exv10w1



 






Exhibit 10.1


Execution Copy



PURCHASE AND SALE AGREEMENT




AMONG




HPL STORAGE LP, AND




AEP ENERGY SERVICES GAS HOLDING COMPANY II, L.L.C.




AS SELLERS




AND




LA GRANGE ACQUISITION, L.P.,




AS BUYER




DATED AS OF JANUARY 26, 2005




Purchase and Sale Agreement





 









 








PURCHASE AND SALE AGREEMENT




TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 	 	 
	1.	 	RULES OF CONSTRUCTION; DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	1.1.	 	 	Definitions
	 	 	1	 
	

	 	 	1.2.	 	 	Rules of Construction
	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.	 	PURCHASE AND SALE; CONSIDERATION; CLOSING	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	2.1.	 	 	Purchase and Sale of the Purchased Interests
	 	 	2	 
	

	 	 	2.2.	 	 	Consideration
	 	 	2	 
	

	 	 	2.3.	 	 	The Closing
	 	 	12	 
	

	 	 	2.4.	 	 	Closing Obligations
	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	SELLERS’ REPRESENTATIONS AND WARRANTIES	 	 	15	 
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	3.1.	 	 	Organization and Good Standing of Sellers
	 	 	15	 
	

	 	 	3.2.	 	 	Enforceability; Authority; No Conflict; No Consent
Requirements with Respect to Sellers
	 	 	15	 
	

	 	 	3.3.	 	 	No Litigation Against Sellers
	 	 	16	 
	

	 	 	3.4.	 	 	Organization and Good Standing of the HPL Companies
	 	 	16	 
	

	 	 	3.5.	 	 	No Conflict; No Consent Requirements with Respect to the HPL Companies
	 	 	17	 
	

	 	 	3.6.	 	 	Capitalization of the HPL Companies; Sellers’ Title
	 	 	17	 
	

	 	 	3.7.	 	 	Financial Statements of the HPL Entities
	 	 	18	 
	

	 	 	3.8.	 	 	No Material Adverse Change
	 	 	18	 
	

	 	 	3.9.	 	 	No Undisclosed Liabilities
	 	 	18	 
	

	 	 	3.10.	 	 	Property and Leases of the HPL Companies
	 	 	19	 
	

	 	 	3.11.	 	 	Contracts of the HPL Companies
	 	 	19	 
	

	 	 	3.12.	 	 	Insurance Maintained by the HPL Companies
	 	 	20	 
	

	 	 	3.13.	 	 	No Litigation Against the HPL Companies
	 	 	20	 
	

	 	 	3.14.	 	 	Compliance by the HPL Entities with Applicable Law; Permits
	 	 	21	 
	

	 	 	3.15.	 	 	Intellectual Property of the HPL Companies
	 	 	21	 
	

	 	 	3.16.	 	 	Tax Matters
	 	 	21	 
	

	 	 	3.17.	 	 	Workforce Matters of the HPL Entities
	 	 	23	 
	

	 	 	3.18.	 	 	Environmental Matters
	 	 	24	 
	

	 	 	3.19.	 	 	Regulatory Matters
	 	 	26	 
	

	 	 	3.20.	 	 	Affiliate Transactions of the HPL Companies
	 	 	26	 
	

	 	 	3.21.	 	 	Finders and Brokers
	 	 	26	 
	

	 	 	3.22.	 	 	Bankruptcy
	 	 	26	 
	

	 	 	3.23.	 	 	Sufficiency of Assets
	 	 	26	 
	

	 	 	3.24.	 	 	Certain Warranty Disclaimers
	 	 	26	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.	 	BUYER’S REPRESENTATIONS AND WARRANTIES	 	 	27	 
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	4.1.	 	 	Organization and Good Standing of Buyer
	 	 	28	 
	

	 	 	4.2.	 	 	Enforceability; Authority; No Conflict; No Consent
Requirements with Respect to Buyer
	 	 	28	 
	

	 	 	4.3.	 	 	No Litigation Against Buyer
	 	 	29	 
	

	 	 	4.4.	 	 	Finders and Brokers
	 	 	29	 
	

	 	 	4.5.	 	 	Bankruptcy
	 	 	29	 
	

	 	 	4.6.	 	 	Availability of Funds
	 	 	29	 
	 
	 	 	 	 	 	 	 	 	 	 
	5.	 	COVENANTS OF THE PARTIES	 	 	30	 
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	5.1.	 	 	Continuing Access
	 	 	30	 
	

	 	 	5.2.	 	 	Retained Matters
	 	 	30	 






	 	 	 
	Purchase and Sale Agreement
	 	Page i






 









 






	 	 	 	 	 	 	 	 	 
	 
	 	5.3.	 	Workforce Matters	 	 	31	 
	 
	 	5.4.	 	Discontinuation of Intercompany Transactions	 	 	36	 
	 
	 	5.5.	 	Termination and Continuation of Certain Insurance Coverages	 	 	37	 
	 
	 	5.6.	 	Substitutions of Credit Support	 	 	37	 
	 
	 	5.7.	 	Claims for Certain Measurement Adjustments	 	 	38	 
	 
	 	5.8.	 	Discontinuance of Trademarks and Tradenames	 	 	38	 
	 
	 	5.9.	 	Change of Sellers’ Names	 	 	39	 
	 
	 	5.10.	 	Required Notices	 	 	39	 
	 
	 	5.11.	 	Public Statements	 	 	39	 
	 
	 	5.12.	 	Audit Matters	 	 	39	 
	 
	 	5.13.	 	Post-Closing Title Review	 	 	40	 
	 
	 	5.14.	 	Distributions to HPL Consolidation’s Partners	 	 	42	 
	 
	 	5.15.	 	Agreement to Cover Open Positions	 	 	42	 
	 
	 	 	 	 	 	 	 	 
	6.	 	SURVIVAL; INDEMNIFICATION	 	 	42	 
	 
	 	 	 	 	 	 	 	 
	 
	 	6.1.	 	Survival	 	 	42	 
	 
	 	6.2.	 	Indemnification by Seller	 	 	43	 
	 
	 	6.3.	 	Indemnification by Buyer	 	 	47	 
	 
	 	6.4.	 	Indemnification Net of Benefits; Mitigation Obligations of Indemnitee	 	 	48	 
	 
	 	 	 	 	 	 	 	 
	7.	 	TAX MATTERS	 	 	48	 
	 
	 	 	 	 	 	 	 	 
	 
	 	7.1.	 	Tax Indemnification	 	 	48	 
	 
	 	7.2.	 	Preparation and Filing of Tax Returns	 	 	49	 
	 
	 	7.3.	 	Procedures Relating to Indemnification of Tax Claims	 	 	50	 
	 
	 	7.4.	 	Tax Refunds and Credits	 	 	51	 
	 
	 	7.5.	 	Tax Treatment of Payments	 	 	51	 
	 
	 	7.6.	 	Transfer Taxes	 	 	51	 
	 
	 	7.7.	 	Termination of Participation in Tax Allocation Agreement	 	 	51	 
	 
	 	7.8.	 	Allocation of the Purchase Price	 	 	51	 
	 
	 	 	 	 	 	 	 	 
	8.	 	GENERAL PROVISIONS	 	 	52	 
	 
	 	 	 	 	 	 	 	 
	 
	 	8.1.	 	Notice Provisions	 	 	52	 
	 
	 	8.2.	 	Confidentiality	 	 	53	 
	 
	 	8.3.	 	Schedules and Exhibits	 	 	54	 
	 
	 	8.4.	 	Interest on Overdue Amounts	 	 	55	 
	 
	 	8.5.	 	Amendment	 	 	55	 
	 
	 	8.6.	 	Merger and Integration; Binding on Successors; No Third	 	 	 	 
	 
	 	 	 	Party Beneficiaries; Assignment	 	 	55	 
	 
	 	8.7.	 	Forbearance and Waiver	 	 	55	 
	 
	 	8.8.	 	Partial Invalidity	 	 	55	 
	 
	 	8.9.	 	Attorney’s Fees	 	 	55	 
	 
	 	8.10.	 	Governing Law; Jurisdiction and Venue	 	 	56	 
	 
	 	8.11.	 	Waiver of Right to Jury Trial	 	 	56	 
	 
	 	8.12.	 	Construction	 	 	56	 
	 
	 	8.13.	 	Multiple Counterparts	 	 	56	 
	 
	 	8.14.	 	Further Assurances	 	 	56	 
	 
	 	8.15.	 	Headings	 	 	57	 






	 	 	 
	Purchase and Sale Agreement
	 	Page ii







 









 






PURCHASE AND SALE AGREEMENT




          This Purchase and Sale Agreement (the “Agreement”) is made to be effective as of
January 26, 2005 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 (“AEP Gas
Holding II”, and together with Storage LP, individually, a “Seller” and collectively,
“Sellers”), and La Grange Acquisition, L.P., a Texas limited partnership (“Buyer”),
as follows:



RECITALS





	A.  	Sellers own all of the outstanding partner interests in HPL Consolidation LP, a Delaware
limited partnership (“HPL Consolidation”)]. HPL Consolidation owns all of the
outstanding member interests in each of HPL Storage GP LLC, a Delaware limited liability
company (“Storage GP”) and HPL GP, LLC, a Delaware limited liability company (“HPL
GP”). HPL Consolidation, Storage GP, and HPL GP own all of the outstanding partner
interests in each of 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 LP”), HPL
Resources Company LP, a Delaware limited partnership (“HPL Resources”), and AEP Gas
Marketing LP, a Delaware limited partnership (“Gas Marketing”). HPL Consolidation,
Storage GP, HPL GP, Storage Holdings, Storage Leaseco, HPL Company LP, HPL Resources, and Gas
Marketing are herein referred to collectively as the “HPL Entities”, or separately as
“HPL Entity”.






	B.  	The HPL Entities are engaged, through themselves and the HPL Entity Subsidiaries, in the
gathering, transportation, purchase, sale, and storage of natural gas within the State of
Texas (the “Business”).






	C.  	Sellers desire to sell and Buyer desires to buy, on the terms and conditions herein set
forth, all of the general partner interests in HPL Consolidation and all of the limited
partner interests in HPL Consolidation, with the exception of a 2% limited partner interest in
HPL Consolidation to be retained by Storage LP.





AGREEMENTS



NOW, THEREFORE, in consideration of the premises and the representations, warranties, and covenants
contained herein and for other good and valuable consideration the receipt and sufficiency of which
is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as
follows:





	1.  	RULES OF CONSTRUCTION; DEFINITIONS






	1.1.  	Definitions.





As used in this Agreement, terms defined in Exhibit 1.1 hereto have the meanings
set forth therein or, to the extent they are accounting terms, they will have the
meanings set forth in GAAP.



	 	 	 
	Purchase and Sale Agreement
	 	Page 1








 









 









	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.  	PURCHASE AND SALE; CONSIDERATION; CLOSING






	2.1.  	Purchase and Sale of the Purchased Interests.





Upon the terms and subject to the conditions set forth in this Agreement, at the Closing
on the Closing Date, Buyer agrees to purchase from Sellers, respectively, and Sellers
hereby agree to sell, transfer and assign to Buyer, free of any and all Encumbrances
other than Permitted Encumbrances, a 1% general partner interest and a 97% limited
partner interest in HPL Consolidation (the “Purchased Interests”).



Immediately after the consummation of the purchase and sale contemplated hereby, Storage
LP will continue to own a 2% limited partner interest in HPL Consolidation, such retained
interest being referred to herein as the “Retained Interest”. Buyer has no
rights in or with respect to the Retained Interest.




	2.2.  	Consideration.






	 	2.2.1.  	Purchase Price. The consideration for the Purchased Interests (the
“Purchase Price”) will be:






	 	(a)  	$825,000,000; plus
	 
	 	(b)  	the Net Working Capital Payment determined pursuant
to Section 2.2.3 hereof; plus
	 
	 	(c)  	the Inventory Payment determined pursuant to
Section 2.2.4 hereof.





	 	 	 
	Purchase and Sale Agreement
	 	Page 2






 









 






The Purchase Price will be allocated between the Sellers in the following
proportion:



	 	 	 	 	 	 
	 
	 	Seller	 	 	Allocation	 
	 	Storage LP

AEP Gas Holding II

	 	 	37%

63%	 
	 






	2.2.2.  	Closing Payment. In accordance with Section 2.4.2(a), at the Closing, Buyer will
tender to Sellers or their designee the portion of the Purchase Price described in
Section 2.2.1(a) hereof, plus the Initial Net Working Capital Payment pursuant to
Section 2.2.3 hereof, plus the Initial Inventory Payment pursuant to Section 2.2.4
hereof (collectively, the “Closing Payment”). The amount of the Closing
Payment will be reduced by $760,552 to reflect interest from the receipt of funds by
the Sellers to the Valuation Time.






	2.2.3.  	Net Working Capital Payment. The “Net Working Capital Payment” will be
equal to the net aggregate of the Initial Net Working Capital Payment and the Net
Working Capital Adjustment, which in the aggregate are intended to reflect the
positive or negative Net Working Capital as of the Valuation Time. The Net Working
Capital Payment will be computed and paid as follows:






	 	(a)  	At the Closing, Buyer will pay (or receive as a
credit against the other elements of the Closing Payment) as part of the
Net Working Capital Payment, an amount (the “Initial Net Working
Capital Payment”) equal to Sellers’ good faith estimate of the
aggregate Net Working Capital of the HPL Entities expected as of the
Valuation Time determined in accordance with Exhibit 2.2.3. Such
estimate will be based on pro forma balance sheets of the HPL Entities as
of the Valuation Time, to be prepared by Sellers in accordance with GAAP
and in consultation with Buyer, in the same format and level of detail as
the Final Balance Sheet, and to be delivered to Buyer no later than 2
Business Days before the scheduled Closing Date.
	 
	 	(b)  	Within 90 days following the Closing Date, Buyer
will prepare and deliver to Sellers (i) unaudited balance sheets of each
of the HPL Entities as of the Valuation Time (each a “Final Balance
Sheet”), prepared in accordance with GAAP consistently applied, and
(ii) a detailed computation of the Net Working Capital of each of the HPL
Entities as of the Valuation Time, reconciled to those balance sheets and
(iii) a computation of the amount, if any, (the “Net Working Capital
Adjustment”) by which the aggregate





	 	 	 
	Purchase and Sale Agreement
	 	Page 3






 









 






Net Working Capital of the HPL Entities as of the Valuation Time,
as so computed, exceeds or is less than the Initial Net Working
Capital Payment. Sellers will provide Buyer and its
representatives and advisors (and if appropriate, the Independent
Accounting Firm), at no expense to Buyer, with all accounting
services, assistance, and access to data during normal business
hours to the working papers, accounting, operating, and other books
and records of Sellers, and the appropriate personnel to the extent
required to complete the preparation of the Final Balance Sheets
and the related computations, and any deadline imposed by this
Agreement on Buyer for the computation or payment of the Net
Working Capital Adjustment will be extended as appropriate in light
of any party’s failure to promptly make such information available.
Pursuant to the Transition Services Agreement, Sellers shall also
ensure that the employees of Sellers (to the extent they continue
to be employed by Sellers or any Affiliate of Sellers) previously
involved with the foregoing accounting services and operation
activities will perform their customary and usual monthly tasks,
including the assistance in the month end closing of the books and
records of the HPL Entities, during the periods following the
Closing Date for purposes of the foregoing. Buyer shall also
ensure that the employees of Sellers (to the extent they continue
to be employed by Sellers or any Affiliate of Sellers and made
available under the Transition Services Agreement) and the
Transferred Employees (to the extent they continue to be employed
by Buyer or any Affiliate of Buyer) previously involved with the
foregoing accounting services and operation activities will perform
their customary and usual monthly tasks, including the assistance
in the month end closing of the books and records of the HPL
Entities, during the periods following the Closing Date for
purposes of the foregoing. However, if Sellers have failed to
assist and provide reasonable access to data as required for Buyer
to complete the preparation of the Final Balance Sheets and the
related computations, Buyer must notify Sellers of such failure on
or before the 90th day following the Closing Date
specifying in detail the documents that Buyer requires, and Buyer
will have an additional 90 days after receipt to complete the
preparation of the Final Balance Sheets and the related
computations. If Sellers do not dispute the Final Balance Sheets
or the related computations in accordance with the next following
sentence, the Net Working Capital Adjustment as computed by Buyer
will be final and binding as between the parties hereto. If
Sellers wish to dispute the Final Balance Sheets or the related
computations, it may do so, within 30 days (or such longer period
as the parties hereto may agree in writing) after the submission of
the Final Balance Sheets, by notifying Buyer in writing of any
disputed items in the Net Working Capital Adjustment. Sellers and
Buyer shall, over



	 	 	 
	Purchase and Sale Agreement
	 	Page 4






 









 






the 20 days following the date of such notice (the “Resolution
Period”), attempt to resolve their differences and any written
resolution by them as to any disputed item shall be final and
binding for all purposes of this Agreement. If at the conclusion
of the Resolution Period, Sellers and Buyer have not reached an
agreement on the disputed items, then all items remaining in
dispute shall be submitted by Sellers and Buyer to the Independent
Accounting Firm. The Independent Accounting Firm shall act as an
arbitrator to determine only those items still in dispute at the
end of the Resolution Period. In making its decision, the
arbitrator must render a decision on each disputed item that adopts
the position of one of the parties on that item and may not decide
on any other amount for that item. The parties shall instruct the
Independent Accounting Firm to render its reasoned written decision
as soon as practicable but in no event later than 60 days after its
engagement (which engagement shall be made no later than 10
Business Days after the end of the Resolution Period). Such
decision shall be set forth in a written statement delivered to
Sellers and Buyer and shall be final and, binding for all purposes
of this Agreement, and judgment may be entered thereon. The fees
and expenses of the Independent Accounting Firm will be paid
one-half by Sellers and one-half by Buyer.




	 	(c)  	Within 30 days of receipt by Sellers of the Final
Balance Sheets and related computations described in Section 2.2.3(b)
hereof from Buyer (or, if Sellers dispute the same, then within 10 days
of the parties’ resolution of any disputed items or receipt of the
Independent Accounting Firm’s decision on any disputed items) Buyer will
pay to Sellers or their designee an amount equal to any positive Net
Working Capital Adjustment, or Sellers will pay to pay to Buyer an amount
equal to any negative Net Working Capital Adjustment, in either such case
by wire transfer and with interest thereon at the Borrowing Rate from the
Closing Date to the date of payment.
	 
	 	(d)  	Notwithstanding any other provisions of this
Agreement, no later than November 30 of the year in which the Closing
occurs, Buyer will provide to Sellers a detailed schedule of property
taxes for the HPL Companies for the calendar year in which the Closing
occurs. Included with the schedule will be copies of each Tax statement
and/or bill. The schedule will detail the allocation of property taxes
to Sellers in accordance with the computation of Net Working Capital. In
the event the amount of the allocation of property taxes to Sellers
exceeds the amount of property taxes allocated to Sellers as computed for
the Net Working Capital Adjustment computed pursuant to Section 2.2.3(b)
of this Agreement, Sellers will pay the excess to Buyer within 20






			
	Purchase and Sale Agreement
	 	Page 5






 









 






Business Days. If the amount allocated to Sellers is less than the
amount as computed for the Net Working Capital Adjustment pursuant
to Section 2.2.3(b) of this Agreement, Buyer will pay to Sellers
the deficit within 20 Business Days. Payments made pursuant to
this Section are subject to the provisions of Section 7.5 of this
Agreement. In the event of a dispute over the allocation of
property taxes under this Section 2.2.3(d), Buyer and Sellers shall
use the dispute resolution procedures set forth in Section 2.2.3(b)
of this Agreement to resolve such dispute.




	2.2.4.  	Inventory Payment. The “Inventory Payment” will be equal to the net
aggregate of the Initial Inventory Payment and the Final Inventory Payment
Adjustment, which in the aggregate are intended to reflect the value of the Gas
Inventory as of the Valuation Time. The Inventory Payment will be computed and paid
as follows:






	 	(a)  	At the Closing, Buyer will pay, as part of the
Inventory Payment, the amount of $174,751,900 (the “Initial Inventory
Payment”), based on Sellers’ good faith estimate of a Gas Inventory
of 31,200,000 MMBtus based on the regularly maintained perpetual gas
inventory records of the HPL Entities.
	 
	 	(b)  	Within 15 days following the Valuation Time, Buyer
shall provide to Sellers a revised estimate of the Gas Inventory based on
the perpetual gas inventory records in MMBtus as of the Valuation Time
(the “Valuation Time Estimate”). The “Valuation Time
Adjustment Amount” shall be the number of MMBtus determined by
subtracting 31,200,000 MMBtus from the Valuation Time Estimate. In the
event the Valuation Time Adjustment Amount is a positive number, Buyer
shall pay to Sellers, or Sellers’ designee, within 15 days of receipt of
an invoice, an amount equal to the Valuation Time Adjustment Amount
multiplied by $5.601. In the event the Valuation Time Adjustment Amount
is a negative number, Sellers shall pay to Buyer, or Buyer’s Designee,
within 15 days of receipt of an invoice, an amount equal to the Valuation
Time Adjustment Amount multiplied by $5.601 plus $0.40 per MMBtu. Any
payment under this Section 2.2.4(b) shall be made by wire transfer and is
the “Valuation Time Adjustment”.
	 
	 	(c)  	No later than 90 days following the Closing Date,
Buyer may deliver written notice (the “Inventory Verification
Notice”) to Sellers advising them whether or not it has elected to
undertake a verification of the actual storage inventory contained in the
Bammel Facilities. Any election by Buyer to undertake (or not undertake)
such verification shall be final and irrevocable in all respects. In the
event Buyer timely delivers an Inventory Verification Notice advising
Sellers that it has elected to






			
	Purchase and Sale Agreement
	 	Page 6






 









 






undertake such a verification, Buyer and Sellers shall engage Wells
Chappell & Company, Inc. (“Wells”) to perform such
verification in accordance with the procedures and methods set
forth on Exhibit 2.2.4 (with all fees and expenses of Wells
to be borne 1/2 by Buyer and 1/2 by Sellers). Buyer and Sellers shall
instruct Wells to complete its physical verification testing of the
actual storage volume of the Bammel Facilities no later than 120
days after the Closing Date (and shall each use their reasonable
best efforts to ensure that such testing is completed by Wells no
later than 120 days after the Closing Date), and to deliver to each
of them no later than 30 days after its completion a copy of its
verification of the actual storage volume of the Bammel Facilities
and any supporting documentation therefor, and any deadline imposed
by this Agreement on Buyer or Sellers which is contingent upon
Wells’ verification of the actual storage volume of the Bammel
Facilities will be extended as appropriate in light of any failure
by Wells to promptly complete and deliver its verification of the
actual storage volume of the Bammel Facilities and any supporting
documentation therefor. Based upon the results of this
verification, Buyer shall (i) recompute in accordance with
Exhibit 2.2.4 that portion of the amount of the Gas
Inventory as of the Valuation Time that was stored in the Bammel
Facilities (as so recomputed, the “Recomputed Bammel
Inventory”) and (ii) deliver to Sellers a statement thereof
(“Buyer’s Statement of Recomputed Bammel Inventory”) no
later than 180 days following the Closing Date. However, if Wells
has failed to promptly complete and deliver its verification of the
actual storage volume of the Bammel Facilities and any supporting
documentation therefor, Buyer must notify Sellers of such failure
on or before the 150th day following the Closing Date,
and Buyer will have an additional 30 days after receipt of the
verification of the actual storage volume of the Bammel Facilities
and any supporting documentation therefor from Wells to complete
the Recomputed Bammel Inventory and Buyer’s Statement of Recomputed
Bammel Inventory. In the event (A) Buyer does not timely deliver
to Sellers the Inventory Verification Notice, (B) Buyer does not
deliver to Sellers Buyer’s Statement of Recomputed Bammel Inventory
on or prior to 180 days following the Closing Date (or if Wells has
failed to promptly complete and deliver its verification of the
actual storage volume of the Bammel Facilities and any supporting
documentation therefor, on or prior to 30 days after receipt of
such verification), (C) Buyer timely delivers an Inventory
Verification Notice stating that it shall not cause a verification
of the actual storage volume of the Bammel Facilities to be
undertaken, or (D) the amount of Recomputed Bammel Inventory set
forth on Buyer’s Statement of Recomputed Bammel Inventory is not
more than 1.03, and not less than 0.97, times that portion of




			
	Purchase and Sale Agreement
	 	Page 7






 









 






the Gas Inventory as of the Valuation Time that was stored in the
Bammel Facilities according to the most current perpetual gas
inventory records (the events referred to in the immediately
preceding clauses (A) through (D) inclusive each being referred to
as a “Inventory Finalization Event”), Buyer shall have no
right to thereafter conduct a verification of the actual storage
inventory contained in the Bammel Facilities for purposes of any
adjustment pursuant to this Agreement. If Buyer provides to
Sellers a timely Buyer’s Statement of Recomputed Bammel Inventory
which indicates that the Recomputed Bammel Inventory is more than
1.03, or less than 0.97, times that portion of the Gas Inventory as
of the Valuation Time that was stored in the Bammel Facilities
according to the most current perpetual gas inventory records (such
event being referred to herein as a “Bammel Inventory
Recomputation Event”), then subject to the provisions of
Section 2.2.4(d) hereof the Recomputed Bammel Inventory will be
used for all purposes of Section 2.2.4(e) hereof as the final
actual storage inventory of the Bammel Facilities as of the
Valuation Time.




	 	(d)  	The provisions of this Section 2.2.4(d) shall apply
only if a Bammel Inventory Recomputation Event occurs. After receipt of
Buyer’s Statement of Recomputed Bammel Inventory, Sellers shall have 30
days to review and dispute Buyer’s Statement of Recomputed Bammel
Inventory (which dispute may not include any challenge to or disagreement
with the results reported by Wells of its verification of the actual
storage volume of the Bammel Facilities), and for this purpose will have
the right to review, copy, abstract, and audit all relevant meter data
and other relevant information held by or available to the HPL Entities
for the period from the Valuation Time through the date as of which the
Recomputed Bammel Inventory was determined by Wells. Buyer will provide
Sellers and their representatives and advisors, at no expense to Sellers,
with all accounting services, assistance, and access to data during
normal business hours to the working papers, accounting, operating, and
other books and records of the HPL Entities, and the appropriate
personnel to the extent required to review and audit the Recomputed
Bammel Inventory, and any deadline imposed by this Agreement on Sellers
for the completion of that review and audit will be extended as
appropriate in light of Buyer’s or its Affiliates’ failure to promptly
make such information available. Pursuant to the Transition Services
Agreement, Buyer shall also ensure that the employees of Sellers (to the
extent they continue to be employed by Sellers or any Affiliate of
Sellers and made available under the Transition Services Agreement)
previously involved with the foregoing accounting services and operation
activities will perform their customary and usual monthly tasks,
including the





	 	 	 
	Purchase and Sale Agreement
	 	Page 8






 









 






assistance in the month end closing of the books and records of the
HPL Entities, during the periods following the Closing Date for
purposes of the foregoing. Buyer shall also ensure that the
Transferred Employees (to the extent they continue to be employed
by Buyer or any Affiliate of Buyer) previously involved with the
foregoing accounting and operation activities will perform their
customary and usual monthly tasks, including the assistance in the
month end closing of the books and records of the HPL Entities,
during the periods following the Closing Date for purposes of the
foregoing. However, if Buyer has failed to assist and provide
reasonable access to data as required for Sellers to complete their
review, Sellers must notify Buyer of such failure on or before the
30th day after receipt of Buyer’s Statement of
Recomputed Bammel Inventory specifying in detail the documents that
Sellers require, and Sellers will have an additional 90 days after
receipt to review Buyer’s Statement of Recomputed Bammel Inventory
and notify Buyer of a dispute. On or prior to the 30th
day after receipt of Buyer’s Statement of Recomputed Bammel
Inventory and supporting documentation (including access to and
audit of such data and information), Sellers shall deliver written
notice to Buyer, specifying in detail any disputed items and the
basis therefor. If Sellers fail to so notify Buyer of any such
disputes or failures on or prior to the 30th day after
receipt of Buyer’s Statement of Recomputed Bammel Inventory, the
calculations set forth on Buyer’s Statement of Recomputed Bammel
Inventory will be used for all purposes of Section 2.2.4(e) hereof
as the final actual storage inventory of the Bammel Facilities as
of the Valuation Time. If Sellers so notify Buyer of any disputed
items on Buyer’s Statement of Recomputed Bammel Inventory, Buyer
and Sellers shall, over the 20 days following the date of such
notice (the “Resolution Period”), attempt to resolve their
differences and any written resolution by them as to any disputed
item shall be final and binding for all purposes of Section
2.2.4(e) hereof as the final actual storage inventory of the Bammel
Facilities as of the Valuation Time. If at the conclusion of the
Resolution Period, Sellers, on the one hand, and Buyer, on the
other, have not reached an agreement on the disputed items, then
all items remaining in dispute shall be submitted by Sellers and
Buyer to the Independent Accounting Firm. The Independent
Accounting Firm shall act as an arbitrator to determine only those
items still in dispute at the end of the Resolution Period. In
making its decision, the arbitrator must render a decision on each
disputed item that adopts the position of one of the parties on
that item and may not decide on any other amount for that item.
The parties shall instruct the Independent Accounting Firm to
render its reasoned written decision as soon as practicable but in
no event later than 60 days after its engagement (which engagement
shall



	 	 	 
	Purchase and Sale Agreement
	 	Page 9






 









 






be made no later than 10 Business Days after the end of the
Resolution Period). Such decision shall be set forth in a written
statement delivered to Sellers and Buyer and shall be final and
binding on the parties hereto for all purposes of Section 2.2.4(e)
hereof as the final actual storage inventory of the Bammel
Facilities as of the Valuation Time. The fees and expenses of the
Independent Accounting Firm will be paid one-half by Sellers and
one-half by Buyer.




	 	(e)  	Within 90 days following the Closing Date (or, if
there has been a Bammel Inventory Recomputation Event, then within 30
days following the determination under Sections 2.2.4(c) and/or 2.2.4(d)
of the final actual storage inventory of the Bammel Facilities as of the
Valuation Time), Buyer will prepare and deliver to Sellers (i) a
computation of the Gas Inventory as of the Valuation Time, taking into
account any final actual storage inventory of the Bammel Facilities as of
the Valuation Time determined under Sections 2.2.4(c) and/or 2.2.4(d) (it
being understood that, except in the event of a failure by Wells to
promptly complete and deliver its verification of the actual storage
volume of the Bammel Facilities and any supporting documentation
therefor, unless the procedures and time limits for the determination of
the actual storage inventory under Sections 2.2.4(c) and/or 2.2.4(d) are
fully complied with, no results of any physical storage inventory will be
used for purposes of this Section 2.2.4(e), and (ii) a computation of the
Final Inventory Payment Adjustment. Sellers will provide Buyer and its
representatives and advisors (and if appropriate, the Independent
Accounting Firm), at no expense to Buyer, with all accounting services,
assistance, and access to data during normal business hours to the
working papers, accounting, operating, and other books and records of
Sellers, and the appropriate personnel to the extent required to complete
the computation of the Gas Inventory and the Final Inventory Payment
Adjustment, and any deadline imposed by this Agreement on Buyer for the
computation or payment of the Final Inventory Payment Adjustment will be
extended as appropriate in light of Sellers’ or their Affiliates’ failure
to promptly make such information available. Pursuant to the Transition
Services Agreement, Buyer shall also ensure that the employees of Sellers
(to the extent they continue to be employed by Sellers or any Affiliate
of Sellers and made available under the Transition Services Agreement)
previously involved with the foregoing accounting services and operation
activities will perform their customary and usual monthly tasks,
including the assistance in the month end closing of the books and
records of the HPL Entities, during the periods following the Closing
Date for purposes of the foregoing. Buyer shall also ensure that the
Transferred Employees (to the extent they





	 	 	 
	Purchase and Sale Agreement
	 	Page 10






 









 






continue to be employed by Buyer or any Affiliate of Buyer)
previously involved with the foregoing accounting services and
operation activities will perform their customary and usual monthly
tasks, including the assistance in the month end closing of the
books and records of the HPL Entities, during the periods following
the Closing Date for purposes of the foregoing. However, if
Sellers have failed to assist and provide reasonable access to data
as required for Buyer to complete the computation or payment of the
Final Inventory Payment Adjustment, Buyer must notify Sellers of
such failure on or before the 90th day following the
Closing Date or, if there has been a Bammel Inventory Recomputation
Event, then within 30 days following the determination under
Sections 2.2.4(c) and/or 2.2.4(d) of the final actual storage
inventory of the Bammel Facilities as of the Valuation Time)
specifying in detail the documents that Buyer requires, and Buyer
will have an additional 90 days after receipt to complete the
preparation and delivery of such computations. If Sellers do not
dispute the computation of the Gas Inventory or the related
computation of the Final Inventory Payment Adjustment in accordance
with the next following sentence, the Final Inventory Payment
Adjustment as computed by Buyer will be final and binding as
between the parties hereto. If Sellers wish to dispute the
computation of the Gas Inventory or the related computation of the
Final Inventory Payment Adjustment, they may do so, within 30 days
(or such longer period as the parties hereto may agree in writing)
after the submission of the Final Inventory Payment Adjustment, by
notifying Buyer of any disputed items in the Gas Inventory or the
related computation of the Final Inventory Payment Adjustment. No
such dispute may include a reconsideration of any final actual
storage inventory of the Bammel Facilities as of the Valuation Time
determined under Sections 2.2.4(c) and/or 2.2.4(d). Sellers and
Buyer shall, over the 20 days following the date of such notice
(the “Resolution Period”), attempt to resolve their
differences and any written resolution by them as to any disputed
item shall be final and binding for all purposes of this Agreement.
If at the conclusion of the Resolution Period, Sellers and Buyer
have not reached an agreement on the disputed items, then all items
remaining in dispute shall be submitted by Sellers and Buyer to the
Independent Accounting Firm. The Independent Accounting Firm shall
act as an arbitrator to determine only those items still in dispute
at the end of the Resolution Period. In making its decision, the
arbitrator must render a decision on each disputed item that adopts
the position of one of the parties on that item and may not decide
on any other amount for that item. The parties shall instruct the
Independent Accounting Firm to render its reasoned written decision
as soon as practicable but in no event later than 60 days after its
engagement (which engagement shall



	 	 	 
	Purchase and Sale Agreement
	 	Page 11






 









 






be made no later than 10 Business Days after the end of the
Resolution Period). Such decision shall be set forth in a written
statement delivered to the parties hereto and shall be final and
binding for all purposes of this Agreement, and judgment may be
entered thereon. The fees and expenses of the Independent
Accounting Firm will be paid one-half by Sellers and one-half by
Buyer.




	 	(f)  	Within 30 days of receipt by Sellers of the
computations of the Gas Inventory as of the Valuation Time and the Final
Inventory Payment Adjustment described in Section 2.2.4(e) hereof from
Buyer (or, if Sellers dispute the same, then within 10 days of the
parties’ resolution of disputed items or receipt of the decision of the
Independent Accounting Firm on disputed items), Buyer will pay to Sellers
or Sellers’ designee (if the Final Inventory Adjustment Amount is
positive) or Sellers will pay to Buyer (if the Final Inventory Adjustment
Amount is negative) the Final Inventory Payment Adjustment and in order
to reverse the adjustment to the Inventory Payment made under Section
2.2.4(b) the parties will offset the Final Inventory Payment Adjustment
by the Valuation Time Adjustment. Such payment, in either case, shall be
made by wire transfer and with interest thereon at the Borrowing Rate
from the Closing Date to the date of payment.






	2.3.  	The Closing.





The purchase and sale provided for in this Agreement (the “Closing”) will take
place at the offices of Sellers’ counsel in Austin, Texas, commencing at 10:00 a.m.
(local time) on January 27, 2005 (the “Closing Date”).



2.4. Closing Obligations.



In addition to any other documents to be delivered under other provisions of this
Agreement, at the Closing:




	 	2.4.1.  	Sellers will deliver to Buyer:






	 	(a)  	assignments of all of the Purchased Interests in
the forms of Exhibit 2.4.1(a) hereto (each an “Assignment and
Assumption Agreement”) executed by Sellers, assigning respectively to
Buyer or its designee the Purchased Interests;
	 
	 	(b)  	a closing statement and cross receipt executed by
Sellers, setting out the computation of the Closing Payment and
acknowledging receipt of the Closing Payment, in a form reasonably
acceptable to Buyer;
	 
	 	(c)  	[intentionally blank];





	 	 	 
	Purchase and Sale Agreement
	 	Page 12







 










 







	 	(d)  	such other instruments of transfer and conveyance
as may reasonably be requested by Buyer to effectuate the purchase of
the Purchased Interests, each in form and substance satisfactory to
Buyer and its legal counsel and executed by Sellers;






	 	(e)  	an option agreement in the form of Exhibit
2.4.1(e) hereto (the “Option Agreement”) executed by Storage
LP, granting to Storage LP the option to sell the Retained Interest on
the terms and conditions therein set out;






	 	(f)  	a transition services agreement in the form of
Exhibit 2.4.1(f) hereto (the “Transition Services
Agreement”) executed by AEP Energy Services, Inc.;






	 	(g)  	a limited guaranty in the form of Exhibit
2.4.1(g) hereto (the “Sellers’ Limited Guaranty”) executed by
AEP (“Sellers’ Guarantor”), guaranteeing in accordance with the
terms thereof certain of Sellers’ obligations under this Agreement;






	 	(h)  	the Cushion Gas Litigation Agreement;






	 	(i)  	the Partnership Agreement for HPL Consolidation;






	 	(j)  	certificates in accordance with section 1445 of the
Code stating that Sellers are not “foreign persons”;






	 	(k)  	a certificate of the Secretary or similar officer
of each Seller and Sellers’ Guarantor certifying and attaching all
requisite resolutions or actions of such Person’s governing body and, if
appropriate, its equity holders, approving the execution and delivery of
this Agreement and the consummation of the Contemplated Transactions and
any change of name contemplated for such Person by Section 5.9 and
certifying to the incumbency and signatures of the officers of such
Person executing this Agreement and any other document relating to the
Contemplated Transactions; and






	 	(l)  	opinions of Sellers’ in-house and Sellers’ outside
counsel, in form and substance reasonably acceptable to Buyer, containing
customary legal opinions including an opinion regarding the
enforceability of the Cushion Gas Litigation Agreement.






	 	2.4.2.  	Buyer will deliver to Sellers:






	 	(a)  	the Closing Payment by wire transfer to the account
of Sellers to an account specified by Sellers in a writing, which writing
will be delivered to Buyer at least 3 days prior to the Closing Date;





			
	 	 	 
	Purchase and Sale Agreement
	 	Page 13






 









 







	 	(b)  	the Assignment and Assumption Agreements executed
by Buyer or its designee;
	 
	 	(c)  	the closing statement and cross receipt described
in Section 2.4.1(b) hereof, executed by Buyer, setting out the
computation of the Closing Payment and acknowledging receipt of the
Purchased Interests, in a form reasonably acceptable to Sellers;
	 
	 	(d)  	[intentionally blank];
	 
	 	(e)  	such other instruments of transfer and conveyance
as may reasonably be requested by Sellers to effectuate the sale of the
Purchased Interests, each in form and substance satisfactory to Sellers
and their legal counsel and executed by Buyer;
	 
	 	(f)  	the Option Agreement executed by Buyer;
	 
	 	(g)  	the Transition Services Agreement executed by each
of the HPL Entities;
	 
	 	(h)  	a corporate guaranty in the form of Exhibit
2.4.2(h) hereto (the “Buyer’s Limited Guaranty”) executed by
Energy Transfer Partners, L.P. (“Buyer’s Guarantor”),
guaranteeing in accordance with the terms thereof certain of Buyer’s
obligations under this Agreement;
	 
	 	(i)  	a 2002 ISDA Master Agreement with Schedule, Credit
Support Annex, and Letters of Confirmation in the form of Exhibit
2.4.2(i) hereto between ETC Marketing, Ltd. and AEP Energy Services,
Inc. (the “Swap Agreement”);
	 
	 	(j)  	the Cushion Gas Litigation Agreement;
	 
	 	(k)  	the Partnership Agreement for HPL Consolidation;
	 
	 	(l)  	a certificate of the Secretary or similar officer
of Buyer and Buyer’s Guarantor certifying and attaching all requisite
resolutions or actions of such Person’s governing body, approving the
execution and delivery of this Agreement and the consummation of the
Contemplated Transactions and certifying to the incumbency and signatures
of the officers of such Person executing this Agreement and any other
document relating to the Contemplated Transactions; and
	 
	 	(m)  	opinions of Buyer’s in-house and Buyer’s outside
counsel, in form and substance reasonably satisfactory to Sellers,
containing customary legal opinions.





			
	 	 	 
	Purchase and Sale Agreement
	 	Page 14






 









 







	 	3.  	SELLERS’ REPRESENTATIONS AND WARRANTIES






Sellers hereby represent and warrant as follows:




	 	3.1.  	Organization and Good Standing of Sellers.






Except as disclosed in Sellers’ Disclosure Schedules, Sellers are duly organized or
formed, as applicable, validly existing and in good standing under the laws of their
respective states of formation or organization, as applicable, with full limited
liability company or limited partnership, as applicable, power and authority to conduct
their business as it is now being conducted, to own or use the properties and assets that
they purport to own or use, and to perform all their obligations under this Agreement and
to otherwise undertake the Contemplated Transactions.




	 	3.2.  	Enforceability; Authority; No Conflict; No Consent Requirements with Respect to Sellers.






	 	3.2.1.  	Except as disclosed in Sellers’ Disclosure Schedules, this Agreement constitutes
the legal, valid, and binding obligation of Sellers, enforceable against them in
accordance with its terms except as such enforceability may be limited by General
Exceptions to Enforceability. Except as disclosed in Sellers’ Disclosure Schedules,
upon the execution and delivery by Sellers of the instruments required to be
executed by Sellers pursuant to Section 2.4.1 (collectively, the “Sellers’
Documents”), each of the Sellers’ Documents will constitute the legal, valid and
binding obligation of Sellers, enforceable against them in accordance with its terms
except, in each case, as such enforceability may be limited by General Exceptions to
Enforceability. Except as disclosed in Sellers’ Disclosure Schedules, neither the
execution and delivery of this Agreement nor the consummation or performance of any
of the Contemplated Transactions by Sellers will breach (i) any provision of any of
the Governing Documents of Sellers or (ii) any resolution adopted by the equity
holders or governing bodies of Sellers.
	 
	 	3.2.2.  	Except as disclosed in Sellers’ Disclosure Schedules, Sellers have the full right,
power and authority to execute and deliver this Agreement and the Sellers’
Documents, to perform their obligations under this Agreement and the Sellers’
Documents, and to carry out the Contemplated Transactions, and such actions have
been duly authorized by all necessary action by Sellers’ governing body and by
Sellers’ equity holders.
	 
	 	3.2.3.  	Except as disclosed in Sellers’ Disclosure Schedules, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions by Sellers will:






	 	(a)  	violate any Applicable Law to which Sellers are
subject; or
	 
	 	(b)  	result in the imposition or creation of any
Encumbrance other than Permitted Encumbrances upon or with respect to any
of the Purchased Interests to be sold by Sellers.





			
	 	 	 
	Purchase and Sale Agreement
	 	Page 15






 









 







	 	3.2.4.  	Except as disclosed in Sellers’ Disclosure Schedules, Sellers are not required to
give any notice to or obtain any consent, approval, permit, license, franchise, or
other authorization, or a variance or exemption
therefrom or waiver thereof from any Governmental Authority or other Person in
connection with the execution and delivery of this Agreement or the
consummation of any of the Contemplated Transactions (the “Sellers’
Consents”).






	 	3.3.  	No Litigation Against Sellers.






Except as disclosed in Sellers’ Disclosure Schedules, there is no pending or, to Sellers’
Knowledge, threatened Proceeding by or against Sellers or any of their Affiliates that
challenges, or seeks to restrain, delay, or prohibit the Contemplated Transactions.
Except as disclosed in Sellers’ Disclosure Schedules, to the Knowledge of Sellers, no
event has occurred or circumstance exists that is reasonably likely to give rise to or
serve as a basis for the commencement of any such Proceeding. Except as disclosed in
Sellers’ Disclosure Schedules, there is not in effect any order, judgment, or decree of
any Governmental Authority enjoining, barring, suspending, prohibiting, or otherwise
limiting Sellers from undertaking the Contemplated Transactions.




	 	3.4.  	Organization and Good Standing of the HPL Companies.






Except as disclosed in Sellers’ Disclosure Schedules, each of the HPL Companies is duly
formed or organized, validly existing and in good standing, as applicable, under the laws
of its state of formation or organization, with full general partnership, limited
partnership, or limited liability company, as applicable, power and authority to conduct
its business as it is now being conducted, to own or use the properties and assets that
it purports to own or use, and to perform all its obligations under this Agreement and to
otherwise undertake the Contemplated Transactions. Except as disclosed in Sellers’
Disclosure Schedules, each HPL Company, as applicable, is duly qualified to do business
as a foreign entity and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or used by it,
or the nature of the activities conducted by it, requires such qualification. Except as
disclosed in Sellers’ Disclosure Schedules, complete and accurate copies of the Governing
Documents of each HPL Company, as currently in effect, have been provided to Buyer.
Except as disclosed in Sellers’ Disclosure Schedules, no HPL Entity has any subsidiary
or, directly or indirectly, owns any shares of capital stock or other equity, securities,
or other ownership interest of any other Person. Except as disclosed in Sellers’
Disclosure Schedules, neither the execution and delivery of this Agreement by Sellers nor
the consummation or performance of any of the Contemplated Transactions by Sellers or by
any of the HPL Entities will breach (i) any provision of any of the Governing Documents
of an HPL Company or (ii) any resolution adopted by the general or limited partners or
the managers, members, or other owners of any HPL Company.



			
	 	 	 
	Purchase and Sale Agreement
	 	Page 16






 









 







	 	3.5.  	No Conflict; No Consent Requirements with Respect to the HPL Companies.






	 	3.5.1.  	Except as disclosed in Sellers’ Disclosure Schedules, neither the execution and
delivery of this Agreement by Sellers nor the consummation or performance of any of
the Contemplated Transactions by Sellers or by any of the HPL Entities will:






	 	(a)  	violate any Applicable Law to which an HPL Company
is subject;
	 
	 	(b)  	contravene, conflict with or result in a violation
or breach of any of the terms or requirements of, or give any
Governmental Authority the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Permit that is held by an HPL Company or that
otherwise relates to the Business conducted by an HPL Company;
	 
	 	(c)  	breach any provision of, or give any Person the
right to declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or payment under, or to cancel, terminate
or modify, any indenture, mortgage, lease, note, or other Material HPL
Contract or other instrument to which any Seller or HPL Company is a
party or by which its properties may be bound; or
	 
	 	(d)  	result in the imposition or creation of any
Encumbrance other than a Permitted Encumbrance upon or with respect to
any of the assets of any HPL Company.






	 	3.5.2.  	Except as disclosed in Sellers’ Disclosure Schedules, no HPL Company is required
to give any notice to or obtain any consent, approval, permit, license, franchise,
or other authorization, or a variance or exemption therefrom or waiver thereof from
any Governmental Authority or other Person in connection with the execution and
delivery of this Agreement or the consummation of any of the Contemplated
Transactions by an HPL Entity (the “HPL Company Consents”).






	 	3.6.  	Capitalization of the HPL Companies; Sellers’ Title.






	 	3.6.1.  	Except as disclosed in Sellers’ Disclosure Schedules, there are no member, partner
or other ownership interests in any of the HPL Companies authorized, issued, or
outstanding or reserved for any purpose. The member, partner, or other ownership
interests, as applicable, of such HPL Companies shown thereon to be outstanding are
duly authorized, validly issued, and fully paid and were not issued in violation of
any preemptive rights, and are owned beneficially and of record by the party
indicated in Sellers’ Disclosure Schedules. Except as disclosed in Sellers’
Disclosure Schedules, there are no (A) existing options, warrants, calls, conversion
rights or privileges, pre-emptive rights, subscriptions, or other rights,





			
	 	 	 
	Purchase and Sale Agreement
	 	Page 17






 









 







	 	 	agreements, arrangements, or commitments of any character obligating any of such HPL
Companies to issue, transfer, or sell or cause to be issued, transferred, or sold
any partner interests or other interests in any of such HPL Companies, or (B)
contracts, agreements, or arrangements of any kind relating to any of
the same.
	 
	 	3.6.2.  	Except as disclosed in Sellers’ Disclosure Schedules, (a) Sellers have good and
marketable title to their respective member or partner interests, as applicable, in
HPL Consolidation, free and clear of any Encumbrances other than Permitted
Encumbrances, (b) the HPL Entities have good and marketable title to their
respective HPL Subsidiary Interests free and clear of any Encumbrances other than
Permitted Encumbrances, and (c) the HPL Entities’ percentage interest as
tenant-in-common in the South Texas Pipeline is 80%, and in each of the Austin
Pipeline, the Big Cowboy Pipeline, and in the A/S Pipeline is 50%.






	 	3.7.  	Financial Statements of the HPL Entities.






Sellers have delivered to Buyer an unaudited balance sheet of each of the HPL Entities
(other than HPL Consolidation) as of December 31, 2004, and the related unaudited
statements of income and expense for the fiscal year then ended (the “HPL Financial
Statements”). Except as disclosed in Sellers’ Disclosure Schedules, the HPL
Financial Statements fairly present as at the respective dates of and for the period
referred to therein and in accordance with GAAP the financial condition and the results
of operations of the HPL Entities.




	 	3.8.  	No Material Adverse Change.






Except as disclosed in Sellers’ Disclosure Schedules, since the date of the HPL Financial
Statements, Sellers have operated, or caused the HPL Companies to operate, the Business
in the Ordinary Course of Business, and there has not been any event or circumstance that
has had or is likely to have a Material Adverse Effect.




	 	3.9.  	No Undisclosed Liabilities.






	 	3.9.1.  	Except as disclosed in Sellers’ Disclosure Schedules, no HPL Entity has any
material liabilities that are required by GAAP to be reflected on the balance sheet
of such HPL Entity except for liabilities reflected or reserved against in the HPL
Financial Statements and current liabilities incurred in the Ordinary Course of
Business since the date of the HPL Financial Statements.






	 	3.9.2.  	Except as disclosed in Sellers’ Disclosure Schedules, there are no Encumbrances
securing the payment or other satisfaction of any liabilities of the kind described
in Section 3.9.1 without regard to the materiality test therein.





			
	 	 	 
	Purchase and Sale Agreement
	 	Page 18






 









 







	 	3.10.  	Property and Leases of the HPL Companies.






	 	3.10.1.  	Except as disclosed in Sellers’ Disclosure Schedules, each HPL Company owns good
and marketable title to, or a valid lessee’s or licensee’s interest in, the major
operating assets used by such HPL Company in the conduct of the Business (other than
pipeline easements and rights-of-way) as identified in Sellers’ Disclosure Schedules
(the “Material Assets”), free and clear of any Encumbrances other than
Permitted Encumbrances.
	 
	 	3.10.2.  	Except as disclosed in Sellers’ Disclosure Schedules (and except with respect to
pipeline easements and rights-of-way), to the Knowledge of Sellers, all leases and
licenses of material real property or other Material Assets of the HPL Companies are
in full force and effect and are valid, binding and enforceable (except as such
enforceability may be limited by General Exceptions to Enforceability), except where
failure thereof would not impair the conduct of normal operations of the Business.
Except as disclosed in Sellers’ Disclosure Schedules, no HPL Company, and to the
Knowledge of Sellers, no other party thereto, is in default under any such lease.






	 	3.11.  	Contracts of the HPL Companies.






	 	3.11.1.  	Except for (A) contracts and other instruments identified or described as
“Disclosed HPL Contracts” in Sellers’ Disclosure Schedules, (B) contracts
with gas suppliers, gas customers, transportation customers, and storage customers
entered into in the Ordinary Course of Business consistent with past practice, (C)
pipeline easement and right-of-way agreements, and (D) Benefit Plans, there are no
outstanding commitments, contracts, or agreements to which any HPL Company is a
party or (except with respect to commitments, contracts, and agreements, entered
into by other owners of undivided interests in certain of the property in which the
HPL Entities have undivided ownership interests, regarding such other owners’ use of
their rights in that property) by which any of its properties are bound that (i)
call for annual payments or receipts, or require capital expenditures or commitments
by the contracting HPL Company of more than $500,000 that may not be terminated
without substantial penalty by the contracting HPL Company on reasonable notice,
(ii) create an Encumbrance against any property of any HPL Company securing the
payment of funds borrowed by an HPL Company, or (iii) guaranty or otherwise provide
credit support for, or indemnification with respect to, the obligations of any
Person other than an HPL Company. Each Disclosed HPL Contract, and each contract
described in clause (B) of this Section 3.11.1 to the extent any such contract
described in clause (B) calls for average daily volumes of more than 2,000 MMBtu is
herein called a “Material HPL Contract”.






	 	3.11.2.  	Except as otherwise provided in the next paragraph of this Section 3.11.2, and
except as disclosed in Sellers’ Disclosure Schedules, each Material HPL Contract is
in full force and effect and is valid and enforceable in





			
	 	 	 
	Purchase and Sale Agreement
	 	Page 19






 









 







accordance with its
terms. Except as disclosed in Sellers’ Disclosure Schedules, the
contracting HPL Company on each such Material HPL Contract is not in material breach
of any applicable terms and requirements thereof. Except as disclosed in Sellers’
Disclosure Schedules, each other Person that has any obligation or liability under
each such Material HPL Contract is, to the Knowledge of Sellers, not in material
breach of any applicable terms and requirements thereof. Except as disclosed in
Sellers’ Disclosure Schedules, the contracting HPL Company has not given to or
received from any other Person, at any time since January 1, 2004 any
written notice given in compliance with the notice provisions of the
applicable contract alleging that the HPL Company or any other Person is in
default under any such Material HPL Contract which has not been resolved.




The representations and warranties of this Section 3.11.2 shall be applicable
with respect to the Bammel Documents, the Bammel Settlement Agreement, and the
Bammel Settlement Approval Order only to the extent that such documents, the
rights and interests of the parties thereto under such documents, the
performance under such documents of the parties thereto, and the transactions
thereunder are not in controversy in the Cushion Gas Litigation Agreement.




	 	3.12.  	Insurance Maintained by the HPL Companies.






All of the material policies of insurance carried on the date of this Agreement by the
HPL Entities or any of their Affiliates directly insuring their properties or the
Business on or prior to the Closing Date (such HPL Entities’ “Business Insurance
Policies”) are identified or described in Sellers’ Disclosure Schedule. Except as
disclosed in Sellers’ Disclosure Schedules, all premiums payable on such Business
Insurance Policies have been timely paid. Except as disclosed in Sellers’ Disclosure
Schedules, with respect to such Business Insurance Policies: (i) all are in full force
and effect; (ii) all have been complied with in all material respects by the HPL
Companies; (iii) no HPL Company has received any notice from the insurer under any such
Business Insurance Policy canceling or materially amending the same; and (iv) there is no
claim under any such Business Insurance Policy that (A) has been denied by the insurer,
and (B) is still being asserted by the insured.




	 	3.13.  	No Litigation Against the HPL Companies.






Except as disclosed in Sellers’ Disclosure Schedules, there is no pending or, to the
Knowledge of Sellers, threatened Proceeding by or against any HPL Company (i) that
relates to or may reasonably be expected to affect, in any material respect, the Business
of, or any of the assets owned or used by any HPL Company, or (ii) that seeks to
restrain, delay or prohibit the Contemplated Transactions. Except as disclosed in
Sellers’ Disclosure Schedules, there is not in effect any order, judgment, or decree of
any Governmental Authority enjoining, barring, suspending, prohibiting, or otherwise
limiting any HPL Company from engaging in the Business, or requiring any HPL Company to
take or refrain from taking any action with respect to any aspect of such Business.
Notwithstanding the foregoing, Sellers make no representation or



			
	 	 	 
	Purchase and Sale Agreement
	 	Page 20






 









 







warranty in this Section
3.13 as to Proceedings, judgments, orders, writs, injunctions, or decrees which are, or
contain issues, of broad applicability to, or which generally affect, the natural gas,
natural gas liquids, or pipeline industry and do not specifically name Sellers, their
Affiliates, or any of the HPL Companies or their respective properties.




	 	3.14.  	Compliance by the HPL Entities with Applicable Law; Permits.






Except as disclosed in Sellers’ Disclosure Schedules, since June 1, 2001, the HPL
Entities have complied in all material respects with all Applicable Laws to which they
are subject (not including Environmental Laws, with respect to which Sellers’
representations and warranties are contained in Section 3.18 hereof). Except as
disclosed in Sellers’ Disclosure Schedules, no investigation or review by any
Governmental Authority, based on an alleged material violation of any Applicable Law (not
including Environmental Laws, with respect to which Sellers’ representations and
warranties are contained in Section 3.18 hereof) is pending or, to the Knowledge of
Sellers, threatened, against an HPL Company, nor has any Governmental Authority indicated
in writing to Sellers, or any HPL Company an intention to conduct the same at any time
after the date hereof.




Except as disclosed in Sellers’ Disclosure Schedules, no Permit from or of any
Governmental Authority or license, franchise, permit, order, or approval from any third
party is required on the part of the HPL Entities to conduct the Business as presently
conducted or is required in connection with the execution and delivery of this Agreement
or the consummation of the Contemplated Transactions except for such Permits as have been
obtained if the failure to have such Permits would not, alone or in the aggregate, result
in a Material Adverse Effect.




	 	3.15.  	Intellectual Property of the HPL Companies.






All material patents, trademarks, service marks, trade names, registered copyrights,
domain names, and applications therefor used mainly in the conduct of the Business by any
HPL Company are herein referred to as “Intellectual Property”. Except as
disclosed in Sellers’ Disclosure Schedules, each HPL Company owns or has the right to use
all such Intellectual Property, free of all Encumbrances other than Permitted
Encumbrances. Except as disclosed in Sellers’ Disclosure Schedules, to the Knowledge of
Sellers, (i) no Person is infringing any of the HPL Companies’ rights in such
Intellectual Property, (ii) no HPL Company is infringing the intellectual property rights
of any other Person, (iii) no registration of any such Intellectual Property has expired
or been abandoned, and (iv) no HPL Company is in default under any license agreement
respecting any of its Intellectual Property, in each case where the result would
materially impair the conduct of the Business.




	 	3.16.  	Tax Matters.






	 	3.16.1.  	Except as disclosed in Sellers’ Disclosure Schedules and subject to Section
3.16.3, there has been timely filed by or for each of the HPL Companies all





			
	 	 	 
	Purchase and Sale Agreement
	 	Page 21






 









 








	 	 	Tax Returns, if any, which are required by law to be filed prior to the Closing Date by
it or with respect to its operations, and all Taxes due or claimed to be due from it
or with respect to its operations (whether or not shown on any Tax Return) have duly
and timely been paid, and there are no assessments or claims for payment of any such
Taxes now pending or, to the Knowledge of Sellers, threatened, or any audit of the
records of an HPL Company being made or threatened by, any taxing authority. Except
as disclosed in Sellers’ Disclosure Schedules and subject to Section 3.16.3, each
Tax Return previously filed by each HPL Company is, or to be filed by each HPL
Company in the future relating to any period ending prior to the Closing Date
shall be, correct and complete in all material respects. Except as disclosed
in Sellers’ Disclosure Schedules and subject to Section 3.16.3, none of such
HPL Companies is currently the beneficiary of any extension of time within
which to file any Tax Return, if any, and no extension or waiver of any
statute of limitations is in effect with respect to any Tax owed by any HPL
Company. Except as disclosed in Sellers’ Disclosure Schedules and subject to
Section 3.16.3, each of such HPL Companies has properly withheld and paid, or
accrued for payment, when due, to appropriate state and/or federal
authorities, all sales and use taxes, if any, and all amounts required to be
withheld from payments made to its employees, independent contractors,
creditors, owners, or other third parties and have also paid all employment
taxes as required under Applicable Law.
	 
	 	3.16.2.  	Each of HPL Company LP, HPL Resources, and Gas Marketing have been domestic
eligible entities within the meaning of Treasury Regulation 301.7701-3 and each has
been treated as a disregarded entity by Sellers and their Affiliates for U.S.
federal income tax purposes since July 31, 2001, and each of Storage Holdings and
Storage Leaseco have been domestic eligible entities within the meaning of Treasury
Regulation 301.7701-3 and each has been treated as a disregarded entity by Sellers
and their Affiliates for U.S. federal income tax purposes since October 12, 2004,
and no election for any of the HPL Entities has been made to change their respective
default classifications, and neither Sellers, nor any of their Affiliates, nor any
taxing authority has taken a position inconsistent with such treatment for federal
income tax purposes. Each of HPL GP, LLC, HPL Storage GP LLC and HPL Consolidation
are domestic eligible entities within the meaning of Treasury Regulation 301.7701-3
and each has been treated as a disregarded entity by Sellers and their Affiliates
(and with respect to HPL Consolidation, such treatment was made up to the Closing)
for U.S. federal income tax purposes, and no election has been made to change the
default classification of any such entities. The only investments ever made by HPL
GP, LLC and HPL Storage GP LLC have been their respective interests in the HPL
Entities.






	 	3.16.3.  	Sellers expressly make no representations or warranties regarding compliance with
Code section 409A.





			
	 	 	 
	Purchase and Sale Agreement
	 	Page 22






 









 







	 	3.17.  	Workforce Matters of the HPL Entities.






	 	3.17.1.  	Employees.
	 
	 	 	Sellers have provided to Buyer a complete and accurate list of the name,
current compensation, scheduled or agreed-upon pay adjustments or bonuses, job
title or description, and date of hire of each employee of the
HPL Entities or their Affiliates as of the day immediately preceding Closing
whose duties relate primarily to the Business (the “Closing
Workforce”).
	 
	 	3.17.2.  	Labor Disputes.
	 
	 	 	Except as disclosed in Sellers’ Disclosure Schedules, each HPL Company is in
compliance in all material respects with all Applicable Law respecting
employment and employment practices, terms and conditions of employment, and
wages and hours. Except as disclosed in Sellers’ Disclosure Schedules, there
is no unfair labor practice complaint against any HPL Company before the
National Labor Relations Board. Except as disclosed in Sellers’ Disclosure
Schedules, there is no labor strike, dispute, slowdown, or stoppage actually
pending or threatened against or affecting any HPL Company. Except as
disclosed in Sellers’ Disclosure Schedules, since June 1, 2001, no HPL Company
has experienced a strike or work stoppage. Except as disclosed in Sellers’
Disclosure Schedules, no HPL Company is a party to or subject to a collective
bargaining agreement and no collective bargaining agreement relating to
employees of any HPL Company is currently being negotiated. Except as
disclosed in Sellers’ Disclosure Schedules, no Proceedings are pending or, to
the Knowledge of Sellers, threatened against any HPL Company with respect to
employment and employment practices, terms and conditions of employment, and
wages and hours. Except as disclosed in Sellers’ Disclosure Schedules, to the
Knowledge of Sellers, there is no effort currently underway to organize the
work force of any HPL Company or any part thereof.
	 
	 	3.17.3.  	Employee Benefit Plans.
	 
	 	 	Sellers’ Disclosure Schedules set forth a complete and accurate list of each
plan, contract, agreement, or other arrangement providing any type of
compensation or benefit, including without limitation any “employee benefit
plan” as defined in Section 3(3) of ERISA in which any individual included in
the Closing Workforce is a participant or to which such individual is a party
(collectively, the “Benefit Plans”). Except as set forth in Sellers’ Disclosure
Schedules, (i) the Benefit Plans are in compliance with all applicable
requirements of ERISA, the Code, and other applicable laws and have been
administered in accordance with their terms and such laws, in each case in all
material respects; and (ii) each Benefit Plan that is intended to be qualified
within the meaning of Section 401 of the Code has received a favorable
determination letter as to its qualification that is current as of the Closing
Date except for changes required by the Economic Growth





			
	 	 	 
	Purchase and Sale Agreement
	 	Page 23







 










 







and Tax
Relief Reconciliation Act (with respect to which good faith amendments have
been made), and nothing has occurred (or failed to occur) that could
reasonably be expected to result in the revocation of such letter. Except as
set forth in Sellers’ Disclosure Schedules, there are no pending or, to the
Knowledge of Sellers, threatened claims involving any individual included in
the Closing Workforce and no pending or, to the Knowledge of Sellers,
threatened litigation involving any individual included in the Closing
Workforce with respect to any of the Benefit Plans, other than ordinary and
usual claims for benefits by participants and beneficiaries, in either case
which, if determined or resolved adversely, would have a Material Adverse
Effect. With respect to any employee benefit plan (within the meaning of
Section 3(3) of ERISA) that is sponsored, maintained, or contributed to, or
has been sponsored, maintained, or contributed to since June 1, 2001, by any
HPL Entity or any corporation, trade, business, or entity that is now or has
been at any time since that date under common control with any HPL Entity,
within the meaning of Section 4.14(b), (c), (m) or (o) of the Code or Section
4001 of ERISA (“Commonly Controlled Entity”), except as set forth in
Sellers’ Disclosure Schedules (iii) no withdrawal liability, within the
meaning of Section 4201 of ERISA, has been incurred, which withdrawal
liability has not been satisfied in full or will be incurred as a result of
the Contemplated Transactions; (iv) no liability to the Pension Benefit
Guaranty Corporation has been incurred by any HPL Entity or any Commonly
Controlled Entity, which liability has not been satisfied in full; (v) no
accumulated funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the Code has been incurred; (vi) all
contributions and premium payments (including, without limitation, employer
contributions and employee elective deferral contributions) that are due have
been paid to the applicable defined contribution Benefit Plan and all
contributions (including, without limitation, installments) to any Benefit
Plan (other than Seller’s defined contribution Benefit Plan) required by
Section 302 of ERISA and Section 412 of the Code have been timely made and all
contributions for any period
ending before the Closing Date that are not yet due have been paid up to
and including the Closing Date to any Benefit Plan which is subject to Section
302 of ERISA or Section 412 of the Code, or accrued on the books of the
appropriate HPL Entities or any Commonly Controlled Entity; and (vii) no
liability under Section 302 of ERISA, Section 412 of the Code or Title IV of
ERISA has been incurred by any HPL Entity or any Commonly Controlled Entity
that would become a liability of Buyer or any of its Affiliates and no
condition exists that would result in any such liability.




	3.18.  	Environmental Matters.
	 
	   	Certain environmental matters have been identified as “Disclosed Environmental
Matters” in Sellers’ Disclosure Schedules. Except as described as a Disclosed
Environmental Matter, and except as otherwise set forth in Sellers’ Disclosure Schedules
and with respect to the period beginning June 1, 2001, and to Sellers’ Knowledge, with
respect to the period preceding the period beginning June 1, 2001:






			
	Purchase and Sale Agreement
	 	Page 24











 









 












	 	3.18.1.  	No HPL Company is in violation, in any material respect, of any Applicable Law
pertaining to environmental protection, or protection of human health or safety,
including without limitation those arising under the Resource Conservation and
Recovery Act (“RCRA”), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended (“CERCLA”), the Superfund
Amendments and Reauthorization Act of 1986 (“SARA”), the Federal Water
Pollution Control Act, the Solid Waste Disposal Act, as amended, the Federal Clean
Air Act, or the Toxic Substances Control Act (collectively, “Environmental
Laws”); and
	 
	 	3.18.2.  	Sellers have no Knowledge, and neither Sellers nor any of the HPL Companies nor
any of their Affiliates have received written notice from any Person, including
without limitation any Governmental Authority, (i) that any HPL Company has been
identified by the United States Environmental Protection Agency (“EPA”) as a
potentially responsible party under CERCLA with respect to a site listed on the
National Priorities List, 40 C.F.R. Part 300 Appendix B; (ii) that any hazardous
waste, as defined by 42 U.S.C. §6903(5), any hazardous substance as defined by 42
U.S.C. §9601(14), any pollutant or contaminant as defined by 42 U.S.C. §9601(33) or
any other toxic substance, oil or hazardous material (including friable asbestos,
urea formaldehyde insulation or polychlorinated biphenyls) in each case regulated by
any Environmental Laws (“Hazardous Substances”) which any HPL Company
generated, transported or disposed of has been found at any site at which a federal,
state or local agency or other third party has conducted an investigation, and in
respect of which Hazardous Substances any of the HPL Companies may have a
remediation liability or obligation pursuant to any Environmental Law; or (iii) that
any HPL Company is or shall be a named party to any claim, action, cause of action,
complaint, or legal or administrative proceeding under Environmental Laws
arising out of any Person’s incurrence of costs, expenses, losses or damages
in connection with the release (as that term is defined in 42 U.S.C. §9601(22)
or the relevant foreign Environmental Laws, hereinafter, “Release”) of
Hazardous Substances.
	 
	 	3.18.3.  	To the Knowledge of Sellers, Sellers’ Disclosure Schedules list each material
Permit required under applicable Environmental Laws for the operation of the
Business. To the Knowledge of Sellers, each such Permit is valid and in full force
and effect, and no Proceeding is pending or threatened to suspend, revoke,
terminate, or declare invalid any such Permit. Except as set forth in Sellers’
Disclosure Schedules, the applicable HPL Company (i) holds and is in compliance, in
all material respects, with each such Permit, (ii) has filed all necessary reports
and maintained all necessary records pertaining to such Permits, in all material
respects, and (iii) has otherwise complied, in all material respects, with all such
Permits.






			
	Purchase and Sale Agreement
	 	Page 25






 









 







	3.19.  	Regulatory Matters.
	 
	   	Except as disclosed in Sellers’ Disclosure Schedules, no HPL Company is subject to
regulation as a “holding company” or a “public utility company” under the Public Utility
Holding Company Act of 1935, as amended. HPL Company LP and MidTexas Pipeline Company
are regulated as gas utilities under the laws of the State of Texas. Except as disclosed
in Sellers’ Disclosure Schedules, no HPL Company is subject to regulation as a “natural
gas company,” as defined in the Natural Gas Act of 1938, as amended (“NGA”).






	3.20.  	Affiliate Transactions of the HPL Companies.
	 
	   	Except as disclosed in Sellers’ Disclosure Schedules, none of the HPL Companies is party
to an agreement or arrangement with Sellers or any of their other Affiliates that will
continue in effect after Closing. Except as disclosed in Sellers’ Disclosure Schedules,
there are no guarantees, letters of credit, indemnity agreements, equity contribution
agreements, or other credit support agreements under which any HPL Company has any
outstanding obligation relating to the obligations, business, or assets of Sellers or any
of their Affiliates (other than another HPL Company).






	3.21.  	Finders and Brokers.
	 
	   	Neither Sellers nor any of the HPL Companies is party to any agreement with any finder or
broker under which Buyer or any HPL Company after Closing would have any responsibility
for any commissions, fees, or expenses in connection with the origin, negotiation,
execution, or performance of this Agreement.






	3.22.  	Bankruptcy.
	 
	   	Except as disclosed in Sellers’ Disclosure Schedules, neither Sellers nor any of the HPL
Companies are subject to any bankruptcy proceeding, and to Sellers’ Knowledge no
proceeding is contemplated, in which Sellers or the HPL Companies would be declared
insolvent or subject to the protection of any bankruptcy or reorganization laws or
procedures.






	3.23.  	Sufficiency of Assets.
	 
	   	Except as set forth in Sellers’ Disclosure Schedules, the equipment, facilities, real
property, Intellectual Property, Material HPL Contracts, and Permits owned, leased, or
licensed by the HPL Companies constitute substantially all of the equipment, facilities,
real property, Intellectual Property, Material HPL Contracts, and Permits used by the HPL
Companies for the conduct of the Business as conducted immediately prior to Closing.






	3.24.  	Certain Warranty Disclaimers.






	 	3.24.1.  	Except as and to the extent expressly set out in this Agreement or the Exhibits
hereto, in Sellers’ Disclosure Schedules, or in any certificate furnished or to be
furnished by Sellers pursuant hereto, Sellers make no






			
	Purchase and Sale Agreement
	 	Page 26






 









 







	 	   	representations or warranties
whatsoever to Buyer and Sellers hereby disclaim all liability and responsibility for
any other representation, warranty, statement or information made, communicated, or
furnished or purportedly made, communicated, or furnished (orally or in writing) to
Buyer or its representatives (including without limitation any opinion, information,
projection, or advice that may have been or may be provided to Buyer by any
director, officer, employee, agent, consultant, or representative of any Seller or
any of their Affiliates). No information provided to Buyer or any of its Affiliates
or any of its or their representatives, advisors, or lenders, shall enlarge or alter
in any way the representations and warranties set out in this Agreement or the
Exhibits hereto, in Sellers’ Disclosure Schedules, or in any certificate furnished
or to be furnished by Sellers pursuant hereto or otherwise constitute a
representation or warranty hereunder. Buyer expressly acknowledges that (i) it has
undertaken all investigations, analyses, and evaluations considered by it to be
necessary or appropriate with respect to the Business, its financial and operating
history and condition, and the Purchased Interests, Applicable Law, relevant
industry and market conditions, and its decision to enter into this Agreement and
consummate the Contemplated Transactions, (ii) it has had an opportunity to ask for
all information desired from Sellers and their Affiliates and the nature and extent
of the responses to such requests are satisfactory to Buyer, and (iii) it has made
its own evaluation of the value of the Business, its financial condition and
prospects, and the Purchased Interests and the risks and benefits of the Business
and the Contemplated Transactions and is not relying on any information or
evaluation from Sellers or any of their Affiliates or representatives other than
those expressly set out in this Agreement or the Exhibits hereto, in Sellers’
Disclosure Schedules, or in any certificate furnished or to be furnished by Sellers
pursuant hereto.
	 
	 	3.24.2.  	EXCEPT AS OTHERWISE CONTAINED IN THIS AGREEMENT OR THE EXHIBITS HERETO, IN
SELLERS’ DISCLOSURE SCHEDULES, OR IN ANY CERTIFICATE FURNISHED OR TO BE FURNISHED BY
SELLERS PURSUANT HERETO, SELLERS AND THEIR AFFILIATES MAKE NO REPRESENTATION OR
WARRANTY REGARDING THE
CONDITION, REMAINING USEFUL LIFE, OR STRUCTURAL INTEGRITY OF ANY OF THE
PIPELINE OR GAS STORAGE ASSETS (OR RELATED EQUIPMENT OR FACILITIES) OF ANY OF
THE HPL COMPANIES. ALL SUCH ASSETS, EQUIPMENT, AND FACILITIES ARE ACCEPTED ON
AN “AS IS” BASIS, AND SELLERS AND THEIR AFFILIATES HEREBY DISCLAIM ALL SUCH
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.






			
	Purchase and Sale Agreement
	 	Page 27






 









 









	4.  	BUYER’S REPRESENTATIONS AND WARRANTIES
	 
	   	Buyer hereby represents and warrants as follows:
	 
	4.1.  	Organization and Good Standing of Buyer.
	 
	   	Except as disclosed in Buyer’s Disclosure Schedules, Buyer is duly formed and validly
existing under the laws of its state of organization, with full limited partnership power
and authority to conduct its business as it is now being conducted, to own or use the
properties and assets that it purports to own or use, and to perform all its obligations
under this Agreement and to otherwise undertake the Contemplated Transactions. Except as
disclosed in Buyer’s Disclosure Schedules, Buyer is duly qualified to do business as a
foreign entity and is in good standing, if applicable, under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned or used
by it, or the nature of the activities conducted by it, requires such qualification.
	 
	4.2.  	Enforceability; Authority; No Conflict; No Consent Requirements with Respect to Buyer.






	 	4.2.1.  	Except as disclosed in Buyer’s Disclosure Schedules, this Agreement constitutes
the legal, valid, and binding obligation of Buyer, enforceable against it in
accordance with its terms except as such enforceability may be limited by General
Exceptions to Enforceability. Except as disclosed in Buyer’s Disclosure Schedules,
upon the execution and delivery by Buyer of the instruments required to be executed
by Buyer or by any of the HPL Entities pursuant to Section 2.4.2 (collectively, the
“Buyer’s Documents”), each of the Buyer’s Documents will constitute the
legal, valid and binding obligation of Buyer or HPL Entity party thereto, as the
case may be, enforceable against it in accordance with its terms except, in each
case, as such enforceability may be limited by General Exceptions to Enforceability.
Except as disclosed in Buyer’s Disclosure Schedules, neither the execution and
delivery of this Agreement or any of the Buyer’s Documents nor the consummation or
performance of any of the Contemplated Transactions by Buyer or any HPL Entity will
breach (i) any provision of any of the Governing Documents of Buyer or (ii) any
resolution adopted by the equity holders or governing bodies of Buyer.
	 
	 	4.2.2.  	Except as disclosed in Buyer’s Disclosure Schedules, Buyer has the full right,
power and authority to execute and deliver this Agreement and the Buyer’s Documents
as applicable, to perform its obligations under this Agreement and the Buyer’s
Documents as applicable, and to carry out the Con
templated Transactions, and such
actions have been duly authorized by all necessary action by such the governing
bodies and equity holders of Buyer.
	 
	 	4.2.3.  	Except as disclosed in Buyer’s Disclosure Schedules, neither the execution and
delivery of this Agreement or any of the Buyer’s Documents nor the consummation or
performance of any of the Contemplated Transactions by Buyer will:






	 	(a)  	violate any Applicable Law to which Buyer is
subject;






			
	Purchase and Sale Agreement
	 	Page 28






 









 







	 	(b)  	contravene, conflict with or result in a violation
or breach of any of the terms or requirements of, or give any
Governmental Authority the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Permit that is held by Buyer; or
	 
	 	(c)  	breach any provision of, or give any Person the
right to declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or payment under, or to cancel, terminate
or modify, any indenture, mortgage, lease, note, or other material
contract or other instrument to which Buyer is a party or by which its
properties may be bound.






	 	4.2.4.  	Except as disclosed in Buyer’s Disclosure Schedules, Buyer is not required to give
any notice to or obtain any consent, approval, permit, license, franchise, or other
authorization, or a variance or exemption therefrom or waiver thereof from any
Governmental Authority or other Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.






	4.3.  	No Litigation Against Buyer.
	 
	   	Except as disclosed in Buyer’s Disclosure Schedules, there is no pending or, to Buyer’s
Knowledge, threatened Proceeding by or against Buyer that challenges, or seeks to
restrain, delay, or prohibit the Contemplated Transactions. Except as disclosed in
Buyer’s Disclosure Schedules, to the Knowledge of Buyer, no event has occurred or
circumstance exists that is reasonably likely to give rise to or serve as a basis for the
commencement of any such Proceeding. Except as disclosed in Buyer’s Disclosure
Schedules, there is not in effect any order, judgment, or decree of any Governmental
Authority enjoining, barring, suspending, prohibiting, or otherwise limiting Buyer from
undertaking the Contemplated Transactions.






	4.4.  	Finders and Brokers.
	 
	   	Buyer is not a party to any agreement with any finder or broker under which any Seller
would have any responsibility for any commissions, fees, or expenses in connection with
the origin, negotiation, execution, or performance of this Agreement.
	 
	4.5.  	Bankruptcy.
	 
	   	Except as disclosed in Buyer’s Disclosure Schedules, Buyer is not subject to any
bankruptcy proceeding, and to Buyer’s Knowledge no proceeding is contemplated, in which
Buyer would be declared insolvent or subject to the protection of any bankruptcy or
reorganization laws or procedures.
	 
	4.6.  	Availability of Funds.
	 
	   	Buyer has sufficient funds available or has received binding written commitments from
responsible financial institutions to provide sufficient funds on the Closing Date to pay
the Purchase Price and conduct the Business. The ability of Buyer to
consummate the transactions contemplated hereby are not subject to any condition or
contingency with respect to financing.






			
	Purchase and Sale Agreement
	 	Page 29






 









 







	5.  	COVENANTS OF THE PARTIES
	 
	5.1.  	Continuing Access.
	 
	   	After the Closing Date and in addition to any rights under the Cushion Gas Litigation
Agreement, each of the parties hereto, its Affiliates, and its and their representatives
and advisors will have reasonable access to (and the right to make and retain copies of)
the records (including, but not limited to email messages) of the HPL Companies and
reasonable access to the officers, directors, then-serving employees, members, agents,
and any other personnel of the HPL Companies, in each case for purposes of consultation
or otherwise to the extent reasonably required in connection with matters relating to the
operations of the HPL Companies before the Closing Date, in connection with the
performance of its obligations and exercise of its rights under this Agreement (including
its prosecution, defense, and settlement of Retained Matters or other litigation or
investigations), or otherwise in connection with the Contemplated Transactions. Each of
the parties hereto agrees to preserve and cause its Affiliates to preserve all such
records for the period of time set forth in any records retention policy in effect at an
HPL Entity as of the Closing Date or for any longer period as may be required by law, but
in any event for at least 6 years from the Closing Date. Each of the parties hereto and
their representatives and advisors will have reasonable access to (and the right to make
and retain copies of) the documents, books and records, and other information of the HPL
Companies (to the extent currently possessed by the HPL Companies, and such parties shall
authorize Buyer or Sellers, as applicable, to seek or obtain, at the expense of the party
seeking such access, such documents, books, records, and other information of the HPL
Companies that are not currently possessed by such parties). At no cost or expense to
the cooperating party other than actual out-of-pocket expenditures (which shall not
include attorney’s fees), each party will reasonably (or otherwise upon reimbursement of
the cooperating party’s out-of-
pocket costs) cooperate and cause their Affiliates to reasonably (or otherwise upon
reimbursement of the cooperating party’s out-of-pocket costs) cooperate in connection
with any audit, investigation, hearing, or inquiry by any Governmental Authority and any
litigation, arbitration, or other Proceeding which may continue or arise after the
Closing Date relating to any of the Retained Matters, such cooperation to include making
individuals and records reasonably (or otherwise upon reimbursement of Buyer’s
out-of-pocket costs) available for review, analysis, testing, consultation, interview,
deposition, or testimony, making a corporate representative available for deposition or
at trial, and executing declarations, affidavits, settlement agreements, and other
instruments as reasonably requested by the other party hereto. Any cost associated with
accessing former employees will be borne by the party seeking such access.
	 
	5.2.  	Retained Matters.






	 	5.2.1.  	Except as otherwise set forth in Sellers’ Disclosure Schedules, Sellers or their
Affiliates will be entitled to exclusively control, conduct, and






			
	Purchase and Sale Agreement
	 	Page 30






 









 







	 	  	otherwise direct the prosecution, defense, and settlement of any of the
Proceedings described as or arising out of “Retained Matters” in
Sellers’ Disclosure Schedules and Buyer covenants to cause the HPL Entities to
grant such control to Sellers. Following the Closing, the liability of the
HPL Entities for any demands, claims, causes of action, suits, judgments,
damages, amounts paid in settlement, penalties, liabilities, losses or
deficiencies, court costs, expenses of arbitration or mediation, and other
out-of-pocket expenses relating to any Retained Matter (“Retained Matter
Liabilities”) will be limited as set out in the description thereof in
Sellers’ Disclosure Schedule, and Sellers hereby agree to solely bear the cost
of, or if unable to directly bear the cost of, shall indemnify and hold
harmless, the HPL Entities from all Retained Matter Liabilities in excess of
such limit on the liability of the HPL Entities therefor (“Sellers’
Retained Matter Responsibility”), in accordance with the provisions of
Section 6.2. Sellers will retain rights in proportion to Sellers’ Retained
Matter Responsibility with respect to any recovery from any of the Retained
Matters or any counterclaim thereto or cross-claim with respect thereto
(whether or not presently asserted), and Buyer agrees to immediately remit,
and cause the HPL Entities to immediately remit, any and all such recoveries
to Sellers or their designees.
	 
	 	5.2.2.  	Cushion Gas Litigation is not a Retained Matter under this Agreement. Allocation
of responsibility and liability among Sellers and their Affiliates on the one hand
and Buyer, the HPL Entities, and their Affiliates on the other hand with respect to
Cushion Gas Litigation is controlled exclusively by the Cushion Gas Litigation
Agreement, and neither Sellers nor any of their Affiliates will have any liability
under this Agreement to Buyer, the HPL Entities, or any of their Affiliates
(including liability based on a breach of the representation and warranty in Section
3.11) for any Damages or other loss, liability, obligation, damage, cost, or expense
of any kind arising out of or relating to any Cushion Gas Litigation and none of the
limitations
on liability contained in this Agreement will apply to any liability arising
under the Cushion Gas Litigation Agreement.






	5.3.  	Workforce Matters.






	 	5.3.1.  	Post-Closing Employment and Compensation; Severance.






	 	(a)  	Sellers have transferred, or have caused to be
transferred, all members of the Closing Workforce to a Seller or an
Affiliate of a Seller (other than an HPL Company). From the Closing Date
until the expiration of the Employee Review Period, Sellers shall be
responsible for the Closing Workforce in accordance with the terms of the
Transition Services Agreement. Not later than 100 days following the
Closing Date (such period being the “Employee Review Period”),
except as provided in Section 5.3.1(b), Buyer shall extend offers of
employment, or cause the HPL Entities or another of its Affiliates to
extend offers of






			
	Purchase and Sale Agreement
	 	Page 31






 









 







	 	   	employment, to the members of the Closing Workforce that it so
elects with terms consistent with Section 5.3.2 (“Offer of
Employment”). Buyer will make Offers of Employment and
initiate employment in consultation with Sellers in an orderly
fashion that does not impose an undue administrative burden on
Sellers. Buyer shall notify Sellers in writing at least 10 days
prior to making an Offer of Employment of: (i) the name of each
such member of the Closing Workforce to whom Buyer or an Affiliate
of Buyer intends to make an Offer of Employment; and (ii) the terms
of each such Offer of Employment. Buyer shall not give notice to
any member of the Closing Workforce that such employee will not
receive an Offer of Employment in the period beginning on the
Closing Date and ending 30 days after the Closing Date. At any
time and from time to time on or before the date that is the last
day of the Employee Review Period, Buyer or an Affiliate of Buyer
shall hire those members of the Closing Workforce who accept an
Offer of Employment. Each member of the Closing Workforce who
accepts an Offer of Employment shall be referred to as a
“Transferred Employee”. The date on which a Transferred
Employee becomes an employee of Buyer or Buyer’s Affiliate shall be
referred to as the “Hire Date” for such Transferred
Employee. Sellers or their Affiliate, as the case may be, shall
terminate each of the Transferred Employees as of such employee’s
Hire Date. Except to the extent that such liabilities are to be
borne by Buyer under Section 5.3.1(c), Sellers shall be liable for
any Required Severance Benefits and health care continuation
benefits (COBRA rights) of any member of the Closing Workforce that
does not become a Transferred Employee, and except as otherwise
provided herein or in the Transition Services Agreement, neither
Buyer nor any Affiliate thereof shall have any other liability or
obligation whatsoever
with respect to any member of the Closing Workforce who does not
become a Transferred Employee.






	 	(b)  	The provisions of Section 5.3.1(a) notwithstanding,
(i) Buyer will have no obligation to employ, or cause to be employed, any
member of the Closing Workforce who does not accept an Offer of
Employment that conforms to the requirements of Section 5.3.1(a); (ii)
Buyer will have no obligation to continue the employment of any
individual who voluntarily terminates his or her employment other than in
the circumstances described in clause (ii) or (iii) of Section 5.3.1(c),
and (iii) Buyer may terminate the employment of any member of the Closing
Workforce at anytime for Cause. For purposes of this Agreement,
termination for “Cause” means termination because of material
dereliction of duty, commission of a crime of moral turpitude, material
violation of any written policy of the employer, or termination because
of any other “termination for






			
	Purchase and Sale Agreement
	 	Page 32






 









 







	 	   	cause” provision in the involved individual’s written employment
agreement, if any.
	 
	 	(c)  	Buyer will provide, or will cause the HPL Entities
or another of its Affiliates to provide the Required Severance Benefits
to each Transferred Employee who:






	 	(i)  	is terminated without Cause during
the Continuation Period,
	 
	 	(ii)  	elects during the Continuation
Period to terminate such employment within 7 days following such
Transferred Employee’s receipt of a notice from his or her
employer of its intent to reduce such employee’s base rate of
pay, or
	 
	 	(iii)  	elects during the Continuation
Period to terminate such employment within 30 days after his or
her employer notifies such employee of its intent to assign such
employee to a principal place of work that is more than 50 miles
from such employee’s principal place of work as of the Closing
Date.






	 	   	Additionally, in the event Buyer fails to extend, or cause to be
extended, Offers of Employment to not less than 75% of the Closing
Workforce as required by Section 5.3.1(a), and the members of the
Closing Workforce that are severed by Sellers or their Affiliates
who have not received Offers of Employment from Buyer and have not
resigned or have not received offers of employment from Sellers or
any of their Affiliates that in each such case would relieve
Sellers of any severance obligation to such employees, then Buyer
will pay to Sellers or their designated Affiliate, within 30 days
of written request therefor
(such request to be made within 30 days of the end of the Employee
Review Period) an amount equal to (A) the weighted average
severance benefits (based on credited service and COBRA premium
rates determined as of the last day of the Employee Review Period)
that could be available pursuant to the Required Severance Benefits
to the remaining members of the Closing Workforce described above
multiplied by (B) a number equal to (x) the number of individuals
constituting 75% of the Closing Workforce minus (y) the number of
individuals who receive an Offer of Employment that conforms to the
requirements of Section 5.3.1(a).






	 	(d)  	Sellers and their Affiliates will not discourage
any member of the Closing Workforce from accepting an Offer of Employment
that conforms to the requirements of Section 5.3.1(a).






			
	Purchase and Sale Agreement
	 	Page 33






 









 







	 	(e)  	Prior to the Closing Date, Sellers shall have
caused the HPL Entities to (i) terminate any Benefit Plans that are
sponsored, contributed to, maintained, or entered into solely by one or
more of the HPL Entities, unless sponsorship is transferred to and
assumed by a Seller or an Affiliate of Sellers (other than an HPL
Company) prior to the Closing Date (including any liability that might
otherwise apply to the HPL Entities), and (ii) terminate the
participation of all HPL Entities in all Benefit Plans. It is expressly
understood and agreed that neither Buyer nor any Affiliate thereof is, by
virtue of this Agreement or otherwise, assuming any Benefit Plan or any
liability or obligation of any kind under any such Benefit Plan.






	 	5.3.2.  	Post-Closing Benefits; Service Credit for Transferred Employees.






	 	(a)  	During the Continuation Period, Buyer will provide,
or cause the HPL Entities or another of its Affiliates to provide,
Transferred Employees with (i) a base compensation level at least as high
as that referred to in Section 3.17.1 hereof (including scheduled
increases in compensation identified therein), and (ii) a principal place
of work that is no more than 50 miles from such Transferred Employee’s
principal place of work as of the day immediately preceding Closing.
	 
	 	(b)  	During the Continuation Period, Buyer will provide,
or cause the HPL Entities or another of its Affiliates to provide, to the
extent permitted by Applicable Law, bonus, fringe benefits, welfare
benefits, retirement and pension benefits, medical, dental, and other
health plans, vacation pay, sick leave, deferred compensation
arrangements, and other benefits (other than severance benefits, which
are controlled by Section 5.3.1(c)) (the “Buyer Plans”) for
Transferred Employees that are no less
favorable than those provided by Buyer or its Affiliates to other
similarly situated employees of Buyer or its Affiliates.
	 
	 	(c)  	To the extent permitted under Applicable Law and
the applicable Buyer Plans, Buyer agrees that for purposes of all Buyer
Plans (including all policies and employee fringe benefit programs,
including vacations, of Buyer) under which an employee’s benefit depends,
in whole or in part, on length of service, credit will be given to
Transferred Employees as of each employee’s Hire Date for service
previously credited with or by Sellers or any of their Affiliates prior
to such Hire Date for such programs, provided that such crediting of
service shall not be given for benefit accrual purposes under any defined
benefit plan. If permitted under the applicable Buyer Plans with no
immediate increase in Buyer’s premiums with respect to any insured group
health plan, each Transferred Employee shall also be given credit






			
	Purchase and Sale Agreement
	 	Page 34






 









 







	 	   	for any deductible or co-payment amounts paid in respect of the
plan year in which the Closing occurs to the extent that, following
such employee’s Hire Date, such Transferred Employee participates
in any Buyer Plan for which deductibles or co-payments are
required. Buyer shall also cause each Buyer Plan (except Buyer’s
insured welfare benefit plans that are not group health plans, with
respect to which Buyer shall use its commercially reasonable
efforts to cause such plans) to waive (i) any preexisting
conditions, exclusions, evidence of insurability requirements, and
actively-at-work exclusions for each Transferred Employee and his
or her dependents under any Buyer Plan in which a Transferred
Employee becomes eligible to participate to the extent that such
pre-existing conditions, exclusions, evidence of insurability
requirements, and actively-at-work exclusions were previously
satisfied under the comparable Benefit Plan, and (ii) any waiting
period limitation which would otherwise be applicable to a
Transferred Employee on or after the Closing to the extent such
Transferred Employee had satisfied any similar waiting period
limitation under an analogous plan prior to the Closing. All
claims and expenses incurred by any such Transferred Employee and
any dependents that were to be taken into account for purposes of
satisfying any deductible or out-of-pocket limit under any Benefit
Plan will be taken into account for purposes of satisfying any
deductible or out-of-pocket limit under the plans maintained after
Closing for the benefit of such Transferred Employee. Sellers
shall use their reasonable best efforts to provide to Buyer
information concerning out-of-pocket expenses incurred by
Transferred Employees under any Benefit Plan for pre-Hire Date
treatments or services.
	 
	 	(d)  	Buyer will recognize, or will cause the HPL
Entities or another of its Affiliates to recognize, all unused earned,
banked, and accrued
vacation of each Transferred Employee as of such employee’s Hire
Date up to a maximum of 2 weeks of vacation for each Transferred
Employee and will provide to each such Transferred Employee a level
of sick leave and other leave benefits that is no less favorable
than the sick leave and other leave benefits provided by Buyer or
its Affiliates to similarly situated employees of Buyer or its
Affiliates. If any Transferred Employee has more than 2 weeks
unused earned, banked, and accrued vacation available to be taken
in the year of Closing under Sellers’ or their Affiliates’ vacation
policy as of such Transferred Employee’s Hire Date, Sellers shall
be responsible for the payment to such Transferred Employee of such
additional amount of unused earned, banked, and accrued vacation
based on such Transferred Employee’s salary immediately prior to
the Hire Date. At any time and from time to time during the
Employee






			
	Purchase and Sale Agreement
	 	Page 35






 









 







	 	   	Review Period, at Buyer’s request, Sellers will prepare a report of
the amounts accrued by Sellers and their Affiliates for vacation
benefits of the Closing Workforce. To the extent that Buyer
provides such benefits to the Transferred Employees as a result of
such accruals (rather than as a result of accruals from service
after the Transferred Employee’s Hire Date), Sellers will remit to
Buyer the amount of such accruals as a reduction of the Purchase
Price.






	 	(e)  	Buyer will provide or cause to be provided to each
Transferred Employee and their qualified beneficiaries who incur a
“qualifying event” (as defined in COBRA) on or after such Transferred
Employee’s Hire Date continuation health coverage in accordance with the
continuation health coverage requirements of COBRA.






	 	5.3.3.  	WARN Act Compliance.
	 
	 	   	Sellers do not anticipate terminating the employment of any member of the
Closing Workforce prior to Closing as a result of the Contemplated
Transactions. Buyer will, at its expense, effect or cause the HPL Entities or
its other Affiliates to effect full compliance with the Worker Adjustment and
Retraining Notification Act (“WARN Act”) and regulations promulgated
thereunder, and any comparable state or local Applicable Law, required as a
result of the Contemplated Transactions, regardless of whether the obligation
to do so is that of Buyer, Sellers, their Affiliates, or the HPL Entities.
Buyer agrees to indemnify Sellers for any damages, costs, fees, including but
not limited to attorneys’ fees, penalties, or other legal obligations under
the WARN Act or comparable state or local Applicable Law, resulting from the
Contemplated Transactions.






	5.4.  	Discontinuation of Intercompany Transactions.
	 
	   	Effective as of the Closing, and consistent with the determination of Net Working
Capital, all intercompany receivables and payables and loans including amounts due to or
from the HPL Entities under the AEP System Amended and Restated Non-Utility Money Pool
Agreement then existing between any HPL Entity on the one hand and AEP or any of its
Affiliates on the other hand (other than those between the HPL Entities) shall be fully
settled so that there are, as of the Valuation Time, no such outstanding payables,
receivables, or loans except as set forth in Sellers’ Disclosure Schedules. Without
limitation of the foregoing, all accruals of federal income tax and state income tax, all
deferred tax liabilities, and all deferred tax assets will be eliminated from the
accounts of the HPL Entities. Except as set forth in Sellers’ Disclosure Schedules, all
intercompany agreements or arrangements between any HPL Entity on the one hand and AEP or
any of its Affiliates on the other hand including agreements for accounting services and
access to accounting processes (other than those between the HPL Entities) shall be
terminated as of the Valuation Time.






			
	Purchase and Sale Agreement
	 	Page 36






 









 







	5.5.  	Termination and Continuation of Certain Insurance Coverages.






	 	5.5.1.  	Buyer acknowledges that as of Closing the insurance coverages relating to the
Business and described as “Terminating Insurance Coverages” in Sellers’
Disclosure Schedules will terminate or otherwise cease to be in effect, except with
respect to claims of any of the HPL Companies that are pending under such insurance
coverage as of the Closing Date, which shall survive the Closing Date and continue
in effect until resolution thereof. No HPL Company will be entitled to any refund
of any premium paid with respect to any such coverage. Except as otherwise provided
in this Agreement, Buyer agrees that it will be solely responsible for, and neither
Sellers nor any of their Affiliates will have any responsibility for, all risks as
to which a claim for coverage under any of the Terminating Insurance Coverages may
have otherwise been brought after Closing.
	 
	 	5.5.2.  	Until December 20, 2006, and thereafter at the option and expense of Sellers,
Buyer will maintain, or cause the HPL Entities to maintain, continuously in force
Chubb Custom Insurance Company Policy Number 3725-37-46 (or an equivalent policy
from an insurer acceptable to Sellers in their sole discretion) covering insured
losses, providing for deductibles and limits, and including endorsements, in each
case, as presently set forth in such policy, and naming AEP and its Affiliates as
additional named insureds. Buyer shall notify Sellers at least 60 days prior to the
end of the coverage period of its intention to not renew the above-described policy.
If such coverage is extended at the option and expense of Sellers, Sellers shall
have the sole right to modify and limit coverage at their discretion.






	5.6.  	Substitutions of Credit Support.
	 
	   	Buyer shall, within 30 days following the Closing Date, cause itself or one or more of
its Affiliates to be substituted in all respects for Sellers or one or more of their
Affiliates, as the case may be, in respect of all obligations of Sellers or any of their
Affiliates under each and every guaranty, indemnity agreement, surety bond, performance
bond, letter of credit, support agreement, keep-well agreement, third party collateral
assignment or other pledge of collateral, or other credit support arrangement of any kind
supporting the credit or facilitating the transactions of any of the HPL Companies in
connection with the Business (each a “Credit Support Arrangement”) and shall
cause Sellers and each of their Affiliates, as the case may be, to be discharged from all
obligations under any such Credit Support Arrangement. The Credit Support Arrangements
include those listed in Schedule 5.6 of Sellers’ Disclosure Schedules. If Buyer is
unable to timely effect such substitution with respect to any Credit Support Arrangement
on terms acceptable to Buyer, then Buyer will immediately obtain a letter of credit, on
terms and from a financial institution reasonably satisfactory to Sellers, with respect
to the obligations of Sellers and each of their Affiliates under such Credit Support
Arrangement.








			
	Purchase and Sale Agreement
	 	Page 37






 









 







	5.7.  	Claims for Certain Measurement Adjustments.
	 
	   	Buyer agrees to remit to Sellers, within 30 days of receipt, any amount receivable within
the 18 months following the Closing Date to correct any misallocation, calculation error,
measurement problem or similar event relating to performance prior to the Closing Date
under any of the HPL Companies’ contracts with gas suppliers, gas customers,
transportation customers, and storage customers. If any such amount is offset for any
reason, the amount so offset will be remitted within 30 days of the date on which the HPL
Companies receive credit as a result of such offset. Sellers will have the right to
direct Buyer and the HPL Companies in the administration of any contract provision
calling for any such a correction to the extent necessary to protect its interests under
this Section 5.7. At the expense of Sellers, Sellers shall have the right, in accordance
with this Section 5.7 and Section 5.1, to audit the records of the HPL Entities to
determine the existence of a right to any such correction and/or the details concerning
any such correction and for this purpose will have the right, in accordance with this
Section 5.7 and Section 5.1, to review, copy, abstract, and audit all relevant meter data
and other relevant information held by or available to the HPL Entities for the relevant
period. Buyer will provide Sellers and their representatives and advisors, at no expense
to Sellers, with all accounting services, assistance, and access to data during normal
business hours to the working papers, accounting, operating, and other books and records
of the HPL Entities, and the appropriate personnel to the extent required to exercise
Sellers’ rights under this Section 5.7. Pursuant to the Transition Services Agreement,
Buyer shall also ensure that the employees of Sellers (to the extent they continue to be
employed by Sellers or any Affiliate of Sellers and made available under the Transition
Services Agreement) previously involved with the foregoing accounting services and
operation activities will perform their customary and usual monthly tasks, including the
assistance in the month end closing of the books and records of the HPL Entities, during
the periods following the Closing Date for purposes of the foregoing. Buyer shall also
ensure that the Transferred Employees (to the extent they continue to be employed by
Buyer or any Affiliate of Buyer) previously involved with the foregoing accounting
services and operation activities will perform their customary and usual monthly tasks,
including the assistance in the month end closing of the books and records of the HPL
Entities, during the periods following the Closing Date for purposes of the foregoing.






	5.8.  	Discontinuance of Trademarks and Tradenames.
	 
	   	Any and all Intellectual Property owned by or licensed to the HPL Companies with respect
to the name “Houston Pipe Line Company” or the acronym “HPL” or any variation or
derivative thereof (the “Business Marks”) shall be retained by the HPL Companies
for their use after Closing. Effective upon Closing Sellers shall cause their
appropriate Affiliates to grant to the HPL Companies a non-exclusive, non-transferable,
non-sublicenseable, royalty-free right to display, solely in connection with the
Business, “AEP”, “American Electric Power” or any other similar trademarks, service
marks, and tradenames owned by or licensed to Sellers or any of their Affiliates (the
“Retained Marks”), for a period of time, not to exceed 6 months
from the Closing Date, as is reasonably necessary to promptly discontinue such






			
	Purchase and Sale Agreement
	 	Page 38






 









 







	   	display,
on any stationery, billing stock, signs, vehicles, pipeline markers, manuals, forms, or
in connection with the normal operation of computer software, but solely to the extent
and in the form that the Retained Marks exist or are contained thereon as of the Closing.
At the conclusion of such period, Buyer shall cause each of the HPL Companies to
discontinue display or other use of, and license to others of, the Retained Marks.
	 
	5.9.  	Change of Sellers’ Names.
	 
	   	At Closing each Seller will take all steps necessary to change its name effective as of
the Closing Date so as to eliminate any reference to “HPL”.
	 
	5.10.  	Required Notices.
	 
	   	Buyer will timely prepare and file or cause to be prepared and filed, at its own expense,
with a complete and contemporaneous copy to Sellers, all notices or other filings
required to be filed by any HPL Company or Buyer after Closing with any Governmental
Authority as a result of or with respect to the execution and delivery of this Agreement
or the Buyer’s Documents or the consummation of the Contemplated Transactions. Upon the
request of Buyer, Sellers will fully cooperate with Buyer in making any such filing.
	 
	5.11.  	Public Statements.
	 
	   	After the Closing Date, no party will issue any press release or make any public
disclosure concerning the Contemplated Transactions or the contents of this Agreement,
the Option Agreement, the Cushion Gas Litigation Agreement, the Guaranties, or the
Transition Services Agreement without the prior written consent of the other parties,
which shall not be unreasonably withheld. Notwithstanding the above, nothing in this
Section will preclude any party from making any disclosures required by Applicable Law or
necessary and proper in conjunction with the filing of any tax return or other document
required to be filed with any Governmental Authority or to comply with the regulations of
any securities exchange; provided, that the party required to make such disclosure shall
allow the other parties reasonable time to review and comment thereon in advance of such
disclosure.
	 
	5.12.  	Audit Matters.
	 
	   	Promptly following Closing, Sellers will provide representatives of Buyer, at no expense
to Sellers, with all assistance and access to data during normal business hours,
including accounting and other books and records of the HPL Entities and Sellers and the
appropriate personnel of Sellers and the HPL Entities, reasonably required by Buyer to
enable Buyer to prepare for the HPL Entities: (i) an audited balance sheet as may be
required or, in the judgment of Buyer, advisable to be filed by Buyer or any Affiliate of
Buyer in accordance with Regulation S-X under the Securities Act of 1933, as amended, and
related statements of income and cash flows for each of its then
three most recent fiscal years, or (ii) other financial statements (including without
limitation adjusted historical financial statements), in each case as may be required or






			
	Purchase and Sale Agreement
	 	Page 39






 









 







	   	advisable for filings with the Securities and Exchange Commission in compliance with
Regulation S-X in connection with or on account of the Contemplated Transactions. Buyer,
at its sole expense, shall engage independent auditors to undertake the above-described
audit, and if Buyer engages Deloitte & Touche, LLP, Sellers (at no expense to Sellers)
will authorize access to that firm’s working papers relating to its audit of AEP insofar
as they relate exclusively to Sellers and their direct and indirect subsidiaries. It is
expressly agreed that no Buyer representative, including the independent auditors engaged
by Buyer as contemplated by this Section 5.12, shall have access to any unpublished
accounting information or working papers other than those of Sellers and their direct or
indirect subsidiaries.
	 
	5.13.  	Post-Closing Title Review.






	 	5.13.1.  	Within 60 days following the Closing Date, Buyer may conduct a review of the HPL
Companies’ title to the real property interests described in Exhibit 5.13 to
this Agreement, and assert Title Defects against Sellers, in accordance with the
procedures set forth in this Section 5.13.
	 
	 	5.13.2.  	Prior to the expiration of the Defect Examination Period (as defined below),
Buyer shall furnish to Sellers written notice(s) (each, a “Defect Notice”)
specifying in reasonable detail each matter which, in Buyer’s opinion, constitutes a
Title Defect (including any and all reasonable supporting documentation), and which
Buyer wishes to assert as a Title Defect hereunder, together with the costs that
Buyer, in good faith, estimates to be the costs necessary to cure or remediate the
described Title Defects (each a “Defect Amount”). The “Defect
Examination Period” shall mean the period commencing on the Closing Date and
ending 30 days after such date. Any Title Defects not asserted by Buyer on or
before the expiration of the Defect Examination Period in accordance with this
Section 5.13 shall be deemed conclusively to be waived. Sellers shall have no
liability for any Defect Amount unless such Defect Amount exceeds $50,000 (a
“Qualifying Defect Amount”) and until and unless the sum of all Qualifying
Defect Amounts exceeds $1,000,000 (the “Title Threshold”) and then only to
the extent that such sum exceeds the Title Threshold, and Sellers’ liability
therefor is subject to the Sellers’ Cap.
	 
	 	5.13.3.  	Sellers shall provide a written response to Buyer within 30 days following the
expiration of the Defect Examination Period stating, with respect to each Title
Defect asserted in the Defect Notice(s), whether or not Sellers agree: (a) that the
alleged Title Defect constitutes a Title Defect under the terms of this Agreement;
and (b) that Buyer’s estimate of the Defect Amount attributable to each Title Defect
asserted by Buyer is acceptable to Sellers (the “Response Notice”). If
Sellers disagree with Buyer’s assertion of the existence of a Title Defect or the
Defect Amount with respect thereto, Sellers’ Response Notice shall also specify in
reasonable detail Sellers’ grounds for such disagreement, the Defect Amount
estimated in good faith
by Sellers therefor, or both, as the case may be. If Sellers do not include
in their Response Notice an objection to a Title Defect or to the Defect






			
	Purchase and Sale Agreement
	 	Page 40






 









 







	 	   	Amount, or if Sellers’ Response Notice agrees that the alleged Title Defect
constitutes a Title Defect under the terms of this Agreement and that Buyer’s
estimate of the Defect Amount is acceptable, then that Defect Amount shall be
the amount taken into consideration under Section 5.13.2, regardless of the
costs that Buyer in fact incurs in curing that Title Defect. Sellers and
Buyer will attempt in good faith to resolve any disagreements with respect to
the matters set forth in Buyer’s Defect Notice(s) and Sellers’ Response Notice
within 30 days following Buyer’s receipt of Sellers’ Response Notice. If
Sellers and Buyer are unable, within such 30 day period, to agree in writing
as to the existence or value, as applicable, of any Title Defect, the parties
agree to submit the dispute to the Independent Accounting Firm, which shall
employ persons who are independent of the parties hereto and are impartial and
experienced in the evaluation of matters of the type to be determined. The
decision of the Independent Accounting Firm with respect to the disputed
matters shall be final and binding on the parties. The parties will direct
the Independent Accounting Firm to render its decision with respect to such
matters within 15 days after the dispute is submitted, or such reasonably
longer period as the Independent Accounting Firm requires in its reasonable
discretion. Sellers and Buyer will each promptly provide all information and
documents within their respective possession that the Independent Accounting
Firm requests in order to make its decision with respect to the disputed
matters. The fees of the Independent Accounting Firm will be borne equally by
Sellers, on the one hand, and Buyer, on the other hand.
	 
	 	5.13.4.  	With respect to each Title Defect that has a Qualifying Defect Amount, Sellers
may, at their election, either remit to Buyer such Qualifying Defect Amount (after
satisfaction of the Title Threshold) or at Sellers’ sole cost and expense, and
subject to the prior consent of Buyer (such consent not to be unreasonably
withheld), cure within the Cure Period (as hereinafter defined) such Title Defect
asserted by Buyer for which Sellers are liable hereunder. The “Cure Period”
shall mean the period of time commencing on the expiration of the Defect Examination
Period and ending 180 days after such date. Immediately following the expiration of
the Cure Period, Sellers shall provide Buyer with written evidence of any curative
actions which, in Sellers’ determination, cure the Title Defect. On or before the
expiration of 15 days following Buyer’s receipt of such notice, Buyer shall
provide to Sellers in writing a list of those Title Defects asserted by Buyer
which Sellers claim to have cured pursuant to this Section, and which Buyer
determines not to have been cured. For a period of 30 days after Sellers’
receipt of Buyer’s notice of uncured Title Defects, Sellers and Buyer shall
attempt in good faith to resolve disputes as to such items by agreement. In
the event that the dispute concerning any uncured Title Defect is not resolved
within this 30 day period, then parties are unable to resolve all disputes
concerning the existence of Title Defects or Defect Amounts within this 30 day
period, then Sellers shall remit to Buyer the Qualifying
Defect Amount for such uncured Title Defect (after satisfaction of the Title
Threshold).






			
	Purchase and Sale Agreement
	 	Page 41






 









 







	5.14.  	Distributions to HPL Consolidation’s Partners.
	 
	   	During the period from the Closing Date through and including the Valuation Time, Buyers
will not cause or allow HPL Consolidation to make any distributions to its partners.
	 
	5.15.  	Agreement to Cover Open Positions.
	 
	   	In the event that either party determines, within 30 days following the Closing Date,
that any Fixed Price Risk as of the end of the trading day immediately before the Closing
Date is not hedged as of the Valuation Time, Sellers shall cause AEP Energy Services,
Inc. to provide (and Buyer will cause ETC Marketing, Ltd. to accept) offsetting hedges to
said Fixed Price Risk from the Closing Date. The obligation of Sellers to provide
offsetting hedges shall not apply to volume variances during February 2005 in the normal
course of business.
	 
	6.  	SURVIVAL; INDEMNIFICATION
	 
	6.1.  	Survival.






	 	6.1.1.  	Subject to the following, the representations and warranties of Sellers and Buyer
in this Agreement shall, without regard to any investigation made by any party,
survive the Closing Date; provided, however, that (i) the representations and
warranties set forth in Sections 3.1, 3.2.1, 3.2.2, 3.4, 3.6, 3.20, 3.21, 4.1,
4.2.1, 4.2.2, and 4.4 hereof shall survive indefinitely, (ii) the representations
and warranties set forth in Section 3.16 and Section 3.17.3 hereof shall survive for
a period of 90 days after the expiration of the applicable statute of limitations,
and (iii) the remainder of the representations and warranties of Sellers in Article
3 and Buyer in Article 4 shall survive the Closing until 12 months thereafter.
	 
	 	6.1.2.  	No claim for Damages or other relief of any kind, including a claim under Sections
6.2.1(i) or 6.3.1(i), arising out of or relating to any breach of representation or
warranty under this Agreement or otherwise arising out of any information alleged to
have been provided or not provided by Sellers or any of their Affiliates in
connection with this Agreement or the Contemplated Transactions (whether sounding in
contract, tort, breach of
warranty, securities law, other statutory cause of action, deceptive trade
practice, strict liability, product liability, or other theory of liability)
may be brought unless suit thereon is filed, or a written notice describing
the nature of the claim, the theory of liability or the nature of the relief
sought and the material factual assertions upon which the claim is based is
given to the other party, before the termination of the applicable Survival
Period.
	 
	 	6.1.3.  	The applicable survival period of each representation or warranty is provided in
Section 6.1.1 and each such period is referred to herein as a
“Survival Period”. Notwithstanding the foregoing, any representation
or warranty that would otherwise terminate shall survive for any Damages with
respect to which suit thereon is filed and process is served, or of
which 






			
	Purchase and Sale Agreement
	 	Page 42






 









 







	 	   	notice describing the nature of the claim, the theory of liability, or the
nature of the relief sought and the material factual assertions upon which the
claim is based is given pursuant to this Agreement, prior to the end of the
Survival Period until the matter is finally resolved and any related Damages
are paid.






	6.2.  	Indemnification by Seller.






	 	6.2.1.  	Except as otherwise provided in Article 7 below, Sellers jointly shall defend,
indemnify and hold Buyer, its Affiliates and respective successors and permitted
assigns, and their respective shareholders, members, partners (general and limited),
officers, directors, managers, employees, agents, and representatives, and each of
their heirs, executors, successors and assigns (“Buyer Indemnified Parties”)
harmless from and against and in respect of any and all actual damages relating to
any demands, claims, lawsuits, causes of action, losses, investigations and other
proceedings (whether or not before a Governmental Authority and whether or not
brought by a third party), including reasonable attorney’s fees (which shall not
include fees on a contingency basis), court costs and other documented out-of-pocket
expenses reasonably incurred investigating or preparing, but excluding in all cases
any special, indirect, incidental, consequential, or punitive damages (collectively,
“Damages”) which arise out of (i) any breach by any Seller of any of the
representations and warranties contained in this Agreement (except for the
representations and warranties set forth in Sections 3.16 (which shall be governed
by Article 7 hereof), (ii) any breach of any of the covenants of any Seller in this
Agreement, (iii) except to the extent that such liabilities are to be borne by Buyer
under Section 5.3.1(c) or pursuant to any Buyer Plans in accordance with the
requirements of Section 5.3 or otherwise, any liabilities or obligations with
respect to any employee of any Seller or with respect to any employee of any HPL
Entity if arising out of or related to employment by an HPL Entity prior to the
Closing Date, any contributions, payments or other obligations arising out of the
administration, sponsorship or participation of the Closing Workforce in any Benefit
Plan with respect to periods of service prior to the Closing Date, and, except as
provided in Section 5.3.1(c), any severance or other liabilities owed to any such
employee who does not become a Transferred Employee in accordance with Section 5.3,
(iv) any Proceeding pending or
which may be asserted with respect to any Retained Matter, but only to the
extent of Sellers’ Retained Matter Responsibility, (v) any personal injury or
property damage loss claims arising from the ownership or operations by the
HPL Companies of their assets or the Business prior to the Closing Date that
is first threatened, asserted, or brought after the Closing Date, (vi) any
obligations to make a correcting adjustment under any of the HPL Companies’
contracts with gas suppliers, gas customers, transportation customers, and
storage customers as a result of any misallocation,
calculation error, measurement problem or similar event relating to
performance under such contract prior to the Closing Date, (vii) other than
claims arising under this Agreement or any other agreement or arrangement






			
	Purchase and Sale Agreement
	 	Page 43






 









 









	 	   	entered into at or in connection with the Closing and claims under affiliate
transactions that are identified in Schedule 5.4 of Sellers’ Disclosure
Schedules, any claims by Sellers or any of their Affiliates or any of their
respective officers, directors, partners, shareholders or members, including
claims of any Person that served as an officer or manager of any HPL Company,
against any HPL Company to the extent such claims relate to the period of time
prior to the Closing Date or relate to the Contemplated Transactions,
specifically including claims under or with respect to any of the affiliate
transactions terminated in accordance with Sections 3.20 and 5.4, and (viii)
the failure, prior to the Closing Date, to obtain any of the Seller Consents
or HPL Company Consents required to be obtained prior to the Closing Date.
	 
	 	6.2.2.  	The foregoing obligation to indemnify Buyer Indemnified Parties set forth in
Section 6.2.1 shall be subject to each of the following limitations.






	 	(a)  	Sellers’ indemnification obligations under Section
6.2.1(i) shall be subject to the Survival Period limitations set forth in
Section 6.1.
	 
	 	(b)  	Sellers’ indemnification obligations set forth in
Section 6.2.1(v) shall be limited such that Sellers shall only be liable
thereunder to the extent that a written claim describing the nature of
the claim, the theory of liability, or the nature of the relief sought
and the material factual assertions upon which the claim is based is
given to Sellers prior to the first anniversary of the Closing Date.
	 
	 	(c)  	Sellers’ indemnification obligations set forth in
Section 6.2.1(vi) shall be limited such that Sellers shall only be liable
thereunder to the extent that a written claim describing the nature of
the claim, the theory of liability, or the nature of the relief sought
and the material factual assertions upon which the claim is based is
given to Sellers within 18 months following the Closing Date.
	 
	 	(d)  	Sellers’ indemnification obligations set forth in
Section 6.2.1(iii) shall be limited such that Sellers shall only be
liable thereunder to the extent that a written claim describing the
nature of the claim, the theory of liability, or the nature of the relief
sought and the
material factual assertions upon which the claim is based is given
to Sellers within 90 days after the expiration of the applicable
statute of limitations.
	 
	 	(e)  	No reimbursement or payment for any Damages
asserted against Sellers under Section 6.2.1(i) (other than for breach of
Sellers’ representations and warranties set forth in Sections 3.1, 3.2.1,
3.2.2, 3.4, 3.6, and 3.9.2, which are not subject to the Sellers’
Threshold) or 6.2.1(v) shall be required unless and until the
cumulative aggregate amount of such Damages for all claims






			
	Purchase and Sale Agreement
	 	Page 44






 









 







	 	   	arising
thereunder equals or exceeds $10,000,000 (the “Sellers’
Threshold”) and then only to the extent that the cumulative
aggregate amount of Damages, as finally determined, exceeds the
Sellers’ Threshold.
	 
	 	(f)  	Notwithstanding anything to the contrary contained
in this Agreement, Sellers’ aggregate liability to Buyer and its
Affiliates for all Damages under Sections 6.2.1(i) (other than for
breaches of Sellers’ representations and warranties set forth in Section
3.6, which are not subject to Sellers’ Cap), 6.2.1(v), and 6.2.1(vi) and
those items of Sellers’ Retained Matter Responsibility that are shown in
Sellers’ Disclosure Schedules to be subject to Sellers’ Cap shall not
exceed $220,000,000 (“Sellers’ Cap”).
	 
	 	(g)  	In addition to the limitation set forth in Section
6.2.2(e) above, Sellers’ indemnification obligations with respect to
Section 3.18 are subject to the additional limitations set forth below:






	 	(i)  	Sellers shall only be liable to the
extent that a claim is provided to Sellers in a reasonably
detailed written communication prior to the first anniversary of
the Closing Date and Buyer shall afford Sellers a reasonable
opportunity to evaluate the conditions giving rise to such claim.
	 
	 	(ii)  	Sellers shall not be responsible
for any Damages that arise out of any action to meet a cleanup or
remedial standard under any Environmental Law that is more
stringent or costly than necessary for the continued ownership or
use of any property or facility as it was last owned or used by
the HPL Entities prior to the Closing Date in compliance with
Environmental Laws applicable as of the Closing Date.
	 
	 	(iii)  	Sellers shall not be responsible
for any costs of any post-Closing construction, demolition, or
renovation of any facilities owned, leased, or operated by the
HPL Entities including any asbestos abatement obligations arising
from such activities, except to the extent that such activities
are
required to comply with Applicable Law, and such
non-compliance was a breach under Section 3.18.
	 
	 	(iv)  	Sellers shall be entitled, but not
obligated, to undertake and control, with Buyer Indemnified
Parties’ reasonable participation, any investigation, remediation
or other
action required by Environmental Laws (and any negotiation
with Governmental Authorities regarding same) with respect
to any matter to the extent covered by






			
	Purchase and Sale Agreement
	 	Page 45






 









 







	 	   	Sellers’
indemnification for a breach of Section 3.18, but in doing
so they must use their commercially reasonable efforts to
avoid any unreasonable interference with the operations of
Buyer, the HPL Entities, or any of their Affiliates. Buyer
Indemnified Parties shall cause the HPL Entities to afford
Sellers reasonable access to any relevant property or
facility to undertake any such investigation, remediation
or other action (it being understood that if Sellers do not
assume responsibility for undertaking actions pursuant to
this subsection, Buyer Indemnified Parties may undertake to
complete such actions in a reasonably cost effective
manner, and Sellers shall have a right to reasonable
participation in such undertaking). Sellers will promptly
repair and restore any damage to the property of an HPL
Entity caused by Sellers in connection with any such
investigation, remediation, or other action as close as
reasonably practicable to the former condition of such
property, and Sellers will indemnify Buyer and the HPL
Entities from and against any Damages related to or arising
from Sellers’ or their agents’ or employees’ performance of
the remediation work or their presence on the premises of
Buyer or the HPL Entities. Sellers will perform any
investigation, remediation, or other action undertaken by
Sellers hereunder in a reasonably diligent manner and in
compliance with all Applicable Laws, including
Environmental Laws.






	 	6.2.3.  	The indemnities provided in this Section 6.2 shall survive the Closing. The
indemnity provided in this Section 6.2 shall be the sole and exclusive remedy of the
indemnified party against the indemnifying parties at law or equity for any matter
covered by Section 6.2.1.
	 
	 	6.2.4.  	Except as otherwise set forth in Section 6.2, Buyer shall give Sellers prompt
written notice of any third party claim which may give rise to any indemnity
obligation under this Section, together with the estimated amount of such claim, and
Sellers shall have the right to assume the defense of any such claim through counsel
of their own choosing, by so notifying Buyer within 60 days of receipt of Buyer’s
written notice under this paragraph; provided, however, that Sellers’ counsel shall
be reasonably satisfactory to Buyer. Failure to give prompt notice shall not affect
the indemnification
obligations hereunder in the absence of actual prejudice. If Buyer desires to
participate in any such defense assumed by Sellers, it may do so at its sole
cost and expense but Sellers shall retain control of any assumed defense. If
Sellers decline to assume any such defense, they shall be liable for all
reasonable costs and expenses of defending such claim incurred by Buyer,
including reasonable fees and disbursements of counsel.






			
	Purchase and Sale Agreement
	 	Page 46






 









 







	 	6.2.5.  	Sellers shall have no indemnification obligation to Buyer with respect to any
Damages arising from or relating to the condition, remaining useful life, or
structural integrity of the pipeline or gas storage assets (or related equipment or
facilities) of the HPL Entities unless such Damages arise out of Sellers’ breach of
a representation or covenant in this Agreement.






	6.3.  	Indemnification by Buyer.






	 	6.3.1.  	Except as otherwise provided in Article 7 below, Buyer shall defend, indemnify and
hold each Seller, their respective Affiliates and respective successors and
permitted assigns, and their respective shareholders, members, partners (general and
limited), officers, directors, managers, employees, agents, and representatives, and
each of their heirs, executors, successors and assigns (“Seller Indemnified
Parties”) harmless from and against and in respect of any and all Damages which
arise out of (i) any breach of any of the representations and warranties contained
in this Agreement, (ii) any breach of any of the covenants of Buyer in this
Agreement, (iii) activities of the HPL Companies after the Closing Date except to
the extent any liability with respect thereto is included in Sellers’ Retained
Matter Responsibility or is otherwise the responsibility of Sellers under another
express provision of this Agreement, and (iv) any liability incurred or amount paid
by AEP or any of its Affiliates under any Credit Support Agreement with respect to
events or circumstances arising after the Closing Date.






	 	6.3.2.  	The foregoing obligation to indemnify Seller Indemnified Parties set forth in
Section 6.3.1 shall be subject to each of the following limitations:






	 	(a)  	Buyer’s indemnification obligations under Section
6.3.1(i) shall be subject to the Survival Period limitations set forth in
Section 6.1.
	 
	 	(b)  	No reimbursement or payment for any Damages
asserted against Buyer under Sections 6.3.1(i) or 6.3.1(iii) shall be
required unless and until the cumulative aggregate amount of such Damages
for all claims arising thereunder equals or exceeds $10,000,000 (the
“Buyer’s Threshold”) and then only to the extent that the
cumulative aggregate amount of Damages, as finally determined, exceeds
the Buyer’s Threshold.
	 
	 	(c)  	Notwithstanding anything to the contrary contained
in this Agreement, Buyer’s liability to Seller Indemnified Parties for
Damages in excess of Buyer’s Threshold under Section 6.3.1(i) shall
not exceed $220,000,000 (“Buyer’s Cap”).






	 	6.3.3.  	Sellers shall give Buyer prompt written notice of any third party claim which may
give rise to any indemnity obligation under this Section, together with the
estimated amount of such claim, and Buyer shall have the






			
	Purchase and Sale Agreement
	 	Page 47






 









 







	 	   	right to assume the defense
of any such claim through counsel of its own choosing, by so notifying Sellers
within 60 days of receipt of Sellers’ written notice under this paragraph; provided,
however, that Buyer’s counsel shall be reasonably satisfactory to Sellers. Failure
to give prompt notice shall not affect the indemnification obligations hereunder in
the absence of actual prejudice. If Sellers desire to participate in any such
defense assumed by Buyer they may do so at their sole cost and expense. If Buyer
declines to assume any such defense, it shall be liable for all costs and expenses
of defending such claim incurred by Sellers, including reasonable fees and
disbursements of counsel. No party shall, without the prior written consent of the
other parties, which shall not be unreasonably withheld, settle, compromise or offer
to settle or compromise any such claim or demand on a basis which would result in
the imposition of a consent order, injunction or decree which would restrict the
future activity or conduct of the parties or any Affiliate thereof or if such
settlement or compromise does not include an unconditional release of the other
parties for any liability arising out of such claim or demand.
	 
	 	6.3.4.  	The indemnities provided in this Section 6.3 shall survive the Closing. The
indemnity provided in this Section 6.3 shall be the sole and exclusive remedy of the
indemnified parties against the indemnifying party at law or equity for any matter
covered by Section 6.3.1.





     6.4. Indemnification Net of Benefits; Mitigation Obligations of Indemnitee.



     The Damages recoverable by any Indemnified Party under this Article 6 shall be calculated
after giving effect to the actual receipt of any available insurance proceeds, third
party indemnification or contribution payment, or other similar right of recovery
(collectively, “Recoveries”) paid or payable to the Indemnified Party. In
computing the amount of any Recovery, (i) such Recovery shall be reduced by a reasonable
estimate of the present value of future insurance premium increases that the Indemnified
Party may reasonably expect to bear to the extent attributable to the payment of
insurance proceeds included in the Recovery and (ii) insurance proceeds which are
ultimately borne by the Indemnified Party under any self-insurance, retrospective
premium, deductible or comparable arrangement shall not be taken into account. In all
cases in which a Person is entitled to be indemnified under this Article 6, such
Indemnified Party shall be under a duty to take all commercially reasonable measures to
mitigate all such Damages.




	7.  	TAX MATTERS
	 
	7.1.  	Tax Indemnification.






	 	7.1.1.  	In accordance with Section 7.3 hereof and except to the extent that such
liabilities are included in the computation of Net Working Capital, Sellers shall
indemnify and hold Buyer and its Affiliates harmless from and against (i) all
liability for Taxes of, or pertaining or attributable to the HPL






			
	Purchase and Sale Agreement
	 	Page 48






 









 







	 	   	Companies with
regard (x) to all taxable periods ending as of or prior to the Closing Date (the
“Pre-Closing Period”) (y) with respect to any Tax period beginning prior to
the Closing and ending after the Closing (the “Straddle Period”), the
portion of Taxes attributable to the portion of such taxable period beginning before
(but not ending on) the Closing Date shall be calculated as though the tax year
terminates as of Closing; provided, however, that in the case of a Tax not based on
income, receipts, proceeds, profits, or similar items, such Taxes shall be equal to
the amount of Tax for the taxable period multiplied by a fraction, the numerator of
which shall be the number of days from the beginning of the taxable period up to but
not including the Closing Date and the denominator of which shall be the total
number of days in the taxable period; and (ii) all Taxes arising out of or related
to a breach of any of the representations and warranties set forth in Section 3.16
of this Agreement.
	 
	 	7.1.2.  	Except for any Liabilities associated with Sellers’ Retained Interest in each HPL
Entity after the Closing and any Liabilities for which Sellers are required to
indemnify Buyer under Section 7.1.1 hereof, Buyer shall indemnify and hold Sellers
and each of their Affiliates harmless from and against any and all Taxes of, or
pertaining or attributable to, the HPL Entities with respect to any taxable period
that begins on or after the Closing.






	7.2.  	Preparation and Filing of Tax Returns.






	 	7.2.1.  	With respect to any Tax which is based on federal income, any Tax election
relating thereto, and with respect to any Tax accounting method, for any Pre-Closing
Period, Sellers, without the consent of Buyer, shall be entitled to file any amended
Tax Return with respect to any Tax which Sellers deem appropriate, as determined in
Sellers’ sole discretion, provided that no filing may change the status of any HPL
Companies as disregarded entities for federal income tax purposes. For all other
Taxes, either Buyer or Sellers, as appropriate, shall be entitled to file an amended
Tax Return provided that: (i) Buyer may not amend a Tax Return in such a manner that
would cause Sellers to have any indemnification obligations under Section 7.1.1
hereof, and further provided that no filing may change the status of any HPL
Companies as disregarded entities for federal income tax purposes for any
Pre-Closing Period, and (ii) Sellers may not amend any Tax Return for a Tax not
based on income without the consent of Buyer which consent shall not be unreasonably
withheld. To the extent not made for previous tax years, Sellers agree to make a
timely and valid 754 election for MidTexas Pipeline Company for the period ending
December 31, 2004. Sellers shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the HPL Companies for all Pre-Closing Periods, and shall pay all Taxes due
with respect to such Tax Returns except to the extent that the liability for
such Taxes is included as a liability in the computation of Net Working
Capital.






			
	Purchase and Sale Agreement
	 	Page 49






 









 







	 	7.2.2.  	Buyer and Sellers agree to provide such assistance as may reasonably be requested
by such other party in connection with the preparation of any Tax Return, any audit
or other examination by any taxing authority, or any judicial or administrative
proceedings relating to liability for Taxes, and any deadline imposed by this
Agreement on Buyer or Sellers in connection with the preparation of any Tax Return,
any audit or other examination by any taxing authority, or any judicial or
administrative proceedings relating to liability for Taxes will be extended as
appropriate in light of any party’s failure to promptly make such assistance
available, and each will retain and provide the requesting party with any records or
information which may be relevant to such return, audit or examination, proceedings
or determination. Any information obtained pursuant to this Section 7.2.2 or
pursuant to any other Section hereof providing for the sharing of information
relating to or review of any Tax Return or other schedule relating to Taxes shall be
kept confidential hereto in accordance with Section 8.2.






	7.3.  	Procedures Relating to Indemnification of Tax Claims.






	 	7.3.1.  	If a claim regarding liability for a Tax or with respect to a Tax Return shall be
made by any Governmental Authority, for which Sellers are or may be liable pursuant
to this Agreement, Buyer shall notify Sellers in writing within 10 Business Days of
receipt by Buyer of notice of such claim (a “Tax Claim”).
	 
	 	7.3.2.  	With respect to any Tax Claim, Sellers, at Sellers’ expense, shall control all
proceedings taken in connection with such Tax Claim (including selection of
counsel), and Buyer shall execute or cause to be executed powers of attorney or
other documents necessary to enable Sellers to take all actions that do not
materially adversely affect Buyer or the HPL Companies with respect to such Tax
Claim. Sellers shall permit Buyer to participate in (but not control) such
proceedings through counsel chosen by Buyer (but the fees and expenses of such
counsel shall be paid by Buyer). Sellers may in their sole discretion pursue or
forego any and all administrative appeals, proceedings, hearings and conferences
with any taxing authority with respect to such Tax Claim, and may initiate any claim
for refund, file and amended return, or take any other action which is deemed
appropriate by Sellers with respect to such Tax Claim, provided such actions do not
materially adversely affect Buyer or the HPL Companies.
	 
	 	7.3.3.  	Buyer and its Affiliates (including after the Closing, the HPL Companies), on the
one hand, and Sellers, on the other hand, shall cooperate with each other in
contesting any Tax Claim, which cooperation shall include, without limitation, the
retention and, at the contesting party’s request and expense, the provision of
records and information which are reasonably relevant to
such Tax Claim, and making employees available on a mutually convenient basis
to provide additional information or explanation of any material provided
hereunder or to testify at proceedings relating to such Tax Claim.






			
	Purchase and Sale Agreement
	 	Page 50






 









 







	7.4.  	Tax Refunds and Credits.
	 
	   	Any refund or credits of Taxes paid or payable that are attributable to the HPL Companies
for any Pre-Closing Period will be for the account of Sellers. Any refunds or credits of
Taxes paid or payable that are attributable to the HPL Companies for any other taxable
period will be for the account of Buyer and Seller with respect to each Buyer’s interest
in and Sellers’ Retained Interest in each HPL Entity. Buyer shall, if Sellers so request
and at Sellers’ expense, cause the HPL Entities to file for and obtain any refunds or
credits to which Sellers are entitled. Buyer shall cause the HPL Entities to forward to
Sellers any such refund within 10 days after the refund is received (or reimburse Sellers
for any such credit within 10 days after the credit is applied against another Tax
liability); provided, however, that Sellers shall indemnify Buyer in accordance with
Section 7.3 hereof for any amount paid pursuant to this Section 7.4 if any such refund or
credit is subsequently disallowed.
	 
	7.5.  	Tax Treatment of Payments.
	 
	   	The Parties shall treat any indemnification payment made pursuant to this Agreement as a
purchase price adjustment for Tax purposes.
	 
	7.6.  	Transfer Taxes.
	 
	   	All Transfer Taxes incurred in connection with this Agreement and the transactions shall
be borne by the person upon whom such tax is imposed by Applicable Law. Sellers shall
file, to the extent required by Applicable Law, all necessary Tax Returns and other
documentation with respect to such Transfer Taxes. Buyer shall, to the extent required
by Applicable Law, join in the execution of any such Tax Return. For purposes of this
Agreement, “Transfer Taxes” shall mean transfer, documentary, sales, use,
registration, and other such taxes (including all applicable real estate transfer taxes).
Prior to the Closing Date, Buyer shall provide to Sellers appropriate exemption
certificates in connection with this Agreement and the Contemplated Transactions with
respect to each applicable Taxing Authority.
	 
	7.7.  	Termination of Participation in Tax Allocation Agreement.
	 
	   	As of the Closing Date, none of the HPL Entities will be parties to that certain
agreement known as the American Electric Power Company, Inc. and Its Consolidated
Affiliates Tax Agreement under Title 17, Chapter II of the Code of Federal Regulations
Paragraph (c) of Section 250.45 Regarding Method of Allocating Consolidated Income Taxes
and said agreement shall have no further effect for any
taxable year of any HPL Company (whether there is an adjustment for the current year, a
future year, or a past year).
	 
	7.8.  	Allocation of the Purchase Price.
	 
	   	The Purchase Price will be allocated in accordance with Exhibit 7.8 hereto.
After the Closing, the parties will make consistent use of the allocation, fair market
value, and useful lives specified in Exhibit 7.8 hereto for all Tax purposes and
in all Tax Returns,






			
	Purchase and Sale Agreement
	 	Page 51






 









 







	   	including those required by section 1060 of the Code. Buyer will
prepare and deliver IRS Form 8594 to Sellers within 45 days after the Closing Date. The
Form 8594 will be amended, subject to the mutual consent of both parties, from time to
time to reflect any adjustments subsequently made to the Purchase Price. In any
Proceeding relating to the determination of any Tax, neither Buyer nor any Seller
contend, agree, or represent that such allocation is not a correct allocation or agree to
any allocation other than that set out in the Form 8594 as amended from time to time.
	 
	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:





	 	 	 
	If to HPL Storage LP:

	 	HPL Storage LP
	

	 	c/o American Electric Power Company, Inc.
	

	 	Attention: Chief Financial Officer
	

	 	1 Riverside Plaza
	

	 	Columbus, OH 43215
	

	 	Facsimile No.: (614) 716-1603
	 
	 	 
	with copy to:

	 	Clark, Thomas & Winters, P.C.
	

	 	Attention: C. Joseph Cain
	

	 	300 West 6th Street, 15th Floor
	

	 	Austin, Texas 78701
	

	 	Facsimile No.: (512) 474-1129
	 
	 	 
	with copy to:

	 	American Electric Power Company, Inc.
	

	 	Attention: Randy G. Ryan
	

	 	1 Riverside Plaza
	

	 	Columbus, Ohio 43215
	

	 	Facsimile No.: (614) 583-1603
	 
	 	 
	If to AEP Energy
Services Gas Holding

	 	AEP Energy Services Gas Holding Company II, L.L.C.
	Company II, L.L.C.:

	 	c/o American Electric Power Company, Inc.
	

	 	Attention: Chief Financial Officer
	

	 	1 Riverside Plaza
	

	 	Columbus, OH 43215
	

	 	Facsimile No.: (614) 716-1603







			
	Purchase and Sale Agreement
	 	Page 52






 









 






	 	 	 
	with copy to:

	 	Clark, Thomas & Winters, P.C.
	

	 	Attention: C. Joseph Cain
	

	 	300 West 6th Street, 15th Floor
	

	 	Austin, Texas 78701
	

	 	Facsimile No.: (512) 474-1129
	 
	 	 
	with copy to:

	 	American Electric Power Company, Inc.
	

	 	Attention: Randy G. Ryan
	

	 	1 Riverside Plaza
	

	 	Columbus, Ohio 43215
	

	 	Facsimile No.: (614) 583-1603
	 
	 	 
	If to Buyer:

	 	La Grange Acquisition, L.P.
	

	 	Attention: Clay Kutch
	

	 	2838 Woodside Street
	

	 	Dallas, Texas 75204
	

	 	 
Facsimile No.: (214)-981-0703
	 
	 	 
	with copy to:

	 	Hunton & Williams LLP
	

	 	Attention: Joe A. Davis
	

	 	Energy Plaza, 30th Floor
	

	 	1601 Bryan Street
	

	 	Dallas, Texas 75201
	

	 	Facsimile No.: (214) 880-0011
	 
	 	 
	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







	 
	   	Any notices will be sent to the address or facsimile number when permitted, as specified
in this Agreement or at such other address or facsimile number for a party as it may
specify in writing to the other parties from time to time. Any notice properly given to
the proper address will be deemed to have been given when dispatched.
	 
	8.2.  	Confidentiality.
	 
	   	Each of the parties hereby agrees, except in order to comply with Applicable Law and any
applicable stock exchange rules and regulations, not to disclose (or permit any of their
Affiliates to disclose), in whole or in part, this Agreement or any information






			
	Purchase and Sale Agreement
	 	Page 53







 










 







	   	disclosed
by one party to the other parties during the period beginning on the effective date of
the Confidentiality Agreement and ending on the Closing Date and which constituted or
would constitute “Confidential Information” under the Confidentiality Agreement
(collectively, the “Confidential Information”) to any Person, other than an
Affiliate of a party who requires such Confidential Information in connection with the
consummation of Contemplated Transactions, for a period of 2 years from the Closing Date
without having first obtained the prior written consent of the disclosing party.
Additionally, each of the parties hereby agrees not to use (or permit any of its
Affiliates to use) any of the Confidential Information for any purpose other than the
exercise of that party’s rights and the performance of its obligations under this
Agreement and the consummation of the Contemplated Transactions, including the conduct by
Buyer and its Affiliates of the Business. Additionally, Sellers agree not to disclose,
except in order to comply with Applicable Law and any applicable stock exchange rules and
regulations, or use (or permit any of their Affiliates to so disclose or use), for a
period of 2 years from the Closing Date, any information and documents relating to the
Business that are of a proprietary nature to Sellers, the HPL Companies, or their
Affiliates, including market and competitive information, customer lists, technology,
know how, and trade secrets (collectively, the “Business Information”), and to
otherwise treat such information and documents as Confidential Information for all
purposes hereunder. Each of the parties further agrees to protect the Confidential
Information by using the same degree of care, but not less than a reasonable degree of
care, to prevent the unauthorized use, dissemination, or publication of the Confidential
Information as such party uses to protect its own confidential information of a like
nature. The provisions of this Section 8.2 impose no obligation upon a party with
respect to specific Confidential Information which (a) except for Business Information in
possession of Sellers, was in such party’s possession before receipt from the disclosing
party as evidenced by written records; (b) is or becomes a matter of public knowledge
through no fault of such party; (c) except for Business Information in possession of
Sellers, is rightfully obtained by such party from a third party who represents that it
is free to pass on such information without a duty of confidentiality and the receiving
party has no knowledge of any such duty of confidentiality; (d) is disclosed by the
disclosing party to a third party without a duty of confidentiality on the third party;
or (e) except for Business Information in possession of Sellers, is independently
developed by such party as evidenced by written records. It is understood and agreed
that the terms of this Section 8.2 shall apply to, and the terms of the Confidentiality
Agreement shall not be applicable to, any Confidential Information disclosed by one party
to the other parties after the date hereof.
	 
	8.3.  	Schedules and Exhibits.
	 
	   	All Schedules and Exhibits hereto are incorporated herein by reference and made a part of
this Agreement. Any fact or item which is disclosed in any part of any Schedule or
Exhibit hereto or in the HPL Financial Statements or the notes thereto will be deemed to
have been disclosed in every part of such Schedules and Exhibit where it is reasonably
apparent that such fact or item is relevant to the matters there under consideration,
notwithstanding the omission of a reference or cross-reference thereto.





	 	 	 
	Purchase and Sale Agreement

	 	Page  54






 









 







	8.4.  	Interest on Overdue Amounts.
	 
	   	Any amount due to a party under this Agreement will earn interest accruing daily from the
due date thereof until paid at the Borrowing Rate.
	 
	8.5.  	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.
	 
	8.6.  	Merger and Integration; Binding on Successors; No Third Party Beneficiaries; Assignment.
	 
	   	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
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. The terms and conditions of this Agreement will inure to the
benefit of and be binding upon the respective permitted successors and 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. No party to this Agreement
shall have the right to assign this Agreement, or any of its rights or obligations
hereunder, without the written consent of the other parties (such consent not to be
unreasonably withheld); provided, however, that without the consent of the other parties,
a party hereto may assign this Agreement, and its rights and obligations hereunder, to an
Affiliate of such party but, in such event, the assigning party will not be released from
its obligations hereunder.
	 
	8.7.  	Forbearance and Waiver.
	 
	   	Except where a specific time period is provided hereunder for the exercise of a right or
remedy, 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.
	 
	8.8.  	Partial Invalidity.
	 
	   	Any invalidity, illegality or unenforceability of any provision of this Agreement in any
jurisdiction will not invalidate or render illegal or unenforceable the remaining
provisions hereof in such jurisdiction and will not invalidate or render illegal or
unenforceable such provision in any other jurisdiction.
	 
	8.9.  	Attorney’s Fees.
	 
	   	In the event of any suit, action, or arbitration proceedings (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





	 	 	 
	Purchase and Sale Agreement

	 	Page  55






 









 







	   	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 arbitration and
litigation expended in the prosecution or defense thereof.
	 
	8.10.  	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 contemplated hereby, and to the extent
permitted by Applicable Law (and assuming effective service of process), each party
hereto hereby waives and agrees not to assert by way of motion, as a defense or otherwise
in any such suit, action, or proceeding, any claim that it is not personally subject to
the jurisdiction of such court, that the suit, action, or proceeding is brought in an
inconvenient forum, that the venue of the suit, action, or proceeding is improper, or
that this Agreement or any document or instrument referred to herein or the subject
matter hereof may not be litigated in or by such court. 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.
	 
	8.11.  	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.
	 
	8.12.  	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.
	 
	8.13.  	Multiple Counterparts.
	 
	   	This Agreement may be executed by the parties in multiple original counterparts, and each
such counterpart will constitute an original hereof.
	 
	8.14.  	Further Assurances.
	 
	   	Upon request from time to time, Sellers and Buyer shall execute or cause to be executed
and delivered such other documents and instruments and do such other acts





	 	 	 
	Purchase and Sale Agreement

	 	Page  56






 









 







	   	as may be
reasonably necessary or appropriate to consummate the Contemplated Transactions.
	 
	8.15.  	Headings.
	 
	   	The headings used in this Agreement have been inserted for convenience of reference only
and do not define or limit the provisions hereof.





[The remainder of this page is intentionally left blank.

The next page of this document is S-1]




	 	 	 
	Purchase and Sale Agreement

	 	Page  57






 









 






	 	 	 	 	 	 	 	 	 
	Executed to be effective as provided above:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	HPL Storage LP	 	AEP Energy Services Gas Holding Company II, L.L.C.
	 
	 	 	 	 	 	 	 	 
	By:	 	HPL Storage, Inc.
	 	By:	 	HPL Storage LP, its Sole Member
	 	 	its General Partner	 	 	 	By: HPL Storage, Inc., its General Partner
	By:

	 	
	 	 	 	 	 	 
	Name: Ronald A. Erd	 	 	 	By:	 	

	Title: President	 	 	 	Name: Ronald A. Erd
	 	 	 	 	 	 	Title: President
	 
	 	 	 	 	 	 	 	 
	La Grange Acquisition, L.P.	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	LA GP, LLC,

its General Partner	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	
	 	 	 	 	 	 
	Name:

	 	
	 	 	 	 	 	 
	Title:

	 	
	 	 	 	 	 	 






	 	 	 
	Purchase and Sale Agreement

	 	Page  S-1






 









 






EXHIBIT 1.1




DEFINITIONS




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



	 	 	 
	TERM	 	DEFINITION
	1. AEP

	 	American Electric Power Company, Inc.
	 
	 	 
	2. AEP Gas Holding II

	 	As defined in the first paragraph of the Agreement.
	 
	 	 
	3. AEPSC

	 	As defined in Section 2.4.1(f) of the Agreement.
	 
	 	 
	4. Affiliate

	 	An “Affiliate” of a Person is any Person directly or
indirectly controlling, controlled by, or under
common control with the first such Person. For the
purposes of this definition, “control,” when used
with respect to any specified Person, means the power
to direct the management and policies of such Person,
directly or indirectly, whether through the ownership
of voting securities, by contract, or otherwise; and
the terms “controlling” and “controlled” have
meanings correlative to the foregoing.
	 
	 	 
	5. Agreement

	 	This Purchase and Sale 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.
	 
	 	 
	6. Applicable Law

	 	Any statute, law, ordinance, executive order, rule,
or regulation (including a regulation that has been
formally promulgated in a rule making proceeding but,
pending final adoption, is in proposed or temporary
form having force of law); guideline or notice having
force of law; or approval, permit, license,
franchise, judgment, order, decree, injunction, or
writ of any Governmental Authority applicable to a
specified Person or specified property, as in effect
from time to time.
	 
	 	 
	7. Assignment and Assumption
Agreement

	 	As defined in Section 2.4.1(a) of the Agreement.
	 
	 	 
	8. Bammel Documents

	 	As defined in the Cushion Gas Litigation Agreement.
	 
	 	 
	9. Bammel Facilities

	 	An underground natural gas storage reservoir located
near Houston, Texas, known as the Bammel storage
reservoir,
and certain appurtenant pipelines,
compressors, wells, pipes, and other equipment and
related facilities






	 	 	 
	Purchase and Sale Agreement, Exhibit 1.1

	 	Page  1






 









 






	 	 	 
	TERM	 	DEFINITION
	10. Bammel Gas Inventory
Verification

	 	As defined in paragraph 1.1 of
Exhibit 2.2.4 of the
Agreement.
	 
	 	 
	11. Bammel Inventory
Recomputation Event

	 	As defined in Section 2.2.4(c) of the Agreement.
	 
	 	 
	12. Bammel Settlement
Agreement

	 	As defined in the Cushion Gas Litigation Agreement.
	 
	 	 
	13. Bammel Settlement
Approval Order

	 	As defined in the Cushion Gas Litigation Agreement.
	 
	 	 
	14. Benefit Plans

	 	As defined in Section 3.17.3 of the Agreement.
	 
	 	 
	15. Borrowing Rate

	 	The lesser of the prime rate as
published in The Wall
Street Journal, or the maximum rate permitted by
Applicable Law.
	 
	 	 
	16. Business

	 	As defined in Recital B of the Agreement.
	 
	 	 
	17. Business Day

	 	Any day other than a Saturday, Sunday, or Holiday.
	 
	 	 
	18. Business Information

	 	As defined in Section 8.2 of the Agreement.
	 
	 	 
	19. Business Insurance
Policies

	 	As defined in Section 3.12 of the Agreement.
	 
	 	 
	20. Buyer

	 	As defined in the first paragraph of the Agreement.
	 
	 	 
	21. Buyer Indemnified Parties

	 	As defined in Section 6.2.1 of the Agreement.
	 
	 	 
	22. Buyer Plans

	 	As defined in Section 5.3.2(b) of the Agreement.
	 
	 	 
	23. Buyer’s Cap

	 	As defined in Section 6.3.2(c) of the Agreement.
Those certain disclosure schedules delivered by Buyer
	 
	 	 
	24. Buyer’s Disclosure
Schedules

	 	to Sellers concurrently with Buyer’s execution and
delivery of the Agreement.
	 
	 	 
	25. Buyer’s Documents

	 	As defined in Section 4.2.1 of the Agreement.
	 
	 	 
	26. Buyer’s Guarantor

	 	As defined in Section 2.4.2(h) of the Agreement.
	 
	 	 
	27. Buyer’s Limited Guaranty

	 	As defined in Section 2.4.2(h) of the Agreement.






	 	 	 
	Purchase and Sale Agreement, Exhibit 1.1

	 	Page  2






 









 






	 	 	 
	TERM	 	DEFINITION
	28. Buyer’s Statement of
Recomputed Bammel Inventory

	 	As defined in Section 2.2.4(c) of the Agreement.
	 
	 	 
	29. Buyer’s Threshold

	 	As defined in Section 6.3.2(b) of the Agreement.
	 
	 	 
	30. Cause

	 	As defined in Section 5.3.1(b) of the Agreement
	 
	 	 
	31. Closing

	 	As defined in Section 2.3 of the Agreement.
	 
	 	 
	32. Closing Date

	 	As defined in Section 2.3 of the Agreement.
	 
	 	 
	33. Closing Payment

	 	As defined in Section 2.2.2 of the Agreement.
	 
	 	 
	34. Closing Workforce

	 	As defined in Section 3.17.1 of the Agreement.
	 
	 	 
	35. COBRA

	 	Section 4980B of the Code and Title 1, Subtitle B,
Part 6 of ERISA, each as amended.
	 
	 	 
	36. Code

	 	The Internal Revenue Code of 1986, as amended from
time to time, and regulations or other Applicable Law
promulgated thereunder.
	 
	 	 
	37. Commonly Controlled Entity

	 	As defined in Section 3.17.3 of the Agreement.
	 
	 	 
	38. Confidential Information

	 	As defined in Section 8.2 of the Agreement.
	 
	 	 
	39. Confidentiality Agreement

	 	That certain Confidentiality Agreement dated as of
December 16, 2004 between AEPSC, as agent for the
Affiliates of AEP and Energy Transfer Partners, L.P.
	 
	 	 
	40. Contemplated Transactions

	 	Each and all of the transactions contemplated by this
Agreement to be undertaken between or among the
parties hereto.
	 
	 	 
	41. Continuation Period

	 	With respect to each Transferred Employee, the period
from each such employee’s Hire Date through the last
day of the month in which occurs the first
anniversary of such Hire Date.
	 
	 	 
	42. Credit Support Arrangement

	 	As defined in Section 5.6 of the Agreement.
	 
	 	 
	43. Cure Period

	 	As defined in Section 5.13 of the Agreement.
	 
	 	 
	44. Current Assets

	 	As defined in
Exhibit 2.2.3 to the Agreement.






	 	 	 
	Purchase and Sale Agreement, Exhibit 1.1

	 	Page  3






 









 






	 	 	 
	TERM	 	DEFINITION
	45. Current Liabilities

	 	As defined in
Exhibit 2.2.3 to the Agreement.
	 
	 	 
	46. Cushion Gas Litigation

	 	As defined in the Cushion Gas Litigation Agreement.

	 
	 	 
	47. Cushion Gas Litigation
Agreement

	 	That certain Cushion Gas Litigation Agreement dated
as of the date of the Agreement by and among Sellers, Buyer, Storage Holdings, Storage Leaseco, HPL Company
LP, and HPL Resources LP.
	 
	 	 
	48. Damages

	 	As defined in Section 6.2.1 of the Agreement.
	 
	 	 
	49. Defect Amount

	 	As defined in Section 5.13 of the Agreement.
	 
	 	 
	50. Defect Examination Period

	 	As defined in Section 5.13 of the Agreement.
	 
	 	 
	51. Defect Notice

	 	As defined in Section 5.13 of the Agreement.
	 
	 	 
	52. Disclosed Environmental
Matters

	 	As defined in Section 3.18 of the Agreement.
	 
	 	 
	53. Disclosed HPL Contract

	 	As defined in Section 3.11.1 of the Agreement.
	 
	 	 
	54. Disclosure Schedules

	 	Those certain disclosure schedules delivered by
Sellers to Buyer concurrently with Sellers’ execution
and delivery of the Agreement.
	 
	 	 
	55. Employee Review Period

	 	As defined in Section 5.3.1 of the Agreement.
	 
	 	 
	56. Encumbrance

	 	Any lien, security interest, mortgage, pledge,
hypothecation, assignment, easement, right-of-way,
servitude, other encumbrance, equitable interest,
charge, restrictive covenant, mineral interest,
community or other marital property interest, right
of first refusal or similar restriction, option,
contractual provision, provision of Governing
Documents, provision of Applicable Law, or other
restriction or matter affecting title to the involved
property or the freedom to dispose of any interest in
or use the involved property or exercise voting
rights associated therewith.
	 
	 	 
	57. Environmental Claims

	 	Any claim for remediation, containment, removal, or
disposal costs or other direct costs incurred as a
result of a violation of Environmental Laws and any
third-party claims by any Person, including any
Governmental Authority, for damages (including,
without limitation, punitive damages), losses,
penalties, fines, interest, fees,






	 	 	 
	Purchase and Sale Agreement, Exhibit 1.1

	 	Page  4






 









 






	 	 	 
	TERM	 	DEFINITION
	

	 	liabilities
(including strict liability), taxes, costs and
expenses (including, without limitation, costs and
expenses of investigation and defense of any claim)
based on a violation of Environmental Laws.
	 
	 	 
	58. Environmental Laws

	 	As defined in Section 3.18.1 of the Agreement.
	 
	 	 
	59. EPA

	 	As defined in Section 3.18.2 of the Agreement.
	 
	 	 
	60. ERISA

	 	The Employee Retirement Income Security Act of 1974,
as amended.
	 
	 	 
	61. Exchange Imbalances

	 	The aggregate of all imbalances as of the
determination date under transportation agreements or
operational balancing agreements, expressed as a
positive number if such aggregate sum of such
imbalances is a net receivable or expressed as a
negative number if such aggregate sum is a net
payable but excluding any such imbalances accounted
for as Gas Inventory.
	 
	 	 
	62. FERC

	 	The Federal Energy Regulatory Commission.
	 
	 	 
	63. Final Balance Sheet

	 	As defined in Section 2.2.3(b) of the Agreement.

	 
	 	 
	64. Final Inventory
Adjustment Amount

	 	An amount equal to (i) the amount of the Gas
Inventory as determined under Section 2.2.4(e) of the Agreement and expressed in MMBtus minus (ii)
31,200,000 MMBtus.

	 
	 	 
	65. Final Inventory Payment
Adjustment

	 	A dollar amount equal to (i) Final Inventory
Adjustment Amount, multiplied by (ii) (a) in the case
that the Final Inventory Adjustment Amount is a
positive number, $5.601 or (b) in the case that the Final Inventory Adjustment Amount is a negative
number, $5.601 plus $0.40 per MMBtu.
	 
	 	 
	66. Fixed Price Risk

	 	Those financial and physical gas purchase and sale
agreements of the HPL Entities in place as of the
Closing Date, which contain a currently determined
fixed price, a currently determined fixed basis, or
price caps and/or floors with currently determined
strike prices.
	 
	 	 
	67. GAAP

	 	Generally Accepted Accounting Principles for
financial reporting as in effect as of the Valuation
Time in the United States, applied on a consistent
basis. Any change in GAAP that becomes effective
after the date hereof will not be taken into account
in the use of GAAP under Section 2.2.3 of the
Agreement for the computation of the Net Working
Capital Adjustment, and any such a computation will
be made by application of GAAP as in effect on the
date of this Agreement.






	 	 	 
	Purchase and Sale Agreement, Exhibit 1.1

	 	Page  5






 









 






	 	 	 
	TERM	 	DEFINITION
	68. Gas Inventory

	 	The volume of natural gas owned by the HPL Entities
as of the determination date, wherever located, but
excluding 10.5 bcf of cushion gas in the Bammel
Facilities and excluding line pack.
	 
	 	 
	69. Gas Marketing

	 	As defined in Recital A of the Agreement.

	 
	 	 
	70. General Exceptions to
Enforceability

	 	Limitations on or exceptions to the enforceability of
an agreement or instrument by (i) bankruptcy,
insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting creditors’
rights, or (ii) general principles of equity relating
to the availability of equitable remedies (regardless of whether such agreement or instrument is sought to
be enforced in a proceeding at law or in equity).
	 
	 	 
	71. Governing Documents

	 	With respect to a particular Person, (i) if a
corporation, the articles or certificate of
incorporation and the bylaws; (ii) if a general
partnership, the partnership agreement and any
statement of partnership; (iii) if a limited
partnership, the limited partnership agreement and
the certificate of limited partnership; (iv) if a
limited liability company, the articles of
organization and operating agreement or regulations;
(v) if another type of Person, any other charter or
similar document promulgated, adopted, or filed in
connection with the creation, formation, or
organization of the Person; (vi) all equityholders’
agreements, voting agreements, voting trust
instruments, joint venture agreements, registration
rights agreements, or other agreements or documents
relating to the organization, management, or
operation of the Person or relating to the rights,
duties, or obligations of the equityholders of the
Person, and (vii) any amendment or supplement to any
of the foregoing.
	 
	 	 
	72. Governmental Authority

	 	Any federal, state, foreign, tribal, local, or
municipal governmental body; and any governmental,
regulatory, or administrative agency, commission,
body, agency, instrumentality, or other authority
exercising or entitled to exercise any executive,
judicial, legislative, administrative, regulatory, or
taxing authority or power, including any court or
other tribunal.
	 
	 	 
	73. Hazardous Substances

	 	As defined in Section 3.18.2 of the Agreement.






	 	 	 
	Purchase and Sale Agreement, Exhibit 1.1

	 	Page  6






 









 






	 	 	 
	TERM	 	DEFINITION
	74. Hire Date

	 	As defined in Section 5.3.1 of the Agreement.
	 
	 	 
	75. Holiday
76. HPL Companies

	 	Any day on which banking institutions located in the
City of Houston, Texas are authorized or required to
close for business.

	 
	 	 
	
76. HPL Companies

	 	
The HPL Entities and the HPL Entity Subsidiaries,
collectively.
	 
	 	 
	77. HPL Company Consents

	 	As defined in Section 3.5.2 of the Agreement.
	 
	 	 
	78. HPL Company LP

	 	As defined in Recital A of the Agreement.
	 
	 	 
	79. HPL Consolidation

	 	As defined in Recital A of the Agreement.
	 
	 	 
	80. HPL Entities

	 	As defined in Recital A of the Agreement.
	 
	 	 
	81. HPL Entity Subsidiaries

	 	AEP Houston Pipe Line Company, LLC, a Delaware
limited liability company, and Mid Texas Pipeline
Company, a Texas general partnership.
	 
	 	 
	82. HPL Financial Statements

	 	As defined in Section 3.7 of the Agreement.
	 
	 	 
	83. HPL GP

	 	As defined in the first paragraph of the Agreement.
	 
	 	 
	84. HPL Resources

	 	As defined in Recital A of the Agreement.
	 
	 	 
	85. HPL Subsidiary Interests

	 	The membership and partnership interests of the HPL
Entities in and to the HPL Entity Subsidiaries.
	 
	 	 
	86. Independent Accounting
Firm

	 	KPMG Peat Marwick or, if such firm is unable or
unwilling to serve, another nationally recognized
firm of independent public accountants that is
willing to serve to be selected by mutual agreement
of the parties hereto (which firm shall not be the
auditor for any party to the Agreement or any
Affiliate of any such party unless disclosed to each
other party and agreed to by such other parties and
will otherwise be selected by mutual agreement of the
parties hereto).
	 
	 	 
	87. Initial Inventory Payment

	 	As defined in Section 2.2.4(a) of the Agreement.
	 
	 	 
	88. Initial Net Working
Capital Payment

	 	As defined in Section 2.2.3(a) of the Agreement.
	 
	 	 
	89. Intellectual Property

	 	As defined in Section 3.15 of the Agreement.






	 	 	 
	Purchase and Sale Agreement, Exhibit 1.1

	 	Page  7






 









 






	 	 	 
	TERM	 	DEFINITION
	90. Inventory Finalization
Event

	 	As defined in Section 2.2.4(c) of the Agreement.
	 
	 	 
	91. Inventory Payment

	 	As defined in Section 2.2.4 of the Agreement.
	 
	 	 
	92. Inventory Verification
Notice

	 	As defined in Section 2.2.4(c) of the Agreement.
	 
	 	 
	93. Knowledge

	 	As to any Seller, “Knowledge” means the actual
knowledge of any of the individuals listed in
Sellers’ Disclosures Schedules as “Sellers’ Knowledge
Group” or any other presently serving officer, member
of the board of directors, or limited liability
company manager of such Seller or the HPL Companies
that such Seller directly or indirectly owned before
the Closing Date, and the knowledge that such
individual would have obtained as a result of the
proper operation of reporting procedure concerning
the business of Sellers or the HPL Entities that was
not grossly negligent. As to Buyer, “Knowledge”
means the actual knowledge of any presently serving
officer or manager of Buyer or its general partner,
and the knowledge that such individual would have
obtained as a result of the proper operation of
reporting procedure concerning the business of Buyer
that was not grossly negligent.
	 
	 	 
	94. Material Adverse Effect

	 	A material adverse effect on the business,
operations, properties, financial condition, or
results of operations of the aggregate Business as
conducted by the HPL Companies, excluding any effect
relating to or resulting from (i) any event affecting
the local, regional, or United States or global
economy or financial or capital markets generally,
(ii) any change in the natural gas transportation,
storage, and marketing business generally, including
the availability of or any changes in prices for
commodities, goods or services, or the availability
or cost of hedges, (iii) the condition or integrity
of any of the pipeline or storage assets of the HPL
Entities, or (iv) changes in Applicable Law.
	 
	 	 
	95. Material Assets

	 	As defined in Section 3.10 of the Agreement.
	 
	 	 
	96. Material HPL Contracts

	 	As defined in Section 3.11.1 of the Agreement.
	 
	 	 
	97. Net Working Capital

	 	As defined in
Exhibit 2.2.3 to the Agreement.
	 
	 	 
	98. Net Working Capital
Adjustment

	 	As defined in Section 2.2.3(b) of the Agreement.






	 	 	 
	Purchase and Sale Agreement, Exhibit 1.1

	 	Page  8






 









 






	 	 	 
	TERM	 	DEFINITION
	99. Net Working Capital
Payment

	 	As defined in Section 2.2.3 of the Agreement.
	 
	 	 
	100. NGA

	 	As defined in Section 3.19 of the Agreement.
	 
	 	 
	101. Offer of Employment

	 	As defined in Section 5.3.1 of the Agreement.
	 
	 	 
	102. Option Agreement

	 	As defined in Section 2.4.1(e) of the Agreement.
	 
	 	 
	103. Ordinary Course of
Business

	 	An action taken by a Person if that action (i) is
consistent in nature, scope, and magnitude with past
practices of that Person and is taken in the ordinary
course of the normal, day-to-day operations of such
Person’s existing lines of business, and (ii) is
similar in nature, scope, and magnitude to actions
customarily taken in the ordinary course of the
normal, day-to-day operations of other Persons that
are in the same line of business as such Person.
	 
	 	 
	104. Permit

	 	Any permit, license, franchise, certificate, or other
authorization, consent, order, or approval, or
variance therefrom or waiver thereof, in each case
from a Governmental Authority.
	 
	 	 
	105. Permitted Contest

	 	Any Proceeding if and only so long as while such
Proceeding or any appeal therefrom is pending (i)
there shall be no material danger that the involved
property or any portion thereof is subject to sale,
forfeiture or loss, and (ii) no material restrictions
are imposed on the use of such property.
	 
	 	 
	106. Permitted Encumbrance

	 	Any of the following affecting title to the involved
property or the freedom to dispose of any interest in
or use the involved property: (i) any of the items
described in Exhibit 3.10 to the Agreement; (ii) any
Encumbrance securing any obligation of Buyer or any
of its Affiliates; (iii) with respect to any property
other than the Purchased Interests (A) any lien
securing the payment of taxes, assessments and other
governmental charges or levies which are either not
delinquent or, if delinquent, are being contested in
good faith as a Permitted Contest; (B) any
materialmen’s, mechanic’s, worker’s, repairmen’s,
employee’s, carrier’s, warehouseman’s or other like
lien relating to the construction of the property or
in connection with any maintenance, repair,
improvement, addition, alteration to, or other
services or materials relating to, the property, or
arising in the ordinary course of business for






	 	 	 
	Purchase and Sale Agreement, Exhibit 1.1

	 	Page  9






 









 






	 	 	 
	TERM	 	DEFINITION
	

	 	amounts in respect of the foregoing that are not more
than 30 days past due or are being contested as a
Permitted Contest; (C) any lien arising out of
judgments or awards with respect to which appeals or
other proceedings for review are being prosecuted in
good faith, so long as such proceedings have the
effect of staying the execution of such judgments or
awards; (D) any obligation or liability of a
shareholder, member, or partner imposed by an
entity’s Governing Documents, any security interest
and other Encumbrance created by or under an entity’s
Governing Documents upon any equity interest in that
entity, or any limitation, condition, or restriction
imposed by law or by or under an entity’s Governing
Documents upon the transfer, assignment, collateral
transfer, or other disposition of any equity interest
in that entity; (E) any zoning or other land use
ordinance that does not materially impair the conduct
of the normal operations of the Business; or (F) any
subdivision and platting restrictions, easements,
rights-of-way, licenses, restrictions on the use of
any of the involved property, or encroachments or
irregularities of title, none of which individually
or in the aggregate could reasonably be expected to
materially impair the conduct of the normal
operations of the Business; and (iii) any other or
additional matter as may be approved in writing by
all parties properly interested therein.
	 
	 	 
	107. Person

	 	Any individual, corporation, partnership, limited
liability company, other business organization of any
kind, association, trust, or governmental entity,
agency, or instrumentality.
	 
	 	 
	108. Pre-Closing Period

	 	Any taxable period ending before or as of the Closing.
	 
	 	 
	109. Proceeding

	 	Any action, arbitration proceeding, audit, hearing,
investigation, inquiry, litigation, or suit (in each
such case whether civil, criminal, administrative,
judicial, or investigative and whether formal or
informal, public or private) commenced, brought,
conducted, or heard by or before any Governmental
Authority or arbitrator.
	 
	 	 
	110. Purchase Price

	 	As defined in Section 2.2.1 of the Agreement.
	 
	 	 
	111. Purchased Interests

	 	As defined in Section 2.1 of the Agreement.
	 
	 	 
	112. Qualifying Defect Amount

	 	As defined in Section 5.13 of the Agreement.






	 	 	 
	Purchase and Sale Agreement, Exhibit 1.1

	 	Page  10






 









 






	 	 	 
	TERM	 	DEFINITION
	113. Recomputed Bammel
Inventory

	 	As defined in Section 2.2.4(c) of the Agreement.
	 
	 	 
	114. Recoveries

	 	As defined in Section 6.4 of the Agreement.
	 
	 	 
	115. Release

	 	As defined in Section 3.18.2 of the Agreement.
	 
	 	 
	116. Required Severance
Benefits

	 	Benefits payable under the program
of severance benefits described in a separate writing delivered to
Buyer at or before Closing.
	 
	 	 
	117. Resolution Period

	 	As defined in Sections 2.2.3(b), 2.2.4(d), and
2.2.4(e) of the Agreement, as applicable.
	 
	 	 
	118. Response Notice

	 	As defined in Section 5.13 of the Agreement.
	 
	 	 
	119. Retained Interest

	 	As defined in Section 2.1 of the Agreement.
	 
	 	 
	120. Retained Marks

	 	As defined in Section 5.8 of the Agreement.
	 
	 	 
	121. Retained Matter
Liabilities

	 	As defined in Section 5.2 of the Agreement.
	 
	 	 
	122. Retained Matters

	 	As defined in Section 5.2 of the Agreement.
	 
	 	 
	123. Seller Indemnified
Parties

	 	As defined in Section 6.3.1 of the Agreement.
	 
	 	 
	124. Sellers

	 	As defined in the first paragraph of the Agreement.
	 
	 	 
	125. Sellers’ Cap

	 	As defined in Section 6.2.2(f) of the Agreement.
	 
	 	 
	126. Sellers’ Consents

	 	As defined in Section 3.2.4 of the Agreement.
	 
	 	 
	127. Sellers’ Disclosure
Schedules

	 	Those certain disclosure schedules delivered by
Sellers to Buyer concurrently with Sellers’ execution
and delivery of the Agreement.
	 
	 	 
	128. Sellers’ Documents

	 	As defined in Section 3.2.1 of the Agreement.
	 
	 	 
	129. Sellers’ Guarantor

	 	As defined in Section 2.4.1(g) of the Agreement.
	 
	 	 
	130. Sellers’ Limited Guaranty

	 	As defined in Section 2.4.1(g) of the Agreement.
	 
	 	 
	131. Sellers’ Retained Matter
Responsibility

	 	As defined in Section 5.2 of the Agreement.






	 	 	 
	Purchase and Sale Agreement, Exhibit 1.1

	 	Page  11






 









 






	 	 	 
	TERM	 	DEFINITION
	132. Sellers’ Threshold

	 	As defined in Section 6.2.2(e) of the Agreement.
	 
	 	 
	133. Storage GP

	 	As defined in Recital A of the Agreement.
	 
	 	 
	134. Storage Holdings

	 	As defined in Recital A of the Agreement.
	 
	 	 
	135. Storage Leaseco

	 	As defined in Recital A of the Agreement.
	 
	 	 
	136. Storage LP

	 	As defined in the first paragraph of the Agreement.
	 
	 	 
	137. Straddle Period

	 	As defined in Section 7.1.1 of the Agreement.
	 
	 	 
	138. Survival Period

	 	As defined in Section 6.1.3 of the Agreement.
	 
	 	 
	139. Swap Agreement

	 	As defined in Section 2.4.2(i) of the Agreement.
	 
	 	 
	140. Tax

	 	(i) Any federal, state, local, or foreign income,
gross receipts, value added, windfall or other
profits, alternative or add-on minimum, estimated,
franchise, profits, sales, use, real property,
personal property, ad valorem, vehicle, airplane,
boat, license, payroll, employment, workers’
compensation, unemployment compensation, withholding,
social security, disability, excise, severance,
stamp, occupation, premium, environmental (including
taxes under Code section 59A), customs duties, import
fees, capital stock transfer, title, documentary, or
registration, or other tax, duty, or impost of any
kind whatsoever, whether disputed or not. “Taxes”
includes (ii) any liability for the payment of any
amounts described in clause (i) above as a result of
being a member of an affiliated, consolidated,
combined, or unitary group for any taxable period,
(iii) any liability for the payment of any amount
described in clause (i) above as a result of being a
Person required to withhold or collect Taxes imposed
on another Person, (iv) any liability for the payment
of any amount described in clause (i), (ii) or (iii)
above as a result of being a transferee of, or
successor in interest to, any Person or as a result
of an express or implied obligation to indemnify any
Person, and (v) any and all interest, penalties,
additions to tax, or additional amounts imposed in
connection with or with respect to any amount
described in clauses (i) through (iv) of this
definition.
	 
	 	 
	141. Tax Claim

	 	As defined in Section 7.3.1 of the Agreement
	 
	 	 
	 
	 	 
	142. Tax Return

	 	Any return, declaration, report, claim for refund, or information return or statement (including, but not limited






	 	 	 
	Purchase and Sale Agreement, Exhibit 1.1

	 	Page  12






 









 






	 	 	 
	TERM	 	DEFINITION
	

	 	to, information returns or reports related to
back-up withholding and any payments to third
parties) relating to Taxes, including any schedule or
attachment thereto, and including any amendment
thereof.
	 
	 	 
	143. Terminating Insurance
Coverages

	 	As defined in Section 5.5 of the Agreement.
	 
	 	 
	144. Title Defect

	 	Any Encumbrance (other than a Permitted Encumbrance)
upon or against the HPL Companies’ title to the real
property interests described in Exhibit 5.13 to this
Agreement that would cause Buyer not to have good and
marketable title to such real property interests.
The foregoing notwithstanding, any defect in title to
an easement or right-of-way will not constitute a
Title Defect if the HPL Company’s rights to maintain
its pipeline and facilities on, under, and over the
involved land are at least equal to industry standard
for such rights in Texas and if such defect does not
and is not reasonably likely to prohibit or interfere
with the use thereof in accordance with past
practice.
	 
	 	 
	145. Title Threshold

	 	As defined in Section 5.13 of the Agreement.
	 
	 	 
	146. Transfer Taxes

	 	As defined in Section 7.6 of the Agreement.
	 
	 	 
	147. Transferred Employees

	 	As defined in Section 5.3.1 of the Agreement.
	 
	 	 
	148. Transition Services
Agreement

	 	As defined in Section 2.4.1(f) of the Agreement.
	 
	 	 
	149. Valuation Time

	 	The end of the gas day for January 31, 2005, which
ends at 9:00 a.m. Central Standard Time on February
1, 2005.
	 
	 	 
	150. Valuation Time Adjustment

	 	As defined in Section 2.2.4(b) of the Agreement.
	 
	 	 
	151. Valuation Time
Adjustment Amount

	 	As defined in Section 2.2.4(b) of the Agreement.
	 
	 	 
	152. Valuation Time Estimate

	 	As defined in Section 2.2.4(b) of the Agreement.
	 
	 	 
	153. Verified Bammel Gas
Inventory

	 	As defined in paragraph 2.1 of
Exhibit 2.2.4 of the
Agreement.
	 
	 	 
	154. WARN Act

	 	As defined in Section 5.3.3 of the Agreement.
	 
	 	 
	155. Wells

	 	As defined in Section 2.2.4(c) of the Agreement.






	 	 	 
	Purchase and Sale Agreement, Exhibit 1.1

	 	Page  13






 









 






EXHIBIT 2.2.3




NET WORKING CAPITAL





	1.  	Net Working Capital will be the net aggregate balance, as of the determination date, of the
Current Assets as defined in Section 2 of this Exhibit 2.2.3 less the Current
Liabilities as defined in Section 2 of this Exhibit 2.2.3.
	 
	2.  	“Current Assets” means the current assets of the HPL Entities as of the determination
date, including any positive Exchange Imbalances (but excluding (i) intercompany accounts
between the HPL Entities, on the one hand, and AEP and its Affiliates, on the other including
the AEP System Amended and Restated Non-Utility Money Pool Agreement (ii) the Gas Inventory,
(iii) balance sheet accounts reflecting unrealized gains, if any, (iv) federal income Tax
receivables and state income or franchise Tax receivables, including refunds or credits of
Taxes that are attributable to the HPL Entities or for any Pre-Closing Period and are payable
to Sellers or their Affiliates pursuant to the terms set forth in Section 7.4 of the
Agreement, and (v) any other Current Assets which Seller will retain under the terms of the
Agreement including prepaid insurance, AEP Procurement Card balances and any employee-related
balances), in each case as reflected on combined balance sheets of the HPL Entities as of such
date as determined pursuant to GAAP, applied in a manner consistent with the preparation of
the Financial Statements, except that the exceptions to GAAP described in Section 1 of this
Exhibit 2.2.3 will be made. “Current Liabilities” means the current
liabilities of the HPL Entities as of the determination date, including any negative Exchange
Imbalances and including accruals for state and local property, sales, and excise taxes (but
excluding (vi) intercompany accounts between the HPL Entities, on the one hand, and AEP and
its Affiliates, on the other including the AEP System Amended and Restated Non-Utility Money
Pool Agreement (vii) balance sheet accounts reflecting unrealized losses, if any, (viii)
accruals for federal income Taxes, (ix) federal income Taxes or state income or franchise
Taxes that are attributable to the HPL Entities for any Pre-Closing Period which are payable
by Sellers or their Affiliates pursuant to the terms set forth in Section 7.1.1 of the
Agreement, (x) accruals for vacation benefits, and (xi) other current liabilities which Seller
will pay under the terms of the Agreement including employee related liabilities and incentive
compensation plan accruals), in each case as reflected on the combined balance sheets of the
HPL Entities as of such date as determined pursuant to GAAP, applied in a manner consistent
with the preparation of the Financial Statements, except that the exceptions to GAAP described
in Section 3 of this Exhibit 2.2.3 will be made.
	 
	3.  	State sales, property, and other excise Taxes will be accrued through the Valuation Time in
accordance with GAAP using a level accrual of the liability then expected for the tax period
during which the Valuation Time occurs.





	 	 	 
	Purchase and Sale Agreement, Exhibit 2.2.3

	 	Page  1






 









 






EXHIBIT 2.2.4




GAS INVENTORY MATTERS





	1.  	The following procedures and methods will be used in the determination of the Gas Inventory:






	1.1.  	If inventory verification pursuant to Section 2.2.4(c) of the Agreement (the “Bammel Gas
Inventory Verification”) is performed, but the Verified Bammel Gas Inventory, determined
pursuant to paragraph 2.1 of this Exhibit, is not more than 1.03 and not less than 0.97 times
that portion of the Gas Inventory as of the Valuation Time that was stored in the Bammel
Facilities according to the most current perpetual gas inventory records, then Gas Inventory
is as reflected on the HPL Entities’ perpetual gas inventory records.






	2.  	The following procedures and methods will be used to conduct the Bammel Gas Inventory
Verification:






	2.1.  	The portion of the Gas Inventory as of the Valuation Time that was stored in the Bammel
Facilities (the “Verified Bammel Gas Inventory”) will be determined by the following
calculation:






	 	2.1.1.  	Volume in MMBtus of the Gas Inventory stored in the Bammel Facilities, as of the
verification date, as verified by Wells pursuant to Section 2.2.4(c) of the
Agreement in accordance with paragraph 2.2 of this Exhibit;
	 
	 	2.1.2.  	minus 65.5 BCF cushion gas in MMBtus;
	 
	 	2.1.3.  	minus third party inventory in the Bammel Facilities at the Valuation Time in
MMBtus as reflected on the perpetual inventory records as adjusted for the Valuation
Time.
	 
	 	2.1.4.  	minus injections into the Bammel Facilities between the Valuation Time and the
verification date in MMBtus as determined from the gas measurement records;
	 
	 	2.1.5.  	plus withdrawals from the Bammel Facilities between the Valuation Time and the
verification date in MMBtus as determined from the gas measurement records; and
	 
	 	2.1.6.  	plus or minus any applicable inventory adjustments occurring between the Valuation
Time and the verification date as determined from the gas measurement records.





	 	 	 
	Purchase and Sale Agreement, Exhibit 2.2.4

	 	Page  1






 









 







	   	Volumes will be determined in mmcf and will be converted to MMBtus as follows:
	 
	   	The conversion will be based on the heat content as reflected on Sellers’ perpetual gas
inventory records.
	 
	2.2.  	Procedures for the Bammel Gas Inventory Verification.
	 
	   	The Verified Bammel Gas Inventory will be calculated by Wells using the same methods
(including a shut-in period of at least 14 days) and assumptions as were used in the
preparation by Wells of its report on the Bammel storage facility dated August 3, 2004.





	 	 	 
	Purchase and Sale Agreement, Exhibit 2.2.4

	 	Page  2






 









 






EXHIBIT 2.4.1(A)

FORMS OF ASSIGNMENT AND ASSUMPTION AGREEMENT




	 	 	 
	Purchase and Sale Agreement, Exhibit 2.4.1(a)

	 	Page  1






 









 






EXHIBIT 2.4.1(E)

FORM OF OPTION AGREEMENT




	 	 	 
	Purchase and Sale Agreement, Exhibit 2.4.1(e)

	 	Page  1






 









 






EXHIBIT 2.4.1(F)

FORM OF TRANSITION SERVICES AGREEMENT




	 	 	 
	Purchase and Sale Agreement, Exhibit 2.4.1(f)

	 	Page  1






 









 






EXHIBIT 2.4.1(G)

FORM OF SELLERS’ LIMITED GUARANTY




	 	 	 
	Purchase and Sale Agreement, Exhibit 2.4.1(g)

	 	Page  1






 









 






EXHIBIT 2.4.2(H)

FORM OF BUYER’S LIMITED GUARANTY




	 	 	 
	Purchase and Sale Agreement, Exhibit 2.4.2(h)

	 	Page  1






 









 






EXHIBIT 2.4.2(I)

FORM OF SWAP AGREEMENT SCHEDULE AND ANNEX




	 	 	 
	Purchase and Sale Agreement, Exhibit 2.4.2(i)

	 	Page  1






 









 






EXHIBIT 3.10




CERTAIN PERMITTED ENCUMBRANCES





	   	Seven Oaks Lateral Pipeline is subject to a Lease and Operating Agreement dated July 1,
1995, as amended by amendment dated November 1, 1998, which includes the right of the
lessee to purchase a portion of the pipeline upon 90 days notice prior to July 1, 2010.






	 	 	 
	Purchase and Sale Agreement, Exhibit 3.10

	 	Page  1






 









 






EXHIBIT 5.13




CERTAIN REAL PROPERTY INTERESTS





	1.  	The rights of way and easements of the HPL Companies in which is located the pipeline
described in Section 2.1.1(a) of Schedule 3.10 of Sellers’ Disclosure Schedules.






	2.  	The fee title interest of the HPL Companies in the land under which is located the Bammel
storage reservoir described in Section 2.1.2 of Schedule 3.10 of Sellers’ Disclosure
Schedules.






	3.  	The rights of way and easements of the HPL Companies in which is located the pipeline
described in Section 2.2.2 of Schedule 3.10 of Sellers’ Disclosure Schedules.






	4.  	The rights of way and easements of the HPL Companies in which are located the pipelines
described in Section 2.4 of Schedule 3.10 of Sellers’ Disclosure Schedules other than the 300
miles of “A/S Line.”





	 	 	 
	Purchase and Sale Agreement, Exhibit 5.13

	 	Page  1






 









 






EXHIBIT 7.8




ALLOCATION OF PURCHASE PRICE




	 	 	 	 	 	 	 	 
	 	Assets comprising the Bammel Facilities

	 	 	No less than $320,000,000,
of which $10,000,000 is
allocated to cushion gas of

approximately 10.5 BCF
	 
	 	50%
general partnership interest 
in MidTexas Pipeline Company

	 	 	$30,000,000	 	 	 
	 	To all other tangible assets

	 	 	Residual purchase price
	 
	 





	 	 	 
	Purchase and Sale Agreement, Exhibit 7.8

	 	Page  1