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, 8 th Floor, San Diego, California 92108
(“DTMC”) this 30 th 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.
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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
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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.
Pipelin
