Form of Mortgage, Deed of Trust

Exhibit 10.5


WHEN RECORDED RETURN TO: VINSON & ELKINS L.L.P. 2300 First City Tower 1001 Fannin Street Houston, TX 77002-6760 Attn: Linda C. Daugherty


MORTGAGE, DEED OF TRUST,
ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT
AND FINANCING STATEMENT


FROM


EEX OPERATING L.P.,


TO


ROBERT C. MERTENSOTTO,
AS TRUSTEE


FOR THE BENEFIT OF


JPMORGAN CHASE BANK,
as Administrative Agent,
and Others


A CARBON, PHOTOGRAPHIC, OR OTHER REPRODUCTION OF THIS
INSTRUMENT IS SUFFICIENT AS A FINANCING STATEMENT.


THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.


THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.


THIS INSTRUMENT COVERS PROCEEDS OF MORTGAGED PROPERTY.


THIS INSTRUMENT COVERS MINERALS AND OTHER SUBSTANCES OF VALUE WHICH MAY BE EXTRACTED FROM THE EARTH (INCLUDING WITHOUT LIMITATION OIL AND GAS) AND ACCOUNTS ARISING OUT OF THE SALE OF OIL, GAS AND OTHER MINERALS AT THE WELLHEADS OF THE WELL OR WELLS LOCATED ON THE PROPERTIES DESCRIBED IN THE EXHIBITS HERETO. THIS FINANCING STATEMENT IS TO BE FILED OR FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS OR SIMILAR RECORDS OF THE COUNTY RECORDERS OF THE COUNTIES LISTED ON THE EXHIBITS HERETO. THE MORTGAGOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE CONCERNED, WHICH INTEREST IS DESCRIBED IN THE EXHIBITS ATTACHED HERETO.


PORTIONS OF THE MORTGAGED PROPERTY ARE GOODS WHICH ARE OR ARE TO BECOME AFFIXED TO OR FIXTURES ON THE LAND DESCRIBED IN OR REFERRED TO IN THE EXHIBITS HERETO. THIS FINANCING STATEMENT IS TO BE FILED FOR RECORD OR RECORDED, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS OR SIMILAR RECORDS OF EACH COUNTY IN WHICH SAID LAND OR ANY PORTION THEREOF IS LOCATED. THE MORTGAGOR IS THE OWNER OF RECORD INTEREST IN THE REAL ESTATE CONCERNED. THIS INSTRUMENT IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS.


TABLE OF CONTENTS


Page ARTICLE I GRANT OF LIEN AND INDEBTEDNESS SECURED Section 1.01 Grant of Liens ...................................................... 1 Section 1.02 Grant of Security Interest .......................................... 4 Section 1.03 Indebtedness Secured ................................................ 4 Section 1.04 Pro Rata Benefit .................................................... 5 Section 1.05 Defined Terms ....................................................... 5 ARTICLE II ASSIGNMENT OF PRODUCTION Section 2.01 Assignment .......................................................... 5 Section 2.02 Rights Under Texas Act .............................................. 6 Section 2.03 No Modification of Payment Obligations .............................. 6 ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS Section 3.01 Title ............................................................... 7 Section 3.02 Defend Title ........................................................ 7 Section 3.03 Not a Foreign Person ................................................ 7 Section 3.04 Power to Create Lien and Security ................................... 7 Section 3.05 Revenue and Cost Bearing Interest ................................... 8 Section 3.06 Rentals Paid; Leases in Effect ...................................... 8 Section 3.07 Operation By Third Parties .......................................... 8 Section 3.08 Abandon, Sales ...................................................... 8 Section 3.09 Failure to Perform .................................................. 8 ARTICLE IV RIGHTS AND REMEDIES Section 4.01 Event of Default .................................................... 9 Section 4.02 Foreclosure and Sale ................................................ 9 Section 4.03 Substitute Trustees and Agents ...................................... 10 Section 4.04 Judicial Foreclosure; Receivership .................................. 10 Section 4.05 Foreclosure for Installments ........................................ 10 Section 4.06 Separate Sales ...................................................... 11 Section 4.07 Possession of the Mortgaged Property ................................ 11 Section 4.08 Occupancy After Foreclosure ......................................... 11 Section 4.09 Remedies Cumulative, Concurrent and Nonexclusive .................... 12 Section 4.10 No Release of Obligations ........................................... 12 Section 4.11 Release of and Resort to Collateral ................................. 12 Section 4.12 Waiver of Redemption, Notice and Marshalling of Assets, Etc ......... 12 Section 4.13 Discontinuance of Proceedings ....................................... 13 Section 4.14 Application of Proceeds ............................................. 13 Section 4.15 Resignation of Operator ............................................. 13 Section 4.16 Indemnity ........................................................... 14 ARTICLE V THE TRUSTEE Section 5.01 Duties, Rights, and Powers of Trustee ............................... 15 Section 5.02 Successor Trustee ................................................... 15 Section 5.03 Retention of Moneys ................................................. 15 ARTICLE VI MISCELLANEOUS Section 6.01 Instrument Construed as Mortgage, Etc ............................... 16


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Section 6.02 Release of Mortgage; Release Upon Partial Payment ............... 16 Section 6.03 Severability .................................................... 16 Section 6.04 Successors and Assigns of Parties ............................... 16 Section 6.05 Satisfaction of Prior Encumbrance ............................... 16 Section 6.06 Subrogation of Trustee .......................................... 17 Section 6.07 Nature of Covenants ............................................. 17 Section 6.08 Notices ......................................................... 17 Section 6.09 Counterparts .................................................... 17 Section 6.10 Governing Law ................................................... 17 Section 6.11 Financing Statement ............................................. 17 Section 6.12 Exculpation Provisions .......................................... 18 Section 6.13 References ...................................................... 19


Exhibit A - Hydrocarbon Property


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MORTGAGE, DEED OF TRUST, ASSIGNMENT
OF PRODUCTION, SECURITY AGREEMENT AND FINANCING STATEMENT


This MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT AND FINANCING STATEMENT (this "Mortgage") is entered into as of the Effective Date (as hereinafter defined) by EEX OPERATING L.P., a Texas limited partnership (the "Mortgagor"), for the benefit of JPMORGAN CHASE BANK, as Administrative Agent (in such capacity, together with its successors in such capacity, the "Mortgagee"), and the Lenders and the other holders of the Indebtedness (as hereinafter defined).


R E C I T A L S


A. On even date herewith, EEX Operating L.P., as the "Borrower" under the Credit Agreement (as hereinafter defined), and EEX Corporation (together with the Borrower, each an "Obligor") are executing a certain Credit Agreement (such agreement, as may from time to time be amended or supplemented, called the "Credit Agreement") pursuant to which, upon the terms and conditions stated therein, the Lenders agree to make loans to the Borrower.


B. Mortgagee has conditioned its obligations under the Credit Agreement upon the execution and delivery by Mortgagor of this Mortgage, and Mortgagor has agreed to enter into this Mortgage.


C. Therefore, in order to comply with the terms and conditions of the Credit 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


GRANT OF LIEN AND INDEBTEDNESS SECURED


Section 1.01 Grant of Liens. To secure payment of the Indebtedness and the performance of the covenants and obligations herein contained, the Mortgagor does by these presents hereby GRANT, BARGAIN, SELL, ASSIGN, MORTGAGE, TRANSFER and CONVEY unto Robert C. Mertensotto of Houston, Texas, as Trustee, whose address for notice hereunder is JPMorgan Chase Bank, 600 Travis, 20th Floor, Houston, Texas 77002 (the "Trustee") and Trustee's successors and substitutes in trust hereunder, in trust for the use and benefit of the Mortgagee, the real and personal property, rights, titles, interests and estates described in the following paragraphs (a) through (h) (collectively called the "Mortgaged Property"):


(a) All rights, titles, interests and estates now owned or hereafter acquired by the Mortgagor in and to the oil and gas leases and/or oil, gas and other mineral leases and other interests and estates and the lands and premises covered or affected thereby which are described on Exhibit A hereto (collectively called the "Hydrocarbon Property") or which Hydrocarbon Property is otherwise referred to herein, and specifically, but without limitation, the undivided interests of the Mortgagor which are more particularly described on attached Exhibit A.


(b) All rights, titles, interests and estates now owned or hereafter acquired by the Mortgagor in and to (i) the properties now or hereafter pooled or unitized with the Hydrocarbon Property; (ii) all presently existing or future unitization, communitization, pooling agreements and declarations of pooled units and the units created thereby (including, without limitation, all units created under orders, regulations, rules or other official acts of any Federal, State or other governmental body or agency having jurisdiction and any units created solely among working interest owners pursuant to operating agreements or otherwise) which may affect all or any portion of the Hydrocarbon Property including, without limitation, those units which may be described or referred to on attached Exhibit A; (iii) all operating agreements, production sales or other contracts, farmout agreements, farm-in agreements, area of mutual interest agreements, gas balancing agreements, equipment leases and other agreements described or referred to in this Mortgage or which relate to (A) any of the Hydrocarbon Property or interests in the Hydrocarbon Property described or referred to herein or on attached Exhibit A or (B) the production, sale, purchase, exchange, processing, handling, storage, transporting or marketing of the Hydrocarbons (as hereinafter defined) from or attributable to such Hydrocarbon Property or interests; (iv) all geological, geophysical, engineering, accounting, title, legal and other technical or business data concerning the Mortgaged Property, the Hydrocarbons or any other item of Property which are in the possession of the Mortgagor and in which the Mortgagor can grant a security interest without violating any restrictions on assignment therein, and all books, files, records, magnetic media, computer records and other forms of recording or obtaining access to such data; and (v) the Hydrocarbon Property described on attached Exhibit A and covered by this Mortgage even though the Mortgagor's interests therein be incorrectly described or a description of a part or all of such Hydrocarbon Property or the Mortgagor's interests therein be omitted; it being intended by the Mortgagor and the Mortgagee herein to cover and affect hereby all interests which the Mortgagor may now own or may hereafter acquire in and to the Hydrocarbon Property notwithstanding that the interests as specified on Exhibit A may be limited to particular lands, specified depths or particular types of property interests.


(c) All rights, titles, interests and estates now owned or hereafter acquired by the Mortgagor in and to all oil, gas, casinghead gas, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined therefrom and all other minerals (collectively called the "Hydrocarbons") which may be produced and saved from or attributable to the Hydrocarbon Property, the lands pooled or unitized therewith and the Mortgagor's interests therein, including all oil in tanks and all rents, issues, profits, proceeds, products, revenues and other income from or attributable to the Hydrocarbon Property, the lands pooled or unitized therewith and the Mortgagor's interests therein which are subjected or required to be subjected to the liens and security interests of this Mortgage.


(d) All tenements, hereditaments, appurtenances and properties in anywise appertaining, belonging, affixed or incidental to the Hydrocarbon Property, rights, titles, interests and estates described or referred to in paragraphs (a) and (b) above, which are now owned or which may hereafter be acquired by the Mortgagor, including, without limitation, any and all property, real or personal, now owned or hereafter acquired and situated upon, used, held for use, or useful in connection with the operating, working or development of any of such Hydrocarbon Property or the lands pooled or unitized therewith (excluding drilling rigs, trucks, automotive equipment or other personal property which may be taken to the premises for the purpose of drilling a well or for other similar temporary uses) and including any and all oil wells, gas wells,


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injection wells or other wells, buildings, structures, off-shore production or drilling platforms and related equipment (both above and below the surface), field separators, liquid extraction plants, plant compressors, pumps, pumping units, pipelines, sales and flow lines, gathering systems, field gathering systems, salt water disposal facilities, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements, servitudes, licenses and other surface and subsurface rights together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing properties.


(e) Any property that may from time to time hereafter, by delivery or by writing of any kind, be subjected to the lien and security interest hereof by the Mortgagor or by anyone on the Mortgagor's behalf; and Trustee is hereby authorized to receive the same at any time as additional security hereunder.


(f) All of the rights, titles and interests of every nature whatsoever now owned or hereafter acquired by the Mortgagor in and to the Hydrocarbon Property rights, titles, interests and estates and every part and parcel thereof, including, without limitation, the Hydrocarbon Property rights, titles, interests and estates as the same may be enlarged by the discharge of any payments out of production or by the removal of any charges or Permitted Encumbrances (as hereinafter defined in Section 3.01) to which any of the Hydrocarbon Property rights, titles, interests or estates are subject, or otherwise; all rights of the Mortgagor to liens and security interests securing payment of proceeds from the sale of production from the Mortgaged Property, including, without limitation, those liens and security interests provided in Tex. Bus. & Com. Code Ann, as amended from time to time (the "Applicable UCC"), (S)9.343; together with any and all renewals and extensions of any of the Hydrocarbon Property rights, titles, interests or estates; all contracts and agreements supplemental to or amendatory of or in substitution for the contracts and agreements described or mentioned above; and any and all additional interests of any kind hereafter acquired by the Mortgagor in and to the Hydrocarbon Property rights, titles, interests or estates.


(g) All of Mortgagor's right, title and interest now owned or hereafter acquired in and to any commodity, interest rate or currency swap, cap, floor, collar, forward agreement, including fixed price forward physical delivery contracts, or other exchange or protection agreements or any option with respect to any such transaction.


(h) All accounts, contract rights, equipment, fixtures, inventory, general intangibles, insurance contracts and insurance proceeds constituting a part of, relating to or arising out of those portions of the Mortgaged Property which are described in paragraphs (a) through (g) above and all proceeds and products of all such portions of the Mortgaged Property and payments in lieu of production (such as "take or pay" payments), whether such proceeds or payments are goods, money, documents, instruments, chattel paper, securities, accounts, general intangibles, fixtures, real property or other assets.


Any fractions or percentages specified on attached Exhibit A in referring to the Mortgagor's interests are solely for purposes of the warranties made by the Mortgagor pursuant to Section 3.01 and Section 3.05 hereof and shall in no manner limit the quantum of interest


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affected by this Section 1.01 with respect to any Hydrocarbon Property or with respect to any unit or well identified on said Exhibit A.


TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee and to his successors and assigns forever to secure the payment of the Indebtedness and to secure the performance of the covenants, agreements, and obligations of the Mortgagor herein contained.


Section 1.02 Grant of Security Interest. To further secure the Indebtedness, the Mortgagor hereby grants to the Mortgagee for its benefit and the benefit of the Lenders and the other holders of the Indebtedness, a security interest in and to the Mortgaged Property (whether now or hereafter acquired by operation of law or otherwise) insofar as the Mortgaged Property consists of equipment, accounts, chattel paper, documents, instruments, goods, supporting obligations, general intangibles, insurance contracts, insurance proceeds, inventory, Hydrocarbons, fixtures, proceeds and any and all other personal property of any kind or character defined in and subject to the provisions of the Applicable UCC, including the proceeds and products from any and all of such personal property. Upon the happening of any Event of Default, the Mortgagee is and shall be entitled to all of the rights, powers and remedies afforded a secured party by the Applicable UCC with reference to the personal property and fixtures in which the Mortgagee has been granted a security interest herein, or the Trustee or the Mortgagee may proceed as to both the real and personal property covered hereby in accordance with the rights and remedies granted under this Mortgage in respect of the real property covered hereby. Such rights, powers and remedies shall be cumulative and in addition to those granted to the Trustee or the Mortgagee under any other provision of this Mortgage or under any other Security Instrument. Written notice mailed to the Mortgagor as provided herein at least ten (10) days prior to the date of public sale of any part of the Mortgaged Property which is personal property subject to the provisions of the Applicable UCC, or prior to the date after which private sale of any such part of the Mortgaged Property will be made, shall constitute reasonable notice.


Section 1.03 Indebtedness Secured. This Mortgage is executed and delivered by the Mortgagor to secure and enforce the following (the "Indebtedness"):


(a) Payment of and performance of any and all indebtedness, obligations and liabilities, including interest (including, without limitation, interest accruing after the maturity of the Loans made by each Lender and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Obligors, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) of the Obligors pursuant to the Credit Agreement or any other Loan Document, whether now existing or hereafter arising and being in the original principal amount of up to two hundred fifty million United States Dollars (US $250,000,000) with final maturity on or before March 31, 2003 (unless otherwise amended pursuant to the Credit Agreement).


(b) Any sums which may be advanced or paid by the Mortgagee or any Lender under the terms hereof or of the Credit Agreement or any Loan Document on account of the failure of the Mortgagor or the Obligors, as applicable, to comply with the covenants of the Mortgagor or the Obligors, as applicable, contained herein or in the Credit Agreement or any other Loan Document; and all other indebtedness of the Mortgagor arising pursuant to the provisions of this Mortgage.


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(c) Payment of and performance of any and all present or future obligations of the Obligors and their Subsidiaries according to the terms of any present or future interest rate or currency swap, rate cap, rate floor, rate collar, forward rate agreement or other exchange or rate protection agreements or any option with respect to any such transaction now existing or hereafter entered into between any Obligor or any Subsidiary of an Obligor and any Lender (or any Affiliate of such Lender), but only to the extent that such agreements are permitted by the terms of the Credit Agreement.


(d) Payment of and performance of any and all present or future obligations of the Obligors and their Subsidiaries according to the terms of any present or future swap agreements, cap, floor, collar, forward agreement or other exchange or protection agreements relating to crude oil, natural gas or other hydrocarbons or commodities or any option with respect to any such transaction now existing or hereafter entered into between any Obligor or any Subsidiary of an Obligor and any Lender (or any Affiliate of such Lender), but only to the extent that such agreements are permitted by the terms of the Credit Agreement. (e) Performance of all Letter of Credit Agreements issued from time to time under or pursuant to the Credit Agreement and all reimbursement obligations for drawn or undrawn portions under any Letter of Credit now outstanding or hereafter issued under or pursuant to the Credit Agreement.


Section 1.04 Pro Rata Benefit. This Mortgage is executed and granted for the pro rata benefit and security of the Lenders, any Person secured hereby and any and all future holders of an interest in the Indebtedness and the interest thereon for so long as same remains unpaid and thereafter for so long as any Lender or any Person secured hereby (or any Lender Affiliate) has any obligations under the Credit Agreement to lend money or issue Letters of Credit in favor of the Mortgagor or has any obligations under any Hedging Agreements (including those described in Section 1.03(c) and Section 1.03(d)) or until the Liens hereby created are released by the Mortgagee; it being understood and agreed that possession of any Note (or any replacements of any said Note) at any time by the Borrower shall not in any manner extinguish the Indebtedness, such Notes or this Mortgage securing payment thereof, and the Borrower shall have the right to issue and reissue any of the Notes from time to time as its interest or as convenience may require, without in any manner extinguishing or affecting the Indebtedness, the obligations under any of the Notes, or the security of this Mortgage.


Section 1.05 Defined Terms. Any capitalized term used in this Mortgage and not defined in this Mortgage shall have the meaning assigned to such term in the Credit Agreement.


ARTICLE II


ASSIGNMENT OF PRODUCTION


Section 2.01 Assignment. To further secure the Indebtedness, the Mortgagor has absolutely and unconditionally granted, assigned, transferred and conveyed, and does hereby absolutely and unconditionally grant, assign, transfer and convey unto the Mortgagee, for its benefit and the benefit of the Lenders, any Person secured hereby and other holders of the Indebtedness, all of the Hydrocarbons and all products obtained or processed therefrom, and the


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revenues and proceeds now and hereafter attributable to the Hydrocarbons and said products and all paymen ...