Waterfall Farms, Inc. - Page 5

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          Form 1040” (before considering limitations).  Under the plan,               
          each participant is entitled to a maximum reimbursement of                  
          $10,000 per year.                                                           
               At a special meeting of the directors held on November 1,              
          1994, the board of directors of Waterfall Farms adopted a                   
          resolution setting forth a repayment obligation similar to that             
          set forth in the bylaws.  At that meeting, the directors also               
          adopted the following resolution:                                           
                    RESOLVED that the Corporation’s officers and                      
               employees shall be required to live at the worksite of                 
               the Corporation to ensure security for the Corporation                 
               property and operations.  The officers and employees                   
               shall be required to live on the worksite to supervise                 
               the care and feeding of the livestock of the                           
               corporation.  The Corporation shall supply said                        
               officers and employees all of their food and lodging                   
               while living at said worksite.  That all of the                        
               officers and employees shall be considered “on duty”                   
               when at the worksite and therefore entitled to such                    
               benefits.                                                              
          C.   Farm Lease                                                             
               During the years at issue, Waterfall Farms leased the Huber            
          farm to Mr. Huber under a “share-crop” arrangement.  Under a                
          written agreement titled “Farm Lease”, dated December 1, 1994               
          (the 1995 lease), effective for 1 year (to November 30, 1995),              
          Mr. Huber agreed to pay Waterfall Farms $15,000 plus one-third of           
          the proceeds from the sale of all crops grown on the farm.  Mr.             
          Huber was to receive the other two-thirds of the proceeds from              
          the sale of the crops, as well as all payments received under               







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Last modified: May 25, 2011