Converted by EDGARwiz


After Recording, Return To:

Crown Mines, L.L.C.

P. O. Box 743547

Dallas, Texas  75374-3547







WATER RIGHTS LEASE AND 

WATER PIPELINE EASEMENT AGREEMENT




This Water Right Lease and Water Pipeline Easement Agreement (“Agreement”) is entered into between CROWN MINES, L.L.C., a Texas limited liability company, with an address of P. O. Box 743547, Dallas, Texas  75374-3547 (“Crown Mines”), and DEER TRAIL MINING COMPANY,

L.L.C.

, a Nevada limited liability company, with an address of 8880 Rio San Diego Drive, 8th Floor, San Diego, California 92108 (“DTMC”) this 30th  day of July, 2007 (“Effective Date”).  Crown Mines and DTMC may be referred to herein individually as a “Party” and collectively as the “Parties.”




RECITALS




A.

Crown Mines has been the owner of Water Right No. 63-37, being more particularly described as having a maximum flow of 0.25 cubic feet per second and a maximum annual diversion of 180.995 acre feet of water from Three Mile Spring for year-round mining purposes at the Deer Trail Mine and Mill Site situated in Piute County, State of Utah (the “Spring Right”).



B.





Water from the Spring Right is conveyed via a pipeline approximately 7,510 feet long located on an associated right-of-way extending from Three Mile Spring to the Deer Trail Mine and Mill Site (“Three Mile Spring Pipeline”).



C.

Concurrently with the Effective Date, Crown Mines has conveyed a fifty percent portion of the Spring Right to DTMC, said portion being more particularly described as having a maximum flow of 0.125 cubic feet per second and a maximum annual diversion of 90.5 acre feet of water from Three Mile Spring for year-round mining purposes.

D.

Concurrently with the Effective Date, Crown Mines has retained a fifty percent portion of the Spring Right, said portion being more particularly described as having a maximum flow of 0.125 cubic feet per second and a maximum annual diversion of 90.5 acre feet of water from Three Mile Spring for year-round mining purposes (the “Retained Right”).

E.

Crown Mines also owns a contractual right to use water diverted under Water Right No. 63-3043 as evidenced and described in the Agreement between Cottonwood Irrigation Company and Deer Trail Development Corporation, dated July 28, 1977 (the “Contractual Right”), a copy of which is attached to this Agreement as Exhibit A.

F.

Concurrently with the Effective Date, crown Mines has assigned a fifty percent portion of its Contractual Right to DTMC.








1











G.

Concurrently with the Effective Date, Crown Mines has retained a fifty percent portion of the Contractual Right (the “Retained Contractual Right”).  The Retained Right and the Retained Contractual Right are referred to collective herein as the “Water Rights.”

H.

Concurrently with the Effective Date, Crown Mines conveyed to DTMC certain patented and unpatented mining claims and mill sites and dumps situated in Piute County, State of Utah, described in the attached Exhibit B (the “Claims”).

I.

DTMC desires to use the Water Rights

and Three Mile Spring Pipeline





in its operation of the Claims through a lease of the Water Rights

 and Three Mile Spring Pipeline

 from Crown Mines.

J.

Crown Mines desires to acquire a perpetual non-exclusive Pipeline Easement over and across the Claims for construction of a future pipeline for the transportation of water.




AGREEMENT




NOW, THEREFORE, in consideration of their mutual covenants and promises described herein, including, but not limited to, the perpetual non-exclusive Pipeline Easement described herein, the Parties agree as follows:




1.

Recordation of Agreement.  This Agreement may be recorded by a Party with any governmental agency, including in the offices of the County Recorder of Piute County, Utah, and Sevier County, Utah.

2.

Lease of Water Right

 and Pipeline

..  Crown Mines hereby leases the Water Rights

and the use of the Three Mile Spring Pipeline

to DTMC for purposes consistent with

the

 approved uses

 of the Water Rights

 (the “Lease”).

3.

Term.  The term of the Lease is five (5) years from the Effective Date, unless earlier terminated or extended as provided herein.  

4.

Extension of Lease.  DTMC may provide written notice to Crown Mines of its desire to extend the term of the Lease for successive periods of up to five (5) years each.  DTMC shall provide notice to Crown Mines of its desire to extend the term of the Lease at least 6 months prior to the end of the term or any extension thereof.  Crown Mines shall extend the term of the Lease as requested by DTMC, provided that: (i) Crown Mines

has

 determined, in its sole and absolute discretion but exercising reasonable commercial judgment, that the Water Rights are not required for operation and development of any of its mining claims or for other uses which may by law be permitted during the period of extension requested by DTMC; and (ii) the Parties have negotiated additional terms, including a price for the lease of the Water Rights, as Crown Mines may have determined to be appropriate, in its sole and absolute discretion but exercising reasonable commercial judgment, for the period of extension requested by DTMC.  In the event that Crown Mines determines that the Water Rights are necessary for operation and development of its mining claims or for other uses which may by law be permitted, Crown Mines shall so 






2









notify DTMC in writing no later than 4 months prior to the end of the term or any extension thereof.

5.

Rent.  The Water Rights shall be leased to DTMC at no cost during the initial term of the Lease.  The Parties shall negotiate in good faith the rental for the Water Rights for each period during which the Lease is proposed to be extended.

6.

Duty to Use Water.  DTMC shall divert and fully use the water available under the Water Rights consistent with their approved uses.  Within 120 days of the Effective Date, DTMC shall submit a water use plan to Crown Mines, including, but not limited to, a description of the diversion and conveyance facilities, the amount of water that it reasonably expects to use, the timing of the proposed use, and a description of the operations that will use the water in its mining and development of the Claims.

7.

Diversion and Use Records.  DTMC shall measure its water diversions and keep records of all water diverted, used, and returned under the Water Rights.  The water diversion and use records maintained by DTMC shall be considered confidential and shall not be disclosed to anyone but Crown Mines without Crown Mines’ express written permission.  On each anniversary of the Effective Date, DTMC shall provide a report of its diversion and use of water under the Water Rights to Crown Mines.

8.

Filing of Change Applications Restricted.  DTMC shall not file any permanent or temporary change applications on the Water Rights without the express prior written permission of Crown Mines.

9.

Termination of Lease.  Crown Mines may terminate the Lease upon 12 months’ written notice to DTMC if Crown Mines determines, in its sole and absolute discretion but exercising reasonable commercial judgment, that the use of the Water Rights are necessary for the mining and development of its claims or for other uses which may by law be permitted.  Termination of the Lease shall have no effect on the perpetual pipeline easement granted by DTMC to Crown Mines herein, which is expressly intended to survive termination of the Lease.

10.

Pipeline Easement.  DTMC hereby grants to Crown Mines a perpetual, non-exclusive easement (“Pipeline Easement”) over and across the Claims at any reasonable point to locate, survey a route, construct, entrench, maintain, protect, inspect and operate a surface or an underground pipeline for the transportation of water, together with necessary valves and other appurtenances.  The easement hereby granted is a burden on the Claims for the benefit of Crown Mines, which burden shall run with the Claims and shall be binding upon successor owners of the Claims or any portion thereof and constitute an easement in gross in favor of Crown Mines and its successors and assigns.  The Pipeline Easement shall be 20 feet in width being 10 feet on each side of the centerline of the pipeline.  The use of the Pipeline Easement shall not unreasonably interfere with DTMC’s mining activities on the Claims, and the Pipeline Easement is in addition to and not in derogation of any other rights of access available to Crown Mines by law.

11.

Notices.  All notices, payments and other required communications (“Notices”) to the Parties shall be in writing, and shall be addressed as follows:






3









If to Crown Mines:

Crown Mines, L.L.C.

P. O. Box 743547

Dallas, Texas  75374-3547




With a Copy to:

Michael R. Haggerty

Jackson Walker L.L.P.

901 Main Street, Suite 6000

Dallas, Texas  75202




If to DTMC:

Deer Trail Mining Company,

L.L.C.



8880 Rio San Diego Drive, 8th Floor

San Diego, California  92108




With a Copy to:

Robert N. Wilkinson, Esq.

60 East South Temple, Suite 1200

Salt Lake City, Utah  84111




All

Notices

 shall be given by personal delivery, by electronic communication or facsimile, with a confirmation sent by registered or certified mail return receipt requested, or by commercial courier service.  All Notices shall be effective and shall be deemed delivered on the date of delivery if delivered during normal business hours, and if not

,

 delivered during normal business hours, on the next business day following delivery.  A Party may change its address by Notice to the other Party.

12.

Authority.  Each of Crown Mines and DTMC represents and warrants to the other that its undersigned officer has been duly authorized, and has the power and authority, to execute this Agreement on its behalf.

13.

Successors and Assigns.  This Agreement and the covenants contained herein shall be binding upon and inure to the benefit of the Parties, their successors and assigns.

IN WITNESS WHEREOF, the parties have caused this Agreement to be properly executed by persons thereunto duly authorized for the purposes therein stated.

EXECUTED as of the date first above written.

DEER TRAIL MINING COMPANY,

L.L.C.

,

CROWN MINES, L.L.C.,

a Nevada limited liability company

a Texas limited liability company




By:  _/s/ Mark A. Lopez___________

By:  _/s/ I.N. Fehr______________

Its:  _Manager___________________

Its:  _Manager_________________









4









STATE OF CALIFORNIA

)

: ss.

COUNTY OF

SAN DIEGO

)




The foregoing instrument was acknowledged before me this 31 day of July, 2007, by Mark A. Lopez, Manager of DEER TRAIL MINING COMPANY,

L.L.C.

, a Nevada limited liability company.

[NOTARY SEAL]

_/s/ Vivian T. Harris____________

Notary Public







STATE OF TEXAS

)

: ss.

COUNTY OF

DALLAS

)




The foregoing instrument was acknowledged before me this 30th day of July, 2007, by I.N. Fehr, the President of CROWN MINES, L.L.C., a Texas limited liability company.

[NOTARY SEAL]

_/s/ Lorlee C. Bartos____________

Notary Public












5









EXHIBIT A

To Water Rights Lease and Water Pipeline Easement Agreement

Agreement between Cottonwood Irrigation Company and 

Deer Trail Development Corporation, dated July 28, 1977











6


















7
















8
















9
















10



















11










EXHIBIT B

To Water Rights Lease and Water Pipeline Easement Agreement

PART 1

Crown Mines L.L.C. Claims Purchased by Deer Trail Mining Company, L.L.C.

Patented Claims Located in Piute County, Utah




			
	CLAIM NAME

	 
	MINERAL SURVEY NUMBER


	CLIFF

	 
	MS 41


	DEER TRAIL

	 
	MS 42 A


	DEER TRAIL

	#01

	MS 6365 A


	DEER TRAIL

	#01 MILLSITE

	MS 6385 B


	DEER TRAIL

	#02

	MS 6365 A


	DEER TRAIL

	#02 MILLSITE

	MS 6365 B


	DEER TRAIL

	#03

	MS 6365 A


	DEER TRAIL

	#03 MILLSITE

	MS 6365 B


	DEER TRAIL

	#04

	MS 6396


	DEER TRAIL

	#05

	MS 6403 A


	DEER TRAIL

	#05 MILLSITE

	MS 6403 B


	DEER TRAIL

	#07

	MS 6403 A


	DEER TRAIL

	#08

	MS 6736


	DEER TRAIL

	#09

	MS 6736


	DEER TRAIL

	#10

	MS 6736


	DEER TRAIL

	#20

	MS 6736


	DEER TRAIL

	#30

	MS 6717


	DEER TRAIL

	#33

	MS 6717


	DEER TRAIL

	#34

	MS 6717


	DEER TRAIL

	#35

	MS 6717


	DEER TRAIL

	#36

	MS 6717


	DEER TRAIL

	#37

	MS 6717


	DEER TRAIL

	#38

	MS 6736


	DEER TRAIL FRAC.

	 
	MS 6717


	DEER TRAIL MILLSITE

	 
	MS 42 B


	DEWITT & FERGUSON

	 
	MS 52 A


	*DEWITT & FERSUSON MILLSITE

	MS 52 B


	GREEN EYED MONSTER

	 
	MS 43 A


	MONSTER APEX

	 
	MS 5972


	MONSTER APEX #2

	 
	MS 5972


	PLUTO

	 
	MS 46


	SPHINX

	 
	MS 6397




TOTAL CLAIMS     32

*DEWITT & FERGUSON MILLSITE MINERAL RIGHTS ONLY







12










EXHIBIT B




To Water Rights Lease and Water Pipeline Easement Agreement



PART II



Crown Mines L.L.C. Claims Purchased by Deer Trail Mining Company, L.L.C.

Unpatented Claims Located in Piute County, Utah




					
	CLAIM NAME

	RECORDED BOOK

	RECORDED PAGE 

	AMENDED BOOK PAGE

	BLM SERIAL NUMBER


	APEX LODE

	D

	452

	 
	95579


	ATHENIA

	D

	423

	 
	95580


	BUSTER

	G

	459

	 
	95585


	BUSTER NO.1

	G

	460

	 
	95586


	BUSTER NO.2

	G

	461

	 
	95587


	BUSTER NO.3

	G

	461

	 
	95588


	BUSTER NO.4

	M

	129

	 
	95589


	BUSTER NO.5

	M

	130

	 
	95590


	BUSTER NO.6

	M

	131

	 
	95591


	BUSTER NO.7

	M

	131

	 
	95592


	BUSTER NO.8

	M

	132

	 
	95593


	BUSTER NO.9

	M

	133

	 
	95594


	CALEDONIA LODE

	D

	588

	 
	95596


	CINNABAR LODE

	D

	584

	 
	95599


	CLIFF NO. 1

	D

	371

	 
	95600


	CLIFF NO. 2

	D

	372

	 
	95601


	CLIFF NO. 3

	D

	372

	 
	95602


	CLIFF NO. 4

	D

	373

	 
	95603


	CLIFF NO. 5

	D

	373

	 
	95604


	CLIFF NO. 6

	D

	373

	 
	95605


	CLIFF NO. 7

	D

	374

	 
	95606


	CLIFF NO. 8

	D

	374

	 
	95607


	COLUMBINE LODE

	D

	586

	 
	95608


	CREST LODE

	D

	452

	 
	95610


	DEER TRAIL EXT.

	C

	250

	 
	95666


	DEER TRAIL EXT. NO. 01

	C

	250

	 
	95667


	DEER TRAIL EXT. NO. 02

	C

	250

	 
	95668


	DEER TRAIL EXT. NO. 03

	C

	251

	 
	95669


	DEER TRAIL EXT. NO. 04

	C

	251

	 
	95670


	DEER TRAIL EXT. NO. 05

	C

	252

	 
	95671


	DEER TRAIL EXT. NO. 06

	C

	252

	 
	95672


	DEER TRAIL EXT. NO. 07

	C

	253

	 
	95673


	DEER TRAIL EXT. NO. 08

	C

	253

	 
	95674










13















					
	DEER TRAIL EXT. NO. 09

	C

	253

	 
	95675


	DEER TRAIL EXT. NO. 10

	C

	254

	 
	95676


	DEER TRAIL EXT. NO. 11

	C

	254

	 
	95677


	DEER TRAIL EXT. NO. 12

	ll

	710

	JJ               65

	353982


	DEER TRAIL EXT. NO. 13

	ll

	711

	 
	353983


	DEER TRAIL EXT. NO. 14

	ll

	772

	 
	353984


	DEER TRAIL EXT. NO. 15

	ll

	713

	 
	353985


	DEER TRAIL EXT. NO. 24

	ll

	722

	 
	353994


	DEER TRAIL EXT. NO. 25

	ll

	723

	 
	353995


	DEER TRAIL EXT. NO. 26

	ll

	724

	 
	353996


	DEER TRAIL EXT. NO. 27

	ll

	725

	 
	353997


	DEER TRAIL EXT. NO. 28

	ll

	726

	 
	353998


	DEER TRAIL EXT. NO. 29

	ll

	727

	 
	353999


	DEER TRAIL EXT. NO. 30

	ll

	728

	 
	354000


	DEER TRAIL EXT. NO. 31

	ll

	729

	 
	354001


	DEER TRAIL EXT. NO. 32

	ll

	730

	 
	354002


	DEER TRAIL EXT. NO. 33

	ll

	731

	 
	354003


	DEER TRAIL EXT. NO. 34

	ll

	732

	 
	354004


	DEER TRAIL EXT. NO. 35

	ll

	733

	 
	354005


	DEER TRAIL EXT. NO. 36

	ll

	734

	 
	354006


	DEER TRAIL EXT. NO. 37

	ll

	735

	 
	354007


	DEER TRAIL EXT. NO. 38

	ll

	736

	 
	354008


	DEER TRAIL EXT. NO. 39

	ll

	737

	 
	354009


	DEER TRAIL EXT. NO. 40

	ll

	738

	 
	354010


	DEER TRAIL EXT. NO. 41

	ll

	739

	 
	354011


	DEER TRAIL EXT. NO. 42

	ll

	740

	 
	354012


	DEER TRAIL EXT. NO. 43

	ll

	741

	 
	354013


	DEER TRAIL EXT. NO. 44

	ll

	742

	 
	354014


	DEER TRAIL EXT. NO. 45

	ll

	743

	 
	354015


	DEER TRAIL EXT. NO. 46

	ll

	744

	 
	354016


	DEER TRAIL EXT. NO. 47

	ll

	745

	 
	354017


	DEER TRAIL EXT. NO. 48

	ll

	746

	 
	354018


	DEER TRAIL EXT. NO. 49

	ll

	747

	 
	354019


	DEER TRAIL EXT. NO. 50

	ll

	748

	 
	354020


	DEER TRAIL EXT. NO. 51

	ll

	749

	 
	354021


	DEER TRAIL EXT. NO. 52

	ll

	750

	 
	354022


	DEER TRAIL NO. 11

	A

	135

	 
	95612


	DEER TRAIL NO. 12

	A

	142

	 
	95613


	DEER TRAIL NO. 13

	A

	142

	 
	95614


	DEER TRAIL NO. 14

	A

	143

	 
	95615


	DEER TRAIL NO. 15

	A

	143

	 
	95616


	DEER TRAIL NO. 16

	A

	144

	 
	95617










14















					
	DEER TRAIL NO. 17

	A

	144

	 
	95618


	DEER TRAIL NO. 18

	A

	145

	 
	95619


	DEER TRAIL NO. 19

	A

	145

	 
	95620


	DEER TRAIL NO. 21

	24

	114

	 
	95621


	DEER TRAIL NO. 22

	24

	114

	 
	95622


	DEER TRAIL NO. 23

	24

	115

	 
	95623


	DEER TRAIL NO. 24

	24

	116

	 
	95624


	DEER TRAIL NO. 25

	24

	117

	 
	95625


	DEER TRAIL NO. 26

	24

	117

	 
	95626


	DEER TRAIL NO. 27

	24

	118

	 
	95627


	DEER TRAIL NO. 28

	24

	119

	 
	95628


	DEER TRAIL NO. 29

	24

	120

	 
	95629


	DEER TRAIL NO. 31

	1

	599

	 
	95630


	DEER TRAIL NO. 32

	24

	122

	 
	95631


	DEER TRAIL NO. 39

	B

	99

	 
	95632


	DEER TRAIL NO. 40

	B

	100

	 
	95633


	DEER TRAIL NO. 41

	B

	100

	 
	95634


	DEER TRAIL NO. 42

	B

	101

	 
	95635


	DEER TRAIL NO. 43

	B

	245

	 
	95636


	DEER TRAIL NO. 44

	B

	246

	 
	95637


	DEER TRAIL NO. 45

	B

	247

	 
	95638


	DEER TRAIL NO. 46

	B

	245

	 
	95639


	DEER TRAIL NO. 47

	B

	246

	 
	95640


	DEER TRAIL NO. 48

	B

	270

	 
	95641


	DEER TRAIL NO. 49

	B

	322

	 
	95642


	DEER TRAIL NO. 50

	B

	322

	 
	95643


	DEER TRAIL NO. 51

	B

	323

	 
	95644


	DEER TRAIL NO. 52

	B

	323

	 
	95645


	DEER TRAIL NO. 53

	B

	324

	 
	95646


	DEER TRAIL NO. 54

	B

	324

	 
	95647


	DEER TRAIL NO. 55

	G

	227

	 
	95648


	DEER TRAIL NO. 56

	G

	227

	 
	95649


	DEER TRAIL NO. 57

	G

	228

	 
	95650


	DEER TRAIL NO. 58

	G

	229

	 
	95651


	DEER TRAIL NO. 59

	G

	229

	 
	95652


	DEER TRAIL NO. 60

	G

	230

	 
	95653


	DEER TRAIL NO. 61

	G

	231

	 
	95654


	DEER TRAIL NO. 62

	G

	231

	 
	95655


	DEER TRAIL NO. 63

	G

	232

	 
	95656


	DEER TRAIL NO. 64

	G

	233

	 
	95657


	DEER TRAIL NO. 65

	G

	233

	 
	95658


	DEER TRAIL NO. 66

	G

	234

	 
	95659










15















					
	DEER TRAIL NO. 67

	G

	234

	 
	95660


	DEER TRAIL NO. 68

	G

	235

	 
	95661


	DEER TRAIL NO. 69

	G

	235

	 
	95662


	DEER TRAIL NO. 70

	G

	236

	 
	95663


	DEER TRAIL NO. 71

	G

	237

	 
	95664


	DEER TRAIL NO. 72

	G

	447

	 
	95665


	FALCON LODE

	D

	584

	 
	95681


	FIRE FLY LODE

	D

	584

	 
	95682


	GOLDEN EAGLE LODE

	D

	583

	 
	95693


	GORGE LODE

	D

	453

	 
	95697


	GRAND VIEW LODE

	D

	423

	 
	95698


	HIDDEN TREASURE AMENDED

	D

	589

	 
	95701


	JONQUIL LODE

	D

	587

	 
	95705


	KIESTER

	D

	586

	 
	95706


	LA CIGALE

	D

	587

	 
	95707


	LINDA PLACER

	N

	125

	 
	95709


	LOWER CONTACT

	D

	450

	 
	95714


	MONSTER #3

	B

	123

	 
	95719


	MONSTER #4

	B

	123

	 
	95720


	MONSTER #5

	B

	124

	 
	95721


	MONSTER #6

	B

	124

	 
	95722


	MONSTER #7

	B

	125

	 
	95723


	MONSTER #8

	B

	125

	 
	95724


	MONSTER #9

	B

	126

	 
	95725


	MOUNTAIN CHIEF AMENDED

	D

	589

	 
	95726


	MOUNTAIN CHIEF NO. 1

	M

	128

	 
	95727


	MOUNTAIN CHIEF NO. 2

	M

	129

	 
	95728


	OLD CHANNEL LODE

	D

	464

	 
	95747


	OLD CHANNEL LODE NO. 1

	M

	81

	 
	95748


	PORCUPINE LODE

	D

	588

	 
	95742


	PORTAL LODE

	D

	453

	 
	95749


	PORTAL NO. 1

	M

	82

	 
	95750


	PORTAL NO. 2

	M

	83

	 
	95751


	PYRITE LODE

	D

	585

	 
	95729


	RED KNOLL LODE

	D

	453

	 
	95731


	SANTA MARIA

	D

	464

	 
	95735


	SILVER WEDGE

	D

	422

	 
	95737


	SLOPE NO. 1

	D

	450

	 
	95752


	SLOPE NO. 2

	D

	451

	 
	95753


	SLOPE NO. 3

	D

	451

	 
	95754










16















					
	SLOPE NO. 4

	M

	83

	 
	95755


	SLOPE NO. 5

	M

	127

	 
	95756


	SLOPE NO. 6

	M

	127

	 
	95757


	SNOW SHOE LODE

	D

	583

	 
	95760


	SYLVIA PLACER

	N

	126

	 
	95763


	TAMARAC LODE

	D

	585

	 
	95764


	THE REEF LODE

	D

	588

	 
	95732


	TOMAHAWK LODE

	D

	583

	 
	95767


	TOPAZ LODE

	D

	587

	 
	95768


	VICTORY LODE

	D

	586

	 
	95771


	WHITE FLINT LODE

	D

	423

	 
	95776


	WILD CAT LODE

	D

	585

	 
	95758


	WOODLAND LODE

	D

	451

	 
	95759


	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	TOTAL CLAIMS

	170

	 
	 
	 















17