SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended March 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File No. 0-16741
COMSTOCK RESOURCES, INC.
(Exact name of registrant as specified in its charter)
NEVADA 94-1667468
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5005 LBJ Freeway, Suite 1000, Dallas, Texas 75244
(Address of principal executive offices)
Telephone No.: (972) 701-2000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days. Yes X No
--- ----
The number of shares outstanding of the registrant's common stock, par
value $.50, as of May 14, 1998 was 24,235,863.
<PAGE>
COMSTOCK RESOURCES, INC.
QUARTERLY REPORT
FOR THE QUARTER ENDED MARCH 31, 1998
INDEX
PART I. Financial Information Page No.
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997..................................4
Consolidated Statements of Operations -
Three Months ended March 31, 1998 and 1997............................5
Consolidated Statement of Stockholders' Equity -
Three Months ended March 31, 1998.....................................6
Consolidated Statements of Cash Flows -
Three Months ended March 31, 1998 and 1997............................7
Notes to Consolidated Financial Statements.................................8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................10
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.................13
Item 6. Exhibits and Reports on Form 8-K....................................14
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
3
<PAGE>
<TABLE>
<CAPTION>
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1998 1997
--------- ------------
(Unaudited)
(In thousands)
<S> <C> <C>
Cash and Cash Equivalents ......................................$ 3,435 $ 14,504
Accounts Receivable:
Oil and gas sales ......................................... 15,550 24,509
Joint interest operations ................................. 3,574 6,732
Other Current Assets ........................................... 1,738 172
--------- ---------
Total current assets ........................... 24,297 45,917
Property and Equipment:
Unevaluated oil and gas properties ........................ 31,233 30,291
Oil and gas properties, successful efforts method ......... 463,521 456,606
Other ..................................................... 1,581 1,561
Accumulated depreciation, depletion and amortization ...... (90,286) (77,677)
--------- ---------
Net property and equipment ..................... 406,049 410,781
Other Assets ................................................... 83 102
--------- ---------
$ 430,429 $ 456,800
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Expenses ..........................$ 23,806 $ 56,184
--------- ---------
Total current liabilities ................................. 23,806 56,184
Long-term Debt, less Current Portion ........................... 265,000 260,000
Deferred Taxes Payable ......................................... 11,514 11,207
Reserve for Future Abandonment Costs ........................... 4,815 4,815
Stockholders' Equity:
Common stock--$0.50 par, 50,000,000 shares authorized,
24,218,863 and 24,208,785 shares outstanding at
March 31, 1998 and December 31, 1997, respectively ........ 12,109 12,104
Additional paid-in capital .................................. 110,396 110,273
Retained earnings ........................................... 2,804 2,234
Less: Deferred compensation-restricted stock grants ......... (15) (17)
--------- ---------
Total stockholders' equity ................................ 125,294 124,594
--------- ---------
$ 430,429 $ 456,800
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31,
(Unaudited)
1998 1997
-------- --------
(In thousands, except
per share amounts)
Revenues:
Oil and gas sales........................................$ 25,442 $ 23,411
Other income ............................................ 116 268
Gain on sale of properties .............................. -- 48
-------- --------
Total revenues .................................. 25,558 23,727
-------- --------
Expenses:
Oil and gas operating ................................... 6,321 4,649
Exploration ............................................. 1,059 --
Depreciation, depletion and amortization ................ 12,622 4,990
General and administrative, net ......................... 422 689
Interest ................................................ 4,257 1,210
-------- --------
Total expenses .................................. 24,681 11,538
-------- --------
Income before income taxes ................................ 877 12,189
Provision for income taxes ................................ (307) (4,266)
-------- --------
Net income ................................................ 570 7,923
Preferred stock dividends ................................. -- (159)
-------- --------
Net income attributable to common stock ................... 570 7,764
======== ========
Net income per share:
Basic............................................$ .02 $ .32
======== ========
Diluted..........................................$ .02 $ .30
======== ========
Weighted average number of common and common stock
equivalent shares outstanding:
Basic........................................... 24,219 24,149
========= =========
Diluted......................................... 25,117 26,467
========= =========
The accompanying notes are an integral part of these statements.
5
<PAGE>
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Deferred
Additional Compensation-
Common Paid-In Retained Restricted
Stock Capital Earnings Stock Grants Total
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997.........................$ 12,104 $110,273 $ 2,234 $ (17) $124,594
Issuance of common stock ......................... 5 123 -- -- 128
Restricted stock grants .......................... -- -- -- 2 2
Net income ....................................... -- -- 570 -- 570
-------- -------- -------- -------- --------
Balance at March 31, 1998............................$ 12,109 $110,396 $ 2,804 $ (15) $125,294
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
-------- --------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...........................................................$ 570 $ 7,923
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Compensation paid in common stock .................................. 130 154
Exploration ........................................................ 1,059 --
Depreciation, depletion and amortization ........................... 12,622 4,990
Deferred income taxes .............................................. 307 4,266
Gain on sales of property .......................................... -- (48)
-------- --------
Working capital provided by operations ........................... 14,688 17,285
Decrease in accounts receivable .................................... 12,117 2,717
Increase in other current assets ................................... (1,566) (865)
Increase (decrease) in accounts payable and accrued expenses ....... (32,378) 1,331
-------- --------
Net cash provided by (used for) operating activities ............. (7,139) 20,468
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of assets ...................................... 6 4,994
Capital expenditures and acquisitions .............................. (8,936) (7,681)
Acquisition deposit ................................................ -- (1,051)
-------- --------
Net cash used for investing activities ........................... (8,930) (3,738)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings ......................................................... 10,000 --
Proceeds from common stock issuances ............................... -- 342
Stock issuance costs ............................................... -- (29)
Principal payments on debt ......................................... (5,000) (20,042)
Dividends paid on preferred stock .................................. -- (159)
-------- --------
Net cash provided by (used for) financing activities ............. 5,000 (19,888)
-------- --------
Net decrease in cash and cash equivalents ...................... (11,069) (3,158)
Cash and cash equivalents, beginning of period ................. 14,504 16,162
-------- --------
Cash and cash equivalents, end of period........................$ 3,435 $ 13,004
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES -
Basis of Presentation -
In management's opinion, the accompanying consolidated financial statements
contain all adjustments (consisting solely of normal recurring adjustments)
necessary to present fairly the financial position of Comstock Resources, Inc.
and subsidiaries (the "Company") as of March 31, 1998 and the related results of
operations and cash flow for the three months ended March 31, 1998 and 1997.
The accompanying unaudited financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to those rules and regulations, although the Company believes
that the disclosures made are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
Company's financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
The results of operations for the three months ended March 31, 1998 are not
necessarily an indication of the results expected for the full year.
Supplementary Information with Respect to the Statements of Cash Flows -
For the Three Months
Ended March 31,
1998 1997
------- -------
(In thousands)
Cash Payments -
Interest $ 4,786 $ 1,247
Income taxes 276 300
Noncash Investing and Financing Activities -
Common stock issued for director compensation $ 128 $ 143
Income Taxes -
Deferred income taxes are provided to reflect the future tax consequences
of differences between the tax basis of assets and liabilities and their
reported amounts in the financial statements using enacted tax rates. For the
three months ended March 31, 1998, the Company made a provision for deferred
income taxes based on an expected tax rate for 1998 of 35%.
8
<PAGE>
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Earnings Per Share -
Basic earnings per share is determined without the effect of any
outstanding potentially dilutive stock options or other convertible securities
and diluted earnings per share is determined with the effect of outstanding
stock options and other convertible securities that are potentially dilutive.
Basic and diluted earnings per share for the three months ended March 31, 1998
and 1997 were determined as follows:
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
---------------------------------------------------
1998 1997
----------------------- -----------------------
Per Per
Income Shares Share Income Shares Share
------ ------ ----- ------ ------ -----
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share:
Net Income $ 570 24,219 $ 7,923 24,149
Less Preferred Stock Dividends -- -- (159) --
-------- ------- -------- ------
Net Income Available to Common Stockholders 570 24,219 $0.02 7,764 24,149 $0.32
===== =====
Diluted Earnings Per Share:
Effect of Dilutive Securities:
Stock Options -- 898 -- 973
Convertible Preferred Stock -- -- 159 1,345
-------- ------- -------- ------
Net Income Available to Common Stockholders
and Assumed Conversions $ 570 25,117 $0.02 $ 7,923 26,467 $0.30
======== ======= ===== ======== ====== =====
</TABLE>
(2) LONG-TERM DEBT -
As of March 31, 1998, the Company had $265.0 million outstanding under its
bank revolving credit facility. Borrowings under the bank credit facility cannot
exceed a borrowing base determined semiannually by the banks. The borrowing base
as of May 14, 1998 was $275.0 million. Amounts outstanding under the bank credit
facility bear interest at a floating rate based on The First National Bank of
Chicago's base rate (as defined) plus 0% to 0.05% or, at the Company's option,
at a fixed rate for up to six months based on the London Interbank Offered Rate
("LIBOR") plus 0.625% to 1.5%, depending upon the utilization of the available
borrowing base. As of March 31, 1998, the Company had placed the outstanding
advances under the revolving credit facility under fixed rate loans based on
LIBOR at an average rate of approximately 7.1% per annum. In addition, the
Company incurs a commitment fee of 0.2% to 0.375%, depending upon the
utilization of the available borrowing base, on the unused portion of the
borrowing base.
(3) SUBSEQUENT EVENT -
On May 8, 1998, the Company purchased a 33% working interest in 13,722
acres at South Timbalier Blocks 34 and 50, and South Pelto Block 15 located
offshore Louisiana in the Gulf of Mexico in 35 to 55 feet of water for $1.4
million. Current daily production from the properties is 1,500 Mcf and 50
barrels of oil from 7 active wells at depths ranging from 800 feet to 9,500
feet. The Company has identified several exploratory prospects to drill on the
acquired acreage. The facilities acquired include four platforms and
infrastructure which enable the Company to accelerate production from any
successful exploratory wells drilled in the area.
9
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table reflects certain summary operating data for the periods
presented:
Three Months Ended
March 31,
1998 1997
---- ----
Net Production Data:
Oil (thousand barrels) 683 299
Natural gas (million cubic feet) 6,637 5,520
Average Sales Price:
Oil (per barrel) $14.74 $22.30
Natural gas (per thousand cubic feet - Mcf) 2.32 3.03
Expenses ($ per equivalent Mcf):
Oil and gas operating(l) $ 0.59 $ 0.64
General and administrative, net 0.04 0.09
Depreciation, depletion and
amortization(2) 1.17 0.68
(1) Includes lease operating costs and production and ad valorem taxes.
(2) Represents depreciation, depletion and amortization of oil and gas
properties only.
Revenues -
The Company's oil and gas sales increased $2.0 million (9%) in the first
quarter of 1998, to $25.4 million from $23.4 million in 1997's first quarter due
to a 20% increase in the Company's natural gas production and a 128% increase in
the Company's oil production. The production increases were largely offset by a
24% decrease in the Company's average realized natural gas price as well as a
34% decrease in the Company's average realized oil price. The significant
increase in production is attributable to a $200.9 million acquisition of
offshore properties completed in December 1997.
Other income decreased $152,000 (57%) to $116,000 in the first quarter of
1998 from $268,000 in the first quarter of 1997. The decrease is attributable to
a lower level of short-term cash deposits outstanding during the quarter as well
as a decrease in management fee income received by the Company in 1998.
Costs and Expenses -
Oil and gas operating expenses, including production taxes, increased $1.7
million (36%) to $6.3 million in the first quarter of 1998 from $4.6 million in
the first quarter of 1997. The increase is due to the 47% increase in oil and
natural gas production (on an equivalent Mcf basis) in the first quarter of
1998. Oil and gas operating expenses per equivalent Mcf produced decreased 5
cents to 59 cents in the first quarter of 1998 from 64 cents in the first
quarter 1997. The decrease is primarily attributable to lower lifting costs
associated with the offshore properties acquired in December 1997.
Depreciation, depletion and amortization ("DD&A") increased $7.6 million
(153%) to $12.6 million in the first quarter of 1998 from $5.0 million in the
first quarter of 1997 due to the 47% increase in oil and natural gas production
(on an equivalent Mcf basis) and due to higher costs per unit of amortization.
DD&A per equivalent Mcf produced increased from 68 cents in 1997's first quarter
to $1.17 in 1998's first quarter. The increase related to the higher costs of
the offshore properties acquired in December 1997.
10
<PAGE>
General and administrative expenses, which is reported net of overhead
reimbursements, decreased $267,000 (39%) to $422,000 in the first quarter of
1998 from $689,000 in 1997's first quarter. The decrease relates to an increase
in overhead reimbursements received by the Company in 1998 while the Company's
overhead costs remained relatively the same.
Interest expense increased $3.0 million (252%) to $4.3 million for the
three months ended March 31, 1998 from $1.2 million for the three months ended
March 31, 1997. The increase is related to a higher level of outstanding
advances under the Company's bank credit facility due to the December 1997
$200.9 million acquisition as well as a higher average interest rate on the
Company's bank credit facility. The weighted average annual interest rate under
the Company's bank credit facility increased to 7.1% in 1998's first quarter as
compared to 6.5% in the first quarter of 1997. The increase in the rate was
attributable to a higher utilization of the borrowing base under the bank credit
facility after the December 1997 acquisition.
The Company provided $307,000 and $4.3 million for deferred income taxes
for the three months ended March 31, 1998 and 1997, respectively, using an
estimated tax rate of 35%.
The Company reported net income of $570,000 for the three months ended
March 31, 1998, as compared to $7.8 million for the three months ended March 31,
1997. Net income per share for the first quarter was 2 cents on diluted weighted
average shares outstanding of 25.1 million as compared to net income per share
of 30 cents for the first quarter of 1997 on diluted weighted average shares
outstanding of 26.5 million.
Capital Expenditures
The following table summarizes the Company's capital expenditure activity
for the three months ended March 31, 1998 and 1997:
Three Months Ended March 31,
----------------------------
1998 1997
---- ----
(In thousands)
Acquisitions $ 703 $ --
Other leasehold costs 994 778
Development drilling 4,286 5,081
Exploratory costs 1,643 1,113
Workovers and recompletions 1,291 697
Other 19 12
--------- ---------
Total $ 8,936 $ 7,681
========= =========
Capital Resources and Liquidity
During the three months ended March 31, 1998, the primary sources of funds
for the Company were cash generated from operations of $14.7 million, before
working capital changes, and borrowings under the bank credit facility of $10.0
million. Primary uses of funds for the three months ended March 31, 1998 were
capital expenditures for development and exploratory activities of $8.9 million
and the repayment of debt of $5.0 million.
The timing of most of the Company's capital expenditures is discretionary
with no material long-term capital expenditure commitments. Consequently, the
Company has a significant degree of flexibility to adjust the level of such
expenditures as circumstances warrant. For the three months ended March 31, 1998
and 1997, the Company spent $7.2 million and $6.9 million, respectively, on
development and exploration activities. The Company currently anticipates
spending an additional $49.0 million on development and exploration projects
during the remainder of 1998. The Company does not have a specific acquisition
budget, as a result of the unpredictability of the timing and size of
forthcoming acquisition activities.
11
<PAGE>
The Company intends to primarily use internally generated cash flow to fund
capital expenditures other than significant acquisitions. The Company
anticipates that such sources will be sufficient to fund the expected 1998
development and exploration expenditures. The Company primarily intends to use
borrowings under its bank credit facility to finance significant acquisitions.
In addition, the Company may seek to obtain other debt or equity financing. The
availability and attractiveness of these sources of financing will depend upon a
number of factors, some of which will relate to the financial condition and
performance of the Company, and some of which will be beyond the Company's
control, such as prevailing interest rates, oil and natural gas prices and other
market conditions.
The Company's bank credit facility consists of a $290.0 million revolving
credit commitment provided by a syndicate of ten banks for which The First
National Bank of Chicago serves as agent. Indebtedness under the credit facility
is secured by substantially all of the Company's assets. The Company's bank
credit facility is subject to borrowing base availability which is generally
redetermined semiannually based on the banks' estimates of the future net cash
flows of the Company's oil and gas properties. As of May 14, 1998, the borrowing
base was $275.0 million. Such borrowing base may be affected from time to time
by the performance of the Company's oil and natural gas properties and changes
in oil and natural gas prices. The revolving credit line bears interest at the
option of the Company at either (i) LIBOR plus 0.625% to 1.5% or (ii) the
"corporate base rate" plus 0% to 0.5%, depending in each case on the utilization
of the available borrowing base. The Company incurs a commitment fee of up to
0.2% to 0.375% per annum, depending on the utilization of the available
borrowing base, on the unused portion of the borrowing base. The average annual
interest rate as of March 31, 1998, of all outstanding indebtedness under the
Company's bank credit facility was approximately 7.1%. The revolving credit line
matures on December 9, 2002 or such earlier date as the Company may elect. The
credit facility contains covenants which, among other things, restrict the
payment of cash dividends, limit the amount of consolidated debt, and limit the
Company's ability to make certain loans and investments.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's annual meeting of stockholders was held in Dallas,
Texas at 4:00 p.m., local time, on May 11, 1998.
(b) Proxies for the meeting were solicited pursuant to Regulation 14
under the Securities Exchange Act of 1934, as amended. There was
no solicitation in opposition to the nominees for election as
director as listed in the proxy statement and such nominees were
elected.
(c) Out of a total 24,196,067 shares of the Company's common stock
outstanding and entitled to vote, 20,631,361 shares were present
at the meeting in person or by proxy, representing approximately
85%. Matters voted upon at the meeting were as follows:
(i) The election of two Class A Directors to serve on the
Company's board of directors until the 2001 annual meeting
of stockholders. The vote tabulation with respect to each
nominee was as follows:
Nominee For Against
------- --- -------
Franklin B. Leonard 20,599,961 31,400
Cecil E. Martin, Jr. 20,603,761 27,600
Other Directors of the Company whose term of office as a
Director continued after the meeting are as follows:
Class B Directors Class C Director
----------------- ----------------
M. Jay Allison Richard S. Hickok
David W. Sledge
(ii) The appointment of Arthur Andersen LLP as the Company's
certified public accountants for 1998 was approved by a vote
of 20,570,284 shares for, 33,511 shares against and 27,566
shares abstaining.
13
<PAGE>
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
10.1*# Employment Agreement dated May 11, 1998 by and between the
Company and M. Jay Allison.
10.2*# Employment Agreement dated May 11, 1998 by and between the
Company and Roland O. Burns.
27. * Financial Data Schedule for the Three Months ended March 31,1998.
- ---------------
* Filed herewith.
# Management contract or compensatory plan documents.
b. Reports on Form 8-K
Current reports on Form 8-K filed during the first quarter of 1998 and
to the date of this filing are as follows:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMSTOCK RESOURCES, INC.
Date May 14, 1998 /s/M. JAY ALLISON
------------ -----------------
M. Jay Allison, President and Chief Executive Officer
(Principal Executive Officer)
Date May 14, 1998 /s/ROLAND O. BURNS
------------ ------------------
Roland O. Burns, Senior Vice President,
Chief Financial Officer, Secretary, and
Treasurer (Principal Financial and Accounting Officer)
14
Exhibit 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") executed by and between COMSTOCK
RESOURCES, INC., a Nevada corporation (the "Company") with principal offices at
5005 LBJ Freeway, Suite 1000, Dallas, Texas 75244, and M. Jay Allison
("Employee"), an individual residing at #3 Post-N-Paddock, Frisco, Texas 75034.
1. Employment. The Company hereby agrees to employ Employee, and Employee
hereby agrees to render his exclusive service to the Company, in his current
capacity of President and Chief Executive Officer of the Company, with such
duties as may be assigned to him from time to time by the Board of Directors for
a period of time commencing on May 11, 1998 (the effective date of this
Agreement) and ending on May 10, 1999 (the "Employment Period"), subject to
earlier termination as hereinafter provided. Upon termination of Employee's
employment for any reason except for death, disability or for good cause,
including termination of the Employment Period, the Company shall assign to the
Employee ownership of any life insurance policies owned by the Company insuring
the Employee's life.
2. Place of Employment. Unless otherwise agreed by the Company and
Employee, throughout the term of this Agreement, Employee's business office
shall be located in Dallas, Texas, at such location as may be specified by the
Board of Directors of the Company.
3. Base Compensation. Employee shall be compensated by the Company at a
minimum base rate of $20,416.67 per month, payable semimonthly on the fifteenth
and final days of each month during the period of Employee's employment under
this Agreement, subject to such increases and additional payments as may be
determined from time to time by the Board of Directors of the Company in its
sole discretion. Such compensation shall be in addition to any group insurance,
pension, profit sharing, and other employee benefits, which are extended from
time to time to Employee in the discretion of the Board of Directors of the
Company and for which Employee is eligible. Subject to such rules and procedures
as are from time to time specified by the Company, the Company shall also
reimburse Employee for all reasonable expenses incurred by him on behalf of the
Company.
4. Performance of Services. Employee shall devote his full working time to
the business of the Company; provided, however, Employee shall be excused from
performing any services for the Company hereunder during periods of temporary
incapacity and during vacations conforming to the Company's standard vacation
policy, without thereby in any way affecting the compensation to which he is
entitled hereunder.
5. Continuing Obligations. In order to induce the Company to enter into
this Agreement, the Employee hereby agrees that all documents, records,
techniques, business secrets and other information which have come into his
possession from time to time during his employment by the Company or which may
come into his possession during his employment hereunder, shall be deemed to be
confidential and proprietary to the Company and the Employee further agrees to
retain in confidence any confidential information known to him concerning the
Company and it's subsidiaries and their respective businesses so long as such
information is not publicly disclosed. In the event of a breach or threatened
breach by the Employee of the provisions of this Paragraph 5, the Company shall,
in addition to any other available remedies, be entitled to an injunction
restraining Employee from disclosing, in whole or in part, any such information
or from rendering any services to any person, firm or corporation to whom any of
such information may have been disclosed or is threatened to be disclosed.
6. Property of Company. All data, drawings, and other records and written
material prepared or compiled by Employee or furnished to Employee while in the
employ of the Company shall be the sole and exclusive property of the Company,
15
<PAGE>
and none of such data, drawings or other records, or copies thereof, shall be
retained by Employee upon termination of his employment. Notwithstanding the
foregoing, Employee shall be under no obligation to return public information.
7. Surviving Provisions. The provisions of Paragraphs 5 and 6 of this
Agreement shall continue to be binding upon Employee in accordance with their
terms, notwithstanding termination of Employee's employment hereunder for any
reason.
8. Termination for Good Cause. It is agreed and understood that the Company
cannot terminate the employment of the Employee under this Agreement except for
good cause, and that, without prejudice to the generality of the right to
terminate for good cause, each of the following contingencies shall be good
cause:
(a) Should Employee by reason of injury or illness become incapable
for more than one hundred fifty (150) consecutive days of satisfactorily
performing his duties as an employee under this Agreement;
(b) Should Employee for reasons other than illness or injury absent
himself from his duties without the consent of the Company (which consent shall
not be unreasonably withheld) for more than twenty (20) consecutive days;
(c) Should Employee be convicted of a felony involving moral
turpitude;
(d) Should Employee during the period of his employment by the Company
engage in any activity that would in the opinion of the Board of Directors of
the Company constitute a material conflict of interest with the Company;
provided that termination for cause based on this subparagraph (d) shall not be
effective unless the Employee shall have received written notice from the Board
of Directors of the Company of such activity (which notice shall also include a
demand for the Employee to cease the activity giving rise to the conflict of
interest) fifteen (15) days prior to his termination and the Employee has failed
after receipt of such notice to cease all activities creating the conflict of
interest; or
(e) Should Employee be grossly negligent in the performance of his
duties hereunder, or materially in breach of his duties and obligations under
this Agreement; provided that termination for cause based on this subparagraph
(e) shall not be effective unless the Employee shall have received written
notice from the Board of Directors of the Company (which notice shall include a
description of the reasons and circumstances giving rise to such notice) fifteen
(15) days prior to his termination and the Employee has failed after receipt of
such notice to satisfactorily discharge the performance of his duties hereunder
or to comply with the terms of this Agreement, as the case may be.
The Company may for good cause terminate Employee's employment under this
Agreement without advance notice, except as otherwise specifically provided for
in subparagraphs (d) and (e) above. Termination shall not affect any of the
Company's other rights and remedies.
9. Payment of Certain Costs of Employee. If a dispute arises regarding the
interpretation or enforcement of this Agreement, all legal fees and expenses
incurred by the Employee in seeking to obtain or enforce any right or benefit
provided for in this Agreement or in otherwise pursuing his claim will be paid
by the Company, to the extent permitted by law. The Company further agrees to
pay prejudgment interest on any money judgment obtained by the Employee
calculated at the First National Bank of Chicago N.A. prime interest rate in
effect from time to time from the date that payment(s) to him should have been
made under this Agreement.
16
<PAGE>
10. Mitigation. The Employee is not required to mitigate the amount of any
payments to be made by the Company pursuant to this Agreement by seeking other
employment or otherwise.
11. Successors.
(a) Except as may otherwise be provided under any other
written agreement between the Company and the Employee with
respect to the terms of Employee's employment in the event
of a change of control of the Company, the Company will
require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to
the Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain
such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement. As used in
this Agreement, "Company" shall mean the Company as
hereinbefore defined any successor to its business and/or
assets as aforesaid which executes and delivers the
agreement provided for in this Paragraph 11 or which
otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If the Employee
should die during the term hereof, the Company shall pay an
amount equal to any amounts than payable to Employee
hereunder, plus an amount equal to six months' annualized
total compensation (considering Employee's base pay and his
most recent annual bonus, if any), with all such amounts to
be paid to Employee's devisee, legatee or other designee or,
if there be no such designee, to his estate.
12. No Inconsistent Obligations. Employee represents and warrants that he
has not previously assumed any obligations inconsistent with those of this
Agreement.
13. Modification. This Agreement shall be in addition to all previous
agreements, written or oral, relating to Employee's employment by the Company,
and shall not be changed orally, but only by a written instrument to which the
Company and the Employee are both parties.
14. Binding Effect. This Agreement and the rights and obligations hereunder
shall be binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, and shall also bind and inure to the benefit
of any successor of the Company by merger or consolidation or any assignee of
all or substantially all of its properties.
15. Bankruptcy. Notwithstanding anything in this Agreement to the contrary,
the insolvency or adjudication of bankruptcy of the Company, whether voluntary
or involuntary, shall terminate this Agreement and the rights and obligations of
Company and Employee hereunder shall be of no further force or effect.
16. Law Governing. This Agreement made, accepted and delivered in Dallas
County, Texas, is performable in Dallas County, Texas, and it shall be construed
and enforced according to the laws of the State of Texas. Venue shall lie in
Dallas County, Texas for the purpose of resolving and enforcing any dispute
which may arise under this Agreement and the parties agree that they will submit
themselves to the jurisdiction of the competent State or Federal Court situated
in Dallas County, Texas.
17. Invalid Provision. In case any one or more of the provisions contained
in this Agreement shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be impaired thereby.
17
<PAGE>
18. Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Employee:
M. Jay Allison
#3 Post-N-Paddock
Fisco, Texas 75034
If to the Company:
Comstock Resources, Inc.
5005 LBJ Freeway, Suite 1000
Dallas, Texas 75244
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
EXECUTED and effective as to this 11th day of May 1998.
COMSTOCK RESOURCES, INC.
/s/ROLAND O. BURNS
------------------
Roland O. Burns
Senior Vice President
EMPLOYEE:
/s/M. JAY ALLISON
-----------------
M. Jay Allison
18
Exhibit 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") executed by and between COMSTOCK
RESOURCES, INC., a Nevada corporation (the "Company") with principal offices at
5005 LBJ Freeway, Suite 1000, Dallas, Texas 75244, and Roland O. Burns
("Employee"), an individual residing at 8430 Edgewood Cove, Frisco, Texas 75034.
1. Employment. The Company hereby agrees to employ Employee, and Employee
hereby agrees to render his exclusive service to the Company, in his current
capacity of Senior Vice President, Chief Financial Officer, Secretary and
Treasurer of the Company, with such duties as may be assigned to him from time
to time by the Board of Directors for a period of time commencing on May 11,
1998 (the effective date of this Agreement) and ending on May 10, 1999 (the
"Employment Period"), subject to earlier termination as hereinafter provided.
Upon termination of Employee's employment for any reason except for death,
disability or for good cause, including termination of the Employment Period,
the Company shall assign to the Employee ownership of any life insurance
policies owned by the Company insuring the Employee's life.
2. Place of Employment. Unless otherwise agreed by the Company and
Employee, throughout the term of this Agreement, Employee's business office
shall be located in Dallas, Texas, at such location as may be specified by the
Board of Directors of the Company.
3. Base Compensation. Employee shall be compensated by the Company at a
minimum base rate of $11,666.67 per month, payable semimonthly on the fifteenth
and final days of each month during the period of Employee's employment under
this Agreement, subject to such increases and additional payments as may be
determined from time to time by the Board of Directors of the Company in its
sole discretion. Such compensation shall be in addition to any group insurance,
pension, profit sharing, and other employee benefits, which are extended from
time to time to Employee in the discretion of the Board of Directors of the
Company and for which Employee is eligible. Subject to such rules and procedures
as are from time to time specified by the Company, the Company shall also
reimburse Employee for all reasonable expenses incurred by him on behalf of the
Company.
4. Performance of Services. Employee shall devote his full working time to
the business of the Company; provided, however, Employee shall be excused from
performing any services for the Company hereunder during periods of temporary
incapacity and during vacations conforming to the Company's standard vacation
policy, without thereby in any way affecting the compensation to which he is
entitled hereunder.
5. Continuing Obligations. In order to induce the Company to enter into
this Agreement, the Employee hereby agrees that all documents, records,
techniques, business secrets and other information which have come into his
possession from time to time during his employment by the Company or which may
come into his possession during his employment hereunder, shall be deemed to be
confidential and proprietary to the Company and the Employee further agrees to
retain in confidence any confidential information known to him concerning the
Company and it's subsidiaries and their respective businesses so long as such
information is not publicly disclosed. In the event of a breach or threatened
breach by the Employee of the provisions of this Paragraph 5, the Company shall,
19
<PAGE>
in addition to any other available remedies, be entitled to an injunction
restraining Employee from disclosing, in whole or in part, any such information
or from rendering any services to any person, firm or corporation to whom any of
such information may have been disclosed or is threatened to be disclosed.
6. Property of Company. All data, drawings, and other records and written
material prepared or compiled by Employee or furnished to Employee while in the
employ of the Company shall be the sole and exclusive property of the Company,
and none of such data, drawings or other records, or copies thereof, shall be
retained by Employee upon termination of his employment. Notwithstanding the
foregoing, Employee shall be under no obligation to return public information.
7. Surviving Provisions. The provisions of Paragraphs 5 and 6 of this
Agreement shall continue to be binding upon Employee in accordance with their
terms, notwithstanding termination of Employee's employment hereunder for any
reason.
8. Termination for Good Cause. It is agreed and understood that the Company
cannot terminate the employment of the Employee under this Agreement except for
good cause, and that, without prejudice to the generality of the right to
terminate for good cause, each of the following contingencies shall be good
cause:
(a) Should Employee by reason of injury or illness become incapable
for more than one hundred fifty (150) consecutive days of satisfactorily
performing his duties as an employee under this Agreement;
(b) Should Employee for reasons other than illness or injury
absent himself from his duties without the consent of the Company (which consent
shall not be unreasonably withheld) for more than twenty (20) consecutive days;
(c) Should Employee be convicted of a felony involving moral
turpitude;
(d) Should Employee during the period of his employment by the Company
engage in any activity that would in the opinion of the Board of Directors of
the Company constitute a material conflict of interest with the Company;
provided that termination for cause based on this subparagraph (d) shall not be
effective unless the Employee shall have received written notice from the Board
of Directors of the Company of such activity (which notice shall also include a
demand for the Employee to cease the activity giving rise to the conflict of
interest) fifteen (15) days prior to his termination and the Employee has failed
after receipt of such notice to cease all activities creating the conflict of
interest; or
(e) Should Employee be grossly negligent in the performance of his
duties hereunder, or materially in breach of his duties and obligations under
this Agreement; provided that termination for cause based on this subparagraph
(e) shall not be effective unless the Employee shall have received written
notice from the Board of Directors of the Company (which notice shall include a
description of the reasons and circumstances giving rise to such notice) fifteen
(15) days prior to his termination and the Employee has failed after receipt of
such notice to satisfactorily discharge the performance of his duties hereunder
or to comply with the terms of this Agreement, as the case may be.
20
<PAGE>
The Company may for good cause terminate Employee's employment under this
Agreement without advance notice, except as otherwise specifically provided for
in subparagraphs (d) and (e) above. Termination shall not affect any of the
Company's other rights and remedies.
9. Payment of Certain Costs of Employee. If a dispute arises regarding the
interpretation or enforcement of this Agreement, all legal fees and expenses
incurred by the Employee in seeking to obtain or enforce any right or benefit
provided for in this Agreement or in otherwise pursuing his claim will be paid
by the Company, to the extent permitted by law. The Company further agrees to
pay prejudgment interest on any money judgment obtained by the Employee
calculated at the First National Bank of Chicago N.A. prime interest rate in
effect from time to time from the date that payment(s) to him should have been
made under this Agreement.
10. Mitigation. The Employee is not required to mitigate the amount of any
payments to be made by the Company pursuant to this Agreement by seeking other
employment or otherwise.
11. Successors.
(a) Except as may otherwise be provided under any other
written agreement between the Company and the Employee with respect to
the terms of Employee's employment in the event of a change of control
of the Company, the Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Employee, to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined
any successor to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this Paragraph 11
or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees
and legatees. If the Employee should die during the term hereof, the
Company shall pay an amount equal to any amounts than payable to
Employee hereunder, plus an amount equal to six months' annualized
total compensation (considering Employee's base pay and his most
recent annual bonus, if any), with all such amounts to be paid to
Employee's devisee, legatee or other designee or, if there be no such
designee, to his estate.
12. No Inconsistent Obligations. Employee represents and warrants that he
has not previously assumed any obligations inconsistent with those of this
Agreement.
13. Modification. This Agreement shall be in addition to all previous
agreements, written or oral, relating to Employee's employment by the Company,
and shall not be changed orally, but only by a written instrument to which the
Company and the Employee are both parties.
21
<PAGE>
14. Binding Effect. This Agreement and the rights and obligations hereunder
shall be binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, and shall also bind and inure to the benefit
of any successor of the Company by merger or consolidation or any assignee of
all or substantially all of its properties.
15. Bankruptcy. Notwithstanding anything in this Agreement to the contrary,
the insolvency or adjudication of bankruptcy of the Company, whether voluntary
or involuntary, shall terminate this Agreement and the rights and obligations of
Company and Employee hereunder shall be of no further force or effect.
16. Law Governing. This Agreement made, accepted and delivered in Dallas
County, Texas, is performable in Dallas County, Texas, and it shall be construed
and enforced according to the laws of the State of Texas. Venue shall lie in
Dallas County, Texas for the purpose of resolving and enforcing any dispute
which may arise under this Agreement and the parties agree that they will submit
themselves to the jurisdiction of the competent State or Federal Court situated
in Dallas County, Texas.
17. Invalid Provision. In case any one or more of the provisions contained
in this Agreement shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be impaired thereby.
22
<PAGE>
18. Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Employee:
Roland O. Burns
8430 Edgewood Cove
Frisco, Texas 75034
If to the Company:
Comstock Resources, Inc.
5005 LBJ Freeway, Suite 1000
Dallas, Texas 75244
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
EXECUTED and effective as to this 11th day of May 1998.
COMSTOCK RESOURCES, INC.
/s/M. JAY ALLISON
-----------------
M. Jay Allison
President and
Chief Executive Officer
EMPLOYEE:
/s/ROLAND O. BURNS
------------------
Roland O. Burns
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial data extracted from the
Consolidated Financial Statements of Comstock Resources, Inc. and
Subsidiaries for the three months ended March 31, 1998 and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,435
<SECURITIES> 0
<RECEIVABLES> 19,124
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,297
<PP&E> 496,335
<DEPRECIATION> (90,286)
<TOTAL-ASSETS> 430,429
<CURRENT-LIABILITIES> 23,806
<BONDS> 265,000
0
0
<COMMON> 12,109
<OTHER-SE> 113,185
<TOTAL-LIABILITY-AND-EQUITY> 430,429
<SALES> 25,442
<TOTAL-REVENUES> 25,558
<CGS> 0
<TOTAL-COSTS> 20,002
<OTHER-EXPENSES> 422
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,257
<INCOME-PRETAX> 877
<INCOME-TAX> 307
<INCOME-CONTINUING> 570
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 570
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
