EXHIBIT (b)(1)
November 14, 2001
Roland O. Burns
Senior Vice President and
Chief Financial Officer
Comstock Resources, Inc.
5300 Town and Country Blvd.
Suite 500
Frisco, Texas 75034
COMMITMENT LETTER
Dear Roland:
TD Securities (USA) Inc. ("TD Securities"), as arranger for Toronto
Dominion (Texas), Inc. ("TDTX"), is pleased to advise you that, subject to the
terms and conditions herein, TDTX is willing to provide Comstock Resources, Inc.
("Comstock") ("You" or the "Borrower") with the following credit facility (the
"Facility"):
A $350,000,000 Senior Secured Revolving Facility for Comstock
Resources, Inc. subject to the Borrowing Base provisions
outlined in Exhibit A described below.
The Facility will be used to fund the acquisition of DevX Energy, Inc.
by Comstock, to refinance existing indebtedness and for general corporate
purposes and as are more fully described in the Summary of Terms and Conditions
attached hereto as Exhibit A (the "Term Sheet").
TD Securities will act as the sole and exclusive advisor and arranger
for the Facility, and TDTX will act as the sole and exclusive administrative
agent. As we have discussed, it is the intent of TD Securities to commence the
syndication of the Facility to one or more banks and financial institutions
(together with TDTX, the "Lenders") promptly following the execution of this
commitment letter and we intend to complete the syndication efforts prior to
closing of the Facility. TD Securities shall be entitled, in consultation with
you, before or after closing, to change the pricing and Borrowing Base of the
Facility if TD Securities determines that such changes are advisable in order to
ensure a successful syndication (to be defined as a final hold by TDTX of
$45,000,000 of the maximum $300,000,000 Borrowing Base outlined in the Term
Sheet) and, if such changes are required after the closing, You agree to enter
into such modifications of the credit documents as may be reasonably necessary
or appropriate to effectuate the foregoing. Any decrease to the Borrowing Base
will be limited to 10% of the amount committed hereto.
TD Securities, as arranger for TDTX, will manage, in consultation with
the Borrower, all aspects of the syndication, including decisions as to the
selection of institutions to be approached and when they will be approached,
when their commitments will be accepted, which institutions will participate,
the allocation of the commitments among the Lenders and the amount and
distribution of fees among the Lenders. You agree to actively assist TD
Securities in achieving a syndication that is
Comstock Resources, Inc.
November 14, 2001
satisfactory to you and TDTX. In that regard, you agree (i) promptly to provide,
and to cause your advisors to provide, TD Securities upon request with all
information reasonably deemed necessary by it to complete successfully the
syndication including, but not limited to, information and projections prepared
by you or on your behalf relating to the transactions contemplated hereby and
(ii) to assist, and to cause your advisors to assist, TD Securities upon request
in the preparation of an information memorandum and other marketing materials to
be used in connection with the syndication. You hereby represent and covenant
that all (i) information (other than projections) provided by you or your
advisors to TD Securities is, or will be when furnished, complete and correct in
all material respects and does not, or will not when furnished, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading in light of the
circumstances under which such statements are made and (ii) the projections you
have provided or will provide to TD Securities have been or will be prepared in
good faith based upon reasonable assumptions. You acknowledge that in arranging
and syndicating the Facility, TD Securities may use, and rely on, information
and projections provided by you without independent verification. You also
acknowledge that TD Securities will share credit and other non-public
information about you and your affiliates with TDTX and other affiliates.
The Facility will be provided pursuant to the terms and conditions of,
and shall become effective only upon the execution and delivery of a mutually
satisfactory credit agreement and other definitive loan documentation
incorporating the terms and conditions set forth in the Term Sheet, your payment
of certain fees to TD Securities and TDTX as agreed between the parties and
other terms and conditions customarily included in credit facilities of this
type, amount and purpose. These terms and conditions will necessarily be further
developed during the course of preparing and negotiating the loan documentation.
TDTX's commitment hereunder is further subject to: (i) satisfactory
completion of due diligence (excluding an engineering review used to determine
the Borrowing Base); (ii) the truth and accuracy in all material respects of the
financial statements and other information provided to TD Securities by the
Borrower; (iii) the absence of any material adverse change in either the
business, assets, liabilities, financial condition, prospects or results of
operations of the Borrower and their affiliates; (iv) the absence of any
material adverse change in or disruption of financial, banking or capital market
conditions (including the loan syndication market) existing now or in the
future, that in the judgment of TD Securities and TDTX would adversely affect
the satisfactory completion of the syndication of the Facility; and (v) the
satisfaction of TD Securities and TDTX that clear market conditions exist and
will exist prior to and during the syndication for obligations of the Facility.
The Borrowers agree to indemnify and hold harmless TD Securities, TDTX,
the Lenders, the issuer of letters of credit, their affiliates and their
respective officers, directors, employees, advisors and agents (each, an
"Indemnified Person") from and against any and all losses, claims, damages and
liabilities to which any such Indemnified Person may become subject arising out
of or in connection with this letter, the Facility, the use of proceeds thereof,
the other transactions contemplated hereby, any related transaction or any
claim, investigation or proceeding relating to any of the foregoing, regardless
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Comstock Resources, Inc.
November 14, 2001
of whether any Indemnified Person is a party thereto, and to reimburse each
Indemnified Person upon demand for any costs or expenses (including legal fees)
incurred in connection with investigating or defending any of the foregoing,
provided that the foregoing indemnity will not, as to any Indemnified Person,
apply to losses, claims, damages or liabilities to the extent they arise from
the willful misconduct or gross negligence of such Indemnified Person. No
Indemnified Person shall be liable for any indirect or consequential damages in
connection with its activities related to this letter or the Facility.
In addition, whether or not any loans are made, the Borrower agrees to
reimburse TD Securities, TDTX and their affiliates on demand for all
out-of-pocket expenses (including due diligence expenses, syndication expenses,
consultant's fees and expenses, printing and reproduction costs, appraisal fees,
travel expenses and reasonable fees, charges and disbursements of counsel)
incurred in connection with the Facility and the preparation, review,
negotiation, execution and delivery of any related documentation, whether or not
executed (including this letter, the Term Sheet and definitive financing
documentation) and the administration, amendment, modification or waiver
thereof.
The terms of this letter may be accepted by Comstock prior to 8:00 p.m.
(New York time) on November 14, 2001 in the manner indicated in the final
paragraph of this letter. If this letter is not so accepted by such time on that
date, this commitment shall automatically expire unless extended in writing by
TD Securities.
In addition, unless extended in writing at the sole discretion of TD
Securities, all obligations of TDTX and TD Securities under this letter shall
expire automatically, without further act and regardless of cause or
circumstances on January 11, 2002 if definitive loan documentation is not
executed and delivered by all the parties thereto and funds disbursed on or
prior to such date. Notwithstanding anything stated herein to the contrary, the
compensation, reimbursement and indemnification provisions hereof shall survive
any termination or expiration hereof, regardless of whether definitive financing
agreements are executed.
This letter is delivered to you on the condition that neither its
existence nor any of its contents shall be disclosed by you to any person or
entity without TD Securities' prior written approval, except (i) as may be
compelled to be disclosed in a judicial or administrative proceeding or as
otherwise required by law, (ii) as may be disclosed on a confidential and "need
to know" basis to your directors, officers, employees, advisers, and agents, and
(iii) after your acceptance of the terms hereof, the existence of this letter
and a summary of the principal terms and conditions of TDTX's commitment
hereunder may be disclosed in any public filings to be made in connection with
the tender offer for DevX (as defined in the Term Sheet), provided that any such
disclosure that is in writing shall be subject to TD Securities' prior review
and approval, such approval not to be unreasonably withheld.
If the foregoing is satisfactory to you, please have the enclosed copy
of this letter duly executed by an authorized officer and return copies to us.
This letter may be executed in any number of counterparts, each of which shall
be an original and all of which, when taken together, shall constitute one
agreement. THIS WRITTEN LETTER AND THE TERM SHEET REPRESENT THE FINAL AGREEMENT
BETWEEN THE
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Comstock Resources, Inc.
November 14, 2001
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. This letter and the Term Sheet may not be
assigned by you without the prior written consent of TD Securities, TDTX and the
issuer of letters of credit in their sole discretion and may not be amended or
any provision hereof or thereof waived or modified except by an instrument in
writing signed by each of the parties hereto. No person or entity other than the
parties hereto shall have any rights under or be entitled to rely upon this
letter or the Term Sheet. THIS LETTER AND THE TERM SHEET SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Delivery of
an executed signature page by facsimile shall be effective execution and
delivery
Please indicate your consent and agreement by your signature below.
Very truly yours,
TD Securities (USA) Inc.
/s/ Mark M. Green
- -----------------------------
Mark M. Green
Managing Director
Agreed to as of the date first above written:
Comstock Resources, Inc.
By: /s/ Roland O. Burns
--------------------------
Name: Roland O. Burns
Title: Senior Vice President and
Chief Financial Officer
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EXHIBIT A
11/14/01
COMSTOCK RESOURCES, INC.
$350,000,000 SENIOR SECURED REVOLVING FACILITY
SUMMARY OF TERMS AND CONDITIONS
BORROWERS: Comstock Resources, Inc. (and all operating
subsidiaries, as appropriate) -
("Borrower").
FACILITY AMOUNT: $350,000,000 senior secured revolving credit
facility (the "Facility"), with the initial
Borrowing Base dependent on the structure
used to fund the acquisition of DevX Energy,
Inc. ("DevX").
A) $300,000,000 if the acquisition is
funded using all cash (including
the repayment of DevX's existing
Senior Notes).
B) $285,000,000 if the equity portion
of the acquisition is funded with
cash and the existing DevX Senior
Notes are exchanged for a new issue
of the Borrower's Senior Notes.
C) $210,000,000 if the acquisition is
funded via capitalization of an
Unrestricted Subsidiary of the
Borrower using a separate credit
facility as provided under separate
cover and other financing
arrangements satisfactory to the
Agent.
ARRANGER: TD Securities (USA), Inc.
ADMINISTRATIVE AGENT: TD (Texas), Inc. (the "Agent").
LENDERS: The Facility will be syndicated to a group
of financial institutions mutually agreeable
to the Arranger and the Borrower.
MAJORITY LENDERS: 66 2/3%
PURPOSE: The Facility will be used for the following
purposes, subject to the funding options
outlined above:
i) Refinance all existing senior bank
debt,
ii) Fund the purchase of DevX
(including the refinancing of
DevX's existing indebtedness), and
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iii) General corporate purposes
MATURITY: Three years from closing.
SECURITY: The Facility will be secured by perfected
first priority liens on and security
interests in all the following: (a) all
equity interests in any Restricted
Subsidiary of the Borrower, (b) an
unconditional guarantee of payment by each
Restricted Subsidiary of the Borrower, and
(c) all other real and personal property of
the Borrower and its Restricted
Subsidiaries, including: a first priority
deed of trust, assignment and security
interest in oil and gas properties
constituting at least 80% of the present
value of the Borrower's and its Restricted
Subsidiaries proved reserves.
PRICING: See Attachment I for all spreads and fees.
AVAILABILITY: The Facility will be fully revolving for
three years, subject to the Borrowing Base.
AMORTIZATION: The Facility will remain subject to the
Borrowing Base provisions outlined below,
and all amounts outstanding under the
Facility will be due and payable at
Maturity.
L/C TERMS AND
CONDITIONS: (i) L/C's will be available during the
revolving period up to a maximum of
$20MM with any L/C's issued
reducing availability under the
Facility on a dollar for dollar
basis.
(ii) Terms up to one year or the
maturity of the Facility.
(iii) L/C fees - same as the Facility
LIBOR margins as noted below.
(iv) Issuance fees - 25 bps per annum,
payable solely to the L/C Issuing
Agent on L/C's issued and
outstanding.
L/C ISSUING AGENT: The Toronto-Dominion Bank.
BORROWING BASE: The Borrowing Base shall be redetermined
semi-annually, each May 1st and November 1st
during the term of the Facility. The May
Borrowing Base will be calculated based upon
a Reserve Report dated as of each January
1st. The November Borrowing Base will be
calculated based upon a Reserve Report dated
as of each July 1st.
The Reserve Report dated as of each January
1st shall be delivered by April 1st of each
year and shall consist of independent
engineering evaluations on all of the
Borrower's oil and gas properties.
Evaluations shall be prepared by independent
engineering firms acceptable to the Agent in
its reasonable
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judgement. The July 1st Reserve Report shall
be delivered by October 1st and may be
prepared by the Borrower in accordance with
accepted industry practices.
Subsequent to the receipt of the Reserve
Report, the Agent shall propose a Borrowing
Base to the Lenders. The proposed Borrowing
Base will be determined using the Agent's
then standard oil and gas lending parameters
(such parameters shall include, but not be
limited to, commodity prices, and
projections of production, operating
expenses, general and administrative
expenses, capital costs, working capital
requirements and liquidity, dividend
payments, obligations, and environmental and
legal costs). Such Borrowing Base must be
approved by 75% of the Lenders (the
"Required Lenders") for affirmations or
decreases and 100% of the Lenders for any
increase.
The Required Lenders and the Borrower may,
once a year, request an additional Borrowing
Base redetermination (a "Requested
Redetermination"). If the Required Lenders
or the Borrower seeks a Requested
Redetermination, the Agent shall propose a
Borrowing Base for approval using the
criteria for redetermining the Borrowing
Base as discussed above. Any Requested
Redetermination shall be effective when the
Borrower is notified of the amount of the
Borrowing Base by the Agent.
OPTIONAL PREPAYMENTS/
COMMITMENT REDUCTIONS: All or a portion of the outstanding loans
under the Facility may be prepaid at any
time and commitments may be terminated in
whole or in part at the Borrower's option,
subject to breakage costs in the case of
loans based on LIBOR if prepayment occurs
other than at the end of an applicable
interest period.
MANDATORY PREPAYMENTS/
COMMITMENT REDUCTIONS: Outstandings under the Facility will be
required to be prepaid in the amount by
which such loans and the L/C exposure exceed
the Borrowing Base at any time (the
"Deficiency"). Any Deficiency will be cured
through three equal monthly payments
beginning one month following notice of such
Deficiency. Other prepayments will be
required following asset sales if the effect
of such asset sale is or would be a
Deficiency.
CONDITIONS
PRECEDENT TO CLOSING: Substantially similar to the existing bank
credit agreement including, but not limited
to the successful completion by the Borrower
of the tender for DevX Energy, Inc. (to be
defined as a tender in excess of 50% of the
Borrower's common stock); execution of
definitive credit documentation satisfactory
to the Agent; satisfactory legal opinions
and satisfactory collateral documents.
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REPRESENTATIONS
AND WARRANTIES: Substantially similar to the existing bank
credit agreement including, but not limited
to authorization and enforceability, absence
of default or event of default and absence
of material adverse change.
AFFIRMATIVE
COVENANTS: Substantially similar to the existing bank
credit agreement including, but not limited
to maintenance of corporate existence and
rights, compliance with applicable laws
(including environmental laws); performance
of obligations; maintenance of properties
and maintenance of appropriate and adequate
insurance.
NEGATIVE COVENANTS: Substantially similar to the existing bank
credit agreement including, but not limited
to limitations on indebtedness, liens,
mergers, asset dispositions and dividends
(stock repurchases allowed up to $20,000,000
in the aggregate provided that no stock
repurchases shall be allowed if the Facility
is over 80% funded). Financial covenants
will include the following:
a) CURRENT RATIO: Borrower will
maintain a minimum current ratio
(including unused/available portion
of Facility and excluding Current
Maturities of Long Term Debt) of at
least 1.0 to 1.0.
b) MINIMUM TANGIBLE NET WORTH: 80% of
the Borrower's shareholder's equity
as of September 30, 2001;
increasing by 75% of any
non-redeemable preferred or common
stock offerings and 50% of net
income (test to exclude non-cash
charges related to FAS 121
impairments or ceiling test
writedowns after September 30,
2001).
c) INTEREST COVERAGE RATIO: Borrower
will maintain a minimum EBITDA to
consolidated interest expense of
2.5 to 1.0 to be calculated on a
rolling, four quarters basis.
EVENTS OF DEFAULT: Substantially similar to the existing bank
credit agreement including, but not limited
to: nonpayment of principal, interest or
fees when due, violation of covenants,
material breach of representations and
warranties, cross default to other debt,
bankruptcy, inability to pay liabilities in
the normal course of business, material
judgments, change in control and events of
default under certain other material
agreements.
EXPENSES AND
INDEMNIFICATION: All reasonable out-of-pocket expenses of the
Agent associated with the syndication,
preparation, execution, delivery, waiver,
modification, administration and enforcement
of the Credit Agreement and the other
documentation contemplated thereby are to be
paid by the Borrower whether or not the
transaction is consummated.
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The Borrower will indemnify the Agent and
the other Lenders and hold them harmless
from and against all costs, expenses
(including reasonable fees, charges and
disbursements of counsel) and liabilities,
including those resulting from any
litigation or other proceedings (regardless
of whether the Agent or any other Lender is
a party thereto), related to or arising out
of the transactions contemplated hereby;
provided that neither the Agent nor any
other Lender will be indemnified for its
gross negligence or willful misconduct.
AGENT'S COUNSEL: Mayer, Brown and Platt
GOVERNING LAW: New York
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ATTACHMENT I
INTEREST SPREADS
FUNDING SPREADS: With regard to the Revolver, at Borrower's
option:
(i) Base Rate.
(ii) 1, 2, 3 or 6 month LIBOR, plus
applicable margin indicated below.
PRICING GRID
(EXPRESSED IN BASIS POINTS PER ANNUM)
<Table>
<Caption>
PRICING LEVEL LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
------------- ------- -------- --------- -------- -------
Libor Margin 100 125 150 175 200
Base Rate Margin 0 25 50 75 100
Commitment Fee 25 25 37.5 37.5 50
</Table>
<Table>
<Caption>
Pricing Level Borrowing Base Utilization
-------------- --------------------------
Level I Less than 24.9%
Level II 25% - 49.9%
Level III 50% - 74.9%
Level IV 75% - 89.9%
Level V 90% or greater
</Table>
Pricing during any Deficiency (when outstandings and L/C exposure exceed the
Borrowing Base then in effect) will equal LIBOR plus 300 bps or Base Rate plus
200 bps on the outstanding amount and L/C exposure.
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