Document:

Exhibit 10.6

 

ADMINISTRATIVE SERVICES AGREEMENT

 

This Administrative Services Agreement (this “Agreement”) by and between SandRidge Energy, Inc., a Delaware corporation, with offices at 123 Robert S. Kerr Avenue, Oklahoma City, OK 73102-6406 (the “Company”), 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”).  The Company and the Trust may hereinafter be referred to collectively as the “Parties” and each individually as a “Party”.  All capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in Article I below.

 

WHEREAS, pursuant to (A) that certain Term Overriding Royalty Interest Conveyance (PDP), that certain Term Overriding Royalty Interest Conveyance (Development), that certain Perpetual Overriding Royalty Interest Conveyance (PDP) and that certain Perpetual Overriding Royalty Interest Conveyance (Development), in each case, filed in Oklahoma and effective as of the Effective Time (collectively, the “OK Conveyances”), and (B) that certain Term Overriding Royalty Interest Conveyance (PDP), that certain Term Overriding Royalty Interest Conveyance (Development), that certain Perpetual Overriding Royalty Interest Conveyance (PDP) and that certain Long-Term Overriding Royalty Interest Conveyance (Development), in each case, filed in Kansas and effective as of the Effective Time (collectively, the “KS Conveyances”, and together with the OK Conveyances, the “Conveyances”), SandRidge Exploration and Production, LLC, a Delaware limited liability company, has caused to be conveyed to the Trust or Mistmada Oil Company, Inc., an Oklahoma corporation (the “Company Subsidiary”), as applicable, overriding royalty interests in certain oil and natural gas properties located in the Mississippian formation in northern Oklahoma and southern Kansas (the “Royalty Interests”);

 

WHEREAS, the Company Subsidiary has assigned all of its Royalty Interests to the Trust, and consequently the Trust holds all of the Royalty Interests; and

 

WHEREAS, in connection with the Conveyances, the Company has agreed to provide certain administrative services for the Trust in exchange for an administrative services fee as described herein.

 

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

 

SECTION 1.01. Definitions. As used in this Agreement, the following terms have the respective meanings set forth below:

 

“AAA” has the meaning set forth in Section 2.07.

 

“Administrative Services Fee” has the meaning set forth in Section 3.01.

 

 

“Affiliate” means, with respect to any specified Person, another Person that directly or indirectly controls, is controlled by, or is under common control with, the specified Person.  As used in this definition, “control” (and the correlative terms “controlled by,” and “under common control”) means 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.

 

“Agreement” has the meaning set forth in the introductory paragraph to this Agreement.

 

“Business Day” means any day that is not a Saturday, Sunday, a holiday determined by the New York Stock Exchange, Inc. as “affecting ‘ex’ dates” or any other day on which national banking institutions in New York, New York are closed as authorized or required by law.

 

“Claimant” has the meaning set forth in Section 2.07.

 

“Closing Date” means [•], 2012.

 

“Company” has the meaning set forth in the introductory paragraph to this Agreement.

 

“Company Subsidiary” has the meaning set forth in the recitals to this Agreement.

 

“Conveyances” has the meaning set forth in the recitals to this Agreement.

 

“Derivatives Agreement” means that certain Derivatives Agreement, dated as of [·], 2012, by and between the Company and the Trust, as the same may be amended from time to time.

 

“Development Agreement” means that certain Development Agreement, effective as of the Effective Time, by and among the Company, SandRidge Exploration and Production, LLC, and the Trust, as the same may be amended from time to time.

 

“Direct Hedge Contracts” means the Initial Direct Hedges and the Future Direct Hedges, in each case, as such contracts may be restructured, amended or modified from time to time.

 

“Effective Time” has the meaning set forth in the introductory paragraph to this Agreement.

 

“Excess Hedged Volumes” has the meaning set forth in Section 2.02(c).

 

“External Expenses” means the actual out-of-pocket fees, costs and expenses incurred by the Company in connection with the provision of the Services.

 

“Force Majeure” shall mean any cause beyond the reasonable control of the Company, including acts of God, strikes, lockouts, acts of the public enemy, wars or warlike

 

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action (whether actual or impending), arrests and other restraints of government (civil or military), blockades, embargoes, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, sabotage, tornadoes, named tropical storms and hurricanes, and floods, civil disturbances, terrorism, mechanical breakdown of machinery or equipment, explosions, confiscation or seizure by any government or other public authority, any order of any court of competent jurisdiction, regulatory agency or governmental body having jurisdiction.

 

“Future Direct Hedges” means oil derivative contracts that are entered into by the Trust after the Closing Date (i) upon the assignment, novation or other transfer of any of the SandRidge Hedge Contracts (or any portion thereof), or the replacement of SandRidge Hedge Contracts (or any portion thereof), in each case in accordance with the terms of the Derivatives Agreement, or (ii) in connection with the Reset of existing Direct Hedge Contracts in accordance with Section 2.02(c) of this Agreement.

 

“Initial Direct Hedges” means those oil derivative contracts specified on Schedule 1 to the Trust Agreement, which contracts are to be entered into by the Trust with counterparties on or substantially concurrent with the Closing Date.

 

“KS Conveyances” has the meaning set forth in the recitals to this Agreement.

 

“OK Conveyances” has the meaning set forth in the recitals to this Agreement.

 

“Party” has the meaning set forth in the introductory paragraph to this Agreement.

 

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

 

“Registration Rights Agreement” means that certain Registration Rights Agreement, dated as of [·], 2012, by and between the Trust and the Company.

 

“Reset” has the meaning set forth in Section 2.02(c).

 

“Respondent” has the meaning set forth in Section 2.07.

 

“Royalty Interests” has the meaning set forth in the recitals to this Agreement.

 

“Rules” has the meaning set forth in Section 2.07.

 

“SandRidge Hedge Contracts” means those oil derivative contracts identified on Exhibit A to the Derivatives Agreement, as such contracts may be restructured, amended or modified from time to time.

 

“Services” has the meaning set forth in Section 2.01.

 

“Special Provisions” has the meaning set forth in Section 2.07.

 

“Termination Date” has the meaning set forth in Section 5.01.

 

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“Trust” has the meaning set forth in the introductory paragraph to this Agreement.

 

“Trust Agreement” means that certain Amended and Restated Trust Agreement of the Trust, dated as of [·], 2012 (as may be amended from time to time), by and among the Company, 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.

 

SECTION 1.02. Construction.  Article, Section and subsection references in this Agreement are references to the corresponding Article, Section and subsection to this Agreement, unless otherwise specified.  If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb).  Unless the context of this Agreement clearly requires otherwise, the singular shall include the plural and the plural shall include the singular wherever and as often as may be appropriate.  All references to instruments, documents, contracts and agreements are references to such instruments, documents, contracts and agreements as the same may be amended, supplemented and otherwise modified from time to time, unless otherwise specified.  The words “includes” or “including” shall mean “including but not limited to” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.  Any reference in this Agreement to “$” or “dollars” shall mean the lawful currency of the United States of America.  When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded.  If the last day of such period is not a Business Day, the period in question shall end on the next succeeding Business Day.  The words “hereof,” “hereby,” “herein,” “hereinafter,” “hereof,” “hereunder” and similar terms refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.  All accounting terms or calculations used or made herein shall be in accordance with the generally accepted accounting principles of the United States. The division of this Agreement into Articles, Sections and other subdivisions are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement.

 

ARTICLE II
 SERVICES

 

SECTION 2.01. Services. Subject to the terms of this Agreement and in exchange for the payments described in Section 3.01, the Company hereby agrees to provide the Trust with (a) services as are necessary to fulfill the purposes of the Trust as set forth in Section 2.02 of the Trust Agreement, including such accounting, bookkeeping and informational services as may be necessary for the preparation of reports the Trust is or may be required to prepare and/or file in accordance with applicable tax and securities laws, exchange listing rules and other requirements, including reserve reports, tax returns and Forms K-1 in each case, that the Trust may reasonably request the Company provide during the term of this Agreement; (b) services of a similar character and scope to those in the foregoing clause (a); (c) services that may be required to satisfy the Trust’s obligations under the Registration Rights Agreement; and

 

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(d) services described in Section 2.02 of this Agreement related to the Trust’s hedging arrangements (all of the foregoing services, the “Services”). As a component of the Services, the Company shall, upon request of the Trust at any time, certify to the Trust the information necessary to make or confirm the calculations, computations and determinations required to be made from time to time under the various agreements to which the Company and the Trust (or Trustee) are parties, including, without limitation, all amounts and other facts necessary to make the various calculations, computations and determinations to be made under the Development Agreement.

 

SECTION 2.02. Hedge Manager Services.

 

(a) The Company shall serve as hedge manager for the Trust.  In this capacity, the Company shall administer, on behalf of the Trust, the Direct Hedge Contracts, including determining amounts owed by or to the Trust under the Direct Hedge Contracts, reviewing amounts determined by the Calculation Agent (as defined in the Direct Hedge Contracts), reviewing and taking appropriate action in response to notices and other communications from counterparties to the Direct Hedge Contracts, drafting and delivering any confirmations, notices or other documents related to the Direct Hedge Contracts and taking any and all other actions that the Company, in its sole discretion, deems necessary or appropriate to administer the Direct Hedge Contracts.

 

(b) As hedge manager, the Company shall have the power and authority to negotiate on behalf of the Trust, with counterparties the terms and conditions of any Future Direct Hedge to be entered into by the Trust, including in connection with any assignment, novation or other transfer to the Trust of a SandRidge Hedge Contract or the replacement of a SandRidge Hedge Contract with a Future Direct Hedge, in each case, in accordance with the Derivatives Agreement, or upon the Reset of a Direct Hedge Contract in accordance with Section 2.02(c) of this Agreement.

 

(c) If at any time the Company reasonably determines that the remaining volumes of oil hedged under the Direct Hedge Contracts and SandRidge Hedge Contracts exceed projected production of oil attributable to the Royalty Interests for the period or periods covered by such Direct Hedge Contracts and SandRidge Hedge Contracts (such difference, the “Excess Hedged Volumes”), the Company may, in its sole discretion, negotiate, on behalf of the Trust, with the Trust’s counterparties under the Direct Hedge Contracts to reset, terminate or replace, or otherwise modify, the terms of all or any portion of the Direct Hedge Contracts in order for the Trust to eliminate or reduce such Excess Hedged Volumes (any such reset, termination, replacement or modification, a “Reset”). The Company shall use commercially reasonable efforts to negotiate terms that would effect any such Reset in a manner that is cash neutral or advantageous to the Trust, but shall have no affirmative duty to negotiate for, or actually cause a Reset or other modification with respect to any Direct Hedge Contracts on behalf of the Trust. In connection with any Reset in accordance with this Section 2.02(c), the Company shall provide the Trust with (i) written notice identifying the Direct Hedge Contracts (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 or other documents evidencing the Future Direct Hedges proposed to be entered into by the Trust in conjunction with such Reset. For the avoidance of doubt, the Company shall

 

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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 2.02(c) or for undertaking a Reset in bad faith).

 

(d) The Trustee shall cooperate with the Company in connection with any Reset or any other action the Company takes with respect to the Direct Hedge Contracts, to the extent reasonably requested to do so by the Company, including executing definitive documentation with counterparties. However, the Trustee shall have neither the right nor the responsibility to approve the terms and conditions of any Reset, which authority and responsibility shall rest solely with the Company, as hedge manager for the Trust.

 

SECTION 2.03. Performance of Services by Others. The Parties hereby agree that in discharging the Company’s obligations under this Agreement, the Company may, in its sole discretion, engage any other Person, including its Affiliates, to perform the Services (or any part of the Services) on its behalf and that, subject to the Company’s right to reimbursement for External Expenses in accordance with this Agreement, the performance of the Services (or any part of the Services) by any such Person shall be treated as if the Company performed such Services itself. Notwithstanding the foregoing, nothing contained herein shall relieve the Company of its obligations hereunder.

 

SECTION 2.04. Intellectual Property. Any (a) inventions, whether patentable or not, developed or invented, or (b) copyrightable material (and the intangible rights of copyright therein) developed, in each case by the Company, its Affiliates or its or their employees in connection with the performance of the Services shall be the property of the Company; provided, that the Trust shall be granted an irrevocable, royalty-free, non-exclusive and non-transferable right and license to use such inventions or material; provided, further, that the Trust shall only be granted such a right and license to the extent such grant does not conflict with, or result in a breach, default or violation of a right or license to use such inventions or material granted to the Company by any Person other than an Affiliate of the Company. Notwithstanding the foregoing, the Company will use all commercially reasonable efforts to grant such right and license to the Trust.

 

SECTION 2.05. Independent Status. It is expressly acknowledged by the Parties that each Party is an “independent contractor” and nothing in this Agreement is intended nor shall be construed to create an employer/employee, joint venture or partnership relationship between the Parties, or to allow any Party to exercise control or direction over the other Party. Except as required in connection with the performance of the Services, neither the Company nor any agent, employee, servant, contractor or subcontractor of the Company or any of its Affiliates shall have the authority to bind the Trust to any contract, agreement or arrangement. Neither the Trust nor the Trustee shall be liable for the salary, wages or benefits, including workers’ compensation insurance and unemployment insurance, of any employee, agent, servant, contractor or subcontractor of the Company or its Affiliates by virtue of this Agreement.  The Company shall not be a fiduciary with respect to the Trust or Trustee and shall owe no fiduciary duties or liabilities to the Trust or Trustee.

 

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SECTION 2.06. Warranties; Limitation of Liability. The Company will use commercially reasonable efforts to provide the Services in a good and workmanlike manner in accordance with the sound and prudent practices of providers of similar services. EXCEPT AS SET FORTH IN THE PRECEDING SENTENCE, THE COMPANY MAKES NO (AND HEREBY DISCLAIMS AND NEGATES ANY AND ALL) WARRANTIES OR REPRESENTATIONS WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES. IN NO EVENT WILL THE COMPANY OR ANY OF ITS AFFILIATES BE LIABLE TO ANY OF THE PERSONS RECEIVING ANY SERVICES OR TO ANY OTHER PERSON FOR ANY EXEMPLARY, PUNITIVE, DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES RESULTING FROM ANY ERROR IN THE PERFORMANCE OF SUCH SERVICES, REGARDLESS OF WHETHER THE PERSON PROVIDING SUCH SERVICES, ITS AFFILIATES OR OTHERS MAY BE WHOLLY, CONCURRENTLY, PARTIALLY OR SOLELY NEGLIGENT OR OTHERWISE AT FAULT, EXCEPT TO THE EXTENT SUCH EXEMPLARY, PUNITIVE, DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES ARE PAID BY THE PARTY INCURRING SUCH DAMAGES TO A PERSON THAT IS NOT A PARTY TO THIS AGREEMENT. THE PROVISIONS OF THIS SECTION 2.06 WILL SURVIVE TERMINATION OF THIS AGREEMENT.

 

SECTION 2.07. Disputes. ANY DISPUTE, CONTROVERSY OR CLAIM THAT MAY ARISE BETWEEN OR AMONG THE COMPANY (ON THE ONE HAND) AND THE TRUST (ON THE OTHER HAND) IN CONNECTION WITH OR OTHERWISE RELATING TO THIS AGREEMENT, THE NATURE OR QUALITY OF THE SERVICES, THE CALCULATION OR ALLOCATION OF THE ADMINISTRATIVE SERVICES FEE OR EXTERNAL EXPENSES OR THE APPLICATION, IMPLEMENTATION, VALIDITY OR ALLEGED OR ACTUAL BREACH OF THIS AGREEMENT, SHALL BE FINALLY, CONCLUSIVELY AND EXCLUSIVELY SETTLED BY BINDING ARBITRATION IN OKLAHOMA CITY, OKLAHOMA IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES (THE “RULES”) OF THE AMERICAN ARBITRATION ASSOCIATION OR ANY SUCCESSOR THERETO (“AAA”) THEN IN EFFECT. THE COMPANY AND THE TRUST HEREBY EXPRESSLY WAIVE THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO TRIAL BY JURY, WITH RESPECT TO ANY MATTER SUBJECT TO ARBITRATION PURSUANT TO THIS SECTION 2.07. EITHER THE COMPANY OR THE TRUST MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, IN ANY COURT HAVING JURISDICTION, TO COMPEL ARBITRATION OF ANY DISPUTE, CONTROVERSY OR CLAIM TO WHICH THIS SECTION 2.07 APPLIES. EXCEPT WITH RESPECT TO THE FOLLOWING PROVISIONS (THE “SPECIAL PROVISIONS”) WHICH SHALL APPLY WITH RESPECT TO ANY ARBITRATION PURSUANT TO THIS SECTION 2.07, THE INITIATION AND CONDUCT OF ARBITRATION SHALL BE AS SET FORTH IN THE RULES, WHICH RULES ARE INCORPORATED IN THIS AGREEMENT BY REFERENCE WITH THE SAME EFFECT AS IF THEY WERE ACTUALLY PRINTED HEREIN.

 

(a) In the event of any inconsistency between the Rules and the Special Provisions, the Special Provisions shall control. References in the Rules to a sole arbitrator shall be deemed to refer to the tribunal of arbitrators provided for under subparagraph (c) below in this Section 2.07.

 

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(b) The arbitration shall be administered by AAA.

 

(c) The arbitration shall be conducted by a tribunal of three arbitrators. Within ten days after arbitration is initiated pursuant to the Rules, the initiating party or parties (the “Claimant”) shall send written notice to the other party or parties (the “Respondent”), with a copy to the Oklahoma City, Oklahoma office of AAA (if no such office exists, to the Dallas, Texas office of AAA), designating the first arbitrator (who shall not be a representative or agent of any party but may or may not be an AAA panel member and, in any case, shall be reasonably believed by the Claimant to possess the requisite experience, education and expertise in respect of the matters to which the claim relates to enable such person to completely perform arbitral duties). Within ten days after receipt of such notice, the Respondent shall send written notice to the Claimant, with a copy to the Oklahoma City, Oklahoma office of AAA (if no such office exists, to the Dallas, Texas office of AAA) and to the first arbitrator, designating the second arbitrator (who shall not be a representative or agent of any party, but may or may not be an AAA panel member and, in any case, shall be reasonably believed by the Respondent to possess the requisite experience, education and expertise in respect of the matters to which the claim relates to enable such person to competently perform arbitral duties). Within ten days after such notice from the Respondent is received by the Claimant, the Respondent and the Claimant shall cause their respective designated arbitrators to select any mutually agreeable AAA panel member as the third arbitrator. If the respective designated arbitrators of the Respondent and the Claimant cannot so agree within said ten day period, then the third arbitrator will be determined pursuant to the Rules. For purposes of this Section 2.07, the Company (on the one hand) and the Trust (on the other hand) shall each be entitled to the selection of one arbitrator. Prior to commencement of the arbitration proceeding, each arbitrator shall have provided the parties with a resume outlining such arbitrator’s background and qualifications and shall certify that such arbitrator is not a representative or agent of any of the parties. If any arbitrator shall die, fail to act, resign, become disqualified or otherwise cease to act, then the arbitration proceeding shall be delayed for fifteen days and the party by or on behalf of whom such arbitrator was appointed shall be entitled to appoint a substitute arbitrator (meeting the qualifications set forth in this Section 2.07) within such fifteen day period; provided, that if the party by or on behalf of whom such arbitrator was appointed shall fail to appoint a substitute arbitrator within such fifteen day period, the substitute arbitrator shall be a neutral arbitrator appointed by the AAA arbitrator within fifteen days thereafter.

 

(d) All arbitration hearings shall be commenced within one hundred twenty days after arbitration is initiated pursuant to the Rules, unless, upon a showing of good cause by a party to the arbitration, the tribunal of arbitrators permits the extension of the commencement of such hearing; provided, that any such extension shall not be longer than sixty days.

 

(e) All claims presented for arbitration shall be particularly identified and the parties to the arbitration shall each prepare a statement of their position with the recommended courses of action. These statements of position and recommended courses of action shall be submitted to the tribunal of arbitrators chosen as provided hereinabove for binding decision. The tribunal of arbitrators shall not be empowered to make decisions beyond the scope of the position papers.

 

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(f) The arbitration proceeding will be governed by the substantive laws of the State of New York and will be conducted in accordance with such procedures as shall be fixed for such purpose by the tribunal of arbitrators, except that (i) discovery in connection with any arbitration proceeding shall be conducted in accordance with the Federal Rules of Civil Procedure and applicable case law, (ii) the tribunal of arbitrators shall have the power to compel discovery and (iii) unless the parties otherwise agree and except as may be provided in this Section 2.07, the arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. §§ 1-16, to the exclusion of any provision of state law or other applicable law or procedure inconsistent therewith or which would produce a different result. The parties shall preserve their right to assert and to avail themselves of the attorney-client and attorney-work-product privileges, and any other privileges to which they may be entitled pursuant to applicable law. No party to the arbitration or any arbitrator may compel or require mediation and/or settlement conferences without the prior written consent of all such parties and the tribunal of arbitrators.

 

(g) The tribunal of arbitrators shall make an arbitration award as soon as possible after the later of the close of evidence or the submission of final briefs, and in all cases the award shall be made not later than thirty days following submission of the matter. The finding and decision of a majority of the arbitrators shall be final and shall be binding upon the parties. Judgment upon the arbitration award or decision may be entered in any court having jurisdiction thereof or application may be made to any such court for a judicial acceptance of the award and an order of enforcement, as the case may be. The tribunal of arbitrators shall have the authority to assess liability for pre-award and post-award interest on the claims, attorneys’ fees, expert witness fees and all other expenses of arbitration as such arbitrators shall deem appropriate based on the outcome of the claims arbitrated. Unless otherwise agreed by the parties to the arbitration in writing, the arbitration award shall include findings of fact and conclusions of law.

 

(h) Nothing in this Section 2.07 shall be deemed to (i) limit the applicability of any otherwise applicable statute of limitations or repose or any waivers contained in this Agreement, (ii) constitute a waiver by any Party of the protections afforded by 12 U.S.C. § 91 or any successor statute thereto or any substantially equivalent state law, (iii) restrict the right of the Trustee to make application to any state or federal district court having jurisdiction in Oklahoma City, Oklahoma to appoint a successor Trustee or to request instructions with regard to any provision in this Agreement when the Trustee is unsure of its obligations thereunder, or (iv) apply to the Delaware Trustee (as defined in the Trust Agreement).

 

(i) The provisions of this Section 2.07 will survive termination of this Agreement.

 

ARTICLE III
 ADMINISTRATIVE SERVICES FEE; REIMBURSEMENT OF EXPENSES

 

SECTION 3.01. Administrative Services Fee; Reimbursement of External Expenses.

 

(a)           The Trust shall pay to the Company an annual administrative services fee of $300,000 (the “Administrative Services Fee”), which shall be paid in immediately available funds and in equal quarterly installments, on or before the 45th day following each calendar quarter. In the event that this Agreement is terminated during a calendar quarter pursuant to

 

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Section 5.01, the amount of the Administrative Services Fee for such calendar quarter shall be based upon the pro rata portion of the Administrative Services Fee that shall have accrued during such quarter up to and including the Termination Date.

 

(b)           In addition to the Administrative Services Fee, the Trust shall reimburse the Company on or before the 45th day following each calendar quarter for all reasonable and necessary External Expenses associated with the provision of Services in the preceding quarter as set forth in a reasonably detailed invoice provided by the Company to the Trust on or before the 15th day following each calendar quarter.

 

SECTION 3.02. Set-Off. In the event that the Company or any of its Affiliates owes the Trust a sum certain in an uncontested amount under any other agreement, then any such amounts may, in the sole discretion of the Company, be aggregated and the Trust and the Company (and the Company’s Affiliates, as the case may be) shall discharge their obligations by netting those amounts against any amounts owed by the Trust to the Company under this Agreement.

 

ARTICLE IV
 FORCE MAJEURE

 

SECTION 4.01. Force Majeure. The Company’s obligation under this Agreement shall be excused when and to the extent its performance of that obligation is prevented due to Force Majeure. The Company shall promptly notify the Trustee that it is prevented from performing its obligations by reason of Force Majeure and shall exercise due diligence to end its inability to perform as promptly as practicable. Notwithstanding the foregoing, the Company shall not be required to settle any strike, lockout or other labor dispute in which it or any of its Affiliates may be involved.

 

ARTICLE V
 MISCELLANEOUS

 

SECTION 5.01. Term and Termination.

 

(a) This Agreement shall become effective on the date of this Agreement and shall continue until the date (the “Termination Date”) that is the earliest of:

 

(i) the date the Trust shall have dissolved and commenced winding up its business and affairs in accordance with Section 9.02 of the Trust Agreement;

 

(ii) the date that all of the Conveyances have been terminated or are no longer held by the Trust;

 

(iii) the date that either the Company or the Trustee may designate by delivering a written notice no less than 90 days prior to such date; provided, that the Company’s drilling obligations under the Development Agreement shall have been completed by such date; provided, further, that the Company shall not terminate this Agreement except in connection with the Company’s transfer of some or all of the Subject Interests (as defined in the Conveyances) and then only with respect to the

 

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Services to be provided with respect to the Subject Interests being transferred, and only upon the delivery to the Trustee of an agreement of the transferee of such Subject Interests, reasonably satisfactory to the Trustee, in which such transferee assumes the responsibility to perform the Services relating to the Subject Interests being transferred; and

 

(iv) the date as mutually agreed in writing by the Parties.

 

(b) Upon termination of this Agreement in accordance with Section 5.01(a)(i) or (ii), all rights and obligations under this Agreement shall cease except for (i) obligations that expressly survive termination of this Agreement, (ii) liabilities and obligations that have accrued prior to the Termination Date, including the obligation to pay any amounts that have become due and payable prior to such Termination Date and (iii) the obligation to pay any portion of the Administrative Services Fee that has accrued prior to such Termination Date, even if such portion has not become due and payable at such time. Upon termination of this Agreement in accordance with Section 5.01(a)(iii), the Company’s obligations to provide Services shall cease only with respect to the Subject Interests transferred, and shall otherwise continue unabated. In the event that the Company terminates this Agreement with respect to Subject Interests transferred in accordance with Section 5.01(a)(iii), the Administrative Services Fee shall be proportionately reduced, unless the Company certifies to the Trustee that such transfer of the Subject Interests will not result in a material decrease in the Company’s costs of providing the Services to the Trust with respect to the remaining Subject Interests.

 

SECTION 5.02. Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, by facsimile, by courier guaranteeing overnight delivery or by first-class mail, return receipt requested, and shall be deemed given (i) when made, if made by hand delivery, (ii) upon confirmation, if made by facsimile, (iii) one Business Day after being deposited with such courier, if made by overnight courier or (iv) on the date indicated on the notice of receipt, if made by first-class mail, to the Parties as follows:

 

(a)           if to the Trust or the Trustee, 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

 

With a copy to:

 

Bracewell & Giuliani LLP
 111 Congress Avenue
 Suite 2300
 Austin, Texas 78701

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Attention: Thomas W. Adkins
 Facsimile No.: (512) 479-3940

 

(b)           if to the Company, to:

 

SandRidge Energy, Inc.

123 Robert S. Kerr Avenue 
 Oklahoma City, OK 73102-6406

Attention: Philip T. Warman

Facsimile No.: (405) 429-5983

 

With a copy to:

 

Covington & Burling LLP

1201 Pennsylvania Avenue, N.W.

Washington, D.C. 20004

Attention: David H. Engvall

Facsimile No. (202) 778 5307

 

or to such other address as such Person may have furnished to the other Persons identified in this Section 5.02 in writing in accordance herewith.

 

SECTION 5.03. Entire Agreement; Supersedure; Third Party Beneficiaries. This Agreement, together with all other agreements and documents contemplated to be executed and delivered in connection with the transactions contemplated hereby, constitutes the entire agreement of the Parties relating to the matters contained herein, and supersedes all prior contracts, agreements and understandings, whether written or oral, relating to the matters contained herein. This Agreement does not confer upon any Person, other than the Parties, any rights or remedies.

 

SECTION 5.04. Effect of Waiver or Consent. Except as otherwise provided in this Agreement, a waiver or consent, express or implied, to or of any breach or default by any Party in the performance by that Party of its obligations under this Agreement is not a consent or waiver to or of any other breach or default in the performance by that Party of the same or any other obligations of that Party under this Agreement.

 

SECTION 5.05. Amendment or Modification. This Agreement may be amended or modified from time to time only by a written instrument executed by each of the Parties.

 

SECTION 5.06. Assignment. Except as provided in Section 2.03, and except for any transfer of the rights of the Trustee hereunder to a successor trustee of the Trust, no Party shall have the right to assign its rights or obligations under this Agreement without the written consent of the other Party.

 

SECTION 5.07. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all Parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument.

 

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SECTION 5.08. Severability. If any provision of this Agreement or the application thereof to any Party or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to the other Party or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

 

SECTION 5.09. Further Assurances. In connection with this Agreement and all transactions contemplated by this Agreement, each Party hereto agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions.

 

SECTION 5.10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.

 

SECTION 5.11. Limitation of Trustee’s Liability. It is expressly understood and agreed by the Parties hereto that (a) this Agreement is executed and delivered by the Trustee not individually or personally, but solely as 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 Agreement. Further, the Trust’s obligations under the Direct Hedge Contracts shall be the sole liability and responsibility of the Trust, and the Trustee shall have no liability for any amounts due under any Direct Hedge Contract, SandRidge Hedge Contract or Reset.

 

[Page deliberately left blank]

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

 

	
 
    	
SandRidge   Energy, Inc.
    
	
 
    	
 
    
	
 
    	
By:   
    	
 
    
	
 
    	
 
    	
Name:
    	
James   D. Bennett
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and Chief Financial Officer
    

 

[Signature Page to Administrative Services 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 Administrative Services Agreement]Exhibit 10.8

 

DERIVATIVES AGREEMENT

 

This DERIVATIVES AGREEMENT, delivered as of April [·], 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, [·], 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 [·], 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 12:01 a.m., Central Time, January 1, 2012 (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 [                         ];

 

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).

 

“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.

 

“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 [                                  ].

 

“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 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.

 

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

 

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“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 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

 

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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 [                      ] 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).

 

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 [                        ], 2012:

 

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(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 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.

 

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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, 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.

 

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(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 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

 

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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 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

 

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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 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.

 

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(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.

 

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.

 

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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 approximately:

[·] Bbl per day of oil production during the period of [·], 2012 through December 31, 2012;

[·] Bbl per day of oil production during 2013;

[·] Bbl per day of oil production during 2014;

[·] Bbl per day of oil production during 2015; and

[·] Bbl per day of oil production during the period January 1, 2016 through [·], 2016.

 

11

 

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:
    	
 
    
	
 
    	
 
    	
Name:
    	
James   D. Bennett
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and Chief Financial Officer
    

 

[Signature Page to Derivatives 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 Derivatives Agreement]

 

 

EXHIBIT A

 

CONFIRMATIONS

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