DOUGLAS COUNTY DEVELOPMENT, INC.

DOUGLAS COUNTY DEVELOPMENT, INC. (“DCDI”) was incorporated on July 21, 1986. The Articles of Incorporation (attached as Appendix A) state that DCDI was incorporated to:

(1) Foster the industrial and commercial growth and development of Douglas County, Kansas; and

(2) Purchase, develop, manage, and lease, sell or otherwise dispose of real estate, buildings and other forms of industrial and commercial improvements of any kind, and other associated property of whatever kind or description.

The incorporator of DCDI was the Chamber of Commerce of Lawrence, Kansas. Under the Bylaws (the most recent restatement of which is attached as Appendix B), the board of directors of DCDI is appointed by the Chamber board of directors. The initial members of the Board of Directors were Lynn Anderson, Phil Anderson, Martin Dickinson, Ralph Gage, Nancy Hiebert, Joel Jacobs, Bob Johnson, Bob Moore, Al Pendleton, Sandy Praeger, Bob Stephens, J. Stewart, Terry Sutcliffe, Chet Vanatta, and Kurt von Achen. Ex-officio members of the original Board were Web Golden, Frank Hempen, Bill Martin, Chris McKenzie, Gary Toebben, Buford Watson, and George Williams.

The establishment of DCDI was the culmination of years of effort directed toward locating a new industrial park for Lawrence and Douglas County. This effort began in 1976 when Quaker Oats purchased thirty (30) acres in the Santa Fe Industrial Park. This purchase left the Santa Fe Industrial Park with only ten (10) remaining acres for development. The Santa Fe Industrial Park had been initiated by the Lawrence Industrial Development Corporation in 1956 and was opened by the Santa Fe Railroad in 1960. Chamber officials began actively searching for a new park in 1976 and continued through 1977. In 1978, after an extensive search and a report by E. J. Allison, the Chamber Board authorized the Chamber to begin securing options on approximately four hundred (400) acres of land north of Lawrence near the Midland Junction. The Chamber then approached the Union Pacific Railroad to see if the Railroad could be persuaded to buy the property and develop it. After much discussion and delay, the Railroad declined to participate in such a project in 1981, after apparently having determined that the cost of bringing utilities to the site could not be justified in the context of that project. The Chamber continued working on the Midland site during 1982 and received initial approval from the City of Lawrence but was not successful in gaining the backing of the County.

In 1984, the Chamber broadened its efforts in this regard and appointed a new task force, including representatives of the City, the County and the Chamber, to identify a site that would merit the support of all of these participants. The task force was appointed by then Chamber President Pete Whitenight. The initial members of the task force were Beverly Bradley (then on the Douglas County Commission), Wayne Kellum (then Douglas County Zoning Administrator), Ernest Angino (then Mayor of Lawrence), Buford Watson (then City Manager of Lawrence), Joel Jacobs (past President of the Chamber) and Gary Toebben (Executive Vice-President of the Chamber). Thereafter, Price Banks (City-County Director of Planning), Nancy Hiebert (new County Commission chairperson), Frank Hempin (Director of Public Works) and Mike Amyx (City Mayor succeeding Ernest Angino), also served on the task force. On February 3, 1986, this task force unanimously recommended to both the City Commission and the County Commission the development of what was then described as “the 300 acre Noria site located immediately East of Farmland Industries on East Highway 10.” This is the site now known as East Hills Business Park.

After identifying this site, efforts were made to interest Santa Fe Railroad and other private developers both in Lawrence and in Kansas City to handle the development of the Park. These efforts were unsuccessful and led the representatives of the City, the County and the Chamber to agree on the formation of a non-profit corporation to develop and market the property. An agreement was reached between the City, County and the Chamber regarding the purchase of the property and development costs. The County agreed to purchase the land and hold it for sale to the new non-profit corporation at cost as the new corporation located private buyers. The City agreed to put in water service at no cost and to put in the streets and sewer service via a benefit district. The City further agreed to pay ninety-five percent (95%) of the annual costs of servicing the benefit district, with the other five percent (5%) assessed to the property on an annual basis. The City agreed to delay the repayment for their ninety-five percent (95%) share until the property was sold and to not charge interest on the outstanding balance beyond the ten-year life of the bonds issued to finance the improvement. The County agreed to keep the Park mowed, and the City agreed to help with the maintenance of the landscaping at the front entrance. Based on these cooperative efforts, DCDI was launched.

The Internal Revenue Service, by letter dated February 19, 1987 (attached as Appendix C), determined that DCDI was exempt from federal income tax pursuant to Internal Revenue Code Section 501(c)(4). The IRS superceded this determination by letter dated April 20, 1994 (attached as Appendix D), by which DCDI was determined to be exempt under Section 501(c)(6) of the Internal Revenue Code. The change from 501(c)(4) to 501(c)(6) was initiated by DCDI by amendment of its articles of incorporation (attached as Appendix E) in order to allow DCDI to hold real estate in its own name and to meet the Kansas statutory requirement for property tax exemption under K.S.A. Section 79-221(a), prior to its amendment to cover (c)(4) as well as (c)(6) organizations. A copy of K.S.A. Section 79-221 is attached as Appendix F. This change was related to early planning for the shell-building project discussed below.

The County purchased the Noria site by a contract dated July 17, 1986, with Wilma Miller as Seller for the approximately 300-acre tract. Concurrently, the City made a commitment to provide utility services and infrastructure to allow for the development of such ground. These relationships were memorialized by an inter-local agreement (attached as Appendix G) between the City and County to confirm their respective roles and by an option agreement (attached as Appendix H) between DCDI and the County pursuant to which DCDI was granted the option to purchase such ground from the County. The interlocal agreement was amended November 5, 1991 (attached as Appendix I), to accommodate the shell-building project which was financed by local business leaders to give the industrial park the ability to offer a shell building to attract new industry. The shell building project was undertaken and completed by DCDI and is discussed below.

These are the arrangements, which remain in place as of this date. As such, DCDI continues to exist as a private not-for-profit corporation holding the option to acquire, from time to time, the undeveloped portions of the industrial park.

The first property sales occurred in 1989. During that year, Harris Construction Company bought a 5.24 acre site. This site is still undeveloped. Farmland Industries bought 34.53 acres, of which 24.43 acres are intended to serve as a buffer between the Industrial Park and the Farmland plant and are not intended for development. RAM Company, a North Carolina partnership more commonly known as the Garage Door Group, bought a 15.84-acre site that became the first developed site in the Park.

It was also during 1989 that DCDI commenced construction of a shell building in order to be able to offer new industrial prospects the option of being able to buy or lease a shell building that could quickly be finished to the prospect’s individual specifications. This building was financed by borrowing the initial twenty percent (20%) from the local business community by issuing interest-bearing bonds to local businesses and individuals. The balance was financed by a commercial banking loan in which several local banks participated. This building was leased to Pitman-Moore, Inc., and was effective in bringing this new company into the community in 1992. No arrangements have been made as of this date to construct a new shell building. All of the investors in the original bond issue have been repaid.

In 1995, DCDI, with the support of the Lawrence banking community, leased a new 12.9-acre site and building to Astor Universal. The building on this site was built to the specifications of Astor. Astor directly contracted with the contractor to build the building. DCDI facilitated financing by providing the construction funds by borrowing against the Astor lease.

In 1997, a similar arrangement was entered into with National Computer Systems pursuant to which DCDI has built and leased facilities to National Computer Systems on sites, which now include a total of 26.44 acres.

During 1998, Sauer Sundstrand purchased a 19.2-acre site and ProSoCo purchased a 10.08-acre site. Their respective owners have developed both of these sites.

These transactions, which have occurred over the last twelve (12) years, represent total new direct investment in the community of approximately $98,000,000. The facilities located at these sites currently provide approximately 1,850 jobs.

The expansion of the park to include the land east of Noria Road (the Melvin tract) was undertaken by DCDI in recognition of the fact that the available space within the original park was no longer adequate for the purpose of continuing to offer a reasonable array of potential industrial development sites. Since DCDI was then able to arrange financing on its own to acquire such ground, the decision was made by DCDI to purchase the ground directly, rather than having the County utilize government funds for this purpose.

As the foregoing information demonstrates, DCDI is the result of a long-term, broadly based community effort to foster industrial growth. This effort has been open to public view over its entire term and has always included a broad array of local business and government leaders. This is evidenced by the participation and cooperation of city and county commissioners and administrators during their respective terms of office over this entire time span. This is not an active “partnership,” in any legal sense, between DCDI, the City, and the County. However, DCDI would not exist were it not for the decisions by the City and County to undertake the steps described above to establish an industrial park. DCDI’s role is more accurately described as being that of a marketing and/or sales organization that is promoting ground, which it controls through a contractual option. Because the collective involvement of the City and County governments are essential to continued industrial growth, DCDI has actively encouraged representatives of those governments to participate in DCDI Board meetings. To date, the City Commission and the County Commission, as reconstituted from year to year, have designated a member from each body to sit on the DCDI Board of Directors as an ex-officio member. However, there has been and is no legal requirement mandating that any member of either the City Commission or the County Commission sit on the DCDI Board as a voting member.