Document:

Exhibit 10.7

 

DEVELOPMENT AGREEMENT

 

This Development Agreement (this “Development Agreement”) by and among SandRidge Energy, Inc., a Delaware corporation, with offices at 123 Robert S. Kerr Avenue, Oklahoma City, OK 73102-6406 (“SandRidge Parent”), SandRidge Exploration and Production, LLC, a Delaware limited liability company and wholly owned subsidiary of SandRidge Parent with offices at 123 Robert S. Kerr Avenue, Oklahoma City, OK 73102-6406 (“Assignor” and, together with SandRidge Parent, “SandRidge”) and SandRidge Mississippian Trust II, a statutory trust formed under the laws of the State of Delaware (the “Trust”), is delivered to be effective as of 12:01 a.m., Central Time, January 1, 2012 (the “Effective Time”).  All capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in Article I below.

 

WHEREAS, Assignor and the Trust have entered into that certain Perpetual Overriding Royalty Interest Conveyance (Oklahoma) (Development) and that certain Long-Term Overriding Royalty Interest Conveyance (Kansas) (Development), each to be effective as of the Effective Time (collectively, the “Perpetual Development Conveyances”);

 

WHEREAS, Assignor and Mistmada Oil Company, Inc., an Oklahoma corporation and wholly owned subsidiary of SandRidge Parent (“SandRidge Sub”), have entered into that certain Term Overriding Royalty Interest Conveyance (Oklahoma) (Development) and that certain Term Overriding Royalty Interest Conveyance (Kansas) (Development), each to be effective as of the Effective Time (collectively, the “Term Development Conveyances,” and together with the Perpetual Development Conveyances, the “Conveyances”), which Term Development Conveyances have been assigned as of the Effective Time by SandRidge Sub to the Trust; and

 

WHEREAS, in connection with the Conveyances, SandRidge has agreed to undertake certain obligations with respect to the drilling and completion of the Development Wells.

 

NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intended to be legally bound hereby, it is agreed as follows:

 

ARTICLE I

 

DEFINITIONS

 

This Article I defines certain capitalized words, terms and phrases used in this Development Agreement. Certain other capitalized words, terms and phrases used in this Development Agreement are defined elsewhere in this Development Agreement.

 

 

“Additional Interest” is defined in Section 3.01.

 

“Additional Lease” is defined in Section 3.01.

 

“Adjusted Development Well Amount” means the amount, for each Development Well, equal to the product of (a) the NRI Factor for such well, multiplied by (b) the Lateral Distance Factor for such well.  For example, in the case of a Development Well for which the NRI Factor is 1.5 and the Lateral Distance Factor is 1.0, the Adjusted Development Well Amount would be equal to: NRI Factor (1.5) x Lateral Distance Factor (1.0) = 1.5.  Therefore, such Development Well would have a 1.5 Adjusted Development Well Amount.  The Adjusted Development Well Amount shall be rounded to the nearest ten thousandth (i.e., four decimal places to the right of the decimal point).

 

“Affiliate” means, for any specified Person, another Person that controls, is controlled by, or is under common control with, the specified Person.  “Control,” in the preceding sentence, refers to the possession by one Person, directly or indirectly, of the right or power to direct or cause the direction of the management and policies of another Person, whether through the ownership of voting securities, by contract or otherwise.

 

“AMI” means that area described in Exhibit A to this Development Agreement, as such area may be extended or exchanged pursuant to Article III below.

 

“Assignee Minerals” means, collectively, the “Assignee Minerals” as defined under each of the Conveyances.

 

“Assignor” is defined in the introductory paragraph to this Development Agreement.

 

“Assignor’s Net Revenue Interest” means the interest, stated as a decimal fraction, in Subject Minerals production from a Development Well attributable to Subject Interests in that Development Well, net of Production Burdens.

 

“Closing Time” means 12:01 a.m., Central Time, on April [  ], 2012.

 

“Conveyances” is defined in the recitals to this Development Agreement.

 

“Development Agreement” is defined in the introductory paragraph to this Development Agreement.

 

“Development Area” means each governmental section outside the AMI but adjacent to a governmental section included in the AMI, except for any governmental section outside the AMI that comprises a part of the Area of Mutual Interest with respect to SandRidge Mississippian Trust I or any other royalty trust sponsored by SandRidge Parent.

 

“Development Well” means any Mineral well located on the Subject Lands, or on lands with which the Subject Lands are pooled or unitized, that is spud after December 31, 2011 and drilled horizontally to, and perforated (or made ready to commence stimulation) for completion in, the Target Formation, on or prior to the Drilling Obligation Completion Date.

 

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“Drilling Obligation Completion Date” means the date that the Total Drilling Target is reached; provided that the “Drilling Obligation Completion Date” shall not be deemed to have been achieved unless SandRidge Parent shall have delivered to the Trustee, within a reasonable time thereafter, (a) a certificate substantially in the form of Exhibit B to this Development Agreement, executed by its Chief Executive Officer, President or any Vice President, certifying that the Total Drilling Target was achieved as of such date and identifying each Development Well, and (b) such other documentation as the Trustee may reasonably request to establish satisfaction of SandRidge’s drilling obligation hereunder.

 

“Effective Time” is defined in the introductory paragraph to this Development Agreement.

 

“Exchange Acreage” is defined in Section 3.02.

 

“Excluded Assets” means those Mineral wells that are described in Exhibit B to each of the Conveyances.

 

“Gas” means natural gas and all other gaseous hydrocarbons or minerals, including helium, but specifically excluding any Gas Liquids.

 

“Gas Liquids” means those natural gas liquids and other similar liquid hydrocarbons, including ethane, propane, butane and natural gasoline, and mixtures thereof, that are removed from a gas stream by the liquids extraction process of any field facility or gas processing plant and delivered by the facility or plant as natural gas liquids.

 

“Kansas Cap” is defined in Section 2.05(d).

 

“Kansas Mortgage” is defined in Section 2.05(b).

 

“Lateral Distance Factor” means:

 

(a)     for each Development Well with a Perforated Length of less than 3,500 feet, the quotient obtained by dividing such well’s Perforated Length by 3,500 feet;

 

(b)     for each Development Well with a Perforated Length of more than 4,500 feet, the quotient obtained by dividing such well’s Perforated Length by 4,500 feet; and

 

(c)      for each Development Well with a Perforated Length from and including 3,500 feet to and including 4,500 feet, a factor equal to 1.0.

 

For example, if the Perforated Length of a Development Well is 3,000 feet, the computation would be: 3,000 feet / 3,500 feet = 0.8571. Therefore, such Development Well would have a Lateral Distance Factor of 0.8571.  If the Perforated Length of a Development Well is 5,000 feet, however, the computation would be: 5,000 feet / 4,500 feet = 1.1111. Therefore, such Development Well would have a Lateral Distance Factor of 1.1111.  If the Perforated Length of a Development Well is 4,000 feet, the Lateral Distance Factor for such Development Well would be 1.0.  The Lateral Distance Factor for each Development Well shall

 

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be rounded to the nearest ten thousandth (i.e., four decimal places to the right of the decimal point).

 

“Mineral(s) ” means Oil, Gas and Gas Liquids.

 

“Mortgages” is defined in Section 2.05(b).

 

“NRI Factor” means, with respect to each Development Well, the fraction obtained by dividing Assignor’s Net Revenue Interest for such well by 47.3967%.  For example, if Assignor’s Net Revenue Interest in a Development Well is 70.0%, the computation would be: 70.0% / 47.3967% = 1.4769.  Therefore, such Development Well would have a NRI Factor of 1.4769.  The NRI Factor for each Development Well shall be rounded to the nearest ten thousandth (i.e., four decimal places to the right of the decimal point).

 

“Oil” means crude oil, condensate and other liquid hydrocarbons recovered by field equipment or facilities, excluding Gas Liquids.

 

“Oklahoma Cap” is defined in Section 2.05(d).

 

“Oklahoma Mortgage” is defined in Section 2.05(b).

 

“Party,” when capitalized, refers to SandRidge Parent, Assignor or the Trust. “Parties,” when capitalized, refers to SandRidge Parent, Assignor and the Trust.

 

“Perforated Length” means the perforated length (in feet) of the well bore of a Development Well, measured from the first perforation or stimulation site along the measured depth to the last perforation or stimulation site along the measured depth.

 

“Perpetual Development Conveyances” is defined in the recitals to this Development Agreement.

 

“Person” means any natural person, corporation, partnership, trust, estate or other entity, organization or association.

 

“Production Burdens” means, with respect to any Subject Lands, Subject Interests or Subject Minerals, all royalty interests, overriding royalty interests, production payments, net profits interests and other similar interests that constitute a burden on, are measured by or are payable out of the production of Minerals or the proceeds realized from the sale or other disposition thereof.

 

“Reasonably Prudent Operator Standard” means the standard of conduct of a reasonably prudent oil and gas operator in the AMI under the same or similar circumstances, acting with respect to its own property and disregarding the existence of the Royalty Interests as a burden on such property.

 

“Royalty Interests” means, collectively, the royalty interests created under each of the Conveyances.

 

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“SandRidge” is defined in the introductory paragraph to this Development Agreement.

 

“SandRidge Parent” is defined in the introductory paragraph to this Development Agreement.

 

“SandRidge Sub” is defined in the recitals to this Development Agreement.

 

“Subject Interests” means Assignor’s undivided interests in the Subject Lands as described on Exhibit A to each of the Conveyances, whether as lessee under leases, as an owner of the Subject Minerals (or the right to extract such Minerals) or otherwise, by virtue of which undivided interests Assignor has the right to conduct exploration, drilling, development and Mineral production operations on the Subject Lands, or to cause such operations to be conducted, or to participate in such operations by paying and bearing all or any part of the costs, risks and liabilities of such operations, to drill, test, complete, equip, operate and produce wells to exploit the Minerals. The “Subject Interests” (a) may be owned by Assignor pursuant to leases, deeds, operating, pooling or unitization agreements, orders or any other instruments, agreements or documents, recorded or unrecorded, (b) include any and all extensions or renewals of leases covering the Subject Lands (or any portion thereof) obtained by Assignor, or any Affiliate thereof, within six (6) months after the expiration or termination of any such lease, and (c) are subject to the Permitted Encumbrances (as defined in each of the Conveyances). For the avoidance of doubt, the “Subject Interests” do not include: (i) Assignor’s interests in the Excluded Assets; (ii) Assignor’s rights to substances other than Minerals; (iii) Assignor’s rights to Minerals (other than Assignee Minerals) under contracts for the purchase, sale, transportation, storage, processing or other handling or disposition of Minerals; (iv) Assignor’s interests in, or rights to Minerals (other than Assignee Minerals) held in pipelines, gathering systems, storage facilities, processing facilities or other equipment or facilities; or (v) any additional or enlarged interests in the Development Wells, Subject Lands or Subject Minerals acquired by Assignor after the Closing Time, except (1) to the extent any such additional or enlarged interest becomes a part of the Subject Interests by amendment to the applicable Conveyance pursuant to Section 3.01 or Section 3.02 below, (2) as may result from the operation of the terms of the instruments creating the Subject Interests, or (3) as may be reflected in extensions and renewals covered by the preceding sentence.

 

“Subject Lands” means the lands subject to or covered by the oil and gas leases described in Exhibit A to each of the Conveyances, insofar and only insofar as they cover the Target Formation, subject to the exceptions, exclusions and reservations set forth on each such Exhibit A.

 

“Subject Minerals” means all Minerals in and under, and that may be produced, saved and sold from a Development Well, from and after the Effective Time, insofar and only insofar as such Minerals are produced from the Target Formation, subject to the following exclusions: Minerals that are (a) lost in the production, gathering or marketing of Minerals; (b) used (i) in conformity with ordinary and prudent operations on the Subject Lands, including drilling and production operations with respect to a Development Well, or (ii) in connection with operations (whether on or off the Subject Lands) for processing or compressing the Subject Minerals; (c) taken by a Third Person to recover costs, or some multiple of costs, paid or incurred by that Third Person under any operating agreement, unit agreement or other agreement in connection

 

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with nonconsent operations conducted (or participated in) by that Third Person; and (d) retained by a Third Person for gathering, transportation, processing or marketing services related to the Subject Minerals in lieu of or in addition to cash payment for such services, to the extent such agreement is permitted under the Conveyances.

 

“Target Formation” means (i) with respect to Alfalfa County, Oklahoma, the “Target Formation” being defined as being the interval between the base of Pennsylvanian-aged Morrow or its stratigraphic equivalent at a depth of 4,833’ and the Devonian-aged Woodford Shale or its stratigraphic equivalent at a depth of 5,344’ in the SandRidge Energy Dorado SWD 1-32 located in section 32, Township 29 North, Range 9 West (API No. 35003219830000); (ii) with respect to Grant County, Oklahoma, the “Target Formation” being defined as being the interval between the base of Pennsylvanian-aged Morrow or its stratigraphic equivalent at a depth of 5,395’ and the Devonian-aged Woodford Shale or its stratigraphic equivalent at a depth of 6,060’ in the SandRidge Energy Orion 1-22 SWD located in section 22, Township 25 North, Range 5 West (API No. 35053227710000); (iii) with respect to Kay County, Oklahoma, the “Target Formation” being defined as being the interval between the base of Pennsylvanian-aged Morrow or its stratigraphic equivalent at a depth of 4,387’ and the Devonian-aged Woodford Shale or its stratigraphic equivalent at a depth of 4,619’ in the Jefferson-WMS State School Land 5-36 located in section 36, Township 25 North, Range 2 West (API No. 35071224500000); (iv) with respect to Noble County, Oklahoma, the “Target Formation” being defined as being the interval between the base of Pennsylvanian-aged Morrow or its stratigraphic equivalent at a depth of 4,523’ and the Devonian-aged Woodford Shale or its stratigraphic equivalent at a depth of 4,783’ in the SandRidge Energy County Line SWD 1-2 located in section 2, Township 24 North, Range 2 West (API No. 35103242860000); (v) with respect to Woods County, Oklahoma, the “Target Formation” being defined as being the interval between the base of Pennsylvanian-aged Morrow or its stratigraphic equivalent at a depth of 5,204’ and the Devonian-aged Woodford Shale or its stratigraphic equivalent at a depth of 5,704’ in the SandRidge Energy Koppitz SWD 1-31 located in section 31, Township 28 North, Range 13 West (API No. 35151232750000); (vi) with respect to Barber County, Kansas, the “Target Formation” being defined as being the interval between the base of the Pennsylvanian-aged Morrow or its stratigraphic equivalent at a depth of 4744’ and the Devonian-aged Chattanooga Shale or its stratigraphic equivalent at a depth of 5096’ in the SandRidge Energy Stephanie SWD 1-3 located in 3-35S-10W (API No. 15007237990000); (vii) with respect to Comanche County, Kansas, the “Target Formation” being defined as being the interval between the base of Pennsylvanian-aged Morrow or its stratigraphic equivalent at a depth of 5,511’ and the Devonian-aged Woodford Shale or its stratigraphic equivalent at a depth of 6,786’ in the Sho-Bar #1-29 Wayne located in section 29, Township 34 South, Range 20 West (API No. 15033213800000); (viii) with respect to Harper County, Kansas, the “Target Formation” being defined as being the interval between the base of the Pennsylvanian-aged Morrow or its stratigraphic equivalent at a depth of 4800’ and the Devonian-aged Chattanooga Shale or its stratigraphic equivalent at a depth of 5096’ in the SandRidge Energy Shea SWD 1-17 located in 17-35S-7W (API No. 15077217810000); and (ix) with respect to Sumner County, Kansas, the “Target Formation” being defined as being the interval between the base of Pennsylvanian-aged Red Fork Zone or its stratigraphic equivalent at a depth of 4,660’ and the Devonian-aged Woodford Shale or its stratigraphic equivalent at a depth of 5,112’ in the Quinton Little Company #1-18 Wolff located in section 18, Township 35 South, Range 4 West (API No. 15191201870000).

 

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“Term Development Conveyances” is defined in the recitals to this Development Agreement.

 

“Third Person” means a Person other than SandRidge or the Trustee.

 

“Total Drilling Target” means that number of Development Wells where the cumulative sum of all the Adjusted Development Well Amounts for such Development Wells drilled or caused to be drilled by SandRidge equals 206.

 

“Trust” is defined in the introductory paragraph to this Development Agreement.

 

“Trust Agreement” means the Amended and Restated Trust Agreement of the Trust, dated as of April [  ], 2012 (as may be amended from time to time), among SandRidge Parent, the Trustee and The Corporation Trust Company, as Delaware trustee.

 

“Trustee” means The Bank of New York Mellon Trust Company, N.A., a national banking association organized under the laws of the United States of America with its principal place of business in New York, New York, as trustee, acting not in its individual capacity but solely as trustee of the Trust.

 

ARTICLE II

 

DEVELOPMENT OF THE SUBJECT LANDS

 

Section 2.01 Drilling Program.

 

(a) Obligation to Drill. SandRidge shall, subject to the terms of this Article II, drill or cause to be drilled such number of Development Wells that is necessary to achieve the Total Drilling Target on or prior to December 31, 2016.

 

(b) Drilling Standard. SandRidge shall drill or caused to be drilled, at SandRidge’s sole cost and expense, each of the Development Wells in a diligent manner in accordance with the Reasonably Prudent Operator Standard.

 

Section 2.02 Obligation to Complete and Equip. SandRidge shall, at SandRidge’s sole cost and expense, (a) attempt to complete in the Target Formation each Development Well that reasonably appears to SandRidge, acting in accordance with the Reasonably Prudent Operator Standard, to be capable of producing Minerals in quantities sufficient to pay completion, equipping and operating costs, (b) equip for production each Development Well that is successfully completed and, when it is equipped and connected to a gathering line, pipeline or other storage or marketing facility, commence production, and (c) plug and abandon all Development Wells that are unsuccessful to the extent required by applicable law.

 

Section 2.03 Costs and Expenses of Development Wells. All costs and expenses associated with or paid or incurred in connection with the spudding, drilling, testing, completing and equipping for production, operating and/or plugging and abandoning of the Development Wells shall be borne solely by SandRidge, but SandRidge may use any Subject Minerals in such operations without any duty to account to the Trustee or the Trust.

 

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Section 2.04 Title Due Diligence. Prior to commencing the drilling of any Development Well, SandRidge shall perform such title due diligence and such title curative work as would be performed by an oil and gas operator drilling a well and acting in accordance with the Reasonably Prudent Operator Standard.

 

Section 2.05 Wells.

 

(a) Prior to the Drilling Obligation Completion Date, SandRidge shall not, and shall cause its Affiliates not to, drill and/or complete any well to the Target Formation in the AMI, other than Development Wells in furtherance of its drilling obligation in Section 2.01 above.

 

(b) In order to secure the performance of SandRidge’s drilling obligation under Section 2.01 above, Assignor hereby covenants and agrees to enter into (i) a Mortgage by which Assignor will grant to the Trust a mortgage lien in and to any of the undeveloped portions of the Subject Interests (including, by amendment to such mortgage, any Additional Lease, Additional Interest or Exchange Acreage that becomes part of the Subject Interests) located in those parts of the AMI located in Oklahoma (the “Oklahoma Mortgage”), and (ii) a Mortgage by which Assignor will grant to the Trust a mortgage lien in and to any of the undeveloped portions of the Subject Interests (including, by amendment to such mortgage, any Additional Lease, Additional Interest or Exchange Acreage that becomes part of the Subject Interests) located in those parts of the AMI located in Kansas (the “Kansas Mortgage” and, together with the Oklahoma Mortgage, the “Mortgages”).

 

(c) If SandRidge fails to achieve the Total Drilling Target by December 31, 2016, SandRidge shall be in default of its obligations under this Development Agreement and the Trust shall be entitled to pursue, in its sole discretion, any and all remedies available pursuant to Article III of each of the Mortgages.  Other than as set forth in the Mortgages, the Trust shall have no separate cause of action for default by SandRidge under Article II of this Development Agreement.  If SandRidge fails to perform its obligations under this Development Agreement (other than its obligations under Article II above), SandRidge shall be in default and the Trust shall be entitled to pursue, in its sole discretion, any and all remedies available at law and in equity.  Notwithstanding anything to the contrary contained herein, the Trust hereby waives any and all claims or rights of action to compel specific performance of SandRidge’s obligations under this Development Agreement.

 

(d) Notwithstanding Section 2.05(c), the maximum amount recoverable upon a failure by SandRidge to satisfy its obligations under Section 2.01 above shall initially be $239,499,000 with respect to the Oklahoma Mortgage (the “Oklahoma Cap”) and $29,601,000 with respect to the Kansas Mortgage (the “Kansas Cap”); provided, that, from and after such time as SandRidge has drilled or caused to be drilled that number of Development Wells where the cumulative total of all Adjusted Development Well Amounts for such Development Wells equals or exceeds 103, the Oklahoma Cap and the Kansas Cap shall be reduced, for each additional Development Well drilled or caused to be drilled by SandRidge (whether located in Oklahoma or Kansas), as follows:

 

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(i) the Oklahoma Cap shall automatically be reduced (but not below zero) by an amount that is equal to (A) $2,325,233.01 multiplied by (B) the Adjusted Development Well Amount for such Development Well; and

 

(ii)           the Kansas Cap shall automatically be reduced (but not below zero) by an amount that is equal to (A) $287,388.35 multiplied by (B) the Adjusted Development Well Amount for such Development Well.

 

For the avoidance of doubt, each of the Oklahoma Cap and the Kansas Cap shall be equal to zero once SandRidge has drilled or caused to be drilled such number of Development Wells that is necessary to achieve the Total Drilling Target.  In addition, upon Assignor’s request and at Assignor’s expense, the lien and security interest evidenced by the applicable Mortgage shall be released as to each Development Well located on the Subject Lands subject to such Mortgage as the same is completed or perforated (or made ready to commence stimulation) for completion in accordance with this Development Agreement, including wells that are completed or perforated (or made ready to commence stimulation) for completion and then plugged and abandoned in the Target Formation.

 

ARTICLE III

 

AMI

 

Section 3.01 Additional Leases and Additional Interests. In the event that, after the Closing Time and prior to the Drilling Obligation Completion Date, Assignor (a) acquires additional leases (other than renewals or extensions of leases that already constitute a part of the Subject Interests) covering lands lying within the AMI (each, an “Additional Lease”) or (b) acquires through forced pooling or otherwise by operation of law or pursuant to any applicable contract any rights or interests that increase Assignor’s Net Revenue Interest in any Development Well, whether before or after the drilling of such well (each such increase in Assignor’s Net Revenue Interest, an “Additional Interest”), at Assignor’s option and subject to Section 3.03 below, upon notice from Assignor, the Trust shall execute, acknowledge and deliver (i) an instrument that amends the applicable Conveyance so that each such Additional Lease or Additional Interest will be subject to the Royalty Interest and be part of the Subject Interests and Subject Lands, and (ii) an instrument that amends the applicable Mortgage so that each such Additional Lease will be subject to such Mortgage.

 

Section 3.02 Exchange of Subject Lands. At Assignor’s option and subject to Section 3.03 below, at any time prior to the Drilling Obligation Completion Date, upon notice from Assignor, the Trust shall execute, acknowledge and deliver to Assignor a recordable instrument (reasonably acceptable to Assignor) that reconveys to Assignor the Royalty Interest relating to such undeveloped portions of the Subject Interests as Assignor may elect, and releases such Subject Interests from the applicable Mortgage, in connection with Assignor’s exchange of such Subject Interests for other undeveloped acreage either within the AMI or outside the AMI but within the Development Area (the “Exchange Acreage”).  Concurrently with such reconveyance and release, Assignor and the Trust shall execute, acknowledge and deliver (a) an instrument that amends the applicable Conveyance so that such Exchange Acreage will be subject to the Royalty Interest and be part of the Subject Interests and Subject Lands, and (b) an

 

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instrument that amends the applicable Mortgage so that such Exchange Acreage will be subject to such Mortgage.  In no event shall Assignor extend any well into any Exchange Acreage unless and until the applicable Conveyance is amended to include such Exchange Acreage as part of the Subject Interests.

 

Section 3.03 Limitations. In no event may (i) any Additional Lease or Additional Interest be made subject to the Royalty Interest pursuant to Section 3.01 above, or (ii) any exchange involving Exchange Acreage be effected pursuant to Section 3.02 above, unless Assignor certifies to the Trust that:

 

(a) the aggregate acreage attributable to all Additional Leases, Additional Interests and Exchange Acreage will not exceed 5% of the Subject Interests as such exist as of the Closing Time;

 

(b) in the case of an Additional Lease only, the reserve profile of the acreage subject to such Additional Lease is consistent with the reserve profiles of other portions of the Subject Interests;

 

(c) in the case of Exchange Acreage only, the reasonably projected quantity of proved undeveloped reserves and probable reserves attributable to the Exchange Acreage does not significantly differ from the reasonably projected quantity of proved undeveloped reserves and probable reserves attributable to the portion of the Subject Interests to be given in exchange therefor; and

 

(d) the addition of any Additional Leases, Additional Interests, or Exchange Acreage, as applicable, to the Conveyances will not cause any adverse federal income tax consequence to any unitholder of the Trust.

 

The Trustee is hereby authorized and directed to rely on any such certification from Assignor, and shall have no authority or responsibility to exercise any discretion in connection with any transaction authorized by this Article III.

 

ARTICLE IV

 

OTHER PROVISIONS

 

Section 4.01 Successors and Assigns.  Subject to the limitation and restrictions on the assignment or delegation by the Parties of their rights and interests under this Development Agreement, all of the covenants and agreements of SandRidge Parent, Assignor and the Trust contained herein shall be deemed to be covenants running with the land and shall be binding upon the successors and assigns of SandRidge Parent’s and Assignor’s interests in the Subject Interests or this Development Agreement and SandRidge Sub’s and the Trust’s interest in the Royalty Interests and shall inure to the benefit of SandRidge Sub and the Trust and their respective successors and permitted assigns.  The foregoing notwithstanding, nothing herein is intended to modify or shall have the effect of modifying the restrictions on assignment set forth in the Conveyances regarding assignments, transfer or pooling of SandRidge Parent’s and Assignor’s interests in the Subject Interests; and the preceding sentence shall not be deemed to permit any assignment or other transfer of the interest of SandRidge Parent or Assignor in any of

 

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the Subject Interests that is not specifically permitted by the provisions of the Conveyances.  Nothing contained in this Development Agreement or in the Conveyances shall in any way limit or restrict the right of the Trust, or the Trust’s respective successors and assigns, to sell, convey, assign or mortgage the Royalty Interests in whole or in part.  If the Trust, or the Trust’s successors and assigns, at any time shall execute a mortgage, pledge or deed of trust covering all or any part of the Royalty Interests as security for any obligation, the mortgagee, the pledgee or the trustee therein named or the holder of the obligation secured thereby shall be entitled, to the extent such mortgage, pledge or deed of trust so provides and upon the occurrence or existence of the event or condition therein stated, if so conditioned, to exercise all of the rights, remedies, powers and privileges herein conferred upon the Trust, and to give or withhold all consents herein required or permitted to be obtained from the Trust.

 

Section 4.02 Governing Law.  THIS DEVELOPMENT AGREEMENT SHALL BE CONSTRUED UNDER AND GOVERNED BY THE LAWS OF THE STATE OF OKLAHOMA WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

 

Section 4.03 Construction of Development Agreement. In construing this Development Agreement, the following principles shall be followed:

 

(a) no consideration shall be given to the captions of the articles, sections, subsections or clauses, which are inserted for convenience in locating the provisions of this Development Agreement and not as an aid in its construction;

 

(b) no consideration shall be given to the fact or presumption that one Party had a greater or lesser hand in drafting this Development Agreement;

 

(c) the word “includes” and its syntactical variants mean “includes, but is not limited to” and corresponding syntactical variant expressions;

 

(d) a defined term has its defined meaning throughout this Development Agreement, regardless of whether it appears before or after the place in this Development Agreement where it is defined;

 

(e) unless the context clearly indicates to the contrary, references to any Party shall be construed to include all permitted successors and assigns of such Party and references to the Trustee shall be construed to include all successor and substitute trustees under the Trust Agreement;

 

(f) the plural shall be deemed to include the singular, and vice versa; and

 

(g) each exhibit, attachment and schedule to this Development Agreement is a part of this Development Agreement, but if there is any conflict or inconsistency between the main body of this Development Agreement and any exhibit, attachment or schedule, the provisions of the main body of this Development Agreement shall prevail.

 

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Section 4.04 No Waiver. Failure of any Party to require performance of any provision of this Development Agreement shall not affect any Party’s right to require full performance thereof at any time thereafter, and the waiver by any Party of a breach of any provision hereof shall not constitute a waiver of a similar breach in the future or of any other breach or nullify the effectiveness of such provision.

 

Section 4.05 Relationship of Parties. This Development Agreement does not create a partnership, mining partnership, joint venture or relationship of trust or agency between the Parties.

 

Section 4.06 Further Assurances. Each Party shall execute, acknowledge and deliver to the other Parties all additional instruments and other documents reasonably required to evidence or effect any transaction contemplated by this Development Agreement.

 

Section 4.07 The 12:01 A.M. Convention. Except as otherwise provided in this Development Agreement, each calendar day, month, quarter, and year shall be deemed to begin at 12:01 a.m. Central Time on the stated day or on the first day of the stated month, quarter, or year, and to end at 12:00 a.m. Central Time on the next day or on first day of the next month, quarter or year, respectively.

 

Section 4.08 Counterpart Execution. This Development Agreement may be executed in any number of counterparts with the same effect as if all the Parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument.

 

Section 4.09 Notices. Any and all notices or demands permitted or required to be given under this Development Agreement shall be in writing and shall be validly given or made if (a) personally delivered, (b) delivered and confirmed by facsimile or like instantaneous transmission service, or by Federal Express or other overnight courier delivery service, which shall be effective as of confirmation of receipt by the courier at the address for notice hereinafter stated or (c) deposited in the United States mail, first class, postage prepaid, certified or registered, return receipt requested, addressed as follows:

 

If to the Trust, to:

 

SandRidge Mississippian Trust II

c/o The Bank of New York Mellon Trust Company, N.A.

Institutional Trust Services

919 Congress Avenue, Suite 500

Austin, Texas 78701

Attention: Michael J. Ulrich

Facsimile No.: (512) 479-2253

 

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With a copy (which shall not constitute notice) to:

 

Bracewell & Giuliani LLP

111 Congress Avenue

Suite 2300

Austin, Texas 78701

Attention: Thomas W. Adkins

Facsimile No.: (512) 479-3940

 

If to SandRidge, to:

 

123 Robert S. Kerr Avenue

Oklahoma City, OK 73102-6406

Attention: Philip T. Warman

Facsimile No.: (405) 429-5983

 

With a copy (which shall not constitute notice) to:

 

Covington & Burling LLP

1201 Pennsylvania Avenue, N.W.

Washington, D.C. 20004

Attention: David H. Engvall

Facsimile No. (202) 778 5307

 

Section 4.10 Limitation of Liability. It is expressly understood and agreed by the Parties that (a) this Development Agreement is executed and delivered by the Trustee not individually or personally, but solely as the Trustee in the exercise of the powers and authority conferred and vested in it, and (b) under no circumstances shall the Trustee be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trust under this Development Agreement.  It is further expressly understood and agreed by the Parties that neither the Trust nor the Trustee, in its capacity as the Trustee or individually, shall have any authority over, or responsibility or liability for, the drilling of the Development Wells or any of the other business or commercial activities contemplated by this Development Agreement, all of which are hereby agreed to be the sole responsibility of SandRidge, and SandRidge hereby agrees to and hereby does indemnify and agree to hold harmless each of the Trust and the Trustee, in its capacity as the Trustee and individually, from and against any and all damages, liabilities, expenses, fines, judgments, amounts paid in settlement, reasonable attorneys’ fees and costs of investigation, and other expenses reasonably incurred by any of them in connection with or as a result of any of the business or commercial activities contemplated by this Development Agreement or any other matter arising out of this Development Agreement or any such matter. SandRidge further agrees to advance any such attorneys’ fees, costs of investigation and other expenses described above as they are incurred.

 

Section 4.11 Severability. If any provision of this Development Agreement or the application thereof to any Party or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Development Agreement and the application of such provision to

 

13

 

the other Parties or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

 

Section 4.12 Termination. This Development Agreement shall terminate and be deemed null and void as of and following the Drilling Obligation Completion Date.

 

Section 4.13 Joint and Several Liability. The Parties acknowledge and agree that the obligations of SandRidge contained in this Development Agreement are the joint and several obligations of SandRidge Parent and Assignor.

 

[Remainder of page intentionally left blank.]

 

14

 

IN WITNESS WHEREOF, each Party has caused this Development Agreement to be executed in its name and behalf and delivered on the date or dates stated in the acknowledgment certificates appended to this Development Agreement, to be effective as of the Effective Time.

 

	
 
    	
SANDRIDGE   ENERGY, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:   
    	
James   D. Bennett
    
	
 
    	
 
    	
Title:   
    	
Executive   Vice President and Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SANDRIDGE   EXPLORATION AND 
    
	
 
    	
PRODUCTION,   LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:   
    	
James   D. Bennett
    
	
 
    	
 
    	
Title:   
    	
Executive   Vice President and Chief Financial Officer
    

 

Signature Page to Development Agreement

 

 

	
 
    	
SANDRIDGE   MISSISSIPPIAN TRUST II
    
	
 
    	
 
    
	
 
    	
By:   
    	
The   Bank of New York Mellon Trust 
    
	
 
    	
 
    	
Company,   N.A., as Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:   
    	
Michael   J. Ulrich
    
	
 
    	
 
    	
Title:   
    	
Vice   President
    

 

Signature Page to Development Agreement

 

 

	
STATE   OF
    	
§
    
	
 
    	
§
    
	
COUNTY   OF
    	
§
    

 

This instrument was acknowledged before me on April       , 2012, by James D. Bennett, Executive Vice President and Chief Financial Officer of SandRidge Energy Inc., a Delaware corporation, on behalf of said corporation.

 

 

	
 
    	
 
    	
NOTARY   PUBLIC,
    
	
 
    	
 
    	
State   of
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(printed   name)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
My   commission expires:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
SEAL or STAMP
    	
 
    	
 
    

 

Acknowledgment Page to Development Agreement

 

 

	
STATE   OF
    	
§
    
	
 
    	
§
    
	
COUNTY   OF
    	
§
    

 

This instrument was acknowledged before me on April       , 2012, by James D. Bennett, Executive Vice President and Chief Financial Officer of SandRidge Exploration and Production, LLC, a Delaware limited liability company, on behalf of said limited liability company.

 

 

	
 
    	
 
    	
NOTARY   PUBLIC,
    
	
 
    	
 
    	
State   of
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(printed   name)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
My   commission expires:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
SEAL   or STAMP
    	
 
    	
 
    

 

Acknowledgment Page to Development Agreement

 

 

	
STATE   OF
    	
§
    
	
 
    	
§
    
	
COUNTY   OF
    	
§
    

 

 

This instrument was acknowledged before me on April       , 2012, by Michael J. Ulrich, Vice President of The Bank of New York Mellon Trust Company, N.A., a national banking association organized under the laws of the United States of America, as Trustee of SandRidge Mississippian Trust II, a Delaware statutory trust, on behalf of said national banking association and said trust.

 

 

	
 
    	
 
    	
NOTARY   PUBLIC,
    
	
 
    	
 
    	
State   of
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(printed   name)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
My   commission expires:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
SEAL   or STAMP
    	
 
    	
 
    

 

Acknowledgment Page to Development Agreement

 

 

Exhibit A

 

(Description of AMI)

 

See attached.

 

 

Exhibit B

 

[Letterhead of SandRidge Energy, Inc.]

 

[Date]

 

Reference is made to that certain Development Agreement (the “Development Agreement”), by and between SandRidge Energy, Inc. (“SandRidge”), SandRidge Exploration and Production, LLC and SandRidge Mississippian Trust II, a Delaware statutory trust, delivered to be effective as of January 1, 2012.  Capitalized terms used but not defined herein have the meaning given them in the Development Agreement.

 

SandRidge hereby certifies to the Trust that SandRidge achieved the Total Drilling Target on [insert date] and, therefore, such date shall be, for all purposes, established as the Drilling Obligation Completion Date.

 

The Development Wells drilled to achieve the Total Drilling Target are listed in the attachment to this letter.

 

Please sign and return an executed copy of this letter to certify that you require no additional documentation to establish SandRidge’s satisfaction of its drilling obligation under the Development Agreement and that [insert date] shall be, for all purposes, established as the Drilling Obligation Completion Date.

 

	
 
    	
SandRidge   Energy, Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

Acknowledged and agreed:

 

 

	
SandRidge   Mississippian Trust II
    	
 
    
	
 
    	
 
    
	
By:   
    	
The   Bank of New York Mellon 
    	
 
    
	
 
    	
Trust   Company, N.A., as Trustee
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:Exhibit 10.9

 

WHEN RECORDED

PLEASE RETURN TO:

SandRidge Energy, Inc.

Attn: Phillip T. Warman

123 Robert S. Kerr Avenue

Oklahoma City, OK 73102-6406

 

                                                                

Space above for County Recorder’s Use

 

[A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE.  A POWER OF SALE MAY  ALLOW THE MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO A COURT IN A FORECLOSURE ACTION UPON DEFAULT BY MORTGAGOR UNDER THIS MORTGAGE.]   [OK Mortgage only]

 

MORTGAGE ([Oklahoma] [Kansas])

 

FROM

 

SANDRIDGE EXPLORATION AND PRODUCTION, LLC,

as MORTGAGOR

TO

 

SANDRIDGE MISSISSIPPIAN TRUST II,

as MORTGAGEE

 

Dated as of April [      ], 2012

 

THIS INSTRUMENT IS TO BE FILED AND RECORDED AS A MORTGAGE IN THE REAL ESTATE RECORDS OF EACH COUNTY IN WHICH THE LANDS DESCRIBED IN EXHIBIT  A, OR ANY PORTION THEREOF, ARE LOCATED.

 

[THIS MORTGAGE IS A MORTGAGE ON OIL AND GAS LEASES AND LEASEHOLD ESTATES, AS SUCH, NO REAL ESTATE MORTGAGE TAX IS DUE.]  [OK Mortgage only]

 

 

MORTGAGE ([Oklahoma] [Kansas])

 

THIS MORTGAGE ([Oklahoma] [Kansas]) (this “Mortgage”) is entered into as of April [      ], 2012, by SandRidge Exploration and Production, LLC, a Delaware limited liability company, as mortgagor (“Mortgagor”), whose address for notice is 123 Robert S. Kerr Avenue, Oklahoma City, Oklahoma 73102-6406, and SandRidge Mississippian Trust II, a statutory trust formed under the laws of the State of Delaware, as mortgagee (“Mortgagee”), whose address for notice is c/o The Bank of New York Mellon Trust Company, N.A., 919 Congress Avenue, Suite  500, Austin Texas 78701.

 

R E C I T A L S:

 

A.                                    By means of (1)  a Term Overriding Royalty Interest Conveyance ([Oklahoma] [Kansas]) (Development), effective as of January  1, 2012, from Mortgagor to Mistmada Oil Company,  Inc., an Oklahoma corporation (“SandRidge Sub”), a true and correct copy of which is annexed hereto as Annex A-1 and made a part hereof (the “Term Conveyance (Development)”), (2)  an Assignment of Overriding Royalty Interest, effective as of January  1, 2012, from SandRidge Sub to Mortgagee, a true and correct copy of which is annexed hereto as Annex A-2 and made a part hereof (the “Assignment”), and (3)  a [Perpetual][Long-Term] Overriding Royalty Interest Conveyance ([Oklahoma] [Kansas]) (Development), effective as of January  1, 2012, from Mortgagor to Mortgagee, a true and correct copy of which is annexed hereto as Annex A-3 and made a part hereof (the “[Perpetual][Long-Term] Conveyance (Development)” and, together with the Term Conveyance (Development), collectively the “Conveyances”), the “Royalty Interest” (as defined in the Conveyances) has been conveyed and assigned to Mortgagee, as applicable, from Mortgagor and SandRidge Sub.  Capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the Conveyances.

 

B.                                    SandRidge Energy,  Inc. (“SandRidge Parent”), the sole member of Mortgagor, has undertaken certain obligations with respect to the properties described in the Conveyances under that certain Development Agreement, dated as of April [        ], 2012, between SandRidge Parent, Mortgagor and Mortgagee (the “Development Agreement”), and Mortgagor is executing this Mortgage to secure the obligations of Mortgagor and SandRidge Parent under the Development Agreement.

 

C.                                    Mortgagor is concurrently executing a mortgage granting Mortgagee a mortgage lien in certain of Mortgagor’s properties located in [Kansas] [Oklahoma] to further secure the obligations of Mortgagor and SandRidge Parent under the Development Agreement.

 

D.                                    Mortgagee has conditioned its execution and delivery of the [Perpetual][Long-Term] Conveyance (Development), the Assignment and the Development Agreement upon the execution and delivery by Mortgagor of this Mortgage, and Mortgagor has agreed to enter into this Mortgage.

 

NOW, THEREFORE, in order to comply with the terms and conditions of the Development Agreement and for other good and valuable consideration, the receipt and

 

 

sufficiency of which are hereby acknowledged, Mortgagor hereby agrees with Mortgagee as follows:

 

ARTICLE  I.
  Granting Clauses; Secured Obligations

 

Section  1.1                                      Grant and Mortgage.  Mortgagor, in order to secure the payment and performance of the secured obligations hereinafter referred to and the performance of the obligations, covenants, agreements, warranties and undertakings of Mortgagor hereinafter described, does hereby GRANT, BARGAIN, SELL, ALIEN, CONVEY, TRANSFER, MORTGAGE, ASSIGN, WARRANT, PLEDGE, HYPOTHECATE and CONFIRM to Mortgagee, its successors and assigns, the following described rights, titles, interests, properties and estates of Mortgagor (sometimes hereinafter collectively referred to as the “Mortgaged Properties”): all of Mortgagor’s right, title, interest and estate in, to and under the oil, gas or other mineral leases described in Exhibit A attached hereto and made a part hereof (the “Leases”); insofar as and only insofar as such Leases cover and pertain to the Target Formation, including such rights in and under the Leases as may be necessary to drill to, complete in and produce and market crude oil, natural gas and natural gas liquids (collectively, “Hydrocarbons”) from the Target Formation; but specifically excluding, however, all of Mortgagor’s rights, title, and interests in and to (i)  any oil, gas, water supply, saltwater disposal or other well of any nature whatsoever now or hereafter located on the Subject Lands (including, but not limited to, those which are producing from, injecting into, or otherwise being operated with regard to the Target Formation) at the time of or prior to a foreclosure sale of the Mortgaged Properties, including, without limitation any Development Wells (each a “Well” and collectively, the “Wells”) together with such corresponding rights (and only such rights) in and to the Leases pertaining to each such Well as are reasonably necessary for Mortgagor to own and operate such Well and to produce, store, treat, condition, process, compress, dehydrate, gather, transport or market Hydrocarbons produced from such Well, and dispose of saltwater or other substances produced therefrom (collectively, the “Wellbore Leasehold Rights”); and (ii)  all personal property, fixtures and equipment in or on or acquired or used in connection with the ownership or operation of the Wells or the production, storage, treating, conditioning, processing, compressing, dehydrating, gathering, transporting or marketing of Hydrocarbons produced from the Wells, or the disposal of saltwater or other substances, produced therefrom.

 

TO HAVE AND TO HOLD the Mortgaged Properties unto Mortgagee, and Mortgagee’s successor and assigns, upon the terms, provisions and conditions herein set forth.

 

Section  1.2                                      Mortgage of the Mortgaged Properties.  This Mortgage is an absolute and unconditional mortgage to Mortgagee of the Mortgaged Properties, whether now in existence or hereafter arising, for the purpose of vesting in Mortgagee, subject to the Permitted Encumbrances (as defined in the Conveyances attached hereto as Annex A-1 and Annex A-3), a perfected mortgage lien in the Mortgaged Properties.

 

Section  1.3                                      Development Agreement and Other Obligations.  This Mortgage is made to secure and enforce the payment and performance of the following, obligations, indebtedness and liabilities:

 

2

 

(a)                                 The full performance of all obligations, covenants, agreements and undertakings of and by SandRidge Parent and Mortgagor from time to time owing to Mortgagee under Article  II of the Development Agreement;

 

(b)                                 Any sums advanced or expenses or costs incurred by the Mortgagee (or any receiver appointed hereunder) which are made or incurred pursuant to, or permitted by, the terms hereof, plus interest thereon at a rate of interest equal to the lesser of (i)  five percent (5%) per annum or (ii)  the maximum rate permitted under applicable law (the “Applicable Rate”) or otherwise agreed upon, from the date of the advances or the incurring of such expenses or costs until reimbursed; and

 

(c)                                  Without limiting the generality of the foregoing, all post-petition interest, expenses, and other duties, damages and liabilities with respect to indebtedness or other obligations described above in this Section  1.3, which would be owed but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization, or similar proceeding.

 

Section  1.4                                      Secured Obligations.  The obligations referred to in Section  1.3, and all renewals, extensions and modifications thereof, and all substitutions therefor, in whole or in part, are herein sometimes referred to as the “secured obligations” or the “obligations secured hereby”.  It is contemplated and acknowledged that the secured obligations may include obligations hereafter arising and that this Mortgage shall have effect, as of the date hereof, to secure all secured obligations, regardless of whether any amounts exist on the date hereof or arise on a later date or, whether having arisen or been advanced, are later repaid in part or in whole and further obligations arise or advances are made at a later date.

 

Section  1.5                                      Limitation on Obligations.  The Mortgagor and Mortgagee hereby agree and acknowledge that, as of the date hereof, the maximum amount recoverable under this Mortgage for any failure by SandRidge Parent or Mortgagor to perform the obligations described in Section  1.3(a)  above is $[239,499,000] [foregoing for OK mortgage] $[29,601,000] [foregoing for KS mortgage]; provided, that such amount will be adjusted downward, from time to time, pursuant to Section  2.05(d)  of the Development Agreement (such amount, as reduced from time to time, the “Maximum Liability”).  Mortgagor and Mortgagee further agree and acknowledge that pursuant to Section  1.1 above, the mortgage lien created by this Mortgage does not cover or extend to any Wells or Wellbore Leasehold Rights.  Accordingly, the mortgage lien created by this Mortgage shall automatically terminate as to each Development Well drilled after the date hereof as the same is completed, along with each such Development Well’s corresponding Wellbore Leasehold Rights.  Upon Mortgagor’s request and at Mortgagor’s expense, Mortgagee shall promptly execute and deliver a partial release, which will evidence the release in full of the mortgage lien created by this Mortgage with respect to any Development Well and corresponding Wellbore Leasehold Rights.

 

Section  1.6                                      Maturity Date.  The obligations, covenants, agreements and undertakings described in Section  1.3(a)  of this Mortgage are due to be performed on and before December  31, 2016 (the “Maturity Date”).

 

3

 

ARTICLE  II.
  Covenants

 

Section  2.1                                      Title Warranty.  Mortgagor warrants, represents, covenants and agrees that the Mortgaged Properties are free and clear of all liens, security interests and other Encumbrances, subject only to the Permitted Encumbrances and that, to Mortgagor’s knowledge, Mortgagor is lawfully seized of the estates and interests granted to Mortgagor under the Leases.  This Mortgage is subject to (but in no event shall this Mortgage be an assumption of) the Permitted Encumbrances, in each case to the extent and only for so long as the same are valid and subsisting and affect title to the Mortgaged Properties; provided, that the foregoing is not intended to, and shall not, subordinate the lien created hereby.

 

Section  2.2                                      Mortgagor hereby covenants with the Mortgagee as follows:

 

(a)                                 Further Assurance.  Mortgagor will, on request of Mortgagee, (i)  promptly correct any defect, error or omission which may be discovered in the contents of this Mortgage, or in the execution or acknowledgment of this Mortgage; (ii)  execute, acknowledge, deliver and record or file such further instruments and do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Mortgage; and (iii)  execute, acknowledge, deliver, and file or record any document or instrument reasonably requested by Mortgagee to protect the mortgage lien hereunder against the rights or interests of third persons. Mortgagor shall pay all reasonable costs connected with any of the foregoing.

 

(b)                                 Name and Place of Business.  Mortgagor will not cause or permit any change to be made in its name, identity, limited liability company structure, federal employer identification number or state of organization (whether by merger or otherwise) unless Mortgagor shall have notified Mortgagee of such change at least ten (10)  days prior to the effective date of such change, and shall have first taken all action required by Mortgagee for the purpose of further perfecting or protecting the mortgage lien in the Mortgaged Properties created hereby. Mortgagor’s exact name is the name set forth in this Mortgage. Mortgagor is a limited liability company organized under the laws of the State of Delaware.

 

Section  2.3                                      Transfer Restriction.  Except as permitted in Sections 11.02 and 11.03 of the applicable Conveyance, Mortgagor will not Transfer any of the Mortgaged Properties without the prior written consent of the Mortgagee.  If any Mortgaged Property is permitted to be Transferred pursuant to Sections 11.02 and 11.03 of the applicable Conveyance, the Mortgagee will promptly execute, acknowledge and deliver a release of this Mortgage to the extent applicable to such Mortgaged Properties proposed to be Transferred pursuant to Sections 11.02 and 11.03 of the applicable Conveyance.

 

ARTICLE  III.
  Remedies Upon Default

 

Section  3.1                                      Default.  The term “default” as used in this Mortgage means:

 

(a)                                 the failure by SandRidge Parent or the Mortgagor to perform any obligation required to be performed by it under Section  2.01 of the Development Agreement on or before the Maturity Date;

 

4

 

(b)                                 failure by SandRidge Parent, within thirty (30) days after notice thereof from the Mortgagee, to cure a breach in the due performance or observance of any other covenant or agreement contained in Article  II of the Development Agreement other than under Section  2.01 of the Development Agreement;

 

(c)                                  failure by the Mortgagor, within thirty (30) days after notice thereof from the Mortgagee, to cure a breach in the due performance or observance of any covenant or agreement contained in this Mortgage; or

 

(d)                                 this Mortgage shall fail to constitute a mortgage lien on any part of the Mortgaged Properties (subject only to Permitted Encumbrances), and such failure is not cured within thirty (30) days after written notice to Mortgagor or Mortgagor otherwise obtains knowledge thereof.

 

Section  3.2                                      Remedies.

 

(a)                                 After (i)  the occurrence of a default under Section  3.1(a)  of this Mortgage or (ii)  the occurrence of any other default by Mortgagor under this Mortgage and during the continuance of such default, the lien evidenced hereby shall be subject to foreclosure, as Mortgagee may elect, in any manner provided for herein or provided for or required by law.  The existence of any default under Section  3.1(a)  can be determined only at the Maturity Date.  Accordingly, notwithstanding any provision hereof or of law to the contrary, the secured obligations set forth in Section  2.01 of the Development Agreement are not subject to acceleration.

 

(b)                                 After (i)  the occurrence of a default under Section  3.1(a)  of this Mortgage or (ii)  the occurrence of any other default by Mortgagor under this Mortgage and during the continuance of such default, Mortgagee is authorized prior or subsequent to the institution of any foreclosure proceedings to enter upon and to cause its agents to enter upon, the Mortgaged Properties, or any part thereof, and to exercise without interference from Mortgagor any and all rights which Mortgagor has with respect to the management, possession and operation of the Mortgaged Properties.  All costs, expenses and liabilities of every character incurred by Mortgagee in managing such properties shall constitute demand obligations owing by Mortgagor and constitute a portion of the secured obligations.

 

(c)                                  After (i)  the occurrence of a default under Section  3.1(a)  of this Mortgage or (ii)  the occurrence of any other default by Mortgagor under this Mortgage and during the continuance of such default, Mortgagee shall have the right and power to sell, to the extent permitted by law, at one or more sales, as an entirety or in parcels, as Mortgagee may elect, the Mortgaged Properties, at such place or places and otherwise in such manner and upon such notice as may be required by law, or, in the absence of any such requirement, as Mortgagee may deem appropriate, and to make conveyance to the purchaser or purchasers.  Mortgagee may postpone the sale of all or any portion of the Mortgaged Properties by public announcement at the time and place of such sale and from time to time thereafter may further postpone such sale by public announcement made at the time of sale fixed by the preceding postponement.  The right of sale hereunder shall not be exhausted by one or any sale, and Mortgagee may make other and successive sales until all of the Mortgaged Properties be legally sold.

 

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(d)                                 After the occurrence of a default under Section  3.1(a)  of this Mortgage, Mortgagee, in lieu of or in addition to exercising the power of sale hereinabove and hereafter given, may proceed by a suit or suits in equity or at law, for one or more of the following: (i)  a foreclosure hereunder or in aid of the execution of any power herein granted, (ii)  the appointment of a receiver pending any foreclosure hereunder or the sale of the Mortgaged Properties, or (iii)  the collection of damages from Mortgagor or SandRidge Parent for failure to perform Mortgagor’s or SandRidge Parent’s obligations under Section  2.01 of the Development Agreement on or before the Maturity Date; provided, that in no event shall Mortgagor or SandRidge Parent be personally liable to Mortgagee for failure to perform Mortgagor’s or SandRidge Parent’s obligations under Section  2.01 of the Development Agreement in excess of the Maximum Liability at the time of determination of such damages.  After the occurrence of any default by Mortgagor under this Mortgage other than under Section  3.1(a)  of this Mortgage and during the continuance of such default, Mortgagee, in lieu of or in addition to exercising the power of sale hereinabove and hereafter given, may proceed by a suit or suits in equity or at law, for one or more of the following: (i)  a foreclosure hereunder or in aid of the execution of any power herein granted, (ii)  the appointment of a receiver pending any foreclosure hereunder or the sale of the Mortgaged Properties, or (iii)  the enforcement of any other appropriate legal or equitable remedy.  In addition to all other remedies herein provided for, Mortgagor agrees that after a default has occurred, Mortgagee shall, as a matter of right, be entitled to the appointment of a receiver or receivers to be designated by Mortgagee for all or any part of the Mortgaged Properties whether such receivership be incident to a proposed sale of such properties (or any of them) or otherwise, and Mortgagor does hereby consent to the appointment of such receiver or receivers, and to the maximum extent permitted by law, waive any and all rights to notice and hearing regarding such appointment or appointments.

 

(e)                                  Mortgagee shall have the right to become the purchaser at any sale held by Mortgagee or by any court, receiver or public officer, and shall have the right to credit upon the amount of the bid made therefor the amount payable out of the net proceeds of such sale to it.

 

(f)                                   [Any sale or sales of the Mortgaged Properties, whether under the power of sale herein granted and conferred or by virtue of judicial proceedings, shall operate to divest all right, title, interest, claim and demand whatsoever either at law or in equity, of Mortgagor of, in and to the premises and the property sold, and shall be a perpetual bar, both at law and in equity, against Mortgagor, Mortgagor’s successors or assigns, and against any and all Persons claiming or who shall thereafter claim all or any of the property sold from, through or under Mortgagor, or Mortgagor’s successors or assigns.]  [OK Mortgage only]

 

(g)                                  All costs and expenses (including attorneys’ fees) incurred by Mortgagee in protecting and enforcing the rights of Mortgagee hereunder, shall constitute a demand obligation owing by Mortgagor to Mortgagee, all of which shall constitute a portion of the secured obligations.

 

(h)                                 Any sale by Mortgagee of the Mortgaged Properties may be made in any county in which any part of the Mortgaged Properties to be sold at such sale may be situated.  Mortgagee may, from time to time, postpone the sale by public announcement thereof at the time and place noticed therefor.  If the Mortgaged Properties consists of several parcels or interests, Mortgagee may designate the order in which the same shall be offered for sale or sold.

 

6

 

Mortgagor waives all rights to direct the order in which any of the Mortgaged Properties will be sold in the event of any sale under this Mortgage, and also any right to have any of the Mortgaged Properties marshaled upon any sale.

 

(i)                                     Notwithstanding any other provisions of this Mortgage, any lease of Minerals covered by this Mortgage which are subject to the Mineral Leasing Act of 1920 as amended, and the regulations promulgated thereunder, shall not be sold or otherwise disposed of to any party other than the citizens of the United States, or to associations of such citizens or to any corporation organized under the laws of the United States, or any state or territory thereof that are qualified to own or control interests in such leases under the provisions of such Act and regulations, or to Persons who may acquire ownership or interest in such leases under the provisions of 30 U.S.C. §184(g)  if applicable, as such Act or regulations are now or may be from time to time in effect.

 

(j)                                    [Without limitation of any of the foregoing remedies, Mortgagor hereby grants to and confers on Mortgagee the power to sell all or any portion of the Mortgaged Properties in the manner and pursuant to the procedures set forth in the “Oklahoma Power of Sale Mortgage Foreclosure Act,” 46 O.S. Supp. §§ 40-49, as the same may be hereafter amended and in effect from time to time (the “Oklahoma POS Act”) or pursuant to other applicable statutory or judicial authority.  If no cure is effected within the time limits set forth in the Oklahoma POS Act, Mortgagee may then proceed in the manner and subject to the conditions of the Oklahoma POS Act to send to Mortgagor and other necessary parties a notice of sale and may sell and convey the Mortgaged Properties in accordance with the Oklahoma POS Act.  Mortgagee may foreclose this Mortgage by exercising said power of sale or, at Mortgagee’s sole option, by judicial foreclosure proceedings as provided by law.  No action of Mortgagee based upon the provisions contained herein or in the Oklahoma POS Act, including, without limitation, the giving of the notice of intent to foreclose by power of sale or the notice of sale, shall constitute an election of remedies which would preclude Mortgagee from accelerating the secured obligations and pursuing judicial foreclosure before or at any time after commencement of the power of sale foreclosure procedure.  Notwithstanding anything contained in this Mortgage to the contrary, any notices of sale given in accordance with the requirements of the Oklahoma POS Act shall constitute sufficient notice of sale.  The conduct of a sale pursuant to a power of sale shall be sufficient hereunder if conducted in accordance with the requirements of the Oklahoma POS Act and other governmental requirements of the State of Oklahoma in effect at the time of such sale, notwithstanding any other provision contained in this Mortgage to the contrary.  In the event of conflict between the provisions hereof and the Oklahoma POS Act, the Oklahoma POS Act shall control.] [OK Mortgage only] [A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE.  A POWER OF SALE MAY  ALLOW THE MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO A COURT IN A FORECLOSURE ACTION UPON DEFAULT BY MORTGAGOR UNDER THIS MORTGAGE.] [OK Mortgage only]

 

(k)                                 NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, MORTGAGEE WAIVES ANY AND ALL CLAIMS OR RIGHTS OF ACTION TO COMPEL SPECIFIC PERFORMANCE OF MORTGAGOR’S OBLIGATIONS UNDER THIS MORTGAGE OR THE DEVELOPMENT AGREEMENT.  NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE

 

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CONTRARY NO PARTY HERETO SHALL BE LIABLE HEREUNDER FOR EXEMPLARY, PUNITIVE, SPECIAL,  INDIRECT, CONSEQUENTIAL, REMOTE OR SPECULATIVE DAMAGES, WHETHER BASED IN CONTRACT, TORT, STRICT LIABILITY, OTHER LAW OR OTHERWISE; PROVIDED THAT SUCH WAIVER OF CONSEQUENTIAL DAMAGES SHALL NOT APPLY TO ANY LIABILITY OF MORTGAGOR FOR BREACH OF ITS OBLIGATIONS UNDER SECTION  2.01 OF THE DEVELOPMENT AGREEMENT, PROVIDED THAT,  IN NO EVENT SHALL MORTGAGOR’S OR SANDRIDGE PARENT’S LIABILITY FOR BREACH OF MORTGAGOR’S OR SANDRIDGE PARENT’S OBLIGATIONS UNDER SECTION  2.01 OF THE DEVELOPMENT AGREEMENT EXCEED THE MAXIMUM LIABILITY.

 

Section  3.3                                      Proceeds of Foreclosure.  The proceeds of any sale held in foreclosure of the mortgage lien evidenced hereby shall be applied as follows, except as otherwise required by applicable law:

 

FIRST, to the payment of all necessary costs and expenses incident to such foreclosure sale, including but not limited to reasonable attorney’s fees, trustees’ or receivers’ fees, accountants’ fees, all court costs and charges of every character in the event foreclosed by suit or any judicial proceeding, if any;

 

SECOND, to the payment of the secured obligations up to the amount of the Maximum Liability;

 

THIRD, to the extent funds are available therefor out of the sale proceeds or any rents and, to the extent known by Mortgagee, to the payment of any debt or obligation secured by a subordinate mortgage on or security interest in the Mortgaged Properties; and

 

FOURTH, the remainder, if any there shall be, shall be paid to Mortgagor, or to Mortgagor’s successors or assigns, or such other Persons as may be entitled thereto by law.

 

Section  3.4                                      Remedies Cumulative.  All remedies herein provided for are cumulative of each other and of all other remedies existing at law or in equity and are cumulative of any and all other remedies provided for in the Development Agreement, and, in addition to the remedies herein provided, there shall continue to be available all such other remedies as may now or hereafter exist at law or in equity for the collection of the secured obligations and the enforcement of the covenants herein and the foreclosure of the mortgage lien evidenced hereby, and the resort to any remedy provided for hereunder or under the Development Agreement or provided for by applicable law shall not prevent the concurrent or subsequent employment of any other appropriate remedy or remedies.

 

Section  3.5                                      Discretion as to Security.  Mortgagee may resort to any security given by this Mortgage or to any guaranty of the obligations secured hereby, in whole or in part, and in such portions and in such order as may seem best to Mortgagee in its sole and uncontrolled discretion, and any such action shall not in any way be considered as a waiver of any of the rights, benefits, liens or security interests evidenced by this Mortgage.

 

Section  3.6                                      Mortgagor’s Waiver of Certain Rights.  To the full extent Mortgagor may do so, Mortgagor agrees that Mortgagor will not at any time insist upon, plead,

 

8

 

claim or take the benefit or advantage of any law now or hereafter in force providing for any valuation, stay, extension or redemption, and Mortgagor, for Mortgagor, Mortgagor’s successors and assigns, and for any and all Persons ever claiming any interest in the Mortgaged Properties, to the extent permitted by applicable law, hereby waives and releases all rights of valuation, stay of execution, redemption, notice of intention to mature or declare due the whole of the secured obligations, notice of election to mature or declare due the whole of the secured obligations and all rights to a marshaling of assets of Mortgagor, including the Mortgaged Properties, or to a sale in inverse order of alienation in the event of foreclosure of the mortgage lien hereby created; provided, however, that in the event of any foreclosure of this Mortgage with respect to the Mortgaged Properties, or any part thereof, appraisement of the Mortgaged Properties is hereby waived or not waived, at the option of Mortgagee, such option to be exercised at the time of the entry of the foreclosure judgment or any time prior thereto.  Mortgagor shall not have or assert any right under any statute or rule  of law pertaining to the marshaling of assets, sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents or other matters whatever to defeat, reduce or affect the right under the terms of this Mortgage to a sale of the Mortgaged Properties for the collection of the secured obligations without any prior or different resort for collection, or the right under the terms of this Mortgage to the payment of the secured obligations out of the proceeds of sale of the Mortgaged Properties in preference to every other claimant whatever.  If any law referred to in this section and now in force, of which Mortgagor or Mortgagor’s successors or assigns or any other Persons claiming any interest in the Mortgaged Properties might take advantage despite this section, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to preclude the application of this section.  To the extent permitted by applicable law, Mortgagor expressly waives any rule  or applicable law pertaining to or prohibiting splitting of causes of action and further consent and agrees that the Mortgagee may institute one or more causes of action (including one or more foreclosure proceedings) as a remedy, simultaneously or consecutively.  Mortgagor expressly acknowledges and consents to Mortgagee commencing separate lawsuits seeking to recover on the secured obligations and/or foreclosure.

 

Section  3.7                                      No Release of Obligations.  Neither Mortgagor nor any other Person hereafter obligated for payment of all or any part of the secured obligations shall be relieved of such secured obligations by reason of (a)  the failure of Mortgagee or any other Person so obligated to foreclose the lien of this Mortgage or to enforce any provision hereunder or under the Development Agreement; or (b)  the release, regardless of consideration, of the Mortgaged Properties or any portion thereof or interest therein or the addition of any other property to the Mortgaged Properties.  Mortgagee may release, regardless of consideration, any part of the Mortgaged Properties without, as to the remainder, in any way impairing, affecting, subordinating or releasing the mortgage lien created in or evidenced by this Mortgage or its stature as a first and prior lien and security interest in and to the Mortgaged Properties, and without in any way releasing or diminishing the liability of any Person liable for the repayment or performance of the secured obligations.  For payment of the secured obligations, Mortgagee may resort to any other security therefor held by Mortgagee in such order and manner as Mortgagee may elect.

 

Section  3.8                                      Discontinuance of Proceedings.  In case Mortgagee shall have proceeded to invoke any right, remedy or recourse permitted hereunder or under the Development Agreement and shall thereafter elect to discontinue or abandon same for any

 

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reason, Mortgagee shall have the unqualified right to do so and, in such an event, Mortgagor and Mortgagee shall be restored to their former positions with respect to the secured obligations, this Mortgage, the Development Agreement, the Mortgaged Properties and otherwise, and the rights, remedies, recourses and powers of Mortgagee shall continue as if same had never been invoked.

 

ARTICLE IV.
  Miscellaneous

 

Section 4.1                                    Filing.  This Mortgage is to be filed for record in the real property records (including the tract index) of each county where any part of the Mortgaged Properties is situated.  The mailing address of Mortgagor is the address of Mortgagor set forth at the end of this Mortgage and the address of Mortgagee from which information concerning the mortgage lien hereunder may be obtained is the address of Mortgagee set forth at the end of this Mortgage.  Nothing contained in this paragraph shall be construed to limit the scope of this Mortgage.

 

Section 4.2                                    Waivers.  Mortgagee may at any time and from time to time in writing waive compliance by Mortgagor with any covenant herein made by Mortgagor to the extent and in the manner specified in such writing, or consent to Mortgagor’s doing any act which hereunder Mortgagor is prohibited from doing, or to Mortgagor’s failing to do any act which hereunder Mortgagor is required to do, to the extent and in the manner specified in such writing, or release any part of the Mortgaged Properties or any interest therein from the mortgage lien of this Mortgage.  Any party liable, either directly or indirectly, for the secured obligations or for any covenant herein or in the Development Agreement may be released from all or any part of such obligations without impairing or releasing the liability of any other party.  No such act shall in any way impair any rights or powers hereunder except to the extent specifically agreed to in such writing.

 

Section 4.3                                    No Impairment of Security.  To the extent allowed by applicable law, the lien, privilege, security interest and other security rights hereunder shall not be impaired by any indulgence, moratorium or release which may be granted including, but not limited to, any renewal, extension or modification which may be granted with respect to any secured obligations, or any surrender, compromise, release, renewal, extension, exchange or substitution which may be granted in respect of the Mortgaged Properties, or any part thereof or any interest therein, or any release or indulgence granted to any endorser, guarantor or surety of any secured obligations.

 

Section 4.4                                    Acts Not Constituting Waiver.  Any default may be waived without waiving any other prior or subsequent default.  Any default may be remedied without waiving the default remedied.  Neither failure to exercise, nor delay in exercising, any right, power or remedy upon any default shall be construed as a waiver of such default or as a waiver of the right to exercise any such right, power or remedy at a later date.  No single or partial exercise of any right, power or remedy hereunder shall exhaust the same or shall preclude any other or further exercise thereof, and every such right, power or remedy hereunder may be exercised at any time and from time to time.  No modification or waiver of any provision hereof nor consent to any departure by Mortgagor therefrom shall in any event be effective unless the same shall be in writing and signed by Mortgagee and then such waiver or consent shall be effective only in the specific instances, for the purpose for which given and to the extent therein 

 

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specified.  No notice nor demand on Mortgagor in any case shall of itself entitle Mortgagor to any other or further notice or demand in similar or other circumstances.  Acceptance of any payment in an amount less than the amount then due on any secured obligations shall be deemed an acceptance on account only and shall not in any way excuse the existence of a default hereunder.

 

Section 4.5                                    Forbearance or Extension.  No forbearance and no extension of the time for the payment of the obligations secured hereby, shall operate to release, discharge, modify, change or affect, in whole or in part, the liability of Mortgagor hereunder for the payment of the obligations or performance of the obligations secured hereby, or the liability of any other Person hereunder or for the payment of the obligations secured hereby.

 

Section 4.6                                    Place of Payment.  All secured obligations which may be owing hereunder at any time by Mortgagor shall be payable at the place designated in the Development Agreement (or if no such designation is made, at the address of Mortgagee indicated at the end of this Mortgage), or at such other place as Mortgagee may designate in writing.

 

Section 4.7                                    Application of Payments to Certain Obligations.  If any part of the secured obligations cannot be lawfully secured by this Mortgage or if any part of the Mortgaged Properties cannot be lawfully subject to the lien, privilege and security interest hereof to the full extent of such obligations, then all payments made shall be applied on said obligations first in discharge of that portion thereof which is not secured by this Mortgage.

 

Section 4.8                                    Compliance With Usury Laws.  It is the intent of Mortgagor and Mortgagee to contract in strict compliance with applicable usury law from time to time in effect.  In furtherance thereof, it is stipulated and agreed that none of the terms and provisions contained herein, in the Development Agreement or in the Conveyances shall ever be construed to create a contract to pay, for the use, forbearance or detention of money, interest in excess of the maximum amount of interest permitted to be collected, charged, taken, reserved or received by applicable law from time to time in effect.

 

Section 4.9                                    Release of Mortgage.  In addition to the partial releases required pursuant to Section 1.5 hereof, if Mortgagor has satisfied its obligations under Article II of the Development Agreement, the mortgage lien created by this Mortgage shall automatically terminate and upon request by Mortgagor, Mortgagee shall promptly cause satisfaction, discharge and release of this Mortgage to be entered upon the record at the expense of Mortgagor and shall execute and deliver or cause to be executed and delivered such instruments of satisfaction, reassignment and/or release as may be appropriate.

 

Section 4.10                             Notice.  All notices, requests, consents, demands and other communications required or permitted hereunder or under the Development Agreement shall be in writing and, unless otherwise specifically provided in the Development Agreement, shall be deemed sufficiently given or furnished if delivered by personal delivery, by telefacsimile, by delivery service with proof of delivery, or by registered or certified United States mail, postage prepaid, at the addresses specified at the end of this Mortgage (unless changed by similar notice in writing given by the particular party whose address is to be changed).  Any such notice or communication shall be deemed to have been given (a) in the case of personal delivery or 

 

11

 

delivery service, as of the date of first attempted delivery at the address and in the manner provided herein, (b) in the case of telefacsimile, upon receipt, and (c) in the case of registered or certified United States mail, three (3) days after deposit in the mail.  Notwithstanding the foregoing, or anything else in the Development Agreement which may appear to the contrary, any notice given in connection with a foreclosure of the mortgage lien created hereunder, or otherwise in connection with the exercise by Mortgagee of its rights hereunder or under the Development Agreement, which is given in a manner permitted by applicable law shall constitute proper notice; without limitation of the foregoing, notice given in a form required or permitted by statute shall (as to the portion of the Mortgaged Properties to which such statute is applicable) constitute proper notice.

 

Section 4.11                             Invalidity of Certain Provisions.  A determination that any provision of this Mortgage is unenforceable or invalid shall not affect the enforceability or validity of any other provision and the determination that the application of any provision of this Mortgage to any Person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to other Persons or circumstances.

 

Section 4.12                             Gender; Titles; Construction.  All references in this Mortgage to articles, sections, subsections and other subdivisions refer to corresponding articles, sections, subsections and other subdivisions of this Mortgage unless expressly provided otherwise.  Titles appearing at the beginning of any of such subdivisions are for convenience only and shall not constitute part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions.  The words “this Mortgage”, “this instrument”, “herein”, “hereof”, “hereunder” and words of similar import refer to this Mortgage as a whole and not to any particular subdivision unless expressly so limited.  Unless the context otherwise requires: “including” and its grammatical variations mean “including without limitation”; “or” is not exclusive; words in the singular form shall be construed to include the plural and vice versa; words in any gender include all other genders; references herein to any instrument or agreement refer to such instrument or agreement as it may be from time to time amended or supplemented; and references herein to any Person include such Person’s successors and assigns.  All references in this Mortgage to Exhibits and Annexes refer to Exhibits and Annexes to this Mortgage unless expressly provided otherwise, and all such Exhibits and Annexes are hereby incorporated herein by reference and made a part hereof for all purposes.  This Mortgage has been drafted with the joint participation of Mortgagor and Mortgagee and shall be construed neither against nor in favor of either such party but rather in accordance with the fair meaning hereof.

 

Section 4.13                             Recording.  Mortgagor will cause this Mortgage and all amendments and supplements thereto and substitutions therefor to be recorded, filed, re-recorded and refiled in such manner and in such places as Mortgagee shall reasonably request and will pay all such recording, filing, re-recording and refiling taxes, fees and other charges.

 

Section 4.14                             Certain Obligations of Mortgagor.  Without limiting Mortgagor’s obligations hereunder, Mortgagor’s liability hereunder and the obligations secured hereby shall extend to and include all post-petition interest, expenses and other duties and liabilities with respect to Mortgagor’s obligations hereunder which would be owed but for the fact that the same may be unenforceable due to the existence of a bankruptcy, reorganization or similar proceeding.

 

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Section 4.15                             Authority of Mortgagee.  All Persons shall be entitled to rely on the releases, waivers, consents, approvals, notifications and other acts of Mortgagee without the joinder of any party other than Mortgagee in such releases, waivers, consents, approvals, notifications or other acts.

 

Section 4.16                             Counterparts.  [This Mortgage may be executed in several counterparts, all of which are identical, except that, to facilitate recordation, certain counterparts hereof may include only that portion of Exhibit A and the applicable Exhibit A to the Conveyances which contains descriptions of the properties located in (or otherwise subject to the recording or filing requirements or protections of the recording or filing acts or regulations of) the recording jurisdiction in which the particular counterpart is to be recorded, and other portions of Exhibit A and the applicable Exhibit A to the Conveyances shall be included in such counterparts by reference only.  All of the counterparts hereof together shall constitute one and the same instrument.  An executed counterpart of this Mortgage containing the full text of Exhibit A and Annexes A-1, A-2 and A-3 (although omitting the exhibits and schedules to such Annexes) is recorded in the real property records of [              ] County, Oklahoma.] [Foregoing for OK Mortgage]  [This Mortgage may be executed in several counterparts, all of which are identical.  All of the counterparts hereof together shall constitute one and the same instrument.] [Foregoing for KS Mortgage]

 

Section 4.17                             Successors and Assigns.  The terms, provisions, covenants, representations, indemnifications and conditions hereof shall be binding upon Mortgagor, and the successors and assigns of Mortgagor, and shall inure to the benefit of Mortgagee and its respective successors and assigns, and shall constitute covenants running with the Mortgaged Properties.  All references in this Mortgage to Mortgagor or Mortgagee shall be deemed to include all such successors and assigns.

 

Section 4.18                             FINAL AGREEMENT OF THE PARTIES.  THE WRITTEN TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

Section 4.19                             CHOICE OF LAW.  WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW THAT MAY CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION, THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF [OKLAHOMA] [KANSAS].

 

Section 4.20                             EXCULPATION PROVISIONS.  EACH OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS MORTGAGE; AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS MORTGAGE; THAT IT HAS IN FACT READ THIS MORTGAGE AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS MORTGAGE; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL 

 

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COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS MORTGAGE; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS MORTGAGE; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS MORTGAGE RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS MORTGAGE ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”

 

Section 4.21                             Release of Trustee. It is expressly understood and agreed by the parties hereto that (a) this Mortgage is executed and delivered for SandRidge Mississippian Trust II, as Mortgagee hereunder, by The Bank of New York Mellon Trust Company, N.A. (the “Trustee”) not individually or personally, but solely as Trustee on behalf of SandRidge Mississippian Trust II in the exercise of the powers and authority conferred and vested in it and (b) under no circumstances shall the Trustee be liable for any liability of the Trust or for any action taken or not taken by the Trust or Trustee under or in connection with this Mortgage. Mortgagor hereby unconditionally and irrevocably releases the Trustee from any and all claims of Mortgagor, whether now existing or arising in the future, arising out of, based upon, or otherwise related to, any action taken or not taken by the Trust or Trustee under or in connection with this Mortgage.

 

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IN WITNESS WHEREOF, this Mortgage is executed by Mortgagor on the date set forth in the acknowledgement below, to be effective immediately after the granting of the Conveyances and the Assignment and simultaneously with the execution and delivery of the Development Agreement.

 

	
 
    	
SANDRIDGE EXPLORATION AND PRODUCTION, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
James   D. Bennett
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and Chief Financial Officer
    

 

The address of Mortgagor is:

 

SandRidge Exploration and Production, LLC

123 Robert S. Kerr Avenue

Oklahoma City, OK  73102-6406

Attention:  Philip T. Warman

Facsimile No.: (405) 429-5983

 

With a copy to:

 

[McAfee & Taft A Professional Corporation

10th Floor, Two Leadership Square

211 N. Robinson

Oklahoma City, OK  73102

Attention:  C. David Stinson, Esq.

Facsimile No.: (405) 235-0439] [For OK Mortgage]

 

[Hinkle Law Firm LLC

301 North Main Street

Suite 2000

Wichita, KS  67202-4820

Attention:  John W. Broomes, Esq.

Facsimile No.: (316) 264-1518] [For KS Mortgage]

 

SIGNATURE PAGE TO MORTGAGE

 

 

	
 
    	
SANDRIDGE MISSISSIPPIAN TRUST II
    
	
 
    	
 
    
	
 
    	
By:
    	
The   Bank of New York Mellon Trust Company, N.A., as Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
  By:
    	
 
    
	
 
    	
 
    	
Name:   Michael J. Ulrich
    
	
 
    	
 
    	
Title:     Vice-President
    
				

 

I do hereby certify that the address of Mortgagee is:

 

The Bank of New York Mellon Trust Company, N.A.

919 Congress Avenue, Suite 500

Austin, Texas 78701

Attn: Michael J. Ulrich

 

SIGNATURE PAGE TO MORTGAGE

 

 

	
STATE OF OKLAHOMA
    	
§
    
	
 
    	
§
    
	
COUNTY OF OKLAHOMA
    	
§
    

 

This instrument was acknowledged before me on April       , 2012, by James D. Bennett as Executive Vice President and Chief Financial Officer of SandRidge Exploration and Production, LLC, a Delaware limited liability company, on behalf of said limited liability company.

 

WITNESS my hand and official seal this            day of April, 2012.

 

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
NOTARY   PUBLIC,
    
	
 
    	
 
    	
State   of Oklahoma
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(printed name)
    
	
My   commission expires:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
[SEAL]
    	
 
    	
 
    

 

 

	
STATE OF 
    	
§
    
	
 
    	
§
    
	
COUNTY OF
    	
§
    

 

This instrument was acknowledged before me on                            , 2012, by Michael J. Ulrich as Vice-President of The Bank of New York Mellon Trust Company, N.A., a national banking association organized under the laws of the United States of America, as Trustee of SandRidge Mississippian Trust II, a Delaware statutory trust, on behalf of said national banking association and said trust.

 

WITNESS my hand and official seal this            day of                                   , 2012.

 

 

	
 
    	
 
    	
NOTARY   PUBLIC,
    
	
 
    	
 
    	
State   of
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(printed name)
    
	
My   commission expires:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
[SEAL]
    	
 
    	
 
    

 

 

ANNEX A-1
 COPY OF TERM ROYALTY CONVEYANCE ([OKLAHOMA] [KANSAS]) (DEVELOPMENT)

 

[Annex A-1 omitted]

 

 

ANNEX A-2
 COPY OF ASSIGNMENT

 

[Annex A-2 omitted]

 

 

ANNEX A-3
 COPY OF [PERPETUAL][LONG-TERM] ROYALTY CONVEYANCE ([OKLAHOMA] [KANSAS]) (DEVELOPMENT)

 

[Annex A-3 omitted]

 

 

EXHIBIT A
 MORTGAGED PROPERTIES

 

[Exhibit A omitted]

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