Note 11 – Commitments and Contingencies The Co

Note 11 – Commitments and Contingencies

The Company is party to a forty year exclusive agreement (“Agreement”), with an original effective date of
November 1, 1995, modified on April 25, 2000, to reduce certain minimum guarantee and compensation
provisions of the Agreement. The Agreement provides that the Company shall draw not less than seven
million (7,000,000) gallons or water from certain springs on an annual basis. During the remainder of the
first twenty-five (25) years of the Agreement, the Company pays one cent ($0.01 per gallon for the first
five million (5,000,000) gallons of water drawn and three-fourth of one cent ($0.0075) for all gallonage
thereafter, but not less than $65,000 per year regardless of the actual gallonage drawn, payable in monthly
installments of $5,416. In event that drought or other conditions reduce the capacity of the springs, so that
the springs cannot meet the minimum guarantee, the minimum guarantee shall be reduced in accordance
with an agreed to formula. For the last fifteen years of the agreement, which expires October 31, 2035, the
Agreement provides that the Company shall pay one and one-quarter cents ($0.0125) per gallon for the first
five million (5,000,000) gallons and for gallons thereafter the Company shall pay one cent ($0.01) per
gallon, with an annual minimum of $82,500, payable in monthly installments of $6,875. The Company is
responsible for all maintenance and repairs, utilities, and capital improvement costs incurred in connection
with the water collection facility, which includes storage tanks, a pump building, piping, and other related
equipment necessary for and related to the harvesting of water from the springs. The Agreement also
provides that the owner of springs may sell water from the springs under certain conditions, provided,
however, that the charge per gallon sold shall not be less than the price per gallon paid by the Company,
with such proceeds divided equally between the Company and the owner. The Company has an option of
first refusal in the event that the owner enters into an agreement for the sale of all or a portion of the real
property, which includes the springs located on the real property. Upon execution of a valid binding
contract between the owner and a third party, which contract shall be made subject to the terms of the
option, the owner shall provide the Company a copy of the contract and it shall have thirty (30) days from
date of delivery or mailing within which to exercise its option by delivering to the owner a check in the
amount of the contract deposit, in which event the owner and the Company shall be bound by the contract.