Exhibit 10.3

 

Execution Version

 

 

 

 

Reference is made to the Intercreditor Agreement, dated as of June 10, 2015,
between Royal Bank of Canada, as Priority Lien Agent (as defined therein), and
U.S. Bank National Association, as Second Lien Collateral Trustee (as defined
therein) and acknowledged and agreed by SandRidge Energy, Inc. and certain of
its subsidiaries (as amended, supplemented, amended and restated or otherwise
modified and in effect from time to time, the “Intercreditor Agreement”).  Each
Person that is secured hereunder, by accepting the benefits of the security
provided hereby, (i) consents (or is deemed to consent), to the subordination of
Liens provided for in the Intercreditor Agreement, (ii) agrees (or is deemed to
agree) that it will be bound by, and will take no actions contrary to, the
provisions of the Intercreditor Agreement, (iii) authorizes (or is deemed to
authorize) the Second Lien Collateral Trustee (as defined in the Intercreditor
Agreement) on behalf of such Person to enter into, and perform under, the
Intercreditor Agreement and (iv) acknowledges (or is deemed to acknowledge) that
a copy of the Intercreditor Agreement was delivered, or made available, to such
Person.

 

Notwithstanding any other provision contained herein, this Agreement, the Liens
created hereby and the rights, remedies, duties and obligations provided for
herein are subject in all respects to the provisions of the Intercreditor
Agreement and, to the extent provided therein, the applicable Security Documents
(as defined in the Intercreditor Agreement).  In the event of any conflict or
inconsistency between the provisions of this Agreement and the Intercreditor
Agreement, the provisions of the Intercreditor Agreement shall control.

 

 

 

 

SECURITY AGREEMENT

 

 

dated as of June 10, 2015

 

from

 

the Grantors referred to herein,

 

to

 

U.S. Bank National Association,
as Collateral Trustee

 

 

 

 

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Table of Contents

 

 

 

Page

 

 

 

Section 1.

Terms Generally

2

Section 2.

Grant of Security

2

Section 3.

Security for Notes Obligations

4

Section 4.

Grantors Remain Liable

4

Section 5.

Delivery and Control of Security Collateral

4

Section 6.

Maintaining Deposit and Securities Accounts

6

Section 7.

Representations and Warranties

7

Section 8.

Further Assurances

8

Section 9.

Collections on Receivables and Related Contracts

10

Section 10.

As to Intellectual Property

10

Section 11.

Voting Rights; Dividends; Etc.

10

Section 12.

Additional Shares

11

Section 13.

Collateral Trustee Appointed Attorney-in-Fact

11

Section 14.

Collateral Trustee May Perform

12

Section 15.

The Collateral Trustee’s Duties

12

Section 16.

Remedies

13

Section 17.

Subordination of Liens

15

Section 18.

Amendments; Waivers; Additional Grantors; Etc.

15

Section 19.

Notices, Etc.

15

Section 20.

Continuing Security Interest; Assignments under the Indenture and the Collateral
Trust Agreement

15

Section 21.

Release

16

Section 22.

Terms Generally; References and Titles

16

Section 23.

Execution in Counterparts

17

Section 24.

Governing Law

17

Section 25.

Consent to Jurisdiction

17

Section 26.

Waiver of Jury Trial

18

Section 27.

Intercreditor Agreement

18

 

Schedules and Exhibits

 

Schedule I

 

Location, Type of Organization, Jurisdiction of Organization and Organizational
Identification Number; Changes Within Last Five Years

Schedule II

 

Pledged Equity

 

 

 

Exhibit A

 

Form of Security Agreement Supplement

 

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SECURITY AGREEMENT

 

SECURITY AGREEMENT (this “Agreement”) dated as of June 10, 2015 made by
SANDRIDGE ENERGY, INC., a Delaware corporation (the “Company”), the other
Persons listed on the signature pages hereof and the Additional Grantors (as
defined in Section 18) (the Company, the Persons so listed and the Additional
Grantors being collectively the “Grantors”), to U.S. BANK NATIONAL ASSOCIATION,
as collateral trustee (the “Collateral Trustee”) for the Secured Parties (as
hereinafter defined)).

 

PRELIMINARY STATEMENTS

 

(1)                                 The Grantors have entered into (i) that
certain Indenture, dated as of June 10, 2015 (as amended, supplemented, or
otherwise modified from time to time, the “Indenture”; capitalized terms defined
therein and not otherwise defined herein being used herein as therein defined)
by and among the Company, the guarantors party thereto and U.S. Bank National
Association, as trustee (together with its successors in such capacity, the
“Trustee”), on behalf of the holders (the “Holders”) of the Notes (as defined
below) pursuant to which the Company is issuing $1,250,000,000 in aggregate
principal amount of its 8.75% Senior Secured Notes due 2020 (the “Notes”) and
(ii) that certain Collateral Trust Agreement, dated as of June 10, 2015 (as
amended, restated, supplemented, or otherwise modified from time to time, the
“Collateral Trust Agreement”; capitalized terms defined therein and not
otherwise defined herein or in the Indenture being used herein as therein
defined) by and among the Company, the guarantors party thereto and U.S. Bank
National Association, as Trustee and as Collateral Trustee.

 

(2)                                 Each Grantor (other than the Company) has
jointly and severally guaranteed on a senior secured basis the payment when due
of all Secured Obligations (as hereinafter defined) owed to the Holders under
the Indenture in accordance with the Collateral Trust Agreement.

 

(3)                                 The Grantors are entering into this
Agreement in order to grant to the Collateral Trustee for the ratable benefit of
(a) the Collateral Trustee, (b) the Holders as the initial Parity Lien Secured
Parties (as defined in the Collateral Trust Agreement) hereunder and (c) all
other Parity Lien Secured Parties from time to time pursuant to the Collateral
Trust Agreement ((a), (b) and (c), collectively, the “Secured Parties”) a
security interest in the Collateral (as hereinafter defined) to secure the
payment and performance in full when due of the Parity Lien Obligations (as
defined in the Collateral Trust Agreement).

 

(4)                                 Each Grantor is the owner of the shares of
stock or other equity interests (the “Initial Pledged Equity”) set forth
opposite such Grantor’s name on and as otherwise described in Schedule II hereto
and issued by the Persons named therein.

 

(5)                                 Each Grantor will derive substantial direct
and indirect benefit from the execution, delivery and performance of their Notes
Obligations under the Indenture, the Notes and the other Note Documents and
their other Parity Lien Obligations under the other Parity Lien Documents (as
defined in the Collateral Trust Agreement) from time to time, and each is,
therefore, willing to execute and deliver this Agreement.

 

NOW, THEREFORE, in consideration of the premises and in order to induce the
Holders to purchase the Notes and in order to induce the other Parity Lien
Secured Parties from time to time to make extensions of credit pursuant to the
other Parity Lien Documents from time to time, each Grantor agrees with the
Collateral Trustee for the ratable benefit of the Secured Parties as follows:

 

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Section 1.                                           Terms Generally.

 

(a)                                 Unless otherwise defined in this Agreement,
the Indenture, or the Collateral Trust Agreement, terms defined in Article 8 or
9 of the UCC (as defined below) and/or in the Federal Book Entry Regulations (as
defined below) are used in this Agreement as such terms are defined in such
Article 8 or 9 and/or the Federal Book Entry Regulations. “UCC” means the
Uniform Commercial Code as in effect, from time to time, in the State of New
York; provided that, if perfection or the effect of perfection or non-perfection
or the priority of any security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
New York, “UCC” means the Uniform Commercial Code as in effect from time to time
in such other jurisdiction for purposes of the provisions hereof relating to
such perfection, effect of perfection or non-perfection or priority. “Federal
Book Entry Regulations” means (a) the federal regulations contained in Subpart B
(“Treasury/Reserve Automated Debt Entry System (TRADES)”) governing book-entry
securities consisting of U.S. Treasury bonds, notes and bills and Subpart D
(“Additional Provisions”) of 31 C.F.R. Part 357, 31 C.F.R. § 357.2, § 357.10
through § 357.14 and § 357.41 through § 357.44 and (b) to the extent
substantially identical to the federal regulations referred to in clause
(a) above (as in effect from time to time), the federal regulations governing
other book-entry securities.

 

(b)                                 The following terms shall have the following
meanings:

 

“Collateral Trust Agreement” has the meaning set forth in the preliminary
statements hereto.

 

“Discharge of Priority Lien Obligations” has the meaning set forth in the
Intercreditor Agreement.

 

“Intercreditor Agreement” has the meaning set forth in the legend appearing on
the first page of this Agreement above the preamble.

 

“Priority Lien Documents” has the meaning set forth in the Intercreditor
Agreement.

 

“Priority Lien Representative” has the meaning set forth in the Intercreditor
Agreement.

 

“Required Parity Lien Debtholders” has the meaning set forth in the Collateral
Trust Agreement.

 

Section 2.                                           Grant of Security.  Each
Grantor grants to the Collateral Trustee, for the ratable benefit of the Secured
Parties, a security interest in such Grantor’s right, title and interest in and
to the following, in each case, as to each type of property described below,
whether now owned or hereafter acquired by such Grantor, wherever located, and
whether now or hereafter existing or arising (collectively, the “Collateral”):

 

(a)                                 all Equipment;

 

(b)                                 all Inventory:

 

(c)                                  all Accounts, Chattel Paper (including
tangible chattel paper and electronic chattel paper), Instruments (including
promissory notes), Securities Accounts, General Intangibles (including payment
intangibles, hedging agreements and rights as administrative agent or other
agent under any loan agreements relating to Pledged Debt (as defined below)) and
all Supporting Obligations (any and all of such Accounts, Chattel
Paper, Instruments, General Intangibles and other obligations, to the extent not
referred to in clause (d), (e) or (f) below, being the “Receivables”, and any
and all such Supporting Obligations, Security Documents, Liens, leases, letters
of credit and other contracts being the “Related Contracts”);

 

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(d)                                 the following (the “Security Collateral”):

 

(i)                                     the Initial Pledged Equity and the
certificates, if any, representing the Initial Pledged Equity, and all
dividends, distributions, return of capital, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Initial Pledged Equity and all
subscription warrants, rights or options issued thereon or with respect thereto;

 

(ii)                                  all additional shares of stock and other
equity interests in Restricted Subsidiaries, from time to time acquired by such
Grantor in any manner (such shares and other equity interests, together with the
Initial Pledged Equity, being the “Pledged Equity”), and the certificates, if
any, representing such additional shares or other equity interests, and all
dividends, distributions, return of capital, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares or other equity
interests and all subscription warrants, rights or options issued thereon or
with respect thereto;

 

(iii)                               all Indebtedness from time to time owed to
such Grantor (such Indebtedness, the “Pledged Debt”) and the instruments, if
any, evidencing such Indebtedness, and all interest, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such Indebtedness; and

 

(iv)                              all other Investment Property (including all
(A) Securities, whether Certificated Securities or Uncertificated Securities,
(B) Security Entitlements, (C) Securities Accounts, (D) Commodity Contracts and
(E) Commodity Accounts) in which such Grantor has now, or acquires from time to
time hereafter, any right, title or interest in any manner, and the certificates
or instruments, if any, representing or evidencing such investment property, and
all dividends, distributions, return of capital, interest, distributions, value,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
investment property and all subscription warrants, rights or options issued
thereon or with respect thereto;

 

(e)                                  all Deposit Accounts;

 

(f)                                   all intellectual property:

 

(g)                                  all Documents (other than title documents
with respect to vessels or vehicles);

 

(h)                                 all books and records (including customer
lists, credit files, printouts and other computer output materials and records)
of such Grantor pertaining to any of the Collateral; and

 

(i)                                     all proceeds of, collateral for, income,
royalties and other payments now or hereafter due and payable with respect to,
and Supporting Obligations relating to, any and all of the Collateral (including
proceeds, collateral and Supporting Obligations that constitute property of the
types described in clauses (a) through (g) of this Section 2 and this clause
(i)) and, to the extent not otherwise included, all (A) payments under insurance
(whether or not the Collateral Trustee is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral, (B) tort claims,
including all Commercial Tort Claims and (C) cash;

 

provided that the following property is excluded from the foregoing security
interests and shall not constitute “Collateral”: (A) voting equity interests in
any Person that is a controlled foreign corporation under Section 957 of the
Internal Revenue Code of 1986 (a “CFC”), to the extent (but only to the extent)

 

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required to prevent the Collateral from including more than 66% of all voting
equity interests in such CFC, (B) Equipment leased by a Grantor under a lease or
otherwise financed pursuant to a purchase-money financing arrangement that
prohibits the granting of a Lien on such Equipment, (C) any general intangible,
investment property or other rights arising under any contract, instrument,
license or other document or under any law, regulation, permit, order or decree
of any governmental authority if (but only to the extent that) the grant of a
security interest therein would constitute a violation of a legally effective
restriction in respect of such general intangible, investment property or other
rights in favor of a third party, unless and until all required consents shall
have been obtained (for the avoidance of doubt, the restrictions described
herein are not negative pledge or similar undertakings in favor of a lender or
other financial counterparty), (D) equity interests in Cholla Pipeline,
LP, Integra Energy, L.L.C. and Sagebrush Pipeline, LLC unless and until any
requisite consent of other holders of equity interests therein are obtained,
(E) to the extent that (and only to the extent that) the grant of a security
interest therein would constitute a material violation of applicable law, any
other property (any and all such excluded property being the “Excluded
Property”) and (F) any assets or property that is provided to issuers of letters
of credit pursuant to the Priority Lien Documents rather than generally to the
holders of Priority Lien Obligations or to the Priority Lien Collateral Agent
for the benefit of the holders of the Priority Lien Obligations as a whole. 
Notwithstanding anything to the contrary herein, none of the covenants or
representations and warranties herein shall apply or be deemed to apply to any
assets or property constituting Excluded Property. Each Grantor shall, if
requested to do so by the Collateral Trustee in its sole discretion or at the
direction of the Required Parity Lien Debtholders pursuant to the Collateral
Trust Agreement, use commercially reasonable efforts to obtain any such required
consent that is reasonably obtainable with respect to Collateral which the
Collateral Trustee reasonably determines to be material.

 

Section 3.                                           Security for Notes
Obligations.  This Agreement secures, in the case of each Grantor, the payment
of all Parity Lien Obligations of any Grantor (all such Parity Lien Obligations
being the “Secured Obligations”).

 

Section 4.                                           Grantors Remain Liable. 
Anything herein to the contrary notwithstanding:

 

(a)                                 each Grantor shall remain liable under the
contracts and agreements included in such Grantor’s Collateral to the extent set
forth therein to perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed;

 

(b)                                 the exercise by the Collateral Trustee of
any of the rights hereunder shall not release any Grantor from any of its duties
or obligations under the contracts and agreements included in the Collateral;
and

 

(c)                                  no Secured Party shall have any obligation
or liability under the contracts and agreements included in the Collateral by
reason of this Agreement or any other Parity Lien Document, nor shall any
Secured Party be obligated to perform any of the obligations or duties of any
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.

 

Section 5.                                           Delivery and Control of
Security Collateral.  (a)  Subject to Section 5(i) below and the Intercreditor
Agreement, all certificates or instruments representing or evidencing Security
Collateral shall be delivered to and held by or on behalf of the Collateral
Trustee pursuant hereto and shall be in suitable form for transfer by delivery,
or shall be accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance satisfactory to the Collateral Trustee. 
Subject to the Intercreditor Agreement, the Collateral Trustee shall have the
right, at any time in its discretion and without notice to any Grantor, to
transfer to or to register in the name of the Collateral Trustee or any of its
nominees any or all of the Security Collateral, subject only to the revocable
rights specified in Section 11(a).  In addition, subject to the Intercreditor
Agreement, the Collateral Trustee shall have the right, upon

 

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the occurrence and during the continuance of an Event of Default to exchange
certificates or instruments representing or evidencing Security Collateral for
certificates or instruments of smaller or larger denominations.

 

(b)                                 Subject to Section 5(i) below and the
Intercreditor Agreement, with respect to any Security Collateral in which any
Grantor has any right, title or interest and that constitutes an uncertificated
security, such Grantor will cause the issuer thereof either:

 

(i)                                     to register the Collateral Trustee as
the registered owner of such security or

 

(ii)                                  to agree in an authenticated record with
such Grantor and the Collateral Trustee that such issuer will comply with
instructions with respect to such security originated by the Collateral Trustee
without further consent of such Grantor, such authenticated record to be in form
and substance satisfactory to the Collateral Trustee.

 

With respect to any Security Collateral in which any Grantor has any right,
title or interest and that is not an uncertificated security, upon the request
of the Collateral Trustee in its sole discretion or at the direction of the
Required Parity Lien Debtholders pursuant to the Collateral Trust Agreement,
such Grantor will notify each such issuer of Pledged Equity that such Pledged
Equity is subject to the security interest granted hereunder. Each Grantor that
is the issuer of any Security Collateral or Pledged Equity belonging to another
Grantor acknowledges the security interest granted hereunder in such Security
Collateral and will take the actions described above in this subsection (b).

 

(c)                                  Subject to Section 5(i) below and the
Intercreditor Agreement, with respect to any Security Collateral in which any
Grantor has any right, title or interest and that constitutes a security
entitlement in which the Collateral Trustee is not the entitlement holder, such
Grantor will cause the securities intermediary with respect to such security
entitlement either:

 

(i)                                     to identify in its records the
Collateral Trustee as the entitlement holder of such security entitlement
against such securities intermediary or

 

(ii)                                  to agree in an authenticated record with
such Grantor and the Collateral Trustee that such securities intermediary will
comply with entitlement orders (that is, notifications communicated to such
securities intermediary directing transfer or redemption of the financial asset
to which such Grantor has a security entitlement) originated by the Collateral
Trustee without further consent of such Grantor, such authenticated record to be
in form and substance satisfactory to the Collateral Trustee (such agreements
together being the “Securities Account Control Agreements”).

 

(d)                                 Subject to Section 5(i) below and the
Intercreditor Agreement, no Grantor will add any securities intermediary that
maintains a Securities Account for such Grantor or open any new securities
account with any then-existing securities intermediary unless:

 

(i)                                     the Collateral Trustee shall have
received at least 10 days’ prior written notice of such securities intermediary
or such new Securities Account, and

 

(ii)                                  the Collateral Trustee shall have
received, in the case of a securities intermediary that is not the Collateral
Trustee, a Securities Account Control Agreement authenticated by such new
securities intermediary and such Grantor, or a supplement to an existing
Securities Account Control Agreement with such then-existing securities
intermediary, covering such new Securities Account.

 

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No Grantor shall terminate any securities intermediary or terminate any
Securities Account, except that a Grantor may terminate a Securities Account,
and terminate a securities intermediary with respect to such Securities Account
if it gives the Collateral Trustee at least 10 days’ prior written notice of
such termination.

 

(e)                                  Subject to Section 5(i) below and the
Intercreditor Agreement, upon any termination by a Grantor of any Securities
Account or any securities intermediary with respect thereto, such Grantor will
immediately:

 

(i)                                     transfer all property held in such
terminated Securities Account to another Securities Account, and

 

(ii)                                  notify all Obligors that were making
payments to such Securities Account to make all future payments to another
Securities Account, in each case so that the Collateral Trustee shall have a
continuously perfected security interest in such funds and property.

 

(f)                                   So long as no Event of Default shall have
occurred and be continuing, each Grantor shall have sole right to direct the
disposition of funds with respect to each of its Securities Accounts.

 

(g)                                  Subject to the Intercreditor Agreement, the
Collateral Trustee may transfer, direct the transfer of, or sell property
credited to any Securities Account to satisfy the Grantor’s obligations under
the Parity Lien Documents if an Event of Default shall have occurred and be
continuing.

 

(h)                                 Subject to the Intercreditor Agreement, upon
the request of the Collateral Trustee upon the occurrence and during the
continuance of an Event of Default, such Grantor will notify each such issuer of
Pledged Debt that such Pledged Debt is subject to the security interest granted
hereunder.

 

(i)                                     Clauses (a) through (e) above shall not
be applicable to any Collateral except Pledged Equity constituting certificated
securities prior to the occurrence of an Event of Default.

 

Section 6.                                           Maintaining Deposit and
Securities Accounts.  Subject to the Intercreditor Agreement, only upon the
occurrence and during the continuance of an Event of Default,

 

(a)                                 Each Grantor will maintain all Deposit
Accounts and Securities Accounts only with the Collateral Trustee (or prior to
the Discharge of Priority Lien Obligations, with the applicable Priority Lien
Representative to be held by such Priority Lien Representative, as gratuitous
bailee for perfection for the Collateral Trustee in accordance with the terms of
the Intercreditor Agreement and Section 27 hereof, with references in this
Section 6 to the Collateral Trustee being deemed to refer to such Priority Lien
Representative in such capacity in accordance with the Intercreditor Agreement)
or with banks (the “Pledged Account Banks”) that have agreed, in a record
authenticated by the Grantor, the Collateral Trustee and the Pledged Account
Banks, to:

 

(i)                                     comply with instructions originated by
the Collateral Trustee directing the disposition of funds in the Deposit
Accounts and Securities Accounts without the further consent of the Grantor and

 

(ii)                                  waive or subordinate in favor of the
Collateral Trustee all claims of the Pledged Account Banks (including claims by
way of a security interest, lien or right of setoff or right of recoupment) to
the Deposit Accounts and Securities Accounts, which authenticated record shall
be in form and substance reasonably satisfactory to, and as negotiated in good
faith by, the Collateral Trustee

 

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(such agreements together being the “Account Control Agreements”), provided that
each Grantor shall promptly (but in any case within 30 days) provide any such
Account Control Agreement following the occurrence of an Event of Default.

 

(b)                                 Each Grantor will promptly instruct each
Person obligated at any time to make any payment to such Grantor for any reason
(an “Obligor”) to make such payment to a Deposit Account.

 

(c)                                  Except for any Deposit Account holding Cash
Collateral (as defined in the Senior Credit Facility), no Grantor will add any
bank that maintains a Deposit Account for such Grantor or open any new deposit
account with any then-existing Pledged Account Bank unless:

 

(i)                                     the Collateral Trustee shall have
received at least 10 days’ prior written notice of such additional bank or such
new Deposit Account, and

 

(ii)                                  the Collateral Trustee shall have
received, in the case of a bank or Pledged Account Bank that is not the
Collateral Trustee, an Account Control Agreement authenticated by such new bank
and such Grantor, or a supplement to an existing Account Control Agreement with
such then existing Pledged Account Bank, covering such new Deposit Account.

 

No Grantor shall terminate any bank as a Pledged Account Bank or terminate any
Deposit Accounts or Securities Accounts, except that a Grantor may terminate a
Deposit Account, and terminate a bank as a Pledged Account Bank with respect to
such Deposit Account if it gives the Collateral Trustee at least 10 days’ prior
written notice of such termination.

 

(d)                                 Upon any termination by a Grantor of any
Deposit Account or any Pledged Account Bank with respect thereto, such Grantor
will immediately:

 

(i)                                     transfer all funds held in such
terminated Deposit Account to another Deposit Account, and

 

(ii)                                  notify all Obligors that were making
payments to such Deposit Account to make all future payments to another Deposit
Account, in each case so that the Collateral Trustee shall have a continuously
perfected security interest in such funds and property.

 

(e)                                  So long as no Event of Default shall have
occurred and be continuing, each Grantor shall have sole right to direct the
disposition of funds with respect to each of its Deposit Accounts.

 

(f)                                   Subject to the Intercreditor Agreement,
the Collateral Trustee may, at any time and without notice to, or consent from,
a Grantor, transfer, or direct the transfer of, funds from the Deposit Accounts
and Securities Accounts to satisfy the Grantor’s obligations under the Parity
Lien Documents if an Event of Default shall have occurred and be continuing.

 

(g)                                  Subject to the Intercreditor Agreement,
upon the occurrence and during the continuance of any Event of Default, the
Collateral Trustee shall be authorized to send to each Pledged Account Bank a
Notice of Exclusive Control as defined in and under any Account Control
Agreement.

 

Section 7.                                           Representations and
Warranties.  Each Grantor represents and warrants as of the Issue Date follows:

 

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(a)                                 Such Grantor’s exact legal name, as defined
in Section 9-503(a) of the UCC, is correctly set forth in Schedule I. Such
Grantor is located (within the meaning of Section 9-307 of the UCC), is the type
of organization and is organized in the state or jurisdiction set forth in
Schedule I. The information set forth in Schedule I with respect to such Grantor
is true and accurate in all respects. Such Grantor has not, within the prior
five years, changed its name, location, chief executive office, place where it
maintains its agreements, type of organization, jurisdiction of organization or
organizational identification number from those set forth in Schedule I except
as disclosed in Schedule I.

 

(b)                                 To the extent required by the terms hereof,
all Security Collateral consisting of certificated securities has been delivered
into the control of the Collateral Trustee.

 

(c)                                  Such Grantor is the legal and beneficial
owner of the Collateral of such Grantor free and clear of any Lien, claim,
option or right of others, except for the security interest created under this
Agreement or as permitted under the Indenture. No effective financing statement
or other instrument similar in effect covering all or any part of such
Collateral or listing such Grantor or any trade name of such Grantor as debtor
is on file in any recording office, except such as may have been filed in favor
of the Collateral Trustee relating to the Note Documents or as otherwise
permitted under the Indenture.

 

(d)                                 With respect to the Pledged Equity that is
an uncertificated security, such Grantor has caused, to the extent required by
the terms hereof, the issuer thereof either:

 

(i)                                     to register the Collateral Trustee as
the registered owner of such security or

 

(ii)                                  to agree in an authenticated record with
such Grantor and the Collateral Trustee that such issuer will comply with
instructions with respect to such security originated by the Collateral Trustee
without further consent of such Grantor.

 

If such Grantor is an issuer of Pledged Equity, such Grantor confirms that it
has received notice of such security interest.

 

(e)                                  The Initial Pledged Equity pledged by such
Grantor constitutes the percentage of the issued and outstanding Equity of the
issuers thereof indicated on Schedule II.

 

(f)                                   (i) To the extent required by the terms
hereof, all filings and other actions (including (A) actions necessary to obtain
control of Collateral as provided in Sections 9-104, 9-105, 9-106 and 9-107 of
the UCC and (B) actions necessary to perfect the Collateral Trustee’s security
interest with respect to Collateral evidenced by a certificate of ownership)
necessary to perfect the security interest in the Collateral of such Grantor
created under this Agreement have been duly made or taken and are in full force
and effect, and (ii) this Agreement creates in favor of the Collateral Trustee
for the benefit of the Secured Parties a valid and, together with such filings
and other actions, perfected second priority security interest in the Collateral
of such Grantor (subject to Permitted Collateral Liens), securing the payment of
the Secured Obligations except as otherwise expressly contemplated hereby.

 

Section 8.                                           Further Assurances.  (a) 
From time to time, at the expense of such Grantor, subject to the Intercreditor
Agreement, each Grantor will promptly execute and deliver, or otherwise
authenticate, all further instruments and documents, and take all further action
that may be necessary or desirable, or that the Collateral Trustee may
reasonably request or as it may request at the direction of the Required Parity
Lien Debtholders pursuant to the Collateral Trust Agreement, in order to perfect
and protect any pledge or security interest granted or purported to be granted
by such Grantor hereunder or to enable the Collateral Trustee to exercise and
enforce its rights and remedies hereunder with respect to any

 

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Collateral of such Grantor. Without limiting the generality of the foregoing,
subject to the Intercreditor Agreement, each Grantor will promptly with respect
to Collateral of such Grantor:

 

(i)                                     upon the occurrence and during the
continuance of an Event of Default, mark conspicuously each document included in
Inventory, each Chattel Paper included in Receivables, each Related Contract,
and, at the reasonable request of the Collateral Trustee or as it may request at
the direction of the Required Parity Lien Debtholders pursuant to the Collateral
Trust Agreement, each of its records pertaining to such Collateral with a
legend, in form and substance satisfactory to the Collateral Trustee, indicating
that such document, Chattel Paper, Related Contract or Collateral is subject to
the security interest granted hereby;

 

(ii)                                  execute or authenticate and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as the Collateral
Trustee may reasonably request or as it may request at the direction of the
Required Parity Lien Debtholders pursuant to the Collateral Trust Agreement, in
order to perfect and preserve the security interest granted or purported to be
granted by such Grantor hereunder;

 

(iii)                               [reserved];

 

(iv)                              upon the occurrence and during the continuance
of an Event of Default, upon the acquisition of any electronic Chattel Paper,
investment property, letter-of-credit rights and transferable records as
provided in Sections 9-105, 9-106 and 9-107 of the UCC by any Grantor, the
Company shall promptly notify the Collateral Trustee of such acquisition, and
upon the reasonable request of the Collateral Trustee or as it may request at
the direction of the Required Parity Lien Debtholders pursuant to the Collateral
Trust Agreement, take all action necessary or desirable to ensure that the
Collateral Trustee has control of such Collateral consisting of electronic
Chattel Paper, investment property, letter-of-credit rights and transferable
records as provided in Sections 9-105, 9-106 and 9-107 of the UCC;

 

(v)                                 upon the occurrence and during the
continuance of an Event of Default, at the reasonable request of the Collateral
Trustee or as it may request at the direction of the Required Parity Lien
Debtholders pursuant to the Collateral Trust Agreement, subject to the
Intercreditor Agreement, take all action to ensure that the Collateral Trustee’s
security interest is noted on any certificate of ownership related to any
Collateral evidenced by a certificate of ownership; and

 

(vi)                              deliver to the Collateral Trustee evidence
that all other action that the Collateral Trustee may deem reasonably necessary
or desirable or as it may request at the direction of the Required Parity Lien
Debtholders pursuant to the Collateral Trust Agreement in order to perfect and
protect the security interest created by such Grantor under this Agreement has
been taken.

 

(b)                                 Each Grantor authorizes the Collateral
Trustee to file one or more financing or continuation statements, and amendments
thereto, including one or more financing statements indicating that such
financing statements cover all assets or all personal property (or words of
similar effect) of such Grantor, in each case without the signature of such
Grantor, and regardless of whether any particular asset described in such
financing statements falls within the scope of the UCC or the granting clause of
this Agreement. A photocopy or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law. Each Grantor
ratifies its authorization for the Collateral Trustee to have filed such
financing statements, continuation statements or amendments filed prior to the
date hereof.

 

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(c)                                  Each Grantor will furnish to the Collateral
Trustee from time to time statements and schedules further identifying and
describing the Collateral of such Grantor and such other reports in connection
with such Collateral as the Collateral Trustee may reasonably request or as it
may request at the direction of the Required Parity Lien Debtholders pursuant to
the Collateral Trust Agreement, all in reasonable detail.

 

Section 9.                                           Collections on Receivables
and Related Contracts.  Except as otherwise provided in this Section 9, each
Grantor will continue to collect, at its own expense, all amounts due or to
become due to such Grantor under Receivables and Related Contracts. In
connection with such collections, such Grantor may take such action as such
Grantor may deem necessary or advisable to enforce collection of the Receivables
and Related Contracts; provided, subject to the Intercreditor Agreement, that
the Collateral Trustee shall have the right at any time, upon the occurrence and
during the continuance of an Event of Default and upon written notice to such
Grantor of its intention to do so, to notify the Obligors under any Receivables
and Related Contracts of the assignment of such Receivables and Related
Contracts to the Collateral Trustee and to direct such Obligors to make payment
of all amounts due or to become due to such Grantor thereunder directly to the
Collateral Trustee and, upon such notification and at the expense of such
Grantor, to enforce collection of any such Receivables and Related Contracts, to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as such Grantor might have done, and to otherwise
exercise all rights with respect to such Receivables and Related Contracts,
including those set forth set forth in Section 9-607 of the UCC.

 

Section 10.                                    As to Intellectual Property. 
(a)  Subject to Section 10(c) below, with respect to its intellectual property,
each Grantor will execute or otherwise authenticate an intellectual property
security agreement, in a form and substance satisfactory to the Collateral
Trustee, for recording the security interest granted hereunder to the Collateral
Trustee in such intellectual property with the U.S. Patent and Trademark Office,
the U.S. Copyright Office and any other governmental authorities necessary to
perfect the security interest hereunder in such intellectual property.

 

(b)                                 Subject to Section 10(c) below, should any
Grantor obtain an ownership interest in any item of the type set forth in
Section 2(f) that is not on the date hereof a part of the intellectual property:

 

(i)                                     this Agreement shall automatically apply
thereto, and

 

(ii)                                  any such item and, in the case of
trademarks, the goodwill symbolized thereby, shall automatically become part of
the intellectual property subject to this Agreement.

 

(c)                                  This Section 10 shall only be applicable
upon the occurrence and during the continuance of an Event of Default.

 

Each Grantor shall give prompt written notice to the Collateral Trustee
identifying such items, and such Grantor shall execute and deliver to the
Collateral Trustee with such written notice, or otherwise authenticate, an
intellectual property security agreement supplement in form and substance
satisfactory to the Collateral Trustee covering such items, which supplement
shall be recorded with the U.S. Patent and Trademark Office, the U.S. Copyright
Office and any other governmental authorities necessary to perfect the security
interest hereunder in such items.

 

Section 11.                                    Voting Rights; Dividends; Etc. 
(a)  Except as set forth in clause (b):

 

(i)                                     Each Grantor shall be entitled to
exercise any and all voting and other consensual rights pertaining to the
Security Collateral owned by such Grantor or any part thereof for any

 

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purpose; provided that such Grantor will not exercise or refrain from exercising
any such right if such action would have a material adverse effect on the value
of the Security Collateral.

 

(ii)                                  Each Grantor shall be entitled to receive
and retain any and all dividends, interest and other distributions paid in
respect of the Security Collateral owned by such Grantor if and to the extent
that the payment thereof is not otherwise prohibited by the terms of the Parity
Lien Documents.

 

(iii)                               The Collateral Trustee will execute and
deliver (or cause to be executed and delivered) to each Grantor all such proxies
and other instruments as such Grantor may reasonably request for the purpose of
enabling such Grantor to exercise the voting and other rights that it is
entitled to exercise pursuant to paragraph (i) above and to receive the
dividends or interest payments that it is authorized to receive and retain
pursuant to paragraph (ii) above.

 

(b)                                 Subject to the Intercreditor Agreement, upon
the occurrence and during the continuance of an Event of Default that has not
been waived:

 

(i)                                     All rights of each Grantor:

 

(A)                               to exercise or refrain from exercising the
voting and other consensual rights that it would otherwise be entitled to
exercise pursuant to Section 11(a)(i) shall, upon notice to such Grantor by the
Collateral Trustee, cease and

 

(B)                               to receive the dividends, interest and other
distributions that it would otherwise be authorized to receive and retain
pursuant to Section 11(a)(ii) shall automatically cease,

 

and all such rights shall thereupon become vested in the Collateral Trustee,
which shall thereupon have the sole right to exercise or refrain from exercising
such voting and other consensual rights and to receive and hold as Security
Collateral such dividends, interest and other distributions.

 

(ii)                                  All dividends, interest and other
distributions that are received by any Grantor contrary to the provisions of
paragraph (i) of this Section 11(b), subject to the Intercreditor Agreement,
shall be received in trust for the benefit of the Collateral Trustee, shall be
segregated from other funds of such Grantor and shall be forthwith paid over to
the Collateral Trustee as Security Collateral in the same form as so received
(with any necessary indorsement).

 

(iii)                               The Collateral Trustee shall be authorized
to send to each Securities Intermediary as defined in and under any Securities
Account Control Agreement a Notice of Exclusive Control as defined in and under
such Securities Account Control Agreement.

 

Section 12.                                    Additional Shares.  Each Grantor
will pledge hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any additional equity interests or other securities of each issuer of
the Pledged Equity to the extent constituting Collateral.

 

Section 13.                                    Collateral Trustee Appointed
Attorney-in-Fact.  Each Grantor irrevocably appoints the Collateral Trustee such
Grantor’s attorney-in-fact, with full authority in the place and stead of such
Grantor and in the name of such Grantor or otherwise, from time to time, upon
the occurrence and during the continuance of an Event of Default, in the
Collateral Trustee’s discretion, to take any action and to execute any
instrument that the Collateral Trustee may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation,
subject to the Intercreditor Agreement:

 

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(a)                                 to obtain and adjust insurance required to
be paid to the Collateral Trustee pursuant to Section 3.4 of the Collateral
Trust Agreement.

 

(b)                                 to ask for, demand, collect, sue for,
recover, compromise, receive and give acquittance and receipts for moneys due
and to become due under or in respect of any of the Collateral,

 

(c)                                  to receive, indorse and collect any drafts
or other instruments, documents and Chattel Paper, in connection with clause
(a) or (b) above, and

 

(d)                                 to file any claims or take any action or
institute any proceedings that the Collateral Trustee may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of the Collateral Trustee with respect to any of the Collateral.

 

Section 14.                                    Collateral Trustee May Perform. 
If any Grantor fails to perform any agreement contained herein, the Collateral
Trustee may, but without any obligation to do so and without notice, itself
perform, or cause performance of, such agreement, and the expenses of the
Collateral Trustee incurred in connection therewith shall be payable by such
Grantor in accordance with Section 7.8 of the Collateral Trust Agreement.

 

Section 15.                                    The Collateral Trustee’s Duties. 
(a)  The powers conferred on the Collateral Trustee hereunder are solely to
protect the Secured Parties’ interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Collateral Trustee shall have no duty as to any Collateral, as
to ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
any Secured Party has or is deemed to have knowledge of such matters, or as to
the taking of any necessary steps to preserve rights against any parties or any
other rights pertaining to any Collateral. The Collateral Trustee shall be
deemed to have exercised reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which it accords its own property.

 

(b)                                 Anything contained herein to the contrary
notwithstanding, the Collateral Trustee may from time to time, when the
Collateral Trustee deems it to be necessary or desirable, appoint one or more
subagents for the Collateral Trustee hereunder with respect to all or any part
of the Collateral. If the Collateral Trustee so appoints any such subagent with
respect to any Collateral:

 

(i)                                     the assignment and pledge of such
Collateral and the security interest granted in such Collateral by each Grantor
hereunder shall be deemed for purposes of this Agreement to have been made to
such subagent, in addition to the Collateral Trustee, for the ratable benefit of
the Secured Parties, as security for the Secured Obligations of such Grantor,

 

(ii)                                  such subagent shall automatically be
vested, in addition to the Collateral Trustee, with all rights, powers,
privileges, interests and remedies of the Collateral Trustee hereunder with
respect to such Collateral, and

 

(iii)                               the term “Collateral Trustee,” when used
herein in relation to any rights, powers, privileges, interests and remedies of
the Collateral Trustee with respect to such Collateral, shall include such
subagent;

 

provided that no such subagent shall be authorized to take any action with
respect to any such Collateral unless and except to the extent expressly
authorized in writing by the Collateral Trustee.

 

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(c)                                  The Collateral Trustee shall be entitled to
rely upon the instructions of the Required Parity Lien Debtholders in requiring
or requesting the performance of certain actions or the delivery of certain
information to be delivered at the request of, or to the extent required by, the
Collateral Trustee hereunder.  The Collateral Trustee shall be entitled to rely
upon any written notice, statement, certificate, order or other document or any
telephone message believed by it to be genuine and correct and to have been
signed, sent or made by the proper person, and, with respect to all matters
pertaining to this Agreement and its duties hereunder, upon advice of counsel
selected by it.

 

(d)                                 In addition to the rights of the Collateral
Trustee hereunder, the Collateral Trustee shall have the rights, protections and
immunities given to it as Collateral Trustee under the Indenture and the
Collateral Trust Agreement, and such are incorporated by reference herein,
mutatis mutandis.

 

Section 16.                                    Remedies.  Subject to the
Intercreditor Agreement, if any Event of Default shall have occurred and be
continuing:

 

(a)                                 The Collateral Trustee may exercise in
respect of the Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a Secured
Party upon default under the UCC (whether or not the UCC applies to the affected
Collateral) and also may:

 

(i)                                     require each Grantor to, and each
Grantor will at its expense and upon request of the Collateral Trustee
forthwith, assemble all or part of the Collateral as directed by the Collateral
Trustee and make it available to the Collateral Trustee at a place and time to
be designated by the Collateral Trustee that is reasonably convenient to both
parties;

 

(ii)                                  without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Trustee’s offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as the Collateral
Trustee may deem commercially reasonable;

 

(iii)                               occupy any premises owned or leased by any
of the Grantors where the Collateral or any part thereof is assembled or located
for a reasonable period in order to effectuate its rights and remedies hereunder
or under law, without obligation to such Grantor in respect of such occupation;
and

 

(iv)                              exercise any and all rights and remedies of
any of the Grantors under or in connection with the Collateral, or otherwise in
respect of the Collateral, including:

 

(A)                               any and all rights of such Grantor to demand
or otherwise require payment of any amount under, or performance of any
provision of, the Receivables, the Related Contracts and the other Collateral,

 

(B)                               withdraw, or cause or direct the withdrawal,
of all funds with respect to the Deposit Accounts or Securities Accounts, and

 

(C)                               exercise all other rights and remedies with
respect to the Receivables, the Related Contracts and the other Collateral,
including those set forth in Section 9-607 of the UCC.

 

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To the extent that notice of sale shall be required by law, at least 10 days’
notice to such Grantor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Collateral Trustee shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Collateral
Trustee may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.

 

(b)                                 Any cash held by or on behalf of the
Collateral Trustee and all cash proceeds received by or on behalf of the
Collateral Trustee in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral may, in the discretion of the
Collateral Trustee, be held by the Collateral Trustee as collateral for, and/or
then or at any time thereafter applied (after payment of any amounts payable to
the Collateral Trustee pursuant to Section 7.8 of the Collateral Trust
Agreement) in whole or in part by the Collateral Trustee for the ratable benefit
of the Secured Parties against, all or any part of the Secured Obligations, in
accordance with Section 3.4 of the Collateral Trust Agreement.

 

(c)                                  The Collateral Trustee may, without notice
to any Grantor, except as required by law and at any time or from time to time,
charge, set-off and otherwise apply all or any part of the Secured Obligations
against any funds held with respect to the Deposit Accounts and Securities
Accounts or in any other deposit account or securities account.

 

(d)                                 In the event of any sale or other
disposition of any of the intellectual property of any Grantor, the goodwill
symbolized by any trademarks subject to such sale or other disposition shall be
included therein, and such Grantor shall supply to the Collateral Trustee or its
designee such Grantor’s know-how and expertise, and documents and things
relating to any intellectual property subject to such sale or other disposition,
and such Grantor’s customer lists and other records and documents relating to
such intellectual property and to the manufacture, distribution, advertising and
sale of products and services of such Grantor.

 

(e)                                  The Grantors recognize that the Collateral
Trustee may deem it impracticable to effect a public sale of all or any part of
the Security Collateral and that the Collateral Trustee may, therefore,
determine to make one or more private sales of any such securities to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. The Grantors acknowledge that
any such private sale may be at prices and on terms less favorable to the seller
than the prices and other terms which might have been obtained at a public sale
and, notwithstanding the foregoing, agree that such private sales shall be
deemed to have been made in a commercially reasonable manner and that the
Collateral Trustee shall have no obligation to delay sale of any such securities
for the period of time necessary to permit the issuer of such securities to
register such securities for public sale under the Securities Act of 1933, as
amended. Any offer to sell such securities that has been:

 

(i)                                     publicly advertised on a bona fide basis
in a newspaper or other publication of general circulation in the financial
community of New York, New York (to the extent that such an offer may be so
advertised without prior registration under such Securities Act), or

 

(ii)                                  made privately in the manner described
above to not less than 15 bona-fide offerees, shall be deemed to involve a
“public disposition” for the purposes of Section 9.610(c) of the UCC (or any
successor or similar, applicable statutory provision), notwithstanding that such
sale may not constitute a “public offering” under the Securities Act, and that
the Collateral Trustee or any other Secured Party may, in such event, bid for
the purchase of such securities.

 

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Section 17.                                    Subordination of Liens.  Each
Grantor confirms that:  (a)  any and all Liens securing debts, liabilities and
other Obligations owed to such Grantor by any other Grantor (“Subordinated
Liens”) shall be subordinate to any and all Liens under the Security Documents
securing the Secured Obligations (“Senior Liens”) as if the Senior Liens were
created, filed, recorded and otherwise perfected prior in time to the creation,
filing, recording and other perfection of the Subordinated Liens, and

 

(b)                                 by reason of this Agreement, the Collateral
Trustee, for the benefit of the Secured Parties, has a perfected,
second-priority Lien on each Subordinated Lien and the right, to the exclusion
of any Grantor, to enforce, exercise remedies, grant waivers, release and take
any and all other actions with respect to such Subordinated Lien.

 

Section 18.                                    Amendments; Waivers; Additional
Grantors; Etc.  (a)  No amendment or waiver of any provision of this Agreement,
and no consent to any departure by any Grantor herefrom shall in any event be
effective unless the same shall be entered into in accordance with Article 9 of
the Indenture and Section 7.1 of the Collateral Trust Agreement. No failure on
the part of the Collateral Trustee or any other Secured Party to exercise, and
no delay in exercising any right hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right.

 

(b)                                 Upon the execution and delivery, or
authentication, by any Person of a security agreement supplement in
substantially the form of Exhibit A hereto (each a “Security Agreement
Supplement”):

 

(i)                                     such Person shall be referred to as an
“Additional Grantor” and shall be and become a Grantor hereunder, and each
reference in this Agreement and the other Parity Lien Documents to “Grantor”
shall also mean and be a reference to such Additional Grantor, and each
reference in this Agreement and the other Parity Lien Documents to “Collateral”
shall also mean and be a reference to the Collateral of such Additional Grantor,
and

 

(ii)                                  the supplemental Schedules attached to
each Security Agreement Supplement shall be incorporated into and become a part
of and supplement the respective Schedule hereto, and the Collateral Trustee may
attach such supplemental Schedules to such Schedules; and each reference to such
Schedules shall mean and be a reference to such Schedules as supplemented
pursuant to each Security Agreement Supplement.

 

Section 19.                                    Notices, Etc.  All notices and
other communications provided for hereunder shall be delivered in the manner
provided in the Collateral Trust Agreement, in the case of the Company or the
Collateral Trustee, addressed to it at its address specified in Section 7.6 of
the Collateral Trust Agreement and, in the case of each Grantor other than the
Company, addressed to it at the address of the Company or the address set forth
on the signature page to the Security Agreement Supplement pursuant to which it
became a party hereto; or, as to any party, at such other address as shall be
designated by such party in a written notice to the other parties. All such
notices and other communications shall be effective when and as provided in the
Collateral Trust Agreement. Delivery by telecopier of an executed counterpart of
any amendment or waiver of any provision of this Agreement or of any Security
Agreement Supplement or Schedule hereto shall be effective as delivery of an
original executed counterpart thereof.

 

Section 20.                                    Continuing Security Interest;
Assignments under the Indenture and the Collateral Trust Agreement.  This
Agreement shall create a continuing security interest in the Collateral and
shall:

 

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(a)                                 remain in full force and effect until the
payment in full of all Secured Obligations,

 

(b)                                 be binding upon each Grantor, its successors
and assigns and

 

(c)                                  inure, together with the rights and
remedies of the Collateral Trustee hereunder and under the Collateral Trust
Agreement, to the benefit of the Secured Parties and their respective
successors, transferees and assigns.

 

Without limiting the generality of the foregoing clause (c), any Secured Party
may assign or otherwise transfer all or any portion of its rights and
obligations under the Collateral Trust Agreement or the other applicable Parity
Lien Documents to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to such Secured Party
herein or otherwise, in each case as provided in the Collateral Trust Agreement
or the applicable Parity Lien Documents.

 

Section 21.                                    Release.  (a)  The Collateral
shall be released from the Lien and security interest created by this Agreement,
all without delivery of any instrument or performance of any act by any party,
at any time or from time to time in accordance with the provisions of
Section 13.06 of the Indenture and Section 4.1 of the Collateral Trust
Agreement.  Upon such release, all rights in the Collateral so released shall
revert to the Grantors.

 

(b)                                 Upon any release of Collateral as provided
in this Section 21, the Collateral Trustee will, at the expense of the
applicable Grantor, execute and deliver to such Grantor such documents as it
shall reasonably request to evidence the release of such Collateral, as the case
may be.

 

Section 22.                                    Terms Generally; References and
Titles.  The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “without limitation.” Unless the context requires otherwise:

 

(a)                                 any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein);

 

(b)                                 any reference herein to any Person shall be
construed to include such Person’s successors and assigns;

 

(c)                                  the words “herein,” “hereof” and
“hereunder,” and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof;

 

(d)                                 all references herein to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement;

 

(e)                                  any reference to any law or regulation
herein shall, unless otherwise specified, refer to such law or regulation as
amended, modified or supplemented from time to time; and

 

(f)                                   the words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.

 

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References to any document, instrument, or agreement shall include:

 

(i)                                     all exhibits, schedules, and other
attachments thereto, and

 

(ii)                                  shall include all documents, instruments,
or agreements issued or executed in replacement thereof.

 

Titles appearing at the beginning of any subdivision are for convenience only
and do not constitute any part of such subdivision and shall be disregarded in
construing the language contained in such subdivisions. The phrases “this
section,” “this clause” and “this subsection” and similar phrases refer only to
the sections, clauses or subsections hereof in which such phrases occur. The
word “or” is not exclusive.  Accounting terms have the meanings assigned to them
by GAAP, as applied by the accounting entity to which they refer. References to
“days” shall mean calendar days, unless the term “Business Day” is used. Unless
otherwise specified, references herein to any particular Person also refer to
its successors and permitted assigns.

 

Section 23.                                    Execution in Counterparts.  This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.  Delivery of an executed counterpart of a
signature page to this Agreement by telecopier shall be effective as delivery of
an original executed counterpart of this Agreement.

 

Section 24.                                    Governing Law.  This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York.

 

Section 25.                                    Consent to Jurisdiction.  All
judicial proceedings brought against any party hereto arising out of or relating
to this Agreement may be brought in any state or federal court of competent
jurisdiction in the State, County and City of New York. By executing and
delivering this Agreement, each party hereto irrevocably:

 

(a)                                 submits, for itself and its property, to the
nonexclusive jurisdiction of the Supreme Court of the State of New York sitting
in New York County and of the United States District Court of the Southern
District of New York, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State court or, to the
extent permitted by law, in such federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that any party hereto may otherwise have to bring any action or proceeding
relating to this Agreement in the courts of any jurisdiction;

 

(b)                                 waives, to the fullest extent it may legally
and effectively do so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement in any court referred to in paragraph (a) of this Section 25, and
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court;

 

(c)                                  agrees that service of all process in any
such proceeding in any such court may be made by registered or certified mail,
return receipt requested, to such party at its address provided in accordance
with Section 7.6 of the Collateral Trust Agreement;

 

17

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(d)                                 agrees that service as provided in paragraph
(c) of this Section 25 is sufficient to confer personal jurisdiction over such
party in any such proceeding in any such court and otherwise constitutes
effective and binding service in every respect; and

 

(e)                                  agrees each party hereto retains the right
to serve process in any other manner permitted by law or to bring proceedings
against any party in the courts of any other jurisdiction.

 

Section 26.                                    Waiver of Jury Trial.  EACH PARTY
TO THIS AGREEMENT WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ITS
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
UNDER THIS AGREEMENT OR ANY OF THE OTHER PARITY LIEN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR THE INTENTS AND
PURPOSES OF THE OTHER PARITY LIEN DOCUMENTS. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE OTHER
PARITY LIEN DOCUMENTS, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY TO THIS
AGREEMENT ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH PARTY HERETO HAS ALREADY RELIED ON THIS WAIVER
IN ENTERING INTO THIS AGREEMENT, AND THAT EACH PARTY HERETO WILL CONTINUE TO
RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL
AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 26 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER WILL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF OR TO THIS AGREEMENT OR ANY OF THE
OTHER PARITY LIEN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
THERETO. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.

 

Section 27.                                    Intercreditor Agreement .

 

(a)                                 Notwithstanding anything to the contrary,
(i) the liens and security interests granted to the Collateral Trustee hereunder
are expressly subject to the Intercreditor Agreement and (ii) the exercise of
any right or remedy by the Collateral Trustee (and the other Secured Parties)
hereunder is subject to the limitations and provisions of the Intercreditor
Agreement.  In the event of any conflict between the provisions of this
Agreement and the provisions of the Intercreditor Agreement, the provisions of
the Intercreditor Agreement shall govern.

 

(b)                                 Without limiting the generality of the
foregoing clause (a) and subject to the provisions of the Intercreditor
Agreement, with respect to the Collateral, any obligation of any Grantor
hereunder or under any other Parity Lien Document with respect to the delivery
or control of any Collateral, the provisions of voting rights, the turning over
of proceeds to the Collateral Trustee or the obtaining of any consent of any
Person, in each case in connection with any Collateral shall, until the
Discharge of Priority Lien Obligations, be deemed to be satisfied if such
Grantor complies with the requirements of the similar provision of the
applicable Priority Lien Document, including, for avoidance of doubt, by
delivering any possessory Collateral or granting control over any Collateral to
the Priority

 

18

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Lien Representative. Notwithstanding anything in this Agreement to the contrary,
for purposes of any representation in this Agreement, delivery of Collateral to,
or the granting of control over Collateral to, the Priority Lien Representative
shall be deemed to include delivery of Collateral to, or the granting of control
over Collateral to, the Collateral Trustee.

 

(c)           Notwithstanding anything herein to the contrary, any request,
decision or determination made, or documents or other items deemed satisfactory,
desirable,  necessary, appropriate or advisable, by the Priority Lien
Representative with respect to the equivalent section under the Priority Lien
Documents, shall be deemed to have been made, or deemed satisfactory, desirable,
necessary, appropriate or advisable by the Collateral Trustee.

 

(d)           Notwithstanding anything to the contrary contained herein, prior
to the Discharge of Priority Lien Obligations no Grantor shall be required to
take any actions other than the filing of UCC financing statements unless it is
so required to take such action under the Priority Lien Documents.

 

[SIGNATURES BEGIN NEXT PAGE]

 

19

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IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly executed
and delivered by its officer thereunto duly authorized as of the date first
above written.

 

 

SANDRIDGE ENERGY INC.

 

 

 

 

 

 

By:

/s/ Eddie M. LeBlanc

 

Name:

Eddie M. LeBlanc

 

Title:

Executive Vice President and Chief Financial Officer

 

 

 

 

SANDRIDGE OPERATING COMPANY

 

INTEGRA ENERGY, L.L.C.

 

SANDRIDGE HOLDINGS, INC.

 

SANDRIDGE GATHERING LLC

 

SANDRIDGE EXPLORATION AND PRODUCTION, LLC

 

SANDRIDGE MIDSTREAM, INC.

 

 

 

 

 

 

 

By:

/s/ Eddie M. LeBlanc

 

Name:

Eddie M. LeBlanc

 

Title:

Executive Vice President and Chief Financial Officer

 

Signature Page
Security Agreement

 

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Schedule I to the Security Agreement

 

LOCATION, TYPE OF ORGANIZATION, JURISDICTION OF ORGANIZATION AND ORGANIZATIONAL
IDENTIFICATION NUMBER

 

Grantor

 

Location

 

Type of
Organization

 

Jurisdiction of
Organization

 

Organizational I.D.
No.

SandRidge Energy, Inc.

 

123 Robert S. Kerr Avenue, Oklahoma City, OK 73102

 

Corporation

 

Delaware

 

20-8084793

SandRidge Operating Company

 

123 Robert S. Kerr Avenue, Oklahoma City, OK 73102

 

Corporation

 

Texas

 

75-2541245

Integra Energy, L.L.C.

 

123 Robert S. Kerr Avenue, Oklahoma City, OK 73102

 

Limited Liability Company

 

Texas

 

75-2887527

SandRidge Holdings, Inc.

 

123 Robert S. Kerr Avenue, Oklahoma City, OK 73102

 

Corporation

 

Delaware

 

20-5878401

SandRidge Gathering LLC

 

123 Robert S. Kerr Avenue, Oklahoma City, OK 73102

 

Limited Liability Company

 

Delaware

 

5610465

SandRidge Exploration and Production, LLC

 

123 Robert S. Kerr Avenue, Oklahoma City, OK 73102

 

Limited Liability Company

 

Delaware

 

87-0776535

SandRidge Midstream, Inc.

 

123 Robert S. Kerr Avenue, Oklahoma City, OK 73102

 

Corporation

 

Texas

 

75-2541148

 

CHANGES IN NAME, LOCATION, CHIEF EXECUTIVE OFFICE, PLACE WHERE IT MAINTAINS
AGREEMENTS, TYPE OF ORGANIZATION, JURISDICTION OR ORGANIZATIONAL IDENTIFICATION
NUMBER IN LAST FIVE YEARS

 

Grantor

 

Changes

SandRidge Energy, Inc.

 

None

SandRidge Operating Company

 

None

Integra Energy, L.L.C.

 

None

SandRidge Holdings, Inc.

 

None

SandRidge Gathering LLC

 

Entity formed in September 2014

SandRidge Exploration and Production, LLC

 

None

SandRidge Midstream, Inc.

 

None

 

Schedule I - 1

--------------------------------------------------------------------------------

 

Schedule II to the Security Agreement

 

PLEDGED EQUITY

 

Grantor

 

Issuer

 

Class of Equity

 

Certificate
No(s)

 

Number of
Shares

 

Percentage of
Outstanding
Shares

 

SandRidge Energy, Inc.

 

Black Bayou Exploration, L.L.C.

 

Membership Interests

 

n/a

 

n/a

 

100

%

SandRidge Energy, Inc.

 

Cornhusker Energy, L.L.C.

 

Membership Interests

 

n/a

 

n/a

 

100

%

SandRidge Energy, Inc.

 

FAE Holdings 389322R, LLC

 

Membership Interests

 

n/a

 

n/a

 

100

%

SandRidge Energy, Inc.

 

Lariat Services, Inc.

 

Common Stock

 

1

 

100,000

 

100

%

SandRidge Energy, Inc.

 

MidContinent Resources, LLC

 

Membership Interests

 

n/a

 

n/a

 

100

%

SandRidge Energy, Inc.

 

Mistmada Oil Company, Inc.

 

Common Stock

 

1

 

1,000

 

100

%

SandRidge Energy, Inc.

 

Sabino Exploration, LLC

 

Membership Interests

 

n/a

 

n/a

 

100

%

SandRidge Energy, Inc.

 

SandRidge CO2, LLC (f/k/a PSCO2, LLC; f/k/a PSCO2, L.P.)

 

Membership Interests

 

n/a

 

n/a

 

100

%

SandRidge Energy, Inc.

 

SandRidge Holdings, Inc.

 

Common Stock

 

1

 

100

 

100

%

SandRidge Energy, Inc.

 

SandRidge Midstream, Inc. (f/k/a ROC Gas Company; f/k/a Riata Operating Company)

 

Common Stock

 

1

 

100,000

 

100

%

SandRidge Energy, Inc.

 

SandRidge Operating Company (f/k/a Alsate Management and Investment Company;
f/k/a Alsate Exploration, Inc.)

 

Common Stock

 

1

 

100,000

 

100

%

SandRidge Energy, Inc.

 

SandRidge Realty, LLC (f/k/a KMSD, L.L.C.)

 

Membership Interests

 

n/a

 

n/a

 

100

%

SandRidge Energy, Inc.

 

Sierra Madera CO2 Pipeline, LLC (f/k/a Sierra Madera CO2 Pipeline, Ltd.)

 

Membership Interests

 

n/a

 

n/a

 

100

%

SandRidge Energy, Inc.

 

WTO Gas Gathering Company, LLC

 

Membership Interests

 

n/a

 

n/a

 

100

%

Integra Energy, L.L.C. (f/k/a Riata Energy South Africa,

 

Cholla Pipeline, L.P.

 

Limited Partnership

 

n/a

 

n/a

 

36.1427

%

 

Schedule II - 1

--------------------------------------------------------------------------------

 

Grantor

 

Issuer

 

Class of Equity

 

Certificate
No(s)

 

Number of
Shares

 

Percentage of
Outstanding
Shares

 

L.L.C.)

 

 

 

Interests

 

 

 

 

 

 

 

SandRidge Holdings, Inc.

 

SandRidge Exploration and Production, LLC (f/k/a NEG Operating LLC)

 

Membership Interests

 

n/a

 

n/a

 

100

%

SandRidge Exploration and Production, LLC (f/k/a NEG Operating LLC)

 

CEBA Midstream, LP

 

Limited Partnership Interests

 

n/a

 

n/a

 

99

%

SandRidge Exploration and Production, LLC (f/k/a NEG Operating LLC)

 

Integra Energy, L.L.C. (f/k/a Riata Energy South Africa, L.L.C.)

 

Membership Interests

 

n/a

 

n/a

 

100

%

SandRidge Exploration and Production, LLC (f/k/a NEG Operating LLC)

 

SandRidge Gathering LLC

 

Membership Interests

 

n/a

 

n/a

 

100

%

SandRidge Exploration and Production, LLC (f/k/a NEG Operating LLC)

 

SandRidge Midcon Midstream GP, LLC

 

Membership Interests

 

n/a

 

n/a

 

100

%

SandRidge Midstream, Inc. (f/k/a ROC Gas Company; f/k/a Riata Operating Company)

 

Cholla Pipeline, L.P.

 

Limited Partnership Interests

 

n/a

 

n/a

 

62.5716

%

SandRidge Midstream, Inc. (f/k/a ROC Gas Company; f/k/a Riata Operating Company)

 

Sagebrush Pipeline, LLC

 

Membership Interests

 

n/a

 

n/a

 

73.80881

%

 

Schedule II - 2

--------------------------------------------------------------------------------

 

Exhibit A to the Security Agreement

 

FORM OF SECURITY AGREEMENT SUPPLEMENT

 

[Date of Security Agreement Supplement]

 

U.S. BANK NATIONAL ASSOCIATION

as the Collateral Trustee for the Secured Parties

Corporate Trust Services

EX-TX-WSFH

5555 San Felipe Street, 11th Floor

Houston, Texas 77056

 

SandRidge Energy Inc.

 

Ladies and Gentlemen:

 

Reference is made to the Security Agreement dated as of June 10, 2015 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the “Security Agreement”) made by the Grantors from time to time party
thereto in favor of the Collateral Trustee for the Secured Parties. Terms used
herein and not otherwise defined herein are used herein as defined in the
Security Agreement.

 

SECTION 1.         Grant of Security.  The undersigned hereby grants to the
Collateral Trustee, for the ratable benefit of the Secured Parties, a security
interest in, all of its right, title and interest in and to all of the
Collateral of the undersigned, whether now owned or hereafter acquired by the
undersigned, wherever located and whether now or hereafter existing or arising,
including the property and assets of the undersigned set forth on the attached
supplemental Schedules to the Schedules to the Security Agreement.

 

SECTION 2.         Security for Obligations.  The grant of a security interest
in, the Collateral by the undersigned under this Security Agreement Supplement
and the Security Agreement secures the payment of all Secured Obligations that
are now or hereafter existing under or in respect of the Parity Lien Documents
and all Secured Obligations that are now or hereafter existing, in each case
whether direct or indirect, absolute or contingent, and whether for principal,
reimbursement obligations, interest, premiums, penalties, fees,
indemnifications, contract causes of action, costs, expenses or otherwise.

 

SECTION 3.         Supplements to Security Agreement Schedules.  The undersigned
has attached hereto supplemental Schedules to the respective Schedules to the
Security Agreement, and the undersigned hereby certifies, as of the date first
above written, that such supplemental Schedules have been prepared by the
undersigned in substantially the form of the equivalent Schedules to the
Security Agreement and are complete and correct.

 

SECTION 4. Representations and Warranties.  The undersigned makes as of the date
hereof each representation and warranty set forth in Section 6 of the Security
Agreement (as supplemented by the attached supplemental Schedules) to the same
extent as each other Grantor.

 

SECTION 5.         Obligations Under the Security Agreement.  The undersigned
hereby agrees, as of the date first above written, to be bound as a Grantor by
all of the terms and provisions of the Security Agreement to the same extent as
each of the other Grantors. The undersigned further agrees, as of the date first
above written, that each reference in the Security Agreement to an “Additional
Grantor” or a “Grantor” shall also mean and be a reference to the undersigned.

 

A - 1

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SECTION 6.         Governing Law.  This Security Agreement Supplement shall be
governed by, and construed in accordance with, the laws of the State of New
York.

 

 

Very truly yours,

 

 

 

[NAME OF ADDITIONAL GRANTOR]

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

Address for notices:

 

 

 

 

 

A - 2

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