Call for Special Meeting of the Blue Mountain School Assembly Meeting

Wednesday, April 10, 2002, 7:00-9:00 pm

The Board of Directors, as empowered by Article III.B of the Bylaws of Blue Mountain School, Inc., calls a Special Assembly Meeting. The meeting shall occur at Blue Mountain School, 76132 Blue Mountain School Road, Cottage Grove, Oregon at 7:00 pm on Wednesday, April 10, 2002.

Agenda:

1. Motion to approve the terms and conditions of a "lease and option to purchase" agreement between Blue Mountain School, Inc. and Dave and Carol Rogers, owners of the property known as 76132 Blue Mountain School Road. (Detailed information about this proposal is given in several articles below.)

   The Board of Directors

2. Motion to change the Staff Hiring Policy, Part I (A) to allow the "How Are We Doing?" meetings in the daytime to be at a time recommended by SPEC and approved by the School Meeting.

SPEC

Summary of Main Elements of the "Lease and Option to Purchase" Agreement proposed in Agenda Item #1

As charged by the Assembly, Laura Stine has been working with Jim Belknap of Territorial Land ... to create a proposal for buying Blue Mountain's site and bringing it up to code. Jim Belknap has been negotiating with Dave and Carol Rogers on the school's behalf in consultation with the Board of Directors. There is a more detailed description of this proposal below, but the main points are:

1. It renews our lease.

2. It gives Blue Mountain the option to purchase the property at any time within the next 3 years for $265,000.

Background Information

• BMS has a 5 year lease with the Rogers. It will end in summer, 2003.

• The school property is zoned "light industrial" which does not allow use as a school. We have a temporary permission to use the site for 5 years as a school, which expires in summer, 2003. The change from "light industrial" to "rural residential with a conditional use for a school" will require approval from the Lane County Planning Department.

• Lane County has made clear that in order to zone us permanently for use as a school, we'd have to make a number of code improvements. SPEC estimates the cost of the code improvements at $65,000.

• Estimates for making the zone changes range as high a $20,000.

• Various Assembly members and committees have had conversations with the Rogers about buying the property over the years. In those conversations, the Rogers have asked anywhere from $325,000 to $425,000.

• In the Summer of 2000, an ad hoc committee of Assembly members, including Tom Rose, Glen Taylor and Steve Johnston, estimated the value of the property to be around $275,000.

Further Details of the "Lease and Option to Purchase" Agreement

We will have the option to purchase at a price of $265,000 anytime in the next 3 years,

or after that at a price of $265,000 plus $1000 for each month beyond three years. In exchange for this, we would need to give the Rogers:

• $10,000 which would be credited to the purchase price if we buy the property, but which we would lose if we decided not to purchase the property.

• Credit for the remainder of the money they borrowed from us to re-roof the

  building (about $16,000).

• Higher lease payments around $3,500 per month (we currently pay around $2,900). If we buy the property within two years, we will get $500 a month credit toward the purchase price to make up for the higher lease payment.

• Commitments to meet two major financial obligations the Rogers have coming up in November, 2003 ($70,000) and October, 2004 ($50,000) if we have not yet purchased by those dates and want to keep our option to buy the property alive.
  
  This is the most complicated part of the deal. As noted above, the Rogers have borrowed two sums of money with the property as their collateral. If we purchase the property before these two payments are due, we will either need to pay off the loans or assume them. The interest rate is quite high (15%) so it would be better to borrow money at a lower rate than to assume the Rogers' loans.
  
  If we have not exercised the option and purchased the property by the time the first loan matures (November, 2003) and we wish to keep our option to buy alive, we will need to pay off that loan (a $70,000 payment) for the Rogers. If we purchase

  after November 2003, the $70,000 paid will be considered as part of a down payment, lowering the amount of money owed to the Rogers. And similarly, if we still haven't exercised the option to buy by October 3, 2004, we will need to make the $50,000 payment which in turn will be applied to the purchase if we do finally purchase.
  
  

Under the proposed agreement, the Rogers will be required to do the following steps for us.

• Give us the option to buy at $265,000 within three years (or slightly more within 5 years as described above).

• Agree not to borrow any more money using the site as collateral.

• Further, if we exercise the option and purchase the property, the Rogers will finance the balance we owe them, minus the two large sums they've borrowed against the property, at favorable rates, not less than 6% nor more than 8%. They are willing to assume a second position allowing us to place a first mortgage on the property, making bank financing possible if we want to refinance the loan payments due in November, 2003 and October, 2004.

• We will have the right to terminate the lease at the end of a school year if we discover during that school year that the zoning issues cannot be resolved.

Reasons for the assembly to consider this proposal

The preference of the Board of Directors would be to go forward as quickly as possible to purchase the property. But the zoning issues need to be addressed first to make sure the property can legally accommodate the school on a long -term basis. This is why

we are presenting a proposal that gives us an option to buy, and we hope the assembly will decide to purchase the property as soon as the zoning is resolved.

Advantages to this proposal:

1. We believe, based onJim Belknap's research and the work done several years ago by the ad-hoc site committee that this purchase price is reasonable.

2. It is our sense that the community generally wishes to keep the current site. In addition, there are no other sites known to be available that seem superior.

3. The financial details of this proposal allow us to purchase the site without crippling our annual operating budget, although we will have to find some way to fund the payments that come due in November 2003 and October 2004. One reasonable

   option should be a mortgage, and this is made easier by the fact that the Rogers are willing to take a second position on the part of the purchase that they are willing to finance.

We expect to have copies of an earnest money agreement for examination at the

meeting. If anyone wishes to have more information than what is presented here,

please contact Laura Stine at 942-4104 or the Assembly Secretary (Hal Sadofsky at 431-1736). One of these people should either have the information you want at their disposal, or be able to find it.