Document:

Exhibit 10.13

 

Execution Copy

 

DERIVATIVES AGREEMENT

 

This DERIVATIVES AGREEMENT, delivered as of April 23, 2012, is between SandRidge Energy, Inc., a Delaware corporation (“SandRidge”), and SandRidge Mississippian Trust II, a Delaware statutory trust (the “Trust”) and is delivered to be effective as of 12:01 a.m., Central Time, April 1, 2012.

 

R E C I T A L S

 

WHEREAS, the Trust is governed by that certain Amended and Restated Trust Agreement dated as of April 23, 2012 by and among SandRidge, The Corporation Trust Company, as Delaware trustee, and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”, and such agreement, the “Trust Agreement”);

 

WHEREAS, SandRidge Exploration and Production, LLC (“SandRidge Sub”), a Delaware limited liability company and a wholly-owned subsidiary of SandRidge, has conveyed (or caused to be conveyed) to the Trust certain royalty interests pursuant to (i) those certain Term Royalty Conveyances (as defined in the Trust Agreement), (ii) those certain Perpetual Royalty Conveyances (as defined in the Trust Agreement), (iii) and the Assignments of Overriding Royalty Interest (as defined in the Trust Agreement), in each case delivered to be effective as of the effective time specified in such conveyances (collectively, the “Conveyances”), pursuant to which SandRidge Sub will from time to time distribute cash proceeds to the Trust;

 

WHEREAS, SandRidge has entered into certain commodity derivatives transactions with Barclays Bank PLC (“Barclays”), Citibank, N.A. (“Citibank”), and Morgan Stanley Capital Group Inc. (“Morgan Stanley”);

 

WHEREAS, SandRidge and the Trust desire to allocate among themselves certain of the economic benefits and costs associated with these transactions;

 

NOW, THEREFORE, in consideration of the premises herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I
 DEFINITIONS; TERMS GENERALLY

 

Section 1.01 Definitions. As used herein, terms defined above have the meanings given such terms above and the following terms have the following meanings:

 

“Agreement” means this Derivatives Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

 

“Approved Trust Counterparty” means any Person regularly engaged in the hedging of commodities who has (or who has a provider of credit support identified in such Person’s ISDA trade documentation that has) a long term corporate debt rating of A-/A3 (or the then-equivalent) by S&P or Moody’s or higher and who is a party to the Collateral Agency Agreement.

 

 

“Bankruptcy Code” has the meaning given in Section 4.07(b).

 

“Barclays” has the meaning given in the recitals to this Agreement.

 

“Barclays Trade Documents” means the ISDA Master Agreement dated as of November 16, 2007 between SandRidge and Barclays, including the Schedule thereto and each Confirmation entered into thereunder, in each case in effect on the date hereof.

 

“Business Day” means a day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed.

 

“Citibank” has the meaning given in the recitals to this Agreement.

 

“Citibank Trade Documents” means the ISDA Master Agreement dated as of October 1, 2011 between SandRidge and Citibank, including the Schedule thereto and each Confirmation entered into thereunder, in each case in effect on the date hereof.

 

“Collateral Agency Agreement” means that certain Collateral Agency Agreement to be entered into by and among Wilmington Trust, National Association as Collateral Agent, the Trust and the other parties thereto, as amended, restated, supplemented, replaced or otherwise modified from time to time.

 

“Confirmations” means the collective reference to each Confirmation attached hereto as Exhibit A.

 

“Counterparties” means the collective reference to Barclays, Citibank and Morgan Stanley.

 

“Defaulting Party” means, with respect to any Trade on any date of determination, any Person: (a) that is a “Defaulting Party” or an “Affected Party” with respect to such Trade on such date under the applicable Trade Documents (as such terms are defined therein) or (b) in respect of which a “Potential Event of Default” or an “Event of Default” has occurred and is continuing on such date under the applicable Trade Documents (as such terms are defined therein).

 

“Excess Hedged Volumes” has the meaning given in Section 3.02.

 

“Excluded Amount” means any amount payable by one party to another party pursuant to any Trade Documents on account of indemnity or reimbursement obligations (including additional amounts owing in respect of tax gross up obligations), costs, fees, expenses (including attorneys fees) or default interest.

 

“Illegality” has the meaning specified in the applicable Trade Documents; provided that the term “Illegality” when used herein in reference to any Trade will only be deemed to have occurred with respect to such Trade if either (a) the Counterparty is an “Affected Party” (as defined in the applicable Trade Documents) with respect to such Illegality; or (b) both (i) SandRidge is an “Affected Party” (as defined in the applicable Trade Documents) with

 

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respect to such Illegality and (ii) the Trust would have been an “Affected Party” (as defined in the applicable Trade Documents) with respect to such Illegality if it were a party to such Trade.

 

“Illegality Termination Payment” means any Termination Payment that becomes due and payable as the result of the termination of any Trade prior to the stated termination date thereof based on the occurrence of an Illegality.

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that is a nationally recognized rating agency.

 

“Morgan Stanley” has the meaning given in the recitals to this Agreement.

 

“Morgan Stanley Trade Documents” means the ISDA Master Agreement dated as of February 22, 2008, between SandRidge and Morgan Stanley, including the Schedule thereto and each Confirmation entered into thereunder, in each case as in effect on the date hereof.

 

“Period End Date” means March 31, June 30, September 30 and December 31 of each calendar year.

 

“Person” means any natural person, corporation, limited liability company, trust, estate, joint venture, association, company, partnership, governmental authority or other entity or organization.

 

“Quarterly Payment Date” means, with respect to any Quarterly Period, the date that is forty-five (45) days after the last day of such Quarterly Period.

 

“Quarterly Period” means each period from but excluding one Period End Date to and including the next Period End Date.

 

“Replaced Trade” has the meaning given in Section 3.01(b).

 

“Reset” and “Reset Trade” have the meanings given in Section 3.02.

 

“Royalty Interests” means the royalty interests conveyed to the Trust by the Conveyances.

 

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc., and any successor thereto that is a nationally recognized rating agency.

 

“SandRidge Gross Up Amount” means, in relation to any Scheduled Payments or any Illegality Termination Payments required to be made by the Counterparties during any Quarterly Period, an amount equal to the sum of all such Scheduled Payments or Illegality Termination Payments, as the case may be, that were due and payable by the Counterparties but not paid by the Counterparties to SandRidge during such Quarterly Period (a) on account of the exercise of any right of netting or set-off against (i) obligations owed by SandRidge or its affiliates to the Counterparties or their affiliates under agreements or instruments other than the Trade Documents or (ii) any obligation of SandRidge to pay an Excluded Amount pursuant to the Trade Documents; or (b) to the extent that any Counterparty (i) set-off any such Scheduled

 

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Payments or Illegality Termination Payments, as the case may be, against any posted collateral held by SandRidge (or any obligation of SandRidge to transfer that posted collateral) or (ii) withheld payment of any such Scheduled Payments or Illegality Termination Payments, as the case may be, up to the value of any posted collateral held by SandRidge.

 

“Scheduled Payment” means, with respect to any Trade, the net payment required to be made by one party thereto to the other party thereto on a “Payment Date” or a “Settlement Payment Date” pursuant to the related Confirmation, without giving effect to the existence of any “Potential Event of Default”, “Event of Default” or the designation of an “Early Termination Date” (as such terms are defined in the applicable Trade Documents) or any right of setoff, counterclaim or defense, and excluding, for the avoidance of doubt: (a) any obligation to transfer cash collateral or other collateral, (b) any Termination Payment and (c) any Excluded Amount.

 

“Termination Payment” means, with respect to any Trade or group of Trades: (a) the net amount which is due and payable by one party thereto to the other party thereto in respect of the early termination of such Trade or group of Trades, as determined pursuant to the applicable Trade Documents (including, for the avoidance of doubt, any unpaid amounts), but (b) without giving effect to any right of set-off and/or right to apply any margin, collateral, guarantees or other credit support delivered or held in connection with such Trade, and (c) excluding any Scheduled Payments (other than unpaid amounts) and any Excluded Amounts.

 

“Trades” means the collective reference to each transaction evidenced by the Confirmations.

 

“Trade Documents” means the collective reference to the Barclays Trade Documents, Citibank Trade Documents, and Morgan Stanley Trade Documents.

 

“Transfer” and “Transferred Trade” have the meanings given in Section 3.01(a).

 

“Trust Direct Hedges” means oil hedge contracts to which the Trust is a counterparty, including, but not limited to, (i) the hedge contracts specified on Schedule 1 to the Trust Agreement, (ii) Transferred Trades and (iii) Trust Replacement Trades, in each case as such hedge contracts may be restructured, amended or otherwise modified from time to time.

 

“Trust Gross Up Amount” means, in relation to any Scheduled Payments or any Illegality Termination Payments required to be made by SandRidge during any Quarterly Period, an amount equal to the sum of all such Scheduled Payments or Illegality Termination Payments, as the case may be, that were due and payable by SandRidge but not paid by SandRidge to the Counterparties during such Quarterly Period to the extent that SandRidge (i) set-off any such Scheduled Payments or Illegality Termination Payments, as the case may be, against any posted collateral held by the Counterparties (or any obligation of the Counterparties to transfer that posted collateral) or (ii) withheld payment of any such Scheduled Payments or Illegality Termination Payments, as the case may be, up to the value of any posted collateral held by the Counterparties.

 

“Trust Replacement Trade” has the meaning given in Section 3.01(b).

 

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Section 1.02 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise: (a) any reference herein to any law shall be construed as referring to such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time; (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to the restrictions contained in this Agreement); (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof and (d) any reference herein to Sections or Exhibits shall be construed to refer to Sections of, or Exhibits to, this Agreement.

 

ARTICLE II
 PAYMENTS

 

Section 2.01 Payments. On the Quarterly Payment Date for each Quarterly Period, commencing with the Quarterly Period ending June 30, 2012:

 

(a) SandRidge will pay to the Trust an amount equal to the sum of the following (without duplication): (i) all Scheduled Payments received by SandRidge from the Counterparties under all Trades during such Quarterly Period plus (ii) the SandRidge Gross Up Amount, if any, related to Scheduled Payments required to be made by the Counterparties to SandRidge under all Trades during such Quarterly Period plus (iii) the amount of any Scheduled Payment required to be made by any Counterparty to SandRidge under any Trade during such Quarterly Period that was not received by SandRidge from such Counterparty, but only if SandRidge was a Defaulting Party on the date such Scheduled Payment was required to be made by such Counterparty;

 

(b) the Trust will pay to SandRidge an amount equal to the sum of the following: (i) all Scheduled Payments made by SandRidge to the Counterparties under all Trades during such Quarterly Period plus (ii) the Trust Gross Up Amount, if any, related to Scheduled Payments required to be made by SandRidge to the Counterparties under all Trades during such Quarterly Period, excluding, in the case of both clauses (i) and (ii) of this subsection (b), any Scheduled Payment made by SandRidge to any Counterparty under any Trade with respect to which SandRidge (x) was a Defaulting Party on the date such Scheduled Payment was required to be made by SandRidge and (y) continues to be a Defaulting Party on the Quarterly Payment Date;

 

(c) SandRidge will pay to the Trust an amount equal to the sum of the following: (i) all Illegality Termination Payments received by SandRidge from the Counterparties under all Trades during such Quarterly Period plus (ii) the SandRidge Gross Up Amount, if any, related to Illegality Termination Payments required to be made by the Counterparties to SandRidge under all Trades during such Quarterly Period;

 

(d) the Trust will pay to SandRidge an amount equal to the sum of the following: (i) all Illegality Termination Payments made by SandRidge to the Counterparties under all Trades during such Quarterly Period plus (ii) the Trust Gross Up Amount, if any, related to

 

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Illegality Termination Payments required to be made by SandRidge to the Counterparties under all Trades during such Quarterly Period;

 

(e) if any Trade has been terminated prior to its stated termination date other than as the result of the occurrence of an Illegality, then notwithstanding the termination of such Trade, SandRidge will pay to the Trust an amount equal to the sum of each Scheduled Payment that would have become due and payable by the relevant Counterparty to SandRidge during such Quarterly Period if such Trade had not been so terminated; and

 

(f) if any Trade has been terminated prior to its stated termination date other than as the result of the occurrence of an Illegality, then notwithstanding the termination of such Trade, the Trust will pay to SandRidge an amount equal to the sum of each Scheduled Payment that would have become due and payable by SandRidge to the relevant Counterparty during such Quarterly Period if such Trade had not been so terminated.

 

Section 2.02 Netting of Payments Under this Agreement.

 

(a) If, on any Quarterly Payment Date, identical amounts would otherwise be payable by each party to the other pursuant to Section 2.01, then, on such date, each party’s obligation to make payment of any such amount will be automatically satisfied and discharged.

 

(b) If, on any Quarterly Payment Date, the aggregate amount that would otherwise have been payable by one party pursuant to Section 2.01 exceeds the aggregate amount that would otherwise have been payable by the other party, then the party that owes the larger aggregate amount must pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount.

 

Section 2.03 General Conditions. All payments made hereunder shall be made in immediately available funds to the account or accounts from time to time specified by the relevant payee. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day.  SandRidge shall determine the amounts due to (or from) the Trust under this Agreement, and all such determinations shall (in the absence of manifest error) be final and binding on each party.

 

Section 2.04 Certain Notices. SandRidge shall promptly notify the Trust of the designation of an “Early Termination Date” pursuant to any Trade Document and the termination of any Trade, and shall provide the Trust with any documentation or other information related thereto as the Trust may reasonably request from time to time.

 

ARTICLE III
 TRANSFER AND REPLACEMENT OF TRADES; RESETTING OF TRADES

 

Section 3.01 Transferred Trades; Replaced Trades.

 

(a) Subject to Section 3.01(b) below, SandRidge may, at any time and in its sole discretion, assign, novate or otherwise transfer (each, a “Transfer”) any Trade, or any portion of any Trade, to the Trust.  Any such Transfer shall constitute the complete assignment, novation or other transfer of all of SandRidge’s obligations and agreements, and all of SandRidge’s rights,

 

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remedies, and powers, under such Trade (or any portion thereof).  Any such Transfer of a Trade (or any portion thereof) shall be subject to the conditions set forth in Section 3.01(c) below.  Trades (or portions thereof) that are Transferred to the Trust in accordance with this Section 3.01(a) are referred to herein as “Transferred Trades.”  Each of the Trust and SandRidge shall pay its respective fees and expenses relating to any Transfer of a Trade (or portion thereof), including attorneys’ fees and expenses.

 

(b) In addition, SandRidge may, at any time and in its sole discretion, request the Trust to enter into new commodity derivatives transactions (each, a “Trust Replacement Trade”) to replace all or any portion of the volumes hedged under Trades that have not been assigned, novated or otherwise transferred to the Trust pursuant to Section 3.01(a) above.  The execution of any Trust Replacement Trade shall be subject to the conditions set forth in Section 3.01(c) below.  Trades (or portions thereof) that are replaced with Trust Replacement Trades in accordance with this Section 3.01(b) are referred to herein as “Replaced Trades.”  Replaced Trades may not be assigned, novated or otherwise transferred to the Trust pursuant to Section 3.01(a) above.

 

(c) Any Transfer of a Trade (or any portion thereof), and any entry by the Trust into a Trust Replacement Trade, shall be subject to the conditions that, upon the effectiveness of such proposed Transfer or the execution of such proposed Trust Replacement Trade, as the case may be, (i) the counterparty to such Transferred Trade or Trust Replacement Trade shall be an Approved Trust Counterparty, (ii) the hedging effects of such Transferred Trade or Trust Replacement Trade shall, in SandRidge’s sole determination, be economically equivalent to the hedging effects of the Transferred Trade or the Replaced Trade, as the case may be, immediately prior to the proposed Transfer or replacement, and (iii) immediately prior to the Transfer of any Trade pursuant to Section 3.01(a) or immediately prior to the entering into a Trust Replacement Trade pursuant to Section 3.01(b), as the case may be, no default, event of default, termination event, early termination event, potential event of default or potential termination event shall have occurred and be continuing and no early termination date shall have been specified or shall have occurred, with respect to such Transferred Trade or Trade replaced with such Trust Replacement Trade, as the case may be.  For the avoidance of doubt, in determining whether such Transferred Trades or Trust Replacement Trades have economically equivalent hedging effects as the existing Trades, the presence or absence of collateral supporting the Trust’s obligations under Transferred Trades or Trust Replacement Trades shall not be considered.  The Trust hereby consents to any Transfer of a Trade, and any entry by the Trust into a Trust Replacement Trade, meeting the foregoing conditions, and the Trust acknowledges that no further review or approval by the Trust shall be required to effect any such Transfer or to execute any such Trust Replacement Trade.  The Trust agrees that it will execute, or cause to be executed, such confirmations, acknowledgements, notices, and other documents requested by SandRidge, or that may otherwise be necessary or desirable, to effect any Transfer of a Trade or enter into any Trust Replacement Trade.  In addition, the written instrument or instruments governing any Transfer and/or any Transferred Trade shall include an acknowledgement by the counterparty to the Transferred Trade that SandRidge is not a party to, nor does SandRidge have any obligations under, the Transferred Trade effective as of and following the time of such Transfer.

 

(d) In connection with any Transferred Trade or Trust Replacement Trade in accordance with this Section 3.01, SandRidge shall provide the Trust with written notice

 

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identifying the Trade or portion of a Trade being Transferred or replaced with a Trust Replacement Trade.  In addition, at least five (5) Business Days prior to the anticipated date of any Transfer or any execution of a Trust Replacement Trade, SandRidge shall provide the Trust with substantially complete drafts of all relevant documentation relating to such Transferred Trade or Trust Replacement Trade, including the ISDA master agreement, related schedules, and transaction confirmations.  Upon the effective date of any Transfer or execution of any Trust Replacement Trade, all of the obligations of SandRidge and the Trust under this Agreement with respect to the volumes covered by the Transferred Trade or Replaced Trade will cease, and SandRidge shall deliver to the Trust a revised Exhibit A, reflecting the removal from such Exhibit A of the Confirmations (or portions thereof) covered by the Transferred Trade or the Replaced Trade, as applicable.

 

Section 3.02 Resetting of Trades.  If at any time SandRidge reasonably determines that the remaining volumes of oil hedged under the Trades and Trust Direct Hedges exceed projected production of oil attributable to the Royalty Interests for the period or periods covered by such Trades and Trust Direct Hedges (such difference, the “Excess Hedged Volumes”), SandRidge may, in its sole discretion, reset, terminate or replace, or otherwise modify, the terms of all or any portion of the Trades in order to eliminate or reduce such Excess Hedged Volumes (any such action, a “Reset”).  SandRidge shall use commercially reasonable efforts to effect any such Reset in a manner that is cash neutral (or advantageous) to the Trust, but shall have no affirmative duty to reset or otherwise modify any Trades.  In connection with any Reset in accordance with this Section 3.02, SandRidge shall provide the Trust with (i) written notice identifying the Trades or portions thereof being reset and describing the material terms of the Reset, including a summary of the volumes, periods, and prices affected by the Reset, and (ii) copies of any revised or new transaction confirmations evidencing new transactions entered into in conjunction with such Reset (“Reset Trades”).  Upon the effective date of any Reset, SandRidge shall deliver to the Trust a revised Exhibit A, reflecting the replacement of the Confirmations (or portions thereof) affected by the Reset with the transaction confirmations evidencing the Reset Trades.  The Trust agrees that it will execute, or cause to be executed, such acknowledgements, notices, and other documents requested by SandRidge, or that may otherwise be necessary or desirable, to give effect to the foregoing.  For the avoidance of doubt, SandRidge shall have no affirmative duty to undertake any Reset and shall incur no liability in connection with affirmatively undertaking (or failing to undertake) a Reset (other than a failure to use its commercially reasonable efforts in effecting a Reset as expressly set forth in this Section 3.02 or for undertaking a Reset in bad faith).

 

ARTICLE IV
 MISCELLANEOUS

 

Section 4.01 Amendments. Any amendment, modification or waiver in respect of this Agreement will only be effective if in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties hereto.  Except as set forth in Article III, SandRidge will not make any material amendment to the terms of the Trades without the Trust’s consent.

 

Section 4.02 No Waiver. No failure on the part of any party to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege, or

 

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any abandonment or discontinuance of steps to enforce such right, power or privilege, under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

Section 4.03 Remedies Cumulative; Non-Exclusive; Etc. All rights, powers, privileges, remedies, and recourses granted in this Agreement or otherwise available at law or equity: (a) shall be cumulative and concurrent; (b) may be pursued separately, successively, or concurrently; (c) may be exercised as often as the occasion therefor shall arise, it being agreed that the exercise or failure to exercise or the beginning, or the abandonment, or the delay of any of same, shall in no event be construed as a waiver or release thereof or of any other right, remedy, or recourse and (d) are intended to be, and shall be, nonexclusive.

 

Section 4.04 Successors and Assigns. The provisions of this Agreement shall be binding upon each party and its successors and permitted assigns and shall inure, together with all the rights and remedies hereunder, to the benefit of such party and its respective successors and assigns; provided that no party may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the other party, and any such purported assignment, transfer or delegation shall be null and void.

 

Section 4.05 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof or thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

 

Section 4.06 Survival; Revival; Restatement. To the extent that any payments made hereunder are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver or other Person or entity under any bankruptcy law, common law or equitable cause, then to such extent, the obligations so satisfied shall be revived and continue as if such payment had not been received and the rights, powers and remedies under this Agreement shall continue in full force and effect. In such event, this Agreement shall be automatically reinstated and each party shall take such action as may be reasonably requested by any other party to effect such reinstatement.

 

Section 4.07 Acknowledgments.

 

(a) Each party hereby acknowledges that (i) no party has any fiduciary relationship with or duty to any other party arising out of or in connection with this Agreement; (ii) no joint venture is created hereby or otherwise exists by virtue of the transactions contemplated hereby among the parties hereto; (iii) no other party is acting as a fiduciary or financial or investment advisor for it; (iv) it is not relying upon any representations (whether written or oral) of any other party; (v) no other party has given to it (directly or indirectly through any other Person) any advice, counsel, assurance, guarantee, or representation whatsoever as to the expected or projected success, profitability, return, performance, result, effect, consequence, or benefit (either legal, regulatory, tax, financial, accounting, or otherwise) of this Agreement; (vi) it has made its own investment, hedging, and trading decisions based

 

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upon its own judgment and upon any advice from such advisors as it has deemed necessary, and not upon any view expressed by the other party; (vii) all trading decisions have been the result of arm’s length negotiations between the parties; (viii) it has a duty to read the Trade Documents and agrees that it is charged with notice and knowledge of the terms of the Trade Documents; that it has in fact read the Trade Documents and is fully informed and has full notice and knowledge of the terms, conditions and effects thereof and (ix) it is entering into this Agreement with a full understanding of all of the risks hereof (economic and otherwise) and it is capable of assuming and willing to assume (financially and otherwise) those risks.

 

(b) Without limiting the applicability of any other provision of the U.S. Bankruptcy Code as amended (the “Bankruptcy Code”) (including Sections 362, 546, 556, and 560 thereof and the applicable definitions in Section 101 thereof), the parties intend that the transactions contemplated by this Agreement will constitute “forward contracts” or “swap agreements” as defined in Section 101 of the Bankruptcy Code, and that the parties are entitled to the rights under, and protections afforded by, Sections 362, 546, 556, and 560 of the Bankruptcy Code.

 

(c) Each party represents to the other party that it is an “eligible contract participant” within the meaning of the Commodity Exchange Act, Section 1a(12).

 

Section 4.08 No Agency Relationship, No Assignment of Trades. Each of the parties hereto acknowledges and agrees that no agency relationship is created hereby or otherwise exists by virtue of the transactions contemplated hereby among the parties hereto, it being expressly understood and agreed that SandRidge has entered into the Trades and the Trade Documents related thereto as principal on its own behalf, and SandRidge is not acting as an agent of the Trust with respect to any Trade nor is SandRidge acting in any other capacity on behalf of the Trust, fiduciary or otherwise. Nothing contained herein shall be interpreted to create or operate as an assignment, transfer or novation of any Trade, any Trade Document or any interest or obligation therein or thereunder.

 

Section 4.09 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

 

Section 4.10 Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. In making proof of this Agreement, it shall not be necessary to produce or account for any counterpart other than one signed by the party against which enforcement is sought. Delivery of an executed counterpart of a signature page of this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.

 

Section 4.11 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AS TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

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Section 4.12 No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and no other Person (including any Counterparty or Trust unitholder) shall have any rights, claims, remedies or privileges hereunder against any party hereto for any reason whatsoever. There are no third party beneficiaries.

 

Section 4.13 Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered for the Trust by The Bank of New York Mellon Trust Company, N.A. (the “Bank”), as Trustee of the Trust, not individually or personally, but solely as Trustee in the exercise of the powers and authority conferred and vested in it as Trustee of the Trust and (b) under no circumstances shall the Bank or Trustee be liable for any liability or obligation of the Trust hereunder.  It is further expressly understood and agreed by the parties hereto that neither the Bank nor the Trustee shall have any authority over, or responsibility or liability for, the transactions contemplated by this Agreement, all of which are hereby agreed to be the sole responsibility of SandRidge and the Trust.

 

Section 4.14 Tax Hedge Designation. Unless otherwise specifically identified, the Trust hereby identifies and designates this Agreement and the economic benefits and costs associated with the underlying commodity derivatives transactions as a hedging transaction for tax purposes under Section 1221(a)(7) of the Internal Revenue Code of 1986, as amended and Section 1.1221-2 of the Treasury regulations promulgated under the Internal Revenue Code.  The transactions being hedged are as follows (in each case by SandRidge attributable to the Trust):

 

the sale of:

 

688,875 Bbl of oil production during the period April 1, 2012 to December 31, 2012 (equivalent to approximately 2,505 Bbl per day of oil production during such period);

 

1,058,500 Bbl of oil production during 2013 (equivalent to approximately 2,900 Bbl per day of oil production during such period); and

 

900,000 Bbl of oil production during 2014 (equivalent to approximately 2,465.75 Bbl per day of oil production during such period).

 

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IN WITNESS WHEREOF, intending to be legally bound, each of the parties hereto has caused this Agreement to be duly executed as of the date first above written.

 

	
 
    	
SandRidge   Energy, Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Matthew K. Grubb
    
	
 
    	
 
    	
Name:
    	
Matthew   K. Grubb
    
	
 
    	
 
    	
Title:
    	
President   and Chief Operating Officer
    

 

 

[Signature Page to Derivatives Agreement]

 

 

	
 
    	
 SandRidge   Mississippian Trust II
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
The   Bank of New York Mellon Trust Company, N.A., as Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Michael J. Ulrich
    
	
 
    	
 
    	
Name:
    	
Michael   J. Ulrich
    
	
 
    	
 
    	
Title:
    	
Vice   President
    
					

 

 

[Signature Page to Derivatives Agreement]

 

 

EXHIBIT A

 

CONFIRMATIONSExhibit 10.14

 

Execution Copy

 

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

 

MORTGAGE (Kansas)

 

FROM

 

SANDRIDGE EXPLORATION AND PRODUCTION, LLC,

as MORTGAGOR

TO

 

SANDRIDGE MISSISSIPPIAN TRUST II,

as MORTGAGEE

 

Dated as of April 23, 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.

 

 

MORTGAGE (Kansas)

 

THIS MORTGAGE (Kansas) (this “Mortgage”) is entered into as of April 23, 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 (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 (Kansas), 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 Long-Term Overriding Royalty Interest Conveyance (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 “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 23, 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 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 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:

 

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(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 $29,601,000; 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”).

 

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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;

 

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(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)            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.

 

(g)           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.  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.

 

(h)           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

 

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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.

 

(i)            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 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,

 

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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, 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

 

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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 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.

 

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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 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

 

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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 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.

 

11

 

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.

 

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.  All of the counterparts hereof together shall constitute one and the same instrument.

 

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 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

 

12

 

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:
    	
/s/   Matthew K. Grubb
    
	
 
    	
 
    	
Name:   
    	
Matthew   K. Grubb
    
	
 
    	
 
    	
Title:   
    	
President   and Chief Operating 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:

 

Hinkle Law Firm LLC

301 North Main Street

Suite 2000

Wichita, KS  67202-4820

Attention:  John W. Broomes, Esq.

Facsimile No.: (316) 264-1518

 

 

SIGNATURE PAGE TO MORTGAGE

 

 

	
 
    	
SANDRIDGE MISSISSIPPIAN TRUST II
    
	
 
    	
 
    
	
 
    	
By:   
    	
The   Bank of New York Mellon Trust Company, N.A., as Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Michael J. Ulrich
    
	
 
    	
 
    	
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 23, 2012, by Matthew K. Grubb as President and Chief Operating 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 23rd day of April, 2012.

 

 

	
 
    	
/s/   Janis L. Roberts
    
	
 
    	
NOTARY   PUBLIC,
    
	
 
    	
 
    
	
 
    	
State   of Oklahoma
    
	
 
    	
 
    
	
 
    	
Janis   L. Roberts
    
	
 
    	
(printed   name)
    

 

 

My commission expires: May 22, 2012

 

	
 
    	
 
    	
 
    
	
 
    	
[SEAL]
    

 

 

	
STATE   OF TEXAS
    	
§
    	
 
    
	
 
    	
§
    	
 
    
	
COUNTY   OF TRAVIS
    	
§
    	
 
    

 

This instrument was acknowledged before me on April 17, 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 17th day of April, 2012.

 

 

	
 
    	
/s/   Sarah Newell
    
	
 
    	
NOTARY   PUBLIC,
    
	
 
    	
 
    
	
 
    	
State   of Texas
    
	
 
    	
 
    
	
 
    	
Sarah   Newell
    
	
 
    	
(printed   name)
    

 

 

My commission expires: February 16, 2014

 

	
 
    	
 
    	
 
    
	
 
    	
[SEAL]
    

 

 

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

 

See attached.

 

 

ANNEX A-2
 COPY OF ASSIGNMENT (KANSAS)

 

See attached.

 

 

ANNEX A-3
 COPY OF LONG-TERM ROYALTY CONVEYANCE (KANSAS) (DEVELOPMENT)

 

See attached.

 

 

EXHIBIT A
 MORTGAGED PROPERTIES

 

See attached.

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