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Paris Economic Development Corporation
<br />(A Component Unit of the City of Paris, Texas)
<br />Notes to Financial Statements (Continued)
<br />September 30, 2007
<br />Note 4: Public Funds Investment Pools (Continued)
<br />PEDC's investments in Pools are reported at an amount determined by the fair value per share of the
<br />Pool's underlying portfolio, unless the Pool is 2a7-like, in which case they are reported at share
<br />value. A 2a7-like Pool is one which is not registered with the Securities and Exchange Commission
<br />(SEC) as an investment company, but nevertheless has a policy that it will, and does, operate in a
<br />manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940.
<br />Temporary investments at September 30, 2007, are invested in Lone Star Investments ($413,416 )
<br />(Texas Political Subdivisions Investment Pool) and MBIA Municipal Investors Service Cotp.
<br />($1,277,627). These investments are reported with the bank accounts as Cash and Cash Equivalents.
<br />Note 5: Notes Receivable
<br />PEDC has a note receivable bearing interest at 7.00% from a corporation located in Paris, Texas, to
<br />assist with the purchase of an existing business. The note is due in monthly installments of principal
<br />and interest of $32,000 through April 15, 2017, at which time the remaining principal is due. This
<br />note is secured by a security agreement, which lists PEDC as having a subordinate interest in all
<br />respects to the financial institution involved and to other individuals as listed in the security
<br />agreement. The balance of this note at September 30, 2007, was $2,669,211.
<br />PEDC and C-Tech, Inc. entered into an incentive agreement and a loan agreement dated June 16,
<br />2003. PEDC agreed to grant C-Tech, Inc. certain economic incentives in consideration of C-Tech's
<br />agreement to conduct business, create new jobs over a certain period of time, and execute and
<br />deliver anon-interest bearing promissory note in favor of PEDC with an original principal amount of
<br />$1,500,000. C-Tech, Inc. did not comply with the terms of the agreements and the terms were
<br />renegotiated. On July 25, 2007, a new agreement became effective which provided for an immediate
<br />payment of $250,000, an additional payment of $50,000 by December 1, 2007, and monthly
<br />payments of $6,000 until $200,000 is paid, beginning September 1, 2007. The balance remaining of
<br />the original note is $238,000. The independent auditors' report for the year ended September 30,
<br />2006, was qualified because a valuation allowance was not provided for the note and the amount of
<br />the uncollecrible portion is reflected as an adjustment to the beginning fund balance.
<br />Note 6: Notes and Bonds Payable
<br />PEDC has executed a note payable to fund an incentive agreement with a corporation planning to
<br />create and operate a computer services business in Paris, Texas. The note beazs interest at a rate of
<br />3.692% with principal and interest payments due on a monthly basis. The note is secured by a tax
<br />assignment and security agreement. It also contains, to the extent permitted by law, a right of setoff
<br />in all accounts PEDC has with the lender. The balance of the note at September 30, 2007, was
<br />$161,990.
<br />A second note has also been executed to fund this incentive agreement and funding for an industrial
<br />park. This note beazs interest at a rate of 4.942% with principal and interest payments due on a
<br />monthly basis. The note is secured by a tax assignment and security agreement. It also contains, to
<br />the extend permitted by law, a right of setoff in all accounts PEDC has with the lender. The balance
<br />of the note at September 30, 2007, was $480,750.
<br />PEDC has outstanding Paris Economic Development Corporation Taxable Sales Tax Revenue
<br />Bonds, Series 1998 originally issued at $4,200,000, bearing interest at 6.25% to 7.75%. Principal
<br />payments are due serially in varying annual amounts to September 1, 2018, from $190,000 to
<br />$365,000.
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