4 IN THE DISTRICT COURT FOR OKLAHOMA COUNTY STATE OF OKLAHOMA COURT FILED IN DISTRICT cOUNTy OI(LAHOMA STATE OF OKLAHOMA, ex ret., ) OFFICE OF STATE ) MR -52020 AUDITOR AND INSPECTOR ) RICI’. ‘VA COURT CLE Petitioner, ) vs. ) EPIC YOUTH SERVICES, LLC ) ) ) ) Respondent. CaseNo. CV2O2O55 MOTION FOR AN ORDER COMPELLING COMPLIANCE WITH AN ADMINISTRATIVE SUBPOENA Pursuant to the Oklahoma Administrative Procedures, Act. 75 0.5. Supp. 2011, § 315(C)t1J and 740.5. 2011, § 215, the State of Oklahoma, cx ret. the Oklahoma Office of State Auditor and Inspector (State Auditor”), requests this Court enter an Order compelling Epic Youth Services, LLC, to comply with its February 25th, 2020 Administrative Investigative Subpoena #25. (Exhibit 1). Many of the items requested in Subpoena #25 were previously requested by the State Auditor in Subpoena #3, issued on September 25, 2019, and Subpoena #14, issued on November 6, 2019. (Exhibits 2 and 3, respectively). In accordance with § 315(C)(1),the State Auditor requests the Court to cite the Respondent to appear, and hear the matter as expeditiously as possible. In support thereof, the State Auditor submits the following brief: I. INTRODUCTION EPIC Youth Services, LLC (“EYS”) refused to comply with an administrative investigative subpoena lawfully issued by the State Auditor. The subpoena was issued as part of a special investigative audit of EPIC Charter School and ‘all related entities” requested by letter dated July 19, 2019, from Oklahoma Governor Kevin Stitt. (Exhibit 4). As the management company for EPIC Charter Schools (“School”), EYS is a related entity who has custody and control of records pertaining to EPIC expenchtures ° Charter Schools’ Pu1lc funds. Specifically, EYS has custody and control of records associated with the Learning Fund (“Fund”). The Learning Fund consists of individual student accounts funded by state dollars paid to the Schools, who then transfers those public ftincls to EYS. Parents may submit requests for expenditures from the student’s Learning Fund account to pay for the student’s various educational and extracurricular activities. EYS received approximately forty-two million dollars in state funds for the Learning Fund accounts from 2011-2019. (Exhibit 5). 2 EYS maintains that any records in that it is a private entity, and as such, adamantly denies its custody or control are subject to disclosure. The State Auditor disagrees with EYS’ conclusion. Nevertheless, the State Auditor conferred with EYS for almost five months, over the course of issuing three subpoenas, regarding a procedure by which the records associated with the expenditure of public dollars would be disclosed, while maintaining the privacy of any private, proprietary EYS information that may be intermingled. EYS was unwilling to disclose the records in the manner necessary for the State Auditor to accurately reconcile the revenue and expenditures associated with the Learning Fund accounts. Consequently, the State Auditor was forced to issue the subpoena, and EYS refused to comply. EY$ positlon is not ifl accordance with Oklahoma law. The State Auditor has no choice but to seek an order from this Court to compel EY$’s compliance with the subpoena. While a “meet and confer” session is not reciuirecl by the Administrative Procedures Act, but out of an abundance of caution, counsel for the State Auditor attempted to confer with counsel for EYS prior to the filing of this motion but was unable to make contact. II. DISCUSSION 1. The State Auditors Investigative Subpoena is Authorized by Statute. 3 A ) EY$ was served with an administrative investigative subpoena on February 25, 2020. The Subpoena requested access to and production of eleven specific types of records associated with the Learning Fund, and required compliance by 12:00 p.m. on February 26, 2020. The documents sought in the subpoena are the same documents the State Auditor has been attempting to obtain via agreement over the last five months. The State Auditor is authorized by 74 O.S. 2011, § 215 to issue the subpoena. Section 215 states as follows: The State Auditor and Inspector shall have ftill power and authority for the various purposes named to examiie books, papers, accounts, bills, vouchers and any other documents, or property of any or all of the aforesaid state institutions, all state officers cind custodians of an’v county or state funds, also to examine under oath, county or state officers and custodians of county and state funds aforesaid. The State Auditor and Inspector is empowered to issue sit bpoenas and administer oath in the performnctnce of his duty, and any persons refltsiizg access to said examiner to ctny such books or pctpers, or any officer, clerk, employee, or other persons aforesaid, who slut!! obstruct access and refuse to seccrch for any required information, or who shall in any manner hinder the examincctio,i required by this article of the records, and books of the officers of public institutions or pertaining to the county and state officers aforesaid, shall be deemed guilty of a misdemeanor and shall be liable on conviction to a fine of not more than One Thousand Dollars ($1,000.00) or imprisonment in the county jail for a period of not more than one (1) year or by both such fine and imprisonment in the discretion of the court. 4 74 0.5. 2011, § 215. (Emphasis added). The legislature emphasized the importance of the State Auditor’s need to obtain records necessary for an audit by including a criminal penalty for failure to comply with the subpoena. The various purposes for which the Auditor has authority to issue a subpoena include a Gubernatorial request pursuant to § 212(C) and § 213(C)(1) of Title 74. Section 212(C) provides: Whenever called upon to do so by the Governor, it shall be the chity of the State Auditor anti Inspector to examine the books and accounts of any officer of the state or any of the officer’s predecessors. The cost of the audit shall be borne by the entity to be audited. Section 213(C)(1) requires the Auditor t.o “perform a special audit on elementary, independent, and technology center school districts upon receiving a written request to do so” from certain state officials including the Governor. Sections 215 and 213tC)tl) describe the entities subject to the Auditors sllbpoena power, inciticling “state officers and custodians of any ... state records,” anti “any officer of the state,” anti independent school districts. EYS is the custodian of state records sought by the Auditor — the records of the Learning Fund accounts ftmdecl by state dollars. The EPIC staff who manage the Learning Fund accounts are officers of the state whose books and records are in the custody of EYS. “An officer is one who is vested with some portion of the function of government to be exercised for the public benefit.” A.G.Opin. 5 80-298, citing to Sparks u. Board of Library Trustees of Carter County, 1946 OK 157, 169 P.2d 201. EPIC Schools are independent school districts subject to a special audit requested by the Governor, and to production of records pursuant to a subpoena issued by the State Auditor. Further, there is no language in § 215 or elsewhere in the State Auditor’s Enabling Act which prevents the Auditor, in the performance of its statutory duties, from seeking documents in the possession of private, third party entities when those documents relate to the expenditure of public funds. See State ex rd. Uguru v. Palaibis, 2002-Ohio-2264, ¶ 8 (State auditor’s subpoena power extends to the records of products to an a private comI)uter company which provides its entity which receives public dollars). 2. The Subpoena Satisfies the Requirements for an Enforceable Administrative Subpoena. The Oklahoma Supreme Court, relying on decisions of the U.S. Supreme Court, established standards for review of an administrative subpoena. The Court held that, to enforce a subpoena: [T]he agency must have a legitimate purpose for the investigation, the inquiry must be relevant that purpose, the agency must not possess the information sought., and the must have adhered to agency to the administrative procedures. Stctte ex rel. Oklahoma Bar Ass’n v. Gasaway, 1993 OK 133, 863 P.2d 1189, 1199.(citingtoSee v. Seattle, 387 U.S. 541 (1967)). The Courtfurtherheldthat: 6 Administrative subpoenas are to be “sufficiently limited in scope, relevant in purpose, and specific in directive so that compliance will not be unreasonably burdensome.” Id. (citing to United States Powell, 379 U.S. 48 (1964)). The subpoena the State Auditor seeks to enforce meets all these criteria. As described above, the Subpoena was issued in accordance with the purposes set forth in statute, and is relevant to fulfilling those purposes. The Auditor did not possess the records they sought from EYS, and issued the subpoena in accordance with the authority granted to it. by statute. The subpoena is limited in scope as it seeks only the items listed in the subpoena as they relate to the public dollars in the individual student Learning’ Fund accounts. The State Auditor is not seeking private pi’oprietary information of EYS. Nonetheless, to the extent that any private proprietary information or other information protected from disclosure l)y law is intermingled with the 1)UbliC records, those records may be protected from disclosure to the public via a protective order from this Court. 3. The Records Sought by the State Audlitor are Ptiblic Records Subject to the Open Records Act. The State Auditor initially sought production of the records pursuant to an open records request. EYS refused the request, claiming that the public dollars allocated by the state to EPIC schools transformed into private funds upon transfer from the Schools to EYS. Consequently, the records associated with the expenditure 7 of those funds now deemed private by EY$ were no longer subject to disclosure under the Open Records Act. Contrary to EYS’ assertion, the Attorney General, interpreting the Open Records Act, opined that private entities ‘supported in part” by public funds are subject to disclosure of records associated with “the transaction of public business, the expenditure of public funds, or the administering of public property.” 51 0.5. Supp.2017, § 24A.3(1); A.G. Opin. 201748. The Attorney General concluded that the Open Records Act applies to a private Oklahoma Sheriffs Association who retains a portion of state fee revenue it collects from uninsured motorists in its capacity as Plan Administrator for a state program. “Those who voluntarily choose to participate in a program which is primarily supported by tax dollars cannot reasonably expect the public which funds the progiain will be denied the right to scrutinize the basis on which the payments are made.” Tulsa Trihitne Co. v Fulton, 1984 OK 46, ¶ 13, 696 P.2d 497, 501. (Nursing homes’ cost reports and audits on file with the Oklahoma Department of Human Services were open records unless they fell within an exception). EY$ is clearly “supported in part” by public funds. EYS has a contract with Community Strategies Inc., a non-profit entity acting as the Board for EPIC schools. The contract requires the Board to pay a portion of the revenues it collects from six different state and federal government funds to EYS for services, including management of the Learning Fund. (Exhibits 6 and 7). 8 Finally, EYS implicitly concedes that records in its custody are public records subject to disclosure under the Open Records Act. In a marketing video created for parents of its students to explain the learning fund accounts, Epic acknowledges that the money in the accounts comes from state funds. (Exhibit 8). EYS, ptrsuant to its management agree with Epic Charter Schools, pays for the marketing expenses of Epic Schools. III. CONCLUSION The State Auditor and Inspector respectfully requests this Court to enter an order compelling Epic Youth Services, LLC to comply with the Subpoena, and for any other relief this Court deems just, equitable, or necessary, includin the State Auditor’s attorne fees and costs ifl(U1Ted in prosecuting this enforcement action. Respectfully Submitted, Nikiatt, OBA No. 20157 Vice eputy Attorney General Sandra Baizer, OBA No. 20618 Assistant Attorney General Legal Counsel Division OFFICE OF THE ATTORNEY GENERAL 313 North East 21st Street Oklahoma City, Oklahoma 73105 9 405/521.3921 405/522.4536 — Facsimile CERTIFICATE OF MAILING I hereby certify that on this day of March 2020, I mailed a true and correct copy of the MOTION FOR AN ORDER COMPELLING COMPLIANCE WITH AN ADMINISTRATIVE SUBPOENA by regular United States mail, postage prepaid, to: Elizabeth A. “Libby” Scott Lee Pugh Crowe & Dunlevy Braniff Buildling 324 N. Robinson Ave. Suite 100 Oklahoma City, OK 73102 Attorneys for Respondent 10 SUBPOENA (FOR DOCUMENTS) IN THE NAME OF THE STATE OF OKLAHOMA TO: Epic Youth Services, LLC (InnovatED) Community Strategies, Inc. Epic One-on-One Charter School Epic Blended Charter School SUBJECT: Subpoena #25 RE: Investigation being conducted by the State Auditor and Inspector under the authority of 74 O.S. § 212(C). GREETINGS: You are hereby commanded, pursuant to the authority of 74 0.5. § 215, setting aside all manner of excuse and delay, to provide to the State Auditor and Inspector, at State Capitol, Room 123 in the County of Oklahoma, State of Oklahoma, by the 25th day of February, 2020, at the hour oI 12:00 P.M. the following: ‘1. Acces f) Ei1 -maii accouiits registered through from July 1. 2014 through January 31, 2020 2. Credit card statements for all credit cards used to make Learning Fund purch:. for The time period July 1, 2014 through January 31, 2020 3. Qti;c J: (CB backup files) data forLearning Fund purchases for The time pariod July 1, 2014 through January 31, 2020 4. Bank of Oklahoma Statements for 309037624 and 312373440 for the time period July 1, 2014 through January 31, 2020 (as applicabla) and bank statemants for any other bank account related to the Leartling Fund 5. Access to all records documenting the $250 technology fee or other technology related service fees charged to learning fund accounts for July ‘1, 2014 Through January 31, 2020 6. Access to all vendor contracts or service agreements for goods or services purchased with the Learning Fund 7. Access to all records pertaining to the approval process for all Learning Fund transactions 8. Access to all documentation pertaining to the $85 service fee charged to student Learning Fund accounts 9. Access to all Learning Fund memos, policies and procedures or other directives used in the management of Learning Fund accounts. 70. Access to Epicenter or other software used to manage or administer the Learning Fund EXHIBIT I 11. Access to all hard copy records or scanned records documenting the expenditures of the Learning Fund from July 1, 2074 through January 37, 2020 NOTE: All records not involving direct access may be digitally presented. The above requested records may also be submitted by: U. S. mail to: Office of State Auditor and Inspector Affn: Brenda Holt, Director, Special Investigative Unit State Capitol Building 2300 N. Lincoln Blvd., Room 123 Oklahoma City, OK 73105 By email to: rstechowitz@sai.ok.gov NOTICE: In the event such records cannot be provided in accordance with 74 O.S. are hereby requested to provide a written explanation, signed under oath, specifying: § 215, you 1. The name(s) and titlelposition(s) of the employees or other individuals who searched for and were unable to find the requested records. 2. An explanation of why the requested records either do not exist and/or are missing. 3. An explanation of what steps were taken to obtain the requested records from any outside n:rce imA.ding, hut not limited to, zoftware vaIc : :1rcctc13, ban[cs, credit card rstitutions, former employees, contractors, vendors or any other person or businesses :ho would maintain such records in the normal course of business. S S 3 3355, 5 51551 2353 5S... C555 55 552 555355 5135 55 3 - ISSSSSISI 5555553 5 555 oreof FAIL NOT, under penalty of the law. IN WITNESS WHEREOF, I have hereunto set my hand hi 24th day of February 2020. II /., £ Cindy d, CPA Oklahoma State Auditor & Inspector ACKNOWLEDGEMENT OF RECEIPT OF SUBPOENA I, acknowledge that I have received Subpoena #25, for EpYiouth Services, LLC/InnovatED, from the Office of State Auditor & Inspector dated the 25th day of February 2020. Z? %a ACKNOWLEDGEMENT OF RECEIPT OF SUBPOENA i, U’ C acknowledge that I have received Subpoena #25, for Communities Strategies, InciEpic Blended Charter School, from the Office of State Auditor & jispector dated the Signature vcQ 25th day of February 2020. Date &%CQ ,___1_•___ 4% L ACKNOWLEDGEMENT OF RECEIPT OF SUBPOENA I, acknowledge that I have received Subpoena #25, for Community Strategies, lncJEpic On-on-One Charter School, from the Office of State Auditor & ln,pector datedhe 7. 1 - . 25th day of February 2020. - ?/ Signature Date ,% I ——. t—..---. &L1 ; —• - SUBPOENA (FOR DOCUMENTS) IN THE NAME OF THE STATE OF OKLAHOMA TO: Epic Youth Services, LLC SUBJECT: Subpoena #3 RE: Investigation being conducted by the State Auditor and Inspector under the authority of 74 OS. § 212(C) relative and appertalning to Epic Youth Services, LLC, 4101 NW 122 St., Oklahoma City, Oklahoma. GREETINGS: You are hereby commanded, pursuant to the authority of 74 0.5. § 215, setting aside all manner of excuse and delay, to provide to the State Auditor and inspector at STATE PiTOL, ROOM 123 in the County of OKLAHOMA, State of Oklahoma, by the 101], day of at the hour of 5:00 P.M. the following: 2LQ! 1. OrganIzational chart for Epic Youth Setvlces, LLC. 2. LIst of Epic Youth Services, LLC employees. For each Individual, provide theJrjob title, e-mail address, and phone number. 3. Electronic (excel or csv file preferred) file containing all learning fund revenues received and expenditures made between July 1, 2075 through June 30, 2019. 4. Epic Youth Services, LLC vendor list (preferably In excel format). NOTE: All records may be digitally presented. The above requested records may also be submitted by: U. S. mail to: Office of State Auditor and Inspector AUnt Brenda Halt, Director, Special Investigative Unit State Capitol Building 2300 N. lincoln Blvd., Room 123 Oklahoma City, OK 73105 By email to: rstachowitz@sai.ok.gov J NOTICE: In the event such records cannot be provided in accordance with 74 O.S. are hereby requested to provide a written explanation, signed under oath, specifying: § 215, you 1. The name(s) and title/position(s) of the employees or other individuals who searched for and were unable to find the requested records. 2. An explanation of why the requested records either do not exist and/or are missing from Epic Youth Services, LLC. 3, An explanation of what steps were taken to obtain the requested records from any outside sources including, but not limited to, software vendors/contractors, banks, credit card institutions, former employees, contractors, vendors or any other person or businesses who would maintain such records in the normal course of business. ..•S. I............. •1IS •I.StaI I..... saw dIS.sS.I. •..aa..Sl ss .5...... Hereof FAIL NOT, under penalty of the law. IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of September 2019, Cindy ByrcV’A Oklahoma State Auditor & Inspector . :‘ I ACKNOWLEDGEMENT OF RECEIPT OF SUBPOENA I, 7ll4’f2 -J-_ acknow)edge that I have received subpoena #3, for Epic Youth Services, LLC from the Office of State Auditor & Inspector, dated the 24th day of September 2019. Dat SUBPOENA (FOR DOCUMENTS) IN THE NAME OF THE STATE OF OKLAHOMA TO: Epic Youth Services, LLC SUBJECT: Subpoena #14 RE: Investigation being conducted by the State Auditor and Inspector under the authority of 74 0.5. § 212(C) relative and appertaining to Epic Youth Services, LLC, 4101 NW 122 St., Oklahoma City, Oklahoma. GREETINGS: You are hereby commanded, pursuant to the authority of 74 O.S. § 215, setting aside all manner of excuse and delay, to provide to the State Auditor and Inspector, at State Capitol, Room 123 in the County of Oklahoma, State of Oklahoma, by the 13th day of November at the hour of jQPP.ML the following: 1. Credit card statements for all credit cards used to make Learning Fund purchases for the time period July 1, 2014 through July 30, 2019 2. QuickBooks (QBB backup file) records for Learning Fund purchases for the time period July 1, 2014 through July 30, 2019 3. Bank oiOk!ehum Statements for 309037624 and 312373440 for the time period July 1, 2014 through July 30, 2019 (as applicable) 4. Explanation of how the $250 technology fee was distributed for FY20 18 NOTE: All records may be digitally presented. The above requested records may also be submitted by: U. S. mail to: Office of State Auditor and Inspector Attn: Brenda Holt, Director, Special Investigative Unit State Capitol Building 2300 N. Lincoln Blvd., Room 123 Oklahoma City, OK 73105 By email to: rstachowitz©sal.ok.gOV EXHIBIT 3 I 1 NOTICE: In the event such records cannot be provided in accordance with 74 O.S. § 215, you are hereby requested to provide a written explanation, signed under oath, specifying: 1. The name(s) and title/position(s) of the employees or other individuals who searched for and were unable to find the requested records. 2. An explanation of why the requested records either do not exist and/or are missing from Community Strategies, Inc. 3. An explanation of what steps were taken to obtain the requested records from any outside sources including, but not limited to, software vendorslcontractors, banks, credit card institutions, former employees, contractors, vendors or any other person or businesses who would maintain such records in the normal course of business. • •IIIZSZNW •SIS •2SIWI IIRIgIIIaaRISI•EIaIR=SRSR*w II.. •IIwtIIInswwtwNWI Hereof FAIL NOT, under penalty of the law. IN WITNESS WHEREOF, I have hereunto set my hand this 5th day of November 2019. CindyC1A V Oklahoma StaVAuditor & Inspector ACKNOWLEDGEMENT OF RECEIPT OF SUBPOENA acknowledge that I have received subpoena #14, for Epic I, Youth Services, LLC from the Office of State Auditor & Inspector, dated the 5th day of er 2019. Date - J. Kevin Stitt Office of the Governor State of Oklahoma July ;9th 2019 Cindy Byrd Oklahoma Auditor & Inspector 2300 North Lincoln Boulevard, Room 123 Oklahoma City, Oklahoma 73105 Dear Auditor Byrd: As ueu izd by Section 212 (C) u lide 7’ Uklehonia :tuw:, ruocTuIiy request an audit of Epic Charter 5choal and all reieed entities. As required by the above citations, the cost of the audit shall be borne by Epic. The scope oftha audit should ioclud a three VeC look back on all previously issued audits, as velJ as any federal audits done ‘luring thet time neriod. Si c/e J. Kevin Stitt Govern or STA7ECAFITDL 2(IJW!ti3 • 2300 N. UNCOU1 BOULEVARD, SUfIE 100 • OKLAHOMA COY, GCLA 73)00’ (405) 521.2342 (405) 521-3353 2I2%’JJ2O ‘Our kids have become a piggy bank’: Epic Charter Schools shields $50M in taxpayer funds from public scrutiny Education tulsawcrld.c... I https://www.tulsaworld.com/news/Iocal/education/out-kids-have-become-a-piggy-bank-epic-charter schools/article_445f6458-c147-5efa-ab29-781c72d64011.html fro STOR ‘Our kids have become a piggy bank’: Epic Charter Schools shields $50M in taxpayer funds from public scrutiny By Andrea Eger Tulsa World Feb 23, 2020 EXHIBIT 5 1/21 2/2412020 ‘Our kids have become a piggy bank’: Epic Charter Schools shields $50M in taxpayer funds from public scrutiny Education tulsawotçI c... Epic Charter Schools in Oklahoma City, in 2019. Bryan Terry/The Oklahoman Epic released this video in 2019, explaining its Learning Fund amid... 2121 2124)?020 Our kids have become a piggy bank: Epic Charter Schools shields $50M in taxpayer funds from public scrutiny Education tulsaworld.c. .. I On top of a 10% cut of every dollar of revenue, Epic Charter Schools is paying its for-profit management company millions more in taxpayer dollars every year for school expenditures that are never audited and which Epic claims are shielded from public scrutiny. School officials now acknowledge payments for previous years totaled $50.6 million for something Epic calls the “Learning Fund.” And based on a recent uptick in student enrollment, Epic’s allocation for 20 19-2020 alone could be $28 million. For a full year, Epic has repeatedly denied the Tulsa World’s request under the Oklahoma Open Records Act for itemized expenditure records from its Learning Fund. 3/21 2/24/2020 Our kids have become a piggy bank: Epic Charter Schools shields $50M in taxpayer funds from public scrutiny I Education J tulsaword.c.. L Epic. Charter Schoals. JIM BECKEIJThe Oklahoman P;o by J5. BEClELih.: Odihornan “O;icc ihe Cunds are paid to the management company, the dollars are no longer public Iltods and, therefore, the records of tI expenditures of the learning fluid dollars are not subject to the open records statute,’ kpic’ attorney Wi !liam hickman wrote in the most recent denial letter. But with iie assistance of an attoiiiey, the World did obtain other records that show the constant shiflin, of public dollars for the Leaning fund to j)iC Youth that law enforcement investigators say has nade :nillionaires out of scnool co-founde;-s avid Cha;iey and Ben T larns. services, the private manaen tent company These transfers began at a rate of about $1 20,0(]0 each, 10 to 1 3 times per year, when Fpic first began operating, for annual totals of $1.2 million to $1.7 million. But amid staggering student enrollment growth, these lump sum payments for the Learning fund spiked as high as $3 million in the last few years, with invoices totaling $20.3 million for the 2018-19 academic year. 4/27 2)24JO2O ‘Our kids have become a piggy bank’: Epic Charter Schools shields S5OM in taxpayer funds from public scrutiny Education tulsaworld.c... I I ‘itimately, Epic released invoices for five of its eight past years of operation, which total more than $42 million, although at least one invoice was missing for one of those years. That works out to an average of $865.80 per student, according to the state’s official student enrollment figures. If Epic had spent that average amount for its students counted by the state in the three years for which Epic did not provide invoices, the charter school could have expended about $52.7 million for the Learning fund since 2011. An Epic spokeswoman said the actual total was $50.6 million, but she could not provide any additional documentation to show that. The unique appeal of setting aside $1,000 in state funding per student has been one of the controversial online school’s chief recruiting tools. “At a traditional school, that ‘per-pupil’ ftmding would be used to cover the costs of things such as textbooks, necessary supplemental items, access to dedicated technology, physical education, athletics and even fine arts in many public schools,” stated an Epic marketing video released in spring 2019 amid news that the school’s student enrollment and financial practices are under investigation by state and federal law enforcement officials. “So, what’s the difference in Epic using a Learning Fund for those same expenses? Well, we give parents and students choices.” How it works Through the Learning Fund, each student enrolled by Oct. 1 at Epic’s virtual charter school, called Epic One-on-One, has an account with a beginning balance of $1,000. Once any curriculum and technology costs are covered, those funds can be expended for books and materials ordered directly through the school or paid to outside vendors for extracurricular activities. P ecords made public show that Epic Youth Services has billed $11.4 million for students in Epic’s other school model. Blended Learning Centers, which offers residents of Oklahoma and Tulsa counties a blend of online and in-person 5/21 2124/2020 Our kids have become a piggy bank: Epic Charter Schools shields $50M in taxpayer funds from public scrutiny I Education tulsaworlct c. instruction. But “Enrolling into the Learning Centers will take the full amount of the student’s Learning fund,” according to Epic’s website. With approval from school employees, Epic One-on-One parents and students can choose from a catalog of 1,400 Learning fund vendors currently. Offered services run the gamut from typical public school opportunities such as art, music, tutoring and P.E. classes, to activities and services that are more commonly funded privately by parents. These include horseback riding, professional photo headshots for pageants or modeling and acting gigs, summer camps, driver’s education, martial arts, aircraft flight training, gymnastics, private soccer clubs and even frill-time soccer and hockey academies. One of the reasons Epic’s model has been criticized is the various financial incentives the charter school offers not only to its employees, but also to its students for helping it expand. hpic employs a common r felTal ii arketing strategy by offering families an additional S200 in their children’s Learnin Funds for each new student referral with no limit. “As many of you know, Fpic grows as each hunily tells another family about the educational services we offer. It’s all about ‘word of mouth’ at EPIC. So, when you share the love, Epic shares it right back,” its website states. Vendors wishing to obtain Lca fund dollars sign a contract with the school, not the for-profit i pic Youth Services co::pany, and are asked to si5m an aidavit that states neither they nor their employees are registered sex offenders and/or have no felony convictions within the last 10 years. 6/21 2124/,2020 Our kids have become a piggy bank’: Epic Charter Schools shields $50M in taxpayer funds from pubTic scrutiny Education tulsaworld.c... J Epic Charter School, at 3810 S. 103rd E. Ave in 2019. IAN MAULE/Tulsa World Questions raised by law enforcement Over the sumrnei investigators at the Oklahoma State Bureau of Investigation revealed in public court documents that the handling of Leariing Fund exnendilnres is on of Epic’s financial practices being scrutinized. “Ben Harris and David Chancy enticed ghost students to enroll in Epic by offering each student an annual learning fund ranging from $800 to $1,000,” stated an OSBI search warrant filed in July. “The parents of many of the homeschool students admitted they enrolled their children in Epic to receive the $800 learning fund without any intent to receive instruction from Epic.” In additional records filed in court in August, OSBI revealed its inquiry had expanded to include allegations of forgery by top executives at Epic and willful neglect by members of its independent governing board. 7/21 2/24/2020 ‘Our kids have become a piggy bank: Epic Charter Schools shields $50M in taxpayer funds from public scwtiny Education I tuisawoddc.. It was then that OSBI first publicly documented Epic’s arrangement of shifting lump sums of state funding for the Learning Fund over to Epic Youth Services, the private management company, on top of the 10% cut of state and federal revenue the company receives. One issue, the O$BI agent wrote, is that Epic was coding the tiansfer of funds as “instructional services” in the Oklahoma Cost Accounting System (OCAS), which all public schools must use to account for their use of public funds. And instrnctional services “must be a course supported by a teacher of record, a recorded grade and included on the transcript,” the agent wrote. Chancy and Brock were accused in that OSBI record of “knowingly and intentionally” using the Learning Fund to jizake flaudulent expenditures, concealing the iaudulent expendnures by disguising the payments as instructional services and falsifying corporate records, according to the court documents. )n Friday, State Auditor Cindy Byrd and an OSBI spokeswoman confirmed the state’s investigations and forensic audit are ongoing. What about accounting and transparency requirements? Ipic has repeatedly responded to news about the law enForcement investigations, as well as public criticisni from lawmakers, by citing its clean audit reports from a “state-approved” auditor and by the Oklahoma State Department of Education. “There is nothing secretive about the Learning fund expenses,” that Epic marketing video states. “All transactions are transparent and everything is audited annually just as all school expenses are audited. Some critics of Epic don’t like the Learning Fund and we can’t figure out why.” But Epic’s routine, annual school audits, by a Cushingbased firm called CBEW Professional Group, all note “none of the activities of FYS (Epic Youth Services) is included in these financial statements.” 8/21 212412020 Our kids have become a piggy bank: Epic Charter Schools shields $50M In taxpayer funds from public scrutiny Education tulsaworld.c. .. I And in denying the Tulsa World’s request for public records that would show where all of the state funding allocated for Epic’s Learning fund has gone, the school’s attorney William Hickman also acknowledged that fact. Hickman defended the school’s denial of the records request by stating no one at the state Department of Education or Epic One-on-One’s sponsor, the Statewide Virtual Charter School Board, scrutinizes those expenditures either. “The state department of education, the statewide virtual charter school board, and auditors have not treated the learning fund expenditures as public funds,” he said. “Simply stated, Epic, like all public schools, is audited each year for all public funds, and the learning fund expenditure records requested by your client have not been a part of these audits because those funds are not public dollars.” State education officials said Epic and all other virtual charter schools will be subject to a new level of detail in reporting their expenditures from now on because of a new state law. “Upon passage of House Bill 1395 last year, the (state Department of Education) promptly began steps for implementation, including setting new OCAS codes for charter management organizations, and provided direction to the virtual schools as to how expenditures to these organizations should be coded,” said l3rad Clark, general counsel at the state Lducation .iepartiiient, whose wife is i’pic’s school board clerk. “Specific to Epic, the OSDE has been in recent communication with the school about its use of OCAS and corresponding coding of expenditures, including those for instructional services, extracurricular activities and technology. For example, on December 20, 2019, the (education department) sent Epic a list of questions i-elating to its reported expenditures and OCAS coding of same for Fiscal Year 2019 and has been in recent communication with the school about its self-ascribed ‘Learning Fund.’” The author of House Bill 1395 said she is following up this session with a new bill, called the Virtual Charter School Transparency and Reform Act, because she thinks more should be done. -- 9/21 2/24/2020 ‘Our kids have become a piggy bank’: Epic Charter Schools shields $50M in taxpayer funds from public scrutiny I Education tulsaworid c.., “We did not have appropriate coding before House Bill 1395, so I do hope this is a giant step in the right direction to bring the transparency we all want in any area of government,” said Rep. Sheila Dills, R-Tulsa. “I firmly believe any entity receiving public dollars should be held to the same level of transparency. I think the attorney general’s opinions are clear on those records that deal with public dollars and if they’re not public, they should be,” Are Epic’s Learning Fund expenditures private? Millions in state dollars flowing from Epic Chatter Schools for student Learning Funds Year 2011-12 2012-73 2013-14 2014-15 2015-16 2a1-i? 2017-18 2018-19 Oct 1 student Total ot Invoices enrollffient revealed 1,710 2,241 2,916 4,370 6,037 9,Ofl 8,059 13,532 N/A 51,222950 51,666,550 NIA N/A S7,810,0fl0 $6,850000 I20,0UO The Open Records Act defines a ‘1 1J7 public record, in part, a docmnents under t11f auihontv of, or coming into the custody, COflU.I)1 or possesslofl of public officils, public bodies or their representatives in connection with the transaction of public business, the expenditur; of public funds o; the administering of public property.” A “frequently asked questions” section on Epic’s website states that Lear!ing fund expenditures are subject to the approval of the school. And multiple Epic parents have shown the Tulsa World their children’s Learning Fund accounts, which include itemized expenditure details and the various school employees who approved them. Previously, Epic’s website directed that Learning Fund vendor invoices be submitted through its parent portal, which is password protected and includes access to a child’s grades and Learning Fund account. 10/21 2J241C2G Our kids have become a piggy bank’: Epic Charter Schools shields $50M in taxpayer funds from public scrutiny Education tulsaworld.c.. I Currently, Epic directs vendor invoices be sent to a school email address, activity@epiccharterschools.org, not the private company, Epic Youth Services. DOCUMENT: See Epic’s Learning fund bills tota1ing42 million When the World discovered that Epic had apparently updated its vendor invoice submission process, the World’s attorney went back to Epic and asked that it release those records because they would appear to show at least part of where Epic is directing its Learning Fund dollars. Epic’s attorney Hickman responded on Thursday that the school had located 24,000 such emails that contain invoices and vendor statements, but they would be required to black out student names from the records before releasing them, at great expense. “Based on the volume of records and the detailed redaction work that would be necessary, your request will cause serious disruption to the organization. My client estimates the cost to ftflfihl your request to be $9,529,” Hickman wrote. In September, the Tulsa World offered to come and visually inspect public records in custody of the school, as provided for in the Oklahoma Open Records Act, but school officials deferred to their attorney’s handling of the matter. The executive director of i pic One-on-One’s sponsor said she herself went to Epic’s offices in 201 9 and i-eviewed computer records there showing how students are using the dollars and how much vendors are being paid. “We were looking at the Learning Fund process because it’s an aspect of Epic that is unique and it was a topic being discussed,” said Rebecca Wilkinson, executive director of the Statewide Vi Lal Charter School Board. “I was ‘ooking to see if students had access to those funds, if they were being used as described, if there was more than one student in a family how those funds were being distributed.” Asked for her impressions, Wilkinson said all of the individual student Learning Fund records she observed looked to be “in order,” with the costs of curriculum and technology needs deducted before payments to vendors for various activities. 11/21 2/2412020 ‘Our kids have become a piggy bank’: Epic Charter Schools shields $50M in taxpayer hinds from public scmtiny Education I tuIsaworlc... Vendor qualifications One former Epic teacher said her short stint at the state’s biggest virtual charter school left her troubled about the potential for misuse of Learning Funds and unqualified vendors. or worse — “What type of screening takes place to approve these vendors?” said Angie Wren, a teacher with 23 years’ experience who has returned to Purcell Public Schools. “As a certified teacher and coach in Oklahoma, I am required to have an OSBI background check, completion of Care and Prevention of Athletic Injuries, along with mandatory annual training on concussion protocol, heat exhaustion and sudden cardiac arrest. I also have to follow district communication policies in place to protect students from any predatory celiphone use by staff members.” Asked whether Epic does criminal background checks on Learning Fund vendors, Assistant Superintendent of Communications Shelly Hickman indicated no. “We are not required to do so. Criminal backgroumJ checks can only he done on people, not companies, which is why the affidavit process has been used” Shelly Hickman said. “Epic is one of the few large public schools that has never had an allegation of sexual abuse in its entire operating history, so what we do must be working.” Since Epic would not release any details about which of its 1,400 vendors had been paid or how much, the World contacted a sampling of ones offering services not common to traditional public schools. 12/21 2)2432020 Our kids have become a piggy bank: Epic Charter Schools shields $50M in taxpayer funds ftom public scrutiny Education I tulsaworld.c... In doing so, the Tulsa World discovered that a photographer offering Epic students photo headshots was the subject of news stories by every major outlet in Oklahoma City after his February 2018 arrest on a complaint of rape by instrumentation. An Oklahoma City Police spokesman provided a copy of the report, which was made by a model who said she had worked with the photographer professionally for four months before she was sexually assaulted that afternoon. The World is not naming the man because police said the local district attorney’s office ultimately declined to file charges in the case. Contacted about his arrest, the Epic-approved vendor said, “No, I was never charged with anything. If a parent had any question, I would have no problems speaking on it. Even if Epic didn’t want me as a vendor, I would have no problem with that.” The man said he had been an approved vendor at Epic for two or three years, but he’s never served a student despite numerous cafls. ccThe last inquiry I had, she was east of Tulsa, like in Grove, so that didn’t quite work out (because it would require too much travel),” he said. “I’m still listed on there and I still look forward to working with students either in person or virtually.” Lpic did not respond when asked if the school was previously aware of the arrest. But Shelly Hickman said such a circumstance could result in the removal of an Epic vendor from their list and noted that the school has no invoices on file from that particular photographer. “The allegations you refer to are about 2 years old. We have not removed this vendor from our list because we try hard not to penalize individuals and businesses for allegations that have yet to culminate into charges, let alone convictions,” Shelly Hickman said. “If a family chooses to use this vendor, we intend to inform them of the public allegations so that they may do their own due diligence.” Vendor services, prohibitions 13127 2/24/2020 ‘Our kids have become a piggy bank’: Epic Charter Schools shields $50M in taxpayer funds from public scrutiny Education I tulsaworid c... Epic has a new rule against Epic parents serving as vendors but offers an out for those who have obtained an employer identification number from the Internal Revenue Service. Tulsa-based HeARTsong Creative openly bills itself as an Epic parent-owned Learning Fund vendor in promoting its theater arts and play-writing classes for area students in a social media group for Epic parents. Giimy Sam said she and her co-owner sister, Anna-Maria Lane, both homeschool their children, and her sister’s children are enrolled at Epic. They were unaware of any nile against parents being vendors, but none of their own children participates in their classes. “I don’t know. All I can say about that is we are a legitimate business, we have an IRS number,” said Sam. “Maybe that (nile) is geared toward someone running things out of their home. No one has ever mentioned that to us.” HeARTsong Creative puts on after-school classes at a host of area schools, hut specifically advertises that Jpic students can attend sessions at Tulsa’s Mayo t)emonstration School and Zai v nlernational School and Ct)lhnsviIle’s Herald 1 l em entary. Asked whether any parent had ever raised the issue of having to foot the $1 DO bill while Epic students attend with public school funding, Sam said it had never come up “because no one lia ever taken us up on the offer.” They tend to come to the holIieschool class (held at a local community center),” she said of the 15 or so Epic students they typically serve. cWe pay for houriy rentals at those schools. That’s why we offer that at some schools and not others the schools where we do not pay a fee, we don’t invite students from outside.” — An Epic spokeswoman said the school posted its new rule against parent vendors 18 months ago and that resulted in two vendors being “disqualified.” Some vendors contacted by the World, including a Tulsa-area woman offering baby/wedding registry’ services last year and the still-listed Destinations Executive Flight Center at Riverside Jones Airport, which offers aircraft flight training, did 14/21 2124,12020 ‘Our kids have become a piggy bank’: Epic Charter Schools shields $SOM in taxpayer funds from public scrutiny Education tulsaworld.c. .. I not respond to voicemails or emails. Currently, 17 soccer clubs throughout the state, from Lawton to the Oklahoma City suburbs, Guthrie, Stiliwater, and Grove, and across the Tulsa metro, are listed as Epic vendors. For example, the Broken Arrow Soccer Club has published instructions on its website for how parents of Epic students can get their player registration fees, which range from $95-$ 115 for the spring 2020 season, refunded after the soccer club invoices and receives payment from Epic. “Once BASC receives the reimbursement check from Epic, we will then refund the fees the parent originally paid to their (debit or credit) card on record,” the website states. Through the 2018-19 academic year, a Norman business called Stone Insurance Education, LLC, was listed as a vendor of “insurance licensing exam prep training.” The business manager there, who asked that her name not be published, confirmed they had a signed vendor contract on file and a single invoice for an Epic student from 2016. “We provide a service to prepare people to take the Oklahoma insurance licensing exam. People are generally hired only if they have passed the licensing exam,” she said. “It is not unusual for anyone 18 years or older to come and prep to take the exam.” The company’s website lists course prices ranging from $190 to $260. Asked whether Epic would be billed the same amount for their student to participate as anyone else, she said: “We are a private provider. There is no discount for anyone. Our prices and fees are flat.” One vendor, Tulsa Soccer Academy, bills itself as “Oklahoma’s only full-time soccer school” through a partnership whereby students enroll in Epic and split their time each day at Titan Sports and Performance Center between soccer training and online school. 15121 2/2412020 ‘Our kids have become a piggy bank’: Epic Charter Schools shields $50M in taxpayer funds from public scrutiny I Education tulsaworl.c... The general manager at the academy’s operator, Tulsa Soccer Club, said he was glad to answer questions about the unique partnership with Epic, which began in 2014. “The rest of the world does this, soccer school, It probably hasn’t grown as big as we’d hoped we kind of fluctuate between 20 to 30 (students) but we’ve got kids as young as 8, 9 years old to 16 years old. It is a cool thing to be able to offer that,” said Club Ambassador Eric Edwards. — pretty Full-time tuition for Epic Charter Schools-enrolled students is listed on the Academy website at $3,650 for the current academic year. Edwards said he was surprised this week to receive the first request from an Epic student wanting the club to become an approved vendor so they could invoice club team dues. “A team’s dues could be $150 to $200 a month and these (Epic) vouchers are around $1,000,” said Edwards. “I’m going to look into it for him.” Oral Roberts ‘nivcrsity is listed as a vendor for su;unur swh ilning lessons, but spokeswoman Stephanie Hill declined to say how many Epic students have been served 01’ What tle costs were. “Our aentinistration believes this is information that should t)e obtained from the school and it is not our role to respond on behalf of anyone who lists us as a venior,” liii] said. “We don’t want to get caught in something that has nothing to do with us.” What parents say Brohen AITOW resident Tasha Youngblood has two daughters enrolled at Epic and many questions about its Leariiing Fund practices. For starters, she can’t understand how Epic justifies charging students the same amount every year for the Chromebook laptop purchased their first year at the school. 16/21 2124)2020 Our kids have become a piggy bank’: Epic Charter Schools shields $50M in taxpayer funds from public scrutiny Education tulsawortd.c. .. I I And her daughter with autism receives such specialized instruction that she barely uses the online curriculum paid for out of the Learning Account “but they make us pay for one.” Youngblood also questions the purpose of a blanket $85 “processing fee” charged from every Epic student’s Learning Fund each year. With whatever remains, Youngblood uses the Learning fund to take one daughter to a sewing class and the other to an art class for special needs students. “That processing fee costs them both a class, at least, every year. Where’s that money going?” she said. “Where’s the laptop fee going every year? It’s paid off. As a parent, I want to know where the money’s going. Broken Arrow (Public Schools) tells you where all of their money goes, Epic should, too. I feel like the school should be held accountable.” If an $85 processing fee were assessed for every one of the 60,814 Epic students counted by the state between fall 2011 and fall 2018, that would equal nearly $5.2 million. If the fee were assessed only against the 47,942 students enrolled at Epic One—on—One, that’s just over $4 million. No public records were released to account for how much in processing fees had been debited from student accounts or spent. And there is no mention of such a fee anywhere in the EYS management contract. Shelly Hickman, the Epic spokeswoman, said the funds cover “shared learning fund expenses that benefit all students, largely shipping expenses and enterprisewide software licenses.” She added: “Not one penny of the $85 debit is kept by EY$.” Hickman initially claimed “this was approved by the board when the board approved the EYS management contract.” But when pressed for documentation to show the arrangement exists in a contract, Hickman conceded. 17/21 2/24/2020 ‘Our kids have become a piggy bank’: Epic Charter Schools shields $50M in taxpayer funds from public scrutiny I Education I tulsawo,ic... “The processing fee is not in the contract nor does it need to be because the contract language clearly directs management of the Learning fund to the (charter management organization),” she said. “The board is very much aware of the processing fee.” As for the annual laptop charge, Hickman said it is for “recurring costs of repair, replacement, support, warranty, and items that are not returned.” Joannie Reeves enrolled her middle school-age son in Epic for the entire 2018-19 school year while he was recovering from a spinal fusion surgery to correct a severe case of scoliosis. She found out about Epic when she went to sign her son up for home study at Miami Public Schools. “I wanted them to send his seventh-grade work home, but that’s not what they offered,” said Reeves. “A woman in the office said 1 should sign up for Epic and the principal’s wife would even get a bomis because she’s a principal at hJ)ic.” Throughout her son Tommy’s year at ]pic, Reeves said she had deep concerns about one of the school’s major expenses funded out of the Learning Fund curriculum. Her son’s experience and her research of Epic’s other curriculum offerings left her with the bell ef that their choices are only appropriate for remedial learners or students needing credit recovery. “Our government has condoned tiase people making a profit off kids getting a half-assed education,” said Reeves. “There needs to be accountability. It is supplemental instruction at best,” said Reeves. Tommy Reeves said he was embarrassed by how unchallenging and juvenile his lessons were, showing journalists an online social studies lecture about the Middle East by an instructor in a safari hat being interrupted repeatedly by a cartoon camel defecating in the background. “This is baby stuff,” he said, shaking his head and walking away from the family computer. 18121 2124(2020 Our kids have become a piggy bank: Epic Charter Schools shields $50M in taxpayer funds from public scrutiny Education I I tulsaworld.c... Reeves showed off a receipt for hundreds of dollars she spent out of pocket on a full set of seventh-grade textbooks she felt were important to ensure her son remained on grade level. The Reeves have their own computer, so Tommy didn’t need Epic to furnish him one with the Learning Fund, which was allocated at $900 per child last year. “They didn’t tell me we could use that on books or extracurricular classes until they called wanting me to enroll him for another year,” she said. “His curriculum cost $67. When I left, his Learning Fund was at $600 or $700, which they kept.” Reeves said her son’s teacher at Epic put in a valiant effort, but the “one-on-one” time Epic advertises was usually limited to 10-15 minutes a week during sessions the teacher held for large groups of students at a public library. “The State of Oklahoma really I lay this at the feet of the Legislature they’re the ones that opened the door for crackpots to come in and sell this stuff for kids. Our kids have become a piggy bank for them,” she said. “I am upset with the curriculum and I want to lay it at the appropriate people’s feet. I don’t want to come down on the teachers or anyone else at Epic trying to really do something. They could offer heifer than what they’re offering.” — — Tommy spent the fall semester in a traditional public school in Oklahoma City, but violent episodes among other students led Reeves to enroll him in Oklahoma Virtual Charter Academy, another statewide virtual charter school. “They gave us four boxes of books, a real curriculum and teachers are available to help him with his homework 24/7 unlike Epic, which puts everything off on the parents,” Reeves said. Staffwriter Curtis Kiliman contributed to this story. 47-5efa-a... 19)21 •2 C w . :. . - I E C 0 •2 ‘.- >, Cu a— . LL (II 0 0 0 E . 0 € i3 C!) 1% 0 a Ui ‘ CO Q -. Cu 03 E g a, > .2 U, :2 d - C v-1 If) th W cu - < 0 -c - . . oj - 0] . . F-.. - - . - II I - TI! I U LU I..._ 1,1 -H jjji.i -- --—---.-- - ------- - - - - I— S — — 2-c rm cO ‘j_j rTh -• —: -- :.: ._,- - — -- ‘_ •,c_. 1D rF — . ..r_. . 2 — - ,. C 1 ‘F . - *—--- : - F- w Q) U—. ?:;: CO < E t.p.g — — U 0 L. — w ..o : — o ‘—i (Th - 0 -+-0_ 0 1 — r rti - . - C .E U’ ._ C] cH UJCO .:- ., joc 0.fD > .— <.E Cu 9E a 0 i. 0. X .2 Cu a tS € rn 0 E 3 — — a. .C 2/2i2C2O ‘Our kids have become a piggy bank’: Epic Charter Schools shields $50M in taxpayer funds from public scrutiny Education I tulsaworld.c... 21/21 Highlights Added by Auditor Epic Charter School Board Approved 511712016 4(a)(ll) Amendment to Op. Agmt wi FIFTH AMENDED CHARTER SCHOOL OPERATING AGREEMEN T This fifth Amended Charter School Operating Agreement (hereinafter referre d to as the “Agreement” or the “Contract”) is made and entered into as of the i4\ day of August, 2016, by and between by and between Epic Youth Services, LLC (“EYS”), an Oklahoma limited liability corporation and Community Strategies, Inc., a Oklahoma not-for-profit corporation (the “BOARD”) for the benefit of a School to be called Epic One-on-One Charter School (the “School”). RECITALS The BOARD has been granted a charter (the “Charter”) by Statewide Virtua l Charter School Board, (the “Authorizer”) to organize and operate a charter school, with Authorizer as the authorizing body. The BOARD and EYS desire to create an enduring educational allianc e, whereby the BOARD and BYS will work cooperatively to promote educational excellence and innovation, based on EYS’S school design, comprehensive educational program and manag ement principles. In order to continue to facilitate the organization of the Epic One-on-One Charter School (the “Charter School”) and implementation of an innovative edticational progra m at the Charter School, the parties desire to establish this arrangement for the management and operation of the Charter School. Therefore, for good and vatuablu consideration, the receipt of which is hereby acknowledged, it is mutually agreed as follows: APJICLE I CONTRACTING RELA’t’lOSH IP A. hrit. 1 he BOARI) represents that it is authorized to contract with a private entity and for that entity to provide educational management services. The I3OARD further represents that it has been granted the Charter by Autmrize: to ag’enize and operate the Charter School. The I3OARD is therefore authorized by the Authorizer to superv ise and control the Charter School and is invested with all powers necessary or desirable for carryin g out the educational program contemplated in this Agreement. B. Contract, The BOARD hereby contre’As with EYS, to the extent permit ted by law, to provide all of the charter school management services hmavtdcd for in this Agreement on the terms and conditions set forth herein, including without limitation the administration nnd supervision of the personnel, materials, equipment, and facilities necess ary for the provision of educational services to students, and the maneganent, operation and mainte nance of the Charter School in accordance with the Charter School mission, educational goals, curriculum, methods of pupil assessment, admission policy and criteria, school calendar and school day schedule, age and grade range of pupils to be enrolled, educational goals, and method to be used to monitor compliance with performance of targeted educational outcomes, all as adopte d by the BOARD and included in the Charter between the BOARD and Authorizer. EXHIBIT 6] Source: Rebecca Wlkinson, Executive Director, Virtual Charter School Board Purpose: Background information EYS Highlights Added by Auditor C. Designation of Agents. The BOARD designates the employees of EYS as agents of the Charter School having a legitimate educational interest such that they are entitled to access to educational records under 20 U.S.C. § 1232g, the Family Rights and Privacy ACT (“FERPA”). D. Status of the Parties. EYS is a for-profit corporation organized under the laws of Oklahoma, and is not in any way affiliated with the BOARD. The BOARD is a non-profit corporation organized under the laws of the State of Oklahoma and is not in any way affiliated with EYS. The parties to this Agreement intend that the relationship created by this Agreement is that of an independent contractor and not employer-employee. The relationship between EYS and the BOARD is based solely on the terms of this Agreement, and the terms of any written agreements that may now or hereafter be executed between EYS and the BOARD. ARTICLE II TERM This Agreement shall be effective as of the date of execution and, unless terminated or cancelled earlier pursuant to the provisions of this Agreement, shall continue until termination or expiration of the Charter. This Agreement shall automatically be extended for the duration of any extension of the Charter, provided that BYS is in compliance with this Agreement. ARTICLE IR OBLIGATtONS Of EYS A. Responsibflitv. EYS shull ha rsponsi5le and accountable to the BOARD for the :diniistration, operation and pcrfurroance of the Charter School in accoidonee v,’ith the Charter and titis Agreement. EYS’s rpa biudily, as set rorth in DM5 Agreement, is expressly limited by: (1) the Charter School’s Budget, which is to be submitted to and approved by the BOARD as provided in this Agreement, and (ii) the availability of governmental funding, whether state, city or Federal, to pay for said services. either BYS nor the BOAPSD shall be required to expend Charter School funds on servi:_. in excess of the amount described in the Charter School Budget, as may be amended freni time to time. 3. Development oftheC1rrterchool. EYS shall provide cctstomary charter school development services (the Da,eloement Services”), including without limitation, assistance with the charter school application prucess, negotiations with the Authorizer and the charter appellate if necessary; development and opening of the Charter School Facility; development of a curriculum; dcvclopmci: of a sohoal operations plan; ictontification of furniture, fixttires, equipment and supplies; arrangement of tranporiation and food services as necessary; conduct of other procurement activities as necessary to start up the Charter School; preparation of specifications for technology and related services; recruitment, selection and pre-service training of school personnel; pre-opening recruitment of students; and identification of business systems for Charter School accounting needs. Page 2 of 20 Firm AMENDED CHARTER ScHooL OPERATING AGREEMENT Source: Rebecca Wilkinson, Executive Director, Virtual Charter School Board Purpose: Background information Highlights Added by Auditor C. Educational Proeram. EYS agrees to implement the educational goals and programs set forth in the Charter (the “Educational Program”). The parties hereto acknowledge that an essential principle of the Educational Program is its flexibility, adaptability and capacity to change in the interest of continuous improvement, effecti veness, and efficiency, and that the 3OARD and EYS are interested in results and not in inflexi ble prescriptions. In the event EYS determines that it is necessary to modify the Educat ional Program, EYS shall inform the BOARD of the proposed changes and obtain BOARD approv al, which shall not be unreasonably withheld, and if required under the Charter, approval of the Authorizer. Not less than semi annually, and otherwise as reasonably requested, EYS will provide the BOARD with updated reports on progress towards implementing each of the Charte r School’s educational goals in the Edticational Program. Notwithstanding anything to the contrary herein, the BOARD shall have the reasonable right to require that EYS discontinue elemen ts of the Educational Program being used by EYS at the Charter School. D. rrolfaei. EYS will assist the BOARD in locatin g a facility suitable for the operation of the Charter School (the “Charter Schoo l facility”). The Charter School Facility shall be subject to BOARD approval, which approval shall not be unreasonably withheld. The Charter School Facility shall meet the requirements of all federal, state and local law and regulations for the operation of the Charter School and shall be suitable for the maximum number of students approved by the Authorizer in the Charter or such lesser number of students as may be recommended by BYS and approved by the BOARD, which approval shall not be unreasonably withheld. The BOARD shall consult with EYS prior to making or accepting any material niodifiention to the Charter School Facility, or any amendment or moliticatin: to the terms and conditions of any lease or any purchase and sale agreement for the Charter School Facility and shall exercise od laith in acting upon the reasonable recoinme tatieas of YS related to thc Chartec ‘ch’ -‘I faility. B. reha’cs. /5 shall assist the BOARD in identit ,’ing and procuring such suitable material:;, furniture, fixtures, equipment and supplies as may be necessary to the oera:iun of the Charter School. Purchases made by EYS on behalf the of I3OARD with Charter School funds, such as nen Ir rietary inistructicmal and/or curricu lum materials, books an .i eiap!iei, cod equipInaii v;iS the o:ouarv of the BOARD, exclusive of items leased or purchased by EYS pursuant to the terms of this Agreement. BYS agrees not to add any fees or charges to the cost of equipment, materials or supplies purchased by EYS an behalf of the BOARI), except interest charges if the purchases are financed pursuant to an equipment lease or equipment use agreement. In the event that EYS makes purchases on behalf of the BOAR[) with Charter School fw,is, FYS shall comply with all applicable laws and conduct the purchase as if the BOARD were nahing such purchases directly from a third party. EYS may, at its discretion, finance purchases pursua nt to an equipment lease and allow the Charter School to use such equipment. As appropriate, the title to the equipment would he held by the applicable lessor, and if subject to an option to purcha se, ultimately would be held by the optioning party and/or the BOARD, as the case may be. EYS’s provision of equipment pursuant to this Agreement shall be subject to, and the BOAR D agrees to abide by, the terms and conditions of any applicable equipment lease between EYS and any third party lessor. At the Page3 of 20 FIFTH AMENDED CHARTER ScHooL OPERJJING AGREEMENT Source: Rebecca Wilkinson, Executive Director. Virtual Charter School Purpose: Background information Board Highlights Added by Auditor end of the term of any such equipment lease, such equipment shall be returned to EYS or any third party lessor, as appropriate under the leasing arrangement. for any property so leased that is subject to an option to pprchase, EYS shall assist the BOARD in its decision to purchase such property and shall act on its behalf in meeting all notice requirements of the lessee therein in its exercise of the option to purchase. FYS, from the Revenues, as defined in Article V, Section A, shall make payment on behalf of the BOARD to the lessor as necessary to complete the transfer of title to the BOARD. Notwithstanding anything to the contrary herein, to the extent that there are not sufficient Revenues for such payment, EYS shall not be required to make such payment. EYS MAKES NO EXPRESSED OR IMPLIED WARRANTIES AS TO ANY MATFER WHATSOEVER WiTH REGARD TO ANY EQUIPMENT, MATERIALS OR SUPPLIES PURCHASED ON BEHALF Of OR FOR USE AT THE CHARTER SCHOOL, INCLUDING WITHOUT LIMIT’ATION THE CONDITION OF ANY SUCH ITEM, ITS MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. NO DEFECT OR PROBLEMS WITH ANY EQUIPMENT, MATERIALS OR SUPPLIES SHALL RELIEVE THE BOARD Of ITS OBLIGATIONS TO PAY FOR USE Of THE ITEM OR Of ANY OTHER OBLIGATION UNDER THIS AGREEMENT. NOTWITHSTANDING THE FOREGOING, EYS WILL ENFORCE ANY EXISTING MANUFACTURER WARPANTJES ON ALL EQUIPMENT, MATERIALS OR SUPPLIES PURCHASED ON BEHALF OF OR FOR USE AT THE CHARTER SCHOOL. F. Proorietarv Piehts/ ntialltv. EYS shall own all copyright and other proprietary to all instructional materials, training materials, curriculum and lescan plans, and any other materials developed by EYS, its employees, agents or subcontractors. OT by any individual \.:*1g for or sopatvid by EYS which is developed during the wudne p.sfommnce of the ind:vidual’s EYS shall harve die 5010 and exclusive. nahi to licnso ueh w:ucriais tdr use by other school districts or customers, The BOARD shall own all proprietary rights to curi:uIum or educational materials that are (i) directly developed and directly paid for by the or (ii) developed by EYS at the direction of the BOARD with funds specifically dedicated by the BOARD for the development of such curriculum or materials. Nothing in this Section dm11 be construed to gram. t the BOARD proprietary riohts over curric’.iii:m or educational materials that are part of the general curriculum development ot BYS not directly paid for by the BOARD. During the term of this Agreement, EYS and the BOARD may each disclose proprietary intbrmatian to the other, including currently existing proprietary information and proprietary infhrmntion created in the future. The receiving patty shell use all such efforts as may be reasonably rquested by the owner of such proprietary information so as not to disclose, publish, copy. transmit. modi’, alter or utilize such proprietary information during the term of this Agreement or at any time after its termination or expiration other than to the extent reasonably necessary for the implementation of this Agreement. Notwithstanding anything to the contrary herein, educational materials and teaching techniques used by or at the Charter School shall be subject to disclosure to the extent required by applicable state or federal law. Page 4of20 Firnt AMENDED CHARTER SCHOOL OPEaATrxo AGREEMENT Source: Rebecca Wilkinson, Executive Purpose: Background information Director, Virtual Charter School Board Highlights Added by Auditor G. Subcontracts. EYS reserves the right to subcontract any and all aspects of all services it agrees to provide to the Charter School, including, but not limited to building cleaning, security, and/or food service. However, EYS shall not subcontract the management, oversight or operation of the teaching and instructional program, ecepl as specifically permitted in this Agreement or with approval of the BOARD. H. Stiadent Recruitment. EYS and the BOARD shall be jointly responsible for the recruitment of students subject to agreement on general recruitment and admission policies. Students shall be selected in compliance with the procedures set forth in the Charter and state and federal law. I. Leamine fund. EYS shall be responsible for managing the School’s student learning fund (the ‘Student Learning fund”). The Student Learning Fund is a ftind that is allocated within the school budget on a per student basis, in the approximate amount of $800 per student for a school year, that families are allowed to direct the spending of with the approval and consent of the School. The Board, or its designee, shall transfer the funds authorized for the Student Learning fund to BYS pursuant to the invoice schedule set forth in Exhibit “A.” The Board may, in its discretion, increase or reduce the amount allocated per student to the Student Learning Fund. J. Due Process Hearinos. BYS shall assist the BOARD in the performance of the BOARDS obligations to make available to students of the Charter School due process hearings regarding suspensions, expulsions, special education, confidentiality and access to records pursuant to the Charter and noplivable slate. tdi 2nd lfle Vws rules and regulations. K. Rules and__Procedures. EYS shall recommend reasonable rules, regulations and procedures applicable to ihe Charter School and is authorized and directed to enft)rce such rules, regulations and proccdures as may be adopted by the BOARD. L. Scheol Year and School Day. The schooi ycor and die school day shall be as provided in the Charter submitted to and approved by Authorizes. M. Pupil Performance Standards and Evaluado. BYS shall implement pupil performance evaluations that permit evaluation of the educational progress of each Charter School student. EYS shall be responsible and accountable to the BOARD for evaluating the performance of students who attend the Charter Schoo]. At a minimum, EYS will utilize assessment strategies reqtnred by the Charter. The BOARD and EYS will cooperate in good faith to identify other measures of and goals for the Charter School swdents and Charter School performance , incltiding but not limited to parent satisfaction. Page 5 of 20 FIFTH AMENDED CHARTER ScHooL OPOFATING AGREEMENT Source: Rebecca Wilkinson, Executive Director, Virtual Charter School Board Purpose: Background information C Highlights Added by Auditor Services to Disabled Students and Special Education. EYS shall assist with special N. education services to students who attend the Charter School in conformity with the requirements of state and federal law and the Charter. EYS may subcontract as necessary and appropriate for the provision of special education services, subject to approval by the BOARD, which approval shall not be unreasonably withheld. Such services shall be provided in a manner that complies tvith local, state and federal laws and applicable regulations and policies. Compliance with Charter and Applicable Laws. EYS shall take those steps necessary to 0. ensure that it complies with the Charter, and any laws, ordinances, rules and regulations applicable to EYS or its responsibilities with regard to the Charter School as set forth in this Agreement, unless such requirements are or have been waived. If EYS is notified by the state, by the Authorizer, or by any other governmental authority that EYS or the BOARD may be in violation of the Charter or any app’icable laws, ordinances, rules and regulations, EYS shall timely noti’ the BOARD of the claimed violation and shall take steps to cure in a timely fashion any and all such violations which relate to responsibilities of RYS hereunder. P. Unusual Events. EYS agrees to timely notify the BOARD and/or Charter School administrator of any anticipated or known: (i) material health or safety issues, (ii) labor, employee or funding problems, or (iii) problems of any other type that could adversely affect the BOARD in complying with its responsibilities tinder the Charter or this Agreement. Charter School RecordslPronrietary. ‘I’he financial, educational and student records pertaining to the Charter School are the propertY of the BOARD, and such records are subject to the applicable provisions of state 1ev.’. All Charter School records shall he physically or electronically ailahie, upon re’inet. at the Charter School, Except as prohibited under the Charter ai applH:hie law, the Au:h’:i:er md thp iicsh’:ll, upon reascoahie request, have access to the records of the Charter School. Q. ARTICLE TV OBLIGATIONS OF Ti I B BOARD A. Good Faith Oblication. iho BOAit) shall e:ablish reasonable Tiscal and academic policies governing the operation of the Charter School. The BOARD shall exercise good faith in acting upon the recommendations of LYS in all matters covered by this Agreement, including but not limited to, EYS’s i’ecommendaio;is concerning additions and changes to policies, rules, regulations and budgets. B. Assistance to EYS. The BOARD shall cooperate with EYS in furnishing all information and submitting all forms and reports required in connection with the Charter or this Agreement, including providing timely notice of’ alt BOARD meetings. The BOARD shall timely furnish EYS all information, documents and records necessary for EYS to properly perform its responsibilities tinder this Agreement. Page 6 of 20 FIFTH AMENDED CHARTER SCHOOL OPERATING AGREEMENT Source: Rebecca Wilkinson, Executive Director, Virtual Charter School Board Purpose: Background information Highlights Added by Auditor C. Compliance with Charter and Applicable Laws. The BOARD shall take those steps necessary to ensure that it complies with the Chatter, and any laws, ordinances, rules and regulations applicable to the BOARD or its responsibilities with regard to the Charter School as set forth in this Agreement, unless such requirements are or have been waived. Ifthe BOARD is notified by the state, by the Authorizer, or by any other governmental authority’ that the BOARD or EYS may be in violation of the Charter or any applicable laws, ordinances, rules and regulations, the BOARD shall timely noti’ EYS of the claimed violation and shall takes steps to cure in a timely fashion any and all such violations which relate to responsibilities of the BOARD hereunder. D. Unusual Events. The BOARD agrees to timely noti’ EYS of any anticipated or known: fi) material health or safety issues, (ii) labor, employee or funding problems, or (iii) problems of any other type that could adversely affect EYS in complying with its responsibilities hereunder. E. Retained Authority. The BOARD shalt retain the authority to, after prior good faith consultation with EYS, make reasonable regulations relative to anything necessary for the proper esiablishment, maintenance, management and administration of the Charter School as required by state law. ARTICLE V FINANCIAL ARRANGEMENTS A. Carter S evei. Except as specifically excluded by the terms of this Agreement, the term Revenues” shall include all funds received by or on behalf of the Charter School, including but not limited to: 1. Funding prc,vidcd by state and local governments to the Charter School fur regular public school students enrolled in the Charter School. 2. Special education funding provided by federal and state governments Chartc School that is directly allocable to students at the Charter School. 3. Gific: iciencd funding provided by federal and state governments to thc Charter School that is directly’ allocable to gifted and talented students at the Chartor School. 4. At-ris: funding provided by federal and state governments to the Charter School that is directly allocable to at-risk students at the Charter School. 5. funding provided by federal and state governments to the Charter School that is directly’ allocable to students in the Charter School with limited English proficiency. Ia the Page 7 of2O Ftm AMENDED CHARTER SCHOOL OPERATING AGREEMENT Source: Rebecca Wilkinson, Executive Director, Virtual Charter School Board Purpose: Background information Highlights Added by Auditor 6. federal and state funding sources, including without limitation Title I, National School Lunch Program Medicaid and other government funded grants or programs, which are directly allocable to the Charter School. 7. fees charged to students for extra services, as and to the extent permitted by law. 8. Grants from governments or the private sector for facilities, professional development, school start up or other needs of the Charter School. Revenues shall not include Other Assets/Funds or Operating Advances, as those terms are hereafter defined. Revenues shall be managed and expended by EYS consistent with the annual Budget, as hereafter defined, and this Agreement. B. Other furs/Assets or Operating Advances. Any donated assets, any non-cash proceeds of fundraisers, and grants from private sources that are in-kind or are not cash. Any funds/assets, and/or cash, that are loaned to the school and are required to be repaid. C. Budget 1. Prpjected_Budg. EYS shall provide the BOARD with an annual projected Budget (the “Budget”). For the Charter School’s first Fiscal Year, the Budget shall he submitted prior to the opening of the Charter School. The Budget for each subsequent Fiscal Year shall be submitted to the BOARD gria:- o September 1. The Budget shall be consistent with the Charter, including without limitation the Charter Shnnl mission as set forth therein, and this Agreement. 2. Jciget_Detail. The Budget shall contain reasonable deicit as requested by the BOARD. The Budget shall include projected expe:lses and costs reasonably :ssoeiated with operating the Charter School and the EYS seiloc! d:sign including, hut not limited to: BOARD Expenses; the projected cost of services cad education orograms provided to the Charter School; leasehold and other loeze or purchase costs hr:urjed for the Charter School Facility; maintenance and repairs to the Charter School facility and capital improvements, except as otherwise agreed upon; personnel salaries and benefits expenses; payroll processing expenses; supplies and ftirnishings necessary to operate the Charter School; all taxes at any kind that are assessed or imposed; insurance premiums and deductible payments; utilities; transportation expenses; food service expenses; profssicinal fees: school development and start up expenses, including promissor’ note payment related to the Development Allocation; general and administrative expenses, including costs of audits in connection with this Agreement; financial service supervision; Indirect Cost Allocation; and other costs and expenses connected to operating the Charter School. 3. Anoroval. The Budget shall be prepared by EYS and submitted to the BOARD for approval, which approval shall not be unreasonably withheld or delayed. The Budget shall include all expenditure items identified in this Agreement and such other Page 8 of 20 F wrn AMENDED CtLsma SchooL OEem4o AGREEMENT Source: Rebecca Wilkinson, Executive Director, Virtual Charter School Board Purpose: Background information Highlights Added by Auditor expenditure items as may hereafter be mutually agreed to by EYS aiid the BOARD. The BOARD shall noti’ EYS in writing that it approves or disapproves the annual Budget within thirty (30) days of submission by EYS. If the BOARD provides written notification to LYS within thirty (30) days that it does not approve the annual Budget as submitted, the BOARD shall identify specific reasons therefore and continue to deposit the Revenues into the Charter School Operating Account pursuant to fiilfiH its obligations under this Agreement, the Charter and applicable law; provided such operation shall not extend more than one hundred twenty (120) days beyond the BOARD’S written notice that it does not approve the annual budget as submitted, or beyond the last day of the school year which is the subject of the disputed budget, whichever is earlier. The annual Budget may be amended from time to time as deemed necessary by EYS and the BOARD. Each such amendment shall be submitted by EYS and approved by the BOARD pursuant to the procedure set forth in this paragraph. D. Financial Renortins. EYS shall provide the BOARD with: I. The projected annual Budget as required by the terms of this Agreement. 2. Monthly cash basis statements of all Revenues received, and of all direct expenditures for services and or expenses rendered to or incurred on behalfof the Charter School, whether incurred on-site or ofisite, upon request. 3. Such other information as mae be reasotothly requested by the BOARD to enable its fi) monitoring of FYS’ perfbrrnone’ and the effieirrv of FYS’ operation of the Chatter School, or (ii) furnie: of reports and iaft: motion which the BOARD is required to provide pursuant to its Charter or applicable law. F. cgjojecords. EYS shall keep accuraD tinancial ecurds pertaining to iLs operation of the Chatter School, together with all Charter School financial records prepared by or in possession of EYS, and shall retain all of the said records Pi a period of five (5) years from the close of the Fiscal Year to which such books, accounts, and rceords relate, or such longar period as may be required by law. EYS and the BOARD shall maintain the proper confidentiality of personae], students, and other records as required by law. F. AnnualuCt. The BOARD shall select and retain an independent auditor to conduct an annual audit of the Charter School in accordance with the ITharter. The annual audit for each Fiscal Year shall he completed no later than December 31 of the immediatel succeeding Fiscal Year. Subject to applicable law, all finance and other records of EYS related to the Charter School will be made available to the BOARD’S independent auditor. Ci. Charter School pating Account. Except as hereinafter provided, all monies received by the BOARD on behalf of the Charter School shall be immediately deposited in the Charter School Operating account established by the BOARD for the benefit of the Charter School (the “Charter School Operating Account”) in a financial institution mutually acceptable to the Pages ot2O F rn-I AMaxoen ChARTER ScHooL OPERATING AGREEMENT Source: Rebecca ‘Mlkinson, Executive Director, Virtuat Charter School Board Purpose: Background information Highlights Added by Auditor BOARD and EYS. Interest income earned on the Charter School Operating Account shall accrue to the BOARD. Monies on deposit in the Charter School Operating Account shall be applied and allocated within three (3) business days of receipt thereof in the following manner and order of priority: 1. The BOARD shall pay for such expenses as it may incur from time to time as a result of entering into the Charter and this Agreement (“BOARD Expenses”). BOARD Expenses shall be provided for in the Charter School’s annual Budget and shall not normally exceed $10,000.00 per Fiscal Year. As used in this Agreement, the term “fiscal Year” shall mean the annual period beginning on July 1 and ending on the next succeeding June 30. 2. The balance of all Revenues shalt facilitate payment of Operating Expenses as set forth in Article V, Section H below. 3. Other Funds shall be retained by the BOARD in the Charter School Operating Account and expended consistent with the terms of this Agreement. Payment of Charter School Oneratine Expenses. The BOARI) shall cause the Revenues II, to be deposited within three (3) business days of receipt thereof into the Charter School Operating Account established for the purpose of paying the Operating Expenses of the Charter School (thc “Charter School Operatino Account”) consistent with the annual Budget and this Agreement. As used in this Agreement, t’ term “Operating Exoenses” shall mean the current expenses of operating the Charter Sehuni, including, without limiting the generality of the fmraring: Charter School Facility p:y:.ants; equipment lease payments; payroll processing expe5es; per5onncl salerica and Lenedts e:.p;:scs; cost of assessticnt maeiels; cost of furniture, fixtures, equipment, technolcey, te::tbooks and other materials and supplies; insurance preiniu:ns and deductible payments; costs fi)r public utility services; transportation expenses; food service expenses; custodial expen’ ; a::penses for maintenance and repair of grotinds and buildings; marketing expenses; auditing expenses; legal fees; promissory note payments, including without limitation such pm:;ieory nnte nayrnents as may relate to the Development Allocation; Indirect Cost Allocation; and ather items reflected in the annual Budget including but not limited to the expenses incorrect by LYS dom time to time hereafter in connection with moving the Charter School to a new school facility and operating the charter on a day to day basis. Monies in the Charter School Operating Account shall be disbursed in the following manner and order of priority: I. Charter School FacilitvPuvmert. EYS or BOARD shall pay the Charter School facility payment as it beeones due and payable. if BYS pays the BOARD shall reimburse EYS. 2. çjpment Lease Payments. EYS or BOARD shall pay the equipment, if any, as it becomes due and payable. If EYS pay’s the BOARD shall reimburse EYS. Page 10 of 20 Firm AMENDED CHARTER SCHOOL OPERATtN0 AGREEMENT Source: Rebecca Wilkinson, Executive Director, Virtual Charter School Board Purpose: Background information Highlights Added by Auditor 3. Other Onerating Expenses. EYS or BOARD shalt pay other Operating Expense. Charter School as they become due and payable. If BYS pays the BOARD shalt reimburse EYS. 1. Development Allocation. EYS shall be entitled to payment for the performance of Development Services hereunder (the ‘Development Allocation”). The Development Allocation shall be equal to One Hundred Twenty Five Thousand and NoIIOO Dollars ($125,000.00). Simultaneous herewith, the BOARD shall execute a promissory note in form acceptable to EYS, which promissory note shall set forth the repayment terms of the Development Allocation. J. Indirect Cost Allocation. EYS shall be entitled to payment, in accordance with the annual Budget and the terms of this Agreement, of an Indirect Cost Allocation for the performance of its responsibilities hereunder. Commencing July 1 of the irst ‘ear of operation of the Charter School and bach fiscal Year thereafter, the Indirect Cost Allocation shall be equal to ten percent (10%) of collected Revenues. The rndirect Cost Allocation shall be paid monthly. in an amouni equal to ten percent of collected revenue for the month at the end of each month. On or before July 31 of each year, EYS shall provide the BOARD a reconciliation of actual collected Revenues for the immediately preceding Fiscal Year. Any shortfall of Indirect Cost Allocation shalt be immediately paid to EYS Any overpayment of the Indirect Cost Allocation far the immediately preceding Fiscal Year shall be applied first to payment of an)’ outstanding Operating Advances, next to pre-payrnent of any promissory notes between the BOARD and EYS, and last to the Indirect Cost Allocation dtie for the then current Fiscal Year. K. lnsuffjcient Funds. To the exrcnt that there are not sufficient funds in the Charter School Operating Account to nay Onratinn Expenses in accordance with the annual Budets’.hjec only to the limitati et f’ in Article V. Section L belos’. EYS shall deposit funds into Charter School Operating Account for the payment of such budgeted and unpaid Operating Expenses as may then be due and owing (“Operating Advances”). On the first date that funds reside in the Charter School Oscieting Account EYS shall be automatically reimbursed foi any outstanding Operatine. Advances plus interest thereon from the date funds are advanced at a rate per annum on the LuIpalcl balance of 400 basis points over the Prime Rate compounded monthly (“Interest”) As u:;ri herein, the “Pritne Rate” shall mean the rote of interest reported by the Wall Street Journal, Money Rates Section as the ‘Prime Rate” on the last day of’ the month immediately preceding the month in which the applicable Operating Advances are made and adjusted on the first day of each fiscal Year to the Prime Rate reported on May 31 of the immediately precedins Fiscal Year. Interest shall be calculated monthly on the basis of the outstanding balance as of the last day of the immediately preceding month. At the retest of EYS, the BOA RI) shall execute a promissory note iii a form acceptable to BYS. L. Availability offunds. EYS shall only be required to perform its responsibilities in accordance with this Agreement to the extent that there are sufficient Revenues to provide the agreed level of services as provided for in the annual Budget. In the event Reventres are insufficient to provide the agreed level of services and subject to the termination rights provided in Article VII of this Agreement, FYS shall propose an amended annual Budget pursuant to the procedures set forth in Article V, Section C. Nothing in this Section shall he construed to Page 11 of 20 FIFTH AMENDeD CHARTER Scm-tooL OPERATiNG AGREEMENT Source: Rebecca Wilkinson, Executive Director, Virtual Charter School Board Purpose: Background information Highlights Added by Auditor absolve EYS of its responsibility to fund Operating Advances pursuant to Article V Section K of this Agreement. M. Other Public Schools. The BOARD acknowtedges that EYS may enter into similar operating agreements with other public school or public charter school entities. EYS shall maintain separate accounts for expenses incurred by and on behalf of the Charter School and other schools operated by EYS. EYS shall only charge the Charter School for expenses incurred by or on behalf of the Charter School. ARTICLE VI PERSONNEL & TRAINING A. Per onnel Responsjbj[jy. EYS shall select and hire a qualified principal or school leader and other personnel to perform services at the Charter School. Personnel shall be employees of BYS or the BOARD based on the preference of EYS and the employee All costs for the principal or school leader position incurred by EYS will be reimbursed by the BOARD, unless otherwise agreed upon by the BOARD and EYS. Notwithstanding anything to the contrary herein, the BOARD shall have the right to approve each principal hired by EYS, which approval shall not be unreasonably withheld or delayed. Any rejection of any principal must be for good cause, must be in writing, and shall enumerate specific reasons for the rejection. failure of the BOARD to approve or reject the designee within ten (10) day’s of notice shall be tlcerned an acceptance of the designee by the BOARD. The BOARD and EYS shall be responsible for all comnen.sahn for their respective employees. The BOARD shall have the right, e:cr:iseble on a reasonable basis. in accordance with all applicable laws, and only upon a majority vote of said BOAJ, to eoir that BYS remove or, at FYS’s option, transfer any employ v.r:ing at the Charter removal or transfer shall be effective at the end often (10) lensiness tiny. unless otheiwise agreed to by EYS and the BOARD. EYS shall have the responsibility’ and authority to decsmine staffing levels, and to select, evaluate, assign, discipline, transfer and terminate personnel consistent with applicable state and federal law, the Cherter and this Acreemeat. B. rio:rm1Teaehers. EYS shall provide a principal for the Charter School. subject to the review and approval of the BOAR I) as set forth in Article VI, Section A, above. EYS shall determine tIme number of teachers and the applicable grade levels and subject required for the operation of the Charter School as set forth in this Agreement. EYS shall peovirie the Charter School with such teachers, qualified in the appropriate grade levels and subject areas, as arc retuired to operate the Charter Sclioai. Teachers may’ be employed by EYr cr the BOARD at the ciiscreton of RYS and the employee. All costs for teaching personnel incurred by EYS will be reimbursed bs’ the BOARD, unless otherwise agreed upon by the BOARD and EYS. The curriculum taught by such teachers shall be consistent with the Educational Program approved by the BOARD. Such teachers may, at the discretion of EYS, work at the Charter School on a fall or part-time basis. If assigned to the Charter School on a part time basis, such teachers may also work at other schools managed or operated by EYS, or another public or private school. Each teacher assigned to the Charter School shall hold a valid teaching certificate issued by the Page 12 of 20 FIFTH AMENDED CHARTER SCHOOL OPERA7N0 AGREEMENT Source: Rebecca Wilkinson, Executive Director, Virtual Charter School Board Purpose: Background information Highlights Added by Auditor state board of education or be working toward such certification, as permitted by state law. Teachers that are not certified must be approved for alternative certification by the authorizer. C. Other Staff. EYS shall determine the number and the functions of other non-instructional staff required for the operation of the Charter School as set forth in this Agreement. BYS shall provide the Charter School with qualified staff to effectively operate the Charter School in accordance with this Agreement. Non-Instructional staff may be employed by EYS or the BOARD at the discretion of EYS and the employee. All costs for non-instructional personnel incurred by EYS will be reimbursed by the BOARD, unless otherwise agreed upon by the BOARD and EYS. Non-instructional staff may, at the discretion of EYS, work at the Charter School on a full or part-time basis. If assigned to the Charter School on a part time basis, teachers and other staff members may also work at other schools managed or operated by FYS, or another public or private school. D. Professional_Develocg.g EYS shall provide education in its methods, curriculum, program, and technology to all teaching and administrative personnel. Non-instructional personnel shall receive such professional development as EYS determines reasonable and necessary under the circumstances. E. Limitations on Discretion. All decisions made by EYS, and any discretion exercised by EYS, in its decisions regarding staffing levels and its selection, evaluation, assignment, diseipline, and transfer of personnel, shall be consistent with state and federal law, and consistent with the parameters adopted and included within the Charter and this Agreement. ARTICLE VII TERMThIATION OF AGRFEMT A. Termination. I. EvEYS. EYS may, at its option, terminate this Agreement prior to the end of the term specified in Article II in the event the IIOALD fails to remedy a Material Event within thuiiv (30) days after written notice tu:ii EYS. As used in this Section, a Material Event” includes, but is not limited to; (I) EYS’ failure to receive for any reason, the contracted fbi revenues, compensation, or reimbursement as required by the terms of this Ag sement; or (ii) the BOARD’S fai]ure to adopt EYS’ reasonable recommendations with respect to Chatter School policies, rules and regulations, which failure line a material adverse effect on EYS’ ability to implement the Charter School design as set forth in the Charter or this Agreement; (iii) in the event the BOARD makes decisions regarding the personnel, Educational Program or Charter School Facility substantially inconsistent with the reasonable recommendations of EYS; or (it’) in the event the number of enrolled students suddenly falls below seventy-five percent (75%) of student capacity for the Charter School for reasons beyond the control of EYS and the ntimber of enrolled students remains below that level for thirty (30) days and results in the inability of the Charter School to remain open; or (v) in the event Page 13 of 20 F irrim AMEN0ED Ci-mtRTER SCHOOL OPERAT[NG AGREeMENT Source: Rebecca Wilkinson, Executive Director, Virtual Charter School Board Purpose: Background information Highlights Added by Auditor that during any fiscal Year, there is a reduction of more than ten percent (10%) in the available combined federal and state funding for the Charter School on a per pupil basis in comparison to the funding that was available in the prior Fiscal Year; or (vi) fraudulent misrepresentation or other willful misconduct by the BOARD that has a material adverse effect on the Charter School; or (vii) the insolvency or bankruptcy of the Charter School; (viii) the loss or suspension of the Charter; or (ix) the enactment, repeal, promulgation or withdrawal of the state charter law such that this Agreement or the operation of the Charter School in conformity with this Agreement or the BOARD’s Charter violates the law; or (x) in the event of any material amendment or modification to the Charter; or (xi) in the event the parties are unable to locate a suitable Charter School Facility adequate for the Educational Program and in full compliance with all applicable building and safety codes; or (xii) in the event that use of the Charter School facility becomes impractical by reason offtre, flood or other act of God. 2. B. By the BOARD. The BOARD may terminate this Agreement prior to the end to the term specified in Article 11 in the event that EYS shall fail to take reasonable steps to remedy a Material Event within thirty (30) days after written notice from the BOARD. As used in this Section, a “Material Event” includes, but is not limited to: (i) failure of EYS to provide services in accordance with the terms of this Agreement; or (ii) failure of EYS to follow policies, procedures, rules, or regulations duly adopted by the BOARI) that are not in violation of federal or state laws, the Charter, or this Aczreement: or iii) fraudulent misrepresentation or other willful misconduct by EYS that has a material adverse effect on the Charter School; or (iv) the insolvenc’.’ or honkruptey of PYS; or Cv) the loss or suspension of tiw Charter; or (vi) the en’ctmon, ‘ol. lromulcrotion or withdrawal of tho state charter law such that this Agreement or the operation of the Charter School in conformity with this Agre ot or the BOARD’s Charter violates the law. Termination/Expiration. I. Effective Date of_Termination, in thz event this Agreement is terminated by either party prior to the end of the term specified in Article H, absent extraordinary circumstances, including without limitation the fraudulent misrepresentation or e,’illful misondu of either party, the termination will not became effective until the end of tha academic year during which the notice of termination is delivered. 2. Personal Prcpgrty. Upon termination or expiration of this Agreement, EYS shall have the right to: fi) remove equipment and other assets owned or leased by EYS; or (ii) require that the BOARD reimburse EYS for any equipment purchased by EYS with EYS funds and ttseU for purposes of the Charter School pursuant to Article Ill Section D; or (iii) require that the BOARD remit to EYS such amounts as may remain outstanding under any equipment lease entered into pursuant to Article HI Section D, including without limitation any amounts due to exercise Page 14 of 20 FIFtH AMENDED CHARTER SCHOOL OPERATING AGREEMENT Source: Rebecca ‘Mlkinson, Executive Director, Virtual Charter School Board Purpose: Background information Highlights Added by Auditor any option to purchase under any such lease and complete transfer of title to the Charter School, Equipment and other assets owned by the Charter School shall remain the property of the Charter School. 3. Intellectual Prooy. Upon termination or expiration of this Agreement for any reason, each party shall, within ftfleen (15) days of the effective date of such termination, return, or at the request of the other party destroy, all curriculums, educational materials, and other intellectual property belonging to such other party. 4. vment. Upon termination or expiration of this Agreement for any reason, the BOARD shall immediately remit to EYS all outstanding Indirect Cost Allocation and Operating Advances together with accrued Interest earned thereon and shall reimbtirse EYS for any other Operating Expenses incurred by EYS on behalf of the Charter School. All such amounts due upon termination shall be payable solely from assets of the Charter School, including without limitation Revenues, Other Funds and such other assets as may be acquired by or on behalf of the Charter School with Charter School Revenues or Other Funds; provided, however, that if the BOARD receives any grant monies or other designated funds which are governed by a use agreement that prohibits the use of such funds to make payment to EYS pursuant to this subsection (the “Restricted funds”), the BOARD shall not be required to include the Restricted Funds in such payment to EYS. C. TrJtjQ. in the event o lerininetion of this Agreetnent for any reason by either party prior to the end of the Agreement’s term. FYS will, in exchange for the comnensation terms included in this agreement, provide the BOM{t) reasonable assistance for up to ninety (90) days to assist in the transition to another administrative or structural arrangement; provided, however, that EYS shall not be reiuirt to provide any assistance to another management company or service provider. ARTICLE VIII CDEMN IFICATION Each party hereto shall indemnify and hold harmless the other party, its officers, employees, agents and consultants float and against any and all actions, claims, suits, liabilities, proceedings, penalties, floes, costs, and expenses (including reasonable attorneys’ fees at bath the trial and appellate levels, including paralecal expenses) relating directly or indirectly to any breach of this Agreement or of the Charter or any violation of the state Charter law or any other applicable law by such indainoifing patty, its officers, employees, agents and consttltants, servants or subcontractors, as applicable. Such indemnification may be achieved by the purchase of general liability and property insurance policies, or by such other means as the parties may mutually agree. Page 15 of 20 FIFTH AMENDED CHAP.TEP. SCHOOL OPERATING AGREEMENT Source: Rebecca Wilkinson, Executive Director, Virtual Charter School Board Purpose: Background information Highlights Added by Auditor ARTICLE DC INSURANCE Insurance Covcrace. EYS shall obtain and on behalf of the BOARD maintain such A. policies of insurance as may be required by the Charter or applicable law. To the extent allowed by law, the costs of such insurance to the BOARD shalt be included in the Charter School Budget, to be prepared by EYS and approved by the BOARD. EYS shall provide proof of such insurance to the BOARD at the BOARD’s request. Any cost incurred by EYS to obtain this insurance shall be reimbursed by the BOARD. The BOARD and EYS shall be listed as named insureds on such policies. To the extent reasonably practicable the parUes shall cooperate with each other in providing such information and complying with such reporting requirements as may be required by any applicable insurer(s) , B. Workers’ Comnensation Insurance. Each party shall maintain workers’ compensation insurance as required by law, covering their respective employees, Costs incurred by EYS for workers compensation insurance for employees allocated to the charter school shall be reimbursed according to the percentage of the employee that is allocated to the charter school. ARTICI,E X WARRANTIES AND REPRESENTATIONS A. BOARD Warranties and Repsentations. The BOARD represents that it has the authority nndr law to execute, deliver and perform this Agreement and to incur the o’i cOons provided for under this Agreement. The BOARD warrants that its actions have been duly and validly authcri7od ee:l ‘at i will adopt any and all resolutions or e:pendittire app: for executin of tt: Aarccmont. B. EYS Warranties and Rcnregfns. EYS warrants and represeat that it is a corporation in good standing and is authorized to conduct business in the State of i3!:laimma. EYS v;ill enmpiv wits all registration and licensing requirements relating to coridu:ting business under this Agree!net. The BOARD agrees to assist EYS in applying for such liceares and permits and in chtai:ing such approvals and consents. C. Mutual Wanomtics. The BOARD and BYS mutually warrant to the other that there are no pending uetiun, claims, suits or proceedings, to its knowledge, threatened or raserinbly anticipated against or affecting it which if adversely determined, would have a matefial adverse effect on its abili:y to perform under this Agreement. Page 16 of 20 Fifli-1 AMENDED CNARThR Sd-tOoL 0?Etc,vrlNG AGREEMENT Source: Rebecca Wilkinson, Executive Director, Virtual Charter School Board Purpose: Background information Highlights Added by Auditor ARTICLE Xl MISCELLANEOUS A. Entire Acreement. This Agreement represents the entire understanding and agreement between the parties with respect to the subject matter hereof, and supersedes all other negotiations, understandings, and representations (if any) made by and between such parties. 3. Force Majeure. Nottvithstanding any other sections ofthis Agreement, neither party shall be liable for any delay in performance or inability to perform due to acts of God or due to war, riot, embargo, fire, explosion, sabotage, flood, accident, labor strike, or other acts beyond its reasonable control; provided either party may terminate this Agreement in accordance with the termination provisions contained in this Agreement if sufficient grounds exist as provided in the Article governing termination. C. Resolution ofjgtites. The parties agree that each will make every good faith effort to resolve any and all disputes under this Agreement amicably before taking any action tinder Article XI Section 0 below. U. State Governinu Law/Waiver of Jury Trial. The rights of all parties hereto shall be subject to the jurisdiction of and be construed according to the laws of the State of Oklahoma. EYS and the BOARE) hereby waive the right to a jury trial in any action, proceeding or counterclaim brought by either LYS or the BOARD against the other. E. All notices and other communications required by the terms of this !r’reement shall be in writing and sent to the parties hereto at th facsimile number or address sot tbith below, Notice ma be given by (1) facsimile with written, evidence of confirmed receipt by the receiving party of the entire notice, (ii) certiflcd or registered mail, postage prepaid, return eir)t requested. or (iii) personal delivery. Notice shall be deemed to hove been given on the date of transmittal or personal delivery if given by facsimile or persorini delivery, or upon the date of postmark if sent by certified or registered mail. Notices to the BOAR]) shall be sent to thu current uddi es of the then current BOARD President. with a cope’ u the then current 131)ARD attorney. 1 he address of the parties hereto for the pm pusca afbi eeir, inclusive of the address of the current BOARD President. and BOARD attorney, are as follows: i’he BOARD: Attn: Mr. Douglass Scott, Esq., Chairman 4117 NW 1 22 Street, Suite A Oklahoma City, OK 73120 Telephone; 405-749..4550 Facsimile: 405749-454O Page 17 of2O Firm AMENDED CHARTEP. ScHOOL OPERATIN0 AGREEMENT Source: Rebecca Wlkinscn, Executive Director, Purpose: Background information Virtual Charter School Board Highlights Added by Auditor with a copy to: Betsy Brown, Secretary/Treasurer 4117NW 127nd Street, Suite A Oklahoma City, OK 73120 Telephone: 405-749-4550 facsimile: 405-749-4540 EYS Schools Inc. Attn: William H. Hickman, Esq. 114 East Main Street Norman, OK 73069 Telephone: 405-605-2375 Facsimile: 405-605-2374 jggment. No party shall assign its rights or obligations hereunder without the prior F. written consent of the other party, which consent shall not be unreasonably withheld or delayed. EYS, however, may assign this Agreement to an entity wholly owned or controlled by EYS. Amendment. This Agreement shall not be altered, amended, modified or supplemented G. except by memorandum approved by the BOARD and signed by both the BOARD President and an authorized officer of EYS. H. Waiver. No waiver of any provision of this Agreement shall be deemed or shall waiver of any other prov!sion. Nor shall s’:: oa’’er constitute a continuing waiver unless otherwise expressly stated. constitute a 1. If any party commen n no lcto: nairst another patty as a result of a breach or alleged breach of this Agreement, the prevailing party shall be entitled to have and recover from the losing party reasonable attorneys’ fees and cests 01 suit, 3. De!eeationofAuthoritv. Nothing in this Aon;unt shall be construed as delegating to BYS powers or authority of the BOARD that are tiDi to eeation by the BOAPJ) under state law and the Charter. K. rnpIigncyIih Law. The parties to this Agreement agree to comply with all applicable laws and regulations. L. gijnce with (gig. The parties to tLis Agreement agree to comply with the tcnns and conditions set forth in the Charter awarded to the BOARD. M. Further Assurances. The patties hereby agree from time to time to execute and deliver such further and other assurances, assignments and documents and do all matters and things which may be convenient or necessary to more effectively and completely carry out the intentions of this Agreement. Page 18 of 20 F ivrn AMENDED CtL4RThR SCHOOL OPERATING AGaEEMENT Source: Rebecca \Ptlkinson, Executive Director, Virtual Charter School Board Purpose: Background intormation Highlights Added by Auditor N. Interpretations. This Agreement shall not be construed more strictly against one party than against the other merely because it may have been prepared by counsel for one of the parties, it being recognized that both parties have been represented by counsel in connection with the negotiation of the terms hereof and have contributed substantially and materially to its preparation. 0. Time of Essence. Time of performance by either party of each and every provision or covenant herein contained is of the essence of this Agreement. P. Binding Effect. All of the terms and provisions of this Agreement, whether so expressed or not, shall be binding upon, inure to the benefit of, and be enforceable by the parties and their respective legal representatives, successors, anti permitted assigns. 1-leadines. The headings contained in this Agreement are for convenience of reference only, and shall not limit or otherwise affect in any way the meaning or interpretation of this Agreement. Q. R. Severabilj.ty. If any part of this Agreement or any other agreement entered into pursuant hereto is contrary to, prohibited by or deemed invalid under applicable law or regulation, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given fuLl force and effect so far as possible. Survival. All covenants, agreements, representations, and warranties made herein or S. otherwise made in writing by an” party mirsuant hereto shall survive the execution and delivery of this Agreement and the consummadon of the transactions contemplated hereby. T. Iijjgdies. Nothing in this Agreement. whether express or implied, is intended to confer any rights or remedies on any person other than the partie3 hereto and their respective legal representatives, successors, and permited assigns, nor is anything in this Agreement intended to relieve or discharge the ohlintion or liability of any third person to any party to this Agreement, nor shall any provision give -n’, toird person any right to subrogation ‘or action over or against any party to this Agreement. U. Countemarts. This Agreement mw be executed in any number of cotinterparts, each of which shall be deemed an origind. amid all of which together shall constitute one and the same instrument. [Signatures on following page.] Page 19 of 20 FIFTH AMENDED CHARTER SCHOOL OPERATING AGREEMENT Source; Rebecca V’Iilkinson, Executive Director, Virtual Charter School Board Purpose; Background information Highlights Added by Auditor IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date and ‘ear first above written. EPIC YOUTH SERVICES, LLC ByjJ &% It COMMUNITY S,-RM’G IES, INC. c By: Tiile 11Pt5Lei7 Page 20 of 20 ‘irri Ansnrn Ci PrTI: SChOOL OrceAliNo AGRaEM:vlr Source: Rebecca Wilkinson, Executive Director, Virtual Charter School Board Purpose: Background information Amendment to Fifth Amended Charter School Operating Agreement As of August, 21, 2019, the agreement entitled Fifth Amended Charter School Operating Agreement between Community Strategies, Inc. and Epic Youth Services is amended as follows: Section I. is removed and replaced with the following: Learning Fund. EYS shall be responsible for managing the School’s student learning fund (the “Student Learning Fund”). The Student Learning Fund is a fund that is allocated within the school budget on a per student basis, in the approximate amount of $800 per student for a school year, that families are allowed to direct the spending of with the approval and consent of the School. The Board, or its designee, shall transfer the funds authorized for the Student Learning Fund to EYS to purchase and manage school assets and services on behalf of the school. The Board may, in its discretion, increase or reduce the amount allocated per student to the Student Learning Fund. \\ / Name: DD:) Community Sties, Inc., Board President I) Name: David Chcney EyS Highlights Added by Auditor CHARTER SCHOOL OPERATING AGREEENI This Charter School Operating Agreement (hereinafter referred to as the “Agreement” or the ‘Contract”) is made and entered into as of the day of May, 2017, by and between by and between Epic Yotith Services. LLC (“EYS”), an Oklahoma limited liabili corporation and Community Strategies. Inc., a Oklahoma not-for-profit corporation (the “BOARD”) for the benefit of a School to be called Epic Blended Charter School (the “School”). RECITALS The BOARD has been granted a charter (the “Charter”) by Rose State College, (the “Authorizer”) to organize and operate a charter school, with Authorizer as the authorizing body. The BOARL) and EYS desire to create an enduring educational alliance, whereby the BOARD and EYS \\ill work cooperatively to promote educational excellence and innovation, based on EYSS school design, comprehensive educational program and management principles. In order to facilitate the organization of the Epic Blended Charter School (the “Charter School”) and implementation of an innovative educational program at the Charter School. the parties desire to establish this arrangement for the management and operation of the Charter School. Therefore, for good and valuable consideration, the receipt.oI which is hereby acknowledged, it is mutual iv anteed as lbllov. s: ARTICLE CON1RACTING RELA’l’GNSi liP \utirorit The BOARD represents that it is authorized to contract with a private entity A. and fbr that eitr to pwvidu cdecationai nianagement services. ‘l’he BUARI ) :‘urther represents it hns been eranied the Charter by AUthOn7er to oreanize and ape! ate the Charter School. he BOARD is therefore authorized by the Arthorizer to supervIse and control th Charter School :titi is Invested e. ith a1 ucwers necessary on desirable for’ carrying rut the educational program c atempiated in this Agreement. I, on iat [he BOARD hen_b runtiact ‘. tilt L $ to thc \tcrt p._i nutted b\ iv to provicla all of the charter school management seivices provided for in this Agreement on the tc ms r i catch no is sJ to th v cli includinc v drout I ir ii t tiC! die admi nittatioo end supervision nt the personnel, materials, equipmcnt. arid faciiitres necessary for the pro vision of’ edncational services to students, and the management. opcratiori and maintenance of the Charter School in accordance with the Charter School missior!. educational goals, curriculum, methods of pupil assessment, admission policy and criteria, school calendar and SC]iOOi clay schedule. ace and grade range of pupils to he enrolled, educational coals. and method to be used to monitor compliance with performance of targeted educational outcomes, all as adopted by the BOARD and included in the Charter between the BOARd) arnd Authorizer. C. jgsjunation of Acg.nls. The BOARD designates the employees of EYS as agents of the Charter School having a legitimate educational interest such that they are entitled to access to educational records under 20 U.S.C. § l232g, the Family Rights and Privacy ACT (“fERPA”). . EXHIBIT Source: Josh Brock, CEO Purpose: Background Information . 4 Highlights Added by Auditor D. Status of the Parties. EYS is a for-proflt corporation organized under the laws of Oklahoma. and is not in any way affiliated with the BOARD. The BOARD is a non-profit corporation organized under the laws of the State of Oklahoma and is not in any way affiliated with EYS. The parties to this Agreement intend that the relationship created by this Agreement is that of an independent contractor and not employer-employee. The relationship between EYS and the BOARD is based solely on the terms of this Aureement, and the terms of any written agreements that may now or hereaBer be executed between BYS and the BOARD. ARTICLE II TERM This Agreement shall be effective as of the date of execution and, unless terminated or cancelled earlier pursuant to the provisions of this Agreement, shall continue until termination or expiration of the Charter. This Agreement shall automatically he extended for the duration of any extension of the Charter, provided that EYS is in compliance with this Agreement. ARTICLE Ill OBLIGATIOISS OF EYS A. Resnonsibilitv. ES shal fe !espanih.le and accoun:abie to the BOARD for the admi rustratton. ooeration a ic’rfo n:ance of the Charter School in accordance \\ ith the (_harter and this Aureement. EYS p r: ;L l;re, :.. foi Ut in titi Agicement, is expree: iit;itei! by hI the C. rter c’H’c to ‘H:ihted to and by the 1n.\ pfl n thts Ag: men. and (at a atla: ty at ‘‘emnamotal landing. hetlier ..t.ae. i t’cd_’td. lb atd si .ee. ‘.u:i A d no! toe dC’AL :.f,li l icqtiited to e;pein Liar tcr c1iol futlJ on criCe inra,;e:o, ut itt. J:ra’j!it c,ei:c’eO it the Charter acl:tai ;i mat be amended fmm time time Do Ia of ti J L’i ‘i It d ‘wm rt ch wr chool ciopt ....,:‘vices”. i.alading without itn:t::tica, as ,is’t:c t ith tie chat -,choo an’I ho’t p:omc a. :otiati,:m, A :tIori2e; rjid the c. late if’ necessary: •.leveionment and openirie of the Charter School taci Iitv: development ot a cm ieU:m: dmvelop:aent of a school upcraticti:s plan; identification of furniture, fixtures. in eat anu supplies: aa n;pement of a atispot LOuti .ini hal serv;ces as aecessm L000clct rocireni cit activities as necessary to star: tin he (The tier School: preparation of snec tcaticais mr tee it: logs and related services: recrumttiwcr,. selection and arc—set ‘ito traii Hug if school personae!, ie—ope :ing eerciitnmt’rit of siodents; and i:ieitti ticetien of business svs—mns tor Charter School accouaa:,e cods. uLtit — dyvet:tj:sr\ i..es (the “1) hat — :t ‘. ‘: C. Edu’:aiionaLProctram. EYS agrees to implement the eelucation,l goals and plograms set forth iii the Charter (the •Educationai i t’agramnj. The parties hereto acknowledge that an essential principle of the Educational Program is its flexibility, adaptability and capacity to change in the interest of continuous improvement, effectiveness, and efficiency. and that the l3OARl) and EYS are interested in results and not in inflexible prescriptions. In the event EYS Page 2 0120 SchooL Source: Josh Brock, CFO Purpose: Background Information ‘:cej ,. 51,g ‘T’” Oica,siixo AGREEMENT Highlights Added by Auditor determines that it is necessary to modify the Educational Program, EYS shall inform the BOARD of the proposed changes and obtain BOARD approval, which shall not be unreasonably withheld, and if required under the Chatter, approval of the Authorizer. Not less than semi annually, and otherwise as reasonably requested. EYS will provide the BOARD with updated reports on progress towards implementing each of the Charter School’s educational goals in the Educational Program. Notwithstanding anything to the contrary herein, the BOARD shall have the reasonable right to require that EYS discontinue elements of the Educational Program being used by EYS at the Charter School. D. Charter School Facility. FYS will assist the BOARD in locating a facility suitable for the operation of the Charter School (the ‘Charter School Facility”). The Charter School Facility shall be subject to BOARD approval, which approval shall not be unreasonably withheld. The Charter School facility shall meet the requirements of all federal, state and local law and tegulations for the operation of the Charter School and shall be suitable for the maximum number of students approved 1w the Authorizer in the Chatter or such lesser number of students as may be recommended 1w E\’S and approved hr the BOARD, which approval shall not he unreasonably ‘a ithhcld. The BO.\R[) shall consult ‘a ith EYS prior to making or accepting any material modification to the (.‘arter School FaDilitv. or any amendment or modification to the terms and conditions ot any ease or one purchase and safe agreement for the Chatter School Facility and shall excicise od faith in actin unon the reasonable recomntendation.s of FYS related to the Chat tar Sd tm lFw ility. Puichase EYu sh.d assist The BDA ft in identi Ring and pr cut lag such stit:ahlc F. muterids, fttrnit’i:e, ix1 to c iiraa artt s rH’s as may hr reccssarv to the orcrati fl of d ‘‘‘c. to’ Charter School P’’c!ra’t’: ms the h( A! tD ‘aid: Citarto: Sor ads. ‘hi’ ietntv I tracJ..i.,.i oH a :Hulai;; ratcil. do, h...! arid suppL arid C! lent ‘aill be the cop’. aii,,r rii.. .acOisivc el dents cu.ed or piLilO c IS pu sat t. the term .f :his Ao’eemeiit. l .I atraes nut to acid any tees or chatges to the cost of ed i’:nent, materials or uppt’ n’ lo. otoo’° i’ EY° on behalf of the BOARD. except ntcrest chat ges if the puicha cc a’ t:nan es r° so mt ti at L equipment lease or e1ulpmcrt use agreen:ont. 1:: t1w evort h fl’ rnak’ ,i.trcis.’ses on halt tIC f ihe BC \RD o, i:h hr’’ F.\S sh cu1 h _ard co,ilac. )JFL1 d I I tm BOARD were makin such purchases directly fiorn a third party. ., . C”) FYS nay, at its discietioc. finance pure hases pursuant to an cqllipment lease and al lo’a the Chatter School to use sudi c1tIlprnettt As appropriate. the title to the equipment would be held Lw the applicahle lessor, and If subject to an option to purchase, ultimately would be held be the optioninO party anti or the BOAR[). as the case rna ho. EYS’. provision of equiptrent otirsuatit to tins Agreenietri shall he subject to. 0H the BOARI) agrees to abide by. the terms and conditions of any applicable equipment lease bet’aeen EYS and any third perLe lessor. At the end of the term of an such equipment lease, such equipment shall ho returned to EYS or an third party lessor, as appropriate under the leasing arrangement. for any pi oper te so leased that is subject to an option to purchase, EYS shall assist the BOARD in its decision to purchase such property anti shall act on its behalf in meeting all notice requirements of the lessee therein in its exercise of the option to purchase. EYS, from the Revenues, as defined in Article V, Section A, shall make payment on behalf of the BOARD to the lessor as necessary to complete the transfer Page 3 of 20 SCHOOL OPERATING AGREEMEt Source: Josh Stock, CFO Purpose: Sackground Information - - / - Highlights Added by Auditor of title to the BOARD. Notwithstanding anything to the contrary herein, to the extent that there are not sufficient Revenues for such payment, EYS shall not be required to make such payment. EYS MAKES NO EXPRESSED OR IMPLIED WARRANTIES AS TO ANY MATTER WHATSOEVER WITH REGARD TO ANY EQUIPMENT, MATERIALS OR SUPPLIES PURCHASED ON BEHALF OF OR FOR USE AT THE CHARTER SCHOOL. INCLUDING WITHOUT LIMITATION THE CONDITION ANY OF SUCH ITEM. ITS MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. NO DEFECT OR PROBLEMS WITH ANY EQUIPMENT, MATERIALS OR SUPPLIES SHALL RELIEVE TI-IF BOARD Of ITS OBLIGATIONS TO PAY FOR USE OF THE ITEM OR OF ANY OTHER OBLIGATION UNDER THIS AGREEMENT. NOTWITHSTANDING THE FOREGOING. EYS WILL ENFORCE ANY EXISTING MANUFACTURER WARRANTIES ON ALL EQUIPMENT. MATERIALS OR SUPPLIES PURCHASED ON BEHALF Of OR FOR [SE AT THE CHARTER SCHOOL. F. Pronrietary Rights/Confidentiality. EYS shall own all copyright and other proprietary rights to all instructional materials. trai nine materials. ctirriculum and lesson plans, and atty other materials developed by EYS. its eniplovees. agents or sttbcontractors. or by any individual working Fot or supervised by FYS which is developed during the routine performance of the individual’s duties. EYS shall have the sole and exclusive rieht to license such materials for use by other school districts or customers. The BOARD shall own all proprietarY rfohts to curriculum or educational materials that ãtC (I) directly developed and directly paid for h the B DARL ut (iii developed b E S at the direction of the BOARD with funds spec: iicabv dedjeatail by tle Hf )...Rt) for the r!euki1—mont of such currierlirIril cr materials Nothing in this Section hahi he cnirued to eraio the F—OARl) propret’r rights over eurricttfom or educational material:; tNt we of teerai curri:ilu:n devei:pruci:t EIS not clite id N by rh. During the term of this Agreement. EYS and the BOARE) may each disclose proprietary formation to the other. includine, curreutiv existine popriemry ln[rrm.it:cn and ni ol.rletarv inrorin:;ion reaied In thIe Ituere. hi rece!vnc party shall use all such efforts a; ma’ he ii:iidih’. reGileatci b the orner otsuchi fuoprietary informs tin so as not to clisc!ose. publish, Cop\’, traaimt, lity. alter Ji iitIiic sLICfl pioprietary inrorniation duriar the Icon of th:r Agreement or at any ti ne after its termination or expiration other than to the extent reasonably necessary for the implementation of this Areement. Nor thstaiding an’, thtlit. n the eonlraiy wicin. educarinal matci itils iil teaclilne t :chiiques usc hy or at he Charter School -hall be ‘ diselosa: e to the extent rec. ci h pph:eable 5mb or feer rI I :o. in . .. Suhcontt acts. LYS reservas the right to subcontract any and all aspects of all services it G. agrees to provide to the Charter School, including, but not limited to building cleaning, security, and/or food service. However. F VS shall not subcontract the management, oversight or operation of the teaching and instructional program, except as specificalk permitted in this Agreement or with approval of the BOARD. Page 4 of 20 Sci loot. OPERATIYG AGnEEicrT Source: Josh Brock, CFO Purpose: Background Information HIghlights Added by Auditor H. Student Recruitnent. EYS and the BOARD recruitment of students shall be jointly respon subject to agreement on sible for the general recruitment and Students shall be selected admission policies. in compliance with the procedures set forth in the and federal law. Charter and state Learning Fund EYS hai l he responsible for manog ing the School’s studen fund (toe ‘Student Leuni t learning ng Fund ) The Studen t Le arning fund is a fund tha v.ithin the school budget t is allocated on a per student bsis in the ajpio\irnate amount fora schàol ear’ tnt fam of 5800 per tudent ilies are ailoved to dir ect the spending of tit onsent of the School h the approval and The Boaid or its design ee shall transfer the tun Student Learning Fund ds authorized for the to FYS pursuant to the inv oice schedule set forth Board may, in its discre in Lhibit A.” The tion, increase or reduce the amount allocated per Learnine Fund. student to the Student .1. Due Process Ileari. hA’S shall assist the BOARD’S oblications BOARD in the perfor to make available to studen mance of the ts of the Charter School regarding suspensions. exp due pro cess hearings ulsions, special education , conFidentiality and acc pursuant to the Charter and ess applicable state, federal to records and local lat’s. rules and rrulations. K. Rules and l’wcejuies EYS shall recommend proecoures applicable to reasoneble rules, regula the Charter School and is tions and authorized and directed .o,’uIations and pi Leedures to untorce such rii!es. as tntv be edopted Nv the BCCRD. L School Ymr nod S.:i.c’rl Da I he school veer and the thottor s’ Htod the school do’,’ ivII ““ e and irc”Oed in r.d A ii, md P’tiornianeeStande rdsandbualuann. BYS evaluations thn p. rmit eva shall t picflv’nt perf.:n mance ltleti::,n of the ertitc’etion ol progress of each Ch l’P1 F S rha NC responsii arter Schaul swdent. Ic u ccounttiblc tn th DOAPS) Cu eviltiati so J-:uts vhrz .ittL’od tim no thc ;or ;ht me cc of Chatter School. At a mi tum unt. FYS will .dlize ass eui re by the Charer. essmei t sti atOicS h he ih)\RD and F YS ill coonerate in ood Fil measures ot and im th to identify other als Fir the Charter Sch ool students and Chart wclerllna but it limited to er School perfte itiance parent satisthction . ‘ Page 5 of 20 Source: Josh Stock, CFO Purpose: Background Infor mati Scktooi. Oi’aaii INC AGREssIEN r on Highlights Added by Auditor N. Services to Disabled Students and Snecial Education. EYS shall assi education services to students who st with special attend the Charter School in conformity with the requirements of state and federal law and the Chatter. EYS may sub contract as necessary and appropriate for the provision of spec ial education services, subject to approval by the BOARD, which approval shall not be unr easonably withheld. Such set-vices shall be provided in a manner that complies with local, state and fede ral laws and applicable regulation s and policies. 0. ,cpliance with Charter and Applica ble Laws. EYS shall take those steps necessary to ensure that it complies with the Charter, and any laws, ordinance s, rules and regulations applicable to EYS or its respons ibilities with regard to the Charter School as set forth in this Agreement, unless such requirements are or have been waived, It’ EYS is notified by the state, by the Authorizer, or Lw any other gov ernmental authority that EYS or the BOARD may be in violation of the Charter or any app licable laws, ordinances, rules and reculations. EYS shall timely notify the BOARD of the claim ed violation and shall take steps to cure in a timely fashion any and all such violati ons which relate to responsibilitie s of EYS hereunder. P. Unusual Events. EYS agrees to timely notify the BOARD and/or Chatter School administrator of any anticipated or known: (1) material health or safet y issues, (ii) labor. employee or funding problems, or (iii) problems of any other type that coul d adveisely affect the BOARD in cornplvin with its resp onsibilities under the Charter or this Agreement. 0. Chaner School RecorJs/Projeta rv, The i’inancial. educational and student records pertamnie to th Chartet School are the propei w of the BOARD. and sue: iecerA. are Su’:ject to tie p:eable pruvisians ot state la’. .A l Charter School records shell be ph,sicall )t r0niollv available. unon tCCjtiCS t. the Cho: ‘er S”!’’ Except .s pruhil ‘ited under tire Luarte: aid aplicahle law. thu \O ortzor and pttHic .iaiil. Juci icuSOIaele access to ilie reeorcls of the Charter request. have School. , . Akil CLE IV OBLlGA’IlO’S C,)P ‘f 1-lE HOARl) ooi F’artb 0! lication. 1 he }3O ARI,) Lid estahlEh reasonable Escal arid acodernic policies governing the oneration of the Charter School. The BOAND shall exercise good faith in Jctine ‘loon the raconimendatoirs of EYS in all matters cO\’ercd 1w tlus A reenrent. including but not limited to, LYS s recomm endations concerning addttio us and changes to policies, rules. teItiHJOnS and htidgei B. AssELncutoEYS. The BOARD shah cooperate with EYS in furn ishing all information all forms and reports required in connection with the Charter or this including providing timely notice ..\greement, of all BOARD meetings. Tue HOARD shall timely furnish EYS all infbnination, documents and records necessary for EYS to properly perform its respons:hilities under this Agreemen t. and suhmittin Page 6 of 20 SCHOOL OnCRAIINO AGREEMONI Source: Josh Brock, CFO Purpose: Background Information LJf. .‘-‘‘‘N ‘.‘-i.. Highlights Added by Auditor C. Compliance with Charter and Applicable Laws. The BOARD shall take those steps necessary to ensure that it complies with the Charter. and any laws, ordinances, rules and regulations applicable to the BOARD or its responsibilities with regard to the Charter School as set forth in this Agreement, unless such requirements are or have been waived. If the BOARD is notified by the state, by the Authorizer, or by any other governmental authority that the BOARD or EN’S may be in violation of the Charter or any applicable laws, ordinances, rules and regulations. the BOARD shall timely notify EYS of the claimed violation and shall takes steps to cure in a timely fashion any and all such violations which relate to responsibilities of the BOARD hereunder. D. Unusual Events. The BOARD agrees to timely notify EYS of any anticipated or known: (I) material health or safety issues, (ii) labor, employee or funding problems, or (iii) problems of any other type that could adversely affect EN’S in complying with its responsibilities hereunder. Retained Authorit The BOARD shall retain the authority to, afier prior good faith C. consultation with EYS. make reasonable regulations relative to anything necessary for the proper establishment. maintenance, management and administration of the Charter School as required by state iaw. ARTICLE V FINANCIAL ARRANGEMENTS Charter School Revenues. A. I-Z\ceot as suecihcallv e:cludecl by the terms o1 this Aurecirent. the term “Re\enues’ shall include all lutois received h or on behalt ot the Charter SehoI..incl:dint Lot not limital te: I Funding proviocd b State and local governments to the Charter Selion I for regular- public schorI scucients enrolled iic the Charter School. 2. Special education 1:: cling ncovrded Lv federal a’rd state governments tn the Charter Schoo that is directly allocable to students at the Charter School. 3. Gifted and talented funding, provided by federal and state governments to the. Charter School that is directly allocable to tted ant talented students at the Charter School. 4. At-risk funding provided by federal and state governments to the Charter School that is directly allocable to at-risk students at the Charter School. 5. Funding provided by Federal and state governments to the Charter School that is directly allocable to students in the Charter School with limited English pro fi ci en c. 6. Federal and state funding sources, including without limitation Title 1, National School Lunch Program, Medicaid and other government funded grants or programs, which are directly allocable to the Charter School. Page 7 of 20 ScHooL OPERATING AGREEMENT Source: Josh Stock, CFO Purpose: Background Information Highlights Added by Auditor 7. fees charged to students for extra services, as and to the extent permitted by law. 8. Grants from governments or the private sector for facilities, professional development, school start up or other needs of the Charter School. Revenues shall not include Other Assets/Funds or Operating Advances, as those terms are hereafter defined. Revenues shall be managed and expended by EYS consistent with the annual Budget, as hereafter defined, and this Agreement. 13. Other funds/Assets or Operating Advances Any donated assets, any noncash proceeds of frmndraisers. and grants from private sources that are in-kind or are not cash. Any ftmnds/assets, and/or cash. that are loaned to the school and arc requited to be repaid. C. Budget I. Projected Buduot. hIS shall provide the BOARD with an annual projected Budget (the Budget’). For the Charter Sehool’s first fiscal Year. the Budget shall he submitted prior to the opening of the Charter School. The Budget for each subsequent Fiscal Year shall he submitted to the BOARD prior to September l. The Budget shall be consistent with the Charter, including without limitation the Charter School mission as set forth therein, and this Areement. 2. 3. BudeetDtaiI. lime Budet shall contain reasonable detail as requested by the B’D.\ RJ, lTh: FtciJct ehall in’!nce proiected expenses anal associated V. itk )}rariag the Charm; ehoel and Ui; EYS sj dcidn inciu.iiiig, hut not limited to: BOARD Expenses; the projected cost of services and education programs provided to the Charter School: leasehold and other lease or purchase costs incurred moe the Charter School Facility: maintenance and repairs to the C.Tharter School facil i tv ,nrd capital improvements, except as otherwise aereed upon: persona I salni e end benefits expenses; peymoll processing expenses; SUiCS auc furnishings necessary to operate the Charter School; all taxes of army kind that are assessed or imposed; insurance pmemiums and deductible payments; utilities: transportation expenses; tfiod service expenses: rrofessionel fees; school development and start up exnenses. includino promissory note pavmemmt related to the Development Allocation: ecneral and administrative expenses, including costs of audits in connection with this Agreement: financial service supervision; Indirect Cost Allocation; arid other costs and expenses connected to operating the Charter School. ,gjroyal. The I3udgct shall be prepared by EYS and submitted to the BOARD for approval, which approval shall not he unreasonably withheld or delayed. The Budget shall include all expenditure items identified in this Agreement and such other expenditure items as may hereafter be mutually agreed to by EYS and the BOAR[). The BOARD shall notif’ FYS in writing that it approves or disapproves the annual Budget within thirty (30) days of sub;nission by EYS. IC the BOARD provides written notification to EYS within thirty (30) days that it does not approve the annual Page 8 of 20 ScHooL OPERATING AGREEMENT Source: Josh Brock, CFO Purpose: Background Information Highlights Added by Auditor Budget as submitted, the BOARD shall identi’ specific reasons therefore and continue to deposit the Revenues into the Charter School Operating Account pursuant to fulfill its obligations under this Agreetnent, the Charter and applicable law: provided such operation shall not extend more than one hundred twenty (120) days beyond the BOARD’S written notice that it does not approve the annual budget as submitted, or beyond the last day of the school year which is the subject of the disputed budget, whichever is earlier. The annual Budget may be amended from time to time as deemed necessary by EYS and the BOARD. Each such amendment shall be submitted by EYS and approved by the BOARD pursuant to the procedure set forth in this paragraph. D. Financial Reporting. EYS shall provide the BOARD with: 1. The projected annual Budget as required by the terms of this Agreement. 2. Monthly cash basis statements of all Revenues received, and of all direct expenditures for services and or expenses rendered to or incurred on behalf of the Charter School, whether incurred on-site or off-site, upon request. 3. Such other information as may he reasonably requested by the BOARD to enable its (i) monitoring of EYS’ performance and the efficiency of EYS’ operation of the Charter School. or (ii) furnishing of reports and information which tIte BOARD is required to provide pursuant to its Charter or applicable law, P ry: Uf3 kc accurate financial records prtairung to i[ ration Schooi., ,f the ‘ha tct tocetha: with all Chote SclLcl financi record:; prepared b or in possessIon ot EYS. and shall retain all of the said records for a period of five (5) years from the close of th.. Fiscal Year to which such hooks, accounts, and records reaw, or sari: loncer period as may be cittired 1w av. F’S and the BOARD iial maintain the prc’oer contidonttahtv of persoanel. students. and other reet’Js as reciutred by law. . AnnurdAudit. The BOARD shall select and retain an independent auditor to conduct an F. annual audit of tIre Chatter School in accordance with the Chatter. The annual audit for each Fiscal Year shall be compleie.l no later than December 31 of the iinrnc’diatel succeeding Fiscal Year. Schiect to applicable law, all finance and other records of BYS related to the Charter School will be made available to the BOARI IS independent auditor c.ccourT n IL SchoolO U Ec.pt as I re’naiiei uruidJ all monies ic by the BOARD on behalf of the Charter School shall he immediately deposited in the Charter School Operating account established by the BOARD for the benefit of the Charter School (the Charter School Operating Account”) in a financial institution mutually acceptable to the BOARD and FYS. Interest income earned on the Charter School Operating Account shall accrue to the BOARD. FYS shall have the ability to transfer Monies between all Depository accounts of charter schools under the BOARD corporate structure. Monies on deposit in the Charter School Operating Account shall be applied and allocated within three (3) business days of receipt thereof in the following manner and order of priority: ‘ Page 9 of 20 SCuoon OPERATING AGRErMEN r Source: Josh Brock, CFO Purpose: Background Information Highlights Added by Auditor The BOARD shall pay for such expenses as it may incur from time to time as a result of entering into the Charter and this Agreement (“BOARD Expenses”). BOARD Expenses shall be provided for in the Charter School’s annual Budget and shall not nonnally exceed $10,000.00 per Fiscal Year. As used in this Agreement. the term “Fiscal Year” shall mean the annual period beginning on July 1 and ending on the next succeeding June 30. 2. The balance of all Revenues shall facilitate payment of Operating Expenses as set forth in Article V. Section H below. 3. Other Funds shall be retained by the BOARD in the Charter School Operating Account and expended consistent with the terms of this Agreement. H. Payment of Charter School Oneratin Expenses. The BOARD shall cause the Revenues to he deposited within three (3) business days of receipt thereof into the Charter School Operating Account established for the purpose of paving the Operating Expenses of the Charter School (the “Charter School Operating Account’’) Consistent with the annual Budget and this Agreement As used in this Agreement, the term “Operating Expenses” shall mean the current expenses of operating the Charmi School. includinc. without limitine the generality of the lbreoint Charter School factlity payments; equipment lease payments: payroll processing expenses: personnel salaries and benets expenses: cost of assessment materials: cost of turniture fixtures. eouinment. technalouv. textbooks and nther materials ani sunolics: insurance imis and deductible payments; costs for puhli utility services; transportation expenses: foei ser ice ex:enses: custodial expeases: expenses or mai :itern1:ie: eair cf grounds and 0 hI iL 1JHl pas Lo I I_CS 010111 0 \ IUL I tients including without limitation such promissory nuts payments as may relate to the Development Alloca tioc: inditeet (Zost Allocation: and other items r:Pectecl in the atmual Bodeet including hut not limited to the expenses meet red H’, EYS from time to time hereafter in connection with moving the Chatter Schuol to a new school facihit’ .rtd operating the charter on a dav to clay basis. Monies n the Lharer dehuol (.)perating Aue_’:nt shall be .itsh!rsed to the following I fanner and order or priority: Charter School Facility Payment. EYS or BOARD shall pay the Charter School Facility paYment as it becomes due and payalle If EYS pays the BOARD shall reimburse FYS. 2. Enjment Lease Payments. EYS or BOARD shall pay the equipment, if any. it becomes due and payable. If EYS pays the BOARD shall reimburse EYS. 3. Other Operatinu Expenses. EYS or BOARD shall pay other Operating Expense. Charter School as they become due and payable. If EYS pays the BOARD shall reimburse EYS. Deelopment Allocation as E’’S halrbe entitled ta)ment for th pe-fu m ‘i of (the “Development Allocation”). The Development Allocation Page 10 of 20 SCHOOL OPERATING AGREEMENT Source: Josh Brock, CFO Purpose: Background Information Highlights Added by Auditor shall be equal to Simultaneous herewith, the BOARD shall execute a promissory note in form acceptable to EYS. which promissory note shall set forth the repayment terms of the Development Allocation. .1. Indirect Cost Allocation. EYS shall be entitled to payment, in accordance with the annual Budget and the terms of this Agreement, of an Indirect Cost Allocation for the patloimarce o”its resoonsibiliiies_hereunder Commcino July 1 of the firstyear of operatio& of the t hanLr School and each tO ten percent lO%) of co1 ed pes’i The Indirect Cost Allocation shall be paid monthly in an amount equal to ten percent of collected revenue for the month at the end of each month. On or before July’ 31 of each year. EYS shall provide the BOARD a reconciliation of actual collected Reventtes for the immediately preceding fiscal Year. Any shortfall of Indirect Cost Allocation shall be immediately paid to EYS. Any overpayment of the Indirect Cost Allocation For the immediately preceding Fiscal Year shall be applied first to payment of any outstandine Operating Advances, next to pvc-payment of any promissory notes between the BOARD and EVS. and last to the Indireet Cost Allocation due for the then current fiscal Year. lose licieiit FLinds, ‘Pa the extent that there are not sufficient funds in the Charter School K. Operating Account to pay Operating Expenses in accordance with the annual Budget, subject only to the limitations set forth in Article V, Section L below. EYS shall deposit funds into the Charter School Operating Account for the payment of such budgeted and unpaid Operating Expenses as may then be due and owing (Opei’ating Advances’’). On the first date that funds reside in the Charter School Operatitie Account EYS shall eitomaticallv reimbursed for nov rutsiandinci Operating Advance.s plus interest thereon from the date funds are advanced at a rate CO uns fid balance at’ 00 basis :rints ova’ the Pr mc Rate eomotiaded thly f:itcrcst”) As uscd reiJo, the “P iota :c” ,a’H mean .te of ütCi CSC cpor:cci b Lee V’all Street Journal, Money Rates Section as the ‘‘Prime Rate’’ on the last day of’ the month ininrediate!y preceding the month in which the applicable Operating Advances are made and on the first day cf each Fiscal Year Lu tire Prime Rate eptid on May’ 3 1 of the irumedjatclc niecedine Fiscal Year. Interest shall be calcuiate:l monthly on the basis of’ tire oustandinc batanee as at the last day of the i mmediatc’iv nrecediirg month. Al the req nest of EYS, the HO.\Rl) shall execute a promissory note in a Form acceptable to EYS. Aahabifrtv of Funds. EYS shall only be required to perform its responsibilities in with this Agreement to the extent that there are sufhicient Revenues to provide the ae’reed level of services as provided for in the annual Bredet. In the event Revenues are insufticient to provide the agieecl level of’ services and subject to the termination rights provided in Article VII of this Agreement, EYS shall propose an amended annual Budget pursuant to the procedures set Forth in Article V, Section C. Nothing in this Section shall be construed to absolve EYS of itS responsibility to fund Operating Advances pursuant to Article V Section K of this Agreement. L. accordance M. Other Public Schools. The BOARD acknowledges that EYS may enter into similar operating agreements with other public school or public charter school entities. EYS shall maintain separate accounts for expenses incurred by and on behalf of the Charter School and Page 11 0120 SCHOOL OPERATING AGREEMENT Source: Josh Stock, CFO Purpose: Background Information Highlights Added by Auditor other schools operated by FYS. EYS shall only charge the Charter School for expenses incurred by or on behalf of the Charter School. ARTICLE VI PERSONNEL & TRAINING Personnel Responsibility. EYS shall select and hire a qualified principal or school leader A. and other personnel to perform services at the Charter School. Personnel shall be employees of EYS or the BOARD based on the preference of EYS and the employee. All costs for the principal or school leader position incurred hr EYS will be reimbursed b’ the BOARD, unless otherwise agreed upon by the BOARD and EYS. Notwithstanding anything to the contrary herein, the BOARD shall have the tight to approve each principal hired by BYS, which approval shall not be unreasonably withheld or delayed. Any rejection of any principal must be for good cause, must be in writing, and shall enumerate specific reasons for the rejection. Failure of the BOARD to approve or reject the designee within ten (10) days of notice shall be deemed an acceptance of the designee h the BOARD. The BOARL) and BYS shall be responsible for all compensation for their respective employees. 1 he BOARD shall have the right, exercisable on a reasonable basis. in accordance with all applicable Laws, and only upon a majority vote of said BOARD, to require that FYS remove or, at EYS’s option, transfer any employee workina at the Charter School. which removal or transfer shall he effective at the end of ten (10) business days, unless othei\vise agreed to by FYS and the BOARD. LYS shall have the responsibility and authority to determine staftug levels, end to select, evaluate, assign, discipline. transfer and terminate peronnel consstenc with applicanle State and federal law, the Charter and this Aurcecnent. f). ‘.:1ie:L _t .,e a i.iilp_o aaii ti1: Co. icr aoooi. the roviev. and approval of the BIi.’\Rl) as set frth in Article VI, Section A. above EYS ‘lll detcrtuin the number of teaehors and the coplicable grade levels and scthects required for the operation of the Charter School as set tirth n this Ac!reetncut. BYS shall provtdc the Chat tot School v. tth och teachers. qualihal in tii: ipm uTit1tC grade levels and suheci areas, as ate required to operate the Charta Sc: al. heaitei; tn:ty h ciuntoved by EYS or the BOA El) at the discretion of FYS and the employee. All costs for teaching personnel incurred hr EYS will be reimbursed hr the ROAR1). unless otherwise aereed upon hr the I3OARD and BYS. lhe ctinicu1um might by such teachers shall he consistent with the Educational Program apgroved by the BOARD. Such teachers may, at the clLrretiort of FYS, work at the Charter School on a full or pci t—time basis. If assigned to the Charter School on a part time basis. such teachers may also vorL at other schools managed or opatntccl by LYS, ur another public or private school. Each teacher assigned to the Charter ached shall hold a valid teaching cot ti ficate issued by the state hoard of education or be worting. toward such certification, as permitted by state law. Teachers that are not certified must be approved for alternative certification by the atitliorizer. . C. Other Staff. EYS shall determine the number and the functions of other non-instructional staff required for the operation of the Charter School as set forth in this Agreement. EYS shall provide the Charter School with qualified staff to effectively nperate the Charter School in accordance with this Agreement. Non-Instructional staff may be employed by EYS or the BOARD at the discretion of EYS and the employee. All costs for non-instructional personnel Page 12 of 20 Scnoot OpERATta:o AGRtTMENT Source: Josh Brock, CFO Purpose: Background Information Highlights Added by Auditor incurred by EYS will be reimbursed BOARD and EYS. Non-instructional School on a full or part-time basis. teachers and other staff members may or another public or private school. by the BOARD, unless otherwise agreed upon by the staff may, at the discretion of EYS, work at the Charter If assigned to the Charter School on a part time basis. also work at other schools managed or operated by EYS. D. Professional Development. EYS shall provide education in its methods, curriculum. program. and technology to all teaching and administrative personnel. Non-instructional personnel shall receive such professional development as EYS determines reasonable and necessary’ under the circumstances. E. Limitations on Discretion. All decisions made by EYS. and any discretion eietcised by EYS. in its decisions regarding staffing levels and its selection, evaluation, assignment. discipline, and transfer of persomiel, shall be consistent with state and federal law, and consistent ith the parameters adopted and included within the Charter and this Agreement. ARTICLE V]l TERMINATION OF AGREEMENT A. Termination. L S in e it its opuon terminate this \gtccment pun; to tue end of toe term specitied in Article II in the event the BOARD fails to remedv a Material Event within thirty (30) clays after written notice from EY.S. As used in this lateral Pveiu” neluoes, hut is not limited ii: (i. LYS’ failure to a. a Has iCe1V O raJa. ihe cu,iidCieJ lur revenues. LUi .5iHtiuii. cimbursement as required 1w the terms of this Agreement; or (ii) the BOARD’S f’ailure to adent LYS ;eascnnhie recommendations with resuect to Charter School policies. ; ties and ; caulatinis. which failure has a material adverse effect on EYS’ ni ii ii t In r Lr chioI fiLsirn as et for, n the fl Id 0; tti S .\uieetricnt (ii) III the event the ROAPJ) makes decisions regarding the personnel, Educational Program or Charter School Facility substantially inconsistent with the reasonable recommendations of FYS: or (iv) in the event the number tjf enrolled students suddenly falls below seventy-five percent (75%) ut student capac’it (‘ci the Cha ter School for reasons beyond the control of E.YS and the nurtiber of enrolled students remains below that level hr thirty (30) fovs and results in the inability of the Charter School to remain open; or (v) in the event that durine any Fiscal Year. there is a reduction of more than ten percent (1 0%) in the available comhined federal and state funding for the Charter School on a per pupil basis in comparison to the funding that was available in the prior Fiscal Year: or (vi) fraudulent misrepresentation or other willful misconduct by the BOARD that has a material adverse effect on the Charter School: or (vii) the insolvency or bankruptcy of the Charter School; (viii) the loss or scispension of the Charter; or (ix) the enactment. repeal, promulgation or withdrawal of the state charter law such that this Agreement or the operation of the Charter School in conformity with this Agreement or the BOARD’s Charter violates the law; or (x) Page 13 of 20 SCHOOL OPHRATING AGREEuEN1 Source: Josh Brock, CFO Purpose: Background Information Highlights Added by Auditor in the event of any material amendment or modification to the Charter: or (xi) in the event the parties are unable to locate a suitable Charter School Facility adequate for the Educational Program and in full compliance with all applicable building and safety codes; or (Xii) in the event that use of the Charter School Facility becomes impractical by reason of fire. flood or other act of God. 2. B. By the BOARD. The BOARD may terminate this Agreement prior to the end to the term specified in Article II in the event that EYS shall fail to take reasonable steps to remedy a Material Event within thirty (30) days after written notice from the BOARD. As used in this Section, a “Material Event” includes, but is not limited to: (1) failure of EYS to provide services in accordance with the terms of this Agreement; or (ii) failure of EYS to follow policies. procedures, rules, or regulations duly adopted by the BOARD that are not in violation of federal or state laws, the Charter. or this Agreement; or iii) fraudulent misrepresentation or other willful misconduct by EYS that has a material adverse effect on the Charter School; or (iv) the insolvency or bankruptcy of EYS; or (v) the loss or susoension of the Charter; or (vi) the enactment, repeal, promulgation or withdrawal of the state charter law such that this Agreement or the opet ation of the Charter School in conlbrrnitv with this Agreement or the BOARD’s Charter violates the law. Terminatioa’Exoiration. E.ftbcdve Date of Termination En the event this \reenwnt is terrninrtted by either party prior to the end of the term spcctfied in Article 11. absent LXadotLw\ ehecinstances, includitir:, ‘a ithuüt limliution the tiiudulent titeprLscntaLiat1 UI willful misconduct Ut either purt, Uk tLrtttiidtluti will not become effective Lintil the end of the academic ear durin which the notice of termination is delivered. 2. Pers eaIPooc;tv. I Ipon termination or expiration of this Apt eemen, LYS shall have the right to: (i) remove e.lcnpntcnt and nlicr assets owned nr leased be EYS; or (ii) require that the BOARD reimburse LYS for any equipment purchased by py with EYS ftincls and used for purposes, of the Charter School pt.irstiant to Article III Section D: or (iii) require that the BOARD remit to EYS such amounts as mae remain outsiandine under any equipment lease entered into pursuant to Article Ill Seetion D. including without li:aitation arm amotrnts due to exercise any optIon to purchase under any stich lease and complete transfer of title 10 the Charter School. Equipment and othe.r assets owned by the Chatter School shall remain the property of the Charter School. 3. Jntellectual Properv. Upon termination or expiration of this Agreement for any reason. each party shall, within fifteen (15) days of the effective date of such termination, return, or at the request of the other party destroy, all curriculums, educational materials, and other intellectual property belonging to such other patty. Page 14 of 20 Scuooi. OPERaTING AGREEMEN Source: Josh Brock, CFO Purpose: Background lntorrnation r Highlights Added by Auditor 4. Payment. Upon termination or expiration of this Agreement for any reason, the BOARD shall Immediatel) remit to BYS all outstanding Indirect CosA1locatiön with accrued Interest earned thereon and shall reimburse BYS for any other Operating Expenses incurred by EYS on behalf of the Charter School. All such amounts due upon termination shall be payable solely from assets of the Charter School, including without limitation Revenues, Other Funds and such other assets as may be acquired by or on behalf of the Charter School with Charter School Revenues or Other Funds; provided, however, that if the BOARD receives any grant monies or other designated funds which are governed by a use agreement that prohibits the use of such funds to make payment to EYS pursuant to this subsection (the “Restricted Funds”), the BOARD shall not be required to include the Restricted Funds in such payment to FYS. C. Transition. In the event of termination of this Aureernent for any reason by either party prier to the end of the Agreements term. EYS will, in exchange for the compensation terms included in this agreement, provide the BOARD reasonable assistance for up to ninety (90) days to assist in the transition to another administrative or structural arrangement; provided, however. that EYS shall not he required to provide any assistance to another management company or service provider. A[.TICI.E VIII lNDF.’i!iFiCAT[O Each rartv here to shall mdnnmi th hold harm eas the other pr tv. its offleis. ioyees, 3geiits and cc suitaat ibm and aganist aiv acid all actiua, ciacias. uis, liabilities, pmc:edins. penalties. fines, costs. and expenses (including reasonable attonievs lees at both the Icc and anpeliatc levels. Inc hiding paralenni execases) relatin directly or itiiircctiv to any h:caah of tins Agreement or ot the Charte: or an violation of the stem Charter la on any other iL’L o s c ii h 1niemnco, n i t $ a a crc] cicn1Icarits servants or subcontractors, as aplicahle. Such indeni :ci:icaticrn may be achieved by the purchase of ceneal liabihtv and properly insurance ohcics, or by such other means as the parties fl\ mutual iv agree. Page 15 of 20 Sci root. OPEItATING Source: Josh Brock, CFO Purpose: Background Information AGREEMENJT Highlights Added by Auditor ARTICLE IX INSURANCE A. Insut-ance Coverae. EYS shall obtain and on behalf of the BOARD maintain such policies of insurance as may be required by the Charter or applicable law. To the extent allowed by law, the costs of such insurance to the BOARD shall be incltided in the Charter School Budget, to be prepared by EYS and approved by the BOARD. EYS shall provide proof of such insurance to the BOARD at the BOARD’s request. Any cost incurred be EYS to obtain this insurance shall be reimbursed by the BOARD. The BOARD and EYS shall he listed as named insureds on such policies. To the extent reasonably practicable the parties shalt cooperate with each other in providing such information and complying with such reporting requirements as may be required by any applicable insurer(s) Workers’ Compensation Insurance. Each pal-tv shall maintain workers’ compensation B. insurance as required by law. covering their lespective employees. Costs incurred be EYS for workers compensation insurance for employees allocated to the chatier school shall he reimbursed aceordine to the percentage of the employee that is allocated to the charter school. ARTICLE X WARRANTIES AND REPRESENTATIONS BIdARD\Varrantics___jgp A. • The BOARD represents that it has the authority under law to execute, deliver and nerfonu this Aereement and to incur the ohlieat:ons txovided for under thts Atrreemant. The BOARD arrants that its actions have been dudv and vai i :11’, authot ized and that it ‘.v I! an’, and all resolutions or e>:penditt:i a approvals recj tired for excutioti of tiltS Ai ecnteat. ViSV\a B NS aIraIt and e that L es i’uU crrnamatioit in good standing a:ti is authorized to ccnch tot husiness in the State cf ()klahoma. LYS iH cnmnlv a. i Hi alt regisuettion an:l ltCCnSiliJ requiretnents relating to contiucting uhess I U IL tteet1ian I h. V) \.D ci rR.S tO aist Iti nnt in 01 inn liLer. s n permits and in obtaining such aprovals and consents. ‘. C. Mutual Warranties. ihe Dt)Ali U and LYS mutual lv warrant to the other that there ate i nut actions. claims, suits or rroceedincs. to its knowledne. threatene:l or reasonably anticiuntod acainsu or affecting it which if atE ersel determined, would have a material acE ;rse eliect on its ability to perfona unuer this Agreement. Page 16 of 20 Sct tooL OPERATIxG AGREEMENT Source: Josh Brock, CEO Purpose: Background Information Highlights Added by Auditor ARTICLE XI MISCELLANEOUS A. Entire Agreement. This Agreement represents the entire understanding and agreement between the parties with respect to the subject matter hereof. and supersedes all other negotiations, understandings, and representations (if any) made by and between such parties. Force Majeure. Notwithstanding any other sections of this Agreement, neither party shall B. be liable for any delay in performance or inability to perform due to acts of God or due to war, riot, embargo. fire, explosion, sabotage, flood, accident, labor strike, or other acts beyond its reasonable control; provided either party may terminate this Agreement in accordance with the termination provisions contained in this Agreement if sufficient grounds exist as provided in the Article governing termination. C. Resolution of Dispute. The parties agree that each will make every good faith effort to resolve an and alt disputes under this Agreement amicably before taking any action under Article X Section 1) below. F). State Governintt Law/Raiver of turv Trial. The rielts of all parties hereto shall he subject to the jurisdictinn of and he construed according to the laws of the State of Oklahoma. EYS and the BOARD hereb waive the right to a urv trial in any action. proceedine or COUfltC ‘Ini in brotieht by either ENS or Ike Hf)AR D aaint the othat. dtdeia i.. a. -dl a.aiaes a:J utlau uoi:nunleatiuns :euuiieU b\ thu tei:i ot this F. .-\greui itent shall be :: a in tie and sent to ti a parties hereto at the racsinn Ic a inbur or address set forth belo Notice may ha aiven by fi) facsimile ‘a ith written evidence of confirm-an receipt ry l a rece’ inc ;o LlS’Lr ot the CII lt o CL ii) tic I or mail t O Os. )OlcI r eceipt reruested. or (hi) pat sona! dali arv. Notice shall he deemed to have an gNen on the date of trari1mittal or personal delivery if :miven by facsimbc Cr personal dIck vLr. orct:n the dew o postmark tf seat by certified ot remzisteicd matl Notices to tli dO.\RD shall be sent to the cm refit addiess of the then current BOARD President. with a copy to Ida than current BOAR D attorney, Thu address of the parties herett: fhr the purposes aforesaid. nclustve of the address of the current RC)AR[) President, and BOARD attorney. are as follows: ‘ The BOARD: Artn: Mr. Douglass Scott. Lsq Chairman 1117 NW I 00 Street. Suite A Oklahoma Cirt, OK 73120 Telephone: 405-749-4550 Facsimile: 405-749-4540 ., Page 17 of 20 Scunoc OPERATING AGREEMENT Source: Josh Stock, CEO Purpose: Background Information Highlights Added by Auditor with a copy to: Betsy Brown, Secretarv/T;easurer 411 7 NW I 22T Street, Suite A Oklahoma City, OK 73120 Telephone: 405-749-4550 facsimile: 405-749-4540 EYS Schools Inc. Attn: ‘vVilliarn H. Hickman. Esq. II 4 East Main Street Norman, OK 73069 Felephone: 405-605-2375 Facsimile: 405-605-2374 F. Assienment. No party shall assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not he unreasonably withheld or delayed. EYS. however, may assign this ARreernent to an entity wholly owned or controlled by LYS. Amendment. Ibis Agreement shall not be altered, amended. modified or supplemented 0. except by memorandum approved by the BOARD and signed by both the BOARD President and an authorized officer of FYS. Waiver. No waiver 01 any prevision of this Agreement shli be deemed or shall 11, cnsotule a v. aiver o any i’thor orvisinn. Nor shal such waiver coatititr a rciati n.ning wai ve unlesc otherwise exnress!v stated. 1. Co: artu Lxunses. U any oartv cu;nriierice an action aeainst aaother OeIIIY as a [05th t UI breach ar alleced breach of this Agreement. the prevailing party shall he entitled to have and re:c;ver 10 the losine. ati i easonable attorneys’ fees arid costs of suit. a l)clceation of Atirho: :.