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*Check Summary Register©

CITY OF COLOGNE 05/03/18 10:25 AM

Page 1

May 2018

Name Check Date Check Amt

10100 Checking

Paid Chk# 022989 AFLAC 5/7/2018 $230.04 Employee Flex Plan

Paid Chk# 022990 ALLISON, CHUCK 5/7/2018 $50.00 Refund Deposit

Paid Chk# 022991 ALPHA WIRELESS COMMUNICA 5/7/2018 $4,200.00 CFD Radio Repairs

Paid Chk# 022992 BIGAOUETTE, CINDY 5/7/2018 $50.00 Refund Deposit

Paid Chk# 022993 BOLTON & MENK, INC 5/7/2018 $28,511.50 Misc. Engineering Fees

Paid Chk# 022994 CARVER COUNTY BROADBAND 5/7/2018 $8,629.40 Internet Access/new WTF and mo

Paid Chk# 022995 CENTERPOINT ENERGY 5/7/2018 $918.23 Utilities-Gas

Paid Chk# 022996 CORE & MAIN 5/7/2018 $2,100.00 Annual Support Fee

Paid Chk# 022997 DIRECTV 5/7/2018 $179.51 Satellite Radio

Paid Chk# 022998 ECM PUBLISHERS, INC. 5/7/2018 $677.50 Publication Fees

Paid Chk# 022999 EIDE BAILLY LLP 5/7/2018 $18,000.00 Annual Audit

Paid Chk# 023000 HAWKINS, INC 5/7/2018 $2,101.25 Chemicals

Paid Chk# 023001 HEALTH PARTNERS 5/7/2018 $3,293.15 Employee Health Insurance

Paid Chk# 023002 HOLIDAY COMPANIES 5/7/2018 $87.62 Fuel

Paid Chk# 023003 LOFFLER-131511 5/7/2018 $59.29 Monthly Copier Lease

Paid Chk# 023004 MELCHERT, HUBERT,SJODIN, P 5/7/2018 $397.50 CFD Legal Fees

Paid Chk# 023005 METRO WEST INSPECTION SER 5/7/2018 $4,347.60 Building Inspection

Paid Chk# 023006 MID COUNTY CO-OP 5/7/2018 $50.00 Refund Deposit

Paid Chk# 023007 MN NCPERS LIFE INSURANCE 5/7/2018 $80.00 Employee Life Insurance

Paid Chk# 023008 MN VALLEY ELECTRIC COOPER 5/7/2018 $166.47 Utilities-Electricity

Paid Chk# 023009 MN VALLEY TESTING LABS 5/7/2018 $399.00 Analysis

Paid Chk# 023010 MSFCA 5/7/2018 $235.00 CFD Training/Education

Paid Chk# 023011 OTTO, DAWN 5/7/2018 $50.00 Refund Deposit

Paid Chk# 023012 OVERLINE & SONS, INC. 5/7/2018 $3,577.50 Jetting Service

Paid Chk# 023013 PROPET DISTRIBUTORS INC. 5/7/2018 $236.90 Park Supplies

Paid Chk# 023014 QUILL 5/7/2018 $49.00 Office Supplies

Paid Chk# 023015 RANDYS SANITATION INC 5/7/2018 $532.07 Refuse Pick-up

Paid Chk# 023016 ROLF, BEV 5/7/2018 $50.00 Refund Deposit

Paid Chk# 023017 SCHMITT, RITA 5/7/2018 $50.00 Refund Deposit

Paid Chk# 023018 SIEGLE HAULING & EXCAVATIN 5/7/2018 $360.00 Snow hauling

Paid Chk# 023019 SNIDER, MELISSA 5/7/2018 $50.00 Refund Deposit

Paid Chk# 023020 TECHSTAR IT SOLUTIONS INC 5/7/2018 $1,160.00 Monthly Contract Fee

Paid Chk# 023021 UNITED FARMERS COOPERATIV 5/7/2018 $38.97 Operating Supplies

Paid Chk# 023022 VERIZON WIRELESS 5/7/2018 $216.06 CFD - Communication

Paid Chk# 023023 VISA 5/7/2018 $679.96 CFD Misc. Expenses

Paid Chk# 023024 VOS CONSTRUCTION, INC. 5/7/2018 $200.00 CCC-Lift Rental

Paid Chk# 023025 WACONIA CHOIR BOOSTERS 5/7/2018 $100.00 Refund Deposit

Paid Chk# 023026 XCEL ENERGY 5/7/2018 $10,737.89 Utilities-Electricity

Paid Chk# 023027 MCFOA 5/7/2018 $45.00 Education/Training

Paid Chk# 023028 MID COUNTY CO-OP 5/7/2018 $1,340.00 Fuel

Paid Chk# 023029 QUALITY FLOW SYSTEMS, INC 5/7/2018 $10,989.00 Pump Purchase/Repairs

Paid Chk# 023030 QUILL 5/7/2018 $79.99 Office Supplies

Total Checks $105,305.40

City of Cologne, Payroll May 7, 2018

City of Cologne, Payroll, EFT Payments

EMPLOYEE 4/16/18 EFT $8,659.99 April 16, 2018 PayrollIRS 4/16/18 EFT $3,102.69 April 16, 2018 PayrollMN DEPT OF REVENUE 4/16/18 EFT $578.86 April 16, 2018 PayrollPERA 4/16/18 EFT $1,801.27 April 16, 2018 PayrollEMPLOYEE 5/1/18 EFT $8,984.63 May 1, 2018 PayrollIRS 5/1/18 EFT $3,229.37 May 1, 2018 PayrollMN DEPT OF REVENUE 5/1/18 EFT $610.40 May 1, 2018 PayrollPERA 5/1/18 EFT $1,868.10 May 1, 2018 PayrollFIRST COMMUNITY BANK 5/1/18 EFT $322.92 Employee Health SavingsSECURITY BANK AND TRUST 5/1/18 EFT $545.83 Employee Health SavingsKLEIN BANK 5/1/18 EFT $322.92 Employee Health SavingsMN DEFERRED COMP 5/1/18 EFT $1,342.80 Employee Deferred CompMN DEPT OF LABOR AND INDUSTRY 4/30/18 EFT 927.05 1st Qtr Building Surcharge

Total $32,296.83

City of Cologne, Minnesota Tax Increment Financing Plan for Tax Increment Financing (Economic Development) District No. 2-1 Within Development District No. 2 (Modern Design TIF Project) Drafted: May 3, 2018 Public Hearing Scheduled: May 7, 2018 Prepared by: SPRINGSTED INCORPORATED 380 Jackson Street, Suite 300 St. Paul, MN 55101-2887 (651) 223-3000

TABLE OF CONTENTS Section Page(s) A. Definitions ................................................................................................................................................................. 1 B. Statutory Authorization................................................................................................................... 1 C. Statement of Need and Public Purpose .............................................................................................. 1 D. Statement of Objectives ................................................................................................................. 1 E. Designation of Tax Increment Financing District as an Economic Development District .................................. 1 F. Duration of the TIF District .............................................................................................................. 2 G. Property to be Included in the TIF District ........................................................................................... 2 H. Property to be Acquired in the TIF District .......................................................................................... 3 I. Specific Development Expected to Occur Within the TIF District ................................................................ 4 J. Findings and Need for Tax Increment Financing ................................................................................... 3 K. Estimated Public Costs .................................................................................................................. 6 L. Estimated Sources of Revenue ........................................................................................................ 6 M. Estimated Amount of Bonded Indebtedness ....................................................................................... 6 N. Original Net Tax Capacity ............................................................................................................... 6 O. Original Tax Capacity Rate ............................................................................................................. 7 P. Projected Retained Captured Net Tax Capacity and Projected Tax Increment ............................................. 7 Q. Use of Tax Increment .................................................................................................................... 8 R. Excess Tax Increment ................................................................................................................... 8 S. Tax Increment Pooling and the Five Year Rule .................................................................................... 9 T. Limitation on Administrative Expenses ............................................................................................... 9 U. Limitation on Property Not Subject to Improvements - Four Year Rule ..................................................... 10 V. Estimated Impact on Other Taxing Jurisdictions ................................................................................. 10 W. Prior Planned Improvements ........................................................................................................ 11 X. Development Agreements ............................................................................................................ 11 Y. Assessment Agreements .............................................................................................................. 11 Z. Modifications of the Tax Increment Financing Plan .............................................................................. 11 AA. Administration of the Tax Increment Financing Plan .......................................................................... 12 AB. Financial Reporting and Disclosure Requirements ............................................................................ 12 Map of the Proposed TIF District within Development District No. 2 .................................................. EXHIBIT I Assumptions Report .......................................................................................................... EXHIBIT II Projected Tax Increment Report ......................................................................................................... EXHIBIT III Estimated Impact on Other Taxing Jurisdictions Report ..................................................................... EXHIBIT IV Market Value Analysis Report ............................................................................................................. EXHIBIT V Projected Pay As You Go Note Report ............................................................................................... EXHIBIT VI

City of Cologne, Minnesota

SPRINGSTED Page 1

Section A Definitions The terms defined in this section have the meanings given herein, unless the context in which they are used indicates a different meaning: "City" means the City of Cologne, Minnesota; also referred to as a "Municipality". "City Council" means the City Council of the City of Cologne; also referred to as the "Governing Body". "County" means Carver County, Minnesota. "Development District" means Municipal Development District No. 2 in the City, which is described in the corresponding Development Program. "Development Program" means the Development Program for the Development District. "Project Area" means the geographic area of the Development District. "School District" means Independent School District No. 108, Minnesota. "State" means the State of Minnesota. "TIF Act" means Minnesota Statutes, Sections 469.174 through 469.1794, both inclusive. "TIF District" means Tax Increment Financing (Economic Development) District No. 2-1 "TIF Plan" means the tax increment financing plan for the TIF District (this document). Section B Statutory Authorization See Development Program for the Municipal Development District. Section C Statement of Need and Public Purpose See Development Program for the Municipal Development District. Section D Statement of Objectives See Development Program for the Municipal Development District. Section E Designation of Tax Increment Financing District as an Economic Development District Economic development districts are a type of tax increment financing district which consist of any project, or portions of a project, which the City finds to be in the public interest because:

(1) it will discourage commerce, industry, or manufacturing from moving their operations to

another state or municipality; or (2) it will result in increased employment in the state; or (3) it will result in preservation and enhancement of the tax base of the state; or


SPRINGSTED Page 2

4) it satisfies the requirements of a workforce housing project under Section 469.176, subdivision 4c, paragraph (d).

The TIF District qualifies as an economic development district in that the proposed development described in this TIF Plan (see Section I) meets the criteria listed above in (2) and (3). Without establishment of the TIF District, the proposed development would not occur within the City. The proposed development will also result in increased employment and enhancement of the tax base in both the City and the State. Tax increments from an economic development district must be used to provide improvements, loans, subsidies, grants, interest rate subsidies, or other assistance in which at least 85% of the square footage of the facilities to be constructed are used for any of the following purposes: (1) manufacturing or production of tangible personal property, including processing, resulting in the

change of the condition of the property; (2) warehousing, storage and distribution of tangible personal property, excluding retail sales; (3) research and development related to the activities listed in (1) or (2) above; (4) telemarketing if that activity is the exclusive use of the property; (5) tourism facilities (see M.S. Section 469.174, Subd. 22); (6) space necessary for and related to the activities listed in (1) through (5) above; or (7) a workforce housing project that satisfies the requirements of paragraph (d) of Minnesota Statutes

Section 169.176, subdivision 4c. In addition to the uses specified above, tax increments may also be used to provide assistance for up to 15,000 square feet of any separately owned commercial facility located within a "small city" (see M.S. Section 469.176, Subd. 4c). Tax increments from the TIF District will be used to provide financial assistance to the proposed development (see Section I), in which over 85% of the square footage of the facilities to be constructed will be used for manufacturing, warehousing, or research or other purposes as listed in (1), (2), & (3) above. Section F Duration of the TIF District Economic development districts may remain in existence 8 years from the date of receipt by the City of the first tax increment. The City anticipates that the TIF District will remain in existence for a period of 9 total years (projected to be through the year 2028). Modifications of this plan (see Section Z) shall not extend these limitations. All tax increments from taxes payable in the year the TIF District is decertified shall be paid to the City. Section G Property to be Included in the TIF District The TIF District is an approximately 2.45 acre area of land located within the Project Area. A map showing the location of the TIF District is shown in Exhibit I. The boundaries and area encompassed by the TIF District are described below:

Parcel ID Number Legal Description 401000161 Section 13 Township 115 Range 025 Block 14.

Beginning at the Northwest corner of Block 14; thence South 88 degrees East on Northerly Line of Block 14 to Northeast corner of Block 14; thence North on Northerly


SPRINGSTED Page 3

extension of East line Block 14 45.66 feet thence Southwesterly 143.12 feet to point of the beginning.

400500620 Section 13 Township 115 Range 025 Lots 1 & 2 Block 14, Lot 1 Block 16 Excluding: South 5 feet & Also Including: Vacated Mill Street Lying Between Easterly Line Of John St & Westerly Line Of Paul Street & Also Including: South 5 feet Lot 1 & All Of Lots 2, 3 & 4 Block 16 & Including Vacated John Street. Resolution No 07-18

400500635 That part of vacated John Street, according to the recorder plat of Village of Benton, City of Cologne, Carver County, Minnesota, described as follows: Commencing at the northeast corner of Block 15, said plat of Village of Benton City; thence South 02 degrees 29 minutes 50 seconds East (assumed bearing) on the east line of said Block 15, a distance of 59.99 feet; thence North 88 degrees 55 minutes 09 seconds East, 5.41 feet to the point of beginning; thence North 88 degrees 55 minutes 09 seconds East, 19.60 feet to a point on the centerline of said vacated John Street; thence South 02 degrees 29 minutes 50 seconds east on said centerline, 79.80 feet; thence South 88 degrees 55 minutes 09 seconds West, 7.00 feet; thence North 03 degrees 10 minutes 35 seconds West 40.00 feet; thence North 19 degrees 18 minutes 36 seconds West, 41.91 feet to the point of beginning.

401000160 That part of the right-of-way of the Chicago, Milwaukee, St. Paul and Pacific Railroad, in the South Half of the Northwest Quarter of Section 13, Township 115 North, Range 25 West of the 5th Principal Meridian, and being parts of the following described properties: Lots 1, 2, 3, and 4, Block 13, Village of Benton City, now Cologne, according to the recorder plat thereof; The alley in said Block 13; Mill Street as dedicated in the recorded plat of the Village of Benton City now Cologne; The South Half of the Northwest Quarter of said Section 13; said right of way is described as follows: Beginning at a point on the West line of said Black 13, distant 44.03 feet Northerly from the Southwest corner of said Block 13; thence on an assumed bearing of South, along said West line and its Southerly extension, a distance of 88.65 feet to the intersection with a line 156.50 feet Southerly of, measured at a right angle to and parallel with the center line of the existing westbound main track of said railroad; thence North 75 degrees 19 minutes 08 seconds East, along said parallel line, a distance of 320.69 feet, to the South line of Lot 1, in said Block 13; thence South 88 degrees 35 minutes 00 seconds East along the South line of said Lot 1, a distance of 2.34 feet to the Southeast corner of said Lot 1; thence on a bearing of North, along said East line, a distance of 56.40 feet to the Northeast corner of said Block 13; thence South 88 degrees 35 minutes 00 seconds East, along the easterly extension of the North line of said Block 13 and the North line of Block 14 in said plat, a distance of 190.00 feet to the Northeast corner of said Block 14; thence on a bearing of North, along the Northerly extension of the East line of said Block 14, a distance of 45.66 feet; thence South 77 degrees 55 minutes 32 seconds West a distance of 143.12 feet; thence South 80 degrees 34 minutes 10 seconds West a distance of 369.89 feet to the point of beginning.

400500640 Section 13 Township 115 Range 025 Lot 014 Block 015 and including part of vacated adjacent Mill Street. Resolution No 07-18

The area encompassed by the TIF District shall also include all street or utility right-of-ways located upon or adjacent to the property described above. Section H Property to be Acquired in the TIF District The City may acquire and sell any or all of the property located within the TIF District. The City currently does not own any property within the TIF District, and does not anticipate acquiring any property.


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Section I Specific Development Expected to Occur Within the TIF District The proposed development is expected to consist of the demolition of an existing building and an 18,200 square foot expansion to an existing manufacturing and warehouse facility. At least 85% of the facility will be used for manufacturing and warehousing, with less than 15% available for office space. The development will result in increased employment within the City, in compliance with statutory requirements. It is anticipated tax increment will be used to finance a portion of the TIF eligible costs related to the development of the site. In addition, the City anticipates using available tax increment for related administrative expenses, potential pooling for TIF-eligible improvements outside of the boundaries of the district but within the Project Area for eligible purposes set forth in Minn. Stat. section 469.176 subd. 4c., and any other eligible expenditures associated with the development of the site. The project is expected to be fully constructed in 2018, and be 100% assessed and on the tax rolls as of January 2, 2019 for taxes payable in 2020. The facility is anticipated to generate the receipt of first increment in 2020. At the time this document was prepared there were no signed construction contracts with regards to the above described development. Section J Findings and Need for Tax Increment Financing In establishing the TIF District, the City makes the following findings: (1) The TIF District qualifies as an economic development district;

See Sections E and I of this document for the reasons and facts supporting this finding.

(2) The proposed development, in the opinion of the City, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future, and the increased market value of the site that could reasonably be expected to occur without the use of tax increment would be less than the increase in market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the TIF District permitted by the TIF Plan.

Factual basis: Proposed development not expected to occur:

The proposed development is expected to consist of an 18,200 square foot expansion to an existing manufacturing and warehousing facility. At least 85% of the facility will be used for manufacturing and warehousing, with less than 15% available for office space. The proposed developer of the site has submitted information to the city demonstrating that the development of the site is not financially feasible without the assistance provided in this TIF Plan.

The City has determined that the proposed development would not occur but for the financial assistance provided in this TIF Plan because of the increased costs related to the redevelopment of the site for the proposed expansion. Due to the high costs of investment for the proposed development, including site improvements and demolition costs incurred by the developer in conjunction with development of the project, the developer has stated that the project as proposed would not occur without the financial assistance provided by the City, as it would not be economically feasible without financial assistance. The City finds the use of tax increment necessary to finance a portion of the costs associated with the redevelopment of the site. The City anticipates providing financial assistance through the use of pay-as-you-go revenues, though reserves the right to utilize interfund loans and potential bond issuance as additional means for providing financial assistance.


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No higher market value expected:

The proposed development, in the opinion of the City, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future, and the increased market value of the site that could reasonably be expected to occur without the use of tax increment would be less than the increase in market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the TIF District permitted by the TIF Plan; The proposed development is expected to consist of a 18,200 square foot expansion to an existing manufacturing and warehouse facility. The increased market value of the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the TIF District permitted by the TIF Plan. Without improvements the City has no reason to expect that significant development would occur without assistance similar to that provided in this plan. For the same reasons that the desired development described above is not feasible without tax increment assistance, the City believes that no alternative development is likely to occur without similar assistance. Almost any other development of the site would require the same demolition and site preparation costs. Therefore, the City concludes as follows: The proposed development, in the opinion of the City, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future.

To summarize the basis for the City’s findings regarding alternative market value, in accordance with

Minnesota Statutes, Section 469.175, Subd. 3(d), the City makes the following determinations:

a. The City’s estimate of the amount by which the market value of the site will increase without the use of tax increment financing is $0 (for the reasons described above), except some unknown amount of appreciation.

b. If the proposed development to be assisted with tax increment occurs in the District, the

total increase in market value would be approximately $800,800, including the value of the building (See Exhibit V).

c. The present value of gross tax increments from the District for the maximum duration of

the district permitted by the TIF Plan is estimated to be $85,419 (See Exhibit V). d. Even if some development other than the proposed development were to occur, the City

finds that no alternative would occur that would produce a market value increase greater than $715,381 (the amount in clause b less the amount in clause c) without tax increment assistance.

(3) The TIF Plan would afford maximum opportunity, consistent with the sound needs of the City as a

whole, for development of the Project Area by private enterprise. Factual basis: The proposed development is the construction of an approximately 18,200 square foot

expansion to an existing manufacturing and warehouse facility to be constructed in the Project Area that is expected to create approximately 5 to 10 or more new jobs in the City and the State, while also retaining 45 existing jobs within the City, plus create substantial new tax base for the City and the State. The development clearly meets the City’s economic development goals in terms of land use, job retention, and wage levels.

(4) The TIF Plan conforms to general plans for development of the City as a whole. Factual basis: The City Planning Commission has determined that the development proposed in the TIF

Plan conforms to the City comprehensive plan. Section K Estimated Public Costs


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The estimated public costs of the TIF District are listed below. Such costs are eligible for reimbursement from tax increments of the TIF District.

Demolition, Site Improvements/Preparation Costs, and other Eligible Improvements $73,400 Pay-go Note Interest Payments 29,703 Administrative expenses 11,457 Total $114,560

The City reserves the right to administratively adjust the amount of any of the items listed above or to incorporate additional eligible items, so long as the total estimated public cost ($114,560) is not increased. The City also reserves the right to fund any of the identified costs with any other legally available revenues, but anticipates that such costs will be primarily financed with tax increments. Section L Estimated Sources of Revenue

Tax increment revenue* $114,560 Interest on invested funds 0 Other 0 Total $114,560

* Net of State Auditor Deduction The City anticipates providing financial assistance to the proposed development through the use of a pay-as-you-go note. As tax increments are collected from the TIF District in future years, a portion of these taxes will be distributed to the developer/owner as reimbursement for public costs incurred (see Section K). The City reserves the right to finance any or all public costs of the TIF District using pay-as-you-go assistance, internal funding, general obligation or revenue debt, or any other financing mechanism authorized by law. The City also reserves the right to use other sources of revenue legally applicable to the Project Area to pay for such costs including, but not limited to, special assessments, utility revenues, federal or state funds, and investment income. Section M Estimated Amount of Bonded Indebtedness The maximum principal amount of bonds (as defined in the TIF Act) secured in whole or part with tax increment from the TIF District is $114,560. The City currently plans to finance the improvements and eligible reimbursable costs in the form of one or more pay-as-you go revenue notes, but reserves the right to issue bonds in any form, including without limitation any interfund loan with interest not to exceed the maximum permitted under Section 469.178, subd. 7 of the TIF Act. Section N Original Net Tax Capacity The County Auditor shall certify the original net tax capacity of the TIF District. This value will be equal to the total net tax capacity of all property in the TIF District as certified by the State Commissioner of Revenue. For districts certified between January 1 and June 30, inclusive, this value is based on the previous assessment year. For districts certified between July 1 and December 31, inclusive, this value is based on the current assessment year. The City intends to file the request for certification prior to July 1, 2018. Therefore, the original net tax capacity will be the net tax capacity as of January 2, 2017. The Estimated Market Value of the property within the TIF District as of January 2, 2017, for taxes payable 2018 (for purposes of estimate TIF revenue) is $1,096,900. Upon


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establishment of the TIF District it is estimated that the original net tax capacity of the TIF District will be $20,916 based on a commercial classification. Each year the County Auditor shall certify the amount that the original net tax capacity has increased or decreased as a result of: (1) changes in the tax-exempt status of property; (2) reductions or enlargements of the geographic area of the TIF District; (3) changes due to stipulation agreements or abatements; or (4) changes in property classification rates. Section O Original Tax Capacity Rate The County Auditor shall also certify the original tax capacity rate of the TIF District. This rate shall be the sum of all local tax rates that apply to property in the TIF District. This rate shall be for the same taxes payable year as the original net tax capacity. In future years, the amount of tax increment generated by the TIF District will be calculated using the lesser of (a) the sum of the current local tax rates at that time or (b) the original tax capacity rate of the TIF District. The sum of all local tax rates that apply to property in the TIF District, for taxes levied in 2017 and payable in 2018 shall be the original tax capacity assuming the request for certification is made prior to June 30, 2018. The County Auditor shall certify the amount for taxes payable 2018 as the original tax capacity rate of the TIF District. For purposes of estimating the tax increment generated by the TIF District, the sum of the local tax rates for taxes levied in 2017 and payable in 2018, is 127.343% as shown below. Final 2017/20168 Taxing Jurisdiction Local Tax Rate

City of Cologne 67.952% Carver County 37.436% ISD # 108 17.961% Other 3.994% Total 127.343%

Section P Projected Retained Captured Net Tax Capacity and Projected Tax Increment The City anticipates that construction on the facility will begin in 2018 and be 100% completed by December 31, 2018, creating a total tax capacity for the TIF District of $36,182 as of January 2, 2019. The captured tax capacity as of that date is estimated to be $10,032 and the first year of tax increment is estimated to be $12,775 payable in 2020. A complete schedule of estimated increment from the TIF District is shown in Exhibit III. The estimates shown in this TIF plan assume that commercial class rates for preferred property remain at 1.5% of the estimated market value up to $150,000 and 2.0% of the estimated market value over $150,000, and for non-preferred property the commercial class rates are projected to remain at 2.0% of the estimated market value. Each year the County Auditor shall determine the current net tax capacity of all property in the TIF District. To the extent that this total exceeds the original net tax capacity, the difference shall be known as the captured net tax capacity of the TIF District.


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The County Auditor shall certify to the City the amount of captured net tax capacity each year. The City may choose to retain any or all of this amount. It is the City’s intention to retain 100% of the captured net tax capacity of the TIF District. Such amount shall be known as the retained captured net tax capacity of the TIF District. Exhibit II gives a listing of the various information and assumptions used in preparing a number of the exhibits contained in this TIF Plan, including Exhibit III which shows the projected tax increment generated over the anticipated life of the TIF District. Section Q Use of Tax Increment Each year the County Treasurer shall deduct 0.36% of the annual tax increment generated by the TIF District and pay such amount to the State's General Fund. Such amounts will be appropriated to the State Auditor for the cost of financial reporting and auditing of tax increment financing information throughout the state. Exhibit III shows the projected deduction for this purpose over the anticipated life of the TIF District. The City has determined that it will use 100% of the remaining tax increment generated by the TIF District for any of the following purposes: (1) Pay for the estimated public costs of the TIF District (see Section K) and County administrative

costs associated with the TIF District (see Section T); (2) pay principal and interest on tax increment bonds or other bonds issued to finance the estimated

public costs of the TIF District; (3) accumulate a reserve securing the payment of tax increment bonds or other bonds issued to

finance the estimated public costs of the TIF District; (4) pay all or a portion of the county road costs as may be required by the County Board under M.S.

Section 469.175, Subdivision 1a; or (5) return excess tax increments to the County Auditor for redistribution to the City, County and

School District. Tax increments from property located in one county must be expended for the direct and primary benefit of a project located within that county, unless both county boards involved waive this requirement. Tax increments shall not be used to circumvent levy limitations applicable to the City. Tax increment shall not be used to finance the acquisition, construction, renovation, operation, or maintenance of a building to be used primarily and regularly for conducting the business of a municipality, county, school district, or any other local unit of government or the State or federal government, or for a commons area used as a public park, or a facility used for social, recreational, or conference purposes. This prohibition does not apply to the construction or renovation of a parking structure or of a privately owned facility for conference purposes. Section R Excess Tax Increment In any year in which the tax increments from the TIF District exceed the amount necessary to pay the estimated public costs authorized by the TIF Plan, the City shall use the excess tax increments to: (1) prepay any outstanding tax increment bonds; (2) discharge the pledge of tax increments thereof; (3) pay amounts into an escrow account dedicated to the payment of the tax increment bonds; or


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(4) return excess tax increments to the County Auditor for redistribution to the City, County and

School District. The County Auditor must report to the Commissioner of Education the amount of any excess tax increment redistributed to the School District within 30 days of such redistribution.

Section S Tax Increment Pooling and the Five-Year Rule At least 80% of the tax increments from the TIF District must be expended on activities within the district or to pay for bonds used to finance the estimated public costs of the TIF District (see Section E for additional restrictions). No more than 20% of the tax increments may be spent on costs outside of the TIF District but within the boundaries of the Project Area, except to pay debt service on credit enhanced bonds. All administrative expenses are considered to have been spent outside of the TIF District. The revenue derived from tax increments paid by properties in the TIF District are considered to have been spent within the TIF District if such amounts are: (1) actually paid to a third party for activities performed within the TIF District within five years after

certification of the district; (2) used to pay bonds that were issued and sold to a third party, the proceeds of which are reasonably

expected on the date of issuance to be spent within the later of the five-year period or a reasonable temporary period or are deposited in a reasonably required reserve or replacement fund.

(3) used to make payments or reimbursements to a third party under binding contracts for activities

performed within the TIF District, which were entered into within five years after certification of the district; or

(4) used to reimburse a party for payment of eligible costs (including interest) incurred within five

years from certification of the district. Beginning with the sixth year following certification of the TIF District, at least 80% of the tax increments must be used to pay outstanding bonds or make contractual payments obligated within the first five years. When outstanding bonds have been defeased and sufficient money has been set aside to pay for such contractual obligations, the TIF District must be decertified. The city does not expect that allowable pooling expenditures will be made outside of the TIF District but within the Project Area (along with allowable administrative expenses), but such expenditures are expressly authorized in this TIF Plan. Section T Limitation on Administrative Expenses Administrative expenses are defined as all costs of the City other than: (1) amounts paid for the purchase of land; (2) amounts paid to contractors or others providing materials and services, including architectural and

engineering services directly connected with the physical development of the real property in the project;

(3) relocation benefits paid to, or services provided for, persons or businesses residing or located

within the TIF District; (4) amounts used to pay principal or interest on, fund a reserve for, or sell at a discount, tax increment

bonds issued pursuant to section 469.178; or


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(5) amounts used to pay other financial obligations to the extent those obligations were used to finance costs described in clauses (1) to (3).

Administrative expenses include amounts paid for services provided by bond counsel, fiscal consultants, planning or economic development consultants, and actual costs incurred by the County in administering the TIF District. Tax increments may be used to pay administrative expenses of the TIF District up to the lesser of (a) 10% of the total estimated tax increment expenditures authorized by the TIF Plan or (b) 10% of the total tax increment for the project. Section U Limitation on Property Not Subject to Improvements - Four Year Rule If after four years from certification of the TIF District no demolition, rehabilitation, renovation, or qualified improvement of an adjacent street has commenced on a parcel located within the TIF District, then that parcel shall be excluded from the TIF District and the original net tax capacity shall be adjusted accordingly. Qualified improvements of a street are limited to construction or opening of a new street, relocation of a street, or substantial reconstruction or rebuilding of an existing street. The City must submit to the County Auditor, by February 1 of the fifth year, evidence that the required activity has taken place for each parcel in the TIF District. If a parcel is excluded from the TIF District and the City or owner of the parcel subsequently commences any of the above activities, the City shall certify to the County Auditor that such activity has commenced and the parcel shall once again be included in the TIF District. The County Auditor shall certify the net tax capacity of the parcel, as most recently certified by the Commissioner of Revenue, and add such amount to the original net tax capacity of the TIF District. Section V Estimated Impact on Other Taxing Jurisdictions Exhibit V shows the estimated impact on other taxing jurisdictions if the maximum projected retained captured net tax capacity of the TIF District was hypothetically available to the other taxing jurisdictions. The City believes that there will be no adverse impact on other taxing jurisdictions during the life of the TIF District, since the proposed development would not have occurred without the establishment of the TIF District and the provision of public assistance. A positive impact on other taxing jurisdictions will occur when the TIF District is decertified and the development therein becomes part of the general tax base. The fiscal and economic implications of the proposed tax increment financing district, as pursuant to Minnesota Statutes, Section 469.175, Subdivision 2, are listed below.

1. The total maximum amount of tax increment that will be generated over the life of the District is estimated to be $114,975.

2. To the extent the manufacturing facility in the proposed TIF District generates any public cost impacts on

City-provided services such as police and fire protection, public infrastructure, and borrowing costs attributable to the District, such costs will be levied upon the taxable net tax capacity of the City, excluding that portion captured by the District.

3. The maximum amount of tax increments over the life of the District that would be attributable to School District levies, assuming the School District’s share of the total local tax rate for all taxing jurisdictions remained the same, is estimated to be $16,217.

4. The maximum amount of tax increments over the life of the District that would be attributable to County

levies, assuming the County’s share of the total local tax rate for all taxing jurisdictions remained the same is estimated to be $33,800.

5. No additional information has been requested by the County or School District.


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Section W Prior Planned Improvements The City shall accompany its request for certification to the County Auditor (or notice of district enlargement), with a listing of all properties within the TIF District for which building permits have been issued during the 18 months immediately preceding approval of the TIF Plan. The County Auditor shall increase the original net tax capacity of the TIF District by the net tax capacity of each improvement for which a building permit was issued. A building permit was issued for a building expansion on September 14, 2016, which had an estimated value of $116,480. Another building permit was issued for the installation of a new heater on December 14, 2016, which had an estimated value of $7,500. Additionally, a building permit was issued on March 6, 2017 for an expansion to the fire protections system which had an estimated value of $5,760. Section X Development Agreements If within a project containing an economic development district, more than 10% of the acreage of the property to be acquired by the City is purchased with tax increment bonds proceeds (to which tax increment from the property is pledged), then prior to such acquisition, the City must enter into an agreement for the development of the property. Such agreement must provide recourse for the City should the development not be completed. The City anticipates entering into an agreement for development, but does not anticipate acquiring any additional property located within the TIF District. Section Y Assessment Agreements The City may, upon entering into a development agreement, also enter into an assessment agreement with the developer, which establishes a minimum market value of the land and improvements for each year during the life of the TIF District. The assessment agreement shall be presented to the County or City Assessor who shall review the plans and specifications for the improvements to be constructed, review the market value previously assigned to the land, and so long as the minimum market value contained in the assessment agreement appears to be an accurate estimate, shall certify the assessment agreement as reasonable. The assessment agreement shall be filed for record in the office of the County Recorder of each county where the property is located. Any modification or premature termination of this agreement must first be approved by the City, County and School District. The City does not anticipate entering into an assessment agreement. Section Z Modifications of the Tax Increment Financing Plan Any reduction or enlargement in the geographic area of the Project Area or the TIF District; increase in the amount of bonded indebtedness to be incurred; increase in the amount of capitalized interest; increase in that portion of the captured net tax capacity to be retained by the City; increase in the total estimated public costs; or designation of additional property to be acquired by the City shall be approved only after satisfying all the necessary requirements for approval of the original TIF Plan. This paragraph does not apply if: (1) the only modification is elimination of parcels from the TIF District; and (2) the current net tax capacity of the parcels eliminated equals or exceeds the net tax capacity of

those parcels in the TIF District's original net tax capacity, or the City agrees that the TIF District's


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original net tax capacity will be reduced by no more than the current net tax capacity of the parcels eliminated.

The City must notify the County Auditor of any modification that reduces or enlarges the geographic area of the TIF District. The geographic area of the TIF District may be reduced but not enlarged after five years following the date of certification. Section AA Administration of the Tax Increment Financing Plan Upon adoption of the TIF Plan, the City shall submit a copy of such plan to the Minnesota Department of Revenue. The City shall also request that the County Auditor certify the original net tax capacity and net tax capacity rate of the TIF District. To assist the County Auditor in this process, the City shall submit copies of the TIF Plan, the resolution establishing the TIF District and adopting the TIF Plan, and a listing of any prior planned improvements. The City shall also send the County Assessor any assessment agreement establishing the minimum market value of land and improvements in the TIF District, and shall request that the County Assessor review and certify this assessment agreement as reasonable. The County shall distribute to the City the amount of tax increment as it becomes available. The amount of tax increment in any year represents the applicable property taxes generated by the retained captured net tax capacity of the TIF District. The amount of tax increment may change due to development anticipated by the TIF Plan, other development, inflation of property values, or changes in property classification rates or formulas. In administering and implementing the TIF Plan, the following actions should occur on an annual basis: (1) prior to July 1, the City shall notify the County Assessor of any new development that has occurred

in the TIF District during the past year to insure that the new value will be recorded in a timely manner.

(2) if the County Auditor receives the request for certification of a new TIF District, or for modification

of an existing TIF District, before July 1, the request shall be recognized in determining local tax rates for the current and subsequent levy years. Requests received on or after July 1 shall be used to determine local tax rates in subsequent years.

(3) each year the County Auditor shall certify the amount of the original net tax capacity of the TIF

District. The amount certified shall reflect any changes that occur as a result of the following: (a) the value of property that changes from tax-exempt to taxable shall be added to the

original net tax capacity of the TIF District. The reverse shall also apply; (b) the original net tax capacity may be modified by any approved enlargement or reduction

of the TIF District; (c) if laws governing the classification of real property cause changes to the percentage of

estimated market value to be applied for property tax purposes, then the resulting increase or decrease in net tax capacity shall be applied proportionately to the original net tax capacity and the retained captured net tax capacity of the TIF District.

The County Auditor shall notify the City of all changes made to the original net tax capacity of the TIF District. Section AB Financial Reporting and Disclosure Requirements The City will file the TIF Plan, and any subsequent amendments thereto, with the Commissioner of Revenue and the Office of the State Auditor pursuant to Minnesota Statutes, Section 469.175, subdivision 4A. The City will comply with all reporting requirements for the TIF District under Minnesota Statutes, Section 469.175, subdivisions 5 and 6

Exhibit I

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Map of TIF District No. 2-1 within Development District No. 2

Exhibit II

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Assumptions Report

City of Cologne, MinnesotaTax Increment Financing (Economic Development) District No. 2Modern Design RehabTIF Projections

Type of Tax Increment Financing District Economic DevelopmentMaximum Duration of TIF District 8 years from 1st increment

Projected Certification Request Date 06/30/18Decertification Date 12/31/28 (9 Years of Increment)

2017/2018

Base Estimated Market Value * $1,096,900

Original Net Tax Capacity * $20,916

Assessment/Collection Year

2018/2019 2019/2020 2020/2021 2021/2022

Base Estimated Market Value $1,096,900 $1,096,900 $1,096,900 $1,096,900Increase in Estimated Market Value 0 800,800 800,800 800,800

Total Estimated Market Value 1,096,900 1,897,700 1,897,700 1,897,700

Total Net Tax Capacity $20,916 $36,182 $36,182 $36,182

City of Cologne 67.952%Carver County 37.436%ISD #108 17.961%Other 3.994%

Local Tax Capacity Rate 127.343% 2017/2018

Fiscal Disparities Contribution From TIF District 34.2875%Administrative Retainage Percent (maximum = 10%) 10.00%Pooling Percent 0.00%

Bonds Interfund LoanBonds Dated NA Note Dated 08/01/17Bond Issue @ 0.00% (NIC) NA Note Rate 5.00%Eligible Project Costs NA Note Amount $73,400

Present Value Date & Rate 08/01/17 5.00% Present Value Amount $73,259

NotesAssumptions assume no change to future tax rates, class rates, and no annual MV inflator is assumedCalculations include payable 2018 final tax capacity ratesTotal EMV upon completion based on Carter County Assessor's estimate of $800,800 increase * Base EMV of properties as provided by Carver County

Exhibit III

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Projected Tax Increment Report


Less: Less: Retained Times: Less: Less:Annual Total Total Original Fiscal Captured Tax Annual State Aud. Subtotal Admin. AnnualPeriod Estimated Net Tax Net Tax Disp. @ Net Tax Capacity Gross Tax Deduction Net Tax Retainage NetEnding Market Value (1) Capacity (2) Capacity (3) 34.2875% Capacity Rate (4) Increment 0.360% Increment 10.00% Revenue

(1) (2) (3) (4) (5) (5) (6) (7) (8) (9) (10) (11)

12/31/18 1,096,900 20,916 20,916 0 0 127.343% 0 0 0 0 012/31/19 1,096,900 20,916 20,916 0 0 127.343% 0 0 0 0 012/31/20 1,897,700 36,182 20,916 5,234 10,032 127.343% 12,775 46 12,729 1,273 11,45612/31/21 1,897,700 36,182 20,916 5,234 10,032 127.343% 12,775 46 12,729 1,273 11,45612/31/22 1,897,700 36,182 20,916 5,234 10,032 127.343% 12,775 46 12,729 1,273 11,45612/31/23 1,897,700 36,182 20,916 5,234 10,032 127.343% 12,775 46 12,729 1,273 11,45612/31/24 1,897,700 36,182 20,916 5,234 10,032 127.343% 12,775 46 12,729 1,273 11,45612/31/25 1,897,700 36,182 20,916 5,234 10,032 127.343% 12,775 46 12,729 1,273 11,45612/31/26 1,897,700 36,182 20,916 5,234 10,032 127.343% 12,775 46 12,729 1,273 11,45612/31/27 1,897,700 36,182 20,916 5,234 10,032 127.343% 12,775 46 12,729 1,273 11,45612/31/28 1,897,700 36,182 20,916 5,234 10,032 127.343% 12,775 46 12,729 1,273 11,456

$114,975 $414 $114,561 $11,457 $103,104

(1) value based on estimate provided by County assessor(2) tax capacity based on commercial-industrial class rate of 1.50% for first $150,000 of value and 2% for value above $150,000(3) original net tax capacity will be based on existing land and building values and commercial-industrial class rate for payable 2018(4) combined local tax capacity rate of City of Cologne, ISD 108 and Carver County for payable 2018

Exhibit IV

SPRINGSTED Page 16

Estimated Impact on Other Taxing Jurisdictions Report


WithoutProject or TIF District With Project and TIF District

Projected Hypothetical2016/2017 2016/2017 Retained New Hypothetical Hypothetical Tax Generated

Taxable 2016/2017 Taxable Captured Taxable Adjusted Decrease In by RetainedTaxing Net Tax Local Net Tax Net Tax Net Tax Local Local Captured

Jurisdiction Capacity (1) Tax Rate Capacity (1) + Capacity = Capacity Tax Rate (*) Tax Rate (*) N.T.C. (*)

City of Cologne 151,611,500 67.952% 151,611,500 $10,032 151,621,532 67.947% 0.004% 6,816

Carver County 12,972,050,800 37.436% 12,972,050,800 10,032 12,972,060,832 37.436% 0.000% 3,756

ISD #108 996,930,100 17.961% 996,930,100 10,032 996,940,132 17.961% 0.000% 1,802

Other (2) --- 3.994% --- 10,032 --- 3.994% --- ---

Totals 127.343% 127.338% 0.005%

* Statement 1: If the projected Retained Captured Net Tax Capacity of the TIF District was hypothetically available to each ofthe taxing jurisdictions above, the result would be a lower local tax rate (see Hypothetical Adjusted Tax Rate above)which would produce the same amount of taxes for each taxing jurisdiction. In such a case, the total local tax ratewould decrease by 0.005% (see Hypothetical Decrease in Local Tax Rate above). The hypothetical tax that theRetained Captured Net Tax Capacity of the TIF District would generate is also shown above.

Statement 2: Since the projected Retained Captured Net Tax Capacity of the TIF District is not available to the taxing jurisdictions,then there is no impact on taxes levied or local tax rates.

(1) Taxable net tax capacity = total net tax capacity - captured TIF - fiscal disparity contribution, if applicable. (2) The impact on these taxing jurisdictions is negligible since they represent only 3.14% of the total tax rate.

Exhibit V

SPRINGSTED Page 17

Market Value Analysis Report


Tax Increment Financing (Economic Development) District No. 2

Modern Design Rehab

TIF Projections

Assumptions Present Value Date 06/30/18 P.V. Rate - Gross T.I. 5.00%

Increase in EMV With TIF District $800,800Less: P.V of Gross Tax Increment 85,419

Subtotal $715,381Less: Increase in EMV Without TIF 0

Difference $715,381

Annual PresentGross Tax Value @

Year Increment 5.00%

1 2020 12,775 11,4452 2021 12,775 10,9003 2022 12,775 10,3814 2023 12,775 9,8875 2024 12,775 9,4166 2025 12,775 8,9687 2026 12,775 8,5418 2027 12,775 8,1349 2028 12,775 7,747

$114,975 $85,419

Exhibit VI

SPRINGSTED Page 18

Projected Pay-As-You-Go Note Report


Note Date: 08/01/17Note Rate: 5.00%Amount: $73,400

Cumulative Unpaid Semi-Annual LoanInterest Accrued Net Balance

Date Principal Interest P & I Due Interest Revenue Outstanding(1) (2) (3) (4) (5) (6) (7) (8)

73,400.0002/01/19 0.00 0.00 0.00 5,505.00 5,505.00 0.00 73,400.0008/01/19 0.00 0.00 0.00 7,340.00 7,340.00 0.00 73,400.0002/01/20 0.00 0.00 0.00 9,175.00 9,175.00 0.00 73,400.0008/01/20 0.00 5,728.00 5,728.00 11,010.00 5,282.00 5,728.00 73,400.0002/01/21 0.00 5,728.00 5,728.00 7,117.00 1,389.00 5,728.00 73,400.0008/01/21 2,504.00 3,224.00 5,728.00 3,224.00 0.00 5,728.00 70,896.0002/01/22 3,955.60 1,772.40 5,728.00 1,772.40 0.00 5,728.00 66,940.4008/01/22 4,054.49 1,673.51 5,728.00 1,673.51 0.00 5,728.00 62,885.9102/01/23 4,155.85 1,572.15 5,728.00 1,572.15 0.00 5,728.00 58,730.0608/01/23 4,259.75 1,468.25 5,728.00 1,468.25 0.00 5,728.00 54,470.3102/01/24 4,366.24 1,361.76 5,728.00 1,361.76 0.00 5,728.00 50,104.0708/01/24 4,475.40 1,252.60 5,728.00 1,252.60 0.00 5,728.00 45,628.6702/01/25 4,587.28 1,140.72 5,728.00 1,140.72 0.00 5,728.00 41,041.3908/01/25 4,701.97 1,026.03 5,728.00 1,026.03 0.00 5,728.00 36,339.4202/01/26 4,819.51 908.49 5,728.00 908.49 0.00 5,728.00 31,519.9108/01/26 4,940.00 788.00 5,728.00 788.00 0.00 5,728.00 26,579.9102/01/27 5,063.50 664.50 5,728.00 664.50 0.00 5,728.00 21,516.4108/01/27 5,190.09 537.91 5,728.00 537.91 0.00 5,728.00 16,326.3202/01/28 5,319.84 408.16 5,728.00 408.16 0.00 5,728.00 11,006.4808/01/28 5,452.84 275.16 5,728.00 275.16 0.00 5,728.00 5,553.6402/01/29 5,553.64 138.84 5,692.48 138.84 0.00 5,692.48 0.00

$73,400 $29,668.48 $103,068.48 $58,359.48 $28,691.00 $103,068.48

Surplus Tax Increment 35.52

Total Net Revenue $103,104.00

10727608v1

DEVELOPMENT AGREEMENT

BY AND BETWEEN

THE CITY OF COLOGNE, MINNESOTA

AND

MODERN DESIGN, LLC

This document drafted by: BRIGGS AND MORGAN

Professional Association 2200 IDS Center 80 South 8th Street Minneapolis, Minnesota 55402

10727608v1

Table of Contents

Page

i

ARTICLE I DEFINITIONS ................................................................................................. 2 Section 1.1. Definitions............................................................................................ 2

ARTICLE II REPRESENTATIONS AND WARRANTIES................................................ 4 Section 2.1. Representations and Warranties of the City ......................................... 4 Section 2.2. Representations and Warranties of the Developer ............................... 4

ARTICLE III UNDERTAKINGS BY DEVELOPER AND CITY ....................................... 6 Section 3.1. Site Improvements and Legal and Administrative Expenses .............. 6 Section 3.2. Limitations on Undertaking of the City ............................................... 6 Section 3.3. Reimbursement: TIF Note ................................................................... 6 Section 3.4. Reports ................................................................................................. 7

ARTICLE IV EVENTS OF DEFAULT ................................................................................. 8 Section 4.1. Events of Default Defined ................................................................... 8 Section 4.2. Remedies on Default ............................................................................ 8 Section 4.3. No Remedy Exclusive.......................................................................... 9 Section 4.4. No Implied Waiver .............................................................................. 9 Section 4.5. Agreement to Pay Attorney's Fees and Expenses ................................ 9 Section 4.6. Indemnification of City ........................................................................ 9

ARTICLE V DEVELOPER'S OPTION TO TERMINATE AGREEMENT ..................... 11 Section 5.1. The Developer's Option to Terminate ................................................ 11 Section 5.2. Action to Terminate ........................................................................... 11 Section 5.3. Effect of Termination ......................................................................... 11

ARTICLE VI ADDITIONAL PROVISIONS ...................................................................... 12 Section 6.1. Restrictions on Use ............................................................................ 12 Section 6.2. Conflicts of Interest............................................................................ 12 Section 6.3. Titles of Articles and Sections ........................................................... 12 Section 6.4. Notices and Demands ........................................................................ 12 Section 6.5. Counterparts ....................................................................................... 13 Section 6.6. Law Governing .................................................................................. 13 Section 6.7. Expiration ........................................................................................... 13 Section 6.8. Provisions Surviving Rescission or Expiration.................................. 13 Section 6.9. Assignability of Agreement and TIF Note......................................... 13 Section 6.10. Transfer of Project ............................................................................. 13

EXHIBIT A Description of Development Property ......................................................... A-1

EXHIBIT B Form of TIF Note ......................................................................................... B-1

EXHIBIT C Site Improvements ....................................................................................... C-1

10727608v1

DEVELOPMENT AGREEMENT

THIS AGREEMENT, made as of the 1st day of May, 2018, by and between the City of Cologne, Minnesota (the "City"), a municipal corporation existing under the laws of the State of Minnesota and Modern Design, LLC, a Minnesota limited liability company (the "Developer").

WITNESSETH:

WHEREAS, pursuant to Minnesota Statutes, Section 469.124 through 469.133, the City has heretofore established Development District No. 2 (the "Development District") and has adopted a development program therefor (the "Development Program"); and

WHEREAS, pursuant to the provisions of Minnesota Statutes, Section 469.174 through 469.1794, as amended (hereinafter, the "Tax Increment Act"), the City has heretofore established, within the Development District, Tax Increment Financing District No. 2-1 (the "Tax Increment District") and has adopted a tax increment financing plan therefor (the "Tax Increment Plan") which provides for the use of tax increment financing in connection with certain development within the Development District; and

WHEREAS, in order to achieve the objectives of the Development Program and particularly to make the land in the Development District available for development by private enterprise in conformance with the Development Program, the City has determined to assist the Developer with the financing of certain costs of a Project (as hereinafter defined) to be constructed within the Tax Increment District as more particularly set forth in this Agreement; and

WHEREAS, the City believes that the development and construction of the Project, and fulfillment of this Agreement are vital and are in the best interests of the City, the health, safety, morals and welfare of residents of the City, and in accordance with the public purpose and provisions of the applicable state and local laws and requirements under which the Project has been undertaken and is being assisted; and

WHEREAS, WHEREAS, the requirements of the Business Subsidy Law, Minnesota Statutes, Section 116J.993 through 116J.995, do not apply to this Agreement because the assistance given to the Developer under this Agreement is a business subsidy of less than $150,000.

NOW, THEREFORE, in consideration of the premises and the mutual obligations of the parties hereto, each of them does hereby covenant and agree with the other as follows:

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2

ARTICLE I

DEFINITIONS

Section 1.1. Definitions. All capitalized terms used and not otherwise defined herein shall have the following meanings unless a different meaning clearly appears from the context:

Agreement means this Agreement, as the same may be from time to time modified, amended or supplemented;

Business Day means any day except a Saturday, Sunday or a legal holiday or a day on which banking institutions in the City are authorized by law or executive order to close;

City means the City of Cologne, Minnesota;

County means Carver County, Minnesota;

Developer means Modern Design, LLC, a Minnesota limited liability company, its successors and assigns;

Development District means Development District No. 2, including the real property described in the Development Program;

Development Program means the Development Program approved in connection with the Development District;

Development Property means the real property described in Exhibit A attached to this Agreement;

Event of Default means any of the events described in Section 4.1 hereof;

Legal and Administrative Expenses means the fees and expenses incurred by the City in connection with the adoption of the Tax Increment Financing Plan and the preparation of this Agreement;

Note Payment Date means August 1, 2020, and each February 1 and August 1 of each year thereafter to and including February 1, 2029; provided, that if any such Note Payment Date should not be a Business Day, the Note Payment Date shall be the next succeeding Business Day;

Prime Rate means the rate of interest from time to time publicly announced by U.S. Bank National Association in St. Paul, Minnesota, as its "prime rate" or "reference rate" or any successor rate, which rate shall change as and when that rate or successor rate changes;

Project means the construction of an approximately 18,200 square foot expansion to an existing manufacturing and warehousing facility by the Developer on the Development Property located in the City;

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3

Site Improvements means the site improvements undertaken or to be undertaken on the Development Property, more particularly described on Exhibit C attached hereto;

State means the State of Minnesota;

Tax Increments means 90% of the tax increments derived from the Development Property which have been received and retained by the City in accordance with the provisions of Minnesota Statutes, Section 469.177, which tax increments from the Development Property are calculated in the sole discretion of the City;

Tax Increment Act means Minnesota Statutes, Sections 469.174 through 469.1794, as amended;

Tax Increment District means Tax Increment Financing District No. 2-1 located within the Development District, a description of which is set forth in the Tax Increment Financing Plan, which was qualified as an economic development district under the Tax Increment Act;

Tax Increment Financing Plan means the tax increment financing plan approved for the Tax Increment District by the City Council on May 7, 2018, and any future amendments thereto;

TIF Note means the Tax Increment Revenue Note (Modern Design, LLC Project) to be executed by the City and delivered to the Developer pursuant to Article III hereof, the form of which is attached hereto as Exhibit B; and

Unavoidable Delays means delays, outside the control of the party claiming its occurrence, which are the direct result of strikes, other labor troubles, unusually severe or prolonged bad weather, acts of God, fire or other casualty to the Project, litigation commenced by third parties which, by injunction or other similar judicial action or by the exercise of reasonable discretion, directly results in delays, or acts of any federal, state or local governmental unit (other than the City) which directly result in delays.

10727608v1

4

ARTICLE II

REPRESENTATIONS AND WARRANTIES

Section 2.1. Representations and Warranties of the City. The City makes the following representations and warranties:

(1) The City is a municipal corporation and has the power to enter into this Agreement and carry out its obligations hereunder.

(2) The Tax Increment District is an "economic development district" within the meaning of Minnesota Statutes, Section 469.174, Subdivision 12, and was created, adopted and approved in accordance with the terms of the Tax Increment Act.

(3) The development contemplated by this Agreement is in conformance with the development objectives set forth in the Development Program.

(4) To finance certain costs within the Tax Increment District, the City proposes, subject to the further provisions of this Agreement, to apply Tax Increments to reimburse the Developer for a portion of the costs of the construction of certain Site Improvements incurred in connection with the Project as further provided in this Agreement.

(5) The City makes no representation or warranty, either expressed or implied, as to the Development Property or its condition or the soil conditions thereon, or that the Development Property shall be suitable for the Developer's purposes or needs.

Section 2.2. Representations and Warranties of the Developer. The Developer makes the following representations and warranties:

(1) The Developer is a Minnesota limited liability company and has the power and authority to enter into this Agreement and to perform its obligations hereunder and doing so will not violate its articles of organization, member control agreement or operating agreement, or the laws of the State and by proper action has authorized the execution and delivery of this Agreement.

(2) The Developer shall cause the Project to be constructed in accordance with the terms of this Agreement, the Development Program, and all applicable local, state and federal laws and regulations (including, but not limited to, environmental, zoning, energy conservation, building code and public health laws and regulations).

(3) The construction of the Project would not be undertaken by the Developer, and in the opinion of the Developer would not have been or be economically feasible within the reasonably foreseeable future, without the assistance and benefit to the Developer provided for in this Agreement.

(4) Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of,

10727608v1

5

the terms, conditions or provision of any contractual restriction, evidence of indebtedness, agreement or instrument of whatever nature to which the Developer is now a party or by which it is bound, or constitutes a default under any of the foregoing.

(5) The Developer will cooperate fully with the City with respect to any litigation commenced with respect to the Project.

(6) The Developer will cooperate fully with the City in resolution of any traffic, parking, trash removal or public safety problems which may arise in connection with the construction and operation of the Project.

(7) Construction of the Project will be substantially completed by December 31, 2018, subject to Unavoidable Delays.

(8) The Developer will obtain, or cause to be obtained, in a timely manner, all required permits, licenses and approvals, and will meet, in a timely manner, all requirements of all applicable local, state, and federal laws and regulations which must be obtained or met before the Project may be lawfully constructed.

(9) The Developer acknowledges that Tax Increment projections contained in the Tax Increment Financing Plan are estimates only and the Developer acknowledges that it shall place no reliance on the amount of projected Tax Increments and the sufficiency of such Tax Increments to reimburse the Developer for a portion of the costs of the construction of the Site Improvements as provided in Article III.

(10) The Developer will not seek a reduction in the market value as determined by the County Assessor of the Project or other facilities, if any, that it constructs on the Development Property, pursuant to the provisions of this Agreement, for so long as the TIF Note remains outstanding.

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6

ARTICLE III

UNDERTAKINGS BY DEVELOPER AND CITY

Section 3.1. Site Improvements and Legal and Administrative Expenses.

(1) The parties agree that the installation of the Site Improvements are essential to the successful completion of the Project. The costs of the Site Improvements shall be paid by the Developer. The City shall reimburse the Developer for the lesser of (a) $73,400, or (b) the actual costs of the Site Improvements actually incurred and paid by the Developer (the "Reimbursement Amount") as further provided in Section 3.3.

(2) The Developer has deposited the sum of $10,000 with the City to be used by the City to pay Legal and Administrative Expenses. In the event the Legal and Administrative Expenses exceed $10,000 the Developer shall pay, at the request of the City, the Legal and Administrative expenses in excess of $10,000.

Section 3.2. Limitations on Undertaking of the City. Notwithstanding the provisions of Sections 3.1, the City shall have no obligation to the Developer under this Agreement to reimburse the Developer for the Reimbursement Amount, if the City, at the time or times such payment is to be made, is entitled under Section 4.2 to exercise any of the remedies set forth therein as a result of an Event of Default which has not been cured.

Section 3.3. Reimbursement: TIF Note. The City shall reimburse the costs identified in Section 3.1(1) through the issuance of the City's TIF Note in substantially the form attached to this Agreement as Exhibit B, subject to the following conditions.

(1) The TIF Note shall be dated, issued and delivered when the Developer shall have demonstrated in writing to the reasonable satisfaction of the City that the construction of the Site Improvements has been completed and that the Developer has incurred and paid all costs of construction of the Site Improvements, as described in and limited by Section 3.1 and shall have submitted paid invoices for the costs of construction of the Site Improvements in an amount not less than the Reimbursement Amount.

(2) The unpaid principal amount of the TIF Note shall bear simple non-compounding interest from the date of issuance of the TIF Note, at 5.00% per annum. Interest shall be computed on the basis of a 360 day year consisting of twelve (12) 30-day months.

(3) The principal amount of the TIF Note and the interest thereon shall be payable solely from the Tax Increments.

(4) The payment dates of the TIF Note shall be the Note Payment Dates. On each Note Payment Date and subject to the provisions of the TIF Note, the City shall pay, against the principal and interest outstanding on the TIF Note, any Tax Increments received by the City during the preceding six (6) months. All such payments shall be applied first to accrued interest and then to reduce the principal of the TIF Note.

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7

(5) The TIF Note shall be a special and limited obligation of the City and not a general obligation of the City, and only Tax Increments shall be used to pay the principal and interest on the TIF Note. If, on any Note Payment Date, the Tax Increments for the payment of the accrued and unpaid interest on the TIF Note are insufficient for such purposes, the difference shall be carried forward, without interest accruing thereon, and shall be paid if and to the extent that on a future Note Payment Date there are Tax Increments in excess of the amounts needed to pay the accrued interest then due on the TIF Note.

(6) The City's obligation to make payments on the TIF Note on any Note Payment Date or any date thereafter shall be conditioned upon the requirements that: (A) there shall not at that time be an Event of Default that has occurred and is continuing under this Agreement and (B) this Agreement shall not have been rescinded pursuant to Section 4.2.

(7) The TIF Note shall be governed by and payable pursuant to the additional terms thereof, as set forth in Exhibit B. In the event of any conflict between the terms of the TIF Note and the terms of this Section 3.3, the terms of the TIF Note shall govern. The issuance of the TIF Note pursuant and subject to the terms of this Agreement, and the taking by the City of such additional actions as bond counsel for the TIF Note may require in connection therewith, are hereby authorized and approved by the City.

Section 3.4. Reports. The Developer shall provide the City with information about the Project as requested by the City so that the City can satisfy the reporting requirements of Minnesota Statutes, Section 116J.994, Subd. 8.

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8

ARTICLE IV

EVENTS OF DEFAULT

Section 4.1. Events of Default Defined. The following shall be "Events of Default" under this Agreement and the term "Event of Default" shall mean whenever it is used in this Agreement any one or more of the following events:

(1) Failure by the Developer to timely pay any ad valorem real property taxes assessed and special assessments or other City charges with respect to the Development Property, when due and payable.

(2) Failure of the Developer to observe or perform any other covenant, condition, obligation or agreement on its part to be observed or performed under this Agreement.

(3) The holder of any mortgage on the Development Property or any improvements thereon, or any portion thereof, commences foreclosure proceedings as a result of any default under the applicable mortgage documents.

(4) If the Developer shall:

(a) file any petition in bankruptcy or for any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under the United States Bankruptcy Act of 1978, as amended or under any similar federal or state law; or

(b) make an assignment for the benefit of its creditors; or

(c) admit in writing its inability to pay its debts generally as they become due; or

(d) be adjudicated as bankrupt or insolvent; or if a petition or answer proposing the adjudication of the Developer as bankrupt or its reorganization under any present or future federal bankruptcy act or any similar federal or state law shall be filed in any court and such petition or answer shall not be discharged or denied within sixty (60) days after the filing thereof; or a receiver, liquidator or trustee of the Developer, or of the Project, or part thereof, shall be appointed in any proceeding brought against the Developer, and shall not be discharged within sixty (60) days after such appointment, or if the Developer, shall consent to or acquiesce in such appointment.

Section 4.2. Remedies on Default. Whenever any Event of Default referred to in Section 4.1 occurs and is continuing, the City, as specified below, may take any one or more of the following actions after the giving of thirty (30) days' written notice to the Developer, but only if the Event of Default has not been cured within said thirty (30) days:

(1) The City may suspend its performance under this Agreement and the TIF Note until it receives assurances from the Developer, deemed adequate by the City, that the Developer will cure its default and continue its performance under this Agreement.

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9

(2) The City may cancel and rescind the Agreement and the TIF Note.

(3) The City may take any action, including legal or administrative action, in law or equity, which may appear necessary or desirable to enforce performance and observance of any obligation, agreement, or covenant of the Developer under this Agreement.

Section 4.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the City is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient.

Section 4.4. No Implied Waiver. In the event any agreement contained in this Agreement should be breached by any party and thereafter waived by any other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other concurrent, previous or subsequent breach hereunder.

Section 4.5. Agreement to Pay Attorney's Fees and Expenses. Whenever any Event of Default occurs and the City shall employ attorneys or incur other expenses for the collection of payments due or to become due or for the enforcement or performance or observance of any obligation or agreement on the part of the Developer herein contained, the Developer agrees that it shall, on demand therefor, pay to the City the reasonable fees of such attorneys and such other expenses so incurred by the City.

Section 4.6. Indemnification of City.

(1) The Developer (a) releases the City and its governing body members, officers, agents, including the independent contractors, consultants and legal counsel, servants and employees (collectively, the "Indemnified Parties") from, (b) covenants and agrees that the Indemnified Parties shall not be liable for, and (c) agrees to indemnify and hold harmless the Indemnified Parties against, any claim, cause of action, suit or liability for loss or damage to property or any injury to or death of any person occurring at or about or resulting from any defect in the Project or on the Development Property.

(2) Except for any willful misrepresentation or any willful or wanton misconduct of the Indemnified Parties, the Developer agrees to protect and defend the Indemnified Parties, now and forever, and further agrees to hold the aforesaid harmless from any claim, demand, suit, action or other proceeding whatsoever by any person or entity whatsoever arising or purportedly arising from the actions or inactions of the Developer (or if other persons acting on its behalf or under its direction or control) under this Agreement, or the transactions contemplated hereby or the acquisition, construction, installation, ownership, and operation of the Project; provided, that this indemnification shall not apply to the warranties made or obligations undertaken by the City in this Agreement or to any actions undertaken by the City which are not contemplated by this Agreement but shall, in any event and without regard to any fault on the part of the City, apply to any pecuniary loss or penalty (including interest thereon from the date the loss is incurred or

10727608v1

10

penalty is paid by the City at a rate equal to the Prime Rate) as a result of the Project causing the Tax Increment District to not qualify or cease to qualify as an "economic development district" under Section 469.174, Subdivision 12, of the Act and Section 469.176, Subdivision 4c. or to violate limitations as to the use of Tax Increments as set forth in Section 469.176, Subdivision 4c.

(3) All covenants, stipulations, promises, agreements and obligations of the City contained herein shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the City and not of any governing body member, officer, agent, servant or employee of the City.

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11

ARTICLE V

DEVELOPER'S OPTION TO TERMINATE AGREEMENT

Section 5.1. The Developer's Option to Terminate. This Agreement may be terminated by the Developer, if (i) the Developer is in compliance with all material terms of this Agreement and no Event of Default has occurred; and (ii) the City fails to comply with any material term of this Agreement, and, after written notice by the Developer of such failure, the City has failed to cure such noncompliance within ninety (90) days of receipt of such notice, or, if such noncompliance cannot reasonably be cured by the City within ninety (90) days, of receipt of such notice, the City has not provided assurances, reasonably satisfactory to the Developer, that such noncompliance will be cured as soon as reasonably possible.

Section 5.2. Action to Terminate. Termination of this Agreement pursuant to Section 5.1 must be accomplished by written notification by the Developer to the City within sixty (60) days after the date when such option to terminate may first be exercised. A failure by the Developer to terminate this Agreement within such period constitutes a waiver by the Developer of its rights to terminate this Agreement due to such occurrence or event.

Section 5.3. Effect of Termination. If this Agreement is terminated pursuant to this Article V, this Agreement shall be from such date forward null and void and of no further effect; provided, however, the termination of this Agreement shall not affect the rights of either party to institute any action, claim or demand for damages suffered as a result of breach or default of the terms of this Agreement by the other party, or to recover amounts which had accrued and become due and payable as of the date of such termination. Upon termination of this Agreement pursuant to this Article V, the Developer shall be free to proceed with the Project at its own expense and without regard to the provisions of this Agreement; provided, however, that the City shall have no further obligations to the Developer with respect to reimbursement of the expenses set forth in Section 3.3; or to make any further payments on the TIF Note.

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ARTICLE VI

ADDITIONAL PROVISIONS

Section 6.1. Restrictions on Use. Until termination of this Agreement, the Developer agrees for itself, its successors and assigns and every successor in interest to the Development Property, or any part thereof, that the Developer and such successors and assigns shall operate, or cause to be operated, the Project as a manufacturing and warehousing facility and shall devote the Development Property to, and in accordance with, the uses specified in this Agreement.

Section 6.2. Conflicts of Interest. No member of the governing body or other official of the City shall have any financial interest, direct or indirect, in this Agreement, the Development Property or the Project, or any contract, agreement or other transaction contemplated to occur or be undertaken thereunder or with respect thereto, nor shall any such member of the governing body or other official participate in any decision relating to the Agreement which affects his or her personal interests or the interests of any corporation, partnership or association in which he or she is directly or indirectly interested. No member, official or employee of the City shall be personally liable to the City in the event of any default or breach by the Developer or successor or on any obligations under the terms of this Agreement.

Section 6.3. Titles of Articles and Sections. Any titles of the several parts, articles and sections of the Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of its provisions.

Section 6.4. Notices and Demands. Except as otherwise expressly provided in this Agreement, a notice, demand or other communication under this Agreement by any party to any other shall be sufficiently given or delivered if it is dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered personally, and

(1) in the case of the Developer is addressed to or delivered personally to:

Modern Design, LLC Attention: Troy Eiden 11255 Kelly Avenue Cologne, MN 55322

(2) in the case of the City is addressed to or delivered personally to the City at:

City of Cologne, Minnesota Attention: Administrator Cologne City Hall PO Box 120 1211 Village Parkway Cologne, MN 55322

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with a copy to:

Briggs and Morgan, P.A. Attention: Mary Ippel 2200 IDS Center 80 South 8th Street Minneapolis, MN 55402

or at such other address with respect to any such party as that party may, from time to time, designate in writing and forward to the other, as provided in this Section.

Section 6.5. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument.

Section 6.6. Law Governing. This Agreement will be governed and construed in accordance with the laws of the State.

Section 6.7. Expiration. This Agreement shall expire on the earlier of (i) February 1, 2029, (ii) the date the TIF Note is paid in full or (iii) the date this Agreement is terminated or rescinded in accordance with its terms.

Section 6.8. Provisions Surviving Rescission or Expiration. Sections 4.5 and 4.6 shall survive any rescission, termination or expiration of this Agreement with respect to or arising out of any event, occurrence or circumstance existing prior to the date thereof.

Section 6.9. Assignability of Agreement and TIF Note. This Agreement may be assigned only with the consent of the City. The TIF Note may only be assigned pursuant to the terms of the TIF Note.

Section 6.10. Transfer of Project. If the Developer sells or transfers the Project, this Agreement shall terminate unless the prior written consent of the City is obtained and the transferee shall have demonstrated the continued need for assistance.

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IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its

name and on its behalf and the Developer has caused this Agreement to be duly executed in its name and on its behalf, on or as of the date first above written.

CITY OF COLOGNE, MINNESOTA By__________________________________ Its Mayor By__________________________________ Its Administrator

This is a signature page to the Development Agreement by and between the City of Cologne, Minnesota and Modern Design, LLC.

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MODERN DESIGN, LLC

By ____________________________________ Its _________________________________

This is a signature page to the Development Agreement by and between the City of Cologne, Minnesota and Modern Design, LLC.

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EXHIBIT A

Description of Development Property

Property located in the City of Cologne, Carver County, Minnesota with the following parcel identification numbers:

401000161 400500620 400500635 401000160

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EXHIBIT B

Form of TIF Note

No. R-1 $______

UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF CARVER

CITY OF COLOGNE

TAX INCREMENT REVENUE NOTE (MODERN DESIGN, LLC PROJECT)

The City of Cologne, Minnesota (the "City"), hereby acknowledges itself to be indebted and, for value received, hereby promises to pay the amounts hereinafter described (the "Payment Amounts") to Modern Design, LLC (the "Developer") or its registered assigns (the "Registered Owner"), but only in the manner, at the times, from the sources of revenue, and to the extent hereinafter provided.

The principal amount of this Note shall equal from time to time the principal amount stated above, as reduced to the extent that such principal installments shall have been paid in whole or in part pursuant to the terms hereof; provided that the sum of the principal amount listed above shall in no event exceed $73,400 as provided in that certain Development Agreement, dated as of May 1, 2018, as the same may be amended from time to time (the "Development Agreement"), by and between the City and the Developer. The unpaid principal amount hereof shall bear interest from the date of this Note at the simple non-compounded rate of five and no hundredths percent (5.00%) per annum. Interest shall be computed on the basis of a 360 day year consisting of twelve (12) 30-day months.

The amounts due under this Note shall be payable on August 1, 2020, and on each February 1 and August 1 thereafter to and including February 1, 2029, or, if the first should not be a Business Day (as defined in the Development Agreement), the next succeeding Business Day (the "Payment Dates"). On each Payment Date the City shall pay by check or draft mailed to the person that was the Registered Owner of this Note at the close of the last business day of the City preceding such Payment Date an amount equal to the sum of the Tax Increments (hereinafter defined) received by the City during the six month period preceding such Payment Date. All payments made by the City under this Note shall first be applied to accrued interest and then to principal. This Note is prepayable by the City, in whole or in part, on any date.

The Payment Amounts due hereon shall be payable solely from 90% of tax increments (the "Tax Increments") from the Development Property (as defined in the Development Agreement) within the City's Tax Increment Financing District No. 2-1 (the "Tax Increment District") within its Development District No. 2 which are paid to the City and which the City is entitled to retain pursuant to the provisions of Minnesota Statutes, Sections 469.174 through 469.1794, as the same may be amended or supplemented from time to time (the "Tax Increment Act"). This Note shall terminate and be of no further force and effect following the last Payment

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Date defined above, on any date upon which the City shall have terminated the Development Agreement under Section 4.2(2) thereof or the Developer shall have terminated the Development Agreement under Article V thereof, on the date the Tax Increment District is terminated, or on the date that all principal and interest payable hereunder shall have been paid in full, whichever occurs earliest.

The City makes no representation or covenant, expressed or implied, that the Tax Increments will be sufficient to pay, in whole or in part, the amounts which are or may become due and payable hereunder.

The City's payment obligations hereunder shall be further conditioned on the fact that no Event of Default under the Development Agreement shall have occurred and be continuing at the time payment is otherwise due hereunder, but such unpaid amounts shall become payable if said Event of Default shall thereafter have been cured; and, further, if pursuant to the occurrence of an Event of Default under the Development Agreement the City elects to cancel and rescind the Development Agreement, the City shall have no further debt or obligation under this Note whatsoever. Reference is hereby made to all of the provisions of the Development Agreement, including without limitation Section 3.3 thereof, for a fuller statement of the rights and obligations of the City to pay the principal and interest of this Note, and said provisions are hereby incorporated into this Note as though set out in full herein.

This Note is a special, limited revenue obligation and not a general obligation of the City and is payable by the City only from the sources and subject to the qualifications stated or referenced herein. This Note is not a general obligation of the City and neither the full faith and credit nor the taxing powers of the City are pledged to the payment of the principal of this Note and no property or other asset of the City, save and except the above-referenced Tax Increments, is or shall be a source of payment of the City's obligations hereunder.

This Note is issued by the City in aid of financing a project pursuant to and in full conformity with the Constitution and laws of the State of Minnesota, including the Tax Increment Act.

This Note may be assigned only with the consent of the City which consent shall not be unreasonably withheld. In order to assign the Note, the assignee shall surrender the same to the City either in exchange for a new fully registered note or for transfer of this Note on the registration records for the Note maintained by the City. Each permitted assignee shall take this Note subject to the foregoing conditions and subject to all provisions stated or referenced herein.

IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions, and things required by the Constitution and laws of the State of Minnesota to be done, to have happened, and to be performed precedent to and in the issuance of this Note have been done, have happened, and have been performed in regular and due form, time, and manner as required by law; and that this Note, together with all other indebtedness of the City outstanding on the date hereof and on the date of its actual issuance and delivery, does not cause the indebtedness of the City to exceed any constitutional or statutory limitation thereon.

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IN WITNESS WHEREOF, City of Cologne, Minnesota, by its City Council, has caused this Note to be executed by the manual signatures of its Mayor and Administrator and has caused this Note to be dated as of __________________, 20___.

_________________________________ Administrator Mayor DO NOT EXECUTE UNTIL PAID INVOICES FOR SITE IMPROVEMENTS ARE GIVEN TO THE CITY - REFER TO SECTION 3.3(1).

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CERTIFICATION OF REGISTRATION

It is hereby certified that the foregoing Note was registered in the name of Modern Design, LLC, and that, at the request of the Registered Owner of this Note, the undersigned has this day registered the Note in the name of such Registered Owner, as indicated in the registration blank below, on the books kept by the undersigned for such purposes.

NAME AND ADDRESS OF REGISTERED OWNER

DATE OF

REGISTRATION

SIGNATURE OF

ADMINISTRATOR Modern Design, LLC Attention: Troy Eiden 11255 Kelly Avenue Cologne, MN 55322

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EXHIBIT C

Site Improvements

Landscaping, including irrigation Foundations and Footings Grading/earthwork Engineering Survey Environmental Testing Soil Borings Site Preparation Onsite Utilities Storm Water/Ponding Outdoor Lighting Onsite Road, Curb, Gutter, Driveway, Sidewalk and Streetscape Improvements Parking

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EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF COLOGNE, MINNESOTA

HELD: May 7, 2018

Pursuant to due call and notice thereof, a regular meeting of the City Council of the City of Cologne, Carver County, Minnesota, was duly called and held on May 7, 2018 at 7:00 p.m.

The following members of the Council were present:

and the following were absent:

Member __________ introduced the following resolution and moved its adoption:

RESOLUTION 18-07 ESTABLISHING DEVELOPMENT DISTRICT NO. 2, APPROVING THE DEVELOPMENT PROGRAM THEREFOR, ESTABLISHING TAX INCREMENT

FINANCING DISTRICT NO. 2-1 WITHIN MUNICIPAL DEVELOPMENT DISTRICT NO. 2 AND APPROVING THE TAX INCREMENT FINANCING PLAN THEREFOR AND

AUTHORIZING EXECUTION OF A DEVELOPMENT AGREEMENT

WHEREAS:

A. It has been proposed that the City of Cologne, Minnesota (the “City”) establish Development District No. 2 (the “Development District”) and establish Tax Increment Financing (Economic Development) District No. 2-1 therein (the “TIF District”) and approve and accept the proposed Tax Increment Financing Plan therefor under the provisions of Minnesota Statutes, Sections 469.174 to 469.1794, as amended (the “Act”); and

B. The City Council has investigated the facts and has caused to be prepared a proposed development program for the Development District (the “Development Program”), and has caused to be prepared a proposed tax increment financing plan for the TIF District therein (the “TIF Plan”); and

C. The City has performed all actions required by law to be performed prior to the establishment of the Development District and the TIF District therein, and the adoption of a proposed Development Program and TIF Plan therefor, including, but not limited to, notification of Carver County and Independent School District No. 108 having taxing jurisdiction over the property to be included in the TIF District and the holding of a public hearing upon published and mailed notice as required by law; and

NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Cologne as follows:

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1. Municipal Development District No. 2. There is hereby established in the City a Municipal Development District No. 2, the initial boundaries of which are fixed and determined as described in the Development Program.

2. Development Program. The Development Program for the Development District, a copy of which is on file in the office of the City Administrator, is adopted as the development program for the Development District.

3. TIF District No. 2-1. There is hereby established in the City within the Development District, Tax Increment Financing (Economic Development) District No. 2-1 therein (the “TIF District”), the initial boundaries of which are fixed and determined as described in the TIF Plan.

4. Tax Increment Financing Plan. The TIF Plan is adopted as the tax increment financing plan for the TIF District, and the City Council makes the following findings:

(a) The TIF District is an economic development district as defined in Minnesota Statutes, Section 469.174, Subd. 12, the specific basis for such determination being that the construction of an approximately 18,200 square foot expansion to an existing manufacturing and warehouse facility (the “Project”) will discourage commerce, industry, or manufacturing from moving their operations to another state or municipality, increase employment in the State, help prevent the emergence of blight and result in the preservation and enhancement of the tax base of the State.

(b) The proposed development in the opinion of the City Council, would not occur solely through private investment within the reasonably foreseeable future. The reasons supporting this finding are that:

(i) Modern Design, LLC (the “Developer”) has represented to the City that private investment will not finance these development activities because of prohibitive costs. It is necessary to finance these development activities through the use of tax increment financing so that this and other development by private enterprise will occur within the Development District.

(ii) A comparative analysis of estimated market values both with and without establishment of TIF District No. 2-1 and the use of tax increments has been performed as described above. Such analysis is found in Exhibit V of the TIF Plan, and indicates that the increase in estimated market value of the proposed development (less the indicated subtractions) exceeds the estimated market value of the site absent the establishment of the TIF District and the use of tax increments.

(c) In the opinion of the City Council, the increased market value of the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in the market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the TIF District permitted by the TIF Plan. The reasons supporting this finding are that:

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(i) The estimated amount by which the market value of the site will increase without the use of tax increment financing is $-0-;

(ii) The estimated increase in the market value that will result from the development to be assisted with tax increment financing is $800,800 (from $1,096,900 to $1,897,700); and

(iii) The present value of the projected tax increments for the maximum duration of the district permitted by the tax increment financing plan is $85,419.

(d) The TIF Plan for the TIF District conforms to the general plan for development or redevelopment of the City of Cologne as a whole. The reasons for supporting this finding are that:

(i) The TIF District is properly zoned; and

(ii) The TIF Plan will generally compliment and serve to implement policies adopted by the City.

(e) The TIF Plan will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development or redevelopment of the Development District by private enterprise. The reasons supporting this finding are that:

The development activities are necessary so that development and redevelopment by private enterprise can occur within the Development District.

5. Public Purpose. The adoption of the Development Program for the Development District, and the adoption of the TIF Plan for the TIF District therein conform in all respects to the requirements of the Act and will help fulfill a need to develop an area of the State which is already built up to provide employment opportunities to improve the tax base and to improve the general economy of the State and thereby serves a public purpose.

6. Certification. The Auditor of Carver County is requested to certify the original net tax capacity of the TIF District as described in the TIF Plan, and to certify in each year thereafter the amount by which the original net tax capacity has increased or decreased in accordance with the Act; and the City Administrator is authorized and directed to forthwith transmit this request to the County Auditor in such form and content as the Auditor may specify, together with a list of all properties within the TIF District for which building permits have been issued during the 18 months immediately preceding the adoption of this Resolution.

7. Filing. The City Administrator is further authorized and directed to file a copy of the Development Program and TIF Plan for the TIF District with the Commissioner of Revenue and the Office of the State Auditor.

8. Administration. The administration of the Development District is assigned to the City Administrator who shall from time to time be granted such powers and duties pursuant to Minnesota Statutes, Sections 469.130 and 469.131 as the City Council may deem appropriate.

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9. Interfund Loan. The City has determined to pay for certain costs (the “Qualified Costs”) identified in the TIF Plan consisting of certain administrative expenses, which costs may be financed on a temporary basis from the City’s general fund or any other fund from which such advances may be legally made (the “Fund”). Under Minnesota Statutes, Section 469.178, Subd. 7, the City is authorized to advance or loan money from the Fund in order to finance the Qualified Costs. The City intends to reimburse itself for the payment of the Qualified Costs, plus interest thereon, from tax increments derived from the TIF District in accordance with the following terms (which terms are referred to collectively as the “Interfund Loan”):

(a) The City shall repay to the Fund from which the Qualified Costs are initially paid, the principal amount of $73,400 (or, if less, the amount actually paid from such fund) together with interest at 4.00% per annum (which is not more than the greater of (i) the rate specified under Minnesota Statutes, Section 270C.40, or (ii) the rate specified under Minnesota Statutes, Section 549.09) from the date of the payment.

(b) Principal and interest on the Interfund Loan (“Payments”) shall be paid semi-annually on each February 1 and August 1 commencing with the first February 1 or August 1 occurring after the date the tax increments from the TIF District are available and not otherwise pledged to and including the earlier of (a) the date the principal and accrued interest of the Interfund Loan is paid in full, or (b) the date of last receipt of tax increment from the TIF District (“Payment Dates”) which Payments will be made in the amount and only to the extent of Available Tax Increment as hereinafter defined. Payments shall be applied first to accrued interest, and then to unpaid principal.

(c) Payments on the Interfund Loan are payable solely from “Available Tax Increments” which shall mean, on each Payment Date, all of the tax increment generated in the preceding six (6) months with respect to the Development Property within the TIF District and remitted to the City by Carver County, all in accordance with Minnesota Statutes, Sections 469.174 to 469.1794, as amended. Payments on this Interfund Loan are subordinate to any outstanding or future bonds, notes or contracts secured in whole or in part with Available Tax Increment, and are on parity with any other outstanding or future interfund loans secured in whole or in part with Available Tax Increment.

(d) The principal sum and all accrued interest payable under this Interfund Loan are pre-payable in whole or in part at any time by the City without premium or penalty. No partial prepayment shall affect the amount or timing of any other regular payment otherwise required to be made under this Interfund Loan.

(e) The Interfund Loan is evidence of an internal borrowing by the City in accordance with Minnesota Statutes, Section 469.178, Subd. 7, and is a limited obligation payable solely from Available Tax Increment pledged to the payment hereof under this resolution. The Interfund Loan and the interest hereon shall not be deemed to constitute a general obligation of the State of Minnesota or any political subdivision thereof, including, without limitation, the City. Neither the State of Minnesota, nor any political subdivision thereof shall be obligated to pay the principal of or interest on the Interfund Loan or other costs incident hereto except out of Available Tax Increment, and neither the full faith and credit nor the taxing power of the State of Minnesota or any political subdivision thereof is pledged to the payment of

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the principal of or interest on the Interfund Loan or other costs incident hereto. The City shall have no obligation to pay any principal amount of the Interfund Loan or accrued interest thereon, which may remain unpaid after the termination of the TIF District.

(f) The City may amend the terms of the Interfund Loan at any time by resolution of the City Council, including a determination to forgive the outstanding principal amount and accrued interest to the extent permissible under law.

10. Development Agreement.

(a) The City Council hereby approves the Development Agreement in substantially the form submitted, and the Mayor and Administrator are hereby authorized and directed to execute the Development Agreement on behalf of the City.

(b) The approval hereby given to the Development Agreement includes approval of such additional details therein as may be necessary and appropriate and such modifications thereof, deletions therefrom and additions thereto as may be necessary and appropriate and approved by the City officials authorized by this resolution to execute the Development Agreement. The execution of the Development Agreement by the appropriate officer or officers of the City shall be conclusive evidence of the approval of the Development Agreement in accordance with the terms hereof.

The motion for the adoption of the foregoing resolution was duly seconded by member _________and upon vote being taken thereon, the following voted in favor thereof:

and the following voted against the same:

Whereupon said resolution was declared duly passed and adopted.

Approved: ____________________ Matt Lein, Mayor

Attest: __________________ Sue Mueller, City Clerk M/_____ Lein________ Evenski_________ S/_____ Szaroletta________ Bruss_________

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STATE OF MINNESOTA COUNTY OF CARVER CITY OF COLOGNE

I, the undersigned, being the duly qualified and acting Administrator of the City

of Cologne, Minnesota, DO HEREBY CERTIFY that I have compared the attached and

foregoing extract of minutes with the original thereof on file in my office, and that the same is a

full, true and complete transcript of the minutes of a meeting of the City Council of said City,

duly called and held on the date therein indicated, insofar as such minutes relate to the

establishment of Municipal Development District No. 2 and Tax Increment Financing District

No. 2-1 therein in the City.

WITNESS my hand this ______ day of May, 2018.

_______________________________________ City Administrator

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