exv10w12



 





Exhibit 10.12




TARGA LIQUIDS MARKETING AND TRADE




PRODUCTS PURCHASE AGREEMENT




EFFECTIVE DATE: January 1, 2007




	 	 	 
	Seller:

	 	Targa North Texas LP
	 

	 	1000 Louisiana, Suite 4300
	 

	 	Houston, TX 77002-5050
	 

	 	Fax No. (713) 584-1503
	 

	 	Attn: Contracts Administration
	 
	 	 
	Buyer:

	 	Targa Liquids Marketing and Trade
	 

	 	1000 Louisiana, Suite 4300
	 

	 	Houston, TX 77002-5050
	 

	 	Fax No. (713) 584-1503
	 

	 	Attn: Contracts Administration







	1.	 	SALE AND PURCHASE





     Seller agrees to sell and deliver to Buyer, and Buyer agrees to purchase and receive from
Seller, the Products on the terms and conditions set forth in this Products Purchase Agreement (the
“Agreement”).




	2.	 	TERM





     This Agreement shall commence on the Effective Date and shall continue in full force and
effect for one hundred eighty (180) Months thereafter (the “Initial Term”). At the end of the
Initial Term, this Agreement shall automatically be extended for successive sixty (60) Month terms,
unless either Party shall have given the other Party no less than one hundred twenty (120) Days
written notice of its intent to terminate this Agreement prior to the end of (i) the Initial Term,
or (ii) the then-current sixty (60) Month extension term, as applicable (the Initial Term, as
extended by any sixty (60) Month extension terms, the “Term”).




	3.	 	TERMS OF SALE AND PURCHASE






	 	3.1.	 	VOLUMES – COMMITMENT & DEDICATION





     Seller shall commit and dedicate, for sale to Buyer under this Agreement, all volumes of
Products owned or controlled by Seller, including such volumes as are produced at the Originating
Facility; provided, however, with respect to High Pressure Condensate, Seller shall have the right
to retain all or a portion of such Product for sale to third parties at its sole election.




	 	3.2.	 	DELIVERY OF PRODUCTS





     Buyer may elect to receive Product from Seller as follows:




	 	(a)	 	Raw Product:






	 	(i)	 	At the tailgate of the Originating Facility
into a Raw Product Pipeline designated by Buyer.
	 
	 	(ii)	 	At the truck rack of the Originating Facility
onto tank trucks provided by Buyer.




1









 












	 	(b)	 	High Pressure Condensate:






	 	(i)	 	At the tailgate of the Originating Facility
into a Raw Product Pipeline designated by Buyer.
	 
	 	(ii)	 	At the truck rack of the Originating Facility
onto tank trucks provided by Buyer.






	 	(c)	 	For Specification Products:






	 	(i)	 	At the truck rack of the Chico Plant onto tank
trucks provided by Buyer.
	 
	 	(ii)	 	At the tailgate of the Chico Plant into a Raw
Product Pipeline designated by Buyer.
	 
	 	(iii)	 	At the tailgate of the Chico Plant into a
crude oil or NGL Component Pipeline designated by Buyer.






	 	3.3.	 	CHICO FRACTIONATION FEE





     In the event that Buyer elects to take delivery of Specification Products at the Chico Plant
by truck or by injection into a crude oil or NGL Component Pipeline, in addition to the Product
price described at Section 4.1(a), Buyer shall pay Seller the Chico Fractionation Fee or the
Adjusted Chico Fractionation Fee, as applicable. There shall be no fractionation fee paid to
Seller for Specification Products designated by Buyer to be re-injected into a Raw Product Pipeline
at the tailgate of the Chico Plant.




	 	3.4.	 	SHIPMENT





     Buyer shall procure transportation for all Products from the applicable Originating Facility
to the applicable Destination.




	 	3.5.	 	ODORIZATION





     Seller shall odorize all propane delivered by tank truck unless Buyer requests that specific
loads be delivered unodorized. Seller shall not odorize Products delivered via Pipelines or
Specification Products (other than propane) delivered by tank truck, unless Buyer requests that
specific loads to be delivered odorized. With respect to Products delivered unodorized hereunder,
Buyer certifies, pursuant to 49 C.F.R. Sec. 173.315(b)(1), that odorization of such Products will
be harmful in the use or further processing of such Products, and that odorization will serve no
useful purpose as a warning agent in such use or further processing. Buyer agrees to comply with
all legal requirements (including 49 C.F.R. Sec. 173.315(b)(1)) concerning odorization that are
applicable to Buyer’s further use or distribution of Products delivered by Buyer under this
Agreement and any Products derived therefrom by, or on behalf of, Buyer from and after the physical
receipt of same at the Originating Facility by Buyer or Buyer’s designees.



     Seller, its suppliers, and/or the personnel at the Originating Facility where the tank trucks
are to be loaded are hereby authorized to load tank trucks furnished or arranged by Buyer, or its
designees, with unodorized liquefied petroleum gas and/or natural gas liquids.



4. PRICE




     4.1. PRICE DETERMINATION




	 	 	Buyer shall pay to Seller for each Gallon of Product delivered under this Agreement a price
for each Gallon calculated as follows:




2









 












	 	(a)	 	Chico Price: For Specification Products from the Chico
Plant that will not be further fractionated at Mont Belvieu, an amount equal
to:
	 
	 	 	 	Sale Price per Gallon of the applicable Products minus the sum of (i) the
Marketing Fee, (ii) the Transportation Costs, and (iii) the Chico
Fractionation Fee.
	 
	 	(b)	 	Mont Belvieu Price: For all other Products an amount
equal to:
	 
	 	 	 	OPIS Index Price for the applicable Products minus the sum of (i) the
Marketing Fee, (ii) the Transportation Costs, and (iii) the Mont Belvieu
Fractionation Fee.





     In the event that the Chico Price, as calculated above, is less than the Mont Belvieu Price,
then the Chico Price shall be recalculated as follows:




	 	 	 	Sale Price per Gallon of the applicable Products minus the sum of (i) the
Marketing Fee, (ii) the Transportation Costs, and (iii) the Adjusted Chico
Fractionation Fee.






	 	4.2.	 	PRICE-RELATED DEFINITIONS






	 	(a)	 	“Adjusted Chico Fractionation Fee” means Chico Fractionation
Fee minus the difference between (i) the Mont Belvieu Price, and (ii) the Chico
Price, but in no event shall Chico Fractionation Fee be less than zero.
	 
	 	(b)	 	“Chico Fractionation Fee” means those costs, stated in cents
per Gallon, relating to the fractionation of the Products, which costs shall be
calculated as follows:
	 
	 	 	 	
	 
	 	(c)	 	“CPIU” means the latest available Consumer Price Index, All
Urban Consumers – (“CPI U” and/or the “CPI-U Index”), U.S. city average, All
Items (1982-84=100), as published by the United States Bureau of Labor
Statistics or any successor agency thereto (the “BLS”). The CPI-U shall be
taken from the data published by the BLS either electronically at the then
current BLS internet site or in the then current official BLS hardcopy version.
	 
	 	(d)	 	“Electricity” means the average cost of purchased electricity
(in ¢/KWH) at the Cedar Bayou Fractionators fractionation facility in Mont
Belvieu, Texas, for the calendar month that is two calendar months prior to the
Month of Product delivery.
	 
	 	(e)	 	“Gas Price” means the Houston Ship Channel Index published in
the first of the month edition of INSIDE FERC’s GAS MARKET REPORT, for one
MMBtu of natural gas for the Month of Product delivery for which the fee is
being calculated. Should such index be discontinued, the Parties shall
mutually agree upon a comparable successor index and/or publication.
	 
	 	(f)	 	“Marketing Fee” means the greater of (i) two and one-half
percent (2.5%) of the Sale Price or OPIS Index Price, as applicable, per Gallon
of the applicable Product or (ii) one cent ($0.01) per Gallon of the applicable
Product.




3









 






	 	(g)	 	“Mont Belvieu Fractionation Fee” means those costs, stated in
cents per Gallon, relating to the fractionation of the Products, which costs
shall be calculated as follows:
	 
	 	 	 	
	 
	 	(h)	 	“OPIS Index Price” means the monthly average of the daily high
and low prices per Gallon, for the Month in which delivery occurs, as quoted by
the Oil Price Information Service (“OPIS”) in the OPIS LP-Gas Report for “Any
Current Month” volumes in the “Mont Belvieu Spot Gas Liquids Prices” table;
using (i) the Non-TET prices for the propane, isobutane, normal butane and
natural gasoline NGL Components; and (ii) the EP Mix price for the ethane NGL
Component.
	 
	 	(i)	 	“Transportation Costs” means all costs and expenses, stated in
cents per Gallon, reasonably incurred in connection with the transportation of
Products hereunder from the applicable Originating Facility to the applicable
destination, including pipeline costs; railcar costs; truck costs; Product
losses (other than as a result of Buyer’s gross negligence or willful
misconduct); demurrage, and loading, unloading, terminalling, handling and
storage charges. With regard to transportation provided in whole or in part by
third parties, “Transportation Costs” means the actual costs and expenses
incurred by Buyer in connection therewith. With regard to transportation
provided in whole or in part by Buyer or any Affiliate of Buyer,
“Transportation Costs” means the commercially reasonable costs and expenses
charged by Buyer or its Affiliate (excluding any general and administrative
costs and expenses). For all Specification Products transported by truck from
the Chico Plant, an additional loading fee of one and one-half cents ($0.015)
per Gallon shall be assessed. For Specification Products injected into any
crude oil or NGL Component Pipeline at the Chico Plant, an additional injection
fee of one and one-half cents ($0.015) per Gallon shall be assessed.






	 	4.3.	 	ALTERNATIVE INDEX





     If for any reason the OPIS Index for a particular Product should (i) cease to be published or
(ii) be materially changed, the Parties agree promptly and in good faith to negotiate a mutually
satisfactory alternate index or substitute methodology for calculating the price for such Product
(the “Alternate Index”). If, on or before thirty (30) Days after the index used to determine the
price hereunder ceases to be published, the Parties are unable to agree on an Alternate Index upon
which to base the calculation of the price, the Parties shall submit such determination to
arbitration in accordance with the provisions of Article 20, which arbitration procedure will
determine the Alternate Index. From the date on which the index price used to determine the price
for a particular Product ceases to be available until the Alternate Index is determined, the price
for such Product shall be the average of the prices in effect hereunder (or that would have been in
effect hereunder) during the twelve (12) Months preceding the Month in which the index upon which
the price was based ceased to be available, which price shall be effective until the effective date
of the Alternate Index determined as set forth in this Section 4.3. Upon the determination of an
Alternate Index, the price will be adjusted retroactively to the date on which the index upon which
the price previously was based ceased to be available. Any payments hereunder that are delayed
pending the determination of an Alternate Index shall bear interest, at the Base Rate, from the
date that such payment would have been due without such delay until the date of payment.



4









 






	5.	 	REPRESENTATIONS AND WARRANTIES






	 	5.1.	 	SELLER REPRESENTATIONS AND WARRANTIES





     Seller represents and warrants to Buyer that (i) Seller has Good And Marketable Title to the
Products delivered by it to Buyer hereunder and the right to sell and deliver same to Buyer, and
SELLER AGREES TO RELEASE, INDEMNIFY, DEFEND AND HOLD BUYER HARMLESS FROM AND AGAINST ANY CLAIMS
ARISING OUT OF OR RELATED TO ANY FAILURE OF SUCH TITLE OR BREACH OF THIS WARRANTY; and (ii) Seller
shall deliver all Products sold to Buyer hereunder in compliance with all Applicable Laws.




	 	5.2.	 	BUYER REPRESENTATION AND WARRANTY





     Buyer represents and warrants to Seller that Buyer shall receive all Products sold by Seller
hereunder in compliance with all Applicable Laws.




	 	5.3.	 	BUYER ACKNOWLEDGMENT





     Buyer acknowledges that the Product delivered hereunder is hazardous and that Buyer is
knowledgeable of (i) the hazards and risks associated with such Product, and (ii) the handling,
receipt, transportation, storage and use of such Product.




	6.	 	WAIVER OF CONSUMER RIGHTS





     Each of Buyer and Seller hereby waives its respective rights, if any, under the Texas
Deceptive Trade Practices-Consumer Protection Act, Sections 17.41 et seq., except for Section
17.555 Texas Business & Commerce Code, a law that gives consumers special rights and protections.
After consultation with an attorney of its own selection, Buyer and Seller voluntarily consent to
this waiver.




	7.	 	DELIVERY





     Delivery shall be deemed to have been completed when the Product has been delivered to the
Measurement Points. As between the Parties, Seller shall be deemed to be in exclusive possession
and control (and responsible for any damages or injury resulting therefrom or caused thereby) of
the Product prior to and at the Measurement Points and Buyer shall be deemed to be in exclusive
control (and responsible for any damages or injury resulting therefrom or caused thereby) of the
Product from the Measurement Points. The “Measurements Points” are defined as follows:




	 	(a)	 	In the case of deliveries by tank truck: when the Product has
passed the Seller’s loading equipment for open hatch deliveries and when the
Product enters the tank truck’s loading equipment for all other deliveries.
	 
	 	(b)	 	In the case of deliveries by Pipeline: when the Product has
passed the downstream flange of the meter measuring the Product for delivery
into the Pipeline at the Originating Facility.






	8.	 	PASSAGE OF TITLE





     Title to, and risk of loss for, the Products shall pass from Seller to Buyer at the applicable
Measurement Points. Notwithstanding the foregoing, title to, and risk of loss associated with, any
Offspec Product shall remain with Seller.



5









 






	9.	 	MEASUREMENT & ANALYSIS






	 	9.1.	 	MEASUREMENT





     All Products under this Agreement shall be measured as follows:




	 	(a)	 	On all deliveries into/out of transport and tank truck
equipment, quantities shall be determined (in the following order of preference
and based on equipment available at the Delivery Point) by: (i) weighing, (ii)
meter with no vapor return or (iii) slip tube, magnetic gauging or rotary
gauging device and applicable tank capacity tables.
	 
	 	(b)	 	On all deliveries into/out of pipelines, quantity shall be
determined by turbine or positive displacement pipeline meter in accordance
with API Manual of Petroleum Measurement Standards.
	 
	 	(c)	 	Metering systems used for quantity determinations shall not
allow vapor return or shall compensate for any vapor return.
	 
	 	(d)	 	All quantities shall be corrected to 60 degrees Fahrenheit and
equilibrium vapor pressure of the applicable Product at 60 degrees Fahrenheit.
	 
	 	(e)	 	Volume and compressibility correction factors shall be
determined from referenced API tables or computer programs used to generate
these tables.






	 	9.2.	 	PRODUCT SAMPLING & ANALYSIS






	 	(a)	 	Buyer will obtain a sample or samples of the applicable Product
from an appropriate location at the Originating Facility, the tank truck, or
pipeline, as applicable, and/or the loading/unloading facilities connected to
the applicable means of transport; at an appropriate time or times and on a
frequency established by Buyer; with the exact sampling locations, times and
frequencies to be determined by Buyer, in its sole discretion, in order to
obtain representative samples of the Raw Product, High Pressure Condensate and
the Mixed Butanes Specification Product being delivered by Seller under this
Agreement.
	 
	 	(b)	 	Representative samples of the Raw Product, High Pressure
Condensate and the Mixed Butanes Specifications Product shall be analyzed by
Buyer.
	 
	 	(c)	 	Other provisions and standards referenced herein
notwithstanding, the volume of the natural gasoline NGL Component contained in
the Raw Product and High Pressure Condensate shall be calculated using the
component densities of the pentanes and the hexanes plus (C6+).
	 
	 	(d)	 	Buyer reserves the right, but shall not have the obligation, to
similarly obtain samples for other Products being purchased hereunder and to
analyze same to confirm compliance with the Specifications applicable to that
Product.






	 	9.3.	 	STANDARDS





     Measurement, sampling and analysis, pursuant to the above provisions, shall be conducted in
accordance with the GPA Standards applicable to the methodology used; including GPA Standards 8182,
8173, 2177 and all other appropriate GPA, API and ASTM standards, with all such standards being
incorporated herein for all purposes, including all revisions of those standards adopted and in
effect during the term of this Agreement.



6









 






	10.	 	CLAIMS





     All claims by Buyer for deficiencies in Product quantity or quality shall be made to Seller
within one hundred eighty (180) days of delivery of the applicable Product. All notices regarding
Product deficiencies shall be made in accordance with Article 19. Failure by Buyer to timely
notify Seller of any deficiency shall be deemed a waiver by Buyer of any claims with regard to such
Product deficiencies.




	11.	 	QUALITY





     All Products delivered to Buyer under this Agreement shall meet the applicable Specifications
and shall not contain any contaminants that may make it or its components commercially
unacceptable. In addition, any Product transported via any Pipeline shall meet the specifications
governing the applicable Pipeline receipt point. Seller may be required, on Buyer’s behalf as
shipper, to furnish any Pipeline on which Products are transported, with a certificate setting
forth the specifications of each shipment of Product to be transported on such Pipeline. Seller
acknowledges that any such Pipeline shall have the right to: (i) refuse to accept any Product for
transportation which do not meet such Pipeline’s specifications or which are not of good and
merchantable quality suitable for transportation through Pipeline’s existing facilities and (ii)
sample and/or test any shipment of Product prior to acceptance or during receipt of same, and in
the event of variance between Seller’s certificate and Pipeline’s test, the latter shall prevail.




	12.	 	OFFSPEC PRODUCTS





     In the event any of Seller’s Products are contaminated or otherwise fail to conform to the
Specifications (“Offspec Product”), either Party may notify the other Party of any such failure,
and Seller immediately shall undertake and diligently pursue such acts as may be necessary to
correct such failure so as to deliver Product conforming to the applicable Specifications. Buyer
shall have the right, at any time and from time to time, to reject any Product not conforming to
such Specifications and to refuse or suspend receipt until it is established to Buyer’s reasonable
satisfaction that subsequent deliveries of Product will conform to the applicable Specifications,
and nothing contained in this Article 12 or the Agreement is intended or shall be construed to
limit such right. If it is subsequently determined that Buyer unknowingly accepted Offspec
Product, the Parties will mutually agree upon a discounted price for such Offspec Product to
reflect (i) its diminution in value, if any, from Product meeting the applicable Specifications or
(ii) the cost incurred by Buyer in handling such Offspec Product. SELLER AGREES TO RELEASE,
INDEMNIFY, DEFEND AND HOLD HARMLESS BUYER, ITS AFFILIATES, AND ITS AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS AND CONTRACTORS FROM AND AGAINST ANY CLAIMS ARISING OUT OF, OR RELATED
TO, THE DELIVERY OF OFFSPEC PRODUCT TO BUYER WHICH ARE UNKNOWINGLY ACCEPTED BY BUYER.




	13.	 	INSPECTIONS





     Each Party shall be entitled to have its representatives present during all loadings,
unloadings, tests and measurements involving delivery of Product under this Agreement. Either
Party may engage certified independent inspectors to perform gauging, sampling, and testing up to
four (4) times during each twelve (12) Month period during the Term, in which event such
inspector’s determinations shall be conclusive and binding on the Parties. Payments for such
outside inspector’s services will be shared equally among the Parties unless some other arrangement
for payment is mutually agreed upon.




	14.	 	NOMINATIONS






	 	14.1.	 	NOMINATIONS FOR RAW PRODUCTS AND HIGH PRESSURE CONDENSATE





     No later than the third Business Day prior to the end of a calendar month, Buyer will notify
Seller of its requested fractionating and processing schedule and means of taking delivery for Raw
Products and High Pressure Condensate at each Originating Facility for the succeeding Month. In
the event from



7









 







time-to-time during a Month Buyer desires to make a change to such nomination, then Buyer
shall give Seller notice of such change at least one Business Day prior to the day on which the
requested change is to become effective.




	 	14.2.	 	NOMINATIONS TO THE CHICO PLANT FOR SPECIFICATION PRODUCTS





     No later than the first Business Day of each calendar quarter during the Term: (i) Buyer shall
provide to Seller an estimate of the volume of Specification Products that Buyer will designate for
delivery at the Chico Plant during such calendar quarter, and (ii) Seller shall provide to Buyer a
schedule of any planned maintenance and shall notify Buyer of other operational constraints then
known to Seller which might reduce Seller’s fractionation capacity during such calendar quarter.



     No later than the last Business Day of each week during the Term, Buyer shall provide Seller
with a nomination of the volume of Specification Products to be delivered by Seller to Buyer at the
Chico Plant the following week.  Such weekly nomination shall designate the volume of each
Specification Product to be delivered to Buyer at the tailgate of the Chico Plant (i) by truck,
(ii) by re-injection into a Raw Product Pipeline, and (iii) by injection into a crude oil or NGL
Component Pipeline. After the nomination has been provided, Seller and Buyer shall cooperate in
communicating throughout each week regarding any changes effecting such nomination, including as a
result of operational constraints. Seller shall use commercially reasonable efforts to accommodate
any requests of Buyer to (i) change the volumes of Specification Products to be delivered, and (ii)
change the means by which Buyer elects to take delivery of such Specification Products.




	15.	 	DEFAULT; TERMINATION






	 	15.1.	 	EVENTS OF DEFAULT





     It shall be an “Event of Default” if:




	 	(a)	 	Either Party becomes insolvent, makes an assignment for the
benefit of creditors, or a receiver or trustee is appointed for the benefit of
such Party’s creditors, or a Party makes a filing for protection from creditors
under any bankruptcy or insolvency laws, or such filing is made against a
Party;
	 
	 	(b)	 	Buyer fails to make any payment when due and such nonpayment
shall have continued for ten (10) Days or more after notice of same from
Seller;
	 
	 	(c)	 	Either Party fails to perform any of its material obligations
hereunder and such nonperformance shall have continued for thirty (30) Days or
more after notice of same from the other Party.






	 	15.2.	 	TERMINATION FOR DEFAULT






	 	(a)	 	If an Event of Default occurs and is continuing, the
non-defaulting Party may, by written notice to the defaulting Party, designate
a day no earlier than the day such notice is effective as an early termination
date (“Early Termination Date”). On the Early Termination Date, all
obligations due on or after the Early Termination Date under the Agreement
shall be terminated except as provided herein. If an Early Termination Date
has been designated, the non-defaulting Party shall in good faith calculate the
amount due between the parties as of the Early Termination Date. The
non-defaulting party shall notify the defaulting Party in writing of the amount
due and whether it is owed to or from the defaulting Party (the “Termination
Payment”). The party owing the Termination Payment shall pay it to the other
party within two (2) Business Days after the effective date of




8









 






	 	 	 	such notice, with interest at the Base Rate from the Early Termination Date
until paid.
	 
	 	(b)	 	In addition, the defaulting Party hereunder shall reimburse the
non-defaulting Party, on demand, for actual, reasonable out-of-pocket expenses
(with interest at the Base Rate), including, without limitation, reasonable
legal fees and expenses incurred by the other Party in connection with the
enforcement of the Agreement.
	 
	 	(c)	 	If an Early Termination Date is designated, the non-defaulting
party shall be entitled, in its sole discretion, to set-off any amount payable
by the non-defaulting Party or any of its Affiliates to the defaulting Party
under the Agreement or otherwise, against any amounts payable by the defaulting
Party to the non-defaulting Party or any of its Affiliates under this Agreement
or otherwise. This provision shall be in addition to any right of setoff or
other right and remedies to which any party is otherwise entitled (whether by
operation of law, contract or otherwise). If an obligation is unascertained,
the non-defaulting party may in good faith estimate that obligation and set-off
in respect of the estimate, subject to the non-defaulting party accounting to
the defaulting Party when the obligation is ascertained.






	 	15.3.	 	OTHER TERMINATION RIGHTS





     In the event that either Party ceases to be an Affiliate of Targa Resources, Inc., then either
Party may, at its sole discretion, elect to terminate this Agreement upon no less than one hundred
twenty (120) Days written notice to the other Party.




	16.	 	FORCE MAJEURE






	 	16.1.	 	SUSPENSION





     In the event of either Party being rendered unable, wholly or in part, by reason of force
majeure to carry out its obligations under this Agreement, other than to make payments due
hereunder, the obligations of the Party suffering force majeure shall be suspended to the extent
affected by and for the period of such force majeure condition. Such Party suffering force majeure
shall give notice and full particulars of such force majeure in writing or by facsimile to the
other Party as soon as possible after the occurrence of the cause. Such cause shall as far as
possible be remedied with all reasonable dispatch.




	 	16.2.	 	DEFINITION





     The term “force majeure” as employed herein shall mean acts of God, strikes, lockouts or other
industrial disputes or disturbances, acts of the public enemy, wars, blockades, insurrections,
riots, epidemics, landslides, lightning, earthquakes, fires, tornadoes, hurricanes or storms, and
warnings for any of the foregoing which may necessitate the precautionary shut-down of wells,
plants, gathering systems or other related facilities, floods, washouts, arrests and restraints of
governments and people, civil disturbances, explosions, sabotage, breakage or accidents to
equipment, machinery, plants, or lines of pipe, the making of repairs or alterations to lines of
pipe or plants, inability to secure labor or materials, freezing of wells or lines of pipe, partial
or entire failure of the Originating Facility or the facilities used to accept delivery of Product
and/or measure the same, electric power shortages, necessity for compliance with Applicable Laws,
inclement weather that necessitates extraordinary measures and expense to construct facilities
and/or maintain operations and any other causes, whether of the kind enumerated herein or
otherwise, not within the control of the Party claiming suspension and which by the exercise of
reasonable diligence such Party is unable to prevent or overcome. Such term shall likewise
include, in those instances where either Party hereto is required to obtain permits or licenses
from any governmental agency to enable such Party to fulfill its obligations hereunder, the
inability of such Party to acquire, or delays on the part of such Party in acquiring, such permits
or licenses. The term “force majeure” shall



9









 







also include any event of force majeure occurring with respect to the facilities or services
of either Party’s suppliers or customers delivering or receiving any Product, fuel, feedstock, or
other substance necessary to the performance of such Party’s obligations, and shall also include
curtailment or interruption of deliveries or services by such third party suppliers or customers as
a result of an event of force majeure.




	 	16.3.	 	LABOR DISPUTES





     It is understood and agreed that the settlement of strikes or lockouts shall be entirely
within the discretion of the Party having the difficulty, and that the above requirements that any
force majeure shall be remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of an opposing party when such course is inadvisable
in the sole discretion of the Party having difficulty.




	 	16.4.	 	MAINTENANCE





     Either Party and/or its designee may briefly interrupt its performance hereunder for the
purpose of making necessary or desirable inspections, alterations and repairs; and the Party
requiring such relief shall give to the other Party reasonable notice of its intention to suspend
its performance hereunder, except in cases of emergency where such notice is impracticable, in
cases where the operations of the other Party will not be affected, or as to Buyer’s performance,
in cases where the Product is being delivered to a terminal or a fractionation facility operated by
a third party and the operator of such plant fails to give Buyer notice of such plant maintenance.
The Party requiring such relief shall endeavor to arrange such interruptions so as to inconvenience
the other Party as little as possible.




	17.	 	INDEMNITIES





     SELLER SHALL INDEMNIFY, RELEASE, DEFEND AND HOLD HARMLESS BUYER AND ITS AFFILIATES, AND ITS
AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS FROM AND AGAINST ANY CLAIMS ARISING
OUT OF OR IN ANY WAY RELATING TO SELLER’S OWNERSHIP, POSSESSION OR CONTROL OF THE PRODUCT UP TO THE
MEASUREMENT POINTS, AND BUYER SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS SELLER AND ITS AFFILIATES,
AND ITS AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS FROM AND AGAINST ANY CLAIMS
ARISING OUT OF OR IN ANY WAY RELATING TO BUYER’S OWNERSHIP, POSSESSION OR CONTROL OF THE PRODUCT AT
AND AFTER THE MEASUREMENT POINTS.




	18.	 	ASSIGNMENT





     Should the rights of Seller giving rise to its ownership and/or control of the Product
dedicated hereunder be assigned during the term of this Agreement (such as sale of any interest in
an Originating Facility wherein Seller’s ownership and control of Product therefrom arises from
Seller’s ownership interest in the Originating Facility), Seller shall make any such a transfer
expressly subject to the terms and conditions of this Agreement and shall (i) require its successor
in interest to expressly assume and agree to perform Seller’s obligations under this Agreement and
to the extent of such assignment or transfer should Seller transfer less than all of its such
rights. Nothing herein shall be construed to release Seller from its obligations hereunder This
Agreement may be assigned by either Party to any of its Affiliates or any Party that is the
transferee or successor to all or substantially all of the assets of the assigning Party without
the prior written consent of the other Party; provided that the assignee shall expressly agree to
assume and perform all of the assigning Party’s obligations hereunder. Any other assignment of
this Agreement shall require the prior written consent of the non-assigning Party, which consent
shall not be unreasonably withheld or delayed. Any assignment in violation of this Section 18
shall be void ab initio.



10









 






	19.	 	NOTICE





     Any notice, claim, demand or other correspondence hereunder shall be in writing and shall be
delivered personally by courier or overnight delivery service, by certified mail, return receipt
requested, or by fax (promptly followed by a copy sent by mail or personal delivery), to the
Party’s address set forth in this Agreement, unless changed by notice. Such notice, claim, demand
or correspondence shall be deemed to have been given on the date of the actual delivery thereof to
the Party receiving such notice, or, if receipt is refused or rejected, upon attempted delivery.




	20.	 	DISPUTE RESOLUTION






	 	20.1.	 	INITIAL NOTICE





     Either Party may initiate dispute resolution procedures by sending written notice (the
“Initial Notice”) to the other Party specifically stating the complaining Party’s claim and
requesting dispute resolution in accordance with this Article 20. The Parties shall attempt in
good faith to resolve any dispute arising out of or relating to this Agreement promptly by
negotiation between executives who have authority to settle the controversy and who are at a higher
level of management than the persons with direct responsibility for administration of this
contract. Within ten (10) Business Days after delivery of the Initial Notice, the receiving Party
shall submit to the other a written response. The Initial Notice and response shall include (a) a
statement of that Party’s position and a summary of arguments supporting that position, and (b) the
name and title of the executive who will represent that Party and of any other person who will
accompany the executive. Within twenty-five (25) Business Days after delivery of the Initial
Notice, the executives of both Parties shall meet at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute. All
negotiations pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of applicable rules of evidence.




	 	20.2.	 	PROCEEDINGS





     Any dispute arising out of or relating to this Agreement, including the breach, termination or
validity thereof, which has not been resolved by negotiation between executives herein within
forty-five (45) Business Days after delivery of the Initial Notice, shall be finally resolved by
arbitration in accordance with the CPR Rules for Non-Administered Arbitration then currently in
effect by three arbitrators appointed by CPR under the terms of CPR Rule 6; provided, however, that
if one Party fails to participate in negotiation as agreed herein, the other Party can commence
arbitration prior to the expiration of the time periods set forth above. The arbitration shall
commence upon the receipt of a notice of arbitration by either Party. The arbitration shall be
governed by the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. and the Texas Arbitration Act, TEX.
CIV. PRAC. & REM. CODE §§ 171.000 et seq., to the extent applicable and not in conflict with the
Federal Arbitration Act. The arbitrators shall render a reasoned award, and judgment upon the
award may be entered by any court having jurisdiction thereof. The place of the arbitration shall
be Houston, Texas. Unless the Parties to this Agreement agree in writing otherwise, the
arbitrators shall not have the power to award, nor shall they award, any punitive or consequential
damages (however nominated); however, the arbitrators may award specific performance where
appropriate. Each Party shall pay its own attorneys fees and costs, and each Party shall pay
one-half of the arbitrators’ fees and costs, no matter which side prevails. Except as required by
law or necessary to confirm or enforce an award, all proceedings hereunder shall remain
confidential.




	 	20.3.	 	PRELIMINARY INJUNCTIONS; PERFORMANCE PENDING RESOLUTION





     Notwithstanding the foregoing, either Party may request preliminary injunctive and/or
equitable relief from a court of competent jurisdiction at any time before an arbitrator has been
selected in order to protect the rights or property of such Party pending the resolution of the
dispute as provided hereunder. Despite such action the Parties will continue to participate in the
procedures specified in this Agreement. Each Party is required to continue to perform its
obligations under this Agreement pending final resolution



11









 







of any dispute arising out of or relating to the Agreement, unless to do so would be
impossible or impracticable under the circumstances.




	21.	 	STATEMENTS, AUDIT





     On or before the fifteenth (15th) Business Day of the Month following the Month of delivery,
Buyer shall deliver to Seller a statement showing for the Month of delivery the amount and type of
Product delivered for sale hereunder, and the applicable Product price(s). Payment shall be made
by Buyer within ten (10) days after its delivery of the statement. Buyer may net against payments
owed to Seller under this Agreement any outstanding payments owed by Seller to Buyer under this
Agreement. If Seller in good faith disputes all or part of any statement or payment, then Seller
shall provide Buyer with a written notice and explanation of the basis for the dispute, but shall
have no right to suspend performance under this Agreement.



     Subject to the limitations set forth in the following paragraph, if an error is discovered in
any statement or payment, then the Party entitled to receive such payment shall be paid by the
other Party within 10 days after issuance of a corrected invoice, together with interest at the
Base Rate.



     For a period of twenty-four (24) Months from the date of any statement or invoice, each Party
and its duly authorized representatives shall have access to the accounting records and other
documents maintained by the other Party which relate to the Product being delivered under this
Agreement and any other matters covered by this Agreement and shall have the right to audit such
records and other documents once a year in the offices of the Party to be audited at any reasonable
time or times upon at least fifteen (15) Days prior written notice Neither Party shall make any
claim on the other for any adjustment twenty (24) Months after the date of any statement or
invoice.




	22.	 	TAXES





     Seller shall be responsible for any royalties, overriding royalties, and other payments due or
to become due on the hydrocarbons which are subject to this Agreement. Seller shall be liable for
and shall pay, or cause to be paid, or reimburse Buyer if Buyer has paid, all taxes applicable to
the sale of Product by Seller to Buyer hereunder. SELLER SHALL RELEASE, INDEMNIFY, DEFEND AND HOLD
BUYER, ITS DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS
ARISING OUT OF OR RELATING TO THE PAYMENT OF ANY TAXES, ROYALTIES, OVERRIDING ROYALTIES AND OTHER
PAYMENTS DUE OR TO BECOME DUE ON THE PRODUCTS AND WHICH SELLER IS OBLIGATED TO PAY UNDER THIS
AGREEMENT.




	23.	 	LIMITATION OF LIABILITY





     Neither Party shall be liable to the other Party for any indirect, incidental, punitive,
exemplary, consequential or special damages save and except only to the extent such damages are
imposed on a Party entitled to indemnity under the terms of this Agreement in favor of an
unaffiliated third party and such damages arise from an underlying claim, liability or damages
against which such Party entitled to indemnity is indemnified by a Party to this Agreement.




	24.	 	CONFLICTS OF INTEREST





     No director, employee or agent of either Party shall give or receive any commission, fee,
rebate, gift or entertainment of significant cost or value in connection with this Agreement. Any
representative(s) authorized by either Party may, at its sole expense, audit the applicable records
of the other Party solely for the purpose of determining whether there has been compliance with
this Article 24.



12









 






	25.	 	CONDUCT OF PARTIES’ BUSINESS





     Each Party in the performance of this Agreement is engaged in an independent business and
nothing herein contained shall be construed as giving either Party any right to control the other
Party in any way in the performance of the other Party’s business. Neither Party shall have any
right to exercise control over any of the other Party’s employees, representatives, agents or
contractors of any level except to the extent of any safety requirements for delivery of Product
under this Agreement. All employees, representatives, agents or contractors of any level of a
Party shall be entirely under the control and direction of that Party, which shall be entirely
responsible for their actions and omissions.




	26.	 	GOVERNING LAW





     THIS AGREEMENT SHALL BE SUBJECT TO THE JURISDICTION OF, GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, INCLUDING THE UNIFORM COMMERCIAL CODE EXCEPT AS
OTHERWISE SPECIFIED HEREIN, WITHOUT REGARD TO ANY CONFLICT OF LAWS RULES THAT MAY DIRECT THE
APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.




	27.	 	CONFIDENTIALITY





     Each Party agrees that it shall not disclose Confidential Information whether acquired before
or after the Effective Date, to any third party other than each Party’s officers, directors,
employees, advisors or representatives who need to know and agree to maintain the confidentiality
of the Confidential Information (collectively, “Representatives”) during the Term and for a period
of not more than three (3) years after the end of the Term. Each Party shall be responsible for
any breach of this Agreement by its Representatives.



     Notwithstanding anything contained in this Article 27, Confidential Information may be
disclosed to any governmental, judicial or regulatory authority requiring such Confidential
Information, provided that: (i) such Confidential Information is submitted under applicable
provisions if any, for confidential treatment by such governmental, judicial or regulatory
authority; (ii) prior to such disclosure, the Party who supplied the information is given notice of
the disclosure requirement so that it may take whatever action it deems appropriate, including
intervention in any proceeding and the seeking of an injunction to prohibit such disclosure; and
(iii) the Party subject to the governmental, judicial or regulatory authority endeavors to protect
the confidentiality of any Confidential Information to the extent reasonable under the
circumstances and to use its good faith efforts to prevent the further disclosure of any
Confidential Information provided to any governmental, judicial or regulatory authority.




	28.	 	SEVERABILITY





     The invalidity of any one or more covenants or provisions of this Agreement shall not affect
the validity of any other provisions hereof or this Agreement as a whole, and in case of any such
invalidity, this Agreement shall be construed to the maximum extent possible as if such invalid
provision had not been included herein.




	29.	 	NO THIRD PARTY BENEFICIARY





     Nothing in this Agreement shall entitle any Person other than Seller or Buyer, or their
successors or assigns, to any claim, cause of action, remedy or right of any kind relating to the
transaction(s) contemplated by this Agreement.



13









 






	30.	 	WAIVER





     Waiver by either Party of the breach of any provision(s) hereof by the other Party shall not
be deemed to be a waiver of the breach of any other provision(s) hereof or of any subsequent or
continuing breach of such provision(s).




	31.	 	ENTIRE AGREEMENT – ALTERATIONS OR AMENDMENTS





     This Agreement contains the entire agreement of the Parties respecting the matters addressed
herein and no oral promises, agreements or warranties shall be deemed a part hereof, nor shall any
alteration or amendment of this Agreement, or waiver of any of its provisions, be binding upon
either Party hereto unless the same be in writing and signed by both Parties.




	32.	 	COMPLIANCE WITH LAWS





     The Parties shall comply with all Applicable Laws in the performance of their respective
obligations under this Agreement.




	33.	 	HEADINGS





     The headings of the Articles, Sections and Paragraphs of this Agreement are for convenience of
reference only and shall not constitute a part, nor modify, define or limit any of the terms or
provisions, hereof.




	34.	 	SURVIVAL





     The provisions of Articles 15, 15, 20, 23, 26 and 27 shall survive any expiration or
termination of this Agreement.




	35.	 	FURTHER ASSURANCES





     Each Party shall take such acts and execute and deliver such documents as may be reasonably
required to effectuate the purposes of this Agreement.




	36.	 	RULES OF CONSTRUCTION





     In construing this Agreement, the following principles shall be followed:




	 	(a)	 	No consideration shall be given to the fact or presumption that
one Party had a greater or lesser hand in drafting this Agreement.
	 
	 	(b)	 	Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
	 
	 	(c)	 	The word “includes” and its syntactical variants mean
“includes, but is not limited to” and corresponding syntactical variant
expressions.
	 
	 	(d)	 	The plural shall be deemed to include the singular and vice
versa, as applicable.




14









 






	 	(e)	 	Unless the context otherwise requires, any reference to a
statutory provision (including those contained in subordinate legislation) is a
reference to the provision as amended or re-enacted, or as modified by other
statutory provisions from time to time, and includes subsequent legislation
made under the relevant statute.





	 	 	 	 	 	 	 	 	 
	Accepted and Agreed to:	 	 	 	Accepted and Agreed to:
	 
	 	 	 	 	 	 	 	 
	Targa North Texas LP	 	 	 	Targa Liquids Marketing and Trade
	 
	 	 	 	 	 	 	 	 
	By:

	 	     /s/ Clark White
	 	 	 	By:
	 	     /s/ D.S. Pryor
	 

	 	 
	 	 	 	 	 	 
	Name: Clark White	 	 	 	Name: D.S. Pryor
	Title: Vice President and Region Manager	 	 	 	Title: Vice President







15