Sa Oi Noni Stabe St subs vow etblscom DrinkerBiddle&Reath Matin Mowi- Lois 215.988-3383 Dect 215,988-2757 Fax ‘madkita more lovis@Ube.com June 27, 2010 VIA ELECTRONIC MAIL & 1 CLASS U.S. MAIL E, Calvin Harmon, Jr., Esquire Legal Counsel to Sills/Moyer Educat 110 W. 9th Street, Suite 309 igton, DE 19801 mn Foundation Ine. We write to inform the various parties to the above-referenced transaction that the closing on the Moyer Academy property, previously scheduled for Tuesday, June 29, 2010, is canceled. The reason for the cancelation is that Sills/Moyer Education Foundation Ine. has been unwilling, notwithstanding prior agreements and communications to the contrary, to transfer the personal property in the school so that it can be utilized by students this Fall. The timely transfer of this property is critical to the future operations of the school, a fact well known to the Board and staff of Moyer Academy. By way of background, the transfer of the personal property at the school ~ which includes items such as desks, computers, lab equipment and sports equipment ~ was important to the State’s willingness to push forward in an attempt to open a school at that location this fall. This property was originally purchased largely with State funds for the purpose of being used by Moyer’s students, A timeline of actions regarding the property is set forth below. «April 8, 2010 -- Dr. Lowery sent a letter to the Moyer Academy Board, indicating an interest in exploring operation of a school at the Moyer Academy site to serve current Moyer Academy students in fall 2010. The letter made clear that before proceeding further, the Department would need the Academy's commitment to ‘CADocuments and SettngsousmmDesktop SAP Dra Letter 627-2010 (MML Revisions) DOCDrinkerRiddle&Reath E. Calvin Harmon, Jr., Esquire June 27, 2010 Page 2 cooperate and transfer the property to allow for continued operation of a school at that location. April 14, 2010 — Moyer Academy Board president contacted Dr. Lowery to say that the board had voted to accept all of the Department's conditions and, on April 15, 2010, the Department received a copy of the board resolutions adopted by both the Moyer Academy board and Sills/Moyer Foundation board. The Moyer ‘Academy resolution stated, “Any and all material assets in Moyer’s custody, possession and ownership shall be timely and appropriately conveyed to the receiving entity as designated by the State.” On May 25, 2010, Mr. Dan Cruce, Deputy Secretary of Education, sent a letter to the Director of Moyer Academy, requesting a number of items to assist with the transfer of the property and the closure of the school, including a “Certification of all asset physical inventory” and “DDOE approval for any transaction over $2,500.” To date, the Department has never received the requested inventory and Moyer Academy has not sought nor received the Department's approval for any expenditures. On June 3, 2010, the undersigned counsel sent a draft Letter of Understanding among all of the parties to Moyer’s attorney, stating, “The Foundation shall transfer all of its right, title and interest in and to the Property and all personal property and fixtures installed in the Property and used in connection therewith to SAP.” Having not received the requested inventory, a K12 representative visited Moyer on June 10th and began recording a general inventory of items present for the purpose of determining the amount of insurance that would be needed. Mr. Theo Gregory approached her and told her that she should not be conducting such an inventory because the property would be transferred. In response, Calvin Harmon, attorney for Moyer Academy, was contacted the same day to inquire as to Mr. Gregory’s statements. Mr. Harmon provided assurances that Moyer Academy understood and agreed that the personal property in the school would be conveyed together with the real property, and indicated that the only exception would be a few items that had been donated to Sills/Moyer " Securing a detailed inventory is important, both for the State and Moyer Academy. For the State, critical for its negotiations with K12 in terms of the assets available for them to operate the school. For Moyer Academy, it is important for Moyer to document all assets acquired with State funds prior to closing,DrinkerBiddle8Reath E, Calvin Harmon, Jr., Esquire June 27, 2010 Page 3 Foundation for the use of the school.’ Mr. Harmon said that Mr. Gregory was in the process of making a list of those items and would be providing it for review. © On June 18, 2010, in response to an email confirming the June 10" conversation, Mr. Harmon indicated for the first time ~ now less than two weeks from the scheduled closing date on the property ~ that the Moyer Academy board would not agree to the transfer of the personal property, as the board was not yet aware of what assets o liabilities it had. Mr. Harmon further indicated that the board would not be able to meet to make such a determination until June 25, 2010 ~ regarding the lateness of the board reviewing such critical issues as assets and ‘outstanding liabilities, his e-mail stated, “The board has been trying to convene a meeting but members of the board are going or are out of town on vacation.” * On Friday, June 25, 2010, Mr. Harmon indicated the board has “determined that there is a substantial shortfall will occur, primarily related to current and projected salaries, professional fees and contractors,” and that the board would meet again on June 28" to further reviews its finances. Mr. Harmon also indicated that Moyer would only be able to sell the personal property to the State if the State agreed to purchase the property for up to $250,000.> We recognize the substantial investment of time, money, and effort that has gone into preparing for this transaction and we do not take this action lightly. Indeed, in an effort to provide an opportunity for the students at Moyer this Fall, the State undertook significant and lengthy negotiations with the potential school operator, the mortgage holders on the property, the guarantor of the property, and others - all aimed at opening a school in the Moyer Academy location this Fall. However, at this late date, with the ability of K12 to successfully prepare for the fall school year in jeopardy with each passing day, it appears the fruit of these efforts will not be realized. ? We understand that Moyer's Board may be claiming that a larger proportion of the personal property was donated and not purchased with State funds. In any event, the Board previously agreed to convey such property with the real property. Furthermore, all furniture, fixtures, equipment and other items of personal property placed on or upon the property or used in connection with the operation of the school is additional Collateral for the various loans to the Foundation and guaranteed by Moyer Academy fentory of the assets nor an accounting of their 5 As previously stated, we had not been presented with valueDrinkerBiddle&Reath E. Calvin Harmon, Jr., Esquire June 27, 2010 Page 4 In closing, we want to thank those who sincerely sought to make this transaction a reality these past few weeks. eh. Moy Markita Morris-Louis For Drinker Biddle & Reath LLP ce: Hal Salmons, Esquire, Counsel for Willgood, Inc., (hsalmons@Pettinaro.com) David A. Weinstein, Esquire, Counsel for TRF, (dweinstein@archerlaw.com) ‘Andrew H. Lippstone, Esquire, Counsel for ISDC, (Alippstone@saul.com) The Delaware Department of Education S.AP., a Delaware not-for-profit corporation