EXHIBIT 10.4
TARGA LIQUIDS MARKETING AND
TRADE
SPECIFICATION PRODUCT PURCHASE
AGREEMENT
EFFECTIVE
DATE:
September 1, 2009 ( “Effective
Date” )
Seller: Targa
Midstream Services Limited Partnership
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, the Specification
Products on the terms and conditions set forth in this
Specification Products 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 agrees to sell, and Buyer agrees to
purchase, all volumes of Specification Products owned or controlled
by Seller and produced from the Third Party Facilities.
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DELIVERY OF
SPECIFICATION PRODUCTS
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Buyer may elect to receive Specification Product
from Seller as follows:
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At the truck
rack of the Third Party Facility onto tank trucks provided by
Buyer;
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At the load
flange of the tank car at the Third Party Facility;
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At the loading
flange of the barge at the Third Party Facility;
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At or near the
tailgate of the Third Party Facility into a Pipeline designated by
Buyer or such other locations as are mutually agreed to by the
Parties;
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At or near the
tailgate of the Third Party Facility into a crude oil or NGL
Component Pipeline designated by Buyer;
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In-storage
Product transfer.
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Buyer shall procure transportation for all
Specification Product from the Third Party Facility to the
applicable destination.
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PRICE
DETERMINATION FOR PRODUCT SALES
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Buyer shall pay
to Seller for the Specification Product delivered to Buyer
hereunder, the purchase price set forth in Exhibit B minus
the Marketing Fee.
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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 Specification Product or (ii) one cent
($0.01) per Gallon of the applicable Specification
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 Specification 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 Specification Product
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 Specification Product sold by Seller
hereunder in compliance with all Applicable Laws.
Buyer acknowledges that the Specification
Product delivered hereunder is hazardous and that Buyer is
knowledgeable of (i) the hazards and risks associated with such
Specification Product, and (ii) the handling, receipt,
transportation, storage and use of such Specification
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 Specification Product has been delivered to the
Measurement Points. For in-storage Specification Product
transfer, delivery will be deemed to have been completed upon
transfer of title in keeping with the title transfer procedures of
the applicable pipeline carrier and/or storage operator or, in lieu
of same, upon the date of transfer shown in the title transfer
documentation provided to such operator. 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 Specification 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 Specification Product
from the Measurement Points.
Title to, and risk of loss for, the
Specification 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
Product shall remain with Seller.
All Specification 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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On all
deliveries into or out of tank cars, the quantity will be
determined (in the following order of preference and based on
equipment available at the point of delivery) by (A) weighing; (B)
meters; or (C) gauging of the tank cars and use of official tank
car capacity tables.
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On all
deliveries into or out of ships or barges, quantity will be
determined (in the following order of preference and based on
equipment available at the point of delivery) by: (A) gauging and
official tank capacity tables or (B) if expressly agreed by the
Parties, by shore meter or shore tank measurements.
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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 Specification 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 Specification Product from an
appropriate location at the Third Party 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 Specification Product being delivered by Seller
under this Agreement.
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Representative
samples of the Specification Product shall be analyzed by
Buyer.
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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 the
Specification Product quantity or quality shall be made to Seller
within 180 days of delivery of the applicable Specification
Product. All notices regarding 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 Specification Product deficiencies.
All Specification Product delivered to Buyer
under this Agreement shall meet the applicable Specifications and
shall not contain any contaminants that may make it commercially
unacceptable. In addition, any Specification 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 Specification Product is transported with a
certificate setting forth the Specifications of each shipment of
Specification Product to be transported on such
Pipeline. Seller acknowledges that any such Pipeline
shall have the right to: (i) refuse to accept any Specification
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 Specification 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 Specification
Product is contaminated or otherwise fails to conform to the
specifications governing the applicable Pipeline receipt point (
“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 Specification Product
conforming to the applicable Specifications. Buyer shall
have the right, at any time and from time to time, to reject any
Specification Product not conforming to the Specifications and to
refuse or suspend receipt until it is established to Buyer's
reasonable satisfaction that subsequent deliveries of Specification
Product will conform to the Specifications, 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 Product, the
Parties will mutually agree upon a discounted price for such
Offspec Product to reflect (i) its diminution in value, if any,
from the Specification Product meeting the
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.
Each Party shall be entitled to have its
representatives present during all loadings, unloadings, tests,
samples and measurements involving delivery of Specification
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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14.1 NOMINATIONS
TO THE THIRD PARTY FACILITY FOR SPECIFICATION PRODUCTS
No later than
the fifth Business Day of each calendar month during the Term,
Buyer shall provide to Seller an estimate of the volume of
Specification Product that Buyer will receive from the Third Party
Facility during the Month. Seller and Buyer shall
cooperate in communicating throughout each Month regarding any
changes effecting such nomination.
14.3 DAMAGE
PAYMENTS
In the event
that (i) Buyer is unable to take all of the Specification Product
nominated during a particular Month due to any Person’s
failure to take Specification 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 Specification Product not taken by Buyer from
Seller and any other Affiliates of Buyer as a result of such
event.
15. DEFAULT;
TERMINATION
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 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.
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, expansions or alterations to lines of pipe or plants,
breakdown or destruction of facilities or equipment, lack of
sufficient brine or brine handling capacity, 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 Specification 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 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
Specification Product, fuel, feedstock, or other substance
necessary to the performance of such Party's obligations, and shall
also incl
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