PAYMENT IN LIEU OF TAX AGREEMENT
Date: March ___, 2009
City of Little Rock, Arkansas Little Rock, Arkansas Re: City of Little Rock, Arkansas Industrial Development Revenue Bonds, Series 2009 (Novus International, Inc. Expansion Project)
Ladies and Gentlemen: Novus Arkansas, LLC ("Novus") has indicated its intent to manufacture additional products and expand its scope of services at its existing facility in Little Rock, Arkansas (the "Existing Facility"). These activities by Novus will require substantial capital expenditure and will help protect existing jobs and possibly increase employment at Novus. Thus, in order to facilitate the foregoing, and to also provide incentive to Novus to consider relocating other manufacturing and services operations to the Existing Facility or this area, the City of Little Rock, Arkansas (the "Issuer") proposes to issue the Industrial Development Revenue Bonds referenced above under the provisions of Act 9 of the First Extraordinary Session of the Sixty-Second General Assembly of the State of Arkansas, approved January 21, 1960, as amended ("Act 9 Bonds"). These Act 9 Bonds (which may be issued in more than one series) shall be issued for the purpose of financing the cost of remodeling and renovating the Existing Facility, the acquisition of new machinery and equipment to be placed within the Existing Facility, and the relocation of machinery and equipment to the Existing Facility. These Act 9 Bonds may also be issued for the purpose of financing any new or additional lands, buildings, improvements, and any new or relocated machinery and equipment sited within any such new or additional such buildings or improvements. These Act 9 Bonds may also be issued for any new or relocated machinery and equipment sited within any other building or improvements owned or leased by Novus, and used in the manufacture or distribution of products by Novus in the City of Little Rock, Pulaski County, Arkansas. Any and/or all of the scenarios listed directly above shall collectively be referred to hereinafter as the "Expansion Project." The Expansion Project will be leased by the Issuer to Novus pursuant to a Lease Agreement dated as of the date of the Act 9 Bonds (the "Lease"). The Act 9 Bonds will be secured by a pledge of revenues from the Expansion Project including, in particular, lease rentals to be paid by Novus to the Issuer under the Lease. The Lease provides in Article IV that Novus is obligated to pay all taxes and assessments, general and special, levied and assessed on the Expansion Project
during the term of the Lease, as well as water and sewer charges, assessments and other governmental charges and impositions. Novus is informed and understands that, notwithstanding Article IV of the Lease, under Article 16, Section 5 of the Constitution of the State of Arkansas as implemented by Act 497 of 1981 (Act No. 497), and under the decision of the Supreme Court of the State of Arkansas in the case of Wayland v. Snapp, 232 Ark. 57, 334 S. W. 2d 663 (1960), the Expansion Project will be exempt from ad valorem taxes because it is owned by the Issuer and used for a public purpose within the meaning of the applicable constitutional and statutory provisions affording the exemption. Thus, Novus and the Issuer agree that Novus, as Lessee of the Expansion Project owned by the issuer will, in fact, pay no ad valorem taxes under the provisions Article IV of the Lease on the Expansion Project. However, it is the mutual desire of the Issuer and Novus that Novus make payments in lieu of taxes on the Expansion Project. Under policies of the Issuer applicable to industrial development bonds, Novus has paid an initial administrative fee to the Issuer of $2,500 (and will pay an additional sum of $10,000 when the Bonds are delivered). Additional amounts will be paid to the Issuer annually for administrative expenses during the time the Bonds are outstanding as hereinafter provided. Therefore, to induce the Issuer to proceed with the issuance of the Act 9 Bonds for the purposes indicated, and to induce Novus to proceed with the Expansion Project, which will inure to the benefit of Novus and the Issuer, and for other valuable consideration, the receipt of which is hereby acknowledged, Novus agrees with the issuer as follows: 1. With reference to tax years 2009 through 2029 (or for so long as the Act 9 Bonds are outstanding), Novus will make payments in lieu of taxes on or before October 1 of the succeeding year equal to 35% of the ad valorem taxes assessed in such year as if the Expansion Project were deemed not to be for a public purpose. These benefits will be available to Novus as long as Novus is able to certify that permanent and temporary employment at the Existing Facility and the Expansion Project is maintained at a level of at least 25 individuals at any time during the tax year. It is understood that the agreement set forth in this document is intended to be a separate agreement from, and not a replacement of, any other agreement between Novus and the Issuer. Specifically, this agreement shall not change any terms and conditions of any, if any, Existing Payment Agreement currently in effect and under which Novus is currently making payments. The Existing Payment Agreement shall remain in full force and effect, and no asset covered under the Existing Payment Agreement shall be subject to the terms of this new agreement. The Issuer agrees to distribute each payment hereunder among the taxing authorities in the proportion that the millage collected by each bears to the total millage collected by all during the year of distribution.
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Payments hereunder are not intended to be in lieu of (i) any licenses, occupation or privilege tax or fee imposed upon Novus for or with respect to its right to carry on its business in the State of Arkansas, (ii) any special benefit or local improvement tax or assessment, or (iii) fees or charges for utility services rendered, such as for water or sewer services. The Issuer and Novus agree to use their best efforts to sustain the enforceability of this agreement. However, if by any reason there is a change in the Constitution of the State of Arkansas, a change by the Supreme Court of the State of Arkansas in its interpretation of the Constitution, a change by the General Assembly of the State of Arkansas or otherwise, and Novus is required to pay any tax for which the payments specified in paragraph 1 above are intended to be in lieu, Novus may deduct the aggregate of any such payments made by it from any amount herein agreed to be paid under paragraph 1. The agreement herein made by Novus shall terminate and be of no further force and effect from and after the date that the Lease shall terminate for any purpose other than a default on the part of Novus. If such termination shall be at a point constituting a portion of a year, Novus shall pay, for the year in which termination occurred, that portion of the specified annual payment that the number of days in such year that the Expansion Project was exempt prior to the termination bears to 365 days. This agreement shall be binding upon the successors and assigns of Novus, but no assignment shall be effective to relieve Novus of any of its obligations hereunder unless expressly authorized and approved in writing by the Issuer. This agreement may be executed simultaneously in counterparts, each of which shall be deemed an original. To defray the Issuer’s administrative expense and as compensation for services rendered, and to be rendered, Novus will pay to the Issuer the sum of $2,500 for the annually during the years 2009 to the time that the Lease expires, payable on or before June 30 of each year.
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When executed, this instrument shall constitute a valid and binding contract by and among Novus and the Issuer. Very truly yours, Novus Arkansas, LLC By: _____________________ Title: _____________________
ACCEPTED: City of Little Rock, Arkansas By: ________________________ Mayor
Date: ________________________