AGREEMENT AND PLAN OF MERGER

EXHIBIT 10.1

 

 

 

 

 

 

AGREEMENT AND PLAN OF MERGER

 

 

BETWEEN

 

 

 

GEOMET RESOURCES, INC.

 

and

 

GEOMET, INC.

 

 

 

 

 

 

 

March 31, 2005

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

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EXHIBIT 10.1

 

AGREEMENT AND PLAN OF MERGER

 

This Agreement and Plan of Merger, dated as of the 31 ^st day of March, 2005 (the “Agreement“), is between GeoMet Resources, Inc., a Delaware corporation (“Parent“), and GeoMet, Inc., an Alabama corporation (“GeoMet“).

 

WHEREAS, the respective Boards of Directors of Parent and GeoMet and the Special Committee of the Board of Directors (the “Special Committee“) of GeoMet have determined that the merger of GeoMet with and into Parent is desirable and in the best interests of the stockholders of the respective companies;

 

WHEREAS, the respective Boards of Directors of Parent and GeoMet and the Special Committee of GeoMet, have approved the merger of GeoMet with and into Parent (the “Merger“), whereby each issued and outstanding share of Series B voting common stock, par value $.01 per share, of GeoMet (“GeoMet Common Stock“) (other than Dissenting Shares, as defined herein) not owned directly or indirectly by GeoMet or Parent will be converted into the right to receive shares of common stock, par value $.001 per share, of Parent (“Parent Common Stock“), upon the terms and subject to the conditions set forth herein;

 

WHEREAS, for federal income tax purposes, the parties intend that the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code“);

 

WHEREAS, the parties intend that this Agreement, as it relates to the Merger, shall constitute a “plan of reorganization” within the meaning of Treasury Regulation Section 1.368-3; and

 

WHEREAS, the parties hereto desire to set forth certain representations, warranties and covenants made by each to the other as an inducement to the consummation of the Merger;

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent and GeoMet hereby agree as follows:

 

ARTICLE I

 

THE MERGER

 

1.1     The Merger . Subject to and in accordance with the terms and conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the “DGCL“) and the Alabama Business Corporation Act (the “ABCA“), at the Effective Time (as defined in Section 1.3) GeoMet shall be merged with and into Parent. As a result of the Merger, the separate corporate existence of GeoMet shall cease and Parent shall continue as the surviving corporation (sometimes referred to herein as the “Surviving Corporation“).

 

1.2     Closing Date. The closing of the transactions contemplated by this Agreement (the “Closing“) shall take place at the offices of Thompson & Knight L.L.P., 1700 Pacific Avenue, Suite 3300, Dallas, Texas 75201, as soon as practicable after the satisfaction or waiver of the conditions set forth in Article IV or at such other time and place and on such other date as

Parent and GeoMet shall agree; provided, that the closing conditions set forth in Article IV shall have been satisfied or waived at or prior to such time. The date on which the Closing occurs is herein referred to as the “Closing Date“.

 

1.3     Consummation of the Merger . As soon as practicable on the Closing Date, the parties hereto will cause the Merger to be consummated by filing with the Secretary of State of Delaware a certificate of merger and with the Secretary of State of Alabama articles of merger in such forms as required by, and executed in accordance with, the relevant provisions of the DGCL and the ABCA. The “Effective Time“ of the Merger as that term is used in this Agreement shall mean such time as the certificate of merger and articles of merger are duly filed with the Secretaries of State of Delaware and Alabama or at such later time (not to exceed 90 days from the date the certificate is filed) as is specified in the certificate of merger and articles of merger pursuant to the mutual agreement of Parent and GeoMet.

 

1.4     Effects of the Merger . The Merger shall have the effects set forth in the applicable provisions of the DGCL and the ABCA. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the properties, rights, privileges, powers and franchises of Parent and GeoMet shall vest in the Surviving Corporation, without any transfer or assignment having occurred, and all debts, liabilities and duties of Parent and GeoMet shall attach to the Surviving Corporation, all in accordance with the DGCL and the ABCA.

 

1.5     Certificate of Incorporation; Bylaws

 

(a)    The Certificate of Incorporation of Parent (the “Parent Certificate“), as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation, and thereafter shall continue to be its Certificate of Incorporation until amended as provided therein and under the DGCL, except that such Certificate of Incorporation shall be amended as follows:

 

(i)    Article I shall be amended to read in its entirety as follows:

 

“The name of the corporation is GeoMet, Inc. (the “Corporation”).”

 

(ii)    Article IV shall be amended to read in its entirety as follows:

 

“The aggregate number of shares of all classes of stock that the Corporation shall have the authority to issue is 10,000,000 shares of common stock, par value of $0.001 per share.”

 

(iii)    Article VIII shall be amended to read in its entirety as follows:

 

“Intentionally omitted.”

 

(b)    The bylaws of Parent, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation and thereafter shall continue to be its bylaws until amended as provided therein and under the DGCL.

 

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1.6     Directors and Officers . At and after the Effective Time the directors of the Surviving Corporation shall be W. Howard Keenan, Jr., Tomás R. LaCosta, J. Darby Seré, William C. Rankin, Philip G. Malone, Brett S. Camp and Jeffrey Smith, each to hold office in accordance with the Certificate of Incorporation and bylaws of the Surviving Corporation, and the officers of GeoMet immediately prior to the Effective Time shall be the officers of the Surviving Corporation at and after the Effective Time, in each case until their respective successors are duly elected or appointed and qualified.

 

1.7     Conversion of Securities Subject to the terms and conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Parent or GeoMet or their stockholders:

 

(a)    Each share of GeoMet Common Stock issued and outstanding immediately prior to the Effective Time, other than any shares of GeoMet Common Stock to be canceled pursuant to Section 1.7(b), shall be converted into the right to receive 4,660.1243 (the “Exchange Ratio“) shares of Parent Common Stock.

 

(b)    Each share of GeoMet Common Stock held in the treasury of GeoMet and each share of GeoMet Common Stock owned by Parent immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof and no payment shall be made with respect thereto.

 

(c)    Each share of Parent Common Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding at the Effective Time.

 

1.8     Exchange of Certificates; Fractional Shares

 

(a)    As soon as practicable after the Effective Time, each holder of a certificate that prior thereto represented GeoMet Common Stock shall be entitled, upon surrender thereof to Parent, to receive in exchange therefor a certificate or certificates representing the number of whole shares of Parent Common Stock into which the shares of GeoMet Common Stock so surrendered shall have been converted as aforesaid, rounded up to the nearest whole share, in such denominations and registered in such names as such holder may request. No fractional shares of Parent Common Stock shall be issued. Until so surrendered and exchanged, each certificate that prior to the Effective Time represented GeoMet Common Stock shall represent solely the right to receive Parent Common Stock.

 

(b)    All shares of Parent Common Stock issued upon the surrender for exchange of certificates that prior to the Effective Time represented shares of GeoMet Common Stock in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of GeoMet Common Stock. At and after the Effective Time, there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of GeoMet Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, certificates which prior to the Effective Time represented shares of GeoMet Common Stock are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article I.

 

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1.9     Taking of Necessary Action; Further Action . The parties hereto shall take all such reasonable and lawful action as may be necessary or appropriate in order to effectuate the Merger as promptly as possible. If, at any time after the Effective Time, any such further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of GeoMet, such corporations shall direct their respective officers and directors to take all such lawful and necessary action.

 

1.10     GeoMet Stock Options . Subject to the consummation of the Merger and effective at the Effective Time, Parent and GeoMet will take such action as is necessary to convert , effective at the Effective Time, each option to purchase shares of GeoMet Common Stock (each, a “GeoMet Option“) that remains as of such time unexercised in whole or in part for an option to purchase Parent Common Stock (a “Parent Option“), with such exchange to be effected as follows:

 

(a)    Each Parent Option shall be fully vested by virtue of the fact that vesting of the GeoMet Option being converted will be accelerated by its terms as a result of the Merger;

 

(b)    The number of shares of Parent Common Stock purchasable under the Parent Option shall be equal to the number of shares of Parent Common Stock that the holder of the GeoMet Option being assumed would have received (without regard to any vesting schedule) upon consummation of the Merger had such GeoMet Option been exercised in full immediately prior to consummation of the Merger; and

 

(c)    The per share exercise price of each Parent Option shall be an amount equal to the per share exercise price of the GeoMet Option being assumed divided by the Exchange Ratio.

 

1.11     Option to Purchase Additional Shares of Parent Common Stock.

 

(a)    In connection with the Merger, Parent shall grant each of the stockholders of GeoMet other than Parent and each of the holders of options to purchase GeoMet Common Stock an option (the “Non-dilution Option“) to purchase up to that number of shares of Parent Common Stock that when added to the number of shares of Parent Common Stock and shares of Parent Common Stock purchasable under Parent Options to be received by such stockholder or optionholder in connection with the Merger would give such stockholder or optionholder the same ownership percentage, on a fully-diluted basis, as such stockholder or optionholder held in GeoMet immediately prior to the Merger. The Non-dilution Option shall expire on the thirtieth (30th) day following the Closing Date. It shall be a condition to the exercise of the Non-dilution Option that each stockholder or optionholder exercising the Non-dilution Option enter into a stockholders agreement in a form agreeable to Parent.

 

(b)    The exercise price for the Non-dilution Option shall be $30.57 per share. The exercise price shall be paid to Parent in cash or by execution and delivery of a promissory note and stock pledge agreement, or a combination thereof. If any portion of the exercise price is paid by execution and delivery of a promissory note and stock pledge

 

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agreement, such promissory note and stock pledge agreement shall be in the forms set forth as Exhibit A and Exhibit B , respectively to this Agreement and shall be full-recourse to the stockholder or optionholder and secured by Parent Common Stock or Parent Options equal in value to 200% of the aggregate principal amount of the note (100% in the case of optionholders).

 

1.12     Dissenter’s Rights . Notwithstanding anything in this Agreement to the contrary, any shares of GeoMet Common Stock outstanding immediately prior to the Effective Time and held by a holder who has properly exercised the holder’s dissenter’s rights in accordance with Article 13 of the ABCA or any successor provision (“Dissenting Shares“), shall not be converted into, or represent the right to receive, Parent Common Stock in accordance with Section 1.7, unless and until such holder fails to perfect or effectively withdraws or otherwise loses his right to appraisal and payment under the ABCA. If, after the Effective Time, any such holder fails to perfect or effectively withdraws or loses his right to appraisal, such Dissenting Shares shall thereupon be treated as if they had been converted as of the Effective Time into the right to receive Parent Common Stock in accordance with Section 1.7, without interest or dividends thereon.

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES

 

2.1      Representations and Warranties of GeoMet . GeoMet hereby represents and warrants to Parent that:

 

(a)      Organization and Qualification of GeoMet . GeoMet is duly organized, validly existing and in good standing under the laws of the State of Alabama and has all requisite corporate power and authority and all necessary governmental authorizations to own, lease and operate all of its properties and assets and to carry on its business as now being conducted, except where the failure to be so organized, existing or in good standing or to have such authority would not reasonably be expected to have a Material Adverse Effect. GeoMet is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except in such jurisdictions where the failure to be duly qualified does not and would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No actions or proceedings to dissolve GeoMet are pending. GeoMet has heretofore delivered to Parent true and complete copies of GeoMet’s Articles of Incorporation (the “GeoMet Articles“) and bylaws as in existence on the date hereof.

 

(b)      No Subsidiaries . GeoMet does not own, directly or indirectly, the capital stock or other securities of any corporation or partnership or have any direct or indirect equity or ownership interest in any other person, other than GeoMet Operating Company Inc., an Alabama corporation and Hudson’s Hope Gas, Ltd., a Canadian national corporation, (collectively, the “GeoMet Subsidiaries“), both of which are wholly-owned subsidiaries of GeoMet.

 

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(c)      Capitalization .

 

(i)    The authorized capital stock of GeoMet consists of 6,000 shares of GeoMet Common Stock, par value $.01 per share, all of which shares are classified as Series B Voting Common Stock. There are issued and outstanding 1,250 shares of GeoMet Common Stock. No shares of GeoMet Common Stock are held as treasury shares. A total of 62.5 shares of GeoMet Common Stock have been reserved for issuance pursuant to the stock option plans described in Section 2.1(c)(ii). All issued shares of GeoMet Common Stock are validly issued, fully paid and nonassessable and no holder thereof is entitled to preemptive rights. Except for the Stockholders’ Agreement dated as of December 8, 2000, GeoMet is not a party to, and is not aware of, any voting agreement, voting trust or similar agreement or arrangement relating to any class or series of its capital stock, or any agreement or arrangement providing for registration rights with respect to any capital stock or other securities of GeoMet.

 

(ii)    There are outstanding GeoMet Options to purchase an aggregate of 49.625 shares of GeoMet Common Stock under the 2001 Stock Option Plan (the “2001 Plan“). Other than as set forth in Section 2.1(c)(i) and this Section 2.1(c)(ii), there are not now, and at the Effective Time there will not be, any (A) shares of capital stock or other equity securities of GeoMet outstanding other than GeoMet Common Stock issued pursuant to the exercise of GeoMet Options or (B) outstanding options, warrants, scrip, rights to subscribe for, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any class of capital stock of GeoMet, or contracts, understandings or arrangements to which GeoMet is a party, or by which GeoMet is or may be bound, to issue additional shares of capital stock or equity interests or options, warrants, scrip or rights to subscribe for, or securities or rights convertible into or exchangeable for, any additional shares of capital stock or equity interests.

 

(iii)    Other than shares of capital stock or partnership interests of the GeoMet Subsidiaries owned by GeoMet, there are not now, and at the Effective Time there will not be, any (A) shares of capital stock, partnership interest or other equity securities of the GeoMet Subsidiaries outstanding or (B) outstanding options, warrants, scrip, rights to subscribe for, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any class of capital stock or partnership interest of the GeoMet Subsidiaries, or contracts, understandings or arrangements to which GeoMet or any of the GeoMet Subsidiaries is a party, or by which GeoMet or any of the GeoMet Subsidiaries is or may be bound, to issue additional shares of capital stock, partnership interest or equity interests or options, warrants, scrip or rights to subscribe for, or securities or rights convertible into or exchangeable for, any additional shares of capital stock, partnership interest or equity interests.

 

(d)      Authorization and Validity of Agreement . GeoMet has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery by GeoMet of this Agreement and the

 

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consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action (subject only, with respect to the Merger, to approval of this Agreement by its stockholders as provided for in Section 3.4). On or prior to the date hereof the Board of Directors (the “GeoMet Board“) and Special Committee has determined to recommend approval of the Merger to the stockholders of GeoMet, and such determination is in effect as of the date hereof. This Agreement has been duly executed and delivered by GeoMet and is the valid and binding obligation of GeoMet, enforceable against GeoMet in accordance with its terms.

 

(e)      No Approvals or Notices Required; No Conflict with Instruments to which GeoMet is a Party . Neither the execution and delivery of this Agreement nor the performance by GeoMet of its obligations hereunder, nor the consummation of the transactions contemplated hereby by GeoMet, will (i) conflict with the GeoMet Articles or the bylaws of GeoMet; (ii) governing documents of any of the GeoMet Subsidiaries; (iii) assuming satisfaction of the requirements set forth in clause (iv) below, violate any provision of law applicable to GeoMet or the GeoMet Subsidiaries; (iv) except for the filing of a certificate of merger and articles of merger in accordance with the DGCL and ABCA, require any consent or approval of, or filing with or notice to, any Governmental Entity, domestic or foreign, under any provision of law applicable to GeoMet or the GeoMet Subsidiaries; or (v) require any consent, approval or notice under, or violate, breach, be in conflict with or constitute a default (or an event that, with notice or lapse of time or both, would constitute a default) under, or permit the termination of any provision of, or result in the creation or imposition of any lien upon any properties, assets or business of GeoMet or the GeoMet Subsidiaries under, any note, bond, indenture, mortgage, deed of trust, lease, franchise, permit, authorization, license, contract, instrument, partnership agreement or other agreement or commitment or any order, judgment or decree to which GeoMet or the GeoMet Subsidiaries is a party or by which GeoMet or the GeoMet Subsidiaries or any of their assets or properties is bound or encumbered, except those that have already been given, obtained or filed or that will be given, obtained or filed prior to the Closing or as would not have a Material Adverse Effect on GeoMet.

 

(f)      Financial Statements . GeoMet has heretofore delivered to Parent copies of GeoMet’s consolidated balance sheet as of December 31, 2004 and the related consolidated statements of income, change in stockholders’ equity and cash flows for the three years ended December 31, 2004 (collectively, the “Financial Statements“). The Financial Statements (including any related notes or schedules) were prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as may be noted therein or in the notes or schedules thereto). The Financial Statements fairly present the financial position of GeoMet and the GeoMet Subsidiaries as of the dates thereof and the results of operations, cash flows and changes in stockholders’ equity for the periods then ended. As of the date hereof, neither GeoMet nor the GeoMet Subsidiaries has any liabilities, absolute or contingent, direct or indirect, that are not reflected in the Financial Statements, except as would not have a Material Adverse Effect on GeoMet.

 

(g)      Conduct of Business in the Ordinary Course; Absence of Certain Changes and Events . Since December 31, 2004, except as contemplated by this Agreement,

 

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GeoMet and the GeoMet Subsidiaries have conducted their business only in the ordinary and usual course, and there has not been (i) any Material Adverse Effect pertaining to GeoMet, or any condition, event or development that reasonably may be expected to result in any such Material Adverse Effect; (ii) any material change by GeoMet or the GeoMet Subsidiaries in their accounting methods, principles or practices; (iii) any revaluation by GeoMet or the GeoMet Subsidiaries of any of their assets, including, without limitation, writing down the value of properties or assets or writing off notes or accounts receivable other than in the ordinary course of business; (iv) any entry by GeoMet or the GeoMet Subsidiaries into any commitment or transaction material to GeoMet or the GeoMet Subsidiaries; (v) any declaration, setting aside or payment of any dividends or distributions in respect of the GeoMet Common Stock or any redemption, purchase or other acquisition of any of its securities; (vi) any increase in indebtedness for borrowed money other than advances under the Credit Agreement in the ordinary course; (vii) any granting of a security interest or lien on any material property or assets of GeoMet or the GeoMet Subsidiaries, other than Permitted Encumbrances; or (viii) any increase in or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards or restricted stock awards), stock purchase or other employee benefit plan or any other increase in the compensation payable or to become payable to any officers or key employees of GeoMet or the GeoMet Subsidiaries other than any increase or establishment approved by the Compensation Committee of GeoMet and disclosed in writing to Parent.

 

(h)      Litigation . Except as would not have a Material Adverse Effect on GeoMet, there are no claims, actions, suits, investigations, inquiries or proceedings pending or, to the knowledge of GeoMet, threatened against or affecting GeoMet or the GeoMet Subsidiaries or any of their properties at law or in equity, or any of their respective employee benefit plans or fiduciaries of such plans, or before or by any Governmental Entity or before any arbitration board or panel.

 

(i)      Compliance with Laws and Permits . Except as would not have a Material Adverse Effect on GeoMet, GeoMet and the GeoMet Subsidiaries (i) have complied with all Applicable Laws (including without limitation Applicable Laws relating to securities, properties, production, sales, gathering and transportation of hydrocarbons, employment practices, terms and conditions of employment, wages and hours, safety, occupational safety, product safety, and civil rights); (ii) have obtained and hold all material permits, licenses, variances, exemptions, orders, franchises, approvals and authorizations of all Governmental Entities necessary for the lawful conduct of their business or the lawful ownership, use and operation of their assets; (iii) have not received any written notice, which has not been dismissed or otherwise disposed of, that it has not so complied; and (iv) have not been charged or, to the best knowledge of GeoMet, threatened with, or, to the best knowledge of GeoMet, under investigation with respect to, any violation of any Applicable Law relating to any aspect of the business of GeoMet or the GeoMet Subsidiaries.

 

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(j)     Employees; Employee Benefit Plans .

 

   (i)    True and complete copies of each of GeoMet’s or any of the GeoMet’s Subsidiaries’ Plans, Benefit Programs or Agreements, related trusts, if applicable, and all amendments thereto, have been furnished to Parent.

 

   (ii)    Except as would not have a Material Adverse Effect on GeoMet:

 

       (A)    None of GeoMet, the GeoMet Subsidiaries, nor any corporation, trade, business or entity under common control with GeoMet or the GeoMet Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA (a “GeoMet ERISA Affiliate“) contributes to or has an obligation to contribute to, or has at any time contributed to or had an obligation to contribute to, a plan subject to Title IV of ERISA, including, without limitation, a multiemployer plan within the meaning of Section 3(37) of ERISA;

 

       (B)    Each Plan and each Benefit Program or Agreement has been administered, maintained and operated in all material respects in accordance with the terms thereof and in compliance with its governing documents and applicable law (including, where applicable, ERISA and the Code);

 

       (C)    There is no matter pending with respect to any of the Plans before any governmental agency, and there are no actions, suits or claims pending (other than routine claims for benefits) or to the knowledge of GeoMet, threatened against, or with respect to, any of the Plans or Benefit Programs or Agreements or their assets;

 

       (D)    No act, omission or transaction has occurred which would result in imposition on GeoMet, the GeoMet Subsidiaries, or any GeoMet ERISA Affiliate of breach of fiduciary duty liability damages under Section 409 of ERISA, a civil penalty assessed pursuant to subsections (c), (i) or (l) of Section 502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code; and

 

       (E)    The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not require GeoMet, the GeoMet Subsidiaries or any GeoMet ERISA Affiliate to make a larger contribution to, or pay greater benefits under, any Plan, Benefit Program or Agreement than it otherwise would or create or give rise to any additional vested rights or service credits under any Plan or Benefit Program or Agreement.

 

   (iii)    Termination of employment of any employee of GeoMet, the GeoMet Subsidiaries or any GeoMet ERISA Affiliate immediately after consummation of the transactions contemplated by this Agreement would not result in payments under the Plans, Benefit Programs or Agreements which, in the

 

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aggregate, would result in imposition of the sanctions imposed under Sections 280G and 4999 of the Code.

 

    (iv)    Each Plan which is an “employee welfare benefit plan,” as such term is defined in Section 3(1) of ERISA, may be unilaterally amended or terminated in its entirety without liability except as to benefits accrued thereunder prior to such amendment or termination.

 

    (v)    None of the employees of GeoMet, the GeoMet Subsidiaries or any GeoMet ERISA Affiliate are subject to union or collective bargaining agreements.

 

(k)      Severance Payments . Except as would not have a Material Adverse Effect on GeoMet, GeoMet and the GeoMet Subsidiaries do not and will not owe a severance payment or similar obligation to any of their respective employees, officers or directors as a result of the Merger or the transactions contemplated by this Agreement, nor will any of such persons be entitled to an increase in severance payments or other benefits as a result of the Merger or the transactions contemplated by this Agreement in the event of the subsequent termination of their employment.

 

(l)      Taxes . Except as would not have a Material Adverse Effect, all Tax Returns of or relating to any Tax that are required to be filed on or before the Closing Date by or with respect to GeoMet, the GeoMet Subsidiaries, or any other corporation that is or was a member of an affiliated group (within the meaning of Section 1504(a) of the Code) of corporations of which GeoMet or the GeoMet Subsidiaries was a member for any period ending on or prior to the Closing Date, have been or will be duly and timely filed, and all Taxes, including interest and penalties, due and payable pursuant to such Tax Returns have been paid or adequately provided for in reserves established by GeoMet or the GeoMet Subsidiaries. There is no material claim against GeoMet or the GeoMet Subsidiaries with respect to any Taxes, and no material assessment, deficiency or adjustment has been asserted or proposed with respect to any Tax Return of or with respect to GeoMet or the GeoMet Subsidiaries that has not been adequately provided for in reserves established by GeoMet or the GeoMet Subsidiaries. The total amounts set up as liabilities for current and deferred Taxes in the Financial Statements have been prepared in accordance with generally accepted accounting principles and are sufficient to cover the payment of all material Taxes, including any penalties or interest thereon and whether or not assessed or disputed, that are, or are hereafter found to be, or to have been, due with respect to the operations of GeoMet and the GeoMet Subsidiaries through the periods covered thereby. GeoMet and the GeoMet Subsidiaries have (and as of the Closing Date will have) made all deposits (including estimated tax payments for taxable years for which the federal income tax return is not yet due) required with respect to Taxes. No waiver or extension of any statute of limitations as to any federal, local or foreign Tax matter has been given by or requested from GeoMet or the GeoMet Subsidiaries. Except for statutory liens for current Taxes not yet due, no liens for Taxes exist upon the assets of GeoMet or the GeoMet Subsidiaries.

 

(m)      Books and Records . All books, records and files of GeoMet and the GeoMet Subsidiaries (including those pertaining to oil and gas properties, wells and other

 

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assets, those pertaining to the production, gathering, transportation and sale of hydrocarbons, and corporate, accounting, financial and employee records) (i) have been prepared, assembled and maintained in accordance with usual and customary policies and procedures and (ii) fairly and accurately reflect in all material respects the ownership, use, enjoyment and operation by GeoMet and the GeoMet Subsidiaries of their respective assets.

 

(n)      Governmental Regulation . Neither GeoMet nor any of the GeoMet Subsidiaries is an “investment company,” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended. Neither GeoMet nor any of the GeoMet Subsidiaries is a “holding company,” or a “subsidiary company” of a “holding company,” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company,” within the meaning of the Public Utility Holding Company Act of 1935, as amended. Neither GeoMet nor any of the GeoMet Subsidiaries has a similar status under any similar state laws or regulations of the type regulating public utilities.

 

(o)      Environmental Matters . Except as would not reasonably be expected to have a Material Adverse Effect:

 

(i)    GeoMet and the GeoMet Subsidiaries have conducted their business and operated their assets, and are conducting their business and operating their assets, in material compliance with all Applicable Laws pertaining to health, safety, the environment, Hazardous Material (as such term is defined in CERCLA), or Solid Wastes (as such term is defined in RCRA) (such Applicable Laws as they now exist or are hereafter enacted and/or amended are collectively, for purposes of this Agreement, called “Environmental Laws“ including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as amended, for purposes of this Section, called “CERCLA“), the Resource Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as amended, for purposes of this Section, called “RCRA“);

 

(ii)    Neither GeoMet nor any of the GeoMet Subsidiaries has been notified by any Governmental Entity that any of the operations or assets of GeoMet or any of the GeoMet Subsidiaries is the subject of any investigation or inquiry by any Governmental Entity evaluating whether any material remedial action is needed to respond to a release of any Hazardous Material or to the improper storage or disposal (including storage or disposal at offsite locations) of any Hazardous Material;

 

(iii)    Neither GeoMet, the GeoMet Subsidiaries nor, to GeoMet’s knowledge, any other person has filed any notice under any federal, state or local law indicating that (i) GeoMet or any of the GeoMet Subsidiaries is responsible for the improper release into the environment, or the improper storage or disposal,

 

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of any Hazardous Material, or (ii) any Hazardous Material is improperly stored or disposed of upon any property of GeoMet or any of the GeoMet Subsidiaries;

 

(iv)    Neither GeoMet nor any of the GeoMet Subsidiaries has any material contingent liability in connection with (A) the release into the environment at or on any property now or previously owned or leased by any of such persons, or (B) storage or disposal of any Hazardous Material;

 

(v)    In the last six years, neither GeoMet nor any of the GeoMet Subsidiaries has received any claim, complaint, notice, inquiry or request for information which remains unresolved as of the date hereof with respect to any alleged material violation of any Environmental Law or regarding potential material liability under any Environmental Law relating to operations or conditions or any facilities or property owned, leased or operated by any of such persons;

 

(vi)    No property now or previously owned, leased or operated by GeoMet or any of the GeoMet Subsidiaries is listed on the National Priorities List pursuant to CERCLA or on any similar federal or state list as sites requiring investigation or cleanup;

 

(vii)    Neither GeoMet nor any of the GeoMet Subsidiaries is directly transporting, has directly transported or is directly arranging for the transportation of any Hazardous Material to any location which is listed on the National Priorities List pursuant to CERCLA or on any similar federal or state list or which is the subject of federal, state or local enforcement actions that may lead to material claims against such company for remedial work, damage to natural resources or personal injury, including claims under CERCLA;

 

(viii)    There are no sites, locations or operations at which GeoMet or any of the GeoMet Subsidiaries is currently undertaking any remedial or response action relating to any disposal or release of any Hazardous Material, as required by Environmental Laws; and

 

(ix)    All underground storage tanks and solid waste disposal facilities owned or operated by GeoMet or any of the GeoMet Subsidiaries are used and operated in material compliance with Environmental Laws.

 

(p)      Insurance . All material properties and material risks of GeoMet and the GeoMet Subsidiaries are covered by valid and currently effective insurance policies or binders of insurance or programs of self-insurance in such types and amounts and with such deductible amounts as are consistent with customary practices and standards of companies engaged in businesses and operations similar to those of GeoMet and the GeoMet Subsidiaries. Neither GeoMet nor any of the GeoMet Subsidiaries shall have any liability for retroactive price adjustments arising under such insurance coverage based on levels of actual activity during the time period of such coverage. GeoMet has provided Parent with true and correct copies of all policies of fire, liability, casualty, life and other insurance currently in force.

 

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(q)      Title to Oil and Gas Interests . The title of GeoMet and the GeoMet Subsidiaries to each of GeoMet’s and the GeoMet Subsidiaries’ Oil and Gas Interests is Defensible Title. The oil and gas leases included within the Oil and Gas Interests are in full force and effect.

 

(r)      Oil and Gas Operations . Except as would not have a Material Adverse Effect on GeoMet:

 

    (i)    All wells included in the Oil and Gas Interests of GeoMet and the GeoMet Subsidiaries have been drilled and (if completed) completed, operated and produced in accordance with generally accepted oil and gas field practices and in compliance in all material respects with Applicable Law.

 

    (ii)    Proceeds from the sale of hydrocarbons produced from GeoMet’s and the GeoMet Subsidiaries’ Oil and Gas Interests are being received by GeoMet or one of the GeoMet Subsidiaries, as applicable, in a timely manner and are not being held in suspense for any reason (except for amounts, individually or in the aggregate, not in excess of $100,000 and held in suspense in the ordinary course of business).

 

(s)      Hydrocarbon Sales and Purchase Agree