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HomeMy WebLinkAboutItem 02 Blue McKenzie Construction Loan AuthorizationAGENDA ITEM SUMMARY Meeting Date: 11/14/2022 Meeting Type: Regular Meeting Department: CMO Staff Contact: Nathan BeILFIN Niel Laudati/CMO S P R I N G F I E LD ECONOMIC Staff Phone No: 541-726-3700 DEVELOPMENT AGENCY Estimated Time: 30 Minutes ITEM TITLE: BLUE MCKENZIE CONSTRUCTION LOAN AUTHORIZATION ACTION Authorize/Not Authorize the City Manager to negotiate and execute Construction REQUESTED: Loan Documents between the Springfield Economic Development Agency and Blue McKenzie Apartments, LLC specific to completing the Downtown Blue McKenzie mixed-use development and with substantially the same terms and conditions as provided in the Loan Documents attached to this agenda item. ISSUE In March 2021, the Springfield Economic Development Agency (SEDA) Board STATEMENT: authorized SEDA to enter a memorandum of understanding (MOU) with Blue McKenzie Apartments, LLC (Blue McKenzie). The MOU outlined intent by SEDA to participate in a new Downtown, mixed-use, market -rate project referred to as the "Blue McKenzie." This participation was structured as two loans; $2,000,000 for predevelopment activities and land acquisition and $10,000,000 to repay the predevelopment loan and fund a substantive portion of construction lending. The initial predevelopment loan and tasks are now 88% complete and the developer is requesting to move forward with construction, including construction lending with SEDA. This memo outlines the $10,000,000 SEDA construction loan proposed terms. ATTACHMENTS: Attachment 1 — Blue McKenzie Briefing Memo Attachment 2 — Blue McKenzie Project Progression Timeline Attachment 3 — Executed SEDA/Blue McKenzie Memorandum of Understanding Attachment 4 — Draft Construction Loan Agreement Attachment 5 — Draft Promissory Note Attachment 6 — Draft Deed of Trust Attachment 7 — Draft Assignment of Plans DISCUSSION/ SEDA has maintained progress over the past three years) on development of the FINANCIAL downtown Blue McKenzie project which includes an 8 -story, mixed-use, market - IMPACT: rate residential, mass timber building for construction in 2023. Details of this effort and project goals are discussed in the briefing memo included as Attachment 1 and illustrated in Attachment 2. Ongoing Board review and direction has resulted in a signed memorandum of understanding (ATT 3) outlining SEDA lending of $10 million to Blue McKenzie LLC, to be disbursed in two separate loans: (a) the May 2021 funded $2,000,000 loan for property acquisition and predevelopment costs. This loan is on track and expended at 88% with tasks completed to 88%, and (b) a subsequent (unfunded) $10,000,000 loan to repay the $2,000,000 predevelopment loan and fund $8,000,000 in construction costs. Draft construction loan documents are discussed in Attachment 1 and included as Attachments 4 through 7. These drafted loan terms are reflective of SEDA goals for the project while being responsive to the fluctuating market dynamics, project costs, and the lending environment. The SEDA Board is asked at this time to authorize the City Manager to negotiate and execute the Construction Loan Documents with substantially the same terms and conditions as provided in the attachments included to this agenda item. MEMORANDUM Springfield Economic Development Agency Date: 11/14/2022 To: Nancy Newton BOARD From: Nathan Bell, Finance BRIEFING Courtney Griesel, Advisor Subject: Blue McKenzie Project Proforma and MEMORANDUM Construction Loan Terms ISSUE: In March 2021, the Springfield Economic Development Agency (SEDA) Board authorized SEDA to enter a memorandum of understanding (MOU) with Blue McKenzie Apartments, LLC (Blue McKenzie). The MOU outlined intent by SEDA to participate in a new Downtown, mixed-use, market -rate project referred to as the "Blue McKenzie." This participation was structured as two loans; $2,000,000 for predevelopment activities and land acquisition and $10,000,000 to repay the predevelopment loan and fund a substantive portion of construction lending. The initial predevelopment loan and tasks are now 88% complete and the developer is requesting to move forward with construction, including construction lending with SEDA. This memo details project specific proforma information provided by the developer in application for the construction loan, including project performance forecasts. This memo also discusses the $10,000,000 SEDA construction loan proposed terms. BACKGROUND: In March of 2021, following over a year of project discussions (Attachment 2), SEDA authorized staff to draft and execute an MOU (Attachment 3) between SEDA and Blue McKenzie. The signed MOU outlines terms of a $1OM loan to fund predevelopment, land acquisition, and a portion of construction costs to develop a downtown, market -rate, mixed-use building. The lending, which utilizes existing tax increment financing (TIF) dollars of the Downtown urban renewal area, supports construction of an 8 -story, mass timber, mixed-use building to be development by Blue McKenzie Apartments, LLC. The building will include ground floor commercial and 84 residential units above. Key project goals have remained consistent from project inception through design and include goals to: 1. Create of a Proof of Concept to Communicate Viability and Profitability of a New Construction Type/Height in Springfield 2. Provide a Market Rate, High Density, Housing Project to Serve as a Comparable to Financial Institutions Approving Similar Future Projects 3. Create a Dense Development in Downtown which Spurs Subsequent Private, Taxable, Development and Increases Market Rate Housing Stock {00026333:1} ATTACHMENT 1, PAGE 1 OF 5 SEDA LOAN INVOLVEMENT AND STATUS TO DATE In April of 2021, the Board authorized staff to execute a loan for the initial $2M of an eventual full $ 1 0 loan. Based on this authorization, the TIF loan is now structed in two parts, with only part (a) funded to date; (a) the April 2021 funded $2,000,000 loan for property acquisition and predevelopment costs. This loan is on track and expended at 88% with tasks completed to 88%, and (b) a subsequent (unfunded) $10,000,000 loan to repay the $2,000,000 predevelopment loan and fund $8,000,000 in construction costs. Terms are outlined later in this memo for Board discussion. lU /:1:11114 a 90111121111111)efy11►1 Q 9.11131 000 8 9 3:17 aCIJ ;7u /5.3efe N Project hard cost estimates in April 2021 were $22M. By early 2022, those hard cost estimates had risen to $25M - $30M with a wider margin of uncertainty in both cost fluctuations and future local market capacity. These increased hard costs are anticipated to bring the total project cost to around $36,000,000. Final construction estimates are anticipated near the time of senior lending negotiations. This unique and volatile global market activity is illustrated below, overlapped with key project milestones. uwaoo Winter 2019 4 Redevelopment Diiscussionsk 12saoo 1.a0a00 750.00- 50000 2%00 2018 2019 - March 2020 SEDA Authorizes Initial $8Sk Financial Assista nce to Scherers April 2021 - SEDA Authorizes Initial $2M Loan J u ne 2022 - - Oct 2022 Board Support 250.00x to Delay Project 12m,om 2021 ■ 2022 _r'00% FIGURE 1 - PROJECT TIMELINE OVERLAPPED WITH LUMBER SPOT PRICE INDEX; MI INDICATOR (OCT 31, 2022) Due to market instability and lack of predictable data to estimate project performance and costs, the SEDA Board determined in June of 2022 to support delay of construction bidding until Winter of 2022/2023. This delay included a shift of construction lending to Winter of 2022/23 and ground breaking to Spring of 2023. During the delay window, pre -development design was completed and market information was collected to assist in understanding the post covid local market. {00026333:1} ATTACHMENT 1, PAGE 2 OF 5 Market trends conclude: • Rents in Springfield have increased by 21% compared to 15% in Eugene. • Growth in unit demand in Springfield has been most robust in 1 -bedroom units. • On a per -square -foot basis, rent levels in Eugene are about 12% higher than Springfield. • Both Eugene and Springfield reflect a relatively low vacancy rate of 2%. Total vacancy below 5% is indicative of a healthy market that will drive future rent growth. PROPOSED CONSTRUCTION LOAN STRUCTURE The Blue McKenzie project remains mostly consistent with core loan structure terms as agreed to by the SEDA Board in both the original MOU and the predevelopment loan. One variation to this is the Board discussed (June 2022) and market- $361VITOTAL driven, six-month project delay. This PROJECT COST (HARD& SOFToFr ] delay moved construction initiation into Winter 2022/23 as a mechanism $27.2M TOTAL to respond to market volatility, but PROTECT COST ��� jHARD&SOFT] maintained the overall intent and SEDA Loan structure of the MOU terms. In $10nn keeping with the agreed sequence and strategy as generally outlined within the MOU, the next consideration to support construction is to initiate the second phase of lending, the $10,000,000 SEDA construction loan. This lending would be one portion of the overall project financing. The project's financial structure, often referred to as a financial stack, remains consistent with information presented to the Board in early 2021, combining a mix of public (SEDA) lending, senior debt (traditional bank lending), and private equity from Blue McKenzie Apartments, LLC members. The primary shift from FIGURE 2 — LOAN STRUCTURE COMPARISON; 2021 TO CURRENT early 2021 to now is the increase in senior debt required, growing from $18M to over $25M. This is reflective of the global inflation of materials and labor costs.. {00026333:1} ATTACHMENT 1, PAGE 3 OF 5 E SEDA SDC __________ C Private Equity — $1Mr SEDASDC IL IL Private Equity $1M members. The primary shift from FIGURE 2 — LOAN STRUCTURE COMPARISON; 2021 TO CURRENT early 2021 to now is the increase in senior debt required, growing from $18M to over $25M. This is reflective of the global inflation of materials and labor costs.. {00026333:1} ATTACHMENT 1, PAGE 3 OF 5 PROPOSED CONSTRUCTION LOAN TERMS Based on the updated Spring 2023 construction window, construction lending is a next step. SEDA will be required to first execute its own TIF borrowing, using current increment generated by the district. Based on the interest rate set by SEDA's lender, terms will be further refined between SEDA and Blue McKenzie. Terms of a SEDA loan with Blue McKenzie are outlined for the SEDA Board's consideration with loan documents included as Attachments 4 through 7 (loan agreement, promissory note, deed of trust, and assignment of plans). These terms are based on the current MOU between SEDA and the Blue McKenzie Apartments, LLC., and reflect the outlined financial stack. Terms have been renegotiated or refined from assumptions under the original MOU as a mechanism to consider and adjust to the current market conditions and significantly higher project costs. Many of the terms are also tied directly to yet -to -be agreed upon senior lender requirements. Direct ties to these terms are crucial in coordinating SEDA funds with senior lending funds and requirements. Term conditions for discussions include: Borrower Blue McKenzie Apartments, LLC Property Location Site located east of 7th Street and north of A Street in Springfield, Map Number 17-03-35-42, Tax lot 2300. Loan Amount $2,000,000 for repayment of SEDA predevelopment loan and $8,000,000 for project construction costs; not to exceed $10,000,000 total. Interest Rate SEDA's borrowing rate plus 0.5%. Adjusted interest rate should SEDA refinance to a lower rate. Construction Period To mirror same term/deadline imposed by senior lender. Repayment Term Entire loan due and payable at 15 years (may agree to longer if senior lender due date is further out, to reflect repayment after senior lender). No prepayment penalties. Loan Security Deed of trust secured against title to the property, and an Assignment to SEDA of predevelopment and development work product. Loan Priority Loan principle will be in third position, subordinate to both primary lender and $1,000,000 in Blue McKenzie Apartments, LLC equity contribution plus 4% return on the equity. Disbursement To mirror same disbursement schedule as imposed by senior lender. Project Total Budget To mirror same budget as acknowledged by senior lender. Construction Timeline To mirror same terms/timeline imposed by senior lender. Hold Back All SEDA funds to be disbursed prior to the securing of permanent financing by Blue McKenzie Apartments, LLC. Blue McKenzie Apartments, LLC equity investment must be spent at same time, or proportionately with, SEDA loan funds. {00026333:11 ATTACHMENT 1, PAGE 4 OF 5 Winter March October November December January March April June November Summer 2019 2019 2020 1 July 2020 2020 2020 2020 2021 2021 2021 2 > 2022 Springfield Buick Business Prepares to Close. Scherer's Contact City to Discuss the Site's Future SEDA Provides $85k Financial Assistance to Owner for Massing, Feasibility & ESA Work w/ Developer NWSP NWSP Presents Findings & Concept to SEDA. The Board Directs Staff to Work w/ the Owner to Outline a Partnership Board Hears Independent Advisor Findings & Directs Staff to Develop Financing Strategies to Assist Development SEDA Authorizes Signing of an MOU Outlining a SEDA Loan as Partnership Means to the Development LLC SEDA Supports Delaying Initiating Construction Lending Due to Market Volatility & Agrees to Pursue Winter 2022 Further Springfield Buick An Update is Consideration of Staff Request Closes. Scherer's Provided to SEDA SEDA Board Property SEDA Authorizes Board & City Meet w/ Reflecting Massing Considers Property Acquisition is Loan Terms and Authorization to Developer NWSP Outcomes: 8 Story, Acquisition as Part Discussed by the Disbursement of Finalize to Discuss Mixed -Use of a Development Board &Ultimately Loan Funds for Construction Loan Redeveloping Building on South Partnership Determined Not D Pre -Development Negotiations and Mid -Block Lot Necessary Lending Springfield Buick Business Prepares to Close. Scherer's Contact City to Discuss the Site's Future SEDA Provides $85k Financial Assistance to Owner for Massing, Feasibility & ESA Work w/ Developer NWSP NWSP Presents Findings & Concept to SEDA. The Board Directs Staff to Work w/ the Owner to Outline a Partnership Board Hears Independent Advisor Findings & Directs Staff to Develop Financing Strategies to Assist Development SEDA Authorizes Signing of an MOU Outlining a SEDA Loan as Partnership Means to the Development LLC SEDA Supports Delaying Initiating Construction Lending Due to Market Volatility & Agrees to Pursue Winter 2022 r MEMORANDUM OF UNDERSTANDING Dated; April i✓ , 2021 Parties: Springfield Economic Development Agency, the urban renewal agency of the City of Springfield, Oregon E'L 9 Blue McKenzie, LLC an Oregon limited liability company BACKGROUND (the "Effective Date") ("SEDA") ("Owner") A. Owner is a newly formed single asset entity formed for the purpose of acquiring and redeveloping a portion of the site located east of Ph Street and north of A Street in Springfield, Map dumber 17-03-35-42, Tax lot 2300 (the "Pro e "). B. Owner plans to construct a new eight -story mixed-use building with seven stories of market rate residential units and ground floor commercial uses (collectively, the "Project"j. Owner intends to construct the Project with cross laminated timber, which Owner believes both represent the ethos of the Springfield community and a modern and energy-efficient building style that promotes healthy, eco -friendly, and livable space. Another goal of the project is to prove the financial feasibility of market rate multifamily construction in Springfield, making the city more attractive for subsequent multifamily construction projects, and increasing housing supply. it is the expressed goal of SEDA and Owner (each, a "Par�rt ," and collectively, the "Parties') that the Project will energize Downtown Springfield, attracting more density and active; uses, while solving part of the City of Springfield's (the"Ci_�'s") current housing crisis. C. To assist Owner with the development of the Project, Owner has requested financial assistance from SEDA, including one or more loans, including a subordinate construction loan, and use of SEDA's Systems Development Charge ("SDC") grant program. On March 8, 2021, the SEDA Board authorized SEDA to enter into this Memorandum of Understanding (MOU) including the following key terms: SEDA expects to loan to Owner up to $10 million at a minimum (estimated) interest rate of 3.211/o over 10 years, to be repaid in the 101h year or thereafter over a_period of five to seven years. SEDA will agree to subordinate its loan to Owner's senior debt lender and to a portion of anticipated profit projected to be paid to the Owner's equity investors. {00017995:101 Page 1 of 10 Attachment 3 Page 1 of 11 D. On or before June 30, 2021, or earlier if possible, SEDA pians to loan up to $2 million for predevelopment costs, which amount includes up to $400,000 for Owner's acquisition of the Property. If the Project moves forward to construction, SEDA will loan to Owner (the „predevelopment loan") a maximum amount of the difference between $10 million and the amount of the predevelopment and acquisition loan, as necessary to fill any gap between total Project costs as reflected in a final budget approved by SEDA and an executed guaranteed maximum price construction contract and Owner's equity and debt financing (the "Construction Loan Amount'), Total Project costs are currently anticipated to be approximately $27 million. If the Project does not proceed to construction and if Owner (a) assigns and delivers to SEDA at no cost to SEDA all architectural designs and drawings for the Project and all third -party reports, studies and other work product, and (b) pravi es SEDA With a deed to the Property in lieu of foreclosure, then SEDA will not exercise any other remedies under the documents evidencing the predevelopment loan. E. SEDA is authorized to provide financial loans to entities in the Downtown Urban Renewal Plan area that are consistent with the Downtown Urban Renewal Plan. This activity is consistent with Section 600B of the plan, which authorizes SEDA to "provide below-market interest rate and market rate loans and provide such other forms of financial assistance to property owners and those desiring to redevelop, rehabilitation, and acquire property." F. This Memorandum of Understanding ("MOU') summarizes the Parties' present understandings, expectations, and intentions with respect to the Project and SEDA's participation in the Project. The Parties will work together in good faith to negotiate and execute definitive development and loan agreements within the term of this MOU. In addition, the Parties will work in good faith toward completion of each task included in this MOU. in some cases, completion of a task may occur after execution of definitive loan documents (e.g., after the predevelopment loan), but such tasks are included in this MOU as an expression of the Parties' desired outcomes. Now, THEREFORE, the Parties hereby agree as follows: AGREEMENT 1. Non -Binding Effect of MOU. This MOU is a statement of the current intent of the Parties, and except for Sections 5.5 through 5.11., which shall be binding on the Parties, this MOU is not a binding legal agreement. The MOU will serve as the framework for negotiations of one or more definitive development and loan agreements. Except for Sections 5.5 through 5.11, this MOU may not be relied upon as a basis for contract by estoppel or serve as the basis for a claim based on detrimental reliance or any other theory. Each Party should seek its own legal counsel related to signing this MOU and through further discussions and negotiations related to the Project and definitive agreements. {00017995:10} Page 2 of 10 Attachment 3 Page 2 of 11 2. Ne otiation of Loan Agreements. Over the next 30 days, the Parties, in good faith, will negotiate terms of the predevelopment and acquisition loan agreement. Over the 12 months following execution of the predevelopment and acquisition loan agreement, the Parties, in good faith, will negotiate the terms of a construction loan and development agreement, In those negotiations, each Party shall be free, in its respective good faith discretion, to agree or not agree on proposed terms for each agreement. The Parties intend that the development and loan agreements will be consistent with the terms and conditions of this MOU and that the documentation evidencing such loans will include, without limitation, a promissory nate and deed of trust. If additional time is required for negotiations, the Parties may extend the term of this MOU to allow for such negotiations, but neither Party shall be required to do so. The Parties understand that despite the Parties' good faith efforts reflected in this MOU, there is a possibility that they will not reach agreement on binding agreements. 3. Owner's Tasks. The following tasks will be completed by the dates set forth in the attached Project Schedule (Attachment 1) 3.1. Development of Project Concept and_Scope. Owner agrees to refine the Project concept and scope for a mixed-use development that is consistent with the following attributes ("Conceptual Desi n'): (a) eight -story mixed-use building; (b) seven stories of market rate residential development providing approximately 84 units; (c) approximately 5,000 square feet of ground floor commercial retail; and (c) CLT construction. Owner's Conceptual Design will include at least the following; (i) a site plan that shows the location of the structure, streets, any parking areas and open spaces; (ii) a program showing all proposed uses for the Project; (iii) the location of uses within the Project; (iv) the approximate square footage of each use; (v) building envelopes that show the approximate scale and massing of the proposed buildings; and (vi) illustrative sketches depicting the character of the overall Project, including public spaces. SEDA will have the right to review and approve or disapprove of the Conceptual Design, which approval shall not be unreasonably withheld. 3.2. Land Use Due Diligence. Owner agrees to review the planning and zoning requirements, ascertain the impact of such requirements on the Project, and develop a schedule for complying with such requirements. Owner understands that it will be responsible to seek any variances in existing land use parameters for the Project as necessary to comply with the Owner's Project Concept and Scope or as otherwise desired by Owner. Owner will be responsible for costs and fees associated with the permitting requirements. 3.3. Schematic DeaL n, Owner will prepare schematic level architectural design drawings ("Schematic Design"}, and engineering drawings and specifications of the Project, which shall be consistent with the Conceptual Design approved by SEDA. The drawings will include a site plan, floor plans, elevation views and renderings, and SNDA will have the right to review and approve or disapprove of the Schematic Design, which approval shall not be unreasonably withheld. Upon completion of Schematic Design, Owner will prepare and provide {00017995;10} Page 3 of 10 Attachment 3 Page 3 of 11 to SEDA a preliminary cost estimate and construction schedule for the Project, which cost estimate and schedule shall be subject to SEDA's review and approval. 3.4. Design Development Drawings and Specifications. Owner will prepare the design development level architectural and engineering drawings and specifications of the structures ("Design Development Drawings'l. The dimensioned drawings, details and the specifications will be sufficiently detailed to allow subcontractor pricing and for the contractor to prepare cost estimates, a schedule, construction contract, and to obtain a building permit. SEDA will have the right to review and approve or disapprove of the 50% and 90% Design Development Drawings, which approval shall not be unreasonably withheld. Upon completion of Design Development Drawings, Owner will prepare and provide to SEDA an updated cost estimate and construction schedule for the Project, which updated cost estimate and schedule shall be subject to SEDA's reasonable review and approval. 3.5. Construction Documents. Owner will prepare construction documents for the Project sufficient to allow the City to review and issue a building permit for all vertical construction other than site work ("Construction Documents). SEDA will have the right to review and approve or disapprove of 50% and 100% Construction Documents, which approval shall not be unreasonably withheld. Upon completion of Construction Documents, Owner will prepare and provide to SEDA an updated cost estimate and construction schedule for the Project, which updated cost estimate and schedules shall be subject to SEDA's reasonable review and approval. After completion of a competitive subcontractor bid process for the construction of the Project, Owner shall provide to SEDA an updated Project budget and timeline. The final Project budget and timeline is subject to reasonable review and approval by the SEDA. 3.5. Building Permits and Other Required Permits. After execution of the development and construction loan agreements, Owner will submit all required documents and fees for permit review and approval by the City of Springfield and all other jurisdictions having authority over the Project, and will modify such documents as necessary to achieve timely approval. 3.7. Project Financing and E ui investment. Owner will be responsible for securing a loan to finance the majority of the costs of construction. This loan will have priority over SEDA's construction loan as may be evidenced by a subordination agreement or intercreditor agreement in a form mutually acceptable to SEDA and Owner's senior lender. SEDA acknowledges that the senior lender will require Owner to use proceeds from SEDA's loan prior to disbursing proceeds from the senior loan. 3.8. Owner's Equi1y Investment. Owner's equity investment in the Project will be not less than $1 million. SEDA will subordinate its Construction loan to a portion of {00017995:10} Page 4 of 10 Attachment 3 Page 4 of 11 anticipated profit projected to be paid on the lesser of the amount of capital actually contributed to the Project by Owner or $1 million, talus not more than a 4% non -compounding annual return on such contributed capital (the 15First Position Equity"). If one or more third party investors also contribute capital to the Project, Owner may substitute all or a portion of the equity contributed by third party investors for Owner's First Position Equity, which shall result in Owner's contributed capital plus not more than a 4% non -compounding annual return on such capital becoming automatically subordinated to SEDA's Construction Loan in the amount of and to the extent of such substitution. 3.9. Development Team Roles. Owner will manage the development and construction of the Project utilizing a team of professionals whose skills, experience, and duties meet or exceed industry standards and sufficient to design, construct and complete the Project. Owner will provide prior written notice to SNDA of any changes in the development team, which changes shall be subject to SEDA's review and approval. Development team members include: Managing Principal: Jean-Pierre Veillet, Managing Member Blue Mckenzie LLC Development Manager: Jean-Pierre Veillet, Managing Member Northwest Sustainable Properties LLC Architect: LRS Architects & Lake Flato Architects General Contractor: TBD Legal Counsel: Brix Law 4. SEDA's Tasks. 4.1. Technical Assistance. SEDA will provide technical assistance and support to Owner to obtain zoning, design review, and building permit approvals through standard approval processes. SEDA does not represent or warrant that zoning and building permits for the Project will be approved by the City, and Owner shall be responsible obtaining any and all approvals required by City in accordance with the City's regulatory processes. SEDA has established contacts with City staff for Owner communication on specific topics, such as land use permitting, building permitting, transportation and infrastructure planning, system development charges, and communications. 4.2. Assistance with 5ystern Development Charge (SDC) Grant. SNDA will assist Owner with any required application for SEDA's SDC grant program to the extent that the Project meets the requirements of the program. 4.3. Predevelo ment & Acquisition Loan. SEDA will loan up to $400,000 to finance Owner's acquisition of the Property and up to $1.6 million for the following predevelopment costs: architecture; structural, civil, and mechanical engineering; survey; geotechnical; preconstruction estimating, predevelopment project management, and permitting fees. In consideration for this loan, Owner will assign all interest in predevelopment work {00017995:10) Page 5 of 10 Attachment 3 Page 5 of 11 product, including architectural drawings, to SEDA and the loan will be secured by a promissory note and first -position deed of trust on the Property. If the Project does not proceed to construction and if Owner (a) assigns and delivers to SEDA at no cost to SEDA all architectural designs and drawings for the Project and all third -party reports, studies and other work product, and (b) provides SEDA with a deed to the Property, then SEDA will not exercise any other remedies under the documents evidencing the predevelopment loan. 4.4. Construction and Development Loan. If the Project proceeds to construction, SEDA will loan Owner up to the Construction Loan Amount for capital construction costs associated with the Project. This construction and development loan will first be applied to repay the outstanding balance of the SEDA predevelopment and acquisition loan. At a minimum, the construction and development loan will bear interest at a rate of 10/0 over SEDA's bond rate (SEDA's bond rate is currently approximately 2.2%) for a period of 10 years. SEDA's loan rate may be higher or lower depending upon outcomes of the Parties' negotiations and SEDA's bond rate. The Parties expect the construction and development loan principal and interest will be repaid in a lump sum 10 years after initial loan disbursement, or over the following five to seven years. SEDA will agree to subordinate the construction and development loan principal and interest to Owner's senior construction lender, to the return of capital invested by members of the Owner, and to a set, non -compounding return of 4% per annum to the members who have invested capital in Owner. The construction and development loan will be secured by a subordinate deed of trust over the Property and all improvements and will be subject to Project -specific and market conditions precedent. 4.5. Progress Review Board Communication and Approvals. SEDA staff will be responsible for review and approval of predevelopment tasks and progress submittals as outlined in sections 3.3-3.5 above. It will be the responsibility of SEDA staff to communicate regularly with the SEDA Board, progress of the Project. 4.6. SEDA Team Roles. SEDA/City team members include: Economic Development Manager: Courtney Griesel Finance Director: Nathan Bell Assistant City Attorney: Kristina Kraaz Public Information Officer: Amber Fossen Economic Development Consultants: Abe Farkas and Nick Popenuk 5. Joint Tasks. 5.1. Loan Agreements. The Parties will regularly assess progress toward each of the progress tasks identified in this MOU and, unless a Party gives written notice to the other of its intent to terminate this MOU, the parties will continue negotiations under this MOU for a period of time sufficient to finalize and execute the required predevelopment and acquisition 10001799SAO) Page 6 of 10 Attachment 3 Page 6 of 11 loan agreement(s) and the construction and development loan agreement, which period shall not exceed 18 months from the Effective Date. 5.2. Develo ment of Project Financing Plan. SEDA and Owner will collaborate on a financing strategy for the Project with the understanding that the terms of private financing in connection with the Project shall be at Owner's discretion, except where SEDA and Owner have specified otherwise, The goal of the Parties is to provide the appropriate level of private and SEDA financing to reach the broader economic goals of the Project, while also assuring that any SEDA funds are incorporated in the Project funding to a level and of a nature absolutely necessary to assure the financial viability of the Project, The Parties anticipate that senior bank financing will be approximately $16 million for the total project cost of $27 million. Within thirty (30) days of the Effective Date, Owner agrees to develop a preliminary Project budget that includes costs for design, permitting, construction, leasing, marketing, and all other costs required to build the Project, as well as a schedule of sources and uses of capital for the Project. The Project budget and schedule will be subject to SEDA's reasonable review and approval and will be updated as appropriate as the tasks described in this MOU are completed. 5.3. Tenant Recruitment. Owner will be responsible for all tenant leases for the Project. At the request of the Owner, SEDA may provide technical assistance as appropriate in the identification and acquisition of ground -floor commercial tenants, up to but not including the negotiation of a tenant lease. Notwithstanding the foregoing, Owner will be the primary point of contact for the negotiation of ground -floor commercial tenant leases. SEDA will notify Owner of discussions with prospective ground -floor tenants. 5.4. Public Notification. Both Owner and the SEDA acknowledge that public notification is a required element of site plan approval for the Project by the City, and that a public hearing before the Springfield Planning Commission could be required for land use approval. Owner will be responsible for any public hearing presentation as the "applicant" and for payment of notice costs as required by the City of Springfield (but which costs may be paid with SEDA loan funds). 5.5. Project Communications. SEDA and Owner will coordinate Project communications such that all press releases and responses to media inquiries will be subject to reasonable prior review and approval by both Parties. Media requests for comments on behalf of SEDA will be coordinated through the SEDA Economic Development Manager and the City of Springfield Public information Officer. 5.6. Project Team Meetings. Regular and direct communication between the Parties is a necessary part of all the tasks contemplated by this MOU. Therefore, Owner has identified .dean -Pierre Velilet of Northwest Sustainable Properties as its project representative, and SEDA has identified Courtney Griesel, Economic Development Manager, as its project representative (each a "Project Representative" and collectively, the "Project Representatives"). 00017995:10) Page 7 of 10 Attachment 3 Page 7 of 11 Each Project Representative will call upon such staff or other consultants as each deems necessary to diligently complete the tasks each Party has agreed to perform in this MOU and agrees to perform in definitive documents. The Project Representatives (or their designees) will schedule regular Project team meetings, not less frequently than every other week, to address matters of mutual interest, keep each other informed on Project progress, including design, permitting and construction, and work toward the satisfactory negotiation of the definitive documents. Owner will participate in briefings of the SEDA Board over the course of the Project as requested by SEDA's Project Representative. 5.7. Prevailing.Wages. SEDA anticipates that the Project, if constructed with a $10 million loan from SEDA, will be deemed a "public improvement" project or a "public works„ project as those terms are defined in the Oregon Public Contracting Code, Therefore, Owner and SEDA recognize that the Project may be subject to state prevailing wage laws. Owner will include payment of prevailing wages in all construction estimates and Project budgets, as applicable. 5.8. Confidentiality. Neither Owner nor SEDA (nor their respective directors, officers, employees, representatives, agents or consultants) shall disclose to any person or entity any of the terms and conditions of any possible transaction which may arise from discussions or negotiations between Owner and SEDA concerning the contents of this MOU, except that Owner and SEDA may make such disclosures as required by law and may make any and all appropriate disclosures to consultants, attorneys, current and potential lenders, partners and investors. SEDA will notify Owner in writing of any Public Records Act request that it receives before complying with such request. Prior to disclosure of any records, Owner and SEDA will work together to determine if the request falls within an exemption to the Public Records Act. 5.9. Indemnification. To the greatest extent allowed under applicable law, Owner shall indemnify, hold harmless and, upon request, defend SEDA and the City and their elected officials, officers, agents and employees from and against any and all claims, damages, iosses and expenses arising out of or resulting from any negligent or intentional act or omission of Owner, its employees or its agents, including consultants and contractors, under this MOU. Likewise, to the greatest extent allowed under applicable law and subject to the Tort Claims Act, SEDA and City shall indemnify hold harmless and, upon Owner's request, defend Owner and its members, officers, agents and employees from and against any and all claims, damages, losses and expenses arising out of or resulting from any negligent act or omission of their respective representatives, agents, board members and employees, under this MOU. 5.10, Notices. All notices given under this MDU shall be in writing and may be delivered, with all applicable delivery and postage charges prepaid, by: (a) personal delivery or messenger; (b) nationally recognized overnight courier service; (c) certified U.S. mail, return receipt requested; or (d) e-mail, to a Party at the address set forth below: {00017995;10} Page 8 of 10 Attachment 3 Page 8 of 11 Agency: Urban Renewal Agency of the City of Springfield 225 Fifth Street Springfield, OR 97477 Attn: Courtney Griesel Email: cc riesel(d)sprinafEeld-or.gov Owner: Blue McKenzie, LLC 240 SE 2nd Ave Portland, OR 97214 Attn: Jean-Pierre Veillet Email: jp@nws-properties.com Notices shall be deemed received by the addressee upon the earlier of actual delivery or refusal of a party to accept delivery thereof; provided that notices sent by email shall be deemed given on the date received if and only if delivered prior to 5:00 p.m. Pacific Time and if concurrently sent by another means allowed hereunder. The addresses to which notices are to be delivered may be changed by giving notice of such change in address in accordance with this notice provision. Notices may be given by counsel to a Parry. 5.11. Miscellaneous. Each Party has reviewed this MOU and agrees that the rule of construction to the effect that any ambiguities are to be resolved against the drafting Party shall not be employed in the interpretation of this MOU. No provision of this MOU shall be deemed to have been waived by either Party unless the waiver is in writing and signed by that Party. As used in this MOU, (a) "shall" means mandatory and imperative, and (b) "including" means including without limitation. This MOU may be executed in one or more identical counterparts, each of which shall be deemed an original and all of which will collectively constitute one agreement. SPRINGFIELD ECONOMIC DEVELOPMENT BLUE MCKENZIE, LLC AGENCY V v4v��, By: By: Its: Its: / 711(�/tei Ion017995:101 Page 9 of 10 Attachment 3 Page 9 of 11 Attachment 3 Page 10 of 11 m c Attachment S Page 11 of 11 N3 � � � SEDA DOWNTOWN CONSTRUCTION AND DEVELOPMENT LOAN Contract # This SEDA Downtown Construction and Development Loan Contract ("Contract") is made and entered into this [ ], 202[_], by and between the Springfield Economic Development Agency, hereinafter referred to as "SEDA" and Blue McKenzie Apartments LLC, an Oregon limited liability company, hereinafter referred to as "Borrower." STATEMENT OF PURPOSE SEDA is authorized to provide financial loans to businesses in the Downtown Urban Renewal Plan area that are consistent with the Downtown Urban Renewal Plan. Borrower and SEDA have entered into a Memorandum of Understanding dated April 16, 2021 (the "MOU") regarding development of an eight -story mixed-use, market rate residential building located east of 7t" Street and north of A Street in Springfield (Map Number 17-03-35-42, Tax Lot 2300) (the "Property"). SEDA provided a predevelopment loan in the maximum principal amount of $2,000,000 pursuant to that certain SEDA Downtown Acquisition and Predevelopment Loan Contract dated May 17, 2021 (the "Predevelopment Loan"). The purpose of this Contract is to set forth the terms under which additional SEDA funds will be provided to Borrower. NOW, THEREFORE, in consideration of the promises contained herein, it is agreed as follows: 1. Purpose of Loan Funding. The purpose of this loan is to refinance the Predevelopment Loan and fund construction and development costs for a new development with the following attributes: (a) eight -story mixed-use building; (b) seven stories of market rate residential development providing approximately 84 units; (c) approximately 5,000 square feet of ground floor commercial retail; and (d) cross -laminated timber construction, more particularly described in the "Springfield Motors Development Report" in Exhibit A (the "Project"). 2. SEDA Agreement to Fund Loan. 2.1. Principle Amount. Subject to, and conditioned upon, Borrower's compliance with the terms of this Contract and the other Loan Documents and the representations contained in the Developer's Statement of Financial Capability (the "Application"), SEDA agrees to provide Borrower a loan in an amount not to exceed ten million dollars ($10,000,000.00). 2.2. Variable Interest Rate. SEDA is obtaining an urban renewal bond to fund Borrower's Loan ("Bond'). All outstanding principle will bear interest at the interest rate of SEDA's Bond plus 0.5%, compounded annually. The interest rate on this Loan is subject to change in the event that SEDA refinances the Bond to a lower interest rate, at which time the interest rate applied to the unpaid principal balance will be set to SEDA's refinanced interest rate plus 0.5% 2.3. Eligible Items. Notwithstanding any provision in this Contract, items eligible for the SEDA funds shall be limited to the refinancing of the Predevelopment Loan and construction and development costs associated with the permanent improvements to the Property identified in Exhibit B. Examples of items not eligible for the SEDA funds include: Ongoing administration costs or business operating costs. SEDA shall have final determination on items eligible for payment, provided SEDA's approval shall not be unreasonably withheld, conditioned, or delayed. ATTACHMENT 4, PAGE 1 OF 8 3. Security. This loan shall be evidenced by a Promissory Note executed by Borrower in favor of SEDA (the "Note"), and secured by (a) a Line of Credit Instrument Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by Borrower in favor of SEDA placed on the Property (the "Deed of Trust"), (b) an Assignment of Plans, Specifications, Reports and Permits executed by Borrower in favor of SEDA, (c) an Assignment of Construction Contract executed by Borrower in favor of SEDA and consented to by General Contractor; (d) an Assignment of Architect's Agreement executed by Borrower in favor of SEDA and consented to by Architect; and (e) an Environmental Indemnity executed by Borrower in favor of SEDA, (collectively with this Contract, the "Loan Documents"). Borrower hereby authorizes SEDA to file or record any other documents Lender considers reasonably necessary to perfect Lender's security interest. 3.1. Subordination. This loan will be secured by a second position lien on the Property. SEDA will agree to subordinate this loan to a senior construction loan and any subsequent senior loan (i.e., permanent financing) after the senior construction loan is paid in full and the underlying deed of trust is reconveyed (each the "Senior Loan"), pursuant to an intercreditor and subordination agreement reasonably acceptable to the parties. The lender of the Senior Loan shall be referred to as the "Senior Lender" and the loan documents governing the Senior Loan will be referred to as the "Senior Loan Documents". SEDA acknowledges that the original Senior Lender will require Borrower to use proceeds from this SEDA loan prior to disbursing Senior Loan funds. Borrower's continuing equity investment in the Project will be not less than one million dollars ($1,000,000) so long as this loan is outstanding, which will be spent down by Borrower prior to, or proportional to SEDA's loan. SEDA will subordinate its loan to a portion of anticipated returned capital and profit projected to be paid to Borrower's equity investors in an amount equal to the lesser of (a) the amount of equity actually contributed to the Project by Borrower's equity investors, or (b) one million dollars ($1,000,000), plus not more than a 4% non -compounding annual return on such contributed capital (the "First Position Equity"). SEDA's subordination pursuant to the preceding sentence shall be evidenced by a subordination agreement reasonably acceptable to the parties. If one or more third -party investors of Borrower subsequently contributes capital to the Project, Borrower may substitute all or a portion of the equity contributed by such third -party investors for the existing First Position Equity (in which case such subsequent equity contributed shall be deemed First Position Equity), which shall result in all or a portion of the First Position Equity becoming automatically subordinated to SEDA's Construction Loan in the amount of and to the extent of such substitution. If Borrower exercises its substitution right pursuant to the preceding sentence, then the parties shall execute a subsequent subordination agreement reasonably acceptable to the parties, which shall replace the existing subordination agreement. 4. Title Insurance. Title insurance will be required. The costs of a title search, title insurance and any endorsements thereto, and credit reports, and recording SEDA's security interest against the Property are considered eligible project expenses and shall be paid by the loan proceeds as the first or subsequent draws on the loan. Borrower will be responsible for reconveyance costs either through the remainder of loan proceeds or by making a separate payment to SEDA. 5. Credit Information Release. Borrower and its members each individually hereby authorize any person or consumer reporting agency to complete and furnish to SEDA's agents any information it may have or obtain in response to SEDA's credit inquiries. Borrower authorizes SEDA to provide information concerning Borrower's and Borrower's members' credit relationship to credit reporting agencies or other creditors. ATTACHMENT 4, PAGE 2 OF 8 6. Funding. Both parties acknowledge that the obligations herein are subject to funding from third -parties — specifically including (1) SEDA's obligations under the Oregon Budget Law and ability to secure an urban renewal bond to fund the Loan, and (2) Borrower's ability to obtain a senior construction loan. SEDA and Borrower agree to use their best efforts in good faith to meet these conditions precedent. Should either SEDA or Borrower not obtain the needed funding from third -parties, this Agreement will be terminated automatically. If this Agreement is terminated due to Borrower's inability to obtain a senior construction loan, SEDA will retain its security as described in Section 3. 7. Disbursement of Loan Proceeds. 7.1. Predevelopment Loan Refinance funds. Loan funds not greater than the outstanding principal balance of the Predevelopment Loan will be deemed advanced to Borrower on the date hereof. No loan funds may be disbursed unless all the Loan Documents are properly executed by Borrower. 7.2. Construction and Development Loan funds. SEDA shall segregate the loan proceeds to a specific SEDA account held for the use of Borrower's disbursement pursuant to the terms of this Contract. SEDA will disburse funds directly to the Borrower. Eligible expenses are only those expenses listed in the project budget in Exhibit B. SEDA will disburse loan funds no more frequently than once in any 30 -day period and within 15 days of SEDA's receipt of a disbursement request that meets the following requirements and is otherwise approved by SEDA: 7.2.1 Borrower will submit each disbursement application using the form in Exhibit D. 7.2.2 Borrower will provide SEDA and City staff with all invoices, proofs of payment, contracts and lien waivers associated with the Project with the disbursement application. 7.2.3 With the exception of the final loan draw, loan funds must be drawn in amounts of at least $50,000. 7.2.4 Borrower will provide SEDA and City staff with any other documentation reasonably requested by SEDA or City staff in connection with the disbursement, including without limitation, title endorsements. 7.2.5 Borrower shall not be in default of any of its obligations under the Loan Documents. 8. Borrower's Representations. Borrower represents, warrants and covenants to SEDA the following as of the date of this Contract, each disbursement date and during the term of this Agreement as follows: 8.1. Organization and Authority. Borrower is a limited liability company, duly and validly organized and in existence under the laws of the State of Oregon. Borrower has full legal right, power and authority, and all necessary licenses and permits required to (a) undertake and carry on the construction and development work, (b) execute and deliver this ATTACHMENT 4, PAGE 3 OF 8 Contract, the Note and the other Loan Documents, and (c) carry out and consummate all transactions contemplated by this Contract, the Note and the other Loan Documents. 8.2. No Violations or Default. Borrower is not in default under or in violation of any agreement to which it is a party or by which it is bound, nor any order, regulation, ruling or requirement of a court or other public body or authority. No creditor has given Borrower notice or threatened to give it any notice of default under any material agreement. At all times material to this Contract, Borrower shall remain fully able to perform all of its duties and obligations. 8.3. Litigation. No action, suit, investigation or proceeding is pending against Borrower or with respect to the Property or the Project before any court or administrative agency, (a) the outcome of which, by itself or taken together with any other litigation, might have a material adverse effect on the business, assets, operations, or financial condition of Borrower, or (b) which purports to affect the legality, enforceability or validity of any Loan Document. 8.4. Tax Returns. All federal, state, and other tax returns of Borrower required by law to be filed have been filed. 9. Prosect Schedule and Completion. The construction and development work must be completed within [INSERT SAME DEADLINE IMPOSED BY SENIOR LENDER] months of the date Borrower signs this Contract (for the avoidance of doubt, subject to extensions for events of force majeure as described in section 32). Each construction or development task must be completed according to the project schedule in Exhibit C. Any deviations or adjustments to the project schedule that will materially delay the ultimate completion of the construction and development work and/or Project completion must be approved by SEDA. If necessary, Borrower may request in writing, an extension to complete any such work. This extension will be authorized by SEDA at its reasonable discretion. [INSERT SAME COMPLETION DEFINITION (PRESUMABLY CERTIFICATE OF OCCUPANCY) AND APPROVAL RIGHTS OVER PROJECT SCHEDULE CHANGES CONTAINED IN THE SENIOR LOAN DOCUMENTS.] 10. Review of Work. SEDA staff may review the construction and development work and work product as stated in Exhibit B to ensure that all elements have been satisfactorily completed. SEDA shall have reasonable discretion to determine whether or not Borrower has complied with Borrower's obligations herein. 11. Standard of Work. Borrower shall ensure that all construction and development activities and work product contemplated by this Contract in Exhibit B or subsequently approved in writing by SEDA, and undertaken by Borrower are of high quality and meet with the commonly accepted standards of persons performing such activities or producing such work product. If Borrower fails to take all reasonable measures, adequate contracting and monitoring typical of a borrower similarly situated to Borrower and in accordance with applicable industry standards, such failure shall be a breach of this Contract, subject to applicable cure periods. 12. Licenses; Maintenance of Business. Borrower will remain a limited liability company, validly existing under the laws of Oregon, and will keep in force all licenses and permits necessary to undertake and complete all construction and development work and subsequently own and operate the Project. 13. Prior Expenses. Expenses incurred by Borrower or otherwise with respect to the Project prior to the date of the execution of this Contract are not eligible for reimbursement ATTACHMENT 4, PAGE 4 OF 8 14. Third Party Contracts. All construction and development contracts will be between Borrower and Borrower's contractors and suppliers as identified in Exhibit B. Borrower will provide copies of executed contracts with all contractors. Borrower will not enter into new contracts for construction or development work with contractors or suppliers not described in Exhibit B, including yet to be identified contractors, without the consent of SEDA, which shall not be unreasonably withheld, conditioned, or delayed. The City of Springfield (the "City") and SEDA are not parties to these contracts by virtue of providing this financial assistance. 15. Final Disbursement. Reserved. 16. Remaining Loan Funds. SEDA's funding assumes that completion of the construction and development work will require expenditure of all sums represented by the applicant as being necessary for the construction and development work. If the total construction and development work costs are less than the projected amount, SEDA's contribution is to be proportionately reduced. If, at the completion of the construction and development work, or the deadline for completion of the construction and development work set forth herein, any loan funds remaining undisbursed, the Borrower shall not be required to repay any undisbursed funds. 17. Repayment Terms. The disbursed principal amount is due and payable in accordance with the Note. 18. Consequences of Unauthorized Expenditure by Borrower. In the event that Borrower expends any loan funds for a purpose outside of, or beyond what is set forth in this Contract, SEDA may withhold any future loan funding and Borrower shall be immediately obligated to repay SEDA all loan funds which have been expended for a purpose outside or beyond that set forth in this Contract. Expenditures shall be subject to inspection annually by SEDA/City auditors. 19. Consequences of Failing to Complete Prosect or Other Breach of this Contract. In the event that the Borrower fails to complete the construction development work described in this Contract within the applicable time schedule (as the same may be extended pursuant to force majeure under section 32 of this Contract), or commits any other material breach of this Contract beyond all applicable notice and cure periods set forth in the Deed of Trust, all sums loaned or granted by the City shall then be immediately repaid to City by Borrower. 20. Inspection and Regulatory Review. It is Borrower's responsibility to obtain all necessary regulatory reviews and approvals including but not limited to land -use review, and requisite permits. The Project must remain in compliance with all regulatory bodies and approval agencies. It will be Borrower's responsibility to resolve any regulatory issues. 21. Special Provisions. In addition to compliance with all representations made in the loan Application, this loan shall further be conditioned upon Borrower's compliance with the following special conditions: 21.1. Project Plan Amendment. Any material deviation from the construction and development work detailed in Exhibit B must be preapproved in writing by SEDA to be eligible for reimbursement. ATTACHMENT 4, PAGE 5 OF 8 21.2. Construction Documents. Borrower will prepare construction documents for the Project sufficient to allow the City to review and issue a building permit for all vertical construction other than site work ("Construction Documents"). SEDA will have the right to review and approve or disapprove of 50% and 100% Construction Documents, which approval shall not be unreasonably withheld. Upon completion of Construction Documents, Borrower will prepare and provide to SEDA an updated budget and construction schedule for the Project, which updated budget and schedule shall be subject to SEDA's reasonable review and approval. After completion of a competitive subcontractor bid process for the construction of the Project, Borrower shall provide to SEDA an updated Project budget and schedule. The final Project budget and schedule is subject to reasonable review and approval by the SEDA. 21.3. Development Team Roles. Borrower will manage the construction and development of the Project utilizing a team of professionals whose skills, experience, and duties meet or exceed industry standards and sufficient to design, construct and complete the Project. Borrower will provide prior written notice to SEDA of any changes in the development team, which changes shall be subject to SEDA's review and approval. Development team members include: Managing Principal: Jean-Pierre Veillet, Manager of Northwest Sustainable Properties LLC, as the Manager of Blue McKenzie LLC Development Manager: Jean-Pierre Veillet, Manager of Northwest Sustainable Properties LLC Architect: LRS Architects & Lake Flato Architects General Contractor: [TBD] Legal Counsel: Brix Law LLP 21.4. Tenant Recruitment. Borrower will be responsible for all tenant leases for the Project. At the request of the Borrower, SEDA may provide technical assistance as appropriate in the identification and acquisition of ground -floor commercial tenants, up to but not including the negotiation of a tenant lease. Notwithstanding the foregoing, Borrower will be the primary point of contact for the negotiation of ground -floor commercial tenant leases. SEDA will notify Borrower of discussions with prospective ground -floor tenants. 21.5. Project Communications. SEDA and Borrower will coordinate Project communications such that all press releases and responses to media inquiries will be subject to reasonable prior review and approval by both parties. Media requests for comments on behalf of SEDA will be coordinated through the SEDA Economic Development Manager and the City of Springfield Public Information Officer. 22. Discharge of Liens. Borrower will timely pay and discharge all indebtedness, taxes and other obligations for which it is liable or to which its income or property is subject, as well as all claims for labor, materials or supplies that, if unpaid, might become by law a lien upon the Property, subject to Borrower's right to contest any liens described in the Deed of Trust. If Borrower fails to discharge any such claim or lien, SEDA may, in its sole discretion and without waiving the default, pay the same, which payment shall, at SEDA's option, be added to the amount outstanding under the Note. ATTACHMENT 4, PAGE 6 OF 8 23. Prevailing Wages. Borrower and its contractors and subcontractors shall comply with ORS 279C.840 requiring Borrower and its contractors and subcontractors to pay workers on the Project the prevailing rate of wage as established by the Oregon Bureau of Labor and Industries unless exempt therefrom. Borrower will be responsible for compliance and reporting under the Oregon Prevailing Wage Law and its implementing rules, ORS 279C.800 et. seq. Borrower will hold the City and SEDA harmless for all costs, fees and penalties that may be incurred, and for all reports, fines and/or litigation costs, including reasonable attorney fees, that may result from Borrower's application of the Oregon Prevailing Wage Law to the Project. 24. No Assignment. The obligations of Borrower hereunder and under any accompanying loan or personal obligations of Borrower are not assignable or transferable without written consent of SEDA, which may be withheld in its sole and absolute discretion. 25. Interest. In the event Borrower breaches any term of this Contract or any of the other Loan Documents, Borrower's obligation will bear interest at the rate of twelve percent (12%) per annum. 26. Attorney's Fees. Should suit or action be filed to enforce this Contract or seek damages for its breach, the prevailing party shall be entitled to an award of its reasonable attorney fees including those incurred upon appeal. 27. Indemnification and Regulatory Compliance. Borrower shall be responsible, and shall comply with, all requirements of law including, but not limited to, compliance with all applicable federal, state, and local regulations and hereby covenants and agrees to indemnify and hold harmless SEDA, from any claim, demand, or damage, resulting in any manner from the extension in loan funds from SEDA to Borrower and/or any use of SEDA funds by Borrower, this Contract, Borrower's actions in connection with the Project, including its agents and assignees, and from any use of SEDA funds except to the extent caused by SEDA's negligence or willful misconduct. 28. Insurance. Borrower will at all times carry a Comprehensive General Liability insurance policy for at least $2,000,000 combined single limits per occurrence for Bodily Injury, Property Damage, and Personal Injury and $3,000,000 aggregate. The City and SEDA will be named as an Additional Insured on the General Liability policy and a certificate evidencing the foregoing insurance requirements in a form acceptable to SEDA shall be delivered to SEDA prior to the initial loan disbursement. This insurance will be primary over any insurance the City may carry on its own. Borrower understands that the City of Springfield is a public entity subject to the requirements of the Oregon Governmental Tort Claims Act, ORS 30.260 et seq. 29. Tax Consequences. SEDA makes no representations concerning the tax consequences to the recipient of any agency grant or loan. Any questions in this regard should be resolved by the recipient with his/her own tax professional. 30. Legal Representation. This Contract was prepared by SEDA. Borrower has had the opportunity to have this Contract reviewed by its own legal counsel prior to its execution. 31. Venue. Venue for litigation concerning this Contract shall rest exclusively with the court of the State of Oregon for Lane County. 32. Force Majeure. If Borrower is delayed by reason of weather, fire, strikes, pandemic (other than the present conditions or restrictions associated with the COVID-19 pandemic), Acts of God, or other similar circumstances beyond Borrower's reasonable control, ATTACHMENT 4, PAGE 7 OF 8 Borrower shall be entitled to additional time to complete the construction and development work equal to that lost by any or all of the above causes, as reasonably determined by SEDA. 33. Obligations Binding on Trustees, Successors and assigns. The obligations of Borrower shall be binding upon Borrower, Borrower's successors and assigns, Borrower's estate, any trusts in which Borrower is a trustor or beneficiary, and any other entity or instrument owned or controlled by Borrower. 34. Indemnification. To the greatest extent allowed under applicable law, Borrower shall indemnify, hold harmless and, upon request, defend SEDA and the City and their elected officials, officers, agents and employees from and against any and all claims, damages, losses and expenses arising out of or resulting from any negligent or intentional act or omission of Borrower, its employees or its agents, including consultants and contractors, in connection with this loan. Likewise, to the greatest extent allowed under applicable law and subject to the Tort Claims Act, SEDA shall indemnify, hold harmless and, upon Borrower's request, defend Borrower and its members, managers, officers, agents and employees from and against any and all claims, damages, losses and expenses arising out of or resulting from any negligent act or omission of SEDA, its representatives, agents, board members and employees, in connection with this loan. 35. Reporting Requirements. Borrower shall deliver to SEDA any financial reports or information and any material notices that Borrower is required to deliver to Senior Lender pursuant to the Senior Loan Documents within the timelines required by the Senior Loan Documents. IN WITNESS WHEREOF, the undersigned have executed and delivered this Contract effective as of the date first set forth above. SEDA: SPRINGFIELD ECONOMIC DEVELOPMENT AGENCY Bv: Nancy Newton, City Manager Date: EXHIBITS: (TBD) A — Springfield Motors Development Report B — Construction Budget, Tasks C — Construction Schedule D — Disbursement Request Form BORROWER: BLUE MCKENZIE APARTMENTS LLC By: Jean-Pierre Veillet, Manager Northwest Sustainable Properties LLC, an Idaho limited liability company Date: ATTACHMENT 4, PAGE 8 OF 8 PROMISSORY NOTE $10,000,000.00 Date: [ 1, 2022 Location: Springfield, Oregon For value received, Blue McKenzie Apartments LLC, an Oregon limited liability company ("Borrower"), promises to pay the Springfield Economic Development Agency, or to another person and at another place that the holder of this Promissory Note (this "Note") may designate ("Lender"), the maximum principal sum of Ten Million Dollars ($10,000,000.00), or as much as may be advanced under that certain SEDA Downtown Construction and Development Loan Contract by and between Borrower and Lender dated as of the date hereof (the "Loan Contract") and payable in the manner and on the terms set forth in this Note: 1. Interest Rate. The outstanding balance of the loan shall bear interest at a variable annual rate of SEDA's urban renewal bond interest rate plus 0.5%, compounded annually (the "Interest Rate"). The interest rate on this Loan is subject to change in the event that SEDA refinances the Bond to a lower interest rate, at which time the interest rate applied to the unpaid principal balance will be set to SEDA's refinanced interest rate plus 0.5%. All interest under this Note will be computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. 2. Payments. The entire outstanding loan balance must be paid not later than fifteen (15) [REVISE REPAYMENT DATE AS NEEDED TO FOLLOW SENIOR LENDER DUE DATE] years after the date of this Note; provided, however, that any payments under this Note are subordinated to the Senior Loan and First Position Equity (as defined in the Loan Contract). 3. Prepayments. Borrower has the right to prepay this Note, in whole or in part, at any time with no prepayment penalties. Early payments will reduce the principal balance due and may result in Borrower making fewer payments. Borrower agrees not to send Lender payments marked "paid in full," "without recourse," or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. 4. Default and Acceleration. Each of the following shall constitute an event of default ("Event of Default") under this Note: a. Payment Default. Borrower fails to make any payment when due under this Note. b. Other Defaults. Any other "Event of Default" occurs in accordance with the Deed of Trust, subject to the cure periods contained therein. Lender's Rights. Upon an Event of Default, after all applicable notice and cure periods, if any, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount, and Lender may exercise any other remedies in accordance with the Deed of Trust. 5. Default Interest Rate. In the Event of a Default, Lender will have the right, in addition to any other remedy set forth in this Note and the Deed of Trust, to increase the Interest Rate to twelve percent (12%) per annum, until the Event of Default is cured to Lender's satisfaction or until the Note is paid in full. 6. Intentionally Omitted. 7. Attorney Fees. Should suit or action be filed to enforce this Note or seek damages for its breach, the prevailing party shall be entitled to an award of its reasonable attorney fees including those incurred upon appeal. 8. Governing Law. This Note is to be governed by and construed in accordance with the laws of Oregon. ATTACHMENT 5, PAGE 1 OF 3 9. Severability. If any provision or clause of this Note is construed by a court of competent jurisdiction to be void, invalid, or unenforceable, that construction will not affect other provisions of this Note that can be given effect without the void, invalid, or unenforceable provision, and to this end the provisions of this Note are declared to be severable. 10. Venue. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of Lane County, Oregon. 11. Amendments. Any amendment to this Note must be made in writing and signed by all parties. 12. Notice. All payments and written communication concerning this Note must be mailed or delivered to the Economic Development Manager, City of Springfield, 225 Fifth Street, Springfield, OR 97477. 13. Voluntariness. Before signing this Note, Borrower read and understood all the provisions of this Note. Borrower agrees to the terms of this Note. 14. Waiver of Protest. Borrower and each present or future maker, surety, endorser and signatory to this Note, in whatever capacity, waives presentment, demand, protest, notice of dishonor, and all suretyship defenses, and agrees that the Lender may exercise its rights under the Note in any order and at any time. Without notice to any such person (except for any notice to borrower specified in this Note and without the need to obtain further consent from any party), and without in any way diminishing the obligations of any person, Lender may (a) deal with any such person with reference to this Note by way of forbearance, extension, modification, compromise, or otherwise; (b) extend, release, surrender, exchange, compromise, discharge, or modify any right or obligation secured by or provided in this Note, the Trust Deed, or any other document securing this Note; and (c) take any other action that the holder may deem reasonably appropriate to protect its interest in the collateral under the Trust Deed. 15. Limitation of Interest. In no event will any payment of interest or any other sum payable under this Note exceed the maximum amount permitted by applicable law. If it is established that any payment(s) exceeding lawful limits have been received, the holder and payee of such amount(s) will refund such excess or, at its option, credit the excess amount(s) to the principal. Such payments will not affect the obligation to make other payments required under this Note that do not cause the lawful limits to be exceeded. 16. Security. Borrower acknowledges that this this Note is secured by (a) a Line of Credit Instrument Deed of Trust, Security Agreement and Fixture Filing dated as of the date of this Note on unaddressed real estate located at Map and Tax Lot number 17-03-35-42-02300 in Springfield, Oregon 97477, executed by Borrower in favor of Lender (the "Deed of Trust"), (b) an Assignment of Plans, Specifications, Reports and Permits dated as of the date of this Note, executed by Borrower in favor of Lender (the "Assignment"), and (c) the other Loan Documents. 17. Bankruptcy. Borrower agrees that, notwithstanding ORS 73.0602 and ORS 73.0604, any payment under this Note that is avoided in a later bankruptcy proceeding or otherwise will not be deemed a payment, and Borrower's obligations under the Note will be reinstated or supplemented, or both, to the extent of any payment so avoided. In that event, Borrower will not be discharged even if this Note has been canceled, renounced or surrendered. 18. Statute -of -Frauds Notice. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES, AND COMMITMENTS MADE BY LENDER CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S PROPERTY MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY LENDER TO BE ENFORCEABLE. 19. Waiver of Jury Trial. BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ATTACHMENT 5, PAGE 2 OF 3 LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS NOTE OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER OF THEM. NEITHER THE BORROWER NOR THE LENDER SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY EITHER THE BORROWER OR LENDER EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY BOTH PARTIES. BORROWER ACKNOWLEDGES RECEIPT OF A COMPETED COPY OF THIS PROMISSORY NOTE. BORROWER: BORROWER IS LIABLE FOR ALL OBLIGATIONS SET FORTH IN THIS NOTE AND THE ACCOMPANYING TRUST DEED. BLUE MCKENZIE APARTMENTS LLC By: Northwest Sustainable Properties LLC, an Idaho limited liability company Its: Manager IN Jean-Pierre Veillet, Manager Date: ATTACHMENT 5, PAGE 3 OF 3 GRANTOR: Property Owner: Blue McKenzie Apartments LLC 95 Freedom Loop Bellevue, Idaho 83313 BENEFICIARY: Springfield Economic Development Agency (SEDA) c/o City of Springfield City Manager's Office 225 Fifth Street Springfield, OR 97477 TRUSTEE: Kristina Kraaz City Attorney's Office 225 Fifth Street Springfield, OR 97477 RETURN AFTER RECORDING TO: Springfield Economic Development Agency (SEDA) City of Springfield 225 Fifth Street Springfield, OR 97477 SPACE ABOVE THIS LINE IS FOR RECORDER'S USE ONLY LINE OF CREDIT INSTRUMENT DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING Maximum principal amount to be advanced: [$10,000,000]; however, such maximum principal amount may be exceeded by principal advances made pursuant to ORS 86.155. Maturity Date: [ 1, 203[_], exclusive of options to renew or extend, if any. Notice to Recorder: THIS DOCUMENT CONSTITUTES A FIXTURE FILING IN ACCORDANCE WITH THE PROVISIONS OF ORS 79.0502 THAT SHALL HAVE AN EFFECTIVE PERIOD UNTIL THIS DEED OF TRUST IS RECONVEYED OR SATISFIED OF RECORD OR ITS EFFECTIVENESS OTHERWISE TERMINATES AS TO THE REAL PROPERTY. THIS LINE OF CREDIT INSTRUMENT DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING ("Deed of Trust") is dated I 1, 202[_], among Blue McKenzie Apartments LLC, an Oregon limited liability company, and whose address is 95 Freedom Loop, Bellevue, Idaho 83313 ("Grantor"); Springfield Economic Development Agency (SEDA), whose address is c/o City of Springfield, City Manager's Office, 225 Fifth Street, Springfield, OR 97477 (referred to below sometimes as "Lender" and sometimes as "Beneficiary"); and Kristina Kraaz, City of Springfield, City Attorney's office, 225 Fifth Street, Springfield, OR 97477 (referred to below as "Trustee"). Grantor is the Owner in fee simple title to certain real property including all improvements and easements and other real property rights belonging thereto located in Lane County, State of Oregon, located east of 7th Street and north of A Street in Springfield (Map Number 17-03-35-42, Tax Lot 2300), more particularly described below. Grantor is the maker of a certain Promissory Note ("Note") payable to the order of the Beneficiary evidencing the loan ("Loan") in the maximum principal amount of [$10,000,000.00] and payable as stated therein. The Note is made pursuant to a SEDA Downtown Construction and Development Loan Contract between Grantor and Beneficiary (the "Loan Contract") and is secured by, among other things, this Deed of Trust and that certain Assignment of Plans, Specifications, Reports and Permits executed by Grantor in favor of Beneficiary (the "Assignment"). The purpose of the loan is to provide funding for Grantor to refinance a loan in the maximum principal amount of $2,000,000 made by Beneficiary to Grantor pursuant to that certain SEDA Downtown Acquisition and Predevelopment Loan Contract dated May 17, 2021, and to fund Grantor's construction and development expenses consistent with the Loan Contract. The Loan is secured by a lien on real property owned by Grantor and located in Lane County, Oregon. CONVEYANCE AND GRANT. For and in consideration of Beneficiary making loan to Grantor and other good and value consideration, receipt in sufficiency of which are acknowledged, this Deed of Trust provides as follows: Grantor conveys to Trustee for the benefit of Lender as Beneficiary with the power of sale and right of entry and possession, all of Grantor's right, title, and interest in and to the following described real property, together with all existing or subsequently erected or affixed buildings, improvements and fixtures; all easements, rights-of-way, and appurtenances; all water, water rights, and ditch rights (including stock in utilities with ditch or irrigation rights); and all other rights, royalties, and profits relating to the real property, including without limitation all minerals, oil, gas, geothermal and similar matters, (the "Real Property") located in Lane County, State of Oregon (Map Identification and Tax Lot No. 17-03-35-42-02300): Commencing at a point 105 feet West of the Southeast corner of Block 72 of the SPRINGFIELD INVESTMENT AND POWER COMPANY'S ADDITION TO SPRINGFIELD, as platted and recorded in Book 25, Page 306, Lane County Oregon Deed Records; thence running West 100 feet, thence North 119 feet; thence East 100 feet; thence South 119 feet to the point of beginning, all in Lane County, Oregon. EXCEPTING THEREFROM: the East 15 feet of the above described parcel. ALSO: the East one-half of the now vacated alley abutting the above described property on the West ATTACHMENT 6, PAGE 1 OF 10 DEED OF TRUST ALSO: that portion of the South one-half of the East-West alley abutting & contiguous with the North boundary per Ordinance #5408. The Note, this Deed of Trust, the Loan Contract, the Assignment and the other Related Documents evidence the obligations of Grantor to Beneficiary. This Deed of Trust is given to secure those obligations and concerns the Real Property. A breach of any term of any of the above referenced notes, contracts, or trust deeds shall constitute a breach of all entitling Lender to all remedies cumulatively available in all instruments. Grantor presently assigns to Lender (also known as Beneficiary in this Deed of Trust) all of Grantor's right, title, and interest in and to all present and future leases of the Property and all Rents from the Property. In addition, Grantor grants to Lender a Uniform Commercial Code security interest in the Personal Property and Rents. THIS DEED OF TRUST, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN THE RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (A) PAYMENT OF THE INDEBTEDNESS AND (B) PERFORMANCE OF ANY AND ALL OBLIGATIONS UNDER THE NOTE AND THE RELATED DOCUMENTS, THE RELATED DOCUMENTS, AND THIS DEED OF TRUST. THIS DEED OF TRUST IS GIVEN AND ACCEPTED ON THE FOLLOWING TERMS: PAYMENT AND PERFORMANCE. Except as otherwise provided in this Deed of Trust, Grantor shall pay to Lender all amounts secured by this Deed of Trust as they become due, and shall strictly and in a timely manner perform all of Grantor's obligations under the Note, this Deed of Trust, and the other Related Documents. POSSESSION AND MAINTENANCE OF THE PROPERTY. Grantor agrees that Grantor's possession and use of the Property shall be governed by the following provisions: Possession and Use. Until the occurrence of an Event of Default, Grantor may (1) remain in possession and control of the Property; (2) use, operate or manage the Property; and (3) collect the Rents from the Property. The following provisions relate to the use of the Property or to other limitations on the Property. THIS INSTRUMENT WILL NOT ALLOW USE OF THE PROPERTY DESCRIBED IN THIS DOCUMENT TO BE IN VIOLATION OF APPLICABLE LAND USE LAWS AND REGULATIONS. Duty to Maintain. Grantor shall maintain the Property in tenantable condition and promptly perform all repairs, replacements, and maintenance necessary to preserve its value. Compliance with Environmental Laws. Grantor represents and warrants to Lender that: (1) During the period of Grantor's ownership of the Property, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from the Property; (2) Grantor has no knowledge of, or reason to believe that there has been, except as previously disclosed to and acknowledged by Lender in writing, (a) any breach or violation of any Environmental Laws, (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Property by any prior owners or occupants of the Property, or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters; and (3) Except as previously disclosed to and acknowledged by Lender in writing, (a) neither Grantor nor any tenant, contractor, agent or other authorized user of the Property shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from the property; and (b) any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations and ordinances, including without limitation all Environmental Laws. Grantor authorizes Lender and its agents to enter upon the Property to make such inspections and tests, at Grantor's expense, as Lender may deem appropriate to determine compliance of the Property with this section of the Deed of Trust. Any inspections or tests made by Lender shall be for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Grantor or to any other person. The representations and warranties contained herein are based on Grantor's due diligence in investigating the Property for Hazardous Substances. Grantor hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or other costs under any such laws; and (2) agrees to indemnify and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Deed of Trust or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release occurring during Grantor's ownership or interest in the Property, whether or not the same was or should have been known to Grantor. The provisions of this section of the Deed of Trust, including the obligation to indemnify, shall survive the payment of the Indebtedness and the satisfaction and reconveyance of the lien of this Deed of Trust and shall not be affected by Lender's acquisition of any interest in the Property, whether by foreclosure or otherwise. Nuisance, Waste. Grantor shall not cause, conduct, or permit any nuisance, nor commit, permit, or suffer any stripping of or waste on or to the Property or any portion of the Property. Without limiting the generality of the foregoing, Grantor will not remove, or grant to any other party to right to remove, any timber, minerals (including oil and gas), coal, clay, scoria, soil, gravel or rock products without Lender's prior written consent. Removal of Improvements. Grantor shall not demolish or remove any Improvements from the Real Property without Lender's prior written consent. As a condition to the removal of any Improvements, Lender may require Grantor to make arrangements satisfactory to Lender to replace such Improvements with Improvements of at least equal value. Lender's Right to Enter. Lender and Lender's agents and representatives may enter upon the Real Property at all reasonable times to attend to Lender's interests and to inspect the Real Property for purposes of Grantor's compliance with the terms and conditions of this Deed of Trust. Compliance with Governmental Requirements. Grantor shall promptly comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the use or occupancy of the Property, including without limitation, the Americans with Disabilities Act. Grantor may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Grantor has notified Lender in writing prior to doing so and so long as, in Lender's sole opinion, Lender's interests in the Property are not jeopardized. Lender may require Grantor to post adequate security or surety bond, reasonably satisfactory to Lender, to protect Lender's interest. ATTACHMENT 6, PAGE 2 OF 10 DEED OF TRUST Duty to Protect. Grantor agrees neither to abandon nor leave unattended the Property. Grantor shall do all other acts, in addition to those acts set forth above in this section, which from the character and use of the Property are reasonably necessary to protect and preserve the Property. DUE ON SALE — CONSENT BY LENDER. Lender may, at Lender's option, declare immediately due and payable all sums secured by this Deed of Trust upon the sale or transfer, without Lender's prior written consent, of all or any part of the Real Property, or any interest in the Real Property. A "sale or transfer' means the conveyance of Real Property or any right, title or interest in Real Property; whether legal, beneficial or equitable; whether voluntary or involuntary; whether by outright sale, deed, installment sale contract, land contract, contract for deed, leasehold interest, lease -option contract, or by sale, assignment, or transfer of any beneficial interest in or to any land trust holding title to the Real Property, or by any other method of conveyance of an interest in the Real Property. If any Grantor is a corporation, partnership or limited liability company (LLC), transfer also includes any change in ownership of more than twenty-five percent (25%) of the voting stock, partnership interests or limited liability company interests, as the case may be, of such Grantor. However, this option shall not be exercised by Lender if such exercise is prohibited by federal law or by Oregon law. Notwithstanding the foregoing, Grantor may execute residential leases at current market terms without Beneficiary's consent. TAXES AND LIENS. The following provisions relating to the taxes and liens on the Property are part of this Deed of Trust: Payment. Grantor shall pay when due (and in all events prior to delinquency) all taxes, special taxes, assessments, charges (including water and sewer), fines and impositions levied against or on account of the Property, and shall pay when due all claims for work done on or for services rendered or material furnished to the Property. Grantor shall maintain the Property free of all liens having priority over or equal to the interest of Lender under this Deed of Trust, except for the lien of taxes and assessments not due and except as otherwise provided in this Deed of Trust. Right to Contest. Grantor may withhold payment of any tax, assessment, or claim in connection with a good faith dispute over the obligation to pay, so long as Lender's interest in the Property is not jeopardized. If a lien arises or is filed as a result of nonpayment, Grantor shall within fifteen (15) days after the lien arises or, if a lien is filed, within fifteen (15) days after Grantor has notice of the filing, secure the discharge of the lien, or if requested by Lender, deposit with Lender cash or a sufficient corporate surety bond or other security satisfactory to Lender in an amount sufficient to discharge the lien plus any costs and attorneys' fees, or other charges that could accrue as a result of a foreclosure or sale under the lien. In any contest, Grantor shall defend itself and Lender shall satisfy any adverse judgment before enforcement against the Property. Grantor shall name Lender as an additional obligee under and surety bond furnished in the contest proceedings. Evidence of Payment. Grantor shall provide to Lender, upon request, satisfactory evidence of payment of the taxes or assessments and shall authorize the appropriate governmental official to deliver to Lender at any time a written statement of the taxes and assessments against the Property. PROPERTY DAMAGE INSURANCE. The following provisions relating to insuring the Property are a part of this Deed of Trust: Maintenance of Insurance. Grantor shall procure and maintain policies of fire insurance with standard extended coverage endorsements on a replacement basis for the full insurable value covering all Improvements on the Real Property in an amount sufficient to avoid application of any coinsurance clause, and with a standard mortgagee clause in favor of Lender. Grantor shall also procure and maintain comprehensive general liability insurance in such coverage amounts as Lender may request with Trustee and Lender being named as additional insureds in such liability insurance policies. Additionally, Grantor shall maintain such other insurance, including but not limited to hazard, business interruption, and boiler insurance, as Lender may reasonably require. Policies shall be written in form, amounts, coverages and basis reasonably acceptable to Lender and issued by a company or companies reasonably acceptable to Lender. Grantor, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least fifteen (15) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Grantor or any other person. Should the Real Property be located in an area designated by the Director of the Federal Emergency Management Agency as a special flood hazard area, Grantor agrees to obtain and maintain Federal Flood Insurance, if available, within 45 days after notice is given by Lender that the Property is located in a special flood hazard area, for the full unpaid principal balance of the loan and any prior liens on the property securing the loan, up to the maximum policy limits set under the National Flood Insurance Program, or as otherwise required by Lender, and to maintain ALL insurance for the term of the loan. Application of Proceeds. Grantor shall promptly notify Lender of any loss or damage to the Property. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the casualty. Whether or not Lender's security is impaired, Lender may, at Lender's election, receive and retain the proceeds of any insurance and apply the proceeds to the reduction of the Indebtedness, payment of any lien affecting the Property, or the restoration and repair of the Property. If Lender elects to apply the proceeds to restoration and repair, Grantor shall repair or replace the damaged or destroyed Improvements in a manner satisfactory to Lender. Lender shall, upon satisfactory proof of such expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost of repair or restoration if Grantor is not in default under this Deed of Trust. Any proceeds which have not been disbursed within 180 days after their receipt and which Lender has not committed to the repair of restoration of the Property shall be used first to pay any amount owing to Lender under this Deed of Trust, then to pay accrued interest, and the remainder, if any, shall be applied to the principal balance of the Indebtedness. If Lender holds any proceeds after payment in full the Indebtedness, such proceeds shall be paid to Grantor as Grantor's interests may appear. Grantor's Report on Insurance. Upon request of Lender, however not more than once a year, Grantor shall furnish to Lender a report on each existing policy of insurance showing: (1) the name of insurer; (2) the risks insured; (3) the amount of the policy; (4) the property insured, the then current replacement value of such property, and the manner of determining that value; and (5) the expiration date of the policy. Grantor shall, upon request of Lender, have an independent appraiser satisfactory to Lender determine the cash value replacement cost of the Property. LENDER'S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender's interest in the Property or if Grantor fails to comply with any provision of this Deed of Trust or any Related Documents, including but not limited to Grantor's failure to discharge or pay when due any amounts Grantor is required to discharge or pay under this Deed of Trust or any Related Documents, Lender on Grantor's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the Property and paying all costs for insuring, maintaining and preserving the Property. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or ATTACHMENT 6, PAGE 3 OF 10 DEED OF TRUST paid by Lender to the date of repayment by Grantor, All such expenses will become a part of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity. The Deed of Trust also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon Default. WARRANTY; DEFENSE OF TITLE. The following provisions relating to ownership of the Property are a part of this Deed of Trust: Title. Grantor warrants that: (a) Grantor holds good and marketable title of record to the Property in fee simple, free and clear of all liens and encumbrances other than those set forth in the Real Property description or in any title insurance policy title report, or final title opinion issued in favor of, and accepted by, Lender in connection with this Deed of Trust, and (b) Grantor has the full right, power, and authority to execute and deliver this Deed of Trust to Lender. Defense of Title. Subject to the exception in the paragraph above, Grantor warrants and will forever defend the title to the Property against the lawful claims of all persons. In the event any action or proceeding is commenced that questions Grantor's title or the interest of Trustee or Lender under this Deed of Trust, Grantor shall defend the action at Grantor's expense. Grantor may be the nominal party in such proceeding, but Lender shall be entitled to participate in the proceeding and to be represented in the proceeding by counsel of Lender's own choice, and Grantor will deliver, or cause to be delivered, to Lender such instruments as Lender may request from time to time to permit such participation. Compliance With Laws. Grantor warrants that the Property and Grantor's use of the Property complies with all existing applicable laws, ordinances, and regulations of governmental authorities. Survival of Representations and Warranties. All representations, warranties, and agreements made by Grantor in this Deed of Trust shall survive the execution and delivery of this Deed of Trust, shall be continuing in nature, and shall remain in full force and effect until such time as Grantor's Indebtedness shall be paid in full. CONDEMNATION. The following provisions relating to condemnation proceedings are a part of this Deed of Trust: Proceedings. If any proceeding in condemnation is filed, Grantor shall promptly notify Lender in writing, and Grantor shall promptly take such steps as may be necessary to defend the action and obtain the award. Grantor may be the nominal party in such proceeding, but Lender shall be entitled to participate in the proceeding and to be represented in the proceeding by counsel of its own choice, and Grantor will deliver or cause to be delivered to Lender such instruments and documentation as may be requested by Lender from time to time to permit such participation. Application of Net Proceeds. If all or any part of the Property is condemned by eminent domain proceedings or by any proceeding or purchase in lieu of condemnation, Lender may at its election require that all or any portion of the net proceeds of the award be applied to the Indebtedness or the repair or restoration of the Property. The net proceeds of the award shall mean the award after payment of all reasonable costs, expenses, and attorney's fees incurred by Trustee or Lender in connection with the condemnation. IMPOSITION OF TAXES, FEES, AND CHARGES BY GOVERNMENTAL AUTHORITIES. The following provisions relating to governmental taxes, fees, and charges are a part of this Deed of Trust: Current Taxes, Fees, and Charges. Upon request by Lender, Grantor shall execute such documents in addition to this Deed of Trust and take whatever other action is requested by Lender to perfect and continue Lender's lien on the Real Property. Grantor shall reimburse Lender for all taxes, as described below, together with all expenses incurred in recording, perfecting or continuing this Deed of Trust, including without limitation all taxes, fees, documentary stamps, and other charges for recording or registering this Deed of Trust. Taxes. The following shall constitute taxes to which this section applies: (1) a specific tax upon this type of Deed of Trust or upon all or any part of the Indebtedness secured by this Deed of Trust; (2) a specific tax on Grantor which Grantor is authorized or required to deduct from payments on the Indebtedness secured by this type of Deed of Trust; (3) a tax on this type of Deed of Trust chargeable against the Lender or the holder of the Note; and (4) a specific tax on all or any portion of the Indebtedness or on payments of principal and interest made by Grantor. Subsequent Taxes. If any tax to which this section applies is enacted subsequent to the date of this Deed of Trust, this event shall have the same effect as an Event of Default, and Lender may exercise any or all of its available remedies for an Event of Default as provided below unless Grantor either (1) pays the tax before it becomes delinquent, or (2) contests the tax as provided above in the Taxes and Liens section and deposits with Lender cash or a sufficient corporate surety bond or other security satisfactory to Lender. SECURITY AGREEMENT; FINANCING STATEMENTS. The following provisions relating to this Deed of Trust as a security agreement are a part of this Deed of Trust: Security Agreement. This instrument shall constitute a Security Agreement to the extent any of the Property constitutes fixtures, and Lender shall have all of the rights of a secured party under the Uniform Commercial Code as amended from time to time. Security Interest. Upon request by Lender, Grantor shall take whatever action is requested by Lender to perfect and continue Lender's security interest in the Rents and Personal Property. In addition to recording this Deed of Trust in the real property records, Lender may, at any time and without further authorization from Grantor, file executed counterparts, copies or reproductions of this Deed of Trust as a financing statement. Grantor shall reimburse Lender for all expenses incurred in perfecting or continuing this security interest. Upon default, Grantor shall not remove, sever or detach the Personal Property from the Property. Upon default, Grantor shall assemble any Personal Property not affixed to the Property in a manner and at a place reasonably convenient to Grantor and Lender and make it available to Lender within three (3) days after receipt of written demand from Lender to the extent permitted by applicable law. ATTACHMENT 6, PAGE 4 OF 10 DEED OF TRUST Addresses. The mailing addresses of Grantor (debtor) and Lender (secured party) from which information concerning the security interest granted by this Deed of Trust may be obtained (each as required by the Uniform Commercial Code) are as stated on the first page of this Deed of Trust. FURTHER ASSURANCES; ATTORNEY-IN-FACT. The following provisions relating to further assurances and attorney-in-fact are a part of this Deed of Trust: Further Assurances. At any time, and from time to time, upon request of Lender, Grantor will make, execute and deliver, or will cause to be made, executed or delivered, to Lender or to Lender's designee, and when requested by Lender, cause to be filed, recorded, refiled, or rerecorded, as the case may be, at such times and in such offices and places as Lender may deem appropriate, any and all such mortgages, deeds of trust, security deeds, security agreements, financing statements, continuation statements, instruments of further assurance, certificates, and other documents as may, in the sole opinion of Lender, be necessary or desirable in order to effectuate, complete, perfect, continue, or preserve (1) Grantor's obligations under the Note, this Deed of Trust, and the Related Documents, and (2) the liens and security interests created by this Deed of Trust as first and prior liens on the Property, whether now owned or hereafter acquired by Grantor. Unless prohibited by law or Lender agrees to the contrary in writing, Grantor shall reimburse Lender for all costs and expenses incurred in connection with the matters referred to in this paragraph. Attorney -in -Fact. If Grantor fails to do any of the things referred to in the preceding paragraph, Lender may do so for and in the name of Grantor and at Grantor's expense. For such purposes, Grantor hereby irrevocably appoints Lender as Grantor's attorney-in-fact for the purpose of making, executing, delivering, filing, recording, and doing all other things as may be necessary or desirable, in Lender's sole opinion, to accomplish the matters referred to in the preceding paragraph. FULL PERFORMANCE. If Grantor pays all the Indebtedness when due, and otherwise performs all the obligations imposed upon Grantor under this Deed of Trust, Lender shall execute and deliver to Trustee a request for full reconveyance and shall execute and deliver to Grantor suitable statements of termination of any financing statement on file evidencing Lender's security interest in the Rents and the Personal Property. All reconveyance fees shall be paid to Lender by Grantor. EVENTS OF DEFAULT. Each of the following, at Lender's option, shall constitute an Event of Default under this Deed of Trust Payment Default. Grantor fails to make any payment when due under the Indebtedness Other Defaults. Grantor fails to comply with or to perform any other term, obligation, covenant, or condition contained in this Deed of Trust or in any of the Related Documents, or to comply with or to perform any term, obligation, covenant, or condition contained in any other agreement between Lender and Grantor. Compliance Default. Failure to comply with any other term, obligation, covenant or condition contained in this Deed of Trust, the Note, or in any of the Related Documents. Default on Other Payments. Failure of Grantor within the time required by this Deed of Trust to make any payment for taxes or insurance, or any other payment necessary to prevent filing of or to effect discharge of any lien. Default in Favor of Third Parties. Should Grantor default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Grantor's property or Grantor's ability to repay the Indebtedness or perform their respective obligations under this Deed of Trust or any of the Related Documents. False Statements. Any warranty, representation, or statement made or furnished to Lender by Grantor or on Grantor's behalf under this Deed of Trust or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. Defective Collateralization. This Deed of Trust or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason. Insolvency. The dissolution or termination of Grantor's existence as a going business, the insolvency of Grantor, the appointment of a receiver for any part of Grantor's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Grantor. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Grantor or by any governmental agency against any property securing the Indebtedness. This includes a garnishment of any of Grantor's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Grantor gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Breach of Other Agreement. Any breach by Grantor under the terms of any other agreement between Grantor and Lender that is not remedied within any grace period provided therein, including without limitation any agreement concerning any indebtedness or other obligation of Grantor to Lender, whether existing now or later. Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the Indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. In the event of a death, Lender, at its option, may, but shall not be required to, permit the guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default. ATTACHMENT 6, PAGE 5 OF 10 DEED OF TRUST Right to Cure. If any default, other than a default in payment is curable and if Grantor has not been given a notice of a breach of the same provision of this Deed of Trust within the preceding twelve (12) months, it may be cured if Grantor, after receiving written notice from Lender demanding cure of such default: (1) cures the default within thirty (30) days; or (2) if the cure requires more than thirty (30) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical, provided that the total cure period shall not exceed sixty (60) days from the default. With respect to any payment default, Lender shall provide written notice and ten (10) days opportunity to cure; provided, however, Lender shall only be required to give one (1) written notice in any twelve (12) month period. RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Deed of Trust, after all applicable notice and cure periods, if any, Trustee or Lender may exercise any one or more of the following rights and remedies: Election of Remedies. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under this Deed of Trust, after Grantor's failure to perform, shall not affect Lender's right to declare a default and exercise its remedies. Foreclosure. With respect to all or any part of the Real Property, the Trustee shall have the right to foreclose by notice and sale, and Lender shall have the right to foreclose by judicial foreclosure, in either case in accordance with and to the full extent provided by applicable law. If this Deed of Trust is foreclosed by judicial foreclosure, Lender will be entitled to a judgment which will provide that if the foreclosure sale proceeds are insufficient to satisfy the judgment, execution may issue for the amount of the unpaid balance of the judgment. UCC Remedies. With respect to all or any part of the Personal Property, Lender shall have all the rights and remedies of a secured party under the Uniform Commercial Code. Collect Rents. Lender shall have the right, without notice to Grantor to take possession of and manage the Property and collect the Rents, including amounts past due and unpaid, and apply the net proceeds, over and above Lender's costs, against the Indebtedness. In furtherance of this right, Lender may require any tenant or other user of the Property to make payments of rent or use fees directly to Lender. If the Rents are collected by Lender, then Grantor irrevocably designates Lender as Grantor's attorney-in-fact to endorse instruments received in payment thereof in the name of Grantor and to negotiate the same and collect the proceeds. Payments by tenants or other users to Lender in response to Lender's demand shall satisfy the obligations for which the payments are made, whether or not any proper grounds for the demand existed. Lender may exercise its rights under this subparagraph either in person, by agent, or through a receiver. Appoint Receiver. Lender shall have the right to have a receiver appointed to take possession of all or any part of the Property, with the power to protect and preserve the Property, to operate the Property preceding foreclosure or sale, and to collect the Rents from the Property and apply the proceeds, over and above the cost of the receivership, against the Indebtedness. The receiver may serve without bond if permitted by law. Lender's right to the appointment of a receiver shall exist whether or not the apparent value of the Property exceeds the Indebtedness by a substantial amount. Employment by Lender shall not disqualify a person from serving as a receiver. Tenancy at Sufferance. If Grantor remains in possession of the Property after the Property is sold as provided above or Lender otherwise becomes entitled to possession of the Property upon default of Grantor, Grantor shall become a tenant at sufferance of Lender or the purchaser of the Property and shall, at Lender's option, either (1) pay a reasonable rental for the use of the Property, or (2) vacate the Property immediately upon the demand of Lender. Other Remedies. Trustee or Lender shall have any other right or remedy provided in this Deed of Trust or the Note or by law. Notice of Sale. Lender shall give Grantor reasonable notice of the time and place of any public sale of the Personal Property or of the time after which any private sale or other intended disposition of the Personal Property is to be made. Reasonable notice shall mean notice given at least fifteen (15) days before the time of the sale or disposition. Any sale of the Personal Property may be made in conjunction with any sale of the Real Property. Sale of the Property. To the extent permitted by applicable law, Grantor hereby waives any and all rights to have the Property marshalled. In exercising its rights and remedies, the Trustee or Lender shall be free to sell all or any part of the Property together or separately, in one sale or by separate sales. Lender shall be entitled to bid at any public sale on all or any portion of the Property. Attorneys' Fees; Expenses. Should suit or action be filed to enforce this Deed of Trust or seek damages for its breach, the prevailing party shall be entitled to an award of its reasonable attorney fees including those incurred upon appeal. Rights of Trustee. Trustee shall have all of the rights and duties of Lender as set forth in this section. POWERS AND OBLIGATIONS OF TRUSTEE. The following provisions relating to the powers and obligations of Trustee are part of this Deed of Trust: Powers of Trustee. In addition to all powers of Trustee arising as a matter of law, Trustee shall have the power to take the following actions with respect to the Property upon the written request of Lender and Grantor: (a) join in preparing and filing a map or plat of the Real Property, including the dedication of streets or other rights to the public; (b) join in granting any easement or creating any restriction on the Real Property; and (c) join in any other agreement affecting this Deed of Trust or the interest of Lender under this Deed of Trust. Obligations to Notify. Trustee shall not be obligated to notify any other party of a pending sale under any other trust deed or lien, or of any action or proceeding in which Grantor, Lender, or Trustee shall be a party, unless the action or proceeding is brought by Trustee. Trustee. Trustee shall meet all qualifications required for Trustee under applicable law. In addition to the rights and remedies set forth above, with respect to all or any part of the Property, the Trustee shall have the right to foreclose by notice and sale, and Lender shall have the right to foreclose by judicial foreclosure, in either case in accordance with and to the full extent provided by applicable law. ATTACHMENT 6, PAGE 6 OF 10 DEED OF TRUST Successor Trustee. Lender, at Lender's option, may from time to time appoint a Successor Trustee to any Trustee appointed under the Deed of Trust by an instrument executed and acknowledged by Lender and recorded in the Office of the Recorder, County of Lane, State of Oregon. The instrument shall contain, in addition to all other matters required by State law, the names of the original Lender, Trustee, and Grantor, the book and page where this Deed of Trust is recorded, and the name and address of the Successor Trustee, and the instrument shall be executed and acknowledged by Lender or its successors in interest. The Successor Trustee, without conveyance of the Property, shall succeed to all the title, power, and duties conferred upon the Trustee in this Deed of Trust and by applicable law. This procedure for substitution of Trustee shall govern to the exclusion of all other provisions for substitution. NOTICES. Any notice required to be given under this Deed of Trust, including without limitation any notice of default and any notice of sale shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified, or registered mail, postage prepaid, directed to the addresses shown near the beginning of this Deed of Trust. All copies of notices of foreclosure from the holder of any lien which has priority over this Deed of Trust shall be sent to Lender's address, as shown near the beginning of this Deed of Trust. Any party may change its address for notices under this Deed of Trust by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Grantor agrees to keep Lender informed at all times of Grantor's current address. Unless otherwise provided or required by law, if there is more than one Grantor, any notice given by Lender to any Grantor is deemed to be notice given to all Grantors. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Deed of Trust: Amendments. This Deed of Trust, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Deed of Trust. No alteration of or amendment to this Deed of Trust shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Annual Reports. Grantor shall furnish to Lender, upon request, a certified statement of net operating income received from the Property during Grantor's previous fiscal year in such form and detail as Lender shall reasonably require. "Net operating income" shall mean all cash receipts from the Property less all cash expenditures made in connection with the operation of the Property. Except in the case of an Event of Default, in no event shall Grantor request such statements more than once in any calendar year. Caption Headings. Caption headings in this Deed of Trust are for convenience purposes only and are not to be used to interpret or define the provisions of this Deed of Trust. Merger. There shall be no merger of the interest or estate created by this Deed of Trust with any other interest or estate in the Property at any time held by or for the benefit of Lender in any capacity, without the written consent of Lender. Governing Law. This Deed of Trust will be governed by, construed, and enforced in accordance with federal law and the laws of the State of Oregon. This Deed of Trust has been accepted by Lender in the State of Oregon. Choice of Venue. If there is a lawsuit, Grantor agrees upon Lender's request to submit to the jurisdiction of the courts of Lane County, State of Oregon. No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Deed of Trust unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Deed of Trust shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Deed of Trust. No prior waiver by Lender, nor any course of dealing between Lender and Grantor, shall constitute a waiver of any of Lender's rights or of any of Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Deed of Trust, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. Severability. If a court of competent jurisdiction finds any provision of this Deed of Trust to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid, and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Deed of Trust. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Deed of Trust shall not affect the legality, validity, or enforceability of any other provision of this Deed of Trust. Successors and Assigns. Subject to any limitations stated in this Deed of Trust on transfer of Grantor's interest, this Deed of Trust shall be binding upon and inure to the benefit of the parties, their successors and assigns. If ownership of the Property becomes vested in a person other than Grantor, Lender, without notice to Grantor, may deal with Grantor's successors with reference to this Deed of Trust and the Indebtedness by way of forbearance or extension without releasing Grantor from the obligations of this Deed of Trust or liability under the Indebtedness. Time is of the Essence. Time is of the essence in the performance of this Deed of Trust. Waive Jury. All parties to this Deed of Trust hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party. Waiver of Homestead Exemption. Grantor hereby releases and waives all rights and benefits of the homestead exemption laws of the State of Oregon as to all Indebtedness secured by this Deed of Trust. Commercial Deed of Trust. Grantor agrees with Lender that this Deed of Trust is a commercial deed of trust and that Grantor will not change the use of the Property without Lender's prior written consent. ATTACHMENT 6, PAGE 7 OF 10 DEED OF TRUST STATUTE OF FRAUDS. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDER CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY LENDER TO BE ENFORCEABLE. FORCED PLACE INSURANCE NOTICE. WARNING: UNLESS YOU PROVIDE US WITH EVIDENCE OF THE INSURANCE COVERAGE AS REQUIRED BY OUR CONTRACT OR LOAN AGREEMENT, WE MAY PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTEREST. THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT YOUR INTEREST. IF THE COLLATERAL BECOMES DAMAGED, THE COVERAGE WE PURCHASE MAY NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE AGAINST YOU. YOU MAY LATER CANCEL THIS COVERAGE BY PROVIDING EVIDENCE THAT YOU HAVE OBTAINED PROPERTY COVERAGE ELSEWHERE. YOU ARE RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED BY US. THE COST OF THIS INSURANCE MAY BE ADDED TO YOUR CONTRACT OR LOAN BALANCE. IF THIS COST IS ADDED TO YOUR CONTRACT OR LOAN BALANCE, THE INTEREST RATE PAYABLE UNDER THE UNDERLYING LOAN WILL APPLY TO THIS ADDED AMOUNT. THE EFFECTIVE DATE OF THE COVERAGE MAY BE THE DATE YOUR PRIOR COVERAGE LAPSED OR THE DATE YOU FAILED TO PROVIDE PROOF OF COVERAGE. THE COVERAGE WE PURCHASE MAY BE CONSIDERABLY MORE EXPENSIVE THAN INSURANCE YOU CAN OBTAIN ON YOUR OWN AND MAY NOT SATISFY ANY NEED FOR PROPERTY DAMAGE COVERAGE OR ANY MANDATORY LIABILITY INSURANCE REQUIREMENTS IMPOSED BY APPLICABLE LAW. (EACH REFERENCE TO "YOU" AND "YOUR" WILL REFER TO GRANTOR AND EACH REFERENCE TO "US" AND "WE" WILL REFER TO BENEFICIARY.) STATUTORY NOTICE. BEFORE SIGNING OR ACCEPTING THIS SECURITY INSTRUMENT, THE PERSON TRANSFERRING FEE TITLE SHOULD INQUIRE ABOUT THE PERSON'S RIGHTS, IF ANY, UNDER ORS 195.300, 195.301 AND 195.305 TO 195.336 AND SECTIONS 5 TO 11, CHAPTER 424, OREGON LAWS 2007, SECTIONS 2 TO 9 AND 17, CHAPTER 855, OREGON LAWS 2009, AND SECTIONS 2 TO 7, CHAPTER 8, OREGON LAWS 2010. THIS SECURITY INSTRUMENT DOES NOT ALLOW USE OF THE PROPERTY DESCRIBED IN THIS SECURITY INSTRUMENT IN VIOLATION OF APPLICABLE LAND USE LAWS AND REGULATIONS. BEFORE SIGNING OR ACCEPTING THIS SECURITY INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO VERIFY THAT THE UNIT OF LAND BEING TRANSFERRED IS A LAWFULLY ESTABLISHED LOT OR PARCEL, AS DEFINED IN ORS 92.010 OR 215.010, TO VERIFY THE APPROVED USES OF THE LOT OR PARCEL, TO DETERMINE ANY LIMITS ON LAWSUITS AGAINST FARMING OR FOREST PROACTICES, AS DEFINED IN ORS 30.930, AND TO INQUIRE ABOUT THE RIGHTS OF NEIGHBORING PROPRTY OWNERS, IF ANY, UNDER ORS 195.300, 195.301 AND 195.305 TO 195.336 AND SECTIONS 5 TO 11, CHAPTER 424, OREGON LAWS 2007, SECTIONS 2 TO 9 AND 17, CHAPTER 855, OREGON LAWS 2009, AND SECTIONS 2 TO 7, CAHPTER 8, OREGON LAWS 2010. DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Deed of Trust. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Deed of Trust shall have the meanings attributed to such terms in the Uniform Commercial Code: Beneficiary. The word "Beneficiary" means the Springfield Economic Development Agency (SEDA), and its successors and assigns. Deed of Trust. The words "Deed of Trust" mean this Deed of Trust among Grantor, Lender, and Trustee, and includes without limitation all assignment and security interest provisions relating to the Personal Property and Rents. Default. The word "Default" means the Default set forth in this Deed of Trust in the section titled "Default." Environmental Laws. The words "Environmental Laws" mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99- 499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto or intended to protect human health or the environment. Event of Default. The words "Event of Default" mean any of the events of default set forth in this Deed of Trust in the Events of Default section of this Deed of Trust. Grantor. The word "Grantor" means Blue McKenzie Apartments LLC and includes all co-signers and co -makers signing the Note. Hazardous Substances. The words "Hazardous Substances" mean materials that, because of their quantity, concentration, or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported, or otherwise handled. The words "Hazardous Substances" are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials, or waste as defined by or listed under the Environmental Laws. The term "Hazardous Substances" also includes, without limitation, petroleum, including crude oil, and any fraction thereof, and asbestos. Improvements. The word "Improvements" means all existing and future improvements, buildings, structures, mobile homes affixed on the Real Property, facilities, additions, replacements, and other construction on the Real Property. Indebtedness. The word "Indebtedness" means all principal, interest, and other amounts, costs, and expenses payable under the Note or Related Documents, together with all renewals of, extensions of, modifications of, consolidations of, and substitutions for the Note or Related Documents and ATTACHMENT 6, PAGE 8 OF 10 DEED OF TRUST any amounts expended or advanced by Lender to discharge Grantor's obligations or expenses incurred by Trustee or Lender to enforce Grantor's obligations under this Deed of Trust, together with interest on such amounts as provided in this Deed of Trust. Lender. The word "Lender" means Springfield Economic Development Agency (SEDA), its successors and assigns. Note. The word "Note" means the Promissory Note dated as of the date hereof, in the original principal amount of [$10,000,000.00] from Grantor to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the promissory note or agreement. Personal Property. The words "Personal Property" mean all equipment, fixtures, and other articles of personal property now or hereafter owned by Grantor, and now or hereafter attached or affixed to the Real Property; together with all accessions, parts, and additions to, all replacements of, and all substitutions for, any of such property; and together with all proceeds (including without limitation all insurance proceeds and refunds of premiums) from any sale or other disposition of the Property. Property. The word "Property" means collectively the Real Property and the Personal Property. Real Property. The words "Real Property" mean the real property, interests and rights, as further described in this Deed of Trust. Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan contracts or agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, collateral assignments and all other instruments, agreements, and documents, whether now or hereafter existing, executed in connection with the Indebtedness. Rents. The word "Rents" means all present and future rents, revenues, income, issues, royalties, profits, and other benefits derived from the Property. Trustee. The word "Trustee" means Kristina Kraaz, City of Springfield, City Attorney's Office, 225 Fifth Street, Springfield, OR 97477 and any substitute or Successor Trustees. GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS DEED OF TRUST, AND GRANTOR AGREES TO ITS TERMS AND CONDITIONS. GRANTOR: BLUE MCKENZIE APARTMENTS LLC, an Oregon limited liability company By: Northwest Sustainable Properties LLC, an Idaho limited liability company Its: Manager By: Jean-Pierre Veillet, Manager CORPORATE ACKNOWLEDGEMENT STATE OF OREGON ) COUNTY OF LANE ) This instrument was acknowledged before me on this day of 202_ by Jean-Pierre Veillet, as the Manager of Northwest Sustainable Properties LLC, an Idaho limited liability company, as the Manager of Blue McKenzie Apartments LLC, the person whose name is subscribed to this instrument, and acknowledged that he executed the same. Notary Public of Oregon My Commission Expires: REQUEST FOR FULL RECONVEYANCE (To be used only when obligations have been paid in full) ATTACHMENT 6, PAGE 9 OF 10 DEED OF TRUST To: Kristina Kraaz, Springfield City Attorney, Trustee The undersigned is the legal owner and holder of all indebtedness secured by this Deed of Trust. All sums secured by this Deed of Trust have been fully paid and satisfied. You are hereby directed, upon payment to you of any sums owning to you under the terms of this Deed of Trust or pursuant to any applicable statute, to cancel the Note secured by this Deed of Trust (which is delivered to you together with this Deed of Trust), and to reconvey, without warranty, to the parties designated by the terms of this Deed of Trust, the estate now held by you under this Deed of Trust. Please mail the reconveyance and Related Documents to: Grantor/Borrower Date: Beneficiary/Lender: By: ATTACHMENT 6, PAGE 10 OF 10 ASSIGNMENT OF PLANS, SPECIFICATIONS, REPORTS AND PERMITS THIS ASSIGNMENT OF PLANS, SPECIFICATIONS, REPORTS AND PERMITS (this "Assignment") is made as of [ ], 202[_] ("Effective Date") by Blue McKenzie Apartments LLC, an Oregon limited liability company ("Assignor"), for the benefit of Springfield Economic Development Agency ("Lender"). Recitals A. Lender has agreed to make a loan to Assignor in the maximum principal amount of $10,000,000.00 (the "Loan"). The Loan is being made pursuant to the terms and conditions of that certain SEDA Downtown Construction and Development Loan Contract, between Assignor, as borrower, and Lender, dated of event date herewith (the "Loan Contract"). Capitalized terms not defined herein shall have the meanings assigned to them in the Loan Contract. B. The Loan is evidenced by that certain Promissory Note of even date herewith in the maximum principal amount of [$10,000,000.00] made by Assignor in favor of Lender (the "Note") and is secured by, among other documents, a Line of Credit Instrument Deed of Trust, Security Agreement and Fixture Filing of even date herewith made by Assignor in favor of Lender (the "Deed of Trust"), encumbering Assignor's interest in certain real property described on Exhibit A attached hereto (the "Property"). C. Lender requires as a condition precedent to making the Loan that Assignor enter into this Assignment and Assignor wishes to grant to Lender a security interest, and collaterally assign, pledge, convey and set over unto Lender the collateral more particularly hereinafter described. Agreement NOW, THEREFORE, in consideration of the making of the Loan and as an inducement to Lender to do so, and for and in consideration of the mutual promises, covenants and agreements hereinafter set forth, Assignor and Lender agree as follows: 1. Creation of Security Interest. Assignor hereby grants to Lender a security interest in, and does hereby collaterally assign, pledge, convey and set over unto Lender, any and all of Assignor's right, title and interest, if any, in, to and under (a) all plans, specifications, surveys, architectural renderings and drawings, soil test reports, and other reports or examinations, (b) all service contracts, construction contracts, architect agreements, consulting agreements, maintenance contracts, management agreements, warranties, guaranties and the right to use all names now or hereafter used by Assignor, (c) all permits, certificates, licenses, approvals, contracts, agreements, entitlements and authorizations, and (d) all market analyses, appraisals and development and economic feasibility studies, which Assignor has, may have, or may subsequently directly or indirectly enter into, obtain or acquire in connection with the design, development and construction of improvements on the Property (collectively, the "Collateral"), it being understood that prior to the occurrence and continuation of an Event of Default by Assignor or as otherwise provided in the Loan Contract, Lender shall not exercise any right in and to the Collateral, and Assignor shall have the right to use the Collateral and enforce all of the terms, covenants, conditions and agreements therein contained, without interruption by Lender, and Lender shall take such action as may be reasonably required to permit Assignor to use the Collateral and ATTACHMENT 7, PAGE 1 OF 5 so enforce said terms, covenants, conditions and agreements. Assignor shall ensure that each and every item that is part of the Collateral is freely assignable to Assignee by its express terms. 2. Assignor's Liabilities. This Assignment is made and given as collateral security for the prompt payment when due of any and all indebtedness, obligations and liabilities of Assignor to Lender, and evidenced by or secured by or otherwise provided in the Loan Contract, the Note, the Deed of Trust and the other Loan Documents, whether such indebtedness, obligations or liabilities are now existing or hereafter created, direct or indirect, absolute or contingent, joint or several, due or to become due, howsoever created, evidenced or arising and howsoever acquired by Lender, and any and all renewals, extensions or refinancings thereof (all of the foregoing are hereinafter collectively referred to as the "Indebtedness"). Upon full payment by Assignor of the Indebtedness, this Assignment and the lien or charge created hereby or resulting herefrom automatically shall cease to exist. 3. Representations, Warranties and Covenants of Assignor. Assignor represents, warrants and covenants to Lender that: (a) Assignor is the owner of all right, title and interest of the owner under all of the documents, instruments, agreements and contracts constituting the Collateral and, so long as any portion of the Indebtedness remains unpaid, Assignor shall remain liable for all costs, fees and expenses which may be or become due and payable under the Collateral; (b) except to Senior Lender in connection with the Senior Loan Documents, Assignor shall not sell, transfer, assign, pledge, encumber or mortgage all or any portion of the Collateral or any interest therein without the prior written consent of Lender; (c) Assignor shall reimburse Lender for all reasonable costs, expenses and fees, including court costs and reasonable attorneys' fees, incurred for any action taken by Lender to remedy an Event of Default or to enforce Lender's rights hereunder; (d) Assignor will punctually and promptly perform all covenants, agreements and conditions required to be performed by it under this Assignment and all of the documents, instruments, agreements and contracts constituting the Collateral; (e) Assignor agrees to take reasonable efforts to enforce performance by the other party to each document, instrument, agreement or contract constituting the Collateral of each and every material obligation, covenant, condition and agreement to be performed by such other party; and (f) Assignor agrees promptly to deliver to Lender, following written request therefor, true, complete and correct copies of each agreement or contract comprising the Collateral. 4. Limitation of Lender's Liability. The interest of Assignor in the Collateral is assigned and transferred to Lender by way of collateral security only, and Lender by its acceptance hereof shall not be deemed to have assumed or become liable for any of the obligations or liabilities of Assignor under the Collateral, whether provided for by the terms thereof, arising by operation of law or otherwise. Assignor hereby acknowledges that Assignor shall remain liable for the due performance of Assignor's obligations under the documents, instruments, agreements and contracts constituting the Collateral to the same extent as though this Assignment had not been made. It is expressly intended, understood and agreed that this Assignment, the Loan Contract, the Note, the Deed of Trust and the other Loan Documents are made and entered into for the sole protection and benefit of Lender and Assignor, and their respective successors and assigns (but in the case of assigns of Assignor, only to the extent permitted hereunder), and no other person or persons shall have any right of action hereunder or rights to the proceeds of the Loan at any time; that no third party shall under any circumstances be entitled to any equitable lien on the undisbursed proceeds of the Loan at any time. The relationship between Lender and Assignor is solely that of a lender and borrower, and nothing contained herein shall in any manner be construed as making the parties hereto partners or joint venturers or creating any other relationship other than lender and borrower. ATTACHMENT 7, PAGE 2 OF 5 5. Events of Default. An "Event of Default" shall be deemed to have occurred under this Assignment upon the occurrence of an "Event of Default" under the Deed of Trust. 6. Remedies. At any time upon or following the occurrence of any one or more Events of Default hereunder, Lender shall be entitled to exercise any and all rights and remedies provided under the Note, the Deed of Trust or the other Loan Documents. 7. Further Assurances. Assignor will, from time to time, execute, acknowledge and deliver such additional documents and instruments and take such other actions as may reasonably be required or requested by Lender for carrying out the intention of or facilitating the performance of this Assignment. Assignor hereby irrevocably authorizes Lender at any time, and from time to time, to file in any jurisdiction any initial financing statements and amendments thereto that indicate the Collateral is comprised of all assets of the debtor or words of similar effect. 8. Indemnity. Assignor hereby agrees to indemnify, defend and hold Lender harmless from and against any and all liability, expense, cost or damage which Lender may incur by reason of any act or omission of Assignor under any of the documents, instruments, or agreements constituting the Collateral; provided, however, the foregoing indemnification shall not apply to any instance in which Lender has committed gross negligence or willful misconduct. 9. Counterparts; Electronic Signatures. This Assignment may be executed in any number of counterparts, all of which shall be taken to be one and the same instrument, for the same effect as if all parties hereto had signed the same signature page. Receipt of an executed signature page to this Assignment by electronic transmission shall constitute effective delivery thereof. 10. Miscellaneous. This Assignment and all rights and liabilities hereunder and in and to any and all Collateral shall be binding upon and inure to the benefit of Lender and its successors and assigns, and shall be binding upon and inure to the benefit of Assignor and its successors and permitted assigns. This Assignment and all rights and obligations hereunder, including matters of construction, validity and performance, shall be governed by the laws of the State of Oregon. All provisions of this Assignment shall be deemed valid and enforceable to the extent permitted by law. Any provision or provisions of this Assignment which are held unenforceable, invalid or contrary to law by a court of competent jurisdiction, shall be of no force or effect, and in such event each and all of the remaining provisions of this Assignment shall subsist and remain and be fully effective according to the terms of this Assignment as though such invalid, unenforceable or unlawful provision or provision had not been included in this Assignment. (Remainder of Page Intentionally Left Blank, Signature Page Follows) ATTACHMENT 7, PAGE 3 OF 5 IN WITNESS WHEREOF, Assignor and Lender have executed this Assignment as of the Effective Date. Assignor: Lender: 4 Blue McKenzie Apartments LLC an Oregon limited liability company By: Northwest Sustainable Properties LLC, an Idaho limited liability company Its: Manager By: Jean-Pierre Veillet, Manager Springfield Economic Development Agency By: Name: Title: EXHIBIT A Property Legal Description (Map Identification and Tax Lot No. 17-03-35-42-02300) Commencing at a point 105 feet West of the Southeast corner of Block 72 of the SPRINGFIELD INVESTMENT AND POWER COMPANY'S ADDITION TO SPRINGFIELD, as platted and recorded in Book 25, Page 306, Lane County Oregon Deed Records; thence running West 100 feet, thence North 119 feet; thence East 100 feet; thence South 119 feet to the point of beginning, all in Lane County, Oregon. EXCEPTING THEREFROM: the East 15 feet of the above described parcel. ALSO: the East one-half of the now vacated alley abutting the above described property on the West. ALSO: that portion of the South one-half of the East-West alley abutting & contiguous with the North boundary per Ordinance #5408. 5