Dear Pathway Families:

We all know these have been trying times over these last couple of years. The economy and our
expectations have been reset to these new times. Previous models of running businesses and non-profit
organizations have become obsolete and need to be revamped. Our failure to change and seek a new
way will mean the eventual end to the institutions we know and love. Pathway is at that crossroad that
requires out of the box thinking. The vision and strategy team of the board has been brainstorming and
researching avenues to point our school in a new direction and get Pathway back on track to growing
our enrollment so we can enhance our facilities, our sports programs and our curriculum. Bottom line,
we have struggled to get to the next level. More on that later……

Several weeks ago we had a PTF meeting and laid out the financial burdens facing our school. We
informed you we needed $200,000 to “right” the ship. We were very blessed and many of you stepped
up and made donations or pledges for a total of $40,000. As much of a blessing that was, you all know
that falls short of our needs. So the vision and strategy team continued to meet and pray for direction.
We have a plan that has bubbled up from those discussions and prayers and that proposal was
presented last night at the PTF meeting. I will do my best to describe the model but feel free if you have
questions to contact Terri Shaffer, Chad Clark or Tim Lawson to discuss further and answer any
questions you may have.

With the need for cash to relieve the stress of meeting operating budget and to retire some of the debt
the school has incurred, any plan proposed needs an infusion of cash in the form of cash in hand or
future operating expense avoidance (i.e. one of our wonderful staff members teaching for no salary so
that their salary is the expense being avoided from our current operating budget). However, after
discussing with several families, for someone to invest in the school further, they want some assurance
that the school is going to be run in a fiscally sound manner and that their investment will be used
wisely. In other words they want some say or a “vote” in how it is spent….thus the first opportunity to
think outside of the box. The enclosed board structure was created to allow the investors in the school
to help fiscally run the school and allow the current model of parent volunteers to provide the
foundation of school spirit, morale, growth and spiritual direction. The proposed structure would have
an Investment Board of individual or families that will loan the school $50,000 (or $25,000 over a two
year period) to allow the school to get back on its feet. This loan to the school could be bought out by
future investors or the school may retire the loans in the future should the finances support it (i.e. let’s
say in 4 years one investor wanted to get out. We would find another investor that would loan the
school $50,000 and that $50,000 would go to pay off the loan of the investor looking to get out. There is
no return on this investment. Investors are just investing in Christian Education).

Therefore, we are looking for 7 to 9 of those investors that can make that loan or a staff member that
can teach for no salary (the expense avoidance). The investment board would have the following
responsibilities: 1) to assist the school administrator in the creation of and approving the school budget;
2) working with the vision and strategy committee to provide a roadmap for future growth and the
infrastructure to support that growth. To clarify, this investment board is not owners of the school.
They are merely making an investment in Christian education and Pathway and this investment is not an
entitlement for anything other than they get to serve on a board and help fiscally run a sound school. If
you are interested and have the means for this type of investment, please contact Terri, Chad or Tim to
discuss.

Second, we do not want to lose what we have in the parent volunteers and the energy and spiritual
direction they can provide by keeping Pathway a “Parent Run” school. Therefore, we would tweak the
current mode,l but in spirit, it remains intact. The school administrator will be the appointed chairman
of the volunteer board and it will be made up of 7 to 9 parent volunteers that will head up the following
committees: Vision and Strategy, Marketing, Fundraising, Facilities, Parent Fellowship, Curriculum,
Spiritual Direction and Finance (to assist the administrator to operate within and develop new proposed
budgets). The current finance responsibilities will be shifted to the new investment board which will
free up the volunteer board to focus on the other important matters of running the school and making it
a learning institution like no other. As a footnote, the current board has spent 75% of their time over
the last couple years focusing on financial matters while the other important matters of the school have
suffered. This shift will have a huge impact on giving the new volunteer board the freedom to run the
school where it matters, in the classroom.

Lastly and most importantly, this new model includes the hiring of a new administrator or “Head
Master”. The plan is to hire an experienced head master that has grown a school from our size and
taken it to the next level from a curriculum and student enrollment standpoint. We have already posted
a job opening ad and have received 8 to 10 candidates. Of those, we feel there are 3 or 4 worthy of
further discussion. We are in the process of assembling a hiring committee consisting of board
members, staff and parents to conduct the interview process and make a final recommendation for a
hiring decision. We are looking to make this hire as soon as possible. What about Sheena? Sheena is
aware of our plans and has informed the board she is behind the board and open to whatever role she
has in the new structure. Her new role has yet to be determined and will probably depend on the
strengths and weaknesses of the new head master of where it would make sense for Sheena to focus
her attention.

This is a lot of information to absorb so what does the Board request of you? First, your prayers. Pray
for direction from God and that everyone at Pathway will embrace God’s vision for the school, whatever
that vision may be. Second, provide feedback to the board on the new proposed structure. We need
positive and negative feedback so that we can fine tune a plan that will embrace and address as many of
the concerns from the parents as possible. Third, enroll your child. If you still want your child at
Pathway for next year, show us by your enrollment. This proposed model or any model means nothing
if we the parents don’t support it with enrollment. We know the enrollment deadline is fast
approaching and you may have lots of unanswered questions. So that we can get a feel for where our
parent base stands, we are proposing the following: If you want your child (ren) at Pathway next year,
enroll before April 30 but registration fees are not due until May 31 (and still receive the early
enrollment discount). This way, you can get your questions answered, we can further fine tune our new
model and have an idea of student count for the next school year but you have not committed your
registration fees until all these details are worked out.
Once again, please pray for Pathway, our students and wonderful staff and that God will impart his will
and direction on our hearts so that we may all be obedient children to our Father in heaven. God Bless!

In His service:

Pathway Board

Contact Information with questions:

Chad Clark - chad@handcraftedloghomes.net

Terri Shaffer - tshaffer@weighstation.net

Tim Lawson – timl@ccs-inc.com

 Pathway Christian Academy 3 Year Plan

PCA Investors Yr 1 Yr 2 Yr 3
Total from investors $200,000 $200,000 $0 In cash, debt or services

Debt Service
Back operating debt $66,000 $0 $0
NBB for Land interest payment $36,000 $36,000 $36,000 debt service only ($610,000 Note)
Parent Loan $0 $0 $40,000 Towards infrastructure cost on Flanagan (no set payback period)
Parent Loan $0 $0 $50,000 Towards infrastructure cost on Flanagan (no set payback period)
Parent Loan $0 $0 $50,000 Towards infrastructure cost on Flanagan (no set payback period)
Brian Blake (balance on buildout) $24,000 $24,000 $12,000
Shah (balance on land improvements) $0 $50,000 $61,742 Infrastructure costs on Flanagan
Buildout of current space $25,000 $375,000 being paid by building purchase - terms on remaing $25,000 TBD

Total Debt Service $126,000 $110,000 $274,742

Excess towards operating expenses $74,000 $90,000 $0

Income Yr 1 Yr 2 Yr 3
FPE (full paying equivalent) 75 90 120
Scholarships 30 35 40
FPE for scholarship students 21 24.5 28 by yr 3 the school should have
Adjusted FPE 96 114.5 148 grown to support yr 3 debt,
Teacher and Staff students 15 18 20 but if not, may need special
fundraising to pay off last
Total Students 120 143 180
portion of debt or request
additional capital from
Average Tuition $4,700 $4,935 $5,182 investors

Tuition Income $451,200 $565,058 $766,899

Fundraising $50,000 $45,000 $40,000

excess income from investments $74,000 $90,000 $0

slowly reduced
dependency on
fundraising
Total Income $575,200 $700,058 $806,899

Expenses
Staff salary and benefits per month $34,000 $40,000 $44,000
Total $408,000 $480,000 $528,000

Operating Expenses per month $14,000 $18,000 $20,000

Total $168,000 $216,000 $240,000

Total Expenses $576,000 $696,000 $768,000

Excess Income -$800 $4,058 $38,899

Amount needed for debt service $0 $0 $274,742

Shortfall/surplus -$235,843

* Plan includes hiring a new position of Headmaster (experienced at school growth)

Pathway - Confidential 4/13/2010 Page 1

 PCA Board Structure

The Finance Board will consist of 7 – 9 members who provide financial

support to the school via non-interest bearing bridge loans. They will be
responsible for large financial decisions of the school and to assist the
headmaster and Vision and Strategy Committee in setting the vision for the Chairman
TBD PCA Finance/Investment Board
school. The intent would be for future parents to “buy out” the original
investors loans or for the school to prosper and “buy out” the loans.

TBD TBD TBD TBD TBD TBD TBD TBD

The Volunteer Board will consist 8 committee chairs of dedicated

parents that work with the headmaster in the running and spiritual
direction of the school. The headmaster will chair this board. The
headmaster is hired by the Finance Board. The headmaster will have
full ownership in the running of the school and will be in charge of Headmaster Volunteer Board
staff, budget proposal and spiritual direction. Vacant (similar to current board)

Marketing Fundraising Facilities

Vision and Strategy Parent Fellowship Curriculum Spiritual Direction Finance
Committee Committee Committee
Committee Committee Committee Committee Committee