UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Section 240.14a-11(c) or
Section 240.14a-12
BLUE DOLPHIN ENERGY COMPANY
(Name of Registrant as specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which the
transaction applies:
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(2) Aggregate number of securities to which the transaction
applies:
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(3) Per unit price or other underlying value of the
transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of the transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing:
(1) Amount previously paid: ________________________________________
(2) Form, Schedule or Registration Statement: ______________________
(3) Filing Party: __________________________________________________
(4) Date Filed: ____________________________________________________
BLUE DOLPHIN ENERGY COMPANY
801 TRAVIS, SUITE 2100
HOUSTON, TEXAS 77002
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held November 11, 2004
To the Stockholders of Blue Dolphin Energy Company:
You are cordially invited to attend a special meeting of stockholders
(the "Special Meeting") of Blue Dolphin Energy Company (the "Company"), to be
held Thursday, November 11, 2004, at 8:30 a.m., Houston time, at the Company's
principal executive offices at 801 Travis, Suite 2100, Houston, Texas, for the
following purposes:
1. To consider and vote upon the issuance of warrants to purchase up to
1,550,000 shares of the Company's common stock pursuant to that
certain Note and Warrant Purchase Agreement dated September 8, 2004
and the transactions contemplated thereby;
2. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation, as amended, to increase the authorized
common stock from 10,000,000 to 25,000,000 shares;
3. To consider and vote upon a proposal to amend and restate the
Company's Certificate of Incorporation, as amended, to (a)
incorporate the other amendments to the Certificate of
Incorporation, that have been approved, or will be, approved by the
stockholders at the Special Meeting and (b) eliminate the authorized
Series A preferred stock;
4. To elect six directors to serve until the next annual meeting of
stockholders or until their successors are duly elected and
qualified, or until their earlier resignation or removal;
5. To consider and vote upon the issuance of warrants to purchase up to
100,000 shares of the Company's common stock to each of three of the
director nominees; and
6. To transact any other business that may properly come before the
Special Meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on September 15,
2004, are entitled to notice of, and to vote at, the Special Meeting and any
adjournment or postponement thereof. Your vote is important. Since many
stockholders are not able to attend the Special Meeting, we have enclosed a
proxy card for your use. You may vote on the matters to be acted upon at the
Special Meeting by completing and returning the proxy card promptly in the
enclosed stamped return envelope. The Special Meeting is being held in lieu of
the 2004 annual meeting of stockholders.
For the Board of Directors
/s/ Ivar Siem
-------------------------------------
IVAR SIEM,
Chairman and Chief Executive Officer
Houston, Texas
October 13, 2004
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE ENCOURAGED TO
INDICATE YOUR VOTE AS TO THE MATTERS TO BE ACTED UPON ON THE ENCLOSED PROXY CARD
AND RETURN THE PROXY CARD PROMPTLY. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY
CHANGE YOUR VOTE AT THAT TIME.
BLUE DOLPHIN ENERGY COMPANY
801 TRAVIS, SUITE 2100
HOUSTON, TEXAS 77002
PROXY STATEMENT
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SPECIAL MEETING OF STOCKHOLDERS
To Be Held November 11, 2004
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This Proxy Statement, the accompanying notice and form of proxy are
first being mailed to stockholders on or about October 14, 2004. These proxy
materials are being furnished to the stockholders of Blue Dolphin Energy
Company, a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
special meeting of stockholders (the "Special Meeting") and any adjournment or
postponement thereof. The Special Meeting will be held on Thursday, November 11,
2004, at 8:30 a.m., Houston time, at the Company's principal executive offices
at 801 Travis, Suite 2100, Houston, Texas.
At the Special Meeting, stockholders will be asked (i) to consider and
vote upon the issuance by the Company of warrants to purchase up to 1,550,000
shares of the Company's common stock, par value $.01 per share (the "Common
Stock"), pursuant to that certain Note and Warrant Purchase Agreement dated
September 8, 2004 (the "Purchase Agreement") and the transactions contemplated
thereby; (ii) to consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 10,000,000 to 25,000,000 shares; (iii) to consider and vote
upon a proposal to amend and restate the Company's Certificate of Incorporation
to (a) incorporate the other amendments to the Certificate of Incorporation that
have been approved or will be approved by stockholders at the Special Meeting
and (b) eliminate the authorized Series A Preferred Stock; (iv) to elect six
directors to serve until the next annual meeting of stockholders or until their
successors are duly elected and qualified, or until their earlier resignation or
removal; (v) to consider and vote upon the issuance of warrants to purchase
100,000 shares of Common Stock, to each of Laurence N. Benz, Michael S. Chadwick
and F. Gardner Parker; and (vi) to transact any other business that may properly
come before the Special Meeting or any adjournment or postponement thereof.
The Company will bear all costs of this solicitation. Proxies will be
solicited primarily by mail, but directors, officers and other employees of the
Company may also solicit proxies in person or by telephone in the ordinary
course of business for which they will not be compensated. The Company has
requested that brokerage houses, nominees, fiduciaries and other custodians send
proxy materials to the beneficial owners of the Common Stock, for which the
Company will reimburse them for their reasonable out-of-pocket expenses.
RECORD DATE; QUORUM
The Board of Directors has fixed the close of business on September 15,
2004, as the record date (the "Record Date") for the determination of
stockholders entitled to notice of, and to vote at, the Special Meeting. A
complete list of stockholders entitled to vote at the Special Meeting will be
open for
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examination by any stockholder during normal business hours for a period of ten
days prior to the Special Meeting at the Company's principal executive offices,
801 Travis, Suite 2100, Houston, Texas. At the close of business on September
15, 2004, there were outstanding 6,756,547 shares of Common Stock. Stockholders
will be entitled to one vote per share of Common Stock held of record on the
Record Date on each matter presented at the Special Meeting. The holders of a
majority of the total shares of Common Stock issued and outstanding, whether
present in person or represented by proxies, will constitute a quorum for the
transaction of business at the Special Meeting. Abstentions and broker non-votes
(i.e. shares held by brokers and other nominees as to which they have not
received voting instructions from the beneficial owners and lack the
discretionary authority to vote on a particular matter) are counted as present
for purposes of determining whether a quorum is present.
VOTING; REVOCATION OF PROXY
All shares of Common Stock represented at the Special Meeting by
properly executed proxies will be voted in accordance with the instructions
indicated on the proxies. If no instructions are indicated with respect to any
shares for which properly executed proxies have been received, such proxies will
be voted (i) "FOR" the issuance of warrants to purchase up to 1,550,000 shares
of Common Stock pursuant to the Purchase Agreement and the transactions
contemplated thereby; (ii) "FOR" amending the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
10,000,000 to 25,000,000 shares; (iii) "FOR" amending and restating the
Company's Certificate of Incorporation to (a) incorporate the other amendments
to the Certificate of Incorporation that have been approved or will be approved
by stockholders at the Special Meeting and (b) eliminate the authorized Series A
Preferred Stock; (iv) "FOR" election of all nominees to the Board of Directors;
and (v) "FOR" the issuance of warrants to purchase 100,000 shares of Common
Stock to each of Messrs. Benz, Chadwick and Parker.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by any
of the following actions:
o by providing written notice of revocation to the Company;
o delivering to the Company a signed proxy of a later date; or
o by voting in person at the Special Meeting.
Any written notice revoking a proxy should be sent to the Secretary of
the Company at the Company's principal executive offices, 801 Travis, Suite
2100, Houston, Texas 77002.
VOTING AGREEMENT
When the Company entered into the Purchase Agreement, the Company's
Chief Executive Officer, President, the members of the board of directors,
except for Laurence N. Benz and F. Gardner Parker, and Columbus Petroleum
Limited, Inc., the Company's largest stockholder, entered into a voting
agreement with the investors that are party to the Purchase Agreement and
granted an irrevocable proxy to Mr. Parker and Barrett L. Webster. The proxy
granted to Messrs. Parker and Webster represents approximately 41% of the issued
and outstanding shares of Common Stock and gives Messrs. Parker and Webster the
authority to vote all of shares of Common Stock beneficially owned by such
stockholder (i) "FOR" the issuance of warrants to purchase up to 1,550,000
shares of Common Stock pursuant to the Purchase Agreement and the transactions
contemplated thereby; (ii) "FOR" amending the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
10,000,000 to 25,000,000 shares; (iii) "FOR" election of all nominees to the
Board of Directors; and
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(iv) "FOR" the issuance of warrants to purchase 100,000 shares of Common Stock
to each of Messrs. Benz, Chadwick and Parker. In addition, the stockholders
executing the voting agreement with the investors also agreed not to sell,
transfer, assign, pledge or otherwise dispose of any of the shares of Common
Stock beneficially owned by such stockholder until either the closing of the
transactions contemplated by the Purchase Agreement or the termination of the
Purchase Agreement.
RECENT DEVELOPMENTS
As previously reported, the Company and its partner have been marketing
and attempting to sell their interests in New Avoca Gas Storage, LLC ("New
Avoca"). The Company has a 25% equity interest in, and is the manager of, New
Avoca. As of June 30, 2004, the Company's carrying value of its' interest in New
Avoca was approximately $.6 million. New Avoca was formed to complete the design
and to develop a natural gas storage facility.
On September 30, 2004, the Company and its partner entered into a
non-binding letter of intent to sell New Avoca. The Company expects to receive
net proceeds from this transaction at closing of approximately $.9 million, and
a possible future contingent payment of approximately $.4 million, subject to
the occurrence of certain future events. The purchase price is also subject to
adjustment based upon changes in the working capital, inventories and other
assets at the time of closing. This transaction, which is expected to close by
November 1, 2004, is subject to the buyer's completion of its due diligence, the
negotiation and execution of a definitive agreement and other customary
conditions to closing.
PROPOSAL NO. 1:
ISSUANCE OF ADDITIONAL WARRANTS
The Company's financial condition has been significantly and negatively
affected by the under performance of its assets and its significant
indebtedness, primarily associated with the abandonment of an offshore oil and
gas property. In order to address this, the Company (i) implemented a cost
reduction plan to reduce operating and overhead costs, (ii) is attempting to
liquidate certain of its non-core assets, including its interest in New Avoca,
(iii) has restructured certain of its outstanding indebtedness, and (iv) engaged
Sanders Morris Harris Group, Inc., a financial services company headquartered in
Houston, Texas ("Sanders Morris"), and Amerifund Capital Group, LLC, a financial
services company headquartered in Houston, Texas ("Amerifund") to assist the
Company in raising capital and other related services.
On September 8, 2004, the Company entered into the Purchase Agreement
with certain accredited investors and directors of the Company, including
Laurence N. Benz, Michael S. Chadwick and F. Gardner Parker, for the purchase
and sale of promissory notes in an aggregate principal amount of $750,000 (the
"Promissory Notes") and 2,800,000 warrants (the "Warrants") to purchase shares
of Common Stock at a purchase price of $0.003 per Warrant. The sale of the
Promissory Notes and the first tranche of 1,250,000 Warrants (the "Initial
Warrants") closed on September 8, 2004, and the closing of the sale of the
second tranche of 1,550,000 Warrants (the "Additional Warrants") is subject to
stockholder approval, as well as customary closing conditions. The proceeds from
the sale of the Promissory Notes will be used for working capital and general
corporate purposes.
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 8, 2005, if stockholders approve the issuance of the
Additional Warrants. The Additional Warrants will also be issued at a price of
$0.003 per warrant. The
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Initial Warrants and the Additional Warrants are immediately exercisable and
will expire five years after their date of issuance. Each Warrant is exercisable
for one share of Common Stock at an exercise price of $0.25 per share. 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 Common Stock at a price below $0.25 per share, subject to certain
exceptions. At the close of business on October 12, 2004, the closing sales
price for the Common Stock on the NASDAQ Small Cap Market was $1.36.
The Additional Warrants are exercisable into an aggregate of 1,550,000
shares of our Common Stock, representing approximately 23%, of the currently
issued and outstanding Common Stock. Because the Common Stock is listed on the
NASDAQ Small Cap Market, the Company is required to comply with the Marketplace
Rules of the National Association of Securities Dealers, Inc. ("NASD") in
connection with any issuance of Common Stock. Marketplace Rule 4350(i)(1)(D)
requires stockholder approval for any sale, issuance or potential issuance of
Common Stock (or securities convertible into or exercisable for Common Stock) at
a price less than the greater of book value or market value where the amount of
stock being issued exceeds 20% of the voting power outstanding before the
issuance. Therefore, the Company must obtain stockholder approval for the
issuance of the Additional Warrants under the Purchase Agreement.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Pursuant to the terms of the Purchase Agreement, Messrs. Benz, Parker
and Chadwick have agreed to purchase 41,667, 341,665 and 20,834 Additional
Warrants, respectively. Certain affiliates and executive officers of Sanders
Morris have also agreed to purchase an aggregate of 395,833 Additional Warrants.
No other director, executive officer, nominee for election as a director,
associate of any director, executive officer or nominee or any other person has
any substantial interest, direct or indirect, by security holdings or otherwise,
in the approval of the issuance of the Additional Warrants. Please see "Certain
Relationships and Related Transactions" for additional information.
VOTE REQUIRED
The affirmative vote of holders of a majority of the shares of Common
Stock issued outstanding as of the record date and entitled to vote and
represented at the Special Meeting (in person or by proxy) at which a quorum is
present will be required to approve the issuance of the Additional Warrants.
Because approval of the issuance of the Additional Warrants require the
affirmative vote of holders of a majority of the shares of Common Stock
outstanding and entitled to vote and represented at the Special Meeting,
abstentions will have the same effect as a vote cast against the issuance of the
Additional Warrants. Broker non-votes will have no effect on approval of the
issuance of the Additional Warrants.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" APPROVAL OF THE ISSUANCE
OF THE ADDITIONAL WARRANTS.
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PROPOSALS NO. 2 AND 3:
AMENDMENTS TO AND RESTATEMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
The Board of Directors has unanimously approved two proposals to amend
the Company's Certificate of Incorporation, as amended (the "Certificate"). The
Board of Directors also has approved a proposal to amend and restate the
Certificate in its entirety to incorporate the other amendments to the
Certificate, if any, that are approved by the stockholders at the Special
Meeting, to eliminate the designation of the Series A Preferred Stock and to
provide one integrated document in order to avoid confusion with previous
amendments. Following the stockholder approval of the two proposed amendments,
the Company intends to file an Amended and Restated Certificate of
Incorporation, or "Amended and Restated Certificate," substantially in the form
set forth as Exhibit A to this Proxy Statement, which assumes both of the
proposed amendments have been adopted by the stockholders. If the stockholders
do not approve both of the proposed amendments, the Company intends to file an
Amended and Restated Certificate reflecting the amendment that has been approved
by the stockholders.
A description of each of the proposals is set forth below. The
descriptions are a summary only and are qualified in their entirety by reference
to the text of such amendments as set forth in the proposed Amended and Restated
Certificate, which will be substantially as set forth in Exhibit A to this Proxy
Statement. The text of the proposed Amended and Restated Certificate in Exhibit
A is subject to revision if the stockholders do not approve either of the
proposals as set forth below.
BACKGROUND
The Certificate has been amended numerous times since it was originally
filed with the Secretary of State of the State of Delaware under the name "Zim
Energy Corp." on January 21, 1986. Since the Company's incorporation, numerous
amendments have been made to the Certificate. The Board of Directors has
determined that several of the provisions of the Certificate may be difficult to
interpret, which may lead to confusion or a lack of clarity with respect to the
rights and obligations of stockholders in certain circumstances. The Board of
Directors therefore determined that it is in the best interests of the Company
and its stockholders to amend and restate the Certificate, as described below.
PROPOSAL NO. 2 - INCREASE THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR
ISSUANCE
The Certificate currently authorizes a maximum of 10,000,000 shares of
Common Stock for issuance by the Company. The Board has considered, deemed
advisable and adopted a resolution approving a proposal to increase the number
of shares of Common Stock authorized for issuance from 10,000,000 shares to a
maximum of 25,000,000 shares. As of the Record Date there were 6,720,001 shares
of Common Stock outstanding. Approximately 1,647,084 additional shares of Common
Stock currently are issuable upon exercise of outstanding employee stock options
and the Initial Warrants. In addition, if the stockholders approve the issuance
of the Additional Warrants and the Warrants to each of Messrs. Benz, Chadwick
and Parker, an aggregate of 1,850,000 shares of Common Stock will be issuable,
which will exceed the 10,000,000 shares of Common Stock currently authorized for
issuance under the Certificate by 253,631 shares. The proposed increase in the
number of shares of Common Stock authorized for issuance will permit:
o the Company to satisfy its obligations under the Additional Warrants
and the Warrants issued to Messrs. Benz, Chadwick and Parker, if
approved by stockholders;
o the issuance of shares of Common Stock to raise capital;
o the issuance of shares of Common Stock in connection with
acquisitions or similar transactions; and
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o the issuance of shares of Common Stock for services rendered to the
Company.
The proposed increase in the number of shares of Common Stock
authorized for issuance will provide the Company with the flexibility necessary
to enable it to (a) raise additional capital through one or more public
offerings or private placements of shares of Common Stock or options, warrants,
convertible debt, convertible preferred stock, or other securities exercisable
or convertible into shares of Common Stock; (b) acquire additional assets or
businesses by using shares of Common Stock for a portion or all of the
consideration paid to the sellers; (c) repay existing indebtedness by issuing
shares of Common Stock in lieu of cash; (d) attract and retain directors,
officers, and key employees and motivate such persons to exert their best
efforts on behalf of the Company by issuing options to acquire shares of Common
Stock; or (e) effect stock splits in the form of a stock dividend or otherwise
to make stock dividends to existing stockholders. The Board of Directors
believes that the number of shares of Common Stock currently authorized for
issuance is not adequate to provide a sufficient number of shares for
transactions such as those described above, including the issuance of the
Additional Warrants. The Board of Directors also believes that the proposed
increase in the number of authorized shares of Common Stock could be an
important factor in the Company's ability to raise capital. Accordingly, the
Board of Directors believes that the proposed amendment to the Certificate is
appropriate and in the best interests of the Company and its stockholders
generally.
Upon approval of the proposed amendment to the Certificate and filing
of the Amended and Restated Certificate with the Delaware Secretary of State,
the authorized shares of Common Stock will be available for issuance by action
of the Board of Directors for any reasons described above or for any other
corporate purpose. The authorized shares of Common Stock in excess of those
issued will be available for issuance at such times and for such corporate
purposes as the Board of Directors may deem advisable, without further action by
stockholders, except as may be required by applicable law, the Marketplace Rules
of NASD or by the rules of any stock exchange or national securities association
trading system on which the Common Stock may be listed or traded in the future.
Upon issuance, such shares will have the same rights as the outstanding shares
of Common Stock. Holders of Common Stock have no preemptive rights.
Other than in connection with the issuance of the Additional Warrants
and the Warrants to Messers. Benz, Chadwick and Parker, if approved by
stockholders, we have no arrangements, agreements, understandings, or plans at
the present time for the issuance or use of the additional shares of Common
Stock proposed to be authorized. The Board of Directors does not intend to issue
any Common Stock except on terms that the directors deem to be in the best
interests of the Company and its then-existing stockholders. Any future issuance
of Common Stock will be subject to the rights and preferences of holders of
outstanding shares of any preferred stock that we may issue in the future.
The issuance in the future of additional authorized shares may have the
effect of diluting the earnings per share and book value per share, as well as
the stock ownership and voting rights, of the currently outstanding shares of
Common Stock. In addition, the effective increase in the number of authorized
but unissued shares of Common Stock may be construed as having an anti-takeover
effect. Although the Board is not proposing this amendment to the Certificate
for this purpose, the Company could, subject to the Board's fiduciary duties and
applicable law, issue such additional authorized shares to purchasers who might
oppose a hostile takeover bid or any efforts to amend or repeal certain
provisions of the Certificate or bylaws. Such a use of these additional
authorized shares could render more difficult, or discourage, an attempt to
acquire control of the Company through a transaction opposed by the Board.
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PROPOSAL NO. 3 - ELIMINATE THE DESIGNATIONS OF THE SERIES A PREFERRED STOCK AND
AMEND AND RESTATE THE CERTIFICATE IN ITS ENTIRETY
The Board of Directors has approved the amendment and restatement of
the Certificate in order to (a) incorporate the other amendments to the
Certificate, if any, that are approved by Company stockholders at the Special
Meeting, (b) eliminate the designations of the Series A Preferred Stock and (c)
provide an integrated document in order to avoid confusion with previous
amendments. The following discussion summarizes the significant change to the
Certificate that will be effected by the proposed amendment and restatement.
The Certificate currently authorizes the Company to issue a total of
2,500,000 shares of preferred stock in one or more series, each of which has
those powers, preferences and rights, and the qualifications, limitations or
restrictions, determined by our Board of Directors. 210,526 of these shares are
currently designated as Preferred Stock Series A, par value $0.10 per share. No
shares of Preferred Stock Series A are currently outstanding. The elimination of
the Series A Preferred Stock will increase the flexibility of the Board of
Directors by making those shares available to be included in one or more new
series of preferred stock. The Board will also be able to, without stockholder
approval, issue from time to time one or more series of preferred stock and
determine the voting powers, designations, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions of any series and the number of shares constituting any series
of preferred stock. The Company has no plan to designate or issue shares of any
new series of preferred stock, the Board's ability to issue shares of preferred
stock without stockholder approval may also be used to discourage an unsolicited
acquisition proposal.
VOTE REQUIRED; EFFECTIVE DATE OF AMENDMENTS
The affirmative vote of the holders of a majority of the shares of
Common Stock issued and outstanding as of the Record Date and entitled to vote
at the Special Meeting will be required to approve each of the foregoing
amendments to the Certificate. Because approval of the amendments to the
Certificate requires the affirmative vote of holders of a majority of the shares
of Common Stock outstanding and entitled to vote thereon, abstentions and broker
non-votes will have the same effect as votes cast against a proposal at the
Special Meeting.
If stockholders approve the proposed amendments, they will become
effective upon the filing of the Amended and Restated Certificate with the
Secretary of State of the State of Delaware. Assuming stockholders approve the
proposed amendments, the Company intends to file the Amended and Restated
Certificate as soon as practicable after the Special Meeting.
If, in the judgment of the Board of Directors, any circumstances exist
that would make any or all of the amendments inadvisable then, notwithstanding
approval of the proposed amendments by the stockholders, the Board of Directors
may abandon some or all of the amendments, either before or after approval of
the proposed amendments by the stockholders and at any time prior to the filing
of the Amended and Restated Certificate. Under Delaware law, stockholders will
not be entitled to appraisal rights with respect to the proposed amendments to
the Certificate.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE
"FOR" PROPOSAL 2 TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
FROM 10,000,000 TO 25,000,000, AND "FOR" PROPOSAL 3 TO ELIMINATE THE CERTIFICATE
OF DESIGNATIONS FOR THE SERIES A PREFERRED STOCK AND TO AMEND AND RESTATE THE
EXISTING AMENDED
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CERTIFICATE OF INCORPORATION TO CONSOLIDATE ALL PRIOR AMENDMENTS AND MAKE
ADDITIONAL CLERICAL CORRECTIONS.
PROPOSAL NO. 4
ELECTION OF DIRECTORS
NOMINEES
Messrs. Laurence N. Benz, Michael S. Chadwick, Harris A. Kaffie, F.
Gardner Parker, Ivar Siem and James M. Trimble (each a "Nominee" and
collectively, the "Nominees") have been nominated by the Board of Directors to
serve as directors until the next annual meeting of stockholders, or in each
case, until their successors have been duly elected and qualified, or until
their earlier resignation or removal. Each Nominee is currently a director of
the Company and has previously been elected by the stockholders, except for
Messrs. Benz and Parker. Messrs. Benz and Parker were appointed to the Board on
September 8, 2004, pursuant to the Purchase Agreement. Each Nominee has
consented to be nominated and has expressed his intention to serve if elected.
The Board of Directors has no reason to believe that any of the Nominees will be
unable or unwilling to serve if elected. However, should any Nominee become
unable or unwilling to serve as a director at the time of the Special Meeting,
the person or persons exercising the proxies will vote for the election of a
substitute nominee designated by the Board of Directors.
VOTE REQUIRED
The members of the Board of Directors serve one-year terms. A plurality
of the votes cast by the stockholders present and entitled to vote at the
Special Meeting, in person or by proxy, is necessary for the election of
directors. Accordingly, abstentions and broker non-votes will have no effect on
the election of directors.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF EACH OF THE NOMINEES.
NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
The following table provides certain information with respect to our
directors and executive officers.
NAME AGE POSITION POSITION HELD SINCE
---- --- -------- -------------------
Ivar Siem 58 Chairman of the Board, Chief Executive 1989
Officer and Director
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NAME AGE POSITION POSITION HELD SINCE
---- --- -------- -------------------
Laurence N. Benz 42 Director 2004
Michael S. Chadwick 52 Director 1992
Harris A. Kaffie 54 Director 1989
F. Gardner Parker 62 Director 2004
James M. Trimble 56 Director 2002
Michael J. Jacobson 58 President 1990
G. Brian Lloyd 45 Vice President, Treasurer and Secretary 1989
The following is a brief description of the background and principal
occupation of each Nominee and executive officer:
Ivar Siem - Chairman of the Board of Directors and Chief Executive
Officer - Since September 2000, Mr. Siem has served as Chairman and President of
Drillmar, Inc. a well construction and intervention company. From 1995 to 2000,
Mr. Siem served on the Board of Directors of Grey Wolf, Inc., during which time
he served as Chairman from 1995 to 1998 and as interim President in 1995 during
its restructuring. Since 1985, he has been an international consultant in
energy, technology and finance. He has served as a Director of Business
Development for Norwegian Petroleum Consultants and as an independent consultant
to the oil and gas exploration and production industry based in London, England.
Mr. Siem holds a Bachelor of Science Degree in Mechanical Engineering from the
University of California, Berkeley, and has completed an executive MBA program
at Amos Tuck School of Business, Dartmouth University.
Laurence N. Benz - Director - Mr. Benz was appointed as a director in
September 2004, pursuant to the Purchase Agreement as one of two directors named
by the investors in the Purchase Agreement. From 1987 to the present, he has
served as the President of Kentucky Orthopedic Rehabilitation LLC, which he
founded. In 2003, Mr. Benz founded Genesis Health Systems and currently serves
as its President. From 1984 through 1989, he served in the U.S. Army as a
Captain in the Army Medical Specialists Corps. He serves as a director for the
charitable organization of Girls on the Run - Kentucky. Mr. Benz received a
Masters degree in Physical Therapy from Baylor University, a Masters in Business
Administration from The Ohio State University and a Doctorate in Physical
Therapy from MGHIHP located in Boston, Massachusetts.
Michael S. Chadwick - Director - Mr. Chadwick has been engaged in the
commercial and investment banking businesses since 1975. From 1988 to 1994, Mr.
Chadwick was President of Chadwick, Chambers & Associates, Inc., a private
merchant and investment banking firm in Houston, Texas, which he founded in
1988. In 1994, Mr. Chadwick joined Sanders Morris Harris Group, Inc., an
investment banking and financial advisory firm, as Senior Vice President and a
Managing Director in the Corporate Finance Group, a position he continues to
hold today. He currently serves on the boards of directors of Landry's
Restaurants, Inc. and Home Solutions of America, as well as numerous privately
held companies. Mr. Chadwick holds a Bachelor of Arts Degree in Economics from
the University of Texas at Austin and a Master of Business Administration Degree
from Southern Methodist University.
Harris A. Kaffie - Director - Mr. Kaffie is a partner in Kaffie
Brothers, a real estate, farming and ranching partnership. He currently serves
as a Director of KBK Capital Corporation and Drillmar, Inc. Mr. Kaffie received
a Bachelor of Business Administration Degree from Southern Methodist University
in 1972.
9
F. Gardner Parker - Director - Mr. Parker was appointed as a director
in September 2004, pursuant to the Purchase Agreement as one of two directors
named by the investors in the Purchase Agreement. Mr. Parker is lead managing
trustee with Camden Property Trust and Chairman of Camden's Compensation
Committee and Corporate Governance Committee. He also serves as a director of
Carrizo Oil and Gas, Inc., Crown Resources Corp., and Sharps Compliance, Inc.
and serves on and/ or chairs their respective Audit Committees and Compensation
Committees. Mr. Parker is also a director of several private companies including
Gillman Auto Dealerships, Net Near U. Communications, Camp Longhorn, nii
Communications, Sherwood Nursing Home and Butler Online. Mr. Parker is a
Certified Public Accountant and was employed by Ernst & Young (formerly Ernst &
Ernst) for fourteen years, seven of which he served as a partner. Mr. Parker is
a graduate of the University of Texas.
James M. Trimble - Director - Mr. Trimble has been President and CEO of
Tri-Union Development Corporation, a privately held oil and gas company, since
July 2002. Previously he served as President of Elysium Energy, L.L.C., from
July 2000 until the contribution of its properties to a public oil and gas
company in November 2001. Prior to Elysium, Mr. Trimble served at Cabot Oil &
Gas Corporation from May 1983 to May 2000 in several managerial and senior level
executive positions. Before joining Cabot, Mr. Trimble served as President of
Volvo Petroleum, Inc. a Houston based, private domestic and international
exploration and Production Company. Mr. Trimble graduated from Mississippi State
University where he majored in Petroleum Engineering for undergraduate and
graduate studies.
Michael J. Jacobson - President - Mr. Jacobson has been associated with
the energy industry since 1968, serving in various senior management capacities
since 1980. He served as Senior Vice President and Chief Financial and
Administrative Officer for Creole International, Inc. and it's subsidiaries,
international providers of engineering and technical services to the energy
sector, as well as Vice President of Operations for the parent holding company,
from 1985 until joining the Company in January 1990. He has also served as Vice
President and Chief Financial Officer of Volvo Petroleum, Inc., and for certain
Fred. Olsen oil and gas interests. Mr. Jacobson began his career with Shell Oil
Company, where he served in various analytical and management capacities in the
exploration and production organization during the period 1968 through 1974. Mr.
Jacobson holds a Bachelor of Science Degree in Finance from the University of
Colorado.
G. Brian Lloyd - Vice President, Treasurer and Secretary - Mr. Lloyd is
a Certified Public Accountant and has been employed by the Company since
December 1985. Prior to joining the Company, he was an accountant for DeNovo Oil
and Gas Inc., an independent oil and gas company. Mr. Lloyd received a Bachelor
of Science Degree in Finance from Miami University, Oxford, Ohio and also
attended the University of Houston. Mr. Lloyd has served as Secretary and
Treasurer of the Company since 1989 and Vice President since March 1998.
There are no family relationships between any director, Nominee or
executive officer.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During 2003, the Board of Directors held eight meetings. Each director,
except for Messers. Benz and Parker who were appointed to the Board in 2004,
attended at least 75% of the total number of meetings of the Board of Directors
and committees on which he served.
10
At the beginning of 2003, the Audit Committee consisted of Mr. Robert
D. Wagner, Jr. and Mr. Chadwick. Mr. Wagner declined to stand for reelection as
a director in May 2003. In May 2003, the Board of Directors appointed Messrs.
Chadwick, Kaffie and Trimble to serve as the Audit Committee, with Mr. Chadwick
elected as Chairman of the Audit Committee. The Board of Directors has
determined that Mr. Chadwick qualifies as an "audit committee financial expert"
as that term is defined in Item 401(e) of Regulation S-B promulgated by the SEC.
The Audit Committee's duties include overseeing our financial reporting and
internal control functions. The Audit Committee met five times during the last
fiscal year.
At the beginning of 2003, the Compensation Committee consisted of
Messrs. Siem and Kaffie. In May 2003, the Board of Directors elected Messers.
Chadwick, Trimble and Siem to serve as the Compensation Committee. The
Compensation Committee's duties are to oversee and set the Company's
compensation policy and to administer its stock option plans. The Compensation
Committee met twice during the last fiscal year.
The Board of Directors currently does not have a standing nominating
committee and consequently has no nominating committee charter. The Board of
Directors believes that it is appropriate under existing circumstances for the
Company not to have a nominating committee because the Board is comprised of
only six members, a majority of whom are independent as defined under the Nasdaq
Stock Market listing standards. In the near future, however, the Company intends
to establish a nominating committee and adopt a nominating committee charter.
Currently, each member of the Board of Directors participates in the
consideration of director nominees.
The Board of Directors does not have a formal policy with regard to the
consideration of any director candidates recommended by stockholders because the
Board believes it can adequately evaluate any such recommendation on a
case-by-case basis. However, the Board of Directors would consider for possible
nomination qualified nominees recommended by stockholders. Stockholders who wish
to propose a qualified candidate for consideration should submit complete
information as to the identity and qualifications of that person to the
Secretary of the Company at 801 Travis, Suite 2100, Houston, Texas 77002 before
February 14, 2005, for the 2005 Annual Meeting. See "Nominations and Proposals
by Stockholders for the 2005 Annual Meeting."
The Board of Directors will continue to nominate qualified incumbent
directors whom the Board believes will continue to make important contributions
to the Board and the Company. The Board of Directors generally requires that
nominees be persons of sound ethical character, be able to represent all
shareholders fairly, have demonstrated professional achievement, have meaningful
experience and have a general appreciation of the major business issues facing
the Company. The Board of Directors does not have a formal process for
identifying and evaluating nominees for director. However, the Board of
Directors will evaluate all candidates, whether recommended by shareholders or
otherwise, in accordance with the above criteria. Pursuant to the terms of the
Purchase Agreement, the Company has agreed to nominate Messrs. Benz and Parker
to stand for election at the 2005 Annual Meeting.
COMMUNICATING WITH BOARD OF DIRECTORS
Any stockholder who desires to contact the Board of Directors or
specific members of the Board of Directors may do so by writing to: Board of
Directors, Blue Dolphin Energy Company, 801 Travis, Suite 2100, Houston, Texas
77002, Attention: Corporate Secretary.
11
DIRECTOR ATTENDANCE AT ANNUAL MEETING
The Board of Director's policy regarding director attendance at the
Annual Meeting of Stockholders is that they are welcome to attend, and that the
Company will make all appropriate arrangements for directors that choose to
attend. In 2003, all directors attended the Annual Meeting. It is unknown if all
Nominees will attend the Special Meeting.
REPORT OF THE AUDIT COMMITTEE
The duties and responsibilities of the Audit Committee are set forth in
a written charter adopted by the Board of Directors. The Audit Committee of the
Board of Directors consists entirely of directors who meet the independence and
experience requirements of Nasdaq Stock Market, Inc. currently applicable to the
Company, as determined by the Board of Directors. The Audit Committee reviews
and reassesses the charter annually and recommends any changes to the Board of
Directors for approval. The Audit Committee has reviewed the relevant
requirements of the Sarbanes-Oxley Act of 2002, the rules, proposed and adopted,
of the Securities and Exchange Commission and the proposed new listing standards
of the Nasdaq Small Cap Market regarding audit committee procedures and
responsibilities. This year, no changes were made to the amended and restated
charter as adopted last year.
The Audit Committee's primary duties and responsibilities are to:
o assess the integrity of the Company's financial reporting process
and systems of internal control regarding accounting;
o assess the independence and performance of the Company's independent
accountants; and
o provide an avenue of communication among the Company's independent
accountants, management and the Board of Directors.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States and to issue a report thereon. The Audit Committee's
responsibility is to monitor and oversee these processes.
At the beginning of 2003, the Audit Committee consisted of Mr. Robert
D. Wagner, Jr. and Mr. Chadwick. In May 2003, the Board of Directors elected
Messrs. Chadwick, Kaffie and Trimble to serve as the Audit Committee, with Mr.
Chadwick elected as Chairman of the Audit Committee. The Board of Directors has
determined that Mr. Chadwick qualifies as an "audit committee financial expert"
as that term is defined in Item 401(e) of Regulation S-B promulgated by the SEC.
The Audit Committee's duties include overseeing our financial reporting and
internal control functions. The Audit Committee met five times during fiscal
year 2003.
The Audit Committee reviewed and discussed the audited financial
statements of the Company for the fiscal year ended December 31, 2003 with the
Company's management and management represented to the Audit Committee that the
Company's financial statements were prepared in accordance with accounting
principles generally accepted in the United States. The Audit Committee
discussed with UHY Mann Frankfort Stein & Lipp CPA's, LLP ("Mann Frankfort"),
the Company's independent accountants, the matters required to be discussed by
Statement on Auditing Standards No. 61, and related amendments (Communication
with Audit Committees).
The Audit Committee received the written disclosures and the letter
from Mann Frankfort required by Independence Standards Board Standard No. 1
(Independence Discussion with Audit
12
Committees), and the Audit Committee discussed with Mann Frankfort their
independence from the Company. The Audit Committee considered the non-audit
services provided by Mann Frankfort and determined that the services provided
are compatible with maintaining Mann Frankfort's independence.
The fees paid to Mann Frankfort in calendar years 2003 and 2002 by the
Company are as follows:
2003 2002
--------- ---------
Audit Fees.............................. $ 78,046 $105,699
Audit-Related Fees...................... - -
Tax Fees................................ 35,398 38,500
All other Fees.......................... 1,300 -
--------- ---------
Total................................... $114,744 $144,199
========= =========
Audit Fees include fees related to the audit of our consolidated
financial statements and review of our quarterly reports filed with the SEC. Tax
Fees were primarily for preparation of federal and state income tax returns, and
tax planning services.
The Audit Committee must pre-approve all audit and non-audit services
provided to the Company by its independent accountants.
Based on the Audit Committee's discussions with management and Mann
Frankfort, and the Audit Committee's review of the representation of management
and the report of Mann Frankfort to the Audit Committee, the Audit Committee
recommended to the Board of Directors that the Company's audited financial
statements be included in the Company's Annual Report on Form 10-KSB/A for the
fiscal year ended December 31, 2003, for filing with the Securities and Exchange
Commission.
The Audit Committee:
Michael S. Chadwick, Chairman
Harris A. Kaffie
James M. Trimble
COMPENSATION OF DIRECTORS
In fiscal year 2003, the Company paid to non-employee members of the
Board of Directors an annual retainer of $12,000, payable 50% in cash and 50% in
Common Stock. The Audit Committee chairman receives an annual retainer of $3,000
and other Audit Committee members receive an annual retainer of $1,500. No
additional remuneration is paid to directors for committee meetings attended,
except that directors are entitled to be reimbursed for expenses related to
attendance of board or committee meetings. No additional compensation is paid to
directors serving on the Compensation Committee.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to the Company's Chief
Executive Officer and each of the executive officers whose annual salary
exceeded $100,000 in fiscal 2003 (collectively, the "Named Executive Officers")
for services rendered to the Company.
13
SUMMARY COMPENSATION TABLE*
LONG-TERM
COMPENSATION
----------------
ANNUAL COMPENSATION SECURITIES
--------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (1)
------------------------------------------------- ---------- -------------- -------- ----------------
Ivar Siem 2003 $ 80,000 - 30,000
Chairman of the Board and 2002 $ 80,000 - 10,000
Chief Executive Officer 2001 $150,000 - -
Michael J. Jacobson 2003 $125,000 - 30,000
President 2002 $125,000 - 10,000
2001 $200,000 - -
John P. Atwood (2)
Vice President - 2003 $120,000 - 30,000
Business 2002 $ 90,000 - 10,000
Development 2001 $137,000 - -
G. Brian Lloyd 2003 $112,500 - 30,000
Vice President - 2002 $105,000 - 10,000
Treasurer 2001 $103,083 - -
----------
* Excludes certain personal benefits, the aggregate value of which do not
exceed 10% of the Annual Compensation shown for each person.
(1) In fiscal year 2001 no options were granted to the Named Executive
Officers.
(2) In connection with the implementation of the Company's cost reduction
plan, Mr. Atwood ceased to be an employee of the Company on August 1,
2004.
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING TO EMPLOYEES IN OF PRICE*
NAME OPTIONS GRANTED FISCAL YEAR ($/SH) EXPIRATION DATE
----------------------------------- ----------------- ------------------ ----------- ---------------
Ivar Siem 30,000 16% $0.43 01/05/2013
Michael J. Jacobson 30,000 16% $0.43 01/05/2013
John P. Atwood 30,000 16% $0.43 01/05/2013
G. Brian Lloyd 30,000 16% $0.43 01/05/2013
----------
(*) The per share market price, as reported by the NASDAQ Small Cap Market on
January 6, 2003, the date of grant, was $0.43.
14
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ON OPTIONS AT FISCAL YEAR END (1) AT FISCAL YEAR END (2)
EXERCISE VALUE ------------------------------ ------------------------------
NAME (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------------- -------- -------- ----------- ------------- ----------- -------------
Ivar Siem - $ - 52,000 - $ 38,000 $ -
Michael J. Jacobson - $ - 50,000 - $ 38,000 $ -
John P. Atwood - $ - 46,667 - $ 38,000 $ -
G. Brian Lloyd - $ - 44,667 - $ 38,000 $ -
----------
(1) Includes options that expired on January 13, 2004 as follows: Mr. Siem -
4,000, Mr. Jacobson - 4,000, Mr. Atwood - 2,667 and Mr. Lloyd - 1,667.
(2) Based on the difference between the closing bid price on December 31, 2003
(the last trading day of 2003) which was $1.66 per share, which exceeded
the exercise price.
The Company's stock option plans provide that upon a change of control
the Compensation Committee may accelerate the vesting of options, cancel options
and make payments in respect thereof in cash in accordance with the terms of the
stock option plans, adjust the outstanding options as appropriate to reflect
such change of control, or provide that each option shall thereafter be
exercisable for the number and class of securities or property that the optionee
would have been entitled to receive had the option been exercised. The stock
option plans provide that a change of control occurs if any person, entity or
group acquires or gains ownership or control of more than 50% of the outstanding
Common Stock or, if after certain enumerated transactions, the persons who were
directors before such transactions cease to constitute a majority of the Board
of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 15, 2004, certain
information with respect to the beneficial ownership of shares of Common Stock
(the Company's only class of voting security issued and outstanding) as to (i)
all persons known by us to be beneficial owners of 5% or more of the outstanding
shares of Common Stock, (ii) each director, (iii) each Named Executive Officer
and (iv) all executive officers and directors, as a group. Unless otherwise
indicated, each of the following persons has sole voting and dispositive power
with respect to such shares.
SHARES OWNED BENEFICIALLY
-------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT (1)
----------------------------------------------------------------------- -------------- -------------
Colombus Petroleum Limited, Inc. (2)(6) 911,712 13.5
Ivar Siem (4)(6) 966,264 14.2
Harris A. Kaffie (4)(6) 807,007 11.8
Michael S. Chadwick (4)(6) 118,485 1.7
James M. Trimble (4)(6) 71,722 1.1
Laurence N. Benz (4) 41,667 0.6
15
SHARES OWNED BENEFICIALLY
-------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT (1)
----------------------------------------------------------------------- -------------- -------------
F. Gardner Parker (4)(6)(7) 2,785,697 41.0
Michael J. Jacobson (4)(6) 211,962 3.1
G. Brian Lloyd (4) 85,366 1.3
Barrett L. Webster (6)(7) 2,744,034 40.6
Western Gulf Pipeline Partners, LP (3)(4) 458,334 6.4
Peregrine Management, LLC (3)(4)(5) 458,334 6.4
Steven A. Webster (3)(4)(5) 458,334 6.4
Executive Officers and Directors, as a group 8 persons (4) 3,251,848 45.0
(1) Based upon 6,756,547 shares of Common Stock outstanding on September 15,
2004.
(2) Based on a Schedule 13D filed with the Securities and Exchange Commission
on February 1, 1999. The address of Colombus Petroleum Limited, Inc., is
Aeulestrasse 74, FL-9490, Vaduz, Liechtenstein.
(3) Based on a Schedule 13D filed with the Securities and Exchange Commission
on September 17, 2004. The address of Western Gulf Pipeline Partners, LP
("Western Gulf"), Peregrine Management, LLC ("Peregrine") and Steven A.
Webster is 14701 St. Mary's Lane, Suite 800, Houston, Texas 77079.
(4) Includes shares of Common Stock issuable upon exercise of options that may
be exercised within 60 days of September 15, 2004 as follows: Mr. Siem -
48,000; Mr. Kaffie - 83,571; Mr. Chadwick - 83,571; Mr. Trimble - 57,142;
Mr. Jacobson - 46,000; Mr. Lloyd - 43,000 and all directors and executive
officers as a group - 361,284. Includes shares of Common Stock issuable
upon exercise of warrants that may be exercised within 60 days of September
15, 2004 as follows: Mr. Chadwick - 20,834; Mr. Benz - 41,667; Mr. Parker -
41,663; Western Gulf Pipeline Partners, LP - 458,334 and all directors and
executive officers as a group - 104,164.
(5) Peregrine is deemed to be the beneficial owner of Western Gulf due to its
position of general partner of Western Gulf. Steven A. Webster is deemed to
be the beneficial owner of Peregrine due to his position of President of
Peregrine.
(6) In connection with the placement of the Promissory Notes and the Warrants,
Michael S. Chadwick, Harris A. Kaffie, Ivar Siem and James M. Trimble,
directors of the Company, Michael J. Jacobson, the Company's President and
Colombus Petroleum Limited, Inc., who combined beneficially own
approximately 41% of the Common Stock, entered into a voting agreement with
the purchasers of the Promissory Notes and the Warrants. Under the terms of
this voting agreement, a proxy was granted to F. Gardner Parker, a director
of the Company, and Barrett L. Webster, to vote on (i) the issuance of the
Additional Warrants, (ii) the issuance of Warrants to Messrs. Benz, Parker
and Chadwick, directors of the Company, (iii) the election of directors,
and (iv) the amendment to the Certificate to increase the authorized Common
Stock. With respect to Messrs. Parker and Webster, includes the 2,744,034
shares of common stock subject to the voting agreement.
(7) Based on a Schedule 13D filed with the Securities and Exchange Commission
on October 5, 2004. The address of Barrett L. Webster is 14701 St. Mary's
Lane, Suite 800, Houston, Texas 77079, and the address of F. Gardner Parker
is 3601 Piping Rock, Houston, Texas 77027.
16
Equity Compensation Plans. The following table sets forth certain
information as of December 31, 2003 with respect to shares of Common Stock that
may be issued under our Incentive Plan and other equity compensation plans.
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES
NUMBER OF REMAINING AVAILABLE
SECURITIES TO BE WEIGHTED-AVERAGE FOR FUTURE ISSUANCE
ISSUED UPON EXERCISE PRICE UNDER EQUITY
EXERCISE OF OF OUTSTANDING COMPENSATION PLANS
OUTSTANDING OPTIONS, (EXCLUDING
OPTIONS, WARRANTS WARRANTS AND SECURITIES REFLECTED
PLAN CATEGORY AND RIGHTS RIGHTS IN THE FIRST COLUMN)
----------------------------------------------- ----------------- ---------------- --------------------
Equity compensation plan approved by security
holders (1) 487,084 $1.00 162,916
Equity compensation plan not approved by
security holders (2) 14,835 3.13 381,988
----------------- ---------------- --------------------
Total 501,919 $1.09 544,904
================= ================ ====================
----------
(1) Represents shares of Common Stock issuable upon exercise of outstanding
options granted under the Incentive Plan.
(2) All remaining options issued pursuant to this plan expired January 13,
2004.
PROPOSAL NO. 5
TO APPROVE THE ISSUANCE OF WARRANTS TO PURCHASE 100,000 SHARES EACH OF THE
COMPANY'S COMMON STOCK TO THREE DIRECTORS PURSUANT TO THE PURCHASE AGREEMENT
Pursuant to the terms of the Purchase Agreement, the Company agreed to
grant Warrants to acquire 100,000 shares of Common Stock to each of Laurence N.
Benz, Michael S. Chadwick and F. Gardner Parker, each of whom are currently
directors of the Company. The Warrants granted to Messrs. Benz, Chadwick and
Parker will be immediately exercisable and will expire five years after their
date of issuance. Each Warrant is exercisable for one share of Common Stock at
an exercise price of $0.25 per share. These 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 Common Stock at a
price below $0.25, subject to certain exceptions.
Marketplace Rule 4350(i)(1)(A) requires stockholder approval for the
grant of the Warrants to Messrs Benz, Chadwick and Parker. Therefore, the
Company must obtain approval for the issuance of these Warrants.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of
Common Stock issued and outstanding and entitled to vote and represented at the
Special Meeting (in person or by proxy) at which a quorum is present, will be
required to approve the issuance of the Warrants to each of Messrs. Benz,
Chadwick and Parker. Because approval of the issuance of Warrants to Messrs.
Benz, Chadwick and Parker require the affirmative vote of holders of a majority
of the shares of Common Stock outstanding and entitled to vote and represented
at the Special Meeting, abstentions will have the same effect as a vote
17
cast against the issuance of the Warrants to Messrs. Benz, Chadwick and Parker.
Broker non-votes will have no effect on approval of the issuance of the Warrants
to Messrs. Benz, Chadwick and Parker.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" APPROVAL OF THE ISSUANCE
OF THE WARRANTS TO LAURENCE N. BENZ, MICHAEL S. CHADWICK AND F. GARDNER PARKER.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our directors, executive officers, and stockholders who own more than
10% of our Common Stock, to file reports of stock ownership and changes in
ownership with the Securities and Exchange Commission and to furnish us with
copies of all such reports they file. Based solely on a review of the copies of
the Section 16(a) reports furnished to us, we believe that during fiscal year
2003, all Section 16(a) filing requirements applicable to its directors,
executive officers and greater than 10% shareholders were complied with, except
for Mr. Chadwick who filed one such report late that reported two transactions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 2003, we entered into a sublease agreement expiring December
31, 2006 for certain of the Company's office space with Tri-Union Development
Corporation ("Tri-Union"). The Company's annual receipts from this sublease are
$78,552. A director of the Company, Mr. James M. Trimble, is the Chairman and
Chief Executive Officer of Tri-Union.
The Company owns 12.8% of the common stock of Drillmar, Inc. Ivar Siem,
Chairman and Chief Executive Officer of the Company, and Harris A. Kaffie, a
director of the Company, are owners of 30.3%, and 30.6%, respectively, of
Drillmar's common stock. Messrs. Siem and Kaffie are both directors, and Mr.
Siem is also Chairman and President, of Drillmar.
In January 2003, Drillmar stockholders approved a restructuring plan
whereby Drillmar will issue up to $3.0 million of convertible notes that will
convert into common stock representing over 99% of Drillmar's outstanding
shares. As a result, the Company's ownership in Drillmar can be reduced to less
than 1%. However, in November 2003, the Company converted its contingent
obligation due from Drillmar for providing office space, accounting and
administrative services from May 2002 through January 2003 totaling $162,000 (9
months at $18,000 per month) into a convertible note, which if converted along
with all of Drillmar's outstanding convertible notes would represent 7.7% of
Drillmar's common stock. Messrs. Siem, Kaffie and Trimble, another director of
the Company, hold Drillmar convertible notes which if converted along with all
of Drillmar's outstanding convertible notes would represent 22.2%, 27.5% and
2.1%, respectively, of Drillmar's common stock.
In February 2003, the Company entered into a new agreement with
Drillmar effective as of February 1, 2003, whereby the Company provides office
space to Drillmar for $1,500 per month. The Company also provides professional,
accounting and administrative services to Drillmar based on hourly rates based
on our cost. The agreement can be terminated upon 30 days notice or by the
mutual agreement of the parties.
Several of the Company's directors participated in the Company's recent
placement of Promissory Notes and Warrants. Messers. Benz and Parker each
purchased a Promissory Note in the
18
aggregate principal amount of $25,000 and Michael S. Chadwick purchased a
Promissory Note in the aggregate principal amount of $12,500. Messrs. Benz,
Parker and Chadwick also purchased 41,667, 41,663 and 20,834 Initial Warrants,
respectively.
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. The Company paid Sanders Morris a $25,000 fee in connection with the
placement of the Promissory Notes and Warrants and has agreed to retain Sanders
Morris as its financial advisor to provide, among other services, a fairness
opinion in connection with the Company's next merger, acquisition or similar
transaction. In September 2004 the Company 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 and a bonus that will accrue at the rate of $3,000 per month,
payable upon consummation of a merger or acquisition by the Company.
NOMINATIONS AND PROPOSALS BY STOCKHOLDERS
FOR THE 2005 ANNUAL MEETING
The Company has tentatively set its year 2005 annual meeting for May
18, 2005. Accordingly, stockholders should submit nominations and proposals in
accordance with the guidance set forth below.
Nominations for the year 2005 Annual Meeting. The Company's Certificate
of Incorporation provides that no person shall be eligible for nomination and
election as a director unless written notice of such nomination is received from
a stockholder of record by the Secretary of the Company 90 days before the
anniversary date of the previous year's annual meeting. Further, such written
notice is to be accompanied by the written consent of the nominee to serve, the
name, age, business and residence addresses, and principal occupation of the
nominee, the number of shares beneficially owned by the nominee, and any other
information which would be required to be furnished by law with respect to any
nominee for election to the Board of Directors. Stockholders who desire to
nominate, at the year 2005 annual meeting of stockholders, persons to serve on
the Board of Directors, must submit nominations to the Company, at its principal
executive office, so that such notice is received by the Company no later than
February 17, 2005. In order to avoid controversy as to the date on which any
such nomination is received by the Company, it is suggested that stockholders
submit their nominations, if any, by certified mail, return receipt requested.
Proposals for the year 2005 Annual Meeting. Stockholders who desire to
present proposals, other than notices of nomination for the election of
directors, to stockholders of the Company at the year 2005 annual meeting of
stockholders, and to have such proposals included in the Company's proxy
materials, must submit their proposals to the Company, at its principal
executive office, by December 17, 2004. In order to avoid controversy as to the
date on which any such proposal is received by the Company, it is suggested that
stockholders submit their proposals, if any, by certified mail, return receipt
requested.
Moreover, any stockholder who intends to submit a proposal for
consideration at the Company's 2005 annual meeting, but not for inclusion in the
Company's proxy materials, must notify the Company. Pursuant to the rules of the
U.S. Securities and Exchange Commission, such notice must (1) be received at the
Company's executive offices no later than February 18, 2005 and (2) satisfy the
rules of the U.S. Securities and Exchange Commission.
19
RELATIONSHIP WITH
INDEPENDENT PUBLIC ACCOUNTANTS
In February 2002, on the recommendation of the Audit Committee, the
Board of Directors elected not to continue the engagement of KPMG LLP ("KPMG")
as the Company's independent accountants. The Audit Committee recommended, and
the Board approved, the selection of Mann Frankfort as its new independent
accountants.
In connection with the audits of the Company's consolidated financial
statements for each of the two fiscal years ended December 31, 1999 and 2000,
and the subsequent interim period through February 15, 2002, there were no
disagreements with KPMG on any matter of accounting principles or practices,
financial disclosure, or auditing scope or procedures, which disagreements if
not resolved to their satisfaction, would have caused them to make reference in
connection with their opinion to the subject matter of the disagreement. The
audit reports of KPMG on the consolidated financial statements of the Company
and subsidiaries as of and for the years ended December 31, 1999 and 2000 did
not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting principles,
except that KPMG's report on the Company's consolidated financial statements for
the years ended December 31, 1999 and 2000 contain a separate paragraph stating
that "As discussed in Note 1 to the consolidated financial statements, effective
January 1, 1999, the Company changed its method of accounting for costs of
start-up activities."
During the two fiscal years ended December 31, 2001 and the subsequent
interim period prior to engaging Mann Frankfort, neither the Company nor anyone
on its behalf consulted with Mann Frankfort regarding the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Company's financial
statements, and neither a written report nor advice was provided to the Company
by Mann Frankfort that was an important factor considered by the Company in
reaching a decision as to any accounting, auditing or financial reporting issue.
Mann Frankfort, has been engaged by the Company's Board of Directors as
the independent accountants for the Company. The Company expects that they will
continue as independent accountants. Representatives of Mann Frankfort are
expected to be present at the Special Meeting, with the opportunity to make a
statement if they desire to do so, and to respond to questions.
OTHER BUSINESS
At the date of this Proxy Statement, the Board of Directors does not
know of any matter to be acted upon at the Special Meeting other than those
matters described above and set forth in the Notice. If other business comes
before the Special Meeting, the persons named on the proxy will vote the proxy
in accordance with their best judgment.
INFORMATION INCORPORATED BY REFERENCE
The following documents are being mailed with this proxy statement and
are incorporated herein by reference and deemed to be a part of this proxy
statement:
o Annual Report on Form 10-KSB/A for the fiscal year ended December
31, 2003; and
o Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein modifies or supersedes such statement. Any such statement so modified
20
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
By Order of the Board of Directors
/s/ G. Brian Lloyd
--------------------------------------------
G. Brian Lloyd
Vice President, Treasurer and Secretary
Houston, Texas
October 13, 2004
21
EXHIBIT A
FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BLUE DOLPHIN ENERGY COMPANY
(PURSUANT TO SECTIONS 242 AND 245 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE)
Blue Dolphin Energy Company, a corporation duly organized and existing
under and by virtue of the provisions of the General Corporation Law of the
State of Delaware (the "Delaware General Corporation Law"), hereby certifies as
follows:
1. That the name of this corporation is Blue Dolphin Energy
Corporation.
2. That the name under which this corporation was originally
incorporated was ZIM Energy Corp., and the original Certificate of Incorporation
of this corporation was filed with the Secretary of State of the State of
Delaware on January 21, 1986.
3. This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation, as heretofore
amended, by (i) amending the first paragraph of Article IV to increase the total
shares authorized for issuance from 12,500,000 to 27,500,000 and to increase the
number of shares of Common Stock authorized for issuance from 10,000,000 shares
to 25,000,000 shares; (ii) further amending Article IV by deleting the existing
second paragraph in its entirety; (iii) deleting the existing Article V in its
entirety; and (iv) renumbering the Articles subsequent to Article V to account
for its deletion.
4. That this Amended and Restated Certificate of Incorporation of Blue
Dolphin Energy Company which was duly proposed by the Board of Directors of this
corporation and was duly adopted by vote of the stockholders in accordance with
the provisions of Sections 242 and 245 of the General Corporation Law of the
State of Delaware.
5. The text of the Amended and Restated Certificate of Incorporation of
this corporation, as amended hereby, is restated to read in its entirety as
follows:
ARTICLE I
Name
The name of the corporation is Blue Dolphin Energy Company (the
"Corporation").
ARTICLE II
Registered Agent and Office
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, Corporation Trust Center, Wilmington, County of
New Castle, Delaware 19801. The name of the registered agent of the Corporation
at such address is The Corporation Trust Company.
ARTICLE III
Purposes and Powers
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful business, act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware (the "Law").
In addition to the powers and privileges conferred upon the Corporation
by law and those incidental thereto, the Corporation shall possess and may
exercise all the powers and privileges, which are necessary or convenient to the
conduct, promotion or attainment of the business, objects or purposes of the
Corporation.
ARTICLE IV
Capital Stock
The total number of shares of stock which the Corporation shall have
the authority to issue is 27,500,000 shares, of which 25,000,000 shall be shares
of Common Stock, par value of $.01 per share ("Common Stock"), and 2,500,000
shall be shares of Preferred Stock of the par value of $.10 per share
("Preferred Stock").
A description of the respective classes of stock and a statement of the
designations and the powers, preferences, and rights, and the qualifications,
limitations and restrictions of the shares of such classes of stock and the
limitations on or denial of the voting rights of the shares of such classes of
stock are as follows:
Section 4.1. Common Stock Provisions. The following provisions apply to
all shares of Common Stock of the Corporation.
(a) Dividends. Subject to the provisions of law and any
preferences of the Preferred Stock or of any other stock then
outstanding ranking prior to the Common Stock as to dividends, the
holders of the Common Stock shall be entitled to receive, when, as and
if declared by the Board of Directors of the Corporation, out of funds
legally available therefor as determined by the Board of Directors,
dividends payable in cash, securities or other property, or any other
stock having a preference as to the payment of dividends. No dividends
shall be declared or paid on any class of Common Stock unless any and
all current and accumulated dividends payable with respect to any
Preferred Stock or any other stock then outstanding having a preference
as to the payment of dividends shall have been declared and paid or the
Corporation shall have reserved or provided for the payment thereof.
2
(b) Voting. Each holder of Common Stock shall be entitled to
one vote for each share held on all matters submitted to a vote of
stockholders of the Corporation.
(c) Liquidation. In the event of any voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Corporation (as used in this Article IV, "liquidation"), after payment
or provision for the payment of the debts and other liabilities of the
Corporation and any preferential amounts to which the holders of
Preferred Stock or of any other stock then outstanding ranking prior to
the Common Stock in the distribution of assets shall be entitled upon
liquidation, the holders of the Common Stock and the holders of any
other stock then outstanding ranking on a parity with the Common Stock
in the distribution of assets upon liquidation shall be entitled to
share proportionately in the distribution of the remaining net assets
of the Corporation.
As used in this Article IV, neither the merger nor consolidation of the
Corporation into or with any other corporation, nor the merger or consolidation
of any other corporation into or with the Corporation, nor any sale, transfer,
lease or other exchange of all or any part of the assets of the Corporation,
shall be deemed to be a liquidation of the Corporation.
Section 4.2. Preferred Stock Provisions. The following provisions apply
to all shares of Preferred Stock of the Corporation.
(a) Authority of the Board of Directors to Issue in Series.
The Preferred Stock may be divided into and issued and reissued from
time to time in one or more series. Subject to the provisions of this
Certificate of Incorporation and of the Law, the Board of Directors is
hereby granted and vested with authority from time to time by the
adoption of a resolution or resolutions to authorize, establish and
designate one or more series of Preferred Stock, and to fix and
determine the voting rights, designations, preferences and the
relative, participating, optional and other special rights and
qualifications, limitations and restrictions of the shares of any
series so established to the full extent now or hereafter permitted by
the Law, including but not limited to the following:
(i) The number of shares of such series, which may
subsequently be increased (except as otherwise provided by the
resolution or resolutions of the Board of Directors providing
for the issue of such series) or decreased (to a number not
less than the number of shares then outstanding) by resolution
or resolutions of the Board of Directors, and the distinctive
designation thereof;
(ii) The rate or amount of dividends and dividend
rights, if any, of such series, the preferences, if any, over
any other class or series of stock, or of any other class or
series of stock over such series, as to dividends, the extent,
if any, to which shares of such series shall be entitled to
participate in dividends on a parity with shares of any other
series or class of stock, whether dividends on shares of such
series shall be
3
fully, partially or conditionally cumulative, or a combination
thereof, and any limitations, restrictions or conditions on
the payment of such dividends;
(iii) The rate or amount and rights, if any, of such
series, and the preferences, if any, over any other class or
series of stock, or of any other class or series of stock over
such series, in the event of any liquidation and the extent,
if any, to which shares of any such series shall be entitled
to participate in such event on a parity with shares of any
other series or class of stock;
(iv) The time or times during which, the price or
prices and rate or rates at which, and the terms and
conditions, including any adjustments, on which, the shares of
such series may be redeemed;
(v) The terms of any purchase, retirement or sinking
fund which may be provided for the shares of such series;
(vi) The price or prices or the rate or rates and the
adjustments, if any, upon which the shares of such class or
series shall be convertible into or exchangeable for, at the
option of either the holder or the Corporation or upon the
happening of a specified event, shares of any other class or
classes or any other series of the same or any other class or
classes of stock of the Corporation;
(vii) The voting powers, if any, of such series in
addition to the voting powers provided by the Law.
(b) Limitation on Dividends. No holders of shares of any
series of the Preferred Stock shall be entitled to receive any
dividends thereon other than those specifically provided for by the
Certificate of Incorporation or the resolution or resolutions of the
Board of Directors providing for the issue of such series of Preferred
Stock, nor shall any accumulated dividends on the Preferred Stock bear
any interest.
(c) Limitation on Liquidation Distributions. In the event of
any liquidation the holders of shares of each series of the then
outstanding Preferred Stock shall be entitled to receive only such
amount as shall have been fixed for such purpose by the Certificate of
Incorporation or in the resolution or resolutions of the Board of
Directors establishing the respective series of each class of Preferred
Stock, together with a sum equal to the amount of all accumulated and
unpaid dividends thereon at the dividend amount or rate fixed therefor
in such resolution or resolutions.
(d) Voting Rights. Each holder of shares of each series of
Preferred Stock shall be entitled to only such voting rights as shall
be established by the Certificate of Incorporation or the resolution or
resolutions of the Board of Directors providing for the issuance of
such series of Preferred Stock.
4
ARTICLE V
Election of Directors
Election of directors need not be by written ballot unless the By-laws
of the Corporation shall so provide.
ARTICLE VI
Amendment of By-laws
The by-laws of the Corporation may from time to time be altered,
amended, or repealed, or new by-laws adopted, by the Board of Directors of the
Corporation subject to the right of stockholders to adopt, alter, amend or
repeal the by-laws as provided by law subject to any limitation contained in the
by-laws of the Corporation.
ARTICLE VII
Nomination of Directors
No person (other than a person nominated or recommended for nomination
by the Board of Directors or any nominating committee thereof or any person to
be elected by the holders of any one or more classes or series of Preferred
Stock of the Corporation or any other classes or series of stock of the
Corporation other than the Common Stock which may be outstanding at some time,
voting separately as a class or classes) shall be eligible for election as a
director at any annual or special meeting of stockholders unless a written
notice regarding such person's nomination, together with the written consent of
such person to serve as a director, is received from a stockholder of record by
the Secretary of the Corporation not later than (i) with respect to an election
to be held at an annual meeting of stockholders, ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of stockholders, or
(ii) with respect to an election to be held at a special meeting of
stockholders, the close of business on the tenth day following the date on which
notice of such meeting is first given to stockholders. Each such notice shall
set forth (i) the name, age, business address and residence address of each
nominee proposed in such notice, (ii) the principal occupation of employment of
each such nominee, (iii) the number of shares of stock of the Corporation which
are beneficially owned by each such nominee, and (iv) such other information in
respect of such nominee as would be required by the federal securities laws and
the rules and regulations promulgated thereunder in respect of an individual
nominated as a director of the Corporation and for whom proxies are solicited by
the Board of Directors.
The Chairman of any meeting of stockholders may, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded.
ARTICLE VIII
Limitation of Director Liability; Indemnification
Section 8.1. Limitation of Director Liability. A director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of his or her fiduciary duty as a
director, except for liability (i) for any breach of such director's duty of
5
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, as the
same exists or may hereinafter be amended, or (iv) for any transaction from
which the director derived an improper personal benefit. In addition to the
circumstances in which a director of the Corporation is not personally liable as
set forth in the preceding sentence, if the Delaware General Corporation Law is
amended after approval of this Article by the stockholders to authorize
corporate action further eliminating or limiting the liability of directors,
then the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the Delaware General Corporation Law,
as so amended. Any repeal or modification of the foregoing Section 8.1 by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
Section 8.2. Indemnification of Directors. Officers, Employees and
Agents.
(a) Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that
he or she or a person of whom he or she is the legal representative, is
or was or has agreed to become a director or officer of the Corporation
or is or was serving or has agreed to serve at the request of the
Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official
capacity as a director or officer or in any other capacity while
serving or having agreed to serve as a director or officer, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists
or may hereafter be amended, (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) against all expense,
liability and loss (including without limitation, attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered by such
person in connection therewith and such indemnification shall continue
as to a person who has ceased to serve in the capacity which initially
entitled such person to indemnity hereunder and shall inure to the
benefit of his or her heirs, executors and administrators; provided,
however, that the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section 8.2 shall be a contract right
and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General
Corporation Law requires, the payment of such expenses incurred by a
current, former or proposed director or officer in his or her capacity
as a director or officer or proposed director or officer (and not in
any other
6
capacity in which service was or is or has been agreed to be rendered
by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the
final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such indemnified
person, to repay all amounts so advanced if it shall ultimately be
determined that such indemnified person is not entitled to be
indemnified under this Section 8.2 or otherwise.
(b) Indemnification of Employees and Agents. The Corporation
may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation, individually or as a group,
with the same scope and effect as the indemnification of directors and
officers provided for in this Section.
(c) Right of Claimant to Bring Suit. If a written claim
received by the Corporation from or on behalf of an indemnified party
under this Section 8.2 is not paid in full by the Corporation within
ninety days after such receipt, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the
claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking, if any
is required, has been tendered to the Corporation) that the claimant
has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the Corporation to indemnify
the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable
standard of conduct set forth in the Delaware General Corporation Law,
nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not
met the applicable standard of conduct.
(d) Nonexclusivity of Rights. The right to indemnification and
the advancement and payment of expenses conferred in this Article VII
shall not be exclusive of any other right which any person may have or
hereafter acquire under any law (common or statutory), provision of the
Certificate of Incorporation of the Corporation, bylaw, agreement, vote
of stockholders or disinterested directors or otherwise.
(e) Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any person who is or was serving as a
director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer,
employee or agent of another corporation,
7
partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have
the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
(f) Savings Clause. If this Section 8.2 or any portion hereof
shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify and
hold harmless each director and officer of the Corporation, as to
costs, charges and expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement with respect to any action, suit
or proceeding, whether civil, criminal, administrative or investigative
to the full extent permitted by any applicable portion of this Section
8.2 that shall not have been invalidated and to the fullest extent
permitted by applicable law.
(g) Definitions. For purposes of this Section, reference to
the "Corporation" shall include, in addition to the Corporation, any
constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger prior to (or, in the case of an
entity specifically designated in a resolution of the Board of
Directors, after) the adoption hereof and which, if its separate
existence had continued, would have had the power and authority to
indemnify its directors, officers and employees or agents, so that any
person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of
this Section with respect to the resulting or surviving corporation as
he would have with respect to such constituent corporation if its
separate existence had continued.
IN WITNESS WHEREOF, Blue Dolphin Energy Company has caused this Amended
and Restated Certificate of Incorporation to be executed by Ivar Siem, its
Chairman and Chief Executive Officer and by G. Brian Lloyd, its Secretary on
this ____ day of __________, 2004.
----------------------------
Ivar Siem, Chairman and
Chief Executive Officer
----------------------------
G. Brian Lloyd, Secretary
8
BLUE DOLPHIN ENERGY COMPANY
SPECIAL MEETING OF STOCKHOLDERS NOVEMBER 11, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned revokes all previous proxies, acknowledges receipt of
the Notice of the Special Meeting of Stockholders to be held on November 11,
2004 and the Proxy Statement, and appoints Michael J. Jacobson and G. Brian
Lloyd, and each of them, the proxy of the undersigned, with full power of
substitution to vote all shares of common stock of Blue Dolphin Energy Company
(the "Company") that the undersigned is entitled to vote, either on his or her
own behalf or on behalf of any entity or entities, at the Special Meeting of
Stockholders of the Company to be held at the Company's principal executive
offices at 801 Travis, Suite 2100 Houston, Texas 77002 on Thursday, November 11,
2004 at 8:30 a.m. local time, and at any adjournment or postponement thereof,
with the same force and effect as the undersigned might or could do if
personally present thereat. The shares represented by this proxy shall be voted
in the manner set forth on the reverse side.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
1. To issue warrants to purchase up to For Against Abstain
1,550,000 shares of common stock [ ] [ ] [ ]
pursuant to that certain Note & Warrant
Purchase Agreement
2. To amend the Certificate of Incorporation to For Against Abstain
increase the number of authorized shares [ ] [ ] [ ]
of common stock to 25,000,000 shares
3. To amend and restate the Certificate of For Against Abstain
Incorporation to (a) incorporate the other [ ] [ ] [ ]
amendments to the Certificate that have been,
or will be, approved by the stockholders
and (b) to eliminate the authorized
Series A preferred stock
4. Election of Directors:
[ ] for all
[ ] withhold all
[ ] for all except _____________
(see instructions below)
To withhold authority to vote for fewer than all of nominees, mark "For All
Except" and write the nominee's name in the list below.
Nominees
--------
Laurence N. Benz F. Gardner Parker
Michael S. Chadwick Ivar Siem
Harris A. Kaffie James M. Trimble
5. To issue warrants to purchase up to 100,000 For Against Abstain
shares of common stock to Laurence N. Benz, [ ] [ ] [ ]
Michael S. Chadwick and F. Gardner Baker.
6. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before this meeting.
IF YOU RETURN YOUR PROPERLY EXECUTED PROXY, THE PROXIES WILL VOTE YOUR SHARES AS
YOU DIRECT. IF YOU DO NOT SPECIFY ON YOUR PROXY HOW YOU WANT TO VOTE YOUR
SHARES, THE PROXIES WILL VOTE THEM "FOR" PROPOSAL 1, 2, 3 AND 5, AND FOR ALL FOR
PROPOSAL 4, AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
Please sign EXACTLY as your name appears hereon. When
signing as attorney, executor, administrator, trustee
or guardian, please give your full title as such. If
more than one trustee, all should sign. If shares are
held jointly, both owners must sign.
------------------------------------ -------------
Signature Date
------------------------------------ -------------
Signature (Joint Owners) Date
2