EXHIBIT 10.3
TARGA LIQUIDS MARKETING AND
TRADE
RAW PRODUCT PURCHASE
AGREEMENT
EFFECTIVE
DATE:
September 1, 2009 ( “Effective
Date” )
1000 Louisiana,
Suite 4300
Attn: Contracts
Administration
Buyer: Targa Liquids
Marketing and Trade
1000 Louisiana,
Suite 4300
Attn: Contracts
Administration
Seller agrees to sell and deliver to Buyer, and
Buyer agrees to purchase and receive from Seller, Raw Product on
the terms and conditions set forth in this Raw Product Purchase
Agreement (the “Agreement” ).
This Agreement shall commence on the Effective
Date and shall continue in full force and effect for fifteen (15)
years (the “Initial Term”
). At the end of the Initial Term, this Agreement shall
automatically be extended for successive five (5) year terms,
unless either Party shall have given the other Party no less than
60 Days written notice of its intent to terminate this Agreement
prior to the end of (i) the Initial Term, or (ii) the then-current
five (5) year extension term, as applicable (the Initial Term, as
extended by one year extension terms, the
“Term” ).
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TERMS OF
SALE AND PURCHASE
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Seller commits and dedicates to sell, and Buyer
agrees to purchase, all volumes of Raw Product owned or controlled
by Seller and produced from the Originating Facility.
Buyer may elect
to receive Raw Product from Seller as follows:
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At or near the
tailgate of the Originating Facility into a Raw Product Pipeline
designated by Buyer or such other locations as are mutually agreed
to by the Parties;
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At the truck
rack of the Originating Facility onto tank trucks provided by
Buyer.
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Buyer shall procure transportation for all Raw
Product from the Originating Facility to the applicable
destination.
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PRICE
DETERMINATION FOR RAW PRODUCT SALES
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Buyer shall pay
to Seller for the Raw Product delivered to Buyer hereunder, a
purchase price equal to the OPIS Index Price for each Gallon of
each NGL Component contained in the Raw Product, minus (i)
Transportation Costs, (ii) Fractionation Costs, and (iii) the
Marketing Fee.
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“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 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 and
isobutane NGL Components; (ii) the Other prices for natural
gasoline and normal butane NGL components; and (ii) the EP Mix
price for the ethane NGL Component.
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“Transportation
Costs” means
all transportation costs incurred by Buyer in transporting the Raw
Product delivered by Seller under this Agreement to the applicable
destination, including pipeline tariff charges, truck costs, Raw
Product losses, (other than as a result of Buyer’s gross
negligence or willful misconduct); demurrage, and loading,
unloading, terminaling, handling and storage and other charges
attributable to the Raw Product. 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).
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“Fractionation Costs”
means the fractionation costs and
expenses incurred by Buyer in connection with the receipt and
fractionation of Raw Product delivered by Seller under this
Agreement that are charged to Buyer with respect to the Raw Product
delivered under this Agreement. Depending on the entity
fractionating Raw Product for Buyer, such fee shall be (i) the then
current fee charged to Buyer under its fractionation agreements
with Gulf Coast Fractionators, Lake Charles Fractionators, Cedar
Bayou Fractionators, L.P. or any other entity providing
fractionation services in which an Affiliate of Buyer has an
ownership interest, or (ii) the fractionation fees charged to Buyer
by a third party providing fractionation services with respect to
such Raw Product.
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“Marketing Fee”
means the greater of (i) two and
one-half percent (2.5%) of the OPIS Index Price, as applicable, per
Gallon of the applicable product or (ii) one cent ($0.01) per
Gallon of the applicable product.
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If for any reason the OPIS Index for a
particular NGL Component or any other index used in the
calculations made pursuant to Section 4.1 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 Component (the
“Alternate Index” ). If, on or
before 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 NGL Component ceases to be
available until the Alternate Index is determined, the price for
such NGL Component shall be the average of the prices in effect
hereunder (or that would have been in effect hereunder) during the
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.
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REPRESENTATIONS AND WARRANTIES
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SELLER
REPRESENTATIONS AND WARRANTIES
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Seller represents and warrants to Buyer that (i)
Seller has Good And Marketable Title to the Raw Product 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 Raw Product sold to Buyer
hereunder in compliance with all Applicable Laws.
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BUYER
REPRESENTATION AND WARRANTY
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Buyer represents and warrants to Seller that
Buyer shall receive all Raw Product sold by Seller hereunder in
compliance with all Applicable Laws.
Buyer acknowledges that the Raw Product
delivered hereunder is hazardous and that Buyer is knowledgeable of
(i) the hazards and risks associated with such Raw Product, and
(ii) the handling, receipt, transportation, storage and use of such
Raw Product.
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WAIVER OF
CONSUMER RIGHTS
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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.
Delivery shall be deemed to have been completed
when the Raw 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 Raw
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 Raw Product
from the Measurement Points.
Title to, and risk of loss for, the Raw Product
shall pass from Seller to Buyer at the applicable Measurement
Points. Notwithstanding the foregoing, title to, and
risk of loss associated with, any Offspec Raw Product shall remain
with Seller.
All Raw Product under this Agreement shall be
measured as follows:
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On all
deliveries into/out of Pipelines, the quantity shall be determined
by turbine or positive displacement pipeline meter in accordance
with API Manual of Petroleum Measurement Standards.
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On all
deliveries into/out of transport and tank truck equipment,
quantities shall be determined by meter with no vapor return, slip
tube, rotary gauging device or weighing, in accordance with GPA
Publication 8162, all appropriate GPA and API standards and all
revisions thereof.
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Metering
systems used for quantity determinations shall not allow vapor
return or shall compensate for any vapor return.
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All quantities
shall be corrected to 60 degrees Fahrenheit and equilibrium vapor
pressure of the applicable Raw Product at 60 degrees
Fahrenheit.
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Volume and
compressibility correction factors shall be determined from
referenced API tables or computer programs used to generate these
tables.
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PRODUCT
SAMPLING & ANALYSIS
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Buyer will
obtain a sample or samples of the Raw Product from an appropriate
location at the Originating Facility, 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 being delivered by Seller under this
Agreement.
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Representative
samples of the Raw Product shall be analyzed by Buyer.
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Other
provisions and standards referenced herein notwithstanding, the
volume of the natural gasoline NGL Component contained in the Raw
Product shall be calculated using the component densities of the
pentanes and the hexanes plus (C6+).
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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.
All claims by Buyer for deficiencies in Raw
Product quantity or quality shall be made to Seller within 180 days
of delivery of the applicable Raw Product. All notices
regarding Raw Product deficiencies shall be made in accordance with
Section 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 Raw Product deficiencies.
All Raw Product delivered to Buyer under this
Agreement shall meet the specifications governing the applicable
Pipeline receipt point and shall not contain any contaminants that
may make it or its NGL Components commercially
unacceptable. Seller may be required, on Buyer's behalf
as shipper, to furnish any Pipeline on which Raw Product is
transported with a certificate setting forth the specifications of
each shipment of Raw Product to be transported on such
Pipeline. Seller acknowledges that any such Pipeline
shall have the right to: (i) refuse to accept any Raw 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 Raw Product prior to acceptance
or during receipt of same, and in the event of variance between the
Seller's certificate and the Pipeline's test, the latter shall
prevail.
In the event any of Seller's Raw Product is
contaminated or otherwise fails to conform to the specifications
governing the applicable Pipeline receipt point (
“Offspec Raw 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 Raw Product conforming to
the applicable specifications. Buyer shall have the
right, at any time and from time to time, to reject any Raw Product
not conforming to the specifications governing the applicable
Pipeline receipt point and to refuse or suspend receipt until it is
established to Buyer's reasonable satisfaction that subsequent
deliveries of Raw Product will conform to the specifications
governing the applicable Pipeline receipt point, and nothing
contained in this Section 12 or the Agreement is intended or
shall be construed to limit such right. If it is
subsequently determined that Buyer unknowingly accepted Offspec Raw
Product, the Parties will mutually agree upon a discounted price
for such Offspec Raw Product to reflect (i) its diminution in
value, if any, from Raw Product meeting the specifications
governing the applicable Pipeline receipt point, or (ii) the cost
incurred by Buyer in handling such Offspec Raw
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 RAW PRODUCT TO BUYER WHICH ARE UNKNOWINGLY ACCEPTED BY
BUYER.
Each Party shall be entitled to have its
representatives present during all loadings, unloadings, tests,
samples and measurements involving delivery of Raw Product under
this Agreement. Either Party may engage certified
independent inspectors to perform gauging, sampling, and testing up
to four times during each 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.
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NOMINATIONS;
DAMAGE PAYMENTS
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Prior to the end of each Month Seller will
nominate the total quantity of Raw Product to be delivered to Buyer
pursuant to this Agreement during the succeeding Month, giving
sufficient time to meet the applicable Pipeline’s nomination
deadlines for such Month, and will also provide Buyer with any
other operational information which could have a significant effect
on the quantity of Raw Product delivered for the
Month. Seller and Buyer will cooperate in communicating
throughout each Month regarding any changes in the quantity of Raw
Product to be delivered at the Measurement Point. Should
Seller become aware that actual deliveries at the Measurement Point
on any day will be more or less than the nominated quantity, Seller
will promptly notify Buyer.
14.2 DAMAGE
PAYMENTS
In the event
that (i) Buyer is unable to take all of the Raw Product nominated
by Seller during a particular Month due to any Person’s
failure to take Raw Product from Buyer, and (ii) Buyer receives
Damage Payments in connection with such event, Buyer will pay
Seller its pro rata share of such Damage Payments based on the
amount of nominated Raw Product not taken by Buyer from Seller and
any other Affiliates of Buyer as a result of such event.
It shall be an “Event of
Default” if:
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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;
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Buyer fails to
make any payment when due and such nonpayment shall have continued
for 10 Days or more after notice of same from Seller;
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Either Party
fails to perform any of its material obligations hereunder and such
nonperformance shall have continued for 30 Days or more after
notice of same from the other Party.
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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 Business Days after the effective date of such notice,
with interest at the Base Rate from the Early Termination Date
until paid.
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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.
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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.
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In the event that either Party ceases to be an
Affiliate of Targa Resources, Inc., then either Party may, at it
sole discretion, elect to terminate this Agreement upon no less
than one hundred twenty (120) Days written notice to the other
Party.
In the event of either Party being rendered
unable, wholly or in part, by reason of force majeure to carry out
its
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