Memorandum on “Full Funding” and “Source and Use” Statements-OCFC

Confidential Not to be Distributed

April 30, 2007
Page 1 of 3

The purpose of the following memorandum is to respond to questions raised by the OCFC
staff related to information submitted to the OCFC.

A. Background Info as of Last Appropriation in 2005-Pre current Appropriation

submission:
General—The Freedom Center has historically received dollars from the State of Ohio for
its governmental participation in capital expenditures related to the Museum Facility.
Specifically, such funding has been primarily for exhibit expenditures as well as certain
furniture & equipment and art. The initial belief was that the $15.850 million in anticipated
State of Ohio funding would occur prior to the Freedom Center’s opening in the second half
of 2004.

However, it was necessary for the State of Ohio to defer appropriations under the capital
budget beyond 2004 and in the case of the Freedom Center such amount deferred (not
appropriated) was $2,850,000 as of December 31, 2004. The $2,850,000 was after giving
consideration to $4,150,000 received in 2005 that brought total appropriations over the years
to $13.0 million and resulting in $2,850,000 of future anticipated funding.

In late 2006 the State appropriated $2,000,000 of the anticipated $2,850,000. The Freedom
Center anticipates the final $850,000 to be appropriated in 2008.

Source and Use Statement--Attached is a “Source and Use” statement submitted in 2005
prior to the release of the $4,150,000 that summarizes the status of Source & Use of funds
that now extends beyond the capital construction period into the operation period of FC.

This schedule (a) included all dollar expenditures (capital expenditures plus “all operating
expenses”) during the Freedom Center’s start up period from 1995 to its opening in the
second half of 2004, and (b) the net cash operating loss from opening to the end of the year
that was estimated to be approximately $1,200,000.

It was management’s belief that although the appropriations were for “capital items” a fair
presentation of the status of achieving “full funding” (raising dollars to pay for all cash
expenditures whether capital or operating) required the inclusion of the estimated net
operating loss in 2004 and accordingly included such in both the “Source and Use” Statement
and the status of “Full Funding” Statement.

Full Funding Schedule--The Freedom Center has submitted a “Full Funding” schedule to
the OCFC at the time of each appropriation as part of the process to have the dollars
appropriated released to the Freedom Center. Attached to this memorandum is the “full
funding” document sent in early 2005 as part of a total package of information to allow for
the release of the $4,150,000 noted above in 2005.
Memorandum on “Full Funding” and “Source and Use” Statements-OCFC
Confidential Not to be Distributed
April 30, 2007
Page 2 of 3

Summary of Full Funding Status as of April 2005 Submission--As can be seen from the
attached 2005 “Full Funding” schedule the “to go” full funding requirement was $7.8 million
not the $6.6 million referred to in our discussions last week. The $7.8 million includes (a) the
$6.6 million in Governmental and other private initiatives noted on the schedule and (b) the
$1.2 million requirement related to the estimated 2004 post opening operational loss.

It is important to note that the “full funding” requirement of $7.8 million was fulfilled with
the “minimal earnings on self imposed endowment”, as previously defined with the OCFC.
This “minimal earnings” was consistently derived similar to previous submissions and
amounted to $9.729 million or $1.9 million in excess of the $7.8 million full funding “to go”.

B. 2007 Info on “Full Funding” and “Source and Use” Statement for 2006 State of Ohio
Appropriation and Request for Release of Funds.

Summary of Current Submission of Information-“Source and Use” and “Full Funding”

Attached are both statements, previously submitted, that updated the statements sent in early
2005 (discussed above) that include an additional cash operating loss of approximately $4.3
million, which when aggregated with the $1.2 million reported in early 2005 results in a $5.5
million deficit through December 31, 2005. This deficit is partially offset by an approximate
$2.4 million operating surplus for the year ending December 31, 2006.

The net change since the last reporting in early 2005 of $1.9 million ($4.3 million deficit less
$2.4 million surplus) was included on the “Source and Use” and “Full Funding” statements
increasing the aggregate Source and Uses from $115.9 previously reported as of December
31, 2004 to $117.8 million as of December 31, 2006.

The full funding schedule is also updated to include the State of Ohio appropriation for $2.0
million. The inclusion of the $2.0 million and the $1.9 million, noted above, result in a
relatively minor net change in “full funding” status of $100,000. The “to go” funding
decreases from $7.8 million as reported in early 2005 to $7.7 million in the current statement.

Similar to past reports management has included on the Full Funding Schedule two items that
meet the definition of meeting “full funding” namely (a) the “minimal earnings on the self
imposed endowment which is $9.0 million compared to the previous submission of $9.8
million and (b) certain verbal commitments of $800,000 related to the Bridge to the Future
Campaign as of December 31, 2006. As noted on the “Full Funding” schedule these
aggregate items of $9.8 million exceed the “to go” requirement of $7.7 million by $2.1
million compared to the $1.9 million at the time of our last report.
Memorandum on “Full Funding” and “Source and Use” Statements-OCFC
Confidential Not to be Distributed
April 30, 2007
Page 3 of 3

Not included on the most recent “full funding” schedule but included with the 5 year pro
forma information supplied to the OCFC staff is the budgeted/projected operating surplus for
the next two years. These are the last two years of a three year plan (2006-2008) to eliminate
a substantial portion of the deficits that occurred in late 2004 and 2005. Currently, the
Freedom Center is budgeting for a $1.1 million surplus in 2007 (important to note that a
surplus of at least $800,000 is required to meet aggregate 2006/2007 bank covenant related to
operating surplus) and is estimating an additional $800,000 surplus in 2008.

The two year aggregate surpluses (2007 and 2008) of $1.9 million will effectively eliminate
most of the deficits noted above and when coupled with the expected State of Ohio capital
appropriation in 2008 of $850,000 will reduce the current $7.7 million “to go” funding
requirement to $5.0 million at the end of 2008.

Said another way, the Freedom Center has exceeded the “Full Funding” requirement by $2.1
million as of this submission and if successful over the next two years it will have increased
the excess over full funding requirement to $4.0 million plus.