GEOI Georesources, Inc. (MM)

PROPOSAL NUMBER 1

ELECTION OF DIRECTORS

Our Articles of Incorporation provide that the number of directors shall not be less than three nor more than ten.  Our Bylaws allow the Board of Directors to set the number of directors subject to our Articles of Incorporation’s parameters.  In the election of directors, each proxy will be voted for each of the nominees listed in the table below (with discretionary authority to cumulate votes) unless the proxy withholds authority to vote for one or more of the nominees. If elected, each nominee will serve until the next annual meeting of shareholders and until his successor shall be duly elected and shall qualify.

If, prior to the meeting, it should become known to the Board of Directors that any one of the nominees named below will be unable to serve as a director after the meeting, the proxy will be voted for substitute nominee(s) selected by the Board of Directors.  The Board has no reason to believe that any of the nominees will be unable to serve.  In the election of directors, the number of nominees equaling the number of directors to be elected, having the highest number of votes cast in favor of their election, are elected to the Board of Directors.

The following table provides certain information with respect to our nominees for directors.

(1)

Member of the Executive Committee.

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(2)

Member of the Audit Committee.

(3)

Member of the Nominating Committee.  

(4)

Member of the Compensation Committee.

(5)

Member of the Audit Committee since 2004.

Frank A. Lodzinski , age 58, has over 35 years of oil and gas industry experience. In 1984, he formed Energy Resource Associates, Inc., which acquired management and controlling interests in oil and gas limited partnerships, joint ventures and producing properties. Certain partnerships were exchanged for common shares of Hampton Resources Corporation in 1992, which Mr. Lodzinski joined as a director and President. Hampton was sold in 1995 to Bellwether Exploration Company for $35 million. In 1996, he formed Cliffwood Oil & Gas Corp. and in 1997, Cliffwood shareholders acquired controlling interests in Texoil, Inc. In 2001, Texoil, Inc. was sold to Ocean Energy, Inc. for $135 million. In 2001, Mr. Lodzinski was appointed CEO and President of AROC, Inc. to direct the restructuring and ultimate liquidation of that company.  In 2003, AROC Inc. completed a $71 million monetization of oil and gas assets with an institutional investor and began a plan of liquidation in 2004. As part of that liquidation, Mr. Lodzinski was responsible for and oversaw petitions for liquidation under Federal bankruptcy laws, of two AROC Inc. subsidiaries, Latex Petroleum Corporation, an Oklahoma corporation and Source Petroleum Inc., a Louisiana corporation. In 2004, Mr. Lodzinski formed Southern Bay Energy, LLC, the General Partner of Southern Bay, which acquired the residual assets of AROC, Inc., and he has served as President of Southern Bay Energy LLC since its formation. He is a certified public accountant and holds a BSBA Degree in Accounting and Finance from Wayne State University in Detroit, Michigan.

Collis P. Chandler, III , age 38, has been President and sole owner of Chandler Energy, LLC since its inception in July 2000. From 1988-2000, Mr. Chandler served as Vice President of The Chandler Company, a privately-held exploration company operating primarily in the Rocky Mountains. His responsibilities over the 12-year period included involvement in exploration, prospect generation, acquisition, structure and promotion as well as direct responsibility for all land functions including contract compliance, lease acquisition and administration. Mr. Chandler received a Bachelor's of Science Degree from the University of Colorado, Boulder in 1992.

Christopher W. Hunt , age 39, has been a founder and President of Knightsbridge Capital, LLC, a private investment firm in Denver, Colorado, since 2002.  Prior to founding Knightsbridge Capital, Mr. Hunt served as a Vice President at the Anschutz Corporation, from 1997 to 2001, where he provided financial, investment and merger and acquisition services for the company's investment portfolio and served in the Denver and London, England, offices.  Previously, Mr. Hunt served in the private investment group of Bechtel Enterprises in San Francisco, California from 1996 to 1997. Mr. Hunt holds a Bachelor's Degree from Yale University (1990) and a Master's Degree in Business from the J.L. Kellogg School of Management at Northwestern University (1995).

Jay F. Joliat , age 51, has, for more than the past five years, been an independent investor and developer in commercial, industrial and garden style apartment real estate and development, residential home building, restaurant ownership and management, as well as venture private equity in generic pharmaceuticals, medical devices and oil and gas. He previously formed and managed his own investment management company early in his career and was formerly employed by E.F. Hutton and Dean Witter Reynolds. He holds a Bachelor of Arts Degree in Management and Finance from the Oakland University (1982) and was awarded a Certified Investment Management Analyst certificate in 1983 after completion of the IMCA program at the Wharton School of Business of the University of Pennsylvania. From 1996 through 2003, Mr. Joliat served on the Board of Directors of Caraco Pharmaceutical Laboratories Ltd., a company with a class of equity securities registered under the

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Securities Exchange Act of 1934, and served in various capacities on the audit, executive and compensation committees.

Scott R. Stevens , age 34, has served on the Board of Managers of Southern Bay Energy, LLC since March 2005. He is a Vice President of Wachovia Capital Partners, which he originally joined in 1999. Wachovia Capital Partners is the principal investing arm of the Wachovia Corporation, the fourth largest bank holding company in the United States. He is a graduate of the University of North Carolina at Chapel Hill and has an MBA from the Graduate School of Business at Stanford University.

Michael A. Vlasic, age 47, has served on the Board of Managers of Southern Bay Energy, LLC since its inception in 2004. He previously was a director of Texoil, Inc., a company with a class of equity securities registered under the Securities Exchange Act of 1934, where he served on the executive committee from 1997 until its sale to Ocean Energy Inc. in 2001. For more than the past five years he has been Chief Executive Manager of Vlasic Investments LLC. He is a graduate of Brown University.

Nick L. Voller , age 55, has been one of GeoResources’ directors since March 2004.  For over the past five years, he has been a partner with Voller Brakey Stillwell & Suess, P.C., a CPA firm located in Williston, North Dakota.  He is a 1972 graduate of the University of North Dakota.

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL OF THE ABOVE NOMINEES.

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BOARD OF DIRECTORS

During the fiscal year ended December 31, 2006, our Board of Directors held six meetings.  In addition, the Board acts from time to time by unanimous written consent in lieu of holding a meeting.  During the fiscal year ended December 31, 2006, the Board did not conduct any meetings by unanimous written consent.  Messrs. Ashley, Hoffelt, Vickers, Voller and Mrs. Kruse attended all of the board meetings.  Mr. Krile missed three board meetings.  As discussed above under Change in Control, all of those directors other than Mr. Voller resigned as part of the closing of the Merger Agreement on April 17, 2007.  

While we do not have a formal policy regarding our Board members’ attendance at the Annual Meeting of Shareholders, we have historically scheduled a meeting of the Board of Directors on the same day as our Annual Meeting so our Board members typically attend the Annual Meeting of Shareholders.  In 2006, all members of our Board of Directors attended our Annual Meeting of Shareholders except Mr. Krile.

Independence of Directors

The rules of the Nasdaq Stock Market require that a majority of the Board of Directors be independent directors, as defined in Nasdaq Rule 4200(a)(15).  In March 2006 and April 2007, we reviewed the independence of our directors.  During these reviews, the Board of Directors considered transactions and relationships between each director, or any member of his family, and us and our subsidiaries.  As a result of this review, the Board of Directors has determined that a majority of the directors who have been nominated for election are independent under Nasdaq Rules.  Our independent directors are: Messrs. Hunt, Joliat, Stevens and Voller.

Committees of the Board of Directors

To assist it in carrying out its duties, the Board has delegated certain authority to an audit committee whose functions are described below:

Audit Committee

Member during 2006: Directors Voller (Chairman), Krile and Hoffelt

Members at April 17, 2007: Directors Joliat (Chairman), Hunt and Voller

Number of Meetings in 2006: 3

Functions:

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Assists the Board in fulfilling its oversight responsibilities as they relate to the Company’s accounting policies, internal controls, financial reporting practices and legal and regulatory compliance;

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Hires the independent auditors;

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Monitors the independence and performance of the Company’s independent auditors and internal auditors;

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Maintains, through regularly scheduled meetings, a line of communication between the Board and the Company’s financial management, internal auditors and independent auditors; and

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Oversees compliance with the Company’s policies for conducting business, including ethical business standards.

The Board of Directors adopted an Audit Committee Charter in 2000 and subsequently amended and restated the Charter in March, 2004, which is available on our website at www.georesourcesinc.com .

Our Board of Directors has determined that Mr. Voller qualified as an “audit committee financial expert” as that term is defined in the rules of the Securities and Exchange Commission.

Our Common Stock is quoted on the Nasdaq Market.  Pursuant to Nasdaq rules, the Audit Committee is to be comprised of three or more directors as determined by the Board of Directors, each of whom shall be “independent”.  Our Board of Directors has determined that all members of the Audit Committee are independent, as defined in the listing standards of the Nasdaq Stock Market and the rules of the SEC.

Compensation and Nominating Functions

During 2006, our Board of Directors did not maintain a nominating committee with respect to identifying, evaluating or recommending candidates for our Board of Directors, nor did it maintain a compensation committee to administer our compensation plans and oversee executive compensation.  Instead, these functions were performed by the full Board of Directors and without a charter.  Our Board did not maintain these committees for the following reasons:

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We were a small company with only 13 full-time employees, 11 of whom were located in Williston, North Dakota, one in Westhope, North Dakota and one in Alzada, Montana.

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Many boards of directors of large companies, due to the large number of directors they maintain, find it necessary to delegate their duties to committees in order to dispense their duties in an orderly fashion.  As a small company, our Board consisted of six directors.  Thus, the Board believed that it was not necessary or warranted for our Board to delegate duties to committees of the Board.  

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As four of our six directors were independent under applicable Nasdaq Stock Market rules, we believed that the nominating and compensation duties of the Board could be accomplished in a disinterested manner by our entire Board of Directors.

Upon the closing of the Mergers discussed above, our reconstituted Board of Directors determined that it would be in the best interest of the Company to establish a nominating committee, a compensation committee and an executive committee.  Thus, on April 17, 2007, we established a nominating committee, a compensation committee and an executive committee.  

Nominating Committee

Members at April 17, 2007: Directors Stevens (Chairman), Hunt and Joliat  

Number of Meetings in 2006: None.  

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On April 17, 2007, the Board of Directors adopted a resolution appointing a Nominating Committee comprised solely of directors who meet the independence requirements set forth in NASDAQ Rule 4200 and within the meaning of the rules and regulations of the Securities and Exchange Commission.  On July 9, 2007, the Board of Directors approved a charter for the Nominating Committee which is available on our website, www.georesourcesinc.com .  All of the research regarding director nominees for the 2007 annual meeting was performed by the entire Board of Directors sitting as a nominating committee prior to the April 17, 2007 formation of the Nominating Committee and the information was then referred to the Nominating Committee.  The Committee followed the Board’s previous policy of nominating board candidates based on whom they believe will be effective in serving the long-term interests of the Company and its shareholders.  Candidates were evaluated based upon their backgrounds and the need for any required expertise on the Board and its committees.  The director nominees were recommended by non-managerial directors and our Chief Executive Officer.  The nomination of the director nominees for the 2007 annual meeting was approved by a majority of the Nominating Committee, with the Board of Directors then ratifying the Committee’s recommendations.  

Our Nominating Committee will consider a candidate for a director position proposed by a shareholder.  A candidate must be highly qualified in terms of business experience and be both willing and expressly interested in serving on the Board.  A shareholder wishing to propose a candidate for the Board’s consideration should forward the candidate’s name and information about the candidate’s qualifications to the GeoResources, Inc., Board of Directors, Nominating Committee, Attn: Chairman, at 110 Cypress Station Drive, Suite 220, Houston, Texas 77090-1629.  Submissions must include sufficient biographical information concerning the recommended individual, including age, employment history for at least the past five years indicating employer’s names and description of the employer’s business, educational background and any other biographical information that would assist the Nominating Committee in determining the qualifications of the individual.  The Nominating Committee will consider all candidates, whether recommended by shareholders or members of management.  The Nominating Committee will consider recommendations received by a date not later than 120 calendar days before the date our proxy statement was released to shareholders in connection with the prior year’s annual meeting for nomination at that annual meeting.  However, we intend on conducting our 2008 Annual Meeting on the first or second Tuesday of June 2008.  Thus, recommendations should be received by the Board of Directors a reasonable time before the Company begins to print and send its proxy materials for its 2008 Annual Meeting, which is approximately 120 calendar days before the first Tuesday of June.  The Board will consider nominations received beyond that date at the annual meeting subsequent to the next annual meeting.

Compensation Committee

Members at April 17, 2007: Directors Joliat (Chairman), Hunt and Stevens

Number of Meeting in 2006: None.

On April 17, 2007, the Board of Directors adopted a resolution appointing a Compensation Committee comprised solely of directors who meet the independence requirements set forth in NASDAQ Rule 4200 and within the meaning of the rules and regulations of the Securities and Exchange Commission.  This Committee was formed on April 17, 2007 and thus did not meet during 2006.  On July 9, 2007, the Board of Directors approved a charter for the Compensation Committee which is available on our website, www.georesourcesinc.com .  The primary function of this Committee is to review and approve executive compensation and benefit programs.  Additionally,

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this Committee approves the compensation of the Chief Executive Officer, Chief Financial Officer, and any other officers deemed appropriate.  The Compensation Committee does not anticipate utilizing any compensation consultants at this time.  Our Chief Executive Officer is expected to recommend to the Compensation Committee the compensation for other executive officers and recommend director compensation.

Executive Committee

Under the current Bylaws, Article III, Section 12, the Chairman of the Board can appoint other committees in addition to the three current standing committees: Audit, Compensation, and Nomination. On April 17, 2007 the Chairman appointed an Executive Committee to be a working committee, assigned with regular tasks outlined by the GeoResources, Inc. Board of Directors. The Chairman of this committee is Frank A. Lodzinski, with members Collis P. Chandler and Michael A. Vlasic.  The Board of Directors has not adopted a charter for the Executive Committee.  

CODE OF ETHICS

Our Board of Directors has adopted a Code of Business Conduct and Ethics (“Code”), which is posted on our website located at www.georesourcesinc.com .  You may also obtain a copy of our Code by requesting a copy in writing at 110 Cypress Station Drive, Suite 220, Houston, Texas 77090-1629 or by calling us at (281) 537-9920.

Our Code provides general statements of our expectations regarding ethical standards that we expect our directors, officers and employees to adhere to while acting on our behalf. Among other things, the Code provides that:

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We will comply with all laws, rules and regulations;

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Our directors, officers and employees are to avoid conflicts of interest and are prohibited from competing with us or personally exploiting our corporate opportunities;

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Our directors, officers and employees are to protect our assets and maintain our confidentiality;

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We are committed to promoting values of integrity and fair dealing; and

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We are committed to accurately maintaining our accounting records under generally accepted accounting principles and timely filing our periodic reports.

Our Code also contains procedures for our employees to report, anonymously or otherwise, violations of the Code.

Section 16(a) Beneficial Ownership Reporting Compliance  

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than 10% of our common stock to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock.  Executive officers, directors and greater than 10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.  To our knowledge, based

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solely on review of the copies of such reports furnished to us during fiscal year 2006, all executive officers, directors and greater than 10% beneficial owners complied with the Section 16(a) filing requirements.

COMPENSATION AND OTHER TRANSACTIONS