Exhibit 10.18
WAIVER AND BORROWING BASE REDETERMINATION AGREEMENT
This WAIVER AND BORROWING BASE
REDETERMINATION AGREEMENT (this “ Agreement ”)
dated as of December 20, 2007, is among COMSTOCK RESOURCES,
INC. (the “ Borrower ”), the banks named on the
signature pages hereto (together with their respective successors
and assigns in such capacity, each as a “ Lender
”), and BANK OF MONTREAL, as administrative agent for the
Lenders (in such capacity, together with its successors and
assigns, the “ Administrative Agent ”).
PRELIMINARY STATEMENT
A. The Borrower, the
Administrative Agent, the Lenders and certain other parties have
entered into that certain Second Amended and Restated Credit
Agreement dated as of December 15, 2006 (as amended, restated,
modified or supplemented from time to time until the date hereof,
the “ Credit Agreement ”).
B. Comstock Oil & Gas, LP (a
partnership wholly owned by the Borrower; hereinafter “
COGI ”), as buyer, and SWEPI LP, a Delaware limited
partnership (“ SWEPI ”), as seller, entered into
a certain Purchase and Sale Agreement, dated as of
November 26, 2007 (as amended from time to time, the “
SWEPI Wilcox Agreement ”), pursuant to which COGI will
purchase, directly or indirectly, from SWEPI certain oil and gas
properties located in South Texas and described therein (the
“ SWEPI Wilcox Properties ”; and the acquisition
of the SWEPI Wilcox Properties by COGI from SWEPI, the “
SWEPI Wilcox Acquisition ”), subject to certain
potential adjustments in accordance with the terms of the SWEPI
Agreement.
C. In order to achieve certain
tax efficiencies, COGI expects to structure the SWEPI Wilcox
Acquisition to qualify for reverse like-kind exchange treatment
under section 1031 of the Code and the regulations and revenue
procedures promulgated thereunder, including Rev. Proc.
2000-37.
D. In furtherance of the reverse
like-kind exchange, COGI will assign the SWEPI Wilcox Agreement to
Comstock (Wilcox), LLC, a Delaware limited liability company
(“ Comstock (Wilcox) ”) that is not affiliated
with COGI, and will lend to Comstock (Wilcox) up to $170,000,000
from the proceeds of Borrowings under the Credit Agreement.
E. The loan by COGI to Comstock
(Wilcox) will be evidenced by a promissory note issued by Comstock
(Wilcox) in favor of COGI (the “ Comstock (Wilcox)
Note ”) and secured by a mortgage or deed of trust
encumbering the SWEPI Wilcox Properties (the “ Comstock
(Wilcox) Mortgage ”), which note and mortgage or deed of
trust will be pledged to the Administrative Agent for the benefit
of itself, the Lenders and the other secured parties to secure the
Secured Obligations.
F. The Borrower has provided to
the Administrative Agent and the Lenders an engineering report
prepared by the Borrower setting forth the reserves, future
production and income attributable to the SWEPI Wilcox Properties
(the “ SWEPI Engineering Report ”).
G. The Borrower has requested
that the Administrative Agent and the Lenders increase the
Borrowing Base in respect of the SWEPI Wilcox Acquisition,
described above, as set forth herein.
H. The Administrative Agent and
the Lenders have agreed to increase the Borrowing Base in respect
of the SWEPI Wilcox Acquisition as set forth herein.
NOW THEREFORE, in consideration of
the foregoing and the mutual agreements set forth herein, the
parties agree as follows:
Section 1.
Definitions . Unless otherwise defined in this
Agreement, each capitalized term used in this Agreement has the
meaning assigned to such term in the Credit Agreement.
Section 2. Waiver of
Section 7.2 . Section 7.2 of the Credit Agreement
(which prohibits the Borrower or any of its Restricted Subsidiaries
from making any Investment unless otherwise permitted therein) is
hereby waived insofar as, AND ONLY INSOFAR AS, COGI shall be
permitted to (a) assign the SWEPI Wilcox Agreement to Comstock
(Wilcox) and (b) make a loan to Comstock (Wilcox) in an
aggregate principal amount of up to $170,000,000 from the proceeds
of Borrowings under the Credit Agreement for the purpose financing
the acquisition of the SWEPI Wilcox Properties by Comstock
(Wilcox), provided that not later than concurrently with the
consummation of the acquisition of the SWEPI Wilcox Properties by
Comstock (Wilcox), COGI shall receive from Comstock (Wilcox) the
Comstock (Wilcox) Note and the Comstock (Wilcox) Mortgage.
1
Exhibit 10.18
Section 3. Redetermination
of Borrowing Base .
(a) Upon
the satisfaction of the conditions set forth in Section 7
below (the “ Increase Date ”), the Borrowing
Base shall be increased by $75,000,000 to $575,000,000 (“
Borrowing Base Increase ”), which Borrowing Base shall
remain in effect until the Borrowing Base shall be
(i) otherwise redetermined or adjusted in accordance with
Section 2.8 of the Credit Agreement, or (ii) otherwise
agreed in accordance with the Credit Agreement.
(b) Both
the Borrower, on the one hand, and the Administrative Agent and the
Lenders, on the other hand, agree that the redetermination of the
Borrowing Base pursuant to this Section 3 shall not constitute
an unscheduled redetermination of the Borrowing Base for purposes
of Section 2.8 of the Credit Agreement.
Section 4. Fees .
Promptly following the Increase Date, the Borrower shall pay to the
Administrative Agent for the account of each Lender a fee equal to
0.20% of each Lender’s Percentage Share of $75,000,000.
Section 5.
Ratification . The Borrower hereby ratifies and
confirms all of the Obligations under the Credit Agreement and the
other Loan Documents.
Section 6.
Effectiveness . This Agreement shall become effective
on the first date on which each of the conditions set forth in this
Section 6 is satisfied:
(a) The
Administrative Agent shall have received duly executed counterparts
of this Agreement from the Borrower, the Administrative Agent and
each of the Lenders;
(b) The
Administrative Agent shall have received from the Borrower a true
and complete copy of the fully executed SWEPI Wilcox Agreement,
together with any disclosure schedules delivered pursuant
thereto;
(c) The
Administrative Agent and the Lenders shall have received a copy of
the SWEPI Engineering Report; and
(d) The
Borrower shall have confirmed and acknowledged to the
Administrative Agent and the Lenders, and by its execution and
delivery of this Agreement, the Borrower does hereby confirm and
acknowledge to the Administrative Agent and the Lenders, that
(i) the execution, delivery and performance of this Agreement
has been duly authorized by all requisite corporate action on the
part of the Borrower; (ii) the Credit Agreement and each other
Loan Document to which it is a party constitute valid and legally
binding agreements enforceable against the Borrower in
accordance
