Exhibit 10.2

EXECUTION COPY

CUSHION GAS LITIGATION AGREEMENT

BY AND AMONG

AEP ENERGY SERVICES GAS HOLDING COMPANY II, L.L.C.
AND
HPL STORAGE, LP
As Sellers,

LA GRANGE ACQUISITION, L.P.,
As Buyer,

AND

AEP ASSET HOLDINGS LP,
AEP LEASECO LP,
HOUSTON PIPE LINE COMPANY LP, AND
HPL RESOURCES COMPANY LP,
As Companies

DATED AS OF JANUARY 26, 2005

 

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

 

CUSHION GAS LITIGATION AGREEMENT

     This Cushion Gas Litigation Agreement (the “Agreement”) is entered into,
effective as of January 26, 2005, by and among HPL Storage LP, a Delaware
limited partnership (“Storage LP”), AEP Energy Services Gas Holding Company II,
L.L.C., a Delaware limited liability company (“AEPESGH” and, together with
Storage LP, the “Sellers”), and La Grange Acquisition, L.P., a Texas limited
partnership (“Buyer”), AEP Asset Holdings LP, a Delaware limited partnership
(“Storage Holdings”), AEP Leaseco LP, a Delaware limited partnership (“Storage
Leaseco”), Houston Pipe Line Company LP, a Delaware limited partnership (“HPL
Company”), and HPL Resources Company LP, a Delaware limited partnership (“HPLR”
and together with Storage Holdings, Storage Leaseco and HPL Company, the
“Companies”), as follows:

RECITALS

A.   Sellers and Buyer have entered into that certain Purchase and Sale
Agreement dated as of the date hereof (the “Purchase Agreement”) calling for the
purchase and sale, on the terms therein set out of 98% of the outstanding
partnership interests in the Companies as well as certain other partnerships.
The purchase and sale contemplated by the Purchase Agreement was consummated
simultaneously with the execution and delivery of this Agreement.   B.   There
are currently various disputes concerning the rights of the Companies in and to
the Cushion Gas (as defined herein), which are the subject of the Cushion Gas
Litigation (as defined herein). The Cushion Gas is an essential component for
the operation of the Bammel Storage Reservoir. One of the purposes of this
Agreement is to provide for the Companies’ continued operation of the Bammel
Storage Reservoir utilizing the Cushion Gas without interference by Enron Corp.,
Bank of America or any of their Affiliates.   C.   As an inducement for the
Buyer to enter into the Purchase Agreement, the Sellers are willing to indemnify
the Buyer and its Affiliates, (including the Companies) on the terms and
conditions set forth herein, against Damages (as defined herein) arising from
the Cushion Gas Litigation.   D.   The Companies have vigorously defended their
interests in the Cushion Gas Litigation and deny that any claims made by Enron
Corp. or Bank of America or their Affiliates in that litigation have any merit.
The making or performance of this Agreement is not an admission of liability or
of the merit of any such claims.   E.   The parties have simultaneously executed
that certain Common Interest and Joint Defense Agreement dated as of January 26,
2005 providing, among other things, for the preservation of the attorney-client
and work product privileges with respect to certain information, documents or
communications relating to the prosecution and/or defense of the Cushion Gas
Litigation.

 

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

 

AGREEMENTS

NOW, THEREFORE, the parties hereby agree as follows:

1.   RULES OF CONSTRUCTION; DEFINITIONS   1.1.   Definitions.       As used in
this Agreement, terms defined in Exhibit 1.1 have the meanings set forth
therein, and capitalized terms used herein or in Exhibit 1.1 not otherwise
defined herein or in Exhibit 1.1 all have the meanings set forth in Purchase
Agreement or, to the extent they are accounting terms, they will have the
meanings set forth in GAAP.   1.2.   Rules of Construction.       Unless the
context of this Agreement requires otherwise, the plural includes the singular,
the singular includes the plural, and “including” has the inclusive meaning of
“including without limitation.” The words “hereof,” “herein,” “hereby,”
“hereunder” and other similar terms of this Agreement refer to this Agreement as
a whole and not exclusively to any particular provision of this Agreement. All
pronouns and any variations thereof will be deemed to refer to masculine,
feminine or neuter, singular or plural, as the identity of the Person or Persons
may require. Unless otherwise expressly provided, any agreement, instrument or
Applicable Law defined or referred to herein means such agreement or instrument
or Applicable Law as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of Applicable Law) by succession of comparable successor law and
includes (in the case of agreements or instruments) references to all
attachments thereto and instruments incorporated therein.   2.   CONDUCT OF THE
CUSHION GAS LITIGATION   2.1.   Control of the Cushion Gas Litigation.

  2.1.1.   The prosecution, defense, and settlement of the Cushion Gas
Litigation shall be controlled by the parties in accordance with the provisions
of this Article 2, which shall control over any conflicting provisions of the
Purchase Agreement.     2.1.2.   Buyer and the Companies will cooperate, and
will cause their Affiliates to cooperate, with Seller in the conduct of Cushion
Gas Litigation in accordance with the terms of this Agreement. Sellers or their
designated Affiliates will exclusively control, conduct, manage and otherwise
direct prosecution and defense of any and all Cushion Gas Litigation. With
respect to Cushion Gas Litigation to which Buyer or its Affiliates (including
the Companies) are or become parties, Sellers or their Affiliates will appoint
counsel for Buyer or its Affiliates, as the case may be, after reasonable
consultation with the Buyer. Buyer acknowledges that Sellers have already
appointed counsel to represent the Companies with regard to the pending Cushion
Gas Litigation matters, which counsel are acceptable to Buyer and the Companies
and will continue to

2

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

 

      act for the Companies in connection therewith. Sellers will, after
reasonable consultation with Buyer or its Affiliates, as the case may be,
appoint separate counsel for Seller and any of its Affiliates (including the
Companies) if required due to conflicts or other legal impediments or
requirements, that cannot be waived by Buyer or its Affiliates in the exercise
of good faith.         Buyer agrees that, to its knowledge, there are currently
no conflicts between the Sellers, Buyer or the Companies that would prevent
Sellers current outside counsel in the Cushion Gas Litigation from continuing to
represent Sellers and the Companies in Cushion Gas Litigation or representing
Buyer in such litigation. Buyer further agrees to execute appropriate conflicts
waivers for the purpose of permitting Sellers’ current outside counsel in the
Cushion Gas Litigation to represent Sellers, the Companies and Buyer in the
Cushion Gas Litigation.     2.1.3.   Sellers or their designated Affiliates
shall be entitled to institute good faith proceedings, in the name of any
Company, in any state or federal court or before any state or federal
administrative agency, in connection with the prosecution and defense of any and
all Cushion Gas Litigation.     2.1.4.   Buyer and the Companies shall forward
to Sellers or their designee, by electronic mail or facsimile if feasible or
otherwise in accordance with Section 8.1 of this Agreement, a copy of any
pleading, demand, settlement offer, discovery request or response, subpoena,
order or correspondence related to Cushion Gas Litigation (“Litigation
Documents”) that they serve, file, or receive within two business days after
serving, filing, or receiving such Litigation Documents (other than any
Litigation Documents that are also addressed to Sellers or their designee by the
party serving or filing such documents). Any counsel appointed by Sellers to act
for any of Buyer, the Companies or any of their Affiliates are Seller’s
designees as provided in this Section.     2.1.5.   None of Buyer, any Company,
or any of their respective Affiliates shall issue any press release or make any
public announcement or disclosure regarding the conduct of any Cushion Gas
Litigation without the consent of Sellers, other than any public disclosure that
Buyer, any Company, or any of their respective Affiliates are required to make
under Applicable Law or securities exchange rules, which disclosure they may
make after affording Sellers a reasonable opportunity to review the applicable
disclosure, unless such advance disclosure to Sellers is not permitted by law or
securities exchange rules.

2.2.   Access to Information and Personnel.

  2.2.1.   Sellers, their Affiliates, and their representatives and advisors
will have access to (and the right to make and retain copies of) the documents,
books and records and other information of the Companies (to the extent
currently possessed by the Companies, and Companies shall authorize Sellers to
seek or obtain, at

3

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

 

      Sellers’ expense, such documents, books, records and other information of
Companies that are not currently possessed by Companies) and access (during
normal business hours unless exigencies require otherwise) to the employees and
other personnel of the Companies, in each case for purposes of consultation or
otherwise to the extent appropriate in connection with the conduct of Cushion
Gas Litigation. Buyer agrees to continue the Companies’ current practice of
retaining all records potentially relevant to Cushion Gas Litigation and to
preserve and cause each of the Companies to preserve all such records (including
electronic information) for the term of this Agreement or for any longer period
as may be required by law, but in any event for at least 6 years. At no cost or
expense to Sellers other than actual out of pocket third party expenditures
(which shall not include attorney’s fees) Buyer will provide, and will cause the
Companies to provide, Sellers and their representatives and advisors with all
accounting services, assistance, and access to accounting, operations, and all
other books and records of the Companies, and appropriate personnel
knowledgeable or involved in connection therewith, in each case to the extent
appropriate to facilitate and assist Sellers in the exercise of their rights and
authority and discharge of their responsibilities under this Article 2. Such
cooperation by Buyer and the Companies will include making employees,
professional consultants, officers and agents available for consultation,
interview, deposition, assistance with other discovery, or testimony, making a
corporate representative available for deposition or trial, and executing
declarations and statements, settlement agreements, and other instruments as
reasonably requested by Sellers that may be executed in good faith.

  2.2.2.   Former Employees         Buyer shall provide Sellers with notice of
any planned termination or resignation of any employee of any of the Companies
as soon as practicable and if requested by Sellers propose a Severance Agreement
that would include provisions providing for Sellers’ continued access to the
employee to the extent set forth in Section 2.2.1. Sellers shall be responsible
for any additional costs to Buyer or the Companies from arrangements that
provide for Sellers’ continued access to former employees, if agreement thereto
is made at the request of Sellers but not otherwise.     2.2.3.   Consultants or
Other Outside Contractors         Buyer and the Companies consent to Sellers
having access to all consultants, engineers or other outside contractors
utilized by the Companies to the extent appropriate to facilitate and assist
Sellers’ conduct of the Cushion Gas Litigation. Sellers shall be responsible for
any costs incurred by Buyer or the Companies by reason of providing such access.
If requested by Sellers, Buyer or Companies will make formal requests to the
consultants requesting that they assist and cooperate with Sellers.

4

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

 

  2.2.4.   Notice of Default.         Sellers must provide Buyer and the
Companies written notice of any breach of any of their respective obligations
under this Section 2 within 30 days following the time that any Seller acquires
knowledge of such failure. The failure of Sellers to provide such notice after
acquiring notice of a breach will be a waiver of such breach, but not a waiver
of any further or additional breach, whether of a similar nature or otherwise,
or waiver of any continuation of such breach following the date of such notice
or any future occurrence of such breach. For purposes of this Agreement, a
Seller shall be deemed to have knowledge of a breach if any officer of the
Seller has actual knowledge of such breach.

3.   MAINTENANCE OF COMMERCIAL ARRANGEMENTS       To minimize the risks that the
parties hereto will incur Damages as a result of the Cushion Gas Litigation, the
parties agree to the following provisions for the maintenance of the commercial
arrangements that are the subject of, or provide context for, the Cushion Gas
Litigation:   3.1.   Maintenance of Existence and Ownership       During the
term of this Agreement, none of Buyer nor any of the Companies will terminate,
or take any action that causes the termination of, the existing prime
lease/sublease structure and Buyer shall continue to own, directly or through
its wholly owned subsidiaries, control of each of the Companies, and a majority
of the ownership interest in each of the Companies; provided that Buyer may
sell, transfer, or otherwise dispose of its direct or indirect interest in the
Companies to another Person that assumes in a writing delivered to the Sellers
the obligations of Buyer under this Agreement.   3.2.   Compliance with Certain
Bammel Documents       During the term of this Agreement, but only for so long
as any of the agreements referred to below remain in effect, each of the
Companies will, and Buyer will cause each of the Companies to:

  3.2.1.   perform according to their terms, on or before the date for
performance specified therein, the obligations of the Companies under the Right
To Use Agreement, the Cushion Gas Consent (including the obligations thereunder
to maintain insurance), the Bammel Settlement Agreement, and the Bammel
Settlement Approval Order and not take any action that would constitute an HPL
Default as defined in the Right to Use Agreement;     3.2.2.   record all
injections of gas into and withdrawals of gas from the Bammel Facilities and
maintain such records, all in accordance with good industry practice and
consistent with past practice;

5

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

 

  3.2.3.   not make any voluntary assignment or disposition of their respective
interests in the Bammel Prime Lease, the Bammel Sublease, the Leased Facilities
(as defined in the Bammel Sublease), the Right To Use Agreement, or the Cushion
Gas Consent in any manner that would eliminate the prime lease/sublease
structure or cause the Right To Use Agreement to terminate;     3.2.4.   not
enter into any agreement for the operation, control, or management of any of the
Leased Facilities by any Person other than a Company, the Buyer or its
Affiliates (or any permitted successor or assign of Buyer as provided in this
Agreement);     3.2.5.   not exercise any cure rights under the Cushion Gas
Consent or Right To Use Agreement with respect to any defaults thereunder that
may allegedly have occurred prior to the Closing, except as and to the extent
agreed to and approved in advance by the Sellers, in their sole and absolute
discretion;     3.2.6.   unless required by law, not make any statement
admitting liability with respect to any fact, legal claim or matter known by
them to be in issue in the Cushion Gas Litigation;     3.2.7.   not permit the
volume of natural gas contained in the Bammel Storage Reservoir (as defined in
the Bammel Settlement Agreement) to be less than 55 Bcf at any time (except that
a reduction in volume of natural gas below 55 Bcf that results from a Force
Majeure Event shall not violate this subparagraph); and     3.2.8.   send to
Sellers a contemporaneous, complete copy of each notice given by any Company to
Enron, BofA, or The Bank of New York (“BONY”) pursuant to the terms of or
relating to the Right to Use Agreement, the Cushion Gas Consent, the Bammel
Settlement Agreement, or the Bammel Settlement Approval Order and send to
Sellers as soon as practicable following receipt (but not later than two
business days after receipt) of a complete copy of any notice received by any
Company from any such Person pursuant to the terms of or relating to any such
Bammel Document.

4.   SELLERS’ INDEMNIFICATION FOR CUSHION GAS LITIGATION DAMAGES   4.1.  
Indemnification by Sellers.       Sellers shall jointly and severally defend,
indemnify and hold Buyer, the Companies, and each of their respective Affiliates
and respective successors and permitted assigns, and each of their respective
shareholders, members, partners (general and limited), officers, directors,
managers, employees, agents, and representatives, and each of their heirs,
executors, successors and assigns (the “Buyer Indemnified Persons”) harmless
from, against and in respect of any and all Damages that arise out of or are
incurred as a result of or in connection with the Cushion Gas Litigation, which
Damages will include the costs of complying with or Damages arising from —

6

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

 

  (i)   any court order or decree in any Cushion Gas Litigation (x) that grants
a right of replevin, sequestration, foreclosure, withdrawal or sale of natural
gas contained in the Bammel Storage Reservoir, or any restriction or constraints
on any sale of any natural gas in the Bammel Storage Reservoir (other than
restrictions on the sale or withdrawal of any Cushion Gas pending the resolution
of the Cushion Gas Litigation), or (y) that otherwise impairs or constrains
HPL’s (or its successors’) or withdrawal of the Cushion Gas as provided in the
Right To Use Agreement and the Cushion Gas Consent prior to the expiration of
the 30-year base term of the Right To Use Agreement;     (ii)   any monetary
liability under and the actual costs of other compliance with any Cushion Gas
Litigation Results, including the posting of any bond or other security required
by any court order or for any appeal and including any sanctions imposed by any
court or any administrative agency; and     (iii)   the loss of use of the
Cushion Gas during the remainder of the initial 30-year term of the Right to Use
Agreement as the result of any Cushion Gas Litigation;

    provided that, in the case of clauses (i) and (ii), the costs of complying
with any court order or Cushion Gas Litigation Result that does not impose an
obligation on the Companies that is greater than the requirements provided for
in Section 3.2 shall not constitute Damages. The aggregate amount of Damages for
which Sellers shall be obligated to indemnify the Buyer Indemnified Persons
under this Agreement shall not exceed the Purchase Price.       The
indemnification obligations of the Sellers under this Section 4.1 shall be
guaranteed by Sellers’ Guarantor pursuant to the Sellers’ Limited Guaranty.  
4.2.   Exceptions for Damages Resulting from Buyer Actions.       Sellers’
indemnification obligations under Section 4.1 will not include (and Sellers will
have no liability to any Buyer Indemnified Person under this Agreement for) any
of the Damages described in Section 4.1 hereof to the extent that they are
caused by or result from (i) the failure of Buyer, any of its Affiliates or any
Company to perform, any of their respective obligations under this Agreement;
(ii) the occurrence of an HPL Default (as defined in the Right to Use Agreement)
after the date hereof; or (iii) the filing of a Bankruptcy case in which the
Buyer or any of the Companies is a Debtor. The foregoing exception shall apply
regardless of whether any such failure is subsequently cured, but only to the
extent that the violation during any uncured period of breach or the pendency of
any such other action caused or increased the amount of any Damages.

7

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

 

5.   AGREEMENTS RELATING TO POSSIBLE CUSHION GAS LITIGATION RESULTS   5.1   In
the event that pursuant to a Cushion Gas Litigation Result or otherwise, Sellers
or any of their Affiliates obtain title to the Cushion Gas during the remainder
of the original 30-year term of the Right to Use Agreement, Sellers agree to
afford the Companies the Quiet Enjoyment of the Cushion Gas on the terms set
forth in the Right to Use Agreement for the remainder of such 30-year term,
subject to continued compliance by the Companies with the terms of the Right to
Use Agreement for the remainder of the initial 30-year term thereof.   5.2  
Sellers shall cause any liens or encumbrances on the Cushion Gas securing
obligations of AEP or any of its Affiliates to be removed and shall take all
actions as may be legally available to the extent necessary or appropriate to
assure that HPL has the right to use the Cushion Gas on the terms set forth in
the Right To Use Agreement for the remainder of such 30-year term that is
superior to the rights of all other Persons to use the Cushion Gas during such
period. Upon satisfaction by Seller’s of their obligations under the preceding
sentence, the Sellers’ Limited Guaranty for obligations under this agreement
shall terminate without any further action by any Person.   5.3   Any cash or
other property payable to any Company pursuant to a Cushion Gas Litigation
Result, as payment of damages or otherwise, shall be the property of Sellers. If
any Company receives any such cash or other property, such Company shall be
deemed to hold such cash or other property in trust for the Sellers and shall
promptly upon receipt assign and deliver all rights thereto to the Sellers or
their designee.   6.   SELLERS’ COOPERATION   6.1.   Provision of Notices.      
Each Seller will send to Buyer a contemporaneous, complete copy of each notice
given by such Seller or that such Seller causes any Company to give to Enron,
BofA, or BONY relating to any of the Cushion Gas Litigation, or pursuant to the
terms of the Right to Use Agreement, the Cushion Gas Consent, the Bammel
Settlement Agreement, or the Bammel Settlement Approval Order, and send to
Buyer, as soon as practicable following receipt (but not later than 2 business
days after receipt) thereof, a complete copy of any notice received by such
Seller from any such Person pursuant to the terms of or relating to any such
Bammel Document. The above documents include any offers of settlement or similar
notices or communications.   6.2.   Independent Counsel.       Buyer may retain
independent counsel, at its expense, to monitor all matters related to the
Cushion Gas Litigation, and Seller will cooperate with and instruct its counsel
to cooperate with any counsel so appointed. Such cooperation shall include
providing copies of all Litigation Documents to be filed sufficiently in advance
of filing to the extent feasible allow review, and copies of any Litigation
Documents upon receipt,

8

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

 

    copies of correspondence and legal memoranda, routine updates and strategy
planning, and participation in any other activity reasonably requested by such
counsel or Buyer.   6.3.   Sellers’ Disclosure.       None of Sellers nor any of
their respective Affiliates shall issue any press release or make any public
announcement or disclosure regarding the conduct of any Cushion Gas Litigation
without the consent of Buyer, other than any public disclosure that a Seller or
any of its respective Affiliates are required to make under applicable law or
securities exchange rules, which disclosure they may make after affording Buyer
a reasonable opportunity to review the applicable disclosure, unless such
advance disclosure to Buyer is not permitted by law.   6.4.   Confidentiality.  
    All non-public information regarding the Companies or Buyer that is provided
to Sellers under the terms of this Agreement are subject to Sellers’
confidentiality obligations set forth in the Purchase Agreement. Seller may use
any of the information required in the pursuit of the Cushion Gas Litigation,
provided that it uses its best efforts to protect the confidentiality of any
such non-public information.   6.5.   Settlement Agreements.       Sellers will
not enter into any settlement agreement, consent order, injunction, decree or
similar order or agreement resolving the Cushion Gas Litigation or any part
thereof that does not include a full release of Buyer and the Companies (and
their Affiliates) for any liability arising out of all claims and liabilities
asserted or that could be asserted in the Cushion Gas Litigation, or that
imposes any obligation on Buyer or the Companies or that restricts any future
activity or conduct of Buyer or the Companies. However, this section does not
prevent any such agreement or order that imposes obligations or restrictions
that are equal to or less restrictive or burdensome that those obligations
described in Article 3.   7.   TERM; REMEDIES   7.1.   Term.       The term of
this Agreement shall commence upon the execution and delivery hereof and unless
terminated earlier as set forth herein, shall continue until the ownership of
and disputed rights to the natural gas that is the subject of the Right to Use
Agreement are resolved, and all Cushion Gas Litigation is resolved, by final
judgment, order, decree, decision, or award, in each case that is no longer
subject to any appeal, motion for rehearing, or other judicial review, or by
final and binding settlement agreement. However, the obligations of the Sellers
under Section 5 and the provisions of Article 8 shall survive a termination of
this Agreement pursuant to the preceding sentence.

9

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

 

7.2.   Termination.       This Agreement may be terminated —

  (i)   at any time by mutual agreement of the parties hereto; or     (ii)   by
Seller, if the Right to Use Agreement is terminated by reason of an HPL Default
that occurs after the date hereof and such termination is either not contested
or is finally determined by a final order of a court of competent jurisdiction.

7.3.   Effect of Breach.       Except as expressly provided in Section 4.2, the
obligations of Sellers to indemnify the Buyer Indemnified Parties and to perform
its other obligations under this Agreement, and the obligations of Buyer, the
Companies and their Affiliates to cooperate with Sellers and perform their other
obligations under this Agreement, are independent obligations supported by and
in consideration of the execution and performance of the Purchase and Sale
Agreement, and are not conditioned upon the other parties’ performance
hereunder. Sellers, on the one hand, and Buyer and the Companies, on the other
hand, shall continue to perform their respective obligations hereunder, during
the term of this Agreement.   7.4.   Remedies.       In addition to any other
rights or remedies the parties may have at law, any party is entitled to seek a
court order requiring another party to perform this Agreement.   8.   GENERAL
PROVISIONS   8.1.   Notice Provisions.       Any notice that is required or
permitted under this Agreement may be given by personal delivery to the party
entitled thereto, by facsimile transmission, by any courier service which
guarantees overnight, receipted delivery, or by U.S. certified or registered
mail, return receipt requested, addressed to the party entitled thereto at the
notice address for such party set forth below, which address for any party may
be changed by written notice from that party to the other parties. Any notice
properly given to the proper address will be deemed to have been given when
dispatched.

         
 
  If to any Seller:   American Electric Power Company, Inc.

      Attention: General Counsel

      1 Riverside Plaza

      Columbus, OH 43215

      Facsimile No.: (614) 716-1603

10

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

 

         

  with a copy to:   American Electric Power Company, Inc.

      Attention: Chief Financial Officer

      1 Riverside Plaza

      Columbus, Ohio 43215

      Facsimile No.: (614) 716-1603
 
       

  with a copy to:   Clark, Thomas & Winters

      Attention: C. Joseph Cain

      300 West Sixth Street

      Austin, Texas 78701

      Facsimile No.: (512) 474-1129
 
       

  If to Buyer or any Company:   La Grange Acquisition, l.P.

      800 East Sonterra Blvd., Suite 400

      San Antonio, TX 78258

      Attention: Jim LaBauve

      Facsimile No.: (210) 403-7500
 
       

  with copy to:   Energy Transfer Partners, L.P.

      Attention: Robert A. Burk

      8801 S. Yale, Suite 310

      Tulsa, Oklahoma 74137

      Facsimile No.: (918) 493-7290
 
       

  with a copy (which shall not    

  constitute notice) to:   Hunton & Williams LLP

      Attention: Joe A. Davis

      Energy Plaza, 30th Floor

      1601 Bryan Street

      Dallas, Texas 75201

      Facsimile No.: (214) 880-0011

8.2.   Amendment.       No amendment to this Agreement will be valid or binding
unless and until reduced to writing and executed by each party’s authorized
representative.   8.3.   Entire Agreement.       This Agreement sets out the
entire understanding of the parties with respect to the matters it purports to
cover and supersedes all prior communications, agreements and understandings,
whether written or oral, concerning such matters. No party will be

11

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

 

    liable or bound to any party in any manner by any warranties,
representations, or covenants other than those set forth in this Agreement and
the instruments to be executed and delivered at Closing.   8.4.   Benefit of
Agreement.       The terms and conditions of this Agreement will inure to the
benefit of and be binding upon the respective successors and permitted assigns
of the parties. Nothing in this Agreement, express or implied, is intended to
confer upon any third party any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, except as expressly provided in this
Agreement. Sellers may assign their rights under this agreement to any Affiliate
of the Sellers, provided that any such assignment shall only relieve the
assignor of its obligations hereunder to the extent that the assignee performs
such obligations on behalf of the assignor.   8.5.   Forbearance and Waiver.  
    Except as otherwise provided in Section 2.2.4, any party’s forbearance in
the exercise or enforcement of any right or remedy under this Agreement will not
constitute a waiver thereof and a waiver under one circumstance will not
constitute a waiver under any other circumstance.   8.6.   Partial Invalidity.  
    In case any provision of this Agreement shall be determined to be invalid,
illegal or unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected and unimpaired thereby, and shall remain in full
force and effect, to the fullest extent permitted by applicable law.   8.7.  
Attorney’s Fees.       In the event of any suit or action (whether based on
contract, tort, or any other theory of liability) to enforce any provision of
this Agreement, to recover damages for a breach hereof, or to secure or preserve
the rights of any party against any other party to any property which is the
subject of this Agreement, the prevailing party will be entitled to recover
reasonable attorney fees (other than fees computed on a contingency fee basis),
court costs and expenses of litigation expended in the prosecution or defense
thereof.   8.8.   Governing Law; Jurisdiction and Venue.       The
interpretation and construction of this Agreement and the rights of the parties
hereunder will be interpreted, construed, and governed by the laws of the state
of New York, without regard to its conflicts of law principles. Each party
hereto hereby irrevocably submits, for itself and its property, to the
jurisdiction of the courts of such jurisdiction in any action, suit, or
proceeding brought against it related to or in connection with this Agreement or
the transactions

12

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

 

    contemplated hereby, and to the extent permitted by applicable law (and
assuming effective service of process), each party hereto hereby irrevocably
waives and agrees not to assert any claim that it is not subject to the
jurisdiction of such court, or that any such suit, action, or proceeding is
improper. Each party hereto agrees that service of process may be made upon it
by certified or registered mail to the address for administrative notice set
forth herein or any other method authorized by the laws of New York.   8.9.  
Waiver of Right to Jury Trial.       To the fullest extent permitted by law, and
as separately bargained-for-consideration, each party hereby waives any right to
trial by jury in any action, suit, proceeding, or counterclaim of any kind
arising out of or relating to this Agreement or the Contemplated Transactions.  
8.10.   Authority.       Each of the parties represents and warrants that
(a) the Person executing this Agreement on its behalf is duly authorized to do
so; (b) any and all corporate or other formalities required to make this
Agreement, when executed and delivered a binding obligation of such party has
been or will be promptly complied with; and (c) the entry into and performance
of this Agreement is not prohibited or impaired by any law, rule, regulation,
order, decree or contract by which it knows itself to be bound or obligated.  
8.11.   Construction.       This Agreement was prepared jointly by the parties,
and no rule that it be construed against the drafter will have any application
in its construction or interpretation.   8.12.   Multiple Counterparts.      
This Agreement may be executed by the parties in multiple original counterparts,
and each such counterpart will constitute an original hereof.

[The remainder of this page is intentionally left blank.
The next page of this document is S-1]

13

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

 

Executed to be effective as provided above:

              AEP Energy Services Gas Holding         Company II, L.L.C.   HPL
Storage LP  
By
  HPL Storage LP, Managing Member   By:   HPL Storage, Inc.,

          its general partner
 
           
By
  HPL Storage, Inc.        

  its general partner        

             
By

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

  By:

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

Name:

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

  Name:

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

Title:

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

  Title:

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

La Grange Acquisition, L.P.

By:  LA GP, LLC,
its general partner

             
By

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

     
Name:

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

     
Title:

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

     

              Houston Pipe Line Company LP   AEP Asset Holdings LP
 
           
By:
  HPL GP, LLC   By:   HPL Storage GP, LLC

  its general partner       its general partner

             
By

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

  By:

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

Name:

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

  Name:

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

Title:

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

  Title:

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

S-1

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

 

              AEP Leaseco LP   HPL Resources Company LP
 
           
By:
  HPL Storage GP, LLC   By:   HPL GP, LLC

  its general partner       its general partner

             
By

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

  By:

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

Name:

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

  Name:

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

Title:

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

  Title:

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

S-2

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

 

EXHIBIT 1.1

DEFINITIONS

Terms defined in this Exhibit 1.1 will have the meanings set forth in this
Exhibit.

          TERM       DEFINITION
1.
  Agreement   This Cushion Gas Litigation Agreement, together with all exhibits,
schedules, and appendices attached hereto, as any of the same may be amended
from time to time in accordance with the provisions hereof.
 
       
2.
  Bammel Documents   The Bammel Prime Lease, the Bammel Sublease, the Right To
Use Agreement, and the Cushion Gas Consent
 
       
3.
  Bammel Prime Lease   Lease Agreement effective November 10, 1999, as amended
effective May 30, 2001, by and between ENA Holdings L.P., as lessor, and BAM
Lease Company, as lessee, the lessor’s interest therein having been assigned to
Storage Holdings as of November 5, 2004 and the lessee’s interest therein having
been assigned to Storage Leaseco as of November 5, 2004.
 
       
4.
  Bammel Settlement
Agreement   Settlement Agreement, dated as of April 28, 2004, by and among AEP
Energy Services Gas Holding Company, a Delaware corporation, HPL Company, HPL
Resources Company LP, a Delaware limited partnership, Enron, Enron North America
Corp., a Delaware corporation, ENA Asset Holdings L.P., a Delaware limited
partnership, and BAM Lease Company, a Delaware corporation, as heretofore
amended.
 
       
5.
  Bammel Settlement
Approval Order   That certain order styled “Order Pursuant to Sections 105(A),
363, 365 And 1146(C) of the Bankruptcy Code and Rules 6004, 6006 and 9019 of the
Federal Rules of Bankruptcy Procedure Authorizing and Approving (A) a Settlement
Agreement and Mutual Release Relating to the Bammel Structure; (B) the Transfer
of Certain Assets Free and Clear of Interests, Liens, Claims and Encumbrances;
and (C) the Assumption, Assignment and/or Rejection of Certain Executory
Contracts and Unexpired Leases” entered by the United States Bankruptcy Court
for the Southern District of New York in the jointly administered cases (Case
No. 01-16034 (AJG)) In re Enron Corp. et al. on September 30, 2004.

Ex. 1.1 - 1

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

 

         
6.
  Bammel Sublease   Sublease Agreement effective May 31, 2001 by and between BAM
Lease Company, as sublessor, and HPL Company, as sublessee, the lessor’s
interest therein having been assigned to Storage Leaseco as of November 5, 2004.
 
       
7.
  Companies   As defined in the first paragraph of the Agreement.
 
       
8.
  Cushion Gas   As defined in the Right to Use Agreement, excluding, however,
10.5 Bcf of natural gas owned by [___] Leaseco, LP.
 
       
9.
  Cushion Gas Consent   Consent and Acknowledgement dated as of May 30,2001
executed by Bank of America, N.A., HPL Company, HPL Resources, Enron Corp.,
Enron North America Corp., and ENA Asset Holdings L.P.
 
       
10.
  Cushion Gas Litigation   Any of the following:

  (i)   the pending litigation styled as Bank Of America, N.A. v. Houston Pipe
Line Company L.P., in the District Court of Harris County, Texas, 280th Judicial
District, Cause No. 2002-36488, AEP Energy Services Gas Holding Company, et al.
v. Bank Of America, N.A., et al., in the United States District Court For The
Southern District Of Texas, Houston Division, Civil Action No. H-03-4973, and
Houston Pipe Line Company L.P., et al. v. Enron Corp., et al., in the United
States Bankruptcy Court, Southern District of New York, Adv. No. 03-93372-AJG
and the Notice of Rejection of the Right To Use Agreement dated February 23,
2004 and the Objection of Houston Pipe Line Company LP, HPL Resources Company LP
and AEP Energy Services Gas Holding Company to Debtors’ Notices of Rejection of
Purchase Option Agreement with Houston Pipeline Company and HPL Asset Holdings,
L.P., and of Amended and Restated Pressurization and Storage Gas Borrowing
Agreement with HPL Asset Holdings, L.P. and Bank of New York (“BONY”), as
Trustee of the Bammel Gas Trust (“BGT”), dated March 8, 2004, filed in In re:
Enron Corp., Case No. 01-16045 (AJG), including any and all hearings, trials,
appeals or enforcement proceedings in these matters;           (ii)   any and
all related or subsequent litigation among Bank Of America, individually, as
Administrative Agent, or as representative of the Trustee of the

Ex. 1.1 - 2

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

 

      Bammel Gas Trust (“BofA”) and the Sellers, Buyer, either of the Companies,
HPL Resources Company L.P. or AEPGH Energy Services Gas Holding Company
(including any and all of their Affiliates, parents, subsidiaries, predecessors,
successors, assigns, agents, servants, employees, attorneys or legal
representatives), in which BofA seeks to replevy, sequester, foreclose upon,
withdraw, or sell any “Storage Gas” (as that term is defined in a certain
Amended and Restated Participation Agreement dated as of May 31, 2001) that BofA
alleges is contained in the Bammel Storage Reservoir or seeks damages with
respect to such gas, or in which BofA seeks any relief that if granted would
impair HPL’s (or its successor’s) right to Quiet Enjoyment of the Cushion Gas,
as such capitalized terms are defined in the Right To Use Agreement;          
(iii)   any cause of action, suit, or proceeding brought, asserted or threatened
against any of the Buyer Indemnified Parties after the date of this Agreement by
BofA, BONY as Trustee, or any claimed lender to BGT, asserting any claim with
respect to natural gas stored in the Bammel Storage Facility or their rights in
or to such gas arising in whole or in part from the negotiation, execution, or
performance of the Purchase Agreement or this Agreement or the Contemplated
Transactions;           (iv)   any amendments to pleadings, counterclaims, cross
claims or third-party claims in the foregoing matters;           (v)   any
arbitration or other dispute resolution proceedings that may now be underway or
may hereafter be conducted concerning any of the foregoing;           (vi)   any
proceedings instituted by Sellers in any state or federal court or before any
state or federal administrative agency in connection with the prosecution and
defense of any of the matters described in clauses (i) through (v) above;      
    (vii)   any settlement negotiation concerning any of the matters described
in clauses (i) through (vi) above; and           (viii)   any appeals concerning
any of the matters described in clauses (i) through (vi) above.

Ex. 1.1 - 3

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

 

         
11.
  Cushion Gas
Litigation Results   Any of the following:

  (i)   any judgment, order, decree, decision, or award, in each case that is
not subject to any further appeal, motion for rehearing, or other judicial
review and the timing for the filing of which has expired; and     (ii)   any
final and binding settlement agreement, made without contravention of this
Agreement or the Purchase Agreement, settling any matter in controversy in the
Cushion Gas Litigation.

         
12.
  Damages   Any losses, costs, expenses, or damages, including those arising out
of or relating to any demands, claims, lawsuits, causes of action,
investigations and other proceedings (whether or not before a Governmental
Authority), including reasonable attorney’s fees, court costs and other
documented out-of-pocket expenses reasonably incurred in investigating or
preparing for defense of any such demands, claims, lawsuits, causes of action,
investigations and other proceedings, and including actual, special, indirect,
incidental, consequential, and punitive damages.
 
       
13.
  Force Majeure Event   An event, cause, contingency or circumstance that
renders a party unable, wholly or in part, to perform its obligations under the
applicable provisions of this Agreement, and that is beyond the reasonable
control of the party (including earthquake, hurricane or other natural disaster
or act of war or terrorism or the requirements of any order of a Governmental
Authority of competent jurisdiction) or emergency that threatens public safety.
A party seeking to have its obligations suspended because of a Force Majeure
Event shall have the burden of proving the existence, duration, and adverse
effect of such Force Majeure Event. The party affected by a Force Majeure Event
shall promptly notify the other parties of the cessation of such Force Majeure
Event.
 
       
14.
  Purchase Agreement   As defined in Recital A to the Agreement.
 
       
15.
  Aggregate Purchase
Price   The sum of (i) the Purchase Price plus (ii) the Gas Purchase Price, as
such terms are defined in the Purchase Agreement.
 
       
16.
  Right To Use
Agreement   Right To Use Agreement effective May 31, 2001 by and between BAM
Lease Company and HPL Company.

Ex. 1.1 - 4