18 - APPROVED ANNUAL AUDIT OF THE PEDC FOR FY 2013-14

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Paris Economic Development Corporation (A Component Unit of the City of Paris, Texas) Notes to Financial Statements September 30, 2014 Note 7: Commitments (continued) (5) 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. (6) Bakery - In December 2013, the Board of Directors reached an incentive agreement for training reimbursement and cash for new job creation of $1,179,000, of which $790,500 remains to be satisfied as of September 30, 2014. Note 8: Interfund Transfers During the year, transfers are used to move revenues from the fund with collection authorization to the Debt Service Fund as debt service principal and interest payments become due. The interfund transfers are reported as Other Financing Sources (Uses). Note 9: Risk Management and Subsequent Events 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. Management has evaluated subsequent events through the date on which the financial statements were available to be issued.