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this account. The SCA also served as additional security for
CDC's notes payable to the bank group.
In July 1982, CDC hired William J. West, Jr., to assist with
the financial operations of CDC. CDC authorized Mr. West to
execute contracts and other instruments on behalf of CDC as
necessary to conduct the business affairs of the corporation. On
October 19, 1982, Mr. West was elected financial vice president
and assistant secretary of CDC. On September 7, 1983, CDC and
Mr. West entered into the first of a series of employment
agreements.
CDC's Operations
Before petitioner's acquisition of CDC on December 31, 1986,
CDC's main financial and accounting office was located in
Oklahoma City, Oklahoma. CDC owned and operated three rig yards
located at Owentown, Texas, Victoria, Texas, and Elk City,
Oklahoma. The Owentown rig yard was the main field operations
office of CDC, where Mr. Arnold maintained an office until
sometime in 1986.
CDC acquired working interests in oil and natural gas
properties. CDC reported income from these working interests in
the amounts of $183,408 in 1982, $68,495 in 1983, $130,900 in
1984, $60,991 in 1985, and $30,692 in 1986.
Drilling Activities
From its incorporation through July 1984, CDC drilled 48
deep wells. CDC drilled these wells primarily in Oklahoma,
Texas, and Louisiana; the wells ranged in depth from 10,000 feet
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