Audit Committee

AUDIT COMMITTEE CHARTER

General

The board of directors ("Board") of Comstock Resources, Inc. (the "Company") has established a committee of the board known as the audit committee (the "Audit Committee"). The purpose of this Amended and Restated Charter (the "Charter") is to specify the governance and the powers and responsibilities of the Audit Committee.

Audit Committee's Purpose

The Audit Committee is appointed by the Board to assist the Board in monitoring (1) the integrity of the financial statements of the Company, (2) the independent auditor's qualifications and independence, (3) the performance of the Company's internal audit function and independent auditors, (4) the compliance by the Company with legal and regulatory requirements and (5) the Company's accounting and financial reporting processes and audits of the Company's financial statements.

The Audit Committee shall prepare or cause the preparation of the report required by the rules of the Securities and Exchange Commission (the "SEC") to be included in the Company's annual proxy statement.  The Audit Committee shall also prepare or cause the preparation of any reports or other communications with regulators or market intermediaries required by the rules of the Commodity Futures Trading Commission (the “CFTC”), whether adopted in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) or otherwise,  in relation to the Company’s derivative contracts.

Audit Committee Membership

The Audit Committee shall consist of no fewer than three members. The members of the Audit Committee shall meet the independence and experience requirements of the New York Stock Exchange, Section 10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the Commission. At least one member of the Audit Committee shall be an "audit committee financial expert" as defined by the rules and regulations of the Commission. Audit Committee members shall not simultaneously serve on the audit committees of more than two other public companies without prior Board approval. All members of the Audit Committee shall be "financially literate" and have a working familiarity with basic finance and accounting practices. The members of the Audit Committee shall be appointed by the Board on the recommendation of the Corporate Governance/Nominating Committee and shall serve for a period of one year or until such time as his or her successor has been duly named or until such member's earlier resignation, death or removal. The Audit Committee shall have a chairman who shall be designated from among its membership by the Board and who shall preside at meetings of the Audit Committee. In the event that the Board fails to select a chairman, then the members of the Audit Committee shall select a chairman. Audit Committee members may be removed (with or without a cause) and replaced by the Board.

Meetings

The Audit Committee shall meet as often as it determines is necessary to carry out its duties and responsibilities, but not less frequently than quarterly. The Audit Committee shall meet periodically with management, the internal auditors and the independent auditor in separate executive sessions. The Audit Committee may request any officer or employee of the Company or the Company's outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.

The chairman of the Audit Committee shall designate a person who need not be a member thereof to act as secretary and minutes of its proceedings shall be kept in minute books provided for that purpose. The agenda of each meeting will be prepared by the secretary and, whenever reasonably practicable, circulated to each member prior to each meeting.

Committee Authority and Responsibilities

The Audit Committee shall have the sole authority to appoint or replace the independent auditor (subject, if applicable, to shareholder ratification). The Audit Committee shall be solely and directly responsible for the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work, and shall have sole power to approve all audit engagement fees and terms. The independent auditor shall report directly to the Audit Committee.

The Audit Committee shall preapprove all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent auditor. Notwithstanding the foregoing sentence, pre-approval shall be required if: (i) the aggregate amount of non-audit services is less than the lesser of: (A) 5% of the total amount paid by the Company to the auditor during the fiscal year in which the non-audit services are provided, or (B) $10,000 during such fiscal year, (ii) such services were not recognized by the Company as non-audit services at the time of the engagement, and (iii) such services are promptly brought to the attention of the Audit Committee and, prior to the completion of the audit, are approved by the Audit Committee or by one or more Audit Committee members who have been delegated authority to grant such approvals. The Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant preapprovals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant preapprovals shall be presented to the full Audit Committee at its next scheduled meeting.

The Audit Committee shall have the sole authority to review and approve the Company’s use of derivatives and swaps as part of a strategy to hedge or mitigate risks to the Company’s business of producing and selling crude oil and natural gas arising from fluctuations in the market prices of these commodities.  The Audit Committee shall have the authority, without prior Board approval, to evaluate and preapprove the entry by the Company into all derivative transactions, including transactions that may be subject to the swap regulations under the Dodd-Frank Act and others that may be exempt or excluded from those regulations.  With respect to derivative transactions involving “swaps,” as defined under the Dodd-Frank Act, the authority of the Audit Committee shall include the authority to review and approve the entry by the Company into transactions that are exempt from both the mandatory swap clearing and the mandatory swap execution requirements imposed by Sections 2(h)(1) and 2(h)(8), respectively, of the Commodity Exchange Act (as it may be amended from time to time, the “CEA”) under the Dodd-Frank Act because the Company qualifies for the exception to such mandatory swap clearing and execution requirements (the “End-User Exception”) contained in Section 2(h)(7) of the CEA based on the criteria set forth therein.  The Audit Committee shall have the authority, in its discretion, to review and approve swap transactions eligible for the End-User Exception on an individual basis, as they are entered into, or, as permitted by the CEA, on a “blanket” basis for a period of no more than 365 days from the date of the election to use the Exception for such swaps.

The Audit Committee shall have the authority without prior Board approval, to the extent it deems necessary or appropriate, to retain (and approve compensation of) independent legal, accounting or other advisors. The Company shall provide for appropriate funding, as determined by the Audit Committee, for payment of compensation to the independent auditor for the purpose of rendering or issuing an audit report and to any advisors employed by the Audit Committee.

The Audit Committee shall make regular reports to the Board. The Audit Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. The Audit Committee shall annually review the Audit Committee's own performance and self-evaluate its own effectiveness. The Audit Committee, to the extent it deems necessary or appropriate, shall also:

In the event the Company’s use of derivatives as part of a hedging strategy is altered following a review and reauthorization by the Audit Committee of a blanket approval of uncleared swap transactions, the Audit Committee shall reevaluate its decision to grant blanket approval of these transactions in order to confirm that such blanket approval is  still appropriate and is consistent with the Company’s election of the End-User Exception and its use of derivatives generally.

1. Review and discuss with management and the independent auditor the annual audited financial statements, including disclosures made in management's discussion and analysis, and recommend to the Board whether the audited financial statements should be included in the Company's Form 10-K.
2. Review and discuss with management and the independent auditor the Company's quarterly financial statements prior to the filing of its Form 10-Q, including the results of the independent auditor's review of the quarterly financial statements.
3. Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of the Company's financial statements, including any significant changes in the Company's selection or application of accounting principles, any major issues as to the adequacy of the Company's internal controls and any special steps adopted in light of material control deficiencies.
4. Review and discuss quarterly reports from the independent auditors on:
   1. All critical accounting policies and practices to be used.
   2. All alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor.
   3. Other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
5. Discuss with management the Company's earnings press releases, including the use of "pro forma" or "adjusted" non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies. Such discussion may be done generally (consisting of discussing the types of information to be disclosed and the types of presentations to be made).
6. Discuss with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Company's financial statements.
7. Discuss with management the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company's risk assessment and risk management policies.
8. Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.
9. Review disclosures made to the Audit Committee by the Company's Chief Executive Officer and Chief Financial Officer during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company's internal controls. Review and discuss any significant changes in internal controls with the Chief Financial Officer and Chief Executive Officer.
10. Review and evaluate the lead partner of the independent auditor team.
11. Obtain and review a report from the independent auditor at least annually regarding (a) the independent auditor's quality-control procedures, (b) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (c) any steps taken to deal with any such issues, and (d) all relationships between the independent auditor and the Company. Evaluate the qualifications, performance and independence of the independent auditor, including considering whether the auditor's quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor's independence, taking into account the opinions of management and internal auditors. The Audit Committee shall present its conclusions with respect to the independent auditor to the Board.
12. Ensure the rotation of the audit partners as required by applicable laws and regulations. Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the independent auditing firm on a regular basis.
13. Recommend to the Board policies for the Company's hiring of employees or former employees of the independent auditor who participated in any capacity in the audit of the Company.
14. Discuss with the national office of the independent auditor issues on which they were consulted by the Company's audit team and matters of audit quality and consistency.
15. Meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit.
16. Review the appointment and replacement of any internal auditing personnel.
17. Review the significant reports to management prepared by the internal auditing department and management's responses.
18. Discuss with the independent auditor and management the internal audit department responsibilities, budget and staffing and any recommended changes in the planned scope of the internal audit.
19. Review with the independent auditor any difficulties the auditor encountered in the course of its audit work (including any restrictions on the scope of the auditor's activities or on access to any information, and any significant disagreements with management) and management's responses thereto.
20. Obtain from the independent auditor assurance that Section 10A(b) of the Exchange Act has not been implicated, in that such independent auditor has not detected or otherwise become aware of information indicating an illegal act (whether or not it may have a material effect on the Company's financial statements) has or may have occurred, or if such illegal acts have or may have occurred, then the Audit Committee shall have received assurance from the independent auditor that the procedures, notices and resignations (as appropriate) contained in Section 10A(b) of the Exchange Act have been complied with by the independent auditor.
21. Obtain reports from management, the Company's internal audit staff and the independent auditor to the effect that none of these persons have any information or knowledge indicating that the Company is not in conformity with applicable legal requirements and the Company's Code of Ethics for Senior Financial Officers and its Code of Business Conduct and Ethics. Review reports and disclosures of insider and affiliated party transactions. Advise the Board with respect to the Company's policies and procedures regarding compliance with applicable laws and regulations and with the Company's Code of Ethics for Senior Financial Officers and its Code of Business Conduct and Ethics.
22. Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
23. Discuss with management and the independent auditor any correspondence with regulators or governmental agencies and any published reports which raise material issues regarding the Company's financial statements or accounting policies.
24. Discuss with the Company's outside legal counsel, to the extent deemed appropriate, matters that may have a material impact on the financial statements or the Company's compliance policies.
25. Receive and appropriately act upon any reports or disclosures from the Company's outside legal counsel as may be required by Section 307 of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated by the Commission thereunder, if any.
26. Review, and discuss with management, at least once a year, the Company’s current hedging strategy to evaluate the effectiveness of that strategy and determine whether any changes should be made, including the Company’s use of swaps and other derivatives, the types and attributes of those transactions (including the advisability of entering into uncleared swaps not executed on an exchange), and whether any blanket approval of uncleared swap transactions remains appropriate to the implementation of the Company’s hedging strategy or whether the Audit Committee should approve uncleared swaps, instead, on a case-by-case basis, as part of the Company’s overall use of derivatives.
27. Review and confirm, at least annually, that the nature of the Company’s business activities and its use of swaps and other derivatives as a tool to mitigate or hedge the commercial risks inherent in its business satisfy the eligibility requirements contained in the CEA for election by the Company of the End-User Exception that will permit the Company to enter into uncleared swaps not executed on a board of trade designated as a derivatives contract market or a swap execution facility that is registered or exempt from registration under the Dodd-Frank Act.
28. With respect to the Company’s currently effective and reasonably anticipated swap transactions, review and confirm, at least annually, that the Company continues to qualify as an “eligible contract participant,” as defined in Section 1.a (18) of the CEA, as required under the Dodd-Frank Act.
29. With respect to derivative transactions treated as “swaps” and subject to the Dodd-Frank Act, develop with management and, if appropriate, the Company’s outside legal counsel, procedures for the timely provision to the Company’s swap counterparties, the CFTC, any appropriate swap data repository or any other relevant swap market intermediary of information required to be furnished in connection with the Company’s election to use the End-User Exception and its satisfaction of the reporting and recordkeeping requirements for swap transactions imposed by the Dodd-Frank Act.  Such procedures may include, but shall not be limited to, obtaining a “legal entity identifier” for the Company for purposes of reporting on its swaps and participating in the ISDA August 2012 DF Protocol (as it may be amended, supplemented or restated from time to time) that has been created by the International Swaps and Derivatives Association, Inc. (“ISDA”) to provide certain standardized amendments to existing ISDA swap documentation to assist swap market participants in complying with various directives of the Dodd-Frank Act.
30. Discuss with the Company’s outside legal counsel, to the extent deemed appropriate, any correspondence with regulators in connection with its entry into derivative transactions, including swaps, and the Company’s compliance with the requirements of the Dodd-Frank Act, the CEA and the federal securities laws relating to its use of derivatives.

Limitation of Audit Committee's Role

While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to (i) plan or conduct audits, (ii) determine that the Company's financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations or (iii) fairly present the Company's financial condition, results of operations and cash flow. These are the responsibilities of management and/or the independent auditor. Further, management is responsible for implementing adequate internal accounting and disclosure controls and procedures and for preparing the Company's financial statements.