SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report: (Date of earliest event reported):
September 14, 2004 (September 8, 2004)
BLUE DOLPHIN ENERGY COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 0-15905 73-1268729
(State of Incorporation) (Commission file Number) (IRS Employer Identification No.)
801 TRAVIS, SUITE 2100
HOUSTON, TEXAS 77002
(Address of Registrant's principal executive offices)
(713) 227-7660
(Registrant's telephone number, including area code)
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:
[ ] Written communication pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[X] 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
(a). On September 9, 2004, Blue Dolphin Energy Company (the "Company")
issued a press release announcing that it entered into a Note and Warrant
Purchase Agreement (the "Purchase Agreement") on September 8, 2004 with certain
accredited investors and directors of the Company for the purchase and sale of
promissory notes in an aggregate principal amount of $750,000 (the "Promissory
Notes") and 2.8 million warrants (the "Warrants") to purchase shares of the
Company's common stock, par value $.01 per share (the "Common Stock"), at a
price of $0.003 per Warrant. The sale of the Promissory Notes and the first
tranche of 1.25 million Warrants closed on September 8, 2004. The closing of the
sale of the second tranche of 1.55 million Warrants is subject to stockholder
approval, as well as customary closing conditions. The sale of securities
pursuant to the Purchase Agreement was made in reliance on the exemptions from
the registration requirements of the Securities Act of 1933, as amended (the
"Act"), pursuant to Section 4(2) of the Act and Rule 506 of Regulation D. The
securities were sold without any general solicitation by the Company or its
representatives, and each investor represented to the Company that it is an
"accredited investor" under the Act. Pursuant to the terms of the Purchase
Agreement, the Company has also agreed to file a registration statement with the
Securities and Exchange Commission ("SEC") to register the resale of shares of
Common Stock issuable upon exercise of the Warrants.
The Promissory Notes mature on December 7, 2004, and accrue interest at
a rate of 12.0% per annum, of which 4% is payable monthly and 8% is payable at
maturity. The Promissory Notes are secured by a second lien on the Company's
Blue Dolphin Pipeline System. The maturity date of the Promissory Notes will be
extended to September 7, 2005, if the Company's stockholders approve the
issuance of the second tranche of Warrants. The Company's obligations under the
Promissory Notes upon the occurrence of a "Default," as that term is defined in
the Promissory Notes, includes the following:
o the failure of the Company to pay principal or interest when due
on the Promissory Notes;
o the failure of the Company to comply with its covenants or
agreements in the Purchase Agreement, the Promissory Notes or any
other ancillary documents; and
o the failure of the Company to pay when due any debt or obligation
that exceeds $50,000.
A "Default" also includes other customary provisions, for example, the Company's
involvement in any bankruptcy proceeding, merger or other similar extraordinary
transaction.
The Warrants are immediately exercisable, have an exercise price of
$0.25 per share and will expire five years after their date of issuance. The
Warrants contain standard antidilution provisions, as well as provisions that
will result in adjustments to the exercise price of the Warrants if the Company
issues shares of Common Stock at a price below $0.25, subject to certain
exceptions.
The Company expects to use the proceeds from this offering for working
capital and general corporate purposes. Without this financing, the Company
expected to exhaust its cash and working capital during the fourth quarter 2004.
The Company now believes that the proceeds from this offering will satisfy its
working capital requirements through the first quarter 2005. However, the
Company will still need to obtain additional capital to satisfy its cash and
working capital requirements past the first quarter 2005. Additionally, in
August 2004 the Company was able to restructure existing indebtedness to Tetra
Applied Technologies, Inc., in the amount of $668,000, that was originally due
in September and October 2004, to be payable in twelve monthly installments of
$55,667 beginning September 1, 2004, plus interest on the outstanding balance at
the rate of six percent per annum.
Pursuant to the terms of the Purchase Agreement, the Company appointed
Laurence N. Benz and F. Gardner Parker to its board of directors. Messrs. Benz
and Parker each purchased a Promissory Note in the aggregate principal amount of
$25,000.00. Mr. Benz purchased 41,667 Warrants in the first tranche and will
purchase 41,667 Warrants in the second tranche. Mr. Parker purchased 41,663
Warrants in the first tranche and will purchase 341,665 Warrants in the second
tranche. Michael S. Chadwick, an existing director, purchased a Promissory Note
in the aggregate principal amount of $12,500.00, 20,883 Warrants in the first
tranche, and will purchase 20,834 Warrants in the second tranche. In addition,
subject to stockholder approval, Messrs. Benz, Chadwick and Parker will each be
granted 100,000 Warrants (the "Director Warrants").
In addition to serving on the Company's board of directors, Mr.
Chadwick is also a Senior Vice President and Managing Director of Sanders Morris
Harris Group, Inc. ("SMH"), a financial services holding company headquartered
in Houston, Texas. The Company paid SMH a $25,000.00 fee in connection with this
transaction and has agreed to retain SMH as the Company's financial advisor for
future strategic acquisitions and other related services. The Company, through
one of its wholly-owned subsidiaries, has also entered into a consulting
agreement with Mr. Parker. Mr. Parker's consulting agreement with the Company
has a term of up to eighteen months. The Company will pay Mr. Parker a monthly
fee of $2,000.00 and a bonus that will accrue at the rate of $3,000.00 per month
and be payable upon consummation of a merger or acquisition by the Company.
The Company expects to hold a special meeting of stockholders in the
fourth quarter of 2004 to seek stockholder approval for the issuance of the
second tranche of Warrants and the Director Warrants, the election of directors,
including Messrs. Benz and Parker, and other matters. In connection with this
transaction, certain directors and executive officers of the Company and one of
the Company's significant stockholders, who combined represent approximately 41%
of the issued and outstanding shares of Common Stock, entered into a voting
agreement (the "Voting Agreement") with the investors in the placement and have
agreed to vote in favor of the issuance of the second tranche of Warrants and
the Directors Warrants, and the election of Messrs. Benz and Parker at the
special meeting and next annual meeting of stockholders.
The above description of the terms of the Promissory Notes and the
Warrants is only a summary. A copy of the form of Promissory Note, the form of
Warrant, the Purchase Agreement, the consulting agreement between Blue Dolphin
Services Co. and Mr. Parker, the
Voting Agreement among the investors in this transaction, members of the board
of directors and certain executive officers of the Company and the press release
are being filed as exhibits to this report and are incorporated herein by
reference.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION
See item 1.01 above.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
See item 1.01 above.
ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS
See item 1.01 above.
ITEM 8.01 OTHER EVENTS.
On September 8, 2004, immediately prior to the transaction reported in
item 1.01 above, the Company sold the common stock of its wholly owned
subsidiary American Resources Offshore, Inc. ("ARO") to the Company's Chairman
and Chief Executive Officer, Ivar Siem, on behalf of those stockholders of the
Company who hold a number of shares of Company common stock above a threshold to
be determined by Mr. Siem, provided, however, that such threshold shall be set
at a level, which will include at a minimum the 30 largest shareholders on a
proportionate basis. ARO has no revenue and no assets, except for federal net
operating loss carryforwards. The consideration paid to the Company consisted of
$1,000 cash, the assumption of the transaction costs, including incremental
costs associated with the reporting and disclosure of this transaction incurred
by the Company in its filings with the SEC and any other required filings or
announcements, and the assumption of any and all liabilities of ARO.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
4.1 Form of Promissory Note
4.2 Form of Warrant
10.1 Note and Warrant Purchase Agreement between Blue Dolphin
Energy Company and Certain Investors, Dated September 8,
2004
10.2 Consent to Lien from Tetra Applied Technologies, Inc.
10.3 Consulting Agreement between Blue Dolphin Services Co. and
F. Gardner Parker
10.4 American Resources Offshore, Inc., Sale Agreement, dated
September 8, 2004
99.1 Voting Agreement dated September 8, 2004
99.2 Press Release dated September 9, 2004
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: September 14, 2004.
BLUE DOLPHIN ENERGY COMPANY
/s/ G. Brian Lloyd
---------------------------
By: G. Brian Lloyd
Vice President, Treasurer
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT
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4.1 Form of Promissory Note
4.2 Form of Warrant
10.1 Note and Warrant Purchase Agreement between Blue Dolphin Energy
Company and Certain Investors, dated September 8, 2004
10.2 Consent to Lien from Tetra Applied Technologies, Inc.
10.3 Consulting Agreement between Blue Dolphin Services Co. and F.
Gardner Parker
10.4 American Resources Offshore, Inc., Sale Agreement, dated
September 8, 2004
99.1 Voting Agreement dated September 8, 2004
99.2 Press Release dated September 9, 2004