assistance $ 13,562 $ - $ 16,925 $ 16,925 $ 3,363

Page | 29 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS YEAR ENDED JUNE 30, 2016

NOTE 1 GENERAL INFORMATION

The accompanying Schedule of Expenditures of Federal and State Awards presents activities of the federal and state awards programs of Harambee Institute of Science and Technology Charter School. All federal financial assistance passed through other governmental agencies or other non-profit organizations, is included in the schedule.

NOTE 2 BASIS OF ACCOUNTING

The accompanying Schedule of Expenditures of Federal and State Awards is presented using the accrual basis of accounting. The amounts reported in this schedule as expenditures may differ from certain financial reports submitted to funding agencies because those reports may be submitted on either a cash or modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Uniform Guidance.

NOTE 3 RELATIONSHIP TO BASIC FINANCIAL STATEMENTS

The expenditures reported in the basic financial statements may differ from the expenditures reported on the Schedule of Expenditures of Federal and State Awards due to program expenditures exceeding grant or contract budget limitations, which are not included as federal financial assistance.

NOTE 4 SUBRECIPIENT FUNDING

No portion of the awards reflected in the accompanying Schedules of Expenditures of Federal Awards was subcontracted to other organizations.

Page | 30

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

Independent Auditor’s Report

Board of Trustees Harambee Institute of Science & Technology Charter School of Philadelphia, Inc. Philadelphia, Pennsylvania

We have audited, in accordance with auditing standards general accepted in the Unites States of America 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 governmental activities, the business-type activities, and the each major fund of Harambee Institute of Science and Technology Charter School of Philadelphia, Inc. (the School) as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the School’s basic financial statements, and have issued our report, thereon dated January 7, 2017.

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements, we considered Harambee Institute of Science and Technology Charter School of Philadelphia, Inc.’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 opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Harambee Institute of Science and Technology Charter School of Philadelphia, Inc.’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of Harambee Institute of Science and Technology Charter School’s internal control.

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 misstatements on a timely basis. A material weakness is a deficiency, or 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. 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.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our and therefore, material weaknesses or significant deficiencies may audit we did not identify any deficiencies in internal control that we consider to be material weaknesses or significant deficiencies. However, material weakness or significant deficiencies may exist that have not been identified.

Page | 31 Board of Trustees Harambee Institute of Science & Technology Charter School of Philadelphia, Inc.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Harambee Institute of Science and Technology Charter School of Philadelphia, Inc.’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.

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 result of that testing, and not to provide an opinion on the effectiveness of the of the entity’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 entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

J. Miller & Associates, LLC J. MILLER & ASSOCIATES, LLC Philadelphia, Pennsylvania January 7, 2017

Page | 32

REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH UNIFORM GUIDANCE

Independent Auditor’s Report

Board of Trustees Harambee Institute of Science & Technology Charter School of Philadelphia, Inc. Philadelphia, Pennsylvania

Report on Compliance for the Major Federal Program

We have audited Harambee Institute of Science & Technology Charter School of (the School’s) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the School’s major federal program for the year ended June 30, 2016. The School’s major federal program is identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.

Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for the School’s major federal program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the School’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for the School’s major federal program. However, our audit does not provide a legal determination of the School’s compliance.

Opinion on the Major Federal Program

In our opinion, the School complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on the major federal program for the year ended June 30, 2016.

Page | 33 Board of Trustees Harambee Institute of Science & Technology Charter School of Philadelphia, Inc.

Report on Internal Control over Compliance

Management of the School is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the School’s internal control over compliance with the types of requirements that could have a direct and material effect on the major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the major program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the School’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

J. Miller & Associates, LLC

J. MILLER & ASSOCIATES, LLC Philadelphia, Pennsylvania January 7, 2017

Page | 34 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL SUMMARY OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2016

Section I – Summary of Auditor’s Results

Financial Statements

Type of auditor’s report issued: Unmodified

Internal control over financial reporting: Material weakness identified? No Significant deficiency identified? None identified

Noncompliance material to financial statements noted? No

Federal Awards Internal control over major programs: Material weakness identified? No Significant deficiencies identified? None identified

Type of auditor’s report issued on compliance for major programs. Unmodified

Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? No

Identification of major programs:

10.553/10.555 Child Nutrition Cluster

CFDA Number Name of Program

Dollar threshold used to distinguish between type A and type B programs: $750,000

Auditee qualified as low-risk auditee? No

Section II – Financial Statement Findings None identified.

Section III – Federal Award Findings and Questioned Costs None identified.

Page | 35

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL OF PHILADELPHIA, INC.

FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

YEAR ENDED JUNE 30, 2015

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL OF PHILADELPHIA, INC. TABLE OF CONTENTS YEAR ENDED JUNE 30, 2015

Page

INDEPENDENT AUDITOR’S REPORT 1

REQUIRED SUPPLEMENTARY INFORMATION

Management’s Discussion and Analysis 3

BASIC FINANCIAL STATEMENTS

Statement of Net Position 7

Statement of Activities 8

Balance Sheet – Governmental Fund 9

Reconciliation of the Balance Sheet of the Governmental Fund to the Statement of Net Position – General Fund 10

Statement of Revenues, Expenditures and Change in Fund Balance (Deficit) – Governmental Fund 11

Reconciliation of the Statement of Revenues, Expenditures and Change in Fund Balance (Deficit) of the Governmental Funds to the Statement of Activities – Governmental Fund 12

Notes to Financial Statements 13

SUPPLEMENTARY INFORMATION

Schedule of Revenues, Expenditures and Change in Fund Balance (Deficit) – Budget and Actual – General Fund 24

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 25

INDEPENDENT AUDITOR’S REPORT

Board of Trustees Harambee Institute of Science and Technology Charter School of Philadelphia, Inc. Philadelphia, Pennsylvania

Report on the Financial Statements

Management’s Responsibility for the Financial Statements

Harambee Institute of Science and Technology Charter School’s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; 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 opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

-RKQ).HQQHG\%OYG6XLWH ▪3KLODGHOSKLD3$ T F Board of Trustees Harambee Institute of Science & Technology Charter School of Philadelphia, Inc.

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and the general fund of Harambee Institute of Science & Technology Charter School of Philadelphia, Inc. as of June 30, 2015, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, Harambee Institute of Science & Technology Charter School implemented the provisions of the Governmental Accounting Standards Board (GASB) Statements No. 68 – Accounting and Financial Reporting for Pensions, an amendment of GASB Statement No. 27 and No. 71 – Pension Transition for Contributions Made Subsequent to the Measurement Date, an amendment of GASB Statement No. 68, which represent a change in accounting principle. The adoption of this standard has a financial impact on the government-wide financial statements as discussed in Note 1. Our opinion is not modified with respect to this matter.

Other Matters

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 30, 2015, on our consideration of the Harambee Institute of Science and Technology Charter School of Philadelphia, Inc.’s internal control over financial reporting and on our tests of its compliance with certain provisions of law, 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 the 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 Harambee Institute of Science and Technology Charter School’s internal control over financial reporting and compliance. J. Miller & Associates, LLC

J. MILLER & ASSOCIATES, LLC

Philadelphia, Pennsylvania December 30, 2015 Page | 2 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL MANAGEMENTS DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2015

The Board of Trustees of Harambee Institute of Science & Technology Charter School of Philadelphia, Inc. (the School) offers readers of the School’s financial statements this narrative overview and analysis of the financial activities of the School for the fiscal year ended June 30, 2015. We encourage readers to consider the information presented here in conjunction with the School’s financial statements.

Financial Highlights Total revenues decreased $175,299 to $5,949,853 primarily due to the discontinuance of the PSERS subsidy program.

At the close of the current fiscal year, on a government-wide basis, the School reports a net position of ($8,336,784). Net position includes a prior period restatement for the implementation of an accounting principle relating to pensions.

At the close of the current fiscal year, on a governmental fund basis, the School reports a fund balance (deficit) of ($303,498) which represents a decreased from the prior fiscal year.

The School’s cash balance at June 30, 2015 was $186,800 representing a decrease of $23,834 from June 30, 2014.

Overview of the Financial Statements The management’s discussion and analysis is intended to serve as an introduction to the School’s basic financial statements. The School’s financial statements as presented comprise four components: Management’s Discussion and Analysis (this section), the basic financial statements, supplementary information and reporting required under Government Auditing Standards.

The statement of net position presents information on all of the School’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the School is improving or deteriorating.

The statement of activities presents information showing how the School’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows.

The government-wide financial statements report on the function of the School that is principally supported by subsidies from school districts whose constituents attend the School.

Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.

Page | 3

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL MANAGEMENTS DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2015

Overview of the Financial Statements (Continued)

Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.

Implementation of New Accounting Principle For the year ended June 30, 2015, the School implemented the provisions of the Governmental Accounting Standards Board (GASB) Statements No. 68 – Accounting and Financial Reporting for Pensions, an amendment of GASB Statement No. 27 and No. 71 – Pension Transition for Contributions Made Subsequent to the Measurement Date, an amendment of GASB Statement No. 68, which represent a change in accounting principle.

The implementation affects the government-wide financial statements only. The effects are to:

Decrease pension expense in the statement of activities by $67,521 from the pension expense recognized in the governmental funds statement. This represents the School’s proportionate pension expense in relation to the total PSERS retirement plan.

Deferred outflows of resources which include: the pension contributions made during the fiscal year ended June 30, 2015 of $516,573 difference in contribution as reported by PSERS vs. actual contributions of $31,757 to be recognized over the next 4.15 years

Deferred inflows of resources which include: $450,400 that represents the difference between projected and actual earnings which will be recognized over the next four years (will reduce pension expense) additional pension expense of $561,000 to be recognized over the next 4.15 years

Recognition of the net pension liability of $7,877,000 at June 30, 2015 based on a measurement date of June 30, 2014. This represents the School’s proportionate share of the total PSERS net pension liability.

Additionally, the effect of the implementation reduced the beginning net position from $169,801 (as reported in the prior year’s financial statements) to ($8,237,790).

These effects are illustrated in the following Government-Wide Financial Analysis.

Page | 4

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL MANAGEMENTS DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2015

Government-Wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the School, liabilities and deferred inflows of resources exceeded assets and deferred outflows of resources by $8,336,784 as of June 30, 2015.

2015 Total Assets and Deferred Outflows of resources$ 1,719,717 Total Liabilities and Deferred Inflows of Resources 10,056,501

Total Net Position $ (8,336,784)

The School’s revenues are predominately from the School District of Philadelphia, based on the student enrollment.

REVENUES Local Educational Agencies $ 4,920,782 Other Local Sources 94,086 State Sources 454,040 Federal Sources 480,945

Total Revenues 5,949,853

EXPENDITURES Instruction 3,182,757 Instructional Staff Support 409,941 Administration Support 1,026,502 Pupil Health 75,572 Business Services 172,199 Operations and Maintenance 867,075 Other Non-Instructional Support Services 74,474 Depreciation 240,327

Total Expenditures 6,048,847

Change in Net Position (98,994)

Net Position, Beginning, Restated (8,237,790)

Net Position, Ending $ (8,336,784)

Page | 5

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL MANAGEMENTS DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2015

The School’s governmental fund, (the General Fund), reported an ending fund deficit of ($303,498). For the year ended June 30, 2015, the School’s revenues of $5,965,574 exceeded expenditures of $5,906,048 by $59,526.

General Fund Budgetary Highlights Actual revenues were less than budgeted by approximately $152,000 due to less revenue from local and federal sources offset by more from state sources. Actual expenditures were less than budgeted by $196,000 primarily due to less costs incurred for other expenditures and financing uses.

Capital Asset and Debt Administration CAPITAL ASSETS As of June 30, 2015 the School’s investment in capital assets for its governmental activities totaled $322,505 (net of accumulated depreciation). This investment in capital assets includes leasehold improvements and classroom and office furniture and equipment.

Major capital asset purchases during the year included the following:

Capital expenditures of $30,007 for furniture and equipment.

LONG-TERM DEBT The School does not have any long-term debt.

Future Events that will Financially Impact the School The School is a guarantor on a mortgage note held by a separate entity, Harambee Institute Inc., related to the facilities used by the School. The estimated balance of the mortgage is $3 million. The mortgage is currently in foreclosure due to non-compliance for reporting by Harambee Institute. The School is currently negotiating a purchase option which would include assuming the debt and ownership of the building.

Page | 6

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL STATEMENT OF NET POSITION JUNE 30, 2015

Governmental Activities

ASSETS

CURRENT ASSETS Cash $ 186,800 State Subsidies Receivable 241,710 Federal Subsidies Receivable 199,517 School District Receivable 81,315 Other Receivables 12,737 Prepaid Expenses 122,380 Other Assets 4,423 Total Current Assets 848,882

CAPITAL ASSETS, NET 322,505

Total Assets 1,171,387

Deferred outflows of resources : Deferred outflows related to pensions 31,757 Contributions subsequent to measurement date 516,573 Total deferred outflows of resources 548,330

LIABILITIES

LIABILITIES Accounts Payable 638,450 Amount Due Taxing Agency 34,207 Accrued Salaries and Benefits Payable 495,444 Net Pension Liability 7,877,000

Total Liabilities 9,045,101

Deferred inflows of resources: Deferred inflows related to pensions 1,011,400

NET POSITION

Net Investment in Capital Assets 322,505 Unrestricted (8,659,289)

Total Net Position $ (8,336,784)

See accompanying Notes to Financial Statements. Page | 7 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2015

Net (Expense) Revenue and Changes in Program Revenues Net Position Charges Operating Total for Grants and Governmental Functions Expenses Service Contributions Activities Governmental Activities: Instruction $ 3,182,757 $ - $ 480,945 $ (2,701,812) Instructional Staff Support 409,941 - - (409,941) Administration Support 1,026,502 - - (1,026,502) Pupil Health 75,572 - - (75,572) Business Services 172,199 - - (172,199) Operations and Maintenance 867,075 - - (867,075) Other Non-Instructional Support Services 74,474 - - (74,474) Depreciation 240,327 - - (240,327)

Total $ 6,048,847 $ - $ 480,945 (5,567,902)

General Revenues: Local Educational Agencies 4,920,782 State Grants and Reimbursements 454,040 All Other Revenue 94,086 Total General Revenues 5,468,908

Change in Net Position (98,994)

Net Position - Beginning of Year, Restated (8,237,790)

Net Position - End of Year $ (8,336,784)

See accompanying Notes to Financial Statements. Page | 8

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL BALANCE SHEET – GOVERNMENTAL FUND JUNE 30, 2015 General Fund

ASSETS

Total Assets $ 848,882

LIABILITIES AND FUND BALANCE (DEFICIT)

LIABILITIES Accounts Payable $ 638,450 Amount Due Taxing Agency 34,207 Accrued Salaries and Benefits Payable 495,444 Total Liabilities 1,168,101

FUND BALANCE (DEFICIT) Nonspendable to: Prepaid Expenses 122,380 Security Deposit 4,423 Unassigned (446,022) Total Fund Balance (Deficit) (319,219)

Total Liabilities and Fund Balance (Deficit) $ 848,882

See accompanying Notes to Financial Statements. Page | 9 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUND TO THE STATEMENT OF NET POSITION JUNE 30, 2015

Total Fund Balance (Deficit) for Governmental Fund $ (319,219)

Total Net Position Reported for Governmental Activities in the Statement of Net Position is Different because:

Some liabilities, including net pension obligations, are not due and payable in the current period and therefore are not reported in the governmental fund

Net pension liability (7,877,000)

Deferred outflows and inflows of resources related to pensions are applicable to future periods and, therefore, are not reported in the governement fund

Deferred outflows of resources related to pensions 548,330 Deferred inflows of resources related to pensions (1,011,400)

Capital assets used in governmental funds are not financial resources and, therefore, are not reported in the fund. Those assets consist of: Equipment 310,669 Leasehold Improvements 2,382,880 Accumulated Depreciation (2,371,044) 322,505

Total Net Position of Governmental Activities $ (8,336,784)

See accompanying Notes to Financial Statements. Page | 10

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE (DEFICIT) GOVERNMENTAL FUND YEAR ENDED JUNE 30, 2015

General Fund

REVENUES Local Educational Agency Assistance $ 4,920,782 Other Local Sources 94,086 State Sources 454,040 Federal Sources 480,945 Total Revenues 5,949,853

EXPENDITURES Instruction 3,234,585 Support Services 2,590,367 Non-Instructional Services 51,089 Capital Outlays 30,007 Total Expenditures 5,906,048

NET CHANGE IN FUND BALANCE (DEFICIT) 43,805

Fund Balance (Deficit) - Beginning of Year (363,024)

FUND BALANCE (DEFICIT) - END OF YEAR $ (319,219)

See accompanying Notes to Financial Statements. Page | 11

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE (DEFICIT) OF GOVERNMENTAL FUND TO THE STATEMENT OF ACTIVITIES JUNE 30, 2015

Net Change in Fund Balance (Deficit) - Total Governmental Fund $ 43,805

Amounts Reported for Governmental Activities in the Statement of Activities are Difference because:

School pension contributions 516,573

School's proportionate share of PSERS pension expense (449,052)

Capital Outlays 30,007 Depreciation Expense (240,327)

Change in Net Position of Governmental Activities $ (98,994)

See accompanying Notes to Financial Statements. Page | 12

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

NOTE 1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GASB Statement No. 68, “Accounting and Financial Reporting for Pensions – an amendment of GASB No. 27,” issued June 2012. The objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities.

GASB Statement No. 71, “Pension Transition for Contributions Made Subsequent to the Measurement Date – An Amendment of GASB Statement No. 68,” issued November 2013. The objective of this Statement is to address an issued regarding application of the transition provisions of Statement No. 68. The issue relates to amounts associated with contributions, if any, made to a defined benefit pension plan after the measurement date of the government’s beginning net pension liability.

Government-Wide and Fund Financial Statements The government-wide financial statements (the statement of net position and the statement of activities) report on the School as a whole. The statement of activities demonstrates the degree to which the direct expenses of the School are offset by program revenues.

The fund financial statements (governmental fund balance sheet and statement of governmental fund revenues, expenditures and changes in fund balance (deficit)) report on the School’s general fund.

Measurement Focus, Basis of Accounting and Financial Statement Presentation Government-wide Financial Statements: The statement of net position and the statement of activities are prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred regardless of the timing of the related cash flows. Grants and similar items are recognized as soon as all eligibility requirements imposed by provider have been met.

Page | 13

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

NOTE 1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Measurement Focus, Basis of Accounting and Financial Statement Presentation, Continued Fund Financial Statements: The Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the School considers revenues to be available if they are collected within 60 days of the end of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting.

The government reports the following major governmental fund:

General Fund – The General Fund is the operating fund of the School and accounts for all revenues and expenditures of the School.

Method of Accounting Accounting standards requires a statement of net position, a statement of activities and changes in net position. It requires the classification of net position into three components – net investment in capital assets; restricted; and unrestricted. These calculations are defined as follows: Net investment in capital assets – This component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. If there are significant unspent related debt proceeds at year-end, the portion of the debt attributable to the unspent proceeds are not included in the calculation of net investment in capital assets. Rather, that portion of the debt is included in the same net position component as the unspent proceeds. The School presently has not incurred any related debt.

Restricted – This component of net position consists of constraints placed on net position use through external constraints imposed by creditors such as through debt covenants, grantors, contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation. The School presently has no restricted net position.

Unrestricted net position – This component of net position consists of net position that do not meet the definition of “restricted” or “net investment in capital assets.”

Page | 14

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

NOTE 1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Budgets and Budgetary Accounting Budgets are adopted on a basis consistent with U.S. generally accepted accounting principles. An annual budget is adopted for the General Fund.

Concentration of Credit Risk The School maintains three accounts at one bank. At times, cash in bank may exceed FDIC insurable limits.

Cash The School’s cash is considered to be cash on hand and demand deposits.

Prepaid Expenses Prepaid expenses include payments to vendors for services applicable to future accounting periods such as insurance premiums.

Page | 15

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

NOTE 1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then.

In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time.

Change in Accounting Principle – Pensions The School has implemented GASB 68 and GASB 71. The purpose of these statements is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. As a result of these changes in accounting principle, a net pension liability was established which required the beginning net position at July 1, 2014 to be adjusted to reflect the change. The following reconciliation provides the cumulative effect of the change in accounting principle to the net position at July 1, 2014:

Prior Period Adjustment Net position as previously reported at June 30, 2014 $ 169,801 Prior period adjustment - Implementation GASB 68: Net pension liability (initial) (8,843,000) Deferred outflows - School's contributions during FY 14 435,409

Cumulative effect of change in accounting principle (8,407,591) Net position as restated, July 1, 2014 $ (8,237,790)

NOTE 2 CASH

Deposits Custodial credit risk is the risk that in the event of a bank failure, the government’s deposits may not be returned to it. The School does not have a policy for custodial credit risk. As of June 30, 2015, the school had no custodial credit risk as its balances did not exceed federally insured limits.

Page | 16

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

NOTE 3 RECEIVABLES Receivables at June 30, 2015 consist of subsidies from federal and state authorities and other government units. All receivables are considered collectible due to the stable condition of the programs.

NOTE 4 CAPITAL ASSETS

Capital asset activity for the year ended June 30, 2015 is as follows:

Balance Balance July 1, June 30, 2014 Additions Deletions 2015

Furniture and Equipment $ 310,669 $ - $ - $ 310,669 Leasehold Improvements 2,352,873 30,007 - 2,382,880 Subtotal 2,663,542 30,007 - 2,693,549 Less: Accumulated Depreciation 2,130,717 240,327 - 2,371,044 Capital Assets, Net $ 532,825 $ (210,320) $ - $ 322,505

Depreciation expense was $240,327 for the year ended June 30, 2015.

NOTE 5 REVENUE FROM LOCAL EDUCATIONAL AGENCIES

Charter schools are funded by the local public school district. The rate of funding per student is determined on an annual basis. For non-special education students the charter school receives for each student no less than the budgeted total expenditure per average daily membership of the prior school year as defined by the Act. For the year ended, June 30, 2015, the rate for the School District of Philadelphia was $7,990 per year for regular education students and $23,287 for special education students. The annual rate is paid monthly by the School District of Philadelphia and is prorated if a student enters or leaves during the year. Total revenue from the School District of Philadelphia was $4,841,276 for the fiscal year ended June 30, 2015. Total revenue from other local districts was $79,506.

NOTE 6 GRANTS

The School participates in numerous state and federal grant programs, which are governed by various rules and regulations of the grantor agencies. Costs charged to the respective grant programs and reimbursement programs are subject to audit and adjustment by the grantor agencies; therefore, to the extent that the School has not complied with the rules and regulations governing the grants and reimbursement programs, refunds of any money received may be required and the collectability of any related receivable at June 30, 2015 may be impaired. In the opinion of the School, there are no significant contingent liabilities relating to compliance with the rules and regulations governing the respective grants; therefore, no provision has been recorded in the accompanying financial statements for such contingencies.

Page | 17

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

NOTE 7 PENSION PLAN

Benefits provided

Contributions

Member Contributions:

Active members who joined the System prior to July 22, 1983, contribute at 5.25% (Membership Class T-C) or at 6.50% (Membership Class T-D) of the member’s qualifying compensation.

Page | 18

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

NOTE 7 PENSION PLAN (CONTINUED)

Employer Contributions

The School’s contractually required contribution rate for fiscal year ended June 30, 2015 was 20.5% of covered payroll, actuarially determined as an amount that, when combined with employee contributions, is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Contributions to the pension plan from the School were $516,573 for the year ended June 30, 2015.

Pension Liability, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

At June 30, 2015, the School reported a liability of $7,877,000 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2014, and the total pension liability used to calculate the net pension liability was determined by rolling forward the System’s total pension liability as of June 30, 2013 to June 30, 2014. The School’s proportion of the net pension liability was calculated utilizing the employer’s one-year reported covered payroll as it relates to the total one-year reported covered payroll. At June 30, 2014, the District’s proportion was .0199%, which decreased from .0216% as of June 30, 2013.

For the year ended June 30, 2015, the School recognized pension expense of $449,052. At June 30, 2015, the School reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Page | 19

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

NOTE 7 PENSION PLAN (CONTINUED)

Deferred Deferred Outflows of Inflows of Resources Resources Difference between expected and $ - $ - actual experience Changes in assumptions - - Net differences between projected - (450,400) and actual earrings on pension plan investments Changes in proportion and differences 31,757 (561,000) between School contributions and proportionate share contributions School contributions subsequent to - the measurement date 516,573 $ 548,330 $ (1,011,400)

$516,573 reported as deferred outflows of resources related to pensions resulting from School contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pension will be recognized in pension expense as follows:

ending June 30, Amount 2016 $ (14,894) 2017 (14,894) 2018 (14,894) 2019 (14,894) 2020 (19,123) $ (78,699)

Actuarial assumptions

The total pension liability as of June 30, 2014 was determined by rolling forward the System’s total pension liability as of the June 30, 2013 actuarial valuation to June 30, 2014 using the following actuarial assumptions, applied to all periods included in the measurement:

Actuarial cost method Entry Age Normal – level % of pay Investment return 7.5%, includes inflation at 3% Salary increases Effective average of 5.5%, which reflects an allowance for inflation of 3%, real wage growth of 1%, and merit or seniority increases of 1.5%

Page | 20

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

NOTE 7 PENSION PLAN (CONTINUED)

Mortality rates were based on the RP-2000 Combined Healthy Annuitant Tables (male and female) with age set back 3 years for both males and females. For disabled annuitants the RP- 2000 Combined Disabled Tables (male and female) with age set back 7 years for males and 3 years for females.

The actuarial assumptions used in the June 30, 2013 valuation were based on the experience study that was performed for the five-year period ending June 30, 2010. The recommended assumption changes based on this experience study were adopted by the Board at its March 11, 2011 Board meeting, and were effective with the June 30, 2011 actuarial valuation.

Long-Term Target Expected Real Asset Class Allocation Rate of Return Public mrkets global equity 19% 5.0% Private markets (equity) 21% 6.5% Private real estate 13% 4.7% Global fixed income 8% 2.0% U.S. long treasuries 3% 1.4% TIPS 12% 1.2% High yield bonds 6% 1.7% Cash 3% 0.9% Absolute return 10% 4.8% Risk parity 5% 3.9% MLPs/Infrastucture 3% 5.3% Commodities 6% 3.3% Financing (LIBOR) -9% 1.1% 100%

The above was the Board’s adopted asset allocation policy and best estimates of geometric real rates of return for each major asset class as of June 30, 2014.

Page | 21

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

NOTE 7 PENSION PLAN (CONTINUED)

Discount rate

Sensitivity of the School’s proportionate share of the net pension liability to changes in the discount rate

Current 1% Decrease Discount rate 1% Increase 6.50% 7.50% 8.50% School's proportionate share of net pension liability $ 9,825,000 $ 7,877,000 $ 6,213,000

Pension plan fiduciary net pension

Detailed information about PSERS’ fiduciary net position is available in PSERS Comprehensive Annual Financial Report which can be found on the System’s website at www.psers.state.pa.us.

Payables to the pension plan

None.

NOTE 8 COMMITMENTS

Page | 22

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015 NOTE 8 COMMITMENTS (CONTINUED)

The School is leasing copier equipment under various operating leases. Lease expense related to all equipment leases for the year ended June 30, 2015 was $60,009.

The minimum lease obligations for the next five years and the aggregate under the operating leases as of June 30, 2015 are as follows:

School Year Ending June 30, Facility Copiers Total 2015 $ 492,000 $ 37,807 $ 529,807 2016 246,000 28,680 274,680 2017 - 28,680 28,680 2018 - 1,743 1,743 Total $ 738,000 $ 96,910 $ 834,910

As of June 30, 2015, there is a balance owed to the IRS for an estimated $34,000 including interest and penalty as a result of an examination. This balance is reported as amount due taxing agency on the accompanying financial statements. The School was approved for a payment arrangement for $3,500 per month beginning in June 2014. Penalties and interest will continue to accrue until the balance is paid in full.

NOTE 9 RISK MANAGEMENT

Page | 23 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2015

Over (Under) Budgeted Amounts Actual Final Original Final Amounts Budget REVENUES Local Educational Agency Assistance $ 5,109,459 $ 5,109,459 $ 4,920,782 $ (188,677) Other Local Sources 118,500 118,500 94,086 (24,414) State Sources 331,488 331,488 454,040 122,552 Federal Sources 542,400 542,400 480,945 (61,455) Total Revenues 6,101,847 6,101,847 5,949,853 (151,994)

EXPENDITURES Instruction 3,126,611 3,126,611 3,234,585 107,974 Support Services 2,675,117 2,675,117 2,590,367 (84,750) Non-Instructional Services 50,000 50,000 51,089 1,089 Other Expenditures and Financing Uses 250,119 250,119 30,007 (220,112) Total Expenditures 6,101,847 6,101,847 5,906,048 (195,799)

NET CHANGE IN FUND BALANCE (DEFICIT) $ - $ - 43,805 $ 43,805

Fund Balance (Deficit) - Beginning of Year (363,024)

FUND BALANCE (DEFICIT) - END OF YEAR $ (319,219)

Page | 24

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

Independent Auditor’s Report

Board of Trustees Harambee Institute of Science & Technology Charter School of Philadelphia, Inc. Philadelphia, Pennsylvania

We have audited, in accordance with auditing standards general accepted in the Unites States of America and the standards applicable to financial audits contained in Government Auditing Standard issued by the Comptroller General of the United States, the financial Statements of the governmental activities and the general fund of Harambee Institute of Science and Technology Charter School of Philadelphia, Inc. (the School) as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the School’s basic financial statements, and have issued our report, thereon dated December 30, 2015.

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements, we considered Harambee Institute of Science and Technology Charter School of Philadelphia, Inc.’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 opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Harambee Institute of Science and Technology Charter School of Philadelphia, Inc.’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of Harambee Institute of Science and Technology Charter School’s internal control.

Page | 25

Compliance and Other Matters

J. Miller & Associates, LLC

J. MILLER & ASSOCIATES, LLC Philadelphia, Pennsylvania December 30, 2015

Page | 26

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL OF PHILADELPHIA, INC.

FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

YEAR ENDED JUNE 30, 2014

HARAMBEE INSTITUTE OF SCIENCE & TECHNOLOGY CHARTER SCHOOL OF PHILADELPHIA, INC. TABLE OF CONTENTS

Page

INDEPENDENT AUDITOR’S REPORT 1

REQUIRED SUPPLEMENTARY INFORMATION

Management’s Discussion and Analysis 3

BASIC FINANCIAL STATEMENTS

Statement of Net Position 6

Statement of Activities 7

Balance Sheet – Governmental Funds 8

Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Position – General Fund 9

Statement of Revenues, Expenditures and Changes in Fund Balance (Deficit) – Governmental Funds 10

Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance (Deficit) of the Governmental Funds to the Statement of Activities – Governmental Funds 11

Notes to Financial Statements 12

Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balance (Deficit) – Budget and Actual – General Fund 19

INDEPENDENT AUDITOR’S REPORT

Board of Trustees Harambee Institute of Science and Technology Charter School of Philadelphia, Inc. Philadelphia, Pennsylvania

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities and the general fund of Harambee Institute of Science and Technology Charter School of Philadelphia, Inc. (a nonprofit organization) as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Harambee Institute of Science and Technology Charter School’s basic financial statements as listed in the table of contents. The prior year summarized comparative information has been derived from Harambee Institute of Science and Technology Charter School’s 2013 financial statements and our report dated July 24, 2014 expressed unqualified opinions on the respective financial statements of the governmental activities and the general fund.

Management’s Responsibility for the Financial Statements

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

1617 John F. Kennedy Blvd., Suite 1010 Philadelphia, PA 19103 T215-600-1701 F877-542-8725

Board of Trustees Harambee Institute of Science & Technology Charter School of Philadelphia, Inc.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and the general fund of Harambee Institute of Science & Technology Charter School of Philadelphia, Inc. as of June 30, 2014, and the respective changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America.

J. Miller & Associates, LLC J. MILLER & ASSOCIATES, LLC

Philadelphia, Pennsylvania November 3, 2014

Page | 2

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL MANAGEMENTS DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2014

The Board of Trustees of Harambee Institute of Science & Technology Charter School of Philadelphia, Inc. (the School) offers readers of the School’s financial statements this narrative overview and analysis of the financial activities of the School for the fiscal year ended June 30, 2014. We encourage readers to consider the information presented here in conjunction with the School’s financial statements.

Financial Highlights Total revenues increased $698,804 to $6,125,152 due to an increase school district funds and e-rate revenue.

At the close of the current fiscal year, the School reports an ending fund deficit of $363,024. The fund deficit decreased from the previous year-end fund deficit as the result of a $484,586 excess of revenues over expenditures for the year ended June 30, 2014.

The School’s cash balance at June 30, 2014 was $210,634 representing a decrease of $7,451 from June 30, 2014.

Overview of the Financial Statements The management’s discussion and analysis is intended to serve as an introduction to the School’s basic financial statements. The School’s financial statements as presented comprise three components: Management’s Discussion and Analysis (this section), the basic financial statements and supplementary information.

The statement of net position presents information on all of the School’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net positoin may serve as a useful indicator of whether the financial position of the School is improving or deteriorating.

The statement of activities presents information showing how the School’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows.

The government-wide financial statements report on the function of the School that is principally supported by subsidies from school districts whose constituents attend the School.

Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.

Page | 3 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL MANAGEMENTS DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2014

Overview of the Financial Statements (Continued)

Government-Wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the School, assets exceeded liabilities by $169,801 as of June 30, 2014.

2014 2013

Total Assets $ 1,542,685 $ 1,323,325 Total Liabilities 1,372,884 1,415,119

Total Net Position $ 169,801 $ (91,794)

The School’s revenues are predominately from the School District of Philadelphia, based on the student enrollment.

2014 2013 REVENUES Local Educational Agencies $ 5,166,432 $ 4,664,394 Other Local Sources 225,695 22,734 State Sources 329,683 334,586 Federal Sources 403,342 404,634

Total Revenues 6,125,152 5,426,348

EXPENDITURES Instruction 3,251,536 3,096,063 Instructional Staff Support 260,671 224,421 Administration Support 866,329 1,126,355 Pupil Health 62,732 53,062 Business Services 193,815 158,758 Operations and Maintenance 890,851 858,908 Other Non-Instructional Support Services 100,982 16,405 Depreciation 236,641 228,933

Total Expenditures 5,863,557 5,762,905

Change in Net Position 261,595 (336,557)

Net Position, Beginning (91,794) 244,763

Net Position, Ending $ 169,801 $ (91,794)

Page | 4 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL MANAGEMENTS DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2014

The School’s governmental fund, (the General Fund), reported an ending fund deficit of $363,024. For the year ended June 30, 2014, the School’s revenues of $6,125,152 exceeded expenditures of $5,640,566 by $484,586.

General Fund Budgetary Highlights The original was approved by the Board of Trustees in August 2013and submitted to the Pennsylvania Department of Education. A final amended budget was approved by the Board of Trustees in October 2013. Actual revenues were more than budget by $173,019, primarily due to amounts earned from local educational agency assistance, e-rate revenue and state sources. Actual expenditures were less than budgeted by $310,9977, primarily due to less costs for instruction and support services offset by non- instructional services and capital outlays that were not budgeted.

Capital Asset and Debt Administration CAPITAL ASSETS As of June 30, 2014 the School’s investment in capital assets for its governmental activities totaled $532,825 (net of accumulated depreciation). This investment in capital assets includes leasehold improvements and classroom and office furniture and equipment.

Major capital asset purchases during the year included the following:

Capital expenditures of $13,650 for furniture and equipment.

LONG-TERM DEBT The School does not have any long-term debt at this time.

Economic Factors and Next Year’s Budgets and Rates The School’s primary source of revenue, the student subsidy provided by the School District of Philadelphia, will have a rate decrease for regular education from $8,417 to $7,996 and a rate increase for special education from $22,307 to $23,073 for the 2014-15 school year. In addition, the retirement contribution rate will increase from 16.93% to 21.40%. The reimbursement for a portion of the retirement payments (PSERS) is being discontinued by the Commonwealth of Pennsylvania. The financial impact will be a loss of approximately $250,000 for the 2014-15 school year.

Future Events that will Financially Impact the School The School will be implementing GASB 68, Accounting for Financial Reporting for Pensions: an Amendment of GASB Statement No. 27, for the year ending June 30, 2015. The financial impact of the implementation has not been determined at this time.

Page | 5 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL STATEMENT OF NET POSITION JUNE 30, 2014

Governmental Activities 2014 2013 ASSETS

CURRENT ASSETS Cash $ 210,634 $ 218,085 State Subsidies Receivable 97,622 110,154 Federal Subsidies Receivable 335,137 172,006 School District Receivable 68,205 6,200 Other Receivables 175,110 16,177 Prepaid Expenses 119,752 44,887 Other Assets 3,400 - Total Current Assets 1,009,860 567,509

CAPITAL ASSETS, NET 532,825 755,816

Total Assets 1,542,685 1,323,325

LIABILITIES

LIABILITIES Accounts Payable 741,420 796,389 Amount Due Taxing Agency 69,207 107,650 Accrued Salaries and Benefits Payable 562,257 511,080

Total Liabilities 1,372,884 1,415,119

NET POSITION

Net Investment in Capital Assets 532,825 755,816 Unrestricted (363,024) (847,610)

Total Net Position $ 169,801 $ (91,794)

See accompanying Notes to Financial Statements. Page | 6 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2014 (WITH COMPARATIVE TOTALS FOR THE YEAR ENDED JUNE 30, 2013)

2014 2013 Net (Expense) Net (Expense) Revenue and Revenue and Program Changes in Changes in Revenues Net Position Net Position Charges Operating Total Total for Grants and Governmental Governmental Functions Expenses Service Contributions Activities Activities Governmental Activities: Instruction 3,251,536 $ - 403,342$ (2,848,194) (2,691,429) Instructional Staff Support 260,671 - - (260,671) (224,421) Administration Support 866,329 - - (866,329) (1,126,355) Pupil Health 62,732 - - (62,732) (53,062) Business Services 193,815 - - (193,815) (158,758) Operations and Maintenance 890,851 - - (890,851) (858,908) Other Non-Instructional Support Services 100,982 - - (100,982) (16,405) Depreciation 236,641 - - (236,641) (228,933)

Total $ 5,863,557 $ -$ 403,342 (5,460,215) (5,358,271)

General Revenues: Local Educational Agencies 5,166,432 4,664,394 State Grants and Reimbursements 329,683 334,586 All Other Revenue 225,695 22,734 Total General Revenues 5,721,810 5,021,714

Change in Net Position 261,595 (336,557)

Net Position - Beginning of Year (91,794) 244,763

Net Position - End of Year $ 169,801 $ (91,794)

See accompanying Notes to Financial Statements. Page | 7 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL BALANCE SHEET – GOVERNMENTAL FUNDS JUNE 30, 2014 (WITH COMPARATIVE TOTALS AT JUNE 30, 2013) General Fund 2014 2013 ASSETS

Total Assets $ 1,009,860 $ 567,509

LIABILITIES AND FUND BALANCE

LIABILITIES Accounts Payable $ 741,420 $ 796,389 Amount Due Taxing Agency 69,207 107,650 Accrued Salaries and Benefits Payable 562,257 511,080 Total Liabilities 1,372,884 1,415,119

FUND BALANCE (DEFICIT) Unrestricted Fund Balance (Deficit) (363,024) (847,610) Total Fund Balance (Deficit) (363,024) (847,610)

Total Liabilities and Fund Balance $ 1,009,860 $ 567,509

See accompanying Notes to Financial Statements. Page | 8 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2014

Total Fund Balance (Deficit) for Governmental Funds $ (363,024)

Total Net Position Reported for Governmental Activities in the Statement of Net Assets (Deficit) is Different because:

Capital assets used in governmental funds are not financial resources and, therefore, are not reported in the funds. Those assets consist of: Equipment 310,669 Leasehold Improvements 2,352,873 Accumulated Depreciation (2,130,717) 532,825

Total Net Position of Governmental Activities $ 169,801

See accompanying Notes to Financial Statements. Page | 9 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE (DEFICIT) GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2014 (WITH COMPARATIVE TOTALS FOR THE YEAR ENDED JUNE 30, 2013)

General Fund 2014 2013 REVENUES Local Educational Agency Assistance $ 5,166,432 4,664,394 Other Local Sources 225,695 22,734 State Sources 329,683 334,586 Federal Sources 403,342 404,634 Total Revenues 6,125,152 5,426,348

EXPENDITURES Instruction 3,251,536 3,096,063 Support Services 2,274,398 2,421,504 Non-Instructional Services 100,982 16,405 Capital Outlays 13,650 150,365 Total Expenditures 5,640,566 5,684,337

NET CHANGE IN FUND BALANCE (DEFICIT) 484,586 (257,989)

Fund Balance (Deficit) -Beginning of Year (847,610) (589,621)

FUND BALANCE (DEFICIT) - END OF YEAR $ (363,024) $ (847,610)

See accompanying Notes to Financial Statements. Page | 10 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE (DEFICIT) OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES JUNE 30, 2014

Net Change in Fund Balance (Deficit) - Total Governmental Funds $ 484,586

Amounts Reported for Governmental Activities in the Statement of Activities are Difference because:

Governmental funds report capital outlays as expenditures. However, in the statement of activities, assets are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period.

Capital Outlays 13,650

Depreciation Expense (236,641)

Change in Net Position of Governmental Activities $ 261,595

See accompanying Notes to Financial Statements. Page | 11 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Comparative Financial Information The financial statements include certain prior year summarized comparative information for 2013 in total. Such information does not include sufficient detail to constitute a presentation in conformity with U.S. generally accepted accounting principles. Accordingly, such information should be read in conjunction with the School’s financial statements for the year ended June 30, 2013 from which the summarized information was derived.

The fund financial statements (governmental fund balance sheet and statement of governmental fund revenues, expenditures and changes in fund balance (deficit)) report on the School’s general fund.

Measurement Focus, Basis of Accounting and Financial Statement Presentation

Government-wide Financial Statements: The statement of net position and the statement of activities are prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred regardless of the timing of the related cash flows. Grants and similar items are recognized as soon as all eligibility requirements imposed by provider have been met.

Fund Financial Statements: Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the School considers revenues to be available if they are collected within 60 days of the end of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting.

Page | 12 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Measurement Focus, Basis of Accounting and Financial Statement Presentation, Continued

The government reports the following major governmental fund:

General Fund – The General Fund is the operating fund of the School and accounts for all revenues and expenditures of the School.

Net investment in capital assets – This component of net assets consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. If there are significant unspent related debt proceeds at year-end, the portion of the debt attributable to the unspent proceeds are not included in the calculation of net investment in capital assets. Rather, that portion of the debt is included in the same net position component as the unspent proceeds. The School presently has not incurred any related debt.

Unrestricted net position – This component of net position consists of net position that do not meet the definition of “restricted” or “net investment in capital assets.”

When expenditures are incurred for purposes for which both restricted and unrestricted fund balance are available, it is currently the School’s policy to use restricted first, then unrestricted fund balance. When expenditures are incurred for purposes for which committed, assigned, and unassigned amounts are available, it is currently the School’s policy to use committed first, then assigned, and finally unassigned amounts.

Page | 13 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Budgets and Budgetary Accounting Budgets are adopted on a basis consistent with U.S. generally accepted accounting principles. An annual budget is adopted for the General Fund.

The Budgetary Comparison Schedule should present both the original and the final appropriated budgets for the reporting period. The School only has a general fund budget; therefore, the original budget was filed and accepted by the Labor, Education and Community Services Comptroller’s Office in August 2013. An amended budget was approved by the Board of Trustees in October 2013. The budget is required supplementary information.

Concentration of Credit Risk The School maintains three accounts at one bank. At times, cash in bank may exceed FDIC insurable limits.

Cash The School’s cash is considered to be cash on hand and demand deposits.

Prepaid Expenses Prepaid expenses include payments to vendors for services applicable to future accounting periods such as insurance premiums.

Page | 14 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Deferred Outflows/Inflows of Resources (Continued) In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The School has no items that qualify for reporting in this category.

NOTE 2 CASH

Deposits Custodial credit risk is the risk that in the event of a bank failure, the government’s deposits may not be returned to it. The School does not have a policy for custodial credit risk. As of June 30, 2014, the school had no custodial credit risk as its balances did not exceed federally insured limits.

NOTE 3 RECEIVABLES Receivables at June 30, 2014 consist of subsidies from federal and state authorities and other government units. All receivables are considered collectible due to the stable condition of the programs.

NOTE 4 REVENUE FROM LOCAL EDUCATIONAL AGENCIES The School receives funding primarily from the School District of Philadelphia on a monthly basis based on enrollment. The rate of funding per student is determined on an annual basis. Charter schools are funded by the local public school district. For non-special education students the charter school receives for each student no less than the budgeted total expenditure per average daily membership of the prior school year as defined by the Act. For the year ended, June 30, 2014, the rate for the School District of Philadelphia was $8,417 per year for regular education students and $22,307 for special education students. The annual rate is paid monthly by the School District of Philadelphia and is prorated if a student enters or leaves during the year. Total revenue from the School District of Philadelphia was $5,057,797 for the fiscal year ended June 30, 2014. Total revenue from other local districts was $108,635.

Page | 15 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 5 CAPITAL ASSETS

Capital asset activity for the year ended June 30, 2014 is as follows:

Balance Balance July 1, June 30, 2013 Additions Deletions 2014

Furniture and Equipment $ 306,619 $ 4,050 $ - $ 310,669 Leasehold Improvements 2,343,273 9,600 - 2,352,873 Subtotal 2,649,892 13,650 - 2,663,542 Less: Accumulated Depreciation 1,894,076 236,641 - 2,130,717 Capital Assets, Net $ 755,816 $ (222,991) $ - $ 532,825

Depreciation expense was $236,641 for the year ended June 30, 2014.

NOTE 6 RETIREMENT PLAN

Plan Description: The School contributes to the Public School Employees’ Retirement System (the System), a governmental cost-sharing multiple-employer defined benefit pension plan. The plan provides retirement and disability benefits, legislatively mandated ad hoc cost-of-living adjustments, and healthcare insurance premium assistance to qualifying annuitants. The Public School Employees’ Retirement Code (Act No. 96 of October 2, 1975, as amended) (24 Pa.C.S. 8101-8535) assigns the authority to establish and amend benefit provisions to the System. The System issues a comprehensive annual financial report that includes financial statements and required supplementary information for the plan. A copy of the report may be obtained by writing to Diane J. Wert, Office of Financial Management, Public School Employees’ Retirement System, P.O. Box 125, Harrisburg, Pennsylvania 17108-0125. This publication is also available on the PSERS website at www.psers.state.pa.us/publications/cafr/index.htm.

Funding Policy: The contribution policy is established in the Public School Employees’ Retirement Code and requires contributions by active members, employers and the Commonwealth of Pennsylvania.

Member contributions are as follows:

- Active members who joined the System prior to July 22, 1983, contribute at 5.25% (Membership Class T-C) or at 6.5% (Membership Class T-D) of the member’s qualifying compensation.

- Members who joined the System on or after July 22, 1983, and who were active or inactive as of July 1, 2001, contribute at 6.25% (Membership Class T-C) or at 7.5% (Membership Class T-D) of the member’s qualifying compensation.

- Members who joined the System after June 30, 2001, contribute at 7.5% (automatic Membership Class T-D). For all new hires and for members who elected Class T-D membership, the higher contribution rates began with service rendered on or after January 1, 2002.

Those who become members for the first time on or after July 1, 2011, may choose between two classes of membership in PSERS, and therefore, two different base contribution rates.

Page | 16 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 6 RETIREMENT PLAN (CONTINUED)

New members electing Class T-E: • The base member contribution rate is 7.50% with “shared risk” contribution levels that may fluctuate between 7.50% and 9.50%. New members electing Class T-F: • The base member contribution rate is 10.3% (base rate) with “shared risk” contribution levels that may fluctuate between 10.30% and 12.30%.

Employer contributions are based upon an actuarial valuation. For fiscal year ended June 30, 2014, the rate of employer’s contribution was 16.93% of covered payroll. The 16.93 % rate is composed of a pension contribution rate of 16.00% for pension benefits and 0.93% for healthcare insurance premium assistance.

Payroll expense for employees covered by the System for the year ended June 30, 2014 was approximately $2.7 million.

In accordance with Act 29 of 1994, the Commonwealth of Pennsylvania will pay school entities for contributions made to the System based on the formula in Act 29 of 1994, but not less than one-half of the school entities contributions. The School’s contributions to the Plan for the years ended June 30, 2014, June 30, 2013, and June 30, 2012 totaled $432,933, $352,760 and $195,004 respectively.

NOTE 7 GRANTS

The School participates in numerous state and federal grant programs, which are governed by various rules and regulations of the grantor agencies. Costs charged to the respective grant programs and reimbursement programs are subject to audit and adjustment by the grantor agencies; therefore, to the extent that the School has not complied with the rules and regulations governing the grants and reimbursement programs, refunds of any money received may be required and the collectability of any related receivable at June 30, 2014 may be impaired. In the opinion of the School, there are no significant contingent liabilities relating to compliance with the rules and regulations governing the respective grants; therefore, no provision has been recorded in the accompanying financial statements for such contingencies.

NOTE 8 COMMITMENTS

The School leases its primary facility from the Harambee Institute Inc. (the “Institute”). The lease is dated February 6, 2006, was effective January 1, 2006 and extends through December 2016. There is an option to renew for an additional ten years. The lease also contains provisions for payment of the School’s proportionate share of taxes and operating expenses. The rate is $41,000 per month. Rent expense for the year ended June 30, 2014 was $492,000.

The School is leasing copier equipment under various operating leases. Lease expense related to all equipment leases for the year ended June 30, 2014 was $60,009.

Page | 17 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 8 COMMITMENTS (CONTINUED)

The minimum lease obligations for the next five years and the aggregate under the operating leases as of June 30, 2014 are as follows:

School Year Ending June 30, Facility Copiers Total 2015 $ 492,000 $ 37,807 $ 529,807 2016 246,000 28,680 274,680 2017 - 28,680 28,680 2018 - 1,743 1,743 Total $ 738,000 $ 96,910 $ 834,910

As of June 30, 2014, there is a balance owed to the IRS for an estimated $69,207 including interest and penalty as a result of an examination. This balance is reported as amount due taxing agency on the accompanying financial statements. The School was approved for a payment arrangement for $3,500 per month beginning in June 2014. However, during fiscal year 2014 the School made payments in excess of the payment arrangement totaling $45,500. Penalties and interest will continue to accrue until the balance is paid in full.

NOTE 9 RISK MANAGEMENT

Page | 18 HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE (DEFICIT) BUDGET AND ACTUAL – GENERAL FUND YEAR ENDED JUNE 30, 2014

Over (Under) Budgeted Amounts Actual Final Original Final Amounts Budget REVENUES Local Educational Agency Assistance $ 5,316,750 $ 5,072,033 $ 5,166,432 $ 94,399 Other Local Sources - 183,000 225,695 42,695 State Sources 290,161 288,000 329,683 41,683 Federal Sources 552,600 409,100 403,342 (5,758) Total Revenues 6,159,511 5,952,133 6,125,152 173,019

EXPENDITURES Instruction 3,653,876 3,450,942 3,251,536 (199,406) Support Services 2,505,634 2,472,601 2,274,398 (198,203) Non-Instructional Services - 28,000 100,982 72,982 Capital Outlays - - 13,650 13,650 Total Expenditures 6,159,510 5,951,543 5,640,566 (310,977)

NET CHANGE IN FUND BALANCE (DEFICIT) $ 1 $ 590 484,586 $ 483,996

Fund Balance (Deficit) - Beginning of Year (847,610)

FUND BALANCE (DEFICIT) - END OF YEAR $ (363,024)

Page | 19 Harambee Institute of Science and Technology Charter School Accrual Basis Balance Sheet As of June 30, 2016

Jun 30, 16 ASSETS Current Assets Checking/Savings 0100 · Cash 323,789.37 Total Checking/Savings 323,789.37

Accounts Receivable 0150 · Accounts Receivable 145,697.34 Total Accounts Receivable 145,697.34

Other Current Assets 0142 · State Subsidies Receivable 173,923.36 0143 · Federal Subsidies Receivable 85,591.98 0146 · Due (to) from School District 52,673.37 0181-01 · Prepaid Expenses 75,879.18 Total Other Current Assets 388,067.89

Total Current Assets 857,554.60

Fixed Assets 0220 · Building 4,998.65 0225 · Leasehold Improvements 2,394,282.03 0230 · Furniture & Equipment 343,552.13 0240 · Accumulated Depreciation 2,570,880.49- Total Fixed Assets 171,952.32

TOTAL ASSETS 1,029,506.92

LIABILITIES & EQUITY Liabilities Current Liabilities Accounts Payable 0420 · Accounts Payable 735,093.85 Total Accounts Payable 735,093.85

Other Current Liabilities 0421 · A/P & Accrued Expenses - Other 115,108.81 0461 · Accrued Salaries & Benefits 305,045.95 24000 · Payroll Liabilities 224,639.11 Total Other Current Liabilities 644,793.87

Total Current Liabilities 1,379,887.72

Total Liabilities 1,379,887.72

Unaudited - For Internal Management Use Only Page1of2 Harambee Institute of Science and Technology Charter School Accrual Basis Balance Sheet As of June 30, 2016

Jun 30, 16

Equity 0740 · Retained Earnings 1,796,424.36- 0741 · Opening Bal Equity 319,427.43 0799 · Investment in Fixed Assets 1,479,747.20 Net Income 353,131.07- Total Equity 350,380.80-

TOTAL LIABILITIES & EQUITY 1,029,506.92

Unaudited - For Internal Management Use Only Page2of2 Harambee Institute of Science and Technology Charter School Profit & Loss Accrual Basis July 2015 through June 2016

Jul '15 - Jun 16 Ordinary Income/Expense Income 6000 · Local Revenue 4,988,284.54 7000 · State Revenue 47,965.91 8000 · Federal Revenue 502,768.00 Total Income 5,539,018.45

Gross Profit 5,539,018.45

Expense 1100 · Instruction 2,763,685.04 1200 · Special Education 269,094.14 1420 · Summer Program 26,890.28 2100 · Pupil Support 130,702.03 2140300 · Psychological Consultant 71,247.48 2260 · Instruction/Curriculum Develop 58,507.75 2271 · Instructional Staff Development 17,034.43 2310 · Board Services 23,338.99 2350 · Legal & Audit Services 136,920.73 2380 · Office of the Principal Service 1,009,799.87 2440 · Nursing Services 65,967.34 2500 · Support Services - Business 165,533.53 2620 · Operation of Building Services 864,814.74 2660 · Security Services 70,397.55 2700 · Student Transportation Services 3,280.69 2810 · Technology 80,281.77 3303 · Afterschool Programs 134,653.16

Total Expense 5,892,149.52

Net Ordinary Income 353,131.07-

Net Income 353,131.07-

Unaudited - For Internal Management Use Only Page1of1 Harambee Institute of Science and Technology Charter School Profit & Loss Budget Performance Accrual Basis July 2015 through June 2016

Jul '15 - Jun 16 Budget $ Over Budget Annual Budget Ordinary Income/Expense Income 6000 · Local Revenue 4,988,284.54 4,944,873.98 43,410.56 4,944,873.98 7000 · State Revenue 47,965.91 60,000.00 12,034.09- 60,000.00 8000 · Federal Revenue 502,768.00 530,000.00 27,232.00- 530,000.00 Total Income 5,539,018.45 5,534,873.98 4,144.47 5,534,873.98

Expense 1100 · Instruction 2,763,685.04 2,712,145.34 51,539.70 2,712,145.34 1200 · Special Education 272,374.83 233,360.00 39,014.83 233,360.00 1420 · Summer Program 26,890.28 45,000.00 18,109.72- 45,000.00 2100 · Pupil Support 130,702.03 118,187.00 12,515.03 118,187.00 2140300 · Psychological Consultant 71,247.48 72,000.00 752.52- 72,000.00 2260 · Instruction/Curriculum Develop 58,507.75 80,000.00 21,492.25- 80,000.00 2271 · Instructional Staff Development 17,034.43 32,000.00 14,965.57- 32,000.00 2310 · Board Services 23,338.99 56,916.67 33,577.68- 56,916.67 2350 · Legal & Audit Services 136,920.73 50,000.04 86,920.69 50,000.04 2380 · Office of the Principal Service 1,009,799.87 765,809.44 243,990.43 765,809.44 2440 · Nursing Services 65,967.34 64,926.00 1,041.34 64,926.00 2500 · Support Services - Business 165,533.53 150,357.07 15,176.46 150,357.07 2620 · Operation of Building Services 864,814.74 962,531.09 97,716.35- 962,531.09 2660 · Security Services 70,397.55 71,756.00 1,358.45- 71,756.00 2810 · Technology 80,281.77 110,000.00 29,718.23- 110,000.00 3303 · Afterschool Programs 134,653.16 10,000.00 124,653.16 10,000.00

Total Expense 5,892,149.52 5,534,988.65 357,160.87 5,534,988.65

Net Income 353,131.07- 114.67- 353,016.40- 114.67-

Unaudited - For Internal Management Use Only Page1of1

APPENDIX D DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT, THE INDENTURE, AND THE MORTGAGE

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APPENDIX D

DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS* OF THE LOAN AGREEMENT, THE INDENTURE AND THE MORTGAGE

Definitions of Certain Terms

Certain terms used in the Indenture, the Loan Agreement and the Mortgage are defined below unless otherwise defined herein or the context clearly indicates otherwise. When and if such terms are used in this Limited Offering Memorandum they shall have the meanings set forth below. Any capitalized term used in this Limited Offering Memorandum regarding the Indenture, the Loan Agreement or the Mortgage and not defined herein shall have the meaning given such term by the Indenture, the Loan Agreement or the Mortgage. In the event of any inconsistency between any definitions or provisions purported to be summarized in this Appendix D and those contained in the Loan Agreement, Indenture or Mortgage, the definitions and provisions in the Loan Agreement, Indenture and Mortgage shall control. Copies of the Indenture, Loan Agreement and Mortgage are available from the Trustee.

“2017 Bonds” means, collectively, the 2017A Bonds and the 2017B Bonds.

“2017A Bonds” means the Authority's Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project) Series 2017A issued in the aggregate principal amount of $______.

“2017B Bonds” means the Authority's Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project) Taxable Series 2017B issued in the aggregate principal amount of $______.

“Accountant” means any independent public accounting firm licensed to practice in the Commonwealth (which may be the firm of accountants who regularly audit the books and accounts of Borrower) from time to time selected by Borrower.

“Accountant's Certificate” means a report, certificate or opinion by the Accountant.

“Acquisition Account” means the account by that name established in the Project Fund pursuant to the Indenture.

“Act” means the Pennsylvania Economic Development Financing Law, Act of August 23, 1967, P.L. 251, as amended.

“Additional Bonds” means any bonds, other than the 2017 Bonds, that are authenticated and delivered under the Indenture.

“Authority” means the Philadelphia Authority for Industrial Development a public instrumentality of the Commonwealth and a public body corporate and politic organized and existing under the Act, the issuer of the Bonds.

* Information in certain blanks to be completed upon pricing.

“Authorized Denomination” means $25,000 and any integral multiple thereof.

“Authorized Representative” means, in the case of the Authority, the Chair, the Vice- Chair, or the Vice President thereof or, in the case of Borrower, the Chief Executive Officer thereof or her designee, when used with reference to the performance of any act, the discharge of any duty or the execution of any certificate or other document, any officer, employee or other person authorized to perform such act, discharge such duty or execute such certificate or other document.

“Beneficial Owner” means any person for which a Participant acquires an interest in the Bonds.

“Bond Counsel” means an attorney or a law firm having a national reputation in the field of municipal law whose opinions are generally accepted by purchasers of municipal obligations.

“Bond Interest Fund” means the Bond Interest Fund created in Section 3.02 of the Indenture.

“Bond Interest Fund Initial Deposit” means an amount equal to $_____.

“Bond Principal Fund’' means the Bond Principal Fund created in Section 3.02 of the Indenture.

“Bond Purchase Agreement” means the 2017 Bond Purchase Agreement, ______, 2017, by and among the Authority, Borrower, and Herbert J. Sims & Co., Inc., as the underwriter for the 2017 Bonds.

“Bonds” when used in the body of the Limited Offering Memorandum means the 2017A Bonds and the 2017B Bonds, and when used in this Appendix D means the 2017A Bonds, the 2017B Bonds and any Additional Bonds, collectively.

“Borrower” means (a) Harambee Institute of Science and Technology Charter School, Inc., a Pennsylvania nonprofit corporation or (b) any surviving, resulting or transferee non-profit corporation, as provided in the Loan Agreement.

“Building” means those certain buildings and all other structures now owned or hereafter acquired that are part of the Facilities (including, but not limited to, all fixtures, heating and air conditioning equipment and all other equipment and machinery affixed thereto, and parking areas and site improvements) which are located on the Land and which is pledged as security for the Bonds, as they may from time to time exist.

“Business Day” means any day other than a Saturday or Sunday or a day on which banking institutions in the Commonwealth are authorized to close.

“Capital Improvements” means the acquisition of land, easements, facilities, and equipment (other than ordinary repairs and replacements), and the construction or reconstruction of improvements, betterments, and extensions which, under generally accepted accounting

D-2 principles as prescribed by the Governmental Accounting Standards Board, are properly chargeable as capital items.

“Capitalized Interest Account” means the account by that name established in the Project Fund pursuant to the Indenture.

“Cash on Hand” means the sum of cash, cash equivalents, liquid investments, and unrestricted marketable securities (valued at the lower of cost or market), not including amounts held in any of the Funds other than the Repair and Replacement Fund; plus amounts identified in the Borrower’s most recent audited financial statements as receivables payable by the School District of Philadelphia or the Department of Education of the Commonwealth of Pennsylvania for the purposes of general education aid; less any Net Liability arising from a short-term borrowing in which Borrower has pledged its Gross Revenue.

“Cede” means Cede & Co., the nominee of DTC, and any successor nominee of DTC.

“Code” means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

“Commonwealth” means the Commonwealth of Pennsylvania.

“Consulting Architect” means an individual or an independent engineering or architectural firm (which may be an individual or an engineering or architectural firm retained by Borrower for other purposes) selected by Borrower.

“Consulting Architect's Certificate” means a written opinion or report signed by the Consulting Architect.

“Costs of Issuance Fund” means the Costs of Issuance Fund created in the Indenture.

“Costs of Issuance Fund Initial Deposit” means an amount equal to $______which amount represents the total costs of issuance for the 2017 Bonds less an underwriter's discount.

“Cost of the Project” means the sum total of all reasonable or necessary costs incidental to the Project that may be financed pursuant to the Act.

“Debt Service Reserve Fund” means the Debt Service Reserve Fund created in Section 3.02 of the Indenture.

“Debt Service Reserve Requirement” means with respect to the 2017 Bonds, an amount equal to $______and with respect to each series of Additional Bonds issued pursuant to the Indenture, unless otherwise provided, an amount equal to the least of (i) ten percent (10%) of the proceeds of such series of Additional Bonds determined on the basis of original principal amount (unless original issue premium or original issue discount exceeds two percent (2%) of the original principal, then determined on the basis of initial purchase price to the public), (ii) the maximum annual debt service during any year for such series of Additional Bonds, and (iii) one hundred twenty-five percent (125%) of the average annual debt service for such series of Additional Bonds.

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“Default Rate” means the lesser of (i) 3% per annum above the highest rate of interest borne by any of the Bonds or (ii) the maximum rate permitted by law.

“Determination of Taxability” means one of (a), (b) or (c):

(a) The delivery to the Authority of a “Proposed Adverse Determination” (the “Adverse Determination”) in connection with an examination of the 2017A Bonds by the IRS asserting that the interest on the 2017A Bonds is included in the gross income of the Registered Owners, such Adverse Determination to be effective 30 days after delivery, subject to a stay of such 30-day period for the action described below, if prior thereto Borrower files with the Trustee evidence of the filing of a timely appeal with the IRS or evidence that a Closing Agreement is being negotiated and delivers to the Trustee a copy of such Closing Agreement or evidence of a successful appeal from the IRS within one hundred eighty (180) days after the date of such Adverse Determination, the failure of which shall constitute the occurrence of a Determination of Taxability on the date that is one hundred eighty (180) days after the date borne by such Adverse Determination.

(b) The delivery of written notice (the “Taxability Notice”) by a Registered Owner to the Authority and Borrower declaring that the IRS has issued to a Registered Owner a proposed deficiency letter (“30-day letter”), the effect of which (in the opinion of the Registered Owner) is to assert that the interest on the 2017A Bonds is included in the gross income of the Registered Owner, such Taxability Notice to be effective 30 days after the delivery, subject to a stay of such 30-day period for the period of litigation, if prior thereto Borrower agrees in writing to participate in and defend a final judicial determination to affirm that the interest on the 2017A 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 Borrower by the Authority, the Trustee or a Registered Owner 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 2017A 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 Borrower, on behalf of the Authority, the Trustee or the Registered Owner (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 2017A 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 2017A Bonds pursuant to Treasury Regulation §1.142-2 to preserve the exclusion from gross income of interest on the 2017A Bonds; and (C) procures an opinion from bond counsel acceptable to the Authority, at Borrower's cost, to the effect that there is a substantial and valid legal basis for the position that the interest on the 2017A Bonds has been, is and will remain tax-exempt, and (1) 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 the IRS has indicated a position not to rule favorably on similar questions or would not rule favorably or (2) counsel has no reason to believe that the proposed remedial action would not be

D-4 sufficient to preserve the exclusion from gross income of the interest on the 2017A 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, Borrower must agree in writing to reimburse and fully indemnify and hold harmless the Authority, the Trustee and the Registered Owners from and against any and all liability, damage, loss, cost or expense (including attorneys' fees) which the Authority, the Trustee or the Registered Owners 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 Registered Owners 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, the Trustee or the Registered Owners may reasonably request from time to time to secure the Authority, the Trustee or the Registered Owners obligations with respect to the 2017A Bonds, including without limitation, any potential increases in interest, whether prospective or retroactive, and any potential taxes, closing agreement amount, penalties or related interest.

“DTC” means The Depository Trust Company, New York, New York, and its successors and assigns.

“Educational Consultant” means an independent, professional firm or corporation experienced in providing educational consulting services to public charter schools and having a favorable reputation in the field.

“Eliminated Expenses” means any Operating Expenses that the Authorized School Representative certifies will be eliminated as a result of any proposed Long-Term Indebtedness.

“Environmental Requirements” means all present and future federal, state or local laws, regulations, orders, judgments, decrees, agreements, authorizations, consents, licenses, permits and other governmental restrictions and requirements which apply to any actual, proposed or threatened storage, existence, release, generation, abatement, removal, disposal, handling or transportation of any Hazardous Substance from, under, into or on the Facilities.

“Event of Default” means one or more events as so defined in the Loan Agreement, the Indenture or the Mortgage.

“Facilities” means, collectively, the Land and the Building and equipment therein, if any, for the educational facilities financed with proceeds of the Bonds.

“Fiscal Year” means Borrower's fiscal year, which currently begins on July 1 and ends on June 30 of the following calendar year.

“Funds” means the, the Bond Principal Fund, the Bond Interest Fund, the Debt Service Reserve Fund, the Repair and Replacement Fund, the Rebate Fund, the Project Fund and the Costs of Issuance Fund.

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“Government Obligations” means (a) State and Local Government Series issued by the United States Treasury (“SLGS”); (b) United States Treasury bills, notes and bonds, as traded on the open market; and (c) Zero Coupon United States Treasury Bonds.

“Gross Revenue” means all income and revenues directly or indirectly derived by the Borrower, from its operations, including without limitation, per pupil revenues and other funding received by virtue of the charter granted to the Borrower, and all gifts, grants, bequests and contributions (including income and profits therefrom) made to the Borrower to the extent not specifically restricted by the donor or maker thereof to a particular purpose inconsistent with their use for the payments required under the Loan Agreement.

“Guaranty” means all loan commitments of Borrower and all obligations of Borrower guaranteeing in any manner, whether directly or indirectly, any obligation of any Person that would, if such Person were Borrower, constitute Indebtedness.

“Hazardous Substance” means, at any time, (a) any “hazardous substance” as defined in §101(14) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§9601 et seq.) as amended at such time; and (b) any additional substances or materials which at such time are classified or considered to be hazardous or toxic under applicable federal, state or local laws, regulations, orders, judgments, decrees, agreements, authorizations, consents, licenses, permits and other governmental restrictions and requirements which apply to the Facilities.

“Indebtedness” means all obligations for borrowed money, payments under operating leases or similar instruments where amounts paid under such instruments are pledged or reasonably expected to be used for the repayment of principal and/or interest with respect to money borrowed, or installment sales and capitalized lease obligations, incurred or assumed by the Borrower or secured by a lien on any Property by the Borrower, including without limitation, Guarantees, Long-Term Indebtedness, Short-Term Indebtedness or any other obligations for payment of principal or interest with respect to money borrowed, provided that Indebtedness will not include (a) payments required to be deposited into any reserve funds pursuant to the provisions of any indenture or other agreement securing Indebtedness; (b) any continuing obligation of the Borrower to pay principal of and interest on Indebtedness which is deemed discharged or defeased in accordance with the agreement or instrument creating or evidencing such Indebtedness; (c) any obligation to reimburse any Person for the payment of Indebtedness; (d) Indebtedness for which moneys or obligations are on deposit in an irrevocable escrow and such moneys or obligations (including, where appropriate, the earnings or other investment to accrue thereon) are required to be applied solely to pay on a timely basis such amounts and such moneys or obligations so required to be applied are sufficient to pay such amounts.

“Indemnified Parties” has the meaning ascribed to such term in the Loan Agreement.

“Indenture” means the Trust Indenture, dated as of March 1, 2017, by and between the Authority and the Trustee, including any indentures supplemental thereto made in conformity therewith, pursuant to which the Bonds are authorized to be issued and secured.

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“Insurance Consultant” means an independent insurance consultant and/or risk management firm or an insurance broker or an insurance agent (which may be a consultant, firm, broker or agent with whom Borrower, the Authority or the Trustee regularly transacts business) selected by Borrower and accepted by the Authority.

“Interest Payment Date” means each March 1 and September 1, commencing September 1, 2017.

“Investment Obligations” means such of the following as shall mature, or shall be subject to redemption by the holder thereof at the option of such holder, not later than the respective dates when the moneys will be required for the purposes intended:

(a) Governmental Obligations;

(b) Any bonds or other obligations of any state of the United States of America or of any local governmental unit of any such state which: (i) are rated at the time of purchase in the highest rating category by S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC, based on an irrevocable escrow; (ii) are not callable unless, if applicable, irrevocable instructions have been given to the trustee of such bonds to give due notice of redemption and to call such bonds for redemption on the date(s) specified in such instructions; and (iii) are secured by cash and/or Government Obligations;

(c) Direct and general obligations of any state of the United States of America, to the payment of the principal of and interest on which the full faith and credit of such state is pledged, provided such obligations are rated at the time of purchase in either of the two highest rating categories by Standard & Poor’s Ratings Services;

(d) Obligations of any state of the United States of America or any local governmental unit of any such state which shall be rated at the time of purchase in the highest rating category by S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC;

(e) Certificates that evidence ownership of the right to payments of principal or interest on the obligations described in Subsection (i), provided that: (i) such obligations shall be held in trust by a bank or trust company or a national banking association meeting the requirements for a successor Trustee under Section 9.03 hereof; (ii) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying Government Obligations; and (iii) the underlying Government Obligations are held in a special account separate from the custodian’s general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated;

(f) Certificates of deposit, whether negotiable or nonnegotiable, and banker’s acceptances of any bank in the United States whose deposits are insured by the Federal Deposit Insurance Corporation or its successor, including the Trustee and its affiliates, or any savings and loan association in the United States whose deposits are insured by the

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Federal Deposit Insurance Corporation or its successor, provided that such certificate of deposit or banker’s acceptance is from a bank or from a savings and loan association having a combined capital and surplus aggregating at least Fifty Million Dollars ($50,000,000) provided further that such certificate of deposit or banker’s acceptance is secured by Government Obligations with a market value equal to the principal amount of such certificate of deposit or banker’s acceptance over the amount guaranteed by the Federal Deposit Insurance Corporation or its successor, and provided further that such certificate of deposit or banker’s acceptance is rated at least A-1+ by Standard & Poor’s Ratings Services at the time of purchase and has a maturity of not more than 365 days;

(g) U.S. dollar denominated deposit accounts, federal funds with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of “A-1” or “A-1+” by S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC, and “P-1” by Moody’s Investors Service (including the Trustee and its affiliates), and maturing no more than 360 days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank). The Trustee may conclusively rely upon the Borrower’s instructions as to compliance with this Subsection (g);

(h) Debentures or notes issued by any of the following Federal agencies: Bank for Cooperatives, Federal Intermediate Credit Bank, Federal Loan Bank, Export-Import Bank of the United States, Government National Mortgage Association or Federal Land Bank (including participation certificates issued by such agencies) and all other obligations issued or in the opinion of the Attorney General of the United States unconditionally guaranteed as to principal and interest by any agency or person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress;

(i) Securities of, or other interests in, a no-load, open-end or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940, 15 U.S.C. §§80a-1 to 80a-64, so long as the portfolio of the investment company or investment trust is limited to: (i) United States government obligations, U.S. agency obligations and repurchase agreements fully collateralized by United States government and agency obligations and the investment company or investment trust takes delivery of the collateral for any repurchase agreement either directly or through an authorized custodian; or (ii) securities of, or other investments in, an investment company or investment trust which meets the foregoing requirements, and is rated at least “AAAm” or “AAAm-G” by S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC, including those for which the Trustee or an affiliate performs services for a fee, whether as a custodian, transfer agent, investment advisor or otherwise; and

(j) Investments in domestic (i) money market funds subject to Securities and Exchange Commission Rule 2a-7 and rated in the highest short-term rating category by at least one nationally recognized rating agency, including without limitation, one or more money market mutual fund portfolios for which the Trustee or any of the affiliates of the Trustee serves as an investment manager, administrator, servicing agent, and/or custodian

D-8

or subcustodian, notwithstanding that (A) the Trustee or an affiliate of the Trustee receives fees from such funds for services rendered, (B) the Trustee charges and collects fees for services rendered pursuant to this Indenture, which fees are separate from the fees received from such funds, and (C) services performed for such funds and pursuant to this Indenture may at times duplicate those provided to such funds by the Trustee or its affiliates; and (ii) public sector investment pools operated pursuant to Securities and Exchange Commission Rule 2a-7 in which the Authority's deposit shall not exceed 5% of the aggregate pool balance at any time and such pool is rated in one of the two highest short-term rating categories by at least one Rating Agency.

Ratings of Investment Obligations referred to herein shall be determined at the time of purchase of such Eligible Investments and without regard to ratings subcategories. The Trustee shall have no responsibility to monitor the ratings of Investment Obligations after the initial purchase of such Eligible Investments, including at the time of the reinvestment of proceeds thereof.

“Irrevocable Deposit” means the irrevocable deposit in trust of cash in an amount (or non-callable Government Obligations, the principal of and interest on which will be in an amount) and under terms sufficient to pay all or a specified portion of the principal of, premium, if any, and/or the interest on, as the same shall become due, any Indebtedness which would otherwise be considered Outstanding. The trustee of such deposit shall have possession of any cash and securities (other than book-entry securities) and may be the Trustee or any other trustee authorized to act in such capacity.

“IRS” means the Internal Revenue Service, a bureau of the U.S. Department of the Treasury.

“Land” means the real estate, interests in real estate, and other real property rights described in the Loan Agreement, together with all real estate, interests in real estate and other real property rights made a part of the Land in connection with the substitution of such real estate and other real property rights pursuant to the Loan Agreement or as the result of replacement of property taken in condemnation, or otherwise, less such real estate, interests in real estate and other real property rights taken by the exercise of the power of eminent domain as provided in the Loan Agreement.

“Lien” means the lien of the Mortgage, and any mortgage or pledge of, security interest in, or lien or encumbrance on, any Property which secures any Indebtedness or other obligation of Borrower or which secures any obligation of any Person other than an obligation to Borrower excluding liens applicable to Property in which Borrower has only a leasehold interest unless the lien secures Indebtedness.

“Loan” means the loan by the Authority to Borrower of the proceeds from the sale of the 2017 Bonds and from any Additional Bonds pursuant to the Loan Agreement.

“Loan Agreement” means the Loan and Security Agreement, dated as of March 1, 2017, by and between the Authority and Borrower, and any amendments and supplements thereto made in conformity with the requirements thereof and of the Indenture.

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“Loan Payments” means those payments required to be paid by Borrower pursuant to Section 5.02 of the Loan Agreement.

“Long-Term Indebtedness” means all Indebtedness (other than Short-Term Indebtedness or any Guaranty which if it were a direct obligation of the Borrower, would constitute Short- Term Indebtedness) for any of the following:

(a) payments of principal and interest with respect to money borrowed for an original term, or renewable at the option of the borrower for a period from the date originally incurred, longer than one (1) year;

(b) payments under leases which are capitalized in accordance with Generally Accepted Accounting Principles having an original term, or renewable at the option of the lessee for a period from the date originally incurred, longer than one (l) year;

(c) payments under operating leases or similar instruments where amounts paid under such instruments are pledged or reasonably expected to be used for the repayment of principal and/or interest with respect to money borrowed, with a term in excess of one (1) year; and

(d) payments under installment purchase contracts having an original term in excess of one (1) year.

Any Variable Rate Long-Term Indebtedness originally determined to be Long-Term Indebtedness, shall continue to be Long-Term Indebtedness for purposes of the Loan Agreement, notwithstanding any “put,” optional tender or similar feature of such Indebtedness, whether such feature was an original attribute of the Variable Rate Long-Term Indebtedness or becomes effective with the passage of time, provided there is no event of default. Not by way of limitation, but for instance, Indebtedness originally determined to be Long-Term Indebtedness, shall continue to be Long-Term Indebtedness for purposes of the Loan Agreement, even though, solely by the passage of time, the original term is within one (1) year or less of maturity, or with the passage of time, a renewal or tender option may be exercised within one (1) year or less.

“Majority Bondholder” means the holder(s) of not less than fifty-one percent (51%) in aggregate principal amount of the Outstanding Bonds.

“Management Consultant” means a Person or firm which is not, and which has no member, holder of 5% or more of any class of its stock, director, officer or employee which is, an officer or employee of Borrower, and which is a nationally recognized professional consultant having the skill and experience necessary to render the particular report required by the provision hereof in which such requirement appears, and which is acceptable to Borrower.

“Maximum Principal and Interest Requirements” means, as of any date of calculation, the highest Principal and Interest Requirements for any outstanding Indebtedness, including the 2017 Bonds, outstanding for any succeeding Fiscal Year.

“Mortgage” means the Open-End Mortgage, Security Agreement and Fixture Filing, dated as of March 1, 2017, from Borrower in favor of the Trustee.

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“Net Income Available for Debt Service” means, for any period of determination thereof, Gross Revenue of Borrower for such period, minus the total Operating Expenses for such period and excluding from Net Income Available for Debt Service, (a) any profits or losses which would be regarded as extraordinary items under Generally Accepted Accounting Principles, (b) gain or loss in the extinguishment of Indebtedness, (c) proceeds of the Bonds and any other Indebtedness permitted by the Loan Agreement, and (d) proceeds of insurance policies, other than policies for business interruption insurance, the proceeds of any sale, transfer or other disposition of the Facilities or any other of Borrower’s assets, and any condemnation or any other damage award received by or owing to Borrower, plus any Operating Expenses that are also included in Principal and Interest Requirements.

“Net Liability” means the amount of the outstanding principal and accrued interest of the short-term borrowing.

“Net Proceeds” means, when used with respect to any insurance payment or condemnation award, the gross proceeds thereof less the expenses (including attorneys' fees) incurred in the collection of such gross proceeds.

“Nominee” means Cede, as nominee of DTC, the initial securities depository for the Bonds, and any successor nominee of DTC and, if another securities depository replaces DTC as securities depository under the Indenture, any nominee of such substitute securities depository.

“Operating Expenses” means fees and expenses of the Borrower, including but not limited to lease payments, interest payments, maintenance, repair expenses, utility expenses, real estate taxes, if any, insurance premiums, administrative and legal expenses, miscellaneous operating expenses, the cost of materials and supplies used for current operations of the Borrower, the cost of vehicles, equipment leases and service contracts, taxes, if any, upon the operations of the Borrower not otherwise mentioned herein, charges for the accumulation of appropriate reserves (excluding deposits to the Repair and Replacement Fund) for current expenses not annually recurrent, but which are such as may reasonably be expected to be incurred in accordance with Generally Accepted Accounting Principles of governmental entities in Pennsylvania, all in such amounts as reasonably determined by the Borrower; provided, however, that “Operating Expenses” shall not include (a) spending for items which could reasonably be accounted for as capital expenditures under Generally Accepted Accounting Principles of governmental entities in Pennsylvania, (b) deposits into and expenditures from the Repair and Replacement Fund, (c) depreciation and amortization expenses, or (d) replenishments of the Debt Service Reserve Fund.

“Opinion of Counsel” means an opinion in writing of legal counsel, who may be counsel to the Authority, the Trustee or the Borrower.

“Outstanding” means when used with respect to the Bonds, as of any particular time, all Bonds which have been duly authenticated and delivered by the Trustee under the Indenture, except:

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(a) Bonds theretofore canceled by the Trustee or delivered to the Trustee for cancellation after purchase in the open market or because of payment at or redemption prior to maturity;

(b) Bonds for the payment or redemption of which cash funds (or securities to the extent permitted in the Indenture) shall have been theretofore deposited with the Trustee (whether upon or prior to the maturity or redemption date of any such Bonds); provided that if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given or arrangements satisfactory to the Trustee shall have been made therefor, or waiver of such notice satisfactory in form to the Trustee, shall have been filed with the Trustee;

(d) Bonds for which the conditions enumerated in the Indenture have been met.

“Participants” means those broker-dealers, banks and other financial institutions from time to time for which DTC holds Bonds as a securities depository.

“Permitted Encumbrance” means, as of any particular time, any of the following:

(a) liens for taxes and special assessments on the Facilities not then delinquent;

(b) the Loan Agreement;

(c) purchase money security interests with respect to any item of equipment related to the Facilities permitted by the Loan Agreement;

(d) utility, access, and other easements and rights-of-way, mineral rights and reservations, restrictions and exceptions which would not in the aggregate (i) materially interfere with or impair any present use of the Facilities or any reasonably probable future use of the Facilities, or (ii) materially reduce the value which would be reasonably expected to be received for the Facilities upon any sale (including any foreclosure of the Mortgage);

(e) mechanics' and materialmen's liens related to the Facilities when payment of the related bill is not overdue;

(f) mechanics' and materialmen's liens, security interests or other encumbrances related to the Facilities to the extent permitted in the Loan Agreement;

(g) Liens arising by reason of good faith deposits with Borrower in connection with leases of real estate, bids or contracts (other than contracts for the payment of money), deposits by Borrower to secure public or statutory obligations, or to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or other similar charges;

(h) Liens arising by reason of deposits with, or the giving of any form of security to, any governmental agency as required by law or governmental regulation as a condition to any

D-12 transaction or any business or the exercise of any privilege or license, or to enable Borrower to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with workmen's compensation, unemployment insurance, pension or profit sharing plans or other similar social security plans, or to share in the privileges or benefits required for companies participating in such arrangements;

(i) judgment Liens against Borrower so long as such judgment is being contested and execution thereon is stayed or while the period for responsive pleading has not lapsed;

(j) rights reserved to or vested in any municipality, school district or public authority by the terms of any right, power, franchise, grant, license or permit, or provision of law, affecting the Facilities, to (A) terminate such right, power, franchise, grant, license or permit, provided that the exercise of such right would not materially impair the use of the Facilities or materially and adversely affect the value thereof, or (B) purchase, condemn, appropriate, or recapture, or designate a purchaser of, the Facilities;

(k) Liens on the Facilities for taxes, assessments, levies, fees, water and sewer charges, and other governmental and similar charges and any liens of mechanics, materialmen, laborers, suppliers or vendors for work or services performed or materials furnished in connection with the Facilities, which are not due and payable or which are not delinquent or which are being contested in good faith or with respect to liens of mechanics, materialmen and laborers, or have been due for less than 60 days;

(l) easements, rights of way, servitudes, restrictions and other minor defects, encumbrances and irregularities in the title to the Facilities which do not materially impair the use of the Facilities or materially and adversely affect the value thereof;

(m) rights reserved to or vested in any municipality or public authority to control or regulate the Facilities or to use the Facilities in any manner, which rights do not materially impair the use of the Facilities or materially and adversely affect the value thereof;

(n) Liens and any other restrictions, exceptions, leases, easements or encumbrances which are existing on the date of initial issuance and delivery of the Bonds and permitted to remain by the Trustee, provided that no such Lien (or the amount of Indebtedness secured thereby), restriction, exception, lease, easement or encumbrance may be increased, extended, renewed or modified to apply to the Facilities not subject to such Lien on such date, unless such Lien as so extended, renewed or modified or otherwise qualified as a Permitted Encumbrance under the Loan Agreement or is otherwise permitted pursuant to the Loan Agreement;

(o) Liens arising by reason of an Irrevocable Deposit;

(p) Liens in favor of the Trustee on the proceeds of the Bonds prior to the applications of such proceeds;

(q) Liens securing the Bonds or any additional Indebtedness permitted by the Loan Agreement;

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(r) such minor defects, irregularities, encumbrances, easements, rights-of-way and clouds on title as normally exist with respect to properties similar in character to the Facilities and which would not in the aggregate (i) materially interfere with or impair any present use of the Facilities or any reasonably probable future use of the Facilities, or (ii) materially reduce the value which would be reasonably expected to be received for the Facilities upon any sale (including any foreclosure of the Lien granted by the Mortgage);

(s) the Lien of the Mortgage; and

(t) the lease or license of the use of a part of the Facilities for use in performing professional or other services necessary for the proper and economical operation of the Facilities in accordance with customary business practices in the industry provided such lease or license does not result in private use to a degree that would adversely affect the federal tax-exempt status of the interest on the Series 2017A Bonds.

“Person” includes an individual, association, corporation, partnership, limited liability corporation, joint venture or a government or an agency or a political subdivision thereof.

“Pledged Revenues” means all revenues, rentals, fees, third-party payments, receipts, contributions or other income derived from the Facilities, including the rights to receive such revenues (each subject to Permitted Encumbrances), all as calculated in accordance with sound accounting practices, including, but not limited to, any revenues received from rentals of the Facilities; proceeds derived from insurance, condemnation proceeds, accounts, contract rights and other rights and assets, whether now or hereafter owned, held or possessed by Borrower which are derived from the Facilities; and all donations, gifts, grants, bequests and contributions (including income and profits therefrom), to the extent not specifically restricted by the donor or maker thereof to a particular purpose inconsistent with their use for any of the payments required under the Indenture. Pledged Revenues shall not, however, include any administrative fee paid to Borrower by a lessee of the Facilities for Borrower's administration of the Facilities.

“Principal and Interest Requirements” means, for any Fiscal Year, and subject to the provisions of the Indenture and the Loan Agreement, the amount required to pay the interest and principal for Long-Term Indebtedness in such Fiscal Year, excluding “funded interest” from the proceeds of the Bonds and excluding interest earnings on the Debt Service Reserve Fund at the then current interest rate per annum, to be determined on the assumption that the Bonds will be retired at the stated maturities thereon except those Bonds which are required by the Indenture to be redeemed prior to their stated maturities from sinking fund payments of Borrower is required, by the Loan Agreement and the Indenture, to make for such purpose, which Bonds will be assumed to be retired on their respective scheduled mandatory redemption dates.

“Project” means the financing or funding, as the case may be, of (a) the acquisition of marketable title to the land (the “Site”) and instructional facilities previously constructed thereon (together with the Site, the “Facilities”), currently leased by the Borrower from the owner, Harambee Institute, Inc. (the “Institute”), (b) certain renovations and improvements to the Facilities (“2017 Improvements”); (c) six (6) months’ capitalized interest on the 2017 Bonds; (d) a debt service reserve fund and (e) payment of the costs of issuance of the 2017 Bonds.

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“Project Fund” means the Project Fund created pursuant to the Indenture.

“Project Fund Initial Deposit” means an amount equal to $ ______.

“Property” means any and all right, title and interest in and to any and all property of Borrower whether real or personal, tangible or intangible and wherever situated and whether now owned or hereafter acquired.

“Pro Rata Portion” means when used with respect to a required deposit to the Bond Principal Fund or the Bond Interest Fund, the dollar amount derived by dividing the amount of principal or interest to come due on the first principal or interest payment date, respectively, by the number of monthly deposits required to be made prior to such payment date.

“Rating Agency” means Moody’s Investors Service, S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC, or Fitch Ratings.

“Rebate Analyst” means a certified public accountant, financial analyst or bond counsel, or any firm of the foregoing, experienced in making the arbitrage and rebate calculations required pursuant to Section 148 of the Code, selected and retained by the Borrower, at the expense of the Borrower, with consent of the Authority, to make the rebate computations required under this Loan Agreement.

“Rebate Fund” means the Rebate Fund created in the Indenture.

“Registered Owner” means the registered owner of any Bond.

“Regular Record Date” means the close of business on the fifteenth day of the calendar month immediately preceding each Interest Payment Date.

“Repair and Replacement Fund” means the Repair and Replacement Fund created in Section 3.02 of the Indenture.

“Repair and Replacement Fund Requirement” means a maximum of $250,000, with an amount equal to $2083 to be deposited monthly commencing [April] 2017, until the maximum is reached.

“Representation Letter” means the blanket representation letter from the Authority to DTC, dated October 31, 1995.

“Revenue Fund” means the Revenue Fund created in Section 3.02 of the Indenture.

“Revenues” means all payments received by the Trustee for the account of the Authority pursuant to the Loan Agreement and the Indenture.

“Short-Term Indebtedness” means all Indebtedness incurred or any Guaranty undertaken by Borrower in the ordinary course of business which (a) has an original maturity of one (1) year or less and (b) is not renewable at the option of Borrower beyond the original one year maturity.

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Short-Term Indebtedness shall not include Indebtedness which has a maturity of one year or less which is attributable to a temporary delay in the receipt of funds due from third party payers.

“Special Record Date” means a special record date, which shall be a Business Day, fixed to determine the names and addresses of owners for purposes of paying interest on a special interest payment date for the payment of defaulted interest, all as further provided in the Indenture.

“Tax Certificate” means the Tax Certificate and Agreement, dated as of ______, 2017, among the Authority and the Borrower and acknowledged by the Trustee and executed in connection with the initial issuance and delivery of the 2017A Bonds, as amended or supplemented from time to time pursuant to its terms.

“Trustee” means U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, with an address of Two Liberty Place, 50 South 16th Street, Philadelphia, Pennsylvania 19102, being the paying agent, the registrar and the trustee under the Indenture, or any successor corporate trustee.

“Trust Estate” means the property pledged, assigned and mortgaged to the Trustee pursuant to the granting clauses of the Indenture.

“Underwriter” means Piper Jaffray, its successors and assigns, or such other underwriter as is approved by the Authority.

“Variable Rate Long-Term Indebtedness” will mean any portion of Long-Term Indebtedness the interest rate to maturity on which is not established at the time of incurrence at a fixed interest rate.

The Loan Agreement

The following is a summary of certain provisions of the Loan and Security Agreement and is qualified by reference to such document in its entirety. Such summary does not purport to be complete or definitive, and reference is made to the Loan and Security Agreement for a full and complete statement of its terms and provisions and for the definition of capitalized terms used in this summary and not otherwise defined in this APPENDIX D. In the event of any inconsistency between any definitions or provisions of the Loan Agreement purported to be summarized in this Appendix D and those contained in the Loan Agreement, the definitions and provisions in the Loan Agreement shall control. Copies of the Loan Agreement are available from the Trustee.

Payments by School District of Philadelphia made directly to Trustee. The Borrower has sent (or will have sent prior to settlement of the sale and purchase of the 2017 Bonds) a written direction to the School District of Philadelphia, whose payments constitute the overwhelming proportion of the Borrower’s revenues, to remit its monthly payments directly to the Trustee for deposit to the Revenue Fund established under the Indenture, to be transferred and applied as hereinafter directed under “Loan Payments and Other Amounts Payable”.

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Term of the Loan Agreement. The Loan Agreement shall remain in full force and effect from the date of delivery until such time as the Loan and any other amounts constituting Indebtedness relating to the Bonds and/or any other amounts due under the Mortgage shall have been fully paid or provision is made for such payment pursuant to the Indenture and all reasonable and necessary fees and expenses of the Trustee accrued and to accrue through final payment of the Bonds, all fees and expenses of the Authority accrued and to accrue through final payment of the Bonds and all other liabilities of Borrower accrued and to accrue through final payment of the Bonds under the Loan Agreement and the Indenture have been paid or provision is made for such payments pursuant to the Indenture; provided, however, notwithstanding any other provision under the Loan Agreement (a) the indemnification provision of Section 8.06 of the Loan Agreement shall survive after the termination of the term of the Loan Agreement; (b) all agreements, representations and certifications by Borrower as to the exclusion from federal gross income of interest on the 2017A Bonds shall survive termination of the term thereof until the expiration of statutes of limitation applicable to the liability of the Registered Owners of the 2017A Bonds for federal income taxes with respect to interest on the 2017A Bonds; (c) all agreements, representations and certifications by Borrower as to the exclusion from Commonwealth gross income of interest on the 2017A Bonds shall survive termination of the term thereof until the expiration of statutes of limitation applicable to the liability of the Registered Owners of the 2017A Bonds for Commonwealth income taxes with respect to interest on the 2017A Bonds; and (d) upon the defeasance of the Indenture, all such indemnification provisions will be enforceable by the Indemnified Parties, and all such agreements, representations and certifications regarding the exclusion from gross income of the interest on the 2017A Bonds will be enforceable by the Registered Owners of the 2017A Bonds, directly against Borrower.

Disbursement from the Project Fund. The Authority has, in the Indenture, authorized and directed the Trustee to disburse the Loan moneys in the Project Fund to or on behalf of Borrower for the Costs of the Project upon receipt by the Trustee of a completed requisition or requisitions on the date of issuance of the Bonds, in the form attached thereto as Exhibit C, signed by the Authorized Representative of Borrower.

Any Loan moneys (including investment proceeds) remaining in the Project Fund, except for moneys in the Capitalized Interest Account, after the date of issuance of the Bonds may be used, at the direction of the Authorized Representative of Borrower, to the extent indicated, for the payment, in accordance with the provisions of the Loan Agreement, of any Cost of the Project not theretofore paid. Any Loan moneys (including investment proceeds) remaining in the Project Fund [as of the date that is thirty (30) days prior to the first principal payment date], and not set aside for the payment of the Costs of the Project shall on such date be transferred to the Bond Principal Fund to pay principal on the Bonds pursuant to the Indenture.

In the event the Loan moneys in the Project Fund available for payment of the Cost of the Project are not sufficient to pay the costs in full, Borrower will pay or deposit in the Project Fund moneys sufficient to pay the costs of completing the Project as may be in excess of the moneys available therefor in the Project Fund. If after exhaustion of the moneys in the Project Fund or otherwise Borrower should pay or deposit moneys in the Project Fund for the payment of any portion of the Costs of the Project pursuant to the provisions of the Loan Agreement, it will not be entitled to any reimbursement therefor from the Authority or from the Trustee or from the

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Registered Owners of the Bonds, nor will it be entitled to any diminution or postponement of the Loan Payments, or other amounts required to be paid under the Loan Agreement.

Disbursements from the Costs of Issuance Fund. The Authority has, in the Indenture, authorized and directed the Trustee to make payments from the Costs of Issuance Fund for the payment of issuance expenses. Payments will be made from the Costs of Issuance Fund only for paying the costs of legal, accounting, organization, marketing or other special services and other fees and expenses, incurred or to be incurred by or on behalf of the Authority, the Trustee, Borrower in connection with the issuance of the Bonds. The Authority does not make any warranty either express or implied that the moneys in the Costs of Issuance Fund available for payment of the foregoing costs will be sufficient to pay such costs in full, and Borrower will pay that portion of such costs in excess of the amount in the Costs of Issuance Fund from any moneys legally available for such purpose. Borrower will not be entitled as a result of paying a portion of the issuance expenses to any reimbursement from the Authority, the Trustee or the Registered Owners of the Bonds, nor will it be entitled to any diminution in or postponement of the Loan Payments or other amounts required to be paid under the Loan Agreement. The Trustee will make payments from the Costs of Issuance Fund in accordance with the closing statement prepared by the Underwriter dated as of the Closing Date and any moneys remaining in the Costs of Issuance Fund following such payments and any other payments to be made from such fund will be transferred to the Bond Interest Fund.

Disbursements from the Repair and Replacement Fund. The Authority has, in the Indenture, authorized and directed the Trustee to make payments from the Repair and Replacement Fund. Payments will be made from the Repair and Replacement Fund upon receipt by the Trustee of a written requisition from an Authorized Representative of Borrower setting forth the amount and the payee for the purpose of paying the cost of extraordinary maintenance and replacements which may be required to keep the Facilities in sound condition, including but not limited to replacement of equipment, replacement of any roof or other structural component, exterior painting and the replacement of heating, air conditioning, plumbing, electrical equipment and floor covering.

Investment of Moneys. Any Loan moneys held as a part of the Funds will be invested, reinvested and transferred to other Funds by the Trustee as provided in the Indenture and at the written direction of Borrower. Any money held as a part of the Funds will be invested in compliance with the procedures established by the Tax Certificate to the extent required to comply with covenants contained in the Loan Agreement. Borrower will provide to the Trustee at least every five years from the date of issuance of the Bonds, as provided in the Tax Certificate, a certificate of an Authorized Representative of Borrower to the effect that all requirements of the Loan Agreement, the Indenture and the Tax Certificate with respect to the Rebate Fund have been met on a continuing basis, (b) the proper amounts have been and are on deposit in the Rebate Fund, and (c) timely payment of all amounts due and owing to the United States Treasury have been made. If the certifications required by either (b) or (c) above cannot be made, the certificate will so state and will be accompanied by either money of Borrower together with a direction to the Trustee to either deposit such money to the Rebate Fund or to pay such money over to the United States Treasury, as appropriate, or written directions to the Trustee to transfer investment income available in any Fund to the Rebate Fund or to the United States

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Treasury, as appropriate. Borrower will acknowledge the provisions of the Indenture which limit the amount of money to be so transferred from the Funds at its direction.

If the certificate described in the preceding paragraph is not delivered to the Trustee within 30 days following each computation date as provided in the Tax Certificate, during the term of the Loan Agreement, the Trustee will provide the Authority with written notice of such failure to receive such certificate. The Trustee will transfer moneys from other Funds as provided in the Indenture to the Rebate Fund or the United States Treasury if directed by a rebate analyst of Borrower.

Tax Covenants.

(a) Borrower will not take any action or omit to take any action with respect to the 2017A Bonds, the proceeds thereof, any other funds of Borrower or any of the Property of Borrower, including the Facilities, if such action or omission would cause the interest on the 2017A Bonds to lose its exclusion from gross income for federal income tax purposes under Section 103 of the Code, or would cause interest on the 2017A Bonds to lose its exclusion from Commonwealth taxable income under present Commonwealth law. The foregoing remains in full force and effect notwithstanding the payment in full or defeasance of the Bonds until the expiration of statutes of limitations applicable to the liability of the Registered Owners of the 2017A Bonds for federal income taxes with respect to interest on the 2017A Bonds, and the Registered Owners of the Bonds for Commonwealth income taxes with respect to interest on the Bonds.

(b) The procedures set forth in the Tax Certificate implementing the above will be complied with by Borrower to the extent necessary under the Code to maintain the exclusion from gross income of interest on the 2017A Bonds for federal income tax purposes or to avoid the application of any penalties under the Code, subject to any applicable statute of limitations. Borrower will appoint a Rebate Analyst to facilitate compliance with this covenant.

(c) The Authority and Borrower covenant and agree that they shall not enter into any arrangement, formal or informal, pursuant to which Borrower (or any “related party,” as defined in Section 1.150-1(b) of the Treasury Regulations) shall purchase the 2017A Bonds. This covenant shall not prevent Borrower from purchasing Bonds in the open market for the purpose of tendering them to the Trustee for purchase and retirement.

(d) With the intent not to limit the generality of the foregoing, Borrower will covenant and agree that:

(i) Borrower shall spend not less than 95% of the proceeds of the 2017A Bonds, plus earnings thereon, for capital costs of the Facilities being financed and all of such Facilities will be used by Borrower for its exempt purposes under Section 501(c)(3) of the Code. Capital costs are defined as costs of land or property of a character subject to allowance for depreciation under Section 167 of the Code and do not include inventory or working capital, costs of issuance or interest following completion of construction.

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(ii) Borrower (a) will take whatever actions are necessary for it to continue to be organized and operated in a manner which will preserve and maintain its status as an organization which is (1) described in Section 501(c)(3) of the Code, and (2) exempt from Federal income taxes under Section 501(a) of the Code (except as to unrelated trade or business income) and (b) will not intentionally perform any acts nor enter into any agreements which would cause any revocation or adverse modification of such Federal income tax status.

Except as permitted by Section 149(b)(3) of the Code, Borrower will not permit the 2017A Bonds to be federally guaranteed within the meaning of Section 149(b) of the Code.

The weighted average maturity of the 2017A Bonds does not exceed 120% of the weighted average reasonably expected economic life of the property financed with such series of Bonds, determined in accordance with Section 147(b) of the Code. For purposes of the preceding sentence, the reasonably expected economic life of property shall be determined as of the date such property was placed in service or, if later, the date of issuance of the related series of Bonds.

The statements concerning the 2017A Bonds and the application of the Bond Proceeds of such series required by Section 149(e) of the Code, and approved by Borrower on behalf of the Authority, are true and complete for the purposes for which intended. Borrower will prepare and submit, or cause to be submitted, true and complete amendments of, or supplements to, those statements if, in an opinion of bond counsel, such amendments or supplements are deemed to be necessary or advisable.

No changes will be made in the bond-financed property of the 2017A Bonds or in the use of such facilities which will adversely affect the excludability from gross income for federal income tax purposes of the interest on the 2017A Bonds or will cause the interest on the 2017A Bonds, or any portion thereof, to constitute an item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations under the Code. Borrower will use the bond-financed property of the 2017A Bonds or cause such property to be used so long as the 2017A Bonds remain unpaid so as to constitute a “project” within the meaning of the Act.

No proceeds of the 2017A Bonds will be used to reimburse Borrower for any expenditure made by Borrower more than 60 days prior to a qualifying declaration of intent, which is approved by bond counsel, except for planning costs and other preliminary expenditures within the meaning of Section 1.150-2 (f)(2) of the Treasury Regulations not in excess of 20% of the issue price of the related series of Bonds and de minimis expenses within the meaning of Section 1.150 2(f)(1) of the Treasury Regulations.

Borrower will not make any investment or deposit in Investment Obligations or which involves the payment or agreement to pay to a party other than the United States an amount that is required to be paid to the United States by entering into a transaction that reduces the rebate amount payable to the United States or results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the yield on the related series of Bonds not been relevant to either party to the transaction.

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The costs of issuance financed with proceeds of the 2017A Bonds, including any bond discount on the sale of such Bonds, will not exceed 2% of the proceeds of such Bonds. Borrower will pay any remaining costs of issuance exceeding 2% of the proceeds of the 2017A Bonds on the date of the issuance of the Bonds.

Title Insurance. On or before the date of issuance of any Bonds and the making of the Loan, the Trustee will be provided with (i) a standard owner's title insurance policy insuring Borrower's ownership interest in the real property and (ii) a standard mortgagee's title insurance policy insuring the Trustee's mortgagee's interest under the Mortgage in the Land and included in the Facilities, subject only to Permitted Encumbrances, in the principal amount of the Outstanding Bonds. Each such policy will be in the form of an ALTA extended policy of title insurance issued by a title company acceptable to the Authority and the Trustee and may not permit the title insurer to purchase any Bonds in lieu of providing payment under the policy unless, upon purchase, all such Bonds are cancelled.

Mortgage and Security Agreement Provisions; Evidence of Loan Indebtedness. In order to secure the payment of the Loan and the payment of all other amounts payable under the Loan Agreement and under the Mortgage and to secure the performance by Borrower of all the covenants expressed or implied by the Loan Agreement and the documents and instruments executed in connection therewith:

(a) Borrower will execute and deliver the Mortgage concurrently with the Loan Agreement. The Mortgage will secure the Loan and all obligations in a first lien security position in favor of the Authority, and its successors and assigns, subject only to Permitted Encumbrances;

(b) Borrower pledges to and grants to the Authority a present security interest, within the meaning of the Commonwealth Uniform Commercial Code and to the extent permitted by law, in all personal property, materials, equipment, fixtures or other property whatsoever now or later attached or affixed to, or installed in, or used in connection with the buildings and other improvements now erected or later to be erected on the Land or otherwise in connection with the Facilities, all accounts, escrows, documents, instruments, chattel paper, claims, deposits and general intangibles, as the foregoing terms are defined in the Uniform Commercial Code, and all contract rights, franchises, books, contracts, certificates, records, plans, specifications, permits, licenses (to the extent assignable), approvals, actions, and causes of action which now or later relate to, are derived from or are used in connection with the Facilities, or the use, operation, construction, management, maintenance, occupancy, operation, or enjoyment thereof or the conduct of any business or activities thereon (collectively, the “Intangibles”), insurance proceeds and all renewals or replacements of or substitutions for any of the foregoing comprising the Facilities and together with and including all Pledged Revenues and all the proceeds thereof, subject to Permitted Encumbrances, and all of Borrower's right, title and interest, if any, in the Funds and in any trust accounts referred to in the Loan Agreement or the Indenture; and

(c) the Liens of the Loan Agreement and the Mortgage will apply to all property related to the Land or the Facilities acquired by Borrower after the date of the Loan Agreement which by the terms of the Loan Agreement will be subject to the Lien and/or the security interests created thereby, will immediately upon the acquisition by Borrower and without further

D-21 mortgage, encumbrance, conveyance, or assignment become subject to the Lien and security interests created by the Loan Agreement, the Mortgage and any and all other documents and instruments delivered in connection therewith, including, without limitation, any Uniform Commercial Code Financing Statements. Borrower will execute, acknowledge, deliver and record or file, as appropriate, all and every such further mortgages, deeds of trust, security agreements, financing statements and assurances as the Authority requires for accomplishing the purposes of the Loan Agreement. Failure of Borrower to execute and deliver such requested documents will be deemed a default thereunder and the Authority and its successors and assigns, as the beneficiary thereunder and under the Mortgage, is given the express authority to file any and all such financing statements, amendments and documents necessary to confirm the Loan Agreements set forth therein, which grant is coupled with an interest and is non-revocable.

The Authority and the Trustee will terminate and release the Mortgage and the security interests granted, sold, bargained or conveyed unto the Authority when the Loan has been paid in full and the Bonds secured thereby are no longer Outstanding and all obligations under the Indenture and the Loan Agreement have been satisfied.

The Loan Agreement constitutes a security agreement and financing statement and is intended to create a perfected security interest (to the extent that such security interest can be perfected by filing) in any property covered by the Loan Agreement which consists of personal property, intangible interests or any right or interest, the perfection of which is governed by the Commonwealth Uniform Commercial Code in favor of the Authority.

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Loan Payments and Other Amounts Payable.

(a) The Loan will be paid by the Borrower from the amounts paid by the School District of Philadelphia directly to the Trustee for deposit into the Revenue Fund established and held under the Indenture, until the principal of, premium, if any, and interest on the Bonds (and any other sums due thereunder) has been paid or provision for the payment thereof will have been made in accordance with the Indenture and transferred by the Trustee within one Business Day of receipt, (i) into the Bond Interest Fund on or before the first day of each month following the month in which the payment from the School District is received, during the term of the Loan Agreement, commencing in April 2017 (in respect of May 1, 2017), an amount (after taking into account any accrued and capitalized interest, if any, contained in the Bond Interest Fund) sufficient to pay 1/6th of the interest which will become due on the Bonds on the next succeeding Interest Payment Date, and (ii) into the Bond Principal Fund on or before the first day of each month following the month in which the payment from the School District is received, during the term of the Loan Agreement, commencing in April 2017 (in respect of May 1, 2017), and thereafter (taking into account, with respect to the final Loan Payment, any amount in the Debt Service Reserve Fund which will be used for such final Loan Payment), an amount sufficient to pay 1/12th the principal which will become due on the Bonds on the next succeeding principal payment date (whether at maturity, upon sinking fund redemption or otherwise); provided, however, that any amount in the Bond Interest Fund or the Bond Principal Fund in excess of the aggregate amount required to be held will be credited against the next succeeding Loan Payment due or otherwise transferred by the Trustee in accordance with the terms of the Indenture; provided further, in the event that the first full month following the month in which the Bonds are issued is not six months prior to the first interest payment date and twelve months prior to the first principal payment date, which is March 1, 2017, an amount equal to the Pro Rata Portion of the interest and principal, respectively, to come due on the Bonds will be substituted for the 1/6th and 1/12th payments otherwise required prior to the first interest payment date and first principal payment date, respectively. On or before the mailing of any notice of redemption pursuant to the Indenture (other than a sinking fund redemption date), Borrower will pay as repayment of the Loan for deposit into the Bond Principal Fund an amount of money which, together with other moneys available in the Bond Principal Fund, is sufficient to pay the principal of and premium, if any, on the Bonds called for redemption and for deposit into the Bond Interest Fund an amount of money which, together with other moneys available in the Bond Interest Fund, is sufficient to pay the interest accrued to the redemption date on the Bonds called for redemption. If by the Business Day on or nearest the third day prior to any principal or interest payment date on the Bonds or the date any other amounts are payable on the Bonds the amount held by the Trustee in the Bond Principal Fund and the Bond Interest Fund is insufficient to make the required payments of principal of, premium, if any, and interest on the Bonds, Borrower will upon notice of such deficiency from the Trustee forthwith pay or cause to be paid such deficiency as repayment of the Loan for deposit into the Bond Principal Fund or the Bond Interest Fund, as the case may be. In the event the size of the Loan is increased by the issuance by the Authority of Additional Bonds for the benefit of the Borrower, the amount of the payments to be made hereunder shall be recalculated by an Accountant, at the expense of the Borrower, to account for such Additional Bonds.

(b) In the event any moneys in the Debt Service Reserve Fund are transferred to the Bond Principal Fund or the Bond Interest Fund pursuant to the Indenture or to the Rebate Fund

D-23 pursuant to the Indenture, or in the event the Trustee has notified Borrower of a deficiency in the Debt Service Reserve Fund pursuant to the Indenture, Borrower will, in 6 equal monthly installments, beginning on the first day of the month following the date on which such deficiency occurs and the first day of each month thereafter (in accordance with the Indenture), deposit or cause to be deposited moneys into the Debt Service Reserve Fund in an amount equal to the amount required to cause the total amount in the Debt Service Reserve Fund to equal the Debt Service Reserve Requirement.

(c) Borrower will pay or provide for the payment of all taxes and assessments, general or special, concerning or in any way related to the Facilities or any part thereof, during the term of the Loan Agreement and any other governmental charges and impositions whatsoever, and all utility and other charges and assessments.

(d) Borrower will pay to the Trustee the reasonable and necessary fees and expenses of the Trustee, including its attorney fees and expenses as and when the same become due, upon submission of a statement therefor.

(e) Borrower will pay to the Trustee for deposit to the Rebate Fund all amounts required to be paid pursuant to the Tax Certificate.

(f) Borrower has paid the Authority an initial fee. Borrower will pay or cause to be paid to the Authority any amounts required to reimburse the Authority for any expenses incurred by the Authority, whether out-of-pocket or internal, in connection with any litigation which may at any time be instituted involving the Loan Agreement, the Bonds or any of the other documents contemplated thereby, or incurred in connection with the Loan Agreement, the Indenture, the Bonds, the Tax Certificate, the purchase contract for the Bonds, the Facilities or any other instrument or action relating to the foregoing, including, but not limited to, fees and disbursements of attorneys of the Authority and termination fees. Such additional payment shall be billed to Borrower from time to time, by the Authority, together with a statement certifying that the amount billed has been paid or incurred and attaching reasonable supporting documentation indicating that the amount billed has been paid or incurred for one or more of the above items. After such a demand, amounts so billed shall be paid by Borrower within ten (10) days after receipt of the bill by Borrower. The sum of such Annual Fee and initial fee shall at all times be in an amount which does not cause Borrower to violate the provisions of Section 4.08 of the Loan Agreement.

(g) Unless the amount on deposit in the Repair and Replacement Fund on the first Business Day of any Fiscal Year equals or exceeds the Repair and Replacement Fund Requirement (in which event no additional deposits are required), commencing in the first month of said Fiscal Year Borrower shall pay or cause to be paid to the Trustee monthly amounts of $2083 (to the extent payment of such monthly amounts is not already being made) until the Repair and Replacement Fund Requirement ($250,000) is met. Borrower will not be required to pay the Trustee any amounts that would result in monies in excess of the Repair and Replacement Requirement being held in the Repair and Replacement Fund.

In the event Borrower fails to make any of the payments required, the item or installment in default will continue as an obligation of Borrower until the amount in default has been fully

D-24 paid, and Borrower agrees to pay the same, and with respect to the payments required by subsections (a), (d) and (f) above, will pay interest at the Default Rate.

Notwithstanding anything herein to the contrary, the Borrower shall receive as a credit against any amounts to be paid by it pursuant to Section 5.02 of the Agreement, amounts on hand in the Revenue Fund and applied to cover such payments in accordance with the Indenture.

Payees of Payments. The Loan Payments provided for in paragraph (a) of the Section entitled “Loan Payments and Other Amounts Payable” above will be paid in funds immediately available in the city in which the principal office of the Trustee is located or at such other location as it shall direct, directly to the Trustee for the account of the Authority and shall be deposited into the Bond Principal Fund or the Bond Interest Fund as appropriate. The payments provided for in paragraph (b) of the Section entitled “Loan Payments and Other Amounts Payable” above will be paid to the Trustee for the account of the Authority and deposited into the Debt Service Reserve Fund. The payments provided for in paragraph (c) of the Section entitled “Loan Payments and Other Amounts Payable” above will be paid to the persons to whom due. The payments to be made to the Trustee in paragraph (d) of the Section entitled “Loan Payments and Other Amounts Payable” above will be paid directly to the Trustee for its own use. The payments provided for in paragraph (e) of the Section entitled “Loan Payments and Other Amounts Payable” above will be paid to the Trustee for the account of the Authority and deposited into the Rebate Fund. The payments to be made to the Authority in paragraph (f) of the Section entitled “Loan Payments and Other Amounts Payable” above will be paid directly to the Authority for its own use. The payments provided for in paragraph (g) of the Section entitled “Loan Payments and Other Amounts Payable” above will be paid to the Trustee for the account of the Authority and shall be deposited into the Repair and Replacement Fund. Notwithstanding anything herein to the contrary, the Borrower shall receive as a credit against any amounts to be paid by it pursuant to Section 5.02 of the Agreement, amounts on hand in the Revenue Fund and applied to cover such payments in accordance with the Indenture.

Obligations of Borrower Unconditional. The obligations of Borrower to make the payments required and to perform and observe the other agreements on its part are absolute and unconditional.

Maintenance and Modifications of Facilities by Corporation. The Facilities will be operated and maintained, in substantial compliance with the Borrower’s charter and with all governmental laws, building codes, ordinances, regulations and zoning laws as will be applicable to such Facilities. Borrower will (a) keep the Facilities in as reasonably safe condition as the operations at the Facilities permit and (b) keep the Facilities in good repair and in good operating condition, making from time to time all necessary repairs thereto (including external and structural repairs) and renewals and replacements thereof. Borrower may dispose of portions of the Facilities that Borrower determines to be obsolete or not useful to operations of the Facilities; provided, however, that such disposition shall require the prior written consent of the Trustee and the Authority. Borrower will not permit any Liens, security interests or other encumbrances other than Permitted Encumbrances to be established or to remain against the Facilities.

Taxes, Other Governmental Charges and Utility Charges. Borrower will pay (a) all taxes and governmental charges of any kind whatsoever or payments in lieu of taxes that may at

D-25 any time be lawfully assessed or levied against or with respect to the Facilities or any interest therein, or any machinery, equipment, or other property installed or brought by Borrower, (b) all utility and other charges incurred in the operation, maintenance, use, occupancy and upkeep of the Facilities and (c) all assessments and charges lawfully made by any governmental body for public improvements that may be secured by a lien on the Facilities.

Borrower may, at its expense, 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 contested to remain unpaid during the period of such contest and any appeal therefrom unless, the Facilities will be subject to loss or forfeiture, in which case such taxes, assessments or charges will be paid promptly or secured by posting a bond with the Trustee, in form satisfactory to the Trustee.

Insurance Required. Borrower will keep the Facilities continuously insured against the following risks, paying as the same become due and payable all premiums with respect thereto:

(a) an ALTA mortgagee title insurance policy in an amount equal to the lesser of (i) the principal amount of the Loan represented by the Bonds plus any other amounts specified to be due under the Loan Agreement or (ii) the insurable value of the Facilities in a form acceptable to the Authority;

(b) insurance against loss or damage to the Facilities and all improvements therein (including, during any period of time when Borrower is making alterations, repairs or improvements to the Facilities, improvements and betterment's coverage), all subject to standard form exclusions, with uniform standard extended coverage endorsement limited only as may be provided in the standard form of extended coverage endorsement at the time in use in the Commonwealth, in an amount equal to the greater of the full replacement value of the Building once constructed or the aggregate principal amount of the Bonds then Outstanding, unless the insurable value is less than the aggregate principal amount of the Bonds Outstanding, in which event in an amount equal to the full replacement value of the Building;

(c) commercial general liability and automobile liability insurance against claims arising in, on or about the Facilities, including in, on or about the sidewalks or premises adjacent to the Facilities, under which the Borrower and the Trustee are named as insureds, providing coverage limits not less than the greater of (i) coverage limits customarily carried by owners or operators of Facilities of similar size and character within the Commonwealth; or (ii) an amount not less than $1,000,000 for bodily injury or death per occurrence and $1,000,000 for property damage per occurrence and the aggregate combined limits of not less than $2,000,000;

(d) fidelity insurance or bonds on those of its officers and employees who handle funds of Borrower, both in such amounts and to such extent as are customarily carried by organizations similar to Borrower and operating properties similar in size and character to the Facilities of Borrower;

(e) business interruption insurance covering all risks as to which insurance is required pursuant to (b) above, in an amount equal to not less than the amounts required to be paid pursuant to paragraph (a) of the Section entitled “Loan Payments and Other Amounts Payable”

D-26 for a period of not less than 12 months. If any such loss or damage has occurred, Borrower will continue to be obligated to pay the amounts required to be paid pursuant to paragraph (a) of the Section entitled “Loan Payments and Other Amounts Payable” and any proceeds of such insurance will be applied against all or part of such payment obligations of Borrower; and

(f) such other forms of insurance as Borrower is required by law to provide with respect to the Facilities, including, without limitation, any legally required worker's compensation insurance and disability benefits insurance.

All the insurance coverage required by this Section may be subject to deductible clauses in such amounts as are customary for Facilities of similar size and character within the Commonwealth. At least annually, commencing for the fiscal year ending June 30, 2017, Borrower will employ (or cause to be employed), at its expense, an Insurance Consultant to review the insurance coverage required by the Loan Agreement and to render to the Authority, the Trustee and Borrower a report as to the adequacy of such coverage and as to its recommendations, if any, for adjustments thereto.

The insurance coverage will be increased or otherwise adjusted by Borrower if as a result of such review the Insurance Consultant finds that the existing coverage is inadequate, taking into account the availability of such insurance, the terms upon which such insurance is available, the cost of such available insurance, and the effect of such terms and such cost upon Borrower's costs and charges for its services. The Authority may permit Borrower to become self-insured for all or any part of the foregoing requirements, or to satisfy any or all of such requirements through the Borrower’s self-insurance, if the Authority have received a written evaluation with respect to such self-insurance programs from a nationally recognized Insurance Consultant stating that such self-insurance is consistent with sound risk management policies.

All policies maintained by Borrower will be taken out and maintained in generally recognized, responsible insurance companies, which may include “captive” insurance companies or governmental insurance pools, selected by Borrower and, with respect to subsections (a), (b) and (e) above, will name the Trustee, the Authority and Borrower as insureds as their respective interests may appear.

Borrower will deliver to the Trustee (a) upon the commencement of the term of the Loan Agreement, the originals or certified copies thereof of all insurance policies which Borrower is then required to maintain together with evidence as to the payment of all premiums due thereon, (b) at least 30 days prior to the expiration of any such policies evidence as to the renewal and the payment of all premiums due and (c) upon request by the Authority or the Trustee, but within 120 days after the end of each fiscal year, a certificate of an Insurance Consultant setting forth the types and coverage as to all insurance policies maintained by Borrower and certifying that such insurance policies are in full force and effect, that such policies comply with the Loan Agreement and that all premiums then due thereon have been paid.

Application of Net Proceeds of Insurance. The Net Proceeds of the insurance will be applied as provided in the Loan Agreement and the Indenture. The Net Proceeds of insurance carried for commercial general liability, automobile liability and worker's compensation disability liability will be applied toward extinguishment or satisfaction of the liability with

D-27 respect to which such insurance proceeds have been paid. The Net Proceeds of the fidelity insurance will be held by Borrower to replace the funds lost. The Net Proceeds of the business interruption insurance will be applied against the payments required to be made by Borrower during such period of business interruption.

Advances by Authority or Trustee. In the event Borrower fails to maintain the full insurance coverage required by the Loan Agreement or fails to keep the Facilities in as reasonably safe condition as their operating condition will permit, or fails to keep the Facilities in good repair and good operating condition, the Authority or the Trustee may take out the required policies of insurance and pay the premiums on the same, or make the required repairs, renewals and replacements; and all amounts advanced by the Authority or the Trustee will become an additional obligation of Borrower which amounts Borrower agrees to pay are payable on demand together with interest at the Default Rate.

Damage and Destruction. Unless Borrower exercises its option to prepay the Loan in full, if the Facilities are destroyed or damaged by fire or other casualty to such extent that the claim for loss under any insurance policies resulting from such event of destruction or damage is less than $250,000, the Net Proceeds of insurance resulting from the claims for losses will be paid to Borrower and will be held or used by Borrower for such purposes as Borrower, in its discretion, may deem appropriate. Borrower will not by reason as a result of the payment of Net Proceeds for such destruction or damage be entitled to any reimbursement from the Authority, the Trustee or the Registered Owners of the Bonds or any postponement, abatement or diminution of the Loan Payments and other payments required to be made under the Loan Agreement.

Unless Borrower exercises its option to prepay the Loan in full, if the Facilities are destroyed or damaged by fire or other casualty to such extent that the claim for loss under any insurance policies resulting from the event of destruction or damage is $250,000 or more, Borrower will promptly give written notice to the Trustee and the Authority. All Net Proceeds of insurance resulting from such claims for losses of $250,000 or more will, if the value of the Buildings is less than the amount of the Bonds Outstanding, and for 10 years following the date of issuance of the Bonds, be held by the Trustee in a separate trust account, whereupon (a) provided that Borrower has provided (i) a Consulting Architect’s Certificate that the Net Proceeds will be sufficient for such purpose and (ii) evidence that after taking into consideration the availability of such Net Proceeds, business interruption insurance, and any additional funds provided for the purpose of covering such costs, there will be adequate amounts available to pay all ongoing expenses including Loan Payments during the period of rebuilding, repair, restoration, replacement or substitution, Borrower will promptly repair, rebuild or restore the property damaged or destroyed to substantially the same condition as it existed prior to such damage or destruction, with changes, alterations and modifications (including the substitution and addition of other property) as desired by Borrower and as will not impair Borrower's ability to operate the Facilities in an efficient manner, and (b) the Trustee, upon receipt of a Consulting Architect's Certificate that such payment is required for such purpose, will apply so much as may be necessary of the Net Proceeds of such insurance to payment of the costs of repair, rebuilding or restoration as the work progresses. In the event that items (i) and (ii) above cannot be provided, the Bonds shall be redeemed in accordance with Section 5.01 of the Indenture. Any balance of the Net Proceeds remaining after payment of all the costs of such repair, rebuilding or

D-28 restoration will be transferred to the Bond Principal Fund and applied to the payment of principal of the Bonds on the next payment date or dates thereof. If the Net Proceeds are not sufficient to pay in the full the costs of such repair, rebuilding or restoration, Borrower will complete the work and will pay any costs in excess of the amount of said Net Proceeds. Borrower will not by reason of the payment of such excess costs be entitled to any reimbursement from the Authority, the Trustee or the Registered Owners of the Bonds or any postponement, abatement or diminution of the Loan Payments and other payments required by the Loan Agreement.

All Net Proceeds of insurance may be used to redeem Bonds (except as limited above); provided (i) all of the Bonds are to be redeemed in accordance with the Indenture upon exercise of the option to prepay the Loan in full or (ii) if less than all of the Bonds are to be redeemed, Borrower will furnish to the Trustee a Consulting Architect's Certificate stating (A) that the property forming a part of the Facilities damaged or destroyed is not essential to Borrower's use or occupancy of the Facilities, or (B) that the Facilities have been restored to a condition substantially equivalent to its condition prior to the damage or destruction or (C) that improvements have been acquired which are suitable for operation as a Facility (as defined in the Act) on the Land.

Condemnation and Title Defects. Unless Borrower exercises its option to prepay the Loan in full, in the event that title to, or the temporary use of, the Facilities are taken under the exercise of the power of eminent domain or because of a title defect, Borrower will be obligated to continue to make the Loan Payments and other payments required to be made under the Loan Agreement. If the Net Proceeds from any award made in such eminent domain proceedings or from any insurance policies purchased is less than $250,000, all of such Net Proceeds will be paid to Borrower and will be held or used by Borrower for such purposes as Borrower, in its discretion deems appropriate. If the Net Proceeds from any award made in eminent domain proceedings or from any insurance policies is $250,000 or more, all of such Net Proceeds will be paid to and held by the Trustee in a separate trust account for the equal benefit of the Registered Owners of the Bonds, to be applied to one or more of the following purposes directed in writing by Borrower, with the written consent of the Trustee:

(a) the restoration of the Facilities to substantially the same condition as it existed prior to such condemnation or without such title defect;

(b) the acquisition, by construction or otherwise, of other improvements suitable for operation as an educational or cultural facilities on the Land; and

(c) the redemption of the Bonds; provided that such condemnation award or title insurance proceeds may be applied for such redemption only if (i) all of the Bonds are to be redeemed in accordance with the Indenture upon exercise of the option to prepay the Loan in full or (ii) in the event that less than all of the Bonds are to be redeemed, Borrower will furnish to the Authority and the Trustee a Consulting Architect's Certificate stating (A) that the property forming a part of the Facilities taken by condemnation proceedings or lost due to a defect in title is not essential to Borrower's use or occupancy of the Facilities, or (B) that the Facilities have been restored to a condition substantially equivalent to its condition prior to the taking by the condemnation proceedings or without the title defect, or (C) that improvements have been acquired which are suitable for Borrower's operations at the Facilities.

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If Borrower elects either of the options set forth in (a) or (b) above, the Trustee, upon receipt of a Consulting Architect's Certificate supervising the repair, rebuilding or restoration that payment is required, will apply the Net Proceeds of the condemnation award or title insurance proceeds to payment of the costs of restoration, acquisition or construction, as the work progresses.

If Borrower elects either of the options set forth in (a) or (b) above, and the Net Proceeds received from eminent domain or title insurance proceeds are insufficient to pay for restoring, acquiring or constructing improvements of substantially the same condition as the Facilities prior to the taking or without such title defect, Borrower will complete the work and will pay any costs in excess of the Net Proceeds. Borrower will not be entitled to any reimbursement from the Authority, the Trustee or the Registered Owners of the Bonds or any postponement, abatement or diminution of the Loan Payments and other payments required to be made under the Loan Agreement.

Unless Borrower exercises its option to prepay the Loan in full, within 90 days from the date of a final order in any eminent domain proceeding granting condemnation or from the date of a taking pursuant to a title defect, Borrower will direct the Authority and the Trustee in writing which of the ways Borrower elects to have the Net Proceeds of the condemnation award or insurance proceeds applied. Any balance of the Net Proceeds of the award in the eminent domain proceedings or insurance proceeds remaining after payment of all the costs of restoration, acquisition or construction will be applied to pay or redeem Bonds. The balance used to pay or redeem Bonds will be transferred to the Bond Principal Fund and applied to the payment of the principal of the Bonds on the next payment date or dates thereof.

The Authority will cooperate fully with Borrower in the handling and conduct of any prospective or pending condemnation proceedings with respect to the Facilities. In no event will Borrower voluntarily settle any prospective or pending condemnation proceeding with respect to the Facilities without the written consent of the Borrower and the Authority.

Borrower Entitled to Certain Net Proceeds. Borrower will be entitled to the Net Proceeds of any insurance payment or condemnation award attributable to damage or destruction or takings of its Property not included in the Facilities, as reasonably determined by the Borrower and approved by the Trustee.

No Change in Loan Payments, No Liens. All buildings, improvements and equipment acquired in the repair, rebuilding or restoration of the Facilities will be deemed a part of the Facilities and will be available for use and occupancy by Borrower, without the payment of any payments other than the Loan Payments and other payments required by the Loan Agreement; provided that no buildings, improvements or equipment will be acquired subject to any lien or encumbrance other than Permitted Encumbrances.

Investment of Net Proceeds. Any Net Proceeds of insurance payments or condemnation awards held by the Trustee pending restoration, repair or rebuilding will be invested in Investment Obligations as provided in the Indenture. Any earnings or profits on investments will be considered part of the Net Proceeds.

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Consolidation, Merger, Sale or Conveyance. Borrower will maintain its corporate existence, will continue to be a nonprofit corporation duly qualified to do business in the Commonwealth, will not merge or consolidate with any Person or sell or convey its interest in the Facilities, except as otherwise permitted in the Loan Agreement.

Audits. Borrower will have its books and records audited annually, commencing with the current Fiscal Year, by an Accountant as soon as practicable after the close of such Fiscal Year, and will furnish within 120 days after the end of such Fiscal Year to the Authority and the Trustee and each rating agency which has rated the Bonds, if any, a copy of the audit report including the Accountant's statement as to the calculation of Pledged Revenues certified by such Accountant.

Upon receipt by Borrower of the Accountant's management letter, if any, Borrower will notify the Authority and the Trustee, that the management letter has been received and is available for inspection by the Authority and the Trustee, at the offices of Borrower.

Financial Statements. Borrower will maintain proper books of records and accounts of the Facilities with full, true and correct entries of all of its dealings substantially in accordance with generally accepted accounting principles. Upon the request of the Authority, Borrower will also provide to the Authority additional information concerning the Project and the operations, financial condition and any pending material transactions of Borrower.

Release and Indemnification Covenants. Borrower will protect and defend the Authority, the Commonwealth, agencies of the Commonwealth, current, former and future members, directors, servants, officers, employees, and other agents of the Commonwealth or the Authority, the Trustee (except as to the Trustee with respect to negligence or willful misconduct by the Trustee) and each person who has the power, directly or indirectly, to direct or cause the direction of the management or policies of the Commonwealth or the Authority (collectively, the “Indemnified Parties” and individually, the “Indemnified Party”) and will release from, pay and hold the Indemnified Parties harmless from and against any and all liabilities, losses, damages, costs, expenses (including reasonable attorneys' fees and court costs, including those for post judgment and appellate proceedings), judgments, claims, demands, suits, actions or other proceedings of whatsoever kind or nature (including, without limitation, those in any manner directly or indirectly arising or resulting from, out of, or in connection with, any injury to, or death of, any person or any damage to property) but excluding, with respect to the Authority, those arising or resulting from any intentional misrepresentation or any willful and wanton misconduct of an Authority Indemnified Party in any manner directly or indirectly (in any case, whether or not by Borrower or its successors and assigns, or directly or indirectly through the agents, contractors, employees, licensees or otherwise of Borrower or its successors and assigns) by any person or entity whatsoever except the Authority, arising or purportedly arising from the Loan Agreement, the Indenture, the Tax Certificate, the Bonds, the initial and any subsequent offers and sales of the Bonds, or the transactions contemplated thereby, the Project and the ownership or the operation by Borrower of its Property and the Facilities, the breach or violation of or any material inaccuracy or material omission in any agreement, covenant, representation or warranty of Borrower set forth in the Loan Agreement or in any document delivered pursuant the Loan Agreement, the presence of any Hazardous Substances or underground storage tanks on or under the Property or the Facilities or any escape, seepage, leakage, spillage, discharge, emission

D-31 or release of any Hazardous Substances from the Property or the Facilities, any liens against the Facilities or Property permitted under or imposed by any Environmental Requirement, or any violation or actual or asserted liability or obligation of Borrower under any Environmental Requirement, regardless of whether or not caused by, or within the control of, Borrower, any actual or asserted liability or obligation of the aforesaid persons under any Environmental Requirement relating to the Facilities or Property, regardless of whether or not caused by, or within the control of, Borrower or any action or failure to act by an Indemnified Party with respect to any of the foregoing.

Any Indemnified Party shall give prompt written notice to Borrower with respect to matters with respect to which indemnification pursuant to this Section is applicable. If Borrower is not so notified, or if Borrower is not afforded reasonable opportunity to participate in any such matter by reason of any action or inaction of the Indemnified Party, Borrower shall have no liability to such Indemnified Party under this Section with respect to such matter. Borrower shall not be liable for any settlement of any such lawsuit or other matter effected without the consent of Borrower. An Indemnified Party shall have the right to employ, at Borrower's expense, separate counsel in any lawsuit only if the Indemnified Party reasonably concludes that a potential conflict of interest exists between such Indemnified Party and Borrower. All covenants, stipulations, promises, agreements, and obligations of the Authority contained in the Loan Agreement shall be deemed to be the covenants, stipulations, promises, agreements, and obligations of the Authority and not of any current, future or former member, director, officer, employee, or other agent of the Authority in his or her individual capacity, and no recourse shall be had for the payment of the principal of, premium, if any, or interest on the Bonds or for any claim based thereon or under the Loan Agreement against any current, future or former member, director, officer, employee, or other agent of the Authority or any natural person executing the Bonds.

The indemnification arising under this Section shall continue in full force and effect notwithstanding the full payment of all obligations under the Loan Agreement or the termination of the Loan Agreement for any reason.

The foregoing release, protection, defense, hold harmless and indemnification provisions shall not apply to any claim, proceeding or action instituted by Borrower against an Indemnified Party relating to any warranty, representation, covenant or obligation of such Indemnified Party under the Loan Agreement, or the Indenture if it is ultimately determined by a court or government agency (from which an appeal is not available or with respect to which the time for appeal has expired) that such Indemnified Party breached or violated any such warranty, representation, covenant or obligation.

Licenses and Qualifications. Borrower will do, or cause to be done, all things necessary to obtain, renew and secure all permits, licenses and other governmental approvals and to comply, or cause its lessees to comply, with such permits, licenses and other governmental approvals necessary for operation of the Facilities as Facility (as defined in the Act) (subject to the Loan Agreement).

Maintenance of Pledged Revenues. So long as any Bonds are Outstanding, Borrower will manage the Facilities on a revenue-producing basis. Borrower will use its best efforts to fix,

D-32 revise, charge and collect such reasonable charges for the use and occupancy of the Facilities, in amounts so that Borrower will receive Pledged Revenues in each Fiscal Year that are sufficient to pay (a) currently all of Borrower's expenses during such Fiscal Year for the operation, maintenance and repair of the Facilities, (b) all payments under the Loan Agreement, and (c) all other obligations imposed by the Loan Agreement upon Borrower payable during such Fiscal Year.

Sale, Lease or other Disposition of the Facilities. Borrower will have the right to lease all or any part of the Facilities pursuant to the subject to the written consent of the Authority, lease or sublease. Borrower will provide to the Authority and the Trustee an opinion of a nationally recognized bond counsel acceptable to the Authority that such transactions or conveyance will not adversely affect the tax-exempt status of the 2017A Bonds, and that the terms and provisions of any future leases or subleases will allow Borrower to comply with the provisions of the Loan Agreement and the Tax Certificate and contain the restrictions upon the use of the Facilities required by the Loan Agreement. Such future leases or subleases must provide for rental payments to be made directly to the Trustee to the extent of the then current payments required under the Loan Agreement. Borrower will not sell or otherwise dispose of the Facilities.

Prior to the lease or other disposition of the Facilities for any purpose, Borrower will obtain (a) an approving opinion of nationally recognized bond counsel acceptable to the Authority addressed to the Trustee and the Authority stating that such lease or disposition will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the 2017A Bonds, and (b) the written consent of the Trustee, which will not be unreasonably withheld.

Nonsectarian Use. In the absence of the receipt by the Authority and the Trustee of a written opinion of nationally recognized municipal bond counsel acceptable to the Authority to the effect that such use will not affect adversely the exclusion from gross income for federal income tax purposes of interest on the 2017A Bonds and that such restriction is no longer required under the provisions of the Act, no proceeds of the Bonds will be used to acquire, construct, install, or refinance any Facilities which are intended to be used primarily for sectarian purposes. Borrower will comply with all applicable state and federal laws concerning discrimination on the basis of race, creed, color, sex, national origin, or religious belief and will respect, permit, and not interfere with the religious beliefs of persons working for Borrower.

Days’ Cash on Hand. Borrower covenants and agrees to maintain unrestricted Cash on Hand in its operating fund of at least 30 Days’ Cash on Hand, tested as of June 30 of each year, commencing June 30, 2017, until the Bonds are no longer outstanding (the “Cash on Hand Requirement”). Following each testing date, Borrower will provide the Trustee with a Certification of having met the Cash on Hand Requirement no later than the earlier of the ensuing December 31 or three weeks after completion of Borrower’s audit for the previous Fiscal Year. Amounts on deposit in such operating fund may be used to pay Operating Expenses or may be used for any other lawful purpose. The foregoing is subject to the qualification that if applicable Commonwealth or federal laws or regulations, or the rules and regulations of agencies having jurisdiction, shall not permit Borrower to maintain the Cash on Hand Requirement, then

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Borrower shall, in conformity with the then prevailing laws, rules, or regulations, maintain its Cash on Hand equal to the maximum permissible level.

If the Cash on Hand for any testing date is less than the Cash on Hand Requirement, then, upon the written direction of the Majority Bondholder, Borrower will promptly employ a Management Consultant to review and analyze the operations and administration of Borrower, inspect the Facilities and other related facilities, and submit to Borrower and Trustee written reports, and make such recommendations as to the operation and administration of Borrower as such Management Consultant deems appropriate, including any recommendation as to a revision of the methods of operation thereof. Borrower agrees to consider any recommendations by the Management Consultant and, to the fullest extent practicable, to adopt and carry out such recommendations. Borrower shall pay for all reasonable costs associated with such Management Consultant.

So long as Borrower is otherwise in full compliance with its obligations under the Agreement, including following, to the fullest extent practicable, the recommendations of the Management Consultant, it shall not constitute an Event of Default under the Loan Agreement.

Limitations on Incurrence of Additional Indebtedness.

(a) Borrower may incur Short-Term Indebtedness in an amount that does not exceed the lesser of 7.5% of the Gross Revenue of Borrower or $500,000 for the most recently completed Fiscal Year. Any Short-Term Indebtedness incurred by Borrower must be unsecured or subordinate to the lien of the Bondholders and may not be secured by any security interest in or lien against the Facility. Borrower may incur Long-Term Indebtedness on parity with all other Long-Term Indebtedness (other than Long-Term Indebtedness incurred under Section 8.13(e) of the Loan Agreement) only as provided in Section 8.13 of the Loan Agreement.

(b) Subject to other provisions within this section, Borrower will not be permitted to incur Long-Term Indebtedness without the consent of the Majority Bondholder, except that without compliance with the next succeeding paragraph, the Borrower may incur Long-Term Indebtedness for the purpose of (a) providing additional funds in order to complete the payment of costs of improvements or alterations under a construction contract for which Long-Term Indebtedness has already been issued or (b) refinancing the principal amount of any outstanding Long-Term Indebtedness, provided the Principal and Interest Requirements on Long-Term Indebtedness (including such requirements for the proposed Long-Term Indebtedness but excluding such requirements for the Long-Term Indebtedness to be refinanced thereby) for each Fiscal Year after the Fiscal Year in which the proposed Long-Term Indebtedness is to be incurred but before the final stated maturity of all then Outstanding Bonds will not exceed the amount of Principal and Interest Requirements on Long-Term Indebtedness that would have been available for each such Fiscal Year had such proposed Long-Term Indebtedness not been incurred.

(c) Subject to the exceptions above, Borrower will not be permitted to incur Long- Term Indebtedness unless Borrower provides the Trustee with (A) an opinion or report of an independent certified public accountant to the effect that the Net Income Available for Debt Service for the next Fiscal Year immediately preceding the date on which such Long-Term

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Indebtedness is to be incurred for which audited financial statements are available totals at least 100% of Maximum Principal and Interest Requirements on Long-Term Indebtedness (including such requirements for the proposed Long-Term Indebtedness, but excluding Eliminated Expenses) payable in any Fiscal Year, and (B) a forecast accompanied by an accountant’s examination report stating that Borrower’s estimated Net Income Available for Debt Service for each Fiscal Year beginning with the second Fiscal Year after the Fiscal Year in which any improvements being financed by such proposed Long-Term Indebtedness are to be placed-in- service, or if no improvements are to be financed thereby, beginning with the first Fiscal Year after the Fiscal Year in which the proposed Long-Term Indebtedness is to be incurred, will be at least 125% of the Maximum Principal and Interest Requirements on Long-Term Indebtedness (including such requirements for the proposed Long-Term Indebtedness, but excluding such requirements for any then outstanding Long-Term Indebtedness or bonds to be refunded (or refinanced) by the proposed Long-Term Indebtedness) for each Fiscal Year beginning with the second Fiscal Year after the Fiscal Year in which any improvements being financed by such proposed Long-Term Indebtedness are to be placed-in-service, or if no improvements are to be financed thereby, beginning with the first Fiscal Year after the Fiscal Year in which the proposed Long-Term Indebtedness is to be incurred, but before the final stated maturity of all then outstanding Bonds.

(d) Borrower may only incur Long-Term Indebtedness if the incurrence of such Long-Term Indebtedness will not cause the rating agency (or agencies) then rating the Bonds, if any, to lower or withdraw the existing applicable rating on the outstanding Bonds.

(e) Borrower may incur Long-Term Indebtedness without regard to the limitations set forth in the Loan Agreement if: (i) such Long-Term Indebtedness is secured solely by a security interest in personal property financed with such Long-Term Indebtedness; (ii) the aggregate payments required to be made by Borrower in each Fiscal Year with respect to all Long-Term Indebtedness incurred as such purchase money indebtedness does not exceed the lesser of 7 ½ percent (7.5%) of the Gross Revenue of the Borrower, as defined in the most recent audited financial statements of the Borrower, or $500,000 determined as of the date such Long-Term Indebtedness is to be incurred; (iii) such Long-Term Indebtedness amortizes over a period of not more than sixty (60) months; and (iv) the Borrower certifies that the incurrence of such Long- Term Indebtedness will not cause it to be in violation of the Loan Agreement.

Limitations on Liens. Except as otherwise specifically provided in the Loan Agreement, Borrower will not create, assume, incur or suffer to be created, assumed or incurred any Liens on the Facilities (other than Permitted Encumbrances).

Debt Service Coverage. Commencing for the fiscal year ended June 30, 2017, as tested as of the last day of each Fiscal Year, the Borrower must either: (A) have at least 60 Days’ Cash on Hand and Net Income Available for Debt Service with respect to the Fiscal Year then ended of at least 100% of the Principal and Interest Requirements on Long-Term Indebtedness (both as defined below); or (B) if Borrower has less than 60 Days’ Cash on Hand on the last day of a Fiscal Year, then Net Income Available for Debt Service with respect to the Fiscal Year then ended equal to at least 110% of the Principal and Interest Requirements on Long-Term Indebtedness. Borrower will provide certification of compliance with either (A) or (B) to the

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Trustee no later than the earlier of the ensuing December 31 or three weeks after completion of Borrower’s audit for the previous Fiscal Year.

If Borrower does not comply with either (A) or (B) described in the paragraph immediately hereinabove, then the Trustee shall give notice thereof to the Bondholders, and upon the written direction of the Majority Bondholder, Borrower will promptly employ a Management Consultant to review and analyze the operations and administration of Borrower, inspect the Facilities, and submit to Borrower and Trustee written reports, and make such recommendations as to the operation and administration of Borrower as such Management Consultant deems appropriate, including any recommendation as to a revision of the methods of operation thereof. Borrower agrees to consider any recommendations by the Management Consultant and, to the fullest extent practicable, to adopt and carry out such recommendations.

So long as Borrower is otherwise in full compliance with its obligations under the Loan Agreement, including following, to the fullest extent practicable, the recommendations of the Management Consultant, it shall not constitute an Event of Default under the Loan Agreement if the Net Income Available for Debt Service for any Fiscal Year is less than 110% of Principal and Interest Requirements on Long-Term Indebtedness for such Fiscal Year (as evidenced by Borrower’s audited financial statements for such Fiscal Year).

Notwithstanding the immediately preceding paragraph, regardless of whether Borrower has retained a Management Consultant, if at the end of the Fiscal Year ending June 30, 2017, or any subsequent Fiscal Year, the Net Income Available for Debt Service as of the end of such Fiscal Year is less than 100% of the Principal and Interest Requirements on Long-Term Indebtedness of such Fiscal Year (as evidenced by Borrower’s audited financial statements for such Fiscal Year), then the Trustee shall give notice thereof to the Bondholders and the Majority Bondholder may either (A) direct the Trustee to declare an Event of Default under the Indenture and Loan Agreement or (B) direct the Trustee to exercise one or more of the remedies permitted under the Loan Agreement and the Indenture.

Capital Needs Assessment. The Borrower agrees to prepare and deliver to the Trustee, on or before March 1, 2022, and on every fifth anniversary thereafter, a needs assessment for the ensuing five-year period with respect to the Facilities (the “Capital Needs Assessment”). The Capital Needs Assessment will include the projected costs of the required capital expenditures for such period identified in the Capital Needs Assessment. The Borrower agrees to budget for and complete any capital repairs relating to the Facilities identified by the Capital Needs Assessment.

Academic Performance Covenant. The Borrower covenants and agrees to maintain an overall performance tier at or above the 3rd quartile on the School District of Philadelphia’s School Progress Report (or similar academic performance reporting tool used by the School District of Philadelphia) (the “School Progress Report”) beginning with the School Progress Report for the 2017-2018 school year. In the event the Borrower receives an overall performance tier below the 3rd quartile on the School Progress Report, then, the Borrower will promptly retain, at its sole expense, an Educational Consultant to review and analyze the instructional program and curriculum of the Borrower, and submit to the Borrower and Trustee a compliance plan establishing benchmarks to assist Borrower in attaining an overall performance ranking in

D-36 the 3rd quartile or higher on the School Progress Report. The Borrower agrees to consider all reasonable recommendations by the Educational Consultant and, to the fullest extent practicable, to adopt and carry out such recommendations. The Trustee has no duty or obligation to monitor the Borrower’s compliance with any recommendations and the Trustee’s sole responsibility with respect to this issue is to communicate with the Bondholders about the Borrower’s choice of Educational Consultant. Prior to retaining such Educational Consultant, the Borrower shall communicate its proposed selection to the Trustee which shall then notify the Bondholders thereof; such proposal shall be deemed approved unless objected to by the holders of fifty-one percent (51%) or more in aggregate principal amount of the Bonds then Outstanding, within fifteen business days after the date of the Trustee’s notice to Bondholders of the Borrower’s proposed selection.

So long as the Borrower is otherwise in full compliance with its obligations under the Loan Agreement, including following, to the fullest extent practicable, the recommendations of the Educational Consultant, failure to satisfy the performance standard set forth in this paragraph shall not constitute an Event of Default under the Loan Agreement.

Assignment by Borrower. The Loan Agreement may not be assigned by Borrower.

Events of Default Defined. The occurrence of any of the following events shall be an “Event of Default” under the Loan Agreement:

(a) failure by Borrower to pay the Loan Payments and continued failure to do so for a period of five days, unless such failure causes an event of default under the Indenture;

(b) failure by Borrower to make payments into the Debt Service Reserve Fund when due and payable;

(d) failure by Borrower to observe and perform any covenant, condition or agreement on its part to be observed or performed other than as referred to in subsections (a) through (c) above, for a period of 30 days after written notice, specifying such failure and requesting that it be remedied, shall have been given to Borrower by the Authority or the Trustee; provided, with respect to any such failure covered by this subsection (d), no Event of Default shall be deemed to be continuing so long as a course of action adequate in the judgment of the Trustee to remedy such failure shall have been commenced within such 30-day period and shall thereafter be diligently prosecuted to completion and the failure shall be remedied thereby provided, however, that such course of action must be complete within 90 days of the written notice that has been given to Borrower;

(e) the dissolution or liquidation of Borrower, or failure by Borrower promptly to lift any execution, garnishment, or attachment of such consequence as will impair its ability to meet its obligations with respect to the Facilities or to make any payments under the Loan Agreement;

(f) the entry of a decree or order for relief by a court having jurisdiction in the premises in respect of Borrower in an involuntary case under the federal bankruptcy laws, as now or later constituted, or any other applicable federal or state bankruptcy, insolvency or other

D-37 similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of Borrower or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days;

(g) the commencement by Borrower of a voluntary case under the federal bankruptcy laws, as now or later constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or the consent by it to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of Borrower or for any substantial part of its property, or the making by it of any assignment for the benefit of creditors, or the failure of Borrower generally to pay its debts as such debts become due, or the taking of corporate action by Borrower in furtherance of any of the foregoing;

(h) an “event of default” has occurred under the Tax Certificate or the Indenture.

The foregoing provisions of subsection (d) above are subject to the following limitations: If by reason of force majeure Borrower is unable in whole or in part to carry out its agreements contained in the Loan Agreement, other than the obligations on the part of Borrower contained in “Mortgage and Security Provisions; Provisions for Payment”, and in Sections “Investment of Moneys”, “Tax Covenant”, “Taxes, Other Governmental Charges and Utility Charges”, “Insurance Required”, “Release and Indemnification Covenants” and “Nonsectarian Use” above and Borrower's obligation to pay the Trustee's or Authority's attorneys' fees and expenses as provided in the Loan Agreement, Borrower shall not be deemed in default during the continuance of such inability. The term “force majeure” means, without limitation, the following: acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders of any kind of the government of the United States of America or of the Commonwealth or any of their departments, agencies, or officials, or any civil or military authority, including, without limitation, insurrections; riots; epidemics; landslides; lightning; earthquake; fire; hurricane; tornadoes; storms; floods; washouts; droughts; arrests; restraint of government and people; any disturbances; explosions; breakage or accident to machinery, transmission pipes or canals; partial or entire failure of utilities; or any other cause or event not reasonably within the control of Borrower. Borrower will remedy with all reasonable dispatch the cause or causes preventing it from carrying out its agreements; provided, that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of Borrower, and Borrower shall not be required to make settlement of strikes, lockouts or other industrial disturbances by acceding to the demands of the opposing party or parties when such course is in the judgment of Borrower unfavorable to Borrower.

Remedies on Default. Whenever any Event of Default occurs and is continuing, the Authority, or the Trustee may take any one or more of the following remedial steps:

(a) The Trustee (acting as assignee of the Authority) or the Authority (in the event of a failure of the Trustee to act under this subsection), as and to the extent provided in the Indenture, may declare the Loan Payments payable for the remainder of the term of the Loan Agreement to be immediately due and payable, whereupon the same shall become due and payable.

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(b) The Trustee may take any action permitted under the Indenture with respect to an event of default.

(c) The Trustee (acting as assignee of the Authority) or the Authority (in the event of a failure of the Trustee to act), as and to the extent provided in the Indenture may exercise its rights under the Mortgage, including, without limitation, the right to foreclose on the Facilities under the Mortgage, and may realize upon the security interest in the Pledged Revenues and may exercise all the rights and remedies of a secured party under the Commonwealth Uniform Commercial Code.

(d) The Trustee (acting as assignee of the Authority) or the Authority (in the event of a failure of the Trustee to act), to the extent provided in the Indenture or the Mortgage may take whatever action at law or in equity as may appear necessary or desirable to collect the amounts due and to become due, or to enforce performance or observance of any obligations, agreements, or covenants of Borrower.

(e) Other than with respect to an Event of Default involving the Borrower's failure to pay Loan Payments, or the Borrower's liquidation, receivership, bankruptcy or other similar insolvency proceeding, the Trustee may, or at the request of the Majority Bondholder will, appoint a Management Consultant to make operational and other business recommendations to the Borrower to improve the operations, operating profits and cash flow of the Borrower, and the Borrower will cooperate with the consultant and will adhere to all reasonable recommendations of the Management Consultant in these regards.

Notwithstanding the foregoing, prior to the exercise by the Authority or the Trustee of any remedy, Borrower may, at any time, pay all accrued payments (exclusive of any such payments accrued solely by virtue of acceleration pursuant to the Loan Agreement) and fully cure all defaults, and in such event, Borrower will be fully reinstated to its position as if such Event of Default had never occurred.

If Borrower fails to make any payment required, the payment so in default shall continue as an obligation of Borrower until the amount in default is fully paid.

Any proceeds received by the Authority or the Trustee from the exercise of any of the above remedies, after reimbursement of any costs incurred by the Authority or the Trustee in connection therewith, shall be applied by the Trustee in accordance with the provisions of the Indenture.

If the Authority or the Trustee proceed to enforce their rights under the Loan Agreement and such proceedings have been discontinued or abandoned for any reason or have been determined adversely to the Authority or the Trustee, then Borrower, the Authority and the Trustee will be restored to their respective positions and rights and all rights, remedies and powers of Borrower, the Authority and the Trustee will continue as though no proceedings had been taken.

No Remedy Exclusive. No remedy conferred upon or reserved to the Authority or the Trustee is intended to be exclusive of any other available remedy or remedies, but each and every such remedy will be cumulative and will be in addition to every other remedy given under

D-39 the Loan Agreement or existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default will impair any right or power or will be construed to be a waiver but any right or power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Authority to exercise any remedy reserved to it, no notice other than required in the Loan Agreement or by applicable law is required. Rights and remedies given the Authority are also extended to the Trustee and the Registered Owners of the Bonds, subject to the Indenture.

Waiver. If any agreement contained in the Loan Agreement is breached by any party and waived by any other party, the waiver will be limited to the particular breach waived and will not be deemed to waive any other breach. The assignment of the Authority's rights in and under the Loan Agreement to the Trustee under the Indenture notwithstanding, the Authority retains its rights under the Loan Agreement and its right to receive certain reports and perform certain discretionary acts but will have no power to waive any Event of Default without the consent of the Trustee. Notwithstanding the foregoing, a waiver of an Event of Default under the Indenture or a rescission of a declaration of acceleration of the Bonds and a rescission and annulment of its consequences constitute a waiver of the corresponding Event of Default under the Loan Agreement and a rescission and annulment of its consequences; provided, that no such waiver or rescission extends to or affects any subsequent or other default or impairs any right as a consequence.

General Option to Prepay the Loan. Borrower has the option exercisable at any time to prepay all or any portion of the Loan by depositing with the Trustee an amount of money or securities to the extent permitted by the Indenture the principal and interest on which when due, will be equal to (giving effect to the credit, if any, provided under the Loan Agreement) an amount sufficient to pay the principal of (in integral multiples of $25,000), and interest on any portion of the Bonds then Outstanding under the Indenture. The exercise of this option is not cause for redemption of Bonds unless the redemption is permitted at that time under the provisions of the Indenture and Borrower specifies the date for the redemption. The Loan Agreement will terminate if Borrower prepays all of the Loan, pays all reasonable and necessary fees and expenses of the Trustee accrued and to accrue through final payment of the Bonds as a result of the prepayment and all of its liabilities accrued and to accrue under the Loan Agreement to the Authority through final payment of the Bonds as a result of such prepayment, and pays, in full, all other amounts due.

Obligation to Prepay the Loan. All amounts due become immediately due and payable, without notice or demand, upon a Determination of Taxability and Borrower will have the immediate obligation to prepay all amounts due under the Loan Agreement and the Loan with respect to the Bonds in whole, and not in part.

Notice of Prepayment. In order to exercise the option granted under the Section entitled “General Option to Prepay the Loan” above, Borrower shall give written notice to the Trustee which shall specify therein the date of making the prepayment, not less than 45 days nor more than 90 days from the date the notice is mailed, unless such notice or time period is waived by the Trustee. In the case of any prepayment pursuant to the Loan Agreement, Borrower will make arrangements with the Trustee for giving notice of redemption, if any, with respect to any Bonds to be redeemed and, if applicable, will pay to the Trustee an amount of money sufficient to

D-40 redeem all of the Bonds to be called for redemption at the appropriate price on or before the Business Day prior to the redemption date.

Amendments, Changes and Modifications. Except as otherwise provided in the Loan Agreement or in the Indenture, the Loan Agreement may not be effectively amended, changed, modified, altered or terminated without the written consent of the Trustee. Any amendment to the Loan Agreement will be executed in accordance with the Indenture.

The Indenture

The following is a summary of certain provisions of the Indenture. Such summary does not purport to be complete or definitive and reference is made to the Indenture for a full and complete statement of the terms and provisions and for the definition of capitalized terms used in this summary and not otherwise defined herein. In the event of any inconsistency between any definitions or provisions of the Indenture purported to be summarized in this Appendix D and those contained in the Indenture, the definitions and provisions in the Indenture shall control. Copies of the Indenture are available from the Trustee.

Potential Bondholders should note and be aware of the following:

THE REGISTERED OWNERS OF NOT LESS THAN FIFTY-ONE PERCENT (51%) IN AGGREGATE PRINCIPAL AMOUNT OF THE BONDS THEN OUTSTANDING SHALL HAVE THE RIGHT, FROM TIME TO TIME, TO CONSENT TO AND APPROVE THE EXECUTION BY THE AUTHORITY AND THE TRUSTEE OF SUCH INDENTURE OR INDENTURES SUPPLEMENTAL TO THE INDENTURE AS SHALL BE DEEMED NECESSARY OR DESIRABLE BY THE AUTHORITY FOR THE PURPOSE OF MODIFYING, ALTERING, AMENDING, ADDING TO, OR RESCINDING, IN ANY PARTICULAR, ANY OF THE TERMS OR PROVISIONS CONTAINED IN THE INDENTURE; PROVIDED, HOWEVER, THAT WITHOUT THE CONSENT OF THE REGISTERED OWNERS OF NOT LESS THAN ONE HUNDRED PERCENT (100%) IN AGGREGATE PRINCIPAL AMOUNT OF THE BONDS AT THE TIME OUTSTANDING AND ADVERSELY AFFECTED THEREBY NOTHING IN THE INDENTURE CONTAINED (EXCLUSIVE OF SUPPLEMENTAL INDENTURES COVERED BY THE INDENTURE) SHALL PERMIT, OR BE CONSTRUED AS PERMITTING: (A) AN EXTENSION OF THE MATURITY OF, OR A REDUCTION OF THE PRINCIPAL AMOUNT OF, OR A REDUCTION OF THE RATE OF, OR EXTENSION OF THE TIME OF PAYMENT OF INTEREST ON, OR A REDUCTION OF A PREMIUM PAYABLE UPON ANY REDEMPTION OF, ANY BOND; (B) THE DEPRIVATION OF THE REGISTERED OWNER OF ANY BOND THEN OUTSTANDING OF THE LIEN CREATED BY THE INDENTURE (OTHER THAN AS PERMITTED IN THE INDENTURE WHEN SUCH BOND WAS INITIALLY ISSUED); (C) A PRIVILEGE OR PRIORITY OF ANY BOND OR BONDS OVER ANY OTHER BOND OR BONDS; OR (D) A REDUCTION IN THE AGGREGATE PRINCIPAL AMOUNT OF THE BONDS, IF ANY, REQUIRED FOR CONSENT TO SUCH SUPPLEMENTAL INDENTURE OR AMENDMENT TO THE LOAN AGREEMENT.

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Additional Bonds. Additional Bonds secured by and payable solely from the Trust Estate may be issued in the Authority's sole discretion in one or more additional series, provided the following terms and conditions have been met:

(a) the Trustee has received a certificate of an Authorized Representative of Borrower to the effect that (i) Borrower is not in default under the Loan Agreement, the Mortgage or the Indenture, (ii) Borrower is not aware of any Events of Default under the Loan Agreement, the Mortgage or the Indenture and (iii) the requirements for additional Indebtedness of Borrower set forth in the Loan Agreement have been met;

(b) the Authority has consented to the issuance of Additional Bonds;

(c) the Authority and the Trustee have received a rating confirmation from the Rating Agency then maintaining a rating on the Outstanding Bonds, confirming that the existing rating will not change after the issuance of Additional Bonds;

(d) the Trustee has received a copy, duly certified by the (Assistant) Secretary of the Authority, of the resolution adopted by the Authority authorizing the issuance of the Additional Bonds and the execution and delivery of a supplemental indenture, supplementing and amending the Indenture, providing the date, interest rates and maturities of such Additional Bonds, options and requirements for redemption prior to maturity with respect to such Additional Bonds, deposit of proceeds to the various funds and accounts, including the Debt Service Reserve Fund, and such other terms as may be required by reason of the foregoing and which adopts the applicable provisions of the Indenture, and of an agreement supplementing and amending the Loan Agreement as well as the Mortgage, if necessary in the context of the issuance of Additional Bonds;

(e) the Authority and the Trustee have received an opinion of nationally recognized bond counsel to the effect that the issuance of such Additional Bonds will not affect adversely the exclusion from gross income for federal income tax purposes of interest on any Outstanding Bonds, the interest on which is excluded from gross income for federal income tax purposes;

(f) the Trustee has received original executed counterparts of the agreement supplementing and amending the Loan Agreement, the supplemental indenture supplementing and amending the Indenture and the amendment supplementing and amending the Mortgage;

(g) the Trustee has received a request and authorization to the Trustee on behalf of the Authority and signed by its Executive Director or any other Authorized Representative of the Authority to authenticate and deliver such Additional Bonds to the purchasers therein identified, upon payment to the Trustee, but for the account of the Authority, of a sum specified in such request and authorization, plus accrued interest thereon, if any, to the date of delivery;

(h) the Trustee will receive from the proceeds of the Additional Bonds or otherwise on the date of delivery of the Additional Bonds an amount equal to the additional Debt Service Reserve Requirement for deposit into the Debt Service Reserve Fund;

(i) the Authority and the Trustee have received an executed opinion of nationally recognized municipal bond counsel to the effect that (i) the Additional Bonds have been duly

D-42 authorized, executed and delivered and constitute the binding limited obligations of the Authority, enforceable in accordance with their terms, subject to normal bankruptcy exceptions, and (ii) the interest on such Additional Bonds is excluded from gross income for federal income tax purposes (unless it is intended that such interest be taxable); and

(j) the Authority and the Trustee shall have received an Accountant’s Certificate to the effect that the Loan Payments, as recalculated pursuant the Loan Agreement will be equal to the amounts necessary to make the principal of, and interest payments on the Outstanding Bonds and the Additional Bonds when due.

All of the Bonds, regardless of the time or times of their issuance or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds over any other except as expressly provided in the Indenture.

Pledge of Trust Estate. Subject only to certain unassigned rights of the Authority, a pledge of the Trust Estate is made and is pledged to secure the payment of the principal of, premium, if any, and interest on the Bonds.

Establishment of Funds. The Indenture establishes and creates the following funds, which are special trust funds held by the Trustee:

(a) Revenue Fund;

(b) Bond Principal Fund;

(d) Debt Service Reserve Fund;

(e) Project Fund, and, within the Project Fund,

(i) the Acquisition Account; and

(ii) the Improvements Account.

(f) Costs of Issuance Fund;

(g) Repair and Replacement Fund; and

(h) Rebate Fund.

The Trustee shall apply the proceeds of the Bonds in the manner set forth in the Loan Agreement.

The Borrower has sent (or will have sent prior to settlement of the sale and purchase of the Bonds) a written direction to the School District of Philadelphia, whose payments constitute the overwhelming proportion of the Borrower’s revenues, to remit its monthly payments directly to the Trustee for deposit to the Revenue Fund established under the Indenture, to be transferred

D-43 and applied as hereinabove described under “Loan Payments and Other Amounts Payable” hereinabove.

Moneys in the Revenue Fund shall be transferred and applied by the Trustee not later than the Business Day after receipt of the monthly payment from the School District of Philadelphia, the transfers as described in FIRST through SIXTH below, commencing with the payment received in the month of [January 2017], as follows:

FIRST: for deposit in the Bond Interest Fund (after taking into consideration earnings or other funds on deposit in the Bond Interest Fund) an amount equal to the Loan Payment paid by the Borrower pursuant to Section 5.02 of the Loan Agreement for the payment of interest due on the next succeeding Interest Payment Date.

SECOND: for deposit in the Bond Principal Fund (after taking into consideration earnings or other funds on deposit in the Bond Principal Fund) an amount equal to the Loan Payment paid by the Borrower pursuant to Section 5.02 of the Loan Agreement for the payment of the principal due on the 2017 Bonds on the next succeeding principal payment date for the 2017 Bonds.

THIRD: to the Debt Service Reserve Fund the amount required, if any, under Section 3.09 of the Indenture, to restore therein to the Debt Service Reserve Fund Requirement;

FOURTH, to the Repair and Replacement Fund, an amount equal to the Repair and Replacement Requirement in accordance with Section 3.18 of the Indenture;

FIFTH, with respect to the payment received in each [May], commencing [May] 2018, and continuing until the full amount is so paid, to the Rebate Fund, any amount, as calculated by the Rebate Analyst and communicated to the Trustee, required of the Borrower to be deposited in the Rebate Fund; and

SIXTH, provided all payments due pursuant to the Loan Agreement have been made or provided for, all amounts remaining on deposit in the Revenue Fund after the Trustee has made the disbursements required in FIRST through FIFTH above, shall be transferred to the Borrower to pay its Operating Expenses or to be used for any other lawful purpose.

Payments into the Bond Principal Fund and the Bond Interest Fund. There shall be deposited into the Bond Principal Fund or the Bond Interest Fund, as appropriate, and as and when received (a) all payments by Borrower, (b) all moneys transferred to the Bond Principal Fund or Bond Interest Fund as provided in the Indenture and described in the Sections entitled “Use of Money in the Debt Service Reserve Fund,” “Payments into the Repair and Replacement Fund” or “Allocation and Transfers of Investment Income”, (c) all other moneys deposited into the Bond Principal Fund or Bond Interest Fund pursuant to the Loan Agreement, the Mortgage or the Indenture and (d) all other moneys received by the Trustee when accompanied by directions not inconsistent with the Loan Agreement or the Indenture that such moneys are to be paid into the Bond Principal Fund or Bond Interest Fund. There shall also be retained in the Bond Principal Fund and Bond Interest Fund, respectively, interest and other income received on investment of moneys in the Bond Principal Fund and Bond Interest Fund to the extent provided in the Section “Allocation and Transfers of Investment Income” in the Indenture.

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If the Trustee does not receive Loan Payments into the Bond Principal Fund and the Bond Interest Fund by the required payment date pursuant to the Loan Agreement, the Trustee will notify the Authority and Borrower of such nonpayment as soon as is practicable but in no event later than the Business Day after such payment was due; and if such payments are not received within two (2) Business Days thereafter, the Trustee shall notify the Registered Owners of the Bonds.

Use of Moneys in the Bond Interest Fund and the Bond Principal Fund. Any accrued or capitalized interest deposited into the Bond Interest Fund pursuant to the Indenture and described at “Payments into the Bond Principal Fund and the Bond Interest Fund” shall be used to pay interest on the Bonds. Except as provided in this Section and in Sections “Rebate Fund,” “Repayment to Borrower from the Funds,” “Allocation and Transfer of Investment Income” and “Application of Moneys” in the Indenture, moneys in the Bond Principal Fund shall be used, subject to the provisions of the Indenture, solely for the payment of the principal of and premium, if any, on the Bonds, and moneys in the Bond Interest Fund shall be used, subject to the provisions of the Indenture, solely for the payment of the interest on the Bonds. Whenever the total amount in the Bond Principal Fund, the Bond Interest Fund and the Debt Service Reserve Fund is sufficient to redeem all of the Bonds Outstanding and to pay interest to accrue thereon prior to such redemption, and redemption premium, if any, the Trustee, subject to the requirements of the Loan Agreement and written direction from Borrower, covenants to take and cause to be taken the necessary steps to redeem all of the Bonds on the redemption date for which the required redemption notice has been given.

Any amounts not necessary to meet the monthly Loan Payments which remain in either the Bond Principal Fund or the Bond Interest Fund following payment on the payment dates of the principal of, premium, if any, and interest due on the Bonds shall remain in such fund and the Borrower shall receive a credit of such amount against future Loan Payments.

Payments into the Debt Service Reserve Fund. There shall be deposited into the Debt Service Reserve Fund proceeds from the sale of the Bonds an amount equal to the Debt Service Reserve Requirement. There shall be deposited into the Debt Service Reserve Fund all moneys required to be paid by the Borrower to the Trustee pursuant to the Loan Agreement. There will also be deposited into the Debt Service Reserve Fund (a) all moneys transferred to the Debt Service Reserve Fund from the Bond Principal Fund or the Bond Interest Fund pursuant to the Indenture as described in the Indenture, (b) all other moneys required to be deposited therein pursuant to the Loan Agreement or the Indenture, and (c) all other moneys received by the Trustee when accompanied by directions not inconsistent with the Loan Agreement, the Mortgage or the Indenture that such moneys are to be paid into the Debt Service Reserve Fund. There shall be retained in the Debt Service Reserve Fund interest and other income received on investments of Debt Service Reserve Fund moneys to the extent provided in the Indenture.

Use of Moneys in the Debt Service Reserve Fund. Except as otherwise provided in the Indenture, moneys in the Debt Service Reserve Fund shall be used by the Trustee promptly and solely for the payment of the principal of, premium, if any, and interest on the Bonds in the event moneys in the Bond Principal Fund and Bond Interest Fund are insufficient to make such payments when due, whether on an interest payment date, sinking fund redemption date, maturity date or otherwise in an amount necessary to cure such Event of Default and

D-45 notwithstanding any other provision of the Indenture. Upon the occurrence of an Event of Default under the Indenture and the exercise by the Trustee under the Loan Agreement or under the Mortgage and under the Indenture, any moneys in the Debt Service Reserve Fund shall be transferred by the Trustee to the Bond Interest Fund, and with respect to any moneys in excess of the amount required to be transferred to the Bond Interest Fund, to the Bond Principal Fund and applied in accordance with the Indenture as described at “Application of Moneys” in the Indenture. On the final maturity date of the Bonds any moneys in the Debt Service Reserve Fund may be used to pay the principal of and interest on the Bonds on such final maturity date. In the event of the redemption of the Bonds in whole, any moneys in the Debt Service Reserve Fund shall be transferred to the Bond Principal Fund and applied to the payment of the principal of and premium, if any, on the Bonds. The Trustee shall value the Investment Obligations in the Debt Service Reserve Fund semiannually on [August 15] and [February 15] of each year at their market value. If on any valuation date the amount in the Debt Service Reserve Fund is greater than the Debt Service Reserve Requirement, the excess shall be transferred by the Trustee to the Bond Interest Fund and applied to the payment of the interest on the Bonds; provided, however, that the amount remaining in the Debt Service Reserve Fund immediately after such transfer shall not be less than the Debt Service Reserve Requirement on that date. If on any valuation date the amount in the Debt Service Reserve Fund is less than the Debt Service Reserve Requirement, the Trustee shall notify Borrower of its obligation pursuant to the Loan Agreement.

At such times as moneys are to be transferred out of the Debt Service Reserve Fund for deposit into the Bond Principal Fund or the Bond Interest Fund pursuant to the Indenture or to the Rebate Fund, the Trustee shall use cash or Investment Obligations in such order of priority as Borrower shall direct in writing. If no Borrower direction has been received, the Trustee shall determine the priority of use of amounts in the Debt Service Reserve Fund.

Within five Business Days of any transfer of funds from the Debt Service Reserve Fund to the Bond Principal Fund or the Bond Interest Fund, the Trustee shall notify Borrower in writing of such transfer and of the amount of the deficiency, if any, of amounts then on deposit in the Debt Service Reserve Fund as of that date.

Custody of the Debt Service Reserve Fund. If there shall be a deficiency in the Bond Principal Fund or the Bond Interest Fund on any payment date for the Bonds, the Trustee shall promptly make up such deficiency from the Debt Service Reserve Fund so that the amount therein is equal to such deficiency.

Replenishment of the Debt Service Reserve Fund. There shall be paid to the Trustee for deposit in the Debt Service Reserve Fund in the event that the sum of moneys in the Debt Service Reserve Fund is less than the Debt Service Reserve Requirement in not more than six (6) consecutive monthly payments beginning on the first day of the month following the date on which such deficiency occurs and the first day of each month thereafter, money in the aggregate amount sufficient to cause the total amount in the Debt Service Reserve Fund to equal the Debt Service Reserve Requirement. The reduction of the balance in the Debt Service Reserve Fund below the Debt Service Reserve Requirement shall not constitute a default if there shall be paid monthly to the Trustee for deposit in the Debt Service Reserve Fund at least one-sixth (1/6) of the deficiency until the Debt Service Reserve Requirement is restored.

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Payments into and Use of Moneys in the Project Fund. There shall be deposited into the Project Fund from the 2017 Bond proceeds, pursuant to the Loan Agreement, an amount equal to the Project Fund Initial Deposit.

The Project Fund shall be in the custody of the Trustee, but in the name of the Authority, and the Authority authorizes and directs the Trustee to withdraw sufficient funds from the Project Fund for the purposes set forth in the Loan Agreement.

Payments into and Use of Moneys in the Costs of Issuance Fund. There shall be deposited into the Costs of Issuance Fund from the 2017 Bond proceeds an amount which shall not be less than the Costs of Issuance Fund Initial Deposit (provided that such amount may be reduced by amounts allocated to issuance expenses paid directly by the Underwriter). There shall be retained in the Costs of Issuance Fund interest and other income received on investments of Costs of Issuance Fund moneys as provided in the Indenture. Except as provided in the Indenture, such moneys shall be expended to pay issuance expenses in accordance with the Loan Agreement; provided however, amounts necessary to pay for invoiced fees of bond counsel, the Authority and the Trustee may be paid by the Trustee without additional documentation. The Trustee is authorized and directed to issue its check on or make wire payments from the Costs of Issuance Fund for each payment.

Termination of Costs of Issuance Fund. No later than ninety (90) days after delivery of the Bonds, upon receipt by the Trustee of a certificate signed by an Authorized Representative of Borrower stating that all expenses incurred in connection with the issuance of the Bonds have been paid, any moneys remaining in the Costs of Issuance Fund shall be transferred to the Bond Interest Fund.

Payments into the Repair and Replacement Fund. There shall be deposited into the Repair and Replacement Fund as and when received (a) all payments by Borrower required to replenish the Repair and Replacement Fund under the Loan Agreement, (b) all other moneys deposited into the Repair and Replacement Fund pursuant to the Loan Agreement or the Indenture, and (c) all other moneys received by the Trustee when accompanied by directions not inconsistent with the Loan Agreement or the Indenture that such moneys are to be paid into the Repair and Replacement Fund. There shall also be retained in the Repair and Replacement Fund, interest and other income received on investment of moneys in the Repair and Replacement Fund to the extent provided in the Indenture. If the Trustee does not receive payments into the Repair and Replacement Fund pursuant to the Loan Agreement by the fifth day after any required payment date pursuant to the Loan Agreement, the Trustee will immediately notify the Authority and Borrower of such nonpayment, and if such payments are not received within two (2) Business Days thereafter, the Trustee shall notify the Registered Owners of the Bonds. Any amounts on deposit in the Repair and Replacement Fund in excess of the Repair and Replacement Fund Requirement shall be transferred by the Trustee to the Bond Interest Fund and applied to the payment of the interest on the Bonds; provided, however, that the amount remaining in the Repair and Replacement Fund immediately after such transfer shall not be less than the Repair and Replacement Fund Requirement ($250,000). Amounts held in the Repair and Replacement Fund are included in the computation of Days’ Cash on Hand.

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Use of Moneys in the Repair and Replacement Fund. Absent an Event of Default under the Indenture or the Loan Agreement, the Trustee is authorized and directed to make each disbursement from the Repair and Replacement Fund required by the Loan Agreement and to issue its checks therefor. The Trustee will keep and maintain adequate records pertaining to the Repair and Replacement Fund and all disbursements therefrom and shall annually provide an account statement thereof with the Authority and Borrower.

Rebate Fund. There shall be deposited into the Rebate Fund investment income on moneys in the Funds to the extent provided in the written direction of Borrower pursuant to the Loan Agreement and subject to the limitations in the Indenture, moneys received from Borrower pursuant to the Loan Agreement, moneys transferred to the Rebate Fund from the Costs of Issuance Fund, the Debt Service Reserve Fund, the Project Fund, the Bond Principal Fund or the Bond Interest Fund pursuant to the Indenture and all other moneys received by the Trustee when accompanied by written directions not inconsistent with the Loan Agreement or the Indenture that such moneys are to be paid into the Rebate Fund. The Trustee shall cause amounts on deposit in the Rebate Fund to be forwarded to the United States Treasury at the times and in the amounts set forth in Borrower's written direction.

If, upon receipt of the certification pursuant to the Loan Agreement, the moneys on deposit in the Rebate Fund are insufficient for the purposes thereof, the Trustee shall transfer moneys to the Rebate Fund from the following Funds in the following order of priority: the Costs of Issuance Fund, the Debt Service Reserve Fund, the Project Fund, the Bond Principal Fund and the Bond Interest Fund. The Trustee shall provide notice to the Authority if the certificate referred to above is not received by the Trustee as provided in the Loan Agreement. Upon receipt by the Trustee and the Authority of written certification by a rebate analyst acceptable to the Authority to the effect that the amount in the Rebate Fund is in excess of the amount required to be therein, such excess shall be transferred to the Bond Interest Fund.

Nonpresentment of Bonds. In the event any Bonds, or portions thereof, are not presented for payment when the principal becomes due, either at maturity, the date fixed for redemption, or otherwise, if funds sufficient for the payment, including accrued interest, has been deposited into the Bond Principal Fund and Bond Interest Fund or otherwise made available to the Trustee for deposit therein, then on and after the date the principal becomes due, all interest shall cease to accrue and all liability of the Authority to the Registered Owner or Registered Owners for the payment of the Bonds, shall terminate and be completely discharged, and it shall be the duty of the Trustee to hold the fund or funds in a separate trust account for the benefit of the Registered Owner or Registered Owners of such Bonds, who shall thereafter be restricted exclusively to such fund or funds for any claim of whatever nature on his, her or their part under the Indenture with respect to such Bond or on, or with respect to, such Bond. Such moneys shall not be required to be invested during such period by the Trustee. If any Bond shall not be presented for payment within the period of three years following the date when the Bond becomes due, whether by maturity or otherwise, the Trustee shall return to Borrower the funds held by it for payment of such Bond and such Bond shall, subject to the defense of any applicable statute of limitation, be an unsecured obligation of Borrower. These obligations of the Trustee shall be subject, however, to any law applicable to the unclaimed funds or the Trustee providing other requirements for the disposition of unclaimed property.

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Moneys to be Held in Trust. All moneys required to be deposited with or paid to the Trustee under any provision of the Indenture shall be held by the Trustee in trust for the purposes specified in the Indenture, and, except for moneys deposited with or paid to the Trustee for the payment or redemption of specific Bonds and moneys held by the Trustee in the Rebate Fund and in the separate trust accounts pursuant to the Section entitled “Nonpresentment of Bonds” above, while held by the Trustee, constitute part of the Trust Estate and be subject to the lien thereof. Moneys held in the Rebate Fund shall be held in trust by the Trustee and shall be applied as described in the Indenture at “Rebate Fund”.

Repayment to Borrower from the Funds. Any amounts remaining in the Funds after payment in full of the Bonds (or making provision for such payment), the fees and expenses of the Trustee, and all other amounts required to be paid under the Indenture and under the Loan Agreement to the Authority and all other amounts required to be paid under the Indenture and under the Loan Agreement (including payments into the Rebate Fund and to the United States of America) shall be paid to the Borrower upon the expiration of the term of the Loan Agreement.

Notices of Redemption. Bonds shall be called for optional redemption by the Trustee upon receipt by the Trustee at least 45 days prior to the redemption date of a certificate of Borrower specifying the Series and principal amount of the Bonds to be called for redemption, the applicable redemption price or prices, the provision or provisions of the Indenture pursuant to which such Bonds are to be called for redemption, provided that such certificate shall not be required with respect to a sinking fund redemption and Bonds shall be called for sinking fund redemption by the Trustee without the necessity of any action by Borrower. In the case of every redemption, or in the case of any defeasance, the Trustee shall cause notice of such redemption or defeasance by mailing by first-class mail a copy of the redemption notice or defeasance notice to the Authority and the Registered Owners of the Bonds designated for redemption or defeasance in whole or in part, at their addresses as the same shall last appear upon the registration records, in each case not less than 30 days prior to the redemption date or defeasance date, provided, however, that failure to give such notice, or any defect therein, shall not affect the validity of any proceedings for the redemption or defeasance of such Bonds. Any notice of redemption by the Trustee may contain a statement that the redemption is conditioned upon the receipt by the Trustee of funds on or before the date fixed for redemption sufficient to the pay the redemption price of the Bonds so called for redemption, and that if funds are not available, such redemption shall be cancelled by written notice to the Registered Owners of the Bonds called for redemption in the same manner as the original redemption notice was mailed.

Each notice of redemption shall specify the date fixed for redemption, the redemption price, the place or places of payment, that payment will be made upon presentation and surrender of the Bonds to be redeemed, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon will cease to accrue and include a statement as to the impact of the redemption on any redemption rights of Borrower. If less than all the Outstanding Bonds are to be redeemed, the notice of redemption shall specify the numbers of the Bonds or portions thereof to be redeemed. If less than all of the Outstanding Bonds are redeemed, the Trustee shall calculate the revised sinking fund schedule based on a pro rata share of the Bonds then Outstanding.

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Bonds Due and Payable on Redemption Date; Interest Ceases to Accrue. On or before the thirtieth day prior to the redemption date specified in any notice of redemption of Borrower, an amount of money sufficient to redeem all the Bonds called for redemption at the appropriate redemption price, including accrued interest to the date fixed for redemption, shall be deposited with the Trustee by Borrower; unless a conditional notice of redemption has been provided by the Trustee. On the redemption date the principal amount of each Bond to be redeemed, together with the accrued interest thereon to such date and redemption premium, if any, shall become due and payable; and from and after such date, notice having been given and deposit having been made in accordance with the provisions of the Indenture, then, notwithstanding that any Bonds called for redemption shall not have been surrendered, no further interest shall accrue on any of such Bonds. From and after such date of redemption the Bonds to be redeemed shall not be deemed to be Outstanding under the Indenture, and the Authority shall be under no further liability in respect thereof.

Partial Redemption of Bonds. Upon surrender of any Bond for redemption in part only, the Authority shall execute and the Trustee shall authenticate and deliver to the Registered Owner thereof, the cost of which shall be paid by Borrower, a new Bond or Bonds of the same Series and maturity and of Authorized Denominations, in an aggregate principal amount equal to that portion of the Bond not redeemed.

No Partial Redemption in Event of Default. The Bonds shall not be subject to partial redemption if an Event of Default has occurred under the Indenture and has not been cured or otherwise waived by the Trustee for the purpose of making any such redemption payment.

Investment of Bond Principal Fund, Bond Interest Fund, Debt Service Reserve Fund, Project Fund, Costs of Issuance Fund, Repair and Replacement Fund and Rebate Fund. On instructions signed by an Authorized Representative of Borrower and delivered to the Trustee, any moneys held as part of the Funds shall be invested by the Trustee in Investment Obligations (a) with respect to the Repair and Replacement Fund and the Costs of Issuance Fund, maturing in the amounts and at the times necessary to provide funds to make the payments to which such moneys are applicable as set forth in a written estimate by an Authorized Representative of Borrower filed with the Trustee, (b) with respect to the Bond Principal Fund, the Bond Interest Fund and the Rebate Fund maturing in the amounts and at the times necessary to provide funds to make the payments to which such moneys are applicable as determined by the Trustee, and (c) with respect to the Debt Service Reserve Fund maturing at such times as determined in writing by an Authorized Representative of Borrower or the Trustee. All such Investment Obligations purchased shall mature or be redeemable on a date or dates prior to the time when the moneys so invested will be required for expenditure. In the event the Trustee does not receive investment instructions from Borrower, the Trustee is directed to invest moneys held as part of the Funds in any Investment Obligations permitted pursuant to the Indenture.

The Trustee shall value the Investment Obligations held within the Funds on each [August 15] and [February 15] of each year, commencing [August 15], 2017. In computing for any purpose under the Indenture the amount in any Fund on any date, Investment Obligations purchased shall be valued at the lesser of their market value or cost (with the exception of the Debt Service Reserve Fund, which shall be valued at its market value). The Trustee shall sell and reduce to cash a sufficient portion of such investments whenever the cash balance in a Fund is

D-50 insufficient for the purposes of such Fund. The Trustee shall not be responsible for any depreciation in the value of any Investment Obligation or for any loss resulting from the sale of any Investment Obligation. The Trustee may make any and all investments permitted by the provisions of the Indenture through its trust or investment departments or its affiliate’s investment departments.

Allocation and Transfers of Investment Income. Any investments will be held by or under the control of the Trustee and will be deemed at all times a part of the Fund from which the investment was made. Any loss resulting from such investments shall be charged to such Fund. Any interest or other gain from any Fund from any investment or reinvestment pursuant to the Indenture realized shall be retained therein or shall be allocated and transferred as follows:

(a) Any interest or other gain realized as a result of any investments or reinvestments of moneys in the Bond Principal Fund and the Bond Interest Fund shall be retained in the respective Fund unless a deficiency exists at the time such interest is received or other gain is realized in the Debt Service Reserve Fund, in which case such interest or other gain shall be paid into the Debt Service Reserve Fund forthwith.

(b) Any interest or other gain realized as a result of any investments or reinvestments of moneys in the Debt Service Reserve Fund shall be credited to the Debt Service Reserve Fund if the amount therein is less than the Debt Service Reserve Requirement. If the amount in the Debt Service Reserve Fund is equal to or greater than the Debt Service Reserve Requirement immediately subsequent to any required valuation, such amount in excess of the Debt Service Reserve Fund Requirement shall be paid into the Bond Interest Fund.

(c) Any interest or other gain realized as a result of any investments or reinvestments of moneys in the Project Fund shall be retained in the Project Fund unless a deficiency exists at the time such interest is received or other gain is realized in the Debt Service Reserve Fund, in which case such interest or other gain shall be paid in the Debt Service Reserve Fund forthwith.

(d) Any interest or other gain realized as a result of any investments or reinvestments of moneys in the Costs of Issuance Fund shall be retained in the Costs of Issuance Fund.

(e) Any interest or other gain realized as a result of any investment or reinvestment of moneys in the Repair and Replacement Fund shall be retained in the Repair and Replacement Fund unless a transfer is permitted pursuant to the Indenture.

Notwithstanding paragraphs (a) through (e) above, any interest or other gain from any Fund shall be transferred to the Rebate Fund to the extent required by the written direction of Borrower pursuant the Loan Agreement, except that no such transfer shall be made from any Fund if such transfer would cause the amount then on deposit in such Fund to be less than required by the provisions of the Indenture. Any interest or other gain realized as a result of any investments or reinvestments of moneys in the Rebate Fund shall be retained in the Rebate Fund.

Discharge of the Indenture. If, when the Bonds secured by the Indenture shall be paid in accordance with their terms, together with all other sums payable under the Indenture, all amounts payable to the Authority and the Trustee under the Loan Agreement and/or under the Mortgage and all amounts payable to the United States of America pursuant to Section 148 of the

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Code, then the Indenture and the Trust Estate and all rights granted under the Indenture shall cease, terminate and become void and be discharged and satisfied. If all Outstanding Bonds secured by the Indenture shall have been purchased by Borrower and delivered to the Trustee for cancellation, and all other sums payable under the Indenture, all amounts payable to the Authority under the Loan Agreement, and all amounts payable to the United States pursuant to Section 148 of the Code have been paid, or provision shall have been made for the payment of the same, then the Indenture and the Trust Estate and all rights granted under the Indenture shall cease, terminate and become void and be discharged and satisfied. In such events, upon the written request of the Borrower, the Trustee shall assign and transfer to the Borrower all property then held by the Trustee under the Indenture and shall execute such documents as may be reasonably required by Borrower and shall turn over to the Borrower any surplus in any Fund, except to the extent otherwise required by the Loan Agreement and the Indenture.

Payment of any Outstanding Bond shall prior to the maturity or redemption date thereof be deemed to have been provided for within the meaning and with the effect expressed in the Indenture if: (a) in case said Bond is to be redeemed on any date prior to its maturity, Borrower shall have given to the Trustee in form satisfactory to it irrevocable instructions to give on a date notice of redemption of such Bond on said redemption date, (b) there shall have been deposited with the Trustee either moneys in an amount which shall be sufficient, or Government Obligations which shall not contain provisions permitting the redemption at the option of the issuer, the principal of and the interest on which when due, and without any reinvestment, will provide moneys which, together with the moneys, if any, deposited with or held by the Trustee at the same time, shall be sufficient to pay when due the principal of and premium, if any, and interest due and to become due on said Bond on and prior to the redemption date or maturity date, as the case may be, (c) there shall have been delivered to the Trustee and the Authority a. certificate from a firm of certified public accountants or other financial services firm certifying as to the sufficiency of the deposit made pursuant to the preceding clause (b), (d) there shall have been delivered an opinion of nationally recognized bond counsel satisfactory to the Trustee and the Authority that such payment does not adversely affect the exclusion from gross income of interest on the 2017A Bonds and the defeasance is in accordance with the requirements of the Indenture, and (e) in the event said Bond is not by its terms subject to redemption within the next 45 days, Borrower shall give the Trustee, in form satisfactory to the Trustee, irrevocable instructions to give, as soon as practicable, in the same manner as the notice of redemption is given, a notice to the Authority and the Registered Owner of such Bond that the deposit required by clause (b) above has been made with the Trustee and that payment of said Bond has been provided for in accordance with the Indenture and stating such maturity or redemption date upon which moneys are to be available for the payment of the principal of and premium, if any, and interest on said Bond and stating whether any redemption provisions relating to the Bonds will remain in effect. Neither such securities nor moneys deposited with the Trustee or principal or interest payments on any such securities shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of and premium, if any, and interest on said Bond; provided any cash received from such principal or interest payments on such securities deposited with the Trustee, if not then needed for such purpose, shall, to the extent practicable, be reinvested in securities of the type described in clause (b) of this paragraph maturing at times and in amounts sufficient to pay when due the principal of and premium, if any, and interest to become due on said Bond on or prior to such redemption date or maturity date thereof, as the case may be. At such time as payment of a Bond has been provided for as

D-52 aforesaid, such Bond shall no longer be secured by or entitled to the benefits of the Indenture, except for the purpose of any payment from such moneys or securities deposited with the Trustee.

Provision will not be made for the payment of any Bonds if such provision would constitute an advance refunding under the Code, as amended, unless simultaneously with such provision for payment, Borrower delivers to the Authority and the Trustee an opinion of nationally recognized bond counsel acceptable to the Authority and the Trustee to the effect that such provision will not adversely affect the exclusion from gross income of the interest on the Bonds.

Events of Default. Each of the following constitutes an “Event of Default” under the Indenture:

(a) default in the payment by the Authority of the principal of or premium, if any, on any Bond when the same shall become due and payable, whether at the stated maturity thereof, on a sinking fund payment date or upon proceedings for redemption;

(b) default in the payment by the Authority of any installment of interest on any Bond when the same shall become due and payable;

(c) default shall be made in the observance or performance of any covenant, agreement, contract or other provision in the Bonds or the Indenture contained (other than as described in (a) or (b) above) and such default shall continue for a period of 30 days after written notice to the Authority, Borrower and the Trustee from the Registered Owners of at least fifty- one percent (51%) in aggregate principal amount of the Bonds then Outstanding or to the Authority and Borrower from the Trustee, subject to such section of the Indenture which provides that the Trustee is not required to take notice of any default (other than Borrower's failure to make payments to, or file documents with, the Trustee unless the Trustee has actual or specific written notice of such default), specifying such default and requiring the same to be remedied, provided, with respect to any such failure covered by this subsection (c), no Event of Default shall be deemed to have occurred so long as a course of action adequate to remedy such failure shall have been commenced within such 30 day period and shall thereafter be diligently prosecuted to completion and the failure shall be remedied thereby provided, however, that such course of action must be completed within 90 days after written notice as specified in the Indenture; or

(d) the occurrence of an “event of default” under the Loan Agreement.

Remedies on Events of Default. Upon the occurrence of an Event of Default, the Trustee shall have the following rights and remedies:

(a) Acceleration. The Trustee (i) may by notice in writing given to the Authority and Borrower or (ii) shall, upon the written request of the Registered Owners of not less than fifty- one percent (51%) in aggregate principal amount of the Bonds then Outstanding, declare the principal amount of all Bonds then Outstanding and the interest accrued thereon to be immediately due and payable and said principal and interest shall thereupon become immediately due and payable. Upon any declaration of acceleration under the Indenture, the Trustee shall

D-53 immediately declare all Loan Payments under the Loan Agreement to be immediately due and payable.

(b) Receivership. Upon the filing of foreclosure under the Mortgage or the filing of a separate action for receivership (whether or not concurrent with foreclosure and not dependent upon the filing of any such foreclosure to enforce the rights of the Trustee and of the Registered Owners), the Trustee shall be entitled as a matter of right (on an ex parte basis and without notice) to the appointment of a receiver or receivers of the Trust Estate, and of the rents, revenues, income, products and profits thereof, pending such proceedings, but, notwithstanding the appointment of any receiver, trustee or other custodian, the Trustee shall be entitled to the possession and control of any cash, securities or other instruments at the time held by, or payable or deliverable under the provisions of the Indenture to, the Trustee.

(c) Foreclosure. Foreclosure under the Mortgage on or against all or any portion of the Facilities or any interest of the Authority therein with the power of sale as and to the extent permitted of a mortgagee or beneficiary by the laws of the Commonwealth and exercise all of the rights and remedies of a secured party under the Uniform Commercial Code of the Commonwealth with respect thereto, and to realize upon the security interest in the Pledged Revenues and exercise all of the rights and remedies of a secured party under the Uniform Commercial Code of the Commonwealth with respect thereto.

(d) Suit for Judgment on the Bonds. The Trustee shall be entitled to sue for and recover judgment, either before or after or during the pendency of any proceedings for the enforcement of the lien of the Indenture, for the enforcement of any of its rights, or the rights of the Registered Owners, but any such judgment against the Authority shall be enforceable only against the Trust Estate. No recovery of any judgment by the Trustee shall in any manner or to any extent affect the lien of the Indenture or any rights, powers or remedies of the Trustee thereunder, or any liens, rights, powers or remedies of the Registered Owners of the Bonds, but such liens, rights, powers and remedies of the Trustee, and of the Registered Owners shall continue unimpaired as before. The obligations of Borrower under the Loan Agreement are general obligations of Borrower.

In the event written notice is given by the Registered Owners or the Trustee as described in “Events of Default” above, the Trustee shall immediately give written notice with respect to such default to Borrower.

No right or remedy is intended to be exclusive of any other right or remedy, but each and every such right or remedy shall be cumulative and in addition to any other right or remedy given under the Indenture or now or later existing at law or in equity or by statute.

If any Event of Default shall have occurred and if requested by the Registered Owners of not less than fifty-one percent (51%) in aggregate principal amount of the Bonds then Outstanding and indemnified, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by the Indenture as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Registered Owners.

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Direction of Remedies. Anything in the Indenture to the contrary notwithstanding, the Registered Owners of not less than fifty-one percent (51%) in aggregate principal amount of the Bonds then Outstanding shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the time, method, and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Indenture, or for the appointment of a receiver, or any other proceedings or remedies provided that such direction shall not be otherwise than in accordance with the provisions of the Indenture. The Trustee shall not be required to act on any direction given to it pursuant to the Indenture unless indemnified as provided in the Indenture.

Rights and Remedies of Registered Owners. No Registered Owner of any Bond shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of the Indenture or for the execution of any trust thereof or for the appointment of a receiver or any other remedy under the Indenture, unless a default has occurred of which the Trustee has been notified, or of which it is deemed to have notice, nor unless such default shall have become an Event of Default and the Registered Owners of not less than fifty-one percent (51%) in aggregate principal amount of the Bonds then Outstanding shall have made written request to the Trustee and shall have offered reasonable opportunity either to proceed to exercise the powers granted or to institute such action, suit or proceeding in its own name, nor unless they have also offered to the Trustee indemnity nor unless the Trustee shall thereafter fail or refuse to exercise within a reasonable period of time (not to exceed 30 days) the powers granted, or to institute such action, suit or proceeding in its own name; and such notification, request, and offer of indemnity are declared in every case at the option of the Trustee to be conditions precedent to the execution of the powers and trusts of the Indenture, and to any action or cause of action for the enforcement of the Indenture, or for the appointment of a receiver or for any other remedy under the Indenture; it being understood and intended that no one or more Registered Owners of the Bonds shall have the right in any manner whatsoever to affect, disturb or prejudice the lien of the Indenture by his, her or their action or to enforce any right under the Indenture except in the manner provided and that all proceedings at law or in equity shall be instituted, had, and maintained in the manner therein provided and for the equal benefit of the Registered Owners of the Bonds then Outstanding. Nothing in the Indenture contained shall, however, affect or impair the right of any Registered Owner of a Bond to enforce the payment, by the institution of any suit, action or proceeding in equity or at law, of the principal of, premium, if any or interest on any Bond at and after the maturity or the obligation of the Authority to pay the principal of, any premium, and interest on each of the Bonds to the respective Registered Owners of the Bonds at the time and place, from the source and in the manner in the Indenture and in the Bonds expressed. So long as the Bonds are held by DTC, the Trustee shall be permitted to accept direction from the beneficial owners of the Bonds, rather than the Registered Owner, upon receipt of appropriate certification of such beneficial ownership by the Trustee.

Application of Moneys. All moneys received by the Trustee pursuant to any right given or action taken under the provisions of the Indenture shall, after payment of the costs and expenses of the proceedings resulting in the collection of such moneys and the fees and expenses, liabilities and advances incurred or made by the Trustee, including any unpaid fees or attorney fees, be held or deposited into the Bond Principal Fund and the Bond Interest Fund during the continuance of an Event of Default and shall be applied as follows:

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(a) Unless the principal of all the Bonds shall have become or shall have been declared due and payable, all such moneys shall be applied:

FIRST, to the payment to the Persons entitled thereto of all installments of interest then due on the Bonds, in the order of the maturity of the installments of such interest and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Persons entitled thereto, without any discrimination or privilege; and

SECOND, to the payment to the Persons entitled thereto of the unpaid principal of and premium, if any, on any of the Bonds which shall have become due (other than Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of the Indenture), in the order of their due dates and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, together with such interest, then to the payment ratably, according to the amount of principal due on such date, to the Persons entitled thereto, without any discrimination or privilege.

(b) If the principal of all the Bonds shall have become due or shall have been declared due and payable, all such moneys shall be applied:

FIRST, to the payment of accrued and unpaid interest; and

SECOND, to principal then due and unpaid upon all of the Bonds, without preference or priority of any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or privilege.

(c) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled then, subject to the provisions of subsection (b) above in the event that the principal of all the Bonds shall later become due or be declared due and payable, the moneys shall be applied in accordance with the provisions of subsection (a) above.

Whenever moneys are to be so applied, such moneys shall be applied at such times, and from time to time, as the Trustee shall determine, in its reasonable discretion, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future, subject to the provision of the Indenture regarding the use of the Debt Service Reserve Fund to cure payment defaults. Whenever the Trustee shall apply such funds, it shall fix the date (which shall be an interest payment date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such dates shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposit of any such moneys and of the fixing of any such date, and shall not be required to make payment to the Registered Owner of any Bond until such Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid.

Whenever all of the Bonds, the premium, if any, and interest thereon have been paid under the provisions of the Indenture and all expenses and fees of the Trustee and all other

D-56 amounts to be paid to the Authority under the Indenture or under the Loan Agreement have been paid, any balance remaining in the Funds shall be applied as provided in the Indenture.

Trustee May Enforce Rights Without Bonds. All rights of action and claims under the Indenture or any of the Bonds Outstanding may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or proceedings relative thereto; and any suit or proceeding instituted by the Trustee shall be brought in its name as Trustee, without the necessity of joining as plaintiffs or defendants any Registered Owners of the Bonds.

Trustee to File Proofs of Claim in Receivership, Etc. In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceedings affecting the Trust Estate or Borrower, the Authority or the Trustee shall, to the extent permitted by law, be entitled to file such proofs of claims and other documents as may be necessary or advisable in order to have claims of the Trustee and the Authority, and of the Registered Owners allowed in such proceedings for the entire amount due and payable by the Authority under the Indenture, or by Borrower, as the case may be, at the date of the institution of such proceedings and for any additional amounts which may become due and payable by it after such date, without prejudice, however, to the right of any Registered Owner to file a claim in his or her own behalf.

Delay or Omission No Waiver. No delay or omission of the Trustee or of any Registered Owner to exercise any right or power accruing upon any default shall exhaust or impair any such right or power or shall be construed to be a waiver of any such default, or acquiescence therein; and every power and remedy given by the Indenture may be exercised from time to time and as often as may be deemed expedient.

No Waiver of One Default to Affect Another. No waiver of any default under the Indenture, whether by the Trustee or the Registered Owners, shall extend to or affect any subsequent or any other then existing default or shall impair any rights or remedies consequent thereon.

Discontinuance of Proceedings on Default; Position of Parties Restored. In case the Trustee or the Registered Owners shall have proceeded to enforce any rights under the Indenture and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee or the Registered Owners, then the Authority, the Trustee and the Registered Owners shall be restored to their former position and rights under the Indenture with respect to the Trust Estate and all rights, remedies and powers of the Authority, the Trustee and the Registered Owners shall continue as if no such proceedings had been taken.

Waivers of Events of Default. The Trustee may waive any Event of Default under the Indenture and its consequences and rescind any declaration of acceleration of maturity of principal of and interest on the Bonds, and shall do so upon the written request of the Registered Owners of not less than fifty-one percent (51%) in aggregate principal amount of the Bonds then Outstanding in respect of which a default exists. In case of any such waiver or rescission, or in case any proceedings taken by the Trustee on account of any such default shall have been discontinued or abandoned or determined adversely to the Trustee, the Authority, the Trustee and

D-57 the Registered Owners shall be restored to their former positions and rights under the Indenture respectively, but no such waiver or rescission shall extend to or affect any subsequent or other default, or impair any rights or remedies consequent thereon.

Duties of the Trustee. The Trustee accepts the trusts imposed upon it by the Indenture and agrees to perform said trusts, but only upon and subject to the following express terms and conditions, and no implied covenants or obligations shall be read into the Indenture against the 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 the Indenture. In the 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 the Indenture, and use the same degree of care and skill in the exercise of such rights and powers as a prudent person would exercise or use in the conduct of his or her own affairs.

(b) The Trustee may execute any of the trusts of the Indenture or powers under the Indenture 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) below, and shall be entitled to act upon the advice or an Opinion of Counsel concerning all matters of the trust and its duties under the Indenture, 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 of the Indenture. The Trustee may act upon the advice or 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 in the Indenture or in the Bonds (except in respect to the certificate of authentication of the Trustee endorsed on the Bonds), or for insuring the Facilities or collecting any insurance moneys or for the validity of the execution by the Authority of the Indenture or of any supplements to the Indenture or instruments of further assurance, or for the sufficiency of the security for the Bonds issued under the Indenture or intended to be secured by the Indenture, or for the recording or rerecording, filing or refiling of the Indenture or any security agreement in connection therewith (excluding the continuation of Uniform Commercial Code financing statements) or for the value of or title to the Facilities, 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 Borrower, except as set forth in the Indenture; but the Trustee may require of Borrower full information and advice as to the performance of the covenants, conditions, and agreements contained in the Indenture, and as to the condition of the Facilities, in the Loan Agreement or the Mortgage. 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 the Indenture.

(d) The Trustee shall not be accountable for the use of any Bonds authenticated or delivered under the Indenture. The Trustee may become the Registered Owner or Beneficial Owner of the Bonds with the same rights which it would have if not Trustee. The Trustee shall

D-58 not be accountable for the use or application by the Authority or Borrower of the proceeds of any of the Bonds or of any money paid to or upon the order of the Authority or Borrower under any provision of the Indenture.

(e) The Trustee shall be protected in acting or refraining from 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 the Indenture upon the request or authority or consent of any person who at the time of making such request or giving such authority or 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 Representative of the Authority or on behalf of Borrower by an Authorized Representative of Borrower or such other Person as may be designated for such purpose by the Authority or 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) below, 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 the Indenture shall not be construed as a duty, and the Trustee shall not be answerable for other than its 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 subsection (a) above.

(h) The Trustee shall not be required to take notice or be deemed to have notice of any default under the Indenture except for the failure by the Authority to cause to be made any of the payments to the Trustee required to be made under the Indenture, the failure by Borrower to cause to be made any of the payments to the Trustee required to be made under the Indenture, under the Loan Agreement, the Mortgage or the failure by the Authority or Borrower to file with the Trustee any of the documents required, or to deposit with the Trustee the insurance coverage report required, under the Indenture, the Loan Agreement or the Mortgage, 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, the Borrower or the Registered Owners and all notices or other instruments required by the Indenture to be delivered to the Trustee, must, in order to be effective, be delivered at the address of the Trustee provided for in the Indenture, and, in the absence of such notice so delivered, the Trustee may conclusively assume that there is no default except as stated. If moneys sufficient, to pay maturing principal and interest on the Bonds are not timely received by the Trustee, the Trustee covenants to give written notice of such fact to Borrower, the Registered Owners and the Authority.

(i) All moneys received by the Trustee shall, until used or applied or invested as provided in the Indenture, be held in trust in the manner and for the purposes for which they

D-59 were received but need not be segregated from other funds except to the extent required by the Indenture or law. The Trustee shall not be under any liability for interest on any moneys received under the Indenture 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 and Borrower pertaining to the Facilities, the Project 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 the Indenture contained, the Trustee shall have the right, but not the obligation, 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 the Indenture, any showings, certificates, opinions, appraisals or other information or corporate action or evidence thereof, as a condition of such action by the Trustee deemed desirable for the purpose of establishing the right of the Authority or 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) Notwithstanding anything in the Indenture to the contrary, before taking any action at the direction of the Registered Owners as provided in the Indenture and other than payment of moneys on deposit in any of the funds as provided for in the Indenture, the Trustee may require that indemnity reasonable to it be furnished to it by the Registered Owners requesting the Trustee to act for the reimbursement of all expenses (including reasonable attorneys' fees and expenses) which it may incur and to protect it against all liability, except liability which may result from its negligence or willful default, by reason of any action so taken.

(n) The Trustee shall not be required to advance any of its own funds in the performance of its obligations under the Indenture unless it has received assurances satisfactory to it that it will be repaid.

(o) The Trustee shall have no responsibility with respect to any information, statement or recital in any offering memorandum, remarketing circular or other disclosure material prepared or distributed with respect to the Bonds except for written information provided by the Trustee specifically for inclusion in such document.

(p) The Trustee makes no representations as to the validity or sufficiency of the Indenture (except as to the Trustee), the Loan Agreement, the Mortgage or the Bonds, assumes no responsibility for the correctness of the same, and shall incur no responsibility in respect to such validity or sufficiency.

(q) The Trustee shall be responsible for filing any UCC continuation or other statements necessary to preserve the security interest securing payment of the Bonds.

(r) The Trustee shall provide any information received pursuant to the Loan Agreement as provided in the Continuing Disclosure Agreement.

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(s) The Trustee will cause all supplements to the financing statements which are prepared and filed on the date of issuance of the Bonds and all other instruments as may be required at all times to be recorded, registered and filed by Borrower and to be kept, recorded, registered and filed in such manner and in such places as may be required by law in order to preserve and protect fully the security of the Registered Owners and all rights of the Trustee under the Indenture.

(t) The Trustee may inform the Registered Owners of environmental hazards that the Trustee has reason to believe exist, and the Trustee has the right to take no further action and, in such event no fiduciary duty exists which imposes any obligation for the Trustee to foreclose upon, manage, maintain or operate the Facilities, if the Trustee in its individual capacity, determines that any such action would materially and adversely subject the Trustee to environmental or other liability for which the Trustee has not been adequately indemnified.

(u) Notwithstanding any other provision of the Indenture to the contrary, any provision relating to the conduct of, intended to provide authority to act, right to payment of fees and expenses, protection, immunity and indemnification to the Trustee, shall be interpreted to include any action of the Trustee, whether it be deemed to be in its capacity as Trustee, registrar, or paying agent.

(v) The Trustee shall provide any information it receives pertaining to the Borrower to the Authority upon its request.

Resignation or Replacement of Trustee. The present or any future Trustee may resign by giving to the Authority, Borrower and the Registered Owners 60 days' notice of such resignation. Such resignation shall take effect immediately on the appointment of a successor. The present or any future Trustee may be removed at any time by an instrument in writing by the Authority or by the Registered Owners of not less than fifty-one percent (51%) in aggregate principal amount of the Bonds and such removal shall take effect immediately on the appointment of a successor. The Trustee may also be removed at any time for any breach of the trust set forth in the Indenture. If no successor is appointed within 60 days following the date designated in the notice for the Trustee's resignation to take effect, the resigning or removed Trustee may petition a court of competent jurisdiction for the appointment of a successor Trustee.

In case the present or any future Trustee shall at any time resign or be removed or otherwise become incapable of acting, a successor may be appointed by the Registered Owners of not less than fifty-one percent (51%) in aggregate principal amount of the Bonds Outstanding by an instrument or concurrent instruments signed by such Registered Owners, or their attorneys- in-fact duly appointed; provided that the Authority (with the consent of Borrower so long as Borrower is not in default under the Loan Agreement) may appoint a successor until a new successor shall be appointed by the Registered Owners. The Authority upon making such appointment shall forthwith give notice thereof to the Registered Owners and Borrower, which notice may be given concurrently with the notice of resignation given by any resigning Trustee. Any successor so appointed by the Authority shall immediately and without further act be superseded by a successor appointed in the manner above provided by the Registered Owners of not less than fifty-one percent (51%) in aggregate principal amount of the Bonds then Outstanding.

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Every successor shall always be a bank or trust company in good standing, be qualified to act under the Indenture, be subject to examination by a federal or state authority and have capital and surplus of not less than Seventy-Five Million Dollars.

Conversion, Consolidation or Merger of Trustee. Any bank or trust company into which the Trustee or its successor may be converted, merged or with which it may be consolidated, or to which it may sell or transfer its corporate trust business as a whole shall be the successor of the Trustee under the Indenture with the same rights, powers, duties and obligations and subject to the same restrictions, limitations and liabilities as its predecessor, all without the execution or filing of any papers or any further act on the part of any of the parties to the Indenture.

Supplemental Indentures Not Requiring Consent of Registered Owners. The Authority may and, at the written direction of Borrower, the Trustee may, without the consent of, or notice to, the Registered Owners, enter into such indentures supplemental to the Indenture (which supplemental indentures shall thereafter form a part the Indenture) for any one or more or all of the following purposes:

(a) to add to the covenants and agreements in the Indenture contained other covenants and agreements thereafter to be observed for the protection or benefit of the Registered Owners;

(b) to cure any ambiguity, or to cure, correct or supplement any defect or inconsistent provision contained in the Indenture, or to make any provisions with respect to matters arising under the Indenture or for any other purpose if such provisions are necessary or desirable and do not materially adversely affect the interests of the Registered Owners of the Bonds;

(d) to modify, alter, amend or supplement the Indenture in such a manner as shall permit the qualification of the Indenture under the Trust Indenture Act of 1939, as from time to time amended; or

(e) to provide for the issuance of Additional Bonds in accordance with the Indenture.

Supplemental Indentures Requiring Consent of Registered Owners. POTENTIAL BONDHOLDERS SHOULD NOTE THE DISCLOSURE REGARDING THE INDENTURE PROVISION, SET FORTH AT THE BEGINNING OF THE INDENTURE SUMMARY OF TERMS, AND NOTED AS A RISK FACTOR THROUGHOUT THE BOND'S OFFICIAL STATEMENT. Exclusive of supplemental indentures which do not require the consent of Registered Owners, the Registered Owners of not less than fifty-one percent (51%) in aggregate principal amount of the Bonds then Outstanding shall have the right, from time to time, to consent to and approve the execution by the Authority and the Trustee of such supplemental indenture or indentures as shall be deemed necessary or desirable by the Authority for the purpose of modifying, altering, amending, adding to, or rescinding, in any particular, any of the terms or provisions contained in the Indenture; PROVIDED, HOWEVER, THAT WITHOUT THE CONSENT OF THE REGISTERED OWNERS OF NOT LESS THAN ONE HUNDRED PERCENT (100%) IN AGGREGATE PRINCIPAL AMOUNT OF THE BONDS AT THE TIME OUTSTANDING AND ADVERSELY AFFECTED THEREBY NOTHING CONTAINED IN THE INDENTURE (EXCLUSIVE OF

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SUPPLEMENTAL INDENTURES WHICH DO NOT REQUIRE THE CONSENT OF REGISTERED OWNERS) SHALL PERMIT, OR BE CONSTRUED AS PERMITTING:

(A) AN EXTENSION OF THE MATURITY OF, OR A REDUCTION OF THE PRINCIPAL AMOUNT OF, OR A REDUCTION OF THE RATE OF, OR EXTENSION OF THE TIME OF PAYMENT OF INTEREST ON, OR A REDUCTION OF A PREMIUM PAYABLE UPON ANY REDEMPTION OF, ANY BOND;

(B) THE DEPRIVATION OF THE REGISTERED OWNER OF ANY BOND THEN OUTSTANDING OF THE LIEN CREATED BY THE INDENTURE (OTHER THAN AS PERMITTED BY THE INDENTURE WHEN SUCH BOND WAS INITIALLY ISSUED);

(D) A REDUCTION IN THE AGGREGATE PRINCIPAL AMOUNT OF THE BONDS, IF ANY, REQUIRED FOR CONSENT TO SUCH SUPPLEMENTAL INDENTURE OR AMENDMENT TO THE LOAN AGREEMENT.

If at any time the Authority shall request the Trustee to enter into such supplemental indenture for any of the purposes set forth above, the Trustee shall, upon being reasonably indemnified by Borrower with respect to expenses, mail by first class mail notice of the proposed execution of such supplemental indenture to the Registered Owners of the Bonds at their addresses as the same shall last appear upon the registration records. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the principal office of the Trustee for inspection by all Registered Owners. If, within 60 days following the mailing of such notice, the Registered Owners of the requisite principal amount of the Bonds Outstanding at the time of the execution of any such supplemental indenture shall have consented to and approved the execution thereof as herein provided, no Registered 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 Trustee or the Authority from executing the same or from taking any action pursuant to the provisions thereof.

Execution of Supplemental Indentures. The Trustee is authorized to join with the Authority in the execution of any such supplemental indenture and to make further agreements and stipulations which may be contained therein, but the Trustee shall not be obligated to enter into any such supplemental indenture which materially adversely affects its rights, duties, or immunities under the Indenture. The Trustee shall require delivery of an opinion of nationally recognized municipal bond counsel acceptable to the Trustee and addressed to the Trustee and the Authority to the effect that each such supplemental indenture (a) has been validly authorized and duly executed by the Authority and is enforceable against the Authority in accordance with its terms, (b) will not adversely affect the qualification of the Bonds as obligations which may be issued pursuant to the Act, (c) will not adversely affect the exclusion from gross income of

D-63 interest on the 2017A Bonds for federal income tax purposes and (d) is permitted pursuant to the terms of the Indenture. Any supplemental indenture so executed shall thereafter form a part of the Indenture and all the terms and conditions contained in any such supplemental indenture as to any provision authorized to be contained therein shall be deemed to be part of the Indenture for any and all purposes. In case of the execution and delivery of any supplemental indenture, express reference may be made thereto in the text of the Bonds issued thereafter, if any.

Consent of Borrower. A supplemental indenture shall not become effective unless and until Borrower shall have consented to the execution and delivery of such supplemental indenture, unless an Event of Default has occurred and is continuing under the Loan Agreement.

Amendments, Etc., of the Loan Agreement or Mortgage Not Requiring Consent of Registered Owners. The Authority and the Trustee may, without the consent of or notice to the Registered Owners, consent to any amendment, change or modification of the Loan Agreement or the Mortgage as such amendment may be required (a) by the provisions of the Loan Agreement or the Indenture, (b) to conform such documents or otherwise for the purpose of curing any ambiguity or formal defect or omission, or (c) in connection with any other change in the Loan Agreement or the Indenture which is not to the material adverse prejudice of the Trustee or the Registered Owners of the Bonds.

Amendments, Etc., of the Loan Agreement or Mortgage Requiring Consent of Registered Owners. Except for the amendments, changes or modifications described above, neither the Authority nor the Trustee shall consent to any other amendment, change or modification of the Loan Agreement or Mortgage without giving notice to and receiving the written approval or consent of the Registered Owners of not less than fifty-one percent (51%) in aggregate principal amount of the Bonds at the time Outstanding, subject to the same limitations and with notice as set forth in the Indenture and described at “Supplemental Indentures Requiring Consent of Registered Owners” in the Indenture. If at any time the Authority and Borrower shall request the consent of the Trustee to any such proposed amendment, change or modification of the Loan Agreement or the Mortgage, the Trustee shall, upon being reasonably indemnified by Borrower with respect to expense, give notice which 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 principal office of the Trustee for inspection by all Registered Owners. If, within 60 days following the mailing of such notice, the Registered Owners of the requisite principal amount of the Bonds Outstanding at the time of the execution of any such amendment, change or modification shall have consented to and approved the execution of the agreement reflecting such amendment, change or modification thereof as provided in the Indenture, no Registered 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 Trustee or the Authority from executing the same or from taking any action pursuant to the provisions thereof.

Execution of Amended Agreement or Mortgage. The Trustee shall, prior to its consent to any supplemental amendment or change to the Loan Agreement or Mortgage, require delivery of an opinion of nationally recognized municipal bond counsel acceptable to the Trustee and addressed to the Trustee and the Authority to the effect that such supplemental amendment or change to the Loan Agreement or Mortgage (a) has been validly authorized and duly executed by

D-64 the Authority and Borrower and is enforceable against the Authority and Borrower in accordance with its terms, (b) will not adversely affect the qualification of the Bonds as obligations which may be issued pursuant to the Act, (c) will not adversely affect the exclusion from gross income of interest on the 2017A Bonds for federal income tax purposes and (d) is permitted pursuant to the terms of the Indenture. After execution thereof, any supplemental amendment, modification or change to the Loan Agreement or Mortgage executed in accordance with the provisions of the Indenture shall thereafter form a part of the Loan Agreement or Mortgage (as applicable) and all the terms and conditions contained in any such amendment, modification or change to the Loan Agreement or Mortgage (as applicable) as to any provision authorized to be contained therein shall be deemed to be part of the Loan Agreement or Mortgage (as applicable) for any and all purposes.

The Mortgage

The following is a summary of certain provisions of the Mortgage. Such summary does not purport to be complete or definitive, and reference is made to the Mortgage for a full and complete statement of its terms and provisions and for the definition of capitalized terms used in this summary and not otherwise defined herein. In the event of any inconsistency between any definitions or provisions of the Mortgage purported to be summarized in this Appendix D and those contained in the Mortgage, the definitions and provisions in the Mortgage shall control. Certain capitalized terms contained within this summary not defined herein have the meanings ascribed to them in Article 9 of the Commonwealth Uniform Commercial Code. Copies of the Mortgage are available from the Trustee.

Mortgaged Property. Pursuant to the Mortgage, Borrower has granted a security interest in and mortgaged to the Trustee, all of Borrower's right, title and interest in and to the following whether presently in existence or to come into existence at some future time (collectively the “Mortgaged Property”): certain parcels of land located in the City and County of Philadelphia, Pennsylvania and more fully described in Exhibit A of the Mortgage (the “Land”); all buildings, structures and improvements of every kind erected on, under or over the Land (the “Improvements”) (the Land, the Improvements and the Fixtures being hereinafter referred to as, collectively, the “Real Estate”); all estates, rights, tenements, hereditaments, privileges, easements, and appurtenances of any kind benefitting the Real Estate; all means of access to and from the Real Estate, whether public or private; all water, oil, gas and mineral rights; all rights of Borrower as declarant or unit owner under any declaration of condominium or association applicable to the Real Estate; and all other claims or demands of Borrower, either at law or in equity, in possession or expectancy, of, in, or to the Real Estate; all leases, licenses, occupancy agreements or agreements to lease all or any part of the Real Estate and all extensions, renewals, amendments, and modifications thereof, and any options, rights of first refusal, or guarantees relating thereto (collectively, “Leases”); and all rents, income, receipts, revenues, security deposits, escrow accounts, reserves, issues, profits, awards, and payments of any kind payable under the Leases or otherwise arising from the Project (collectively, the “Income”); all awards and other compensation now and later to be made to Borrower for any taking by eminent domain, either permanent or temporary, of all or any part of the Real Estate or any easement or appurtenance thereof, including severance and consequential damage and change in grade of streets, or any of the personal property described below; all payments, proceeds, settlements or other compensation now or later made, including any interest thereon, and the right to receive the

D-65 same, from any and all insurance policies covering the Real Estate or any portion thereof or any of the personal property described in this Section below; all Goods, purchased by Borrower with proceeds of the Bonds, including without limitation, Fixtures, Equipment and Accessions; all Goods, other than those purchased by Borrower with proceeds of the Bonds, having a useful life of five (5) years or more, including without limitation, Fixtures, Equipment and Accessions, attached to, situated or installed in or upon, or used in the operation or maintenance of the Real Estate; all Accounts and General Intangibles relating to the use, construction upon, occupancy, leasing, sale or operation of the Real Estate, with the exception of any donor restricted gifts made to Borrower; all As-Extracted Collateral arising from the Land; all books and records evidencing or relating to the foregoing, including, without limitation, billing records of every kind and description, tenant lists, data storage and processing media, software and related material, including computer programs, computer tapes, cards, disks and printouts, and including any of the foregoing which are in the possession of any affiliate or property manager; all right, title, and interest of Borrower in and to the name and style by which the Land and/or the Improvements is known, including trademarks and trade names relating thereto; all right, title, and interest of Borrower in, to and under all plans, specifications, maps, surveys, studies, reports, permits, licenses, architectural, engineering and construction contracts, books of account, insurance policies, and other documents, of whatever kind or character, and all proceeds and other amounts paid or owing to Borrower under or pursuant to any and all contracts and bonds, relating to the use, construction upon, renovation, occupancy, leasing, sale, or operation of the Land and/or the Improvements; all right, title, and interest of Borrower in and to all contracts, permits, certificates, licenses, approvals, utility deposits, utility capacity, and utility rights issued, granted, agreed upon, or otherwise provided by any governmental or private authority, person or entity relating to the ownership, development, construction, operation, maintenance, marketing, sale or use of the Land and/or the Improvements, including all of the Borrower's rights and privileges now or later otherwise arising in connection with or pertaining to the Land and/or the Improvements, including, without limiting the generality of the foregoing, all water and/or sewer capacity, all water, sewer and/or other utility deposits or prepaid fees, and/or all water and/or sewer and/or other utility tap rights or other utility rights, any right or privilege of Borrower under any loan commitment, lease, contract, Declaration of Covenants, Restrictions and Easements, or like instrument, Developer's Agreement, or other agreement with any third party pertaining to the ownership, development, construction, operation, maintenance, marketing, sale, or use of the Land and/or the Improvements; and all Proceeds of any of the above-described property.

Warranty of Title. Until the obligations are fully satisfied, Borrower represents, warrants and covenants that:

(a) Borrower has good and marketable fee simple absolute title to the Mortgaged Property subject only to the Permitted Encumbrances, and Borrower will defend the validity, priority and enforceability of the lien of the Mortgage against the claims of all persons excepting only those claiming under Permitted Encumbrances.

(b) Borrower has full power and lawful authority to subject the Mortgaged Property to the lien of the Mortgage;

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(c) The execution, delivery and performance of the Mortgage and the other Loan Documents will not contravene any Legal Requirements (defined below) or any agreement, document or instrument to which the Borrower is a party or by which the Borrower or the Mortgaged Property is bound;

(d) The Borrower will make, execute, acknowledge and deliver all such further other deeds, documents, instruments or assurances and cause to be done all such further acts and things as may at any time be required by the Trustee to confirm and fully protect the lien and priority of the Mortgage; and

(e) The Borrower will make such payments, all before the same becomes delinquent, and perform all obligations as are required under any Permitted Encumbrances affecting the Mortgaged Property.

Legal Requirements Generally. Borrower represents and warrants to the Trustee that the Mortgaged Property is in compliance and will be kept in compliance with, all present and future laws, statutes, codes, ordinances, orders, judgments, decrees, injunctions, rules, regulations, restrictions and requirements (collectively “Legal Requirements”) of the United States of America, the Commonwealth and any political subdivision thereof in which the Real Estate is located or any agency, department, bureau, board, commission or instrumentality of any of the foregoing now existing or later created (individually, a “Governmental Authority”) having jurisdiction over Borrower or the Mortgaged Property or the construction, use, occupancy, operation, maintenance, or improvement of the Mortgaged Property, whether foreseen or unforeseen, ordinary or extraordinary.

Environmental Matters. Borrower represents, warrants and covenants that neither Borrower nor, to the best of its knowledge, any other person has or will (i) use, install or dispose of any hazardous materials on, from, or affecting the Real Estate except in full compliance with Applicable Environmental Laws (defined below); or (ii) received any notice from any Governmental Authority with regard to Hazardous Materials on, from or affecting the Real Estate.

General Obligations. Until the obligations are fully satisfied, Borrower shall:

(a) Perform, or cause its tenants to perform, all maintenance, repair, restoration and rebuilding required to keep the Real Estate in good repair, order and condition in full compliance with the requirements of the Loan Documents, any Leases affecting the Real Estate and all Legal Requirements;

(b) Pay, or cause its tenants to pay, all charges for water, sewer, gas, electric and other utility services provided to the Real Estate promptly as and when due;

(c) Complete, or cause its tenants to complete, any improvements to the Real Estate required under the Loan Documents, any Leases affecting the Real Estate, or required by any Governmental Authority or insurer insuring the Real Estate, in a good and workmanlike manner and free of mechanics' liens;

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(d) Permit, and cause any lessee or occupant of the Real Estate to permit, the Trustee and its agents and representatives, to enter upon the Real Estate at any reasonable time and after reasonable notice to appraise and photograph the Real Estate and to inspect for compliance with Legal Requirements (including subsurface investigations to determine compliance with Applicable Environmental Laws), insurance requirements, and the obligations of Borrower under the Mortgage and the other Loan Documents; and

(e) Maintain full and complete books of account and records reflecting the results of the operations of the Real Estate in accordance with generally accepted accounting principles consistently applied, and will furnish or cause to be furnished to Trustee such financial information concerning the condition of the Borrower and the Real Estate as Trustee shall reasonably request and make the books and accounts relating to the Real Estate available for inspection by Trustee, or its representatives, upon request at any reasonable time.

Real Estate Taxes and Assessments. Borrower shall pay, or cause to be paid, when due and before interest or penalties commence to accrue thereon, all taxes, assessments, water and sewer rents, levies, encumbrances and all other charges or claims of any nature and kind, whether public or private, which may be assessed, levied, imposed, suffered, placed or filed at any time against the Real Estate or any part thereof or which by any present or future law may have priority (either in lien or in distribution out of the proceeds of any sale) over the lien of the Mortgage.

Insurance Coverages. Until the obligations are fully satisfied, Borrower shall maintain and keep in force, or cause tenants to maintain and keep in force, the policies of insurance required by the Mortgage with respect to the Real Estate.

Events of Default. The occurrence of any one or more of the following events shall, at the election of the Trustee, constitute an “Event of Default” under the Mortgage:

Any event of default as defined in any other Loan Document after notice and cure periods, if any;

Failure to pay any sum required to be paid under the Mortgage as and when due and the continuation thereof for a period of five (5) days;

Any breach of warranty or other violation of any provision contained in the Mortgage; or

Nonperformance of, or noncompliance with, any of the agreements, covenants, conditions, warranties, representations or other provisions contained in the Mortgage (if and only to the extent not included in any of the occurrences listed above), which nonperformance or noncompliance is not cured and remedied within thirty (30) days after notice thereof is given to Borrower. Provided, with respect to any such failure covered by this subsection (d), no Event of Default shall be deemed to be continuing so long as a course of action adequate in the judgment of the Mortgagee to remedy such failure shall have been commenced within such 30-day period and shall thereafter be diligently prosecuted to completion and failure shall be remedied thereby provided, however, that such course of action must be complete with ninety (90) days of the written notice that has been given to Borrower.

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Remedies; Execution. Upon the occurrence of, and during the continuance of an Event of Default, the Trustee shall have the right to accelerate all obligations under the Loan Documents (including interest thereon at the Default Rate) pursuant to the terms of the Loan Documents and to enforce its rights under the Mortgage and the other Loan Documents by exercising such remedies as are available to the Trustee under applicable law, either by suit in equity or action at law, or both, whether for specific performance of any provision contained in the Mortgage or any of the other Loan Documents or in aid of the exercise of any power granted in the Mortgage or the other Loan Documents. The Trustee's remedies include the right to institute an action of mortgage foreclosure against the Mortgaged Property or take such other action for realization on the security provided under the Mortgage.

Rights and Remedies Cumulative. All rights and remedies of the Trustee as provided in the Mortgage and the other Loan Documents shall be cumulative and concurrent, may be pursued separately, successively or together against Borrower or the Mortgaged Property, or both, at the sole discretion of the Trustee and may be exercised as often as occasion therefor shall arise. The failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof.

Any failure by Trustee to insist upon strict performance by Borrower of any of the terms and provisions of this Mortgage or the other Loan Documents shall not be deemed to be a waiver of any of the terms or provisions of this Mortgage or the other Loan Documents, and Trustee shall have the right thereafter to insist upon strict performance by Borrower of any and all of them.

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APPENDIX E FORM OF OPINION OF BOND COUNSEL

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______, 2017

Re: Philadelphia Authority for Industrial Development $______Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project) Series 2017A (“Series A Bonds”), and $______Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project) Federally Taxable Series 2017B (“Series B Bonds”)

To the Purchasers of the Within-Described Bonds:

We have acted as Bond Counsel in connection with the issuance by the Philadelphia Authority for Industrial Development (“Authority”) of the referenced bonds (the Series A Bonds and the Series B Bonds are sometimes hereinafter referred to, collectively, as the “Bonds”). The Series A Bonds are issued on a federally tax-exempt basis; the Series B Bonds as federally taxable.

The Authority is a body corporate and politic constituting an instrumentality of the Commonwealth of Pennsylvania (“Commonwealth”), created under the Economic Development Financing Law, Act of the General Assembly of the Commonwealth, enacted December 17, 1993, P.L. 490, as amended, 73 P.S. § 371 et seq. (“Act”). The Bonds are being issued under and pursuant to the Act, a resolution of the Authority adopted on October 13, 2017 (“Resolution”), and a trust indenture dated as of March 1, 2017 (“Indenture”) by and between the Authority and U.S. Bank National Association, as Trustee (“Trustee”). Pursuant to a Loan Agreement, dated as of March 1, 2017 (“Loan Agreement”), between the Authority and Harambee Institute of Science and Technology Charter School, Inc. (“Borrower”), a Pennsylvania nonprofit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (“Code”), the Authority will lend the proceeds of the Bonds to the Borrower to finance the costs of the Project (hereinafter defined). The Borrower operates a charter school on the real property and improvements known as 638-640 North 66th Street in Philadelphia, Pennsylvania (“Facilities”), which it has rented from the Harambee Institute, Inc. since the school’s inception. The Borrower’s obligations under the Loan Agreement are secured by an Open-End Mortgage, Security Agreement and Fixture Filing on the Facilities, dated as of March 1, 2017, from the Borrower to the Trustee (“Mortgage”).

The Bonds are being issued to finance (i) the costs of the acquisition of certain renovations and improvements to the Facilities; (ii) the funding of capitalized interest and a debt service reserve fund for the Bonds; and (iii) payment of the costs of issuance and sale of the Bonds (“Project”).

The Bonds are special, limited obligations of the Authority payable solely from the amounts paid and payable by the Borrower under the Loan Agreement. The Bonds are not secured by a lien or charge on, or pledge of any revenues or other assets of the Authority.

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In our capacity as Bond Counsel, we have examined the Constitution of the Commonwealth and such statutes of the Commonwealth and other applicable law as we deemed necessary to enable us to render the opinion set forth below including the Act. We have also examined and relied upon the proceedings of the Authority authorizing the issuance and sale of the Bonds and certain certifications and agreements (including a Tax Compliance Certificate and Agreement of the Authority and the Borrower relating to the Series A Bonds intended to satisfy certain provisions of the Code), receipts and other documents, including the Indenture, the Loan Agreement and the Bonds, which we considered relevant. We have also examined and have relied upon the legal opinions as to various matters delivered by the Authority’s Staff Counsel and by Kleinbard LLC, Philadelphia, Pennsylvania, special counsel to the Borrower, as to all matters of fact and law set forth therein. In rendering the opinion set forth below, we have relied upon the authenticity, truthfulness and completeness of all certificates, records and other documents and instruments examined, and the genuineness of all signatures thereon. We have not undertaken to verify the factual matters set forth therein by independent investigation.

Based upon and subject to the foregoing and to the qualifications stated herein, we are of the opinion that:

1. The Authority is a body corporate and politic, constituting an instrumentality of the Commonwealth, created and validly existing under the Act with the power and authority thereunder to adopt the Resolution, to undertake the Project, to execute and deliver the Indenture and the Loan Agreement and to issue the Bonds.

2. The Resolution was duly adopted; the Indenture and the Loan Agreement have been duly authorized, executed and delivered by the Authority and, assuming the due authorization, execution and delivery by the other parties thereto, are valid and legally binding instruments of the Authority, enforceable against the Authority in accordance with their terms, except as may be affected by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws or legal or equitable principles affecting the enforcement of creditors' rights (“Creditors’ Rights Limitations”).

3. The Bonds have been duly authorized, executed and issued by the Authority, and are valid and binding special and limited obligations of the Authority payable solely from the sources described therein and in the Indenture, enforceable in accordance with their terms, and are entitled to the benefit and security of the Indenture and the Mortgage, except as may be affected by Creditors’ Rights Limitations.

4. Under the laws of the Commonwealth, as enacted and construed on the date hereof, the Bonds are exempt from personal property taxes in the Commonwealth and interest on the Bonds is exempt from Pennsylvania personal income tax and Pennsylvania corporate net income tax.

5. Under existing law, regulations, rulings and judicial decisions and assuming continuing compliance with certain representations and continuing compliance with certain covenants, interest on the Series A Bonds is excludible from gross income of the owners thereof for federal income tax purposes and interest on the Series A Bonds is not a specific preference item for purposes of the federal alternative minimum tax; provided, however, the interest on the Series A Bonds will be included in adjusted current earnings of certain corporations, and such E - 2

corporations are required to include in the calculation of alternative minimum taxable income 75% of the excess of such corporations’ adjusted current earnings over its alternative minimum taxable income (determined without regard to such adjustment and prior to the reduction for certain net operating losses). The opinions described in this paragraph 5 with respect to federal tax matters assume the accuracy of certain representations of the Borrower and the Authority and continuing compliance with covenants designed to satisfy the requirements of the Code, that must be met subsequent to the issuance of the Series A Bonds. Failure to comply with such requirements could cause interest on the Series A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series A Bonds. We express no opinion regarding any other federal tax law consequences arising with respect to the Series A Bonds.

Interest on the Series B Bonds is not excludible from gross income of the holders thereof for federal income tax purposes.

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We express no opinion with respect to any matter not expressly set forth in the numbered paragraphs herein, including any federal income tax consequences arising with respect to the Bonds other than as expressed in paragraph 5 above, or as to the accuracy, completeness or sufficiency of the Preliminary Limited Offering Memorandum or the definitive Limited Offering Memorandum prepared in connection with the offering or issuance of the Bonds, including the appendices thereto, and make no representation that we have independently verified the contents thereof.

We call to your attention that the Bonds are special, limited obligations of the Authority payable solely from the sources described in the Indenture and are not in any way a debt or liability of the Commonwealth, the City of Philadelphia ("City") or any political subdivision of either thereof, nor is the general credit of the Authority or the general credit or taxing power of the Commonwealth, the City or any such political subdivision of either of them pledged for payment of the Bonds. The Authority has no taxing power.

This opinion is rendered on the basis of federal law and the laws of the Commonwealth, as enacted and construed on the date hereof. This opinion is given as of the date hereof, and we assume no obligation to update or supplement this opinion to reflect any facts or circumstances which may hereafter come to our attention or any changes in law which may hereafter occur. This opinion is rendered solely to the addressees hereof in connection with the issuance of the Bonds on the date hereof and may not be relied on for any other purpose or by any other person, nor may it be distributed or disclosed to any other person (other than those represented at the settlement of the sale and purchase of the Bonds) without the prior written consent in each instance of a partner of the undersigned firm.

Very truly yours,

KUTAK ROCK LLP

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APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT

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CONTINUING DISCLOSURE AGREEMENT

between

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL, INC.

and

U.S. BANK NATIONAL ASSOCIATION, as Dissemination Agent

Dated as of March 1, 2017

Relating to:

Philadelphia Authority for Industrial Development $______Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Series 2017A

Philadelphia Authority for Industrial Development $______Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project) Federally Taxable Series 2017B

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THIS CONTINUING DISCLOSURE AGREEMENT dated as of this 1st day of March, 2017 (this “Agreement”), is executed by and between HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL, INC., a Pennsylvania nonprofit corporation (the “School”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association (the “Dissemination Agent”), as Dissemination Agent.

RECITALS

WHEREAS, this Agreement is being executed in connection with the issuance by the Philadelphia Authority for Industrial Development (the “Issuer”) of its $______Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Series 2017A and its $______Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Federally Taxable Series 2017B (the “Bonds”);

WHEREAS, the Bonds are being issued pursuant to a Trust Indenture dated as of March 1, 2017 (the “Indenture”), by and between the Issuer and the Dissemination Agent, acting as trustee (the “Trustee”). The proceeds of the Bonds are being used as described in the Indenture to benefit the School; and

WHEREAS, to provide for the furnishing of certain information relating to the Bonds and the School and the security therefor and to permit the participating underwriter of the Bonds to comply with the requirements of Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (17 C.F.R. § 240.15c2-12), the School and Dissemination Agent desire to enter into this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto DO HEREBY AGREE as follows:

Section 1. Definitions. Terms used with initial capital letters but not defined herein shall have the meanings given such terms in the Indenture, unless the context hereof clearly requires otherwise.

In addition, the following terms, when used herein, have the following respective meanings:

Bondowner or Owner: in respect of a Bond, the registered owner or owners thereof appearing in the bond register maintained by the Trustee or any beneficial owner thereof, if such owner provides to the Trustee evidence of such beneficial ownership in form and substance reasonably satisfactory to the Trustee.

Business Day means any day other than a Saturday, Sunday or (i) a day on which banks located in the city in which the designated corporate trust office of the Dissemination Agent is located are required or authorized to remain closed or (ii) a day the New York Stock Exchange is closed.

Disclosure Information: shall have the meaning assigned in Section 4 hereof.

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Electronic Means: facsimile transmission, email transmission or other similar electronic means of communication providing evidence of transmission, including a telephone communication confirmed by any other method set forth in this definition.

EMMA: the Electronic Municipal Market Access system operated by the MSRB and the primary portal for complying with the continuing disclosure requirements of the Rule.

Material Fact: a fact as to which a substantial likelihood exists that a reasonably prudent investor would attach importance thereto in deciding to buy or sell the Bonds or, if not disclosed, would significantly alter the total information otherwise available to an investor from the Official Statement, information disclosed hereunder or information generally available to the public. Notwithstanding the foregoing, a “Material Fact” is also an event or condition that would be deemed “material” for purposes of the purchase or sale of a Bond within the meaning of applicable federal securities laws, as interpreted at the time of discovery of the occurrence of the event or condition.

MSRB: the Municipal Securities Rulemaking Board or any successor to its functions.

Official Statement: the Official Statement dated ______, 2017, relating to the Bonds, as amended or supplemented to the date of issuance of the Bonds.

Participating Underwriter: Herbert J. Sims & Co., Inc., the original underwriter of the Bonds required to comply with the Rule in connection with the primary offering of the Bonds for sale.

Person: any individual, corporation, partnership, limited liability company, limited liability partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

Purchaser: any Person who purchases or otherwise receives all or any portion of the Bonds from an Owner.

Rating Agency: S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC, Moody’s Investors Service, Fitch Ratings Inc. or any of their successors or any other nationally recognized rating agency.

Repository: EMMA, or any other filing system approved by the SEC.

Rule: Rule 15c2-12 promulgated by the SEC under the Securities Exchange Act of 1934 (17 C.F.R. § 240.15c2-12), as in effect and interpreted from time to time.

SEC: the Securities and Exchange Commission or any successor to its functions governing state and municipal securities disclosure.

State: the Commonwealth of Pennsylvania.

Section 2. Representations. Each of the parties hereto represents and warrants to each other party that, with the exception that the Dissemination Agent has no power to enforce

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performance by the School of its obligations hereunder, (i) it has all requisite power and authority to execute, deliver and perform this Agreement under applicable law and any resolutions or other actions of such party now in effect, (ii) it has duly authorized the execution and delivery of this Agreement, (iii) the execution and delivery of this Agreement and performance of the terms hereof by such party do not and will not violate any law, regulation, ruling, decision, order, indenture, decree, agreement or instrument to which it is a party or by which it is bound, and (iv) to its best knowledge, no litigation, proceeding or administrative matter is pending to which it is a party, or overtly threatened, contesting or questioning the legal existence of such party, its power and authority to enter into and perform this Agreement or its due authorization, execution and delivery of this Agreement.

The School represents and warrants that the School is the only “obligated person” in respect of the Bonds within the meaning of the Rule.

Section 3. Appointment of Dissemination Agent as Agent. The School hereby appoints the Dissemination Agent as its agent for the purpose of furnishing the information described in this Agreement in the manner set forth herein.

The Dissemination Agent hereby accepts such appointment, subject to the terms and conditions of this Agreement.

Section 4. Financial Information and Reports of the School; Investor Call.

(a) Annual Financial Information. The School shall, on or before 150 days after the close of the School’s fiscal year (the “Fiscal Year”) in each year (the “Annual Submission Date”), commencing for the Fiscal Year ended June 30, 2016, deliver to the Dissemination Agent the financial information and operating data relating to the School for the preceding Fiscal Year as hereinafter specified (the “Annual Disclosure Information”), accompanied by a certificate executed by an authorized officer of the School stating in effect that such information is the Annual Disclosure Information required to be submitted under this Section 4(a). The School may change the Annual Submission Date to the Dissemination Agent if it changes its Fiscal Year, provided, however, that the new Annual Submission Date shall be not later than 150 days after the end of each new Fiscal Year and the first such new Annual Submission Date shall not be more than one year after the last preceding Annual Submission Date.

In the event that a complete audit report (as required by subdivision (i) of this Section 4(a)) is not available by the Annual Submission Date, the Issuer shall provide unaudited financial statements as part of the Annual Disclosure Information and deliver the complete audit report to the Dissemination Agent as soon as available thereafter.

The Annual Disclosure Information shall comprise the following (subject to modification as provided in Sections 9 and 11 hereof):

(i) A complete audit report and opinion of an accountant and the consolidated or combined financial statements of the School for such Fiscal Year, containing balance sheets as of the end of such Fiscal Year and a statement of activities and statement of cash flows for the Fiscal Year then ended, and showing in comparative form such figures for the preceding Fiscal Year prepared in accordance with generally accepted accounting

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principles promulgated by the Financial Accounting Standards Board applicable to entities such as the School as in effect from time to time, or, if and to the extent such financial statements have not been prepared in accordance with such generally accepted accounting principles for reasons beyond the reasonable control of the School, noting the discrepancies therefrom and the effect thereof;

(ii) Commencing with the fiscal year ending June 30, 2017, updates to the information contained in Appendix A to the Official Statement, as shown on Exhibit A hereto; and

(iii) Commencing with the fiscal year ending June 30, 2017, other information reporting requirements shown on Exhibit A hereto.

(b) Quarterly Financial Information. The School, on or before 45 days after the end of each fiscal quarter commencing with the fiscal quarter ended December 31, 2016 (the “Quarterly Submission Date”), is to deliver to the Dissemination Agent certain financial information relating to the School as hereinafter specified (the “Quarterly Disclosure Information”) together with a certificate of authorized representative of the School in the form of Exhibit D hereto that such financial information is the Quarterly Disclosure Information required to be submitted under this Section 4(b). The Quarterly Disclosure Information shall comprise the following (subject to modification as provided in Sections 9 and 11 hereof):

(i) Unaudited consolidated or combined financial statements of the School for such fiscal quarter consisting of at least statements of financial position as of the end of such quarter and statements of activities for such fiscal quarter and year to date, each prepared in accordance with generally accepted accounting principles promulgated by the Financial Accounting Standards Board, as in effect from time to time (subject to year-end adjustments and except such financial statements may omit footnotes that would be required by generally accepted accounting principles), consistently applied, or, if and to the extent such financial statements have not been prepared in accordance with such generally accepted accounting principles for reasons beyond the reasonable control of the School, noting the discrepancies therefrom and the effect thereof. Such financial statements shall be certified as true, correct and complete by the chief financial officer of the School to the best of his or her knowledge.

(ii) enrollment data and waitlist data as of the last day of the quarter, and for the quarters that include an official state count date, the enrollment as of the official count date;

(iii) the following information or materials, if the information was received or the related events occurred during the quarter, or if the information has not been previously provided to the Trustee

(A) any changes to the amount of state school aid allocated to the School that occurred during the quarter;

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(B) notice of renewal, non-renewal, or termination of the School’s Charter, or notice of non-compliance, or any similar notification, from either the State or the School’s authorizing body, if any;

(D) a copy (which may be sent electronically) of the School’s adopted annual budget for the present Fiscal Year and a copy of revisions, if any, to the School’s annual budget as approved by its governing board;

(E) if the School has determined to renovate or expand its facilities, or if required pursuant to the terms of the Indenture, a capital assessment plan (which may be sent electronically) detailing the condition of each of the facilities and the projected sources of funding such needs, if any; and

(F) notice of any incurring of Long-Term Indebtedness (as such term is defined in the Indenture).

(c) Disclosure Information. The Annual Disclosure Information and the Quarterly Disclosure Information are herein together referred to as the “Disclosure Information.”

Any or all of the Disclosure Information may be incorporated, if it is updated as required hereby, by reference from other documents, including offering documents, which have been filed with the SEC or have been made available to the public on the web site of the MSRB. The School shall clearly identify in the Disclosure Information each document so incorporated by reference.

If any part of the Disclosure Information can no longer be generated because the operations of the School have changed or been discontinued, such Disclosure Information need no longer be provided if the School includes in the Disclosure Information a statement to such effect, provided, however, that if such operations have been replaced by other operations of the School in respect of which data is not included in the Disclosure Information and the School determines that certain specified data regarding such replacement operations would be a Material Fact, then, from and after such determination, the Disclosure Information shall include such additional specified data regarding the replacement operations.

If the Disclosure Information is changed or this Agreement is amended as permitted by this Section 4(c) or Section 11 hereof, then the School shall include in the next Disclosure Information to be delivered hereunder, to the extent necessary, an explanation of the reasons for the amendment and the effect of any change in the type of financial information or operating data provided.

(d) Notice Events. The School shall also provide notice to the Dissemination Agent in a timely manner not in excess of ten (10) Business Days after the occurrence of any of the following events or conditions (as used herein, the “Notice Events”):

(1) Principal and interest payment delinquencies;

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(2) Non-payment related defaults, if material;

(3) Unscheduled draws on debt service reserves reflecting financial difficulties;

(4) Unscheduled draws on credit enhancements reflecting financial difficulties;

(5) Substitution of credit or liquidity providers, or their failure to perform;

(6) 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 security, or other material events affecting the tax status of the security;

(7) Modifications to rights of security holders, if material;

(8) Bond calls, if material, and tender offers;

(9) Defeasances

(10) Release, substitution, or sale of property securing repayment of the securities, if material;

(11) Rating changes;

(12) Bankruptcy, insolvency, receivership or similar event of the obligated person;

(13) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, 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

(14) Appointment of a successor or additional trustee or the change of name of a trustee, if material.

(e) The School agrees to notify the Dissemination Agent promptly of: (1) any change in, or the withdrawal of, any rating of the Bonds by a Rating Agency of which it receives notice (the Bonds were originally issued without a rating); (2) any change in the accounting principles pursuant to which the financial statements constituting a portion of the Disclosure Information are prepared; and (3) any change in the Fiscal Year.

(f) The Disclosure Information and notice of Notice Events shall be provided in an electronic format as prescribed by the MSRB, together with such identifying information as is prescribed by the MSRB. The SEC has designated the EMMA system operated by the MSRB as the nationally recognized municipal securities information repository and the exclusive portal for

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complying with continuing disclosure requirements of the Rule. Until the EMMA system is amended or altered by the MSRB or the SEC, the Dissemination Agent shall make all filings required under this Disclosure Agreement solely with EMMA.

(g) The School shall, at the request of any Beneficial Owner of at least $1,000,000 of Bonds, hold, no more frequently than once per fiscal quarter, a conference call open to the Participating Underwriter, the Dissemination Agent and all Beneficial Owners of or potential investors in the Bonds. A Beneficial Owner may request such a call by submitting to the School and Dissemination Agent a request substantially in the form attached hereto as Exhibit B by Electronic Means. Within five (5) Business Days of receipt thereof, the Dissemination Agent shall make available to the public on EMMA a notice of such call in substantially the form attached hereto as Exhibit C. Such call shall be held on a Business Day not later than eleven (11) Business Days following receipt of the request of Beneficial Owner and at a time selected by the School. Within two (2) Business Days following any such call, a recording thereof shall be made available by the School for a period of at least thirty (30) days on EMMA.

(h) Commencing with the fiscal year ending June 30, 2017, the School shall also hold an annual conference call within five (5) Business Days of the Annual Submission Date upon notice substantially in the form attached hereto as Exhibit C and recorded and posted as provided in paragraph 4(g) hereinabove.

(i) If the School issues Additional Bonds under the Indenture, the School shall provide to the Dissemination Agent any additional information required by any continuing disclosure agreement for such Additional Bonds.

Section 5. Disclosure to Public. The Dissemination Agent is authorized and directed to make available to the MSRB, in an electronic format as prescribed by the MSRB from time to time, together with such identifying information as is prescribed by the MSRB from time to time, the following information in a timely manner by electronic transmission, overnight delivery, mail or other means, as appropriate:

(a) the Disclosure Information provided pursuant to Section 4(a) and 4(b) hereof within, in the case of receipt of the Annual Disclosure Information, 30 days of receipt and in the case of the Quarterly Disclosure Information, 15 days of receipt, and including, together with the Quarterly Disclosure Information, any information received pursuant to Section 4(b) hereof since the last posting of Quarterly Disclosure Information;

(b) any Notice Event reported to the Dissemination Agent by the School under Section 4(d) hereof in the form provided by the School;

(1) default in the payment of principal of or interest on any Bonds;

(2) the giving of the notice of redemption of any Bonds (other than mandatory sinking fund redemption) or the receipt by the Trustee of irrevocable instructions to give any such notice, together with a copy of such notice of redemption;

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(3) the discharge of the Indenture or the defeasance of any Bonds under Article IX of the Indenture;

(4) any change in, or the withdrawal of, any rating of the Bonds by a Rating Agency (the Bonds were originally issued without a rating);

(5) notice of the events described in this paragraph (c) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Holders of affected Bonds pursuant to the Indenture.

(d) notice, in substantially the form attached as Exhibit E, regarding the failure of the School to provide the Disclosure Information required pursuant to Section 4(a) and (b) hereof; and

(e) any amendment of or supplement to this Agreement entered into in accordance with Section 11 hereof, together with a copy of such amendment or supplement and any explanation provided by the School pursuant to Section 11 hereof; and

(f) the termination of the obligations of the School under this Agreement in respect of the Bonds pursuant to Sections 9 or 14 hereof; and

(g) a change in accounting principles or a change in Fiscal Year reported to the Dissemination Agent by the School under Section 4(e) hereof.

The Dissemination Agent’s obligation to deliver the information at the times and with the contents described above shall be limited to the extent the School has timely provided such information to the Dissemination Agent as required hereby. The Dissemination Agent may conclusively rely upon any written representation of the School required hereby.

The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with the School, apart from the relationship created by the Rule shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition except as may be provided by written notice from the School. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the School, the Beneficial Owner or any other party. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report provide by the School pursuant to this Agreement.

At the written request of the School, the Dissemination Agent shall, at the expense of the School, also furnish promptly to the MSRB a copy of any other information provided by the School for such dissemination.

Section 6. Disclosure to Bondowners and Rating Agencies. The Dissemination Agent is further authorized and directed to forward in an appropriate manner to any Rating Agency, upon request, then maintaining a rating of the Bonds (the Bonds were originally issued without a rating) and, at the expense of such Owner, to any Owner who requests in writing such information, any information transmitted to the MSRB under Section 5 hereof, at the time of

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such transmission or, if such information is transmitted with a subsequent time of release, at the time such information is to be released.

Section 6A. Disclosure Incident to Resale. The School agrees to provide the Dissemination Agent and any Owner or Purchaser, upon request of such Owner or Purchaser and within five (5) Business Days of receipt by the School of such request, with a) a very brief statement of the nature of the business of the School and the products and services offered by the School; b) the School’s most recent balance sheet and financial statements, and similar financial statements for the two preceding Fiscal Years (audited to the extent reasonably available), which information shall be immediately posted on the MSRB website.

Section 7. Costs, Expenses and Indemnification of Dissemination Agent.

(a) The School hereby agrees to pay reasonable compensation of the Dissemination Agent for, and all costs and expenses of the Dissemination Agent incurred in, performing the services required of it under this Agreement, whether as agent for the School or otherwise.

(b) Article XI of the Indenture is hereby made applicable to the Dissemination Agent as if said Sections were (solely for this purpose) contained in this Agreement. The Dissemination Agent shall have only such duties as are specifically set forth in this Agreement. The obligations of the School under this Section shall survive resignation or removal of the Dissemination Agent for any reason and payment of the Bonds.

Section 8. Defaults and Remedies. Subject to Section 3 hereof, failure of the School or the Dissemination Agent to comply with any provisions of this Agreement on its part to be observed shall constitute a default hereunder and any party hereto aggrieved thereby, including the Owners of any Outstanding Bonds as third-party beneficiaries hereof, may take whatever action at law or in equity may appear necessary or appropriate to enforce performance and observance of any agreement or covenant contained herein, including a proceeding for a writ of mandamus or specific performance. Direct, indirect, consequential and punitive damages shall not be recoverable by any Person for any default hereunder and are hereby waived to the extent permitted by law. Notwithstanding anything to the contrary contained herein, in no event shall a default under this Agreement constitute a default or an Event of Default under the Bonds or the Indenture.

Section 9. Binding Effect; Bondowners as Third-Party Beneficiaries. This Agreement shall inure to the benefit of and shall be binding upon the School and the Dissemination Agent and their respective successors and permitted assigns, provided, however, that in the event another Person succeeds to the obligations and agreements of the School under this Agreement and the School is released from its obligations under the Indenture, (i) the School shall be released from all further covenants and agreements contained herein, and (ii) the Disclosure Information may be modified to the extent permitted by Section 11 hereof. In addition, this Agreement shall constitute a third-party beneficiary contract for the benefit of the Owners from time to time of the Outstanding Bonds. Said third-party beneficiaries shall be entitled to enforce performance and observance by the parties of the respective agreements and covenants herein contained as fully and completely as if said third-party beneficiaries were parties hereto; provided that this Agreement (other than this Section 9) may be amended or supplemented from

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time to time without notice to or the consent of such third-party beneficiaries. Nothing in this Agreement, express or implied, shall give to any Person, other than the parties hereto and their respective successors and permitted assigns as provided herein, and the Owners of the Outstanding Bonds, any benefit or other legal or equitable right, remedy or claim under this Agreement.

Section 10. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.

Section 11. Amendments. This Agreement (and the form and requirements of the Disclosure Information) may not be effectively amended or supplemented except in a writing executed by the parties hereto accompanied by an opinion of Bond Counsel, who may rely on certificates of the School and others and the opinion may be subject to customary qualifications, to the effect that: (i) such amendment or supplement (a) is made in connection with a change in circumstances that arises from a change in law or regulation or a change in the identity, nature or status of the School or the type of business conducted by the School, or (b) is required by, or better complies with, the provisions of paragraph (b)(5) of the Rule; (ii) this Agreement as so amended or supplemented would have complied with the requirements of paragraph (b)(5) of the Rule at the time of the primary offering of the Bonds, giving effect to any change in circumstances applicable under clause (i)(a) and assuming that the Rule as in effect and interpreted at the time of the amendment or supplement was in effect at the time of the primary offering; (iii) such amendment or supplement does not materially impair the interests of the Bondowners under the Rule; and (iv) such amendment or supplement does not conflict with any provision of this Agreement not amended or supplemented thereby. This Agreement may be amended or supplemented from time to time without notice to or the consent of the Owners of any Bonds (except as provided in Section 9 hereof).

If the Disclosure Information is amended pursuant to this Section 11, the School shall provide to the Dissemination Agent, an explanation of the reasons for the amendment and the effect, if any, of the change in the type of financial information or operating data being provided hereunder.

Section 12. Execution Counterparts. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 13. Governing Law; Construction. This Agreement shall be construed in accordance with the laws of the State without giving effect to the conflicts-of-law principles thereof. This Agreement is entered into to comply with the continuing disclosure provisions of the Rule and should be construed so as to satisfy the requirements of paragraph (b)(5) of the Rule.

Section 14. Term. Except as provided in Section 7(b) hereof, this Agreement shall remain in effect so long as any Bonds are Outstanding.

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IN WITNESS WHEREOF, HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL, INC. and U.S. BANK NATIONAL ASSOCIATION, as Dissemination Agent, have caused this CONTINUING DISCLOSURE AGREEMENT to be executed in their respective names, all as of the date first written above.

HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL, INC.

Its

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U.S. BANK NATIONAL ASSOCIATION, as Dissemination Agent

Its

[Signature of the Dissemination Agent – Continuing Disclosure Agreement]

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EXHIBIT A

FORM OF CERTIFICATE FOR ANNUAL FILING OF CERTAIN OPERATING COVENANTS

Name of Borrower: Harambee Institute of Science and Technology Charter School, Inc.

Name of Bond Issue: Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Series 2017A

Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Taxable Series 2017B

Dissemination Agent: U.S. Bank National Association

Date of Issuance: March [__], 2017

NOTICE IS HEREBY GIVEN that the above named Borrower (the “School”) is providing to the Dissemination Agent the Annual Disclosure Information as required under Section 4(a) of the Continuing Disclosure Agreement dated as of March 1, 2017 (the “Disclosure Agreement”), between the Dissemination Agent and the School.

As of June 30, 20__, the School’s:

Cash on Hand was equal to $______. Days Cash on Hand was ____ days (Cash on Hand in the amount of $______, divided by the quotient of Operating Expenses for the 20__ fiscal year of $______for the fiscal year ended June 30, divided by 365). The School’s Debt Service Coverage Ratio for fiscal year 20__ was ____x.

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Table 3

Historical and Projected Enrollment by Grade1

Current Projected Projected Projected Projected Projected Year Year 1 Year 1 Year 1 Year 1 Year 1 Kindergarten 1st 2nd 3rd 4th 5th 6th 7th 8th Total Enrollment

Special Education Enrollment2 Table 4 Historical Waiting Lists By Grade3 Grade Prior Year K 1 2 3 4 5 6 7 8 _____ Total

1 At the time the Series 2017 Bonds were issued, the authorizing charter for the School capped enrollment at 525 students in grades K-8. The School is required to enroll students first from the School District. 2 Not in addition to total enrollment. 3 The School is authorized to enroll up to 525 students in grades K-8.

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Table 5 Retention Rate YEAR No. of Returning Retention Grade Students Rate Kindergarten returning to 1st 1st returning to 2nd 2nd returning to 3rd 3rd returning to 4th 4th returning to 5th 5th returning to 6th 6th returning to 7th 7th returning to 8th

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Table 7: Academic Performance – School Progress Report (Peer Schools) *Denotes charter schools. _____-____ School Progress Report Peer Schools - Group 3 School Performance Tier City Rank Peer Rank (out of __ (out of __ Schools) Schools) Laboratory Charter of Community and Languages* Northwood Academy Charter School* Antonia Pantoja Charter School* Community Academy of Philadelphia* John S. Jenks School Academy for Arts & Science Thomas K. Finletter School Eugenio Maria De Hostos Charter School* Harambee Institute of Science and Technology Charter Charles W. Henry School Wissahickon Charter School* Thomas Miffn School Hardy Williams Academy Mastery Charter School* Ad Prima Charter School* Anna L. Lingelbach School General Philip Kearny School John F. McCloskey School Fitler Academics Plus School Penrose School Global Leadership Academy Charter School* Overbrook Educational Center Henry H. Houston School Benjamin Franklin School KIPP Philadelphia Charter School* Bache-Martin School Anna B. Day School Math, Civics and Sciences Charter School* Robert E. Lamberton School Chester A. Arthur School Khepera Charter School*

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Dated: HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL, INC.

By: Its:

[SIGNATURE PAGE TO CERTIFICATE FOR ANNUAL FILING OF CERTAIN OPERATING COVENANTS]

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EXHIBIT B

REQUEST FOR CONFERENCE CALL

Harambee Institute of Science and Technology Charter School, Inc. 640 N. 66th Street Philadelphia, PA 19151 Attn: CEO

U.S. Bank National Association Global Corporate Trust Services Two Liberty Place, 50 South 16th Street Philadelphia, Pennsylvania 19102

The undersigned Beneficial Owner of at least $1,000,000 of Bonds, as defined in the Continuing Disclosure Agreement dated as of March 1, 2017, between Harambee Institute of Science and Technology Charter School, Inc. and U.S. Bank National Association, hereby requests a conference call pursuant to Section 4(g) of such agreement.

Dated: ______

Name:

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EXHIBIT C

Notice of Investor Call To the holders of

Philadelphia Authority for Industrial Development

$[______] Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Series 2017A $[______] Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Federally Taxable Series 2017B

dated as of March 1, 2017

CUSIP: [______]

NOTICE IS HEREBY GIVEN that, pursuant to Section 4[(g)][(h)] of the Continuing Disclosure Agreement dated as of March 1, 2017, between Harambee Institute of Science and Technology Charter School, Inc. (the “School”) and U.S. Bank National Association, a conference call will be held on ______, 20__ at ______Philadelphia, Pennsylvania time, such call to last no longer than one (1) hour, which call shall be open to all holders or potential holders of the above- referenced bonds, the agenda for which call shall be limited to the below-referenced matters:

• current enrollment and waitlist data • academic achievement, including standardized test scores • School financial matters • matters related to administration or governance of the School • State funding levels • matters relating to the School’s charter contract

The call will be recorded and, within two (2) Business Days thereof, such recording shall be made available by the School for a period of at least thirty (30) days on the MSRB website.

Telephone Number: ______Access Code : ______

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EXHIBIT D

FORM OF CERTIFICATE FOR FILING OF QUARTERLY DISCLOSURE INFORMATION

Name of Borrower: Harambee Institute of Science and Technology Charter School, Inc.

Name of Bond Issue: Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Series 2017A

Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Federally Taxable Series 2017B

Date of Issuance: March [__], 2017

NOTICE IS HEREBY GIVEN that the above named Borrower is providing to the Dissemination Agent the Quarterly Disclosure Information as required under Section 4(b) of the Continuing Disclosure Agreement dated as of March 1, 2017 (the “Disclosure Agreement”), between the Dissemination Agent and the Borrower.

In addition to the quarterly financial reports, the Borrower has attached the following (mark applicable items):

______Enrollment data and waitlist data as of the last day of the quarter;

______Enrollment data and waitlist data as of the official state reporting date if such date occurred within the quarter

______Any changes to the amount of state school aid allocated to the School that occurred during the quarter;

______Notice of renewal, non-renewal, or termination of the School’s Charter, or notice of non-compliance, or any similar notification, from either the State or the School’s authorizing body, if any;

______Any report provided to a Rating Agency;

______A copy (which may be sent electronically) of the School’s adopted annual budget for the present Fiscal Year and a copy of revisions, if any, to the School’s annual budget as approved by its governing board;

______If the School has determined to renovate or expand its facilities, or if required pursuant to the terms of the Indenture, a capital assessment plan (which may be sent electronically) detailing the condition of each of the facilities and the projected sources of funding such needs, if any; and

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______Notice of any issuance of Long-Term Indebtedness (as such term is defined in the Indenture).

The Quarterly Disclosure Information is true, correct and complete to the best of my knowledge.

The undersigned is the Authorized Representative of the Issuer and has knowledge of the facts set forth in this Certificate.

Dated: HARAMBEE INSTITUTE OF SCIENCE AND TECHNOLOGY CHARTER SCHOOL, INC.

By Its

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EXHIBIT E

NOTICE TO REPOSITORIES OF FAILURE BY BORROWER TO FILE ANNUAL OR QUARTERLY REPORT

Name of Borrower: Harambee Institute of Science and Technology Charter School, Inc.

Name of Bond Issue: Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Series 2017A

Charter School Revenue Bonds (Harambee Institute of Science and Technology Charter School Project), Federally Taxable Series 2017B

Dissemination Agent: U.S. Bank National Association

Date of Issuance: March [__], 2017

NOTICE IS HEREBY GIVEN that the above named Borrower has not provided an [Annual Report][Quarterly Report] with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated as of March [__], 2017, between the undersigned Dissemination Agent and the Issuer. The Borrower anticipates that the [Annual Report] [Quarterly Report] will be filed by ______.

Dated: ______

U.S. BANK NATIONAL ASSOCIATION, as Dissemination Agent

By Authorized Signatory

cc: Herbert J. Sims & Co., Inc.

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APPENDIX G BOOK-ENTRY ONLY SYSTEM

The following description of the procedures and record keeping with respect to beneficial ownership interests in the Series 2017 Bonds, payment of principal, premium, if any, accreted value, if any, and interest with respect to the Series 2017 Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Series 2017 Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Neither the Authority nor the School takes responsibility therefor.

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Series 2017 Bonds. The Series 2017 Bonds will be issued as fully-registered bonds 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 Bond certificate will be issued for each stated maturity of the Series 2017 Bonds, each in the aggregate principal amount of such issue, and will be deposited with DTC. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE SERIES 2017 BONDS, REFERENCES HEREIN TO BONDHOLDERS, HOLDERS OR OWNERS OF THE SERIES 2017 BONDS (OTHER THAN UNDER THE CAPTION “TAX MATTERS” HEREIN) SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE SERIES 2017 BONDS.

DTC, the world’s largest securities 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 1934. 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 100 countries that DTC’s participants (“Direct 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”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of the Series 2017 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2017 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2017 bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations 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 Series 2017 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 the Series 2017 Bonds, except in the event that use of the book-entry system for the Series 2017 Bonds is discontinued.

To facilitate subsequent transfers, all Series 2017 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 Series 2017 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2017 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2017 Bonds are credited, which may or may not be the Beneficial

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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 the Series 2017 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2017 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Series 2017 Bonds may wish to ascertain that the nominee holding the Series 2017 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 registrar and request that copies of the notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Series 2017 Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2017 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI 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 Series 2017 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, payments of principal, premium, if any, and interest on the Series 2017 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 Trustee, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by 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 Authority or the Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of the principal of and interest on the Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of 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 depository with respect to the Series 2017 Bonds at any time by giving reasonable notice to the Authority. Under such circumstances, in the event that a successor depository is not obtained, Series 2017 bond certificates are required to be printed and delivered.

The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, the Series 2017 bond certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC’s book-entry only system has been obtained from sources that the Authority, the School and the Underwriter believe to be reliable, but neither the Authority, the School nor the Underwriter take any responsibility for the completeness or accuracy thereof.

NEITHER THE AUTHORITY, THE SCHOOL, THE TRUSTEE, NOR THE UNDERWRITER WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO PARTICIPANTS OR THE BENEFICIAL OWNERS OF THE SERIES 2017 BONDS WITH RESPECT TO (I) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT; (II) THE PAYMENT BY THE DEPOSITORY TO ANY PARTICIPANT OR BY ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AMOUNT, OR REDEMPTION PRICE OF OR INTEREST ON THE SERIES 2017 BONDS; (III) THE DELIVERY OF ANY NOTICE BY THE DEPOSITORY TO ANY PARTICIPANT OR BY ANY PARTICIPANT TO ANY BENEFICIAL OWNER THAT IS REQUIRED OR PERMITTED TO BE GIVEN TO SERIES 2017 BONDHOLDERS UNDER THE TERMS OF THE INDENTURE; (IV) THE SELECTION OF THE BENEFICIAL

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OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE SERIES 2017 BONDS; OR (V) ANY OTHER ACTION TAKEN BY THE DEPOSITORY AS OWNER OF THE SERIES 2017 BONDS.

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PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT Charter School Revenue Bonds, Series 2017A and Federally Taxable Series 2017B (Harambee Institute of Science and Technology Charter School Project)