October 24, 2013
 
Lazarus Energy LLC
801 Travis, Suite 2100
Houston, Texas 77002
Attention: Jonathan Carroll
 
GEL TEX Marketing, LLC
Milam Services, Inc.
919 Milam, Suite 2100
Houston, Texas 77002
Attention: Steve Nathanson
 
Re: Letter Agreement Regarding Certain Advances and Related Agreements
 
 
Gentlemen:
 
Reference is made to that certain (i) Joint Marketing Agreement dated August 12,
2011 (as amended, restated or supplemented from time to time, the "JMA"), by and
between Lazarus Energy LLC, a Delaware limited liability company ("Lazarus"),
and GEL Tex Marketing, LLC, a Delaware limited liability company ("GEL"), (ii)
Construction and Funding Contract dated August 12, 2011 (as amended, restated or
supplemented from time to time, the "CFC"), by and between Lazarus and Milam
Services, Inc., a Delaware corporation ("MSI"), (iii) Crude Oil Supply and
Throughput Services Agreement dated August 12, 2011 by and between GEL and
Lazarus, (iv) Letter Agreement dated June 25, 2012 by and between GEL, MSI and
Lazarus regarding expense payments and reservations of rights ("Operating
Expense Payment Letter Agreements"), (v) Acknowledgement Letter dated June 1,
2012 addressed to Lazarus by GEL (the "Acknowledgement Letter"), (vi) Letter
Agreement Regarding Distribution to Recover December 31, 2012 Payment made to
Lazarus dated December 20, 2012 ("December 2012 Payments Letter Agreement"),
(vi) Letter Agreement Regarding Distributions to Recover Payment made to Settle
Claims Against Lazarus dated February 21, 2013 ("Settlement Payment Distribution
Letter"), and (vii) Letter Agreement Advances To Fund February 2013 Turnaround
dated February 21, 2013 (the "2013 Turnaround Letter"). Capitalized terms not
otherwise defined herein shall have the meanings set forth in the CFC.
 
The parties to this Letter Agreement desire to set forth certain
acknowledgements and agree to certain modifications to the JMA, the CFC and the
Supply Agreement, as more particularly set forth herein.
 
Section 1.    Advances to pay for Equipment and Services at the Facility.
 
(a) GEL agrees to advance an amount equal to (1) $75,986.01, to be used by
Lazarus exclusively to pay the invoices of Petroleum Measurement Equipment
Company ("PEMC") that are attached as Exhibit A hereto, for equipment and
services provided by PEMC at the Facility, (2) $50,947.95, to be used by Lazarus
exclusively to pay the invoices of Guardian Compliance ("Guardian") that are
attached as Exhibit B hereto, for equipment and services provided by Guardian at
the Facility, (3) not more than $45,000, to be used by Lazarus exclusively to
purchase from Ro-Flo Compressors LLC a Naphtha compressor, which shall be
located and used exclusively at the Facility, and (4) not more than $15,000, to
be used by Lazarus exclusively to purchase from a vendor pre-approved by GEL the
firefighting equipment described on Exhibit C, which shall be located and used
exclusively at the Facility.
 
 
 
 

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(b) Lazarus shall provide to GEL true and correct copies of the invoices from
the applicable suppliers of the equipment referenced in Section 1(a) (the
"Equipment"), and such other information substantiating the charged amounts from
the applicable suppliers of the Equipment. GEL, at its option, shall either pay
such invoices directly to the supplier, or advance funds to Lazarus for
contemporaneous payment by Lazarus to the applicable supplier in a manner
acceptable to GEL, provided that GEL shall only pay or advance funds for
Equipment that has been delivered to the Facility. The amounts to be paid or
advanced by GEL for the Equipment shall not exceed for each item the amount
specified in Section 1(a) for such item. GEL shall have the right to approve the
vendor(s) and the compressor and firefighting equipment prior to any such
purchase.
 
(c) All amounts advanced or paid by GEL or its Affiliates pursuant to this
Letter Agreement shall constitute Obligations.
 
(d) In the event Lazarus breaches or otherwise fails to comply with any of its
obligations under this Letter Agreement, in addition to any other remedies at
law or equity available to GEL, GEL shall be entitled to have any and all
Equipment referenced herein removed from the Facility and delivered to GEL.
 
Section 2.   Certain Agreements.
 
(a) Commencing on the first date written above and continuing until and
including August 12, 2019, Lazarus hereby waives its right to terminate the
Supply Agreement pursuant to Section 2.1 thereof and its right to terminate the
JMA pursuant to Section 7.1 thereof. Lazarus further hereby agrees that, unless
sooner terminated by GEL with 180 days prior written notice, the Supply
Agreement and the JMA shall be automatically renewed for successive one year
terms at the expiration of the respective Initial Term (as such term is defined
in such agreements) and at the expiration of each such successive one year term,
in each case until August 12, 2019.
 
(b) Notwithstanding any provisions of the CFC, JMA, Supply Agreement or any
Contract Document to the contrary, (1) to the extent that GEL's, Milam's or
their respective Affiliates' ability to assign or otherwise transfer any of
their rights or obligations in whole or in part under the CFC, JMA, Supply
Agreement or any Contract Documents is restricted in any way by the terms of
such applicable agreement, then such restrictions shall not apply to any such
assignment or transfer to a prospective assignee or transferee that is
financially responsible, creditworthy, and has significant industry
qualifications and experience commiserate with that required to fulfill its
obligations under such applicable agreement, and (2) GEL, Milam and their
respective Affiliates have the right to provide any data or information relating
the CFC, JMA, Supply Agreement or any Contract Document or any of them, the
Facility or the Project to any prospective assignee or transferee and to their
respective representatives with the understanding that any data or information
relating to the CFC, JMA, Supply Agreement, any Contract Document, the Facility,
or the Project may be confidential or proprietary, and any prospective assignee
or transferee and their respective representatives shall execute a
confidentiality agreement with respect to such confidential or proprietary data
or information.
 
 
 
 

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(c) Lazarus reaffirms that Operations Payments (as defined in the JMA) may only
be used to pay Operating Expenses (as defined in the JMA) of the Facility. On or
before the 5th day of each calendar month, Lazarus shall provide to GEL an
itemized list of the Operating Expenses of the Facility, including detail by
person and amount of salaries, that will be paid by the Operations Payment in
such month. Upon request of GEL, Lazarus shall provide an accounting of use of
the Operations Payments in prior months, including supporting documentation for
any such uses.
 
(d) Lazarus agrees and acknowledges that the current outstanding aggregate
balance of the Obligations as of August 31, 2013 owed by it to Milam and GEL is
$11,364,862 Lazarus hereby ratifies all of its Obligations under the CFC and
each of the Contract Documents to which it is a party, and agrees and
acknowledges that the CFC and each of the Contract Documents to which it is a
party shall continue in full force and effect after giving effect to this Letter
Agreement. Without limiting the foregoing, Lazarus hereby specifically ratifies
all liens and security interests granted to Milam or GEL, or their respective
Affiliates to secure the Obligations. Nothing in this Letter Agreement
extinguishes, novates or releases any right, claim, Lien, security interest or
entitlement of GEL, Milam or their respective Affiliates created by or contained
in the CFC or any of such Contract Documents, nor is Lazarus released from any
covenant, warranty or Obligation created by or contained therein.
 
(e) Lazarus hereby agrees to keep the Equipment in good working order and
condition and to use the Equipment exclusively at the Facility and in a manner
that a reasonable prudent owner of such Equipment would. Lazarus further agrees
to carry customary insurance covering the Equipment. Lazarus shall not remove
the Equipment from the Facility without the prior written consent of GEL. The
security interests granted in the Contract Documents shall cover the Equipment
and Lazarus agrees to execute a financing statement covering the Equipment.
 
(f) Lazarus agrees and acknowledges that GEL has satisfied all of its
obligations under the 2013 Turnaround Letter and that no additional funds will
be advanced to Lazarus thereunder.
 
(g) Lazarus for itself, its successors and assigns and all those at interest
therewith (collectively, the "Releasing Parties"), jointly and severally, hereby
voluntarily and forever, RELEASE, DISCHARGE AND ACQUIT the Contractor Group
(sometimes referred to below collectively as the "Released Parties") and all
those at interest therewith of and from any and all Claims or losses of every
kind or nature at this time known or unknown, direct or indirect, fixed or
contingent, which the Releasing Parties, have or hereafter may have arising out
of any act, occurrence, transaction, or omission occurring from the beginning of
time to the date of execution of this Letter Agreement if related to the CFC,
the other Contract Documents or any of the agreements referenced in the first
paragraph above (the "Released Claims"), except that the future duties and
obligations of the Contractor Group under the CFC and the Contract Documents
shall not be included in the term Released Claims. IT IS THE EXPRESS INTENT OF
THE RELEASING PARTIES THAT THE RELEASED CLAIMS SHALL INCLUDE ANY CLAIMS OR
CAUSES OF ACTION ARISING FROM OR ATTRIBUTABLE TO THE NEGLIGENCE, GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY OF THE RELEASED PARTIES.
 
 
 
 

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Section 3. Certain Representations
 
(a) Each party hereby represents to the other that (a) it has full power and
authority to execute and deliver this Letter Agreement and to consummate the
transactions contemplated hereby, (b) the execution and delivery of this Letter
Agreement by such party have been duly and validly authorized by all necessary
corporate action on the part of such party, and (c) this Letter Agreement has
been duly and validly executed and delivered by such party and constitutes a
valid and binding obligation of such party, enforceable against such party in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity and the discretion of the court before which any
proceedings seeking injunctive relief or specific performance may be brought.
 
(b) In connection with each advance of funds or direct payment made by GEL or
its Affiliates pursuant to this Letter, Lazarus represents, warrants and
certifies to GEL that the amounts requested by Lazarus represent the actual
costs incurred by Lazarus, after giving effect to all discounts or rebates, for
the item for which such payment or advance is requested, and that the item is or
will be in exclusive use at the Facility.
 
As modified by this Letter Agreement, all of the terms of the JMA, CFC, Supply
Agreement, Operating Expense Payment Letter Agreements, Acknowledgement Letter,
December 2012 Payments Letter Agreement, the Settlement Payment Distribution
Letter, and the 2013 Turnaround Letter are hereby ratified and confirmed and
shall remain in full force and effect.
 
 
[Signature Page Follows.]
 
 
 
 

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IN WITNESS WHEREOF, the parties hereto have caused this Letter Agreement to be
executed by their duly authorized representatives effective as of the date first
written above.
 
 

  GEL TEX MARKETING, LLC, a Delaware limited liability company        
By:
/s/ R.V. DEERE
 
Name:
R.V. Deere
 
Title:
CFO

 
 

  MILAM SERVICES, INC., a Delaware corporation      
 
By:
/s/ R.V. DEERE
 
Name:
R.V. Deere
 
Title:
CFO

 
 

  LAZARUS ENERGY LLC, a Delaware limited liability company      
 
By:
/s/ JONATHAN CARROLL
 
Name:
Jonathan Carroll
 
Title:
President

 
 
 
 
 

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EXHIBIT A
 
 
Petroleum Measurement Equipment Company Invoices
 
 
 
 
 
(see attached)
 
 
 
 
 
 

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EXHIBIT B
 
 
Guardian Compliance Invoices
 
 
 
(see attached)
 
 
 
 
 
 
 
 
 

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EXHIBIT C
 
Firefighting Equipment Description
 
 
Air packs
Foam for rack sprinkler
All call emergency system
Gas monitor
Fire engine/control panel
Cold packs
PPE fire gear
 
 
 
 
 
 

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