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A PROFESSIONAL CORPORATION One North Central Avenue, Suite 1200 Phoenix, Arizona 85004-4417 P 602.440.4800 F 602.257.9582 Offices in Arizona & Colorado www.readave.corn John J. Fries Direct Line: 602-440-4819 Direct Fax: 602-257-6919 E-mail: tfries 7 realaw.com August 5, 2019 T • Board of Supervisors Board of Directors Maricopa County, Arizona The Industrial Development Authority of the County of Maricopa Re: Not to Exceed $28,000.000 — The Industrial Development Authority of the County of Maricopa Education Revenue Bonds (Sun Valley Academy Projects), Series 2019A and 2019B Ladies and Gentlemen: At the Authority Board meeting on August 13, 2019. the Authority Board will be asked to grant final approval to the financing for the Sun Valley Academy Projects and to adopt a resolution authorizing the issuance and sale of the bonds described above (the "Bonds"). This letter provides a summary of the proposed financing. THE AUTHORITY The Authority is an Arizona nonprofit corporation, formed with the permission of Maricopa County and incorporated under and pursuant to the Arizona Industrial Development Financing Act, Title 35, Chapter 5, Arizona Revised Statutes, as amended (the "Act"), and the Authority is designated by law to be a political subdivision of the State of Arizona. THE APPLICANT/BORROWER The Applicant/Borrower, Morrison Education Group, Inc., is an Arizona nonprofit corporation and a tax-exempt organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. The Applicant holds a charter contract with the Arizona State Board for Charter Schools and has been serving Arizona students since 2009. The Applicant currently operates an Arizona public charter school known as Sun Valley Academy, serving students in grades kindergarten through 8 at 2675 West Baseline Road, Phoenix, (the "Phoenix School"). The Applicant is the owner of the real property for the Phoenix School. The Applicant plans to open a new charter school, serving grades kindergarten through 8 in Avondale, Arizona (the "Avondale School"). 4627532.1 08/05/19 Board of Supervisors Maricopa County. Arizona Board of Directors of The Industrial Development Authority of the County of Maricopa August 5, 2019 Page 2 PRIOR FINANCING In 2018, the Authority issued its Education Revenue Bonds (Sun Valley Charter School Project), Series 2018 (the "Series 2018 Bonds") in the aggregate principal amount of $11,510,000 to finance the acquisition and construction of the Phoenix School. The Applicant intends to refund the Series 2018 Bonds with the proceeds of the Series 2019 Bonds (as defined below). THE PROJECT The Applicant will use the proceeds of this financing, in part, to (i) acquire approximately 8.2 acres of land located west of the southwest corner of West McDowell Road and North Avondale Boulevard, Avondale, Arizona and to construct, improve and equip charter school facilities for use in the operation of the Avondale School; (ii) construct, improve and equip six new classroom at the Phoenix School for use in the operation of the Phoenix School; (iii) refund the Series 2018 Bonds; (iv) pay capitalized interest on a portion of the Bonds; (v) fund any required reserve funds, and (vi) pay certain expenses relating to issuance of the Bonds (collectively, the -Project"). The current owner of the property, comprising the land for the Avondale School, is Stotz Farms, Inc., an Arizona corporation and unrelated third party. The Applicant has a signed contract to purchase the land at $6.50 per square foot, approximating $2,321,748.00. The closing is scheduled for on or before September 30, 2019. NOTIFICATION TO ARIZONA ATTORNEY GENERAL As required by the provisions of Arizona Revised Statutes, Section 35-721.F, the Authority has notified the Arizona Attorney General of the Authority's intention to issue the Bonds. By letter dated July 31, 2019, the Arizona Attorney General has confirmed that the Project qualifies as a financeable "project" under the Arizona statute. ALLOCATION FOR TAX EXEMPT FINANCING No allocation of the Arizona "volume cap" is required for the issuance of the Bonds since the Bonds are being issued and treated as governmental bonds that are exempt from the requirements of obtaining volume cap. FINANCING PARTICIPANTS The major participants in the financing are as follows: Board of Supervisors Maricopa County, Arizona Board of Directors of The Industrial Development Authority of the County of Maricopa August 5, 2019 Page 3 Issuer: The Industrial Development Authority of the County of Maricopa Issuer Counsel: Ryley Carlock & Applewhite, a professional corporation Applicant/Borrower: Highland Prep Bond Trustee: BOKF, N.A. Master Trustee: BOKF N.A. Bond Underwriter: RBC Capital Markets, LLC Bond Counsel: Engelman Berger, PC Applicant/Borrower Counsel: Warren Charter Law, PLC Bond Underwriter Counsel: Ballard Spahr, LLP PRINCIPAL FINANCING DOCUMENTS Document Parties Bond Indenture (the "Indenture") Issuer and Trustee Loan Agreement (the "Loan Agreement") Issuer and Borrower Deed of Trust, Security Agreement, Assignment of Borrower Rents and Leases and Fixture Filing (the "Deed of Trust") Preliminary and Final Limited Offering Memorandum Borrower and Bond Underwriter Tax Certificate and Agreement Issuer and Borrower Various assignment of contract instruments Borrower Bond Purchase Agreement Borrower, Issuer and Bond Underwriter Board of Supervisors Maricopa County, Arizona Board of Directors of The Industrial Development Authority of the County of Maricopa August 5, 2019 Page 4 PLAN OF FINANCING The Bonds will be issued in one or more tax exempt and taxable series in an aggregate principal amount of not to exceed $28,000,000. The Bonds will be issued under and pursuant to the terms and provisions of the Indenture. The proceeds from the sale of the Bonds will be loaned by the Authority to the Borrower pursuant to the terms of the Loan Agreement. The Borrower will be obligated to make loan repayments in amounts and at such times as required to pay principal and interest on the Bonds on their respective due dates. The obligations of the Borrower to make periodic loan repayments as well as to perform the other obligations of the Borrower as set forth in the Loan Agreement will be secured by the Deed of Trust that will encumber the property being acquired and financed. The Bonds will be underwritten by the Bond Underwriter and offered by it for sale in a limited public offering to accredited investors through Greenwich Investment Management, Inc. The Borrower will enter into a Master Indenture, under which the Borrower will be the sole obligated group member and in connection with the issuance of the Bonds, the Borrower and Master Trustee will enter into a Supplemental Master Indenture for Obligation No. 1 which, together with the Loan Agreement, will evidence the obligations of the Borrower to make loan repayments in amounts necessary to pay the principal and interest on the Bonds. Finally, the Tax Certificate and Agreement will be executed by the Bond Issuer and Borrower to evidence various agreements aimed at establishing and preserving the tax exempt status of the Bonds. FINAL APPROVAL At the Authority Board meeting on August 13, 2019, the Authority Board will be asked by the Applicant/Borrower to grant final approval to the application for financing and to adopt a resolution authorizing the issuance and sale of the Bonds. BOARD OF SUPERVISORS APPROVAL If the Authority Board acts to grant final approval for the financing and to adopt a resolution authorizing the issuance and sale of the Bonds, the Maricopa County Board of Supervisors will be requested, at its meeting on August 21, 2019, to act as required by law to adopt a resolution approving the proceedings of the Authority for the issuance of the Bonds. Board of Supervisors Maricopa County, Arizona Board of Directors of The Industrial Development Authority of the County of Maricopa August 5, 2019 Page 5 Under the provisions of the Act, specifically A.R.S. § 35-721.B., the proceedings under which the Bonds of the Authority are to be issued require the approval of the Maricopa County Board of Supervisors for each issuance of bonds. Under the provisions of the Act, specifically A.R.S. § 35-742, Maricopa County is not in any event liable for the payment of principal or interest on bonds issued by the Authority or for the performance by the Authority of any pledge, mortgage, obligation or agreement of any kind undertaken by the Authority and bonds of the Authority or any of its agreements or obligations shall not be construed to constitute an indebtedness of Maricopa County within the meaning of any constitution or statutory provision. TRANSACTION CLOSING If the required approvals of the Authority Board and the Maricopa County Board of Supervisors are received, it is currently anticipated that the Bonds will be issued in September 2019. At the time the Bonds are issued, it is anticipated the designated Bond Counsel will deliver its written opinion to the effect the Bonds have been validly issued and that as to the portion of the Bonds designated as being tax-exempt, the interest on the Bonds is exempt from federal and Arizona income taxation and that as to the portion of the Bonds that are not designated as tax-exempt, the interest on such Bonds will be exempt from Arizona income taxation. LEGAL COUNSEL RECOMMENDATION As counsel to the Authority, we have reviewed drafts of the principal financing documents, we have been advised that these documents are now in substantially final form, and based upon our review of such and our review of the proceedings to date relating to the proposed issuance of the Bonds, we believe the financing documents and proceedings are in substantial conformance with the policies and guidelines of the Authority and are in both form and substance acceptable for the Authority Board and Maricopa County Board of Supervisors to act upon and that the Resolution presented to the Authority Board relating to authorizing the issuance and sale of the Bonds, and related matters, and the Resolution of the Maricopa County Board of Supervisors will be asked to adopt are in form and substance acceptable for the adoption.