Document:

Exhibit 10.3

Exhibit 10.3

Suite 1600, 777 Dunsmuir Street

P.O. Box 10425, Pacific Centre

Vancouver, BC  V7Y 1K4

telephone: 604.689.7371  facsimile: 604.688.0094

 

February 27, 2004

Mr. Arthur R. Leger

2338 Sunrise Drive

Reno, Nevada  89509

(775) 827-6312

ArthurLeger57@hotmail.com 

	
RE:
	
Letter Agreement between Luna Gold Corp. and Arthur R. Leger

	 	
for the Lease of the LS and NBM Properties, Lander Co., Nevada

Dear Art,

Further to our Letter dated January 27, 2004, granting Luna Gold Corp. ("Luna") a 30 day exclusive option on your LS Gold ("LS") and North Battle Mountain ("NBM") properties, more specifically described in Attachment 1 hereto (the "Properties"), Luna hereby notifies you that it is exercising its right under the exclusive option to enter into a binding Letter Agreement, ("LA") to lease the Properties.   This binding LA sets out the terms and conditions which would form the basis of separate lease agreements for the LS and NBM properties, made between Luna (the "Optionee") and Mr. Arthur R. Leger (the "Optionor").  These lease agreements (the "Leases") will be prepared incorporating the terms of this LA, as well as such other terms as we may agree to, including standard terms which normally form part of more in depth exploration and mining agreements.

	
1. 
	
The Optionor will grant the Optionee the right to acquire a 100% undivided interest in the Properties (the "Option"), subject to a retained 3% net smelter production royalty (the "Royalty") reserved to the Optionor.

	 
	
2. 
	
The Option is exercisable over a fifteen (15) year period and, in order to maintain the Option in good standing, the Optionee will make to the Optionor the following cash payments and carry out the following work commitments:

	 
	 	
(a) 
	
For the LS Gold Property, the following schedule of cash payments and work commitments would apply:

 

 

	

Due Date
	

Cash Payment
	

Work Commitment

	

On execution of LA
	

$5,000 (PAID)
	

-

	

By Yr. 1 Anniv.
	

$15,000
	

$10,000

	

By Yr. 2 Anniv.
	

$25,000
	

$50,000

	

By Yr. 3 Anniv.
	

$50,000
	

$100,000

	

By Yr. 4 Anniv.
	

$155,000
	

$100,000

	

By Yr. 5 Anniv.
	

$250,000
	

$250,000

	

By Yr. 6 Anniv.
	

$250,000
	

$250,000

	

By Yr. 7 Anniv.
	

$250,000
	

$240,000

	

Each of Yrs. 8 to 15
	

$50,000
	

$50,000

	

TOTAL
	

$1,400,000
	

$1,400,000

	 	
(b) 
	
For the North Battle Mountain Property, the following schedule of cash payments and work commitments would apply:

	

Due Date
	

Cash Payment
	

Work Commitment

	

On execution of LOI
	

$5,000
	

-

	

By Yr. 1 Anniv.
	

$15,000
	

$10,000

	

By Yr. 2 Anniv.
	

$20,000
	

$25,000

	

By Yr. 3 Anniv.
	

$50,000
	

$50,000

	

By Yr. 4 Anniv.
	

$160,000
	

$100,000

	

By Yr. 5 Anniv.
	

$250,000
	

$250,000

	

By Yr. 6 Anniv.
	

$250,000
	

$250,000

	

By Yr. 7 Anniv.
	

$250,000
	

$315,000

	

Each of Yrs. 8 to 15
	

$50,000
	

$50,000

	

TOTAL
	

$1,400,000
	

$1,400,000

	 	
(c) 
	
All cash payments are considered as Advance Royalty Payments ("AMR") and would be credited against the Royalty on each property separately.

	 
	 	
(d)
	
For the LS Gold Property only, a separate NSR production royalty of 1% would apply to new claims located on open ground by either party within the Area of Mutual Interest, as depicted on Attachment 2 hereto, with such new claims to be included in the LS Gold Property Lease.

	 
	 	
(e) 
	
The initial work commitment, to be completed by the year one anniversary date, is an obligation to Luna; however subsequent cash payments and work commitments are at the option of Luna and must only be met in a timely manner so as to maintain the Letter Agreement or Lease in good standing.  Any excess expenditures during a given year can be applied to the following or subsequent year's obligations.  

 

 

	
3. 
	
Luna would record the current claims - 80 for the LS Property and 34 for the North Battle Mountain Property - and make the appropriate payments to the BLM and Lander County within the first 30 days following execution of this LA.

	 
	
4. 
	
Luna would file annual assessment fees with both the BLM and Lander County as long as the Option on the Property(s) was in effect, subject to Clause 8 below.

	 
	
5. 
	
Luna would report all factual data gathered from the Properties to Mr. Leger on each anniversary date above.  Luna also agrees to utilize Mr. Leger's geologic knowledge of the properties on a consulting basis as Luna feels appropriate; such consulting work by Mr. Leger to be at the rate of $200/day US, plus all normal field expenses.

	 
	
6. 
	
Luna would abide by all state and federal permitting requirements and complete any required reclamation obligations as appropriate.

	 
	
7. 
	
Luna would have the right to assign the Letter Agreement or the Lease, as the case may be, to a third party, as well as have the right to enter into any Joint Venture arrangement with a third party.

	 
	
8. 
	
Luna could terminate this Letter Agreement or the Lease at any time, subject to meeting all prior commitments.  If termination occurred within 60 days of the due date for payment of any annual assessment obligation, Luna would make such payment.

	 
	
9. 
	
Both Parties agree to execute all documents and do all acts as may be necessary within their respective powers to carry out and give full force to the true intent and purpose of this LA.

	 
	
10. 
	
This Letter may be executed in one or more counterparts and by fax, each of which will be deemed to be an original, and all of which taken together will constitute one and the same instrument.

	 
	
11. 
	
Both Parties confirm that the purpose of this Letter is to create a legally binding obligation between each other.

	 
	
12. 
	
The Optionor represents and warrants to the Optionee that, to the Optionor's knowledge, the claims comprising the Properties are in good standing (although in need of filing) and are free and clear of all liens, charges and encumbrances and that the Optionor has full power and authority to grant the Option.

	 
	
13. 
	
This Letter Agreement will be governed and construed in accordance with the laws of Nevada.

 

 

	
14. 
	
Any notice, direction or other instrument given under this Letter Agreement will be in writing and given by delivery of same or by mailing the same by prepaid registered or certified mail or by sending the same by fax or other similar form of communication and in each case addressed to the intended recipient at the following address:

	 
	 
	 	 	
Optionee:

	 
	 	 	 	
Luna Gold Corp.

	 	 	 	
33174 Bergen Mountain

	 	 	 	
Evergreen, Colorado 80439

	 	 	 	
Fax:  303 679-0938

	 	 	 	
E-mail:  cwhering@attglobal.net

	 	 	 	
Attention:  Carl Hering, Director

	 
	 
	 	 	
Optionor:

	 
	 	 	 	
Mr. Arthur R. Leger

	 	 	 	
2338 Sunrise Drive

	 	 	 	
Reno, Nevada  89509

	 	 	 	
(775) 827-6312

	 	 	 	
ArthurLeger57@hotmail.com 

	 
	
15. 
	
All dollar amounts referred to herein are U.S. dollars.

	 
	
If the above terms and conditions are acceptable to you please indicate your agreement by executing this Letter Agreement in the space provided below and returning one duly executed copy to us for our records.

	 
	
Luna gold Corp.

	 
	 
	
/s/ Carl Hering, Director

	 
	 
	 
	
AGREED and ACCEPTED this 4th day of March, 2004

	 
	 
	
BY:

	 	
/s/ Arthur R. LegerEXHIBIT 10.1

                           NOTE MODIFICATION AGREEMENT

         This Note Modification  Agreement (this  "Modification") by and between
BLUE DOLPHIN ENERGY COMPANY (the "Borrower") and WESTERN GULF PIPELINE PARTNERS,
LP (the "Lender") is entered into on the 8th day of April 2005.

                                    RECITALS:

         A. Borrower  executed that certain  Promissory  Note dated September 8,
2004,  payable to the order of Lender,  in the face amount of  $275,000.00  (the
"Note"), a copy of which is attached hereto as Exhibit A.

         B.  Pursuant to Section 3(c) of the Note,  the Maturity  Date under the
Note was extended to the Extended Maturity Date.

         C. Borrower and Lender have agreed to amend certain terms of the Note.

         D.  Borrower  and  Lender  desire  to  acknowledge   and  document  the
amendments to the Note subject to the terms and conditions contained herein.

                  NOW,  THEREFORE,  in  consideration  of  the  promises  herein
contained,  the  mutual  benefits  to be  derived  herefrom  and other  good and
valuable  consideration received by each party, and each intending to be legally
bound hereby, the parties agree as follows:

         1. Specific Amendments to Note.

                  A. The  following  definitions  are  hereby  amended  in their
         entirety to read as follows:

                  Base Rate means,  from day-to-day,  an annual rate of interest
         equal to the lesser of (a) 12.0% and (b) the Maximum Rate.

         Maturity Date means the earlier to occur of (a) June 30, 2006,  and (b)
         the date upon which the  Obligation  has been  accelerated  pursuant to
         Section 11 below.

                  B. The following definition is hereby added to the Note:

         Modification means that certain Note Modification Agreement dated April
         8, 2005 between Borrower and Lender.

                  C. The  definition  of Extended  Maturity Date as set forth in
         the Note is hereby  deleted  therefrom  for all purposes from and after
         the date of this Modification.

                  D. Section  3(b) is hereby  amended in its entirety to read as
         follows:

<PAGE>

                  (b) So long as no Default exists on any interest payment date,
         from the date of the Modification until the Maturity Date, interest due
         under  this Note  that has  accrued  during  such  period  shall not be
         payable on such interest  payment date, but shall continue to accrue on
         a daily  basis  and  shall be due and  payable  on the  Maturity  Date;
         provided that, all accrued but unpaid interest under this Note shall be
         due and payable on any interest payment if a Default exists on any such
         interest payment date. The outstanding  Principal Debt plus all accrued
         and unpaid interest on this Note and all other Obligations shall be due
         and payable on the Maturity Date.

         2. General  Amendments  to Loan  Documents.  The Loan  Documents  shall
continue in force and effect to secure the  obligations of Borrower  pursuant to
the Note, and any reference to the descriptions of the obligations, indebtedness
or liabilities of Borrower secured by any such Loan Documents shall be deemed to
refer to the  obligations of Borrower  pursuant to the Note, as hereby  amended.
This  Modification  modifies the Note and the other Loan Documents but in no way
acts as a release or  relinquishment  of the liens securing payment of the Note,
including  without  limitation the liens and security  interests  created by the
Mortgage,  and such liens and security  interests are hereby renewed,  extended,
ratified, confirmed and carried forward by Borrower in all respects.

         3.  Conditions  Precedent in  Connection  with the  Modification.  This
Modification   shall  not  become  effective  unless  and  until  the  following
conditions have been satisfied:

                  A.  Receipt  of  Modification.   Lender  shall  have  received
         multiple counterparts of this Note Modification Agreement, as requested
         by Lender, duly executed by an authorized officer of Borrower.

                  B.  Payment of Legal Fees.  Lender shall have paid to Porter &
         Hedges,  L.L.P.  all  reasonable  legal fees  incurred  to such firm in
         connection with this Modification.

                  C. Legal  Matters  Satisfactory  to Lender.  All legal matters
         incident to the consummation of the  transactions  contemplated by this
         Modification shall be satisfactory to the Lender.

         4. Reaffirmation of Representations and Warranties.

                  A. To  induce  the  Lender to enter  into  this  Modification,
         Borrower hereby represents and warrants to Lender as follows:

                           i.       The   execution   and   delivery   of   this
                                    Modification  and  the  performance  by  the
                                    Borrower  of  its  obligations   under  this
                                    Modification   (i)  are  within   Borrower's
                                    corporate   power,   (ii)   have  been  duly
                                    authorized   by  all   necessary   corporate
                                    action,  (iii) have been  authorized  by all
                                    necessary   governmental  approval  (if  any
                                    shall be required), and (iv) do not and will

<PAGE>

                                    not   contravene   or   conflict   with  any
                                    provision  of  law  or of  the  articles  of
                                    incorporation  or the bylaws of  Borrower or
                                    of any agreement binding upon Borrower.

                           ii.      This  Modification   represents  the  legal,
                                    valid and  binding  obligations  of Borrower
                                    enforceable  against  Borrower in accordance
                                    with its  terms  subject  as to  enforcement
                                    only     to     bankruptcy,      insolvency,
                                    reorganization,  moratorium or other similar
                                    laws affecting the enforcement of creditors'
                                    rights generally.

                           iii.     Since  the  original  date of the  Note,  no
                                    change,   event  or  state  of  affairs  has
                                    occurred  and  is  continuing   which  would
                                    constitute   a  Default  or  solely  by  the
                                    passage  of time  or the  giving  of  notice
                                    would constitute a Default.

                  B. To induce the  Borrower  to enter  into this  Modification,
         Lender hereby represents and warrants to Borrower as follows:

                           i.       Each and every document  which  evidences or
                                    secures  payment of the Note  represents the
                                    valid,     enforceable    and    collectible
                                    obligation to Borrower.

                           ii.      There are no  existing  claims,  defenses or
                                    rights of setoff with  respect to any of the
                                    documents  evidencing or securing payment of
                                    the Note.

                           iii.     Since  the  original  date of the  Note,  no
                                    change,   event  or  state  of  affairs  has
                                    occurred  and  is  continuing   which  would
                                    constitute   a  Default  or  solely  by  the
                                    passage  of time  or the  giving  of  notice
                                    would constitute a Default.

         5.  Reaffirmation of Note. This  Modification  shall be deemed to be an
amendment to the Note,  and the Note,  as amended  hereby,  is hereby  ratified,
adopted and confirmed in each and every respect.

         6. Defined Terms.  Each capitalized  term used herein,  but not defined
herein, shall have the meaning given to it in the Note.

         7. Governing Law. THIS MODIFICATION  SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED  STATES OF AMERICA.  This  Modification  has been  entered into in Harris
County,  Texas,  and it shall be performable  for all purposes in Harris County,
Texas. Courts within the State of Texas shall have jurisdiction over any and all
disputes  between  the  Borrower  and  the  Lender,  whether  in law or  equity,
including,  but not limited to, any and all disputes  arising out of or relating
to this Modification or any other Loan Documents;  and venue in any such dispute
whether in federal or state court shall be laid in Harris County, Texas.

<PAGE>

         8. Severability.  Whenever possible each provision of this Modification
shall  be  interpreted  in  such  manner  as to be  effective  and  valid  under
applicable law, but if any provision of this Modification shall be prohibited by
or invalid under  applicable  law, such  provision  shall be  ineffective to the
extent of such prohibition or invalidity,  without invalidating the remainder of
such provision or the remaining provisions of this Modification.

         9. Execution in Counterparts.  This Modification may be executed in any
number of counterparts and by the different parties on separate  counterparts on
different dates,  and each such  counterpart  shall be deemed to be an original,
but all  such  counterparts  shall  together  constitute  but  one and the  same
agreement.

         10. Section  Captions.  Section captions used in this  Modification are
for convenience of reference only, and shall not affect the construction of this
Modification.

         11. Successors and Assigns. This Modification shall be binding upon the
Borrower,  the Lender and its respective successors and assigns, and shall inure
to the benefit of the Borrower,  the Lender and the  respective  successors  and
assigns of the Lender.

         12.   Non-Application  of  Chapter  346  of  Texas  Finance  Code.  The
provisions  of Chapter 346 of the Texas  Finance Code (which  regulates  certain
revolving  loan accounts and  revolving  tri-party  accounts)  are  specifically
declared by the parties hereto not to be applicable to this  Modification or any
of the other Loan Documents or to the transactions contemplated hereby.

         13. NOTICE OF FINAL AGREEMENT.  THE WRITTEN NOTE AND LOAN DOCUMENTS, AS
HEREBY AMENDED,  REPRESENT THE FINAL AGREEMENT AMONG THE LENDER AND BORROWER AND
MAY NOT BE  CONTRADICTED  BY EVIDENCE OF PRIOR,  CONTEMPORANEOUS,  OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS  BETWEEN
THE PARTIES.

<PAGE>

                                             BORROWER:

                                             BLUE DOLPHIN ENERGY COMPANY,
                                             a Delaware corporation

                                             By:________________________________
                                                Michael J. Jacobson
                                                President

                                             LENDER:

                                             WESTERN GULF PIPELINE PARTNERS, LP,
                                             a Texas limited partnership

                                             By: PEREGRINE MANAGEMENT, LLC,
                                                 its General Partner

                                                 By:____________________________
                                                    Barrett L. Webster,
                                                    its Manager

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