Blueprint
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
July 20,
2018
Blue Dolphin Energy Company
(Exact name of registrant as specified in its charter)
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Delaware
(State or Other Jurisdiction of Incorporation)
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0-15905
(Commission File Number)
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73-1268729
(IRS Employer Identification
No.)
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801 Travis Street, Suite 2100
Houston, Texas 77002
(Address
of principal executive office and zip code)
(713) 568-4725
(Registrant’s
telephone number, including area code)
(Not Applicable)
(Former name or former address, if changed since last
report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2
below):
[ ]
Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240.13e-4(c))
Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of
1934 (§240.12b-2 of this chapter).
Emerging growth
company ☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Item
1.01
Entry
into a Material Definitive Agreement.
As
previously disclosed, on August 11, 2017, Lazarus Energy, LLC
(“LE”), a wholly owned subsidiary of Blue Dolphin
Energy Company (“Blue Dolphin”), was involved in
arbitration proceedings with GEL Tex Marketing, LLC
(“GEL”), an affiliate of Genesis Energy, LP. The
arbitrator’s final award (the “Final Award”)
denied all of LE’s claims against GEL and granted
substantially all of the relief requested by GEL in its
counterclaims. Among other matters, the Final Award awarded
damages, legal and administrative fees, and court costs payable to
GEL by LE in the aggregate sum of approximately $31.3
million.
As
previously disclosed, on September 26, 2017, LE and Blue Dolphin,
together with their affiliates Lazarus Energy Holdings, LLC and
Jonathan Carroll (collectively, the “Lazarus Parties”),
entered into a Letter Agreement with GEL, effective September 18,
2017 (as amended, the “Letter Agreement”), confirming
the parties’ agreement to the continuation of the hearing on
confirmation of the Final Award (the “District Court
Action”) for a period of no more than 90 days after September
18, 2017 (the “Continuance Period”), subject to the
terms of the Letter Agreement, to facilitate settlement discussions
between the parties. In connection with execution of the Letter
Agreement, GEL received $3,648,742, which amount was applied to
reduce Final Award. The Letter Agreement was subsequently amended
nine times to extend the Continuation Period through and including
July 31, 2018. In connection with the Letter Agreement amendments,
LE paid to GEL an additional aggregate amount of $3,500,000 (the
“Continuance Payments”), which was applied to reduce
the balance of the Final Award. During the Continuance Period, the
parties engaged in negotiations over the terms of a potential
settlement.
On July
20, 2018, GEL and the Lazarus Parties, along with affiliates of the
Lazarus Parties, Nixon Product Storage, LLC, a wholly owned
subsidiary of Blue Dolphin (“NPS”), and Carroll &
Company Financial Holdings, L.P. (“C&C”), entered
into a Settlement Agreement (the “Settlement
Agreement”)
whereby GEL and the Lazarus Parties agreed to
mutually release all claims against each other and to file a
stipulation of dismissal with prejudice in connection with the
Arbitration (the “Settlement”), subject to the terms
and conditions set forth in the Settlement Agreement.
The
Settlement is conditioned upon payment by the Lazarus Parties to
GEL of $10,000,000 in cash (the “Settlement Payment”)
and $500,000 in cash at the end of each calendar month until the
Settlement Payment is paid (the “Interim Payments”) or
the Settlement Agreement is terminated. The Interim Payments will
not be applied to reduce the amount of the Settlement Payment, but
will reduce the Final Award.
The
Settlement Agreement restricts the Lazarus Parties, including Blue
Dolphin, from taking certain actions without the prior written
consent of GEL, including (i) the incurrence of any debt not
specifically excepted in the Settlement Agreement, (ii) the
establishment of any liens not specifically excepted in the
Settlement Agreement, (iii) the disposition of any assets other
than certain ordinary course sales to unaffiliated third parties,
payments to unaffiliated third-party trade creditors and scheduled
debt payments, (iv) the entrance into any transactions with
affiliates not specifically excepted in the Settlement Agreement,
(v) the failure to pay debts generally as they become due and (vi)
the entrance into a bankruptcy, reorganization or similar
proceeding. A violation of any of the restrictions in the
Settlement Agreement, as well as the failure of the Lazarus Parties
to make Interim Payments as they become due, will constitute an
event of default under the Settlement Agreement which, subject to
certain cure periods, would allow GEL to terminate the Settlement
Agreement and enforce its rights under the Final
Award.
The
Lazarus Parties are exploring the possibility of obtaining a
commercial loan in an aggregate principal amount equal to the
Settlement Payment (the “Settlement Financing”),
subject to obtaining the consent of Veritex Bank N.A., as lender
under certain loan agreements with the Lazarus Parties and their
affiliates. Under the Settlement Agreement, the Lazarus Parties are
required to work in good faith and take reasonable actions
necessary to obtain the Settlement Financing in accordance with the
terms of the Settlement Agreement. Prior to the consummation of the
Settlement Financing, the Lazarus Parties are required to (i) cause
NPS to consummate the Settlement Financing and restrict its ability
to commence a bankruptcy case, (ii) assign to NPS certain tank
leases that will constitute collateral for the Settlement Financing
and (iii) cause NPS to assume joint and several liability for all
or a portion of the Final Award. The failure to achieve certain
milestones in connection with obtaining the Settlement Financing
will constitute an event of default under the Settlement Agreement,
which would allow GEL to terminate the Settlement Agreement and
enforce its rights under the Final Award.
Simultaneously with
the execution of the Settlement Agreement, Carroll and C&C
entered into a Security Agreement pursuant to which Carroll and
C&C agreed to secure up to $10,000,000 of LE’s
obligations under the Final Award with a security interest in their
equity in LEH.
The
Settlement Agreement will terminate, unless extended in writing by
GEL, on December 31, 2018 if the Settlement Payment is not made on
or before such date, and may be terminated by GEL following the
occurrence of an event of default under the Settlement Agreement,
as described above.
Pursuant to the
Settlement Agreement, the parties agreed to terminate the Letter
Agreement, and GEL agreed not to take any action to execute or
collect on the Final Award and to take all action necessary to
continue the District Court Action until the earlier of (i) the
date on which the Settlement Payment is paid or (ii) the
termination of the Settlement Agreement.
Blue
Dolphin can provide no assurance that the conditions necessary to
consummation of the Settlement will be met. If certain conditions
are not met or the Settlement Agreement is terminated, GEL may seek
to enforce the Final Award against the Lazarus Parties, in which
case, Blue Dolphin and its affiliates would likely be required to
seek protection under bankruptcy laws.
The
foregoing description of the terms of the Settlement Agreement does
not purport to be complete and is qualified in its entirety by
reference to the Settlement Agreement, which has been filed as
Exhibit 10.1 to this Current Report on Form 8-K.
Item
1.02
Termination
of a Material Definitive Agreement.
The
information set forth in Item 1.01 above is incorporated by
reference in this Item 1.02 in its entirety.
Item 2.03
Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The
information set forth in Item 1.01 above is incorporated by
reference in this Item 2.03 in its entirety.
Item
9.01
Financial
Statements and Exhibits.
(d) Exhibits
10.1
Settlement Agreement, dated as of July 20, 2018, by and among
Lazarus Energy, LLC, Blue Dolphin Energy Company, Lazarus Energy
Holdings, LLC, Nixon Product Storage, LLC, Carroll & Carroll
Financial Holdings, L.P., and Jonathan Carroll.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly
authorized.
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Blue
Dolphin Energy Company
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By:
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/s/
JONATHAN
P. CARROLL
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Jonathan
P. Carroll
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Chief
Executive Officer, President,
Assistant
Treasurer and Secretary
(Principal
Executive Officer)
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