BLUE DOLPHIN ENERGY CO (Form: 8-K, Received: 12/10/2015 12:02:53)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported):

December 10, 2015

Blue Dolphin Energy Company

(Exact name of registrant as specified in its charter)

Delaware

(State or Other Jurisdiction

of Incorporation)

0-15905

(Commission File Number)

73-1268729

(IRS Employer Identification No.)

801 Travis Street, Suite 2100

Houston, TX 77002

(Address of principal executive office and zip code)

(713) 568-4725

(Registrant’s telephone number, including area code)

(Not Applicable)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

LRM Term Loan

On December 4, 2015, Lazarus Refining & Marketing, LLC, a Delaware corporation (“LRM”) and wholly owned subsidiary of Blue Dolphin Energy Company (“Blue Dolphin”), entered into a Loan Agreement with Sovereign Bank, a Texas state bank (“Sovereign”), as administrative agent and lender pursuant to which Sovereign agreed to make a term loan to LRM in the principal amount of $10.0 million (the “LRM Term Loan”). The LRM Term Loan is guaranteed under the Business & Industry Guaranteed Loan Program administered by the United States Department of Agriculture Rural Development. The LRM Term Loan, which requires a monthly payment of principal and interest of $74,110.95, has a 19 year term and accrues interest at a rate based on the Wall Street Journal Prime Rate plus 2.75%. Proceeds of the LRM Term Loan will primarily be used to construct additional new petroleum product storage tanks at Blue Dolphin’s crude oil and condensate processing facility located in Nixon, Texas (the “Nixon Facility”), as well as to refinance a $3.0 million bridge loan. Pursuant to a construction rider in the LRM Term Loan, proceeds will be placed in an escrow account whereby Sovereign will make advances for construction related expenses.

The LRM Term Loan is secured by: (i) a second priority lien on the rights of Lazarus Energy, LLC (“LE”) in the Nixon Facility and the other collateral of LE pursuant to a Security Agreement to the LRM Term Loan; (ii) a first priority lien on the real property interests of LRM; (iii) a first priority lien on all of LRM’s fixtures, furniture, machinery and equipment; (iv) a first priority lien on all of LRM’s contractual rights, general intangibles and instruments, except with respect to LRM’s rights in its leases of Tanks 62, 63, and 80, with respect to which Sovereign will have a second priority lien in such leases subordinate to a prior lien granted by LRM to Sovereign to secure obligations of LRM under a loan made on May 2, 2014 in the original principal sum of $2.0 million; and (v) all other collateral as described in the security documents. The LRM Term Loan contains representations and warranties, affirmative, restrictive, and financial covenants, as well as events of default which are customary for term loans of this type. Repayment of funds borrowed and interest accrued under the LRM Term Loan is guaranteed by Blue Dolphin, LE, Jonathan P. Carroll (“Carroll”), and Lazarus Energy Holdings, LLC (“LEH”), which owns approximately 81% of Blue Dolphin’s common stock. Carroll is also the majority owner of LEH.

The above summary of the LRM Term Loan does not purport to be complete and is qualified in its entirety by reference to the full text of the respective loan documents, which are provided as exhibits to this Current Report Form 8-K and which are incorporated by reference into this Item 1.01.

Guaranty Fee Agreements

On December 4, 2015, Carroll entered into a Guaranty Fee Agreement with LRM (the “LRM Guaranty Fee Agreement”) dated December 4, 2015, in consideration for Carroll’s execution and delivery of a guaranty as security for and as a condition of the obligations of LRM under the LE Term Loan. Pursuant to the LRM Guaranty Fee Agreement, LRM shall pay Carroll, as a guarantor, a guaranty fee equal to 2.00% per annum, paid monthly, of the outstanding principal balance owed under the LRM Term Loan. Amounts payable to Carroll as the guaranty fee shall be paid at the end of each calendar month.

Item 9.01 Financial Statements and Exhibits.

(d)

Exhibits.

10.1	Loan Agreement among Sovereign Bank, Lazarus Refining & Marketing, LLC, Jonathan Pitts Carroll, Sr., Blue Dolphin Energy Company, Lazarus Energy, LLC, and Lazarus Energy Holdings dated December 4, 2015.
10.2	Promissory Note between Lazarus Refining & Marketing, LLC and Sovereign Bank for the principal sum of $10,000,000 dated December 4, 2015.
10.3	Security Agreement of Lazarus Refining & Marketing, LLC in favor of Sovereign Bank dated December 4, 2015.
10.4	Deed of Trust, Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing for Lazarus Refining & Marketing, LLC dated December 4, 2015.
10.5	Construction Rider to Loan Agreement dated December 4, 2015.
10.6	Absolute Assignment of Leases and Rents dated December 4, 2015.
10.7	Indemnification Agreement dated December 4, 2015.
10.8	Pledge Agreement by Lazarus Energy Holdings, LLC in favor of Sovereign Bank dated December 4, 2015.
10.9	Collateral Assignment of Key Agreements dated December 4, 2015.
10.10	First Amendment to Lazarus Energy, LLC Loan Agreement and Loan Documents dated December 4, 2015.
10.11	First Amendment to Lazarus Energy, LLC Deed of Trust, Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing dated December 4, 2015.
10.12	Guaranty Fee Agreement between Jonathan P. Carroll and Lazarus Refining & Marketing, LLC dated December 4, 2015.
99.1	Blue Dolphin Energy Company Press Release Issued December 10, 2015.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: December 10, 2015

	Blue Dolphin Energy Company

	/s/ JONATHAN P. CARROLL
	Jonathan P. Carroll Chief Executive Officer, President, Assistant Treasurer and Secretary (Principal Executive Officer)

SOVEREIGN BANK – LOAN NO. 17036096

LOAN AGREEMENT

AMONG

Sovereign Bank

As Lender

______________________________________________

Lazarus Marketing & Refining, LLC

As Borrower

and

______________________________________________

Jonathan Pitts Carroll, Sr., Blue Dolphin Energy Company, Lazarus Energy LLC and Lazarus Energy Holdings LLC

As Guarantors

LOAN AGREEMENT

This Loan Agreement is made and entered this 4 th day of December, 2015, by and among Sovereign Bank (“Lender”), Lazarus Refining & Marketing, LLC , a Delaware limited liability company (“Borrower”), and Jonathan Pitts Carroll, Sr. , a Texas resident (“Carroll”), Blue Dolphin Energy Company , a Delaware corporation (“Blue Dolphin”), Lazarus Energy LLC , a Delaware limited liability company (“Lazarus Energy”), and Lazarus Energy Holdings LLC , a Delaware limited liability company (“LEH”, and jointly and severally together with Carroll, Blue Dolphin and Lazarus Energy, collectively “Guarantor” or “Guarantors”).

RECITALS

WHEREAS, Borrower has heretofore entered into that certain Loan and Security Agreement, dated as of June 22, 2015, by and between the Borrower and Lender (the “Bridge Loan Agreement”), pursuant to which Lender advanced a term loan in the principal amount of $3,000,000 for the purpose of acquiring equipment obtained on or around June 22, 2015, from a refinery in Longview, Texas that was or is to be installed at the Nixon Refinery and leased to Lazarus Energy (the “Bridge Loan Equipment”);

WHEREAS, Lazarus Energy, an Affiliate of Borrower, is the owner of an oil refinery plant located at 11372 US Hwy 87, Nixon, Wilson County, Texas (together with all Improvements or alterations made thereto, the “Nixon Refinery”);

WHEREAS, Borrower desires to construct the Storage Improvements (as defined below) which shall be installed on the Land and leased to Lazarus Energy and/or unaffiliated third parties; and

WHEREAS, Borrower has requested that Lender provide long-term financing (a) to fund the construction costs of the Storage Improvements; (b) to repay the Bridge Debt under the Bridge Loan Agreement and the related loan documents; (c) to fund the Construction Contingency Account for contingency costs relating to the Storage Improvements; and (d) to pay for closing fees and costs.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

AGREEMENT

Article 1

Definitions.

1.1 Certain Defined Terms .

Unless a particular term, word or phrase is otherwise defined or the context otherwise requires, capitalized terms, words and phrases used herein or in the Loan Documents (as hereinafter defined) have the following meanings (all definitions that are defined in this Agreement in the singular to have the same meanings when used in the plural and vice versa ):

Advance shall have the meaning given such term in Section 3.4 .

Affiliate shall mean any Person controlling, controlled by or under common control with any other Person. For purposes of this definition, “control” (including “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or otherwise.

Agreement shall mean this Loan Agreement, as it may from time to time be amended, modified, restated or supplemented.

Annual Financial Statements shall mean, with respect to any Person, the annual financial statements of such Person, which statements shall include a balance sheet and an income statement as of the end of such fiscal year, all prepared in conformity with GAAP.

Attorney R epresentation Notice shall mean that certain Attorney Representation Notice Dated as of the Closing Date in Proper Form executed by Borrower.

Bankruptcy Code shall mean the United States Bankruptcy Code, as amended, and any successor statute.

Borrower’s Affidavit shall mean an affidavit in the form of Exhibit D attached hereto and made a part hereof signed by the President of Borrower.

Bridge Debt shall mean the outstanding principal, interest, fees and other amounts outstanding under the Bridge Loan Agreement between Lender and Borrower and the related loan documents.

Business Day shall mean any day other than a Saturday or Sunday or a legal holiday on which commercial banks are authorized or required to close in Dallas, Texas.

Ceiling Rate shall mean, on any day, the maximum nonusurious rate of interest permitted for that day by whichever of applicable federal or state laws permits the higher interest rate, stated as a rate per annum. On each day, if any, that the state law establishes the Ceiling Rate, the Ceiling Rate shall be the weekly ceiling rate for that day. Lender may from time to time, as to current and future balances, implement any other ceiling under applicable federal or state laws by notice to Borrower, if and to the extent permitted by applicable laws and regulations. Without notice to Borrower or any other person or entity, the Ceiling Rate shall automatically fluctuate upward or downward as and in the amount by which such maximum nonusurious rate of interest permitted by applicable law fluctuates.

Certification Regarding Anti-Terrorism Laws shall mean that certain Certification Regarding Anti-Terrorism Laws dated the Closing Date, from Borrower and Guarantors to Lender.

Closing Date shall mean December 4, 2015.

Code shall mean the Internal Revenue Code of 1986, as amended, as now or hereafter in effect, together with all regulations, rulings and interpretations thereof or thereunder by the Internal Revenue Service.

Collateral shall mean all Property, tangible or intangible, real, personal or mixed, now or hereafter subject to the Security Documents or any liens, security interests or encumbrances granted pursuant to the Security Documents, including without limitation, all “Property” as defined in the Deed of Trust and all “Collateral” as defined in any Security Document, and shall include, without limitation, the Storage Improvements and the equipment financed by the Bridge Loan.

Commercial Land shall mean the Land.

Conditional Commitment shall mean Form 4279-3, Conditional Commitment for Guarantee issued by RBS in connection with this Loan.

Construction Contingency Account shall mean a non-interest bearing account in Lender’s or its designee’s name maintained by Lender, into proceeds of the Loan will be funded for construction contingency purposes in accordance with Sections 2.2 and 3.4 .

Construction Rider shall mean the Construction Rider in the form of Exhibit C or otherwise acceptable to Lender, which Construction Rider is incorporated into this Agreement pursuant to Section 3.3 .

Corporation shall mean corporations, limited liability companies, partnerships, joint ventures, joint stock associations, business trusts and other business entities, whether organized under the laws of the United States of America or of a foreign jurisdiction.

Current Assets shall mean all assets, which in accordance with GAAP would be included in current assets.

Current Liabilities shall mean all Indebtedness which in accordance with GAAP would be included as current liabilities.

Current Ratio shall mean the ratio of Current Assets to Current Liabilities.

Debt shall mean, with respect to any Person, the sum of (a) all borrowings under the Note of such Person; (b) any obligation of such Person for borrowed money which under GAAP is shown on the balance sheet as a liability (including the principal component of capitalized lease obligations, but excluding reserves for deferred income taxes, deferred pension liability and other deferred expenses and reserves); (c) Indebtedness for borrowed money secured by any Lien existing on Property owned by such Person subject to such Lien, whether or not the Indebtedness secured thereby shall have been assumed; (d) guarantees of borrowed money Indebtedness and endorsements (other than endorsements of negotiable instruments for collection in the ordinary course of business) or such Person; (e) obligations of such Person arising under letters of credit; (f) the redemption amount owed by such Person with respect to any equity interest required to be redeemed; and (g) to the extent not covered in clauses (a) through (f) above, all liabilities (including short-term and long-term liabilities) of such Person which under GAAP would be shown on the balance sheet as a liability.

Debt Service Coverage Ratio shall mean, as of the close of the date of determination, the ratio computed for the period consisting of the trailing twelve month period (ending on such date of determination) of: (a) the combined EBITDA (for such trailing twelve month period) of Borrower and Lazarus Energy minus all property taxes and insurance to be paid for such trailing twelve month period if not yet paid during such period minus all distributions or dividends made by Borrower and Lazarus Energy (subject to Lender’s consent rights to the same as provided in this Agreement) during such trailing twelve month period; to (b) the sum (for such trailing twelve month period) of all scheduled principal and interest of Borrower and Lazarus Energy in each case scheduled or required to be made for the period of measurement, in each case in accordance with GAAP.

Debtor Relief Law shall mean any Legal Requirements relating to bankruptcy, reorganization, compromise arrangement, insolvency, readjustment of debt, general assignment for the benefit of creditors, dissolution or liquidation or similar proceeding of any jurisdiction.

Deed of Trust shall mean collectively (a) that certain Deed of Trust, Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing dated as of the Closing Date, in Proper Form, executed by Lazarus Energy in favor of Robert Blount, as trustee, for the benefit of Lender, covering and affecting the Land, the Nixon Refinery and the real and personal property described or otherwise encumbered therein (the “LE Deed of Trust”), and (b) that certain Leasehold Deed of Trust, Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing dated as of the Closing Date, in Proper Form, executed by Borrower in favor of Robert Blount, as trustee, for the benefit of Lender, covering and affecting the real and personal property described or otherwise encumbered therein (the “Borrower Deed of Trust”), in each case as the same may be amended, modified, restated or supplemented from time to time.

Default shall mean an event, which with notice or lapse of time or both would, unless cured or waived, become an Event of Default.

Default Rate shall mean, on any day, a rate per annum equal to the Ceiling Rate for that day.

Disbursement Account shall mean a non-interest bearing account in Lender’s or its designee’s name in a financial institution selected by Lender.

Disclosure Schedule shall mean the Disclosure Schedule attached hereto as Schedule 1 .

Document Correction Agreement shall mean that certain Agreement of Assurance dated as of the Closing Date in Proper Form executed by Borrower, as the same may from time to time be amended, modified, supplemented or restated.

EBITDA shall mean, with respect to any Person, for any applicable period and with the respect to such Person, the sum of the following for such Person (and its consolidated subsidiaries, if any): (a) net income (determined in accordance with GAAP), plus (b) to the extent deducted in determining net income, the sum of (i) amounts attributable to amortization, depletion and depreciation of assets, (ii) income tax expense, and (iii) Interest Expense for such period, and minus, to the extent included in the statement of such net income for such period, the sum of (A) interest income (except to the extent deducted in determining Interest Expense), and (B) any extraordinary, unusual or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such net income for such period, gains on the sales of assets).

Environmental Claim shall mean any third party (including Governmental Authorities and employees) action, lawsuit, claim or proceeding (including claims or proceedings at common law or under the Occupational Safety and Health Act or similar laws relating to safety of employees) which seeks to impose liability for (a) noise; (b) pollution or contamination of the air, surface water, ground water or land or the cleanup of such pollution or contamination; (c) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation; (d) exposure to Hazardous Substances; (e) the safety or health of employees; or (f) the manufacture, processing, distribution in commerce or use of Hazardous Substances. An Environmental Claim includes, but is not limited to, a common law action, as well as a proceeding to issue, modify or terminate an Environmental Permit, or to adopt or amend a regulation to the extent that such a proceeding attempts to redress violations of an applicable permit, license, or regulation as alleged by any Governmental Authority.

Environmental Liabilities includes all liabilities arising from any Environmental Claim, Environmental Permit or Requirement of Environmental Law under any theory of recovery, at law or in equity, and whether based on negligence, strict liability or otherwise, including but not limited to: remedial, removal, response, abatement, investigative, monitoring, personal injury and damage to property or injuries to persons, and any other related costs, expenses, losses, damages, penalties, fines, liabilities and obligations, and all costs and expenses necessary to cause the issuance, reissuance or renewal of any Environmental Permit including attorneys’ fees and court costs.

Environmental Permit shall mean any permit, license, approval or other authorization under any applicable Legal Requirement relating to pollution or protection of health or the environment, including laws, regulations or other requirements relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous substances or toxic materials or wastes into ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants or Hazardous Substances.

Equipment and General Intangibles shall have the respective meanings assigned to them in the UCC in force on the Closing Date.

Event of Abandonment shall mean (a) the written announcement by Borrower of a decision to abandon or indefinitely defer, or the abandonment of, the construction or completion or operation of all or any material part of the Storage Improvements for any reason, or (b) the total suspension for more than 30 consecutive days or abandonment of the construction of the Storage Improvements.

Event of Default shall have the meaning assigned to it in Section 7.0 .

Event of Taking shall mean the occurrence of any of the following events carried out by any Governmental Authority: (a) any condemnation, nationalization, seizure, compulsory acquisition, or expropriation of all or any portion of (i) the Storage Improvements or (ii) the business operations of Borrower; or (b) any intervention in, or assumption of custody or control of, all or any portion of (i) the Storage Improvements or (ii) the business operations of Borrower.

Financing Statements shall mean all such Uniform Commercial Code financing statements as Lender shall require, in Proper Form, duly executed (or authorized, as appropriate) by Borrower, Lazarus Energy or others to give notice of and to perfect or continue perfection of Lender’s Liens in all Collateral.

Funds Control Agreement shall mean any funds control agreement or similar agreement from time to time entered into between Lender and any third party (including a monitoring consultant described in Section 3.3 ), in form acceptable to Lender, for the purpose of such third party’s monitoring or controlling of the disbursement of the Loan or Advances relating to the construction of the Storage Improvements and/or relating to any other use of proceeds of the Loan or Advances thereunder.

GAAP shall mean, as to a particular Person, such accounting practice as, in the opinion of independent certified public accountants of recognized national standing, conforms at the time to generally accepted accounting principles, consistently applied. In addition, GAAP means those principles and practices (a) which are recognized as such by the Financial Accounting Standards Board; and (b) which are consistently applied for all periods after the Closing Date so as to reflect properly the financial condition, and results of operations and changes in financial position, of such Person. If any change in any accounting principle or practice is required by the Financial Accounting Standards Board in order for such principle or practice to continue as GAAP, all reports and financial statements required hereunder may be prepared in accordance with such change. Notwithstanding the foregoing, as to individuals only, GAAP means such accounting principles and practices as, in the opinion of such accountants, conform at the time to such individual’s federal income tax basis of accounting, consistently applied.

Governmental Authority shall mean any foreign governmental authority, the United States of America, any State of the United States and any political subdivision of any of the foregoing, and any central Bank, agency, department, commission, board, bureau, court or other tribunal having jurisdiction over Lender, Borrower, Guarantor any Party or their respective Property.

Guaranty shall mean collectively all guaranties dated as of the Closing Date in Proper Form executed by all Guarantors in favor of Lender, as any of the same may from time to time be amended, modified, restated or supplemented.

Guarantor shall mean, to the extent the term is preceded or qualified with the word “any”, “each” or “such” or like word, each of Carroll, Blue Dolphin, Lazarus Energy and LEH individually; otherwise, the term Guarantor shall mean any and all of them collectively on a joint and several basis, and Guarantors shall mean all of them collectively on a joint and several basis.

Hazardous Substance shall mean petroleum products, and any hazardous or toxic waste or substance defined or regulated as such from time to time by any law, rule, regulation or order described in the definition of Requirements of Environmental Law.

Improvements shall mean all buildings and other improvements now or hereafter placed on the Land, as well as all appurtenances, betterments and additions thereto; all and singular the rights, privileges, hereditaments, and appurtenances in any wise incident or appertaining to said Land and improvements, including, without limitation, any and all rights to the present or future use of waste water, waste water capacity, drainage, water or other utility facilities to the extent same pertain to or benefit said Land or the improvements located thereon, including, without limitation, all reservations of or commitments or letters covering any such use in the future whether now owned or hereafter acquired.

Indebtedness shall mean and include, without duplication, (a) all items which in accordance with GAAP would be included on the liability side of a balance sheet on the date as of which Indebtedness is to be determined (excluding capital stock, surplus, surplus reserves and deferred credits); (b) all guaranties, letter of credit contingent reimbursement obligations and other contingent obligations in respect of, or any obligations to purchase or otherwise acquire, Indebtedness of others; (c) the redemption amount with respect to any equity interest to be redeemed; and (d) all indebtedness secured by any Lien existing on any interest of the Person with respect to which Indebtedness is being determined in Property owned subject to such Lien whether or not the Indebtedness secured thereby shall have been assumed; provided, that the term Indebtedness shall not mean or include any Indebtedness in respect of which monies sufficient to pay and discharge the same in full (either on the expressed date of maturity thereof or on such earlier date as such Indebtedness may be duly called for redemption and payment) shall be deposited with a depository, agency or trustee acceptable to Lender in trust for the payment thereof.

Indemnification Agreement shall mean that certain Indemnification Agreement dated the Closing Date, by and between Borrower and Lender.

Interest Expense shall mean, with respect to any Person and for any applicable period, the aggregate interest expense (both accrued and paid and net of interest income paid during such period to such Person) of such Person for such applicable period, including the portion of any payments made in respect of capitalized lease liabilities allocable to interest expense, but excluding one-time write-offs of unamortized upfront fees associated with this Agreement.

Key Agreements shall mean all contracts, permits, licenses and other rights acquired by a person or to which such Person are a party or by which such Person is bound and from time to time material to the ownership of assets or the operations of such Person, including, without limitation and for sake of clarity, (a) the construction contract relating to the Storage Improvements described in the Construction Rider or any construction contract with the general contractor relating to the construction of the Storage Improvements (each, a “Construction Contract”), (b) the Ground Lease Agreement dated June 1, 2015, between Borrower and Lazarus Energy, as amended by the certain Amendment to Ground Lease dated November 17, 2015 (as so amended, the “Ground Lease”), (c) the Equipment Lease dated June 1, 2015, between Borrower and Lazarus Energy (the “Equipment Lease”), (d) the Tolling Agreement dated October 1, 2015, between Borrower and Lazarus Energy, and (e) each lease, rental or other agreement between Borrower and any other Person relating to storage services provided by Borrower or in connection with Borrower’s assets, including from the Collateral constituting the Storage Improvements.

Land shall mean that certain approximate 56.309 acre tract of land (comprised of an approximate 51.309 acre tract and a 5.000 acre tract) situated in Wilson County, Texas, more particularly described on Exhibit A attached hereto and made a part hereof.

LE Loan Agreement shall mean that certain Loan Agreement dated June 22, 2015, between Lazarus Energy, as borrower, and Lender, as amended, supplemented, restated and otherwise modified from time to time.

Legal Requirement shall mean any law, statute, ordinance, decree, requirement, order, judgment, rule, or regulation (or interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority, whether presently existing or arising in the future, including, without limitation, any Requirements of Environmental Law.

Lien shall mean any mortgage, pledge, charge, encumbrance, security interest, collateral assignment or other lien whether based on common law, constitutional provision, statute or contract.

Loan shall mean the loan provided for in Section 2.1 hereof.

Loan Documents shall mean, collectively, the Note, this Agreement, the Guaranties, the Security Documents, the Authorization Agreement for automatic drafts, the Disclaimer of Oral Agreements, the Document Correction Agreement, the Borrower’s Affidavit, the Attorney Representation Notice, the Indemnification Agreement, the Certification Regarding Anti-Terrorism Laws, the Secretary’s Certificate(s), and the Financing Statements, each dated as of the Closing Date, and all instruments, certificates and agreements now or hereafter executed or delivered to Lender pursuant to any of the foregoing or in connection with the Obligations or any commitment regarding the obligations, and all amendments, modifications, renewals, extensions, increases and rearrangements of, and substitutions for, any of the foregoing.

Material Adverse Effect shall mean a material adverse effect (as determined by Lender acting in good faith) upon (a) the condition (financial or otherwise), business, operations, assets or prospects of (i) Borrower or any Guarantor or (ii) a material portion of the Storage Improvements or the Collateral; (b) the ability of Borrower, any Guarantor or any other Party to fully and timely perform its respective obligations under the Loan Documents, the RBS Documents or the Key Agreements; (c) the rights and remedies of Lender under any of the Loan Documents; (d) the legality, validity, binding nature or enforceability of any Loan Document or any Key Agreements.

Maturity Date shall have the meaning given such term in the Note.

Mortgagee’s Policy of Title Insurance shall mean a mortgagee’s policy or policies of title insurance issued in favor of Lender by an underwriter satisfactory to Lender insuring the Lien of the LE Deed of Trust as a second priority lien in an amount equal to Ten Million and NO/100 Dollars ($10,000,000), subject only to such encumbrances as are acceptable to Lender.

Net Worth shall mean as to any Person, (a) all assets of such Person, less (b) all liabilities of such Person, all determined in accordance with GAAP.

Note shall mean collectively, that certain adjustable rate promissory note dated as of the Closing Date, the form of which is attached hereto as Exhibit B and made a part hereof, made and executed by Borrower payable to the order of Lender in the aggregate original principal amount of $10,000,000 , and all modifications, renewals, extensions, increases and rearrangements of, and substitutions for such promissory note.

Obligations shall mean, as at any date of determination thereof, all obligations and liabilities of Borrower or any Guarantor arising under or in connection with a Loan Document, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter arising, in respect of: (a) any and all sums, including principal, interest (including interest that would accrue on any of the foregoing during the pendency of any bankruptcy or related proceeding with respect to Borrower or any Guarantor), expenses, premiums, Prepayment Consideration (as defined in the Note), costs (including court costs), charges, fees (including attorneys’ fees) indemnities or other liabilities called for in the Note or in any Loan Document; (b) all other agreements, covenants, conditions, warranties, representations, liabilities, obligations and indebtedness of any Party now or hereafter created or incurred, in whole or in part, under this Agreement or any other Loan Document; (c) all other debts of any kind and character now or hereafter owing by Borrower or any Guarantor to the Lender whether such debts be evidenced by written instrument or not and whether they be direct obligations arising out of a guaranty, endorsement, suretyship or otherwise, or whether they be joint, several or indirect, and whether they were heretofore or are hereafter purchased or acquired and any and all amendments, modifications, renewals, extensions, increases, or rearrangements in whole or in part of any of the above.

Organizational Documents shall mean, with respect to a corporation, the certificate of incorporation, articles of incorporation and bylaws of such corporation; with respect to a limited liability company, the articles of organization, the limited liability company operating agreement and the regulations of such limited liability company; with respect to a partnership, the partnership agreement establishing such partnership and the certificate of limited partnership as to any limited partnership, with respect to a joint venture, the joint venture agreement establishing such joint venture; and, with respect to a trust, the instrument establishing such trust; in each case including any and all modifications thereof as of the date of the Loan Document referring to such Organizational Document and any and all future modifications thereof.

Part ies shall mean Borrower, Guarantor, and any other party (other than Lender) executing any Loan Document.

Person shall mean any individual, corporation, limited liability company, partnership, joint venture, joint stock association, business trust, other business entity, trust, unincorporated organization, Governmental Authority or any other form of entity.

Prime Rate as used herein shall mean the “Prime Rate” as defined in the Note.

Prepayment Consideration shall have the meaning set forth in the Note.

Proper Form shall mean in form and substance satisfactory to Lender.

Property shall mean any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible.

Quarterly Financial Statements shall mean the quarterly financial statements of a Person, including all notes thereto, which statements shall include a balance sheet as of the end of such calendar quarter and an income statement for such calendar quarter and for the fiscal year to date, all setting forth in comparative form the corresponding figures for the corresponding calendar quarter of the preceding year, prepared in accordance with GAAP (with the exclusion of notes and an auditor’s opinion) and certified as fairly reflecting the financial condition of such Person as of the date thereof and for the period covered thereby, subject to normal yearend adjustments, by the Chief Financial Officer or President of such Person.

RBS shall mean The Unites States of America acting through and by its agency, the Rural Business Cooperative Service, United States Department of Agriculture, or its successor agency.

RBS Agreement of Compliance shall mean that certain Agreement of Compliance of Borrower dated as of the Closing Date.

RBS Documents shall mean all of the following duly executed by or on behalf of the parties thereto and in Proper Form: (a) Loan Note Guarantee (Form 4279-5); (b) Certificate of Incumbency (Form 4279-7), if applicable; (c) Lender’s Agreement (Form 4279-4); (d) the RBS Agreement of Compliance; and (e) any other document executed by any Party for the benefit of RBS or the United Stated Department of Agriculture or any of its agencies or subdivisions in connection with the Loan Documents, and all amendments, modifications, renewals, extensions, increases and rearrangements of, and substitutions for, any of the foregoing.

RBS Guarantee shall mean that certain guaranty of the United States of America acting through RBS in the amount of seventy percent (70%) of the principal amount of the Note, said guaranty being Seven Million and 00/100 Dollars ($7,000,000).

RBS Guarantee Fee shall mean that certain fee imposed by RBS in the amount of three percent (3%) of the amount of the RBS Guarantee in connection with this Loan, said fee being Two Hundred Ten Thousand and 00/100 Dollars ($210,000).

Related Person shall mean, with respect to any Person, any individual, corporation, organization or other entity that is an officer, director, stockholder, partner or employee of such Person.

Remedial Action shall mean any action necessary to ensure compliance with the Requirements of Environmental Law including (a) the removal and disposal or containment (if containment is practical under the circumstances and is permissible within Requirements of Environmental Law) or monitoring of any and all Hazardous Substances at the Property; (b) the taking of necessary precautions to protect against the release or threatened release of Hazardous Substances at, on, in, about, under, within or near the air, soil, surface water, groundwater or soil vapor at the Property or any public domain affected by the Property or any surrounding areas thereof; (c) any action necessary to mitigate the usurpation of wetlands, pinelands or other protected land or reclaim the same or to protect and preserve wildlife species; (d) any action necessary to meet the requirement permit; or (e) any other action required to satisfy Requirements of Environmental Law imposed upon Borrower the property and/or any operation thereon.

Requirements of Environmental Law shall mean all requirements imposed by any law (including for example and without limitation The Resource Conservation and Recovery Act and The Comprehensive Environmental Response, Compensation, and Liability Act), rule, regulation, or order of any Governmental Authority in effect at the applicable time which relate to (i) noise; (ii) pollution, protection or cleanup of the air, surface water, ground water or land; (iii) solid, gaseous or liquid waste generation, treatment, storage, disposal or transportation; (iv) exposure to Hazardous Substances; (v) the safety or health of employees or (vi) regulation of the manufacture, processing, distribution in commerce, use discharge or storage of Hazardous Substances.

Rural Area shall mean all territory of a State that is not within the outer boundary of any city having a population of fifty thousand or more and its immediately adjacent urbanized and urbanizing area with a population density of more than one hundred persons per square mile, as determined by the Secretary of Agriculture according to the latest decennial census of the United States.

Secretary’s/Member’s Certificate shall mean a certificate, in Proper Form, of the Secretary or an Assistant Secretary or a Member of a Person as to (a) the resolutions of the Board of Directors or other governing body of such Person authorizing the execution, delivery and performance of the documents to be executed by such Person; (b) the incumbency and signature of the officer of such Person executing such documents on behalf of such Person; and (c) the Organizational Documents of such Person.

Security Documents shall mean (a) that certain Security Agreement dated as of the Closing Date executed by Borrower in favor of Lender covering, among other Property, the Contract Rights, General Intangibles, Instruments, Chattel Paper, Furniture, Fixtures and Equipment of Borrower, together with a joinder thereto executed by Lazarus Energy (the “Security Agreement”); (b) the Deed of Trust; (c) the Assignment of Leases and Rents dated as of the Closing Date; (d) the Collateral Assignment of Key Agreements dated as of the Closing Date in favor of Lender, together with the acknowledgements thereto; (e) that certain Pledge Agreement dated as of the Closing Date executed by LEH in favor of Lender pledging, among other things, 250,000 shares of stock of Blue Dolphin; and (f) that certain Assignment of Life Insurance Policy as Collateral dated as of August 4, 2015, as amended by that certain Amendment to Assignment of Life Insurance Policy as Collateral dated November 11, 2015 and recorded on November 24, 2015, covering Carroll in favor of Lender with respect to a Life Insurance Policy No. N100249850 with Nationwide Life Insurance Company on Carroll in an amount of $10,000,000 (such life insurance

policy, the “Carroll Life Insurance Policy”; and such assignment and the amendments related thereto, the “Insurance Assignment”), provided that in accordance with Section 8.19 , (i) the assignment of such life insurance policy to secure the Obligations is subordinate to a prior assignment of such life insurance policy in favor of One World Bank and (ii) proceeds of the assignment of such life insurance policy to Lender will be applied to repay the “Obligations” under the LE Loan Agreement up to $5,000,000 prior to repaying the Obligations (except that any remaining amounts, if any, after repayment of the first $5,000,000 of the “Obligations” under the LE Loan Agreement and after repayment of the Obligations may thereafter continue to be applied to repay the “Obligations” under the LE Loan Agreement); together with any and all pledge, security or other collateral agreements, documents or instruments hereafter executed in favor of Lender in connection with, or as security for, the Obligations, as any of them may be amended, modified, restated or supplemented from time to time.

Survey shall mean an ALTA boundary survey of the Land in Proper Form dated December 2000 and re-inspected February 13, 2006 or as may be required by Lender, performed by a registered public land surveyor duly licensed as such in the State in which the Land is located, acceptable to the Lender (and, in each instance that the Lender shall so require, to the title company), or such other survey as acceptable to Lender, which survey shall show the Storage Improvements upon the completion of construction of the Storage Improvements]. Except as otherwise acceptable to Lender, each Survey shall be evidenced by a survey plat with north arrow showing the length and direction of the perimeter boundaries of the Land, the location and dimensions of all improvements in place as of the date of such survey, names of adjacent and nearby streets and roads, setback lines, encroachments, easements, rights-of-way and railroads, if any, affecting the Land, a legal description of the Land, and the date of the survey. The print of each Survey shall contain the duly executed and sealed certification of the surveyor certifying to the Lender (and, in each instance that the Lender shall so require, to the title company), substantially as follows:

I hereby certify to the Lender and the Title Company that on [date], this survey was made on the ground by me or under my supervision as per the field notes set forth on or attached to this survey and correctly and accurately shows: the boundaries and area to the nearest ten-thousandth (1/10,000) of an acre (or the nearest square foot) of the subject property; the sizes, locations and types of all buildings and other improvements thereon (if any) and the locations of all easements, rights-of-way, setback lines and other matters affecting the subject property and which are of record or, whether or not they are of record, which are visible or of which I have been advised.

Except as shown on this survey, there are no encroachments upon the subject property by improvements on adjacent property, there are no party walls with or encroachments upon adjacent property, streets or alleys or onto any improvements setback line by any improvements on the subject property and there are no conflicts or protrusions. Adequate ingress and to and egress from the subject property is provided by US Highway 87 which is a paved, dedicated public right-of-way maintained by the City of Nixon or the County of Wilson, Texas.

None of the improvements, if any, on the subject property is situated so as to violate any setback line requirement.

No part of the subject property liens within the 100 year Flood Plain or in an identified Flood Prone Area or Special Flood Hazard Area, as such capitalized terms are defined by the U. S. Department of Housing and Urban Development in administering the Flood Disaster Protection Act of 1973, as amended.

Stated Rate shall mean the per annum interest rate specified in the Note applicable to the Loan (which as of the Closing date is equal to the Prime Rate as of the Closing Date + 2.75%), as subsequently adjusted in accordance with the terms of the Note and this Agreement.

Storage Improvement s shall mean (a) three (1) 100,000 barrel (bbl) capacity tanks for storage of crude oil (petroleum), together with an API 650 cone roof tank, a carbon steel plan floating roof, and a ring-wall foundation; and (b) such other Improvements or modifications to the Storage Improvements as approved by Lender.

Tangible Net Worth shall mean as to any Person, the total assets (valued at the lesser of (a) cost less normal depreciation or (b) fair market value and excluding subordinated debt and appraisal surplus) of such Person, less (1) all intangibles and (2) all liabilities, all determined in accordance with GAAP of such Person. The intangibles shall include (i) deferred charges, (ii) the amount of any write up in the book value of any assets contained in any balance sheet resulting from revaluation thereof or any write-up in excess of the cost of such assets acquired (excluding marketable securities) and (iii) the aggregate of all amounts appearing on the assets side of any such balance sheet for franchises, licenses, permits, patents, patent applications, copyrights, trademarks, trade names, goodwill, experimental or organizational expenses and other like intangibles.

Total Assets shall mean all assets of Borrower which in accordance with GAAP would be included in assets.

UCC shall mean the Uniform Commercial Code of the State of Texas, or if the creation, perfection, and enforcement of any security interest granted in the Security Documents is governed by the laws of a state other than the State of Texas, then, as to the matter in question, the Uniform Commercial Code in effect in that state.

USDA Conditional Commitment shall mean the Conditional Commitment, on Form 4279-3, dated September 17, 2015, issued by the United States Department of Agriculture Rural Development, relating to Case No. 51-047-*****5708 and a loan to Borrower in the principal amount of $10,000,000, as amended by a letter from the United States Department of Agriculture Rural Development dated October 23, 2015, and as may be amended, supplemented, restated or otherwise modified from time to time.

Working Capital shall mean Current Assets minus Current Liabilities.

Working Capital Proceeds shall have the meaning assigned in Section 2.2 of this Agreement.

1.2 Miscellaneous . Except as otherwise expressly provided or the context otherwise requires, the following rules of interpretation shall apply to this Agreement and the other Financing Documents: (a) the words hereof , herein , and hereunder and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; (b) whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms; (c) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; (d) the word “will” shall be construed to have the same meaning and effect as the word “shall”; (e) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or therein) and shall include any appendices, schedules, exhibits, clarification letters, side letters and disclosure letters executed in connection therewith; (f) any reference herein to any Person shall be construed to include such Person’s successors and assigns to the extent permitted under the Loan Documents and, in the case of any Governmental Authority, any Person succeeding to its functions and capacities; (g) any reference to any Legal Requirements in any of the Loan Documents shall include all references to such Legal Requirements as amended from time to time; (h) all terms of an accounting or financial nature shall be construed in accordance with GAAP; and (i) to the extent that there is more than one Guarantor with respect to the Loan, all representations, warranties, covenants and other obligations of “Guarantor” in this Agreement and in any other Loan Document are and shall be the representations, warranties, covenants and obligations of all Guarantors on a joint and several basis.

Article 2

The Loan

2.1 The Loan . Subject to the terms and conditions of this Agreement, Lender agrees to make a loan to Borrower (in the time frame specified in Section 3.4 ) in an aggregate principal amount not to exceed $10,000,000, the proceeds of which will be disbursed in accordance with Section 3.4 . Amounts prepaid or repaid in respect of the Loan (or any Advances made under the Loan) may not be reborrowed.

2.2 Use of Proceeds . The proceeds of the Loan (including any Advances) shall be used by Borrower as follows:

(a)	To repay the Bridge Debt in full, which is estimated to be $3,000,000 in principal plus accrued interest thereon and fees related thereto.

(b)

To pay for the construction of the Storage Improvements; provided that not more than Five Million Eight Hundred Seventy-Seven Thousand Six Hundred Eighty-Seven and No/100 Dollars ($5,877,687) of the Loan may be applied to such construction except at the discretion of Lender; provided that, without the consent of Lender, proceeds may not be used to pay for the expenses of construction of line items in excess of the applicable amounts identified for the various line items specified in Section 1 of the USDA Conditional Commitment; provided, however, that if there are savings from other line items of construction, Lender may approve re-allocations of savings from one line item to overruns on another line item in its sole discretion.

(c)

To fund the following fees and expenses in each case related to the Nixon Refinery or the transactions contemplated by the Loan Documents: (i) the fees described in Section 3.1(h) (inclusive of a $200,000 loan origination fee, the $210,000 RBS Guaranty Fee, and a $50,000 loan packager fee), (ii) legal fees of $45,000, and (iii) construction monitoring and guarantee contract fees of up to $65,000.

(d)

To fund the Construction Contingency Account in an amount of $552,313 (subject to adjustments as set forth in Section 2.2 ) for disbursements in accordance with this Agreement for the purpose of funding contingencies (and, once Lender is satisfied that all contingencies have been satisfied after Completion (as defined in the Construction Rider) has occurred, to be thereafter applied in accordance with Section 3.4 ).

Should the actual Bridge Debt be higher than the amount specified in clause (a) above, the difference between the estimated amount and the actual amount will be taken from the Construction Contingency Account until expended, and thereafter funded by Borrower in the form of a cash contribution for the shortfall.

Should the actual Bridge Debt be lower than the amount specified in clause (a) above, the difference between the estimated amount and the actual amount will be deposited into the Construction Contingency Account.

Should the actual amounts of the legal fee, loan packager fee and construction monitoring and guarantee contract fees be lower than the estimated amounts then the difference may be applied to other reasonable and valid closing costs. Should fees and costs associated with the Loan have a remaining balance after loan closing, this balance will be deposited into the Construction Contingency Account by Borrower.

Following the occurrence of Completion (as defined in the Construction Rider) of the Storage Improvements, any remaining funds on deposit in the Disbursement Account or Construction Contingency Account shall be deposited in a Lender monitored working capital expenditures account maintained at Lender to be used solely and exclusively for operating business expenses of Borrower with respect to the Storage Improvements (and such funds may not be used directly or indirectly as a revolving line of credit).

Funds drawn from any lender monitored working capital expenditures account are solely/exclusively for future operating business expenses of the Storage Improvements and no funds shall directly or indirectly be used for payments, distributions, reimbursements, salaries and/or dividends to any owner, partner, stockholder, subsidiary, affiliate or beneficiary of Borrower, Lazarus Energy LLC; Blue Dolphin Energy Company; Lazarus Energy Holdings, LLC; Carroll & Company Financial Holdings, LP; and AP Energy Partners, LLC.

2.3 Note . The Loan made by Lender to Borrower shall be evidenced by the Note to be executed and delivered by Borrower to Lender on the Closing Date. The Loan shall bear interest from time to time at the rate and be due and payable (and may be prepaid) on the terms and conditions set forth in the Note and in this Agreement.

2.4 Security . The Obligations will be secured by the Security Documents which cover, without limitation, the following Collateral: (a) a second priority lien on the rights of Lazarus Energy in the Land and Nixon Refinery and the other Collateral of Lazarus Energy pursuant to the Security Agreement; (b) a first priority lien on the real property interests of Borrower; (c) a first priority lien on all of Borrower’s fixtures, furniture, machinery and equipment; (d) a first priority lien on all of Borrower’s Contract Rights, General Intangibles and Instruments, except with respect to Borrower’s rights in its leases of tanks 62, 63 and 80, with respect to which Lender will have a second priority lien in such leases subordinate to a prior lien granted by Borrower to Lender to secure obligations of Borrower under a loan made on May 2, 2014 in the original principal amount of $2,000,000; and (e) all other Collateral as described in the Security Documents.

2.5 Increased Loan Costs, etc. Borrower agrees to reimburse Lender for any increase in the cost to Lender of, or any reduction in the amount of any sum receivable by Lender in respect of making, continuing or maintaining (or of its obligation or Commitment to make or continue) any Loans that arise in connection with any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase in after the Closing Date of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any Governmental Authority, including without limitation any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase in that (a) is in respect of any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, Lender; or (b) subjects Lender to any tax of any kind whatsoever with respect to this Agreement or the Loan (including Advances made thereunder) made by it, or change the basis of taxation of payments to such Lender in respect thereof. Such additional amounts shall be payable by Borrower directly to Lender within ten (10) days of its receipt of such notice, and such notice shall, in the absence of manifest error, be conclusive and binding on Borrower.

2.6 Increased Capital Costs . If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any Governmental Authority affects or would affect the amount of capital required or expected to be maintained by Lender or any Person controlling Lender, and Lender determines (in good faith but in its sole discretion) that the rate of return on its or such controlling Person’s capital as a consequence of the Loan (or its commitment to make the Loan) made by Lender is reduced to a level below that which Lender or such controlling Person could have achieved but for the occurrence of any such circumstance, then upon notice from time to time by Lender to Borrower, Borrower shall within ten (10) days following receipt of such notice pay directly to Lender additional amounts sufficient to compensate Lender or such controlling Person for such reduction in rate of return. A statement of Lender as to any such additional amount or amounts shall, in the absence of manifest error, be conclusive and binding on Borrower. In determining such amount, Lender may use any method of averaging and attribution that it (in its sole discretion) shall deem applicable.

2.7 Taxes . Any and all payments by or on account of any obligation of Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any taxes (other than taxes imposed on or measured by net income or profits (or franchise Taxes in lieu of net income Taxes) or any branch profits taxes imposed on Lender); provided that if Borrower shall be required to deduct any taxes from such payments, then (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) Lender receives an amount equal to the sum it would have received had no such deductions been made; (b) Borrower shall make such deductions; and (c) Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with Legal Requirements. Borrower shall indemnify Lender, within ten (10) days after written demand therefor, for the full amount of any taxes (other than taxes imposed on or measured by net income or profits (or franchise Taxes in lieu of net income Taxes) or any branch profits taxes imposed on Lender) paid by Lender and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to Borrower by Lender shall be conclusive absent manifest error. Upon Lender’s request, Borrower shall deliver to Lender the original or a certified copy of a receipt issued by the relevant Governmental Authority evidencing any payment of taxes by Borrower, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Lender.

Article 3

Conditions for Making the Loan; Borrowing Procedures

3.1 Conditions Precedent to Funding of Loan . The obligation of Lender to fund the Loan (which Lender shall endeavor to make not later than three (3) business days after the conditions precedent in Article 3 have been satisfied or waived by Lender) is conditioned upon and subject to all legal matters incident to the transactions hereby contemplated being satisfactory to Lender and Lender’s legal counsel, and is further conditioned upon Lender’s receipt of the following in Proper Form or the following conditions precedent having been otherwise fulfilled or waived:

(a)	the Loan Documents (including the Note and Security Documents) and all other agreements, documents and instruments required by Lender to be executed and/or delivered at or prior to Closing, each duly executed where appropriate, and in Proper Form;

(b)	a duly executed Secretary’s/Member’s Certificate with respect to Borrower and any Party which is not a natural person;

(c)	a duly executed Borrower’s Affidavit dated as of the later of the Closing Date or the date of the funding of the Loan;

(d)	an opinion of counsel to Borrower and Guarantors in Proper Form covering such matters as acceptable to Lender;

(e)	a list and summary of all pending or threatened litigation against Borrower certified to by the President of Borrower;

(f)	if requested, evidence satisfactory to Lender that there has been no material deterioration in Borrower’s financial condition since the issuance of the Form FmHA 4279-3 Conditional Commitment for Guarantee;

(g)	evidence satisfactory to Lender that Borrower has tangible balance sheet equity (defined as Tangible Net Worth divided by Total Assets) of at least ten percent (10%) in accordance with Rural Development Instruction 4279-B, Section 4279.131(d);

(h)	Borrower shall have paid (i) the RBS Guarantee Fee, (ii) a loan origination fee to Lender in an amount equal to 2% of the Loan ($200,000), and (iii) a loan packaging fee of $50,000 (and the parties hereto agree that all such fees will be fully earned once paid and non-refundable);

(i)	the Mortgagee’s Policy of Title Insurance;

(j)	the Survey, which shall be modified as appropriate to show the Storage Improvements upon completion and together with any applicable down date endorsements;

(k)	the RBS Documents;

(l)	insurance policies reflecting the insurance required by the Loan Documents or evidence thereof satisfactory to Lender;

(m)	at Lender’s request, invoices and/or statements of bills owed or incurred or other evidence that Loan or proceeds thereof are for purposes authorized under this Agreement;

(n)	current financial statements of Borrower and Guarantor dated no earlier than ninety (90) days prior to the Closing Date;

(o)	a current certificate from the appropriate official of the state(s) of organization of Borrower and Guarantor as to the existence and good standing of Borrower and Guarantor;

(p)	a current certificate from the appropriate public official of each jurisdiction other than Borrower’s state of organization as to the due qualification to do business and good standing of Borrower where such qualification is necessary to conduct Borrower’s business in such jurisdiction;

(q)	evidence of the payment in full of the Bridge Debt, termination of the loan agreement evidencing the Bridge Debt and release of any lien or security interest granted to secure the Bridge Debt and applicable UCC and other termination statements relating thereto;

(r)	a timetable and budget for the Storage Improvement in form and substance acceptable to Lender;

(s)	true and correct copies of all Key Agreements, which shall be in full force and effect;

(t)	a true and correct copies of amendments to the Loan Agreement and other Loan Documents dated as of the Closing Date that reflect the cross-collateralization of the indebtedness under the LE Loan Agreement and this Agreement and their related loan documents;

(u)

lien search results showing all financing statements and documents and instruments on file against Borrower or any Guarantor in such jurisdictions as Lender may request, dated not more than thirty (30) days prior to the Closing Date, together with UCC financing statements covering the Collateral in form and substance satisfactory to Lender;

(v)	a copy of a settlement statement in Proper Form; and

(w)	payment of all costs and expenses (including, without limitation, any appraisal, survey, insurance, environmental assessment, engineering, inspection, searches, recording and attorney’s fees) in connection with the Loan Documents and the transactions contemplated thereby, if then invoiced.

3.2 Conditions Precedent to Loan and All Advances . The obligation of Lender to make any the Loan and any Advance under the Loan hereunder shall be subject to the further conditions precedent that on the date of the Loan and each Advance:

(a)

the following statements shall be true (and each of the giving of the applicable Request for Advance and the acceptance by Borrower of the proceeds of the Loan or any such Advance shall constitute a representation and warranty by Borrower that on the date of the Loan or such Advance such statements are true):

(i)

The representations and warranties contained in Article 6 of this Agreement and in each other Loan Document are true and correct in all material respects on and as of the date of the Loan or such Advance, before and after giving effect to the Loan or such Advance, as applicable, and to the application of the proceeds therefrom, as though made on and as of such date;

(ii)	No event has occurred and is continuing, or would result from the Loan or such Advance or the application of the proceeds therefrom, which constitutes a Default or an Event of Default;

(iii)

No Material Adverse Effect, Event of Taking or Event of Abandonment has occurred in Lender’s determination;

(iv)	The budget delivered pursuant to Section 3.1 is adequate for the planned construction of the Storage Improvements; and

(v)	No law, regulation, order, judgment or decree of any Governmental Authority shall enjoin, prohibit or restrain, or impose or result in the imposition of any material adverse condition upon Lender’s making the Loan or any requested Advance; and

(b)	Lender shall have received such other approvals, opinions or documents as Lender may request.

3.3 Conditions Precedent to Advances from Disbursement Account or Construction Contingency Account or for Construction Purposes . The obligation of Lender to make any Advance from the Disbursement Account or the Construction Contingency Account or otherwise for the purpose of funding construction of the Storage Improvements shall be subject to the further conditions precedent specified below that on the date of each such Advance:

(a)	Borrower shall have complied, at Lender’s discretion, with all conditions precedent, procedures and obligations specified in the Construction Rider (which Construction Rider is hereby incorporated herein as if set forth in its entirety, mutatis mutandis) and/or in any Funds Control Agreement; and

(b)	Borrower has obtained or caused to be obtained a completion guaranty provided by Tetra Tech, Inc. with respect to the construction work for the Storage Improvements as requested or required by Lender.

Borrower agrees that Lender may (but is not obligated to) hire pursuant to one or more Funds Control Agreements a monitoring consultant for the purpose of monitoring the disbursement of any Advances under the Loan Documents (including from the Disbursement Account and the Construction Contingency Account) and that the fees and expenses of each such consultant will be paid by Borrower.

3.4 Borrowing Procedures . Within three (3) Business Days after satisfaction of all of the conditions set forth in Section 3.1 and 3. 2 above, Lender shall endeavor to fund the Loan for the purposes set forth in Section 2.2 , with the proceeds of the Loan being applied as follows: (x) proceeds of the Loan for the purposes of Sections 2.2(a) and 2.2(c) shall be paid directly to the Persons entitled to such proceeds as approved by Lender and (y) the remainder of the proceeds of the Loan, which shall consist of the amounts described in Sections 2.2(b) and 2.2(d) plus any additional amounts otherwise required by Section 2.2 , shall be deposited into the Disbursement Account and the Construction Contingency Account to be further disbursed (by way of Advances as opposed to the Loan) by Lender in accordance with the conditions and procedures specified in Section 3.3 and for the purposes set forth in Section 2.2 hereof (and any advance of funds from the proceeds of the Loan deposited or reserved pursuant to clause (y) above shall constitute an “ Advance ”). Interest shall begin to accrue on the Loan from the date funded, whether that funding of the Loan is to Borrower, an escrow agent, a third party or to the Disbursement Account or Construction Contingency Account. For sake of clarity, the Loan shall be deemed funded (including for purposes of interest accrual) when it is initially funded to Borrower or any other Person or into the Disbursement Account, the Construction Contingency Account or any other account (and in the case of the Disbursement Account or Construction Contingency Account or any other account, regardless of whether the funds in such accounts have yet been further disbursed to Borrower). While a Default or Event of Default exists, Lender shall not be obligated to fund the Loan or any Advance from the Disbursement Account, Construction Contingency Account or other account and Lender shall be entitled (and is hereby authorized) without notice to Borrower or any other Person to apply the Loan proceeds in all such accounts to the Obligations. From time to time, Borrower may request Advances under the Loan from the Disbursement Account (or, if the amounts in the Disbursement Account have been fully applied in accordance with this Agreement, from the Construction Contingency Account) by submitting to Lender a Request for Advance no later than two (2) Business Days preceding the date of the requested Advance. Subject to the terms and conditions of this Agreement, Lender shall advance to Borrower or, at Lender’s option, by joint payee checks or directly to the applicable third party, the amount requested; provided in no event, will the aggregate amounts advanced under the Loan exceed the original principal amount of the Note. Following the occurrence of Completion (as defined in the Construction Rider) of the Storage Improvements, any remaining funds on deposit in the Disbursement Account or Construction Contingency Account shall be deposited in a Lender monitored account maintained at Lender for working capital purposes to be used solely for business expenses of Borrower with respect to the Storage Improvements (and such funds may not be used directly or indirectly as a revolving line of credit or otherwise to make payments, distributions, reimbursement, salary payments or dividends to any owner, partner, stockholder, subsidiary, Affiliate or beneficiary of Borrower, any Guarantor, Carrol & Company Financial Holdings, LP or AP Energy Partners, LLC).

Article 4

Affirmative Covenants

Until payment in full of and satisfaction of all Obligations and the termination of all commitments of Lender under the Loan Documents (unless full compliance with any of the following provisions has been waived in writing, signed by both Lender and Borrower or each Guarantor, as the case may be), Borrower and each Guarantor will do and, if necessary, cause to be done, each and all of the following:

4.1 Financial Statements and Information . Without request by Lender (unless otherwise indicated), furnish Lender with true, correct and complete copies of the following documents and instruments:

(a)	Within ninety (90) days after the end of each fiscal year of Borrower, Borrower’s compiled Annual Financial Statements with supporting schedules;

(b)

Within ninety (90) days after the end of each fiscal year of the applicable Guarantor, annual financial statements of such Guarantor, which financial statements (i) in the case of all Guarantors other than Blue Dolphin (A) shall contain the financial information of the same type as described in the definition of Annual Financial Statement) and (B) shall be reviewed and shall be certified and signed by such Guarantor as being true, correct and complete, (ii) in the case of Blue Dolphin, shall be (A) audited and certified as being fairly stated by audited by a recognized certified independent accounting firm acceptable to Lender and not subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit and (B) accompanied by a copy of Blue Dolphin’s annual 10-K report (which delivery may be satisfied by Blue Dolphin timely filing of its annual 10-K report), and (iii) in the case of Carroll, such annual financial shall be due within thirty (30) days of the end of the applicable year);

(c)

Within sixty (60) days after the end of each calendar quarter, Quarterly Financial Statements of Borrower and each Guarantor (except that (i) in the case of Blue Dolphin, such quarterly financial statements shall be satisfied upon Blue Dolphin’s timely filing of its quarterly 10-Q reports and (ii) in the case of Carroll, such quarterly financials shall not be required pursuant to this clause (c));

(d)	Within thirty (30) days after the filing of same, a true, correct and complete copy of the signed and dated annual U. S. federal income tax return or extension requests of Guarantor;

(e)

Such other financial and other information concerning Borrower or Guarantors requested by RBS or as Lender may request from time to time, including without limitation updated appraisals on the Storage Improvements or any other Collateral or other real estate, equipment or chattel property within sixty (60) days from the date Lender or RBS requests such information or appraisals;

(f)

Upon request of Lender, evidence of payment and discharge of all taxes, assessments and governmental charges or levies imposed on Borrower, Guarantor, their income or profits or any of their Property prior to the date on which penalties or liens attach thereto, provided, however, neither Borrower nor Guarantor shall be required to pay any such tax, assessment, charge, levy or claim the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves have been set up in accordance with GAAP;

(g)	Prompt written notice of all claims, actions or litigation, including, without limitation, all proceedings before any Governmental Authority affecting Borrower, Guarantor or the Property of either of them, except litigation or proceedings that is not in excess of $100,000;

(h)

Prompt written notice of the occurrence of (i) any Default hereunder (including without limitation, any “Default” or “Event of Default” under the LE Loan Agreement, (ii) any event or occurrence which has had or can be expected to have a Material Adverse Effect, (iii) any Event of Abandonment or Event of Taking, or (iv) any casualty or damage to the Storage Improvement or any Collateral in excess of $100,000;

(i)	Within (i) thirty (30) days of the required submission date to any Governmental Authority, a copy of all required environmental and other regulatory reporting documents and (ii) thirty (30) days of the receipt of reports from any Governmental Authority, a copy of such reports;

(j)	Currently with delivery of the Annual Financial Statements in Section 4.1(a), a list showing the number of jobs and type (full/part time) of such jobs that Borrower has created or is employing;

(k)

Prompt written notice of any adverse findings made by any Governmental Authority with respect to any material permits, approvals, licenses and franchises (including all Environmental Permits and all construction permits and good standing approvals), if such findings are not corrected or cured within thirty (30) days; and

(l)	Within sixty (60) days after the end of any fiscal quarter of Borrower, reports of quarterly accounts receivables and accounts payable agings.

4.2 Financial Tests . Borrower shall have and maintain:

(a)

As at the end of each fiscal quarter of Borrower, a ratio of (i) the total combined Debt of Borrower and Lazarus Energy (excluding Debt owed to any Guarantor or any Affiliate or Related Person of any of them or of Borrower that is expressly subordinated in Proper Form to the Obligations in right of payment and liens) to (ii) total combined Tangible Net Worth of Borrower and Lazarus Energy, not exceeding 2.50 to 1.0;

(b)	As at the end of each fiscal year of Borrower, a ratio of (i) the Debt of Borrower to Net Worth of Borrower, not exceeding 5.0 to 1.0;

(c)

As at the end of each fiscal quarter of Borrower, a ratio of (i) the total combined Current Assets (excluding any intercompany accounts receivables) of Borrower and Lazarus Energy to (ii) the total combined Current Liabilities (for sake of clarity including any intercompany payables) of Borrower and Lazarus Energy of not less than 1.0 to 1.0; and

(d)	As at the end of each fiscal year of Borrower, a Current Ratio of Borrower of not less than 1.0 to 1.0;

(e)	as at the end of each fiscal quarter, a Debt Service Coverage Ratio of not less than 1.50 to 1.0.

4.3 Taxes, Existence, Property, Etc. At all times (a) pay when due all taxes and governmental charges of every kind upon Borrower or Guarantor or against its income, profits or Property, unless and only to the extent that the same shall be contested diligently in good faith and by proper proceedings and against which Borrower, or Guarantor, as the case may be has set up adequate reserves in accordance with GAAP and have in operation a depository plan for payment of future withholding taxes when required; (b) obtain and maintain in full force and effect (or where appropriate, promptly renew in a timely manner), or cause to be obtained and maintained in full force and effect all material permits, approvals, licenses and franchises (including all Environmental Permits and all construction permits) required by any Governmental Authority under any Legal Requirement for the construction, maintenance or operation of the Storage Improvements and Borrower’s business and operations generally, in each case, at or before the time the same becomes necessary for such purposes and; (c) do all things necessary to preserve its existence, qualifications, rights, permits, approvals, licenses and franchises in all jurisdictions where its Property or the nature of its business makes such licensing or qualification necessary: and (d) cause the Collateral and its Property necessary or appropriate to the conduct of its business to be protected, maintained and kept in good repair, ordinary wear and tear excepted, and make all replacements and additions to its Property as may be necessary to conduct its business properly and efficiently.

4.4 Legal Requirements . Comply with all applicable Legal Requirements in respect of the conduct of its business and the ownership of its Property, including, without limitation, the following:

(a)	Requirements of Environmental Law.

(b)	All equal opportunity and nondiscrimination requirements as more fully set out in RBS Instruction 4279A, 4279B and 4287B.

(c)	All requirements under Clean Air Act and Water Pollution Control Act as more fully set out in RBS Instruction 4279A, 4279B and 4287B.

(d)	All special laws and regulations as required by RBS Instruction 4279A, 4279B and 4287B.

(e)	The Americans with Disabilities Act.

(f)	Legal Requirements in connection with the construction of the Storage Improvements.

4.5 Inspection . Permit Lender or RBS at any time to inspect its Property, to examine its files, books and records except privileged communication with legal counsel and classified governmental material, and make and take away copies thereof, and to discuss its affairs with its officers and accountants, all during normal business hours and at such intervals and to such extent as Lender or RBS may desire. RBS personnel and any person(s) accompanying RBS personnel shall be authorized to enter upon the premises and into any building thereon, whether permanent or temporary, jointly or separately, with personnel of the Lender to carry out the functions involving their interests. It is anticipated that scheduled and unscheduled inspections shall be conducted during normal business hours by these personnel as well as final acceptance inspections, and Borrower hereby authorizes all such scheduled and unscheduled inspections.

4.6 Further Assurances . Promptly execute and deliver, at Borrower’s expense, any and all other and further instruments which may be requested by Lender to cure any defect in the execution and delivery of any Loan Document in order to effectuate the transactions contemplated by the Loan Documents, and in order to grant, preserve, protect and perfect the validity, perfection and priority of the Liens created by the Security Documents and effectuate the intent of the Loan Documents.

4.7 Books and Records . Maintain books of record and account in such detail, form and scope as Lender or RBS shall require and in accordance with GAAP.

4.8 Insurance . Maintain at Borrower’s sole expense insurance with such insurers, on such of its Property, with responsible companies in such amounts, with such deductibles and against such risks as required pursuant to the Loan Documents and otherwise as may be required by and satisfactory to Lender, and furnish Lender satisfactory evidence thereof promptly upon request. Without limiting the foregoing, Borrower shall cause Lender to be named as additional insured with respect to any liability insurance and will cause Lender to be named as loss payee and mortgagee as specified in the Loan Documents and will cause mortgagee title insurance to be issued in favor of Lender with respect to the Nixon Refinery. All insurance proceeds and condemnation proceeds shall be applied at Lender’s election to the restoration of the affected Property or the payment or prepayment of the Obligations.

4.9 Cultural Materials . If cultural materials are encountered during any construction, work must cease in the immediate area. Work can continue in the project area where no cultural materials are present. The Secretary of Interior must be contacted in accordance with 36 CFR 8007. Also, the State Historic Preservation Officer must be notified.

4.10 Protection of Collateral . Lender may at any time after notice to Borrower take such steps as Lender deems necessary to protect Lender’s interest in and to preserve the Collateral. Borrower agrees to cooperate fully with all of Lender’s efforts to preserve the Collateral and will take such actions to preserve the Collateral as Lender may direct. All of Lender’s expenses of preserving the Collateral shall be charged to Borrower’s account and added to the Note. Upon the occurrence and continuation of an Event of Default, Lender may use any of Borrower’s owned or leased lifts, hoists, trucks or other facilities or equipment for handling or removing the Collateral and Lender shall have, and is hereby granted, a right of ingress or egress to and through any of Borrower’s owned or leased Property.

4.11 Rural Areas . Borrower will utilize all Loan proceeds in improving, developing or financing business, industry and employment and improving the economic or environmental climate in a Rural Area.

4.12 Completion; Installation of Bridge Loan Equipment . Borrower shall use commercially reasonable efforts to cause the Storage Improvements to be constructed by the Completion Date in accordance with Legal Requirements and prudent industry practice and, at Lender’s discretion the Construction Rider and/or any Funds Control Agreement. In accordance with the last paragraph of Section 11 of the USDA Conditional Commitment, Borrower shall install the Bridge Loan Equipment in accordance with plans and specifications (and timing) acceptable to Lender and in accordance with Legal Requirements. Such installation shall be inspected by an independent engineer licensed in Texas and otherwise acceptable to Lender, which engineer shall verify and certify that the installation meets technical requirements, that the Bridge Loan Equipment is operational and that the Nixon Refinery is producing at the quality and quantity of production projected after installation of the Bridge Loan Equipment. Commencing after June 30, 2015, Borrower shall provide Lender with quarterly progress reports (to be delivered within thirty (30) days after the end of such quarter or such later time as approved by Lender) regarding such installation of the Bridge Loan Equipment.

4.13 Escrow Fund . At the option of Lender, Lender may require Borrower to establish an Escrow Fund (defined below) sufficient to discharge its obligations for the payment of taxes, insurance premiums, and maintenance as required by the Deed of Trust. The initial deposits together with the amounts set forth in this subsection shall be called the (“Escrow Fund”). Initial deposits for taxes, premiums, and maintenance shall be made by Borrower to Lender in amounts determined by Lender in its sole and exclusive discretion on the date hereof to be held in Lender’s Escrow Fund. Additionally, Borrower shall pay to Lender or its designee on the first day of each calendar month: (a) one twelfth of an amount which would be sufficient to pay the taxes payable, or estimated by Lender to be payable (if greater), upon the due dates established by the appropriate taxing authority during the ensuing twelve (12) months; (b) one-twelfth of an amount which would be sufficient to pay, or estimated by Lender to be sufficient to pay (if greater), the insurance premiums due for the renewal of the coverage afforded by the policies upon the expiration thereof; and (c) one-twelfth of an amount which would be sufficient to pay or estimated by Lender to be sufficient to pay (if greater), all costs associated with maintenance and upkeep of building, grounds, equipment, and all other property which needs to be maintained in the ordinary course of business (“CAM”). Borrower shall notify Lender immediately of any changes to the amounts, schedules and instructions for payment of taxes, insurance premiums, and CAM of which it has obtained knowledge and expressly authorizes Lender or its designee to obtain the bills for taxes and other charges directly from the appropriate authority. The Escrow Fund and the payments of interest or principal, or both, payable pursuant to the Note, shall be added together and shall be paid as the aggregate sum by Borrower to Lender. Provided there are sufficient amounts in the Escrow Fund and no Default or an Event of Default exists, Lender shall be obligated to pay on behalf of Borrower the taxes, insurance premiums and CAM as they become due on their respective due dates by applying the Escrow Fund to the payment of such taxes, insurance premiums, and CAM required to be made by Borrower hereunder. If the amount of the Escrow Fund shall not be sufficient to pay the amounts due for taxes, insurance premiums, and CAM herein, Borrower shall promptly (but in no event later than three (3) Business Days after demand by Lender) pay to Lender, upon demand, an amount which Lender shall estimate to make up the deficiency. The Escrow Fund shall constitute a separate fund and shall not be commingled with other monies held by Lender. No interest or earnings shall be payable to Borrower on the Escrow Fund.

4.14 Change in Guarantor’s Status . Should any Guarantor die, become legally incapacitated, become insolvent, or fail to pay such Guarantor’s debts generally as they become due, or voluntarily seek, consent to, or acquiesce in the benefit or benefits of any Debtor Relief Law or become a party to (or be made the subject of) any proceeding provided for by any Debtor Relief Law (other than as a creditor or claimant) that could suspend or otherwise adversely affect the rights and remedies of Lender granted hereunder, then, in any such event, the obligations guaranteed under such Guarantor’s Guaranty shall be, as between such Guarantor and Lender, a fully matured, due, payable and performable obligation of such Guarantor to Lender (without regard to whether Borrower is then in default under this Agreement or the other Loan Documents or whether such guaranteed obligations, or any part thereof is then due and owing or unperformed by Borrower to Lender), payable and/or performable in full by such Guarantor to Lender automatically without notice or demand, which shall be the estimated amount owing in respect of the contingent claim created hereunder ; provided , however , the death or legal incapacity of Guarantor shall not cause the maturity of such guaranteed obligations if, within thirty (30) days of the date of such death or incapacity, the representative or legal guardian of such Guarantor or Guarantor’s estate affirms in writing (which instrument shall be in form and substance satisfactory to Lender) (a) the obligations of such Guarantor’s estate with respect to such Guarantor’s Guaranty and (b) that no distributions shall be made from such estate without the prior written consent of Lender .

4.15 Asbestos . Borrower shall use commercially reasonable efforts to cause Lazarus Energy, as owner of the Nixon Refinery, to comply with its operations and maintenance plan and, in the event that building renovation or demolition activities are planned, cause Lazarus Energy to obtain a thorough asbestos survey in accordance with Requirements of Environmental Law.

4.16 Prepayment of Debt to LE . Unless Lender otherwise agrees, on or within five Business Days of the Closing Date, Borrower shall prepay at least $1,500,000 in debt incurred by Borrower from LE on or around June 22, 2015 in order to purchase the Bridge Loan Equipment.

4.17 Tenant or Lessee List . Promptly following the request of Lender or following execution of any new lease or rental agreement entered into by Borrower as a lessor or rentor relating to the Storage Improvements, an updated tenant or lessee list, with copies of the executed lease or rental agreements of such tenants or lessees, and matching income projections as the ability of such payments to cover scheduled payments of principal and interest on the Loan. Upon the substantially full lease or rent of the Storage Improvements, promptly deliver a tenant or lessee list, with copies of the executed lease or rental agreements of such tenants or lessees, and matching income projections showing the ability of such payments to cover scheduled payments of principal and interest on the Loan. Borrower shall update such tenant list and provide copies of current agreements on at least an annual basis thereafter (or as requested by Lender).

Article 5

Negative Covenants

Until payment in full of and satisfaction of all Obligations, Borrower shall not, without prior express written consent of Lender (and RBS if deemed necessary by Lender):

5.1 Indebtedness . Create, incur or assume, directly or indirectly, or become or remain liable with respect to any Debt (including by way of guaranty) whether direct, indirect, contingent or otherwise, other than (a) the Loan, (b) trade payables or similar current liabilities (other than Debt for borrowed money, or under a credit facility or other line of credit) arising out of transactions in the ordinary course of Borrower’s business, and (c) loans or advances to Borrower from any director, shareholder, owner, member, partner or Affiliate of Borrower if (i) Lender provides its prior written consent and (ii) such loans or advances are subordinated in right of payment and/or priority of lien or converted into equity interests as required by Lender in its sole discretion.

5.2 Contingent Liabilities . Directly or indirectly assume, guarantee, endorse or otherwise become liable upon, or agree to purchase or otherwise furnish funds for the payment of, the liability or obligation, including contingent liabilities or obligations, of any Person.

5.3 Liens . Create, incur, assume or suffer to exist any Lien upon any of its Property now owned or hereafter acquired, or sell any accounts, except (i) Liens securing payment of the Note under this Agreement; and (ii) mechanics, carriers, workmen, repairmen or other like Liens incurred in the ordinary course of business in respect of obligations which are not overdue or are being contested in good faith by appropriate proceedings, if adequate reserves with respect thereto are maintained in accordance with GAAP, provided that all Liens described in Section 5.3(ii) shall be subordinate in priority to the Liens granted under the Loan Documents and provided further that Borrower shall not incur any such Liens or commence construction on any portion of the Storage Improvements until after the recordation of the Deed of Trust.

5.4 Nature of Business . Engage in any business other than Borrower’s principal business activity as in effect on the Closing Date or a business activity which is directly related thereto, or change the nature or method of operation or its manner of conducting business in any material respect.

5.5 Loans or Investments to Affiliates . Make any loans or advances to, or investments in or purchase of equity interests of, any officer, director, shareholder, owner, member, partner or Affiliate of Borrower or any Guarantor unless (a) Lender provides its prior written consent and (b) in the case of loans or advances, such loans or advances are subordinated in right of payment and/or priority of lien as required by Lender in its sole discretion.

5.6 Mergers, Consolidations, Dispositions, Acquisitions, Investments . Liquidate or dissolve; form any new subsidiary or merge or consolidate with any corporation or other entity, or sell, lease, assign, transfer or otherwise dispose of (whether in one transaction or a series of transactions) all or substantially all of its assets, whether now owned or hereafter acquired; or acquire by purchase in any acquisitive corporate transaction or otherwise, all or substantially all of the assets of any corporation or other entity or make any investment in the assets of any corporation or other entity or business venture or allow any changes in the current equity ownership of- Borrower or any entity Guarantor.

5.7 Capital Expenditures . During any fiscal year, make or incur any expenditures for acquiring or improving any real property, machinery, equipment, furniture or fixtures by purchase, lease purchase agreement or option the aggregate cost or annual rental of which is in excess of five hundred thousand and No/100 Dollars ($500,000) except as may be acquired by the proceeds of the Loan.

5.8 Disposition of Assets . During any fiscal year, sell, lease or dispose of (whether in one or more transactions) in any manner any real property, machinery, equipment, furniture or fixtures not constituting Collateral, and shall not sell or dispose of any Collateral except in accordance with Section 5.13 hereof.

5.9 Redemptions, Dividends, Distributions . Redeem, retire or otherwise acquire, directly or indirectly, any shares of Borrower’s capital stock or other equity interest, declare or pay any dividend on or in respect any shares of Borrower’s capital stock or bonuses to officers or shareholders unless (a) after-tax profit was made in the preceding fiscal year; (b) Borrower is and will remain in compliance with covenants of the Loan Agreement and Conditional Commitment; (c) all of Borrower’s debts are paid to a current status; and (d) Borrower has received the prior written concurrence of the Lender, or make any other distribution of any Property or cash to owners of any equity interest in Borrower (in their capacity as such) except as provided above; provided, that if no Event of Default has occurred and is continuing, Borrower may make dividends and distributions to cover personal tax liability of the members of Borrower resulting from the profitability of Borrower’s business. No such redemptions, dividends or distributions may be made if Lender determines that such redemptions, dividends or distribution will adversely affect the ability of Borrower to repay the Obligations. Without limiting the foregoing, no proceeds of the Loan (including any Advances) shall be used to make dividends or distributions to the shareholder(s) of Borrower on account of the equity interests in Borrower.

5.10 New Management Practices . Implement any new management practices without the prior written consent of Lender.

5.11 Change of Name or Location . Change its name or the location of its chief executive office or principal place of business or the place where it keeps its books and records or state of incorporation or organizational structure.

5.12 Organizational Documents . Amend, modify, restate or supplement any of its Organizational Documents if such action could be expected to adversely affect the Loan or any Obligation or the abilities of any of the Parties to perform their respective Obligations under any Loan Document.

5.13 Collateral . Dispose of any of the Collateral or use the Collateral, permit the same to be used, for any unlawful purpose or in any manner inconsistent with the provisions or requirements of any insurance policy required in the Loan Documents, or allow any tangible Collateral to be moved from its current location, in each case without the consent of Lender (or, in the case of disposition of fixed assets or equipment constituting Collateral shall also require the consent of RBS). Borrower further agrees that all payments of any kind from any sale, including but not limited to public or private, of any of the Collateral will be made jointly payable to the Lender and Borrower and shall be kept separate and distinct from other Property of Borrower. These payments include but are not limited to the sale of any equipment, real estate, rolling stock, bonds or stocks. All proceeds must be applied to the Obligations upon receipt of such proceeds. If the Collateral is evidenced by promissory notes or other instruments for the payment of money, Borrower, will, at the request of Lender, immediately deliver them to Lender, appropriately endorsed to Lender’s order and regardless of the form of endorsement, Borrower waives presentment, demand, notice of dishonor, protest and notice of protest.

5.14 Compensation . Notwithstanding anything herein to the contrary, no salaries, compensation and/or other like payments to officers and/or owners will be increased unless (a) an after tax profit (excluding extraordinary and non-recurring gains) (as shown on the Annual Financial Statements) was made in the preceding fiscal year; (b) all of Borrower’s Debt is paid to current status; (c) Borrower remains in compliance with the covenants of this Loan Agreement; and (d) prior written concurrence of the Lender is obtained. No such compensation shall be permitted if Lender determines that the same will adversely affect the ability of Borrower to repay the Obligations.

5.15 Key Agreements . (a) Amend, modify or grant a waiver of any provision of any of the Key Agreements if such amendment, modification or waiver could have a Material Adverse Effect; or (b) fail to enforce any right under any Key Agreement if such failure could have a Material Adverse Effect; (c) waive, reduce or forgive any amounts due to it under any Key Agreement (including any storage fees due under any Key Agreement) without the consent of Lender; (d) amend, modify or grant a waiver of any provision of any Key Agreement without the consent of Lender if, in Lender’s determination, such amendment, modification or waiver would be adverse to Lender; (e) not exercise its rights under the Ground Lease in a manner so as to cause the Storage Improvements to be located in real property on which the Nixon Refinery is physically located or would, in Lender’s determination, impair the operation of or otherwise materially and adversely impact the Nixon Refinery, without the consent of Lender.

5.16 Additional Life Insurance . Without the prior written consent of Lender and RBS, purchase additional life insurance from Borrower’s business assets or income.

5.17 Related Parties . Engage in any transactions with any Guarantor or any Affiliate or any Related Person of any of them or of Borrower, except with notice to Lender and upon fair and reasonable terms where such terms are no less favorable, taken as a whole, than would be obtained in a comparable arm’s-length transaction with other parties that are not Related Persons.

5.18 No Subsidiaries . Borrower shall not create or acquire any subsidiary (or a majority of the equity interests in any Person) without the consent of Lender.

5.19 Control Agreement . Borrower shall maintain all of its operating accounts with Lender.

5.20 Gambling Activity . Borrower shall not derive any of its annual gross revenue from gambling activity.

5.21 Certain Guarantor Covenants .

(a)

EACH GUARANTOR THAT IS NOT AN INDIVIDUAL (OTHER THAN BLUE DOLPHIN) HEREBY ACKNOWLEDGES AND AGREES THAT UNTIL THE OBLIGATIONS ARE PAID IN FULL IN CASH AND ALL COMMITMENTS OF LENDER UNDER THE LOAN DOCUMENTS HAVE TERMINATED OR EXPIRED, SUCH GUARANTOR WILL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER (WHICH MAY BE WITHHELD IN LENDER’S SOLE AND ABSOLUTE DISCRETION), SELL, LEASE, ASSIGN, ENCUMBER, HYPOTHECATE, TRANSFER OR OTHERWISE DISPOSE OF A MATERIAL PORTION OF SUCH GUARANTOR’S ASSETS OR ANY INTEREST THEREIN FOR LESS THAN REASONABLY EQUIVALENT VALUE OR IF THE RESULT OF SUCH ACTION WOULD (i) MATERIALLY AND ADVERSELY AFFECT THE FINANCIAL CONDITION OF SUCH GUARANTOR OR (ii) MATERIALLY AND ADVERSELY AFFECT SUCH GUARANTOR’S ABILITY TO PERFORM ITS OBLIGATIONS UNDER ITS GUARANTY OR THE OTHER LOAN DOCUMENTS.

(b)

EACH GUARANTOR THAT IS AN INDIVIDUAL HEREBY ACKNOWLEDGES AND AGREES THAT UNTIL THE OBLIGATIONS ARE PAID IN FULL IN CASH AND ALL COMMITMENTS OF LENDER UNDER THE LOAN DOCUMENTS HAVE TERMINATED OR EXPIRED, SUCH GUARANTOR WILL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER (WHICH MAY BE WITHHELD IN LENDER'S SOLE AND ABSOLUTE DISCRETION), SELL, LEASE, ASSIGN, ENCUMBER, HYPOTHECATE, TRANSFER OR OTHERWISE DISPOSE OF ANY ASSETS OF GUARANTOR EXCEPT FOR TRANSFERS OF ASSETS VALUED AT LESS THAN TEN PERCENT (10%) OF SUCH GUARANTOR’S TOTAL ASSETS AND TRANSFERS FOR WHICH SUCH GUARANTOR RECEIVES CONSIDERATION (IN THE FORM OF CASH OR OTHER PHYSICAL ASSET OF COMPARABLE LIQUIDITY) SUBSTANTIALLY EQUIVALENT TO THE FAIR MARKET VALUE OF THE TRANSFERRED ASSET (AS DETERMINED BY LENDER).

Article 6

Representations and Warranties

To induce Lender to extend the credit and financial accommodations evidenced by the Loan Documents, Borrower and Guarantor each represents and warrants to Lender that:

6.1 Organization . Each of Borrower and Guarantor (other than Carroll) is a corporation or limited liability company, as applicable, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has all requisite power and authority, corporate or otherwise, necessary in order for it to conduct its business and own its Properties. Each of Borrower and Guarantor (other than Carroll) is a corporation or limited liability company in good standing under the laws of all jurisdictions (other than its jurisdiction of organization) in which qualification is necessary in order for it to conduct its business and own its Property as conducted and owned in such jurisdictions.

6.2 Financial Statements . The financial statements of Borrower and Guarantor as of and for the period ended December 31, 2014 and September 30, 2015 , respectively, delivered to Lender concurrently herewith fairly present the financial condition of Borrower and Guarantor as at such date and the results of the operations of Borrower for the period ended on such date all in accordance with GAAP, and since the date of such financial statements, no event has occurred which has had or is likely to have a Material Adverse Effect.

6.3 Enforceable Obligations; Authorization . The execution, delivery and performance of the Loan Documents to which Borrower or Guarantor is a party are within its corporate powers and have been duly authorized by all necessary corporate action of Borrower or Guarantor, as applicable. Neither execution or delivery of any Loan Documents nor the fulfillment of or compliance with its terms will contravene or violate (i) Borrower’s or Guarantor’s Organizational Documents, (ii) any Legal Requirement binding on or affecting Borrower or Guarantor or (iii) any mortgage, indenture, contract, agreement or other instrument, or any judgment, order or decree binding upon Borrower or Guarantor. No authorization or approval or other action by, and no notice to or filing with, any franchisor, licensor, distributor, Governmental Authority, regulatory body, or other Person is required for the due execution, delivery and performance by Borrower or Guarantor of the Loan Documents to which each is a party. The Loan Documents to which Borrower or Guarantor is a party have been duly executed and delivered and are legal, valid and binding obligations of Borrower and Guarantor, enforceable against each in accordance with their respective terms. The Improvements and the use of the Land and Improvements comply in all respects with applicable Legal Requirements.

6.4 Contractual Obligations . Neither Borrower nor Guarantor has received notice nor has any actual knowledge that (i) it is in default in the performance, observance or fulfillment of any the obligations, covenants or conditions contained in any contractual obligation, including, without limitation, franchise and distribution contracts, applicable to it, or (ii) any condition exists which, with the giving of notice or the lapse of time or both, would constitute such a default under such contractual obligations, in each case, except where such default or defaults, if any, will not have or is not likely to have a Material Adverse Effect.

6.5 Litigation . There is no pending or, to the knowledge of Borrower or Guarantor, threatened action or proceeding affecting Borrower or Guarantor before any court, governmental agency or arbitrator, which has had or is likely to have an adverse effect on the financial position of Borrower or Guarantor or the results of operations of Borrower or any of their businesses or the ability of Borrower or Guarantor to perform its obligations under the Loan Documents or would subject Borrower or Guarantor to any liability not fully covered by insurance, or would be required to be disclosed in the notes to any financial statements of Borrower or Guarantor prepared in accordance with GAAP.

6.6 Title; Permits . Borrower possesses adequate assets, licenses, patents, patent applications, copyrights, trademarks, trademark applications, trade names, technology, processes, and franchise and distribution rights to continue to conduct its business as heretofore conducted by it. Borrower has and will continue to have good and indefeasible title to its Property free and clear of all Liens other than as permitted by Section 5.3 . No Liens exist as of the Closing Date upon or with respect to any Property of Borrower other than Liens permitted under Section 5.3 .

6.7 Indebtedness . Except for trade payables arising and endorsements of negotiable instruments for collection, in each case, in the ordinary course of its business, and except as permitted under Section 5.1 of this Agreement, Borrower will not have, as of the Closing Date, (i) any obligation or liability (including, without limitation, contingent liabilities) which could reasonably be expected to have a Material Adverse Effect, (ii) any Indebtedness for borrowed money other than the Obligations or (iii) any obligation to guarantee the obligations of any other Person.

6.8 Regulations G, U and X . Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations G, U or X issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Loan will be used to purchase or carry any margin stock or to extend to others for the purpose of purchasing or carrying any margin stock or for any purpose which would be inconsistent with the provisions of Regulations G, U or X.

6.9 Corporate Structure . The outstanding capital stock of Borrower is duly authorized, validly issued, fully paid and non-assessable is not margin stock. At least fifty-one percent (51%) of the outstanding equity interests of Borrower are owned by citizens of the United States or individuals who reside in the United States after being legally admitted for permanent residence.

6.10 No Untrue or Misleading Statements . The representations and warranties of Borrower, Guarantor and of each other Party to a Loan Document contained in the Loan Documents, and all certificates and other documents delivered pursuant to the terms thereof do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. Neither Borrower nor Guarantor has intentionally withheld any material fact from Lender in regard to any matter, which will have or is likely to have a Material Adverse Effect.

6.11 Investment Company Act; Public Utility Holding Company Act, Etc. Borrower is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, the Investment Company Act of 1940, or any other Legal Requirements which limit the ability of Borrower to incur indebtedness or its ability to consummate the transactions contemplated hereby or by the other Loan Documents.

6.12 Solvency . Both immediately before and immediately after giving effect to the consummation of the transactions evidenced by the Loan Documents, each of Borrower and Guarantor has capital sufficient to carry on its respective business and transactions and all businesses and transactions in which it is about to engage and is solvent and able to pay its respective debts as they mature; and each of Borrower and Guarantor owns Property having a value, both at fair valuation and at present fair salable value, greater than the amount required to pay its respective debts.

6.13 Legal Requirements . Borrower and Guarantor are in compliance with all Legal Requirements applicable to them or their respective business, the violation of which would have a Material Adverse Effect.

6.14 Environmental Matters . The operations of Borrower and Guarantor are in compliance with all applicable Requirements of Environmental Law; and (a) none of the Properties of Borrower or Guarantor require any Remedial Action; (b) to the knowledge of Borrower and Guarantor, there is not now on or in the Properties of Borrower or Guarantor (i) any asbestos containing materials, (ii) except as previously disclosed to Lender in the Phase I environmental site assessment dated June, 2000, any underground or aboveground storage tanks, or (iii) any polychlorinated biphenyls (PCB’s) used in hydraulic oils, electrical transformers or other equipment; (c) neither Borrower nor Guarantor has received or is otherwise aware of any notice or claim to the effect that Borrower or Guarantor is or may be liable in any respect to any Person as a result of the release or threatened release of Hazardous Substances into the environmental; (d) neither Borrower nor Guarantor, nor any of their past or present Properties or operations, are subject to any investigation, judicial or administrative proceeding, order, judgment, decree, settlement or other agreement respecting (i) any Requirements of Environmental Law, (ii) any Remedial Action or (iii) any Environmental Claim or Environmental Liabilities arising from the release or threatened release of Hazardous Substances into the environment; and (e) none of the Properties of Borrower or Guarantor require any Remedial Action, other than such actions as specified in the Phase I and Phase II assessments delivered pursuant to Section 3.1 and completed by the applicable environmental remediator (or with respect to which arrangements for completion satisfactory to Lender have been made).

6.15 Taxes . Each of Borrower and Guarantor has filed (or has obtained a currently effective extension of time for the filing of) all federal and all state, local and other tax returns and other reports which each is required by any Legal Requirement to file, and all taxes, assessments, fees and other governmental charges thereupon and upon their respective Property, assets, income and franchises which are shown in such returns or reports to be due and payable have been paid other than those taxes, fees, assessments, and charges which are being contested pursuant to Section 4 .3 hereof and such returns properly reflect the United States income, foreign taxes and/or state taxes of Borrower and Guarantor for the periods covered thereby. Borrower and Guarantor do not have any knowledge of any proposed tax assessment against Borrower or Guarantor that will have or is likely to have a Material Adverse Effect.

6.16 Use of Proceeds . Borrower’s uses of the proceeds of the Loan are and will continue to be, legal and proper corporate uses (duly authorized by Borrower’s Board of Directors, partner or members or managers, as applicable) in connection with Borrower’s business and are consistent with this Agreement and all applicable Legal Requirements in effect from time to time. None of the proceeds of the Loan will be disbursed to the owner(s), partners, stockholders or beneficiaries of Borrower or any members of their families.

6.17 Security Interests . The Liens of Lender attaching to the Collateral will at all times constitute valid and enforceable first priority Liens in favor of Lender, subject to no prior Lien (except in the case of the Liens granted by Lazarus Energy, which Liens will be second priority Liens subject only to the Liens granted by Lazarus Energy to Lender under the “Loan Documents” as defined in the LE Loan Agreement). Before any funding under the Note, Borrower and Guarantor will have taken or will have participated with Lender in taking, all necessary action and make all necessary filings to provide Lender with perfected, first priority Liens in the Collateral under the laws of all applicable jurisdictions. The Collateral is free from damage caused by fire or other casualty. Borrower and/or Guarantor, as applicable, have good and marketable title to and enjoy peaceful and undisturbed possession of all of the Collateral.

6.18 Business Loan . All loans evidenced by the Note are and shall be for business, commercial, investment or other similar purposes and not primarily for personal, family, household or agricultural use, as such terms are used in the commercial law provision of the Code.

6.19 Principal Place of Business & Collateral . Borrower’s principal place of business and chief executive office is at 801 Travis Street, Suite 2100, Houston, TX 77002 , all Collateral is located at such address or at 11372 US Highway 87, Nixon, TX 78140 . Borrower has never changed its name, whether by amendment of its organizational documents or otherwise.

6.20 Certificate of Title . No part of the Collateral is covered by a certificate of title or subject to any certificate of title law, unless Borrower has taken all steps required by Lender to cause such Collateral to be subject to a first priority Lien in favor of Lender in accordance with the applicable certificate of title laws.

6.21 Land . The Land described on Exhibit A is all the real estate owned or leased by Borrower and any entity Guarantor (including Lazarus Energy which is the owner of the Land).

6.22 ADA Compliance . Borrower’s office facilities and all places accessible to the public are accessible to physically handicapped person who may be employed or come to visit. The office layout is in compliance with the Uniform Federal Accessibility Standards (UFAS) or the American With Disabilities Act (ADA), which became effective January 26, 1992, as appropriate.

Article 7

Events of Default and Remedies

7.1 Events of Default . If any of the following events (each an “Event of Default”) shall occur, then the Lender may do any or all of the following without any notice to Borrower (except as hereinafter expressly provided): (i) declare the Note to be, and thereupon such Note shall forthwith become, immediately due and payable, together with all accrued interest thereon and all fees and other amounts payable hereunder and under the other Loan Documents, without notice of any kind, notice of acceleration or of intention to accelerate, presentment and demand or protest, all of which are hereby expressly waived; (ii) exercise its rights of offset against each account and all other Property of Borrower in the possession of the Lender, which right is hereby granted by Borrower to Lender; (iii) terminate Lender’s obligation to make the Loan or any further Advances under the Loan and (iv) exercise any and all other rights available to Lender under the Loan Documents, at law or in equity:

(a)

Borrower or Guarantor fails to make any payment of principal of or interest on the Note or in respect of any other Obligation under any Loan Document as and when due and such failure shall continue for a period of ten (10) days after written notice by Lender to Borrower (unless such ten (10) day period would unreasonably subject Lender to a material loss of its rights as set out in the Loan Documents, in which event such failure must be cured within such shorter period as Lender may require); or

(b)

Borrower or Guarantor shall fail to pay when due, or within any applicable period of grace, any principal of, or interest on, any other Indebtedness in excess of $100,000; or if the holder of such other Indebtedness declares, or may declare, such Indebtedness due prior to its stated maturity because of Borrower’s or Guarantor’s default thereunder; or

(c)

Any representation or warranty made by Borrower or Guarantor herein or by Borrower, Guarantor or any other Party in any other Loan Document or in any certificate, financial statement or other written statement furnished to Lender proves to have been incorrect, false or misleading in any material respect when made; or

(d)

Borrower, Guarantor or any other Party violates any covenant, agreement or condition or otherwise fails to perform any obligation (other than the obligation to pay principal of, or interest on, the Note) contained in this Agreement or any of the other Loan Documents or in connection with any other Indebtedness owed by Borrower, Guarantor or any other Party to Lender and such violation or failure continues uncured for a period of five (5) days after written notice from lender to Borrower (unless such five (5) day period would unreasonably subject Lender (in Lender’s view) to a material loss of its rights as set out in the Loan Documents, in which event such failure must be cured within such shorter period as Lender may require); or

(e)	Final judgment for the payment of money is rendered against Borrower or Guarantor and the same is not immediately paid or sufficiently bonded or escrowed; or

(f)

Borrower, Guarantor or any other Person claims, or any court finds or rules, that the Lender does not have a valid first priority perfected Lien under any Security Document (subject only to Liens permitted by the Loan Documents); or the Liens granted pursuant to the Security Documents fail to be valid first priority perfected Liens (subject only to Liens permitted by the Loan Documents); or any Security Document is terminated or otherwise ceases to be in full force and effect (except in accordance with its terms and not related to any Default hereunder); or any Loan Document or any material provision of any Loan Document without Lender’s consent is declared by a court of competent jurisdiction (or asserted by any Party) to be illegal, invalid or unenforceable or ceases to be legal, valid or enforceable; or

(g)

Borrower, Guarantor or any other Party sells, encumbers, or abandons (except as otherwise expressly permitted by the Loan Documents) any of the Property now or hereafter subject to any of the Security Documents; or any levy, seizure or attachment is made on any material portion thereof or thereon and same is not dismissed within 30 days; or any material portion of such Property is lost, stolen, substantially damaged or destroyed unless such loss, damage or destruction is in Lender’s judgment adequately covered by insurance; or

(h)

Borrower, Guarantor or any other Party makes a general assignment for the benefit of creditors or becomes insolvent or fails generally to pay its debts as they become due, or petitions or applies to any tribunal for the appointment of a trustee, custodian, receiver, (or other similar official) of Borrower, Guarantor or any other Party of all or any substantial part of the assets of Borrower, Guarantor or any other Party or commences a voluntary case or any other proceeding relating to Borrower, Guarantor or any other Party under any Debtor Relief Law; or

(i)

Any such petition or application is filed, or any such proceeding is commenced, against Borrower, Guarantor or any other Party and Borrower, Guarantor or such other Party by any act or omission indicates its approval, consent, or acquiescence thereto, or an order for relief is entered in an involuntary case under the federal bankruptcy laws as now or hereafter constituted, or an order, judgment or decree is entered appointing any such trustee, custodian, receiver, liquidator, or similar official or adjudicating Borrower or such other Party bankrupt or insolvent, or approving the petition in any such proceedings, and such order, judgment, or decree remains in effect for 30 days; or

(j)

Borrower, Guarantor or any other Party conceals, removes, or permits to be concealed or removed, any part of its Property, with intent to hinder, delay or defraud its creditors or any of them, or makes or suffers a transfer of any of its Property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or shall have made any transfer of its Property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or

(k)

Any event shall occur condition exist which results in a Material Adverse Effect; or any casualty has occurred to the Nixon Refinery or Storage Improvements that (i) in Lender’s or any insurance company’s determination would cause the Nixon Refinery or the Storage Improvements to be a total loss or destroyed or (ii) would affect more than 50% production or capacity of the Nixon Refinery or the Storage Improvements; or any Event of Abandonment occurs; or any Event of Taking shall occur and Lender is not satisfied with the steps being taken by Borrower to remedy the Event of Taking; or

(l)	Any litigation commences which hinders or delays the collection of any part of the Obligations or the exercise of any right or option of Lender; or

(m)	Death, incapacity, dissolution, business failure, merger, or similar event, adversely affects Borrower, Guarantor or any other Party; or

(n)	Borrower uses the Loan proceeds or Collateral in any manner different from the manner contemplated in the Loan Documents; or

(o)	Lender or any holder of the Note believes in good faith that the prospect of full payment of the Obligations or performance of any covenants or obligations by Borrower is impaired; or

(p)	Failure of Borrower to comply with the terms of the Conditional Commitment or the terms of any RBS Document; or

(q)	Any “Event of Default” has occurred under the LE Loan Agreement or any default occurs under any Loan Obligation;

(r)

Lazarus Energy or Borrower shall repay or prepay any portion of any debt owed to John H. Kissick or any other subordinated debt prior to (i) the payment in full in cash of all “Obligations” under the LE Loan Agreement and all Obligations under the Loan Documents and (ii) the termination of all commitments of Lender under the LE Loan Agreement and all commitments of Lender under this Agreement;

(s)

The payment in full in cash of the “Loan” and interest thereon under the LE Loan Agreement, unless either (i) Borrower repays all Obligations under the Loan Documents on the same date or (ii) John H. Kissick confirms in writing to Lender in a manner satisfactory to Lender that all debt of Lazarus Energy owing to John H. Kissick is and continues to be subordinated in right of payment to the payment in full of the Obligations;

(t)	Any event occurs which, with or without the passage of time or the giving of notice, would permit the holder of any prior lien on the Land to accelerate the prior lien debt; or

(u)

Failure (i) by Blue Dolphin to own 100% of the equity interests in Borrower or Lazarus Energy; (ii) by LEH to own at 80% of the voting equity interests in Blue Dolphin; (iii) by Carroll to own at least 50.1% of the voting equity interests in LEH; or (iv) by Carroll to be the President of Blue Dolphin or a member and board director of LEH;

provided, that if an Event of Default of the type described in Section 7.1(g) or (h) occurs, then the Note shall automatically without any action by any Person be immediately due and payable, together with all accrued interest thereon and all fees and other amounts payable hereunder and under the other Loan Documents, without notice of any kind, notice of acceleration or of intention to accelerate, presentment and demand or protest, all of which are hereby expressly waived.

7.2 Other Remedies . In addition to and cumulative of any rights or remedies provided for in Section 7.1 hereof, if any one or more Events of Default shall have occurred, the Lender may proceed to protect and enforce its rights hereunder, by any appropriate proceedings, and the Liens evidenced by the Security Documents shall be subject to foreclosure in any manner provided for therein or provided for by law as the Lender may elect. The Lender may also proceed either by the specific performance of any covenant or agreement contained in this Agreement or the other Loan Documents or to enforce the payment of the Note or to enforce any other legal or equitable right provided under this Agreement or the other Loan Documents, or otherwise existing under any law in favor of the holders of Indebtedness of Borrower.

Article 8

Miscellaneous

8.1 Not an Agent . Nothing contained herein shall be construed to constitute Borrower or Guarantor as Lender’s agent for any purpose whatsoever and lender shall not be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever same may be located and regardless of the cause thereof. Lender does not, by anything herein or in any assignment or otherwise, assume any of Borrower’s or Guarantor’s obligations under any contract or agreement assigned to Lender and Lender shall not be responsible in any way for the performance by Borrower or Guarantor or any of the terms and conditions hereof.

8.2 Notices . Any notice or other document required or permitted to be delivered to any party hereto shall be in writing and shall be given or delivered by hand delivery, by depositing it with an overnight delivery service, by registered or certified mail, return receipt requested, or sent by telecopy (provided an identical notice is also sent simultaneously by mail, overnight delivery, or personal delivery as otherwise provided in this Section 8. 2 to the party entitled to receive such notice or other document at the address specified adjacent to their signature on the signature pages of this Agreement or any such other address as such party shall request in a written notice made in compliance herewith. Any such notice or document will be deemed given or delivered on the earliest of the date actually received if sent by hand delivery, on the first Business day after deposit with an overnight delivery service, on the date deposited in the mail, if mailed, or on the date the telecopy is transmitted to the party’s telecopy number and confirmation of complete receipt is received by the transmitting party during normal business hours or the next Business Day if not confirmed during normal business hours. Actual notice, however and from whoever given or received, shall always be effective when received.

8.3 Waiver; Remedies Cumulative . No failure to exercise and no delay in exercising on the part of Lender of any right, power or privilege under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any Loan Document preclude any other right, power or privilege. The rights and remedies provided in the Loan Documents are cumulative of, and not exclusive of, any rights or remedies provided by law, in equity, or in any other agreement or Loan Document, all of which Lender may pursue at any time and from time to time.

8.4 Assignment . This Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and permitted assigns; provided, however, Borrower may not assign or transfer any of its rights or obligations hereunder without the prior written consent of Lender, and any such assignment or transfer without such consent shall be null and void. Borrower acknowledges and agrees that Lender may sell one or more participations or assign its interest in all or any part of the Loan to others.

8.5 Severability . If a court of competent jurisdiction finds any provision of this Loan Agreement, the Note, or any other Loan Document to be invalid or unenforceable as to any Person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other Person or circumstance. If feasible, any such unenforceable or invalid provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if such provision cannot be so modified, it shall be stricken and all of the remaining provisions of the Loan Documents in all other respects shall remain valid and enforceable and in no way affected thereby.

8.6 Expenses, Etc. Borrower shall pay or reimburse Lender on demand: (a) the fees and expenses of legal counsel to Lender, in connection with the preparation, negotiation, execution and delivery of this Agreement (including the Exhibits and schedules hereto), and the other Loan Documents and the making of the Loan, and any modification, supplement or waiver of any of the terms of this Agreement, or any other Loan Document; (b) out-of-pocket expenses incurred by Lender in connection with the preparation, documentation and administration of the Loan or any of the Loan Documents; and (c) all amounts expended, advanced or incurred by Lender to satisfy any obligation of Borrower, Guarantor or any Party under this Agreement or any other Loan Document to collect the Obligations or to enforce, protect, preserve or defend the rights of Lender under this Agreement or any other Loan Document, including without limitation, fees and expenses incurred in connection with Lender’s participation as a member of a creditors’ committee in a case commenced under the Bankruptcy Code or other similar law, fees and expenses incurred in connection with lifting the automatic stay prescribed in §362 of the Bankruptcy Code, fees and expenses incurred in connection with any action pursuant to §1129 of the Bankruptcy Code and all other customary out-of-pocket expenses incurred by Lender in connection with such matters, together with interest thereon at the Past Due Rate on each such amount until the date of reimbursement to Lender.

8.7 Indemnification . Borrower shall indemnify the Lender and its Affiliates and their respective directors, officers, employees, representatives, advisors, attorneys, members, management, and agents from, and hold each of them harmless against, any and all losses (except loss of profits), liabilities, claims or damages to which any of them may become subject, except with respect to any indemnified party for such indemnified party’s gross negligence or willful misconduct ( AND REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY INDEMNIFIED PARTIES ) , insofar as such losses (except loss of profits), liabilities, claims or damages arise out of or result from or relates to any (i) actual or proposed use by Borrower of the proceeds of any extension of credit by Lender hereunder; (ii) breach by Borrower of this Agreement or any other Loan Document or the breach by any Party of any Loan Document; (iii) violation by

Borrower or any other Party of any Legal Requirement; (iv) investigation, litigation or other proceeding relating to any of the foregoing, and Borrower shall reimburse Lender and its Directors, officers, employees and agents, upon demand for any expenses (including legal fees) incurred in connection with any such investigation or proceeding; (v) any transaction contemplated by the Loan Documents or the execution, delivery and performance of the Loan Documents or any other document in any way relating to the Loan Documents and the transactions contemplated by the Loan Documents (including any RBS Document and any Key Agreement); or (vi) taxes (excluding income taxes and franchise taxes) payable or ruled payable by any Governmental Authority in respect of the Obligations or any Loan Document, together with interest and penalties, if any.

8.8 Amendments, Etc. No amendment or modification of this Agreement, the Note or any other Loan Document shall in any event be effective against Borrower unless the same shall be agreed or consented to in writing by Borrower. No amendment, modification or waiver of any provision of this Agreement, the Note or any other Loan Document, nor any consent to any departure by Borrower therefrom, shall in any event be effective against the Lender unless the same shall be agreed or consented to in writing by Lender (and RBS if deemed necessary by Lender), and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

8.9 Limitation of Interest . Borrower, Guarantor and Lender intend to strictly comply with all applicable federal and state laws, including applicable usury laws (or the usury laws of any jurisdiction whose usury laws are deemed to apply the usury laws of the State of Texas. Accordingly, the provisions of this Section 8 .9 shall govern and control over every other provision of this Agreement or any other Loan Document which conflicts or is inconsistent with this Section, even if such provision declares that it controls. As used in this Section, the term interest includes the aggregate of all charges, fees, benefits or other compensation which constitute interest under applicable law, provided that, to the maximum extent permitted by applicable law, (a) any non-principal payment shall be characterized as an expense or as compensation for something other than the use, forbearance or detention of money and not as interest, and (b) all interest at any time contracted for, reserved charged or received shall be amortized, prorated, allocated and spread, in equal parts during the full term of the Obligations. In no event shall Borrower or any other Person be obligated to pay, or Lender have any right or privilege to reserve, receive or retain, (a) any interest in excess of the maximum amount of nonusurious interest permitted under the laws of the State of Texas or the applicable laws (if any) of the United States or of any other state, or (b) total interest in excess of the amount which Lender could lawfully have contracted for, reserved, received, retained or charged had the interest been calculated for the full term of the Obligations at the Ceiling Rate. On each day, if the Ceiling Rate, the rate at which interest shall accrue

shall automatically be fixed by operation of this sentence at the Ceiling Rate for that day, and shall remain fixed at the Ceiling Rate for each day thereafter until the total amount of interest accrued equals the total amount of interest which would have accrued if there were no such Ceiling Rate imposed by this sentence. Thereafter, interest shall accrue at the Stated Rate unless and until the Stated Rate again exceeds the Ceiling Rate; in which case, the provisions of the immediately preceding sentence shall again automatically operate to limit the interest accrual rate to the Ceiling Rate. The daily interest rates to be used in calculating interest at the Ceiling Rate shall be determined by dividing the applicable Ceiling Rate by the number of days in the calendar year for which such calculation is being made. None of the terms and provisions contained in this Agreement or in any other Loan Document which directly or indirectly relate to interest shall ever be construed without reference to this Section 8.9 , or be construed to create a contract to pay for the use, forbearance or detention of money at an interest rate in excess of the Ceiling Rate. If the term of any Obligation is shortened by reason of acceleration of maturity as a result of any Default or by any other cause, or by reason of any required or permitted prepayment, and if for that (or any other) reason lender at any time, including but not limited to, the stated maturity, is owed or receives (and/or has received) interest in excess of interest calculated at the Ceiling Rate, then and in any such event all of any such excess interest shall be canceled automatically as of the date of such acceleration, prepayment or other event which produces the excess, and, if such excess interest has been paid to Lender, it shall be credited pro tanto against the then outstanding principal balance of Borrower’s obligations to lender, effective as of the date or dates when the event occurs which causes it to be excess interest, until such excess is exhausted or all of such principal has been fully paid and satisfied, whichever occurs first, and any remaining balance of such excess shall be promptly refunded to its payor.

8.10 Survival . The obligations of Borrower and Guarantor under each Loan Document to which each is a Party shall survive the repayment of the Loan.

8.11 Captions . Captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.

8.12 Counterparts . This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement and any of the parties hereto may execute this Agreement by signing any such counterpart. Delivery of a signature page hereto via facsimile or electronic transmission shall be deemed to constitute delivery of an original signature page.

8.13 Governing Law; Waiver of Trial By Jury . LENDER SHALL HAVE THE OPTION BY WHICH STATE LAWS THIS LOAN AGREEMENT SHALL BE GOVERNED AND CONSTRUED: (A) THE LAWS OF THE STATE OF TEXAS; OR (B) IF COLLATERAL HAS BEEN PLEDGED TO SECURE THE DEBT EVIDENCED BY THIS LOAN AGREEMENT, THEN BY THE LAWS OF THE STATE OR STATES WHERE THE COLLATERAL IS LOCATED, AT LENDER’S OPTION. THIS CHOICE OF STATE LAWS IS EXCLUSIVE TO THE LENDER. BORROWER SHALL NOT HAVE ANY OPTION TO CHOOSE THE LAWS BY WHICH THIS AGREEMENT SHALL BE GOVERNED. BORROWER AND GUARANTORS HEREBY CONSENT TO THE EXERCISE OF EXCLUSIVE JURISDICTION OVER IT BY ANY FEDERAL COURT SITTING IN DALLAS COUNTY, TEXAS OR ANY STATE COURT LOCATED IN DALLAS COUNTY SELECTED BY HOLDER, FOR THE PURPOSES OF ANY

AND ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THE NOTE, THIS LOAN AGREEMENT AND ALL OTHER LOAN DOCUMENTS. BORROWER AND GUARANTORS IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING BROUGHT IN ANY SUCH COURT, ANY CLAIM BASED ON THE CONSOLIDATION OR PROCEEDINGS IN SUCH COURTS IN WHICH PROPER VENUE MAY LIE IN DIVERGENT JURISDICTIONS, AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. BORROWER AND GUARANTORS HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS LOAN AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.

8.14 Venue . Borrower hereby irrevocably (a) agrees that any legal proceeding against Lender arising out of or in connection with the Loan Documents shall be brought in the district courts of Dallas County, Texas , or in the United States District Court for the Northern District of Texas , or elsewhere (collectively, the “Courts”); (b) submits to the nonexclusive jurisdiction of the Courts; (c) agrees and consents that service of process may be made upon it in any proceeding arising out of the Loan Documents or any transaction contemplated thereby by service of process as provided Texas law; (d) WAIVES, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of any Loan Document or the transactions contemplated thereby in the Courts; and (e) WAIVES any claim that any such suit, action or proceeding in any Court has been brought in an inconvenient forum. Nothing herein shall affect the right of Lender to commence legal proceedings or otherwise proceed against Borrower in any jurisdiction or to serve process in any manner permitted by applicable law. Borrower agrees that a final and nonappealable judgment in any such action or proceeding may be enforced in other jurisdictions in any manner provided by law.

8.15 Conflicts Between This Agreement and the Other Loan Documents . In the event of any conflict between the terms of this Agreement and the terms of any of the other Loan Documents, the terms of this Agreement shall control.

8.16 Cross-Collateralization and Cross-Default . This Agreement, the Collateral and the Obligations are cross-collateralized and cross-defaulted with (a) the LE Loan Agreement, (b) the “Obligations” thereunder, (c) the collateral securing such obligations, (d) the obligations thereunder, and (e) the collateral securing such obligations. Without limiting the foregoing, Borrower (and Lazarus Energy, by its signature below) and Lender contemplate and agree that Borrower and/or Lazarus Energy and Lender have engaged or may from time to time engage in various loan and financing transactions and that from time to time other circumstances may arise in which Borrower and/or Lazarus Energy becomes obligated to Lender, including under the LE Loan Agreement and under transactions of a type that are very different from the transactions evidenced by the Loan Documents, including by notes, advances, overdrafts, bookkeeping entries, guaranty agreements, deeds of trust, or

any other method or means (each a “Loan Obligation”). Borrower (and Lazarus Energy, by its signature below) and Lender agree that all such transactions will be secured by the Collateral, and that the Obligations arising under this Agreement and the other Loan Documents will be secured by any collateral granted in connection with such Loan Obligation. Repayment of all Obligations and performance of all other obligations under this Agreement by Borrower and/or Lazarus Energy shall not terminate Lender’s security interest in the Collateral, unless Lender executes a written release. If any default occurs under any Loan Obligation, then Lender may declare an Event of Default. An Event of Default shall be a default under any such Loan Obligation. Lender’s failure to exercise cross-defaults shall not constitute a waiver by Lender of such right.

8.17 Patriot Act Notice . Lender hereby notifies Borrower and each Guarantor that pursuant to the requirements of Section 326 of the USA Patriot Act of 2001, 31 U.S.C. § 5318 (the “Act”), that Lender is required to obtain, verify and record information that identifies such Persons, which information includes the name and address of such Persons and other information that will allow Lender to identify such Person in accordance with the Act.

8.18 Priority of Insurance Assignment . Borrower, Guarantors and Lender confirm and agree that (a) Lender has been assigned the Carroll Life Insurance Policy pursuant to the Insurance Assignment; (b) the Insurance Assignment secures, among other things, all liabilities of Borrower and Lazarus Energy to Lender (including under the LE Loan Agreement and related loan documents and including under this Agreement and the Loan Documents); (c) the Insurance Assignment is subordinate to a prior assignment of the Carroll Life Insurance Policy in favor of One World Bank; and (d) the proceeds of the Carroll Life Insurance Policy shall be applied to repay all of the “Obligations” under the LE Loan Agreement up to $5,000,000 prior to repaying the Obligations (except that any remaining amounts, if any, after repayment of the first $5,000,000 of the “Obligations” under the LE Loan Agreement and after repayment of the Obligations may thereafter continue to be applied to repay the “Obligations” under the LE Loan Agreement). Borrower and Guarantors agree not to increase or permit any of its Affiliates to increase, after the date hereof, the principal amount of its indebtedness to One World Bank without the consent of Lender.

[The Remainder of This Page Left Blank Intentionally]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

LENDER:

Sovereign Bank

By: _______________________________

Name: _____________________________

Title: ______________________________

Address for Notice:

17950 Preston Road, Suite 500

Dallas, Texas 75252

Attn: Kathryn Walker, Senior Vice President

Telecopy No.: 972-713-1122

BORROWER:

Lazarus Refining & Marketing, LLC

By: Blue Dolphin Energy Company, a Delaware

corporation, its sole member

By: _______________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

Address for Notice:

801 Travis Street, Suite 2100

Houston, Texas 77002

Attn: Jonathan Pitts Carroll, Sr.

Telecopy No.: 866-804-9066

GUARANTORS:

Jonathan Pitts Carroll, Sr., as Guarantor

Address for Notice:

c/o Lazarus Energy Holdings LLC

801 Travis Street, Suite 2100

Houston, Texas 77002

Attn: Jonathan Pitts Carroll, Sr.

Telecopy No.: 866-804-9066

Blue Dolphin Energy Company, as Guarantor

By: _______________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

Address for Notice:

801 Travis Street, Suite 2100

Houston, Texas 77002

Attn: Jonathan Pitts Carroll, Sr.

Telecopy No.: 866-804-9066

Lazarus Energy LLC, as Guarantor

By: Blue Dolphin Energy Company, a Delaware

corporation, its sole member

By: _______________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

Address for Notice:

801 Travis Street, Suite 2100

Houston, Texas 77002

Attn: Jonathan Pitts Carroll, Sr.

Telecopy No.: 866-804-9066

Lazarus Energy Holdings LLC, as Guarantor

By: _______________________________

Name: Jonathan Pitts Carroll, Sr.

Title: Member

Address for Notice:

801 Travis Street, Suite 2100

Houston, Texas 77002

Attn: Jonathan Pitts Carroll, Sr.

Telecopy No.: 866-804-9066

EXHIBIT A

LEGAL DESCRIPTION OF LAND

Being a 56.309 ACRE TRACT situated George McPeters Survey, A-419, Wilson County, Texas. Said 56.309 ACRE TRACT is that tract conveyed by Bill Klingemann, Substitute Trustee, to Notre Dame Investors, Inc, by Substitute Trustee’s Deed, in Volume 1159 at Page 609, dated May 06, 2003 and is comprised of all the tract called 51.30 acres in conveyance from Leal Petroleum Corporation to American Petro Chemical Corporation recorded in Volume 842 at Page 705 and all of a tract called 5.000 acres in conveyance from Notre Dame Refining Corporation to American Petro Chemical Corporation recorded in Volume 1049 at Page 651 of the Official Records of said county. Said 56.309 acre tract subsequently called 56.309 Acres in conveyance from Notre Dame Investors, Inc. to Lazarus Energy, L.L.C. recorded in Volume 1342 at Page 687 of the Official Public Records and being described by metes and bounds as follows:

BEGINNING at a one-half inch diameter rebar set with cap (B&A) marking the northwest corner of the tract herein described, same being the northwest corner of said 51.30 acre tract, northeast corner of a tract called Tract 2-B (41.245 acres) in Volume 685 at Page 101, lying in the south line of a tract called 7.654 acres in Volume 271 at Page 30, further described as lying in the south line of U.S. Highway No. 87; said point bears N 76° 16’ 00” E, 1495.62 feet from a concrete right of way marker found;

THENCE with a segment of the north line of the tract herein described, same being a segment of the common line of said 51.30 acre tract and said 7.654 acre tract, along a segment of the south line of U.S. Highway 87, N 76° 16’ 00” E, 140.71 feet (called N 76° 16’ E, 140.0 feet – basis of bearing) to a one-half inch diameter rebar set with cap (B&A) marking a north corner of the tract herein described, same being the north corner of said 51.30 acre tract, northwest corner residue called 640 acres in Volume X at Page 136;

THENCE continuing with the north line of the tract herein described, same being the common line of said 51.30 acre tract with that of said residue 640 acre tract and a tract called 1.666 acres in Volume 1030 at Page 772 as follows:

S 13° 27’ 49” E, 208.63 feet (called S 13° 37’ E, 207.4 feet) to a five-eighths inch diameter rebar found near a two way fence corner,

N 76° 26’ 34” E, 368.79 feet (called N 76° 29’ E, 368.4 feet) to a one-half inch diameter rebar set with cap (B&A),

N 76° 28’ 28” E, 31.40 feet (called N 76° 49’ E, 31.4 feet) to a five-eighths inch diameter rebar found near a two way fence corner,

S 13° 55’ 25” E, 238.17 feet (called S 14° 00’ E, 238.0 feet) to a five-eighths inch diameter rebar found marking a re-entrant corner of the tract herein described, same being the southwest corner of said residue 640 acre tract,

N 76° 06’ 05” E, at 386.77 feet a one inch diameter iron pipe found and at, 388.52, (N 76° 16’ E, 388.1 feet) to a one-half inch diameter rebar set with cap (B&A) marking a re-entrant corner of the tract herein described,

same being the southeast corner of said residue 640 acre tract and

N 13° 36’ 45” W, at 1.84 feet a one inch diameter iron pipe found and at 446.92 feet (called N 13° 37’ W, 447.1 feet) to a one-half inch diameter rebar found marking a north corner of the tract herein described, same being the northeast corner of said 1.666 acre tract, lying in the south line of said 7.654 acre tract, further described as lying in the south line of U.S. Highway 87;

THENCE continuing with the north line of the tract herein described, same being a segment of the common line of said 51.30 acre tract and said 5.000 acre tract with that of said 7.654 acre tract, along a segment of the south line of U.S. Highway 87 as follows:

N 76° 16’ 00” E, 275.15 feet (called N 76° 16’ E, 275.3 feet) to a railroad spike found in asphalt driveway,

N 81° 58’ 38” E, 100.50 feet (called N 82° 12’ E, 99.2 feet) to a one-half inch diameter rebar set with cap (B&A),

N 76° 16’ 00” E, 800.00 feet (called N 76° 14’ E, 800.5 feet) to a one-half inch diameter rebar set with cap (B&A),

N 70° 33’ 22” E, 100.50 feet (called N 70° 43’ E, 101.2 feet) to a concrete right of way marker found broken, and

N 76° 16’ 00” E, 464.56 feet (in total called No record call, and N 75° 02’ 04” E, 278 feet) to a one-half inch diameter rebar set with cap (B&A) marking the northeast corner of the tract herein described, same being the northeast corner of said 5.000 acre tract, lying in the south line of said 7.654 acre tract, being the northwest corner of a tract called 200.008 acres in Volume 691 at Page 41; said point bears S 76° 16’ 00” W, 278.37 feet from an iron pipe found;

THENCE with the east line of the tract herein described, same being a segment of the common line of said 5.000 acre tract and said 51.30 acre tract with that of said 200.008 acre tract as follows: S 13° 43’ 44” E, 783.78 feet (called S 15° 01’ E, 783.5 feet) to a five-eighths inch diameter rebar found near a two way fence corner marking the east most southeast corner of the tract herein described, same being the southeast corner of said 5.000 acre tract, re-entrant corner of said 200.008 acre tract,

S 76° 16’ 39” W, 277.87 feet (called S 75° 02’ 04” W, 278 feet) to a five-eighths inch diameter rebar found marking a re-entrant corner of the tract herein described, same being the southwest corner of said 5.000 acre tract, lying in the east line of said 51.30 acre tract and being a north corner of said 200.008 acre tract, and

S 13° 24’ 23” E, 261.29 feet (called S 13° 24’ E, 261.7 feet) to a four inch diameter iron pipe post fence corner marking the south most southeast corner of the tract herein described, same being the southeast corner of said 51.30 acre tract and re-entrant corner of said 200.008 acre tract;

THENCE with the south line of the tract herein described, same being a segment of the common line of said 51.30 acre tract and said 200.008 acre tract as follows:

S 76° 08’ 20” W, 768.00 feet (called S 76° 10’ W, 768.0 feet) to a one-half inch diameter rebar set with cap (B&A), and

S 76° 15’ 20” W, 1619.78 feet (called S 76° 17’ W, 1619.8 feet) to a five-eighths inch diameter rebar found near a three way fence corner marking the southwest corner of the tract herein described, same being the southwest corner of said 51.30 acre tract, lying in the north line of said 200.008 acre tract and being the southeast corner of said 41.245 acre tract;

THENCE with the west line of the tract herein described, same being the common line of said 51.30 acre tract and said 41.245 acre tract as follows:

N 13° 57’ 38” W, 223.50 feet (called N 13° 55’ W, 223.5 feet) to a one-half inch diameter rebar set with cap (B&A),

N 13° 53’ 37” W, 373.70 feet (called N 13° 51’ W, 373.7 feet) to a fence post, and

N 13° 49’ 38” W, 449.84 feet (called N 13° 47’ W, 448.8 feet) to the PLACE OF BEGINNING and containing 56.309 ACRES OF LAND.

EXHIBIT B

FORM OF PROMISSORY NOTE

[To be attached]

EXHIBIT C

FORM OF CONSTRUCTION RIDER

[To be attached]

EXHIBIT D

FORM OF BORROWER’S AFFIDAVIT

[To be attached]

PROMISSORY NOTE

NOTE NO. 17036096

$10,000,000.00

December 4, 2015

FOR VALUE RECEIVED , Lazarus Refining & Marketing, LLC , a Delaware limited liability company (hereinafter referred to as “Maker”), hereby unconditionally promises to pay to the order of Sovereign Bank (“Payee”) at 17950 Preston Road, Suite 500, Dallas, TX 75252, or at such other address given to Maker by Payee, the principal sum of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) , in lawful money of the United States of America, together with interest per annum (calculated on the basis of a 360-day year) on the unpaid principal balance from day-to-day remaining, computed from the date of advance until maturity at the per annum rate (the “Stated Rate”) equal to the lesser of (a) the Maximum Rate (as hereinafter defined) or (b) Prime Rate (as hereafter defined) plus two and three quarters percent (P + 2.75%)*. The interest rate as of the date hereof is six percent (6%) . Principal and interest under this promissory note (the “Note”) are due and payable as follows:

Monthly payments of principal and interest shall be due and payable in the amount of SEVENTY FOUR THOUSAND ONE HUNDRED TEN AND 95/100 DOLLARS ($74,110.95), with the first such installment due on the 4 th day of January, 2016 . Monthly payments shall continue to be due and payable on the same day of each calendar month thereafter until December 4 , 2034 (the “Maturity Date”), when all unpaid principal and unpaid interest shall be due and payable in full. Monthly payments shall be increased or decreased based on the changes in interest rate to ensure that the entire loan balance is paid in full on the final Maturity Date.

*The interest rate will adjust on the first day of each calendar quarter (the “Adjustment Date”) to a rate equal to two and three quarters percent (2.75%) per annum (on the basis of actual days elapsed over a 360-day year) above the minimum prime lending rate charged by large U.S. money center commercial banks as published from time to time in the Money Rates Section of the Wall Street Journal (“Prime Rate”), each change in the rate charged hereunder to become effective without notice to the undersigned as of the Adjustment Date, but in no event shall the rate charged hereunder exceed the Maximum Rate (as hereafter defined). The undersigned understands and acknowledges that Payee may from time to time make various loans at rates of interest having no relationship to the Prime Rate, and that the Prime Rate may not be the lowest interest rate charged for loans by Payee. In the event the Wall Street Journal is no longer published or in the event the Wall Street Journal discontinues publishing a “Prime Rate”, the Prime Rate shall be the nearest comparable published rate, as determined by the holder of this Note.

The term “Maximum Rate,” as used herein, shall mean, with respect to each holder hereof, the maximum nonusurious interest rate, if any, that at any time, or from time to time, may under applicable law be contracted for, taken, reserved, charged or received on the indebtedness evidenced by this Note under the laws which are presently in effect of the United States and the State of Texas applicable to such holder and such indebtedness or, to the extent allowed by law under such applicable laws of the United States of America and the State of Texas which may hereafter be in effect, which allow a higher maximum non-usurious interest rate than applicable laws now allow; provided, that in determining the Maximum Rate, due regard shall be given, to the extent required by applicable law, to any and all relevant payments, fees, charges, deposits, balances, agreements and calculations which may constitute or be deemed to constitute interest, or be deducted from principal to calculate the interest rate or otherwise affect interest rate determinations, so that in no event shall the Payee contract for, charge, receive, take, collect, reserve or apply, on the Note, any amount in excess of the maximum non-usurious rate of interest permitted by applicable law. To the extent that Texas law determines the Maximum Rate, the Maximum Rate shall be determined by utilizing the “indicated rate ceiling” from time to time in effect pursuant to the Texas Finance Code (V.T.C.A. Finance Code Section 303.001 et seq.) (the “Texas Finance Code”) or such successor statute, as then in effect, governing usury. The Maximum Rate shall not be limited to the applicable rate ceiling in the Texas Finance Code or such successor statute if Federal laws or other state laws now or hereafter in effect and applicable to this Note (and the interest contracted for, charged and collected hereunder) shall permit a higher rate of interest.

Page 1

Maker and Payee intend to comply with the applicable law governing the Maximum Rate. Interest contracted for, charged, or received shall not exceed the Maximum Rate, and, if in any contingency whatsoever, Payee shall receive anything of value deemed interest under applicable law which would cause the interest contracted for, charged, or received by the holder thereof to exceed the maximum amount of interest permissible under applicable law, the excessive interest shall be applied to the reduction of the unpaid principal balance hereof and not to the payment of interest, or if such excessive interest exceeds the unpaid principal balance hereof such excess shall be refunded to Maker, and the provisions of this Note and any demand on Maker shall immediately be deemed reformed and the amounts thereafter collectible hereunder shall be reduced, without the necessity of the execution of any new documents, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder. All interest paid or agreed to be paid to the holder hereof shall, to the extent permitted by applicable law, shall be amortized, prorated, allocated, and spread throughout the full term of such indebtedness until payment in full (including the period of any renewal or extension hereof) so that the rate or amount of interest on account of such indebtedness does not exceed the Maximum Rate.

Maker agrees to pay a late charge of five percent (5%) of the payment amount if such payment is not received within ten (10) days of the due date. Payments, when made, shall be applied in a manner and order according to the sole discretion of the holder of this Note.

In addition to the late charge in the preceding paragraph, all past-due principal and, to the extent permitted by applicable law, past-due interest upon this Note shall bear interest at the Maximum Rate.

Unless otherwise specified, Maker shall make each payment required to be made by it hereunder (whether of principal, interest, or otherwise) or under any other Loan Document (except to the extent otherwise provided therein) prior to 1:00 p.m., Dallas, Texas time, on the date when due, in immediately available funds, without set-off or counterclaim. All such payments shall be made to the Lender at its offices the address specified in the first paragraph of this Note or pursuant to most recent wire instructions provided by Payee to Maker from time to time, except as otherwise expressly provided in the relevant Loan Document. All amounts owing under this Agreement or under any other Loan Document are payable in United States Dollars.

Remittances in payment of any part of this Note other than in the required amount in immediately available funds at the place where this Note is payable shall not, regardless of any receipt or credit issued therefor, constitute payment until the required amount is actually received by Payee in full accordance herewith and shall be made and accepted subject to the condition that any check or draft may be handled for collection in accordance with the practice of the collecting bank or banks. Acceptance by Payee of any payment in an amount less than the full amount then due shall be deemed an acceptance on account only, and the failure to pay the entire amount then due shall be and continue to be an Event of Default (hereinafter defined).

Page 2

This is the Promissory Note issued pursuant to, and referenced in, that certain Loan Agreement dated as of the date hereof, among Maker, as Borrower, the Guarantors identified therein, and Payee, as Lender (as amended, restated, or otherwise modified from time to time, the “Loan Agreement”). This Note is secured in part by a Deed of Trust, Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing, dated as of the date hereof, executed by Maker in favor of Robert Blount for the benefit of Payee, to be recorded in the real property records of Wilson County, Texas. Maker and each surety, endorser, guarantor and other party ever liable for payment of any stuns of money payable on this Note, jointly and severally waive presentment, protest, notice of protest and nonpayment, notice of default and notice of acceleration and intention to accelerate, and agree that their liability under this Note shall not be affected by any renewal or extension in the time of payment hereof, or in any indulgences, or by any release or change in any security for the payment of this Note, and hereby consent to any and all renewals, extensions, indulgences, releases or changes, regardless of the number of such renewals, extensions, indulgences, releases or changes.

If this Note or any Loan Documents (as defined in the Loan Agreement) is given by Payee to an attorney for collection or enforcement, or if suit is brought for collection or enforcement, or if it is collected or enforced through probate, bankruptcy, or other judicial proceeding, then Maker shall pay Payee all costs of collection and enforcement, including reasonable attorney’s fees and court costs, in addition to other amounts due.

No waiver by Payee of any of its rights or remedies under this Note or any Loan Documents, shall be considered a waiver of any other right or remedy of Payee; no delay or omission in the exercise or enforcement by Payee of any rights or remedies shall ever be construed as a waiver of any right or remedy of Payee; and no exercise or enforcement of any such rights or remedies shall ever be held to exhaust any right or remedy of Payee.

Maker agrees that in the event any portion of this Note is prepaid in whole or in part prior to the fifth anniversary of the date of this Note, so as to constitute a Prepayment (as defined below), consideration will be tendered with the prepayment to the Payee (“Prepayment Consideration”) in the amount of five percent (5.0%) of the outstanding loan principal balance prepaid. It is understood and agreed that a “Prepayment” shall be any principal payment on this Note other than scheduled monthly payments of principal and interest as provided under this Note. Maker acknowledges that the Prepayment Consideration is consideration to Payee for the privilege of prepaying the indebtedness evidenced by this Note prior to maturity, and Maker recognizes that Payee would incur substantial additional costs and expenses in the event of a prepayment of the indebtedness evidenced by this Note and that the Prepayment Consideration compensates Payee for such costs and expenses (including without limitation, the loss of Payee’s investment opportunity during the period from the date of prepayment until the Maturity Date). Maker agrees that Payee shall not, as a condition to receiving the Prepayment Consideration, be obligated to actually reinvest the amount prepaid in any manner whatsoever.

As used herein, an “Event of Default” shall mean any one or more of the following: (i) the failure by Maker to pay any installment of principal or interest under this Note when due, (ii) the failure by Maker to pay all sums owed to Payee under this Note on or before the Maturity Date, or (iii) any Event of Default (as defined in the Loan Agreement).

Upon the occurrence of an Event of Default: (i) under Section 7.1(h) or (i) of the Loan Agreement, this Note shall be immediately become due and payable upon the occurrence of an Event of Default, or (ii) other than as specified by clause (i) immediately preceding, Payee may, at its option, without notice or demand, declare the unpaid principal balance of, and the accrued but unpaid interest on this Note immediately due and payable and exercise and pursue any and all other rights and remedies as provided herein or in any of the Loan Documents or otherwise available under applicable law.

Page 3

Upon the occurrence of an Event of Default, Payee is hereby authorized at any time and from time to time, without notice to Maker (any such notice being expressly waived by each such Maker), to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held, and other indebtedness at any time owing, by the Payee to or for the credit or the account of Maker, against any and all obligations of such Maker now or hereafter existing under this Note, irrespective of whether or not Payee shall have made demand under this Note and although such obligations may be contingent and unmatured. The rights of the Payee under this section are in addition to all other rights and remedies (including, without limitation, other rights of offset) which Payee may have hereunder or under any applicable law.

All obligations, covenants, and terms of payment are expressly performable solely in Dallas County, Texas. The substantive laws of the State of Texas shall govern the validity, construction, enforcement and interpretation of this Note. In the event of a dispute involving this Note or any of the Loan Documents, the undersigned irrevocably agrees that venue for such dispute shall lie in any court of competent jurisdiction in Dallas County, Texas.

Maker:

Lazarus Refining & Marketing, LLC,

a Delaware limited liability company

By: Blue Dolphin Energy Company, a Delaware

corporation, its sole member

By: ___________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

Page 4

SECURITY AGREEMENT

Security Agreement dated December 4, 2015 of Lazarus Refining & Marketing, LLC, a Delaware limited liability company (hereinafter referred to as the “Debtor”) in favor of Sovereign Bank (“Lender”).

In consideration of advances, loans, extensions of credit or other financial accommodations, now existing or hereafter made, to or for the account or benefit of the Debtor by Lender, and as an inducement therefor, the Debtor hereby represents, warrants, and agrees as follows:

Section 1

General Information

DEBTOR’S EXACT LEGAL NAME:	Lazarus Refining & Marketing, LLC

STATE OF DEBTOR’S ORGANIZATION:	Delaware

TYPE OF DEBTOR’S ORGANIZATIONAL ENTITY:	Limited Liability Company

DEBTOR’S ORGANIZATIONAL ID NUMBER:	4169296

DEBTOR’S TAXPAYER ID NUMBER:	56-2615708

ADDRESS OF DEBTOR’S PLACE OF BUSINESS:	801 Travis Street, Suite 2100 Houston, Texas 77002

LENDER’S ADDRESS:	17950 Preston Road, Suite 500 Dallas, TX 75252

Section 2

Definitions

Any capitalized term relating to a Collateral definition shall have the meaning accorded thereto in the Uniform Commercial Code (the “Code”), as now enacted and hereinafter amended in the State of Texas. Any capitalized term used herein but not defined herein shall have the meaning given such term in the Loan Agreement (defined below).

“Agreement” shall mean this Security Agreement as the same may be amended, modified, and supplemented from time to time.

“Collateral” shall mean the following personal property of Debtor, wherever located, and now owned, or hereafter acquired or arising, but in all cases excluding Excluded Collateral:

1.	Chattel Paper, including but not limited to Tangible Chattel Paper and Electronic Chattel Paper;

2.	Deposit Accounts, and all other bank accounts including but not limited to securities accounts if any ;

3.	Documents;

General Intangibles, including but not limited to contracts and contract rights (including but not limited to the Key Agreements) and Payment Intangibles (including but not limited to Payment Intangibles and rights to payment under the Key Agreements, including but not limited to rights to fees for tank storage services);

Page 1

5.	Goods, including but not limited to Equipment, Fixtures, and Accessions;

6.	Instruments, including but not limited to Promissory Notes;

7 .

Records;

8.	Investment Property;

9.	Letter-of-Credit Rights and Letters of Credit;

10.	As-Extracted Collateral;

11.	Supporting Obligations;

12.	Commercial Tort Claims;

13.	Governmental approvals , permits, licenses, authorizations, consents, rulings, tariffs, rates, certifications, waivers, exemptions, filings, claims, orders, judgments and decrees (each a “Governmental Approval”);

14.

Records;

15.	Intellectual Property Collateral;

16.

Proceeds of any of the foregoing and, to the extent not otherwise included, all accessions, substitutions, replacements, products, offerings, rents, issues, profits, returns and income of or from any of the foregoing as well as all payments under insurance (whether or not Lender is the loss payee thereof and including without limitation, casualty or hazard insurance and policies of owner’s or mortgagee’s title insurance), or rights of loss payee or endorsee thereof, and escrow agreements, all tax, insurance, security or other deposits, and rights acquired by reason of condemnation or exercise of the power of eminent domain; and

17.	all other property and rights of every kind and description and interests therein.

“Event of Default” shall mean any event referred to in Section 6 of this Agreement.

“Excluded Collateral” means: (a) accounts receivable (but for sake of clarity excluding payment intangibles and rights to receive payments under any Key Agreements); (b) inventory; and (c) any Governmental approval that by its terms or by operation of law would be void, voidable, terminable or revocable if mortgaged, pledged or assigned hereunder is expressly excepted and excluded from the Liens and terms of this Agreement.

“Intellectual Property Collateral” means all copyrights, all patents and patent applications (including the inventions and improvements described and claimed therein together with the reissues, divisions, continuations, renewals, extensions and continuations in-part thereof), all trade names, trademarks and service marks, logos, trademark and service mark registrations (including all renewals of trademark and service mark registrations, and all rights corresponding thereto throughout the world together, in each case, with the goodwill of the business connected with the use of, and symbolized by, each such trade name, trademark and service mark, but excluding any such registration that would be rendered invalid, abandoned, void or unenforceable by reason of its being included as part of the Collateral), all inventions, processes, production methods, proprietary information, know-how and trade secrets, all licenses or user or other agreements granted to the Debtor with respect to any of the foregoing, in each case whether now or hereafter owned or used (including the licenses or other agreements with respect to any of the foregoing), all information, customer lists, identification of suppliers, data, plans, blueprints, specifications, designs, drawings, recorded knowledge, surveys, engineering reports, test reports, manuals, materials standards, processing standards, performance standards, catalogs, computer and automatic machinery software and programs, all field repair data, sales data and other information relating to sales or service of products now or hereafter manufactured, all accounting information and all media in which or on which any information or knowledge or data or records may be recorded or stored and all computer programs used for the compilation or printout of such information, knowledge, records or data, and all causes of action, claims and warranties now or hereafter owned or acquired by the Debtor in respect of any of the items listed above.

Page 2

“LE Loan Agreement” shall mean that certain Loan Agreement dated as of June 22, 2015, among Lazarus Energy, as borrower, Lender and the “Guarantors” identified therein, as the same may be amended, restated, or otherwise modified from time to time.

“Loan” shall mean the loan (including all advances made under such loan) evidenced by the Note.

“Loan Agreement” shall mean that certain Loan Agreement dated as of even date herewith among Debtor, Lender and the “Guarantors” identified therein, as the same may be amended, restated, or otherwise modified from time to time.

“Loan Documents” shall mean the Loan Agreement, the Note and all other Loan Documents (as defined in the Loan Agreement).

“Obligations” shall mean (i) the Obligations (as defined in the Loan Agreement) including without limitation, indebtedness evidenced by that certain promissory note of even date herewith executed by Debtor payable to the order of Lender in the principal amount of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) (as the same may be amended, restated, or otherwise modified from time to time, the “Note”) and (ii) the Obligations (as defined in the LE Loan Agreement) including without limitation, indebtedness evidenced by that certain promissory note dated as of June 22, 2015, executed by Lazarus Energy payable to the order of Lender in the principal amount of TWENTY-FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00) (as the same may be amended, restated, or otherwise modified from time to time, the “LE Note”), together with any and all present or future indebtedness, liabilities, and obligations of the Debtor or Lazarus Energy to Lender of any kind and however evidenced, originally contracted with Lender or with another or others, or in which Lender may have or hereafter acquire a participating interest, direct or indirect, matured or not matured, absolute or contingent, and in any and all amendments, extensions, modifications, and renewals of any of the same. The term “Obligations” shall also include, and Debtor hereby agrees to pay, any and all attorneys’ fees, costs, and expenses incurred by Lender in the collection or enforcement of any of the Obligations and the perfection, preservation, and enforcement of its rights and remedies hereunder and its security interest in the Collateral.

Section 3

Security Interest

As collateral security for the prompt and unconditional payment and performance of the Obligations, the Debtor hereby pledges, hypothecates, assigns, collaterally assigns, charges, mortgages, delivers, and transfers to Lender, and hereby grants to Lender a lien and security interest in, all of the Debtor’s right, title, and interest in and to the Collateral. The Debtor does further grant to Lender a continuing lien and security interest upon all of the Debtor’s money and any other property and the proceeds thereof, now or hereafter actually or constructively held or received by Lender for any purpose, including but not limited to, collection, custody, pledge, and transmission. For sake of clarity and without limiting the generality of the foregoing grants, the foregoing grants include a collateral assignment of all of the Key Agreements, including without limitation, all present or future crude oil marketing agreements or similar arrangements providing for the marketing, storage, processing, purchase and sale of crude oil or other products at or with respect to the Nixon Refinery, the Storage Improvements or the Land.

Anything herein to the contrary notwithstanding: (a) the Debtor will remain liable under the contracts and agreements included in the Collateral to the extent set forth therein, and will perform all of their duties and obligations under such contracts and agreements to the same extent as if this Agreement had not been executed; (b) the exercise by Lender of any of its rights hereunder will not release Debtor from any of its duties or obligations under any such contracts or agreements included in the Collateral; and (c) Lender will not have any obligation or liability under any contracts or agreements included in the Collateral by reason of this Agreement, nor will Lender be obligated to perform any of the obligations or duties of Debtor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

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Notwithstanding anything to the contrary contained herein or any of the other Loan Documents, if at any time all or any part of any payment theretofore applied by Lender to any of the Obligations is or must be rescinded or returned by Lender for any reason whatsoever (including, without limitation, the insolvency, bankruptcy, reorganization or other similar proceeding of Debtor or any other Person), such Obligations shall, for purposes of this Agreement, to the extent that such payment is or must be rescinded or returned, be deemed to have continued to be in existence, notwithstanding any application by Lender or any termination agreement or release provided to Debtor, and this Agreement (including the grants in Section 3) shall continue to be effective or reinstated, as the case may be, as to such Obligations, all as though such application by Lender had not been made.

Section 4

Representations and Warranties

In order to induce Lender to enter into the Loan Agreement and make the Loan thereunder, Debtor represents and warrants to Lender as set forth below as of the date hereof and on each date that the Loan or any advance is disbursed pursuant to the Loan Agreement:

A. The information relating to the Debtor set forth in Section 1 of this Agreement is accurate and complete. The Debtor is duly organized, validly existing, and in good standing under the laws of each jurisdiction in which it transacts business and has the power, authority, and legal right to enter into this Agreement and to grant to Lender the security interest in the Collateral. The execution, delivery, and performance of this Agreement and any instruments or documents executed and delivered by the Debtor herewith, and the grant of the security interest in the Collateral to Lender pursuant to the terms hereof, are not in contravention of law or the terms of the Debtor’s organizational and governing documents, including but without limitation, Articles of Incorporation, Articles of Association, Partnership Agreement, Articles of Organization, By-Laws, Operating Agreement, Regulations or any indenture, contract, or agreement to which the Debtor is a party or by which it is bound. This Agreement, when executed and delivered, will constitute a legal, authorized, valid, and binding obligation of the Debtor enforceable in accordance with its terms.

B. The Debtor is the sole owner of the Collateral, free of any liens, security interests, claims, or other encumbrances of any kind except as granted herein.

C. All Equipment is in good working order.

D. There are no actions, proceedings, or investigations pending or threatened against the Debtor, and there are no judgments, federal or state tax liens or other liens, security interests (except as disclosed herein and in the Loan Documents) or encumbrances against the Debtor, or any of its assets.

E. All financial statements and other documents provided to Lender by the Debtor, or its representatives are true and correct and fairly and accurately represent the financial condition of the Debtor and if applicable, its shareholders, members, partners, managers, directors, and/or officers.

F. All Collateral is to be used, acquired, and/or held for business purposes. Additionally, the proceeds of the Loan shall be used strictly for business purposes. No lending transaction evidenced by the Note is a “consumer-goods transaction”, as that term is used or defined in the Code.

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G. All of the representations and warranties made by Debtor in the Loan Agreement or in any other Loan Document are true and correct in all respects as if such representations and warranties were incorporated herein in their entirety and made by Debtor. The representations and warranties made by Debtor in this Agreement shall survive the execution and delivery of this Agreement.

Section 5

Debtor’s Covenants

Debtor covenants and agrees that, until the date that all Obligations are indefeasibly paid in full all commitments of Lender to advance or disburse funds under the Loan Documents have terminated or expired (the “Termination Date”), Debtor shall perform, comply with and be bound by the obligations set forth below:

A. Pay and perform or cause to be paid and performed all the Obligations according to their terms;

B. Maintain business records relating to the Collateral satisfactory to Lender and, where appropriate, shall note thereon the security interest of Lender;

C. The Debtor shall keep such business records at its chief executive office and will permit Lender (and RBS at its request) access thereto at all reasonable times for the purposes of inspection, audit, examination, verification, extracting, copying, and such other purposes as Lender may require. Any such inspection, audit, examination, verification, extracting, and copying shall be at the Debtor’s expense;

D. Promptly deliver to Lender at its request such lists, schedules, invoices, receipts, original documents, and other information relating to the Collateral;

E. Promptly notify Lender of (i) any material loss or damage to the Collateral, and (ii) the occurrence of any event which could adversely affect the security interest of Lender in the Collateral;

F. Not change its name, trade style, the location of its chief executive office, its state of organization, its organizational ID number, corporate or organizational structure or where any of the Collateral is kept without the prior written consent of Lender;

G. At its own expense keep the Collateral free of all liens (except as disclosed herein and in the Loan Documents) and encumbrances except (i) the security interest of Lender, and (ii) liens arising in connection with taxes or other governmental charges or assessments which are contested in good faith by appropriate proceedings;

H. Maintain the Collateral in compliance with any applicable law, statute, ordinance, regulation or administrative order;

I. Not sell, transfer, or otherwise dispose of the Collateral or any interest therein (except sales of Inventory to buyers in the ordinary course of its business);

J. Insure the Collateral at all times against all hazards, including but not limited to, fire, windstorm, lightning, vandalism, malicious mischief, and such other hazards as identified in the Conditional Commitment, and such policies shall be payable to Lender as its interest may appear. The policies of insurance shall be satisfactory to Lender as to form and insurer. The policies of insurance shall be in an amount equal to greater of the full replacement cost of the Collateral or the outstanding principal amount of the Loan. Debtor shall furnish certificates, policies, or endorsements to Lender as proof of such insurance, and if Debtor fails to do so Lender is authorized but not required to obtain such insurance at Debtor’s expense. All policies shall provide for at least thirty (30) days prior written notice of cancellation to Lender and shall provide that coverage as to Lender will not be affected by any act or omission of Debtor. Lender may act and is hereby appointed to act as attorney-in-fact for Debtor in making, adjusting, and settling any claims under any such insurance policies (and such appointment is coupled with an interest). Debtor assigns to Lender all of its right, title, and interest in and to any insurance policies insuring the Collateral, including all rights to receive the proceeds of insurance, and directs all insurers to pay all such proceeds directly to Lender and authorizes Lender to endorse Debtor’s name on any instrument for such payment. Lender shall be named as “loss payee” on all policies of insurance regarding the Collateral. Any liability insurance policy of Debtor shall name Lender as an additional insured.

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K. At Debtor’s expense, as Lender may request, place notices upon the Collateral or such portion thereof or in or about designated areas where the Collateral may be kept or used indicating the security interest of Lender herein;

L. Be liable to Lender for any expenditures by Lender for the maintenance and preservation of the Collateral, including without limitation, taxes, levies, insurance, and repairs, attorney’s fees and expenses, accountant’s fees and expenses, and for the collection, repossession, holding, preparation, and sale or other disposition of or realization upon the Collateral. Debtor will also be liable to Lender for all damages for breach of warranty, misrepresentation, or breach of covenant by Debtor. All such liabilities shall be secured by the security interest granted herein, and shall be payable upon demand;

M. Not, without Lender’s prior written consent, (i) sell, lease, pledge, encumber (except by purchase money lien on property acquired after the date of the Note), or otherwise dispose of any of Debtor’s assets, except in the ordinary course of business (ii) purchase, lease, or otherwise acquire any assets (or commit to do so) other than current assets or assets acquired in the ordinary course of business; or (iii) declare or pay any dividends (except stock dividends), or return any capital to any of its stockholders, or redeem, repurchase, or otherwise acquire any of its outstanding capital stock; or (iv) become a party to any consolidation, merger, liquidation, or dissolution; and

N. Cooperate with Lender in obtaining a control agreement and such other documents required by Lender, in form and substance satisfactory to Lender, to establish, protect, preserve and perfect on a first priority basis an security interest in deposit accounts, investment property, letter-of-credit rights, electronic chattel paper, commercial tort claims or all other Collateral (other than Excluded Collateral).

O. Debtor shall warrant and defend the right and title herein granted unto Lender in and to the Collateral (and all right, title and interest represented by the Collateral) against the claims and demands of all Persons whomsoever. Debtor agrees that, from time to time at its own expense, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that Lender may request, in order to perfect, preserve, control and protect any security interest, Lien or other interest granted or purported to be granted hereby or to enable Lender to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Debtor agrees that, upon the acquisition after the date hereof by Debtor of any Collateral, with respect to which the security interest granted hereunder is not perfected automatically upon such acquisition, to promptly notify Lender of such acquisition and to take such actions with respect to such Collateral or any part thereof as required by the Loan Documents or requested by Lender. Without limiting the generality of the foregoing, Debtor will

1. file (and hereby authorize Lender to file) such Filing Statements or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or that Lender may request in order to perfect and preserve the security interests and other rights granted or purported to be granted to Lender hereby;

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2. deliver to Lender and at all times keep pledged to the Lender pursuant hereto, on a first-priority, perfected basis, at the request of Lender, all Investment Property constituting Collateral, all distributions with respect thereto, and all interest and principal with respect to any promissory notes, and all Proceeds and rights from time to time received by or distributable to Debtor in respect of any of the foregoing Collateral;

3. not take or omit to take any action the taking or the omission of which would result in any material impairment or alteration of any obligation of the maker of any Payment Intangible or other Instrument constituting Collateral, except as acceptable to Lender;

4. furnish to Lender, from time to time at Lender’s request, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Lender may reasonably request, all in reasonable detail; and

5. do all things reasonably requested by Lender in accordance with this Agreement in order to enable Lender to have and maintain control over the Collateral consisting of Investment Property, Deposit Accounts, Letter-of-Credit-Rights and Electronic Chattel Paper.

With respect to the foregoing and the grant of the security interest and Lien hereunder, Debtor hereby authorizes Lender to file one or more financing or continuation statements, and amendments thereto, and other similar documents necessary or desirable in the opinion of Lender with respect to or describing all or any part of the Collateral or otherwise to perfect, establish, protect or maintain the perfection of Lender’s security interest in the Collateral or any portion thereof; and to make all relevant filings with the United States Patent and Trademark Office or the United States Copyright Office in respect of the Intellectual Property Collateral. Debtor agrees that a carbon, photographic or other reproduction of this Agreement or any UCC financing statement covering the Collateral or any part thereof shall be sufficient as a UCC financing statement where permitted by Legal Requirements. Debtor hereby authorizes the Lender to file financing statements describing as the collateral covered thereby “all of the debtor’s personal property or assets” or words to that effect, notwithstanding that such wording may be broader in scope than the Collateral described in this Agreement. The authorizations contained in this clause O shall be irrevocable and continuing until the Termination Date.

Section 6

Event of Default

Any Event of Default (as defined in the Loan Agreement) shall constitute an Event of Default hereunder.

Section 7

Rights and Remedies of Lender

A. In addition to the rights and remedies granted to Lender herein, Lender shall at all times have the rights and remedies of a secured party under the Code.

B. On and after the occurrence of an Event of Default, Lender may do all or any of the following:

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1. Declare all or any part of the Obligations due and payable.

2. Enter the premises of the Debtor and take custody of or remove the Collateral, without judicial process or the responsibility to post a bond or other financial undertaking.

3. Require the Debtor to assemble the Collateral, and make it available to Lender at the Debtor’s premises or at any other location selected by Lender, where it will remain at the Debtor’s expense pending sale or other disposition. Lender may take possession of, remove, or otherwise deal with the Collateral for any purpose including putting the Collateral in saleable form.

4. Dispose of all or any part of the Collateral in such manner and upon such terms as Lender, in its sole discretion, shall determine. If notice of sale or disposition of Collateral is required, ten (10) days’ notice to the Debtor of any intended sale or other disposition of the Collateral shall be deemed to be reasonable. Lender shall have the right to purchase the Collateral.

5. Endorse any note, draft, check, or other instrument for the payment of money and any other invoice, assignment, verification, notice, or other document with respect to the Collateral, as the attorney-in-fact for the Debtor with full power of substitution.

6. Accept and receive payment of, receipt for, or settle, compromise, or adjust any claim, suit, action, or proceeding with respect to the Collateral and give discharge, release, or full or partial acquittance therefor.

7. Defend any suit, action, or proceeding against the Debtor concerning the Collateral.

C. The Debtor shall reimburse Lender for any and all costs and expenses, including but not limited to reasonable attorneys’ fees, incurred by Lender in preserving the Collateral or the security interest; enforcing, collecting, or realizing upon the Obligations or the Collateral; and performing the Debtor’s obligations hereunder, which Lender is hereby authorized to do.

D. Lender shall be under no obligation or liability to any party for the performance or observance of any of the representations, warranties, conditions, or terms of any document relating to the Collateral.

E. Lender shall be under no duty to protect the Collateral from deterioration, waste or loss by fire, theft or otherwise unless such deterioration, waste or loss be caused by the willful act of the Lender. Debtor expressly waives any duty on the part of the Lender to protect the Collateral from deterioration, waste or loss except for the willful acts of the Lender.

F. Lender may, without notice, demand, or presentment, which are hereby waived by Debtor and all other parties obligated in any manner whatsoever on the Obligations, declare the entire unpaid balance of the Obligations immediately due and payable, and upon such declaration, the entire unpaid balance of the Obligations shall be immediately due and payable. Debtor hereby waives all notices allowed by law, including without limitation, demand, presentment, notice of dishonor, protest, notice of intent to accelerate maturity and notice of acceleration in connection with this Agreement, any note or other document.

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G. Lender may seize all books and records of Debtor pertaining to the Collateral. Lender shall have the authority to enter upon any real property or improvements thereon in order to seize any such books or records, or any Collateral located thereon, and remove the same therefrom without liability.

H. Lender may apply proceeds of the disposition of Collateral to the Obligations in any manner elected by Lender and permitted by the Code. Such application may include, without limitation, the reasonable expenses of retaking, holding, preparing for sale or other disposition, and the reasonable attorneys’ fees and legal expenses incurred by Lender.

I. Lender may, under Legal Requirements, proceed to realize its benefits under any of this Agreement or the other Loan Documents giving any secured party a Lien upon any Collateral, either by judicial foreclosure or by non-judicial sale or enforcement, Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Agreement. If, in the exercise of any of its rights and remedies, Lender shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against Debtor or any other obligor or any other Person, whether because of any Legal Requirements pertaining to “election of remedies” or the like, Debtor hereby consents to such action by Lender and waives any claim based upon such action, even if such action by Lender shall result in a full or partial loss of any rights of subrogation that Debtor might otherwise have had but for such action by Lender.

J. The powers conferred on Lender hereunder are solely to protect its interest in the Collateral and shall not impose any duty on it to exercise any such powers. Except for reasonable care of any Collateral in its possession and the accounting for moneys actually received by it hereunder, Lender shall have no duty as to any Collateral or responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Investment Property, whether or not the Lender has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Lender shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral, (i) if such Collateral is accorded treatment substantially equal to that which the Lender accords its own personal property; or (ii) if it takes such action for that purpose as Debtor reasonably requests in writing at times other than upon the occurrence and during the continuance of any Event of Default, but failure of Lender to comply with any such request at any time shall not in itself be deemed a failure to exercise reasonable care.

Section 8

Miscellaneous

A. All representations and warranties made herein or in any of the Loan Documents shall be continuous.

B. Debtor agrees that from time to time, without presentment, notice or demand, and without affecting or impairing in any way the rights of Lender with respect to the Collateral, Debtor’s obligations hereunder, or the Obligations, Lender may, but shall not be obligated to, take any action which Debtor is obligated to do and to exercise such rights and powers as Debtor might exercise with respect to the Collateral.

C. For so long as any Event of Default exists, Debtor hereby irrevocably appoints Lender as its attorney-in-fact to exercise the following rights and powers: (i) collect by legal proceedings or otherwise and indorse, receive and receipt for all dividends, interest, payments, proceeds, and other sums and property now or hereafter payable on or on account of the Collateral; (ii) enter into any extension, reorganization, deposit, merger, consolidation, or other agreement pertaining to, or deposit, surrender, accept, hold, or apply other property in exchange for the Collateral; (iii) insure, process and preserve the Collateral; make, adjust and settle any claims under any insurance on the Collateral; (iv) transfer the Collateral to its own or its nominees’ name; (v) make any compromise or settlement, and take any action it deems advisable, with respect to the Collateral; (vi) notify any account debtor on any Collateral to make payment directly to Lender; and (vii) sign and file a financing statement describing any liens held by Lender in any applicable jurisdiction, on behalf of Debtor if required. Lender shall incur no liability to Debtor or any third party for acting hereunder or for failure to act hereunder.

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D. No provision hereof may be amended, modified, waived, or supplemented, except by a writing signed by the party to be charged thereby. No waiver by Lender of any Default shall be a waiver of any other Event of Default.

E. All rights and remedies of Lender shall be cumulative and may be exercised at such times and in such order as Lender determines, and no delay or omission in exercising or enforcing any such right or remedy shall be a waiver thereof or preclude the exercise or enforcement thereof at a later time.

F. This Agreement and the interests granted to Lender hereunder shall in all respects include a continuing, absolute, unconditional and irrevocable grant of security interest, and this Agreement and such interests shall remain in full force and effect until terminated in writing by Lender.

G. This Agreement shall be binding upon and shall be for the benefit of the parties hereto and their executors, heirs, successors, and assigns, as the case may be; provided that Debtor may not assign any of its obligations hereunder or under any other Loan Document without the prior written consent of Lender.

H. Except as expressly provided to the contrary herein, each section, part, term, or provision of this Agreement shall be considered severable, and if for any reason any section, part, term, or provision herein is determined to be invalid and contrary to or in conflict with any existing or future law or regulation by a court or governmental agency having valid jurisdiction, such determination shall not impair the operation of or have any other effect on other sections, parts, terms, or provisions of this Agreement as may remain otherwise intelligible, and the latter shall continue to be given full force and effect and bind the parties hereto, and said invalid sections, parts, terms, or provisions shall not be deemed to be a part of this Agreement.

I. Any notice required hereunder or under applicable law shall be in writing and shall be deemed effective if either (1) hand delivered, (2) sent by certified mail, return receipt requested, postage prepaid, or (3) sent by overnight courier. All notices sent by U.S. mail and addressed as shown in Section 1 of this Agreement shall be deemed received on the earlier of (i) the third day (excluding Sundays and legal holidays when the U.S. mail is not delivered) immediately following date of deposit in the U.S. mail or (ii) the date of actual receipt. All notices which are hand delivered or sent by overnight courier shall be deemed received on the day of delivery to the address shown in Section 1 of this Agreement.

J. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or via other electronic means shall be effective as delivery of a manually executed counterpart of this Agreement.

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K. This Agreement shalt be governed by and construed in accordance with the laws of the State of Texas, without regard to principles of conflicts of law, and venue for any action hereunder shall be in Dallas County, Texas.

L. The provisions of Section 8.16 of the Loan Agreement are hereby incorporated herein as if such provisions are set forth herein in their entirety, mutatis mutandis.

M. DEBTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR COUNTERCLAIM THAT RELATES TO OR ARISES OUT OF ANY OF THE LOAN DOCUMENTS OR THE ACTS OR FAILURE TO ACT OF OR BY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.

IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date set forth above.

DEBTOR:

Lazarus Refining & Marketing, LLC,

a Delaware limited liability company

By: Blue Dolphin Energy Company, a Delaware

corporation, its sole member

By: ______________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

LENDER:

Sovereign Bank

By: ______________________

Name: ____________________

Title: ____________________

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Sovereign Bank

17950 Preston Road, Suite 500

Dallas, TX 75252

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD TN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.

LEASEHOLD DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT,

ASSIGNMENT OF LEASES AND RENTS,

FINANCING STATEMENT AND FIXTURE FILING

STATE OF TEXAS	§
	§	KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF WILSON	§

THAT , as of the 4 th day December, 2015, Lazarus Refining & Marketing, LLC , a Delaware limited liability company (hereinafter called “Grantor”), whose mailing address is 801 Travis Street, Suite 2100, Houston, Texas 77002 in consideration of the debt and trust hereinafter mentioned, does hereby GRANT, BARGAIN, SELL, TRANSFER, ASSIGN, MORTGAGE, PLEDGE, HYPOTHECATE and CONVEY unto Robert Blount , Trustee (hereinafter called “Trustee”), in trust, with a POWER OF SALE, for the use and benefit of Holder (as defined below) all rights, titles and interests of Grantor in and to the following described property:

1. Real Property . The real estate situated in Wilson County, Texas, which is more particularly described in Exhibit “A” attached hereto and made a part hereof by reference for all purposes, together with all buildings, structures, and other improvements (such buildings, structures, and other improvements (including the Expansion Improvements) being hereinafter sometimes called the “Improvements”) now or hereafter situated thereon (such real estate, and Improvements being hereinafter sometimes called the “Land”); as well as all easements, appurtenances, tenements, hereditaments, privileges, franchises, appendages, rights-of-way, and all other rights now or hereafter appurtenant or otherwise related to the Land any portion thereof or used in connection therewith or as a means of access thereto and/or egress therefrom or which are otherwise of benefit thereto or to the users thereof; as well as all options to purchase or lease all or any portion of the Land; as well as all other real property rights and interests in the Land.

2. Fixtures and Personal Property . The following personal property of Grantor, wherever located, and now owned, or hereafter acquired or arising, including Proceeds and Supporting Obligations, which are now, or at any time hereafter are, a part of the Land; or situated in, on, or about the Land and utilized in connection therewith; or delivered to the Land or acquired for use in connection with the Land; or delivered to the Land or acquired for use or incorporation in the construction of any improvements on the Land; or for the purchase of any Goods to be used in connection with the construction, maintenance, operation or use of any improvements on the Land: Chattel Paper, including Tangible Chattel Paper and Electronic Chattel Paper; Deposit Accounts; Documents; General Intangibles, including Payment Intangibles, trademarks, trade names and symbols; Goods, including Equipment, Fixtures, and Accessions, but excluding Inventory; Instruments, including Promissory Notes; Proceeds; Records; Software; plans and specifications for improvements to be placed on the Land; all permits, licenses, franchises, certificates, and other rights and privileges obtained in connection with the Land; all contract

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rights and contracts to which Grantor is a party or with respect to any Property (including rights to enforce the same and receive payments thereunder whether for goods or services rendered); all As-Extracted Collateral and other substances which may be extracted from the Land, including without limitation, oil and gas, all Hydrocarbon Property (as defined in this Deed of Trust) including all General Intangibles, and all rights to payment arising from Hydrocarbon Property extraction or oil and gas leases, including all minerals, oil, and gas upon or after extraction and all rights to payment arising therefrom, including but not limited to, royalties, rentals, and other rights to payment from sale of extracted and nonextracted minerals, oil and gas: and all renewals, replacements, and substitutions thereof and additions thereto (all property described or referred to in this paragraph is sometimes called “Accessories”). Any capitalized term not otherwise defined herein shall have the meaning accorded thereto in the Uniform Commercial Code, as now enacted and hereinafter amended in the State of Texas.

3. Other Property . (a) All rights, titles, interests and estates now owned or hereafter acquired by Grantor in and to the oil and gas leases and/or oil, gas and other mineral leases, all wellbore interests and other interests and estates and the lands and premises covered or affected thereby (collectively called the “Hydrocarbon Property”); (b) all other interest of every kind and character which Grantor now has or at any time hereafter acquires in and to the property described or referred to in paragraphs 1 and 2 preceding, including but not limited to proceeds from the condemnation or threatened condemnation of the Land and the proceeds of any and all insurance covering the Land, and all property which is used in connection with the operation of the Land and Accessories; (c) all deposits or other security or advance payments, including, without limitation, rental and premium payments made by or on behalf of Grantor to others with respect to (i) insurance policies relating to all or any part of the properties encumbered by this Deed of Trust, (ii) utility service for all or any part thereof, (iii) cleaning, maintenance, repair, or similar services for all or any part of the properties encumbered by this Deed of Trust, (iv) refuse removal or sewer service for all or any part of the properties encumbered by this Deed of Trust, (v) rental of equipment, if any, used in the operation by or on behalf of Grantor of all or any part of the properties encumbered by this Deed of Trust, and (vi) parking or similar services or rights afforded to all or any part of the properties encumbered by this Deed of Trust; and (d) all permits, certificates, licenses, approvals and authorizations related to the Property (as defined below) or any portion thereof or used in connection therewith (except to the extent that the granting hereunder of Grantor’s right, title and interest in any such permit, approval or authorization would violate the terms thereof or of any Legal Requirement or would cause such permit, approval or authorization to become void or voidable); and

4. Leasehold Estates . All rights, titles and interests of Grantor under the Ground Lease (as defined in the Loan Agreement). Additionally, in the event the estate of the Grantor in and to any portion of the Property is a leasehold estate, this conveyance shall include, and the lien, security interest, and assignment created hereby shall encumber and extend to all other further or additional title, estates, interest, or rights which may exist now or at any time be acquired by Grantor in or to the Property demised under the lease creating such leasehold estate (including the Ground Lease) and including Grantor’s rights, if any, to the Property demised under such lease and, if fee simple title to any of such Property shall ever become vested in the Grantor such fee simple interest shall be encumbered by this Deed of Trust in the same manner as if Grantor had fee simple title to said Property as of the date of execution hereof;

All properties, rights, and interests described or referred to in the preceding paragraphs 1, 2, 3 and 4 are sometimes referred to collectively as the “Property”.

TO HAVE AND TO HOLD the above-described Property, together with all improvements thereon and all the rights, hereditaments, and appurtenances in anywise appertaining or belonging thereto, unto Trustee, and his successors or substitutes in this trust, and his and their assigns, against the claim or claims of all persons claiming or to claim the same or any part thereof, forever to secure the payment of the Obligations (as defined below) and to secure the performance of the obligations of Grantor herein contained. The Property is to remain so specially mortgaged, affected and hypothecated unto and in favor of Trustee for the benefit of Holder to secure payment of the Obligation (and the performance of the obligations of Grantor herein contained) until full and final payment or discharge of the Obligation and the termination of all commitments of Holder under the Loan Documents.

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Grantor, for Grantor and Grantor’s successors, hereby agrees to warrant and forever defend, all and singular, the Property unto Trustee, and his successors or substitutes in this trust, and Holder, and his and their assigns and successors, in trust and for the uses and purposes hereinafter set forth, forever.

Grantor hereby grants to Holder and its successors and assigns, a security interest in the Property, and each and every part thereof, and in all proceeds from the sale, lease, or other disposition thereof and in all sums, proceeds, funds, and reserves described or referred to in Section 5.7, 5.8, and 5.9 hereof. The security interest created hereby is specifically intended to cover and include all Leases (as such term is defined in Section 4.1 hereof), together with all the right, title, and interest of Grantor, as lessor thereunder, including, without limiting the generality of the foregoing, the present, and continuing right to make claim for, collect, receive, and receipt for any and all of the rents, income, revenues, issues, and profits and monies payable as damages or in lieu of rent and monies payable as the purchase price of the Property or any part thereof or of awards or claims for money and other sums of money payable or receivable thereunder howsoever payable, and to bring actions and proceedings thereunder or for the enforcement thereof, and to do any and all things which Grantor or any lessor is or may become entitled to do under the Leases, provided, that this provision shall neither impair nor diminish any obligation of Grantor under the Leases, nor shall any obligation be imposed upon Holder.

ARTICLE I.

The Obligation

Section 1.1 Holder and Obligation . This Deed of Trust (for sake of clarity, as used herein, the expression “this Deed of Trust” shall mean this Deed of Trust, Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing) and all rights, title, interest, liens, security interest, powers, and privileges created hereto or arising by virtue hereof, are given to secure payment and performance of the following indebtedness, obligations, and liabilities: (a) the Indebtedness (i) evidenced by that certain promissory note of even date herewith (the “Note”) executed by Grantor, payable to the order of Sovereign Bank (“Holder”) whose mailing address for payments is 17950 Preston Road, Suite 500, Dallas, TX 75252, in the principal amount of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) bearing interest as therein specified, containing an attorney’s fee clause, interest and principal being payable as therein specified, and finally maturing nineteen (19) years from the date of the Note and (ii) arising under the Loan Agreement dated as of the date hereof among Lazarus Refining & Marketing, LLC, as borrower, Holder, and the Guarantors parties thereto (the “Loan Agreement”); (b) all indebtedness, obligations, and liabilities arising pursuant to the provisions of this Deed of Trust, the Note, any Guaranty, the Loan Agreement (as defined in the Note and used herein with the same meaning) or such other documents evidencing, securing or pertaining to the indebtedness referred to in subsection (a) of this Section 1.1, as shall from time to time be executed and delivered to Holder by Grantor, any guarantor or any other party, and any other Loan Document (as

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defined in the Loan Agreement and used herein with the same meaning); (c) all other and any additional debts, obligations, and liabilities of every kind and character of Grantor whether now or hereafter existing in favor of Holder, regardless of whether such debts, obligations, and liabilities be direct or indirect, primary, secondary, joint, several, joint and several, fixed, or contingent, including, without limitation, all “Obligations” defined in the Loan Agreement dated as of June 22, 2015, among Grantor, as borrower, Holder and the Guarantors parties thereto (the “LE Loan Agreement”) and all amounts evidenced or owing under the Promissory Note dated June 22, 2015, made by Lazarus Energy payable to the order of Holder and executed and delivered in connection with the LE Loan Agreement; (d) any sums advanced or expenses or costs incurred by the Trustee or Holder (or any receiver appointed hereunder) that are made or incurred pursuant to, or permitted by, the terms hereof, plus interest thereon at the rate herein specified or otherwise agreed upon, from the date of the advances or the incurring of such expenses or costs until reimbursed; and (e) any and all renewals, modifications, rearrangements, continuations, restructuring, amendments, or extensions of all or any part of the indebtedness, obligations, and liabilities described or referred to in Subsections 1.1(a), 1.1(b), 1.1(c) and 1.1(d) preceding. The word “Obligation” or “Obligations”, as used herein, shall mean all of the indebtedness, obligations, and liabilities described or referred to in Subsections 1.1(a), 1.1(b), 1.1(c) and 1.1(d) preceding and as described and referred to in this subsection 1.1(e). The word “Holder”, as used herein, shall mean the Holder named in Subsection 1.1(a) above and all subsequent Holders of the Obligation at the time in question.

Section 1.2 Obligation; Future Advances . This Deed of Trust is given by Grantor to secure the Obligations, including indebtedness in the principal amount outstanding from time to time under the Loan Agreement, the Note and the Loan Documents. Grantor, Trustee, and Holder expressly intend that this Deed of Trust secure, and this Deed of Trust shall secure, a line of credit and other additional amounts advanced, from time to time, or other sums that may be advanced or otherwise become due to Trustee and/or Holder under the Loan Agreement, this Deed of Trust or any other Loan Document, or any extension, renewal or modification thereof, including, without limitation, loans made on demand, term or revolving credit basis.

ARTICLE II.

Certain Representations; Warranties, and Covenants of Grantor

Section 2.1 Warranties and Representations . Grantor represents, warrants, and undertakes that (a) Grantor has full right and authority to execute and deliver this Deed of Trust; (b) unless specifically provided herein to the contrary, Grantor has in its own right good and indefeasible title in fee simple to the Property free from any encumbrance superior to the indebtedness hereby secured; and (c) the representations and warranties set forth in Article 6 of the Loan Agreement are true and correct as if set forth herein in their entirety, mutatis mutandis.

Section 2.2 Covenants . Grantor and Grantor’s successors and permitted assigns hereunder, covenants, agrees, and undertakes to: (a) pay, or cause to be paid, before delinquent, all taxes and assessments of every kind or character in respect to the Property, or any part thereof, and from time to time, upon request of Holder, to furnish to Holder evidence satisfactory to Holder of the timely payment of such taxes and assessments and governmental charges; (b) purchase policies of insurance with respect to the Property with such insurers, in such amounts and covering such risks as shall be satisfactory to Holder, including, but not limited to, (1) owner’s and contractors’ policies of comprehensive general public liability insurance; (2) hazard insurance against all risks of loss, including collapse, in an amount not less than the full replacement cost of all Improvements, including the cost of debris removal, with annual agreed amount endorsement and sufficient at all times to prevent Grantor from becoming a co-insurer, such insurance prior to completion of the Improvements to be in builder’s risk form on a non-reporting basis and including coverage for all materials and equipment, wherever located, intended to be installed in or utilized in the construction of the Improvements; (3) if the Property is in a “Flood Hazard Area”, a flood insurance policy, or binder therefor, in an amount equal to the principal amount of the Note or the maximum amount available under the Flood Disaster Protection Act of 1973, and regulations issued pursuant thereto, as amended from time to time, whichever is less, in form complying with the “insurance purchase requirements” of that act; (4) such policies of mortgagee’s title insurance insuring the validity and priority of this Deed of Trust and any future renewals or extensions of this Deed of Trust, including any such mortgagee’s title insurance which the Holder may require during the term of the Obligation to supplement or replace any mortgagee’s title policy earlier provided to Holder insuring the validity and priority of this Deed of Trust; and (5) such other insurance, if any, as Holder may reasonably require from time to time, or which is required by the Loan Documents (including the insurance described in Exhibit E to the Loan Agreement); (c) cause all insurance carried in accordance with Section 2.2(b) to be payable to Holder as a mortgagee, to deliver the original policies of insurance carried by

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each Lessee (as that term is hereinafter defined) for the benefit of Grantor, and to cause all such policies to be payable to Holder as its interest may appear; (d) pay, or cause to be paid, all premiums for such insurance when due, furnish to Holder satisfactory proof of the timeliness of such payments and deliver all renewal policies to Holder at least ten (10) days before the expiration date of each expiring policy; (e) comply with all federal, state, or municipal laws, rules, ordinances, and regulations applicable to the Property and its ownership, use and operation, including but not limited to maintenance of the Property in compliance with the Americans with Disabilities Act of 1990, and comply with all, and not violate any, easements, restrictions, agreements, covenants, and conditions with respect to or affecting the Property or any part thereof; (f) at all times maintain, preserve, and keep the Property in good repair, condition, and appearance, and from time to time make all necessary and proper repairs, replacements, and renewals, and not commit or permit any waste on or of the Property, and not do anything to the Property that may impair its value; (g) with the exception of those unpaid liens and bills that will be paid at the closing of the loan evidenced by the Note, promptly pay all bills for labor and materials incurred in connection with the Property and never permit to be created or to exist in respect to the Property or any part thereof any lien or security interest even though inferior to the liens and security interest hereof for any such bill, and in any event never permit to be created or exist in respect to the Property or any part thereof any other or additional lien or security interest on a parity with or superior to any of the liens or security interest hereof; (h) at any time, and from time to time, upon request of Holder, forthwith, execute and deliver to Holder any and all additional instruments and further assurances, and do all other acts and things, as may be reasonably necessary or proper, in Holder’s reasonable opinion, to effect the intent of these presents, more fully evidence, grant, preserve, protect and perfect the rights, titles, liens, and security interests herein created or intended to be created and to protect the rights, remedies, powers, and privileges of Holder hereunder; (i) from time to time, upon request of Holder, promptly furnish to Holder financial statements and reports and appraisals relating to the Grantor and the Property as required in the Loan Documents; (j) continuously maintain Grantor’s existence and its right to do business in Texas; (k) pay and perform all of the Obligation in accordance with the terms thereof or of this Deed of Trust; (l) at any time any law shall be enacted imposing or authorizing the imposition of any tax upon this Deed of Trust, or upon any rights, titles, liens, or security interests created hereby, or upon the Obligation, or any part thereof, timely pay all such taxes; provided that, in the alternative, Grantor may, in the event of the enactment of such a law, and must, if it is unlawful for Grantor to pay such taxes, prepay the Obligation in full within sixty (60) days after demand therefor by Holder; (m) at any time and from time to time, furnish promptly upon request of Holder a written statement or affidavit, in such form as shall be reasonably satisfactory to Holder, stating the unpaid balance of the Obligation and that there are no offsets or defenses against full payment of the Obligation and the terms hereof, or, if there are any such offsets or defenses, specifying them; (n) punctually and properly perform all of Grantor’s covenants, duties, and liabilities under any other security agreement, mortgage, deed of trust, collateral pledge agreement, contract, or assignment of any kind now or hereafter existing as security for or in connection with payment of the Obligation, or any part thereof (each such security agreement being herein called “other security instrument”); (o) allow Holder from time to time to inspect the Property and all records relating thereto or to the Obligation, and to make and take away copies of such records; (p) not cause or permit the Accessories, or any part thereof, to be removed from the county and

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state where the Land is located, except items of the Accessories which have become obsolete or worn beyond practical use and which have been replaced by adequate substitutes having a value equal to or greater than the replaced items when new; (q) not, without the prior written consent of Holder, sell, trade, transfer, assign, or exchange or otherwise dispose of (or suffer or permit any of the same to occur with respect to) (1) any equity interests of Grantor or any person in direct or indirect control of Grantor and (r) pay, or cause to be paid, any and all reasonable attorneys’ fees, filing fees and expenses incurred by Holder for the preparation and recordation of any and all legal instruments which the Holder may require at the time of the creation of this Obligation (including this Deed of Trust and/or any and all other instruments which Lender may require in connection herewith) or which Holder may require during the term of the Obligation.

Section 2.3 Sale or Mortgage of the Property . Except as expressly permitted by Section 5.8 or 5.13 of the Loan Agreement, and except for the lien and security interest created by this Mortgage and the other Liens permitted under the Loan Documents, Grantor will not sell, convey, mortgage, pledge, or otherwise dispose of or encumber the Property nor any portion thereof, nor any of Grantor’s right, title or interest therein, without first securing the written consent of Holder.

Section 2.4 Hazardous Waste Warranty and Representation of Grantor . Grantor represents and warrants that, with the exception of the matters revealed by the Phase I and Phase II environment assessments delivered pursuant to Section 3.1 of the Loan Agreement, the following statements are true:

(1) No industrial activities that could have resulted in environmental contamination of the Property have occurred on the Property to Grantor’s knowledge, including without limitation, storage, treatment or disposal of hazardous substances;

(2) no report, analysis, study or other document identifies any harmful or friable asbestos or hazardous contaminants on the Property to Grantor’s knowledge; and

(3) the Property contains no harmful or friable asbestos, hazardous wastes or other hazardous substances to Grantor’s knowledge.

At its sole cost and expense Grantor shall comply with all federal, state and local laws, regulations and orders with respect to the discharge and removal of hazardous or toxic substances, pay immediately when due the cost of removal of any such substances, and keep the Property free of any lien imposed pursuant to such laws, regulation and orders. In addition, Grantor shall not install or permit to be installed in the Property any friable asbestos or any substance containing asbestos and deemed hazardous by applicable federal, state and local laws, regulations and orders. In addition to the remedies set forth elsewhere in the Deed of Trust or other collateral documents concerning the Obligation herein secured as to default by Grantor, Holder may cause the Property to be freed from the hazardous wastes, contaminants or asbestos, and in such event, the cost of the removal shall be secured by this Deed of Trust, shall be payable by Grantor on demand and shall bear interest at the default interest rate provided in the Note from the date advanced until paid. Grantor shall give to Holder and its agents and employees access to the Property for such purpose, and hereby grants to Holder a license to remove the hazardous wastes, contaminants or asbestos from the Property. Grantor shall indemnify, defend and hold Holder harmless from and against any and all liability, loss or damage (including, without limitation, reasonable attorneys’ fees and costs incurred in the investigation, defense and settlement of claims) that Holder may incur as a result of or in connection with the assertion against Grantor of any claim relating to the presence or removal of any hazardous wastes, contaminants or asbestos from the Property, or relating to compliance with any applicable federal, state or local laws, regulations or orders relating thereto.

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Grantor warrants and represents that to Grantor’s actual knowledge there are no toxic wastes or hazardous substances in the building materials used to construct the improvements located on the Property, and that Grantor shall indemnify and hold Holder and Trustee harmless from any and all claims, costs or expenses (including defense costs and reasonable attorneys’ fees) arising out of, relating to or in any manner connected with the breach of any such warranty or representation. Further, Grantor shall indemnify and hold Holder and Trustee harmless from any and all claims, costs or expenses (including defense costs and reasonable attorneys’ fees) arising out of, relating to, or in any manner connected with any toxic wastes, brought onto or made on the Property by Grantor, its agents, employees, invitees, partners, or tenants, their agents, employees or invitees. Grantor agrees that any violation of Grantor’s warranties in this paragraph will entitle Holder to specific performance or any other remedy available at law and parties agree that any applicable statute of limitations is hereby tolled from date of execution hereof until Holder has actual knowledge of any such violation of warranty.

ARTICLE III.

Respecting Defaults and Remedies of Holder

Section 3.1 Default . The term “default”, as used herein, shall mean the occurrence of any Event of Default (as defined in the Loan Agreement).

Section 3.2 Holder’s Remedies Upon Default . Upon a default, Holder may, at its option, do any one or more of the following:

(a) If Grantor has failed to keep or perform any covenant whatsoever contained in this Deed of Trust, Holder may, but shall not be obligated to any person to do so, perform or attempt to perform said covenant, and any payment made or expense incurred in the performance or attempted performance of any such covenant shall be a part of the Obligation, and Grantor promises, upon demand, to pay to Holder, at the place where the Note is payable, or at such other place as Holder may direct by written notice, all sums so advanced or paid by Holder, with interest from the date when paid or incurred by Holder at the rate provided in the Note. No such payment by Holder shall constitute a waiver of any default. In addition to the liens and security interest hereof, Holder shall be subrogated to all rights, titles, liens, and security interest securing the payment of any debt, claim, tax, or assessment for the payment of which Holder may make an advance, or which Holder may pay.

(b) Unless otherwise modified herein, Holder may, without notice, demand, or presentment, which are hereby waived by Grantor and all other parties obligated in any manner whatsoever on the Obligation, declare the entire unpaid balance of the Obligation immediately due and payable, and upon such declaration, the entire unpaid balance of the Obligation shall be immediately due and payable. Grantor hereby waives all notices allowed by law, including without limitation, demand, presentment, notice of dishonor, protest, notice of intent to accelerate maturity and notice of acceleration.

(c) Holder may request Trustee to, and Trustee at Holder’s direction may, proceed with foreclosure, and in such event Trustee is hereby authorized and empowered, and it shall be his special duty, upon such request of Holder, to sell the Property, or any part thereof, to the highest bidder or bidders for cash, at the courthouse door of the county in the State of Texas wherein such Land or any part thereof then subject to the lien hereof is situated; provided that if such Land is situated in more than one county such sale of the Property, or part thereof, may be made in any county in the State of Texas wherein any part of the Land then subject to the lien hereof is situated. Any such sale shall be made at a public auction, between the hours of ten o’clock a.m. and four o’clock p.m. on the first Tuesday in any month, after a written or printed notice has been posted at the courthouse door in the county, or if more than one, then in each of the counties, wherein the Land subject to the lien hereof is situated, which notice shall designate the county where the Property, or any part thereof, will be sold, and which notice shall be posted at least twenty-one (21) days prior to the date of the sale. If then required by applicable law of the State of Texas, notice of the proposed sale shall be given also by filing, at least twenty-one (21) days before the date of the sale, a copy of such notice in the office of the county clerk of the county, or if more than one, then of each of the counties, wherein the Land to be sold is situated, which notice shall designate the county in which the sale is to be made.

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At least twenty-one (21) days preceding the date of sale, Holder shall serve written notice of the proposed sale by certified mail on each debtor obligated to pay the Obligation according to the records of the Holder. Service of such notice shall be completed upon deposit of the notice, enclosed in a postpaid wrapper, properly addressed to such debtor at the most recent address as shown by the records of the Holder, in a post office or official depository under the care and custody of the United States Postal Service. The affidavit of any person having knowledge of the facts to the effect that such service was completed shall be prima facie evidence of the fact of service. After such sale, Trustee shall make good and sufficient deeds and assignments to the purchaser or purchasers thereunder in the name of Grantor, conveying the Property, or any part thereof, so sold to the purchaser or purchasers with general warranty of title by Grantor. Sale of a part of the Property shall not exhaust the power of sale, but sales may be made from time to time until the Obligation is paid and performed in full. It shall not be necessary to have present or to exhibit at any such sale any of the Accessories, In addition to the rights and powers of sale granted under the preceding provisions of this Subsection 3.2(c), if default is made in the payment of any installment of the Obligation. Holder may, at its option, at once or at any time thereafter while any matured installment remains unpaid, without declaring the entire Obligation to be due and payable, orally or in writing direct Trustee to enforce this trust and to sell the Property subject to such matured indebtedness and the liens and security interest securing its payment, in the same manner, all as provided in the preceding provisions of this Subsection 3.2(c). After such sale, Trustee shall make due conveyance to the purchaser or purchasers. Sales made without maturing the Obligation may be made hereunder whenever there is a default in the payment of any installment of the Obligation, without exhausting the power of sale granted hereby, and without affecting in any way the power of sale granted under this Subsection 3.2(c), the unmatured balance of the Obligation (except as to any proceeds of any sale which Holder may apply as prepayment of the Obligation) or the liens and security interests securing payment of the Obligation. It is intended by each of the foregoing provisions of this Subsection 3.2(c) that Trustee may, after any request or direction by Holder, sell, not only the Land but also the Accessories and other interests constituting a part of the Property, or any part thereof, along with the Land, or any part thereof, as a unit and as a part of a single sale, or may sell any part of the Property separately from the remainder of the Property. It is agreed that, in any deed or deeds given by Trustee, any and all statements of fact or other recitals therein made as to the identity of Holder, or as to the occurrence or existence of any default, or as to the acceleration of the maturity of the Obligation, or as to the request to sell, notice of sale, time, place, terms, and manner of sale, and receipt, distribution, and application of the money realized therefrom, or as to the due and proper appointment of a substitute trustee, and without being limited by the foregoing, as to any other act or thing having been duly done by Holder or by Trustee, shall be taken by all courts of law and equity as prima facie evidence that the said statements or recitals state facts and are without further question to be so accepted, and Grantor does hereby ratify and confirm any and all acts that Trustee may lawfully do in the premises by virtue hereof. In the event of the resignation or death of Trustee, or his removal from his county of residence stated on the first page hereof, or his failure, refusal, or inability, for any reason, to make any such sale or to perform any of the trusts herein declared, or, at the option of Holder, with or without cause, then Holder may appoint, in writing, but without the necessity of recordation, notice or any other formality, a substitute trustee, who shall thereupon succeed to all the estates, titles, rights, powers, and trusts herein granted to and vested in Trustee. In the event of the resignation or death of any such substitute trustee, or his failure, refusal, or inability to make any such sale or perform such trusts, or, at the option of Holder, without cause, successive substitute trustees may thereafter, from time to time, be appointed in the same manner. Wherever herein the word “Trustee” is used, the same shall mean the person who is the duly appointed trustee or substitute trustee hereunder at the time in question.

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(d) Holder may, or Trustee may upon written request of Holder, proceed by suit or suits, at law or in equity, to enforce the payment and performance of the Obligation in accordance with the terms hereof and of the Note or other instruments evidencing it, to foreclose the liens, security interest and this Deed of Trust as against all or any part of the Property, and to have all or any part of the Property sold under the judgment or decree of a court of competent jurisdiction.

(e) Holder, as a matter of right and without regard to the sufficiency of the security, and without any showing of insolvency, fraud, or mismanagement on the part of Grantor, and without the necessity of filing any judicial or other proceeding other than the proceeding for appointment of a receiver, shall be entitled to the appointment of a receiver or receivers of the Property, or any part thereof, and of the income, rents, issues, and profits thereof.

(f) Holder may enter upon the Land, take possession of the property and remove the Accessories, or any part thereof, with or without judicial process, and, in connection therewith, without any responsibility or liability on the part of Holder (excluding gross negligence and willful misconduct of Holder), take possession of any property located on or in the Property which is not a part of the Property and hold or store such property at Grantor’s expense.

(g) Holder may require Grantor to assemble the Accessories, or any part thereof, and make them available to Holder at a place to be designated by Holder which is reasonably convenient to Grantor and Holder.

(h) After notification, if any, hereafter provided in this Subsection 3.2(h), Holder may sell, lease, or otherwise dispose of, at the office of Holder, or on the Land, or elsewhere, as chosen by Holder, all or any part of the Accessories, in their then condition, or following any commercially reasonable preparation or processing, and each Sale (as used in this Subsection, the term “Sale” means any such sale, lease, or other disposition made pursuant to this Subsection 3.2(h)) may be as a unit or in parcels, by public or private proceedings, and by way of one or more contracts, and at any Sale, it shall not be necessary to exhibit the Accessories, or part thereof, being sold. The Sale of any part of the Accessories shall not exhaust Holder’s power of Sale, but Sales may be made from time to time until the Obligation is paid and performed in full. Reasonable notification of the time and place of any public Sale pursuant to this Subsection 3.2(h), or reasonable notification of the time after which any private Sale is to made pursuant to this Subsection 3.2(h), shall be sent to Grantor and to any other person entitled under the Texas Business and Commerce Code (“Code”) to notice; provided that if the Accessories or part thereof being sold are perishable, or threaten to decline rapidly in value, or are of a type customarily sold on a recognized market, Holder may sell, lease, or otherwise dispose of the Accessories, or part thereof, without notification, advertisement, or other notice of any kind. It is agreed that notice sent or given not less than ten (10) calendar days prior to the taking of the action to which the notice relates is reasonable notification and notice for the purposes of this Subsection 3.2(h).

(i) Holder may surrender the insurance policies maintained pursuant to Subsection 2.2(b) hereof, or any part thereof, and receive and apply the unearned premiums as a credit on the Obligation, and in connection therewith, Grantor hereby appoints Holder as the agent and attorney-in-fact for Grantor to collect such premiums.

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(j) Holder may retain the Accessories in satisfaction of the Obligation whenever the circumstances are such that Holder is entitled to do so under the Code.

(k) Holder may buy the Property, or any part thereof, at any public or judicial sale.

(l) Holder may buy the Accessories, or any part thereof, at any private sale if the Accessories, or part thereof, being sold are a type customarily sold in a recognized market or are a type which is the subject of widely distributed standard price quotations.

(m) Holder shall have and may exercise any and all other rights and remedies which Holder may have at law or in equity, or by virtue of any other security instrument, or under the Code, or otherwise.

(n) Holder may apply the reserves, if any, required by Section 5.9 hereof, toward payment of the Obligation.

Section 3.3 Holder as Purchaser . If Holder is the purchaser of the Property, or any part thereof, at any sale thereof, whether such sale be under the power of sale hereinabove vested in Trustee, or upon any other foreclosure of the liens and security interest hereof, or otherwise, Holder shall, upon any such purchase, acquire good title to the Property so purchased, free of the liens and security interest of these presents.

Section 3.4 Other Rights of Holder . Should any part of the Property come into the possession of Holder, whether before or after default, Holder may use or operate the Property for the purpose of preserving it or its value, pursuant to the order of a court of appropriate jurisdiction, or in accordance with any other rights held by Holder in respect to the Property. Grantor covenants to promptly reimburse and pay to Holder, at the place where the Note is payable, the amount of all reasonable expenses (including the cost of any insurance, taxes, or other charges), incurred by Holder in connection with its custody, preservation, use, or operation of the Property, together with interest thereon from the date incurred by Holder at the rate provided in the Note, and all such expenses, costs, taxes, interest, and other charges shall be a part of the Obligation. It is agreed, however, that the risk of loss or damage to the Property is on Grantor, and Holder shall have no liability whatsoever for decline in value of the Property, or for failure to obtain or maintain insurance, or for failure to determine whether insurance in force is adequate as to amount or as to the risks insured.

Section 3.5 Possession After Foreclosure . In case the liens or security interest hereof shall be foreclosed by Trustee’s sale or by judicial action, the purchaser at any such sale shall receive, as an incident to his ownership, immediate possession of the property purchased, and if Grantor or Grantor’s successors shall hold possession of said Property, or any part thereof, subsequent to foreclosure, Grantor and Grantor’s successors shall be considered as tenants at sufferance of the purchaser at foreclosure sale, and anyone occupying the Property after demand is made for possession thereof shall be guilty of forcible detainer and shall be subject to eviction and removal, forcible or otherwise, with or without process of law, and all damages by reason thereof are hereby expressly waived.

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Section 3.6 Application of Sales Proceeds Upon Foreclosure . The proceeds from any sale, lease, or other disposition made pursuant to this Article III, or the proceeds from surrendering any insurance policies pursuant to Subsection 3.2(i) hereof, or any rental collected by Holder pursuant to Article IV hereof, or the reserves required by Section 5.9 hereof, or sums received pursuant to Section 5.7 hereof, or proceeds from insurance which Holder elects to apply to the Obligation pursuant to Section 5.8 hereof, shall be applied by Trustee, or by Holder, as the case may be, as follows: First, to the payment of all reasonable expenses of advertising, preserving, selling, and conveying the Property, or part thereof, including reasonable attorney’s fees, and including a reasonable commission to Trustee not to exceed five percent (5%) of the proceeds of the sale; second, to interest on the Obligation; third, to principal on the matured portion of the Obligation; fourth, to prepayment of the unmatured portion, if any, of the Obligation applied to installments of principal in inverse order of maturity; and fifth, the balance, if any, remaining after the full and final payment and performance of the Obligation, to the person or persons legally entitled thereto.

Section 3.7 Abandonment of Sale . In the event a foreclosure hereunder should be commenced by Trustee in accordance with Subsection 3.2(c) hereof, Holder may at any time before the sale, direct Trustee to abandon the sale, and may then institute suit for the collection of the Note, and for the foreclosure of the liens and security interest hereof. If Holder should institute a suit for the collection of the Note, and for a foreclosure of the liens and security interest hereof, it may at any time before the entry of a final judgment in said suit dismiss the same, and require Trustee to sell the Property, or any part thereof, in accordance with the provisions of this Deed of Trust.

ARTICLE IV.

Assignment of Leases and Rentals

Section 4.1 Definitions . As used in this Deed of Trust: (a) “Lease” means any lease, sublease, or other agreement under the terms of which any Person has or acquires any right to occupy or use or receive products or property or services (including tank and other storage services) from any part of the Property or is otherwise obligated to pay to Grantor in exchange for goods or services from or with respect to the Property, or any part thereof, or any interest therein, including all extended or renewal terms thereof and all modifications or amendments thereto and replacements therefor (including, without limitation, the GEL Transaction Documents (as defined in the LE Loan Agreement and used herein with the same meaning); (b) “Lessee” means the lessee, sublessee, tenant, counterparty, customer, purchaser, or other person having the right to occupy or use or receive a part of the Property or other benefits relating to the Property under a Lease; and (c) “Rental” means the rents, royalties, and other consideration payable to Grantor by the Lessee under the terms of a Lease (including, without limitation, the right to receive payments under the GEL Transaction Documents). All capitalized terms used herein and not defined herein shall, unless the context otherwise requires, have the meanings given such terms in the Loan Agreement.

Section 4.2 Assignment of Leases and Rentals . Grantor hereby absolutely and not only as collateral assigns to Holder all of Grantor’s right, title and interest in and to the Leases and Rentals together with (i) all rights, remedies, benefits and advantages to be derived therefrom; (ii) all of the right, power and authority of Grantor to alter, modify or change the terms of the Leases, or to surrender, cancel or terminate the same; and (iii) all Rental payable under each Lease now or at any time hereafter existing, such assignment being upon the following terms: (a) until receipt from Holder of notice of the occurrence of a default, each Lessee may pay Rental directly to Grantor as licensee of Holder, but Grantor covenants that any Rental received by Grantor after receipt of such notice shall be held by Grantor in trust for the use and benefit of Holder and paid to Holder immediately upon request therefor; (b) upon receipt from Holder of notice that a default exists, or at any other time in the sole discretion of Holder that notice is given to a Lessee, each Lessee is hereby authorized and directed to pay directly to Holder all Rental thereafter accruing, and a receipt for such payment from Holder shall be a release of such Lessee to the extent of all amounts so paid; (c) Rental so received by Holder shall be applied by Holder, first, to the expenses, if any, of collection and then in accordance with Section 3.6; (d) without impairing its rights hereunder. Holder may, at its option, at any

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time and from time to time, release to Grantor Rental so received by Holder, or any part thereof; (e) Holder shall not be liable for its failure to collect, or its failure to exercise diligence in the collection of Rental, but shall be accountable only for Rental that it shall actually receive; (f) this assignment shall terminate upon the release of this Deed of Trust but no Lessee shall he required to take notice of termination until a copy of such release shall have been delivered to such Lessee. As between Holder and Grantor, and any person claiming through or under Grantor, other than a Lessee who has not received notice of default pursuant to Section 4.2(b), the assignment contained in this Section 4.2 is intended to be absolute, unconditional, and presently effective and the provisions of Subsection 4.2(a) and 4.2(b) are intended solely for the benefit of each Lessee and shall never inure to the benefit of Grantor or any person claiming through or under Grantor, other than a Lessee who has not received such notice. It shall never be necessary for Holder to institute legal proceedings of any kind whatsoever to enforce the provisions of this Section 4.2. Notwithstanding anything to the contrary contained herein, Holder is entitled to all the rights and remedies of an assignee set forth in Chapter 64 of the Texas Property Code, the Texas Assignment of Rents Act (" TARA "). The assignment of Leases and Rentals provided in this Deed of Trust shall constitute and serve as a security instrument under TARA. Holder shall have the ability to exercise its rights related to the Leases and Rentals, in Holder’s sole discretion and without prejudice to any other remedy available, as provided in this Deed of Trust or any other Security Document or as otherwise allowed by Legal Requirements, including, without limitation, TARA. Notwithstanding anything to the contrary contained in this Deed of Trust or the other Security Documents, to the extent this Deed of Trust or any of the other Security Documents contain any notice or cure period, the date enforcement of Beneficiary's rights under TARA begins shall not be affected, extended or otherwise modified by reason of such periods.

Section 4.3 No Subordination . Nothing in this Article IV shall ever be construed as subordinating this Deed of Trust to any Lease; provided, however, that any proceedings by Holder to foreclose this Deed of Trust, or any action by way of its entry into possession after default, shall not operate to terminate any Lease which has been approved by Holder, and Holder will not cause any Lessee under any such approved Lease to be disturbed in his possession and enjoyment of the leased premises so long as such Lessee shall continue to fully and promptly perform all of the terms, covenants, and provisions of its Lease.

Section 4.4 Grantor’s Obligations . Grantor shall: (a) upon demand by Holder, assign to Holder, by separate instrument in form and substance satisfactory to Holder, any or all Leases, or the Rental payable thereunder, including but not limited to, any Lease which is now in existence or which may be executed after the date hereof; (b) neither accept from any Lessee, nor permit any Lessee to pay, Rental for more than one month in advance not including a customary security deposit; (c) comply, as lessor, with the terms and provisions of each Lease; (d) not waive, excuse, release, or condone any nonperformance of any covenants of any Lessee; (e) give to Holder duplicate notice of each default by each Lessee given by Grantor; and (f) cause each lessee to agree (and each Lessee under each Lease executed after the date hereof does so agree) to give to Holder written notice of each and every default by Grantor under his Lease and not to exercise any remedies under such Lease unless Holder fails to cure such default within ten days, or within such longer period as may be reasonably necessary if such default cannot be cured within ten (10) days, after Holder has received such notice, provided that Holder shall never have any obligation or duty to cure any such default.

Section 4.5 Holder’s Collection of Rental . In the event Holder ever collects Rental through an agent, Holder shall be entitled to pay its agent as compensation for collecting such Rental, from sums so collected, a sum not to exceed five percent (5%) of the Rental so collected. All payments received by Holder pursuant to Article IV hereof shall be applied to repay the Obligation in the manner selected by Holder.

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Section 4.6 No Liability of Holder in Collecting, etc . Holder shall not be obligated to enforce, collect, perform or discharge, nor does it hereby undertake to enforce, collect, perform or discharge, any obligation, duty or liability under the Leases or under or by reason of this assignment; and Grantor shall and does hereby agree to perform and discharge any and all obligations, duties and liabilities of Grantor under the terms of any of the Leases and to indemnify Holder for and to hold Holder harmless of and from any and all liability, loss or damage which it may or might incur under the Leases or under or by reason of this assignment, and of and from any and all claims and demands whatsoever which may be asserted against it by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements contained in the Leases, INCLUDING WITHOUT LIMITATION AS A RESULT OF HOLDER’S NEGLIGENCE (except for matters caused by the Holder’s gross negligence or willful misconduct) . Should Holder incur any liability, loss or damage under the Leases or under or by reason of this assignment, or in the defense of any such claims or demands, the amounts thereof, including costs, expenses and reasonable attorney’s fees, shall be secured by this Deed of Trust; and Grantor shall reimburse Holder therefor immediately, upon demand, and the failure of Grantor to do shall constitute an Event of Default under the Loan Agreement.

Section 4.7 Assignment Not a Restriction on Holder’s Rights . Nothing herein contained shall detract from or limit the absolute obligation of Grantor to make payment of the Obligation regardless of whether the Rentals and Leases assigned by this Article are sufficient to pay the same, and the rights under this Article shall be in addition to all other security now or hereafter existing to secure the payment of the Obligation.

Section 4.8 Indemnity . Grantor agrees to indemnify the Trustee, and Holder (each such Person being called an “ Indemnitee ”) against all issues, claims, damages, actions, liabilities, judgments, costs, reasonable attorneys’ fees or other charges of whatsoever kind or nature (all hereinafter in this Section 4.8(a) called “ claims ”) made against or incurred by them or any of them and arising out of, in connection with, or as a result of, (i) the assertion, either before or after the payment in full of the Obligation, that any Indemnitee received Rentals claimed by third persons, or (ii) any actual or prospective claims, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such claims are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee (IT BEING UNDERSTOOD THAT IT IS THE INTENTION OF THE PARTIES HERETO THAT EACH OF THE INDEMNITEES BE INDEMNIFIED IN THE CASE OF ITS OWN NEGLIGENCE (OTHER THAN GROSS NEGLIGENCE), REGARDLESS OF WHETHER SUCH NEGLIGENCE IS SOLE OR CONTRIBUTORY, ACTIVE OR PASSIVE, IMPUTED, JOINT OR TECHNICAL). All amounts due under this Section shall be payable not later than thirty (30) days after written demand therefor. The obligations of Grantor as hereinabove set forth in this Section 4.8(a) shall survive the release, termination, foreclosure or assignment of this Deed of Trust or any sale hereunder.

Section 4.9 Release of Other Security . Holder may take or release other security, may release any party primarily or secondarily liable for any Obligation secured hereby, may grant extensions, renewals or indulgences with respect to such Obligation, and may apply any other security therefor held by it to the satisfaction of such indebtedness, without prejudice to any of its rights hereunder.

ARTICLE V.

Miscellaneous

Section 5.1 Release . If the Obligation is paid in full in accordance with the terms of this Deed of Trust and the Note and other Loan Documents and all commitments of Holder to advance funds under the Loan Agreement have terminated or expired, and if Grantor shall well and truly perform all of Grantor’s covenants contained herein, then this conveyance shall become null and void and be released at Grantor’s request and expense.

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Section 5.2 Rights Cumulative . All rights, remedies, powers, and privileges and all liens, titles, and security interests herein expressly conferred are cumulative, and shall not be deemed to deprive Holder or Trustee of any other legal or equitable rights, remedies, powers, privileges, liens, titles, or security interests by or through judicial proceedings or otherwise appropriate to enforce the conditions, covenants, and terms of this Deed of Trust, the Note, and other security instruments.

Section 5.3 Waiver . Any and all covenants in this Deed of Trust may from time to time, by instrument in writing signed by Holder and delivered to Grantor, be waived to such extent and in such manlier as Holder may desire, but no such waiver shall ever affect or impair Holder’s rights, remedies, powers, privileges, liens, titles, and security interest hereunder, except to the extent so specifically stated in such written agreement. Neither the exercise of, nor the failure to exercise any option or remedy under the terms of this Deed of Trust shall be considered as a waiver of the right to exercise same, or any other option or remedy given herein.

Section 5.4 Maximum Rate of Interest . Grantor and Holder intend to comply with the applicable law governing the Maximum Rate (hereafter defined). All agreements between Grantor and Holder, whether now existing or hereafter arising and whether written or oral, are expressly limited so that in no event whatsoever, whether by reason of acceleration of the maturity of the Obligation or otherwise, shall the interest contracted for, charged, or received by Holder hereunder or otherwise exceed the Maximum Rate. lf, in any contingency whatsoever, Holder shall receive anything of value deemed interest under applicable law which would cause the interest contracted for, charged, or received by the Holder to exceed the Maximum Rate, the excessive interest shall be applied to the reduction of the unpaid principal balance of the Obligation and not to the payment of interest, or if such excessive interest exceeds the unpaid principal balance of the Obligation, such excess shall be refunded to Grantor, and the provisions herein and any demand on Grantor shall immediately be deemed reformed, and the amounts thereafter collectible hereunder shall be reduced, without the necessity of the execution of any new documents, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder. All interest paid or agreed to be paid to the Holder, to the extent permitted by applicable law, shall be amortized, prorated, allocated, and spread throughout the full term of such indebtedness until payment in full (including the period of any renewal or extension hereof) so that the rate or amount of interest on account of such indebtedness does not exceed the Maximum Rate.

The term “Maximum Rate,” as used herein, shall mean the maximum nonusurious interest rate, if any, that at any time, or from time to time, may under applicable law be contracted for, taken, reserved, charged or received on the Obligation, or any portion thereof, under the laws which are presently in effect of the United States and the State of Texas applicable to such holder and such indebtedness or, to the extent allowed by law under such applicable laws of the United States of America and the State of Texas which may hereafter be in effect, which allow a higher maximum non-usurious interest rate than applicable laws now allow; provided, that in determining the Maximum Rate, due regard shall be given, to the extent required by applicable law, to any and all relevant payments, fees, charges, deposits, balances, agreements and calculations which may constitute or be deemed to constitute interest, or be deducted from principal to calculate the interest rate or otherwise affect interest rate determinations, so that in no event shall the Holder contract for, charge, receive, take, collect, reserve or apply, on the Obligation, or any portion thereof, any amount in excess of the maximum non-usurious rate of interest permitted by applicable law , To the extent that Texas law determines the Maximum Rate, the Maximum Rate shall be determined by utilizing the “indicated rate ceiling” from time to time in effect pursuant to the Texas Finance Code (V.T.C.A. Finance Code Section 303.001 et seq.) (the “Texas Finance Code”) or such successor statute, as then in effect, governing usury. The Maximum Rate shall not be limited to the applicable rate ceiling in the Texas Finance Code or such successor statute if Federal laws or other state laws now or hereafter in effect and applicable to Obligation, or any portion thereof (and the interest contracted for, charged and collected hereunder) shall permit a higher rate of interest.

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Section 5.5 Effect of Transfer on Grantor’s Liability . If the ownership of the Property or any part thereof becomes vested in a person other than Grantor or in the event of a change in ownership of any Grantor other than an individual, Holder may, without notice to Grantor or Grantor’s successors, deal with such successor or successors in interest with reference to this Deed of Trust and the Obligation, either by way of forbearance on the part of Holder, or extension of time of payment of the Obligation, or release of all or any part of the Property or any other property securing payment of the Obligation, or otherwise, without in any way modifying or affecting Holder’s rights and liens hereunder or the liability of Grantor or any other party liable for payment of the Obligation, in whole or in part.

Section 5.6 Waiver of Right to Marshal . Grantor hereby waives all rights of marshaling in event of any foreclosure of the liens and security interests hereby created.

Section 5.7 Condemnation Proceeds . Holder shall he entitled to receive any and all sums which may be awarded or become payable to Grantor for the condemnation of the Property, or any part thereof, for public or quasipublic use, or by virtue of private sale in lieu thereof, and any sums which may be awarded or become payable to Grantor for damages caused by public works or construction on or near the Property. All such sums are hereby assigned to Holder, and Grantor shall, upon request of Holder, make, execute, acknowledge, and deliver any and all additional assignments and documents as may be necessary from time to time to enable Holder to collect and receipt for any such sums. Holder shall not be, under any circumstances, liable or responsible for failure to collect or exercise diligence in the collection of any of such sums. Any sums received by Holder in the event of condemnation shall be applied to installments on the Obligation in inverse order of maturity.

Section 5.8 Insurance Proceeds . The proceeds of any and all insurance upon the Property shall be collected by Holder, and Holder shall have the option, in Holder’s sole discretion, to apply any proceeds so collected either to the restoration of the Property or to the liquidation of the Obligation.

Section 5.9 Reserve for Taxes and Insurance Premiums . Upon a default which remains uncured after the expiration of any applicable cure period, and at the request of Holder, Grantor shall create a fund or reserve for the payment of all insurance premiums, taxes, and assessments against or affecting the Property by paying to Holder, on the first day of each calendar month prior to the maturity of the Note, a sum equal to the premiums that will next become due and payable on the hazard insurance policies covering the Property, or any part thereof, plus taxes and assessments next due on the Property, or any part thereof, as estimated by Holder, less all sums paid previously to Holder therefor, divided by the number of months to elapse before one month prior to the date when such premiums, taxes, and assessments will become due, such sums to be held by Holder, without interest, unless interest is required by applicable law, for the purposes of paying such premiums, taxes, and assessments. Any excess reserve shall, at the discretion of Holder, be credited by Holder on subsequent reserve payments or subsequent payments to be made on the Note by the maker thereof, and all deficiency shall be paid by Grantor to Holder on or before the date when such premiums, taxes, and assessments shall become delinquent. In the event there exists a deficiency in such fund or reserve at any time when taxes, assessments, or insurance premiums are due and payable, Holder may, but shall not be obligated to, advance the amount of such deficiency on behalf of the Grantor, and such amounts so advanced shall become a part of the Obligation, shall be immediately due and payable and shall bear interest at the rate provided in the Note from the date of such advance through and including the date of repayment. Transfer of legal title to the Property shall automatically transfer the interest of Grantor in all sums deposited with Holder under the provisions hereof or otherwise. In the event that Holder does not request that such a fund be established, Grantor hereby agrees that it will promptly pay all premiums, taxes, and assessments when due, and will furnish to Holder proof of payment within 45 days of the due date by submitting canceled checks along with the statement concerning such taxes, premiums, or assessments.

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Section 5.10 Right to Accelerate Upon Transfer . If Grantor shall sell, convey, assign, or transfer all or any part of the Property or any interest therein or any beneficial interest in the Grantor, Holder may at Holder’s option, declare the Obligation to be immediately due and payable, which option may be exercised at any time following such sale, conveyance, assignment, or transfer. Holder may in its sole discretion and at Grantor’s request decide not to exercise said option in which event Holder’s forbearance may be predicated on such terms and conditions as Holder may in its sole discretion require, including but not limited to Holder’s approval of the transferee’s credit worthiness and management ability, and the execution and delivery to Holder by transferee, prior to the sale, transfer, assignment, or conveyance of a written assumption agreement containing such terms as Holder may require, including but not limited to, a payment of a part of the principal amount of the Obligation, the payment of an assumption fee, a modification of the term of the Obligation, and such other terms as Holder may require. Should the Property be sold, traded, transferred, assigned, exchanged, or otherwise disposed of without the prior written consent of Holder and payment of any portion of the Obligation is thereafter accepted by the Holder such acceptance shall not be deemed a waiver of the requirement of Holder’s consent in writing thereto or with respect to any other sale, trade, transfer, assignment, exchange, or other disposition.

Section 5.11 Prohibition Against Subordinate Financing . If Grantor without the prior written consent of Holder, executes or delivers any pledge, security agreement, mortgage, or deed of trust covering all or any portion of the Property (hereafter called “Subordinate Mortgage”) Holder may, at Holder’s option, which option may be exercised at any time following such pledge, security agreement, mortgage, or deed of trust, declare the Obligation to be immediately due and payable. in the event of consent by Holder to the foregoing or in the event the foregoing prohibition is determined by a court of competent jurisdiction to be unenforceable under the provisions of any applicable law, Grantor will not execute or deliver any Subordinate Mortgage unless there shall have been delivered to Holder not less than ten (10) days prior to the date thereof a copy thereof which shall contain express covenants to the effect: (a) that the Subordinate Mortgage is in all respects unconditionally subject and subordinate to the lien, security interest, and assignment evidenced by this Deed of Trust and each term and provision hereof; (b) that if any action or proceeding shall be instituted to foreclose the Subordinate Mortgage (regardless of whether the same is a judicial proceeding or pursuant to a power of sale contained therein), no tenant of any portion of the Property will be named as a party defendant, or will any action be taken with respect to the Property which would terminate any occupancy or tenancy of the Property without the prior written consent of Holder; (c) that the rents and profits, if collected through a receiver or by the Holder of the Subordinate Mortgage, shall be applied first to the Obligations, including principal and interest due and owing on or to become due and owing on the Note and the other indebtedness secured hereby and then to the payment of maintenance, operating charges, taxes, assessments, and disbursements incurred in connection with the ownership, operation, and maintenance of the Property; and (d) that if any action or proceeding shall be brought to foreclose the Subordinate Mortgage, (regardless of whether the same is a judicial proceeding or pursuant to a power of sale contained therein), written notice of the commencement thereof will be given to Holder contemporaneously with the commencement of such action or proceeding.

Section 5.12 Subrogation . It is understood and agreed that the proceeds of the Note, to the extent the same are utilized to renew or extend any indebtedness or take up any outstanding liens against the Property, or any portion thereof, have been advanced by Holder at Grantor’s request and upon Grantor’s representation that such amounts are due and payable. Holder shall be surrogated to any and all rights, remedies, powers, privileges, liens, titles, and security interests owned or claimed by any owner or holder of said outstanding indebtedness or lien, however remote, regardless of whether said indebtedness or lien is acquired by assignment or is released by the holder thereof upon payment.

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Section 5.13 Covenant to Perform . Grantor and each and every subsequent owner of the Property, or any part thereof, covenants and agrees that Grantor will perform or cause to be performed, each and every condition, term, provision, and covenant of this Deed of Trust, except that Grantor shall have no duty to pay the indebtedness evidenced by the Note except in accordance with the terms of the Note and all renewals and extensions thereof, and this Deed of Trust or in accordance with the terms of the transfer to Grantor.

Section 5.14 Notice . Except as otherwise provided herein, wherever this Deed of Trust requires notice to Grantor, notice shall be in writing and shall be deemed effective if either (1) hand delivered, (2) sent by certified mail, return receipt requested, postage prepaid, or (3) sent by overnight courier. All notices sent by U.S. mail and addressed as shown on the first page of this Deed of Trust shall be deemed received on the earlier of (i) the third day (excluding Sundays and legal holidays when the U.S. mail is not delivered) immediately following date of deposit in the U.S. mail or (ii) the date of actual receipt. All notices which are hand delivered or sent by overnight courier shall be deemed received on the day of delivery to the address shown on the first page of this Deed of Trust or such other address as specified by Grantor, Trustee or Holder to each other from time to time.

Section 5.15 Recording, etc . Grantor will promptly (and Holder may, if it chooses to do so in its sole discretion, and Grantor hereby authorizes Holder to), and at Grantor’s expense, record, register, deposit and file this and every other instrument in addition or supplemental hereto in such offices and places and at such times and as often as may be necessary to preserve, protect and renew the lien and security interest hereof as a valid first lien on and prior perfected security interest in real or personal property, as the case may be, and the rights and remedies of Trustee and of Holder, and otherwise will do and observe all things or matters necessary or expedient to be done or observed by reason of any law or regulation of any State or of the United States of America or of any other competent authority, for the purpose of effectively creating, maintaining and preserving the lien and security interest hereof on and in the Property.

Section 5.16 Successors and Assigns . This Deed of Trust is binding upon Grantor and Grantor’s successors, and shall inure to the benefit of Holder, and its successors and assigns, and the provisions hereof shall be covenants running with the Land. The duties, covenants, conditions, obligations, and warranties of Grantor in this Deed of Trust shall be joint and several obligations of Grantor and Grantor’s successors. Grantor may not assign its rights or obligations under this Deed of Trust without the consent of Lender in its sole discretion.

Section 5.17 Counterparts . This Deed of Trust may be executed in a number of identical counterparts, each of which, for all purposes, shall be deemed an original.

Section 5.18 Financing Statement . This Deed of Trust is intended to be a financing statement filed as a fixture filing with respect to As-Extracted Collateral, Accessories and the Goods described at the beginning of this Deed of Trust which are or are to become fixtures relating to the Land. The address of Grantor (Debtor) is set forth on the first page hereof and the address of Holder (Secured Party) is set forth in Section 1.1 hereof. This Deed of Trust is to be filed for record in the real property records of the county clerk of the county or counties where the Land is located. Grantor is the record owner of the Land. A carbon, photographic, or other reproduction of this Deed of Trust or of a financing statement pursuant hereto is sufficient as a financing statement.

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Section 5.19 Partial Invalidity . If the lien of this Deed of Trust is invalid or unenforceable as to any part of the Obligation, or if the lien is invalid or unenforceable as to any part of the Property, the unsecured or partially secured portion of the Obligation shall be completely paid prior to the payment of the remaining and secured or partially secured portion of the Obligation, and all payments made on the Obligation, whether voluntary or under foreclosure or other enforcement action or procedure, shall be considered to have been first paid on and applied to the full payment of that portion of the Obligation which is not secured or fully secured by the lien of this Deed of Trust.

Section 5.20 Appraisal . Holder may from time to time obtain, or require Grantor to obtain for Holder, an appraisal performed by a licensed or certified appraiser acceptable to Holder of any real property securing any extension of credit by Holder to Grantor. Grantor shall insure that such appraiser has free and full access to the subject real property for the purpose of making an appraisal. Grantor consents to such access by appraiser. If Grantor is not in possession of the real property at the time of the appraisal, Grantor shall obtain any consent and cooperation of any person in possession of the real property at the time of the appraisal. Unless prohibited by applicable law, Grantor shall pay to Holder, on demand, any fees incurred by Holder in obtaining any appraisal required under a regulation or policy of any applicable governmental authority or required under Holder’s loan policy. Grantor’s obligation under this paragraph shall be secured by Holder’s lien upon the subject real property unless the real property is the homestead of the Grantor.

Section 5.21 Attorneys’ Fees . If this Deed of Trust or any document related to it is given by Holder to an attorney for enforcement, or if suit is brought for collection or enforcement, or if this Deed of Trust or any document related to it is collected or enforced through probate, bankruptcy or other judicial proceeding (or Holder takes action to protect its interests through probate, bankruptcy or other judicial proceedings), Grantor shall pay Holder reasonable attorneys’ fees, court costs and expenses in addition to other amounts due hereunder.

Section 5.22 Renewals, Amendments and Other Security . Renewals and extensions of the Obligation may be given at any time and amendments may be made to agreements relating to any part of such Obligation (in accordance with such agreements) or the Property and the Trustee and Holder may take or may now hold other security in accordance with the Loan Documents for the Obligation, all without notice to or consent of Grantor. The Trustee and Holder may resort first to such other security or any part thereof or first to the security herein given or any part thereof, or from time to time to either or both, even to the partial or complete abandonment of either security, and such action shall not be a waiver of any rights conferred by this Deed of Trust, which shall continue as a valid lien upon and perfected security interest in the Property not expressly released until the Note and all other Obligations secured hereby are fully paid and all commitments of Holder to advance funds under the Loan Documents have terminated.

Section 5.23 Severability . Except as expressly provided to the contrary herein, each section, part, term, or provision of this Deed of Trust shall be considered severable, and if for any reason any article, section, part, term, or provision herein is determined to be invalid and contrary to or in conflict with any existing or future law or regulation by a court or governmental agency having valid jurisdiction, such determination shall not impair the operation of or have any other effect on other sections, parts, terms, or provisions of this Deed of Trust as may remain otherwise intelligible, and the latter shall continue to be given full force and effect and bind the parties hereto, and said invalid sections, parts, terms, or provisions shall not be deemed to be a part of this Deed of Trust.

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Section 5.24 No Liability for Trustee . THE TRUSTEE SHALL NOT BE LIABLE FOR ANY ERROR OF JUDGMENT OR ACT DONE BY THE TRUSTEE IN GOOD FAITH, OR BE OTHERWISE RESPONSIBLE OR ACCOUNTABLE UNDER ANY CIRCUMSTANCES WHATSOEVER (INCLUDING, WITHOUT LIMITATION, THE TRUSTEE’S NEGLIGENCE), EXCEPT FOR THE TRUSTEE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. The Trustee shall have the right to rely on any instrument, document or signature authorizing or supporting any action taken or proposed to be taken by them hereunder, believed by them in good faith to be genuine. All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated in any manner from any other moneys (except to the extent required by Legal Requirements), and the Trustee shall be under no liability for interest on any moneys received by them hereunder.

Section 5.25 No Agency, Partnership or Joint Venture . Nothing contained herein nor any acts of the parties hereto shall be deemed or construed by the Holder or by any other party as creating the relationship between them of (i) principal and agent, (ii) a partnership, or (iii) a joint venture.

Section 5.26 Cross-Default Provision; Cross-Collateralization . It is expressly understood and agreed that, should Grantor default or commit an event of default under or pursuant to any agreement which is secured by a lien or liens on any portion of the Property, the Obligation hereby secured, at the option of the Holder, shall become due and payable. Additionally, the provisions of Section 8.16 of the Loan Agreement are hereby incorporated herein as if such provisions are set forth herein in their entirety, mutatis mutandis.

Section 5.27 Miscellaneous . THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS. THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES. THIS INSTRUMENT ALSO SECURES OTHER AMOUNTS PROVIDED HEREIN AND AT LAW. THIS INSTRUMENT SECURES AN OBLIGATION THAT MAY INCREASE OR DECREASE FROM TIME TO TIME.

Section 5.28 Construction Mortgage . This Deed of Trust is a construction mortgage, as that term is used in the Code.

Section 5.29 GOVERNING LAW . THIS DEED OF TRUST SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE UNITED STATES OF AMERICA AND OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).

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Section 5.30 Waiver of Right to Trial by Jury . GRANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR COUNTERCLAIM THAT RELATES TO OR ARISES OUT OF ANY OF THE LOAN DOCUMENTS OR THE ACTS OR FAILURE TO ACT OF OR BY HOLDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS DEED OF TRUST OR THE OTHER LOAN DOCUMENTS.

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EXECUTED as of the date first above written.

Lazarus Refining & Marketing, LLC,

a Delaware limited liability company

By: Blue Dolphin Energy Company, a Delaware

corporation, its sole member

By: _______________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

STATE OF TEXAS	§
	§
COUNTY OF HARRIS	§

BEFORE ME , the undersigned, a Notary Public in and for the said County and State, on this day personally appeared Jonathan Pitts Carroll, Sr., President of Blue Dolphin Energy Company, a Delaware corporation, the sole member of Lazarus Refining & Marketing, LLC, a Delaware limited liability company, known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the same in the capacity therein stated, as the act of the entity for the purposes and consideration therein expressed.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ___________________, 2015.

	____________________________________
	NOTARY PUBLIC, State of Texas

My Commission Expires:

AFTER RECORDING RETURN TO:

Ronda K. Garrett

Sovereign Bank

17950 Preston Road, Suite 500

Dallas, TX 75252

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EXHIBIT A to Deed of Trust, Mortgage, Security Agreement,

Assignment of Rents and Leases, Financing Statement and Fixture Filing

Property Description

S 13° 27’ 49” E, 208.63 feet (called S 13° 37’ E, 207.4 feet) to a five-eighths inch diameter rebar found near a two way fence corner,

N 76° 26’ 34” E, 368.79 feet (called N 76° 29’ E, 368.4 feet) to a one-half inch diameter rebar set with cap (B&A),

N 76° 28’ 28” E, 31.40 feet (called N 76° 49’ E, 31.4 feet) to a five-eighths inch diameter rebar found near a two way fence corner,

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same being the southeast corner of said residue 640 acre tract and

N 76° 16’ 00” E, 275.15 feet (called N 76° 16’ E, 275.3 feet) to a railroad spike found in asphalt driveway,

N 81° 58’ 38” E, 100.50 feet (called N 82° 12’ E, 99.2 feet) to a one-half inch diameter rebar set with cap (B&A),

N 76° 16’ 00” E, 800.00 feet (called N 76° 14’ E, 800.5 feet) to a one-half inch diameter rebar set with cap (B&A),

N 70° 33’ 22” E, 100.50 feet (called N 70° 43’ E, 101.2 feet) to a concrete right of way marker found broken, and

THENCE with the south line of the tract herein described, same being a segment of the common line of said 51.30 acre tract and said 200.008 acre tract as follows:

S 76° 08’ 20” W, 768.00 feet (called S 76° 10’ W, 768.0 feet) to a one-half inch diameter rebar set with cap (B&A), and

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THENCE with the west line of the tract herein described, same being the common line of said 51.30 acre tract and said 41.245 acre tract as follows:

N 13° 57’ 38” W, 223.50 feet (called N 13° 55’ W, 223.5 feet) to a one-half inch diameter rebar set with cap (B&A),

N 13° 53’ 37” W, 373.70 feet (called N 13° 51’ W, 373.7 feet) to a fence post, and

N 13° 49’ 38” W, 449.84 feet (called N 13° 47’ W, 448.8 feet) to the PLACE OF BEGINNING and containing 56.309 ACRES OF LAND.

CONSTRUCTION RIDER TO LOAN AGREEMENT

This Construction Rider To Loan Agreement (this “Construction Rider”) is made and entered as of the Closing Date, by and among Sovereign Bank, as Lender, Lazarus Energy LLC, as Borrower, and Guarantor (as defined in the Loan Agreement defined below). In the event the terms and provisions of this Construction Rider are in conflict with the terms and provisions of the Loan Documents, the terms and provisions of this Construction Rider will control. However, the terms, conditions, requirements, and agreements contained herein are intended to be in addition to, and not a replacement of, the terms, conditions, requirements, and agreements contained in, and consistent with, the Loan Agreement.

Unless a particular term, word or phrase is otherwise defined or the context otherwise requires, capitalized terms, words and phrases used herein have the following meanings (all definitions that are defined in this Construction Rider in the singular to have the same meanings when used in the plural and vice versa). Capitalized terms not otherwise defined in this Construction Rider shall have the same meaning as defined in the Loan Agreement:

“ Advance ” means a disbursement by Lender of any of the Escrow or proceeds of the Loan from the Disbursement Account for the construction of the Storage Improvements.

“ Approved Budget ” means a budget and cost itemization prepared by Borrower, and approved in writing by Lender, specifying the cost by item of (a) all labor, materials, and services necessary for the construction of the Storage Improvements in accordance with the Plans and all Legal Requirements; and (b) all other expenses anticipated by Borrower incident to the Loan, the Land, and the construction of the Storage Improvements.

“ Architect ” means the architect, if any, named on Exhibit “1” attached hereto and incorporated herein by reference.

“ Architectural Contract ” means a written agreement between Borrower and Architect, if any, for architectural services pertaining to construction of the Storage Improvements.

“ Borrower’s Affidavit ” means a sworn affidavit of Borrower (and such other parties as Lender may require) to the effect that all statements, invoices, bills, and other expenses incident to the construction of the Storage Improvements incurred to a specified date, whether or not specified in the Approved Budget, have been paid in full, except for (a) amounts retained pursuant to a Construction Contract, and (b) items to be paid from the proceeds of an Advance then being requested or in another manner satisfactory to Lender.

“ Completion ” is defined in Section C of this Construction Rider.

“ Completion Date ” means the Completion Date specified in Exhibit “1”.

“ Construction Contract ” means each agreement made by Borrower for construction of the Storage Improvements.

“ Contractor ” means each Person with whom Borrower makes a Construction Contract.

“ Deed of Trust ” means the Deed of Trust (as defined in the Loan Agreement) covering and encumbering, among other things, the Land and/or Storage Improvements to secure payment and performance of the Obligations.

“ Escrow ” means any funds placed on deposit with Lender or Lender's Representative and to be disbursed per the Loan Agreement or any other agreement.

“ Inspecting Architects/Engineers ” means the inspecting architects and/or engineers, if any, specified by Lender from time to time.

“ Lender's Representative ” means the party who would make the actual advances from the Escrow or the Disbursement Account to Borrower.

“ Loan Agreement ” shall mean the Loan Agreement dated as of the date hereof, among Sovereign Bank, as Lender, Lazarus Refining & Marketing, LLC, as Borrower, and Jonathan Pitts Carroll, Sr., Lazarus Energy Holdings LL, Lazarus Energy LLC and Blue Dolphin Energy Company, collectively as Guarantor, to which this Construction Rider is attached, as it may from time to time be amended, modified, restated or supplemented.

“ Plans ” means the final working drawings and specifications and timeline for the construction of the Storage Improvements (including soil reports and engineering calculations) prepared by Architect (or Borrower, if there is no Architect) and as modified or supplemented from time to time and approved by Lender, Borrower, any lessee of the Land, if applicable, and, to the extent necessary, by each Governmental Authority.

“ Principal Debt ” means the aggregate unpaid balance of all Advances of the Loan, and all other principal indebtedness, if any, under the Note, at the time in question.

“ Request for Advance ” means a written request by Borrower (and such other parties as Lender may require) to Lender, on a form approved by Lender, specifying by name, current address, and amount all parties to whom Borrower is obligated for labor, materials, or services supplied for the construction of the Storage Improvements and all other expenses incident to the Loan, the Land, and the construction of the Storage Improvements, whether or not specified in the Approved Budget, requesting an Advance for the payment of such items, containing, if requested by Lender, an Borrower’s Affidavit, accompanied by such schedules, affidavits, releases waivers, statements, invoices, bills, and other documents as Lender may request.

“ Title Company ” means the title company or title companies named in Exhibit “1”.

“ Title Insurance ” means one or more title insurance commitments, binders, or policies, as Lender may require, issued by the Title Company, on a coinsurance or reinsurance basis (with direct access in Texas) if and as required by Lender, in the maximum amount of the Loan insuring or committing to insure that the Deed of Trust constitutes a valid lien covering the Land and all Storage Improvements thereon subject only to those exceptions which Lender may approve.

A. General. Subject to the conditions hereof and the other terms, conditions, and requirements contained in the Loan Agreement, and provided that an Event of Default has not occurred, Lender will make Advances for construction-related expenses to Borrower in accordance with this Construction Rider. However, prior to any construction-related Advance, the following additional terms and conditions must be satisfied:

1.	Borrower must pay to Lender all required fees, costs, and expenses.

2.	Lender must obtain an inspection of and acceptable report on the Storage Improvements by the Inspecting Architects/Engineers, if required by Lender.

3.	The sum of the Principal Debt plus the amount of the requested Advance shall not be in excess of the amount then available under Section 2.1 of the Loan Agreement.

4.	The Title Insurance shall be endorsed and extended, if required by Lender, to cover each Advance with no additional title exceptions objectionable to Lender.

Borrower shall procure and deliver to Lender, if required by Lender, releases or waivers of mechanic's liens and receipted bills showing payment of all amounts due to all Persons who have furnished materials or services or performed labor of any kind in connection with the construction of any of the Storage Improvements or otherwise with respect to the Land.

At the option of Lender, Advances shall be made only on the certificate of the Inspecting Architects/Engineers or other designated agent of Lender approved by the Lender, to which certificate shall be attached an estimate by the Contractor setting forth items to be paid out of the proceeds of each such Advance. However, the Lender may, at its discretion, make advances without requiring such certificate and Contractor's estimate, in which event Borrower shall furnish Lender a list of and the amounts of each items to be paid out of the Advances, or such other evidence that Lender may require.

B. Procedure for Borrowing . Lender shall not be required to make Advances more frequently than specified in Exhibit “1”, hereto. Each Application for Advance shall be submitted by Borrower to Lender a reasonable time (but not less than five Business Days) prior to the requested date (which must be a Business Day) of the Advance. Except as Lender may otherwise determine from time to time, each Advance will be made at Lender's principal office or at such other place as Lender may designate.

C. Advances . Advances shall be made only for costs and expenses specified in the Approved Budget, and then only for work performed, services rendered, or materials furnished; invoices for same must be provided to Lender; no Advance shall be made for advance or unearned payments (or for making a dividend or distribution to any shareholder of Borrower). Advances for payment of costs of construction of the Storage Improvements shall be made only after actual commencement of construction of the Storage Improvements and shall not exceed the aggregate of (a) the costs of labor, materials, and services incorporated into the Storage Improvements in a manner acceptable to Lender, plus (b) if approved by Lender, the purchase price of all uninstalled materials to be utilized in the construction of the Storage Improvements stored on the Land, or elsewhere with the written consent of, and in a manner acceptable to, Lender, less (c) retainage, if any, specified in Exhibit “1”, and less (d) all prior Advances for payment of costs of labor, materials, and services for the construction of the Storage Improvements. Without limitation of other conditions applicable thereto, the final Advance, including all retainage, will not

be made until Completion of the Storage Improvements has occurred. “Completion” shall have occurred with respect to the Storage Improvements when (i) “completion” (as that term is used in §53.106 of the Texas Property Code) of the Storage Improvements has occurred and (ii) Lender has received the following to its satisfaction (or waived them in writing): (1) a completion certificate from the Architect and from the Inspecting Architects/Engineers, if any, (2) evidence that all Legal Requirements have been satisfied, including, but not limited to, delivery to Lender of certificates of occupancy permitting the Storage Improvements to be legally occupied, if applicable, (3) evidence that no mechanic's or materialmen's liens or other encumbrances have been filed and remain in effect against the Land, (4) final lien releases or waivers by Architect, Contractor, and all subcontractors, materialmen and other Persons who have supplied labor, materials or services for the construction of the Storage Improvements, or who otherwise might be entitled to claim a contractual, statutory or constitutional lien against the Land, (5) an “as-built” Survey showing that the Storage Improvements as completed do not encroach on any boundary line, easement, building set back line, or other restricted area. Ten percent (10%) retainage shall be withheld from all Advances until thirty (30) days after Completion of the Storage Improvements. In addition, the final Advance hereunder shall, at Lender's option, be withheld until thirty (30) days after (i) the Completion of the Storage Improvements and (ii) an affidavit of completion has been filed with the county clerk of the county in which the Land is located in compliance with §53.106 of the Texas Property Code. To the extent that the Storage Improvements are divided into phases or identifiable segments, references in the preceding sentence to a final Advance shall include each final Advance with respect to such a phase or segment. As a condition precedent to the first Advance for labor, materials, or construction services (whether or not it is the first Advance), Borrower and each original Contractor shall have jointly executed and recorded with the county clerk of the county in which the Land is situated, an affidavit of commencement of work, in form and substance approved by Lender, which contains the information required by §53.124(c) of the Texas Property Code, provided further that the date of commencement of work specified in such affidavit shall be subsequent to the date of recordation of the Deed of Trust.

D. Approved Budget Allocations . Lender shall not be obligated to make an Advance of an item allocated in the Approved Budget to the extent that the amount of the Advance of such item, when added to the amount of prior Advance of such item, would exceed the amount allocated to such item in the Approved Budget. Lender reserves the right to make Advances which are allocated to any of the items in the Approved Budget for such other items therein or in such different proportions as Lender may, in its sole discretion, deem necessary or advisable. Borrower may not reallocate items of cost in or change the Approved Budget without the prior written consent of Lender.

E. Disbursement of Loan Proceeds . Borrower and Lender agree, anything herein or in the other Loan Documents to the contrary notwithstanding, that the Lender shall have the right, in its sole discretion, to advance the proceeds of the Loan in installments, from time to time, as, in the opinion of the Lender, funds are needed by Borrower for the purposes herein expressed; and the Lender reserves the right in its discretion to advance only such part of said Loan proceeds as it deems best, and to discontinue making such Advances to Borrower if, in its discretion, further or additional Advances shall seem to it unjustified, unwise or undesirable or if it deems itself insecure; and said Loan Documents shall be and remain valid and binding as security for the aggregate amount advanced at any time, whether or not the full amount of said Loan is Advanced. Lender will endeavor to make a requested disbursement within ___ days after Borrower has made a written request for payment and Lender has received all supporting information and documentation as may be required by Lender and/or any construction manager retained by Lender.

F. Timely Payment of Construction Costs . Borrower agrees to pay, as the work progresses, all bills for labor and materials going into construction of the Storage Improvements, and agrees to submit to the Lender all such receipts, affidavits, canceled checks or other evidences of payment as may be requested from time to time, and when and if requested by the Lender at any time to furnish adequate proof of payment of all indebtedness of every kind and character incurred in the development of the Land and/or the construction of Storage Improvements.

G. No Work Done - Condition of Premises . Borrower warrants that no construction materials, supplies or equipment have been placed on the Land, that no labor has been performed therein incidental to the contemplated construction, and that Borrower has not received any notice of a claim of a mechanic's or materialman's lien against the Land except those liens shown on Exhibit “G” to the Loan Agreement and which will be paid in full with proceeds of the Loan and released. Borrower also warrants that the Storage Improvements are not now damaged or injured as a result of any fire, explosion, accident, flood or other casualty.

H. Work in Accordance with Plans . Borrower agrees to proceed with diligence to construct the Storage Improvements called for by the Plans and the Construction Contract, a copy of which Plans and Construction Contract have been delivered to the Lender, and Borrower further agrees that said construction work shall be done strictly in accordance with Plans and Construction Contract as approved by the Lender, and with all applicable Legal Requirements. The Plans and the Construction Contract heretofore delivered to, and approved by, the Lender may not be materially changed, altered or added to without the prior written consent of Lender. Borrower shall use achieve Completion by no later than the Completion Date (or such later date as is consent to by Lender in writing).

I. Disbursements. Inspections shall be made by a representative of Lender for all disbursements. At no time and in no event shall Lender be obligated to disburse funds in excess of the amount recommended by Lender's agent or the Inspecting Architects/Engineers; or if any Event of Default shall have occurred; or if Lender is unsatisfied with the progress of construction; or, if in the sole opinion of Lender, the estimated remaining cost of construction in accordance with the Plans exceeds the remaining undisbursed portion of the Loan proceeds; or if any Storage Improvements shall have been damaged by fire or other casualty and Lender shall not have received insurance proceeds sufficient in the sole judgment of Lender to effect the restoration of the Storage Improvements to the condition immediately preceding such damage and in accordance with the Plans, if applicable, and permit the completion of the Storage Improvements on or before the scheduled completion date. It is understood that any sum or sums required for the construction of the Storage Improvements over and above the proceeds of the Loan herein agreed to be made shall be advanced by, and be the sole responsibility of, Borrower.

J. Remedies of Lender . Upon the occurrence of any Event of Default, and after the expiration of any applicable cure period, Lender shall at its option be entitled, in addition to and not in lieu of the remedies provided in the Loan Agreement and other Loan Documents, to proceed to exercise any or all of the following remedies:

1. Require Borrower to vacate the Land and Storage Improvements. Borrower agrees that, upon Lender's request in the event of an Event of Default, to immediately vacate the Land and Storage Improvements;

2. Enter into possession of the Land and Storage Improvements;

3. Perform or cause to be performed any and all work and labor necessary to complete the Storage Improvements in accordance with the Plans and Construction Contract;

4. Employ security watchmen to protect the Land and Storage Improvements;

5. Disburse that portion of the Loan proceeds not previously disbursed (including any retainage) to the extent necessary to complete construction of the Storage Improvements in accordance with Plans and Construction Contract, and if the completion requires a larger sum than the remaining undisbursed portion of the Loan, to disburse such additional funds, all of which funds so disbursed by Lender shall be deemed to have been disbursed to Borrower and shall be secured by the Security Documents. For this purpose, Borrower hereby constitutes and appoints Lender its true and lawful attorney-in-fact with full power of substitution to complete the construction of the Storage Improvements in the name of Borrower, and hereby empowers Lender as said attorney to take all actions necessary in connection therewith including any Escrow and any funds which may remain unadvanced under the Loan for the purpose of completing the Storage Improvements in the manner called for by the Plans; to make such additions and changes and corrections in the Plans which shall be necessary or desirable to complete the Storage Improvements in substantially the manner contemplated by the Plans; to employ such contractors, subcontractors, agents, architects, and inspectors as shall be required for said purposes; to pay, settle or compromise all existing or future bills and claims which are or may be liens against said Land, or may be necessary or desirable for the completion of the Storage Improvements or the clearance of the title to the Land; to execute all applications and certificates in the name of Borrower which may be required by any construction contract and to do any and every act with respect to the construction of the Storage Improvements and to take such action and require such performance as it deems necessary. In accordance therewith Borrower hereby assigns and quitclaims to Lender all sums to be advanced hereunder including retainage and any sums in escrow conditioned upon the use of said sums, if any, for the completion of the Storage Improvements; and/or

6. Take any other action that Lender, in its sole discretion, deems necessary or advisable under the circumstances to protect and preserve the Collateral. Borrower agrees to immediately reimburse Lender for all costs incurred to protect and preserve the Collateral.

K. Right of Inspection . Borrower agrees to permit Lender and its representatives and agents to enter upon the Land during normal business hours with 24 hours’ notice and to inspect the Storage Improvements and all materials to be used in the construction thereof and to cooperate and cause Contractor to cooperate with Lender and its representatives and agents during such inspections; provided, however, that this provision shall not be deemed to impose upon Lender any duty or obligation whatsoever to undertake such inspection, to correct any defects in the Storage Improvements or to notify any person with respect thereto.

L. Correction of Defects . Borrower agrees to promptly correct any structural defect in the Storage Improvements and to promptly correct any departure from the Plans not previously approved by Lender. An Advance shall not constitute a waiver of Lender's right to require compliance with this, or any other, covenant.

M. General Conditions . The following conditions shall be applicable throughout the term of the Loan Agreement:

1. Rights of Third Parties. All conditions of the obligations of Lender hereunder, including the obligation to make Advances, are imposed solely and exclusively for the benefit of Borrower and Borrower's successors and assigns and no other person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lender will refuse to make advances in the absence of strict compliance with any or all thereof and no other person shall, under any circumstances, be deemed to be a beneficiary of such conditions, any and all of which may be freely waived in whole or in part by the Lender at any time if in its sole discretion it deems it desirable to do so. In particular, Lender makes no representations and assumes no duties or obligations as to third parties concerning the quality of the construction by Borrower or the Storage Improvements or the absence therefrom of defects. In this connection, Borrower agrees to and shall indemnify Lender from any liability, claims or losses resulting from the disbursement of the Loan proceeds or from the condition of the Storage Improvements whether related to the quality of construction or otherwise and whether arising during or after the term of the Loan. This provision shall survive the repayment of said Loan and shall continue in full force and effect so long as the possibility of such liability, claims, or losses exists.

2. Evidence of Satisfaction of Conditions. Any condition of this Construction Rider which requires the submission of evidence of the existence or nonexistence of a specified fact or facts implies as a condition the existence or nonexistence, as the case may be, of such fact or facts, and Lender shall, at all times, be free to independently establish to its satisfaction and in its absolute discretion such existence or nonexistence.

N. Advances Do Not Constitute a Waiver . No Advance shall constitute a waiver of the conditions of Lender's obligation to make further Advances nor, in the event Borrower is unable to satisfy any such condition, shall any such waiver have the effect of precluding Lender from thereafter declaring such inability to be a Default. In addition, any waiver of any provision of the Loan Agreement shall not constitute a waiver of any other provision, and shall not act as a future waiver of any provision of the Loan Agreement.

O. Compliance With Federal Law . Borrower will ensure that each Contractor complies with Executive Order 11246, entitled “Equal Employment Opportunity”, as amended by Executive Order 11375, and as supplemented by applicable Department of Labor Regulations (41 CFR, Part 60). Failure of the Contractor to comply with these laws will be an Event of Default.

P. Cost Overruns . Borrower will not allow any change and/or cost overrun on any contract or other commitment which will result in an additional cash flow expenditure and/or debt to the business and/or request for a subsequent loan, either guaranteed or not, without the express written approval of RBS. In no event will a subsequent Business & Industry Guaranteed Loan be approved to cover such costs. Furthermore, Borrower will not divert Loan funds from purposes identified in Section 2.2 of the Loan Agreement for any of the aforementioned items without the express written approval of RBS. Failure to comply with the terms of this paragraph will be considered a material adverse change in Borrower's financial condition and a default under the Loan. In the event any of the aforementioned increases in costs and/or expenses are incurred by Borrower, Borrower must provide for such increases in a manner that there is no diminution of Borrower's operating capital.

Q. Contingency Allocations . Any amount allocated in the Approved Budget for “contingencies” or other non-specific purposes may, in Lender’s discretion, be disbursed by Lender to pay contingent costs and expenses of maintaining, leasing and promoting the “Property” or the “Collateral” (in each case as defined in the Deed of Trust or any other Security Document) and such other costs or expenses as Lender shall approve. Under no circumstances shall Borrower have the right to require Lender to disburse any amounts so allocated and Lender may impose such requirements and conditions as it deems prudent and necessary should it elect to disburse all or any portion of the amounts so allocated.

R. Funds Control Agreement . At Lender’s sole discretion, Lender’s obligations to make advances under the Loan (including any advances under Section 3.3 of the Credit Agreement) will be subject to Borrower’s entering into and complying with all of conditions precedent, procedures and obligations specified in one or more Funds Control Agreements as Lender deems necessary or advisable, which Funds Flow Agreements may, at Lender’s discretion or specification, supersede some or all of funding conditions and other terms of this Construction Rider. At Lender’s direction, Borrower shall promptly enter into such Funds Control Agreements. In the absence of any Funds Control Agreement, the terms and conditions of this Construction Rider shall apply, subject to any waivers hereto as permitted by Lender at its sole discretion.

S. Purpose of Loan and Escrow . The proceeds of the Loan and Escrow will be used for the purposes specified in the Loan Documents. Such Loan and Escrow will not be used directly or indirectly for personal, family, household or agricultural purposes or for the purposes of purchasing or carrying any Margin Stock or for the purpose of extending credit to others for the purpose of purchasing or carrying any Margin Stock.

Dated: December 4, 2015.

LENDER:

Sovereign Bank

By: ________________________

Name: ______________________

Title: _______________________

BORROWER:

Lazarus Refining & Marketing, LLC

By: Blue Dolphin Energy Company, a Delaware

corporation, its sole member

By: ________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

GUARANTORS:

______________________________

Jonathan Pitts Carroll, Sr., as Guarantor

Blue Dolphin Energy Company, as Guarantor

By: ________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

Lazarus Energy LLC, as Guarantor

By: Blue Dolphin Energy Company, a Delaware

corporation, its sole member

By: ________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

Lazarus Energy Holdings LLC, as Guarantor

By: ________________________

Name: Jonathan Pitts Carroll, Sr.

Title: Member

EXHIBIT “1”

CONSTRUCTION RIDER

Loan:	$10,000,000.00

The Architect:	N/A

The Closing Date:	The date of the Loan Agreement.

The Completion Date:	On or before twelve (12) months from Closing Date.

The Contractor(s):	Lazarus Energy Holdings LLC

The Expansion: Improvements:	Construction of Storage Improvements (as defined in the Loan Agreement) on the Land (as defined in the Loan Agreement) pursuant to the construction contract relating to the Storage Tank Expansion Project J.O. / W.O. No. 130908 between Lazarus Energy LLC and the Contractor; and in each case in accordance with plans and specifications as more particularly described in said contract.

Retainage to be deducted from Advance:	Ten Percent (10%), if and to the extent required by Lender at its discretion.

Frequency of Advances:	At sole discretion of Lender.

The Title Company:	Providence Title 5001 HWY 287 South, Ste 105 Arlington, TX 76017

ABSOLUTE ASSIGNMENT OF LEASES AND RENTS

THIS ABSOLUTE ASSIGNMENT OF LEASES AND RENTS (“Assignment”) is made this 4 th day of December, 2015, by Lazarus Refining & Marketing, LLC , a Delaware limited liability company (hereinafter called “Assignor”) to Sovereign Bank (hereinafter called “Assignee”);

WITNESSETH

Assignor, in consideration of the sum of Ten Dollars ($10.00) cash in hand paid and other good and valuable consideration paid by Assignee, the receipt and sufficiency of which are hereby acknowledged, does hereby absolutely and unconditionally GRANT, CONVEY, ASSIGN, TRANSFER and SET OVER unto Assignee the following:

A. All rights, title, interests, estates, powers, privileges, options and other benefits of Assignor in, to and under the lease agreements, rental agreements, storage agreements and other similar agreements which now or in the future, from time to time, cover or affect all or any portion of or interest in the land described in Exhibit “A” attached hereto and made a part hereof and the improvements (including, without limitation, the Storage Improvements) located thereon (said land and improvements hereinafter called the “Subject Property”) together with all renewals, extensions, modifications, amendments, subleases and assignments of such lease agreements (such lease agreements, renewals, extensions, modifications, amendments, subleases and assignments herein called the “Leases”); and

B. All of the rents, income, receipts, revenues, royalties, bonuses, issues, profits, receivables and other sums of money (hereinafter collectively called the “Rents”) that are now and/or at any time hereafter become due and payable to Assignor under the terms of the Leases or arising or issuing from or out of the Leases or from or out of the Subject Property or any part thereof, including but not limited to minimum rents, additional rents, percentage rents, deficiency rents and liquidated damages following default, security deposits, advance rents, daily rents or room charges, all proceeds payable under any policy of insurance covering loss of rents resulting from untenantability caused by destruction or damage to the Subject Property and all of Assignor’s rights to recover monetary amounts from any lessee in bankruptcy including, without limitation, rights of recovery for use and occupancy and damage claims arising out of lease defaults, including rejections, under the Federal Bankruptcy Code, including specifically the immediate and continuing right to collect and receive each and all of the foregoing; and

C. Any and all guaranties of payment of the Rents.

This Assignment is made by Assignor to provide a direct and continuing source of payment (currently and in the future) of the following note, obligations, indebtedness and liabilities: (a) one certain promissory note of even date herewith in the principal amount of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) made by Assignor and payable to the order of Assignee, with interest at the rate or rates therein provided, both principal and interest being payable as therein provided, and all amounts remaining unpaid thereon being finally due and payable nineteen (19) years from the date of the Note, and containing a provision for the payment of a reasonable additional amount as attorney’s fees, and all other notes given in substitution therefore or in modification, increase, renewal or extension thereof, in whole or in part, such note and all other notes given in substitution therefore or in modification, increase, renewal or extension thereof, in whole or in part,

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being hereinafter called the “Note”; and (b) all indebtedness now or hereafter incurred or arising pursuant to the provisions of, or secured by, (i) a second lien Deed of Trust, Mortgage, Security Agreement, Assignment of Rents, Financing Statement and Fixture Filing made by Lazarus Energy to Robert Blount, as Trustee, for the benefit of Assignee, and (ii) a first lien Leasehold Deed of Trust, Mortgage, Security Agreement, Assignment of Rents, Financing Statement and Fixture Filing made by Assignor to Robert Blount, as Trustee, for the benefit of Assignee (collectively, the “Deed of Trust”), in each case to secure the payment of the Note and covering the Subject Property and certain other property described therein; SUBJECT, HOWEVER, to the terms, provisions and conditions set forth in this Assignment.

1. Assignor hereby represents and warrants unto Assignee that Assignor is the sole owner of the entire lessor’s interest in the Leases and has good title and good right to assign the Leases and Rents hereby assigned and no other person or entity has any right, title or interest therein; that Assignor has duly and punctually performed all of the terms, covenants, conditions and warranties of the Leases that were to be kept, observed and performed by it; that Assignor has not at any time prior to the date hereof exercised any right to subordinate any Lease to any deed of trust or mortgage or any other encumbrance of any kind; that Assignor has not executed any prior assignments of the Leases or the Rents thereunder; that no Rents reserved in any Lease have been anticipated and no Rents for any period subsequent to the date of this Assignment have been collected in advance of the time when the same became due under the terms of the applicable Lease; that Assignor has performed no act or executed any other instrument which might prevent Assignee from enjoying and exercising any of its rights and privileges evidenced hereby; that each of the Leases is valid and subsisting and in full force and effect and unmodified; that there exists no defense, counterclaim or set-off to the payment of the Rents under the Leases; and that there are no defaults now existing under the Leases and no event has occurred which with the passage of time or the giving of notice, or both, would constitute such a default.

2. Assignor agrees that, so long as the indebtedness evidenced by the Note or any part thereof or any other indebtedness secured by the Deed of Trust shall remain unpaid, Assignor will make no assignment, pledge or disposition of the Leases or the Rents thereunder; nor will Assignor subordinate any of the Leases to any deed of trust or mortgage or any other encumbrance of any kind or permit, consent or agree to such subordination; nor will Assignor reduce the Rents payable under any of the Leases, modify, alter or amend the Leases or waive, excuse, condone, discount, set off, compromise or in any manner release or discharge any lessee under any Lease of and from any obligations, covenants, conditions and agreements, to be kept, observed and performed by the lessee, including the obligation to pay the Rents thereunder in the manner and at the place and time specified therein; nor will Assignor incur any indebtedness to a lessee under or guarantor of any Lease which may under any circumstance be used as an offset against the Rents or other payments due under said Lease; nor will Assignor exercise any option required or permitted by the terms of any of the Leases without the prior written consent of Assignee; nor will Assignor receive or collect any Rents from any present or future lessee of the Subject Property or any part hereof except in trust for Assignee and then only for such periods not to exceed one month in advance of the date on which such payment is due; nor will Assignor cancel or terminate any of the Leases, accept a surrender thereof, commence an action of ejectment or any summary proceedings for dispossession of a lessee under any of the Leases, or convey or transfer or suffer of permit a conveyance or transfer of the premises demised thereby or of any interest therein so as to effect directly or indirectly, proximately or remotely, a merger of the estates and rights of, or a termination or diminution of the obligations of any lessee thereunder; nor will Assignor consent to an assignment or sublease of the interest and estate of any lessee under any of the Leases, whether or not in accordance with its terms; nor will assignor modify or change the terms of any guaranty of any of the Leases or cancel or terminate such guaranty; nor will Assignor enter into additional leases covering any portion of the Subject Property, or renew or extend the term of any Lease unless an option therefore was originally reserved by the lessee in the Lease for a fixed and definite rental, or relocate or expand the floor space of any lessee under a Lease within the Subject Property, without first having obtained the written consent of Assignee; and any such acts, if done or permitted to be done without the prior written consent of Assignee, shall be null and void.

Page 2

3. Assignor covenants with Assignee, for so long as the indebtedness evidenced by the Note or any part thereof or any other indebtedness secured by the Deed of Trust shall remain unpaid, to observe and perform duly and punctually all the obligations imposed upon any lessor under the Leases and not to do or permit to be done anything to materially impair the value thereof; to enforce the performance of each and every term, provision, covenant, agreement and condition in the Leases to be performed by any lessee thereunder; to appear in and defend any action or proceeding arising under, occurring out of or in any manner connected with any of the Leases, or the obligations, liabilities or duties of Assignor or any lessee under the Leases and, upon request by Assignee, to make appearance in the name and on behalf of Assignee, but at the expense of Assignor; to exercise any option or election contained in or relating to any of the Leases which Assignee shall require; at Assignee’s request to assign and transfer to Assignee by specific Assignment of Leases and Rents, in the form of this Assignment, any and all subsequent Leases upon all or any part of the Subject Property (it being understood and agreed that no such specific assignment shall be required for such subsequent Leases to be covered by and included within this Assignment as provided herein); to deliver to Assignee executed copies of any and all Leases, renewals and extensions of existing Leases and any and all subsequent Leases upon all or any part of the Subject Property; and to execute and deliver at the request of Assignee all such further assurances and assignments in the premises covered by the Leases or Rents as Assignee shall from time to time require and to deliver other records and instruments, including but not limited to rent rolls and books of account, that Assignee shall from time to time require.

4. Assignor may collect Rents on behalf of Assignee until the occurrence of a default specified in the Deed of Trust and the issuance by Assignee of a notice of such default (hereinafter called a “Notice of Default”) to the lessees under the Leases. Upon receipt from Assignee of a Notice of Default, each lessee under the Leases is hereby authorized and directed to pay directly to Assignee all Rent thereafter accruing and the receipt of Rent by Assignee as provided herein shall be a release of such, lessee to the extent of all amounts so paid. The receipt by a lessee under the Leases of a Notice of Default shall be sufficient authorization for such lessee to make all future payments of Rents directly to Assignee and each such lessee shall be entitled to rely on such Notice of Default and shall have no liability to Assignor for any Rents paid to Assignee after receipt of such Notice of Default. Rents received by Assignee after giving a Notice of Default for any period prior to foreclosure under the Deed of Trust or acceptance of a deed in lieu of such foreclosure shall be applied by Assignee to the Payment (in such order as Assignee shall determine) of: (a) all expenses of managing the Subject Property, including but not limited to the salaries, fees and wages of a managing agent and such other employees as Assignee may deem necessary or desirable; all expenses of operating and maintaining the Subject Property, including but not limited to all taxes, assessments, charges, claims, utility costs and premiums for insurance, and the cost of all alterations, renovations, repairs or replacements; all expenses incident to taking and retaining possession of the Subject Property and/or collecting the Rents due and payable under the Leases; and (b) the Note and other indebtedness secured by the Deed of Trust, principal, interest, attorney’s and collection fees and other amounts, in such order as Assignee in its sole discretion may determine. In no event will this Assignment reduce the indebtedness evidenced by the Note or otherwise secured by the Deed of Trust, except to the extent, if any, that Rents are actually received by Assignee and applied upon (after said receipt) to such indebtedness in accordance with the preceding sentence. Without impairing its rights hereunder, Assignee may, at its option, at any time and from time to time, release to Assignor Rents so received by Assignee or any part thereof. As between Assignor and Assignee, and any person claiming by, through or under Assignor, other than any lessee under the Leases who has not received a Notice of Default pursuant to this Paragraph, this Assignment is intended to be absolute, unconditional and presently effective and the provisions of this Paragraph for notification of lessees under the Leases upon the occurrence of a default specified in the Deed of Trust are intended solely for the benefit of each such lessee and shall never inure to the benefit of Assignor or any person claiming by, through or under Assignor (other than a lessee who has not received such notice). It shall never be necessary for Assignee to institute legal proceedings of any kind whatsoever to enforce the provisions of this Paragraph or this Assignment.

Page 3

5. Assignor covenants that at any time during which Assignor is receiving Rents directly from lessees under the Leases, Assignor shall, upon receipt of written direction from Assignee, make demand and/or sue for all Rents due and payable under one or more Leases, as directed by Assignee, as it becomes due and payable, including Rents which are past due and unpaid. In the event Assignor fails to take such action, or at any time during which Assignor is not receiving Rents directly from lessees under the Leases, Assignee shall have the right (but shall be under no duty) to demand, collect and sue for, in its own name or in the name of Assignor, all Rents due and payable under the Leases, as it becomes due and payable, including Rents which are past due and unpaid.

6. Assignor agrees that Assignee shall not be liable for any loss sustained by Assignor resulting from Assignee’s failure to let the Subject Property, or any part thereof, or from any other act or omission of Assignee under or relating to the Leases, unless such loss is caused by the gross negligence or willful misconduct of Assignee, nor shall Assignee be obligated to perform or discharge any obligation, duty or liability under the Leases by reason of this Assignment or the exercise of rights or remedies hereunder. Assignee shall not be liable for its failure to collect, or its failure to exercise diligence in the collection of, Rents under the Leases, but shall be accountable only for Rents that Assignee actually receives. ASSIGNOR WILL INDEMNIFY AND HOLD HARMLESS ASSIGNEE (FOR PURPOSES OF THIS PARAGRAPH, THE TERM “ASSIGNEE” SHALL INCLUDE THE DIRECTORS, OFFICERS, PARTNERS, EMPLOYEES AND AGENTS OF ASSIGNEE AND ANY PERSONS OR ENTITIES OWNED OR CONTROLLED BY, OWNING OR CONTROLLING, OR UNDER COMMON CONTROL OR AFFILIATED WITH ASSIGNEE) FROM AND AGAINST, AND REIMBURSE ASSIGNEE FOR, ALL CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES AND COSTS OF APPEAL) INCURRED UNDER THE LEASES BY REASON OF THIS ASSIGNMENT OR THE EXERCISE OF RIGHTS OR REMEDIES HEREUNDER, OR WHICH MAY BE ASSERTED AGAINST ASSIGNEE BY REASON OF ANY ALLEGED OBLIGATIONS OR UNDERTAKINGS ON ITS PART TO PERFORM OR DISCHARGE ANY OF THE TERMS, COVENANTS OR AGREEMENTS CONTAINED IN THE LEASES, INCLUDING SPECIFICALLY ANY OBLIGATION OR RESPONSIBILITY FOR ANY SECURITY DEPOSITS OR OTHER DEPOSITS DELIVERED TO ASSIGNOR BY ANY LESSEE UNDER ANY LEASE AND NOT ACTUALLY DELIVERED TO ASSIGNEE. THE INDEMNITIES CONTAINED IN THIS PARAGRAPH SHALL INCLUDE CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES) RESULTING FROM THE NEGLIGENCE OF ASSIGNEE, BUT NOT THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ASSIGNEE . The foregoing indemnities shall not terminate upon release or other termination of this Assignment. Any amount to be paid under this Paragraph by Assignor to Assignee shall be a demand obligation owing by Assignor to Assignee, shall bear interest from the date such amount becomes due until paid at the rate of interest payable on matured but unpaid principal of or interest on the Note and shall be secured by the Deed of Trust and by any other instrument securing the Note. This Assignment shall not operate to place responsibility upon Assignee for the control, care, management or repair of the Subject Property, nor for the carrying out of any of the terms and conditions of the Leases; nor shall it operate to make Assignee responsible or liable for any waste committed on the Subject Property by the tenants or by any other parties or for any dangerous or defective condition of the Subject Property, or for any negligence in the management, upkeep, repair or control of the Subject Property resulting in loss or injury or death to any tenant, licensee, employee or stranger.

Page 4

7. Assignor agrees that this Assignment is primary in nature to the obligation evidenced and secured by the Note, the Deed of Trust and any other document given to secure and collateralize the indebtedness secured by the Deed of Trust and that any default under this Assignment is and shall be a default under the Deed of Trust. Assignor agrees that Assignee may enforce this Assignment without first resorting to or exhausting any security or collateral securing the payment of the Note; provided however, that nothing herein contained shall prevent Assignee from suing on the Note, foreclosing the Deed of Trust or exercising any other right under any document securing the payment of the Note or at law or in equity.

8. Assignor covenants and agrees that so long as the indebtedness under the Note and Deed of Trust or any indebtedness secured by the Deed of Trust remain unpaid, in the event any lessee under the Leases should be the subject of any proceeding under the Federal Bankruptcy Code or any other federal, state or local statute which provides for the possible termination or rejection of any of the Leases assigned hereby, if any Lease is so rejected, no settlement for damages shall be made without the prior written consent of Assignee, and any check in payment of damages for rejection of any such Lease will be made payable to Assignee to the fullest extent permitted by law. Assignor hereby assigns any such payment to Assignee and further covenants and agrees that upon the request of Assignee, it will duly endorse to the order of Assignee any such check, the proceeds of which will be applied to the Note and other indebtedness secured by the Deed of Trust, principal, interest, attorneys’ and collection fees and other amounts, in such order as Assignee in its sole discretion may determine.

9. Assignor agrees with Assignee that nothing contained herein and no act done or omitted by Assignee pursuant to the powers and rights granted Assignee hereunder shall be deemed to be a waiver by Assignee of its rights and remedies under the Note and the Deed of Trust or a waiver or curing of any default hereunder or under the Note or the Deed of Trust, and this Assignment is made and accepted without prejudice to any of the rights and remedies possessed by Assignee under the terms of the Note and the Deed of Trust. The right of Assignee to collect said principal sum, interest and indebtedness and to enforce any security therefore hold by it may be exercised by Assignee either prior to, simultaneously with, or subsequent to any action taken by it hereunder.

10. If the Note and all other indebtedness secured by the Deed of Trust are paid as the same becomes due and payable and if all of the covenants, warranties, undertakings and agreements made in the Deed of Trust and in this Assignment are kept and performed, then this Assignment shall become null and void and of no further force and effect but no lessee under the Leases shall be required to take notice of such termination until a copy of a release of the Deed of Trust and this Assignment shall have been delivered to such lessee.

11. Assignor agrees that Assignee may take or release any security for the payment of the Note and other indebtedness secured by the Deed of Trust, may release any party primarily or secondarily liable therefore and may apply any security held by it to the satisfaction of the Note and such other indebtedness secured by the Deed of Trust without prejudice to any of its rights under this Assignment.

12. Assignor agrees that Assignee may at any time and from time to time in writing (a) waive compliance by Assignor with any covenant herein made by Assignor to the extent and in the manner specified in such writing; (b) consent to Assignor doing any act which hereunder Assignor is prohibited from doing, or consent to Assignor failing to do any act which hereunder Assignor is required to do, to the extent and in the manner specified in such writing; or (c) release any part of the Subject Property and/or the Leases, or any interest therein, from this Assignment. No such act shall in any way impair the rights of Assignee hereunder except to the extent specifically agreed to by Assignee in such writing.

Page 5

13. Assignor agrees that the rights and remedies of Assignee hereunder shall not be impaired by any indulgence, including but not limited to (a) any renewal, extension or modification which Assignee may grant with respect to any indebtedness secured by the Deed of Trust, (b) any surrender, compromise, release, renewal, extension, exchange or substitution which Assignee may grant in respect of the Subject Property and/or the Leases and/or the Rents or any part thereof or any interest therein, or (c) any release or indulgence granted to any endorser, guarantor or surety of any indebtedness secured hereby .

14. Assignor agrees that a determination that any provision of this Assignment is unenforceable or invalid shall not affect the enforceability or validity of any other provision and any determination that the application of any provision of this Assignment to arty person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to any other persons or circumstances.

15. Assignor agrees that notwithstanding (a) the fact that any Lease or the leasehold estate created thereby may he held, directly or indirectly, by or for the account of any person or entity which shall have an interest in the fee estate of the Subject Property, (b) the operation of law or (c) any other event, lessee’s leasehold estate under such Lease shall not merge into the tee estate and the lessee shall remain obligated under such lease as assigned by this Assignment.

16. Assignor agrees and covenants with Assignee that this Assignment and the terms, provisions, representations and warranties herein contained shall be binding upon Assignor and Assignor’s successors and assigns, and all subsequent owners of the Subject Property and shall inure to the benefit of Assignee and Assignee’s successors and assigns, including all subsequent holders of the Note and the Deed of Trust. All references in this Assignment to Assignor or Assignee shall he deemed to include all such successors and assigns of such respective party.

17. Assignor agrees that within this Assignment, words of any gender shall be held and construed to include any other gender, and words in the singular number shall he held and construed to include the plural and words in the plural number shall he held and construed to include the singular, unless the context otherwise requires.

18. Assignor agrees that this Assignment may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All such counterparts shall be construed together and shall constitute one instrument, but in making proof hereof it shall only be necessary to produce one such counterpart.

19. Assignor agrees and covenants with Assignee that this Assignment shall not be construed or deemed made for the benefit of any third party or parties.

20. This Assignment shall be construed in accordance with and shall be subject to the laws of the State of Texas without regard to principles of conflict of laws.

21. This Assignment contains the entire agreement concerning the assignment by Assignor of the Leases and the Rents thereunder between the parties hereto. No variations, modifications or changes herein or hereof shall be binding upon any party hereto, unless set forth in a document duly executed by or on behalf of such party.

Page 6

IN WITNESS WHEREOF, Assignor has executed this Assignment of Leases and Rents as of the date first above written.

Lazarus Refining & Marketing, LLC,

a Delaware limited liability company

By: Blue Dolphin Energy Company, a Delaware

corporation, its sole member

By: ___________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

STATE OF TEXAS	§
	§
COUNTY OF HARRIS	§

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ___________________, 2015.

	________________________________
	NOTARY PUBLIC, State of Texas

My Commission Expires:

______________________

AFTER RECORDING RETURN TO:

Ronda K. Garrett

Sovereign Bank

17950 Preston Road, Suite 500

Dallas, TX 75252

Page 7

EXHIBIT “A”

LEGAL DESCRIPTION

S 13° 27’ 49” E, 208.63 feet (called S 13° 37’ E, 207.4 feet) to a five-eighths inch diameter rebar found near a two way fence corner,

N 76° 26’ 34” E, 368.79 feet (called N 76° 29’ E, 368.4 feet) to a one-half inch diameter rebar set with cap (B&A),

N 76° 28’ 28” E, 31.40 feet (called N 76° 49’ E, 31.4 feet) to a five-eighths inch diameter rebar found near a two way fence corner,

same being the southeast corner of said residue 640 acre tract and

Page 1

N 76° 16’ 00” E, 275.15 feet (called N 76° 16’ E, 275.3 feet) to a railroad spike found in asphalt driveway,

N 81° 58’ 38” E, 100.50 feet (called N 82° 12’ E, 99.2 feet) to a one-half inch diameter rebar set with cap (B&A),

N 76° 16’ 00” E, 800.00 feet (called N 76° 14’ E, 800.5 feet) to a one-half inch diameter rebar set with cap (B&A),

N 70° 33’ 22” E, 100.50 feet (called N 70° 43’ E, 101.2 feet) to a concrete right of way marker found broken, and

THENCE with the south line of the tract herein described, same being a segment of the common line of said 51.30 acre tract and said 200.008 acre tract as follows:

S 76° 08’ 20” W, 768.00 feet (called S 76° 10’ W, 768.0 feet) to a one-half inch diameter rebar set with cap (B&A), and

Page 2

THENCE with the west line of the tract herein described, same being the common line of said 51.30 acre tract and said 41.245 acre tract as follows:

N 13° 57’ 38” W, 223.50 feet (called N 13° 55’ W, 223.5 feet) to a one-half inch diameter rebar set with cap (B&A),

N 13° 53’ 37” W, 373.70 feet (called N 13° 51’ W, 373.7 feet) to a fence post, and

N 13° 49’ 38” W, 449.84 feet (called N 13° 47’ W, 448.8 feet) to the PLACE OF BEGINNING and containing 56.309 ACRES OF LAND.

Page 3

INDEMNIFICATION AGREEMENT

This Agreement is made and entered into on the 4 th day of December, 2015 by Lazarus Refining & Marketing, LLC, a Delaware limited liability company (“Debtor”), Blue Dolphin Energy Company, Lazarus Energy LLC, a Delaware limited liability company, Lazarus Energy Holdings LLC, a Delaware limited liability company, and Jonathan Pitts Carroll, Sr. (collectively on a joining and several basis, “Guarantor”, whether one or more) for the benefit of Sovereign Bank (“Lender”) in connection with that certain loan from Lender to Debtor in the original principal amount of $10,000,000.00 (the “Loan”). The Loan is secured by (i) a second lien Deed of Trust, Mortgage, Security Agreement, Assignment of Rents, Financing Statement and Fixture Filing made by Lazarus Energy to Robert Blount, as Trustee, for the benefit of Lender, and (ii) a first lien Leasehold Deed of Trust, Mortgage, Security Agreement, Assignment of Rents, Financing Statement and Fixture Filing made by Debtor to Robert Blount, as Trustee, for the benefit of Lender (collectively, the “Deed of Trust”) on real property more particularly described on Exhibit “A” attached hereto and made a part hereof for all purposes (the “Property”).

Debtor and Guarantor represent and warrant that, with the exception of the matters revealed by the Phase I and Phase II environment assessments previously delivered to Lender (the “Report”), the following statements are true:

(1) No industrial activities that could have resulted in environmental contamination of the Property have occurred on the Property to Debtor’s or Guarantor’s knowledge, including without limitation, storage, treatment or disposal of hazardous substances;

(2) Other than the Report, no report, analysis, study or other document identifies any harmful or friable asbestos or hazardous contaminants on the Property to Debtor’s or Guarantor’s knowledge; and

(3) the Property contains no harmful or friable asbestos, hazardous wastes or other hazardous substances to Debtor’s or Guarantor’s knowledge.

At its sole cost and expense, Debtor and Guarantor shall comply with all federal, state and local laws, regulations and orders with respect to the discharge and removal of hazardous or toxic substances, pay immediately when due the cost of removal of any such substances, and keep the Property free of any lien imposed pursuant to such laws, regulation and orders, regardless of whether such toxic substances were introduced to the Property prior to or after Debtor’s ownership and control of the Property. In addition, Debtor shall not install or permit to be installed in the Property any friable asbestos or any substance containing asbestos and deemed hazardous by applicable federal, state and local laws, regulations and orders. In addition to the remedies set forth elsewhere in the Deed of Trust or other collateral documents concerning the Loan herein secured as to default by Debtor, Lender may cause the Property to be freed from the hazardous wastes, contaminants or asbestos, and in such event, the cost of the removal shall be secured by the Deed of Trust, shall be payable by Debtor on demand and shall bear interest at the default interest rate provided in the Promissory Note secured by the Deed of Trust from the date advanced until paid. Debtor shall give to Lender and its agents and employees access to the Property for such purpose, and hereby grants to Lender a license to remove the hazardous wastes, contaminants or asbestos from the Property. Debtor and Guarantor shall indemnify, defend and hold Lender harmless from and against any and all liability, loss or damage (including, without limitation, reasonable attorneys’ fees and costs incurred in the investigation, defense and settlement of claims) that Lender may incur as a result of or in connection with the assertion against Debtor or Guarantor of any claim relating to the presence or removal of any hazardous wastes, contaminants or asbestos from the Property, or relating to compliance with any applicable federal, state or local laws, regulations or orders relating thereto.

Page 1

Debtor and Guarantor warrant and represent that to their knowledge there are no toxic wastes or hazardous substances in the building materials used to construct the improvements located on the Property, and that Debtor and Guarantor shall indemnify and hold Lender harmless from any and all claims, costs or expenses (including defense costs and reasonable attorneys’ fees) arising out of, relating to or in any manner connected with the breach of any such warranty or representation and all such claims, costs or expenses that Lender may incur as a result of or in connection with any presence of or removal of any hazardous wastes, contaminants, or asbestos from the Property, regardless of whether such conditions are or are not caused by or within the control of the Debtor or whether such conditions became present at a time when the Debtor was not the owner or in control of the Property. Further, Debtor and Guarantor shall indemnify and hold the Property and Lender free from any and all claims, costs or expenses (including defense costs and reasonable attorneys’ fees) arising out of, relating to, or in any manner connected with any toxic wastes, brought onto or made on the Property by Debtor, its agents, employees, invitees, partners, or tenants, their agents, employees or invitees. Debtor and Guarantor agree that any violation of Debtor’s or Guarantor’s warranties in this paragraph will entitle Lender to specific performance or any other remedy available at law and parties agree that any applicable statute of limitations is hereby tolled from date of execution hereof until Lender has actual knowledge of any such violation of warranty.

Debtor and Guarantor agree to maintain the Property in compliance with and perform due diligence to bring the Property into compliance with the Americans with Disabilities Act of 1990 and all other state, federal and local laws concerning accessibility to disabled and handicapped individuals (“ADA Statutes”). Debtor and Guarantor shall indemnify, defend and hold Lender harmless from and against any and all liability, loss or damage (including, without limitation, reasonable attorneys’ fees and costs incurred in the investigation, defense and settlement of claims) that Lender may incur as a result of or in connection with the assertion against Debtor or Guarantor of any claim relating to ADA Statutes or relating to compliance with ADA Statutes. Debtor and Guarantor agree that any violation of Debtor’s or Guarantor’s warranties in this paragraph will entitle Lender to specific performance or any other remedy available at law and parties agree that any applicable statute of limitations is hereby tolled from date of execution hereof until Lender has actual knowledge of any such violation of warranty.

Debtor and Guarantor further agree that any violation of the agreements under this Indemnification Agreement will constitute an event of default with respect to the Loan.

Page 2

Executed as of the date first above written.

DEBTOR:

Lazarus Refining & Marketing, LLC,

a Delaware limited liability company

By: Blue Dolphin Energy Company, a Delaware

corporation, its sole member

By: _________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

GUARANTORS:

____________________________

Jonathan Pitts Carroll, Sr.

Blue Dolphin Energy Company

By: _________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

Lazarus Energy LLC

By: Blue Dolphin Energy Company, a Delaware

corporation, its sole member

By: _________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

Lazarus Energy Holdings LLC

By: _________________________

Name: Jonathan Pitts Carroll, Sr.

Title: Member

Page 3

STATE OF TEXAS	§
	§
COUNTY OF HARRIS	§

BEFORE ME, the undersigned, a Notary Public in and for the said County and State, on this day personally appeared Jonathan Pitts Carroll, Sr., President of Blue Dolphin Energy Company, a Delaware corporation, the Sole Member of Lazarus Refining & Marketing, LLC, a Delaware limited liability company, known to me to be the person whose name is subscribed to the foregoing document and acknowledged to me that he executed the same in the capacity therein stated and for the purposes and consideration therein expressed.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ____________________, 2015.

	_________________________________
	NOTARY PUBLIC, State of Texas

My Commission Expires:

____________________

Page 4

STATE OF TEXAS	§
	§
COUNTY OF HARRIS	§

BEFORE ME , the undersigned, a Notary Public in and for the said County and State, on this day personally appeared Jonathan Pitts Carroll, Sr., known to me to be the person whose name is subscribed to the foregoing document and acknowledged to me that he executed the same for the purposes and consideration therein expressed.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ____________________, 2015.

	_________________________________
	NOTARY PUBLIC, State of Texas

My Commission Expires:

____________________

STATE OF TEXAS	§
	§
COUNTY OF HARRIS	§

BEFORE ME, the undersigned, a Notary Public in and for the said County and State, on this day personally appeared Jonathan Pitts Carroll, Sr., President of Blue Dolphin Energy Company, a Delaware corporation, known to me to be the person whose name is subscribed to the foregoing document and acknowledged to me that he executed the same in the capacity therein stated and for the purposes and consideration therein expressed.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ____________________, 2015.

	_________________________________
	NOTARY PUBLIC, State of Texas

My Commission Expires:

____________________

Page 5

STATE OF TEXAS	§
	§
COUNTY OF HARRIS	§

BEFORE ME, the undersigned, a Notary Public in and for the said County and State, on this day personally appeared Jonathan Pitts Carroll, Sr., President of Blue Dolphin Energy Company, a Delaware corporation, the Sole Member of Lazarus Energy LLC, a Delaware limited liability company, known to me to be the person whose name is subscribed to the foregoing document and acknowledged to me that he executed the same in the capacity therein stated and for the purposes and consideration therein expressed.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ____________________, 2015.

	_________________________________
	NOTARY PUBLIC, State of Texas

My Commission Expires:

____________________

STATE OF TEXAS	§
	§
COUNTY OF HARRIS	§

BEFORE ME, the undersigned, a Notary Public in and for the said County and State, on this day personally appeared Jonathan Pitts Carroll, Sr., the Member of Lazarus Energy Holdings LLC, a Delaware limited liability company, known to me to be the person whose name is subscribed to the foregoing document and acknowledged to me that he executed the same in the capacity therein stated and for the purposes and consideration therein expressed.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ____________________, 2015.

	_________________________________
	NOTARY PUBLIC, State of Texas

My Commission Expires:

____________________

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EXHIBIT A

LEGAL DESCRIPTION

S 13° 27’ 49” E, 208.63 feet (called S 13° 37’ E, 207.4 feet) to a five-eighths inch diameter rebar found near a two way fence corner,

N 76° 26’ 34” E, 368.79 feet (called N 76° 29’ E, 368.4 feet) to a one-half inch diameter rebar set with cap (B&A),

N 76° 28’ 28” E, 31.40 feet (called N 76° 49’ E, 31.4 feet) to a five-eighths inch diameter rebar found near a two way fence corner,

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N 76° 16’ 00” E, 275.15 feet (called N 76° 16’ E, 275.3 feet) to a railroad spike found in asphalt driveway,

N 81° 58’ 38” E, 100.50 feet (called N 82° 12’ E, 99.2 feet) to a one-half inch diameter rebar set with cap (B&A),

N 76° 16’ 00” E, 800.00 feet (called N 76° 14’ E, 800.5 feet) to a one-half inch diameter rebar set with cap (B&A),

N 70° 33’ 22” E, 100.50 feet (called N 70° 43’ E, 101.2 feet) to a concrete right of way marker found broken, and

THENCE with the south line of the tract herein described, same being a segment of the common line of said 51.30 acre tract and said 200.008 acre tract as follows:

S 76° 08’ 20” W, 768.00 feet (called S 76° 10’ W, 768.0 feet) to a one-half inch diameter rebar set with cap (B&A), and

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THENCE with the west line of the tract herein described, same being the common line of said 51.30 acre tract and said 41.245 acre tract as follows:

N 13° 57’ 38” W, 223.50 feet (called N 13° 55’ W, 223.5 feet) to a one-half inch diameter rebar set with cap (B&A),

N 13° 53’ 37” W, 373.70 feet (called N 13° 51’ W, 373.7 feet) to a fence post, and

N 13° 49’ 38” W, 449.84 feet (called N 13° 47’ W, 448.8 feet) to the PLACE OF BEGINNING and containing 56.309 ACRES OF LAND.

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SOVEREIGN BANK – LOAN NO. 17036096

PLEDGE AGREEMENT

THIS PLEDGE AGREEMENT (as amended, modified or restated from time to time, this “ Agreement ”) dated as of DECEMBER 4, 2015 (the “ Effective Date ”), is between SOVEREIGN BANK , a Texas state bank (“ Lender ”), and LAZARUS ENERGY HOLDINGS LLC , a Delaware limited liability company (“ Pledgor ”).

RECITALS

WHEREAS , Lender has extended certain financial accommodations to LAZARUS REFINING & MARKETING, LLC , a Delaware limited liability company (“ Debtor ”), pursuant to that certain LOAN AGREEMENT dated as of the Effective Date between Lender and Debtor (as amended, modified, or restated from time to time, the “ Loan Agreement ”; capitalized terms not otherwise defined herein shall have the same meanings as in the Loan Agreement); and

WHEREAS , it is expressly understood between Pledgor and Lender that the execution and delivery of this Agreement is a condition precedent to Lender’s obligation to enter into the Loan Agreement, the value of the consideration received and to be received by Pledgor is reasonably worth at least as much as the liability and obligation of Pledgor under this Agreement, and such liability and obligation may reasonably be expected to benefit Pledgor directly or indirectly;

NOW, THEREFORE , for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

1. Grant of Security Interest . Pledgor pledges, assigns and grants to Lender a first lien security interest and lien in the Collateral (hereinafter defined) to secure the payment and the performance of the Obligations (as defined in the Loan Agreement and used herein with the same meaning). The security interest is granted in the following collateral (the “ Collateral ”):

(a) The issued and outstanding capital stock of BLUE DOLPHIN ENERGY COMPANY , a Delaware corporation (“ Issuer ”) described on Schedule A attached hereto (the “ Equity Interests ”), together with any and all other securities, cash, certificates or other property, warrants, options or rights distributed or distributable in respect of, or in substitution or exchange for such shares of common stock or such certificate or any of the foregoing, or other property at any time and from time to time receivable or otherwise distributed in respect of or in exchange for all or any thereof; and

(b) Any and all of the following property that Pledgor receives, or is or becomes entitled to receive, on account of any of the Equity Interests or any other Collateral: (i) any stock certificate, including without limitation, any certificate representing a stock dividend or any certificate issued or issuable in connection with any recapitalization, reclassification, merger, consolidation, conversion, sale of assets, combination of shares, stock split or spin-off; (ii) any and all options, warrants and subscription or other rights, whether received or receivable as an addition to or in substitution of any other Collateral, including all certificates evidencing or representing the same; (iii) any and all dividends or distributions of any kind whatsoever, whether distributable in cash, cash equivalents, stock or other securities, or other property of any kind; (iv) any interest, premium or principal payments; (v) any and all conversion or redemption proceeds; and (vi) any and all other dividends, profits, proceeds, income, distributions, payments upon dissolution or liquidation of Issuer, payments upon the sale, financing or refinancing of any of the property or assets of Issuer, payments of proceeds of a casualty or condemnation, return of capital, proceeds upon a redemption or conversion, repayment of loans, and payments of any kind or nature whatsoever, in each case now or hereafter distributable or payable by Issuer or any shareholder of Issuer (in its capacity as a shareholder) to Pledgor by reason of Pledgor being a shareholder in Issuer, or now or hereafter distributable or payable to Pledgor from any other source by reason of Pledgor being a shareholder of either, or on account of any interest in or claim or rights against Issuer held by Pledgor, or with respect to the assets of Issuer by reason of Pledgor being a shareholder in Issuer; and

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(d) All accounts, contract rights, security entitlements, securities accounts, investment property and general intangibles now or hereafter evidencing or arising from any of the foregoing; and

(e) All notes or other documents or instruments now or hereafter evidencing or securing any of the foregoing; and

(f) All right of Pledgor to collect and enforce payments distributable or payable by Issuer or any shareholder of Issuer to Pledgor pursuant to the terms of the Organizational Documents of Issuer; and

(g) All documents, writings, books, files, records, computer tapes, programs, ledger books and ledger pages arising from or evidencing any of the foregoing; and

(h) All renewals, extensions, additions, substitutions or replacements of any of the foregoing; and

(i) All powers, options, rights, privileges and immunities pertaining to any of the foregoing; and

(j) All products and proceeds of any of the foregoing and all cash, security or other property distributed on account of, or in exchange or substitution of, any of the foregoing (including, without limitation, all stock rights, stock splits, subscription rights, dividends, new certificates and new securities).

2. Pledgor’s Warranties . Pledgor hereby represents and warrants to Lender as follows:

(a) Financing Statements; Liens and Security Interests . No financing statement covering the Collateral is or will be on file in any public office, except the financing statements relating to this security interest, and no security interest, other than the one herein created, has attached or been perfected in the Collateral or any part thereof. This Agreement creates a valid first priority security interest in favor of Lender in the Collateral. The taking possession by the Lender of the certificates representing the Equity Interests and all other certificates and instruments constituting Collateral, together with a Stock Power in the form of Exhibit A attached hereto, will perfect and establish the first priority of the Lender’s security interest in the Equity Interests.

(b) Ownership . Pledgor owns the Collateral free from any setoff, claim, restriction, lien, security interest or encumbrance except for taxes not yet due and payable and the security interest hereunder.

(c) Power and Authority . Pledgor has full power and authority to enter into this Agreement, and all necessary consents and approvals of any persons, entities, governmental or regulatory authorities and securities exchanges have been obtained to effectuate the validity of this Agreement.

3. Pledgor’s Covenants . Until full payment and performance of all of the Indebtedness, unless Lender otherwise consents in writing:

(a) Agreement . Pledgor shall perform all of its agreements herein and in any other agreements between it and Lender.

(b) Ownership of Collateral . Pledgor shall defend the Collateral against all claims and demands of all persons at any time claiming any interest therein adverse to Lender. Pledgor shall keep the Collateral free from all liens and security interests other than taxes not yet due and payable and the security interest hereunder.

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(c) Lender’s Costs . Pledgor shall pay all reasonable costs necessary to obtain, preserve, perfect, defend and enforce the security interest created by this Agreement, and preserve, defend, enforce and collect the Collateral, including but not limited to taxes, assessments, reasonable attorney’s fees, legal expenses and expenses of sales. Whether the Collateral is or is not in Lender’s possession, and without any obligation to do so and without waiving Pledgor’s default for failure to make any such payment, Lender at its option may pay any such costs and expenses and discharge encumbrances on the Collateral, and such payments shall be a part of the Indebtedness and bear interest at the maximum rate under applicable law. Pledgor agrees to reimburse Lender on demand for any costs so incurred.

(d) Possession of Collateral . Pledgor shall deliver all equity and stock certificates to Lender, and following and during the continuation of an Event of Default, Pledgor shall deliver all other instruments and documents which are a part of the Collateral and in Pledgor’s possession to Lender immediately, or if hereafter acquired, immediately following acquisition, in a form suitable for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank with signatures appropriately guaranteed in form and substance reasonably satisfactory to Lender.

(e) Power of Attorney . Pledgor appoints Lender and any officer thereof as Pledgor’s attorney-in-fact with full power in Pledgor’s name and on Pledgor’s behalf to do every act which Pledgor is obligated to do or may be required to do hereunder following the occurrence and during the continuation of an Event of Default; provided however, nothing in this paragraph shall be construed to obligate Lender to take any action hereunder nor shall Lender be liable to Pledgor for failure to take any action hereunder. This appointment shall be deemed a power coupled with an interest and shall not be terminable as long as the Indebtedness is outstanding and shall not terminate on the disability or incompetence of Pledgor. Without limiting the generality of the foregoing, Lender shall have the right and power following the occurrence and during the continuation of an Event of Default, to receive, indorse and collect all checks and other orders for the payment of money made payable to Pledgor representing any dividend, interest payment or other distribution payable in respect of the Collateral or any part thereof.

4. Rights and Powers of Lender . Lender, after an Event of Default and during the continuation thereof, without liability to Pledgor may: (a) take control of proceeds, including securities received as dividends or by reason of splits; (b) release the Collateral in its possession to Pledgor, temporarily or otherwise; (c) take control of funds generated by the Collateral, such as cash dividends, interest and proceeds, and use same to reduce any part of the Indebtedness; (d) exercise all other rights which an owner of such Collateral may exercise; and (e) transfer any of the Collateral or evidence thereof into its own name or that of its nominee. Lender shall not be liable for failure to collect any account or instruments, or for any act or omission on the part of Lender, its officers, agents or employees, except for its or their own willful misconduct or gross negligence. The foregoing rights and powers of Lender will be in addition to, and not a limitation upon, any rights and powers of Lender given by law, elsewhere in this Agreement, or otherwise.

5. Event of Default . If any Event of Default shall occur and be continuing, then, in each and every such case, Lender may, without (a) presentment, demand, or protest, (b) notice of default, dishonor, demand, non-payment, or protest, (c) notice of intent to accelerate all or any part of the Indebtedness, (d) notice of acceleration of all or any part of the Indebtedness, or (e) notice of any other kind, all of which Pledgor hereby expressly waives (except for any notice required under this Agreement, any other Loan Document or which may not be waived under applicable law), at any time thereafter exercise and/or enforce any of the following rights and remedies, at Lender’s option:

(a) Acceleration . The Indebtedness shall, at Lender’s option, become immediately due and payable.

(b) Liquidation of Collateral . Sell, or instruct any agent or broker to sell, all or any part of the Collateral in a public or private sale, direct any agent or broker to liquidate all or any part of any account and deliver all proceeds thereof to Lender, and apply all proceeds to the payment of any or all of the Indebtedness in such order and manner as Lender shall, in its discretion, choose or hold such proceeds as additional Collateral for the Indebtedness.

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Pledgor specifically understands and agrees that any sale by Lender of all or part of the Collateral pursuant to the terms of this Agreement may be effected by Lender at times and in manners which could result in the proceeds of such sale as being significantly and materially less than might have been received if such sale had occurred at different times or in different manners, and Pledgor hereby releases Lender and its officers and representatives from and against any and all obligations and liabilities arising out of or related to the timing or manner of any such sale. If, in the opinion of Lender, there is any question that a public sale or distribution of any Collateral will violate any state or federal securities law, Lender may offer and sell such Collateral in a transaction exempt from registration under federal securities law, and any such sale made in good faith by Lender shall be deemed “commercially reasonable.”

6. No Disposition, Etc . Without the prior written consent of Lender, Pledgor agrees that Pledgor will not sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Collateral, nor will Pledgor create, incur or permit to exist any pledge, lien, mortgage, hypothecation, security interest, charge, option or any other encumbrance with respect to any of the Collateral, or any interest therein, or any proceeds thereof.

7. General .

(a) Parties Bound . Lender’s rights hereunder shall inure to the benefit of its successors and assigns, and in the event of any assignment or transfer of any of the Indebtedness or the Collateral, Lender thereafter shall be fully discharged from any responsibility with respect to the Collateral so assigned or transferred, but Lender shall retain all rights and powers hereby given with respect to any of the Indebtedness or the Collateral not so assigned or transferred. All representations, warranties and agreements of Pledgor, if more than one, are joint and several and all shall be binding upon the successors and assigns of Pledgor.

(b) Waiver . No delay of Lender in exercising any power or right shall operate as a waiver thereof; nor shall any single or partial exercise of any power or right preclude other or further exercise thereof or the exercise of any other power or right. No waiver by Lender of any right hereunder or of any default by Pledgor shall be binding upon Lender unless in writing, and no failure by Lender to exercise any power or right hereunder or waiver of any default by Pledgor shall operate as a waiver of any other or further exercise of such right or power or of any further default. Each right, power and remedy of Lender as provided for herein or in any of the Loan Documents, or which shall now or hereafter exist at law or in equity or by statute or otherwise, shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by Lender of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Lender of any or all other such rights, powers or remedies.

(c) Notice . All notices, requests, demands or other communications required or permitted to be given pursuant to this Agreement shall be in writing and given by (a) personal delivery, (b) expedited delivery service with proof of delivery, or (c) United States mail, postage prepaid, registered or certified mail, return receipt requested, sent to the intended addressee at the address set forth on the signature page hereof and shall be deemed to have been received either, in the case of personal delivery, as of the time of personal delivery, in the case of expedited delivery service, as of the time of expedited delivery and in the manner provided herein, or in the case of mail, upon the THIRD ( 3 rd ) day after deposit in a depository receptacle under the care and custody of the United States Postal Service. Any party shall have the right to change its address of notice hereunder to any other location within the continental United States by notice to the other party of such new address. Notice shall be deemed reasonable if given in accordance with this clause (c) at least TEN (10) days before the related action (or if the Code elsewhere specifies a longer period, such longer period).

(d) Modifications . No provision hereof shall be modified or limited except by a written agreement expressly referring hereto and to the provisions so modified or limited and signed by Pledgor and Lender. The provisions of this Agreement shall not be modified or limited by course of conduct or usage of trade.

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(e) Partial Invalidity . The unenforceability or invalidity of any provision of this Agreement shall not affect the enforceability or validity of any other provision herein, and the invalidity or unenforceability of any provision of any Loan Document to any person or circumstance shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances.

(f) Applicable Law and Venue . This Agreement has been delivered in the State of Texas and shall be construed in accordance with the laws of that State. This Agreement is performable by Pledgor in the county or city of Lender’s address as set forth in this Agreement and Pledgor expressly waives any objection as to venue in any such location. Wherever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement 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 provisions or the remaining provisions of this Agreement.

(g) Other Pledge Agreement; Partial Release; Replacement Stock Certificates . Pledgor and Lender have previously entered that certain Pledge Agreement dated May 2, 2014, between Pledgor and Lender relating to Loan Number 17033655 (the “ 2014 Pledge Agreement ”), pursuant to which Pledgor granted a security interest in, among other things, (i) 200,000 shares of stock of Issuer represented by Certificate No. BDC2593, (ii) 200,000 shares of stock of Issuer represented by Certificate No. BDC2594, and (iii) 200,000 shares of stock of Issuer represented by Certificate No. BDC2597, together with the other “Collateral” relating thereto under the 2014 Pledge Agreement (the “ BDC Share Collateral ”), in order to secure the “Indebtedness” referenced therein (the “ 2014 Indebtedness ”). In connection with the execution and delivery of this Agreement, Pledgor and Lender agree and confirm as follows: (A) all liens and security interests granted to Lender under the 2014 Pledge Agreement in and to 50,000 of the 200,000 shares of stock of Issuer represented by Certificate No. BDC 2594 (and all other “Collateral” related thereto under the 2014 Pledge Agreement) shall hereafter be subordinate in priority to the liens and security interests granted to Lender under this Agreement in and to such property, notwithstanding the order, manner or time or grant or perfection; (B) all liens and security interests granted to Lender under the 2014 Pledge Agreement in and to the 200,000 shares of stock of Issuer represented by Certificate No. BDC 2597 (and all other “Collateral” related thereto under the 2014 Pledge Agreement) shall hereafter be subordinate in priority to the liens and security interests granted to Lender under this Agreement in and to such property, notwithstanding the order, manner or time or grant or perfection; (C) with respect to any UCC-1 financing statements with naming Pledgor as debtor and Lender as secured party, Lender is acting as secured party having a security interest in and to all BDC Share Collateral or portions thereof granted under the 2014 Pledge Agreement and this Agreement, and in possessing any BDC Share Collateral, Lender holding the same, and is acting as agent on behalf of itself, under the 2014 Pledge Agreement and on behalf of itself as Lender under this Agreement; (D) with respect to the shares of stock of Issuer evidenced by Certificate No. BDC2594, (1) for all shares evidenced by such stock certificate except for 50,000 shares of such stock of Issuer, Lender shall have a first priority security interest in such shares of stock of Issuer for itself as Lender and secured party under the 2014 Pledge Agreement to secure the 2014 Indebtedness and (2) for the remaining 50,000 shares of such stock of Issuer, (I) Lender shall have a second priority security interest in such 50,000 shares of stock of Issuer for itself as Lender and secured party under the 2014 Pledge Agreement to secure the 2014 Indebtedness and (II) Lender shall have a first priority security interest in such 50,000 shares of stock of Issuer for itself as Lender and secured party under this Agreement to secure the Obligations; (E) with respect to the 200,000 shares of such stock of Issuer evidenced by Certificate No. BDC2597, (I) Lender shall have a second priority security interest in such 200,000 shares of stock of Issuer for itself as Lender and secured party under the 2014 Pledge Agreement to secure the 2014 Indebtedness and (II) Lender shall have a first priority security interest in such 200,000 shares of stock of Issuer for itself as Lender and secured party under this Agreement to secure the Obligations; (F) Lender is authorized to take any remedies or enforce any rights granted by the 2014 Pledge Agreement or this Agreement or the related loan documents or applicable law; and (G) at the request or election of Lender, Pledgor shall promptly cause Certificate No. BDC2594 to be replaced by two or more separate replacement certificates, one or more of which may evidence 150,000 shares of stock of Issuer in the aggregate (and will remain pledged to Lender pursuant to the 2014 Pledge Agreement) and one or more of which may evidence 50,000 shares of stock of Issuer in the aggregate (and will be pledged to Lender pursuant to this Agreement on a first priority basis and will remain pledged to Lender pursuant to the 2014 Pledge Agreement on a second priority basis), or in such other subset or denominations as Lender may request (and Lender is hereby irrevocably authorized to take such actions and sign and deliver such documents and instruments (including issuance of replacement stock certificates of Issuer) on behalf of Pledgor as it deems necessary or advisable to carry out the intent of this Section and this Agreement or to perform any obligations of Pledgor hereunder. Except as expressly modified by this Section 7(g), none of Lender’s rights granted under the 2014 Pledge Agreement shall be impaired, diminished, discontinued or otherwise affected in any way.

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(h) Ratification of Prior Documents . Pledgor hereby ratifies, approves, and confirms (i) all terms, provisions, conditions and obligations (including the liens and security interests granted thereunder) of the 2014 Pledge Agreement (and the “Loan Agreement” defined therein) and each collateral document, each guaranty and each other loan document, instrument or agreement related thereto to which it is a party and all actions taken under or pursuant to such foregoing documents, instruments or agreements and (ii) all terms, provisions, conditions and obligations (including the liens and security interests granted thereunder) of the LE Loan Agreement (as defined in the Loan Agreement) and each pledge or other collateral document, each guaranty and each other loan document, instrument or agreement related thereto to which it is a party and all actions taken under or pursuant to such foregoing documents, instruments or agreements, in each case in each and every respect.

REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

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EXECUTED as of the Effective Date.

LENDER:	ADDRESS:

SOVEREIGN BANK	17950 Preston Road, Suite 500
	Dallas, TX 75252
By:
Name:
Title:

PLEDGOR:	ADDRESS :

LAZARUS ENERGY HOLDINGS LLC	801 Travis Street, Suite 2100
	Houston, TX 77002
By: ______________________ Name: Jonathan Pitts Carroll, Sr. Title: Member

ACKNOWLEDGEMENT

BLUE DOLPHIN ENERGY COMPANY , a Delaware corporation (“ Issuer ”), signs this Acknowledgement for the following purposes: Issuer has reviewed the terms and conditions of the foregoing Agreement and acknowledges the lien of Lender on the Collateral as of the date first written above. Issuer hereby confirms and agrees that (i) Pledgor is the registered owner of pledged stock in Issuer, and (ii) Issuer shall not change the registered owner of the Equity Interests without the prior written consent of Lender. If Issuer shall receive instructions originated by Lender relating to the Collateral, Issuer shall immediately comply with such instructions without further consent by Pledgor or any other person.

BLUE DOLPHIN ENERGY COMPANY

By: ___________________

Name: Jonathan P. Carroll

Title: President

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SCHEDULE A

TO PLEDGE AGREEMENT

PLEDGED STOCK

Class of Stock	Stock Certificate No.	No. of Shares
COMMON	BDC2594		50,000 shares of 200,000 shares represented by Stock Certificate BDC2594
COMMON	BDC2597		200,000

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EXHIBIT A

TO PLEDGE AND CONTROL AGREEMENT

STOCK POWERS

ATTACHED

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IRREVOCABLE STOCK POWER

FOR VALUE RECEIVED , the undersigned hereby sells, assigns and transfers to _________________________________, 50,000 out of 200,000 shares of common stock in BLUE DOLPHIN ENERGY COMPANY , a Delaware corporation, standing in the name of the undersigned on the books of such corporation, represented by Certificate Number BDC2594 and the undersigned does hereby irrevocably constitute and appoint __________________________________ the undersigned’s true and lawful attorney-in-fact, with full power of substitution, to transfer this stock on the books of such corporation.

LAZARUS ENERGY HOLDINGS LLC

By: _______________________

Name: Jonathan P. Carroll

Title: Sole Member

Dated:

ATTACH CERTIFICATE REPRESENTING EQUITY INTEREST

IRREVOCABLE STOCK POWER

FOR VALUE RECEIVED , the undersigned hereby sells, assigns and transfers to _________________________________, 200,000 shares of common stock in BLUE DOLPHIN ENERGY COMPANY , a Delaware corporation, standing in the name of the undersigned on the books of such corporation, represented by Certificate Number BDC2597 and the undersigned does hereby irrevocably constitute and appoint __________________________________ the undersigned’s true and lawful attorney-in-fact, with full power of substitution, to transfer this stock on the books of such corporation.

LAZARUS ENERGY HOLDINGS LLC

By: _______________________

Name: Jonathan P. Carroll

Title: Sole Member

Dated:

ATTACH CERTIFICATE REPRESENTING EQUITY INTEREST

COLLATERAL ASSIGNMENT OF KEY AGREEMENTS

THIS COLLATERAL ASSIGNMENT OF KEY AGREEMENTS (this “ Assignment ”), is made as of December 4, 2015, by and among LAZARUS REFINING & MARKETING, LLC, a Delaware limited liability company (“ Borrower ”) and LAZARUS ENERGY LLC (“ Lazarus Energy ”; and together with Borrower each an “ Assignor ” and collectively “ Assignors ”), in favor of SOVEREIGN BANK (together with successors and assigns, “ Assignee ”).

RECITALS:

WHEREAS, pursuant to the terms of that certain Loan Agreement, dated as of even date herewith (as amended, supplemented, amended and restated or otherwise modified from time to time, the “ Loan Agreement ”), among Borrower, as borrower, Lender, and the other parties specified therein as “Guarantors”; capitalized terms not otherwise defined in this Assignment that are defined in the Loan Agreement shall have

WHEREAS, Borrower (and Lazarus Energy, with respect to the agreements described in clauses (b), (c) and (e) in this recital) has entered into or may hereafter enter into (a) the construction contract relating to the Storage Improvements described in the Construction Rider and any other construction contract between Borrower and the general contractor relating to the construction of the Storage Improvements (each, a “Construction Contract”), (b) the Ground Lease Agreement dated June 1, 2015, between Borrower and Lazarus Energy, as amended by the certain Amendment to Ground Lease dated November 16, 2015 (as so amended, the “Ground Lease”), (c) the Equipment Lease dated June 1, 2015, between Borrower and Lazarus Energy (the “Equipment Lease”), and (d) the Tolling Agreement dated October 1, 2015, between Borrower and Lazarus Energy, and (e) each lease, rental or other agreement between Borrower and any other Person relating to storage services provided by Borrower or in connection with Borrower’s assets, including from the Collateral constituting the Storage Improvements (as so amended, and as amended, supplemented, restated or otherwise modified from time to time, each a “ Key Agreement ”); and

WHEREAS, Assignors are desirous of further securing to Assignee the repayment of the Secured Obligations and the performance of the other terms, covenants and agreements contained herein and in the Loan Agreement, the other Loan Documents and each other document evidencing, securing, guaranteeing and/or relating to the Secured Obligations; and

WHEREAS, as additional security for the payment and performance by Borrower of the Secured Obligations under the Loan Agreement and the other Loan Documents, Assignee has required that each Assignor pledge and assign to Assignee any and all of its respective right, title and interest in, to and under the Key Agreements.

AGREEMENT:

NOW, THEREFORE, in consideration of the extension of the terms of the Secured Obligations and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Assignor and Assignee hereby covenant and agree as follows:

1. To secure payment and performance of the obligations of Assignors in connection with the Secured Obligations, each Assignor does hereby absolutely, unconditionally and irrevocably grant a security interest in, assign, transfer, convey and set over unto Assignee, its successors and assigns, all of such Assignor’s right, title and interest, whether now owned or hereafter acquired, now existing or hereafter arising, wherever located, in, to and under (a) the Key Agreements, (b) personal property, including all goods, software, investment property, investment accounts, securities, commodity accounts, securities accounts, money, cash, letters of credit or letter-of-credit rights, supporting obligations, tax refunds, accounts, any and all contract rights, chattel paper (whether tangible or electronic), instruments, documents, general intangibles (including payment intangibles), promissory notes, right to receive proceeds of any insurance, indemnity, warranty or guaranty,

deposit accounts and bank accounts, copyrights, trademarks, patents, commercial tort claims, and other rights of any kind (including all rights to receive hydrocarbons or petroleum products, to receive payments of money or to receive other value pursuant to contracts, agreements or other arrangements with other Persons, for the trading, lending, borrowing or exchanging of hydrocarbons or petroleum products in the ordinary course of business), all present and future income, profits, substitutes or replacements of any of the foregoing, in each case as defined in the UCC (hereinafter defined) to the extent applicable, and in each case arising out of or related to the Key Agreements, and (c) all proceeds of any or all of the foregoing (collectively, the “ Key Agreement Collateral ”), TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns. Moreover, to secure payment and performance of the obligations of Assignors in connection with the Secured Obligations, each Assignor does hereby absolutely, unconditionally and irrevocably assign to Assignee, its successors and assigns, any and all rights that such Assignor may now or hereafter have to terminate the Key Agreement, as provided for therein. This Assignment shall constitute a security agreement under the Uniform Commercial Code as adopted in the State of Texas (the “ UCC ”).

2. Upon the occurrence and during the continuance of an Event of Default, Assignee shall be entitled to exercise all remedies provided in the UCC with respect to the security interest granted herein.

3. Concurrently herewith, each Assignor shall cause the Counterparty to execute and deliver to Assignee an “Acknowledgment of Pledge” in the form of Exhibit A annexed hereto, whereby the Counterparty shall consent to the assignment contained in Paragraph 1 hereof. In addition, Assignee shall endeavor to deliver written notice to the Counterparty of any subsequent assignment, which shall include the subsequent assignee’s name and notice information, provided that the failure to deliver such notice shall not be a default under this Assignment or limit any of Assignee’s rights hereunder.

4. Each Assignor hereby covenants and agrees that such Assignor shall not, without first obtaining Assignee’s or its successor’s or assign’s written consent, convey, assign, sell, mortgage, encumber, pledge, hypothecate, grant a security interest in, grant an option or options with respect to, or otherwise transfer in trust, assign or dispose of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration) any of the Key Agreement Collateral.

5. Each Assignor represents and warrants that: (a) it has the full power, right and authority to assign its interest in the Key Agreement Collateral; (b) it owns its Key Agreement Collateral free and clear of all liens and claims of others and it has not transferred, assigned, granted a security interest in or otherwise encumbered its interest in and to the Key Agreement Collateral other than in favor of Assignee; (c) no security agreement, financing statement or other document is on file or of record in any public office with respect to the Key Agreement Collateral, other than in favor of Assignee; and (d) upon the filing of a UCC financing statement naming such Assignor as debtor and Assignee as secured party, Assignee will have a perfected lien on the Key Agreement Collateral of such Assignor.

6. Each Assignor covenants and agrees with Assignee as follows: (a) it will (i) comply with all terms of the Key Agreements, (ii) deliver to Assignee a copy of any material notice it receives from the Counterparty (including notices alleging default, threatening or declaring termination, or threatening or declaring a loss of capacity), and (iii) not waive or amend any material provision of any Key Agreement or fail to exercise any material right thereunder, if such waiver or amendment could reasonably be expected to impair the value of any Key Agreement or adversely affect the rights and remedies of Assignee under this Assignment, the Key Agreement Collateral; and (b) it will not change the location of its state of organization from the location specified in the caption to this Assignment unless, in conjunction therewith, such Assignor executes and delivers to Assignee such additional UCC financing statements as Assignee shall reasonably request to allow for Assignee’s continued perfected lien on the Key Agreement Collateral.

7. Each Assignor further covenants and agrees with Assignee that it will at any time and from time to time, upon the written request of Assignee, and at the joint and several expense of Assignors, promptly and duly execute and deliver such further instruments and documents and take such further action as Assignee may reasonably request for the purpose of obtaining or preserving the full benefits of this Assignment and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC. Each Assignor also hereby authorizes Assignee to file any such financing or continuation statement to the extent permitted by applicable law. A carbon, photographic or other reproduction of this Assignment shall be sufficient as a financing statement for filing in any jurisdiction. Additionally, each Assignor further covenants and agrees with Assignee that it will at any time and from time to time, upon the written request of Assignee, promptly and duly execute and deliver any amendment of the Key Agreements as Assignee may reasonably request.

8. This Assignment does not include the delegation to Assignee of any Assignor’s duties, responsibilities or obligations under the Key Agreements, Assignors remaining liable to perform all duties, responsibilities and obligations to be performed by Assignors thereunder, and Assignee shall not have any obligation or liability under the Key Agreements or by reason of or arising out of this Assignment, and each Assignor specifically agrees to indemnify and forever hold Assignee harmless from any claim or liability on account thereof, including, without limitation, attorneys’ fees incurred, except to the extent arising from the fraud, negligence, illegal acts or willful misconduct of Assignee.

9. Assignee’s sole duty with respect to the custody, safekeeping and physical preservation of the Key Agreement Collateral in its possession, under of the UCC or otherwise, shall be to deal with it in the same manner as Assignee deals with similar property for its own account. Neither Assignee nor any of its members, partners, shareholders, directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Key Agreement Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Key Agreement Collateral upon the request of any Assignor or any other Person or to take any other action whatsoever with regard to the Key Agreement Collateral or any part thereof. The powers conferred on Assignee hereunder are solely to protect Assignee’s interests in the Key Agreement Collateral and shall not impose any duty upon Assignee to exercise any such powers. Assignee shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its members, partners, shareholders, officers, directors, employees or agents shall be responsible to any Assignor or any other Person for any act or failure to act hereunder.

10. Any notices required to be given under this Assignment shall be given in the manner provided in Section 8. 2 of the Loan Agreement (or the LE Loan Agreement, in the case of Lazarus Energy) at such Assignor’s address specified on the signature page hereto. All such notices and communications shall be effective when delivered, except, such notices and communications to Assignee shall not be effective until received by Assignee.

11. This Assignment may not be modified, amended or terminated except by a written agreement executed by all of the parties hereto.

12. Any provision of this Assignment that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

13. Assignee shall not by any act (except by a written instrument), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default (or any Event of Default under the LE Loan Agreement) or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of Assignee any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by Assignee of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Assignee otherwise has on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singularly or concurrently and are not exclusive of any rights or remedies provided by law.

14. The parties hereto hereby notify the Counterparty of this Assignment and the security interests granted to Assignee hereunder.

15. THIS ASSIGNMENT SHALL BE DEEMED A CONTRACT UNDER, AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF TEXAS .

16. EACH ASSIGNOR HEREBY AGREES THAT ANY SUIT OR PROCEEDING ARISING IN RESPECT OF THIS ASSIGNMENT, OR ANY OF THE MATTERS CONTEMPLATED HEREBY OR THEREBY WILL BE, SUBJECT TO THE OTHER PROVISIONS OF THIS SECTION 16, TRIED WITHIN HARRIS COUNTY, TEXAS IN ANY OF THE LOCAL, STATE OR FEDERAL COURTS LOCATED THEREIN (OR IN ANY COURT HAVING JURISDICTION OVER APPEALS FROM ANY SUCH COURT), AND EACH ASSIGNOR HEREBY AGREES TO SUBMIT TO THE JURISDICTION OF, AND VENUE IN, SUCH COURT. EACH ASSIGNOR HEREBY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY APPLICABLE LEGAL REQUIREMENT. EACH ASSIGNOR HEREBY AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY REGISTERED MAIL ADDRESSED TO THE APPLICABLE PARTIES WILL BE EFFECTIVE SERVICE OF PROCESS AGAINST ANY ASSIGNOR FOR ANY ACTION OR PROCEEDING RELATING TO ANY SUCH DISPUTE. EACH ASSIGNOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS ASSIGNMENT IN ANY COURT REFERRED TO IN THIS SECTION 16. EACH ASSIGNOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, THE DEFENSE OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. WITHOUT LIMITATION OF THE FOREGOING, NOTHING HEREIN SHALL BE DEEMED TO IMPAIR THE RIGHT OF AGENT, ON BEHALF OF ITSELF, THE OTHER SECURED PARTIES, AND THEIR RESPECTIVE AFFILIATES (AND ONLY SUCH PERSONS, ASSIGNORS, ANY OF ITS SUBSIDIARIES, OR ANY OTHER PERSONS) TO BRING PROCEEDINGS IN THE COURTS OF ANY OTHER APPLICABLE JURISDICTIONS WHERE ANY OF THE COLLATERAL MAY BE LOCATED, OR TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LEGAL REQUIREMENTS .

17. This Assignment shall terminate without further action by any Person upon the payment in full of the Secured Obligations and termination of all of Lender’s commitments under the Loan Agreement and the LE Loan Agreement. Upon such termination, all collateral assignments, liens, security interests, transfers and assignments conveyed hereunder shall terminate and be released and reconveyed, as applicable, to the applicable Assignor, and Assignee will at Assignors’ joint and several expense execute and deliver such documents and instruments and take such actions to evidence and effectuate the foregoing.

18. This Assignment shall be binding upon and shall inure to the benefit of Assignors and Assignee and their respective successors and permitted assigns.

19. This Assignment may be executed in any number of counterparts each of which shall be an original, but all of which shall constitute one instrument.

20. All references to “ Assignee ” hereunder shall be deemed to include the successors and assigns of Assignee and the parties hereto acknowledge that actions taken by Assignee hereunder may be taken by Assignee’s agents and by the agents of the successors and assigns of Assignee.

21. Each Assignor hereby acknowledges that Counterparty has also collaterally assigned and granted a lien and security interest in its rights, title and interest in and to the Key Agreement Collateral pursuant to that certain Security Agreement dated as of the date hereof, made by Borrower in favor of Assignee (the “ Security Agreement ”). By its signature below, each Assignor further agrees with Assignee that all of the provisions of Exhibit A to this Assignment are hereby incorporated into this Assignment as if set forth in this Section 21, mutatis mutandis, except that (a) references to such Assignor in such Exhibit shall be references to Borrower, (b) references to the undersigned in such Exhibit A shall be references to each such Assignor, (c) references to the Assignment shall be references to the Security Agreement, (d) references to the Acknowledgement shall be references to this Section 21, and (e) each Assignor acknowledges having received a copy of the Security Agreement.

22. Each Assignor hereby acknowledges that the other Assignor has also collaterally assigned and granted a lien and security interest in its rights, title and interest in and to the Key Agreement Collateral pursuant to this Assignment. By its signature below, each Assignor further agrees with Assignee that all of the provisions of Exhibit A to this Assignment are hereby incorporated into this Assignment as if set forth in this Section 22, mutatis mutandis, except that (a) references to such Assignor in such Exhibit shall be references to the other Assignor, (b) references to undersigned in such Exhibit A shall be references to such Assignor, and (c) references to the Acknowledgement shall be references to this Section 22.

23. As used herein, the “Secured Obligations” shall mean (i) the Obligations (as defined in the Loan Agreement) including without limitation, indebtedness evidenced by that certain promissory note of even date herewith executed by Debtor payable to the order of Lender in the principal amount of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) (as the same may be amended, restated, or otherwise modified from time to time, the “Note”); and (ii) the Obligations (as defined in the LE Loan Agreement) including without limitation, indebtedness evidenced by that certain promissory note dated June 22, 2015, executed by Lazarus Energy payable to the order of Lender in the principal amount of TWENTY-FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00) (as the same may be amended, restated, or otherwise modified from time to time, the “LE Note”), together with any and all present or future indebtedness, liabilities, and obligations of the Debtor or Lazarus Energy to Lender of any kind and however evidenced, originally contracted with Lender or with another or others, or in which Lender may have or hereafter acquire a participating interest, direct or indirect, matured or not matured, absolute or contingent, and in any and all amendments, extensions, modifications, and renewals of any of the same. The term “Secured Obligations” shall also include, and Debtor hereby agrees to pay, any and all attorneys’ fees, costs, and expenses incurred by Lender in the collection or enforcement of any of the Secured Obligations and the perfection, preservation, and enforcement of its rights and remedies hereunder and its security interest in the Collateral.

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IN WITNESS WHEREOF , Assignors and Assignee have duly executed this Collateral Assignment of Key Agreement as of the day and year first written above.

	ASSIGNOR:

Address : 801 Travis, Suite 2100 Houston, Texas 77002 Attention: Jonathan Pitts Carroll, Sr. Telecopy No.: 866-804-9066	LAZARUS MARKETING & REFINING, LLC a Delaware limited liability company By: __________________________ Name: Jonathan Pitts Carroll, Sr. Title: President
Address : 801 Travis, Suite 2100 Houston, Texas 77002 Attention: Jonathan Pitts Carroll, Sr. Telecopy No.: 866-804-9066	LAZARUS ENERGY a Delaware limited liability company By: __________________________ Name: Jonathan Pitts Carroll, Sr. Title: President

Signature Page to

Collateral Assignment of Key Agreements


	ASSIGNEE:

	SOVEREIGN BANK,


	By: __________________________ Name: Title:

Signature Page to

Collateral Assignment of Key Agreements

EXHIBIT A

ACKNOWLEDGMENT OF PLEDGE OF KEY AGREEMENT

December 4, 2015

The undersigned hereby acknowledges and consents to the execution and delivery to SOVEREIGN BANK (“ Assignee ”), whose address is 17950 Preston Road, Suite 500

Dallas, Texas 75252 , by LAZARUS REFINING & MARKETING, LLC, a Delaware limited liability company, whose address is 801 Travis, Suite 2100, Houston, Texas 77002 (“ Borrower ”), and LAZARUS ENERGY LLC, a Delaware limited liability company, whose address is 801 Travis, Suite 2100, Houston, Texas 77002 (“ Lazarus Energy ”, and together with Borrower each an “ Assignor ” and collectively “ Assignors ”), of that certain Collateral Assignment of Key Agreements dated of even date herewith (the “ Assignment ”), as collateral security for the payment and performance by each Assignor of each and all of the “Secured Obligations” under and defined in the Assignment, and the assignment and pledge thereby to Assignee of all of Assignors’ right, title and interest in, to and under the Key Agreement Collateral (as defined in the Assignment). All capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Assignment, a fully executed copy of which is appended hereto as Schedule A and made a part hereof.

The undersigned shall document the pledge of the Key Agreement Collateral to Assignee in accordance with its normal business practices and agrees not to consent to any modification, amendment, transfer or assignment of the Key Agreement Collateral without the prior written consent of Assignee. The undersigned represents and warrants that the undersigned does not have any claim, right of offset, or counterclaim against Assignors under or with respect to the Key Agreement Collateral, and Assignors are not in default under the Key Agreements.

Notwithstanding the security interests of Assignee in the Key Agreement Collateral, Assignee shall have no obligation or liability whatsoever to the undersigned, or any member or manager thereof, or any creditor or other Person having any relationship, contractual or otherwise, with the undersigned, nor shall Assignee be obligated to perform any of the obligations or duties of any Assignor under the Key Agreements or to take any action to collect or enforce any claim for payment due to any Assignor arising thereunder, unless Assignee has assumed the obligations of such Assignor under the Key Agreement Collateral. The provisions of this Acknowledgment of Pledge of Key Agreement (this “ Acknowledgment ”) shall likewise be binding upon any and all permitted transferees, successors and assigns of the undersigned.

The undersigned hereby agrees that, upon notice by Assignee to the Counterparty that an Event of Default has occurred and is continuing under the Loan Agreement dated as of December 4, 2015, among Borrower, as borrower, Assignee, as lender, and the “Guarantors” parties thereto (the “Loan Agreement”) or the “LE Loan Agreement” as defined in the Loan Agreement, and until such time as such notification is rescinded, Assignee shall have the sole and exclusive right to exercise all of Assignors’ powers of ownership pertaining to the Key Agreement, except as otherwise provided herein. The undersigned agrees that it shall not amend or modify the Key Agreements without the prior written consent of Assignee, its successors or assigns.

The undersigned shall, from time to time, promptly execute and deliver such further instruments, documents and agreements, and perform such further acts, as may be reasonably requested by Assignee to carry out and effect the terms of the Assignment and this Acknowledgment of Pledge.

This Acknowledgment is being granted to and for the sole benefit of Assignee, and any permitted successors and/or permitted assigns of Assignee. The undersigned hereby consents to the sale or transfer by Assignee of each Assignor’s rights under the Key Agreements, including any sale, assignment, transfer or other disposition of such Assignor’s rights under the Key Agreements in connection with the exercise of any foreclosure rights or other default remedies under the Loan Agreement.

This Acknowledgment may be delivered by facsimile or electronic transmission. Any delivery by facsimile or electronic transmission will be deemed an original, can be relied upon as if it were an original and to the same extent as if it were an original, and will be admissible in any legal proceeding as the best evidence of the document and to the same extent as if it were an original.

This Acknowledgment is being given to induce Assignee to accept the Assignment and with the understanding that Assignee will rely hereon.

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IN WITNESS WHEREOF, the undersigned has caused this Acknowledgment of Pledge of Key Agreement to be duly executed and delivered.

Dated as of the date first written above.

LAZARUS ENERGY LLC

By: Blue Dolphin Energy Company, its sole member

By: ________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

ADDRESS:

801 Travis Street, Suite 2100

Houston, Texas 77002

Attn: Jonathan Pitts Carroll, Sr.

Telecopy No.: 866-804-9066

LAZARUS REFINING & MARKETING, LLC

By: Blue Dolphin Energy Company, its sole member

By: ________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

ADDRESS:

801 Travis Street, Suite 2100

Houston, Texas 77002

Attn: Jonathan Pitts Carroll, Sr.

Telecopy No.: 866-804-9066

FIRST AMENDMENT TO

LOAN AGREEMENT AND LOAN DOCUMENTS

This First Amendment to Loan Agreement (this “ Amendment ”) is entered into as of this 4 th day of December, 2015 (the “ Amendment Effective Date ”), by and among Sovereign Bank (“ Lender ”), Lazarus Energy LLC , a Delaware limited liability company (“ Borrower ”), and Jonathan Pitts Carroll, Sr. , a Texas resident (“ Carroll ”), Blue Dolphin Energy Company , a Delaware corporation (“ Blue Dolphin ”), Lazarus Refining & Marketing, LLC , a Delaware limited liability company (“ LRM ”), and Lazarus Energy Holdings LLC , a Delaware limited liability company (“ LEH ”, and jointly and severally together with Carroll, Blue Dolphin and Lazarus Energy, collectively “ Guarantor ” or “ Guarantors ”).

W I T N E S S E T H:

WHEREAS, the Borrower, Guarantors and Lender are parties to that certain Loan Agreement dated as of June 22, 2015 (as amended, supplemented, restated or otherwise modified from time to time, including pursuant hereto, the “ Loan Agreement ”); and

WHEREAS, LRM has entered into that certain Loan Agreement dated as of December 4, 2015, among Lender, LRM, as borrower, and the “Guarantors” parties thereto, pursuant to which Lender agreed to make a loan to LRM in a principal amount of up to $10,000,000 (the “ LRM Loan Agreement ”);

WHEREAS, as a condition to Lender agreeing to enter into the LRM Loan Agreement, Borrower and the other Guarantors are required to enter into this Amendment; and

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Capitalized Terms . All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Loan Agreement.

2. Amendment(s) to the Loan Agreement . The Loan Agreement is hereby amended as follows:

(a) Section 4.2(c) of the Loan Agreement is hereby amended by inserting the words “of not less than 1.0 to 1.0” after the words of “Borrower and LRM”.

(b) Section 7.1(b) of the Loan Agreement is hereby amended by inserting the following phrase at the end of such Section:

“any Event of Default occurs under that certain Loan Agreement dated as of December 4, 2015, among Lender, LRM, as borrower, and the “Guarantors” parties thereto, as amended or otherwise modified from time to time (the “LRM Loan Agreement”); or”

8.16 Cross-Collateralization and Cross-Default . This Agreement, the Collateral and the Obligations are cross-collateralized and cross-defaulted with (a) LRM Loan Agreement, (b) the “Obligations” thereunder, (c) the collateral securing such obligations, (d) the obligations thereunder, and (e) the collateral securing such obligations. Without limiting the foregoing, Borrower (and LRM, by its signature below) and Lender contemplate and agree that Borrower and/or LRM and Lender have engaged or may from time to time engage in various loan and financing transactions and that from time to time other circumstances may arise in which Borrower and/or LRM becomes obligated to Lender, including under the LRM Loan Agreement and including transactions of a type that are very different from the transactions evidenced by the Loan Documents, including by notes, advances, overdrafts, bookkeeping entries, guaranty agreements, deeds of trust, or any other method or means (each a “Loan Obligation”). Borrower (and LRM, by its signature below) and Lender agree that all such transactions will be secured by the Collateral, and that the Obligations arising under this Agreement and the other Loan Documents will be secured by any collateral granted in connection with such Loan Obligation. Repayment of all Obligations and performance of all other obligations under this Agreement by Borrower and/or Lazarus Energy shall not terminate Lender’s security interest in the Collateral, unless Lender executes a written release. If any default occurs under any Loan Obligation, then Lender may declare an Event of Default. An Event of Default shall be a default under any such Loan Obligation. Lender’s failure to exercise cross-defaults shall not constitute a waiver by Lender of such right.

(d) A new Section 8.17 is hereby added to the Loan Agreement as follows:

3. Amendments to Security Documents . The parties agree that all references to “Obligations” or “Secured Obligations” in any Security Document is hereby automatically deemed to include the Obligations (as defined in the LRM Loan Agreement). Without limiting the foregoing and for sake of clarity, the parties hereby further agree and confirm that all Liens granted by Borrower or any Guarantor shall also secure the “Obligations” as defined in the LRM Loan Agreement.

4. Representations and Warranties True; No Event of Default . By its execution and delivery hereof, the Borrower represents and warrants that, as of the date hereof:

(a) the representations and warranties contained in the Loan Agreement and the other Loan Documents are true and correct on and as of the date hereof as made on and as of such date except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date;

(b) no event has occurred and is then continuing which constitutes a Default or an Event of Default;

(c) (i) the Borrower has limited liability company power and authority to execute and deliver this Amendment, (ii) this Amendment has been duly executed and delivered by the Borrower, and (iii) this Amendment and the Loan Agreement, as amended hereby, constitute the legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable debtor relief laws and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and except as rights to indemnity may be limited by federal or state securities laws;

(d) neither the execution, delivery and performance of this Amendment and the Loan Agreement, as amended hereby, nor the consummation of any transactions contemplated herein or therein, will conflict with (i) the Organizational Documents of Borrower or any Guarantor, (ii) any provision or law, statute, rule or regulation applicable to Borrower or any Guarantor, or (iii) any material contract restriction to which Borrower or any Guarantor or any of their properties are subject; and

(e) no authorization, approval, consent, or other action by, notice to, or filing with, any governmental authority or other Person not previously obtained is required for (i) the execution, delivery or performance by Borrower or any Guarantors of this Amendment or (ii) the execution by Borrower and each Guarantor of this Amendment.

5. Conditions Precedent to Effectiveness . This Amendment shall be effective as of the Amendment Effective Date when each of the following conditions precedent have been fulfilled to the satisfaction of the Administrative Agent (and the execution by the Borrower of this Amendment constitutes a representation and warranty that each of such conditions precedent have been satisfied):

(a) this Amendment shall have been duly executed by the parties hereto and delivered to Lender;

(b) no Default or Event of Default exists; and

(c) Lender shall have received such other documents, instruments and information as Lender may request prior to the execution and delivery of its signature page hereto.

6. Fees . The Borrower shall reimburse Lender for all reasonable outstanding legal fees and expenses incurred to date, to the extent then invoiced, whether incurred in connection with this Amendment or otherwise in connection with the Loan Documents.

7. Ratification . This Amendment is a Loan Document and shall be deemed to be an amendment to the Loan Agreement, and each of the Borrower and other Obligors hereby ratifies, approves, and confirms all terms, provisions, conditions and obligations of the Loan Agreement, each Security Document, each Guaranty and each other Loan Document to which it is a party in each case as amended hereby and after giving effect to the amendments made hereunder, in each and every respect. All references to the Loan Agreement in any other document, instrument, agreement or writing shall, from and after the Amendment Effective Date, be deemed to refer to the Loan Agreement as amended hereby.

8. Lien Continuation . Each of Borrower and Guarantors for themselves and each other Borrower and Guarantors hereby ratifies, approves and confirms in every respect all the terms, provisions, conditions and obligations of the Loan Agreement (including as amended hereby) and each of the other Loan Documents (including, without limitation, all Guaranties and other Security Documents) and all security and other collateral granted in favor of the Lender for the Secured Parties and hereby confirms that the indebtedness secured by the Security Documents continues to include, without limitation, the Obligations and the Obligations (as defined in the LRM Loan Agreement). Nothing herein shall in any manner diminish, impair, or extinguish the indebtedness evidenced by the Note or the Liens securing the Obligations or the Obligations (as defined in the LRM Loan Agreement). Each of Borrower and each Guarantor agrees that the indebtedness evidenced by the Note are just, due, owing, and unpaid, and is subject to no offsets, deductions, credits, charges, or claims of whatsoever kind or character.

9. Release . EACH OF BORROWER AND THE GUARANTORS FOR THEMSELVES AND EACH OTHER HEREBY ACKNOWLEDGES AND AGREES THAT, AS OF THE DATE OF THIS AMENDMENT, IT HAS NO OFFSETS, DEFENSES, CLAIMS, OR COUNTERCLAIMS AGAINST LENDER AND ITS RELATED PARTIES, AND EACH OF THEIR PREDECESSORS, SUCCESSORS, ASSIGNS, AFFILIATES, SHAREHOLDERS, PARTNERS, MEMBERS, MANAGERS, DIRECTORS, OFFICERS, ACCOUNTANTS, ATTORNEYS, EMPLOYEES, AGENTS, AND REPRESENTATIVES (COLLECTIVELY, THE “RELEASED PARTIES”), WITH RESPECT TO THE OBLIGATIONS OR THE LOAN DOCUMENTS (INCLUDING THIS AMENDMENT) OR THE TRANSACTIONS CONTEMPLATED THEREBY, AND THAT IF BORROWER OR ANY GUARANTOR NOW HAS, OR EVER DID HAVE, ANY OFFSETS, DEFENSES, CLAIMS, OR COUNTERCLAIMS AGAINST ANY RELEASED PARTIES, WHETHER KNOWN OR UNKNOWN, AT LAW OR IN EQUITY, ALL OF THEM ARE HEREBY EXPRESSLY WAIVED AND EACH OF BORROWER AND THE GUARANTORS HEREBY RELEASES THE RELEASED PARTIES FROM ANY LIABILITY THEREUNDER.

10. Miscellaneous .

(a) Except as provided herein, all terms and conditions of the Loan Agreement and the other Loan Documents remain in full force and effect.

(b) This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by facsimile or electronic transmission shall be effective as delivery of a manually executed original counterpart of this Amendment.

11. Joinder . Each Guarantor joins in this Amendment to evidence their agreement and acknowledgment of the provisions of this Amendment and to join in any other agreements by any of them under this Amendment. Each Guarantor joins in this Amendment to evidence that the Guaranty remains in full force and effect and that the Guaranty is not limited or impaired as a result of the parties’ execution and delivery of this Amendment, or otherwise, after giving effect to the amendments hereunder.

12. Successors and Assigns . This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

13. NO ORAL AGREEMENTS . THIS WRITTEN AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES HERETO.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written.

LENDER:

Sovereign Bank

By: ________________________

Name:

Title:

BORROWER:

Lazarus Energy LLC

By: Blue Dolphin Energy Company, a Delaware

corporation, its sole member

By: ________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

[Signature Page to First Amendment to Loan Agreement]

GUARANTORS:

______________________________

Jonathan Pitts Carroll, Sr., as Guarantor

Blue Dolphin Energy Company, as Guarantor

By: _______________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

Lazarus Refining & Marketing, LLC, as Guarantor

By: Blue Dolphin Energy Company, a Delaware corporation, its sole member

By: _______________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

Lazarus Energy Holdings LLC, as Guarantor

By: _______________________

Name: Jonathan Pitts Carroll, Sr.

Title: Member

[Signature Page to First Amendment to Loan Agreement]

FIRST AMENDMENT

TO DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT,

ASSIGNMENT OF LEASES AND RENTS,

FINANCING STATEMENT AND FIXTURE FILING

FROM

LAZARUS ENERGY LLC,

as Grantor

Robert Blount, Trustee

AND

SOVEREIGN BANK

as Holder

Dated as of December 4, 2015

A CARBON, PHOTOGRAPHIC, FACSIMILE, OR OTHER REPRODUCTION OF THIS INSTRUMENT IS SUFFICIENT AS A FINANCING STATEMENT.

THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.

THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES. THIS INSTRUMENT ALSO SECURES OTHER AMOUNTS PROVIDED HEREIN AND AT LAW. THIS INSTRUMENT SECURES AN OBLIGATION THAT MAY INCREASE OR DECREASE FROM TIME TO TIME.

THIS INSTRUMENT ALSO COVERS AS-EXTRACTED COLLATERAL AND GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE IMMOVABLE PROPERTY DESCRIBED HEREIN. THE GRANTOR HAS AN INTEREST OF RECORD IN THE IMMOVABLE PROPERTY CONCERNED, WHICH INTEREST IS DESCRIBED IN EXHIBIT A TO THE MORTGAGE REFERENCED HEREIN.

A POWER OF SALE HAS BEEN OR MAY BE GRANTED IN THIS INSTRUMENT. A POWER OF SALE MAY ALLOW THE HOLDER TO TAKE THE PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE GRANTOR UNDER THIS DEED OF TRUST.

THIS INSTRUMENT IS A FINANCING STATEMENT TO BE FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS.

AFTER RECORDING RETURN TO:

Ronda K. Garrett

Sovereign Bank

17950 Preston Road, Suite 500

Dallas, TX 75252

FIRST AMENDMENT TO DEED OF TRUST, MORTGAGE, SECURITY

AGREEMENT, ASSIGNMENT OF LEASES AND RENTS,

FINANCING STATEMENT AND FIXTURE FILING

THIS FIRST AMENDMENT TO DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS,

FINANCING STATEMENT AND FIXTURE FILING, dated as of December 4, 2015 (herein called this “First Amendment”), is from LAZARUS ENERGY LLC, a Delaware limited liability company, whose principal office and mailing address is 801 Travis, Suite 2100, Houston, Texas 77002, as grantor (herein called the “Grantor”), to Robert Blount, as trustee, whose mailing address is c/o Sovereign Bank, 17950 Preston Road, Suite 500, Dallas, Texas 77252 (together with any successors and assigns, “Trustee”), and SOVEREIGN BANK, having an office and mailing address at 17950 Preston Road, Suite 500, Dallas, Texas 77252, as Holder (together with its successors and assigns, the “Holder”).

W I T N E S E T H :

WHEREAS, pursuant to a Loan Agreement, dated as of June 22, 2015, among Lazarus Energy LLC, as borrower (together with any successor(s) and assign(s) thereto, the “Borrower”), Sovereign Bank, as Lender, and the “Guarantors” parties thereto (as amended, supplemented, amended and restated or otherwise modified from time to time, the “Loan Agreement”), the Lender extended commitments to make a loan (by way of multiple advances) to the Borrower in the principal amount of $25,000,000; and

WHEREAS, in connection with the Loan Agreement, the Grantor has heretofore executed and delivered to Robert Blount, as Trustee, for the benefit of the Holder that certain Deed of Trust, Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing, dated as of June 22, 2015 (as supplemented, restated, amended or otherwise modified from time to time, including pursuant to this First Amendment, herein called the “Deed of Trust”), to secure the “Obligation” as defined in the Deed of Trust; and

WHEREAS, the Deed of Trust has been filed and recorded, among other places, as set forth in Schedule I hereto; and

WHEREAS, Lazarus Refining & Marketing, LLC (together with its successors and assigns, “LRM”), an Affiliate of Grantor, is entering into a Loan Agreement, dated as of the date hereof, by and among LRM, as borrower, the Holder, as lender, and the “Guarantors” parties thereto (the “LRM Loan Agreement”); and

WHEREAS, as a condition precedent to the execution of the LRM Loan Agreement and the making of the initial and the continuation of existing credit extensions under the LRM Agreement, the Grantor is required to execute and deliver this First Amendment; and

WHEREAS, the Grantor desires to amend the Deed of Trust so as, among other things, to amend the Deed of Trust to further secure payment of the Obligation (as defined in the Deed of Trust after giving effect hereto) and to further amend the Deed of Trust as herein set forth.

NOW, THEREFORE, in consideration of the premises and of the debts and trusts mentioned above and the agreements herein contained and other good and valuable considerations, the parties hereto agree as follows:

I. REAFFIRMANCE OF THE DEED OF TRUST FOR THE OBLIGATION. To secure the Obligation, the Grantor has specifically mortgaged, affected, and hypothecated to inure to the use and benefit of the Lender, all the Grantor’s right, title and interest, whether now owned or hereafter acquired, in and to all of the Property, and insofar as such Property consist of equipment, general intangibles, accounts, contract rights, inventory, investment property, fixtures, proceeds of collateral or any other personal property are of a kind or character defined in or subject to the applicable provisions of the Uniform Commercial Code (as in effect in the appropriate jurisdiction with respect to each of said properties, rights and interests), the Grantor has granted to the Lender, a continuing security interest therein.

TO HAVE AND TO HOLD the Property unto the Trustee for the benefit of the Lender, forever to secure the payment of the Obligation and the performance of the obligations of the Grantor herein and in the Deed of Trust contained. The Property are to remain so specially mortgaged, affected and hypothecated unto and in favor of the Lender to secure payment of the Obligation and other sums as set forth in the Deed of Trust and to secure the performance of the obligations of the Grantor contained in the Deed of Trust until full and final payment or discharge of the Obligation and other sums as set forth in the Deed of Trust, and the Grantor is herein bound and obligated not to sell or alienate the Property to the prejudice of this act.

The reaffirmation of the Deed of Trust under this Section is intended merely as a ratification and confirmation of the liens and security interests previously granted over the Property by the Grantor under the Deed of Trust, and shall not be construed as an additional grant or increase in Grantor’s interest in and to the Property.

II. INCLUSION IN THE OBLIGATION OF OTHER OBLIGATIONS. The term Obligation, when used in the Deed of Trust, is hereby deemed to also include (i) all payment obligations of LRM under the “Note” as defined in the LRM Loan Agreement (the “LRM Note”), and (ii) all the other “Obligations” as defined in the LRM Loan Agreement.

III. AMENDMENTS.

A. Amendment to Certain Definitions . All capitalized terms used herein and not otherwise defined shall have the meanings given them in the Deed of Trust and, if not defined in the Deed of Trust, shall have the meanings given them in the First Lien Credit Agreement. All references in the Deed of Trust to the “Loan Agreement” or to any Loan Document (as defined in the Loan Agreement) shall be deemed to be a reference to the Loan Agreement as defined herein or to the appropriate “Loan Document” as defined in the Loan Agreement, as the case may be.

B. Amendment to Section 1.1 . Section 1.1 of the Deed of Trust is hereby further amended by changing the reference to existing clause (e) thereof to be a reference to “clause (f)” and be inserting a new clause (e) immediately before such clause (f):

“(e) (i) all payment obligations of Lazarus Refining & Marketing, LLC and its successors and assigns (“LRM”) under the Promissory Note dated as of even date herewith payable to the order of Holder in the principal amount of $10,000,000, and (ii) all the other “Obligations” as defined in the Loan Agreement, dated as of the date hereof, by and among LRM, as borrower, the Holder, as lender, and the “Guarantors” parties thereto (the “LRM Loan Agreement”);”

C. Amendment to Section 5.1 . Section 5.1 is hereby amended by inserting the words “and the LRM Loan Agreement” after the words “advance funds under the Loan Agreement”.

IV. WARRANTIES, COVENANTS AND AGREEMENTS. The representations, warranties, covenants and agreements contained in the Deed of Trust and in the Loan Agreement are hereby remade by the Grantor and (together with the remedies contained in the Deed of Trust) are in full force and effect as of the date hereof.

V. MISCELLANEOUS PROVISIONS.

A. This First Amendment shall be considered as an amendment and supplement to the Deed of Trust and, except as herein expressly amended and supplemented, the Deed of Trust is hereby ratified, approved and confirmed in every respect. All references to the Deed of Trust in the Deed of Trust or any other document shall hereafter be deemed to refer to the Deed of Trust as amended hereby.

B. This First Amendment may be executed in any number of counterparts, each of which shall be deemed an original and all of which are identical.

C. The Grantor hereby represents and warrants to the Trustee and the Lender as follows:

1. The Grantor is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware;

2. The execution and delivery of this First Amendment and the performance by the Grantor of its obligations hereunder and thereunder, are within the Grantor’s limited liability company powers, have been duly authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required), and do not and will not contravene or conflict with any provision of law or of the Organizational Documents of the Grantor or of any agreement binding upon the Grantor; and

3. This First Amendment is, and when duly executed and delivered will be, the legal, valid and binding obligations of the Grantor, enforceable in accordance with their respective terms.

D. Section headings in this First Amendment are inserted for convenience of reference and shall not be considered a part of this First Amendment or used in its interpretation.

E. At the option of the Lender, this First Amendment, or a carbon, photographic or other reproduction of this First Amendment or of any Uniform Commercial Code financing statement covering the Property or any portion thereof shall be sufficient as a Uniform Commercial Code financing statement and may be filed as such.

[Signatures begin on following page]

IN WITNESS WHEREOF, the parties hereto have executed or caused to be executed this First Amendment on the day, month and year first above written.

GRANTOR

LAZARUS ENERGY LLC

By: Blue Dolphin Energy Company, its Sole Member

By: ________________________

Name: Jonathan Pitts Carroll, Sr.

Title: President

The name and mailing address of Grantor is:

Lazarus Energy LLC

801 Travis Street, Suite 2011

Houston, Texas 77002

S - 1

HOLDER

SOVEREIGN BANK

By: ________________

Name:

Title:

The name and mailing address

of the Holder are:

Sovereign Bank

17950 Preston Road, Suite 500

Dallas, TX 75252

S - 2

STATE OF TEXAS	§
	§
COUNTY OF HARRIS	§

BEFORE ME , the undersigned, a Notary Public in and for the said County and State, on this day personally appeared Jonathan Pitts Carroll, Sr., President of Blue Dolphin Energy Company, a Delaware corporation, the sole member of Lazarus Energy LLC, a Delaware limited liability company, known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the same in the capacity therein stated, as the act of the entity for the purposes and consideration therein expressed.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ___________________, 2015.

	______________________________
	NOTARY PUBLIC, State of Texas

My Commission Expires:

__________________________

AFTER RECORDING RETURN TO:

Ronda K. Garrett

Sovereign Bank

17950 Preston Road, Suite 500

Dallas, TX 75252

S - 3

STATE OF TEXAS	§
	§
COUNTY OF HARRIS	§

BEFORE ME , the undersigned, a Notary Public in and for the said County and State, on this day personally appeared ______________________, the _________________ of Sovereign Bank, known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the same in the capacity therein stated, as the act of the entity for the purposes and consideration therein expressed.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ___________________, 2015.

	______________________________
	NOTARY PUBLIC, State of Texas

My Commission Expires:

__________________________

AFTER RECORDING RETURN TO:

Ronda K. Garrett

Sovereign Bank

17950 Preston Road, Suite 500

Dallas, TX 75252

S - 4

Schedule I

Recording Information

A.	Deed of Trust, Mortgage, Security Agreement, Assignment of Rents and Leases, Financing Statement and Fixture Filing dated June 22, 2015, from Lazarus Energy LLC, as Grantor, to Robert Blount, Trustee, for the benefit of Sovereign Bank, filed as follows:

Jurisdiction	File No.	File Date
Wilson County, Texas	Doc. No. 00045774; Vol. 1856, Page 320	6/25/15

I-1

GUARANTY FEE AGREEMENT

THIS GUARANTY FEE AGREEMENT (the “ Agreement ”) is made as of December 4, 2015 (the “ Effective Date ”), by and between Jonathan P. Carroll (“Guarantor”) and Lazarus Refining & Marketing, LLC, a Delaware limited liability company (“ LRM ”). Guarantor and LRM are sometimes referred to herein as the " Parties ".

WHEREAS, LRM entered into a Loan Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”) dated December 4, 2015, with Sovereign Bank (“ Lender ”) as evidenced by that certain Promissory Note (the “ Note ”) of even date with the Loan Agreement, in the original principal sum of TEN MILLION AND 00/100 DOLLARS ($10,000,000.00); and

WHEREAS, as a condition precedent to Lender’s obligations to extend credit to LRM under the Loan Agreement, Lender required the execution and delivery of an unconditional guaranty as security for the obligations of LRM under the Loan Agreement and Note; and

WHEREAS, Guarantor entered into a United States Department of Agriculture Rural Development Unconditional Guarantee, Business and Industry Guaranteed Loan Program (as amended, restated, supplemented or otherwise modified from time to time, the “ Guaranty ”) of even date with the Loan Agreement and Note in favor of Lender to secure LRM’s obligations under the Loan Agreement and Note.

NOW, THEREFORE, in consideration of the Guaranty and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by LRM, the Parties agree as follows:

1. Payment of Fee . LRM shall pay Guarantor or assignee a fee in an amount equal to two percent (2.00%) per annum, paid monthly, of the outstanding principal balance owed under the Loan Agreement (the “ Guaranty Fee ”). Amounts payable to Guarantor as the Guaranty Fee shall be paid at the end of each calendar month.

2. Governing Law . This Agreement shall be governed and construed in accordance with the laws of the State of Texas without reference to any conflict of law provision.

3. Counterparts . This Agreement may be executed in multiple counterparts, including counterparts transmitted by facsimile, each of which will be deemed an original, but both of which together will constitute one and the same instrument.

[Remainder of page intentionally left blank; signature page to follow.]

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

	LAZARUS REFINING & MARKETING, LLC		JONATHAN P. CARROLL


By:	/s/ TOMMY L. BYRD	By:	/s/ JONATHAN P. CARROLL
	Tommy L. Byrd		Jonathan P. Carroll

PRESS RELEASE

FOR IMMEDIATE RELEASE

December 10, 2015

BLUE DOLPHIN SECURES ADDITIONAL $10 MILLION

IN FINANCING TO FURTHER EXPAND NIXON FACILITY

Houston, December 10, 2015 /AccessWire/ -- Blue Dolphin Energy Company (“Blue Dolphin”)(OTCQX:BDCO), an independent refiner and marketer of refined petroleum products in the Eagle Ford Shale, announced the closing of an additional $10.0 million loan facility.

On December 4, 2015, Lazarus Refining & Marketing, LLC, a wholly owned subsidiary of Blue Dolphin, closed on a $10.0 million term loan (the "Term Loan") with Sovereign Bank, a Texas state bank (“Sovereign”). The Term Loan is guaranteed under the Business & Industry Guaranteed Loan Program administered by the United States Department of Agriculture Rural Development Program.

The proceeds of the Term Loan will support continued commercial development of Blue Dolphin’s Nixon Facility, specifically construction of an additional 300,000 barrels of petroleum storage tanks, as well as be used to refinance an existing $3.0 million bridge loan with Sovereign. In June 2015, Blue Dolphin announced plans to expand the Nixon Facility and is currently constructing 500,000 barrels of petroleum storage tanks at the refinery. At construction completion, the Nixon Facility’s petroleum storage tank capacity, which will exceed 1,000,000 barrels, will provide capabilities to:

-	Enhance operational flexibility and margins as a result of being able to accept a broader variety of crude oil/condensate feedstocks at a lower cost and producing a wider variety of products;

-	Support Nixon Facility throughput growth of up to 30,000 barrels per day; and

-	Generate additional revenue from refined product and crude storage tank leasing to third parties.

“Over the past six months, Blue Dolphin has secured $35.0 million in 19 year financing. This new round of financing allows us to continue envisioned capital improvements to the Nixon Facility, helping to unlock the refinery’s embedded value,” said Jonathan P. Carroll, Chief Executive Officer and President of Blue Dolphin.

Mr. Carroll continued, “The Nixon Facility has been running well, with peak refinery throughput hitting in excess of 14,000 barrels per day. By bringing the naphtha stabilizer and depropanizer units back online and with further debottlenecking efforts, combined with the addition of more than 800,000 barrels of newly built storage tanks, we anticipate continued success with further expansion of the Nixon Facility.”

The Term Loan matures in December 2034 and accrues interest at a rate based on the Wall Street Journal Prime Rate plus 2.75%. Additional details regarding the Term Loan are included in a related Form 8-K filed with the Securities and Exchange Commission on December 10, 2015.

Forward-Looking Statements

This press release contains forward-looking statements. You can generally identify forward-looking statements by our use of forward-looking terminology such as "outlook," "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "seek," "should," or "will," or the negative thereof or other variations thereon or comparable terminology. These forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. For a discussion of risk factors which may affect our results, please see the risk factors and other disclosures included in our most recent Annual Report on Form 10-K, any subsequently filed Quarterly Reports on Form 10-Q, and our other Securities and Exchange Commission (“SEC”) filings. These risks may cause our actual results, performance, or achievements to differ materially from any future results, performance, or achievements expressed or implied by these forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this press release are made only as of the date hereof. Blue Dolphin disclaims any intention or obligation to update publicly or revise its forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

About Blue Dolphin

Blue Dolphin Energy Company (OTCQX: BDCO) is an independent refiner and marketer of refined petroleum products in the Eagle Ford Shale. Blue Dolphin’s primary business is refinery operations at the 15,000 bpd Nixon Facility, which includes the refining of crude oil and condensate into marketable finished and intermediate products, as well as petroleum storage and terminaling. Blue Dolphin also owns and operates pipeline assets and has leasehold interests in oil and gas properties. For additional information, visit Blue Dolphin's corporate website at http://www.blue-dolphin-energy.com .

Contact

Jonathan P. Carroll

Chief Executive Officer and President

713-568-4725