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Therefore, CDC began negotiations with the bank group again to
restructure and refinance its debt. On April 13, 1984, the bank
group applied $3,126,316.96 of funds in the SCA to CDC's debt.
CDC's Activities After July 1984
On June 15, 1984, CDC entered into an equipment maintenance
and security agreement with Mr. Arnold. Under this agreement,
Mr. Arnold was responsible for the care and maintenance of CDC's
17 remaining drilling rigs and related rig equipment. The
agreement required him to provide 24-hour security for CDC's
drilling rigs and equipment in its Elk City and Owentown rig
yards. In consideration for those services, Mr. Arnold received
$19,850 per month (plus travel costs). CDC also incurred
expenses for rig watch and land rent for rigs not at the Owentown
and Elk City rig yards. All work under the equipment maintenance
and security agreement was personally supervised by Mr. Arnold
and/or his two employees, Edwin L. Arnold (Mr. Arnold's son) and
Daniel Webber. The equipment maintenance and security agreement
remained in effect from June 1984 through December 31, 1986.
After July 1984, CDC moved most of its rigs to the rig yards
it owned. Due to the high cost of moving a rig, CDC stacked four
rigs in other locations. CDC continued to provide security for
its rig yards and for the rigs it did not move. Beginning on
December 1, 1984, maintenance, security, and insurance
expenditures on CDC's rig fleet were paid out of the SCA.
In order to reach settlements with certain creditor groups
and help pay down its bank group debt, CDC needed to sell some of
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