SECURITY AGREEMENT
This Security Agreement is made this 10th day of April, 1996 by and
between Cibola Corporation, a Wyoming corporation (the "Secured Party"),
and The Beard Company, an Oklahoma corporation (the "Debtor").
RECITALS:
WHEREAS, the Debtor is justly indebted to the Secured Party as evidenced
by that certain Nonrecourse Secured Promissory Note dated of even date herewith
in the principal amount of $1,438,560.00 (the "Note"), the proceeds of
which were used by the Debtor to acquire 144,000 shares of common stock, $0.01
par value, of the Secured Party (the "Pledged Shares");
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Debtor and the Secured Party
agree as follows:
1. Definitions. The following terms shall have the following meanings:
"Distributions" shall mean all stock dividends, liquidating dividends,
shares of stock resulting from stock splits, reclassifications, warrants,
options, noncash dividends, and other distributions on or with respect to the
Pledged Shares, whether similar or dissimilar to the foregoing, except that
Distributions shall not mean Dividends as that term is defined below.
"Dividends" shall mean cash dividends declared on or with respect to
the Pledged Shares; such term does not include any Distributions.
"Pledged Property" shall mean all the Pledged Shares and all other
instruments that are now being delivered by the Debtor to, or that may from
time to time hereafter be delivered by the Debtor to, the Secured Party or
any agent, custodian, or representative of the Secured Party pursuant to this
Security Agreement.
2. Security Interest. To secure the payment when due of principal and
interest under the Note and the performance of the Debtor's obligations under
this Security Agreement and any other agreement with the Secured Party, the
Debtor shall and hereby does, on and as of the date hereof, grant, convey,
assign, and transfer to the Secured Party a security interest in and to:
(a) the Pledged Property together with all Dividends, Distributions,
and any rights with respect thereto, and all proceeds of any of
the foregoing;
(b) all additional shares of stock of the Secured Party at any time
and from time to time acquired by the Debtor in any manner and
the certificates representing such additional shares, and also
cash, securities, dividends, rights, and other property at
any time and from time to time received, receivable, or
otherwise distributed with respect to or in exchange for any or
all of the additional shares subject to this Section 2 (b); and
(c) all other property hereafter delivered to the Secured Party in
substitution for or in addition to any of the foregoing, all
certificates and instruments representing or evidencing
such property, and all cash, securities, interest, Dividends,
Distributions, rights, and other property at any time and
from time to time received, receivable, or otherwise distributed
with respect to or in exchange for any or all thereof;
together with interest, profits, Dividends, and Distributions arising there-
from, and in the case of intangible property, all voting (provided, however,
that so long as no default exists hereunder or under the Note, the
Debtor shall have the right to vote all shares of stock that are held
as Collateral), surrender, borrowing, redemption, or similar rights, and
all accruals or increases thereof, or substitutions thereof (all such
Pledged Property, Dividends, Distributions, notes, instruments, cash,
securities, interests, rights, and other property being herein collec-
tively called the "Collateral").
3. Default.
3.1 Events of Default. Under the Note and this Security Agreement,
any one or more of the following shall constitute an "Event of Default":
(a) The Debtor shall fail to make a payment of interest or
principal on the Note when the same shall have become due;
(b) Default shall occur in the observance or performance of any
other material provision of the Note, this Security Agreement, or any other
agreement between the Debtor and the Secured Party; or
(c) The Debtor becomes insolvent or bankrupt, is generally
unable to pay debts as they become due, makes an assignment for the
benefit of creditors, causes or suffers an order for relief to be entered
against it under applicable federal bankruptcy law, or applies for or
consents to the appointment of a custodian, trustee, liquidator, or
receiver for the Debtor or for the major part of its property.
3.2 Remedies. Upon the occurrence of an Event of Default, the
Secured Party shall have all rights and remedies available to it under this
Security Agreement, the Note, and under the Uniform Commercial Code and
any other applicable law.
3.2.1 Whenever a default shall be existing, the Note,
notwithstanding any provisions thereof to the contrary, at the option
of the Secured Party and without demand or notice of any kind, be
declared, and thereupon immediately shall become, due and payable,
and the Secured Party may exercise from time to time any rights
and remedies available to it under this Security Agreement. The
Debtor hereby waives presentment, demand, protest, and any notice
(to the extent permitted by applicable law) of any kind in connection
with this Security Agreement.
3.2.2 The Secured Party shall be entitled to recover all of its
costs, including but not limited to attorneys' fees, incurred with
respect to the collection of the amounts due under the Note and under
the terms of this Security Agreement from the proceeds of the sale
of the Collateral.
3.2.3 Any proceeds of any disposition of the Collateral may be
applied by the Secured Party to the payment of expenses incurred in
connection with the Collateral, including without limitation reasonable
attorneys' fees and legal expenses, and any balance of such proceeds
may be applied by the Secured Party toward the payment of the amounts
due under the Note.
3.2.4 If any notification of intended disposition of any of
the Collateral is required by law, such notification, if mailed,
shall be deemed reasonably and properly given if mailed at least
five days before such disposition, postage prepaid, addressed to
the Debtor, either at the address of the Debtor as shown herein or at
any other address of the Debtor appearing on the records of the
Secured Party.
3.2.5 All of the Secured Party's rights and remedies expressed
hereunder are in addition to all other rights and remedies possessed
by the Secured Party, including those under any other agreement or
instrument relating to any of the liabilities or security therefor.
No delay on the Secured Party's part in the exercise of any right
or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Secured Party of any right or remedy shall preclude
other or further exercise thereof or the exercise of any right or remedy.
No action by the Secured Party permitted hereunder shall impair or affect
its rights in and to the collateral.
3.2.6 The Debtor agrees that in any sale of any of the Collateral
pursuant to a Default, the Secured Party is hereby authorized to comply
with any limitation or restriction in connection with such sale as it
may be advised by counsel as necessary in order to avoid any violation
of applicable law (including, without limitation, compliance with
such procedures as may restrict the number of prospective bidders and
purchasers, require that such prospective bidders and purchasers
have certain qualifications, and restrict such prospective bidders and
purchasers to persons who will represent and agree that they are pur-
chasing for their own account for investment and not with a view to
the distribution or resale of such Collateral), or in order to obtain
any required approval of the sale or of the purchaser by any
governmental regulatory authority or official, and the Debtor
further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable
manner, nor shall the Secured Party be liable nor accountable to the
Debtor for any discount allowed by reason of the fact that such Collateral
is sold in compliance with any such limitation or restriction.
3.2.7 No delay or omission of the Secured Party to exercise any
right, remedy or power shall impair the same or be construed to be a
waiver of any Event of Default or an acquiescence thereto. No waiver
of any Event of Default shall extend to or affect any subsequent Event
of Default or impair any rights, remedies, or powers available to
the Secured Party. The acceptance by the Secured Party at any time
and from time to time of partial payment of the Note shall not be deemed
to be a waiver of any default then existing. If any waiver is granted
by the Secured Party, it will be under no obligation to give notice to
the Debtor that future waivers will not be granted.
4. Representations and Warranties of The Debtor. To induce the Secured
Party to enter into the transactions provided for herein, the Debtor represents
and warrants to the Secured Party that:
4.1 The Debtor is duly authorized to execute and deliver this
Security Agreement and the Note and to perform all of its obligations
thereunder, including the execution, delivery, and performance of whatever
additional documents are necessary or required in connection with the
transactions that are contemplated herein.
4.2 The execution and delivery by the Debtor of this Security
Agreement and the Note and the performance by the Debtor of its obligations
under this Security Agreement and the Note do not and will not conflict with
any provision of law or of any other agreement affecting or binding upon the
Debtor.
4.3 This Security Agreement and the Note, when duly executed and
delivered, will be valid and binding obligations of the Debtor enforceable
in accordance with their respective terms, except as limited by bankruptcy,
insolvency, or other laws of general application relating to the enforcement of
creditors' rights.
5. Rights and Obligations of the Secured Party and the Debtor With
Respect to the Collateral.
5.1 Upon the occurrence of an Event of Default, the Secured Party
shall be entitled to exercise its remedies hereunder.
5.2 Upon payment in full of the Note, the security interest of
the Secured Party in the Collateral shall, without any further action on the
part of any person, thereafter terminate and be released. Further, the
Secured Party in that event agrees to execute such documents as are
requested by the Debtor to further evidence the release of this security
interest, including written releases and termination statements with respect
to the released security interest.
6. Set-off. As additional security for the payment of the Note, the
Secured Party is hereby given a pledge lien upon and a security interest
in any amounts that may be owing from time to time by the Secured Party to
the Debtor, which lien and security interest shall be independent of
and additional to the right of set-off that the Secured Party may have.
7. Notices. All notices required or permitted under this Security
Agreement must be in writing and shall be sufficient if delivered personally
or mailed by certified or registered mail, return receipt requested, to the
other party at the addresses set forth below:
Secured Party: Cibola Corporation
c/o CT Corporation System
1720 Carey Avenue
Cheyenne, Wyoming 82001
Debtor: The Beard Company
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, Oklahoma 73112
Attention: Herb Mee, Jr.
8. Governing Law; Interpretation. This Security Agreement shall be
construed, enforced, and governed in accordance with the laws of the State
of Wyoming. Wherever possible each provision of this Security Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement was negotiated and prepared by both
parties with advice of counsel to the extent deemed necessary by each
party, and was not prepared by one party to the exclusion of the other.
Accordingly, it should not be interpreted or construed against a party
by reason of that party's participation in its preparation.
9. Headings. The descriptive headings contained in this Security
Agreement are for reference purposes only and are not intended to interpret,
define, or limit the scope, extent, or intent of this Security Agreement
or any provision contained herein.
10. Amendment; Waiver. This Security Agreement may only be amended
by a written agreement signed by all of the parties hereto. A waiver of
a breach of any provision of this Security Agreement by any party shall
not operate or be construed as a waiver of any subsequent breach.
11. Assignment. This Security Agreement shall be binding upon all
parties, and their successors and assigns.
12. Severability. If any provision of this Security Agreement as
applied to any party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Security Agreement or the validity or
enforceability of this Security Agreement.
13. Counterparts. This Security Agreement may be executed in
counterparts, each of which will be deemed an original.
14. Rights Cumulative. All rights and remedies with respect to the
subject matter hereof, whether evidenced hereby or by any other agreement,
instrument, or paper, will be cumulative, and may be exercised separately or
concurrently.
15. Entire Agreement. The parties herein have not made any representa-
tions, warranties, or covenants not set forth with respect to this subject
matter hereof, and this Security Agreement constitutes the entire agreement
between them with respect to the subject matter hereof.
16. Further Instruments. The parties agree to execute any financing
statements and all such other and further instruments and documents and to take
any and all such further actions reasonably required to effectuate this
Security Agreement, and the intents and purposes hereof.
IN WITNESS WHEREOF, the parties have executed this Security Agreement
on the date first written above.
Secured Party: CIBOLA CORPORATION
By: MICHAEL C. BLACK
Michael C. Black, President
Debtor: THE BEARD COMPANY
By: HERB MEE, JR.
Herb Mee, Jr., President