Exhibit 10(c)
Bonray/MEL
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is executed and delivered this 31st day of
March, 1995, by BONRAY DRILLING CORPORATION, an Oklahoma corporation
("Debtor"), in favor of M.E.L. OIL & GAS CORPORATION, an Oklahoma corporation
("Secured Party"), with reference to the following:
A. Pursuant to a certain Agreement of Purchase and Sale (the
"Purchase Agreement") of even date between Debtor and Secured Party, Secured
Party agreed to sell certain drilling equipment to Debtor for cash and a
purchase money secured loan (the "Loan").
B. The Loan is evidenced by a promissory note of Debtor of even
date herewith, in the aggregate principal amount of $828,050 (the "Note") and
is secured by certain drilling equipment.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Debtor and Secured Party agree as
follows:
1. Security Interest. Debtor does hereby grant, bargain, sell, and
convey unto Secured Party a security interest in and to the Category One
Equipment and the Category Two Equipment described on Exhibit A to the Purchase
Agreement, together with all proceeds and products thereof and replacements
therefor (the "Collateral").
2. Obligations Secured. The security interest created hereby is
given to secure the due, punctual, and complete performance by Debtor of all
of Debtor's obligations under the Note and hereunder.
3. Sale or Encumbrance. Except as consented to in writing by the
Secured Party, Debtor shall neither (a) create or permit the existence of
any lien, encumbrance, or security interest of any kind on any of the Col-
lateral, nor (b) sell, transfer, lease, or otherwise dispose of the
Collateral.
4. Insurance. Debtor shall continuously maintain insurance on
the Collateral consistent with Debtor's existing policies on its other drilling
equipment with loss payable clause in favor of Secured Party.
5. Representations and Warranties. Debtor represents and warrants
to Secured Party as follows:
5.1 Debtor's Place of Business. Debtor's principal place of
business and the location of its chief executive office (and the place where
all books and records relating to the Collateral are maintained) is set forth
below the signature of the Debtor at the end of this Security Agreement.
The Debtor will not change the principal place of business, its name, or
the place where its books and records relating to the Collateral are maintained
without at least 10 days prior written notice to Secured Party.
5.2 Financing Statements. Debtor shall execute and deliver
to Secured Party such financing statements, continuation statements, certifi-
cates, and other documents or instruments as Secured Party shall require to en-
able Secured Party to perfect or from time to time renew the security interest
created hereby including, without limitation, such financing statements,
certificates, and other documents as Secured Party shall require to
perfect the security interest created hereby in the Collateral or in any
replacements or proceeds of the Collateral.
5.3 Location of Collateral. Debtor shall not permit any of
the Collateral to be removed from the State of Oklahoma without the prior
written consent of Secured Party; provided, however, Debtor may move the Col-
lateral to the Texas panhandle for a period not exceeding six months.
6. Waiver. No waiver or modification by Secured Party of any of
the terms and conditions hereof shall be effective unless reduced to writing
and signed by Secured Party. No waiver or indulgence by Secured Party as to
any required performance by Debtor hereunder shall constitute a waiver as to
any subsequent required performance or any other obligation of Debtor
hereunder.
7. Performance by Secured Party. If Debtor at any time fails to
perform any obligation for which it is obligated hereunder, including, without
limitation, any payment of taxes, insurance premiums, or other sums of money
required to be paid hereunder, Secured Party may, but shall be under no obli-
gation to do so, pay such amount as is required to be paid, in which event
Secured Party shall be immediately reimbursed therefore by Debtor. Such
amounts paid by Secured Party shall be deemed a portion of the indebtedness
secured hereby, and such items shall bear interest from the date incurred by
Secured Party until paid by Debtor at the rate specified in the Notes for
interest accruing after an Event of Default. The accrual of interest hereunder
shall not prejudice any other remedies that may be available to Secured Party
hereunder.
8. Default. Debtor shall be in default hereunder in the event
Debtor is in default under the Note or if Debtor fails to perform any obliga-
tion required to be performed hereunder. The occurrence of any such events
shall herein be referred to as an "Event of Default."
9. Remedies. If an Event of Default occurs, Secured Party shall
have all remedies available under law. Without limitation of the foregoing, at
the request of Secured Party, Debtor shall assemble the Collateral and make it
available to Secured Party at a place designated by Secured Party reasonably
convenient to both parties. Debtor acknowledges that a period of ten days
from the time the notice is sent shall be a reasonable period for notifica-
tion of any sale or other disposition of Collateral by or for the Secured
Party. Debtor shall pay, on demand, all expenses reasonably incurred by
Secured Party in protecting, preserving, storing, and selling the Collateral.
If this Security Agreement or any obligation secured by it is referred to
an attorney for protecting, defending, or enforcing the provisions thereof,
Debtor shall pay attorneys' fees, expenses of title search, and all court costs
and costs of public officials and all costs (including, but not limited to,
attorneys' fees and expenses) incurred by Secured Party in the taking posses-
sion of, preservation, maintenance, and sale of the Collateral, which
amounts shall be deemed a portion of the indebtedness secured hereby. Any
and all such items shall bear interest from the date incurred by Secured Party
until repaid by Debtor at the rate specified in the Notes for interest accruing
after an Event of Default.
10. Notices. All notices, requests, demands, instructions, and other
communications called for hereunder or contemplated hereby shall be given in
the manner and to the addresses set forth in the Purchase Agreement.
11. Whole Agreement; No Oral Modification. This Agreement may not
be modified except by an instrument in writing signed by the parties hereto.
12. Remedies Cumulative. The various rights, powers, elections,
and remedies of the parties hereto shall be considered as cumulative and no one
of them is exclusive of the others or exclusive of any right or remedy allowed
by law, and no right shall be exhausted by being exercised on one or more
occasions.
13. Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
14. Section Headings. The section headings in this Agreement are
for convenient reference only and shall not in any way affect the meaning or
interpretation of this Agreement.
EXECUTED AND DELIVERED the day and year first written above.
BONRAY DRILLING CORPORATION
By /s/ Richard G. Hefner
----------------------------
Richard B. Hefner, President
"Debtor"
Address:
4701 N.E. 23rd Street
Oklahoma City, Oklahoma 73140