BLUE DOLPHIN ENERGY CO
10-Ks and 10-Qs
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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 ☑
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))
☑
Definitive Proxy
Statement
☐
Definitive
Additional Materials
☐
Soliciting Material
pursuant to §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):
☑
No fee
required
☐
Fee computed on
table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1)
Title of each class
of securities to which transaction
applies:
(2)
Aggregate number of
securities to which transaction applies:
(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):
(4)
Proposed maximum
aggregate value of transaction:
(5)
Total fee
paid:
☐
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 No.:
(3)
Filing
Party:
(4)
Date
Filed:
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NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
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To Our
Stockholders:
Notice
is hereby given that an Annual Meeting of Stockholders (the
“Annual Meeting”) of Blue Dolphin Energy Company, a
Delaware corporation (referred to herein as “Blue
Dolphin,” “we,” “us” and
“our”), will be held on Thursday, December 27, 2018 at
10:00 a.m. Central Time at Blue Dolphin’s principal office
located at 801 Travis Street, 21
st
Floor, Houston,
Texas 77002. At the Annual Meeting, stockholders will consider
proposals to:
(1)
elect five (5)
directors, all of whom shall serve until the next annual meeting of
stockholders, or in each case until their successors are duly
elected and qualified, or until their earlier resignation or
removal;
(2)
ratify the
selection of UHY LLP (“UHY”) as our independent
registered public accounting firm for the fiscal year ending
December 31, 2018; and
(3)
transact any other
business that may properly come before the Annual
Meeting.
Additional
information regarding the Annual Meeting is set forth in the
accompanying proxy statement. Our Board of Directors (the
“Board”) has specified the close of business on
November 5, 2018 as the record date (“Record Date”) for
the purpose of determining the stockholders who are entitled to
receive notice of, and to vote at, the Annual Meeting. Only
stockholders of record at the close of business on the Record Date
are entitled to notice of and to vote at the Annual Meeting and at
any adjournment or postponement thereof.
Regardless of
whether you plan to attend the Annual Meeting in person, we request
that you
vote your shares of Blue
Dolphin common stock at your earliest convenience in order to
ensure that your shares of Blue Dolphin common stock will be
represented at the Annual Meeting.
Depending on how you hold
your shares of Blue Dolphin common stock, options to cast your
ballot include the Internet, telephone, or mail. If you have
Internet access, we recommend that you record your vote via the
Internet.
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AVAILABILITY
OF PROXY MATERIALS – IMPORTANT NOTICE
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Proxy
materials are available online
https://iproxydirect.com/BDCO
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MEETING
DETAILS
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Location
Blue
Dolphin Energy Company
801
Travis Street, 21st Floor
Houston,
Texas 77002
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Parking
Parking
will be validated for attendees that park in the 801 Travis Street
parking garage (entrance off Rusk Street).
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Proxy
Forms
Registered
stockholders may vote in person at the Annual Meeting by completing
a ballot or by submitting their pre-printed proxy form. Beneficial
stockholders that desire to vote in person at the Annual Meeting
must obtain a legal proxy form from the brokerage firm, bank, trust
or other nominee and present it to the inspector of election with
their ballot. The inspector of election at the Annual Meeting has
access to the registered stockholder’s list to verify whether
a registered stockholder is entitled to vote as of the Record Date.
However, the inspector of election does not have access to the
control number verification system that brokerage firms, banks,
trusts and other nominees use to verify whether a beneficial
stockholder is entitled to vote at the Annual Meeting. See
“Frequently Asked Questions – 7. How do I vote if I am
a beneficial stockholder?” for more information on voting
shares held through a brokerage firm, bank, trust or other
nominee.
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By Order of the
Board
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/s/
JONATHAN P.
CARROLL
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Jonathan P. Carroll |
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Chairman of the
Board
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November 15,
2018
Houston,
Texas
BLUE
DOLPHIN ENERGY COMPANY
November 15,
2018
Fellow
Stockholders:
Although 2018 has been no less challenging than 2016 and 2017, we
continue to weather the storm. Significant milestones this year
include:
(1)
Positive EBITDA
-- For the nine months ended September
30, 2018, EBITDA
(1)
for refinery operations was positive
at $2.8 million compared to a loss of $20.9 million for the nine
months ended September 30, 2017. EBITDA for tolling and terminaling
operations was also positive at $2.8 million for the nine months
ended September 30, 2018. We did not report tolling and terminaling
operations as a separate business segment in
2017;
(2)
GEL Settlement
Agreement
-- In July 2018, GEL
Tex Marketing, LLC (“GEL”) and the Lazarus
Parties
(2)
entered into a Settlement Agreement
whereby all parties agreed to mutually release all claims against
each other and to file a stipulation of dismissal with prejudice in
connection with the final arbitration award, subject to the terms
and conditions set forth in the Settlement Agreement. The most
critical condition is a one-time payment to GEL of $10.0 million in
cash; and
(3)
Arbitration Award Balance
Reduction
-- To date, Lazarus
Energy, LLC (“LE”) has paid $9.2 million to GEL towards
reducing the outstanding balance of the final arbitration award.
After the $3.7 million initial payment to GEL in September 2017, LE
has been making payments to GEL at $0.5 million per
month.
We
certainly have a long way to go, but I am encouraged by the
progress that we continue to make. As always, I want to thank you,
our stockholders, for your continued support. I also want to thank
the folks that keep the business running every day -- our people.
Together we are making headway, and I remain optimistic about our
future.
With
regards,
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Jonathan
P. Carroll
Chairman
of the Board,
Chief
Executive Officer and President
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(1)
EBITDA reflects earnings before:
(i) interest income (expense), (ii) income taxes, and (iii)
depreciation and amortization.
(2)
The Lazarus Parties refers to LE,
Blue Dolphin Energy Company, Lazarus Energy Holdings, LLC, Nixon
Product Storage, LLC, Carroll & Company Financial Holdings,
L.P., and Jonathan Carroll.
801
Travis Street, Suite 2100, Houston, Texas 77002
Phone
(713) 568-4725 ● Fax (713) 227-7626 ●
www.blue-dolphin-energy.com
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PROXY STATEMENT
BLUE DOLPHIN ENERGY COMPANY
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TABLE OF CONTENTS
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PAGE
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PROCEDURAL MATTERS
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2
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General
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2
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Date, Time and Place
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2
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Purpose
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2
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Record Date; Who Is Entitled to Vote
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2
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Material Delivery
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2
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Quorum
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2
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Abstentions and Broker Non-Votes
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3
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Votes Required for Approval
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3
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Voting Your Shares
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3
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Revoking Your Proxy
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4
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Where to Direct Questions
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4
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Reimbursement of Solicitation Expenses
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4
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FREQUENTLY ASKED QUESTIONS (“FAQs”)
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5
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PROPOSALS
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8
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(1) ELECTION OF DIRECTORS
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8
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(2) RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
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10
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(3) TRANSACTION OF OTHER MATTERS
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10
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EXECUTIVE OFFICERS
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11
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CORPORATE GOVERNANCE AND BOARD MATTERS
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12
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AUDIT COMMITTEE REPORT
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14
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COMPENSATION DISCUSSION AND ANALYSIS
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16
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COMPENSATION COMMITTEE REPORT
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18
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
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18
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RELATED PARTY TRANSACTIONS
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19
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
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23
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DIRECTOR NOMINATION AND STOCKHOLDER PROPOSALS BY STOCKHOLDERS FOR
ANNUAL MEETING OF STOCKHOLDERS
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WHERE YOU CAN FIND MORE INFORMATION
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25
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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING
STATEMENTS
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25
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DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN
ADDRESS
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26
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APPENDICES
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AUDIT COMMITTEE CHARTER
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A-1
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COMPENSATION COMMITTEE CHARTER
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B-1
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1
This
proxy statement and accompanying notice and proxy form are being
furnished to the stockholders of Blue Dolphin Energy Company
(referred to herein as “Blue Dolphin,”
“we,” “us” and “our”) in
connection with the solicitation of proxies by Blue Dolphin’s
Board of Directors (the “Board”) for use at the Annual
Meeting of Stockholders (the “Annual Meeting”) and any
adjournment or postponement thereof.
The
Annual Meeting will be held on Thursday, December 27, 2018 at 10:00
a.m. Central Time at Blue Dolphin’s principal office, which
is located at 801 Travis Street, 21
st
Floor, Houston,
Texas 77002.
At the
Annual Meeting, stockholders are being asked to consider and vote
upon proposals to:
(1)
elect five (5)
directors, all of whom shall serve until the next annual meeting of
stockholders, or in each case until their successors are duly
elected and qualified, or until their earlier resignation or
removal;
(2)
ratify the
selection of UHY LLP (“UHY”) as our independent
registered public accounting firm for the fiscal year ending
December 31, 2018; and
(3)
transact any other
business that may properly come before the Annual
Meeting.
The
Board has fixed the close of business on November 5, 2018 as the
record date (the “Record Date”) for the determination
of stockholders entitled to notice of, and to vote at, the Annual
Meeting. A list of registered stockholders entitled to vote at the
Annual Meeting will be open for examination by any stockholder
during normal business hours for a period of ten (10) days prior to
the Annual Meeting at our principal office, which is located at 801
Travis Street, 21
st
Floor, Houston,
Texas 77002. On the Record Date, there were 10,975,514 shares of
our common stock, par value $0.01 per share (the “Common
Stock”), outstanding. Stockholders are entitled to one (1)
vote per share of Common Stock
held on
the Record Date
on
each matter presented at the Annual Meeting.
This
proxy statement, along with its accompanying notice and proxy form,
are first being mailed to stockholders on or about November 16,
2018. We are also mailing an insert notifying stockholders that our
Annual Report on Form 10-K for the fiscal year ended December 31,
2017 (the “Annual Report”) is available
online.
The
holders of a majority of the
shares
of Common Stock entitled to vote at the Annual Meeting and
represented in person or by proxy shall constitute a quorum at the
Annual Meeting
for the transaction of business.
2
Abstentions
– If a stockholder abstains from voting on
a proposal, the shares are considered present and entitled to vote
at the Annual Meeting. Therefore, abstentions will count toward
determining whether or not a quorum is present. Under Delaware law,
a proxy marked “abstain” is not considered a vote cast.
Accordingly, an abstention will have no effect on the proposal
regarding the election of directors, as the nominees are elected by
a plurality of the votes cast. Abstentions on proposals that
require the affirmative vote of a majority of the shares entitled
to vote and represented at the Annual Meeting, in person or by
proxy, will, in effect, be a vote against such matter.
Broker Non-Votes
– Broker non-votes occur when
brokers, banks or other nominees that hold shares on behalf of
beneficial (“street name”) stockholders do not receive
voting instructions from the beneficial stockholders prior to the
Annual Meeting and do not have discretionary voting authority to
vote those shares. Broker non-votes are considered present and
entitled to vote at the Annual Meeting. Therefore, broker non-votes
will count toward determining whether or not a quorum is present.
However, under New York Stock Exchange Rule 452, which has been
approved by the Securities and Exchange Commission (the
“SEC”), brokers are prohibited from voting shares of
Common Stock for which they have not received instructions on
non-routine matters, including the election of
directors.
With
the exception of the election of directors, our By-Laws, as amended
and restated (the “By-Laws”), require an affirmative
vote of a majority of the votes cast by the stockholders present,
either in person or by proxy, and entitled to vote at the Annual
Meeting for the proposal to be approved. The votes required for
approval, and the impact of abstentions and broker non-votes for
each proposal stockholders are being asked to consider and vote
upon are as follows:
Proposal (1)
— Election of Directors: You may vote “FOR” any
one, or all, of the nominees, or withhold your vote for any one or
more of the nominees. As the nominees are elected by a plurality of
the votes cast, withheld votes and abstentions will not affect the
outcome of this proposal. This proposal is considered a non-routine
matter and brokers will not have discretionary authority to vote
shares for which they have not received instructions;
and
Proposal (2)
— Ratification of Independent Registered Public Accounting
Firm: You may vote “FOR” or “AGAINST” or
abstain from voting. The affirmative vote of the holders of a
majority of the shares of Common Stock entitled to vote and
represented at the Annual Meeting, in person or by proxy, is
required to approve the ratification of UHY as our independent
registered public accountants for the fiscal year ending December
31, 2018. Abstentions will have the same effect as a vote
“AGAINST” the ratification. Under applicable SEC rules,
this proposal is considered a routine matter and brokers will have
the discretionary authority to vote shares of Common Stock for
which they have not received instructions.
All
shares of Common Stock represented at the Annual 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
“FOR” Proposal Nos. (1) and (2).
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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 pursuant to the following actions:
-
providing written
or electronic notice of revocation;
-
submitting a proxy
of a later date; or
-
voting in person at
the Annual Meeting.
A
written notice of revocation should be sent to Blue Dolphin Energy
Company, Attention: Secretary, 801 Travis Street, Suite 2100,
Houston, Texas 77002. Depending on how you hold your shares, you
can submit a proxy of a later date via the Internet, by telephone,
by fax, or by mail.
Where to Direct Questions
To
assist you with casting your vote, we have attempted to answer key
questions you may have as a stockholder related to the proposals
you are being asked to consider. Please review the frequently asked
questions (FAQs) section, which is included as part of this proxy
statement. If you have any additional questions, please contact
Blue Dolphin, Investor Relations at (713) 568-4725.
Blue
Dolphin will bear all costs of this solicitation. Proxies will be
solicited primarily by mail, but may also be solicited in person,
by telephone or other electronic means by directors, officers and
employees of Blue Dolphin in the ordinary course of business, for
which they will not
receive additional
compensation
. Blue Dolphin has requested that brokers,
nominees, fiduciaries and other custodians send proxy materials to
the beneficial owners of
Common
Stock,
for which Blue Dolphin will reimburse them for their
reasonable out-of-pocket expenses.
Remainder
of Page Intentionally Left Blank
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The
FAQs presented in this section are to assist you in understanding
the proposals you are being asked to vote upon for the Annual
Meeting. The items addressed may not answer all questions that may
be important to you as a stockholder. For additional information,
please refer to the more detailed discussion contained elsewhere in
this proxy statement or contact Blue Dolphin, Investor Relations at
(713) 568-4725.
Procedural Matters
1.
Why
am I receiving this proxy statement?
You are
receiving this proxy statement because you hold shares of Blue
Dolphin Common Stock as of the Record Date for the Annual
Meeting.
2.
What
does it mean if I receive more than one proxy?
If you
receive more than one proxy form, it means that you hold shares of
Common Stock in more than one account. For example, you may own
your shares of Common Stock individually, jointly with your spouse,
as trustee of a trust, or as custodian for a minor. To ensure that
all of your shares of Common Stock are voted, you will need to sign
and return each proxy form received because they are held in a
different form of ownership.
3.
Who
is entitled to attend and vote at the Annual Meeting?
If you
owned shares of Common Stock as of the close of business on
November 5, 2018, you are entitled to notice of, and to vote at,
the Annual Meeting or any adjournment or postponement of the Annual
Meeting. As of the Record Date, there were approximately 10,975,514
shares of Common Stock and outstanding.
4.
When
and where will the Annual Meeting be held?
The
Annual Meeting will be held on Thursday, December 27, 2018 at 10:00
a.m. Central Time at Blue Dolphin’s principal office, which
is located at 801 Travis Street, 21
st
Floor, Houston,
Texas 77002.
5.
What
do I need to do now?
After
carefully reading and considering the information contained in this
proxy statement, please vote your shares of Common Stock as
described below. You are entitled to one (1) vote for each share of
Common Stock you own as of the Record Date.
6.
How
do I vote if I am a registered stockholder?
If your
shares of Common Stock are registered directly in your name with
our transfer agent, Securities Transfer Corporation, you are
considered, with respect to those shares, the stockholder of record
or a “registered stockholder.” Registered stockholders
may vote as follows: (i) by mail by completing, signing and dating
each proxy form received and returning it in the enclosed prepaid
envelope, (ii) by fax by completing, signing and dating each proxy
form received and faxing to (202) 521-3464, (iii) via the Internet
at
https://www.iproxydirect.com/BDCO
by following the instructions, or (iv) in person by attending the
Annual Meeting. If voting by mail, fax, or the Internet, your
voting instructions must be received by 11:59 p.m. Eastern/10:59
p.m. Central Time on the date prior to the date of the Annual
Meeting. Voting by mail, fax, or the Internet will not prevent you
from voting in person at the Annual Meeting. You are encouraged to
submit a proxy by mail, fax, or the Internet even if you plan to
attend the Annual Meeting in person to ensure that your shares of
Common Stock are present in person or represented by proxy at the
Annual Meeting.
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7.
How
do I vote if I am a beneficial stockholder?
If your
shares of Common Stock are held by a brokerage firm, bank, trust or
other nominee, you are considered the “beneficial
stockholder” of the shares of Common Stock being held in
“street name.” These proxy materials are being
forwarded to you by your broker, bank or other holder of record who
is considered, with respect to those shares of Common Stock, the
stockholder of record. As the beneficial stockholder, you have the
right to direct your broker, bank or other holder of record on how
to vote your shares of Common Stock and you are invited to attend
the Annual Meeting. Your broker, bank, trustee or nominee is
obligated to provide you with a voting instruction form for voting
purposes.
As a
beneficial stockholder, you cannot vote your shares of Common Stock
directly and must instead instruct the brokerage firm, bank, trust
or other nominee on how to vote your shares of Common Stock. With
specific instructions on how to vote, your brokerage firm, bank,
trust or other nominee will be permitted to vote shares of Common
Stock on your behalf for any matter, including non-routine matters
under SEC Rules. Proposal (1), regarding the election of directors,
is considered a non-routine matter. Without instructions on how to
vote, your brokerage firm, bank, trust or other nominee will only
be permitted to vote shares of Common Stock on your behalf for
routine matters under applicable SEC rules. Proposal (2), regarding
the ratification of UHY as our independent registered public
accounting firm for the year ending December 31, 2018, is
considered a routine matter.
Therefore, it is important
that you promptly follow the directions provided by your brokerage
firm, bank, trust or other nominee regarding how to instruct them
to vote your shares of Common Stock.
If you wish to vote in person at the
Annual Meeting, you must obtain a legal proxy form from the
brokerage firm, bank, trust or other nominee and present it to the
inspector of election with your ballot.
If you hold some
shares of Common Stock as a registered stockholder and some shares
of Common Stock as a beneficial stockholder, the shares of Common
Stock cannot be combined for voting purposes because the shares of
Common Stock held beneficially list the brokerage firm, bank, trust
or other nominee as the stockholder of record.
8.
What
if I fail to instruct my brokerage firm, bank, trust or other
nominee how to vote?
Because
your brokerage firm, bank, trust or other nominee does not have
discretionary authority to vote on non-routine matters, failure to
provide your broker or other nominee with voting instructions on
how to vote your shares of Common Stock will result in a broker
non-vote for Proposal (1).
9.
What
are the proposals that will be voted on at the Annual
Meeting?
You are
being asked to consider and vote upon proposals to: (1) elect five
(5) directors, (2) ratify the selection of UHY as our independent
registered public accounting firm for the year ending December 31,
2018, and (3) transact any other business that may properly come
before the Annual Meeting and any adjournment or postponement
thereof.
10.
How
does Blue Dolphin’s Board recommend that I vote on the
proposals?
The
Board has determined that each of the proposals presented in the
proxy statement are in the best interests of you -- our stockholder
-- and unanimously recommends that you vote “FOR” each
proposal presented in the proxy statement.
11.
How
many votes are required to approve an adjournment or postponement
of the Annual Meeting to a later time, if necessary or appropriate,
to obtain a quorum or solicit additional proxies in favor of the
proposals?
If a
quorum is not met, the Board may submit a proposal to adjourn or
postpone the Annual Meeting to a later date or dates until a quorum
is met. If a quorum is met but there are insufficient votes to
adopt the proposals, our By-Laws require the affirmative vote of a
majority of the votes cast in order to adjourn or postpone the
Annual Meeting to a later time. Withheld votes, abstentions and
broker non-votes will have no effect on this matter.
12.
How
are votes counted?
The
inspector of election that is appointed for the Annual Meeting will
count the votes. Such person will separately count
“FOR,” “WITHHELD” and “AGAINST”
votes, as well as abstentions and broker non-votes.
6
13.
What
constitutes a quorum for the Annual Meeting?
The
presence, in person or by proxy, of stockholders representing a
majority of the shares of Common Stock entitled to vote at the
Annual Meeting will constitute a quorum for the Annual Meeting.
Shares of Common Stock held by registered stockholders that submit
a properly executed proxy form will be counted as part of the
quorum. Shares of Common Stock held by beneficial stockholders that
either provide their brokerage firm, bank, trust or other nominee
with voting instructions or obtain a legal proxy form for voting in
person at the Annual Meeting will be counted as part of the
quorum.
14.
Am
I entitled to appraisal rights?
Under
Delaware law, stockholders are not entitled to appraisal rights
with respect to any of the proposals presented at the Annual
Meeting.
15.
What
happens if I sell my shares of Blue Dolphin Common Stock before the
Annual Meeting?
The
date of record to determine whether stockholders are entitled to
vote at the Annual Meeting is earlier than the date of the Annual
Meeting. If you transfer or sell your shares of Common Stock after
the Record Date but before the Annual Meeting, you will, unless
special arrangements are made, retain your right to vote at the
Annual Meeting.
16.
Who
can answer further questions?
For
additional questions, please contact Blue Dolphin, Investor
Relations at (713) 568-4725. For assistance in submitting proxies
or voting shares of Common Stock, registered stockholders should
contact Securities Transfer Corporation by phone at (469) 633-0101
or visit their website at
http://www.stctransfer.com
.
Beneficial stockholders should contact their brokerage firm, bank,
trust or other nominee for additional information.
Selection of UHY as Independent Registered Public Accounting
Firm
17.
How long has UHY been our independent registered public accounting
firm?
UHY has
been engaged as our independent registered public accounting firm
since 2002. Although ratification of UHY as our independent
registered public accounting firm by our stockholders is not
required by our By-Laws, the Board believes that submitting this
matter to a vote reflects good corporate practice.
18.
What happens if UHY’s selection is not ratified?
In the
event of a negative vote on such ratification, the Audit Committee
of the Board (the “Audit Committee”) will consider
whether it is appropriate to select another independent registered
public accounting firm. Even if this appointment is ratified, the
Audit Committee, in its discretion, may direct the appointment of a
different independent registered public accounting firm at any time
during the year if the Audit Committee determines that such a
change would be in our best interest and that of our
stockholders.
Remainder of Page Intentionally Left Blank
7
Director Nominees
The
Board has affirmatively determined that each of Ryan A. Bailey,
Amitav Misra, and Christopher T. Morris, each an outside director,
is considered an “Independent Director” as such term is
defined by OTCQX and SEC rules. Jonathan P. Carroll, our Chief
Executive Officer and President, and Herbert N. Whitney, are not
considered independent directors. The independent members of the
Board have nominated Messrs. Bailey, Misra, Morris, Carroll and
Whitney to serve as directors until the next annual meeting of
stockholders. Each director that has been nominated (each a
“Director Nominee”) shall serve as a director 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
Director Nominee has consented to being nominated and has expressed
a willingness to serve if elected. The Board has no reason to
believe that any of the Director Nominees will be unable or
unwilling to serve if elected. However, should any Director Nominee
become unable or unwilling to serve as a director at the time of
the Annual Meeting, the person or persons exercising the proxies
will vote for the election of a substitute Director Nominee
designated by the Board.
This
table shows, as of the Record Date, each Director Nominee’s
name, age, principal occupation and directorships during the past
five (5) years, as well as their relevant knowledge and experience
that led to their nomination to the Board:
|
Name, Age
Principal Occupation and Directorships During Past 5
Years
|
|
Knowledge and Experience
|
|
|
|
|
|
Jonathan P. Carroll
, 57
Blue
Dolphin Energy Company
Chairman of the Board
(since 2014)
Chief Executive Officer, President,
Assistant Treasurer and Secretary
(since 2012)
Lazarus
Energy Holdings, LLC (“LEH”)
President and majority owner
(since 2006)
Together,
LEH and Jonathan Carroll owned 79.8% of our outstanding Common
Stock as of the Record Date.
Mr.
Carroll has served on Blue Dolphin’s Board since 2014. He is
currently Chairman of the Board. Since 2004, he has served on the
Board of Trustees of the Salient Fund Group, and has served on the
compliance, audit and nominating committees of several of
Salient’s private and public closed-end and mutual funds. Mr.
Carroll previously served on the Board of Directors of the General
Partner of LRR Energy, L.P. (NYSE: LRE) from January 2014 until its
merger with
Vanguard
Natural Resources, LLC in October 2015.
|
|
Mr.
Carroll earned a Bachelor of Arts degree in Human Biology and a
Bachelor of Arts degree in Economics from Stanford University, and
he completed a Directed Reading in Economics at Oxford University.
Based on his educational and professional experiences, Mr. Carroll
possesses particular knowledge and experience in business
management, finance and business development that strengthen the
Board’s collective qualifications, skills and
experience.
|
|
|
|
|
|
Ryan A. Bailey
, 43
Children’s
Health System of Texas
Head of Investments
(since 2014)
The
Meadows Foundation
Investment Officer/Interim Chief Investment Officer
(2006 to
2014)
Mr.
Bailey was appointed to Blue Dolphin’s Board in November
2015. He is currently a member of the Audit and
Compensation Committees. He also serves as an advisor
and mentor to Texas Wall Street Women, a non-profit member
organization; is a member of the advisory board of Solovis, Inc.,
an investment software company; and serves as a Board member for
the Texas Hedge Fund Association.
|
|
Mr.
Bailey earned a Bachelor of Arts in Economics from Yale University
and completed a graduate course in tax planning from the Yale
School of Management. He holds professional
credentialing as a Chartered Financial Analyst (CFA), Financial
Risk Manager (FRM), Chartered Alternative Investment Analyst (CAIA)
and Chartered Market Technician (CMT). Based on his educational and
professional experiences, Mr. Bailey possesses particular knowledge
and experience in finance, financial analysis and modeling,
investment management, risk assessment and strategic planning that
strengthen the Board’s collective qualifications, skills and
experience.
|
|
|
|
|
8
|
Name, Age
Principal Occupation and Directorships During Past 5
Years
|
|
Knowledge and Experience
|
|
|
|
|
|
Amitav Misra
, 41
Arundo
Analytics, Inc.
General Manager Americas (
since November 2018
)
Vice President of Marketing
(since 2017)
Cardinal
Advisors
Founder and Partner
(2014 to 2017)
Taxa,
Inc.
President, Director and Chief Operating Officer
(2012 to
2014)
EnerNOC,
Inc.
Channel Manager
(2011 to 2012)
Mr.
Misra has served on Blue Dolphin’s Board since
2014. He is currently a member of the Audit and
Compensation Committees. Mr. Misra serves as an advisor
to several energy, technology and private investment
companies. He is also a director of the Houston Center
for Literacy, a non-profit organization.
|
|
Mr.
Misra earned a Bachelor of Arts in Economics from Stanford
University and holds FINRA Series 79 and Series 63 licenses. Mr.
Misra possesses particular knowledge and experience in economics,
business development, private equity, and strategic planning that
strengthen the Board’s collective qualifications, skills and
experience.
|
|
|
|
|
|
Christopher T. Morris
, 57
Impact
Partners LLC
President
(since 2017)
Tatum
(a Randstad Company)
New York Managing Partner
(2013 to 2017)
MPact
Partners LLC
President
(2011 to 2013)
Mr.
Morris has served on Blue Dolphin’s Board since 2012; he is
currently Chairman of the Audit and Compensation
Committees.
|
|
Mr.
Morris earned a Bachelor of Arts in Economics from Stanford
University and a Masters in Business Administration from the
Harvard Business School. Based on his educational and professional
experiences, Mr. Morris possesses particular knowledge and
experience in business management, finance, strategic planning and
business development that strengthen the Board’s collective
qualifications, skills and experience.
|
|
|
|
|
|
Herbert N. Whitney
, 78
Wildcat
Consulting, LLC
Founder and President
(since 2006)
Mr.
Whitney has served on Blue Dolphin’s Board since 2012. He
previously served on the Board of Directors of Blackwater Midstream
Corporation, the Advisory Board of Sheetz, Inc., as Chairman of the
Board of Directors of Colonial Pipeline Company, and as Chairman of
the Executive Committee of the Association of Oil
Pipelines.
|
|
Mr.
Whitney has more than 40 years of experience in pipeline
operations, crude oil supply, product supply, distribution and
trading, as well as marine operations and logistics having served
as the President of CITGO Pipeline Company and in various general
manager positions at CITGO Petroleum Corporation. He earned his
Bachelor of Science in Civil Engineering from Kansas State
University. Based on his educational and professional experiences,
he possesses extensive knowledge in the supply and distribution of
crude oil and petroleum products, which strengthens the
Board’s collective qualifications, skills and
expertise.
|
|
|
|
|
Recommendation
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
“FOR”
THE ELECTION OF ALL OF THE DIRECTOR NOMINEES.
9
For additional information related to this matter, refer to the
FAQs provided as part of this proxy statement.
For
purposes of determining whether to select UHY as our independent
registered public accounting firm to perform the audit of our
consolidated financial statements for the year ending December 31,
2018, the Audit Committee conducted a thorough review of
UHY’s performance. The Audit Committee
considered:
-
UHY’s
performance on previous audits, including the quality of the
engagement team and the firm’s experience, client service,
responsiveness and technical expertise;
-
the firm’s
leadership, management structure and client and employee
retention;
-
the firm’s
financial strength and performance; and
-
the appropriateness
of fees charged.
UHY has
acted as our principal independent registered public accounting
firm since 2002. We are asking our stockholders to ratify the
selection of UHY as our independent registered public accounting
firm for the fiscal year ended December 31, 2018. Although
ratification is not required by our By-Laws or otherwise, the Board
is submitting the selection of UHY to our stockholders for
ratification as a matter of good corporate practice. If the
selection is not ratified, the Audit Committee will consider
whether it is appropriate to select another independent registered
public accounting firm. Even if the selection is ratified, the
Audit Committee, in its discretion, may select a different
independent registered public accounting firm at any time during
the year if it determines that such a change would be in the best
interests of Blue Dolphin and our stockholders.
A
representative of UHY is expected to be available during the Annual
Meeting, with the opportunity to make a statement if he or she
decides to do so, and will respond to appropriate
questions.
Recommendation
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE
RATIFICATION
OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
At the
date of this proxy statement, the Board was not aware of any matter
to be acted upon at the Annual Meeting other than those matters set
forth in Proposal Nos. (1) and (2) as described herein. If other
business comes before the Annual Meeting, the persons named on the
proxy will vote the proxy in accordance with their best
judgment.
Remainder
of Page Intentionally Left Blank
10
This
table shows, as of the Record Date, the name and age of each
executive officer, as well as their principal occupation during the
past five (5) years:
|
Name
|
|
Position
|
|
Since
|
|
Age
|
|
|
|
|
|
|
|
|
|
Jonathan
P. Carroll
|
|
Chief
Executive Officer, President, Assistant Treasurer, and Secretary
(Principal Executive Officer)
|
|
2012
|
|
57
|
|
|
|
|
|
|
|
|
|
Tommy
L. Byrd
|
|
Chief
Financial Officer (Principal Financial Officer)
Treasurer,
and Assistant Secretary
|
|
2015
2012
|
|
61
|
Jonathan P. Carroll
was appointed
Chairman of the Board of Blue Dolphin in 2014, and he was appointed
Chief Executive Officer, President, Assistant Treasurer and
Secretary of Blue Dolphin in 2012. He has also served as President
of LEH since 2006 and is its majority owner. Together, LEH and
Jonathan Carroll owned 79.8% of Blue Dolphin’s Common Stock
as of the Record Date. Before founding LEH, Mr. Carroll was a
private investor focused on direct debt and equity investments,
primarily in distressed assets. Since 2004, he has
served on the Board of Trustees of Salient Fund Group, and has
served on the compliance, audit and nominating committees of
several of Salient’s private and public closed-end and mutual
funds. Mr. Carroll previously served on the Board of
Directors of the General Partner of LRR Energy, L.P. (NYSE: LRE)
from January 2014 until its merger with Vanguard Natural Resources,
LLC in October 2015. He earned a Bachelor of Arts degree in Human
Biology and a Bachelor of Arts degree in Economics from Stanford
University, and he completed a Directed Reading in Economics at
Oxford University.
Tommy L. Byrd
was appointed Chief
Financial Officer of Blue Dolphin in 2015, having previously served
as Interim Chief Financial Officer from 2012 through 2015 and as
Controller from 2011 to 2012. Mr. Byrd also serves as Treasurer and
Assistant Secretary of Blue Dolphin, positions for which he was
appointed in 2012. He is also an employee of LEH, where he has
served as Chief Financial Officer since 2006. He earned a Bachelor
of Business Administration in Accounting from Stephen F. Austin
State University. Mr. Byrd has extensive financial management,
accounting and internal audit experience in the energy
industry.
Remainder
of Page Intentionally Left Blank
11
Board
The
Board consists of Messrs. Carroll, Bailey, Misra, Morris and
Whitney, with Mr. Carroll serving as Chairman. During 2017, the
Board met five (5) times and acted by written consent once. All
directors participated in the meetings and acted by written
consent. The Board has two standing committees, the Audit Committee
and the Compensation Committee.
Audit Committee
The
Audit Committee consists of Messrs. Morris, Bailey, and Misra, with
Mr. Morris serving as Chairman. During 2017, the Audit Committee
met five (5) times. The Board has affirmatively determined that all
members of the Audit Committee are independent under OTCQX and SEC
rules and that each of Messrs. Morris and Bailey qualifies as an
Audit Committee Financial Expert. The Audit Committee's duties
include overseeing financial reporting and internal control
functions. The Audit Committee’s written charter is available
on our corporate website (
http://www.blue-dolphin-energy.com
).
The Audit Committee charter is also included in this proxy
statement as
Appendix A
.
Compensation Committee
The
Compensation Committee consists of Messrs. Morris, Bailey, and
Misra, with Mr. Morris serving as Chairman. During 2017, the
Compensation Committee did not meet. The Board has affirmatively
determined that all members of the Compensation Committee are
independent under OTCQX rules. The Compensation Committee’s
duties include setting and overseeing our compensation policies, as
well as reviewing and recommending to the Board for its approval
all compensation for the Chief Executive Officer, other senior
executives, and directors. The Compensation Committee’s
written charter is available on our corporate website (
http://www.blue-dolphin-energy.com
).
The Compensation Committee charter is also included in this proxy
statement as
Appendix B
.
Master Limited Partnership (“MLP”) Conversion Special
Committee
The MLP
Conversion Special Committee was formed by the Board in 2013 to
determine the feasibility of optimizing stockholder value by
potentially converting Blue Dolphin from a publicly traded
“C” corporation to a publicly traded MLP. Due to a
shift in market conditions, the MLP Conversion Special Committee
was dissolved in March 2018. The MLP Conversion Special Committee
did not meet during 2017.
Nominating Committee
Given
the small size of the Board, the Board adopted a “Board
Nomination Procedures” policy in lieu of appointing a
standing nominating committee. Using the “Board Nomination
Procedures” policy, the Audit Committee, which is comprised
of independent directors, uses the policy to perform in a similar
function as a standing nominating committee. The policy is used by
the independent directors when choosing nominees to stand for
election. The Board will consider for possible nomination qualified
nominees recommended by stockholders in accordance with Blue
Dolphin’s Certificate of Incorporation. As addressed in the
“Board Nomination Procedures” policy, the manner in
which independent directors evaluate nominees for director as
recommended by a stockholder is the same as that for nominees
received from other sources. (See “Director Nomination and
Stockholder Proposals by Stockholders for Annual Meeting of
Stockholders” in this proxy statement for more
information).
12
The
Board endeavors to nominate qualified directors that will make
important contributions to the Board and to Blue Dolphin. The Board
generally requires that nominees be persons of sound ethical
character, be able to represent all stockholders fairly, have
demonstrated professional achievements, have meaningful experience,
and have a general appreciation of the major business issues facing
Blue Dolphin. The Board also
considers issues of diversity and background in its selection
process, recognizing that it is desirable for its membership to
have differences in viewpoints, professional experiences,
educational backgrounds, skills, race, gender, age and national
origin.
Director Attendance at Annual Meeting
Given the small size of the Board, director attendance at our
annual meeting of stockholders is encouraged but not required.
Only
Mr. Carroll was present at the 2017 annual meeting of
stockholders.
Leadership Structure
Blue
Dolphin is led by Mr. Carroll, who has served as Chairman of the
Board since 2014 and as our Chief Executive Officer and President
since 2012. Having a single leader for the Company is commonly
utilized by other public companies in the United States, and we
believe it is effective for Blue Dolphin as well. This leadership
structure demonstrates to our personnel, customers and stockholders
that we are under strong leadership, with a single person setting
the tone and having primary responsibility for managing our
operations, and eliminates the potential for confusion or
duplication of efforts. We do not believe that appointing an
independent Board chairman, or a permanent lead director, would
improve upon the performance of the Board.
Risk Oversight
Our
Board is involved in overseeing Blue Dolphin’s risk
management. The two standing Board committees provide appropriate
risk oversight. The Audit Committee oversees the accounting and
financial reporting processes, as well as compliance, internal
control, legal and risk matters. The Compensation Committee
oversees compensation policies, including the approval of
compensation for directors and management. We believe that the
processes established to report and monitor systems for material
risks applicable to us are appropriate and effective.
Code of Ethics and Code of Conduct
In
compliance with the Sarbanes-Oxley Act of 2002, the Board adopted a
code of ethics policy and a code of conduct policy. The Audit
Committee established procedures to enable anyone who has a concern
about our conduct, policies, accounting, internal control over
financial reporting, and/or auditing matters to communicate that
concern directly to the Chairman of the Audit Committee. The code
of ethics and code of conduct policies are available to any
stockholder, without charge, upon written request to Blue Dolphin
Energy Company, Attention: Audit Committee Chairman, 801 Travis
Street, Suite 2100, Houston, Texas 77002 or such other contact
information for the Audit Committee Chairman that we may post on
our website from time to time. Our code of ethics and code of
conduct policies are also available on our website (
http://www.blue-dolphin-energy.com
).
Any amendments or waivers to provisions of our code of ethics or
code of conduct will be disclosed on Form 8-K as filed with the SEC
and/or posted on our website.
13
Communicating with Directors
As the
Board does not receive a large volume of correspondence from
stockholders, at this time, there is no formal process by which
stockholders can communicate with the Board. Instead, any
stockholder who desires to contact the Board or specific members of
the Board may do so by writing to: Blue Dolphin Energy Company,
Attention: Secretary for the Board, 801 Travis Street, Suite 2100,
Houston, Texas 77002. Currently, all communications addressed in
such manner are sent directly to the indicated directors. In the
future, if the Board adopts a formal process for determining how
communications are to be relayed to directors, that process will be
disclosed on Form 8-K as filed with the SEC and/or posted on our
website (
http://www.blue-dolphin-energy.com
).
The
duties and responsibilities of the Audit Committee are set forth in
a written charter adopted by the Board. The Audit Committee is
comprised solely of independent directors who have the requisite
financial experience and expertise and meet the requirements of
OTCQX rules and SEC Rule 10A-3. The Audit Committee reviews and
reassesses its written charter annually and recommends any changes
to the Board for approval. In addition, the Audit Committee
periodically reviews relevant requirements of the Sarbanes-Oxley
Act of 2002, as well as proposed and adopted rules of the SEC
regarding Audit Committee procedures and responsibilities to ensure
compliance. The Audit Committee charter is available on our website
(
http://www.blue-dolphin-energy.com
).
The Audit Committee charter is also included in this proxy
statement as
Appendix A
.
The
Audit Committee’s primary duties and responsibilities are
to:
-
assess the
integrity of our financial reporting process and systems of
internal control regarding accounting;
-
assess the
independence and performance of our independent registered public
accounting firm; and
-
provide an avenue
of communication between our independent registered public
accounting firm, management, and the Board.
For the
fiscal year ended December 31, 2017, management represented to the
Audit Committee that: (i) our consolidated financial statements
were prepared in accordance with accounting principles generally
accepted by the United States of America and (ii)
our internal control
over financial reporting were effective. UHY, our independent
registered public accounting firm, performed an audit as of
December 31, 2017, that determined that our consolidated financial
statements were free of material misstatement. As a smaller
reporting company, we are not required to have an audit of our
internal control over financial reporting. However, UHY’s
audit as of December 31, 2017, included consideration of internal
control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances. The Audit
Committee reviewed and discussed with management and UHY our
audited consolidated financial statements and our internal control
over financial reporting for the fiscal year ended December 31,
2017.
Pursuant
to Public Company Accounting Oversight Board guidance,
UHY:
-
communicates to the
Audit Committee its responsibilities in relation to the audit and
establishes an understanding of the terms of the audit engagement
with the audit committee;
-
obtains information
from the Audit Committee relevant to the audit;
-
communicates to the
Audit Committee an overview of the overall audit strategy and
timing of the audit; and
-
provides the Audit
Committee with timely observations arising from the audit that are
significant to the financial reporting process.
14
With
regard to determining UHY’s performance and independence for
the fiscal year ended December 31, 2017, the Audit Committee
reviewed:
Performance
-
UHY’s
performance on previous audits, including the quality of the
engagement team and the firm’s experience, client service,
responsiveness and technical expertise;
-
UHY’s
leadership, management structure, and client and employee
retention;
-
UHY’s
financial strength and performance; and
-
the appropriateness
of fees charged by UHY.
Independence
-
the relationships
between UHY and Blue Dolphin, as well as any relationships between
UHY and our management and directors;
-
whether any
relationship with or service provided by UHY: (i) creates a mutual
or conflicting interest with us, (ii) places UHY in the position of
auditing its own work, (iii) results in UHY acting as management or
an employee of us, or (iv) places UHY in a position of being an
advocate for us; and
-
whether UHY
provides any prohibited non-audit services to us.
The
Audit Committee discussed with UHY its performance and independence
for the fiscal year ended December 31, 2017. Based on its findings,
the Audit Committee determined that the services provided by UHY
are satisfactory and UHY is independent.
The
Audit Committee holds a meeting at least quarterly in which
management and UHY participate. Following the Audit Committee
meeting, independent members of the Board meet separately in an
executive session with representatives from UHY. As a result, an
avenue of communication between UHY, management, and the Board is
accomplished on a regular basis.
This
table shows fees paid to UHY for the periods
indicated:
|
|
December
31,
|
|
|
|
2017
|
2016
|
|
|
|
|
|
Audit
fees
|
$
229,568
|
$
196,971
|
|
Audit-related
fees
|
-
|
|
|
Tax
fees
|
-
|
|
|
All
other fees
|
-
|
|
|
|
|
|
|
|
$
229,568
|
$
196,971
|
Audit
fees for 2017 and 2016 related to the audit of our consolidated
financial statements and the review of our quarterly reports that
are filed with the SEC. The Audit Committee must pre-approve all
audit and non-audit services provided to us by our independent
registered public accounting firm.
Based
on discussions with management and UHY, as well as review of
UHY’s report to the Audit Committee, the Audit Committee
recommended to the Board that our audited consolidated financial
statements for the fiscal year ended December 31, 2017, be included
in the Annual Report, as filed with the SEC.
The
Audit Committee:
Christopher
T. Morris, Chairman
Ryan
A. Bailey
Amitav
Misra
15
Executive Compensation Policy and Procedures
LEH
operates and manages all of our properties pursuant to an Amended
and Restated Operating Agreement (the “Operating
Agreement”). Under the Operating Agreement, LEH provides us
with personnel, among other services, in capacities equivalent to
Chief Executive Officer and Chief Financial Officer. All Blue
Dolphin personnel work for and are paid directly by
LEH.
Compensation for Named Executives
This
table shows compensation paid to our principal executive officer,
principal financial officer, and the most highly compensated
executive officers other than the principal executive officer and
principal financial officer whose annual salary exceeded $100,000
(collectively, the “Named Executive Officers”) pursuant
to the Operating Agreement for services rendered to Blue Dolphin
for the fiscal year ended December 31, 2017:
SUMMARY
COMPENSATION TABLE
|
Name and Principal Position
|
Year
|
Salary
|
Total
|
|
|
|
|
|
|
Jonathan
P. Carroll
|
2017
|
$
-
|
$
-
|
|
Chief
Executive Officer and President
|
2016
|
$
-
|
$
-
|
|
|
|
|
|
|
Tommy L. Byrd
(1)
|
2017
|
$
100,000
|
$
100,000
|
|
Chief
Financial Officer
|
2016
|
$
100,000
|
$
100,000
|
(1)
Mr. Byrd works for
and is paid directly by LEH. However, a portion of his compensation
is billed to Blue Dolphin at cost pursuant to the Operating
Agreement.
The
Compensation Committee reviews and recommends to the Board for its
approval all compensation for the Chief Executive Officer and other
senior executives.
Compensation Risk Assessment
LEH’s
approach to compensation practices and policies applicable to our
non-executive personnel is consistent with the base pay market
median for each position. LEH believes its practices and policies
in this regard are not reasonably likely to have a material adverse
effect on us.
Outstanding Equity Awards
None.
Director Compensation Policy and Procedures
Under
the Operating Agreement, LEH provides us with personnel, among
other services, in capacities equivalent to Chief Executive Officer
and Chief Financial Officer. Mr. Carroll, our Chief Executive
Officer and President, does not receive any compensation for his
service as a director. The Compensation Committee reviews and
recommends to the Board for its approval all compensation for the
directors.
16
Compensation for Non-Employee Directors
The
annual retainer payable to non-employee directors serving on the
Board is $40,000 per year. Payments are made in Common Stock and
cash on a quarterly rotating basis.
Cash Fees
.
Cash fees reflect
the amount of cash compensation earned for Board and committee
service. For service on the Board,
non-employee directors
are entitled to receive cash payments in the amount of $10,000 for
services rendered in the second and fourth quarters of each
year.
Additional
compensation is paid to non-employee directors for serving on the
Audit Committee. The chairman of the Audit Committee receives an
additional annual retainer of $5,000 in cash in the second and
fourth quarters of each year. Members of the Audit Committee
receive an additional annual retainer of $2,500 in cash in the
second and fourth quarters of each year. During 2017, no additional
compensation was paid to non-employee directors for serving on the
MLP Conversion Special Committee. Non-employee directors serving on
the Compensation Committee do not receive additional compensation.
Non-employee directors are reimbursed for reasonable out-of-pocket
expenses related to in-person meeting attendance.
Stock Awards
. For service on
the Board, non-employee directors are entitled to receive Blue
Dolphin Common Stock with a fair market value of $10,000 for
services rendered in the first and third quarters of each year. The
number of shares of Common Stock issued is determined by the
closing price of Blue Dolphin’s Common Stock on the last
trading day in the respective quarterly period in which services
were rendered. The shares of Common Stock are subject to resale
restrictions applicable to restricted securities and securities
held by affiliates under federal securities
laws.
This
table shows
the compensation that each
director earned for his Board and committee service
for the
year ended December 31, 2017:
|
Name
|
Cash Fees
|
Stock
Awards
(1)(2)
|
Total
|
|
|
|
|
|
|
Christopher
T. Morris
|
$
25,000
|
$
20,000
|
$
45,000
|
|
Ryan
A. Bailey
|
22,500
|
20,000
|
42,500
|
|
Amitav
Misra
|
22,500
|
20,000
|
42,500
|
|
Herbert
N. Whitney
|
-
|
-
|
-
|
|
|
|
|
|
|
|
$
70,000
|
$
60,000
|
$
130,000
|
|
(1)
|
At
December 31, 2017, Messrs. Morris, Bailey, Misra and Whitney had
total restricted awards of Common Stock outstanding of 58,359,
44,009, 50,100 and 9,683, respectively.
|
|
(2)
|
In accordance with SEC rules, the grant date fair value of
non-employee director stock awards is calculated by multiplying the
number of shares of Common Stock awarded by the closing price of
Blue Dolphin’s Common Stock on the grant date, which was
$3.50 at March 31, 2017 and $0.28 at September 30, 2017. Based on
the calculation, the aggregate grant date fair value of
non-employee director stock awards for services rendered for the
first and third quarters of 2017 was $20,000 and $20,000,
respectively.
|
17
Compensation Committee Interlocks and Insider
Participation
Only
one of our directors, Jonathan P. Carroll, also serves as an
executive officer. Mr. Carroll does not serve on any of our
standing committees.
None of
our executive officers serve on the board of directors of another
entity whose executive officers serve on our Board. None of our
officers or LEH’s personnel, other than Mr. Carroll,
participated in the deliberations of our Board or our Compensation
Committee concerning executive officer or director
compensation.
Family Relationships between Directors and Executive
Officers
As of
the Record Date, there were no relationships between any of our
directors or executive officers and any other director or executive
officer of Blue Dolphin.
Based
on discussions with management and review of the Compensation
Discussion and Analysis, the Compensation Committee consisting of
Messrs. Morris, Bailey, and Misra, recommended to the Board that
the Compensation Discussion and Analysis be included in the
Annual Report and 2018 proxy statement.
The
Compensation Committee:
Christopher
T. Morris, Chairman
Ryan
A. Bailey
Amitav
Misra
Security Ownership of Certain Beneficial Owners
This
table shows information with respect to persons or groups known to
us to be the beneficial owners of more than five percent (5%) of
our Common Stock as of the Record Date. Unless otherwise indicated,
each named party has sole voting and dispositive power with respect
to such shares.
|
Title of Class
|
|
Name of Beneficial Owner
|
Amount and Nature of Beneficial Ownership
|
Percent of Class
(1)
|
|
|
|
|
|
|
|
Common
Stock
|
|
Lazarus
Energy Holdings, LLC
|
8,426,456
|
76.8
%
|
|
|
|
801
Travis Street, Suite 2100
|
|
|
|
|
|
Houston,
Texas 77002
|
|
|
(1)
Based upon
10,975,514 shares of Common Stock issued and outstanding and 0
shares of Common Stock issuable upon exercise of stock options,
each as of the Record Date.
18
Security Ownership of Management
This
table shows information as of the Record Date with respect to: (i)
directors, (ii) executive officers and (iii) directors and
executive officers as a group beneficially owning our Common Stock.
Unless otherwise indicated, each of the following persons has sole
voting and dispositive power with respect to such
shares.
|
Title of Class
|
|
Name of Beneficial Owner
|
Amount and Nature of Beneficial Ownership
|
Percent of
Class
(1)
|
|
|
|
|
|
|
|
Common
Stock
|
|
Jonathan P. Carroll
(2)
|
8,763,300
|
79.8
%
|
|
Common
Stock
|
|
Christopher
T. Morris / Mpact Partners, LLC
|
75,026
|
*
|
|
Common
Stock
|
|
Amitav
Misra
|
66,767
|
*
|
|
Common
Stock
|
|
Ryan
A. Bailey
|
60,676
|
*
|
|
Common
Stock
|
|
Herbert
N. Whitney
|
9,683
|
---
|
|
Common
Stock
|
|
Tommy
L. Byrd
|
---
|
---
|
|
|
|
|
|
|
|
Directors/Nominees
and Executive Officers as a Group (6 Persons)
|
8,975,452
|
81.8
%
|
||
(1)
Based upon
10,975,514 shares of Common Stock issued and outstanding and 0
shares of Common Stock issuable upon exercise of stock options,
each as of the Record Date.
(2)
Includes 8,426,456
shares issued to LEH. Mr. Carroll and his affiliates have an
approximate 60% ownership interest in LEH.
*
Less than
1%.
Blue
Dolphin and certain of its subsidiaries are party to several
agreements with LEH and its affiliates. Management believes that
these related party transactions were consummated on terms
equivalent to those that prevail in arm's-length
transactions.
Related Parties
.
LEH
. LEH is our controlling shareholder. Jonathan Carroll,
Chairman of the Board, Chief Executive Officer, and President of
Blue Dolphin, is the majority owner of LEH. Together, LEH and
Jonathan Carroll owned 79.8% of Blue Dolphin’s Common Stock
as of the Record Date. Related party agreements with LEH include:
(i) an Amended and Restated Operating Agreement with Blue Dolphin
and LE, (ii) a Jet Fuel Sales Agreement with LE, (iii) a Loan
Agreement with Blue Dolphin Pipe Line Company (“BDPL”),
(iv) an Amended and Restated Promissory Note with Blue Dolphin, and
(v) a Debt Assumption Agreement with LE. Additionally, in June
2018, Blue Dolphin obtained 100% of the issued and outstanding
membership interest of Nixon Product Storage, LLC
(“NPS”) from Lazarus Midstream Partners, L.P., an
affiliate of LEH, pursuant to an Assignment Agreement.
Ingleside Crude, LLC (“Ingleside”)
. Ingleside is
a related party of LEH and Jonathan Carroll. Blue Dolphin is party
to an Amended and Restated Promissory Note with
Ingleside.
Lazarus Marine Terminal I, LLC (“LMT”)
. LMT is a
related party of LEH and Jonathan Carroll. LE is party to a Dock
Tolling Agreement with LMT.
Jonathan Carroll
. Jonathan Carroll is Chairman of the Board,
Chief Executive Officer, and President of Blue Dolphin. Related
party agreements with Jonathan Carroll include: (i) Amended and
Restated Guaranty Fee Agreements with LE and Lazarus Refining &
Marketing, LLC and (ii) an Amended and Restated Promissory Note
with Blue Dolphin.
19
Currently,
Blue Dolphin depends on LEH and its affiliates (including Jonathan
Carroll and Ingleside) for financing when revenue from operations
and borrowings under bank facilities are insufficient to meet
liquidity needs. Such borrowings are reflected in our consolidated
balance sheets in accounts payable, related party, and/or long-term
debt, related party.
Operations Related Agreements
.
Amended and Restated Operating Agreement
. LEH operates and
manages all Blue Dolphin properties pursuant to the Amended and
Restated Operating Agreement. The Amended and Restated Operating
Agreement, which was restructured in 2017 following cessation of
crude supply and marketing activities under a Crude Supply
Agreement and a Joint Marketing Agreement with GEL, expires: (i)
April 1, 2020, (ii) upon written notice by either party to the
Amended and Restated Operating Agreement of a material breach by
the other party, or (iii) upon 90 days’ notice by the Board
if the Board determines that the Amended and Restated Operating
Agreement is not in our best interest. LEH receives an operating
fee of 5% of Blue Dolphin’s direct operating expenses.
LEH’s operating fee and Blue Dolphin’s direct operating
expenses are reflected within refinery operating expenses in Blue
Dolphin’s consolidated statements of operations.
Jet Fuel Sales Agreement
. LE sells jet fuel to LEH pursuant
to a Jet Fuel Sales Agreement. LEH resells the jet fuel purchased
from LE to a government agency. LEH bids for jet fuel contracts are
evaluated under preferential pricing terms due to its HUBZone
certification. The Jet Fuel Sales Agreement terminates on the
earliest to occur of: (a) a one-year term expiring March 31, 2019
plus a 30-day carryover or (b) delivery of a maximum quantity of
jet fuel as defined therein. Sales to LEH under the Jet Fuel Sales
Agreement are reflected within refinery operations revenue in Blue
Dolphin’s consolidated statements of operations. (LRM
previously leased petroleum storage tanks to LEH for the storage of
the jet fuel under a Terminal Services Agreement. The Terminal
Services Agreement was terminated as described below).
Terminal Services Agreement
. Pursuant to a Terminal Services
Agreement, LEH leased petroleum storage tanks from LRM for the
storage of LEH purchased jet fuel under the Jet Fuel Sales
Agreement (as described above). The Terminal Services Agreement was
terminated in June 2017. Rental fees received from LEH under the
Terminal Services Agreement are reflected within tolling and
terminaling revenue in our consolidated statements of
operations.
Amended and Restated Tank Lease Agreement
. Pursuant to an
Amended and Restated Tank Lease Agreement with Ingleside, LE leased
petroleum storage tanks to meet periodic, additional storage needs.
The Amended and Restated Tank Lease Agreement was terminated in
July 2017. Rental fees owed to Ingleside under the tank lease
agreement are reflected within long-term debt, related party, net
of current portion in our consolidated balance sheets. Amounts
expensed as rental fees to Ingleside under the Amended and Restated
Tank Lease Agreement are reflected within refinery operating
expenses in our consolidated statements of operations.
Dock Tolling Agreement
. In May 2016, LE entered a Dock
Tolling Agreement with LMT to facilitate loading and unloading of
petroleum products by barge at LMT’s dock facility in
Ingleside, Texas. The Dock Tolling Agreement has a five-year term
and may be terminated at any time by the agreement of both parties.
LE pays LMT a flat reservation fee monthly. The reservation fee
includes tolling volumes up to 84,000 gallons per day. Excess
tolling volumes are subject to an increased per gallon rate.
Amounts expensed as tolling fees under the Dock Tolling Agreement
are reflected in the cost of sales in Blue Dolphin’s
consolidated statements of operations.
Financial Agreements
.
BDPL Loan Agreement (In Default)
. In August 2016, BDPL
entered a loan and security agreement with LEH as evidenced by a
promissory note in the original principal amount of $4.0 million
(the “BDPL Loan Agreement”). The BDPL Loan Agreement
matured on August 15, 2018. Interest is still accruing at a rate of
16.00%. The BDPL Loan Agreement is currently in default due to
non-payment.
20
The
proceeds of the BDPL Loan Agreement were used for working capital.
There are no financial maintenance covenants associated with the
BDPL Loan Agreement. The BDPL Loan Agreement is secured by certain
property owned by BDPL. Outstanding principal owed to LEH under the
BDPL Loan Agreement is reflected in long-term debt, related party,
current portion in Blue Dolphin’s consolidated balance
sheets. Accrued interest under the BDPL Loan Agreement is reflected
in interest payable, related party, current portion in Blue
Dolphin’s consolidated balance sheets.
Promissory Notes
. We currently rely on LEH and its
affiliates (including Jonathan Carroll) to fund our working capital
requirements. During 2017, LEH and its affiliates (Ingleside and
Jonathan Carroll) provided working capital to Blue Dolphin in the
form of non-cash advances, such as conversions of accounts payable
to debt. These non-cash advances are reflected in the below
promissory notes. There can be no assurance that LEH and its
affiliates will continue to fund our working capital requirements.
Outstanding principal and accrued interest owed under these
promissory notes are reflected in long-term debt, related party,
current portion in our consolidated balance sheets.
●
June LEH Note
– In March 2017,
Blue Dolphin entered a promissory note with LEH (the “March
LEH Note”). In June 2017, the March LEH Note was amended and
restated to increase the principal amount (the “June LEH
Note”). The June LEH Note accrues interest at a rate of 8.00%
and has a maturity date of January 2019. Interest under the June
LEH Note, which is compounded annually and accrued at a rate of
8.00%, was paid in kind and added to the outstanding
balance.
●
March Ingleside Note
– In March
2017, a promissory note between Blue Dolphin and Ingleside was
amended and restated (the “March Ingleside Note”) to
increase the principal and extend the maturity date to January
2019. Interest under the March Ingleside Note, which is compounded
annually and accrued at a rate of 8.00%, was paid in kind and added
to the outstanding balance.
●
March Carroll Note
– In March
2017, a promissory note between Blue Dolphin and Jonathan Carroll
was amended and restated (the “March Carroll Note”) to
increase the principal amount, revise the payment terms to reflect
payment in cash and shares of Blue Dolphin Common Stock, and extend
the maturity date to January 2019. Interest under the March Carroll
Note, which is compounded annually and accrued at a rate of 8.00%,
was paid in kind and added to the outstanding balance.
Debt Assumption Agreement
. On September 18, 2017, LEH paid, on
LE’s behalf, certain obligations totaling $3.6 million to GEL
relating to arbitration proceedings with GEL and a September 2017
letter agreement with GEL. In exchange for such payments, LE agreed
to assume $3.7 million of LEH’s existing indebtedness
pursuant to the Debt Assumption Agreement, entered on November 14,
2017 and made effective September 18, 2017, by and among LE, LEH
and John Kissick. Debt held by John Kissick, including the
debt
associated with the Debt Assumption Agreement, is
reported in Blue Dolphin’s Quarterly Report on Form 10-Q for
the period ended September 30, 2018 as the Notre Dame Debt (defined
below) and is reflected in long-term debt less unamortized debt
issue costs, current portion in Blue Dolphin’s consolidated
balance sheets, as it is currently in default.
Amended and Restated Guaranty Fee Agreements
. Pursuant to
Amended and Restated Guaranty Fee Agreements, Jonathan Carroll
earns fees for providing his personal guarantee on certain LE and
LRM long-term debt. Jonathan Carroll was required to guarantee
repayment of funds borrowed and interest accrued under certain LE
and LRM loan agreements. Amounts owed to Jonathan Carroll under
Amended and Restated Guaranty Fee Agreements are reflected within
long-term debt, related party, net of current portion in Blue
Dolphin’s consolidated balance sheets. Amounts expensed
related to Amended and Restated Guarantee Fee Agreements are
reflected within interest and other expense in Blue Dolphin’s
consolidated statements of operations.
21
Financial Statements Impact
.
Consolidated Balance Sheets
. Accounts receivable, related
party from LEH associated with the Jet Fuel Sales Agreement were $0
and $0.7 million at September 30, 2018 and December 31, 2017,
respectively. Accounts payable, related party to LMT associated
with the Dock Tolling Agreement were $1.4 million and $1.0 million
at September 30, 2018 and December 31, 2017,
respectively.
Long-term
debt, related party associated with the BDPL Loan Agreement, March
Ingleside Note, and the March Carroll Note as of the dates
indicated was as follows:
|
|
September 30,
|
December 31,
|
|
|
2018
|
2017
|
|
|
(in thousands)
|
|
|
|
|
|
|
LEH
|
$
4,303
|
$
4,000
|
|
Ingleside
|
1,263
|
1,169
|
|
Jonathan
Carroll
|
966
|
439
|
|
|
|
|
|
|
6,532
|
5,608
|
|
|
|
|
|
Less:
Long-term debt, related party,
|
|
|
|
current portion
|
(6,532
)
|
(4,000
)
|
|
|
|
|
|
|
$
-
|
$
1,608
|
Accrued
interest associated with the BDPL Loan Agreement was $1.4 million
and $0.9 million at September 30, 2018 and December 31, 2017,
respectively.
Consolidated Statements of Operations
. Revenue from related
parties was as follows:
|
|
Three Months Ended September
30,
|
Nine Months Ended September 30,
|
||||||
|
|
2018
|
2017
|
2018
|
2017
|
||||
|
Refinery
operations
|
(in thousands, except percent
amounts)
|
|||||||
|
LEH
|
$
27,299
|
28.7
%
|
$
20,803
|
31.1
%
|
$
73,415
|
28.6
%
|
$
59,786
|
33.8
%
|
|
Other
customers
|
67,169
|
70.4
%
|
45,330
|
67.8
%
|
180,830
|
70.4
%
|
114,882
|
65.0
%
|
|
Tolling
and terminaling
|
|
|
|
|
|
|
|
|
|
LEH
|
-
|
0.0
%
|
56
|
0.1
%
|
-
|
0.0
%
|
675
|
0.4
%
|
|
Other
customers
|
1,075
|
0.9
%
|
710
|
1.0
%
|
2,659
|
1.0
%
|
1,499
|
0.8
%
|
|
|
|
|
|
|
|
|
|
|
|
|
$
95,543
|
100.0
%
|
$
66,899
|
100.0
%
|
$
256,904
|
100.0
%
|
$
176,842
|
100.0
%
|
Fees
associated with the Dock Tolling Agreement with LMT totaled $0.2
million for both the three months ended September 30, 2018 and
2017. Fees associated with the Dock Tolling Agreement with LMT
totaled $0.6 million for both the nine months ended September 30,
2018 and 2017.
22
Expenses
and fees associated with the Amended and Restated Operating
Agreement with LEH for the periods indicated were as
follows:
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30
|
||||||
|
|
2018
|
2017
|
2018
|
2017
|
||||
|
|
Amount
|
per
bbl
|
Amount
|
per
bbl
|
Amount
|
per
bbl
|
Amount
|
per
bbl
|
|
|
(in thousands, except per bbl
amounts)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
Blue
Dolphin's direct operating
|
|
|
|
|
|
|
|
|
|
expenses
|
$
1,033
|
$
0.85
|
$
1,674
|
$
1.46
|
$
4,175
|
$
1.22
|
$
5,927
|
$
1.84
|
|
LEH
operating fee
|
52
|
0.04
|
84
|
0.07
|
209
|
0.06
|
296
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
Total
refinery operating expenses
|
$
1,085
|
$
0.89
|
$
1,758
|
$
1.53
|
$
4,384
|
$
1.28
|
$
6,223
|
$
1.93
|
For the
three months ended September 30, 2018, refinery operating expenses
decreased approximately $0.7 million, or $0.64 per bbl, compared to
the same period a year earlier. For the nine months ended September
30, 2018, refinery operating expenses decreased approximately $1.8
million, or $0.65 per bbl, compared to the same nine-month period a
year earlier. The decrease in refinery operating expenses was due
to the revised cost-plus expense reimbursement structure under the
Amended and Restated Operating Agreement, as well as
management’s efforts to reduce spending.
Interest
expense associated with the BDPL Loan Agreement, the Restated
Guaranty Fee Agreements, and the related-party promissory notes
(the June LEH Note, the March Ingleside Note, and March Carroll
Note) for the periods indicated was as follows:
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
||
|
|
2018
|
2017
|
2018
|
2017
|
|
|
(in
thousands)
|
|||
|
Jonathan
Carroll
|
$
180
|
$
171
|
$
519
|
$
521
|
|
LEH
|
166
|
164
|
489
|
542
|
|
Ingleside
|
25
|
23
|
96
|
69
|
|
|
|
|
|
|
|
|
$
371
|
$
358
|
$
1,104
|
$
1,132
|
Section
16(a) of the Exchange Act requires our directors, executive
officers, and stockholders who own more than ten percent (10%) of
the Common Stock, to file reports of stock ownership and changes in
ownership with the SEC and to furnish us with copies of all such
reports as filed. Based solely on a review of the copies of the
Section 16(a) reports furnished to us, we are unaware of any late
filings made during 2017.
23
Director Nominations and Proposals Process
We have
tentatively set the 2019 Annual Meeting of Stockholders for
December 18, 2019. Accordingly, stockholders should submit
nominations and proposals in accordance with the guidance set forth
below.
Director Nominations Deadline
Our
Amended and Restated 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 Blue Dolphin at least
ninety (90) calendar 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. In order to avoid controversy as
to the date on which a director nomination is received,
stockholders of record must make submissions to us at our principal
executive office by certified mail, return receipt requested. Blue
Dolphin’s mailing address is located at our principal office:
801 Travis Street, Suite 2100, Houston, Texas 77002. (See
“Corporate Governance and Board Matters – Nominating
Committee” in this proxy statement for more
information.)
We did
not receive any director nominee submissions by September 7, 2017,
the deadline for the 2018 Annual Meeting.
Stockholder Proposals Deadline
Pursuant
to SEC requirements, stockholders of record must submit stockholder
proposals for inclusion in the printed proxy materials to us at
least one hundred and twenty (120) calendar days before the date we
released the previous year’s proxy statement for our annual
meeting of stockholders. However, if the date of the annual meeting
has been changed by more than thirty (30) days from the date of the
previous year’s meeting, then stockholders must submit their
proposals a reasonable time before Blue Dolphin begins to print and
send its proxy materials. We did not receive any stockholder
proposal submissions.
As
noted above we expect our 2019 annual meeting to be held on
December 18, 2019, and we therefore will print and send proxy
materials on or around November 11, 2019. Accordingly, stockholder
proposals must be submitted a reasonable time before November 11,
2019. In order to avoid controversy as to the date on which a
stockholder proposal is received, stockholders of record must make
submissions to us at our principal executive office by certified
mail, return receipt requested.
Remainder
of Page Intentionally Left Blank
24
We are
subject to the informational requirements of the Exchange Act. We
file financial and other information with the SEC as required,
including but not limited to, proxy statements on Schedule 14A,
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and
Current Reports on Form 8-K. Investors may obtain any document that
we file with the SEC through the SEC’s conventional and
electronic reading rooms. These reading rooms are managed by the
SEC’s Office of Freedom of Information and Privacy Act
Operations.
|
Office of
Freedom of Information and Privacy Act
Operations
|
|
Conventional
Reading Rooms
|
|
Electronic
Reading Rooms
|
|
|
|
|
|
|
|
100 F
Street, N.E.
Mail
Stop 2736
Washington,
D.C. 20549
(202)
551-8300
|
|
Headquarters
Office
100 F
Street, N.E.
Room
1580
Washington,
D.C. 20549
(202)
551-8090
|
|
Public
Company Information / SEC Comment and Response Letters
https://www.sec.gov/edgar/searchedgar/companysearch.html
SEC
Opinion, Policy Statements, and Staff Manuals
https://www.sec.gov/foia/efoiapg.htm
|
We also
make our SEC filings available on our website (
http://www.blue-dolphin-energy.com
)
.
Certain
statements included in this proxy statement and the accompanying
notice and letter to stockholders are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1935. Forward-looking statements represent management’s
beliefs and assumptions based on currently available information.
Forward-looking statements relate to matters such as our industry,
business strategy, goals, and expectations concerning our market
position, future operations, margins, profitability, capital
expenditures, liquidity and capital resources, commitments and
contingencies, and other financial and operating information. We
have used the words “anticipate,” “assume,”
“believe,” “budget,”
“continue,” “could,”
“estimate,” “expect,” “intend,”
“may,” “plan,” “potential,”
“predict,” “project,” “will,”
“future” and similar terms and phrases to identify
forward-looking statements.
Forward-looking
statements reflect our current expectations regarding future
events, results, or outcomes. These expectations may or may not be
realized. Some of these expectations may be based upon assumptions
or judgments that prove to be incorrect. In addition, our business
and operations involve numerous risks and uncertainties, many of
which are beyond our control, which could result in our
expectations not being realized, or materially affect our financial
condition, results of operations, and cash flows. Actual events,
results and outcomes may differ materially from our expectations
due to a variety of factors. Although it is not possible to
identify all of these factors, they include those described under
the heading “Risk Factors” in our Annual Report on Form
10-K and our Quarterly Reports on Form 10-Q as filed with the
SEC.
25
Brokers,
banks or other nominees may deliver only one (1) copy of this proxy
statement to multiple beneficial stockholders who share the same
address, unless that broker, bank or other nominee has received
contrary instructions from one or more of the beneficial
stockholders. Upon written or oral request, we will promptly
deliver a separate copy of this proxy statement to a beneficial
stockholder at a shared address to which a single copy of the
documents was delivered. Beneficial stockholders sharing an address
who are receiving multiple copies of proxy materials and annual
reports that wish to receive a single copy of such materials in the
future will need to contact their broker, bank or other nominee to
request that only a single copy of each document be mailed to all
beneficial stockholders at the shared address in the
future.
Registered
and beneficial stockholders who wish to receive a separate copy of
this proxy statement, now or in the future, should submit their
request to Blue Dolphin, Investor Relations at (713) 568-4725, or
submit a written request to Blue Dolphin Energy Company, Attention:
Investor Relations, 801 Travis Street, Suite 2100, Houston, Texas
77002.
|
|
By Order of the
Board
|
|
|
|
|
|
|
|
/s/
JONATHAN P.
CARROLL
|
|
|
|
Jonathan P.
Carroll
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Chairman of the
Board
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Houston,
Texas
November
15, 2018
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26
Blue Dolphin Energy Company
Amended and Restated Audit Committee Charter
PURPOSE
The
Audit Committee is appointed by the Board of Directors (the
“Board”) of Blue Dolphin Energy Company (“Blue
Dolphin”) to assist the Board in its general oversight of
accounting and financial reporting processes, audits of the
financial statements, the internal control and audit functions,
compliance with legal and regulatory requirements and ethical
standards. The Audit Committee members are not professional
accountants or auditors and their functions are not intended to
duplicate or certify the activities of management and the
independent registered public accounting firm.
Management
is responsible for: (a) the preparation, presentation and integrity
of Blue Dolphin’s financial statements, (b) accounting and
financial reporting principles, and (c) Blue Dolphin’s
internal controls and procedures designed to promote compliance
with accounting standards, applicable laws and regulations and Blue
Dolphin’s ethical standards. Blue Dolphin’s independent
registered public accounting firm is responsible for performing an
independent audit of the consolidated financial statements in
accordance with generally accepted auditing standards.
The
Audit Committee shall have the authority to retain, at Blue
Dolphin’s expense, special legal, accounting or other
consultants or experts to advise the Audit Committee. The Audit
Committee may request any officer or employee of Blue Dolphin or
Blue Dolphin’s outside counsel or independent registered
public accounting firm to attend a meeting of the Audit Committee
or to meet with any member of, or consultants to, the Audit
Committee.
The
Audit Committee shall make regular reports to the Board. The Audit
Committee shall meet at least four times each year and hold such
other meetings from time to time as may be called by its Chairman
or any two members of the Audit Committee. At least quarterly, the
Audit Committee will meet separately in an executive session with
representatives from the independent registered public accounting
firm.
COMMITTEE MEMBERSHIP
The
Audit Committee shall be comprised of at least three directors who
shall be appointed by the Board. The Audit Committee shall only
include directors who satisfy the independence requirements of the
Securities and Exchange Commission (the “SEC”) and the
NASDAQ Stock Market, Inc. (“NASDAQ”) applicable to Blue
Dolphin and are free of any relationship that, in the opinion of
the Board, would interfere with their exercise of independent
judgment as an Audit Committee member. No member of the Audit
Committee may receive any payment from Blue Dolphin other than
payment for services as a director or member of a committee of the
Board.
Audit
Committee members must be able to read and understand fundamental
financial statements, including Blue Dolphin’s balance sheet,
income statement and cash flow statement. As required by NASDAQ,
one member of the Audit Committee shall have accounting or related
financial management expertise and qualify as a “financial
expert” in accordance with the requirements of the SEC and
the NASDAQ (as may be modified or supplemented). The role of the
financial expert will be that of assisting the Audit Committee in
overseeing the audit process, not auditing Blue
Dolphin.
A-1
COMMITTEE AUTHORITY AND RESPONSIBILITIES
The
Audit Committee shall:
1.
Review and reassess
the adequacy of the Audit Committee Charter annually and recommend
any proposed changes to the Board for approval.
2.
Review the annual
audited financial statements with management, including major
issues regarding accounting and auditing principles and practices
as well as the adequacy of internal controls that could
significantly affect Blue Dolphin’s financial
statements.
3.
Review with
management and representative(s) from the independent registered
public accounting firm: (a) significant financial reporting issues,
critical accounting principles and practices and judgments made in
connection with the preparation of Blue Dolphin’s financial
statements, including an analysis of the effect of alternative
generally accepted accounting principles (“GAAP”)
methods on Blue Dolphin’s financial statements and a
description of any transactions as to which management obtained
Statement on Auditing Standards (“SAS”) No.
50
, Reports on the Application of
Accounting Principles
letters, and (b) any material
reports or estimates prepared by outside consultants, reserve
engineers, or other experts or specialists.
4.
Review with
management and representative(s) from the independent registered
public accounting firm the effect of regulatory and accounting
initiatives as well as off-balance sheet structures on Blue
Dolphin’s financial statements, if any.
5.
Review with
management and representative(s) from the independent registered
public accounting firm Blue Dolphin’s quarterly financial
statements prior to the filing of its Form 10-Q, including the
results of the independent registered public accounting
firm’s reviews of the quarterly financial statements. The
Chair of the Audit Committee may perform this task and convene the
Audit Committee when appropriate.
6.
Meet periodically
with management to review Blue Dolphin’s major financial risk
exposures and the steps management has taken to monitor and control
such exposures.
7.
Review major
changes to Blue Dolphin’s auditing and accounting principles
and practices as suggested by the independent registered public
accounting firm or management.
8.
Review the
experience and qualifications of the senior members of the
independent registered public accounting firm and the quality
control procedures of the independent registered public accounting
firm.
9.
Retain, review
performance of, and, where warranted in the Audit Committee’s
judgment, terminate the independent registered public accounting
firm selected to audit the financial statements of Blue
Dolphin.
10.
Approve all
permissible non-audit services to be performed by the independent
registered public accounting firm.
11.
Approve the fees to
be paid to the independent registered public accounting
firm.
A-2
12.
Receive periodic
reports from the independent registered public accounting firm
regarding the registered public accounting firm’s
independence consistent with Independence Standards Board Standard
1,
Independence Discussions with
Audit Committees
, and discuss with the registered public
accounting firm any disclosed relationships or services that may
impact the objectivity of the auditor, and if so determined by the
Audit Committee, take or recommend that the Board to take
appropriate action to oversee the independence of the registered
public accounting firm.
13.
Obtain and review
annually: (a) a report by the independent registered public
accounting firm describing the firm’s internal
quality-control procedures, and (b) any material issues raised by
the most recent internal quality-control review, peer review,
Public Company Accounting Oversight Board (“PCAOB”)
inspection, or by an inquiry or investigation by government or
professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the firm,
and any steps taken to deal with such issues.
14.
Establish
procedures for the receipt, retention, and treatment of complaints
received by Blue Dolphin regarding accounting, internal accounting
controls, or auditing matters.
15.
Review and discuss
with management and the independent registered public accounting
firm various topics and events that may have significant financial
impact on Blue Dolphin or that are the subject of discussions
between management and the independent registered public accounting
firm.
16.
Approve all
related-party transactions.
17.
Review and discuss
with management and the independent registered public accounting
firm: (a) the adequacy and effectiveness of Blue Dolphin’s
internal controls (including any significant deficiencies or
material weaknesses) and significant changes in internal controls
reported to the Audit Committee by the independent registered
public accounting firm or management, (b) Blue Dolphin’s
internal audit procedures, and (c) the adequacy of Blue
Dolphin’s disclosure controls and procedures, and management
reports thereon.
18.
Review and discuss
with management and the independent registered public accounting
firm significant risk exposures and control issues.
19.
Meet with the
independent registered public accounting firm prior to the audit to
review: (a) its audit plan and audit procedures, including the
scope, staffing and timing of the audit, (b) the results of the
annual audit examination and accompanying management letters, and
(c) the result of the independent registered public accounting
firm’s procedures with respect to interim
periods.
20.
Obtain from the
independent registered public accounting firm assurance that
Section 10A of the Securities Exchange Act of 1934 (added by the
Private Securities Litigation Reform Act of 1995) has not been
implicated.
21.
Review with
management and the independent registered public accounting firm
any correspondence with regulators or governmental agencies and any
employee complaints or published reports which raise material
issues regarding Blue Dolphin’s financial statements or
accounting policies.
A-3
22.
Discuss with the
independent auditor the matters required to be discussed by SAS No.
16,
Communications with Audit
Committees
, and related amendments, relating to the conduct
of the audit.
23.
Review with the
independent registered public accounting firm any problems or
difficulties the registered public accounting firm may have
encountered and any management letter provided by the registered
public accounting firm and Blue Dolphin’s response to that
letter. Such review should include:
a.
any difficulties
encountered in the course of the audit work, including any
restrictions on the scope of activities or access to required
information; and
b.
any changes
required in the planned scope of the audit.
24.
Prepare the Audit
Committee report required by the rules of the SEC to be included in
Blue Dolphin’s annual proxy statement.
25.
Advise the Board
with respect to Blue Dolphin’s policies and procedures
regarding compliance with applicable laws and
regulations.
26.
Review with the
outside legal counsel matters that may have a material impact on
the financial statements, Blue Dolphin’s compliance policies
and any material reports or inquiries received from regulators or
governmental agencies.
LIMITATION OF AUDIT COMMITTEE’S ROLE
While
the Audit Committee has the responsibilities and powers set forth
in the Audit Committee Charter, it is not the duty of the Audit
Committee to plan or conduct audits or to determine that Blue
Dolphin’s financial statements are complete and accurate and
are in accordance with GAAP. This is the responsibility of
management and the independent registered public accounting firm.
Nor is it the duty of the Audit Committee to conduct
investigations, to resolve disagreements, if any, between
management and the independent registered public accounting firm or
to assure compliance with laws and regulations.
A-4
Blue Dolphin Energy Company
Compensation Committee Charter
PURPOSE
The Compensation Committee is appointed by the Board of Directors
(the “Board”) of Blue Dolphin Energy Company
(“Blue Dolphin”) to discharge the Board’s
responsibilities relating to compensation of the directors, the
Chief Executive Officer and President (collectively, the
“CEO”), and senior executives of Blue Dolphin. The
Compensation Committee has overall responsibility for evaluating
and either approving or recommending to the Board, as set forth
below, the director, CEO, and senior executive compensation plans,
policies and programs of Blue Dolphin. If applicable, the
Compensation Committee is also responsible for producing a report
on executive compensation for inclusion in Blue Dolphin’s
Annual Report on Form 10-K and/or annual proxy statement. The
Compensation Committee is also responsible for making
recommendations to the Board regarding succession planning and
development for the CEO and other senior executives of Blue
Dolphin. All references herein to “the senior executives of
Blue Dolphin” shall be deemed to exclude the CEO of Blue
Dolphin unless otherwise stated.
COMMITTEE MEMBERSHIP
The Compensation Committee shall consist of at least two members.
Each member of the Compensation Committee shall be an independent
member of the Board. One of the members shall serve as the
chairperson of the Compensation Committee (the
“Chairperson”). The Board shall appoint the members of
the Compensation Committee. The Chairperson shall be designated by
the Board or, if no such designation is made, shall be selected by
the affirmative vote of the majority of the Compensation Committee.
The Board may remove or replace the Chairperson and any other
member of the Compensation Committee at any time.
COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Compensation Committee is delegated all authority of the Board
as may be required or advisable to fulfill the purposes of the
Compensation Committee. The Compensation Committee may form and
delegate some or all of its authority to subcommittees comprised of
Committee members when it deems appropriate.
Without limiting the generality of the preceding statements and
subject to any contractual arrangements in place that may limit its
actions, the Compensation Committee shall have authority, and is
entrusted with the responsibility, to do the following
actions:
1.
Each
year, the Compensation Committee, or a subcommittee thereof,
shall:
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review
and recommend to the Board for its approval corporate goals and
objectives relevant to the compensation of the CEO;
B-1
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evaluate
(which evaluation need not be in written form) the performance of
the CEO in light of those goals and objectives; and
–
based
on this evaluation, review and recommend to the Board for its
approval all annual salary and other compensation arrangements and
components, and the level thereof, for the CEO, which may include
the following:
–
the
annual base salary level,
–
any
equity compensation amounts pursuant to an incentive or successor
plan,
–
any
incentives and awards pursuant to cash bonus or incentive
compensation plans or programs, and
–
any
special or supplemental benefits.
In
determining its recommendations for any forms of compensation other
than the base salary component of the CEO’s compensation, the
Compensation Committee should consider Blue Dolphin’s
performance and relative shareholder return, the value of similar
incentive awards to Chief Executive Officers at comparable
companies, and the awards given to the CEO in past years. The CEO
may not be present during voting or deliberations on his or her
compensation.
2.
Except
as set forth below, each year, the Compensation Committee shall
review and approve, for the senior executives of Blue Dolphin, all
annual salary and other compensation arrangements and components,
and the level thereof, which may include the
following:
–
the
annual base salary level,
–
any
equity compensation amounts pursuant to an incentive or successor
plan,
–
any
incentives and awards pursuant to cash bonus or incentive
compensation plans or programs, and
–
any
special or supplemental benefits.
In
determining any forms of compensation other than the base salary
component of compensation, the Compensation Committee should
consider Blue Dolphin’s performance and relative shareholder
return, the value of similar incentive awards to senior executives
at comparable companies and the awards given to senior executives
in past years.
3.
Each
year, the Compensation Committee shall review and make a
recommendation to the Board for its approval regarding the
compensation of all directors.
B-2
4.
Each
year, the Compensation Committee shall review and make
recommendations to the Board for its approval with respect to any
of Blue Dolphin’s equity compensation-based plans or any cash
bonus or incentive compensation plans or programs. Such review and
recommendations shall include the appropriate terms and operations
of such plans or programs, as well as the particular thresholds at
which awards should be granted. Each year, the Compensation
Committee shall determine and approve grants and awards or any cash
bonus or incentive compensation plans or programs, make
determinations with respect to achievement of performance goals and
take action on other matters provided in such plans or programs. If
required by law, applicable listing standards, shareholders shall
be given the opportunity to vote on the adoption of, or
modification to, any of Blue Dolphin’s equity-based
plans.
5.
The
Compensation Committee shall review and recommend to the Board for
its approval, for each of the CEO and the senior executives of Blue
Dolphin, any new employment agreements, severance arrangements and
change-in-control agreements and provisions, or amendments to those
in existence.
6.
The
Compensation Committee shall review and recommend to the Board for
its approval any transaction in equity securities of Blue Dolphin,
or derivatives of those equity securities, between Blue Dolphin and
any officer or director of Blue Dolphin who is subject to the
reporting and short-swing liability provisions of Section 16 of the
Securities Exchange Act of 1934, as amended.
7.
Each
year, the Compensation Committee shall review succession planning
and development strategies for the CEO and senior executives of
Blue Dolphin and report its findings to the Board.
8.
The
Compensation Committee shall have the authority to retain, amend
the engagement with and terminate any compensation consultant to be
used to assist it in the evaluation of director, CEO and senior
executive compensation. The Compensation Committee shall have
authority to approve the consultant’s fees and other
retention terms and shall have authority to cause Blue Dolphin to
pay the fees and expenses of such consultants. The Compensation
Committee shall also have authority to obtain advice and assistance
from internal or external legal, accounting or other advisors, to
approve the fees and expenses of such outside advisors, and to
cause Blue Dolphin to pay the fees and expenses of such outside
advisors.
PROCEDURES
1.
Meetings.
The Compensation Committee
shall meet at the call of the Chairperson, two or more members of
the Compensation Committee or the Chairman of the Board. Meetings
may, at the discretion of the Compensation Committee, include
members of Blue Dolphin’s management, independent consultants
and such other persons as the Compensation Committee or the
Chairperson may determine. The Compensation Committee may meet in
person, by telephone conference call or in any other manner in
which the Board is permitted to meet under law or Blue
Dolphin’s by-laws, as amended and restated.
2.
Quorum and Approval.
A majority of the
members of the Compensation Committee shall constitute a quorum.
The Compensation Committee shall act on the affirmative vote of a
majority of members present at a meeting at which a quorum is
present. The Compensation Committee may also act by unanimous
written consent in lieu of a meeting.
3.
Rules.
The Compensation Committee may
determine additional rules and procedures, including designation of
a chairperson pro tempore in the absence of the Chairperson, at any
meeting thereof.
B-3
4.
Reports.
The Compensation Committee
shall make regular reports to the Board, directly or through the
Chairperson.
5.
Review of Charter
. Each year the
Compensation Committee shall review the need for changes in this
Charter and recommend any proposed changes to the Board for
approval.
B-4
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BLUE DOLPHIN ENERGY COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL
MEETING OF STOCKHOLDERS – DECEMBER 27, 2018 AT 10:00 AM
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This Proxy is Solicited on Behalf of the Board of Directors Blue
Dolphin Energy Company.
THIS PROXY WILL BE VOTED AS
DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED
“FOR” THE PROPOSALS WHEN APPLICABLE
. THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS.
THIS PROXY FORM IS VALID ONLY
WHEN SIGNED AND DATED ON THE REVERSE. THE SIGNER
ACKNOWLEDGES RECEIPT OF THE NOTICE OF THE ANNUAL MEETING OF
STOCKHOLDERS AND THE PROXY STATEMENT, REVOKES ALL PREVIOUS PROXIES
AND APPOINTS JONATHAN P. CARROLL AND TOMMY L. BYRD, AND EACH OF
THEM, AS PROXIES, EACH WITH THE POWER TO APPOINT HIS SUBSTITUTE,
AND AUTHORIZES EACH OF THEM TO REPRESENT AND TO VOTE, AS DESIGNATED
ON THE REVERSE, ALL OF THE SHARES OF COMMON STOCK OF BLUE DOLPHIN
ENERGY COMPANY HELD OF RECORD BY THE SIGNER AT THE CLOSE OF
BUSINESS ON NOVEMBER 5, 2018, AT THE ANNUAL MEETING AND AT ANY
ADJOURNMENT OR
POSTPONEMENTTHEREOF.
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(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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VOTING INSTRUCTIONS
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If you vote by phone, fax or internet, please DO NOT mail your
proxy card.
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MAIL:
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Please
mark, sign, date, and return this Proxy Card promptly using the
enclosed envelope.
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FAX:
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Complete the reverse portion of this Proxy Card
and Fax to
(202)
521-3464.
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INTERNET:
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https://www.iproxydirect.com/BDCO
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PHONE:
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(866) 752-VOTE(8683)
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ANNUAL MEETING OF THE STOCKHOLDERS OFBLUE DOLPHIN ENERGY
COMPANY
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PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE:
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PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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Proposal 1
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FOR ALL
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WITHHOLD
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FOR ALL
EXCEPT
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Election
of Directors:
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Jonathan
P. Carroll
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Ryan
A. Bailey
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CONTROL ID:
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Amitav
Misra
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REQUEST ID:
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Christopher
T. Morris
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Herbert
N. Whitney
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Proposal 2
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FOR
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AGAINST
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ABSTAIN
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Ratify
the selection of UHY LLP (“UHY”) as our independent
registered public accounting firm for the fiscal year ending
December 31, 2018.
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Proposal 3
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FOR
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AGAINST
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ABSTAIN
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Transact
any other business that may properly come before the Annual
Meeting.
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MARK “X” HERE IF YOU PLAN TO ATTEND THE MEETING:
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THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE
ELECTION OF ALL OF THE DIRECTOR NOMINEES AND “FOR” THE
RATIFICATION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM.
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MARK HERE FOR ADDRESS CHANGE
☐
New Address (if applicable):
____________________________________________________________________________________
IMPORTANT:
Please sign exactly as your name or names appear
on this Proxy. When shares are held jointly, each holder should
sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized
person.
Dated:
________________________, 2018
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(Print
Name of Stockholder and/or Joint Tenant)
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(Signature
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(Second
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TABLE OF CONTENTS