10 - PEDC 2015-2016 ANNUAL AUDIT REPORT

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PARIS ECONOMIC DEVELOPMENT CORPORATION (A Component Unit of the City of Paris, Texas) Notes to the Financial Statements (Continued) September 30, 2016 IL Detailed Notes on All Activities and Funds (Continued) E. Commitments (Continued) In connection with a first lien loan by a bank to a commercial operation in the amount of $5,800,000, PEDC has entered into a Guaranty of Collection agreement. The loan payment is guaranteed by an individual (and a related company), and in addition, PEDC has guaranteed the full and prompt collection of the principal and interest due under the note together with limited cost of collection. If the lender makes demand under the Guaranty of Collection agreement, the lender will allow PEDC to satisfy its liability in monthly installments as specified in the original note. The agreement is dated September 23, 2010, and will terminate when the note is paid or the expiration of ten years. 4. Retail and Office Structure - Incentive is to participate in reimbursement of sewer line construction to the extent of $250,000. 5. Powder Coated Engineered Wood Manufacturer — In December 2014, the Board of Directors reached an incentive agreement with a manufacturer of powder coated engineered wood to convey eight acres of the industrial park for construction of a building. The incentive agreement was valued at $33,999, the cost of the land to PEDC. An additional 16 acres has been provided as an incentive to complete the construction and for further expansion within five years. The 16 acre incentive is valued at PEDC's cost of $69,055 and remains outstanding at September 30, 2016. Subsequent to year end, Powder Industries did not fulfill their inventive agreement and therefore PEDC received the deed to the property back. F. Risk Management PEDC is exposed to various risks of loss and has obtained insurance related to general liability, loan enforcement liability, errors and omissions liability, and automobile liability. G. Long -Term Liabilities Bonds Pavable PEDC has outstanding Paris Economic Development Corporation Sales Tax Revenue Refunding Bonds, Series 2010, originally issued at $2,685,000, bearing interest at 4.1 % to 4.39 %. Principal payments are due serially in varying annual amounts to September 1, 2018, from $325,000 to $340,000. Sales and Use Taxes (one - quarter of one percent) levied by the City of Paris, Texas, within its boundaries under the Development Corporation Act of 1979, are pledged for payment of bonds and interest. The resolution authorizing the issuance of the bonds requires that monthly deposits be made to the Debt Service Fund in an amount sufficient to pay the next maturing bonds and interest.