SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to
Section
14(a) of the
Securities Exchange Act of 1934
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the Registrant /x/
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a Party other than the Registrant / /
Check
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appropriate box:
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for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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X
/ Definitive Proxy
Statement
/
/ Definitive
Additional Materials
/
/ Soliciting
Material Pursuant to §240.14a-12
GEORESOURCES,
INC.
-----------------------------------------------------------------------------------------
(Name
of
Registrant as Specified in its Charter)
NONE
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(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
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of Filing Fee (Check the appropriate box):
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fee required
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on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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2)
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Aggregate
number of securities to which transaction
applies:
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was
determined):
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4)
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maximum aggregate value of
transaction:
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Check
box if any part of the fee is offset as provided by Exchange Act
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0-11(a)(2) and identify the filing for which the offsetting fee was
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previously. Identify the previous filing by registration statement
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October
18, 2007
TO
OUR SHAREHOLDERS:
You
are
cordially invited to attend our Annual Meeting of Shareholders to be held on
Tuesday, November 6, 2007, at 1:00 p.m. Mountain Standard Time, at 1625
Broadway, Suite 1600, Denver, Colorado 80202. The other directors and
officers join me in extending this invitation.
The
formal matters to be acted upon at the meeting are described in the accompanying
Notice of Annual Meeting of Shareholders and Proxy Statement. In addition
to the formal issues, a brief report of our operations will also be
presented.
It
is
very important that your shares are represented at the meeting. If you are
unable to attend the meeting but have questions or comments about our
operations, we would like to hear from you.
The
form
of proxy is enclosed. To assure that your shares will be voted at the
meeting, please complete and sign the enclosed postage paid proxy, and return
it
promptly. No additional postage is required if mailed in the United States.
Submitting your proxy will not affect your right to vote in person if you
attend the meeting.
Sincerely,
GEORESOURCES,
INC.
/s/ Frank
A.
Lodzinski
FRANK
A. LODZINSKI
President
and Chief Executive
Officer
GeoResources,
Inc.
110
Cypress Station Drive, Suite 220
Houston,
Texas 77090-1629
___________________________________________________
NOTICE
OF 2007 ANNUAL MEETING OF SHAREHOLDERS
To
be held on November 6, 2007
___________________________________________________
TO
OUR SHAREHOLDERS:
The
2007
Annual Meeting (the “Meeting”) of Shareholders of GeoResources, Inc. will be
held at 1625 Broadway, Suite 1600, Denver, Colorado, on Tuesday, November 6,
2007, at 1:00 p.m., Mountain Standard Time, for the following
purposes:
1. To
elect seven directors
for the ensuing year;
2. To
approve an amendment
to Article IX of the Articles of Incorporation to eliminate cumulative voting
in
the election of directors;
3. To
approve an amendment
to our Articles of Incorporation to reduce voting requirements of shareholders
in certain matters required by the Colorado Business Corporation Act, from
a
two-thirds vote of the outstanding voting shares to a majority vote of the
outstanding shares; and
4. To
consider and act upon
such other matters as may properly come before the Meeting and any adjournments
thereof.
Only
shareholders of record at the close of business on October 15, 2007, are
entitled to notice of and to vote at the meeting.
Shareholders
are requested to sign and date the enclosed proxy, and return it to our offices.
The proxy requires no postage if mailed in the United States.
By
Order
of the Board of Directors.
/s/ Cathy
Kruse
CATHY
KRUSE
Corporate
Secretary
October
18, 2007
TABLE
OF
CONTENTS
|
Page
#
|
|
|
INFORMATION
CONCERNING SOLICITATION AND
VOTING
|
1
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
3
|
CHANGE
IN CONTROL
|
6
|
PROPOSAL
NUMBER 1
|
8
|
ELECTION
OF DIRECTORS
|
8
|
BOARD
OF DIRECTORS
|
11
|
CODE
OF ETHICS
|
14
|
COMPENSATION
AND OTHER
TRANSACTIONS
|
15
|
PROPOSAL
2
|
18
|
AMENDMENT
TO THE ARTICLES OF INCORPORATION TO
ELIMINATE CUMULATIVE VOTING
|
18
|
PROPOSAL
3
|
20
|
TO
AMEND OUR ARTICLES OF INCORPORATION TO REDUCE
VOTING REQUIREMENTS OF SHAREHOLDERS IN MATTERS REQUIRED BY THE
COLORADO
BUSINESS CORPORATION ACT FROM A TWO-THIRDS VOTE OF THE OUTSTANDING
VOTING
SHARES TO A MAJORITY VOTE OF THE OUTSTANDING SHARES
|
20
|
INDEPENDENT
PUBLIC
ACCOUNTANTS
|
21
|
PRINCIPAL
ACCOUNTANT FEES AND
SERVICES
|
22
|
AUDIT
COMMITTEE REPORT
|
22
|
SHAREHOLDER
PROPOSALS
|
24
|
SHAREHOLDER
COMMUNICATIONS WITH THE BOARD OF
DIRECTORS
|
24
|
OTHER
BUSINESS
|
25
|
ACCOMPANYING
DOCUMENTS TO
SHAREHOLDERS
|
25
|
AVAILABILITY
OF REPORT ON FORM
10-KSB
|
25
|
GeoResources,
Inc.
110
Cypress Station Drive, Suite 220
Houston,
Texas 77090-1629
PROXY
STATEMENT
Annual
Meeting of Shareholders To Be Held On November 6, 2007
----------------------------------------------------
INFORMATION
CONCERNING SOLICITATION AND VOTING
The
accompanying proxy is solicited by our Board of Directors for use at our Annual
Meeting of Shareholders to be held at 1:00 p.m. Mountain Standard Time on
Tuesday, November 6, 2007, at 1625 Broadway, Suite 1600, Denver, Colorado,
and
for the following purposes:
1. To
elect seven directors
for the ensuing year;
2. To
approve an amendment
to Article IX of the Articles of Incorporation to eliminate cumulative voting
in
the election of directors;
3. To
approve an amendment
to our Articles of Incorporation to reduce voting requirements of shareholders
in matters required by the Colorado Business Corporation Act, from a two-thirds
vote of the outstanding voting shares to a majority vote of the outstanding
shares; and
4. To
consider and act upon
such other matters as may properly come before the Meeting and any adjournments
thereof.
The
cost
of soliciting proxies, including the preparation, assembly, and mailing of
the
proxies and solicitation material, as well as the cost of forwarding such
material to the beneficial owners of stock, will be borne by us.
Directors, officers and regular employees may, without compensation other
than their regular remuneration, solicit proxies personally or by
telephone.
Any
shareholder giving a proxy may revoke it at any time prior to its use at the
meeting by giving written notice of revocation to our Secretary or by attending
the meeting and voting in person. At any time before the vote on a
proposal, you can change your vote either by giving our Secretary a written
notice revoking your proxy or by signing, dating, and returning to us a new
proxy. We will honor the proxy with the latest date. If the enclosed
proxy is executed properly and returned in time to be voted at the meeting,
the
shares represented will be voted as instructed. Proxies which are signed
but which lack any voting instructions will be voted in favor of the slate
of
directors proposed by the Board of Directors and will be deemed to grant
discretionary authority to vote upon any other matters properly before the
meeting.
If
your
shares are held in “street name” by your broker, a bank, or other nominee, you
will probably receive this proxy statement from them with instructions for
voting your shares. Please respond quickly so that they may represent
you.
If
your
shares are held in the name of a broker, bank or other nominee, and you do
not
tell that person how to vote your shares (so-called “broker non-votes”), that
person can vote them
as
it
sees fit only on matters that self regulatory organizations determine to be
routine. Broker non-votes will be counted as present to determine if a
quorum exists but will not be counted as present and entitled to vote on any
non-routine proposal.
The
mailing address of our principal
executive office is 110 Cypress Station Drive, Suite 220, Houston, Texas
77090-1629. This Proxy Statement and the accompanying proxy card were
mailed to our shareholders on or about October 18, 2007.
Our
Board
of Directors fixed October 15, 2007 as the record date for the determination
of
shareholders entitled to vote at the meeting. Persons who were not
shareholders on that date will not be allowed to vote at the
meeting.
At
the
close of business on October 15, 2007, there were issued and outstanding
14,703,383 shares of our common stock, our only outstanding class of voting
equity securities. A majority of the shares of common stock outstanding
must be represented at the meeting in person or by proxy to constitute a quorum
transaction of the business that is properly brought before the meeting.
On matters other than the election of directors, holders of the common
stock are entitled to one vote per share held as of the record date. With
respect to the election of directors, each holder of common stock is entitled
to
cumulative voting rights, that is, to cast all of his or her votes (determined
by multiplying the number of shares owned by the total number of other directors
to be elected) for any one nominee or to distribute his or her votes among
any
two or more nominees. There are no conditions precedent to the exercise of
cumulative voting rights. Discretionary authority to cumulate votes in the
election of directors is solicited in this Proxy Statement.
In
the
election of directors, the seven nominees with the highest number of votes
cast
in their favor will be elected as directors to our Board of Directors.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The
following table shows the number of
shares of our common stock beneficially owned as of October 15, 2007
by:
·
|
each
person whom we know beneficially owns more than 5% of our common
stock;
|
·
|
each
director, and the two new nominees proposed to be elected to our
Board of
Directors at the Annual Meeting;
|
·
|
each
of our executive officers; and
|
·
|
our
directors and executive officers as a
group.
|
|
Common
Shares
Beneficially
Owned
|
Names and Addresses of Beneficial Owner
(1)
|
Number
|
Percent
|
|
|
|
Frank
A. Lodzinski (2) (3) (4)
110
Cypress Station Drive, Suite 220
Houston,
Texas 77090
|
5,179,975
|
35.2%
|
|
|
|
Collis
P. Chandler, III (5)
475
Seventeenth Street, Suite 1210
Denver,
Colorado 80202
|
1,620,711
|
11.0%
|
|
|
|
Christopher
W. Hunt
200
Fillmore Street, No. 408
Denver,
Colorado 80206
|
35,000
|
*
|
|
|
|
Jay
F. Joliat (6)
36801
Woodward Avenue, Suite 301
Birmingham,
Michigan 48009
|
307,535
|
2.1%
|
|
|
|
Scott
R. Stevens (7)
301
South College Street, 12
th
Floor
Charlotte,
North Carolina 28288
|
0
|
*
|
|
|
|
Michael
A. Vlasic (4)
38710
Woodward Avenue
Bloomfield
Hills, Michigan 48304
|
5,022,018
|
34.2%
|
|
|
|
Nick
L. Voller
222
University Avenue
Williston,
North Dakota 58801
|
0
|
*
|
|
Common
Shares
Beneficially
Owned
|
Names and Addresses of Beneficial Owner
(1)
|
Number
|
Percent
|
Francis
M. Mury (8)
110
Cypress Station Drive, Suite 220
Houston,
Texas 77090
|
100,000
|
*
|
|
|
|
Robert
J. Anderson (9)
110
Cypress Station Drive, Suite 220
Houston,
Texas 77090
|
65,528
|
*
|
|
|
|
Howard
E. Ehler (10)
110
Cypress Station Drive, Suite 220
Houston,
Texas 77090
|
60,053
|
*
|
|
|
|
All
executive officers and directors as a group (ten
persons)(11)
|
7,322,822
|
49.8%
|
|
|
|
Wachovia
Capital Partners 2005, LLC (7)
301
South College Street, 12
th
Floor
Charlotte,
North Carolina 28288
|
1,888,560
|
12.8%
|
|
|
|
Vlasic
FAL, L.P. (4)
110
Cypress Station Drive, Suite 220
Houston,
Texas 77090
|
5,022,018
|
34.2%
|
|
|
|
Chandler
Energy, LLC (5)
475
Seventeenth Street, Suite 1210
Denver,
Colorado 80202
|
1,620,711
|
11.0%
|
|
|
|
*
Less than 1%
|
|
|
(1)
|
Unless
otherwise indicated, the shares are held directly in the names of
the
named beneficial owners and each person has sole voting and sole
investment power with respect to the
shares.
|
(2)
|
Includes
65,957 shares of common stock owned by Mr.
Lodzinski.
|
(3)
|
Includes
92,000 shares of common stock held in the name of VL Energy, L.L.C.
pursuant to a shareholders agreement with certain former employees
of
Southern Bay Oil & Gas, L.P. Mr. Lodzinski is the sole
shareholder of VL Energy, L.L.C. VL Energy, L.L.C. currently
shares the right to dispose of those shares with each employee that
is
ultimately entitled to his or her portion of the 92,000
shares.
|
(4)
|
Pursuant
to the Schedule 13D filed by Vlasic FAL, L.P., Vlasic FAL, L.P.,
a Texas
limited partnership, is managed by VL Energy L.L.C., a Texas limited
partnership and general partner. All of the membership interests of
VL Energy L.L.C. are owned by Frank A. Lodzinski. Mr. Lodzinski and
Mr. Vlasic indirectly own all of the limited partnership interests
of
Vlasic FAL L.P., through limited liability companies that they control,
and that each of Mr. Lodzinski and Mr. Vlasic own in part, with the
remaining owners consisting primarily of family members. The entity
controlled by Mr. Vlasic that is the limited partner of Vlasic FAL,
L.P.
has the right to remove the general partner at any time. Vlasic
FAL,
|
|
|
L.P.
directly owns 5,022,018 shares of the Company, or 34.2% of
the issued and
outstanding common stock of the Company. Based on the legal
structure of Vlasic FAL, L.P., Mr. Lodzinski and Mr. Vlasic
are beneficial
owners of all of the shares of common stock held by Vlasic
FAL, L.P., and
share the right to vote and dispose of these
shares.
|
(5)
|
Includes
1,595,711 shares of common stock held in the name of Chandler Energy,
LLC,
which is solely owned by Mr. Chandler. Includes 25,000 shares
that are held by Chandler Energy, LLC pursuant to a shareholders
agreement
with certain former employees of Chandler Energy,
LLC.
|
(6)
|
Includes
123,485 shares of common stock owned directly by Mr. Joliat and 184,050
shares of common stock which is owned through trusts of which Mr.
Joliat
is trustee. Includes 25,063 shares of common stock owned by Mr. Joliat’s
wife.
|
(7)
|
Mr.
Stevens is a member of the managing member of Wachovia Capital Partners
2005, LLC, which owns 1,888,650 shares of the GeoResources’ common stock.
Mr. Stevens disclaims beneficial ownership of all such securities,
except
to the extent of his pecuniary interest therein. These
securities may be deemed to be beneficially owned by (a) WCP Management
Company 2005, LLC, the managing member of Wachovia Capital Partners
2005,
LLC, and (b) Scott B. Perper, the managing member of WCP Management
Company 2005, LLC. Mr. Perper disclaims beneficial ownership of such
securities except to the extent of his pecuniary interest
therein.
|
(8)
|
Includes
14,000 shares of common stock that have not yet vested pursuant to
a
shareholders agreement between Mr. Mury, Southern Bay Oil & Gas, L.P.
and VL Energy, L.L.C.
|
(9)
|
Includes
21,304 shares of common stock held by Mr. Anderson in an Individual
Retirement Account and includes 16,000 shares of common stock that
have
not yet vested pursuant to a shareholders agreement between Mr. Anderson,
Southern Bay Oil & Gas, L.P. and VL Energy,
L.L.C.
|
(10)
|
Includes
4,261 shares of common stock held by Mr. Ehler in an Individual Retirement
Account and includes 16,000 shares of common stock that have not
yet
vested pursuant to a shareholders agreement between Mr. Ehler, Southern
Bay Oil & Gas, L.P. and VL Energy,
L.L.C.
|
(11)
|
This
number includes only the 5,022,018 shares of common stock in the
name of
Vlasic FAL, L.P. once, in which Mr. Vlasic and Mr. Lodzinski may
be each
considered beneficial owners of those shares. Additionally,
this number only counts the shares of common stock once that have
not
vested for Mr. Anderson, Mr. Ehler and Mr. Mury, who share control
of
these shares with Mr. Lodzinski until they have
vested.
|
CHANGE
IN CONTROL
On
April 17, 2007, GeoResources, Inc.
(the “Company”) completed the transactions in which Southern Bay Oil & Gas,
L.P. (“Southern Bay”) and PICA Energy, LLC (“PICA”) were merged with two
subsidiaries of the Company (the “Mergers”) pursuant to a Plan and Agreement of
Merger dated September 14, 2006 (the “Merger Agreement”). The Merger
Agreement provided in substance for the mergers of the business of Southern
Bay
and Chandler Energy, LLC (“Chandler”), two independent oil and gas entities,
into two subsidiaries of the Company. To accomplish the merger with Chandler’s
business, Chandler transferred all but a small portion of its business and
assets to PICA on April 17, 2007, and PICA was immediately merged into the
Company’s wholly owned subsidiary, Chandler Acquisition, LLC. Southern Bay
was a private oil and gas exploration and production limited partnership with
properties located primarily along the Texas and Louisiana Gulf Coast, operating
out of Houston, Texas. Chandler was a private oil and gas exploration and
production limited liability company, with properties located primarily in
Colorado, Michigan and Utah, operating out of Denver, Colorado. Prior to
the Mergers, none of Southern Bay, Chandler, the Yuma Working Interests owners
or their affiliates had any material relationship with the Company or any of
its
affiliates, or any director or officer of the Company, or any associate of
any
such director or officer.
The
Mergers resulted in a change of
control of the Company, as our Board of Directors and executive officers now
consist mostly of persons formerly affiliated with Southern Bay and
Chandler.
In
the Mergers, the Company issued a
total of 10,690,000 shares of its common stock, representing approximately
74.3%
of the outstanding common stock at the time, consisting of (a) 8,263,000
shares to the partners of Southern Bay in exchange for 100% of the partnership
interests of Southern Bay, (b) 1,931,000 shares to the members of Chandler
in exchange for 100% of the membership interests of PICA, and (c) 496,000 shares
in exchange for certain working interests in a Chandler operated oil and gas
project in northeastern Colorado (the “Yuma Working
Interests”).
Other
than as occurred on April 17,
2007 pursuant to the Merger Agreement, the Company is not aware of any
agreements or understandings among Southern Bay, Chandler, the Yuma Working
Interest owners or their affiliates or associates with respect to the election
of directors of the Company.
In
connection with the Mergers, the
Company issued 5,022,018 shares of its common stock to Vlasic FAL, L.P. in
exchange for its limited partnership interests in Southern Bay. These
shares constituted 34.2% of the outstanding shares of the common stock of the
Company as of April 17, 2007. Vlasic FAL, L.P. is a limited partnership
which is controlled by Frank A. Lodzinski and Michael A. Vlasic and therefore,
both of these persons may be deemed to be the beneficial owner of the shares
held of record by Vlasic FAL, L.P. In addition, in connection with the
Mergers, Mr. Lodzinski was issued directly 65,957 shares of Company common
stock
in exchange for his limited partnership interests in Southern Bay (.4% of the
outstanding shares), and he has voting control over another 534,534 shares
of
common stock of the Company owned by Southern Bay employees (3.6% of the
outstanding shares). By virtue of their respective beneficial ownership
positions of the common stock of the Company, Messrs. Lodzinski and Vlasic
may
be deemed to have acquired control of the Company on April 17,
2007.
Also,
pursuant to the Merger Agreement,
the number of the Board of Directors of the Company was increased from six
to
seven.
Simultaneously
with the closing of the
Mergers and pursuant to the Merger Agreement, Jeffrey P. Vickers, Cathy Kruse,
H. Dennis Hoffelt, Paul A. Krile and Duane Ashley resigned from their positions
on the Board of Directors and appointed Frank A. Lodzinski, Collis P. Chandler,
III, Christopher W. Hunt, Jay F. Joliat, Scott R. Stevens and Michael A. Vlasic
as directors of the Company. Nick L. Voller continues as a director of the
Company. There is no family relationship between or among the executive
officers and directors of the Company or the nominees to the Board of Directors
as disclosed in this Proxy Statement.
The
Company is not aware of any
arrangements which may at a future date result in a change of control of the
Company.
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.
NAME
OF NOMINEE
|
AGE
|
CURRENT
POSITION(S)
WITH
THE COMPANY
|
DIRECTOR
SINCE
|
|
|
|
|
Frank
A. Lodzinski
|
58
|
President,
Chief Executive Officer and Director (1)
|
2007
|
|
|
|
|
Collis
P. Chandler, III
|
38
|
Executive
Vice President and Chief Operating Officer Northern Region and
Director
(1)
|
2007
|
|
|
|
|
Christopher
W. Hunt
|
39
|
Director
(2) (3) (4)
|
2007
|
|
|
|
|
Jay
F. Joliat
|
51
|
Director
(2) (3) (4)
|
2007
|
|
|
|
|
Scott
R. Stevens
|
34
|
Director
(1) (3) (4)
|
2007
|
|
|
|
|
Michael
A. Vlasic
|
47
|
Director
(1)
|
2007
|
|
|
|
|
Nick
L. Voller
|
55
|
Director
(5)
|
2004
|
|
(1)
|
Member
of the Executive Committee.
|
|
(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
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.
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.
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,
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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-
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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
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
Executive
Compensation
Summary
Compensation
Table
The
following table presents the
aggregate compensation earned by the Principal Executive Officer of the Company
for the fiscal year ended December 31, 2006. After our change of
control on April 17, 2007, we appointed new executive officers whose
compensation will be reported in next year’s proxy material relating to the 2008
Annual Meeting of Shareholders. The Company does not have an
employment contract with any of its executive officers. Jeffrey P. Vickers
was
the only employee of the Company who earned a total annual salary and bonus
in
excess of $100,000 in 2006. There has been no compensation awarded to, earned
by
or paid to any employee required to be reported in any table or column in the
fiscal year covered by any table, other than what is set forth in the following
table.
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All
Other
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Name
And
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Compensation
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Principal
Position
|
|
Year
|
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Salary
($)
|
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Bonus
($)
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($)
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Total
($)
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Jeffrey
P. Vickers, Principal Executive
|
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2006
|
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$
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127,887
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$
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46,478
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$
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16,765
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$
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191,130
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Officer
|
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In
the preceding table, the column
titled “All Other Compensation” is comprised entirely of profit sharing amounts
($10,372) and the 401(k) GeoResources matching funds ($6,393) discussed
below.
Mr. Vickers
served as the
President of the Company for several years on an “at will” basis and was
paid primarily pursuant to salary and an occasional cash bonus. From time to
time he also received grants of options to purchase common stock pursuant to
the
Company option plans approved by shareholders. In addition, the Company has
a
Profit Sharing Plan and Trust described below as well as a non-standardized
401(k) Profit Sharing Plan described below. These components have consisted
of
Mr. Vickers compensation.
Through
December 31, 2007, if the
Company achieved net income in a fiscal year, its Board of Directors could
determine to contribute an amount based on its profits to the Employees’ Profit
Sharing Plan and Trust (the “Profit Sharing Plan”). An eligible employee may be
allocated from 0% to 15% of his compensation depending upon the total
contribution to the Profit Sharing Plan. A total of 20% of the amount allocated
to an individual vests after three years of service, 40% after four years,
60%
after five years, 80% after six years and 100% after seven years. On retirement,
an employee is eligible to receive the vested amount. On death, 100% of the
amount allocated to an individual is payable to the employee’s beneficiary. The
Company made total contributions to the Profit Sharing Plan, matching and
discretionary, for the years ended December 31, 2006 and 2005 of $73,315
and $71,343, respectively.
Effective
July 1, 2004, the
Company executed an Adoption Agreement Nonstandardized Code 401(k) Profit
Sharing Plan that incorporated a 401(k) Plan into the existing Profit Sharing
Plan. This retirement plan was amended and updated to comply with legislative
changes effective September 30, 2003. Eligible employees are allowed to
defer up to 15% of their compensation and the Company will match up to
5%.
Outstanding
Option Awards At Fiscal
Year End
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Number
of
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Securities
|
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Underlying
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Option
Exercise
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Unexercised
Options
|
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Price
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Option
Expiration
|
Name
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Grant
Date
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|
(#)
Exercisable
|
|
($)
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Date
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Jeffrey
P. Vickers,
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May 2,
1997
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35,000
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2.37
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May 1,
2007
|
Principal
Executive and
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May 2,
1997
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26,500
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2.37
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May 1,
2007
|
Principal
Financial Officer
|
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December 18,
1997
|
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36,000
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2.31
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December 17,
2007
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Option
Grants in Last Fiscal Year.
The Company did not grant any stock options in 2006. The 1993 Employees’
Incentive Stock Option Plan of the Company expired in 2003. Nonetheless,
all
options outstanding under that plan remain exercisable until they are cancelled
or expired pursuant to their terms. If within the duration of any of the
remaining outstanding options, there is a corporate merger consolidation,
acquisition of assets or other reorganization and if this transaction affects
the optioned stock, the optionee will thereafter be entitled to receive upon
exercise of his option those shares or securities that he would have received
had the option been exercised prior to the transaction and the optionee had
been
a shareholder with respect to such shares.
There
are no options outstanding under
the 1993 Employees’ Incentive Stock Option Plan.
In
2004, the Company adopted the 2004
Employees’ Stock Incentive Plan (“2004 Plan”). The 2004 Plan was amended on
April 17, 2007 to allow for a reserve of 2,000,000 shares of the Company’s
common stock for either nonstatutory options or incentive stock options that
may
be granted pursuant to the terms of the 2004 Plan. Under the terms of the 2004
Plan, the option price can not be less than 100% of the fair market value of
the
common stock of the Company on the date of grant, and if the optionee owned
more
than 10% of the voting stock, the option price per share can not be less than
110% of the fair market value.
Director
Compensation
The
following table sets forth all compensation paid by the Company to its directors
in 2006.
Name
of Director
|
|
Fees
Earned or Paid in Cash ($)
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H.
Dennis Hoffelt
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$
|
4,000
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Jeffrey
P. Vickers
|
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-0-
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Cathy
Kruse
|
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-0-
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Paul
A. Krile
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$
|
3,800
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Duane
Ashley
|
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$
|
3,000
|
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Nick
L. Voller
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$
|
4,100
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|
In
2006
we paid each director who is not also an employee $200 per month, plus $100
per
meeting and reimbursed the directors for travel expenses. Each director
who was also on the audit committee, compensation committee or the nominating
committee received an additional $100 per month for each committee on which
the
director served.
On
April 17, 2007, the board of
directors awarded former members H. Dennis Hoffelt, Paul A. Krile and Duane
Ashley with a one time cash payment of $5,000 each for their service to the
Company as independent directors and awarded Mr. Voller a one-time cash payment
of $5,000 for his continued service as a director.
Since
April 17, 2007, we have not paid
directors for their services and this policy is under review by our Compensation
Committee.
Employment
Contracts and Termination of Employment Arrangements
We
have
no employment contracts in place with any of our executive officers. We
also have no compensatory plan or arrangement with respect to any executive
officer where such plan or arrangement will result in payments to such officer
upon or following his resignation, retirement, or other termination of
employment with us and our subsidiaries, or as a result of a change-in-control
of the Company or a change in the executive officers’ responsibilities following
a change-in-control.
PROPOSAL
2
AMENDMENT
TO THE ARTICLES OF INCORPORATION TO
ELIMINATE
CUMULATIVE VOTING
Our
Articles of Incorporation have provided for cumulative voting in the election
of
directors since we were formed in 1958. Thus, Article IX of our
Articles of Incorporation, as originally written, has remained in effect, and
our shareholders currently have the right to cumulate their votes in the
election of our directors.
For
the
reasons set forth below, we are asking you to consider and approve an amendment
to our Articles of Incorporation to eliminate cumulative voting in the election
of directors. With cumulative voting rights a shareholder has a number of
votes equal to the number of shares of common stock multiplied by the number
of
directors to be elected. These votes can be allocated among the nominees
in any manner the shareholder desires, including casting all of the votes for
one candidate.
For
instance, in an election in which seven members of the Board of Directors are
to
be elected, a shareholder with 1,000 shares of stock would have 7,000 votes
(1,000 shares times seven directors). The shareholder could then allocate
these 7,000 votes among the nominees in any manner, including casting all 7,000
votes for one nominee. By contrast, without cumulative voting rights, the
shareholder would be permitted to cast only up to 1,000 votes for, or abstain
from voting, with respect to any particular nominee for director. In this
example, without cumulative voting, and the seven nominees receiving the
greatest number of votes – a “plurality” – would then be elected as members of
the Board of Directors.
With
cumulative voting, by aggregating votes and casting them for a single
individual, rather than casting one vote for each share with respect to each
nominee, shareholders holding substantially less than a majority of the
outstanding voting shares of a company may be able to elect one or more
directors. Thus, a small minority of shareholders may be able to
disproportionately influence the composition of the Board of Directors,
potentially furthering objectives that may be contrary to those of the majority
of shareholders. Our Board of Directors does not believe that a small
minority of shareholders, potentially having special interests, should have
this
ability to elect one or more directors who may be adverse to the interests
of
the majority of shareholders. Cumulative voting in these circumstances
would provide increased opportunities for disruptive actions by a minority
of
shareholders to the detriment of other shareholders.
Our
Board
of Directors believes that each director should only be elected if such director
receives a plurality of the votes cast and that each director should represent
the interests of all shareholders, rather than the interest of a minority
shareholder or special constituency.
In
order
to eliminate the cumulative voting rights, it will be necessary to amend our
Articles of Incorporation. Under the Colorado Business Corporation Act,
this amendment will require the affirmative vote of shareholders with two-thirds
of the shares of our outstanding common stock.
The
Board
of Directors has determined that elimination of cumulative voting is in the
Company’s best interests and that of its shareholders. Effective September
24, 2007, our Board of Directors adopted a resolution to approve an amendment
to
our Articles of Incorporation to eliminate cumulative voting, subject to the
approval of our shareholders. The elimination of cumulative
voting,
if
approved by our shareholders, will be effected by amending the language of
Article IX to affirmatively state that cumulative voting is not
permitted.
The
proposed Article IX is as follows:
Article
IX.
No
Cumulative Voting
Cumulative
voting in the election of
directors shall not be allowed.
The
affirmative vote of two-thirds of the votes cast by the holders of all
outstanding shares of our common stock entitled to vote on this proposal is
required for adoption of this proposal.
If
our shareholders vote to approve the elimination of cumulative voting, we will
amend our Articles of Incorporation to reflect this change by filing Articles
of
Amendment to Articles of Incorporation with the Colorado Secretary of State,
and
the amendment will become effective upon this filing. If cumulative voting
is eliminated, the change will be in effect with respect to the election of
directors in our 2008 annual meeting of shareholders.
YOUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL TO AMEND THE
ARTICLES OF INCORPORATION TO ELIMINATE CUMULATIVE VOTING FOR
DIRECTORS.
PROPOSAL
3
TO
AMEND OUR ARTICLES OF
INCORPORATION TO REDUCE VOTING REQUIREMENTS OF SHAREHOLDERS IN MATTERS REQUIRED
BY THE COLORADO BUSINESS CORPORATION ACT FROM A TWO-THIRDS VOTE OF THE
OUTSTANDING VOTING SHARES TO A MAJORITY VOTE OF THE OUTSTANDING
SHARES
Because
we have been in existence since
1958, the Colorado Business Corporation Act requires that, unless our Articles
of Incorporation provide otherwise, significant corporate transactions, such
as
mergers, sale of all or of substantially all of our assets, dissolutions and
amendments to our articles of incorporation require a two-thirds vote of the
outstanding shares entitled to vote thereon.
Your
Board of Directors proposes to
amend the Articles of Incorporation to reduce this required two-thirds vote
to a
majority vote of the outstanding shares. A simple majority vote is
more in line with most other public companies and your Board believes a majority
vote on such matters is in the best interests of our shareholders. We
believe a two-thirds requirement places an undue burden on the Company and
results in excessive expenses. It can be difficult to achieve a
two-thirds vote because public company shareholders do not vote as frequently
as
those in private companies. We experienced this issue at our last
special meeting in which we had to adjourn the meeting for 30 days in order
to
obtain a two-thirds vote to approve an amendment to our Articles of
Incorporation. The technicality of requiring a two-thirds vote to
amend our Articles of Incorporation, resulted in a significant delay and expense
in completing the mergers that occurred on April 17, 2007.
We
believe a majority vote will reflect
the will of our shareholders and yet allow us to solicit shareholder votes
without the extraordinary expense and effort that can occur with a two-thirds
vote. Accordingly, we have approved an amendment to our Articles of
Incorporation as follows:
ARTICLE
XIII
Voting
Requirements
When,
with respect to any action to be
taken by shareholders of the Corporation, the Colorado Business Corporation
Act
requires the affirmative vote of the holders of two-thirds of the outstanding
shares entitled to vote thereon, or of any class or series, such action may
be
taken by the affirmative vote of the holders of a majority of the outstanding
shares entitled to vote on such action, unless any class of shares is entitled
to vote thereon as a class, in which event the proposed action may be taken
upon
receiving the affirmative vote of the holders of a majority of the shares of
each class of shares entitled to vote thereon as a class and of the total shares
entitled to vote thereon.
The
affirmative vote of two-thirds of the votes cast by the holders of all
outstanding shares of our common stock entitled to vote on this proposal is
required for adoption of this proposal.
YOUR
BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” THE ADOPTION OF THE ABOVE AMENDMENT
TO OUR ARTICLES OF INCORPORATION.
INDEPENDENT
PUBLIC ACCOUNTANTS
Our
independent public accounting firm was Richey, May & Co., P.C., (“Richey”),
of Englewood, Colorado. Richey audited our accounts for the 2005 and 2006
fiscal years. A representative of Richey is not expected to be present at
the meeting but, if present, will respond to appropriate questions.
On
July
6, 2007, Richey was dismissed as the Company’s independent registered public
accounting firm. The decision to change accountants was made by the Audit
Committee of the Board of Directors of the Company and was made to further
consolidate the Company’s accounting functions in Houston, Texas.
The
audit
reports of Richey on the consolidated financial statements of the Company as
of
and for the years ended December 31, 2006 and 2005 did not contain an
adverse opinion or disclaimer of opinion, and were not qualified or modified
as
to uncertainty, audit scope or accounting principles.
In
connection with the audits of the two fiscal years ended December 31, 2006
and 2005, and the subsequent interim period through March 31, 2007, there was
not: (1) a “disagreement” (as such term is defined in Item 304(a)(1)(iv) of
Regulation S-B) with Richey on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to their satisfaction, would have caused Richey
to make reference in connection with its opinion to the subject matter of the
disagreement, or (2) a “reportable event” (included in Item 304(a)(1)(iv) of
Regulation S-B and its related instructions).
Effective
July 10, 2007 the Company engaged Grant Thornton LLP (“Grant Thornton”) as its
independent registered public accounting firm. The decision to engage
Grant Thornton was made by the Audit Committee of the Board of Directors of
the
Company.
During
the two fiscal years ended December 31, 2006, and through the date of the
engagement of Grant Thornton as the independent registered public accounting
firm of the Company, neither the Company nor anyone on its behalf has consulted
with Grant Thornton on any matter that (i) involved the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the consolidated
financial statements of the Company, in each case where a written report was
provided or oral advice was provided that Grant Thornton concluded was an
important factor considered by the Company in reaching a decision as to the
accounting, auditing or financial reporting issue; or (ii) was either the
subject of a “disagreement,” (as that term is defined in Item 304(a)(1)(iv)
of Regulation S-B and the related instructions to Item 304 of
Regulation S-B), or a “reportable event” (included in Item 304(a)(1)(iv) of
Regulation S-B).
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
During
2006 and 2005, we paid the following fees to our principal
accountants:
|
|
2006
|
|
|
2005
|
|
Audit
Fees
|
|
$
|
31,150
|
|
|
$
|
29,500
|
|
Audit
Related Fees
|
|
|
1,665
|
|
|
|
2,339
|
|
Tax
Fees
|
|
|
6,527
|
|
|
|
4,235
|
|
All
Other Fees
(1)
|
|
|
5,225
|
|
|
|
7,335
|
|
|
|
$
|
44,567
|
|
|
$
|
43,409
|
|
(1)
Services
relating to review of our Quarterly Reports on Form 10-QSB and SFAS 143
research.
To
help
assure independence of the independent auditors, the Audit Committee has
established a policy whereby all audit, review, attest and non-audit engagements
of the principal auditor or other firms must be approved in advance by the
Audit
Committee; provided, however, that de minimis non-audit services may instead
be
approved in accordance with applicable Securities and Exchange Commission rules.
This policy is set forth in our Amended Audit Committee Charter. Of
the fees shown in the table which were paid to our principal accountants, 100%
were approved by the Audit Committee.
AUDIT
COMMITTEE REPORT
The
Audit
Committee reports to and acts on behalf of the Board of Directors by providing
oversight of our financial management, independent auditors and financial
reporting procedures. An amended Audit Committee Charter was adopted in
2004. Our management is responsible for preparing our financial
statements, and the independent auditors are responsible for auditing those
financial statements. The Audit Committee is responsible for overseeing
the conduct of these activities by our management and the independent auditors.
In this context, the Audit Committee has met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that our consolidated financial statements were prepared in accordance
with generally accepted accounting principles, and the Audit Committee has
reviewed and discussed the consolidated financial statements with management
and
the independent auditors.
The
members of the Audit Committee are not professionally engaged in the practice
of
auditing or accounting and are not experts in the fields of accounting or
auditing, including auditor independence. The members of the Audit
Committee rely without independent verification on the information provided
to
them and on the representations made by management and the independent
accountants. Accordingly, the Audit Committee’s oversight does not provide
an independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate internal controls
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee’s
considerations and discussions referred to above do not assure that the audit
of
our financial statements have been carried out in accordance with generally
accepted auditing standards, that the financial statements are presented in
accordance with generally accepted accounting principles, or that our auditors
are in fact “independent”.
The
Audit
Committee has discussed with the independent auditors matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). In addition, the independent auditors provided to the Audit
Committee the written disclosures required by Independent Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the Audit
Committee and the independent auditors have discussed the auditors’ independence
from the Company and its management, including the matters in those written
disclosures. Additionally, the Audit Committee considered the fees and costs
billed and expected to be billed by the independent auditors for our audit
services. The Audit Committee has discussed with management the procedures
for selection of consultants and the related competitive bidding practices
and
fully considered whether those services provided by the independent auditors
are
compatible with maintaining auditor independence.
The
Audit
Committee has discussed with the independent auditors, with and without
management present, their evaluations of our internal accounting controls and
the overall quality of our financial reporting.
In
reliance on the reviews and discussions with management and the independent
auditors referred to above, the Audit Committee recommended to the Board of
Directors and the Board has approved, the inclusion of the audited financial
statements in our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2006, for filing with the Securities and Exchange
Commission.
The
Audit Committee (as of March 31,
2007)
Nick
L. Voller
H.
Dennis Hoffelt
Paul
A. Krile
SHAREHOLDER
PROPOSALS
Under
the
rules of the SEC, if a shareholder wants us to include a proposal in our proxy
statement and form of proxy for presentation at our 2008 Annual Meeting of
Shareholders, the proposal must be received by us at our principal executive
offices at 110 Cypress Station Drive, Suite 220, Houston, Texas 77090-1629
by
January 2, 2008. The proposal should be sent to the attention of our
Secretary.
The
SEC
also sets forth procedures under which shareholders may make proposals outside
of the process described above in order for a shareholder to nominate persons
for election as Directors or to introduce an item of business at an Annual
Meeting of Shareholders. These procedures require that shareholders must
submit nominations or items of business in writing to the Secretary of the
Company at our principal executive offices. We must receive the notice of
your intention to introduce a nomination or to propose an item of business
at
our 2008 Annual Meeting no later than 45 days in advance of the 2008 annual
meeting if it is being held within 30 days preceding the anniversary date
(November 6, 2007) of this year’s meeting. However, we intend to
return to our normal Annual Meeting date of the first or second Tuesday of
June
in 2008. Thus, we need to receive notice of your intention to
introduce a nomination or to propose an item of business at our 2008 Annual
Meeting no later than 45 days in advance of June 3, 2008, which is a reasonable
time before the Company will begin printing and sending its proxy
materials.
For
any
other meeting, the nomination or item of business must be received by the tenth
day following the date of public disclosure of the date of the meeting.
These requirements are separate from and in addition to the SEC’s
requirements described in the first paragraph of this section relating to
including a proposal in our proxy statements.
Our
Annual Meeting of Shareholders is generally held on the first or second Tuesday
of June with the exception of this Annual Meeting, which is held in November
due
to the closing of the mergers described above. Assuming that our 2008
Annual Meeting is held on schedule, we must receive notice of your intention
to
introduce a nomination or other item of business at that meeting by April 7,
2008, which is a reasonable time before the Company will begin printing and
sending its proxy materials.
In
order
to curtail controversy as to the date on which a proposal was received by us,
it
is suggested that proponents submit their proposals by certified mail-return
receipt requested. Such proposals must also meet the other requirements
established by the Securities and Exchange Commission for shareholder
proposals.
SHAREHOLDER
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Because
of our small size, to date we feel it is not necessary to develop formal
processes by which shareholders may communicate directly with directors.
Instead, we believe that our informal process by which any communication
sent to the Board of Directors either generally or in care of a corporate
officer, has served our shareholders’ needs. In view of recently adopted SEC
disclosure requirements related to this issue, the Board of Directors expects
to
review in the coming months whether more specific procedures are required.
Until
any other procedures are developed and posted on our website at
www.georesourcesinc.com
,
any communication to the Board of Directors may be
mailed
to
the Board, in care of our Secretary, at 110 Cypress Station Drive, Suite 220,
Houston, Texas 77090-1629. Shareholders should clearly note on the mailing
envelope that the letter is a “Shareholder-Board Communication.” All such
communications should identify the author as a shareholder and clearly state
whether the intended recipients are all members of the board of directors or
just certain specified individual directors. Our Secretary will make copies
of
all such communications and circulate them to the appropriate director or
directors.
OTHER
BUSINESS
We
know
of no other matters to be presented at the meeting. If any other matter
properly comes before the meeting, the appointed proxies will vote the proxies
in accordance with their best judgment.
ACCOMPANYING
DOCUMENTS TO SHAREHOLDERS
A
copy of
our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006,
along with our Form 10-QSB for the quarter ended June 30, 2007 and our pro
forma
financial statements filed with our Form 8-K/A Amendment No. 1, dated April
17,
2007, accompany this Notice of Annual Meeting of Shareholders and Proxy
Statement. No part of these documents is incorporated herein and no part
thereof is to be considered proxy soliciting material.
AVAILABILITY
OF ANNUAL REPORT ON FORM 10-KSB
We
will
provide at no charge a copy of our Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2006, as filed with the Securities and Exchange
Commission, to any beneficial owner of shares entitled to vote at the meeting.
Please address your request to the attention of the Secretary,
GeoResources, Inc., 110 Cypress Station Drive, Suite 220, Houston, Texas
77090-1629.
By
Order of The Board of
Directors.
GEORESOURCES,
INC.
/s/
Cathy Kruse
CATHY
KRUSE
Corporate
Secretary
Dated:
October 18, 2007
PROXY
FOR ANNUAL MEETING OF SHAREHOLDERS
GEORESOURCES,
INC.
The
undersigned shareholder of GeoResources, Inc., acknowledges receipt of the
Proxy
Statement and Notice of Annual Meeting of Shareholders to be held on Tuesday,
November 6, 2007, at 1:00 p.m. local time at 1625 Broadway, Suite 1600, Denver,
Colorado, and hereby appoints Frank A. Lodzinski and Collis P. Chandler, III,
each with the power of substitution, as Attorneys and Proxies to vote all the
shares of the undersigned at said meeting and at all adjournments thereof,
hereby ratifying and confirming all that said Attorneys and Proxies may do
or
cause to be done by virtue hereof. The above-named Attorneys and Proxies
are instructed to vote all of the undersigned’s shares as follows:
1.
|
Election
of Directors:
|
[
]
|
FOR
all nominees listed below (except as listed to the contrary below),
with
discretionary authority to cumulate votes unless a different distribution
of votes is indicated by marking after the nominee’s
name.
|
Frank
A. Lodzinski
|
Collis
P. Chandler, III
|
Jay
F. Joliat
|
Christopher
W. Hunt
|
Scott
R. Stevens
|
Michael
A. Vlasic
|
Nick
L. Voller
|
|
INSTRUCTION:
To withhold authority to vote for any individual nominee, write the
nominee’s name in the line spaces
provided.
|
[
]
|
WITHHOLD
AUTHORITY to vote for all nominees listed
above.
|
2.
|
To
approve an amendment to Article IX of the Articles of Incorporation
to
eliminate cumulative voting in the election of
directors;
|
[
]
|
FOR
|
[
] AGAINST
|
[
] ABSTAIN
|
3.
|
To
approve an amendment to our Articles of Incorporation to reduce voting
requirements of shareholders in matters required by the Colorado
Business
Corporation Act, from a two-thirds vote of the outstanding voting
shares
to a majority vote of the outstanding shares;
and
|
[
]
|
FOR
|
[
] AGAINST
|
[
] ABSTAIN
|
4.
|
Transaction
of such other matters as may properly come before the meeting and
any
adjournments thereof.
|
[
]
|
FOR
|
[
] AGAINST
|
[
] ABSTAIN
|
YOU
MAY VOTE IN FAVOR OF ALL THE ABOVE PROPOSALS WITHOUT CHECKING ANY OF THE ABOVE
BOXES BY MERELY SIGNING, DATING AND RETURNING THIS PROXY. IF THIS PROXY IS
PROPERLY EXECUTED AND ANY OF THE ABOVE BOXES ARE CHECKED, THIS PROXY WILL BE
VOTED IN THE MANNER DIRECTED BY THE SHAREHOLDER.
PLEASE
SIGN, DATE AND RETURN THIS PROXY IMMEDIATELY.
|
Date:
____________________________,______
2007
No. of Shares:
__________________
|
Sign
Here:
________________________________________________________________
|
_________________________________________________________________________
|
Signature(s)
of Shareholder(s)
|
Please
sign your name exactly as it appears on your stock certificate.
If
shares are held jointly, each holder should sign. Executors,
trustees, and fiduciaries should so indicate when
signing.
|
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