S-4

As filed with the Securities and Exchange Commission on October 31, 2007

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

TARGA RESOURCES, INC.

TARGA RESOURCES FINANCE CORPORATION*

(Exact name of registrant as specified in its charter)

Delaware	4922	74-3117058
Delaware	4922	20-3673840
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

1000 Louisiana, Suite 4300 Houston, Texas 77002 (713) 584-1000	Rene R. Joyce 1000 Louisiana, Suite 4300 Houston, Texas 77002 (713) 584-1000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)	(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copy to:

David P. Oelman

Christopher S. Collins

Vinson & Elkins L.L.P.

First City Tower

1001 Fannin Street, Suite 2300

Houston, Texas 77002-6760

713-758-2222

Approximate date of commencement of proposed sale of the securities to the public:    As soon as practicable after the effective date of this Registration Statement.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Amount to be registered	Proposed maximum offering price per note(1)	Proposed maximum aggregate offering price(1)	Amount of registration fee
8 1/2% Senior Notes due 2013	$250,000,000	100%	$250,000,000	$7,675
Guarantees of the 8 1/2% Senior Notes due 2013	$250,000,000	(2)	(2)	(2)

(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(f)(2) under the Securities Act of 1933.

(2) No separate consideration will be received for the guarantees, and no separate fee is payable pursuant to Rule 457(n) under the Securities Act of 1933.

*ADDITIONAL SUBSIDIARY GUARANTOR REGISTRANTS

EXACT NAME OF ADDITIONAL REGISTRANT AS SPECIFIED IN ITS CHARTER	STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION	PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER	IRS EMPLOYEE IDENTIFICATION NO.
Targa Resources LLC	Delaware	4922	14-1904332
Targa Resources II LLC	Delaware	4922	75-3150812
Targa Resources Holdings GP LLC	Delaware	4922	83-0391111
Targa Resources Holdings LP	Delaware	4922	73-1699939
Targa Gas Marketing LLC	Delaware	4922	11-3762680
Targa Midstream GP LLC	Delaware	4922	20-3726668
Targa Midstream Services Limited Partnership	Delaware	4922	76-0507891
Targa Regulated Holdings LLC	Delaware	4922	76-0467636
Targa NGL Pipeline Company LLC	Delaware	4922	73-1175068
Targa Liquids Marketing and Trade	Delaware	4922	N/A
Targa Liquids GP LLC	Delaware	4922	N/A
Midstream Barge Company LLC	Delaware	4922	94-3253383
Targa OPI LLC	Delaware	4922	76-0467637
Targa Energy Pipeline Company LLC	Delaware	4922	N/A
Targa GP Inc.	Delaware	4922	20-4036018
Targa LP Inc.	Delaware	4922	20-4036097
Targa Versado GP LLC	Delaware	4922	N/A
Targa Versado LP	Delaware	4922	20-4036235
Targa Straddle GP LLC	Delaware	4922	N/A
Targa Straddle LP	Delaware	4922	20-4036286
Targa Permian GP LLC	Delaware	4922	N/A
Targa Permian LP	Delaware	4922	20-4036350
Targa Downstream GP LLC	Delaware	4922	N/A
Targa Downstream LP	Delaware	4922	20-4036406
Targa LSNG GP LLC	Delaware	4922	N/A
Targa LSNG LP	Delaware	4922	68-0625252

Each Registrant hereby amends this Registration Statement on such dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated October 31, 2007

Prospectus

Targa Resources, Inc.

Targa Resources Finance Corporation

Offer to Exchange up to

$250,000,000 of 8 ¹/2% Senior Notes due 2013 for

$250,000,000 of 8 ¹/2 % Senior Notes due 2013

that have been Registered under the Securities Act of 1933

Terms of the Exchange Offer

New Notes. We are offering to exchange up to $250,000,000 of our outstanding 8 ¹/2% Senior Notes due 2013 for new notes. The terms of the new notes are substantially identical to the outstanding notes, except that we have registered the new notes under the Securities Act of 1933.

Notes Exchanged. We will exchange for an equal principal amount of new notes all outstanding notes that you validly tender and do not validly withdraw before the exchange offer expires. Tenders of outstanding notes may be withdrawn at any time prior to the expiration of the exchange offer.

Expiration Date. The exchange offer expires at 5:00 p.m., New York City time, on                     , 2007 unless extended.

Taxation. The exchange of outstanding notes for new notes will not be a taxable event for U.S. federal income tax purposes.

Broker-Dealers. Each broker-dealer that receives the new notes for its own account pursuant to this exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. The letter of transmittal accompanying this prospectus states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act of 1933. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer for a period of 180 days after the expiration of the exchange offer in connection with resales of the new notes received in exchange for outstanding notes where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”

Terms of the 8 ¹/2% Senior Notes Offered in the Exchange Offer

Maturity. The new notes will mature on November 1, 2013.

Interest. Interest on the new notes accrues at the rate of 8 ¹/2% per year and is payable semi-annually in arrears on May 1^st and November 1^st of each year.

Redemption. Prior to November 1, 2008, we may redeem up to 35% of the aggregate principal amount of the notes at a price equal to 108.500% of the principal amount of the notes to be redeemed with the net proceeds of certain public equity offerings. Prior to November 1, 2009, we may redeem the notes, in whole or in part, at a price equal to 100% of the principal amount of the notes to be redeemed plus a make-whole amount described in this prospectus. On or after November 1, 2009, we may redeem the notes, in whole or in part, at the redemption prices described in this prospectus.

Guarantees and Ranking. The new notes will be jointly and severally guaranteed on a senior unsecured basis by each of our current and future restricted subsidiaries. The notes and the guarantees are senior unsecured obligations ranking equally in right of payment with all of our and the subsidiary guarantors’ other senior unsecured debt and senior in right of payment to all of our and the subsidiary guarantors’ future subordinated debt. The notes and the guarantees are effectively subordinated to our and the subsidiary guarantors’ existing and future secured debt to the extent of the value of the assets securing such debt.

Please read “ Risk Factors” on page 7 for a discussion of factors you should consider before participating in the exchange offer.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is                     , 2007.

This prospectus incorporates important business and financial information about us that is not included in or delivered with this document. This information is available to you without charge upon written or oral request to: Targa Resources, Inc., 1000 Louisiana, Suite 4300, Houston, Texas 77002, Attention: Corporate Secretary, (713) 584-1000. The exchange offer is expected to expire on                     , 2007 and you must make your exchange decision by the expiration date. To obtain timely delivery, you must request the information no later than                     , 2007, or the date which is five business days before the expiration date of this exchange offer.

This prospectus is part of a registration statement we filed with the Securities and Exchange Commission. In making your investment decision, you should rely only on the information contained or incorporated by reference in this prospectus and in the accompanying letter of transmittal. We have not authorized anyone to provide you with any other information. If you receive any unauthorized information, you must not rely on it. This exchange offer is not being made to, nor will we accept tenders of outstanding notes from, holders of existing notes in any jurisdiction in which the exchange offer or the issuance of new notes would not be permitted. You should not assume that the information contained in this prospectus, or the documents incorporated by reference into this prospectus, is accurate as of any date other than the date on the front cover of this prospectus or the date of such document, as the case may be.

TABLE OF CONTENTS

Prospectus Summary	1
Ratio of Earnings to Fixed Charges	6
Risk Factors	7
Exchange Offer	24
Use of Proceeds	32
Selected Historical Financial and Operating Data	33
Management’s Discussion and Analysis of Financial Condition and Results of Operation	38
Business	73
Management	100
Certain Relationships and Related Party Transactions	113
Description of New Notes	116
Federal Income Tax Considerations	180
Plan of Distribution	180
Legal Matters	181
Experts	181
Where You Can Find More Information	181
Forward-Looking Statements	182
Index to Financial Statements	F-1
Letter of Transmittal	A-1

i

PROSPECTUS SUMMARY

This summary provides a brief overview of certain information from this prospectus, but may not contain all the information that may be important to you. You should read this entire prospectus before making an investment decision. You should carefully consider the information set forth under “Risk Factors.” In addition, certain statements include forward-looking information which involve risks and uncertainties. Please read “Forward-Looking Statements.”

In this prospectus, we use the term “outstanding notes” to refer to the 8 ¹/2% Senior Notes due 2013 that were issued on October 31, 2005, and the term “new notes” to refer to the 8 ¹/2% Senior Notes due 2013 that have been registered under the Securities Act of 1933 and are being offered in exchange for the outstanding notes as described in this prospectus. References to the “notes” in this prospectus include both the outstanding notes and the new notes. As used in this prospectus, unless the context otherwise requires, “Targa,” “our,” “we,” “us” and similar terms refer to Targa Resources, Inc., together with its subsidiaries, including its publicly traded master limited partnership, Targa Resources Partners LP, which we refer to in this prospectus as the “Partnership.”

Targa Resources, Inc.

Targa Resources, Inc. was formed in 2004 by its management team, which consists of former members of senior management of several midstream and other diversified energy companies, and Warburg Pincus LLC. We are a leading provider of midstream natural gas and natural gas liquid, or NGL, services in the United States. We provide these services through our integrated platform of midstream assets. Our gathering and processing assets are located primarily in the Permian Basin in west Texas and southeast New Mexico, the Louisiana Gulf Coast accessing the offshore region of the Louisiana Gulf Coast, and, through the Partnership, the Fort Worth Basin in north Texas, the Permian Basin in west Texas and the onshore region of the Louisiana Gulf Coast. Additionally, our natural gas liquids logistics and marketing assets are located primarily at Mont Belvieu and Galena Park near Houston, Texas and in Lake Charles, Louisiana with terminals and transportation assets across the United States. We believe our asset locations, including those of the Partnership, provide us access to natural gas supplies and proximity to end-use markets and leading market hubs while positioning us to capitalize on potential growth opportunities from selected areas of the Permian Basin, the continued development of deepwater and deep shelf Gulf of Mexico natural gas reserves, the increasing importation of liquefied natural gas, or LNG, to the Gulf Coast and the growth of the Barnett Shale production in north Texas. We believe our asset locations, scale, broad range of services, operational focus and competitive cost structure position us well to serve customers and to benefit from the importance of infrastructure in the growing U.S. energy market.

We own interests in or operate approximately 10,000 miles of natural gas pipelines and approximately 550 miles of NGL pipelines, with natural gas gathering systems covering approximately 14,500 square miles and 21 natural gas processing plants with access to natural gas supplies in the Permian Basin, north Texas, onshore southern Louisiana, and the Gulf of Mexico. Additionally, we have an integrated NGL logistics and marketing business, with 16 storage, marine and transport terminals with above ground NGL storage capacity of approximately 900 MBbls, net NGL fractionation capacity of approximately 300 MBbls/d and 43 owned and operated storage wells with a net storage capacity of approximately 65 MMBbls. For the twelve months ended December 31, 2006 and the six months ended June 30, 2007, we generated, on a consolidated basis, income from operations of $235.8 million and $115.5 million, respectively.

On October 24, 2007 the Partnership completed a public offering of 13,500,000 common units. The Partnership used the proceeds from the offering, borrowings under its senior secured revolving credit facility and the issuance of approximately 275 thousand general partner units to us to finance the acquisition from us of certain natural gas gathering and processing businesses located in west Texas and Louisiana for approximately $705 million, subject to certain adjustments.

Our executive offices are located at 1000 Louisiana, Suite 4300, Houston, Texas 77002 and our telephone number is (713) 584-1000.

1

The Exchange Offer

On October 31, 2005, we completed a private offering of the outstanding notes. We entered into a registration rights agreement with the initial purchasers in the private offering in which we agreed to deliver to you this prospectus and to use commercially reasonable efforts to consummate the exchange offer.

Exchange Offer We are offering to exchange up to $250,000,000 of new notes for an identical principal amount of outstanding notes.

Expiration Date The exchange offer will expire at 5:00 p.m. New York City time, on                    , 2007, unless we decide to extend it. While we do not currently intend to extend the exchange offer, it is possible that we will extend the exchange offer until all outstanding notes are tendered.

Condition to the Exchange Offer The registration rights agreement does not require us to accept outstanding notes for exchange if the exchange offer or the making of any exchange by a holder of the outstanding notes would violate any applicable law or interpretation of the staff of the SEC, or if a threatened or pending judicial or administrative proceeding impairs our ability to proceed with the exchange offer. A minimum aggregate principal amount of outstanding notes being tendered is not a condition to the exchange offer.

Procedures for Tendering Outstanding Notes The outstanding notes were issued as global securities and were deposited with Wells Fargo Bank, National Association, who holds the outstanding notes as the custodian for the Depository Trust Company, or DTC. Beneficial interests in the outstanding notes are held by participants in DTC on behalf of the beneficial owners of the outstanding notes. We refer to beneficial interests in notes held by DTC as notes held in book-entry form. Beneficial interests in notes held in book-entry form are shown on, and transfers of notes can be made only through, records maintained by DTC and its participants.

To tender your outstanding notes in the exchange offer, you must transmit to Wells Fargo Bank, National Association, as exchange agent, on or prior to the expiration date of the exchange offer, the following:

• a computer-generated message transmitted by means of DTC’s Automated Tender Offer Program (ATOP) system that, when received by the exchange agent will form a part of a confirmation of book-entry transfer in which you acknowledge and agree to be bound by the terms of the letter of transmittal; and

• a timely confirmation of book-entry transfer of your existing notes into the exchange agent’s account at DTC, according to the procedure for book-entry transfers described in this prospectus under the heading “Exchange Offer—Terms of the Exchange Offer” and “—Procedures for Tendering.”

2

Withdrawal of Tenders You may withdraw your tender of outstanding notes at any time prior to the expiration date. To withdraw, you must submit a notice of withdrawal to the exchange agent using ATOP procedures before 5:00 p.m. New York City time on the expiration date of the exchange offer. Please read “Exchange Offer—Withdrawal of Tenders.”

Acceptance of Outstanding Notes and Delivery of New Notes If the conditions described under “Exchange Offer—Conditions to the Exchange Offer” are satisfied, we will accept any and all outstanding notes that you properly tender in the exchange offer before 5:00 p.m. New York City time on the expiration date. We will return to you, without expense, as promptly as practicable after the expiration date, any outstanding note that we do not accept for exchange. We will deliver the new notes as promptly as practicable after the expiration date and acceptance of the outstanding notes for exchange. Please refer to the section in this prospectus entitled “Exchange Offer— Terms of the Exchange Offer.”

Fees and Expenses We will bear all expenses related to the exchange offer. Please refer to the section in this prospectus entitled “Exchange Offer—Fees and Expenses.”

Use of Proceeds The issuance of the new notes will not provide us with any new proceeds. We are making this exchange offer solely to satisfy our obligations under our registration rights agreement.

Consequences of Failure to Exchange Outstanding Notes If you do not exchange your outstanding notes in this exchange offer, you will no longer be able to require us to register the outstanding notes under the Securities Act except in the limited circumstances provided under our registration rights agreement. In addition, you will not be able to resell, offer to resell or otherwise transfer the outstanding notes unless we have registered the outstanding notes under the Securities Act, or unless you resell, offer to resell or otherwise transfer them under an exemption from the registration requirements of, or in a transaction not subject to, the Securities Act.

U.S. Federal Income Tax Considerations The exchange of new notes for outstanding notes in the exchange offer will not be a taxable event for U.S. federal income tax purposes. Please read “Federal Income Tax Considerations.”

Exchange Agent We have appointed Wells Fargo Bank, National Association as exchange agent for the exchange offer. You should direct questions and requests for assistance, requests for additional copies of this prospectus or the letter of transmittal to the exchange agent addressed as follows: Attn: Reorg, Wells Fargo Bank, N.A., Corporate Trust Operations, MAC N9303-121, 6th and Marquette Avenue, Minneapolis, MN 55479. Eligible institutions may make requests by facsimile at (612) 667-6282.

3

Terms of the Notes

The new notes will be identical to the outstanding notes except that the new notes will be registered under the Securities Act and will not have restrictions on transfer, registration rights or provisions for additional interest and will contain different administrative terms. The new notes will evidence the same debt as the outstanding notes, and the same indenture will govern the new notes and the outstanding notes.

The following summary contains basic information about the notes and is not intended to be complete. It does not contain all the information that may be important to you. For a more complete understanding of the notes, please refer to the section of this prospectus entitled “Description of New Notes.”

Issuers Targa Resources, Inc. and Targa Resources Finance Corporation.

Targa Resources Finance Corporation, a Delaware corporation, is a wholly owned subsidiary of Targa Resources, Inc. organized for the purpose of co-issuing our existing notes and the notes offered hereby. Targa Resources Finance Corporation does not have any operations of any kind and will not have any revenue other than as may be incidental to its activities as a co-issuer of the notes.

Notes Offered $250 million in aggregate principal amount of 8 ¹/2% senior notes due 2013

Maturity Date November 1, 2013

Interest Interest on the notes accrues at the rate of 8 ¹/2% per year and is payable semi-annually in arrears on May 1^st and November 1^st of each year.

Optional Redemption Prior to November 1, 2008, we may redeem up to 35% of the aggregate principal amount of the notes at a price equal to 108.500% of the principal amount of the notes to be redeemed with the net proceeds of certain public equity offerings. Prior to November 1, 2009, we may redeem the notes, in whole or in part, at a price equal to 100% of the principal amount of the notes to be redeemed plus a make-whole amount described in this prospectus. On or after November 1, 2009, we may redeem the notes, in whole or in part, at the redemption prices described in this prospectus under “Description of New Notes—Optional Redemption.”

Guarantees Initially, all payments with respect to the notes (including principal and interest) are fully and unconditionally guaranteed, jointly and severally, by substantially all of our existing subsidiaries, other than the Partnership and its subsidiaries. In the future, our subsidiaries that guarantee other indebtedness of ours or another subsidiary guarantor must also guarantee the notes. The guarantees are also subject to release in certain circumstances.

Ranking The notes and the guarantees thereof are senior unsecured obligations ranking equally in right of payment with all of our and the subsidiary guarantors’ other senior unsecured debt and senior in right of payment to all of our and the subsidiary guarantors’ future

4

subordinated debt. The notes and the guarantees thereof are effectively subordinated to our and the subsidiary guarantors’ existing and future secured debt to the extent of the value of the assets securing such debt.

Certain Covenants The indenture governing the notes contains covenants that, among other things, limit our ability and certain of our subsidiaries’ ability to:

• incur or guarantee additional indebtedness or issue preferred stock;

• pay dividends on our capital stock or redeem, repurchase or retire our capital stock or subordinated indebtedness;

• make investments;

• create restrictions on the payment of dividends or other amounts to us from our non-guarantor restricted subsidiaries;

• engage in transactions with our affiliates;

• sell assets, including capital stock of our subsidiaries;

• transfer assets;

• enter into sale and leaseback transactions;

• consolidate or merge; and

• incur liens.

These covenants are subject to important exceptions and qualifications which are described in this prospectus under “Description of New Notes.”

5

RATIO OF EARNINGS TO FIXED CHARGES

	Six Months Ended June 30,		Year Ended December 31,			106-Day Period Ended April 15, 2004	Year Ended December 31,
	2007	2006	2006	2005	2004		2003	2002
RATIO OF EARNINGS TO FIXED CHARGES(1)	1.3x	1.7x	1.2x	0.6x	3.2x	N/A	N/A	N/A

(1) Not applicable to the predecessor because the predecessor has not historically incurred debt obligations.

6

RISK FACTORS

You should carefully consider the following risks and other information contained in this prospectus before deciding to participate in the exchange offer. The risks and uncertainties described below are not the only risks facing us or applicable to your investment in our new notes. Additional risks not presently known to us or which we consider immaterial based on information currently available to us may also materially adversely affect us. If any of the following risks or uncertainties actually occur, our business, financial condition and results of operations could be materially adversely affected.

Risks Related to the Exchange Offer and the Notes and our Capital Structure

We have a substantial amount of indebtedness which may adversely affect our cash flow and our ability to operate our business, to comply with debt covenants and to make payments on our indebtedness, including the notes.

We are highly leveraged. As of June 30, 2007, our total indebtedness, including the notes, was $1,772.6 million, which represents approximately 67% of our capitalization. For the twelve-month period ended December 31, 2006, our interest expense was $180 million. In addition, as of December 31, 2006, we had issued approximately $227.5 million in irrevocable standby letters of credit under our $300 million senior secured synthetic letter of credit facility, which is not reflected on our balance sheet. We may also utilize our $250 million senior secured revolving credit facility in the future.

Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness, including the notes. Our substantial indebtedness, combined with our lease and other financial obligations and contractual commitments, could have other important consequences to you as a holder of notes, including the following:

• our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms;

• satisfying our obligations with respect to our indebtedness, including the notes, may be more difficult and any failure to comply with the obligations of any of our debt instruments could result in an event of default under the indenture governing the notes and the agreements governing such other indebtedness;

• we will need a portion of our cash flow to make interest payments on our debt, reducing the funds that would otherwise be available for operations and future business opportunities;

• our debt level will make us more vulnerable to competitive pressures or a downturn in our business or the economy generally; and

• our debt level may limit our flexibility in planning for, or responding to, changing business and economic conditions.

Our ability to service our debt, including the notes, will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service our current or future indebtedness, we will be forced to take actions such as reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or seeking additional equity capital. We may not be able to effect any of these actions on satisfactory terms, or at all. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources—Capital Requirements.”

7

Increases in interest rates could adversely affect our business.

In addition to our exposure to commodity prices, we have significant exposure to increases in interest rates. As of June 30, 2007, our total indebtedness was $1,772.6 million, of which $250 million was at fixed interest rates and $1,522.6 million was at variable interest rates. We have entered into hedging arrangements for a notional amount of $350 million of indebtedness through November 2007. A one percentage point increase in the interest rate on our variable interest rate debt would have increased annual interest expense by approximately $11.7 million. As a result of our significant amount of variable interest rate debt, our financial condition could be adversely affected by significant increases in interest rates.

Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could increase the risks associated with our substantial leverage.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although the indenture governing the notes and our senior secured credit facilities contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and any indebtedness incurred in compliance with these restrictions could be substantial. For example, in addition to the $1,228 million of indebtedness outstanding under our senior secured term loan facility at June 30, 2007 and up to $250 million available under our senior secured revolving credit facility, the indenture governing the notes will allow us to incur additional indebtedness of up to $200 million of senior secured debt. As an additional example, the indenture governing the notes will allow us to incur a significant amount of indebtedness in connection with acquisitions (including an unlimited amount of certain types of debt that will require cash payments of interest during the period the notes are outstanding). The indenture also permits the incurrence of indebtedness by the Partnership. If we incur additional debt, the risks associated with our substantial leverage would increase.

Repayment of our debt, including the notes, is dependent on cash flow generated by our subsidiaries.

Targa Resources, Inc. is a holding company and Targa Resources Finance Corporation was created solely to serve as a corporate co-obligor on the obligations of Targa Resources, Inc. under the Indenture and will continue to have nominal assets and no operations or revenues. Our subsidiaries own substantially all of our operating assets and conduct substantially all of our operations. Accordingly, repayment of our indebtedness, including the notes, is dependent, to a material extent, on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Unless they are guarantors of the notes, our subsidiaries do not have any obligation to pay amounts due on the notes or to make funds available for that purpose. Our subsidiaries may not be able to, or be permitted to, make distributions to enable us to make payments in respect of our indebtedness, including the notes. Each subsidiary is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While the indenture governing the notes and our senior secured credit facilities limit the ability of our subsidiaries that are not subsidiary guarantors to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to certain significant qualifications and exceptions, including an exception with respect to any restrictions included in the documentation governing indebtedness that is permitted to be incurred under the terms of the indenture governing the notes. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness, including the notes.

The notes will be structurally subordinated to claims of creditors of our current and future non-guarantor subsidiaries.

The notes will be structurally subordinated to indebtedness and other liabilities of our subsidiaries that are not guarantors of the notes, including the Partnership. The indenture governing the notes will allow our non-guarantor subsidiaries to incur a significant amount of permitted indebtedness in the future, including refinancing indebtedness under all of the baskets for our senior secured credit facilities and our incremental

8

$200 million senior secured debt basket. In the event of a bankruptcy, liquidation or reorganization of any of our non-guarantor subsidiaries, these non-guarantor subsidiaries will pay the holders of their debts, holders of preferred equity interests and their trade creditors before they will be able to distribute any of their assets to us.

Investors may not be able to rely on the earnings and assets of our joint ventures to support payments due under the notes.

We hold majority interests in our Versado and Cedar Bayou Fractionators joint ventures. While the minority shareholders’ income related to these joint ventures is deducted as minority expense in calculating our net income, our consolidated financial statements reflect the financial results of these companies, including all of their revenue and operating income, even though we own less than 100% of their equity and do not solely control the distribution of their income. For the twelve months ended December 31, 2006, Versado and Cedar Bayou Fractionators produced net income of $66.7 million and earnings before interest, income taxes, depreciation and amortization, or EBITDA, of $93.0 million. Of the total EBITDA, $58.8 million represented Targa’s share and the remaining $34.2 million represented the minority interest holders’ share. During that period, Targa received cash distributions of $63.3 million and the minority shareholders received cash distributions of $37.2 million from these consolidated joint ventures. We also hold minority interests in VESCO and Gulf Coast Fractionators. For the twelve months ended December 31, 2006, we recognized equity earnings of $10.0 million from the joint ventures. We received cash of $2.3 million from Gulf Coast Fractionators and we made cash contributions to VESCO of $9.1 million. For an explanation of EBITDA and a reconciliation of EBITDA to its most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles, or GAAP, please see “Selected Historical Financial and Operating Data.”

The ability of our joint ventures to distribute their earnings to us, in the form of dividends or otherwise, is subject to, among other things, the consent of our joint venture partners. Each of our existing majority-owned joint ventures are, and any future majority-owned joint venture will likely be, an unrestricted subsidiary and, therefore, will not be subject to the covenants contained in the indenture governing the notes or our senior secured credit facilities and will not guarantee the notes or our senior secured credit facilities. The indenture governing the notes will permit us to distribute to our stockholders all of our equity interests in future unrestricted subsidiaries (but not the equity of our existing majority-owned joint ventures) without any restriction. Accordingly, investors in the notes may not be able to rely upon income from or the assets of our joint ventures to support the payment of interest, principal or other amounts owing in respect of the notes.

We may transfer a significant amount of our assets to master limited partnerships, which will not be restricted subsidiaries and will not guarantee the notes.

Our senior secured credit facilities and the indenture governing the notes permit us, subject to certain conditions, to transfer assets, including equity interests we hold in other entities, to the Partnership or other master limited partnerships, or MLPs, and their subsidiaries, which will not be restricted subsidiaries or guarantors of the notes. These conditions include, among other things, that (i) after and as a result of any such transfer we receive an amount of cash attributable to such transfer equal to at least 75% of the fair market value of the assets or equity interests transferred, with the remaining consideration in the form of equity interests in the Partnership or other MLP to which the assets or equity interests are contributed and (ii) we apply the net cash proceeds received from the transfer to repay senior indebtedness, repurchase notes or, subject to certain limitations, reinvest in our business. Provided that we comply with these and other conditions, we may transfer a significant portion of our assets to the Partnership or other MLPs and their subsidiaries, and they will not be subject to any restrictions under our senior secured credit facilities or the indenture governing the notes or be required to distribute any funds to us or provide any guarantee in respect of the notes.

9

Investors may not be able to rely on the earnings or assets of the Partnership or the general partner of the Partnership to support payments due under the notes.

The ability of the Partnership, any other MLP or a general partner of an MLP following such general partner’s initial public offering, to distribute earnings to us is subject to the decisions of the board of directors (or similar governing body) of the Partnership’s or other MLP’s general partner. The members of these boards owe fiduciary duties to public equity holders of the Partnership or other MLP, and will not owe any duties, fiduciary or otherwise, to holders of the notes. The Partnership is not, and any other MLPs will not be, subject to the covenants contained in the indenture governing the notes or our senior secured credit facilities and will not guarantee the notes or our senior secured credit facilities. Likewise, following its initial public offering, the general partner of the Partnership or other MLP will no longer be subject to the covenants contained in the indenture governing the notes or our senior secured credit facilities and will be released from its guarantee of the notes and the senior secured credit facilities.

Our senior secured credit facilities and the indenture governing the notes permit us, subject to certain conditions, to sell equity interests in the Partnership or any other MLP. In addition, we are allowed to distribute to our stockholders equity interests we may hold in the Partnership or any other MLPs and general partners of MLPs if our pro forma consolidated leverage ratio after giving effect to any such distributions is less than 2.75 to 1.00. Accordingly, investors in the notes may not be able to rely upon income from or the assets of the Partnership or any other MLPs, or any general partners of MLPs to support the payment of interest, principal or other amounts owing in respect of the notes.

The terms of our senior secured credit facilities and the indenture governing the notes may restrict our current and future operations, particularly our ability to respond to changes in our business or to take certain actions.

The credit agreement governing our senior secured credit facilities and the indenture governing the notes contain, and any future indebtedness we incur would likely contain, a number of restrictive covenants that impose significant operating and financial restrictions, including restrictions on our ability to engage in acts that may be in our best long-term interests. The senior secured credit agreement and indenture governing the notes include covenants that, among other things, restrict our ability to:

• incur or guarantee additional indebtedness or issue preferred stock;

• pay dividends on our capital stock or redeem, repurchase or retire our capital stock or subordinated indebtedness;

• make investments;

• create restrictions on the payment of dividends or other distributions to us from our non-guarantor restricted subsidiaries;

• engage in transactions with our affiliates;

• sell assets, including capital stock of the subsidiaries;

• make certain acquisitions;

• transfer assets;

• enter into sale and lease back transactions;

• consolidate or merge; and

• incur liens.

The senior secured credit agreement also includes covenants that, among other things, restrict our ability to:

• prepay, redeem and repurchase certain debt, other than loans under the senior secured credit facilities;

• make capital expenditures;

10

• amend debt and other material agreements; and

• change business activities conducted by us.

In addition, our senior secured credit facilities require us to satisfy and maintain specified financial ratios and other financial condition tests, some of which will become more restrictive over time. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will meet those ratios and tests.

A breach of any of these covenants could result in an event of default under our senior secured credit facilities. Upon the occurrence of such an event of default, the lenders could elect to declare all amounts outstanding under the senior secured credit facilities to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders under our senior secured credit facilities could proceed against the collateral granted to them to secure that indebtedness. We have pledged substantially all of our assets as collateral under our senior secured credit facilities. If the lenders under our senior secured credit facilities accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay our senior secured credit facilities, as well as our unsecured indebtedness, including the notes.

The operating and financial restrictions and covenants in these debt agreements and any future financing agreements may adversely affect our ability to finance future operations or capital needs or to engage in other business activities.

The notes and the guarantees are not secured by our assets nor those of the subsidiary guarantors, and the lenders under our senior secured credit facilities and certain present and future counterparties under our secured hedging arrangements will be entitled to remedies available to secured creditors, which gives them priority over the note holders to collect amounts due to them.

The notes and the guarantees are not secured by any of our assets. Our obligations under our senior secured credit facilities and certain of our hedging arrangements are secured by, among other things, a first priority pledge of substantially all our and our subsidiary guarantors’ assets, subject to certain exceptions. The notes are effectively subordinated to this senior secured indebtedness and such secured hedging arrangements to the extent of the value of the collateral securing such indebtedness. As of June 30, 2007, on a combined basis, the notes and the guarantees were effectively subordinated to approximately $1,522.6 million of indebtedness outstanding under our senior secured credit facilities. Under the terms of the indenture governing the notes, we may incur additional senior secured indebtedness under, or in addition to, our senior secured credit facilities, and such additional indebtedness could be significant. We have entered into long-term, fixed price hedges covering a portion of our expected natural gas and NGL equity volumes. If the difference between the amount we owe our hedge counterparties is more than the amount our counterparties owe to us, then the amount of such difference will be secured by our assets.

The right of repayment under the notes may be compromised if we enter into bankruptcy, liquidation, reorganization or other winding-up proceedings or if there is a default in, or acceleration of, payment under our senior secured credit facilities, our senior secured hedging arrangements or other senior secured indebtedness. If any of these events occurs, the senior secured creditors could sell those of our assets in which they have been granted a security interest, to the exclusion of the note holders, even if an event of default exists under the indenture at such time. As a result, upon the occurrence of any of these events, there may not be sufficient funds to pay amounts due on the notes.

Federal and state statutes may allow courts, under specific circumstances, to void guarantees and subordinate claims in respect of the guarantees.

The issuance of the guarantees by the subsidiary guarantors may be subject to review under state and federal laws if a bankruptcy, liquidation or reorganization case or a lawsuit, including in circumstances in which

11

bankruptcy is not involved, were commenced at some future date by the subsidiary guarantors or on behalf of our unpaid creditors or the unpaid creditors of a guarantor.

Under the federal bankruptcy laws and comparable provisions of state fraudulent transfer and fraudulent conveyance laws, a court may void or otherwise decline to enforce a subsidiary guarantor’s guarantee, or a court may subordinate such guarantee to the applicable subsidiary guarantor’s existing and future indebtedness.

While the relevant laws may vary from state to state, a court might void or otherwise decline to enforce the guarantee if it found that when the applicable subsidiary guarantor entered into its guarantee, or, in some states, when payments became due under the guarantee, the applicable subsidiary guarantor received less than reasonably equivalent value or fair consideration and either:

• the applicable subsidiary guarantor was insolvent, or rendered insolvent by reason of issuing the guarantee;

• the applicable subsidiary guarantor was engaged in a business or transaction for which the applicable subsidiary guarantor’s remaining assets constituted unreasonably small capital;

• the applicable subsidiary guarantor intended to incur, or believed that the applicable subsidiary guarantor would incur, debts beyond such subsidiary guarantor’s ability to pay such debts as they mature; or

• the applicable subsidiary guarantor was a defendant in an action for monetary damages, or had a judgment for monetary damages rendered against such guarantor, and the damages remained unsatisfied after final judgment.

A court might also void a guarantee, without regard to the above factors, if it found that the applicable subsidiary guarantor entered into its guarantee with actual intent to hinder, delay or defraud its creditors.

A court would likely find that a subsidiary guarantor did not receive reasonably equivalent value or fair consideration for the guarantee if such subsidiary guarantor did not substantially benefit directly or indirectly from the issuance of the applicable guarantee. As a general matter, value is given for a guarantee if, in exchange for the guarantee, property is transferred or an antecedent debt is satisfied. In the case of the subsidiary guarantees, a court could find that the benefit from the guarantees went to Targa and that the guarantors did not, directly or indirectly, receive any benefit from the guarantees.

The measures of insolvency applied by courts will vary depending upon the particular fraudulent transfer law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, an entity would be considered insolvent if:

• the sum of its debts, including subordinate and contingent liabilities, was greater than the fair saleable value of its assets;

• if the present fair saleable value of its assets were less than the amount that would be required to pay the probable liability on its existing debts, including subordinate and contingent liabilities, as they become absolute and mature; or

• it cannot pay its debts as they become due.

In the event of a finding that a fraudulent conveyance or transfer has occurred, a court may void, or hold unenforceable, any of the guarantees, which could mean that you may not receive any payments on the guarantees and the court may direct you to repay any amounts that you have already received from any subsidiary guarantor to such subsidiary guarantor or a fund for the benefit of such subsidiary guarantor’s creditors. Furthermore, the holders of voided notes would cease to have any direct claim against the applicable subsidiary guarantor. Consequently, the applicable subsidiary guarantor’s assets would be applied first to satisfy

12

our or the applicable subsidiary guarantor’s liabilities, if any, before any portion of the applicable subsidiary guarantor’s assets could be applied to the payment of the notes. Sufficient funds to repay the notes may not be available from other sources, including the remaining subsidiary guarantors, if any. Moreover, the voidance of a guarantee could result in an event of default with respect to our and our subsidiary guarantors’ other debt that could result in acceleration of such debt (if not otherwise accelerated due to such subsidiary guarantor’s insolvency or other proceeding).

Although each guarantee will contain a provision intended to limit that subsidiary guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent transfer, this provision may not be effective to protect those guarantees from being voided under fraudulent transfer law, or may reduce that subsidiary guarantor’s obligation to an amount that effectively makes its guarantee worthless.

Because each subsidiary guarantor’s liability under its guarantee may be reduced to zero, avoided or released under certain circumstances, you may not receive any payments from some or all of the subsidiary guarantors.

You have the benefit of the guarantees of the subsidiary guarantors. However, the guarantees by the subsidiary guarantors are limited to the maximum amount that the subsidiary guarantors are permitted to guarantee under applicable law. As a result, a subsidiary guarantor’s liability under its guarantee could be reduced to zero, depending upon the amount of other obligations of such subsidiary guarantor. Further, under the circumstances discussed more fully above, a court under federal or state fraudulent conveyance and transfer statutes could void the obligations under a guarantee or further subordinate it to all other obligations of the subsidiary guarantor. In addition, you will lose the benefit of a particular guarantee if it is released under certain circumstances described in the indenture.

We may not be able to repurchase the notes upon a change of control.

Upon the occurrence of certain change of control events, we will be required to offer to repurchase all notes that are outstanding at 101% of the principal amount thereof, plus any accrued and unpaid interest, and additional interest, if any, to the date of repurchase. Our senior secured credit facilities provide that certain change of control events (including a change of control as defined in the indenture governing the notes) constitute a default. Any future credit agreement or other agreements relating to our indebtedness would likely contain similar provisions. If we experience a change of control event that triggers a default under our senior secured credit facilities or any future credit facility, we could seek a waiver of such default or seek to refinance the relevant indebtedness. In the event we do not obtain such a waiver or refinance our senior secured credit facilities, such default could result in amounts outstanding under our senior secured credit facilities being declared due and payable. In the event we experience a change of control event that results in our having to offer to repurchase your notes, we may not have sufficient financial resources to satisfy all of our obligations under our senior or any replacement secured credit facilities, any other outstanding debt and the notes. A failure to make the applicable change of control offer or to pay the applicable change of control purchase price when due would result in a default under the indenture.

In addition, the change of control covenant in the indenture governing the notes does not cover all corporate reorganizations, mergers or similar transactions and may not provide you with protection in a highly leveraged transaction.

If you do not properly tender your outstanding notes, you will continue to hold unregistered outstanding notes and your ability to transfer outstanding notes will be adversely affected.

We will only issue new notes in exchange for outstanding notes that you timely and properly tender. Therefore, you should allow sufficient time to ensure timely delivery of the outstanding notes and you should carefully follow the instructions on how to tender your outstanding notes. Neither we nor the exchange agent is required to tell you of any defects or irregularities with respect to your tender of outstanding notes.

13

If you do not exchange your outstanding notes for new notes pursuant to the exchange offer, the outstanding notes you hold will continue to be subject to the existing transfer restrictions. In general, you may not offer or sell the outstanding notes except under exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not plan to register outstanding notes under the Securities Act unless our registration rights agreement with the initial purchaser of the outstanding notes requires us to do so. Further, if you continue to hold any outstanding notes after the exchange offer is consummated, you may have trouble selling them because there will be fewer notes outstanding.

We cannot assure you that an active trading market for the notes will develop.

The new notes are a new issue of securities for which there is no established trading market. We do not intend to have the notes listed on a national securities exchange or included in any automated quotation system. The liquidity of any market for the notes will depend upon the number of holders of the notes, our performance, the market for similar securities, the interest of securities dealers in making a market in the notes and other factors. A liquid trading market may not develop for the notes. If an active market does not develop or is not maintained, the price and liquidity of the notes may be adversely affected.

Risks Related to Our Business

Our cash flow is affected by supply and demand for natural gas and NGL products, natural gas and NGL prices, and decreases in these prices due to weather and other natural and economic forces could materially and adversely affect our results of operations and financial condition.

Our operations can be affected by the level of natural gas and NGL prices and the relationship between these prices. The prices of natural gas and NGLs have been volatile and we expect this volatility to continue. The NYMEX daily settlement price for natural gas for the prompt month contract in the year ended December 31, 2005 ranged from a high of $15.38 per MMBtu to a low of $5.79 per MMBtu and for the year ended December 31, 2006 ranged from a high of $10.63 per MMBtu to a low of $4.20 per MMBtu. From the beginning of 2007 through June 30, 2007 the NYMEX daily settlement price for natural gas has ranged from a high of $9.07 per MMBtu to a low of $5.40 per MMBtu. NGL prices exhibit similar volatility. Based on monthly index prices, the average price for our NGL composition in the year ended December 31, 2005 ranged from a high of $1.12 per gallon to a low of $0.73 per gallon and for the year ended December 31, 2006 ranged from a high of $1.18 per gallon to a low of $0.92 per gallon. From the beginning of 2007 through June 30, 2007 the average price for our NGL composition ranged from a high of $1.13 per gallon to a low of $0.93 per gallon.

Our future cash flow will be materially adversely affected if we experience significant, prolonged pricing deterioration below general price levels experienced over the past few years in our industry.

The markets and prices for natural gas and NGLs depend upon factors beyond our control. These factors include demand for these commodities, which fluctuate with changes in market and economic conditions and other factors, including:

• the impact of seasonality and weather;

• general economic conditions;

• the level of domestic crude oil and natural gas production and consumption;

• the availability of imported natural gas, NGLs and crude oil;

• actions taken by foreign oil and gas producing nations;

• the availability of local, intrastate and interstate transportation systems;

• the availability and marketing of competitive fuels;

14

• the impact of energy conservation efforts; and

• the extent of governmental regulation and taxation.

Our primary natural gas gathering and processing arrangements that expose us to commodity price risk are percent-of-proceeds arrangements. Under percent-of-proceeds arrangements, we generally process natural gas from producers and remit to the producers an agreed percentage of the proceeds from the sale of residue gas and NGL products at market prices or a percentage of residue gas and NGL products at the tailgate of our processing facilities. In some percent-of-proceeds arrangements, we remit to the producer a percentage of an index price for residue gas and NGL products, less agreed adjustments, rather than remitting a portion of the actual sales proceeds. Under these types of arrangements, our revenues and our cash flows increase or decrease, whichever is applicable, as the price of natural gas, NGLs and/or crude oil fluctuates.

Because of the natural decline in production from existing wells in our operating regions, our success depends on our ability to obtain new sources of supplies of natural gas and NGLs which depends on certain factors beyond our control. Any decrease in supplies of natural gas or NGLs could adversely affect our business and operating results.

Our gathering systems are connected to natural gas wells, from which the production will naturally decline over time, which means that our cash flows associated with these wells will likely also decline over time. To maintain or increase throughput levels on our gathering systems and the utilization rate at our processing plants and our treating and fractionation facilities, we must continually obtain new natural gas supplies. Additionally, our profitability is materially affected by the volume of raw NGL mix fractionated at our fractionation facilities. A material decrease in natural gas production from producing areas that we rely on for raw NGL mix, as a result of depressed commodity prices or otherwise, could result in a decline in the volume of NGL products delivered to our fractionation facilities. Our ability to obtain additional sources of natural gas depends in part on the level of successful drilling activity near our gathering systems.

We have no control over the level of drilling activity in the areas of our operations, the amount of reserves associated with the wells or the rate at which production from a well will decline. In addition, we have no control over producers or their drilling or production decisions, which are affected by, among other things, prevailing and projected energy prices, demand for hydrocarbons, the level of reserves, geological considerations, governmental regulations, availability of drilling rigs and other production and development costs and the availability and cost of capital. Fluctuations in energy prices can greatly affect production rates and investments by third parties in the development of new oil and natural gas reserves. Drilling activity generally decreases as oil and natural gas prices decrease. In the past, the prices of natural gas have been extremely volatile, and we expect this volatility to continue. Natural gas prices reached historic highs in 2005 and early 2006, but declined substantially in the second half of 2006 and have continued to decline in 2007. Reductions in exploration or production activity or shut-ins by producers in the areas in which we operate as a result of a sustained decline in natural gas prices would lead to reduced utilization of our gathering and processing assets.

Because of these factors, even if new natural gas reserves are discovered in areas served by our assets, producers may choose not to develop those reserves. If, due to reductions in drilling activity or competition, we are not able to obtain new supplies of natural gas to replace the natural decline in volumes from existing wells, throughput on our pipelines and the utilization rates of our treating, processing and fractionation facilities would decline, which could reduce our revenue.

Some of our business is seasonal, requires that we build inventory to meet seasonal demand, and is potentially impacted by weather.

While the volumes of raw NGL mix that we fractionate are generally stable on an average annual basis, they often vary on a seasonal basis. For example, we typically fractionate lower volumes during the winter months,

15

when more raw NGL mix is fractionated by facilities closer to the field to capture propane for heating purposes and when natural gas wells and certain oil wells tend to be less productive. Conversely, we typically fractionate greater volumes during the summer months, when less raw NGL mix is locally fractionated for heating purposes, when natural gas wells tend to be more productive and when refineries have excess supply of raw NGL mix due to various regulatory restrictions. This seasonality in demand may cause our results of operations to lack predictability on a quarter to quarter basis.

Similarly, weather conditions have a significant impact on the demand for propane because end-users depend on propane principally for heating purposes. Warmer-than-normal temperatures in one or more regions in which we operate can significantly decrease the total volume of propane we sell. Lack of consumer demand for propane may also adversely affect the retailers we transact with in our wholesale propane marketing operations, exposing us to their inability to satisfy their contractual obligations to us.

If we fail to balance our purchases of natural gas and our sales of residue gas and NGLs, our exposure to commodity price risk will increase.

We may not be successful in balancing our purchases of natural gas and our sales of residue gas and NGLs. In addition, a producer could fail to deliver promised volumes to us or deliver in excess of contracted volumes, or a purchaser could purchase less than contracted volumes. Any of these actions could cause an imbalance between our purchases and sales. If our purchases and sales are not balanced, we will face increased exposure to commodity price risks and could have increased volatility in our operating income.

Our hedging activities may not be effective in reducing the variability of our cash flows and may, in certain circumstances, increase the variability of our cash flows. Moreover, our hedges may not fully protect us against volatility in basis differentials. Finally, the percentage of our expected equity commodity volumes that are hedged decreases substantially over time.

We have entered into derivative transactions related to only a portion of our equity volumes. As a result, we will continue to have direct commodity price risk to the unhedged portion. Our actual future volumes may be significantly higher or lower than we estimated at the time we entered into the derivative transactions for that period. If the actual amount is higher than we estimated, we will have greater commodity price risk than we intended. If the actual amount is lower than the amount that is subject to our derivative financial instruments, we might be forced to satisfy all or a portion of our derivative transactions without the benefit of the cash flow from our sale of the underlying physical commodity, resulting in a reduction of our liquidity. The percentages of our expected equity volumes that are covered by our hedges decrease over time. The derivative instruments we utilize for these hedges are based on posted market prices, which may be lower than the actual natural gas, NGL and condensate prices that we realize in our operations. These pricing differentials may be substantial and could materially impact the prices we ultimately realize. As a result of these factors, our hedging activities may not be as effective as we intend in reducing the variability of our cash flows, and in certain circumstances may actually increase the variability of our cash flows. To the extent we hedge our commodity price risk, we may forego the benefits we would otherwise experience if commodity prices were to change in our favor. For additional information regarding our hedging activities, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Quantitative and Qualitative Disclosures about Market Risk.”

If third-party pipelines and other facilities interconnected to our natural gas pipelines and facilities become partially or fully unavailable to transport natural gas and NGLs, our revenues could be adversely affected.

We depend upon third party pipelines and other facilities that provide delivery options to and from our pipelines and processing and fractionation facilities. Since we do not own or operate these pipelines or other facilities, their continuing operation in their current manner is not within our control. If any of these third-party pipelines and other facilities become partially or fully unavailable to transport natural gas and NGLs, or if the gas quality specifications for their pipelines or facilities change so as to restrict our ability to transport gas on those pipelines or facilities, our revenues and cash available for distribution could be adversely affected.

16

Our industry is highly competitive, and increased competitive pressure could adversely affect our business and operating results.

We compete with similar enterprises in our respective areas of operation. Some of our competitors are large oil, natural gas and petrochemical companies or integrated midstream energy companies that have greater financial resources and access to supplies of natural gas and NGLs than we do. Some of these competitors may expand or construct gathering, processing and transportation systems that would create additional competition for the services we provide to our customers. In addition, our customers who are significant producers of natural gas may develop their own gathering, processing and transportation systems in lieu of using ours. Our ability to renew or replace existing contracts with our customers in the gathering and processing business, as well as the natural gas logistics and marketing business, at rates sufficient to maintain current revenues and cash flows could be adversely affected by the activities of our competitors and our customers. All of these competitive pressures could have a material adverse effect on our business, results of operations, financial condition and ability to make cash distributions to you.

We typically do not obtain independent evaluations of natural gas reserves dedicated to our gathering pipeline systems; therefore, volumes of natural gas on our systems in the future could be less than we anticipate.

We typically do not obtain independent evaluations of natural gas reserves connected to our gathering systems due to the unwillingness of producers to provide reserve information as well as the cost of such evaluations. Accordingly, we do not have independent estimates of total reserves dedicated to our gathering systems or the anticipated life of such reserves. If the total reserves or estimated life of the reserves connected to our gathering systems is less than we anticipate and we are unable to secure additional sources of natural gas, then the volumes of natural gas transported on our gathering systems in the future could be less than we anticipate. A decline in the volumes of natural gas on our systems could have a material adverse effect on our business, results of operations, and financial condition.

A reduction in demand for NGL products by the petrochemical, refining or heating industries could materially adversely affect our business, results of operations and financial condition.

The NGL products we produce have a variety of applications, including as heating fuels, petrochemical feedstocks and refining blend stocks. A reduction in demand for NGL products, whether because of general economic conditions, new government regulations, reduced demand by consumers for products made with NGL products, increased competition from petroleum-based products due to pricing differences, mild winter weather or other reasons, could result in a decline in the volume of NGL products we handle or reduce the fees we charge for our services. Our NGL products and their demand are affected as follows:

Ethane. Ethane is typically supplied as purity ethane and as part of ethane-propane mix. Ethane is primarily used in the petrochemical industry as feedstock for ethylene, one of the basic building blocks for a wide range of plastics and other chemical products. Although ethane is typically extracted as part of the mixed NGL stream at gas processing plants, if natural gas prices increase significantly in relation to NGL product prices or if the demand for ethylene falls, it may be more profitable for natural gas producers to leave the ethane in the natural gas stream thereby reducing the volume of NGLs delivered for fractionation and marketing. We have experienced periods where natural gas producers have retained ethane in the natural gas stream and may experience such periods in the future.

Propane. Propane is used as a petrochemical feedstock in the production of ethylene and propylene, as a heating, engine and industrial fuel, and in agricultural applications such as crop drying. Changes in demand for ethylene and propylene could adversely affect demand for propane. The demand for propane as a heating fuel is significantly affected by weather conditions. The volume of propane sold is at its highest during the six-month peak heating season of October through March. Demand for our propane may be reduced during periods of warmer-than-normal weather.

17

Normal Butane. Normal butane is used in the production of isobutane, as a refined product blending component, as a fuel gas, either alone or in a mixture with propane, and in the production of ethylene and propylene. Changes in the mandated composition of refined products, demand for heating fuel and for ethylene and propylene, could adversely affect demand for normal butane.

Isobutane. Isobutane is predominantly used in refineries to produce alkylates to enhance octane levels. Accordingly, any action that reduces demand for motor gasoline or demand for isobutane to produce alkylates for octane enhancement might reduce demand for isobutane.

Natural Gasoline. Natural gasoline is used as a blending component for certain refined products and as a feedstock used in the production of ethylene and propylene. Changes in the mandated composition of motor gasoline and in demand for ethylene and propylene could adversely affect demand for natural gasoline.

Any reduced demand for ethane, propane, normal butane, isobutane or natural gasoline for any of the reasons stated above could adversely affect demand for the services we provide as well as NGL prices, which would negatively impact our results of operations and financial condition.

We have significant relationships with Chevron as a producer utilizing our gas processing operations, a purchaser of our NGLs and a customer for our marketing and refinery services. In some cases, these agreements are subject to renegotiation and termination rights.

We have several gas processing agreements with Chevron pursuant to which Chevron has dedicated, for the life of the fields, substantially all of the natural gas it produces from committed areas in New Mexico, Texas and the Gulf of Mexico. In 2006 and in the first six months of 2007, approximately 19% and 21%, respectively, of our natural gas gathered for processing was from Chevron under these gas processing agreements. These contracts provide that either party has the right to renegotiate the processing terms. If the parties are unable to agree on revised terms, then the agreements provide for the issue to be settled by binding arbitration. It is possible that the terms will be renegotiated or arbitrated on terms that are less favorable to us than the current terms of these agreements. In addition, to the extent that the volume of natural gas processed under these contracts declines as a result of depletion or otherwise, we would be adversely affected.

In 2006 and in the first six months of 2007, approximately 28% and 24%, respectively, of our consolidated revenues and approximately 20% and 14%, respectively, of our consolidated cost of sales, were derived from transactions with Chevron and ChevronPhillipsCompany, or CPC. We are in the process of renegotiating our contracts with CPC. See “Business—Significant Customers.” Under many of our Chevron contracts where we purchase or market NGLs on Chevron’s behalf, Chevron may elect to terminate the contracts or renegotiate the price terms. To the extent Chevron reduces the volumes of NGLs that it purchases from us or reduces the volumes of NGLs that we market on its behalf, or to the extent the economic terms of such contracts are changed, our revenues and cash available for debt service could decline.

We do not own most of the land on which our pipelines and facilities are located, which could disrupt our operations.

We do not own most of the land on which our pipelines and facilities are located, and we are therefore subject to the possibility of more onerous terms and/or increased costs to retain necessary land use if we do not have valid rights of way or leases or if such rights of way or leases lapse or terminate. We sometimes obtain the rights to land owned by third parties and governmental agencies for a specific period of time. Our loss of these rights, through our inability to renew right-of-way contracts, leases or otherwise, could cause us to cease operations on the affected land, increase costs related to continuing operations elsewhere, and reduce our revenue.

18

We may be unable to cause our majority-owned joint ventures to take or not to take certain actions unless some or all of our joint venture participants agree.

We participate in several majority-owned joint ventures whose corporate governance structures require at least a majority in interest vote to authorize many basic activities and require a greater voting interest (sometimes up to 100%) to authorize more significant activities. Examples of these more significant activities are large expenditures or contractual commitments, the construction or acquisition of assets, borrowing money or otherwise raising capital, making distributions, transactions with affiliates of a joint venture participant, litigation and transactions not in the ordinary course of business, among others. Without the concurrence of joint venture participants with enough voting interests, we may be unable to cause any of our joint ventures to take or not take certain actions, even though taking or preventing those actions may be in the best interest of us or the particular joint venture.

In addition, subject to certain conditions, any joint venture owner may sell, transfer or otherwise modify its ownership interest in a joint venture, whether in a transaction involving third parties or the other joint owners. Any such transaction could result in our partnering with different or additional parties.

If we lose our senior management or key business line personnel, our business may be adversely affected.

Our success is dependent upon the efforts of our senior management, as well as on our ability to attract and retain senior management. There is substantial competition for qualified personnel in the midstream natural gas industry. We may not be able to retain our existing senior management, fill new positions or vacancies created by expansion or turnover, or attract additional qualified senior management personnel. We have not entered into employment agreements with any of our key executive officers. In addition, we do not maintain “key man” life insurance on the lives of any members of our senior management. A loss of one or more of these key people could harm our business and prevent us from implementing our business strategy.

Weather may limit our ability to operate our business and could adversely affect our operating results.

The weather in the areas in which we operate can cause delays in our operations and, in some cases, work stoppages. For example, natural gas sales volumes for the six months ended June 30, 2007 were negatively impacted by unseasonably wet weather, which limited our ability to complete connections to new wells. Any similar delays or work stoppages caused by the weather could adversely affect our operating results for the affected periods.

Our business involves many hazards and operational risks, some of which may not be fully covered by insurance. If a significant accident or event occurs that is not fully insured, if we fail to recover all anticipated insurance proceeds for significant accidents or events for which we are insured, or if we fail to rebuild facilities damaged by such accidents or events, our operations and financial results could be adversely affected.

Our operations are subject to many hazards inherent in the gathering, compressing, treating, processing and transport ting of natural gas and the fractionation, storage and transportation of NGLs, including:

• damage to pipelines, plants, logistical assets and related equipment and surrounding properties caused by hurricanes, tornadoes, floods, fires and other natural disasters, explosions and acts of terrorism;

• inadvertent damage from third parties, including from construction, farm and utility equipment;

• leaks of natural gas, NGLs and other hydrocarbons or losses of natural gas or NGLs as a result of the malfunction of equipment or facilities; and

• other hazards that could also result in personal injury and loss of life, pollution and suspension of operations.

19

These risks could result in substantial losses due to personal injury and/or loss of life, severe damage to and destruction of property and equipment and pollution or other environmental damage and may result in curtailment or suspension of our related operations. A natural disaster or other hazard affecting the areas in which we operate could have a material adverse effect on our operations. For example, Hurricanes Katrina and Rita damaged gathering systems, processing facilities, NGL fractionators and pipelines along the Gulf Coast, including certain of our facilities. These hurricanes disrupted the operations of our customers in August and September 2005, which curtailed or suspended the operations of various energy companies with assets in the region. The size and complexity of insurance claims associated with these storms resulted in longer than anticipated delays in some recoveries of insurance proceeds and these delays and any ultimate failure to recover insurance proceeds could adversely affect our financial results. We are not fully insured against all risks inherent to our business. We are not insured against all environmental accidents that might occur which may include toxic tort claims, other than those considered to be sudden and accidental. If a significant accident or event occurs that is not fully insured, if we fail to recover all anticipated insurance proceeds for significant accidents or events for which we are insured, or if we fail to rebuild facilities damaged by such accidents or events, our operations and financial condition could be adversely affected. In addition, we may not be able to maintain or obtain insurance of the type and amount we desire at reasonable rates. As a result of market conditions, premiums and deductibles for certain of our insurance policies have increased substantially, and could escalate further. For example, following Hurricanes Katrina and Rita, insurance premiums, deductibles and co-insurance requirements increased substantially, and terms generally are less favorable than terms that could be obtained prior to such hurricanes. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage.

Terrorist attacks, and the threat of terrorist attacks, have resulted in increased costs to our business. Continued hostilities in the Middle East or other sustained military campaigns may adversely impact our results of operations.

The long-term impact of terrorist attacks, such as the attacks that occurred on September 11, 2001, and the threat of future terrorist attacks on our industry in general, and on us in particular, is not known at this time.

Increased security measures taken by us as a precaution against possible terrorist attacks have resulted in increased costs to our business. Uncertainty surrounding continued hostilities in the Middle East or other sustained military campaigns may affect our operations in unpredictable ways, including disruptions of crude oil supplies and markets for our products, and the possibility that infrastructure facilities could be direct targets of, or indirect casualties of, an act of terror.

Changes in the insurance markets attributable to terrorist attacks may make certain types of insurance more difficult for us to obtain. Moreover, the insurance that may be available to us may be significantly more expensive than our existing insurance coverage. Instability in the financial markets as a result of terrorism or war could also affect our ability to raise capital.

A change in the jurisdictional characterization of some of our assets by federal, state or local regulatory agencies or a change in policy by those agencies may result in increased regulation of our assets, which may cause our revenues to decline and operating expenses to increase.

With the exception of our interest in Venice Gathering System, L.L.C., or VGS, we are generally exempt from Federal Energy Regulatory Commission, or FERC, regulation under the Natural Gas Act of 1938, or NGA, but FERC regulation still affects our businesses and the markets for products derived from those businesses. FERC has recently proposed to require intrastate pipelines, possibly including natural gas gathering pipelines, to comply with certain Internet posting requirements, with the goal of promoting transparency in the interstate natural gas market. FERC has not yet issued a final rule on that proposed rulemaking. We may experience an increase in costs if the rule is adopted as proposed.

20

Other FERC regulations may indirectly impact our businesses and the markets for products derived from these businesses. FERC’s policies and practices across the range of its natural gas regulatory activities, including, for example, its policies on open access transportation, gas quality, ratemaking, capacity release and market center promotion, may indirectly affect the intrastate natural gas market. In recent years, FERC has pursued pro-competitive policies in its regulation of interstate natural gas pipelines. However, we cannot assure you that FERC will continue this approach as it considers matters such as pipeline rates and rules and policies that may affect rights of access to transportation capacity.

Section 1(b) of the NGA exempts natural gas gathering facilities from regulation by FERC as a natural gas company under the NGA. We believe that the natural gas pipelines in our gathering systems meet the traditional tests FERC has used to establish a pipeline’s status as a gatherer not subject to regulation as a natural gas company. However, the distinction between FERC-regulated transmission services and federally unregulated gathering services is the subject of substantial, on-going litigation, so the classification and regulation of our gathering facilities are subject to change based on future determinations by FERC, the courts, or Congress. In addition, the courts have determined that certain pipelines that would otherwise be subject to the Interstate Commerce Act of 1887, or ICA, are exempt from regulation by the FERC under the ICA as proprietary lines. The classification of a line as a proprietary line is a fact-based determination subject to FERC and court review. Accordingly, the classification and regulation of some of our gathering facilities and transportation pipelines may be subject to change based on future determinations by FERC, the courts, or Congress.

Should we fail to comply with all applicable FERC administered statutes, rules, regulations and orders, we could be subject to substantial penalties and fines. Under the Energy Policy Act of 2005, or EPAct 2005, FERC has civil penalty authority under the NGA to impose penalties for current violations of up to $1 million per day for each violation and disgorgement of profits associated with any violation.

State regulation of natural gas gathering facilities and intrastate transportation pipelines generally includes various safety, environmental and, in some circumstances, nondiscriminatory take and common purchaser requirements, and complaint-based rate regulation. Natural gas gathering may receive greater regulatory scrutiny at both the state and federal levels now that FERC has taken a more light-handed approach to regulation of the gathering activities of interstate pipeline transmission companies and as a number of such companies have transferred gathering facilities to unregulated affiliates. The states we operate in have adopted regulations that generally allow natural gas producers and shippers to file complaints with state regulators in an effort to resolve grievances relating to gathering and intrastate transportation pipeline access and rate discrimination. Our gathering and intrastate transportation operations could be adversely affected in the future should they become subject to the application of state or federal regulation of rates and services. These operations may also be or become subject to safety and operational regulations relating to the design, installation, testing, construction, operation, replacement and management of such facilities. Other state regulations may not directly apply to our business, but may nonetheless affect the availability of natural gas for purchase, processing and sale, including state regulation of production rates and maximum daily production allowables from natural gas wells. Additional rules and legislation pertaining to these matters are considered or adopted from time to time. We cannot predict what effect, if any, such changes might have on our operations, but the industry could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes. Other state and local regulations also may affect our business. For more information regarding regulation of Targa’s operations, please read “Business—Regulation.”

We may incur significant costs and liabilities in the future resulting from a failure to comply with new or existing environmental regulations or an accidental release of hazardous substances or hydrocarbons into the environment.

Our natural gas gathering, treating, fractionating and processing operations are subject to stringent and complex federal, state and local environmental laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. These laws include, for example, (1) the federal

21

Clean Air Act and comparable state laws that impose obligations related to air emissions, (2) the federal Resource Conservation and Recovery Act, or RCRA, and comparable state laws that impose requirements for the handling, storage, treatment or disposal of solid and hazardous waste from our facilities, (3) the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, also known as “Superfund,” and comparable state laws that regulate the cleanup of hazardous substances that may have been released at properties currently or previously owned or operated by us or at locations to which our wastes have been transported for disposal, and (4) the Federal Water Pollution Control Act, also know as the Clean Water Act, and comparable state laws that regulate discharges of wastewater from our facilities to state and federal waters. Failure to comply with these laws and regulations or newly adopted laws or regulations may trigger a variety of administrative, civil and criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial requirements, and the issuance of orders enjoining future operations or imposing additional compliance requirements on such operations. Certain environmental laws, including CERCLA and analogous state laws, impose strict, joint and several liability for costs required to clean up and restore sites where hazardous substances or hydrocarbons have been disposed or otherwise released. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of hazardous substances, hydrocarbons or other waste products into the environment.

There is inherent risk of incurring environmental costs and liabilities in connection with our operations due to our handling of natural gas and other petroleum products, air emissions and water discharges related to our operations, and historical industry operations and waste disposal practices. For example, an accidental release from one of our facilities could subject us to substantial liabilities arising from environmental cleanup and restoration costs, claims made by neighboring landowners and other third parties for personal injury and property damage and fines or penalties for related violations of environmental laws or regulations. Moreover, the possibility exists that stricter laws, regulations or enforcement policies could significantly increase our operational or compliance costs and the cost of any remediation that may become necessary. In particular, we may incur expenditures in order to maintain compliance with legal requirements governing emissions of air pollutants from our facilities. We may not be able to recover all or any of these costs from insurance. Please see “Business—Environmental and Other Matters” for more information.

We may incur significant costs and liabilities resulting from pipeline integrity programs and related repairs.

Pursuant to the Pipeline Safety Improvement Act of 2002, the United States Department of Transportation, or DOT, has adopted regulations requiring pipeline operators to develop integrity management programs for transmission pipelines located where a leak or rupture could do the most harm in “high consequence areas,” including high population areas, areas that are sources of drinking water, ecological resource areas that are unusually sensitive to environmental damage from a pipeline release and commercially navigable waterways, unless the operator effectively demonstrates by risk assessment that the pipeline could not affect the area. The regulations require operators of covered pipelines to:

• perform ongoing assessments of pipeline integrity;

• identify and characterize applicable threats to pipeline segments that could impact a high consequence area;

• improve data collection, integration and analysis;

• repair and remediate the pipeline as necessary; and

• implement preventive and mitigating actions.

We currently estimate that we will incur an aggregate cost of approximately $10.2 million between 2007 and 2010 to implement pipeline integrity management program testing along certain segments of our natural gas and NGL pipelines. This estimate does not include the costs, if any, of any repair, remediation, preventative or

22

mitigating actions that may be determined to be necessary as a result of the testing program, which costs could be substantial. At this time, we cannot predict the ultimate cost of compliance with this regulation, as the cost will vary significantly depending on the number and extent of any repairs found to be necessary as a result of the pipeline integrity testing. Following this initial round of testing and repairs, we will continue our pipeline integrity testing programs to assess and maintain the integrity or our pipelines. The results of these tests could cause us to incur significant and unanticipated capital and operating expenditures for repairs or upgrades deemed necessary to ensure the continued safe and reliable operations of our pipelines.

We are controlled by a major stockholder, whose interests may conflict with the interests of the holders of the notes.

Warburg Pincus beneficially owns approximately 74% or more of the outstanding voting stock of our parent. Warburg Pincus is able to elect members of our board of directors, appoint new management and approve any action requiring the approval of our stockholders, including amendment of our certificate of incorporation and mergers or sales of substantially all of our assets. The directors elected by Warburg Pincus will be able to make decisions affecting our capital structure, including decisions to issue additional capital stock, implement stock repurchase programs and declare dividends. Our interests and the interests of our affiliates could conflict with your interests. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of our equity holders might conflict with your interests as a note holder. In addition, our equity holders may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to you as a holder of the notes. Furthermore, Warburg Pincus may in the future own businesses that directly compete with our business. In addition, the indenture governing the notes contains significant exceptions to the covenant governing transactions with affiliates, including an exception for permitted investments, which would allow such investments in entities controlled by Warburg Pincus without any restriction. None of our stockholders has any obligation to provide us with any additional debt or equity financing.

If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. In addition, potential changes in accounting standards might cause us to revise our financial results and disclosure in the future.

Effective internal controls are necessary for us to provide timely and reliable financial reports and effectively prevent fraud. If we cannot provide timely and reliable financial reports or prevent fraud, our reputation and operating results would be harmed. We continue to enhance our internal controls and financial reporting capabilities. These enhancements will require a significant commitment of additional resources, hiring additional personnel and developing formalized internal reporting procedures to ensure the reliability of our financial reporting. Our efforts to update and maintain our internal controls may not be successful, and we may be unable to maintain adequate controls over our financial processes and reporting in the future, including future compliance with the obligations under Section 404 of the Sarbanes-Oxley Act of 2002. Any failure to develop or maintain effective controls, or difficulties encountered in their implementation or other effective improvement of our internal controls could prevent us from timely and reliably reporting our financial results and may harm our operating results. Ineffective internal controls could also cause investors to lose confidence in our reported financial information. In addition, the Financial Accounting Standards Board or the SEC could enact new accounting standards that might impact how we are required to record revenues, expenses, assets and liabilities. Any significant change in accounting standards or disclosure requirements could have a material effect on our business, results of operations, financial condition and ability to pay our note holders.

23

EXCHANGE OFFER

Purpose and Effect of the Exchange Offer

In connection with the issuance of the outstanding notes, we entered into a registration rights agreement. Under the registration rights agreement, we agreed to file, within two years after the original issuance of the outstanding notes on October 31, 2005, a registration statement, of which this prospectus is a part, with the SEC with respect to a registered offer to exchange each outstanding note for a new note having terms substantially identical in all material respects to such outstanding note except that the new note will not contain terms with respect to transfer restrictions, registration rights or additional interest. We also agreed to use commercially reasonable efforts to:

• cause the registration statement to be declared effective under the Securities Act within 870 days after the original issuance of the outstanding notes;

• as soon as practicable after the effectiveness of the registration statement, offer the new notes in exchange for surrender of the outstanding notes;

• keep the exchange offer open for not less than 20 business days (or longer if required by applicable law) after the date notice of the exchange offer is mailed to the holders of the outstanding notes;

• if the exchange offer is effected, consummate the exchange offer not later than 910 days (or if the 910th day is not a business day, the first business day thereafter) after the original issuance of the outstanding notes; and

• keep the registration statement effective, and amend and supplement this prospectus in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the new notes, subject to certain extensions and limitations set forth in the registration rights agreement.

We have fulfilled our agreement to file the exchange offer registration statement and are now offering eligible holders of the outstanding notes the opportunity to exchange their outstanding notes for new notes registered under the Securities Act. Holders are eligible if they are not prohibited by any law or policy of the SEC from participating in this exchange offer.

Under limited circumstances, we agreed to use commercially reasonable efforts to cause the SEC to declare effective a shelf registration statement for the resale of the outstanding notes. We also agreed to use commercially reasonable efforts to keep the shelf registration statement effective for up to two years after the date of the original issuance of the outstanding notes, subject to certain extensions and limitations set forth in the registration rights agreement. The circumstances include if:

• a change in law or in applicable interpretations of the staff of the SEC do not permit us to effect the exchange offer;

• for any other reason the exchange offer is not consummated within 910 days from October 31, 2005, the date of the original issuance of the outstanding notes;

• an initial purchaser notifies us following consummation of the exchange offer that outstanding notes held by it are not eligible to be exchanged for new notes in the exchange offer;

• any holder, other than an exchanging dealer, notifies us within 30 days after the consummation of the exchange offer that it is prohibited by law or SEC policy from participating in such exchange offer; or

• any holder, other than an exchanging dealer, that participates in the exchange offer may not resell the new notes acquired by it in the exchange offer to the public without delivering a prospectus and so notifies us within 30 days after such holder first becomes aware of such restrictions.

24

Subject to certain exceptions, we will pay additional cash interest on the applicable outstanding notes if:

• the exchange offer registration statement is not declared effective by the SEC on or prior to the 870th day after the original issuance of the outstanding notes;

• the exchange offer is not consummated on or prior to the 40th day after the exchange offer registration statement is declared effective;

• we are obligated to file a shelf registration statement as a result of a change in law or in applicable interpretations of the staff of the SEC do not permit us to effect the exchange offer and the shelf registration statement is not declared effective on or prior to the 910th day after the original issuance of the outstanding notes;

• we are obligated to file a shelf registration statement for any other reason, we fail to file the shelf registration statement with the SEC on or prior to the 60^th day after the date on which the obligation to file a shelf registration statement arises or the shelf registration statement is not declared effective on or prior to the 90^th day after the date the shelf registration statement is filed;

• after this registration statement or the shelf registration statement, as the case may be, is declared effective, such registration statement thereafter ceases to be effective; or

• after this registration statement or the shelf registration statement, as the case may be, is declared effective, such registration statement or the related prospectus ceases to be usable in connection with certain resales during certain periods because either (i) an event occurs as a result of which the prospectus would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading or (ii) it is necessary to amend such registration statement or supplement the prospectus to comply with the Securities Act or the Exchange Act or the respective rules thereunder.

Each event referred to in the first, second and fourth bullet points above is a “registration default.” Such additional interest will be payable from and including the date on which any such registration default occurs to the date on which all registration defaults have been cured.

The rate of the additional interest will be 0.25% per year for the first 90-day period immediately following the occurrence of a registration default, and such rate will increase by an additional 0.25% per year with respect to each subsequent 90-day period until all registration defaults have been cured, up to a maximum additional interest rate of 1.0% per year. We will pay such additional interest on regular interest payment dates. Such additional interest will be in addition to any other interest payable from time to time with respect to the outstanding notes and the new notes.

To exchange your outstanding notes for transferable new notes in the exchange offer, you will be required to make the following representations:

• any new notes will be acquired in the ordinary course of your business;

• you have no arrangement or understanding with any person to participate in the distribution of the new notes;

• you are not our “affiliate,” as defined in Rule 405 of the Securities Act, or, if you are our “affiliate,” as defined in Rule 405 of the Securities Act, you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable;

• if you are not a broker-dealer, you are not engaged in and do not intend to engage in the distribution of the new notes; and

• if you are a broker-dealer, you will receive new notes for your own account in exchange for outstanding notes that you acquired as a result of market-making activities or other trading activities and you will comply with the applicable provisions of the Securities Act including, but not limited to, delivery of a prospectus in connection with any resale of such new notes; see “Plan of Distribution.”

25

In addition, we may require you to provide information to be used in connection with the shelf registration statement to have your outstanding notes included in the shelf registration statement. A holder who sells outstanding notes under the shelf registration statement generally will be required to be named as a selling securityholder in the related prospectus and to deliver a prospectus to purchasers. Such a holder will also be subject to the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the registration rights agreement that are applicable to such a holder, including indemnification obligations.

The description of the registration rights agreement contained in this section is a summary only. For more information, you should review the provisions of the registration rights agreement that we filed with the SEC as an exhibit to the registration statement of which this prospectus is a part.

Resale of New Notes

Based on no-action letters of the SEC staff issued to third parties, we believe that new notes may be offered for resale, resold and otherwise transferred by holders, other than broker-dealers, without further compliance with the registration and prospectus delivery provisions of the Securities Act if:

• you are not our “affiliate” within the meaning of Rule 405 under the Securities Act;

• such new notes are acquired in the ordinary course of your business; and

• you do not intend to participate in a distribution of the new notes.

The SEC, however, has not considered the exchange offer for the new notes in the context of a no-action letter, and the SEC may not make a similar determination as in the no-action letters issued to these third parties.

If you tender in the exchange offer with the intention of participating in any manner in a distribution of the new notes, you

• cannot rely on such interpretations by the SEC staff; and

• must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction.

Unless an exemption from registration is otherwise available, any security holder intending to distribute new notes should be covered by an effective registration statement under the Securities Act. The registration statement should contain the selling security holder’s information required by Item 507 of Regulation S-K under the Securities Act.

This prospectus may be used for an offer to resell or other retransfer of new notes only as specifically described in this prospectus. Failure to comply with the registration and prospectus delivery requirements by a holder subject to these requirements could result in that holder incurring liability for which it is not indemnified by us. If you are a broker-dealer, you may participate in the exchange offer only if you acquired the outstanding notes as a result of market-making activities or other trading activities. Each broker-dealer that receives new notes for its own account in exchange for outstanding notes, where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge in the letter of transmittal that it will deliver a prospectus in connection with any resale of the new notes. Please read the section captioned “Plan of Distribution” for more details regarding the transfer of new notes.

Terms of the Exchange Offer

Subject to the terms and conditions described in this prospectus and in the letter of transmittal, we will accept for exchange any outstanding notes properly tendered and not withdrawn prior to 5:00 p.m. New York City time on the expiration date. We will issue new notes in principal amount equal to the principal amount of outstanding notes surrendered under the exchange offer. Outstanding notes may be tendered only for new notes and only in integral multiples of $1,000.

26

The exchange offer is not conditioned upon any minimum aggregate principal amount of outstanding notes being tendered for exchange.

As of the date of this prospectus, $250 million in aggregate principal amount of the outstanding notes are outstanding. This prospectus is being sent to DTC, the sole registered holder of the outstanding notes, and to all persons that we can identify as beneficial owners of the outstanding notes. There will be no fixed record date for determining registered holders of outstanding notes entitled to participate in the exchange offer.

We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement and the applicable requirements of the Securities Act, the Securities Exchange Act of 1934 and the rules and regulations of the SEC. Outstanding notes that the holders thereof do not tender for exchange in the exchange offer will remain outstanding and continue to accrue interest. These outstanding notes will be entitled to the rights and benefits such holders have under the indenture relating to the notes and the registration rights agreement.

We will be deemed to have accepted for exchange properly tendered outstanding notes when we have given oral or written notice of the acceptance to the exchange agent and complied with the applicable provisions of the registration rights agreement. The exchange agent will act as agent for the tendering holders for the purposes of receiving the new notes from us.

If you tender outstanding notes in the exchange offer, you will not be required to pay brokerage commissions or fees or, subject to the letter of transmittal, transfer taxes with respect to the exchange of outstanding notes. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the exchange offer. It is important that you read the section labeled “—Fees and Expenses” for more details regarding fees and expenses incurred in the exchange offer.

We will return any outstanding notes that we do not accept for exchange for any reason without expense to their tendering holder as promptly as practicable after the expiration or termination of the exchange offer.

Expiration Date

The exchange offer will expire at 5:00 p.m. New York City time on                 , 2007, unless, in our sole discretion, we extend it.

Extensions, Delays in Acceptance, Termination or Amendment

We expressly reserve the right, at any time or various times, to extend the period of time during which the exchange offer is open. During any such extensions, all outstanding notes previously tendered will remain subject to the exchange offer, and we may accept them for exchange.

In order to extend the exchange offer, we will notify the exchange agent orally or in writing of any extension. We will notify the registered holders of outstanding notes of the extension no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date.

If any of the conditions described below under “—Conditions to the Exchange Offer” have not been satisfied, we reserve the right, in our sole discretion

• to delay accepting for exchange any outstanding notes,

• to extend the exchange offer, or

• to terminate the exchange offer,

by giving oral or written notice of such delay, extension or termination to the exchange agent. Subject to the terms of the registration rights agreement, we also reserve the right to amend the terms of the exchange offer in any manner.

27

Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders of outstanding notes. If we amend the exchange offer in a manner that we determine to constitute a material change, we will promptly disclose such amendment by means of a prospectus supplement. The supplement will be distributed to the registered holders of the outstanding notes. Depending upon the significance of the amendment and the manner of disclosure to the registered holders, we will extend the exchange offer if the exchange offer would otherwise expire during such period.

Conditions to the Exchange Offer

We will not be required to accept for exchange, or exchange any new notes for, any outstanding notes if the exchange offer, or the making of any exchange by a holder of outstanding notes, would violate applicable law or any applicable interpretation of the staff of the SEC, or if a threatened or pending judicial or administrative proceeding impairs our ability to proceed with the exchange offer. Similarly, we may terminate the exchange offer as provided in this prospectus before accepting outstanding notes for exchange in the event of such a potential violation.

In addition, we will not be obligated to accept for exchange the outstanding notes of any holder that has not made to us the representations described under “—Purpose and Effect of the Exchange Offer,” “—Procedures for Tendering” and “Plan of Distribution” and such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to allow us to use an appropriate form to register the new notes under the Securities Act.

Furthermore, we will not accept for exchange any outstanding notes tendered, and will not issue new notes in exchange for any such outstanding notes, if at such time any stop order has been threatened or is in effect with respect to (1) the registration statement of which this prospectus constitutes a part or (2) the qualification of the indenture relating to the notes under the Trust Indenture Act of 1939.

We expressly reserve the right to amend or terminate the exchange offer, and to reject for exchange any outstanding notes not previously accepted for exchange, upon the occurrence of any of the conditions to the exchange offer specified above. We will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the outstanding notes as promptly as practicable.

These conditions are for our sole benefit, and we may assert them or waive them in whole or in part at any time or at various times in our sole discretion. If we fail at any time to exercise any of these rights, this failure will not mean that we have waived our rights. Each such right will be deemed an ongoing right that we may assert at any time or at various times.

Procedures for Tendering

In order to participate in the exchange offer, you must properly tender your outstanding notes to the exchange agent as described below. It is your responsibility to properly tender your notes. We have the right to waive any defects. However, we are not required to waive defects and are not required to notify you of defects in your tender.

If you have any questions or need help in exchanging your notes, please call the exchange agent, whose address and phone number are set forth in “Prospectus Summary—The Exchange Offer—Exchange Agent.”

All of the outstanding notes were issued in book-entry form, and all of the outstanding notes are currently represented by global certificates held for the account of DTC. We have confirmed with DTC that the outstanding notes may be tendered using DTC’s Automated Tender Offer Program (ATOP). The exchange agent will establish an account with DTC for purposes of the exchange offer promptly after the commencement of the

28

exchange offer and DTC participants may electronically transmit their acceptance of the exchange offer by causing DTC to transfer their outstanding notes to the exchange agent using the ATOP procedures. In connection with the transfer, DTC will send an “agent’s message” to the exchange agent. The agent’s message will state that DTC has received instructions from the participant to tender outstanding notes and that the participant has received and agrees to be bound by the terms of the letter of transmittal.

By using the ATOP procedures to exchange outstanding notes, you will not be required to deliver a letter of transmittal to the exchange agent. However, you will be bound by its terms just as if you had signed it.

Determinations Under the Exchange Offer

We will determine in our sole discretion all questions as to the validity, form, eligibility, time of receipt, acceptance of tendered outstanding notes and withdrawal of tendered outstanding notes. Our determination will be final and binding. We reserve the absolute right to reject any outstanding notes not properly tendered or any outstanding notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defect, irregularities or conditions of tender as to particular outstanding notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, all defects or irregularities in connection with tenders of outstanding notes must be cured within such time as we shall determine. Although we intend to notify holders of defects or irregularities with respect to tenders of outstanding notes, neither we, the exchange agent nor any other person will incur any liability for failure to give such notification. Tenders of outstanding notes will not be deemed made until such defects or irregularities have been cured or waived. Any outstanding notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned to the tendering holder, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date.

When We Will Issue New Notes

In all cases, we will issue new notes for outstanding notes that we have accepted for exchange under the exchange offer only after the exchange agent timely receives:

• a book-entry confirmation of such outstanding notes into the exchange agent’s account at DTC; and

• a properly transmitted agent’s message.

Return of Outstanding Notes Not Accepted or Exchanged

If we do not accept any tendered outstanding notes for exchange or if outstanding notes are submitted for a greater principal amount than the holder desires to exchange, the unaccepted or non-exchanged outstanding notes will be returned without expense to their tendering holder. Such non-exchanged outstanding notes will be credited to an account maintained with DTC. These actions will occur as promptly as practicable after the expiration or termination of the exchange offer.

Your Representations to Us

By agreeing to be bound by the letter of transmittal, you will represent to us that, among other things:

• any new notes will be acquired in the ordinary course of your business;

• you have no arrangement or understanding with any person to participate in the distribution of the new notes;

• you are not our “affiliate,” as defined in Rule 405 of the Securities Act, or, if you are our “affiliate,” as defined in Rule 405 of the Securities Act, you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable;

29

• if you are not a broker-dealer, you are not engaged in and do not intend to engage in the distribution of the new notes; and

• if you are a broker-dealer, you will receive new notes for your own account in exchange for outstanding notes that you acquired as a result of market-making activities or other trading activities and you will comply with the applicable provisions of the Securities Act including, but not limited to, delivery of a prospectus in connection with any resale of such new notes; see “Plan of Distribution.”

Withdrawal of Tenders

Except as otherwise provided in this prospectus, you may withdraw your tender at any time prior to 5:00 p.m. New York City time on the expiration date. For a withdrawal to be effective you must comply with the appropriate procedures of DTC’s ATOP system. Any notice of withdrawal must specify the name and number of the account at DTC to be credited with withdrawn outstanding notes and otherwise comply with the procedures of DTC.

We will determine all questions as to the validity, form, eligibility and time of receipt of notice of withdrawal. Our determination shall be final and binding on all parties. We will deem any outstanding notes so withdrawn not to have been validly tendered for exchange for purposes of the exchange offer.

Any outstanding notes that have been tendered for exchange but are not exchanged for any reason will be credited to an account maintained with DTC for the outstanding notes. This return or crediting will take place as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. You may retender properly withdrawn outstanding notes by following the procedures described under “—Procedures for Tendering” above at any time prior to 5:00 p.m., New York City time, on the expiration date.

Fees and Expenses

We will bear the expenses of soliciting tenders. The principal solicitation is being made by mail; however, we may make additional solicitation by telephone or in person by our officers and regular employees and those of our affiliates.

We have not retained any dealer manager in connection with the exchange offer and will not make any payments to broker-dealers or others soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and reimburse it for its related reasonable out of pocket expenses.

We will pay the cash expenses to be incurred in connection with the exchange offer. They include:

• SEC registration fees;

• fees and expenses of the exchange agent and trustee;

• accounting and legal fees and printing costs; and

• related fees and expenses.

Transfer Taxes

We will pay all transfer taxes, if any, applicable to the exchange of outstanding notes under the exchange offer. The tendering holder, however, will be required to pay any transfer taxes, whether imposed on the registered holder or any other person, if a transfer tax is imposed for any reason other than the exchange of outstanding notes under the exchange offer.

30

Consequences of Failure to Exchange

If you do not exchange new notes for your outstanding notes under the exchange offer, you will remain subject to the existing restrictions on transfer of the outstanding notes. In general, you may not offer or sell the outstanding notes unless the offer or sale is either registered under the Securities Act or exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the outstanding notes under the Securities Act.

Accounting Treatment

We will record the new notes in our accounting records at the same carrying value as the outstanding notes. This carrying value is the aggregate principal amount of the outstanding notes less any bond discount, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes in connection with the exchange offer.

Other

Participation in the exchange offer is voluntary, and you should carefully consider whether to accept. You are urged to consult your financial and tax advisors in making your own decision on what action to take.

We may in the future seek to acquire untendered outstanding notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. We have no present plans to acquire any outstanding notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any untendered outstanding notes.

31

USE OF PROCEEDS

The exchange offer is intended to satisfy our obligations under the registration rights agreement. We will not receive any cash proceeds from the issuance of the new notes in the exchange offer. In consideration for issuing the new notes as contemplated by this prospectus, we will receive outstanding notes in a like principal amount. The form and terms of the new notes are identical in all respects to the form and terms of the outstanding notes, except the new notes do not include certain transfer restrictions. Outstanding notes surrendered in exchange for the new notes will be retired and cancelled and will not be reissued. Accordingly, the issuance of the new notes will not result in any change in our outstanding indebtedness.

32

SELECTED HISTORICAL FINANCIAL AND OPERATING DATA

The following table summarizes selected historical financial and operating data of Targa and the predecessor for the periods and as of the dates indicated. The selected historical financial information included in this prospectus reflects the unaudited results of operations of Targa as of and for the six months ended June 30, 2007 and 2006, and the audited results of operations of Targa as of and for the years ended December 31, 2006, 2005 and 2004, and is derived from the audited consolidated financial statements of Targa. Targa’s consolidated financial results for the year ended December 31, 2004 includes the results of operations for the eight and a half month period commencing with its April 16, 2004 acquisition of the predecessor business from ConocoPhillips, combined with the acquisition-related activities of Targa for the period from January 1 to April 15, 2004.

The selected combined historical financial information of the predecessor as of and for the years ended December 31, 2002 and 2003 and as of and for the three and a half months ended April 15, 2004 is derived from the audited financial statements of the predecessor. The historical financial statements of the predecessor were prepared on a going-concern basis, as if certain midstream assets of ConocoPhillips, which Targa acquired on April 16, 2004, had existed as an entity separate from ConocoPhillips during the periods presented. The assets acquired from ConocoPhillips were not a separate legal entity during the periods presented. During the periods presented, ConocoPhillips charged the predecessor operations a portion of its corporate support costs, including engineering, legal, treasury, planning, environmental, tax, auditing, information technology and other corporate services, based on usage, actual costs or other allocation methods considered reasonable by ConocoPhillips management. Accordingly, expenses included in the predecessor’s financial statements may not be indicative of the level of expenses that might have been incurred had the predecessor been operating as a separate stand-alone company.

This information should be read together with and is qualified in its entirety by reference to, the historical combined financial statements and the accompanying notes included elsewhere in this prospectus. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operation” for a discussion of factors that affect the comparability of the information reflected in the selected financial and operating data.

33

(in thousands)	Targa Resources, Inc.															Predecessor
	Six Months Ended June 30, 2007			Six Months Ended June 30, 2006			Year Ended December 31, 2006			Year Ended December 31, 2005(1)			Year Ended December 31, 2004(2)			Three and a Half Months Ended April 15, 2004			Year Ended December 31, 2003			Year Ended December 31, 2002
Statement of Operations Data:
Revenues(3)	$	3,059,780		$	3,104,734		$	6,132,881		$	1,829,027		$	602,376		$	232,769		$	724,667		$	541,195
Costs and expenses
Product purchases		2,708,586			2,752,196			5,440,832			1,631,963			544,918			212,306			665,357			479,682
Operating expenses(4)		120,311			102,405			224,169			52,090			15,253			9,257			27,552			29,146
Depreciation and amortization		73,166			42,155			149,687			27,141			10,631			3,833			12,866			9,791
General and administrative		42,259			41,189			82,351			28,275			11,149			757			3,289			3,281
Total costs and expenses		2,944,322			2,937,945			5,897,039			1,739,469			581,951			226,153			709,064			521,900
Operating income		115,458			166,789			235,842			89,558			20,425			6,616			15,603			19,295
Other income (expense):
Interest expense, net		(78,003	)		(88,328	)		(180,189	)		(39,856	)		(6,406	)		—			—			—
Equity in earnings of unconsolidated investments		5,647			3,968			9,968			(3,776	)		2,370			—			—			—
Gain on sale of investment in Bridgeline(5)		—			—			—			18,008			—			—			—			—
Loss on mark-to-market derivative contracts		—			—			—			(73,950	)		—			—			—			—
Loss on early debt extinguishment		—			—			—			(3,375	)		—			—			—			—
Minority interest		(12,818	)		(15,593	)		(25,998	)		(7,361	)		—			—			—			—
Non-controlling interest in Targa Resources Partners LP		(4,048	)		—			—			—			—			—			—			—
Income (loss) before income taxes		26,236			66,836			39,623			(20,752	)		16,389			6,616			15,603			19,295
Income tax (expense) benefit		(3,196	)		(26,927	)		(16,209	)		6,537			(5,227	)		(2,567	)		(6,062	)		(7,475	)
Net income (loss)		23,040			39,909			23,414			(14,215	)		11,162			4,049			9,541			11,820
Dividends on redeemable preferred stock		—			—			—			(7,167	)		(5,829	)		—			—			—
Net income (loss) to common stock	$	23,040		$	39,909		$	23,414		$	(21,382	)	$	5,333		$	4,049		$	9,541		$	11,820
Balance Sheet Data (end of period):
Current assets	$	866,602		$	863,579		$	859,657		$	827,575		$	92,496		$	22,810		$	47,974		$	16,706
Total assets		3,436,542			3,501,740			3,458,025			3,396,586			443,213			288,821			316,790			313,289
Current liabilities		628,319			620,591			1,303,730			575,985			131,143			29,179			50,579			48,928
Long-term debt, less current maturities		1,760,125			2,178,125			1,471,875			2,184,375			157,473			—			—			—
Other long-term liabilities		91,031			95,166			66,622			89,135			12,508			88,781			88,947			94,807
Total liabilities		2,956,228			2,893,882			2,842,227			2,849,495			301,124			117,960			139,526			143,735
Minority interest		476,753			104,628			101,528			112,714			—			—			—			—
Redeemable preferred stock								—			—			135,050			—			—			—
Total stockholders’ equity(6)		480,314			503,230			514,270			434,377			7,039			170,861			177,264			169,554
Total liabilities and stockholders’ equity		3,436,542			3,501,740			3,458,025			3,396,586			443,213			288,821			316,790			313,289
Other Financial Data:
Net cash provided by (used in):
Operating activities	$	134,312		$	176,676		$	233,286		$	108,855		$	33,135		$	11,480		$	(6,349	)	$	43,454
Investing activities		(58,611	)		(79,149	)		(117,812	)		(2,328,916	)		(353,234	)		(1,176	)		(2,413	)		(11,407	)
Financing activities		(38,365	)		(6,898	)		(14,162	)		2,250,621			330,676			(10,304	)		8,762			(32,047	)
Capital expenditures, excluding acquisitions		67,780			72,722			142,902			21,976			5,499			1,176			2,413			11,407
EBITDA(7)		177,405			197,319			369,499			46,245			33,426			10,449			28,469			29,086
Operating margin(7)		230,883			250,133			467,880			144,974			42,205			11,206			31,758			32,367

34

(in thousands)	Targa Resources, Inc.															Predecessor
	Six Months Ended June 30, 2007			Six Months Ended June 30, 2006			Year Ended December 31, 2006			Year Ended December 31, 2005(1)			Year Ended December 31, 2004(2)			Three and a Half Months Ended April 15, 2004			Year Ended December 31, 2003			Year Ended December 31, 2002
Operating Statistics(8)
Consolidated
Natural gas sales volume, BBtu/d		520.8			502.3			501.2			313.5			252.7			297.4			279.7			324.9
Average realized natural gas price, $/MMBtu		6.90			7.25			6.61			8.45			6.45			5.42			5.30			3.19
Natural gas liquids sales volume, MBbl/d		298.6			303.5			300.2			59.8			22.8			24.8			24.6			29.7
Average realized natural gas liquids price, $/gal		1.02			1.02			1.02			0.85			0.70			0.55			0.50			0.36
Natural Gas Gathering and Processing
Gathering throughput volume, MMcf/d		1,987.9			2,010.8			1,871.7			477.9			285.6			316.5			294.8			379.9
Plant inlet volume, MMcf/d		1,946.2			1,762.9			1,841.5			400.8			262.6			313.5			296.9			346.0
Natural gas sales volume, BBtu/d		537.1			518.5			517.8			313.5			252.7			297.4			279.7			324.9
Average realized natural gas price, $/MMBtu		6.91			7.24			6.61			8.45			6.45			5.42			5.30			3.19
Natural gas liquids sales volume, MBbl/d		90.1			86.9			89.8			29.0			22.8			24.8			24.6			29.7
Average realized natural gas liquids price, $/gal		0.91			0.86			0.88			0.85			0.70			0.55			0.50			0.36
Logistics Assets
Fractionation volume, MBbl/d		194.7			182.8			181.9			23.7			N/A			N/A			N/A			N/A
Terminalling and storage volume, MBbl/d		344.7			357.5			373.1			56.3			N/A			N/A			N/A			N/A
Transport volume, MBbl/d		36.1			35.4			34.8			5.6			N/A			N/A			N/A			N/A
NGL Distribution and Marketing Services
Natural gas liquids sales volume, MBbl/d		254.9			242.4			246.30			30.80			N/A			N/A			N/A			N/A
Average realized natural gas liquids price, $/gal		0.99			0.98			0.99			1.00			N/A			N/A			N/A			N/A
Wholesale Marketing
Natural gas liquids sales volume, MBbl/d		63.9			80.7			74.4			16.5			N/A			N/A			N/A			N/A
Average realized natural gas liquids price, $/gal		1.15			1.17			1.16			1.18			N/A			N/A			N/A			N/A
Reconciliation of EBITDA to net cash provided by (used in) operating activities:
Net cash provided by (used in) operating activities	$	134,312		$	176,676		$	233,286		$	108,855		$	33,135		$	11,480		$	(6,349	)	$	43,454
Interest expense, net		78,003			88,328			180,189			39,856			6,406			—			—			—
Amortization of debt issue costs		(9,011	)		(6,476	)		(13,001	)		(6,742	)		(956	)		—			—			—
Amortization of issue discount		—			—			—			(531	)		(113	)		—			—			—
Current income tax expense (benefit)		693			—			34			205			—			3,215			5,182			6,109
Changes in operating working capital which (provided) used cash:
Accounts receivable and other assets		15,595			40,849			2,052			97,135			77,843			(25,164	)		31,275			(5,155	)
Inventory		(34,699	)		(59,608	)		(23,407	)		16,756			381			—			(7	)		(128	)
Accounts payable and other liabilities		(17,327	)		(64,256	)		(37,043	)		(138,941	)		(85,210	)		21,400			(1,651	)		(14,830	)
Other		9,839			21,806			27,389			(70,348	)		1,940			(482	)		19			(364	)
EBITDA	$	177,405		$	197,319		$	369,499		$	46,245		$	33,426		$	10,449		$	28,469		$	29,086
Reconciliation of EBITDA to net income (loss):
Net income (loss)	$	23,040		$	39,909		$	23,414		$	(14,215	)	$	11,162		$	4,049		$	9,541		$	11,820
Add:
Interest expense, net		78,003			88,328			180,189			39,856			6,406			—			—			—
Income tax expense (benefit)		3,196			26,927			16,209			(6,537	)		5,227			2,567			6,062			7,475
Depreciation and amortization expense		73,166			42,155			149,687			27,141			10,631			3,833			12,866			9,791
EBITDA	$	177,405		$	197,319		$	369,499		$	46,245		$	33,426		$	10,449		$	28,469		$	29,086

35

(in thousands)	Targa Resources, Inc.												Predecessor
	Six Months Ended June 30, 2007		Six Months Ended June 30, 2006		Year Ended December 31, 2006		Year Ended December 31, 2005 (1)			Year Ended December 31, 2004 (2)			Three and a Half Months Ended April 15, 2004		Year Ended December 31, 2003		Year Ended December 31, 2002
Reconciliation of operating margin to net income (loss):
Net income (loss)	$	23,040	$	39,909	$	23,414	$	(14,215	)	$	11,162		$	4,049	$	9,541	$	11,820
Add:
Depreciation and amortization expense		73,166		42,155		149,687		27,141			10,631			3,833		12,866		9,791
Income tax expense (benefit)		3,196		26,927		16,209		(6,537	)		5,227			2,567		6,062		7,475
Other, net		11,088		11,474		16,030		70,454			(2,370	)		—		—		—
Interest expense, net		78,003		88,328		180,189		39,856			6,406			—		—		—
General and administrative expense		42,390		41,340		82,351		28,275			11,149			757		3,289		3,281
Operating margin	$	230,883	$	250,133	$	467,880	$	144,974		$	42,205		$	11,206	$	31,758	$	32,367

(1) Reflects acquisition of DMS effective October 31, 2005.

(2) Targa commenced operations on April 16, 2004 with the closing of the acquisition of certain assets in Texas and Louisiana from ConocoPhillips. Prior to April 16, 2004, certain investors in Targa had previous investments in Pipeco, f.k.a. Targa Resources, Inc., f.k.a. Warburg Pincus VIII Development Company, Inc. Pipeco was the entity that performed due diligence and other acquisition-specific activities associated with the asset acquisitions from ConocoPhillips.

Pipeco and Targa are considered “entities under common control” as defined under GAAP and, as such, Targa’s audited financial results include the year ended December 31, 2004.

(3) For Targa, the amount includes $83 million, $9 million, and $1 million of transactions with affiliates for the years ended December 31, 2006, 2005, and 2004, respectively. For the predecessor, the amount includes $113 million, $558 million, and $322 million of transactions with affiliates for the three and a half months ended April 15, 2004, and for the years ended December 31, 2003 and 2002, respectively.

(4) Includes taxes other than income taxes for the predecessor’s financial information.

(5) In August 2005 we sold our 40% interest in Bridgeline for $117.0 million in cash.

(6) The comparable line-item in the predecessor’s historical financial statements is “Parent company investment.”

(7) We define EBITDA as net income before interest, income taxes, depreciation, and amortization. EBITDA is used as a supplemental financial measure by our management and by external users of our financial statements such as investors, commercial banks, and others, to assess:

• the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis;

• our operating performance and return on capital as compared to other companies in the midstream energy sector, without regard to financing or capital structure; and

• the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.

The economic substance behind management’s use of EBITDA is to measure the ability of our assets to generate cash sufficient to pay interest costs, support our indebtedness, and make distributions to our investors.

EBITDA is not a presentation made in accordance with generally accepted accounting principles (“GAAP’) and has important limitations as an analytical tool. The GAAP measures most directly comparable to EBITDA are net cash provided by operating activities and net income. Our non-GAAP financial measure of EBITDA should not be considered as an alternative to GAAP net cash provided by operating activities and GAAP net income. You should not consider EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Because EBITDA excludes some, but not all items that affect GAAP net income and GAAP net cash provided by operating activities and is defined differently by different companies in our industry, our definition of EBITDA may not be comparable to similarly titled measures of other companies.

Management compensates for the limitations of EBITDA as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures, and considering such differences in management’s decision-making processes.

We define operating margin as total operating revenues, which consist of natural gas and natural gas liquids (“NGL”) sales plus service fee revenues, less product purchases, which consist primarily of producer payments and other natural gas and NGL purchases, less operating expense. Management reviews operating margin monthly for consistency and trend analysis. Based on this monthly analysis, management takes appropriate action to maintain positive trends or to reverse negative trends. Management uses operating margin as an important measure of the core profitability of our operations.

The GAAP measure most directly comparable to operating margin is net income. Our non-GAAP financial measure of operating margin should not be considered as an alternative to GAAP net income. Operating margin is not a presentation made in accordance with GAAP and has important limitations as an analytical tool. You should not consider operating margin in isolation or as a substitute for analysis of our results as reported under GAAP. Because operating margin excludes some, but not all items that affect net income and is defined differently by different companies in our industry, our definition of operating margin may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

Management compensates for the limitations of operating margin as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures, and considering such differences in management’s decision-making processes.

36

We believe that investors benefit from having access to the same financial measures that our management uses in evaluating our operating results. Operating margin provides useful information to investors because it is used as a supplemental financial measure by our management and by external users of our financial statements, including such investors, commercial banks, and others, to assess:

• the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis;

• our operating performance and return on capital as compared to other companies in the midstream energy sector, without regard to financing or capital structure; and

• the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.

(8) Segment operating statistics include the effect of intersegment sales, which have been eliminated from the consolidated presentation. For all volume statistics presented, the numerator is the total volume sold during the period and the denominator is the number of calendar days during the period. Volumes from assets acquired in the DMS acquisition are included from the acquisition date, October 31, 2005. NGL-related statistics include condensate.

Gathering throughput consists of natural gas volumes gathered from wellheads and central delivery points directly connected to gathering systems. We sometimes supplement gathering throughput with natural gas purchased from third parties and natural gas gathered by third parties and these combined volumes flow to the processing facilities. This combined volume, less fuel consumption and loss and less direct resales of unprocessed or bypassed gas, comprises plant inlet volumes. Plant inlet volumes, less additional fuel consumption and loss, less natural gas volume processed into NGLs and less volumes contractually redelivered to third party gatherers and producers, comprise natural gas sales. NGL sales are equivalent to the amount of NGL recovered from natural gas, less NGL contractually redelivered to third parties and producers.

37

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATION

General Overview

We are a Delaware corporation formed in 2004 by our management team and Warburg Pincus to acquire, own and operate assets in the midstream natural gas business. Since our formation, we have made the following significant acquisitions and dispositions, the impact of which is central to an understanding of our historical and anticipated results of operations:

• in April 2004, we purchased certain midstream natural gas assets located in west Texas and South Louisiana from ConocoPhillips for $247 million;

• in December 2004, we purchased a 40% interest in Bridgeline from Enron for $101 million including acquisition-related costs;

• in August 2005, we sold our 40% interest in Bridgeline to Chevron for $117 million;

• in October 2005, we acquired Dynegy Midstream Services, Limited Partnership (“DMS”) for approximately $2,452 million, including acquisition-related costs of $11 million. The north Texas natural gas gathering and processing assets (“North Texas”) we acquired were initially classified as “held for sale”;

• in September 2006, we reclassified North Texas from “held for sale” to “held for use;”

• in February 2007, we contributed North Texas to the Partnership and completed an initial public offering of Partnership common units. We retained a controlling 38.6% interest in the Partnership; and

• in October 2007, we sold Permian Basin and South Louisiana natural gas gathering assets to the Partnership in connection with its sale of additional common units.

We are an integrated midstream energy company and offer a range of midstream services to producers and consumers of natural gas and natural gas liquids. Our gathering and processing assets are located primarily in the Permian Basin in west Texas and southeast New Mexico, the Louisiana Gulf Coast accessing the offshore region of the Louisiana Gulf Coast, and, through the Partnership, the Fort Worth Basin in north Texas, the Permian Basin in west Texas and the onshore region of the Louisiana Gulf Coast. Additionally, our natural gas liquids logistics and marketing assets are located primarily at Mont Belvieu and Galena Park near Houston, Texas and in Lake Charles, Louisiana with terminals and transportation assets across the United States. We own or operate approximately 10,000 miles of natural gas pipelines and approximately 550 miles of NGL pipelines, with natural gas gathering systems covering approximately 14,500 square miles and 21 natural gas processing plants with access to natural gas supplies in the Permian Basin, north Texas, onshore southern Louisiana and the Gulf of Mexico. Additionally, we have an integrated NGL logistics and marketing business, with 16 storage marine and transport terminals with above ground NGL storage capacity of approximately 900 MBbls, net NGL fractionation capacity of approximately 300 MBbls/d and 43 owned and operated storage wells with a net storage capacity of approximately 65 MMBbls.

How We Measure and Evaluate Our Operations

We conduct our business through two divisions and report our results of operations under four segments as follows:

• the Natural Gas Gathering and Processing division, which is a single segment consisting of our natural gas gathering and processing facilities, as well as certain fractionation capability integrated within those facilities; and

• the NGL Logistics and Marketing division, which consists of three segments:

• Logistics Assets;

38

• NGL Distribution and Marketing, and

• Wholesale Marketing.

Our profitability is a function of the difference between the revenues we receive from our operations, including revenues from the natural gas and NGLs we sell, and the costs associated with conducting our operations, including the costs of natural gas and NGLs we purchase as well as operating and general and administrative costs. Because commodity price movements tend to impact both revenues and costs, increases or decreases in our revenues alone are not necessarily indicative of increases or decreases in our profitability. Our contract portfolio, the prevailing pricing environment for natural gas and NGLs, our hedging program and the natural gas and NGL throughput on our system are important factors in determining our profitability. Our profitability is also affected by the NGL content in gathered wellhead natural gas, demand for our products, changes in our customer portfolio and the effect of changing commodity prices on the value of our inventory. For a discussion of our contract portfolio and the effects of commodity prices on our results of operations, please read “—Contractual Arrangements” and “Quantitative and Qualitative Disclosures About Market Risk—Commodity Price Risk.”

To evaluate and manage our business, our management uses a variety of financial and operational measurements. These measurements, some of which are described below, enable our management to monitor our results of operations and profitability.

Throughput and Marketed Volumes, Facility Efficiencies and Fuel Consumption. For our Natural Gas Gathering and Processing division, our profitability is impacted by our ability to add new sources of natural gas supply to offset the natural decline of existing volumes from natural gas wells that are connected to our systems. This is achieved by connecting new wells as well as by capturing supplies currently gathered by third-parties. These supplies are contracted based on the competitive dynamics of the area and producer preference. In addition, we generally seek to increase operating margins and meet producing customer needs by limiting volume losses and reducing fuel consumption by increasing compression efficiency. With our gathering systems’ extensive use of remote monitoring capabilities, we monitor the volumes of natural gas received at the wellhead or central delivery points along our gathering systems, the volume of natural gas received at our processing plant inlets and the volumes of NGLs and residue natural gas recovered by our processing plants. This information is tracked through our processing plants to determine customer settlements and helps us increase efficiency and reduce fuel consumption.

As part of monitoring the efficiency of our operations, we measure the difference between the volume of natural gas received at the wellhead or central delivery points on our gathering systems and the volume received at the inlet of our processing plants as an indicator of fuel consumption and line loss. We also track the difference between the volume of natural gas received at the inlet of the processing plant and the NGL and residue gas produced at the outlet of such plants to monitor the fuel consumption and recoveries of the facilities. These volume, recovery and fuel consumption measurements are an important part of our operational efficiency analysis.

For our NGL Logistics and Marketing division, we monitor volumes, NGL composition and similar factors that impact our segment margins. Similar to our processing plants, we monitor NGL throughput volumes, fuel consumption and recovery efficiencies at our fractionation facilities. For our sales and services businesses, we monitor (i) total NGL volumes and margins generated by such sales, measured as the difference between the price at which we purchase NGLs and the price at which we sell NGLs, (ii) inventory volumes across our businesses and (iii) general and administrative costs in these business lines, and the margin after allocation of such general and administrative costs, to ensure they are efficient and competitive.

Operating Margin. We review performance based on the non-generally accepted accounting principle (“non-GAAP”) financial measure of operating margin. We view our operating margin as an important performance measure of the core profitability of our operations. We review our operating margin monthly for consistency and trend analysis.

39

With respect to our Natural Gas Gathering and Processing division, we define operating margin as total operating revenues, which consist of natural gas and NGL sales plus service fee revenues, less product purchases, which consist primarily of producer payments and other natural gas purchases less operating expense. Natural gas and NGL sales revenue includes settlement gains and losses on commodity hedges. Our Natural Gas Gathering and Processing segment operating margin is impacted by volumes and commodity prices as well as by our contract mix and hedging program, which are described in more detail below.

With respect to our NGL Logistics and Marketing division, we define operating margin as total revenue, which consists primarily of service fee revenues and NGL sales, less cost of sales, which consists primarily of NGL purchases and changes in inventory valuation. Within this division, our management analyzes segment operating margin for each of the three segments per unit of NGL handled or sold as an indicator of operational and commercial performance.

The GAAP measure most directly comparable to operating margin is net income. Our non-GAAP financial measure of operating margin should not be considered as an alternative to GAAP net income. Operating margin is not a presentation made in accordance with GAAP and has important limitations as an analytical tool. You should not consider operating margin in isolation or as a substitute for analysis of our results as reported under GAAP. Because operating margin excludes some, but not all, items that affect net income and is defined differently by different companies in our industry, our definition of operating margin may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

We compensate for the limitations of operating margin as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating these learnings into our decision-making processes.

We believe that investors benefit from having access to the same financial measures that our management uses in evaluating our operating results. Operating margin provides useful information to investors because it is used as a supplemental financial measure by us and by external users of our financial statements, including such investors, commercial banks and others, to assess:

• the financial performance of our assets without regard to financing methods, capital structure or historical cost basis;

• our operating performance and return on capital as compared to other companies in the midstream energy sector, without regard to financing or capital structure; and

• the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.

Operating Expenses. Operating expenses are costs associated with the operation of a specific asset. Direct labor, ad valorem taxes, repair and maintenance, utilities and contract services compose the most significant portion of our operating expenses. These expenses generally remain relatively stable independent of the volumes through our systems but fluctuate depending on the scope of the activities performed during a specific period.

General and Administrative Expenses. General and administrative expenses (“G&A”) include the cost of employee compensation and related benefits, office lease and expenses, insurance, professional fees and information technology expenses, as well as other expenses not directly associated with our field operations. We also look at margin less business-specific G&A for the segments in the NGL Logistics and Marketing division where G&A reflects necessary personnel expense for the segments.

EBITDA. EBITDA is another non-GAAP financial measure that is used by us. We define EBITDA as net income before interest, income taxes, depreciation and amortization. EBITDA is used as a supplemental financial

40

measure by us and by external users of our financial statements such as investors, commercial banks and others, to assess:

• the financial performance of our assets without regard to financing methods, capital structure or historical cost basis;

• our operating performance and return on capital as compared to other companies in the midstream energy sector, without regard to financing or capital structure; and

• the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.

The economic substance behind our use of EBITDA is to measure the ability of our assets to generate cash sufficient to pay interest costs, support our indebtedness and make distributions to our investors.

The GAAP measures most directly comparable to EBITDA are net cash provided by operating activities and net income. Our non-GAAP financial measure of EBITDA should not be considered as an alternative to GAAP net cash provided by operating activities and GAAP net income. EBITDA is not a presentation made in accordance with GAAP and has important limitations as an analytical tool. You should not consider EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Because EBITDA excludes some, but not all, items that affect net income and net cash provided by operating activities and is defined differently by different companies in our industry, our definition of EBITDA may not be comparable to similarly titled measures of other companies.

41

We compensate for the limitations of EBITDA as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating these learnings into our decision-making processes.

	Targa															Combined(1)			Predecessor
	Six Months Ended June 30, 2007			Six Months Ended June 30, 2006			Year Ended December 31, 2006			Year Ended December 31, 2005			Year Ended December 31, 2004			Year Ended December 31, 2004			Three and a Half Months Ended April 15, 2004
Reconciliation of EBITDA to net cash provided by (used in) operating activities:
Net cash provided by (used in) operating activities	$	134,312		$	176,676		$	233,286		$	108,855		$	33,135		$	44,615		$	11,480
Interest expense, net		78,003			88,328			180,189			39,856			6,406			6,406			—
Amortization of debt issue costs		(9,011	)		(6,476	)		(13,001	)		(6,742	)		(956	)		(956	)		—
Amortization of issue discount		—			—			—			(531	)		(113	)		(113	)		—
Current income tax expense (benefit)		693			—			34			205			—			3,215			3,215
Changes in operating working capital which (provided) used cash:
Accounts receivable and other assets		15,595			40,849			2,052			97,135			77,843			52,679			(25,164	)
Inventory		(34,699	)		(59,608	)		(23,407	)		16,756			381			381			—
Accounts payable and other liabilities		(17,327	)		(64,256	)		(37,043	)		(138,941	)		(85,210	)		(63,810	)		21,400
Other		9,839			21,806			27,389			(70,348	)		1,940			1,458			(482	)
EBITDA	$	177,405		$	197,319		$	369,499		$	46,245		$	33,426		$	43,875		$	10,449
Reconciliation of EBITDA to net income (loss):
Net income (loss)	$	23,040		$	39,909		$	23,414		$	(14,215	)	$	11,162		$	15,211		$	4,049
Add:
Interest expense, net		78,003			88,328			180,189			39,856			6,406			6,406			—
Income tax expense (benefit)		3,196			26,927			16,209			(6,537	)		5,227			7,794			2,567
Depreciation and amortization expense		73,166			42,155			149,687			27,141			10,631			14,464			3,833
EBITDA	$	177,405		$	197,319		$	369,499		$	46,245		$	33,426		$	43,875		$	10,449
Reconciliation of operating margin to net income (loss):
Net income (loss)	$	23,040		$	39,909		$	23,414		$	(14,215	)	$	11,162		$	15,211		$	4,049
Add:
Depreciation and amortization expense		73,166			42,155			149,687			27,141			10,631			14,464			3,833
Income tax expense (benefit)		3,196			26,927			16,209			(6,537	)		5,227			7,794			2,567
Other, net		11,088			11,474			16,030			70,454			(2,370	)		(2,370	)		—
Interest expense, net		78,003			88,328			180,189			39,856			6,406			6,406			—
General and administrative expense		42,390			41,340			82,351			28,275			11,149			11,906			757
Operating margin	$	230,883		$	250,133		$	467,880		$	144,974		$	42,205		$	53,411		$	11,206

42

(1) See discussion of the presentation of the combined results of operations for the year ended December 31, 2004 at “—Results of Operations.”

Acquisition of DMS

On October 31, 2005, we acquired DMS for approximately $2,452 million, including certain acquisition-related costs. Under the terms of the agreement, we acquired Dynegy Inc.’s (“Dynegy”) ownership interests in DMS, which held Dynegy’s natural gas gathering and processing assets and its NGL fractionation, terminalling, storage, transportation, distribution and marketing assets.

We acquired DMS to expand our natural gas gathering and processing asset base in Texas, Louisiana and New Mexico and to gain greater access to marketing and distribution channels for our produced NGL.

We have accounted for the acquisition under the purchase method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) 141, “Business Combinations.” The purchase price and the final allocation to assets and liabilities based on their estimated fair values as of October 31, 2005 are shown below (in thousands):

Purchase Price:
Cash purchase price	$	2,350,000
Cash collateral		90,703
Acquisition-related costs incurred		11,739
Total purchase price	$	2,452,442
Fair value of assets acquired and liabilities assumed:
Current assets, including cash of $34 million	$	601,915
Property, plant and equipment		2,231,503
Unconsolidated investments		21,195
Other assets		3,059
Current liabilities		(279,636	)
Other long-term liabilities		(20,241	)
Minority interest		(105,353	)
	$	2,452,442

Proposed Disposition of Assets and Initial and Subsequent Public Offerings

At the time we acquired DMS, we planned to market North Texas in an auction style sales process in early 2006, with the expectation that the sales transaction would close by mid 2006. In September 2006, our Board of Directors (the “Board”) determined that the available sales options did not meet the Board’s criteria. As a result, North Texas was reclassified from “held for sale” to “held for use” and we began activities necessary for an initial public offering (“IPO”) of common units representing limited partnership interests in Targa Resources Partners LP (“the Partnership”).

On February 14, 2007, we completed the IPO and the Partnership borrowed $294.5 million under its newly established credit facility. In return for our contribution of North Texas to the Partnership we received a 2% general partner interest and a 36.6% limited partner interest in the Partnership and cash proceeds of $665.7 million. We consolidate the Partnership’s net assets and results due to our continuing control of the Partnership through our general partner interest.

We used the proceeds received from contributing North Texas to the Partnership and cash on hand to retire in full the outstanding balance (including accrued interest) of our $700 million senior secured asset sale bridge loan facility.

43

On October 24, 2007 the Partnership completed a public offering of 13,500,000 common units. The Partnership used the proceeds from the offering, borrowings under its senior secured revolving credit facility and the issuance of approximately 275 thousand general partner units to us to finance the acquisition from us of certain natural gas gathering and processing businesses located in west Texas and Louisiana for approximately $705 million, subject to certain adjustments.

Contractual Arrangements

Because of the significant volatility of natural gas and NGL prices in our natural gas gathering and processing division, contract mix can have a significant impact on our profitability. Negotiated contract terms are based upon a variety of factors, including natural gas quality, geographic location, the competitive environment at the time the contract is executed and customer preferences. Contract mix and, accordingly, exposure to natural gas and NGL prices may change over time as a result of changes in these underlying factors.

Contract Mix

Set forth below is a table summarizing the contract mix of our natural gas gathering and processing division for the month of December 2006, and the potential impacts of commodity prices on operating margins:

Contract Type	Percent of Throughput		Impact of Commodity Prices
Percent-of-Proceeds / Percent-of-Liquids	47	%	Decreases in natural gas and or NGL prices generate decreases in operating margins
Fee-Based	23	%	No direct impact from commodity price movements
Wellhead Purchases / Keep-Whole	2	%	Increases in natural gas prices relative to NGL prices generate decreases in operating margins Decreases in NGL prices relative to natural gas prices generate decreases in operating margins
Hybrid	28	%	In periods of favorable processing economics, similar to percent-of-liquids (or wellhead purchases/keep-whole in some circumstances, if economically advantageous to the processor) In periods of unfavorable processing economics, similar to fee-based

Processing customer preferences, competitive forces and other factors sometimes cause us to enter into more commodity price sensitive contracts such as wellhead purchases and keep-whole arrangements. We prefer to enter into contracts with less commodity price sensitivity including fee-based and percent-of-proceeds arrangements (which we can hedge).

In general, with respect to our Permian Basin assets, onshore Louisiana Gillis and Acadia plants and North Texas, the majority of our throughput is subject to percent-of-proceeds or similar arrangements. Our Coastal Louisiana straddle plants are generally governed by percent-of-proceeds or hybrid contracts. Our NGL fractionation, storage, terminalling, transportation and distribution services are generally provided under fee-based arrangements. Finally, within our NGL Distribution and Marketing and our Wholesale Marketing segments we operate under a variety of fee- and margin-based marketing arrangements.

44

Results of Operations

Comparison of Results of Operations. The most significant event affecting the comparability of our results of operations was the DMS acquisition. Because the closing date of the DMS acquisition was on October 31, 2005, our Consolidated Statements of Operations do not include any revenues or expenses from DMS prior to November 1, 2005.

The following discussion is based on our results of operations for the years ended December 31, 2006 and 2005, and the unaudited sum of: (i) the audited results of operations of the predecessor for the three and a half months ended April 15, 2004 and (ii) the audited results of operations of Targa for the year ended December 31, 2004 which reflects operating results only for the eight and a half months ended December 31, 2004. Because Targa and its predecessor followed different bases of accounting, the combined results of operations for the year ended December 31, 2004 are not prepared on the same basis and, thus, this combined presentation is not in accordance with GAAP. The discussion based on the combined information is presented for the convenience of investors to facilitate the presentation of a more meaningful discussion of the historical periods. The combined results of operations of the predecessor and Targa for the year ended December 31, 2004 does not necessarily represent the results that would have been achieved during this period had the business been operated by Targa for the entire year.

The following table summarizes the key components of our consolidated results of operations for the periods indicated:

	Targa Resources, Inc.															Combined			Predecessor
(in thousands)	Six Months Ended June 30, 2007			Six Months Ended June 30, 2006			Year Ended December 31, 2006			Year Ended December 31, 2005			Year Ended December 31, 2004			Year Ended December 31, 2004			Three and a Half Months Ended April 15, 2004
Revenues	$	3,059,780		$	3,104,734		$	6,132,881		$	1,829,027		$	602,376		$	835,145		$	232,769
Product purchases		(2,708,586	)		(2,752,196	)		(5,440,832	)		(1,631,963	)		(544,918	)		(757,224	)		(212,306	)
Operating expenses		(120,311	)		(102,405	)		(224,169	)		(52,090	)		(15,253	)		(24,510	)		(9,257	)
Operating margin		230,883			250,133			467,880			144,974			42,205			53,411			11,206
Depreciation and amortization		(73,166	)		(42,155	)		(149,687	)		(27,141	)		(10,631	)		(14,464	)		(3,833	)
General and administrative		(42,259	)		(41,189	)		(82,351	)		(28,275	)		(11,149	)		(11,906	)		(757	)
Operating income		115,458			166,789			235,842			89,558			20,425			27,041			6,616
Interest expense		(78,003	)		(88,328	)		(180,189	)		(39,856	)		(6,406	)		(6,406	)		—
Equity in earnings of unconsolidated investments		5,647			3,968			9,968			(3,776	)		2,370			2,370			—
Other income (expense)		(16,866	)		(15,593	)		(25,998	)		(66,678	)		—			—			—
Income tax (expense) benefit		(3,196	)		(26,927	)		(16,209	)		6,537			(5,227	)		(7,794	)		(2,567	)
Net income (loss)	$	23,040		$	39,909		$	23,414		$	(14,215	)	$	11,162		$	15,211		$	4,049

45

Our operating margin by segment and in total is as follows for the periods indicated:

	Targa Resources, Inc.										Combined		Predecessor
(in thousands)	Six Months Ended June 30, 2007		Six Months Ended June 30, 2006		Year Ended December 31, 2006		Year Ended December 31, 2005		Year Ended December 31, 2004		Year Ended December 31, 2004		Three and a Half Months Ended April 15, 2004
Natural Gas Gathering and Processing	$	188,190	$	209,901	$	404,904	$	128,371	$	42,205	$	53,411	$	11,206
Logistics Assets		16,278		23,662		42,415		6,075		—		—		—
NGL Distribution and Marketing Services		17,671		8,012		10,604		6,028		—		—		—
Wholesale Marketing		8,744		8,558		9,957		4,500		—		—		—
	$	230,883	$	250,133	$	467,880	$	144,974	$	42,205	$	53,411	$	11,206

Comparison of Six Months Ended June 30, 2007 to Six Months Ended June 30, 2006

Revenues decreased by $44.9 million, or 1.4%, to $3,059.8 million for the six months ended June 30, 2007 compared to $3,104.7 million for the six months ended June 30, 2006.

Revenues from the sale of natural gas decreased by $8.2 million, consisting of an increase of $24.3 million due to sales volumes, offset by a decrease of $32.5 million due to lower realized prices. Revenues from the sale of NGL decreased by $39.7 million, consisting of decreases of $38.1 million due to lower sales volumes and $1.6 million due to lower realized prices. Revenues from the sale of condensate decreased by $1.7 million. Lower realized prices decreased condensate revenues by $3.9 million. Higher sales volumes increased condensate revenues by $2.2 million. Non-commodity sales revenues, which are principally derived from fee-based services, increased by $4.7 million.

Average realized prices for natural gas decreased by $0.35 per MMBtu (including a $0.06 decrease due to hedging), or 5%, to $6.90 per MMBtu for the six months ended June 30, 2007 compared to $7.25 per MMBtu for the six months ended June 30, 2006. The average realized price for NGL was $1.02 per gallon for the six months ended June 30, 2007 and 2006, with no impact due to hedging. The average realized price for condensate decreased by $5.87 per barrel (net of a $1.32 increase due to hedging), or 9%, to $60.09 per barrel for the six months ended June 30, 2007 compared to $65.96 per barrel for the six months ended June 30, 2006.

Natural gas sales volumes increased by 18.5 BBtu per day, or 4%, to 520.8 BBtu per day for the six months ended June 30, 2007 compared to 502.3 BBtu per day for the six months ended June 30, 2006. NGL sales volumes decreased by 4.9 MBbl per day, or 2%, to 298.6 MBbl per day for the six months ended June 30, 2007 compared to 303.5 MBbl per day for the six months ended June 30, 2006. Condensate sales volumes increased by 0.2 MBbl per day, or 6%, to 3.7 MBbl per day for the six months ended June 30, 2007 compared to 3.5 MBbl per day for the six months ended June 30, 2006.

Product purchases decreased by $43.6 million, or 2%, to $2,708.6 million for the six months ended June 30, 2007 compared to $2,752.2 million for the six months ended June 30, 2006. This decrease is due to lower producer settlements (primarily price) and lower downstream purchases (price and volume)

Operating expenses increased by $17.9 million, or 17%, to $120.3 million for the six months ended June 30, 2007 compared to $102.4 million for the six months ended June 30, 2006. Please see “—Results of Operations” for a more detailed explanation of the components of the increase.

Depreciation and amortization expense increased by $31.0 million, or 73%, to $73.2 million for the six months ended June 30, 2007 compared to $42.2 million for the six months ended June 30, 2006. The increase is due to the

46

recognition of depreciation expense for North Texas that was previously deferred in 2006 when the assets were classified as ‘held for sale.’

General and administrative expense increased by $1.1 million, or 3%, to $42.4 million for the six months ended June 30, 2007 compared to $41.3 million for the six months ended June 30, 2006. The increase was primarily the result of an increase in Sarbanes-Oxley compliance costs.

Net interest expense decreased by $10.3 million, or 12%, to $78.0 million for the six months ended June 30, 2007 compared to $88.3 million for the six months ended June 30, 2006. This decrease is due to lower company debt related to the retirement of the $700 million senior secured asset sale bridge loan facility, partially offset by higher interest rates during the six months ended June 30, 2007 and the early write-off of $2.2 million of debt issue costs related to the $700 million senior secured asset sale bridge loan facility.

During the six months ended June 30, 2007, income tax expense was $3.2 million on pre-tax net income of $26.2 million, compared to income tax expense of $26.9 million on pre-tax net income of $66.8 million for the six months ended June 30, 2006. Income tax expense decreased by $8.3 million during the six months ended June 30, 2007 as a result of Texas House Bill 3928 (“HB 3928”), effective June 15, 2007, which required us to recognize changes in deferred tax assets related to a computational change of the temporary credit related to the Texas Margin Tax. Excluding the effect of HB 3928, our effective income tax rate would have been 43.8% for the six months ended June 30, 2007 compared to 40.3% for the six months ended June 30, 2006.

Comparison of Year Ended December 31, 2006 to Year Ended December 31, 2005

Revenues were $6,132.9 million for 2006 compared to $1,829.0 million for 2005. The $4,303.9 million, or 235%, increase was primarily due to the following factors:

• higher commodity sales volumes primarily as a result of the DMS acquisition increased revenues $3,712.5 million, consisting of increases in natural gas and NGL revenue of $579.0 million and $3,133.5 million, respectively;

• a net increase attributable to commodity prices of $461.6 million, consisting of a decrease in natural gas revenue of $336.5 million, offset by an increase in NGL revenue of $798.1 million; and

• an increase in fee-based and other revenue of $129.8 million, primarily as a result of twelve months of operations of the DMS acquisition assets for 2006 compared to two months for 2005.

Our average realized price for natural gas decreased $1.84 per MMBtu, or 22%, to $6.61 per MMBtu for 2006 compared to $8.45 per MMBtu for 2005. Our average realized price for NGL increased $0.17 per gallon, or 20%, to $1.02 per gallon for 2006 compared to $0.85 per gallon for 2005.

Natural gas sales volumes increased 187.7 BBtu/d, or 60%, to 501.2 BBtu/d for 2006 compared to 313.5 BBtu/d for 2005. NGL sales volumes increased 240.4 MBbl/d, or 402%, to 300.2 MBbl/d for 2006 compared to 59.8 MBbl/d for 2005. The increase in natural gas and NGL volumes is primarily the result of twelve months of operations of the DMS acquisition assets for 2006 compared to two months for 2005.

Product purchases were $5,440.8 million for 2006 compared to $1,632.0 million for 2005. The $3,808.8 million, or 233%, increase was primarily the result of twelve months of NGL purchases by our NGL Logistics and Marketing division for 2006 compared to two months for 2005.

Operating expenses increased $172.1 million, or 330%, to $224.2 million for 2006 compared to $52.1 million for 2005. The increase was primarily attributable to the additional costs required to operate the company after the DMS acquisition, the most significant of which was for salary-related employee expenses.

47

Depreciation and amortization expense increased $122.6 million, or 452%, to $149.7 million for 2006 compared to $27.1 million for 2005. The increase is due to the DMS acquisition. Approximately $9.1 million of the increase was previously deferred depreciation expense for the North Texas assets, which were reclassified from “held for sale” to “held for use” during 2006.

General and administrative expense increased $54.1 million, or 191%, to $82.4 million for 2006 compared to $28.3 million for 2005. The increase is primarily due to increased corporate headcount as a result of the DMS acquisition. Corporate headcount, classified as general and administrative expense, increased from 39 at October 31, 2005 to 205 at December 31, 2006. Higher costs for insurance and information technology infrastructure also impacted general and administrative expense for 2006.

Net interest expense increased by $140.3 million, or 352%, to $180.2 million for 2006 compared to $39.9 million for 2005. The increase was primarily the result of higher debt levels related to the DMS acquisition financing.

Equity in earnings of unconsolidated investments increased $13.8 million, or 363%, to income of $10.0 million for 2006 compared to a loss of $3.8 million for 2005. The increase was the result of our sale of Bridgeline, where our equity loss for 2005 was $4.7 million, coupled with equity earnings from Venice Energy Services Company LLC (“VESCO”) and Gulf Coast Fractionators LP (“GCF”) for twelve months for 2006 compared to two months for 2005.

Our loss on mark-to-market derivative contracts for 2005 occurred because certain commodity swap derivatives we entered into concurrent with the execution of the DMS acquisition agreement did not qualify for hedge accounting treatment until the closing of the acquisition. For the year ended December 31, 2005, such loss consisted of (i) a $60.4 million non-cash mark-to-market loss and (ii) $13.6 million in premium amortization expense. There were no mark-to-market gains or losses during 2006.

Income tax expense was $16.2 million on pretax income of $39.6 million for 2006 compared to an income tax benefit of $6.5 million on a pretax loss of $20.8 million for 2005. Our effective tax rates for 2006 and 2005 were 40.9% and 37.5%, respectively. Our 2006 effective rate was increased by the May 2006 enactment of the Texas margins tax, which caused 2006 Texas losses to become unusable, increased deferred Texas income taxes and provided a partial offset through a temporary credit period. Variances in our annual effective tax rate from the 35% federal statutory rate are primarily caused by state income taxes.

Comparison of Year Ended December 31, 2005 to Year Ended December 31, 2004 (Combined)

The following discussion is based on our results of operations for the year ended December 31, 2005 as compared to the unaudited sum of: (i) the audited results of operations of the predecessor for the three and a half months ended April 15, 2004 and (ii) the audited results of operations of Targa for the eight and a half months ended December 31, 2004. Because Targa and its predecessor followed different bases of accounting during the respective periods, the combined results of operations for the year ended December 31, 2004 are not prepared on the same basis and, thus, this combined presentation is not in accordance with GAAP. The following discussion based on the combined information is presented for the convenience of investors to facilitate the presentation of a more meaningful discussion of the historical periods. The combined results of operations of the predecessor and Targa for the year ended December 31, 2004 do not necessarily represent the results that would have been achieved during this period had the business been operated by Targa for the entire year.

Revenues increased $993.9 million, or 119%, to $1,829.0 million for 2005 compared to $835.1 million for 2004. The increase is primarily due to:

• higher commodity sales volumes as a result of the DMS acquisition increased revenues $472.6 million, consisting of increases in natural gas and NGL revenue of $105.2 million and $367.4 million, respectively;

48

• higher commodity prices increased revenues $440.7 million, consisting of increases in natural gas and NGL revenue $266.6 million and $174.1 million, respectively; and

• an increase in fee-based and other revenue of $80.6 million.

Our average realized price for natural gas, increased $2.33 per MMBtu, or 38%, to $8.45 per MMBtu for 2005 compared to $6.12 per MMBtu for 2004. Our average realized price for NGL increased $0.19 per gallon, or 29%, to $0.85 per gallon for 2005 compared to $0.66 per gallon for 2004.

Natural gas sales volumes increased 47.8 BBtu/d, or 18%, to 313.5 BBtu/d for 2005 compared to 265.7 BBtu/d for 2004. NGL sales volumes increased 36.4 MBbl/d, or 156%, to 59.8 MBbl/d for 2005 compared to 23.4 MBbl/d for 2004. The increase in natural gas and NGL volumes is primarily the result of the DMS acquisition.

Product purchases increased $874.8 million, or 116%, to $1,632.0 million for 2005 compared to $757.2 million for 2004. Of the increase, $624.5 million is directly attributable to the DMS acquisition, with the remainder primarily due to higher commodity prices in 2005.

Operating expenses increased $27.6 million, or 113%, to $52.1 million for 2005 compared to $24.5 million for 2004. Excluding a $31.2 million increase due to the DMS acquisition, operating expenses decreased $3.6 million from 2004 to 2005. The decrease was attributable primarily to cost reductions subsequent to our acquisition of the predecessor business from ConocoPhillips in April 2004, the most significant of which was a decrease in non-salary related employee expenses.

Depreciation and amortization expense increased $12.6 million, or 87%, to $27.1 million for 2005 compared to $14.5 million for 2004. The increase is primarily due to the DMS acquisition.

General and administrative expense increased $16.4 million, or 138%, to $28.3 million for 2005 compared to $11.9 million for 2004. Approximately $11.7 million of the increase was for salaries and wages of former DMS employees we hired as a result of the DMS acquisition, and the remainder was due to business development and higher corporate overhead expenses during 2005.

Interest income (expense), net increased $33.5 million, or 523%, to $39.9 million for 2005 compared to $6.4 million for 2004. The increase was primarily the result of higher debt levels related to the DMS acquisition financing, and to a lesser extent, higher interest rates during 2005.

Equity in earnings of unconsolidated investments for 2005 was a loss of $3.8 million, consisting of a loss of $4.7 million related to Bridgeline, offset by income of $0.6 million and $0.3 million related to VESCO and GCF, respectively. For 2004, our equity in earnings of unconsolidated investments was income of $2.4 million related to Bridgeline.

On August 5, 2005, we sold our equity investment in Bridgeline for $117.0 million in cash, and realized a pre-tax gain of $18.0 million.

Our loss on mark-to-market derivative contracts for 2005 occurred because certain commodity swap derivatives we entered into concurrent with the execution of the DMS acquisition agreement did not qualify for hedge accounting treatment until the closing of the acquisition. For the year ended December 31, 2005, such loss consisted of a $60.4 million non-cash mark-to-market loss and $13.6 million in premium amortization expense. There were no mark-to-market gains or losses during 2004.

We recognized a net income tax benefit of $6.5 million on a pretax loss of $20.8 million for 2005 compared to income tax expense of $7.8 million on pretax income of $23.0 million for 2004. Our effective tax rates for 2005 and 2004 were 37.5% and 35.0%, respectively. Variances in our annual effective tax rate from the 35% federal statutory rate are primarily caused by state income taxes.

49

Natural Gas Gathering and Processing Segment

The following table provides summary financial data regarding results of operations in our Natural Gas Gathering and Processing segment for the periods presented.

	Targa Resources, Inc.															Combined			Predecessor
(in thousands)	Six Months Ended June 30, 2007			Six Months Ended June 30, 2006			Year Ended December 31, 2006			Year Ended December 31, 2005(1)			Year Ended December 31, 2004(3)			Year Ended December 31, 2004			Three and a Half Months Ended April 15, 2004
Operating statistics:(2)
Gathering throughput, MMcf/d		1,987.9			2,010.8			1,871.7			477.9			285.6			294.6			316.5
Plant natural gas inlet, MMcf/d		1,946.2			1,762.9			1,841.5			400.8			262.6			277.3			313.5
Natural gas sales, BBtu/d		520.8			502.3			517.8			313.5			252.7			265.7			297.4
Gross NGL production, MBbl/d		105.1			104.4			106.8			31.8			22.8			23.4			24.8
Net NGL sales, MBbl/d		298.6			303.5			89.8			29.0			22.8			23.4			24.8
Average realized prices:
Natural gas, $/MMBtu		6.90			7.25			6.61			8.45			6.45			6.12			5.42
NGLs, $/gal		1.02			1.02			0.88			0.85			0.70			0.66			0.55
Revenues	$	1,353,173		$	1,297,578		$	2,591,019		$	1,309,058		$	602,376		$	835,145		$	232,769
Product purchases		(1,107,330	)		(1,033,193	)		(2,067,375	)		(1,145,577	)		(544,918	)		(757,224	)		(212,306	)
Operating expenses		(57,653	)		(54,484	)		(118,740	)		(35,110	)		(15,253	)		(24,510	)		(9,257	)
Operating margin	$	188,190		$	209,901		$	404,904		$	128,371		$	42,205		$	53,411		$	11,206
General and administrative	$	21,799		$	17,921		$	40,471		$	16,377		$	7,698		$	8,455		$	757
Equity in earnings of unconsolidated investments	$	3,500		$	2,254		$	7,214		$	(4,159	)	$	2,370		$	2,370		$	—

(1) Includes the results of assets acquired in the DMS acquisition for the two months ended December 31, 2005.

(2) Segment operating statistics include the effect of intersegment sales, which have been eliminated from the consolidated presentation. For all volume statistics presented, the numerator is the total volume sold during the period and the denominator is the number of calendar days during the period. Volumes from assets acquired in the DMS acquisition are included from and after the acquisition date, October 31, 2005.

(3) Prior to April 16, 2004, certain investors in Targa had previous investments in Pipeco, f.k.a. Targa Resources, Inc., f.k.a. Warburg Pincus VIII Development Company, Inc. Pipeco was the entity that performed due diligence and other acquisition specific activities associated with the asset acquisitions from ConocoPhillips.

Pipeco and Targa are considered “entities under common control” as defined under GAAP and, as such, Targa’s audited financial results include the year ended December 31, 2004.

50

Comparison of Six Months Ended June 30, 2007 to Six Months Ended June 30, 2006

Revenues increased $55.6 million, or 4% to $1,353.2 million for the six months ended June 30, 2007 compared to $1,297.6 million for the six months ended June 30, 2006. The net increase is primarily due to:

• an increase in commodity sales volumes that increased revenues by $50.7 million, consisting of increases in natural gas, NGL and condensate revenues of $24.5 million, $20.8 million, and $5.4 million, respectively;

• an increase in commodity prices that increased revenues by $0.3 million, consisting of an increase in NGL revenues of $37.2 million, partially offset by decreases in natural gas and condensate revenues of $32.0 million and $4.9 million, respectively; and

• an increase in compression and gathering, processing, and other services increased revenues by $0.9 million, $2.2 million, and $1.5 million, respectively.

Our average realized price for natural gas decreased $0.33 per MMBtu (including a $0.06 increase due to hedging), or 5%, to $6.91 per MMBtu for the six months ended June 30, 2007 compared to $7.24 per MMBtu for the six months ended June 30, 2006. Our average realized price for NGL increased $0.05 per gallon, or 6%, to $0.91 per gallon for the six months ended June 30, 2007 compared to $0.86 per gallon for the six months ended June 30, 2006. Our average realized price for condensate decreased $5.31 per barrel (net of a $0.96 increase due to hedging), or 9%, to $56.48 per barrel for the six months ended June 30, 2007 compared to $61.79 per barrel for the six months ended June 30, 2006.

Our natural gas sales volume increased 18.6 BBtu/d, or 4%, to 537.1 BBtu/d for the six months ended June 30, 2007 compared to 518.5 BBtu/d for the six months ended June 30, 2006. The net increase in gas sales volumes is due to:

• an increase in natural gas sales volumes in North Texas due to increased wellhead production in the region, partially offset by the impact of unseasonably wet weather, which limited our ability to complete connections to new wells; and

• an increase due to increased wellhead production in certain of our West Texas operations, partially offset by plant maintenance curtailments at certain of our Permian Basin facilities.

Our NGL sales volume increased 3.2 MBbl/d, or 4%, to 90.1 MBbl/d for the six months ended June 30, 2007 compared to 86.9 MBbl/d for the six months ended June 30, 2006. The increase in NGL sales volumes is primarily from increased production from our Louisiana straddle plants compared to 2006. During 2006, several of these plants were either shut-down or severely curtailed as a result of damage suffered from hurricanes Katrina and Rita during 2005.

Our condensate sales volume increased 0.5 MBbl/d, or 11%, to 5.1 MBbl/d for the six months ended June 30, 2007 compared to 4.6 MBbl/d for the six months ended June 30, 2006.

Product purchases increased $74.1 million, or 7%, to $1,107.3 million for the six months ended June 30, 2007 compared to $1,033.2 million for the six months ended June 30, 2006. For the six months ended June 30, 2007 and 2006, product purchases were 82% and 80% of total revenue, respectively. The increase in product purchases for the six months ended June 30, 2007 corresponds with the increase in revenue for the same period.

Operating expenses increased $3.2 million, or 6%, to $57.7 million for the six months ended June 30, 2007 compared to $54.5 million for the six months ended June 30, 2006. The increase is primarily attributable to the additional cost of operating straddle plants in Louisiana that were off line for a portion of the six months ended June 30, 2006 as a result of damage suffered from hurricanes Katrina and Rita during 2005. Operating expenses were also higher for the six months ended June 30, 2007 due to repair and settlements paid related to a fire near our Saunders facility.

51

General and administrative expense increased by $3.9 million, or 22%, to $21.8 million for the six months ended June 30, 2007 compared to $17.9 million for the six months ended June 30, 2006. Our Natural Gas Gathering and Processing segment’s general and administrative expense is an allocation of corporate-level expenses, which were higher in 2007. In addition, the refinement of our corporate general and administrative expense allocation methodology during 2006 increased this segment’s corporate general and administrative expense allocation percentage to 52% for the six months ended June 30, 2007 compared to 43% for the six months ended June 30, 2006.

Our equity in earnings of unconsolidated investments was $3.5 million for the six months ended June 30, 2007 compared to $2.3 million for the six months ended June 30, 2006. The increase resulted from VESCO operating close to capacity during 2007 compared to being off line for most of the first quarter of 2006 as a result of damage suffered from hurricanes Katrina and Rita during 2005.

Comparison of Year Ended December 31, 2006 to Year Ended December 31, 2005

Revenues increased $1,281.9 million, or 98%, to $2,591.0 million for 2006 compared to $1,309.1 million for 2005. This increase is primarily due to:

• an increase attributable to commodity sales volumes of $1,472.0 million, consisting of increases in natural gas and NGL revenue of $680.0 million and $792.0 million, respectively;

• a decrease attributable to commodity prices of $355.1 million, consisting of a decrease in natural gas revenue of $397.9 million, offset by an increase in NGL revenue of $42.8 million; and

• an increase in fee-based and other revenue of $165.0 million, primarily from miscellaneous processing activities.

Our average realized price for natural gas decreased $1.84 per MMBtu, or 22%, to $6.61 per MMBtu for 2006 compared to $8.45 per MMBtu for 2005. Our average realized price for NGL increased $0.03 per gallon, or 4%, to $0.88 per gallon for 2006 compared to $0.85 per gallon for 2005.

Our natural gas sales volume increased 204.3 BBtu/d, or 65%, to 517.8 BBtu/d for 2006 compared to 313.5 BBtu/d for 2005. Our NGL sales volume increased 60.8 MBbl/d, or 210%, to 89.8 MBbl/d for 2006 compared to 29.0 MBbl/d for 2005. The increases in volumes are primarily from a full year of operations for the DMS acquisition assets in 2006 compared to two months for 2005.

Product purchases increased $921.8 million, or 80%, to $2,067.4 million for 2006 compared to $1,145.6 million for 2005. The increase is attributable primarily to the DMS acquisition.

Operating expenses increased $83.6 million, or 238%, to $118.7 million for the 2006 compared to $35.1 million for 2005. The increase is primarily attributable to the DMS acquisition.

General and administrative expense increased $24.1 million, or 147%, to $40.5 million for the year ended December 31, 2006 compared to $16.4 million for the year ended December 31, 2005. General and administrative expense for this segment is an allocation of corporate-level expenses, which were generally higher during 2006 as a result of the DMS acquisition.

For 2006, earnings from unconsolidated investments consisted of our $7.2 million equity in the earnings of VESCO. For the year ended December 31, 2005, earnings from unconsolidated investments consisted of our $0.5 million equity in the earnings of VESCO and our $4.7 million equity in the losses of Bridgeline. We sold our interest in Bridgeline in August 2005.

52

Comparison of Year Ended December 31, 2005 to Year Ended December 31, 2004 (Combined)

The following discussion is based on our results of operations for the year ended December 31, 2005 as compared to the unaudited sum of: (i) the audited results of operations of the predecessor for the three and a half months ended April 15, 2004 and (ii) the audited results of operations of Targa for the eight and a half months ended December 31, 2004. Because Targa and its predecessor followed different bases of accounting, the combined results of operations for the year ended December 31, 2004 are not prepared on the same basis and, thus, this combined presentation is not in accordance with GAAP. The following discussion based on the combined information is presented for the convenience of investors to facilitate the presentation of a more meaningful discussion of the historical periods. The combined results of operations of the predecessor and Targa for the year ended December 31, 2004 do not necessarily represent the results that would have been achieved during this period had the business been operated by Targa for the entire year.

Revenues increased $474.0 million, or 57%, to $1,309.1 million for 2005 compared to $835.1 million for 2004. The increase is primarily due to:

• higher commodity sales volumes primarily as a result of the DMS acquisition increased revenues $161.2 million, consisting of increases in natural gas and NGL revenue of $105.2 million and $56.0 million, respectively;

• higher commodity prices increased revenue $351.1 million, consisting of an increase in natural gas and NGL revenue of $266.6 million and $84.5 million.

Our average realized price for natural gas increased $2.33 per MMBtu, or 38%, to $8.45 per MMBtu for 2005 compared to $6.12 per MMBtu for 2004. Our average realized price for NGL increased $0.19 per gallon, or 29%, to $0.85 per gallon for 2005 compared to $0.66 per gallon for 2004.

Our natural gas sales volume increased 47.8 BBtu/d, or 18%, to 313.5 BBtu/d for 2005 compared to 265.7 BBtu/d for 2004. The increase is primarily attributable to the DMS acquisition.

Our NGL sales volume increased 5.6 MBbl/d, or 24%, to 29.0 MBbl/d for 2005 compared to 23.4 MBbl/d for 2004. An increase of 8.8 MBbl/d attributable to the DMS acquisition was partially offset by a 3.2 MBbl/d decrease due to the impact of hurricane related production volume losses, bypass of gas due to hurricane damage to processing plants and bypass of gas due to unfavorable processing economics.

Product purchases increased $388.4 million, or 51%, to $1,145.6 million for 2005 compared to $757.2 million for the year ended December 31, 2004. The increase consisted of a $138.1 million in product purchases for two months of operations attributable to the DMS acquisition, and a $250.3 million increase in product purchases that resulted primarily from higher commodity prices in 2005 compared to 2004.

Operating expenses increased $10.6 million, or 43%, to $35.1 million for the year ended December 31, 2005 compared to $24.5 million for the year ended December 31, 2004. The increase consisted of $14.2 million in operating expenses for two months of operations attributable to the DMS acquisition, and a $3.6 million decrease in operating expenses achieved because many of our Louisiana assets that would have undergone routine maintenance instead required major overhauls or replacement in 2005 compared to 2004 due to hurricane related damage. These overhauls were generally capitalized instead of expensed.

General and administrative expense increased $7.9 million, or 93%, to $16.4 million for the year ended December 31, 2005 compared to $8.5 million for the year ended December 31, 2004. General and administrative expense for this segment is an allocation of corporate-level expenses, which were generally higher during 2005 as a result of the DMS acquisition.

For the year ended December 31, 2004, equity in earnings of unconsolidated investments consisted of our $2.4 million equity in the earnings of Bridgeline. For the year ended December 31, 2005, equity in earnings of unconsolidated investments consisted of our $4.7 million equity in the loss of Bridgeline and our $0.5 million equity in the earnings of VESCO.

53

Logistics Assets Segment

The following table provides summary financial data regarding results of operations of our Logistics Assets segment for the periods presented.

($ in thousands)	Six Months Ended June 30, 2007			Six Months Ended June 30, 2006			Year Ended December 31, 2006			Year Ended December 31, 2005(1)
Fractionation volumes, MBbl/d(2)		194.7			182.8			181.9			23.7
Terminalling & storage, MBbl/d(2)		344.7			357.5			373.1			56.3
Transport, MBbl/d(2)		36.1			35.4			34.8			5.6
Revenues from services	$	91,795		$	85,013		$	175,227		$	24,812
Other revenues		917			1,271			3,286			186
		92,712			86,284			178,513			24,998
Operating expenses		(76,434	)		(62,622	)		(136,098	)		(18,923	)
Operating margin		16,278		$	23,662		$	42,415		$	6,075
General and administrative		8,376		$	6,622		$	14,074		$	2,472
Equity income (loss) of unconsolidated affiliate		2,147		$	1,714		$	2,754		$	383

(1) Reflects results beginning with the DMS acquisition on October 31, 2005.

(2) Operating statistics for 2005 are based on a 365-day year. For the sixty-one day period ended December 31, 2005, throughput volumes for fractionation, terminalling and storage, and transport were 141.9 MBbl/d, 337.1 MBbl/d and 33.4 MBbl/d, respectively.

Comparison of Six Months Ended June 30, 2007 to Six Months Ended June 30, 2006

Revenues from fractionation, terminalling and storage, transport and other sources increased $6.4 million, or 7%, to $92.7 million for the six months ended June 30, 2007 compared to $86.3 million for the six months ended June 30, 2006. This is attributable to higher service rates in 2007.

Higher service rates for the six months ended June 30, 2007 compared to the six months ended June 30, 2006 were derived primarily from commercial transportation activities. New barge transportation contracts for Pascagoula mixed butanes and propane/propylene mix coupled with new railcar lease revenue earned from our NGL Distribution and Marketing and Wholesale Marketing segments added revenue of $8.7 million. This increase in service rates was partially offset by lower fractionation fees at our Lake Charles facility in 2007 due to lower fuel prices.

Terminalling and storage volumes were slightly lower for the six months ended June 30, 2007 than for the six months ended June 30, 2006 primarily due to lower import volumes into our Galena Park facility, partially offset by higher volumes at our Cedar Bayou fractionator. Our fractionation facilities operated at 71% and 66% of design capacity for the six months ended June 30, 2007 and 2006, respectively.

Operating expenses increased $13.8 million, or 22%, to $76.4 million for the six months ended June 30, 2007 compared to $62.6 million for the six months ended June 30, 2006. This increase is primarily due to:

• fuel, barge maintenance and barge, truck and rail transportation costs increased by $9.0 million;

• pipeline integrity testing and fuel expense at our Lake Charles area facilities increased by $2.2 million;

• storage well maintenance costs at our Mont Belvieu facility increased $1.5 million; and

• start-up costs for our new low-sulfur natural gasoline unit increased operating expenses by $1.1 million.

54

General and administrative expense increased by $1.8 million, or 27%, to $8.4 million for the six months ended June 30, 2007 compared to $6.6 million for the six months ended June 30, 2006. General and administrative expense for this segment is an allocation of corporate level expenses, which were higher in 2007. In addition, the refinement of our corporate general and administrative expense allocation methodology during 2006 increased this segment’s corporate general and administrative expense allocation percentage to approximately 20% for the six months ended June 30, 2007 compared to 16% for the six months ended June 30, 2006.

Our equity in earnings of unconsolidated investments was $2.1 million for the six months ended June 30, 2007 compared to $1.7 million for the six months ended June 30, 2006.

Comparison of Year Ended December 31, 2006 to Year Ended December 31, 2005

Revenues from fractionation, terminalling and storage, and transport increased $150.4 million, or 606%, to $175.2 million for 2006 compared to $24.8 million for 2005. Approximately $148.4 million of the increase is the result of twelve months of operations for 2006 compared to two months for 2005. Higher service rates for 2006 compared to 2005 increased revenues by $2.0 million.

Fractionation, terminalling and storage, and transport volumes were higher for 2006 than for the two month period ended December 31, 2005 largely as a result of reduced raw NGL mix supplies from plants affected by Hurricane Rita and normal seasonal variations in volumes delivered to Mont Belvieu for fractionation during the winter months. Our fractionation facilities operated at 66% and 54% of design capacity for 2006 and 2005, respectively.

NGL Distribution and Marketing Services Segment

The following table provides summary financial data regarding results of operations of our NGL Distribution and Marketing Services segment for the periods presented:

($ in thousands)	Six Months Ended June 30, 2007			Six Months Ended June 30, 2006			Year Ended December 31, 2006			Year Ended December 31, 2005(1)
NGLs sold, MBbl/d(2)		254.9			242.4			246.3			30.8
NGL realized price, $/gal		0.99			0.98			0.99			1.00
NGL sales revenues	$	1,931,897		$	1,816,714		$	3,728,373		$	474,163
Other revenues(3)		—			—			10,396			500
		1,931,897			1,816,714			3,738,769		$	474,663
Product purchases		(1,913,013	)		(1,807,990	)		(3,726,121	)		(468,542	)
Operating expenses		(1,213	)		(712	)		(2,044	)		(93	)
Operating margin	$	17,671		$	8,012		$	10,604		$	6,028
General and administrative expenses	$	4,398		$	6,556		$	9,504		$	1,523

(1) Reflects results beginning with the DMS acquisition on October 31, 2005.

(2) Operating statistics for 2005 are based on a 365-day year. For the two months ended December 31, 2005, NGLs sold averaged 184.3 MBbl/d.

(3) Reflects revenue generated from miscellaneous products and services.

Comparison of Six Months Ended June 30, 2007 to Six Months Ended June 30, 2006

Revenues increased $115.2 million, or 6%, to $1,931.9 million for the six months ended June 30, 2007 compared to $1,816.7 million for the six months ended June 30, 2006. The net increase comprised a $92.8 million increase as a result of higher sales volumes, a $22.7 million increase due to higher commodity prices and a $0.3 million decrease in non-commodity revenues, which are principally derived from fee-based services.

55

NGLs sold in the six months ended June 30, 2007 were 254.9 MBbl/d compared to 242.4 MBbl/d in the six months ended June 30, 2006. The increase in sales volume was primarily due to:

• sales of production which, prior to April 2006, were marketed by our Natural Gas Gathering and Processing segment;

• increased sales of production from our Yscloskey natural gas processing facility, which was not fully operational until June 2006 as a result of damage suffered from hurricanes Katrina and Rita during 2005;

• increased sales of excess raw product at VESCO, which was not in operation until February 2006 as a result of damage suffered from hurricanes Katrina and Rita during 2005; and

• increased sales due to cooler weather in comparison to 2006.

Our operating margin increased by $9.7 million, or 121%, to $17.7 million for the six months ended June 30, 2007 compared to $8.0 million for the six months ended June 30, 2006. Our operating margin for the six months ended June 30, 2006 was impacted by hurricanes Katrina and Rita-related market issues affecting our seasonal-build inventory at December 31, 2005, with the consequence being both higher unit costs and increased volumes. As we liquidated the seasonal-build inventory, a mild winter contributed to increasing supplies and declining prices, resulting in a negative operating margin. The operating margin for the six months ended June 30, 2007 improved in comparison to 2006 due to a continuous month-to-month increase in commodity prices. The largest impact was seen in the first quarter of 2007, compared to the large decrease experienced in 2006, which resulted in a lower of cost or market adjustment as of March 31, 2006. Offsetting these favorable variances was a loss of $4.9 million recorded in 2007 resulting from an inventory reconciliation adjustment.

General and administrative expense decreased by $2.2 million, or 33%, to $4.4 million for the six months ended June 30, 2007 compared to $6.6 million for the six months ended June 30, 2006. Our NGL Distribution and Marketing segment’s general and administrative expense is an allocation of corporate-level expenses, which overall were higher in 2007. However, the refinement of our corporate general and administrative expense allocation methodology during 2006 decreased this segment’s corporate general and administrative expense allocation percentage to approximately 10% for the six months ended June 30, 2007 compared to 16% for the six months ended June 30, 2006.

Comparison of Year Ended December 31, 2006 to Year Ended December 31, 2005

Revenues from the sale of NGLs were $3,728.4 million for 2006 compared to $474.2 million for 2005. The $3,254.2 million, or 686%, increase consisted of a $3,316.1 million increase from higher sales volumes offset by a $61.9 million decrease as a result of lower commodity prices. The increase in sales volumes was primarily from twelve months of operations for 2006 compared to two months for 2005.

NGLs sold for the year ended December 31, 2006 were 246.3 MBbl/d compared to 184.3 MBbl/d for the two months ended December 31, 2005. Our sources of NGL supply and demand were sharply curtailed in late 2005 as a result of Hurricanes Katrina and Rita. These sources were restored during 2006 as facilities damaged or closed as a result of the hurricanes resumed operations.

56

Wholesale Marketing Segment

The following table provides summary financial data regarding results of operations of our Wholesale Marketing segment for the periods presented:

($ in thousands)	Six Months Ended June 30, 2007			Six Months Ended June 30, 2006			Year Ended December 31, 2006			Year Ended December 31, 2005(1)
NGLs sold, MBbl/d(2)		63.9			80.7			74.4			16.5
NGL realized price, $/gal		1.15			1.17			1.16			1.18
NGL sales revenues	$	558,855		$	719,022		$	1,322,689		$	298,320
Other revenues(3)		—			—			7,869			1,000
		558,855			719,022			1,330,558			299,320
Product purchases		(550,107	)		(710,457	)		(1,320,591	)		(294,757	)
Operating expenses		(4	)		(7	)		(10	)		(63	)
Operating margin	$	8,744		$	8,558		$	9,957		$	4,500
General and administrative expenses	$	7,794		$	8,253		$	17,820		$	2,335

(1) Reflects results beginning with the DMS acquisition on October 31, 2005.

(2) Operating statistics for 2005 are based on a 365-day year. For the two months ended December 31, 2005, NGLs sold averaged 98.5 MBbl/d.

(3) Reflects revenue generated from miscellaneous products and services.

Comparison of Six Months Ended June 30, 2007 to Six Months Ended June 30, 2006

Revenues decreased $160.1 million, or 22%, to $558.9 million for the six months ended June 30, 2007 compared to $719.0 million for the six months ended June 30, 2006. The decrease is primarily due to lower NGL sales volumes and lower average realized prices. Lower NGL sales volumes decreased revenues by $149.9 million and lower commodity prices decreased revenues by $10.2 million.

NGL sold decreased 16.8 MBbl/d, or 21%, to 63.9 MBbl/d for the six months ended June 30, 2007 compared to 80.7 MBbl/d for the six months ended June 30, 2006. The decrease is primarily due to terminated feedstock contracts with Chevron that ended in September 2006. During the six months ended June 30, 2006, sales into Chevron’s Richmond, Salt Lake City and El Segundo refineries totaled 10.8 MBbl/d. The remaining decrease in sales is due to lower market demand associated with higher overall market prices.

The decline in price is primarily due to the terminated feedstock contracts with Chevron that ended in September 2006. These contracts were for higher priced NGL products.

General and administrative expense decreased by $0.5 million, or 6%, to $7.8 million for the six months ended June 30, 2007 compared to $8.3 million for the six months ended June 30, 2006. This segment’s general and administrative expense includes an allocation of corporate-level expenses, which were higher in the six months ended June 30, 2007, and direct segment general and administrative expense, which was slightly lower in the six months ended June 30, 2007. The refinement of our corporate general and administrative expense allocation methodology during 2006 decreased this segment’s corporate general and administrative expense allocation percentage to approximately 18% for the three months ended June 30, 2007 compared to 20% for the three months ended June 30, 2006.

57

Comparison of Year Ended December 31, 2006 to Year Ended December 31, 2005

Revenues from the sale of NGLs were $1,322.7 million for 2006 compared to $298.3 million for 2005. The $1,024.4 million, or 343%, increase consisted of a $1,049.9 million increase from higher sales volumes offset by a $25.5 million decrease as a result of lower commodity prices. The increase in sales volumes was primarily from twelve months of operations for 2006 compared to two months for 2005.

NGLs sold for the year ended December 31, 2006 were 74.4 MBbl/d compared to 98.5 MBbl/d for the two months ended December 31, 2005. The Wholesale Marketing segment builds and holds propane inventory during the summer and generates the bulk of its revenue in the winter from propane sales.

Wholesale Marketing’s results for 2006 have been impacted by negative margins in our Florida operations due primarily to the loss of product previously supplied from VESCO and increased barge costs in the Gulf Coast.

Hurricanes Katrina and Rita

Certain of our Louisiana and Texas facilities sustained damage during the 2005 hurricane season from two gulf coast hurricanes—Katrina and Rita.

The Pelican offshore pipeline resumed full operations in January 2006. The Barracuda, Stingray and Yscloskey straddle plants resumed full operations in February, April and June 2006, respectively.

The Venice facility resumed partial operations during February 2006. When Venice becomes fully operational in mid-2008, its gross natural gas processing capacity will be approximately 750 MMcf/d. Also, the Venice partners have elected to not restore the facility’s NGL fractionation capability. We have a 22.9% equity ownership interest in the Venice facility.

While we believe that we have adequate insurance coverage for the facility repair costs, we are unable to predict the timing of insurance payments at this stage of the claims process. We will experience a reduction in physical damage recoveries from OIL Insurance Ltd. (as a Loss Payee) related to the salvage of the Pelican Platform destroyed by Hurricane Rita, as OIL is currently paying losses at 70% due to their $1 billion aggregate coverage limit for all insured members, which has been substantially exceeded. Our initial purchase price allocation for the DMS acquisition in October 2005 included an $81.1 million receivable for insurance claims related to expenditures to repair pre-acquisition property damage caused by Katrina and Rita. That estimate of recoveries remains unchanged.

Our repair expenditures and property damages insurance recoveries are summarized in the following table.

	Year Ended December 31,				Six Months Ended June 30, 2007
(in thousands)	2005		2006				Total
Property Damage
Repair/rebuild expenditures	$	6,931	$	48,408	$	7,734	$	63,073
Contributions to VESCO		5,990		9,102		4,648		19,740
	$	12,921	$	57,510	$	12,382	$	82,813
Insurance proceeds(1)	$	—	$	27,221	$	12,454	$	39,675

(1) Represents partial payments from insurance carriers related to property damage claims, which is reflective of the timing lag involved in the claims review process.

58

We have submitted and continue to submit business interruption insurance claims for our estimated losses caused by the hurricanes. We recognize income from business interruption insurance claims in our consolidated statements of operations and comprehensive income in the period that a proof of loss is executed and submitted to the insurers for payment. This income recognition criterion has resulted in and will likely continue to result in business interruption insurance recoveries being recorded in periods subsequent to the periods that we experience lost income from the affected property, resulting in fluctuations in our net income that may reduce the comparability of reported quarterly and annual results for some periods into the future.

At December 31, 2005, we estimated that our total business interruption claims proceeds could exceed $50 million. That estimate remains unchanged. Our income recognition from business interruption claims is summarized in the following table.

	Year Ended December 31,				Six Months Ended June 30, 2007
(in thousands)	2005		2006				Total
Business Interruption Insurance
Included in revenues	$	1,185	$	10,720	$	5,522	$	17,427
Included in equity earnings		1,449		2,856		3,088		7,393
	$	2,634	$	13,576	$	8,610	$	24,820

Liquidity and Capital Resources

Our ability to finance our operations, including to fund capital expenditures and acquisitions, to meet our indebtedness obligations, to refinance our indebtedness or to meet our collateral requirements will depend on our ability to generate cash in the future. Our ability to generate cash is subject to a number of factors, some of which are beyond our control, including weather, commodity prices, particularly for natural gas and NGLs, and our ongoing efforts to manage operating costs and maintenance capital expenditures, as well as general economic, financial, competitive, legislative, regulatory and other factors. Please read “Risk Factors.”

Historically, our cash generated from operations has been sufficient to finance our operating expenditures and non-acquisition related capital expenditures. Based on our anticipated levels of operations and absent any disruptive events, we believe that internally generated cash flow and borrowings available under our senior secured credit facilities should provide sufficient resources to finance our operations, non-acquisition related capital expenditures, hurricane-related repair expenditures, long-term indebtedness obligations and collateral requirements for at least the next twelve months.

A significant portion of our capital resources are utilized in the form of cash and letters of credit to satisfy counterparty collateral demands. These counterparty collateral demands reflect our non-investment grade status and counterparties’ views of our financial condition and ability to satisfy our performance obligations, as well as commodity prices and other factors. At December 31, 2006 and June 30, 2007, our total outstanding letter of credit postings were $227.6 million and $233.7 million, respectively.

In connection with the IPO completed on February 14, 2007, the General Partner of TRP LP is obligated to make minimum quarterly cash distributions to unit holders from available cash, as defined in the partnership agreement. As of June 30, 2007, such minimum amounts payable to non-Targa unit holders total approximately $26 million annually.

59

Cash Flow

The following table summarizes cash flow provided by or used in operating activities, investing activities and financing activities for the periods presented.

	Targa Resources, Inc.														Combined			Predecessor
(in thousands)	Six Months Ended June 30, 2007			Six Months Ended June 30, 2006			Year Ended December 31, 2006			Year Ended December 31, 2005			Year Ended December 31, 2004		2004			Three and a Half Months Ended April 15, 2004
Net cash provided by (used in)
Operating activities	$	134,312		$	176,676		$	233,286		$	108,855		33,135		$	44,615		$	11,480
Investing activities		(58,611	)		(79,149	)		(117,812	)		(2,328,916	)	(353,234	)		(354,410	)		(1,176	)
Financing activities		(38,365	)		(6,898	)		(14,162	)		2,250,621		330,676			320,372			(10,304	)

The discussion of cash flows for the year ended December 31, 2004 is based on the unaudited sum of (i) the audited cash flows of the predecessor for the three and a half months ended April 15, 2004, and (ii) the audited cash flows of Targa for the year ended December 31, 2004. Prior to April 16, 2004, certain investors in Targa had previous investments in Pipeco, f.k.a. Targa Resources, Inc., f.k.a. Warburg Pincus VIII Development Company, Inc. Pipeco was the entity that performed due diligence and other acquisition specific activities associated with the asset acquisitions from ConocoPhillips. Pipeco and Targa are considered “entities under common control” as defined under GAAP and, as such, Targa’s audited financial results include the year ended December 31, 2004. Because Targa and its predecessor followed different bases of accounting, the combined cash flow information for the year ended December 31, 2004 is not prepared on the same basis and, thus, is not in accordance with GAAP. The following discussion based on the combined cash flows is presented for the convenience of investors to facilitate the presentation of a more meaningful discussion of the historical period. The combined cash flows of the predecessor and Targa for the year ended December 31, 2004 do not necessarily represent the cash flows that would have occurred during this period had the business been operated by Targa for the entire year.

Operating Activities

Net cash provided by operating activities was $134.3 million for the six months ended June 30, 2007 compared to $176.7 million for the six months ended June 30, 2006. Changes in working capital provided $36.4 million in cash flow from operating activities for 2007 compared to $83.0 million in 2006. The decrease was primarily the result of a relatively lower seasonal drawdown of inventory during the six months ended June 30, 2007 compared to the six months ended June 30, 2006 and fewer days outstanding for trade payables at the end of each respective period. In addition to the effect of working capital changes, operating margin was lower in the first six months of 2007 due to slightly lower revenue as a result of lower commodity prices and to higher operating expenses. These negative effects to operating cash flow were partially offset by lower distributions to minority interest holders during 2007.

Net cash provided by operating activities was $233.3 million for 2006 compared to $108.9 million for 2005 and $44.6 for 2004. Improved operating cash flow was primarily the result of operating income contributions from assets acquired in the DMS acquisition, as well as improved margins from existing assets, partially offset by higher interest costs related to funding of the DMS acquisition.

Investing Activities

Net cash used in investing activities was $58.6 million for the six months ended June 30, 2007 compared to $79.1 million for the six months ended June 30, 2006. This $20.5 million decrease is primarily due to a decrease

60

in purchases of property, plant and equipment of $4.0 million and proceeds from property damage insurance claims of $12.5 million received in 2007.

Net cash used in investing activities was $117.8 million for 2006, compared with $2,328.9 million for 2005 and $354.4 million for 2004. Factors affecting the comparability of net cash used in investing activities are:

• During 2006, we had net cash outflows of $30.3 million attributable to facilities damaged by Hurricanes Katrina and Rita, consisting of $48.4 million in repair expenditures and a $9.1 million contribution to VESCO, offset by $27.2 million in cash receipts from property damage insurance claims;

• During 2005, we made cash payments of $2,417.1 million related to the DMS acquisition, expended $8.9 million for hurricane related repairs, made a contribution of $6.1 million to VESCO to fund repair costs, and received $117.0 million from the sale of Bridgeline;

• During 2004, we paid $247.0 million to acquire assets in West Texas and Louisiana from ConocoPhillips, and $101.3 million for a 40% interest in Bridgeline.

The remaining $87.5 million, $13.8 million, and $6.1 million for 2006, 2005, and 2004, respectively, primarily reflect maintenance and expansion capital expenditures during the periods.

Financing Activities

Net cash used in financing activities was $38.5 million for the six months ended June 30, 2007 compared to $6.9 million for the six months ended June 30, 2006. For the six months ended June 30, 2007, repayments of $754.3 million to retire indebtedness and $4.1 million incurred in connection with financing arrangements were partially offset by $342.5 million borrowed under the Partnership’s new credit facility and $377.6 million in net proceeds from the Partnership’s IPO.

Net cash used in financing activities was $14.2 million for 2006, compared with net cash provided by financing activities of $2,250.6 million for 2005 and $330.7 million for 2004. The decrease as compared to 2005 in cash provided by financing activities of $2,236.4 million is primarily attributable to cash required to fund the DMS acquisition in 2005. During 2005, borrowings of $2,200 million and equity contributions of $316 million were used for funding of the DMS acquisition, the refinancing of $84 million of existing debt, and payment of $59 million in costs incurred in connection with the new credit facility and the issuance of our notes.

Capital Requirements

The midstream energy business can be capital intensive, requiring significant investment to maintain and upgrade existing operations. A significant portion of the cost of constructing new gathering lines to connect to our gathering system is generally paid for by the natural gas producer. We expect to make significant expenditures during the next year for the construction of additional natural gas gathering and processing infrastructure and to enhance the value of our natural gas logistics and marketing assets.

We categorize our capital expenditures as either: (i) maintenance expenditures or (ii) expansion expenditures. Maintenance expenditures are those expenditures that are necessary to maintain the service capability of our existing assets including the replacement of system components and equipment which is worn, obsolete or completing its useful life, the addition of new sources of natural gas supply to our systems to replace natural gas production declines and expenditures to remain in compliance with environmental laws and regulations. Expansion expenditures improve the service capability of the existing assets, extend asset useful lives, increase capacities from existing levels, reduce costs or enhance revenues.

61

Our planned capital expenditures for 2007, excluding expenditures for the repair of previously discussed hurricane damage, are:

($ in millions)	Maintenance		Expansion		Total
Gas gathering and processing	$	67.3	$	18.9	$	86.2
Logistics assets		11.2		15.9		27.1
Wholesale marketing		1.2		0.3		1.5
	$	79.7	$	35.1	$	114.8

We are currently funding the cost of hurricane damage related repairs for the facilities we operate and have been and expect to continue to be reimbursed by our partners for their share of costs under the normal joint interest billing process. We expect to be reimbursed under our property insurance coverage for our portion of repair costs. For the non-operated facilities, we are funding our share through joint interest billings from the facility operator and expect to be reimbursed by our insurance coverage. For VESCO, we are funding our share through capital contributions. The funding-recovery time lag may require us to increase borrowings under our revolving credit facility; however, we believe we have adequate capacity to fund this activity and meet our normal working capital requirements.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Contractual Obligations

The following is a summary of our contractual cash obligations over the next several fiscal years, as of December 31, 2006:

(in millions)	Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Debt obligations(1)	$	2,184.4	$	712.5	$	25.0	$	25.0	$	1,421.9
Interest on debt obligations(2)		758.7		167.3		243.1		238.0		110.2
Operating lease obligations(3)		87.7		17.6		23.2		16.4		30.5
Capacity payments(4)		8.2		2.6		4.8		0.8		—
Asset retirement obligation		11.6		—		—		—		11.6
	$	3,050.6	$	900.0	$	296.1	$	280.2	$	1,574.2

(1) Includes (i) a $1,234.4 million remaining outstanding balance on our senior secured term loan facility due October 2012, (ii) a $700.0 million senior secured asset sale bridge loan facility, which was repaid in February 2007, and (iii) $250.0 million of senior notes due November 2013.

(2) Represents interest expense on our debt obligations based on interest rates as of December 31, 2006 and the timing of required future principal repayments of the respective facilities. We used an average rate of 6.7% to estimate our interest on variable rate debt obligations.

(3) Operating lease obligations include minimum lease payment obligations associated with gas processing plant site leases, railcar leases, office space leases and pipeline rights-of-way.

(4) Consist of capacity payments, primarily for NGL storage facilities.

Credit Ratings

At June 30, 2007 we had the following credit ratings, all of which are speculative ratings:

	Moody’s Investor Services	Standard & Poor’s
Corporate rating	B1	B
Senior secured credit facilities	Ba3	B+
Senior unsecured notes	B3	CCC+

62

A speculative rating signifies a higher risk that we will default on our obligations than does an investment grade rating.

Debt Obligations

Our debt obligations consisted of the following at the dates indicated:

(in thousands)	June 30, 2007			December 31, 2006
Long-term debt:
Senior secured term loan facility, variable rate, due October 2012	$	1,228,125		$	1,234,375
Senior secured asset sale bridge loan facility, variable rate (1)		—			700,000
Senior unsecured notes, 8 1/2% fixed rate, due November 2013		250,000			250,000
Senior secured revolving credit facility, variable rate, due October 2011 (2)		—			—
Senior secured revolving credit facility of the Partnership, variable rate, due February 2012		294,500			—
Subtotal debt		1,772,625			2,184,375
Current maturities of debt		(12,500	)		(712,500	)
Long-term debt	$	1,760,125		$	1,471,875
Irrevocable standby letters of credit:
Letters of credit outstanding under synthetic letter of credit facility (3)	$	233,690		$	227,571
Letters of credit outstanding under senior secured revolving credit facility of the Partnership		—			—
	$	233,690		$	227,571

(1) The entire amount was repaid in February 2007 concurrent with the closing of the Partnership's IPO.

(2) The entire $250 million available under the senior secured revolving credit facility may also be utilized for letters of credit.

(3) The $300 million senior secured synthetic letter of credit facility terminates in October 2012. At June 30, 2007 we had $66.3 million available under this facility.

Available Credit

At June 30, 2007 we had $250 million in borrowing capacity under our senior secured revolving credit facility. This borrowing capacity was available in any combination of cash borrowings and letters of credit. We also had $66.3 million of availability for letters of credit under our $300 million senior secured synthetic letter of credit facility.

Description of Debt Obligations

For a complete description of our debt obligations please see Note 7 to our Consolidated Financial Statements beginning on page F-1 of this Registration Statement.

Critical Accounting Policies

The policies and estimates discussed below are considered by management to be critical to an understanding of our financial statements, because their application requires the most significant judgments from management in estimating matters for financial reporting that are inherently uncertain. See Note 3 of the accompanying Notes to the Consolidated Financial Statements included in this Registration Statement for additional information on these policies and estimates, as well as a discussion of additional accounting policies and estimates.

63

The preparation of financial statements in accordance with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from these estimates.

Revenue Recognition

Our primary types of sales and service activities reported as operating revenue include:

• Sales of natural gas, NGLs, and condensate;

• Natural gas processing, from which we generate revenue through the compression, gathering, treating, and processing of natural gas; and

• Other services including fractionation, storage, terminalling and transportation of NGLs.

We recognize revenue when all of the following criteria are met: (1) persuasive evidence of an exchange arrangement exists, if applicable, (2) delivery has occurred or services have been rendered, (3) the price is fixed or determinable and (4) collectibility is reasonably assured.

For processing services, we receive either fees or a percentage of commodities as payment for these services, depending on the type of contract. Under percent-of-proceeds contracts, we are paid for our services by keeping a percentage of the NGLs extracted and the residue gas resulting from processing natural gas. In percent-of-proceeds arrangements, we remit either a percentage of the proceeds received from the sales of residue gas and NGLs or a percentage of the residue gas or NGLs at the tailgate of the plant to the producer. Under the terms of percent-of-proceeds and similar contracts, we may purchase the producer’s share of the processed commodities for resale or deliver the commodities to the producer at the tailgate of the plant. Percent-of-value and percent-of-liquids contracts are variations on this arrangement. Under keep-whole contracts, we keep the NGLs extracted and return the processed natural gas or value of the natural gas to the producer. Natural gas or NGLs that we receive for services or purchase for resale are in turn sold and recognized in accordance with the criteria outlined above. Under fee-based contracts, we receive a fee based on throughput volumes.

We generally report revenues gross in the combined statements of operations, in accordance with EITF Issue No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent.” Except for fee-based contracts, we act as the principal in these transactions where we receive natural gas or NGLs, take title to the commodities, and incur the risks and rewards of ownership.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect our reported financial positions and results of operations. We review significant estimates and judgments affecting our consolidated financial statements on a recurring basis and record the effect of any necessary adjustments. Estimates and judgments are based on information available at the time such estimates and judgments are made. Adjustments made with respect to the use of these estimates and judgments often relate to information not previously available. Uncertainties with respect to such estimates and judgments are inherent in the preparation of financial statements. Estimates and judgments are used in, among other things, (1) estimating unbilled revenues and operating and general and administrative costs, (2) developing fair value assumptions, including estimates of future cash flows and discount rates, (3) analyzing tangible and intangible assets for possible impairment, (4) estimating the useful lives of our assets and (5) determining amounts to accrue for contingencies, guarantees and indemnifications. Actual results could differ materially from our estimates.

64

Property, Plant, and Equipment

Property, plant, and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated service lives of our functional asset groups are as follows:

Asset Group	Range of Years
Natural gas gathering systems and processing facilities	15 to 25
Fractionation, terminalling and natural gas liquids storage facilities	25
Transportation equipment and barges	5 to 10
Office and miscellaneous equipment	3 to 7

Expenditures for maintenance and repairs are generally expensed as incurred. However, expenditures for refurbishments that extend the useful lives of assets or prevent environmental contamination are capitalized and depreciated over the remaining useful life of the asset.

Our determination of the useful lives of property, plant and equipment requires us to make various assumptions, including the supply of and demand for hydrocarbons in the markets served by our assets, normal wear and tear of the facilities, and the extent and frequency of maintenance programs. From time to time, we utilize consultants and other experts to assist us in assessing the remaining lives of the crude oil or natural gas production in the basins we serve.

We may capitalize certain costs directly related to the construction of assets, including internal labor costs, interest and engineering costs. Upon disposition or retirement of property, plant and equipment, any gain or loss is charged to operations.

In accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we evaluate the recoverability of our property, plant and equipment when events or circumstances such as economic obsolescence, the business climate, legal and other factors indicate we may not recover the carrying amount of the assets. We continually monitor our businesses and the market and business environments to identify indicators that may suggest an asset may not be recoverable.

We evaluate an asset for recoverability by comparing the carrying value of the asset with the asset’s expected future undiscounted cash flows. These cash flow estimates require us to make projections and assumptions for many years into the future for pricing, demand, competition, operating cost and other factors. If the carrying amount exceeds the expected future undiscounted cash flows we recognize an impairment loss to write down the carrying amount of the asset to its fair value as determined by quoted market prices in active markets or present value techniques if quotes are unavailable. The determination of the fair value using present value techniques requires us to make projections and assumptions regarding the probability of a range of outcomes and the rates of interest used in the present value calculations. Any changes we make to these projections and assumptions could result in significant revisions to our evaluation of recoverability of our property, plant and equipment and the recognition of an impairment loss in our Consolidated Statements of Operations.

Price Risk Management (Hedging)

We account for derivative instruments in accordance with SFAS 133 “Accounting for Derivative Instruments and Hedging Activities,” as amended. Under SFAS 133, all of our derivative financial instruments not qualifying for the normal purchases and normal sales exception are recorded on the balance sheet at fair market value as current and long-term assets or liabilities on a net basis by counterparty and are adjusted each period for changes in the fair market value. The fair market value of these derivative financial instruments reflects the estimated amounts that we would pay or receive to terminate or close the contracts at the reporting date, taking into account the current unrealized losses or gains on open contracts. We use external market quotes and indices to value substantially all of the financial instruments we utilize.

65

If a derivative does not qualify as a hedge, or is not designated as a hedge, the unrealized gain or loss on the derivative is recognized currently in earnings each period. If a derivative qualifies for cash flow hedge accounting, the effective portion of the unrealized gain or loss on the derivative is deferred in Accumulated Other Comprehensive Income (“OCI”), a component of stockholders’ equity, and reclassified to the Statement of Operations in the period the hedged forecasted transaction is recognized or is no longer expected to occur. Cash flows from a derivative instrument designated as a hedge are classified in the same category as the cash flows from the item being hedged.

The relationship between the hedging instrument and the hedged item must be highly effective in achieving the offset of changes in cash flows attributable to the hedged risk both at the inception of the contract and on an ongoing basis. Hedge accounting is discontinued prospectively when a hedge instrument becomes ineffective. Gains and losses deferred in OCI related to cash flow hedges for which hedge accounting has been discontinued remain unchanged until the related product has been delivered. If it is probable that a hedged forecasted transaction will not occur, deferred gains or losses on the hedging instrument are recognized in other revenues immediately.

We formally document all relationships between hedging instruments and hedged items, as well as our risk management objectives and strategy for undertaking the hedge. This process includes specific identification of the hedging instrument and the hedged item, the nature of the risk being hedged and the manner in which the hedging instrument’s effectiveness will be assessed. At the inception of the hedge and on a quarterly basis, we assess whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. Any ineffective portion of the unrealized gain or loss is recognized in earnings in the current period.

Asset Retirement Obligations

Under the provisions of SFAS 143, “Accounting for Asset Retirement Obligations,” we record legal obligations to retire tangible, long-lived assets on our balance sheet as liabilities, recorded at a discount, when such liabilities are incurred. We have recorded approximately $11.6 million in asset retirement obligations as of December 31, 2006.

In March 2005, the FASB issued FASB Interpretation (“FIN”) 47, “Accounting for Conditional Asset Retirement Obligations.” This Interpretation clarifies the definition and treatment of conditional asset retirement obligations as discussed in SFAS 143. A conditional asset retirement obligation is defined as an asset retirement activity in which the timing and/or method of settlement are dependent on future events that may be outside the control of the company. FIN 47 states that a company must record a liability when incurred for conditional asset retirement obligations if the fair value of the obligation is reasonably estimable. This Interpretation is intended to provide more information about long-lived assets, more information about potential future cash outflows for these obligations and more consistent recognition of these liabilities. Our adoption of FIN 47 on December 31, 2005 had no effect on our financial position, results of operations, or cash flows.

Accounting for Income Taxes

We follow the guidance in SFAS No. 109, “Accounting for Income Taxes”, which requires that we use the asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all significant temporary differences.

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax payable and related tax expense together with assessing temporary differences resulting from differing treatment of certain items, such as depreciation, for tax and accounting purposes. These differences can result in deferred tax assets and liabilities, which are included within our consolidated balance sheets.

66

We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized, we must establish a valuation allowance. We consider all available evidence, both positive and negative, to determine whether, based on the weight of the evidence, a valuation allowance is needed. Evidence used includes information about our current financial position and our results of operations for the current and preceding years, as well as all currently available information about future years, including our anticipated future performance, the reversal of deferred tax liabilities and tax planning strategies.

We believe future sources of taxable income, reversing temporary differences and other tax planning strategies will be sufficient to realize assets for which no reserve has been established. While we have considered these factors in assessing the need for a valuation allowance, there is no assurance that a valuation allowance would not need to be established in the future if information about future years change. Any change in the valuation allowance would impact our income tax provision and net income in the period in which such a determination is made.

Estimated Useful Lives

The estimated useful lives of our long-lived assets are used to compute depreciation expense, future asset retirement obligations and in impairment testing. Estimated useful lives are based, among other things, on the assumption that we provide an appropriate level of maintenance capital expenditures while the assets are still in operation. Without these continued capital expenditures, the useful lives of these assets could decrease significantly. Estimated lives could be impacted by such factors as future energy prices, environmental regulations, various legal factors and competition. If the useful lives of these assets were found to be shorter than originally estimated, depreciation expense may increase, liabilities for future asset retirement obligations may be insufficient and impairments in carrying values of tangible and intangible assets may result.

Recent Accounting Pronouncements

We adopted SFAS 154, “Accounting Changes and Error Corrections,” on January 1, 2006. SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections.

We adopted SFAS 123R, “Share-Based Payment,” on January 1, 2006. SFAS 123R requires us to recognize compensation expense related to equity awards based on the fair value of the award at the grant date. The fair value of an equity award is estimated using the Black-Scholes option pricing model. Under SFAS 123R, the fair value of all awards expected to vest is amortized to earnings on a straight-line basis over the requisite service or vesting period. We account for Targa Investments’ equity awards granted to our employees using the provisions of SFAS 123R. Previously, equity awards made by us prior to the October 2005 reorganization, and by our parent Targa Investments subsequent to the reorganization were accounted for using the intrinsic value method pursuant to Accounting Principles Board Opinion (“APB”) 25, “Accounting for Stock Issued to Employees.”

Prior to our adoption of SFAS 123R, we recognized compensation expense related to stock options only if the grant date fair value of the underlying stock was less than the exercise price of the option; additionally, compensation expense was recognized in connection with the issuance of non-vested common stock. We have applied SFAS 123R prospectively to new awards and to awards modified, repurchased, or cancelled on or after January 1, 2006. We shall continue to account for any portion of awards outstanding on January 1, 2006 using the intrinsic value method. Stock-based compensation expense is based on the awards ultimately expected to vest, and has been reduced for estimated forfeitures. The effects of applying SFAS 123R for the year ended December 31, 2006 did not have a material effect on our net income.

In July 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109,” which clarifies the accounting and disclosure for uncertainty in income taxes recognized in an enterprise’s financial statements. FIN 48 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. This

67

interpretation is effective for fiscal years beginning after December 15, 2006. We continue to evaluate our tax positions, and based on our current evaluation, anticipate FIN 48 did not have a significant impact on our results of operations or financial position.

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) 157 “Fair Value Measurements”. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS 157 does not require any new fair value measurements. However, for some entities, the application of SFAS 157 will change current practice. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We have not yet determined the impact this statement will have on our results of operations or financial position.

In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin 108 (“SAB 108”). Due to diversity in practice among registrants, SAB 108 expresses SEC staff views regarding the process by which misstatements in financial statements are evaluated for purposes of determining whether financial statement restatement is necessary. SAB 108 is effective for fiscal years ending after November 15, 2006, and early application is encouraged. Our adoption of SAB 108 had no impact on our results of operations or financial position.

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of No. 115,” which is effective for fiscal years beginning after November 15, 2007, with early adoption permitted. SFAS 159 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. We are currently reviewing this new accounting standard and the impact, if any, it will have on our financial statements.

68

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our principal market risks are our exposure to changes in commodity prices, particularly to the prices of natural gas and NGLs, and interest rates, as well as nonpayment or nonperformance by our customers.

Commodity Price Risk

A significant portion of our revenues is derived from percent-of-proceeds contracts under which we receive either an agreed upon percentage of the actual proceeds that we receive from our sales of the residue natural gas and NGLs or an agreed upon percentage based on index related prices for the natural gas and NGLs. The prices of natural gas and NGLs are subject to fluctuations in response to changes in supply, demand, market uncertainty and a variety of additional factors beyond our control. We monitor these risks and enter into hedging transactions designed to mitigate the impact of commodity price fluctuations on our business. In addition, we also enter into hedges for frac spreads with certain of our customers and for operational purposes. Cash flows from a derivative instrument designated as a hedge are classified in the same category as the cash flows from the item being hedged.

The primary purpose of our commodity risk management activities is to hedge our exposure to commodity price risk inherent in our contract mix and reduce fluctuations in our operating cash flow despite fluctuations in commodity prices. In an effort to reduce the variability of our cash flows, as of June 30, 2007, we have hedged the commodity price associated with a significant portion of our expected natural gas, NGL and condensate equity volumes for the years 2007 through 2012 by entering into derivative financial instruments including swaps and purchased puts (or floors). The percentages of our expected equity volumes that are covered by our hedges is approximately 60% to 80% through 2009 and decreases over time. With swaps, we typically receive an agreed fixed price for a specified notional quantity of natural gas or NGLs, and we pay the hedge counterparty a floating price for that same quantity based upon published index prices. Since we receive from our customers substantially the same floating index price from the sale of the underlying physical commodity, these transactions are designed to effectively lock-in the agreed fixed price in advance for the volumes hedged. In order to avoid having a greater volume hedged than our actual equity volumes, we limit our use of swaps to hedge the prices of less than our expected natural gas and NGL equity volumes. We utilize purchased puts (or floors) to hedge the commodity price exposure associated with additional expected equity commodity volumes without creating volumetric risk. We intend to continue to manage our exposure to commodity prices in the future by entering into similar hedge transactions using swaps, collars, purchased puts (or floors) or other hedge instruments as market conditions permit.

We have tailored our hedges to generally match the NGL product composition and the NGL and natural gas delivery points to those of our physical equity volumes. Our NGL hedges cover baskets of ethane, propane, normal butane, iso-butane and natural gasoline based upon our expected equity NGL composition. We believe this strategy avoids uncorrelated risks resulting from employing hedges on crude oil or other petroleum products as “proxy” hedges of NGL prices. Additionally, our NGL hedges are based on published index prices for delivery at Mont Belvieu, and our natural gas hedges are based on published index prices for delivery at Waha, Houston Ship Channel and Mid-Continent, which closely approximate our actual NGL and natural gas delivery points. We hedge a portion of our condensate sales using crude oil hedges that are based on the NYMEX futures contracts for West Texas Intermediate light, sweet crude.

Our commodity price hedging transactions are typically documented pursuant to a standard International Swap Dealers Association (“ISDA”) form with customized credit and legal terms. Our principal counterparties (or, if applicable, their guarantors) have investment grade credit ratings. Our payment obligations in connection with substantially all of these hedging transactions, and any additional credit exposure due to a rise in natural gas and NGL prices relative to the fixed prices set forth in the hedges, are secured by a first priority lien in the collateral securing our senior secured indebtedness that ranks equal in right of payment with liens granted in favor of our senior secured lenders. As long as this first priority lien is in effect, we expect to have no obligation

69

to post cash, letters of credit, or other additional collateral to secure these hedges at any time even if our counterparty’s exposure to our credit increases over the term of the hedge as a result of higher commodity prices or because there has been a change in our creditworthiness. A purchased put (or floor) transaction does not create credit exposure to us for our counterparties.

Summary of Our Hedges

At June 30, 2007, we had the following open commodity derivative positions designated as cash flow hedges:

Natural Gas

Instrument Type	Index	Avg. Price $/MMBtu		MMBtu per day						(in thousands) Fair Value
				2007	2008	2009	2010	2011	2012
Swap	IF-HSC	$	9.08	2,740	—	—	—	—	—	$	925
Swap	IF-HSC		8.09	—	2,328	—	—	—	—		(34	)
Swap	IF-HSC		7.39	—	—	1,966	—	—	—		(595	)
				2,740	2,328	1,966	—	—	—		296
Swap	IF-NGPL MC		8.56	8,152	—	—	—	—	—		2,975
Swap	IF-NGPL MC		8.43	—	6,964	—	—	—	—		2,644
Swap	IF-NGPL MC		8.02	—	—	6,256	—	—	—		340
Swap	IF-NGPL MC		7.43	—	—	—	5,685	—	—		(713	)
Swap	IF-NGPL MC		7.34	—	—	—	—	2,750	—		(181	)
Swap	IF-NGPL MC		7.18	—	—	—	—	—	2,750		(90	)
				8,152	6,964	6,256	5,685	2,750	2,750		4,975
Swap	IF-Waha		7.71	30,118	—	—	—	—	—		4,533
Swap	IF-Waha		7.27	—	29,307	—	—	—	—		(5,898	)
Swap	IF-Waha		6.86	—	—	28,854	—	—	—		(11,644	)
Swap	IF-Waha		7.39	—	—	—	15,009	—	—		(2,524	)
Swap	IF-Waha		7.36	—	—	—	—	8,750	—		(780	)
Swap	IF-Waha		7.18	—	—	—	—	—	8,750		(527	)
				30,118	29,307	28,854	15,009	8,750	8,750		(16,840	)
Total Swaps				41,010	38,599	37,076	20,694	11,500	11,500		(11,569	)
Floor	IF-NGPL MC		6.45	520	—	—	—	—	—		56
Floor	IF-NGPL MC		6.55	—	1,000	—	—	—	—		258
Floor	IF-NGPL MC		6.55	—	—	850	—	—	—		186
				520	1,000	850	—	—	—		500
Floor	IF-Waha		6.70	350	—	—	—	—	—		37
Floor	IF-Waha		6.85	—	670	—	—	—	—		168
Floor	IF-Waha		6.55	—	—	565	—	—	—		113
				350	670	565	—	—	—		318
Total Floors				870	1,670	1,415	—	—	—		818
										$	(10,751	)

70

NGLs
Instrument Type	Index	Avg. Price $/MMBtu		MMBtu per day						(in thousands) Fair Value
				2007	2008	2009	2010	2011	2012
Swap	OPIS-MB	$	0.88	9,414	—	—	—	—	—	$	(13,196	)
Swap	OPIS-MB		0.83	—	8,756	—	—	—	—		(23,124	)
Swap	OPIS-MB		0.80	—	—	8,094	—	—	—		(15,250	)
Swap	OPIS-MB		0.84	—	—	—	6,047	—	—		(4,204	)
Swap	OPIS-MB		0.87	—	—	—	—	3,050	—		(464	)
Swap	OPIS-MB		0.87	—	—	—	—	—	2,050		169
				9,414	8,756	8,094	6,047	3,050	2,050	$	(56,069	)

Condensate

Instrument Type	Index	Avg. Price $/MMBtu		MMBtu per day						(in thousands) Fair Value
				2007	2008	2009	2010	2011	2012
Swap	NY-WTI	$	72.82	439	—	—	—	—	—	$	127
Swap	NY-WTI		70.68	—	384	—	—	—	—		(223	)
Swap	NY-WTI		69.00	—	—	322	—	—	—		(356	)
Swap	NY-WTI		68.10	—	—	—	301	—	—		(274	)
Total Swaps				439	384	322	301	—	—		(726	)
Floor	NY-WTI	$	58.60	25	—	—	—	—	—	$	2
Floor	NY-WTI		60.50	—	55	—	—	—	—		48
Floor	NY-WTI		60.00	—	—	50	—	—	—		56
Total Floors				25	55	50	—	—	—		106
				464	439	372	301	—	—	$	(620	)

These contracts may expose us to the risk of financial loss in certain circumstances. Our hedging arrangements provide us protection on the hedged volumes if prices decline below the prices at which these hedges are set. If prices rise above the prices at which we have hedged, we will receive less revenue on the hedged volumes than we would receive in the absence of hedges.

Interest Rate Risk

We are exposed to interest rate risk primarily through our borrowing activities. As of June 30, 2007, we had approximately $1,773 million of indebtedness, of which $250 million was at fixed interest rates and $1,523 million was at variable interest rates. Borrowings under our senior secured credit facilities, other than the senior secured synthetic letter of credit, bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the higher of (1) the prime rate of Credit Suisse and (2) the federal funds rate plus 1/2 of 1% or (b) the London Interbank Offered Rate (“LIBOR”) determined by reference to the costs of funds for dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs.

Subsequent to the senior secured credit agreement closing date, we entered into interest rate swaps for an aggregate notional amount of $350 million. The interest rate swaps effectively fix our interest rate on $350 million in borrowings to a rate of 4.8% plus the applicable LIBOR margin (2.25% at December 31, 2006). At December 31, 2006, the fair value of our interest rate swaps was $1.4 million.

Based on LIBOR as of June 30, 2007, the annual interest expense on our variable rate debt inclusive of the effect of the interest rate swaps would increase or decrease by approximately $12 million if interest rates were to increase or decrease by one percentage point.

71

Credit Risk

We are subject to risk of losses resulting from nonpayment or nonperformance by our customers. We monitor the creditworthiness of customers to whom we grant credit and establish credit limits in accordance with our credit policy.

Commitments and Contingencies

Please read “Business—Environmental and Other Matters” and “Business—Legal Proceedings.”

72

BUSINESS

Overview

We are a leading provider of midstream natural gas and NGL services in the United States. We provide these services through our integrated platform of midstream assets. Our gathering and processing assets are located primarily in the Permian Basin in west Texas and southeast New Mexico, the Louisiana Gulf Coast accessing the offshore region of the Louisiana Gulf Coast, and, through the Partnership, the Fort Worth Basin in north Texas, the Permian Basin in west Texas and the onshore region of the Louisiana Gulf Coast. Additionally, our natural gas liquids logistics and marketing assets are located primarily at Mont Belvieu and Galena Park near Houston, Texas and in Lake Charles, Louisiana with terminals and transportation assets across the United States. We believe our asset locations, including those of the Partnership, provide us access to natural gas supplies and proximity to end-use markets and leading market hubs while positioning us to capitalize on potential growth opportunities from selected areas of the Permian Basin, the continued development of deepwater and deep shelf Gulf of Mexico natural gas reserves, the increasing importation of liquefied natural gas, or LNG, to the Gulf Coast and the growth of the Barnett Shale production in north Texas. We believe our asset locations, scale, broad range of services, operational focus and competitive cost structure position us well to serve customers and to benefit from the importance of infrastructure in the growing U.S. energy market.

We were formed in 2004 by our management team, which consists of former members of senior management of several midstream and other diversified energy companies, and Warburg Pincus. Targa Resources Finance Corporation (“Targa Finance”) is a Delaware corporation and wholly owned subsidiary of Targa. Targa Finance was created solely to serve as a corporate co-obligor on the obligations of Targa and will continue to have nominal assets and no operations or revenues. We are a large-scale, integrated midstream energy company with the ability to offer a wide range of midstream services to a diverse group of natural gas and NGL producers and customers. At June 30, 2007, we had total assets of $3.4 billion. We own or operate approximately 10,000 miles of natural gas pipelines and approximately 550 miles of NGL pipelines, with natural gas gathering systems covering approximately 14,500 square miles and 21 natural gas processing plants with access to natural gas supplies in the Permian Basin, north Texas, onshore southern Louisiana and the Gulf of Mexico. Additionally, we have an integrated NGL logistics and marketing business, with 16 storage, marine and transport terminals with above ground NGL storage capacity of approximately 900 MBbls, net NGL fractionation capacity of approximately 300 MBbls/d and 43 owned and operated storage wells with a net storage capacity of approximately 65 MMBbls.

Industry Overview

The midstream natural gas industry provides an essential link between the exploration and production of natural gas and the delivery of its components to end-use markets. We categorize the midstream natural gas industry into, and describe our business in, two divisions: (i) the Natural Gas Gathering and Processing division, which includes the Partnership, and (ii) the NGL Logistics and Marketing division. Our NGL Logistics and Marketing division consists of three segments: (a) Logistics Assets, (b) NGL Distribution and Marketing and (c) Wholesale Marketing. We have significant operations in both divisions and believe that we are one of the larger providers of services across each division.

Natural Gas Gathering and Processing

Natural gas gathering and processing consists of gathering, compressing, dehydrating, treating, conditioning, processing, storing, marketing and transporting natural gas and NGLs. The gathering of natural gas consists of aggregating natural gas produced from various wells through small diameter gathering lines for transportation to processing plants. Natural gas has a widely varying composition, depending on the field, the formation and the reservoir from which it is produced. The processing of natural gas consists of the extraction of imbedded NGLs and the removal of water vapor, solids and other contaminants to form (i) a stream of

73

marketable natural gas, commonly referred to as residue gas, and (ii) a stream of combined NGLs, commonly referred to as “Mixed NGL” or “Y-Grade.” Once processed, the residue gas is transported to markets through pipelines that are either owned by the gatherers/processors or third-parties. End-users of residue gas include large rural, commercial and industrial customers, as well as natural gas and electric utilities serving individual consumers. We sell our residue gas either directly to such end-users or to marketers at market hubs, which are typically located in close proximity or ready access to our facilities.

NGL Logistics and Marketing

NGL logistics and marketing consists of the fractionation, storage, terminalling, transportation, distribution and marketing of NGLs. Through fractionation, the raw NGL mix produced by processing the natural gas is separated into component parts (ethane, propane, butanes and natural gasoline). Such component parts are delivered to end-users through pipelines, barges, trucks and rail cars. End-users of component NGLs include petrochemical and refining companies and propane markets for heating, cooking or crop drying applications. Retail distributors often sell to end-use propane customers.

Competitive Strengths

Large Scale, Strategically Located and Diversified Operations

Our portfolio of integrated midstream assets is strategically positioned across multiple geographic regions and producing basins where we provide products and services spanning the midstream value chain to a broad base of customers. We believe the size and scope of our portfolio of assets place us in proximity to a large number of new and existing gas producing wells in our areas of operations, allowing us to generate economies of scale within our operating regions and allowing us to attract customers by providing access to our existing facilities and to multiple end-use markets and market hubs.

• Significant scale of operations. We own or operate approximately 10,000 miles of natural gas pipelines and approximately 550 miles of NGL pipelines, with natural gas gathering systems covering approximately 14,500 square miles and 21 natural gas processing plants with access to natural gas supplies in the Permian Basin, north Texas, onshore southern Louisiana and the Gulf of Mexico. Additionally, we have an integrated NGL logistics and marketing business, with 16 storage, marine and transport terminals with an NGL above ground storage capacity of approximately 900 MBbls, net NGL fractionation capacity of approximately 300 MBbls/d and 43 owned and operated storage wells with a net storage capacity of 65 MMBbls. Due to the high cost of obtaining permits for and constructing midstream assets and the difficulty of developing the expertise necessary to operate them, the barriers to entry are high in the midstream natural gas sector on a scale competitive with ours. We believe our installed asset base complements our history of providing high-quality services.

• Multiple producing basins. Our major gathering and processing systems source natural gas volumes from four producing areas: the Permian Basin, the onshore South Louisiana basin, the offshore Gulf of Mexico basin, including the deepwater and deep shelf formations, and the Fort Worth Basin, which includes Barnett Shale production. In aggregate, these basins are a significant contributor to current domestic natural gas production, favorably positioning us to access large, diverse and important sources of domestic natural gas supply.

• Large and diverse customer base. We focus on providing high-quality services at competitive costs, which we believe has allowed us to attract and retain a large, diverse customer base. Our customer base includes active natural gas producers in our regions of operations as well as purchasers and consumers of NGLs. While we have commercial relationships with large, diversified energy companies, we also provide services to a number of other customers, which reduces our dependence on any one customer. As of June 30, 2007, other than Chevron (including CPC), no single customer accounted for more than 10% of our consolidated revenue. We expect to continue to strengthen and grow our customer

74

relationships due to our broad service offerings, well-positioned assets, competitive cost of service, market access, and commitment to providing high-quality customer service.

We have an ongoing relationship with CPC (the Chevron Phillips Chemical joint venture) for feedstock supply and services provided at Mont Belvieu and Galena Park. Agreements associated with this relationship are expected to be renegotiated over time to better meet the objectives of both companies, but are expected to continue on some similar basis due to the integrated nature of facilities and the difficulty and cost associated with replicating our assets.

For a detailed discussion of our gathering and processing agreements with Chevron, see “—Significant Customers.”

• Broad service and product offering. We offer a wide range of midstream natural gas gathering and processing services and NGL logistics and marketing services. We believe the breadth and scope of our assets allow us to attract customers due to our ability to deliver products and services across the value chain and due to our well-positioned assets and markets. We believe this breadth and asset positioning, combined with our singular midstream focus, gives us a competitive advantage over other midstream companies and divisions of larger companies. In addition, we believe this diversity of assets and services diversifies cash flows by reducing our dependency on any particular line of business.

Attractive Cash Flow Characteristics

We believe our strategy, combined with our high-quality asset portfolio and strong industry fundamentals, allow us to generate attractive cash flows and achieve substantial near-term deleveraging of the business. Geographic, business and customer diversity enhances our cash flow profile. We have a favorable contract mix that is primarily fee-based or percent-of-proceeds which, along with our long-term commodity-hedging program, serves to mitigate the impact of commodity price movements on cash flow.

We have hedged the commodity price associated with a significant portion of our expected natural gas, NGL and condensate equity volumes for the years 2007 through 2012 by entering into derivative financial instruments including swaps and purchased puts (or floors). The percentages of our expected equity volumes that are covered by our hedges is approximately 60% to 80% through 2009 and decreases over time. The primary purpose of our commodity risk management activities is to hedge our exposure to price risk and to mitigate the impact of fluctuations in commodity prices on cash flow. We have intentionally tailored our hedges to approximate our actual NGL product composition and to approximate our actual NGL and natural gas delivery points. We intend to continue to manage our exposure to commodity prices in the future by entering into similar hedge transactions as market conditions permit.

Our maintenance capital expenditures have averaged approximately 15% of EBITDA over the last two years. We believe that our assets are well maintained and anticipate that a similar level of capital expenditures will be sufficient for us to continue to operate these assets in a prudent and cost-effective manner.

Asset Base Well-Positioned for Organic Growth

We believe our asset platform and strategic locations allow us to maintain and grow our cash flows as our supply areas continue to benefit from active exploration and development. Generally, higher oil and gas prices, such as those currently being experienced in global energy markets, result in increased domestic drilling and workover activity to increase production. The location of our assets provide us with access to stable natural gas supplies and proximity to end-use markets and liquid market hubs while positioning us to capitalize on high drilling and production activity in our basins and on emerging opportunities for Gulf Coast assets associated with LNG imports and LPG imports. Our existing infrastructure has the capacity to handle incremental volumes without significant capital investments. Finally, we believe that as U.S. demand for natural gas and NGLs continues to grow, our infrastructure will continue to increase in value as such infrastructure takes on increasing importance in meeting that demand.

75

Experienced and Incentivized Management Team

Our seven senior management team members have over 200 years of combined experience operating, acquiring, integrating and improving the value of midstream natural gas assets and businesses across major supply areas including Texas, Louisiana and the Gulf Coast, and have held management positions at companies with midstream assets and commercial operations similar in scale and scope to ours. Several of the senior management team members have worked together effectively in prior roles and have complementary skills and sufficient depth to continue to manage the combined businesses and seek opportunities for operational and commercial improvements. Our management team is also incentivized to maintain and grow value as the executive management team and other senior managers own approximately 20% of the equity of Targa Investments, our parent company, on a fully diluted basis.

Business Strategy

Our strategy is focused on efficient operations, prudent risk management and growth through acquisitions and organic projects. We will implement this strategy by pursuing the following initiatives:

Enhance Cash Flows. We intend to continue to pursue new contracts, cost effectiveness and operating improvements of our assets. Such improvements in the past have, among other results, included new production and acreage commitments, reducing gas fuel, flare and loss volumes and enhancing NGL recoveries. We will also continue to enhance existing plant assets to improve and maximize capacity and throughput.

Mitigate Cash Flow Volatility. We intend to continue to operate our business in a manner that mitigates the impact of fluctuations in commodity prices on our cash flows. Key to this strategy will be continuing our natural gas, NGL and condensate hedging strategy over time.

Pursue Complementary Acquisitions and Investments. We intend to maintain a balanced and diversified portfolio of midstream energy assets and to optimize this asset base by developing organic projects and pursuing selective acquisitions that we believe will benefit from our existing infrastructure, personnel and customer relationships. We seek to make acquisitions at attractive multiples and follow a disciplined strategy focused on financial returns and strategic fit. In addition, our management has a long track record of successfully acquiring, integrating and improving the value of assets.

Provide Growth and Deleveraging Through Drop-down Strategy. In February 2007, we formed a master limited partnership, Targa Resources Partners LP (the “Partnership”), contributed North Texas to the Partnership and offered partnership units to the public. In October 2007, we sold the San Angelo System (“SAOU”) and the Louisiana System (“LOU”) to the Partnership and offered common units of the Partnership to the public. We own 25.5% of the outstanding limited partner interest of the Partnership, a 2% general partner interest and the associated incentive distribution rights. We intend to utilize the Partnership as a growth vehicle to enhance our cash flows. Our expected drop-downs to the Partnership should reduce our leverage over the next several years.

Our Business—Natural Gas Gathering and Processing Division

We gather and process natural gas from the Permian Basin in west Texas and southeast New Mexico, the offshore region of the Louisiana Gulf Coast and, through the Partnership, the Fort Worth Basin in north Texas, the Permian Basin in west Texas and the onshore region of the Louisiana Gulf Coast. Most of the NGLs we process are supplied through our gathering systems which, in aggregate, consist of over 10,000 miles of natural gas pipelines. The remainder is supplied through third-party owned pipelines. Our processing plants include 15 facilities that we own (either wholly or jointly) and operate as well as 6 facilities in which we have an ownership interest but are operated by others. During 2006, we processed an average of approximately 1.8 Bcf per day of natural gas and produced an average of approximately 106.8 MBls/d of NGLs, in each case, net to our ownership interests. In the first six months of 2007, we processed an average of approximately 1.9 Bcf per day of natural gas and produced an average of approximately 105.1 Mbls/d of NGLs, in each case net to our ownership interest.

76

We continually seek new supplies of natural gas, both to offset the natural declines in production from connected wells and to increase throughput volumes. We obtain additional natural gas supply in our operating areas by contracting for production from new wells or by capturing existing production currently gathered by others. Competition for new natural gas supplies is based primarily on location of assets, commercial terms, service levels and access to markets. The commercial terms of natural gas gathering and processing arrangements are driven, in part, by capital costs, which are impacted by the proximity of systems to the supply source and operating costs, which are impacted by operational efficiencies and economies of scale.

We believe our extensive asset base and scope of operations in the regions in which we operate provide us with significant opportunities to add both new and existing natural gas production to our systems. We believe our size and scope give us a strong competitive position by placing us in proximity to a large number of existing and new natural gas producing wells in our areas of operations, allowing us to generate economies of scale and to provide our customers with access to our existing facilities and to multiple end-use markets and market hubs. Additionally, we believe our ability to serve our customers’ needs across the natural gas and NGL value chain further augments our ability to attract new customers and end-users.

77

The following tables set forth key ownership and operational information regarding our operating gathering systems and natural gas processing plants:

Natural Gas Gathering and Processing Systems
Facility	% Owned	County/Approximate Square Miles	Approximate Gross Processing Capacity (MMcf/d)	2006 Approximate Inlet Throughput Volume (MMcf/d)	2006 Approximate NGL Production (MBbls/d)	Process Type		Approximate Fractionation Capacity (MBbl/d)
Permian Basin
Sand Hills	100.0	Crane, TX	150	121.8	14.0	Cryo	(6)	N/A
Saunders(1)	63.0	Lea, NM	70	28.7	3.7	Cryo		N/A
Eunice(1)	63.0	Lea, NM	120	56.1	6.6	Cryo		N/A
Monument(1)	63.0	Lea, NM	90	45.0	4.6	Cryo		N/A
Mertzon(2)	100.0	Irion, TX	48	30.3	5.5	Cryo		N/A
Sterling(2)	100.0	Sterling, TX	62	52.4	8.5	Cryo		N/A
Conger(2)(3)	100.0	Sterling, TX	25	N/A	N/A	Cryo		N/A
			565	334.3	42.9
Combined Gathering Area		10 counties/8,160 square miles
Louisiana Gulf Coast
Barracuda	100.0	Cameron, LA	200	124.2	3.2	Cryo		N/A
Lowry	100.0	Cameron, LA	265	219.8	4.9	Cryo		N/A
Stingray	100.0	Cameron, LA	300	148.3	2.5	RA	(7)	N/A
Yscloskey(4)	23.8	St. Bernard, LA	1,850	140.6	1.7	RA		N/A
VESCO(5)	22.9	Plaquemines, LA	300	112.3	2.9	Cryo		N/A
Calumet(4)	37.2	St. Mary, LA	1,200	172.9	4.1	RA		N/A
Bluewater(4)	21.8	Acadia, LA	425	40.5	1.2	Cryo		N/A
Terrebonne(4)	11.4	Terrebonne, LA	900	49.8	2.0	RA		N/A
Toca(4)	9.4	St. Bernard, LA	850	37.6	0.9	Cryo/RA		N/A
Iowa	9.9	Jeff. Davis, LA	500	9.6	0.3	Cryo		N/A
Sea Robin	0.8	Vermillion, LA	900	52.0	1.3	Cryo		N/A
Gillis(2)	100.0	Calcasieu, LA	180	129.2	7.9	Cryo		13.0
Acadia(2)	100.0	Acadia, LA	80	39.8	1.8	Cryo		N/A
			7,950	1,276.6	34.7			13.0
Combined Gathering Area		12 parishes/3,800 square miles
North Texas
Chico(2)	100.0	Wise, TX	265	150.5	17.6	Cryo	(6)	11.5
Shackelford(2)	100.0	Shackelford, TX	13	11.3	1.3	Cryo	(6)	N/A
			278	161.8	18.9			11.5
Combined Gathering Area		14 counties/2,500 square miles

(1) These plants are part of our Versado joint venture with Chevron, and 2006 volumes represent our 63.0% ownership interest.

(2) Included in assets of the Partnership.

(3) The Conger plant is not currently operating, but is on standby and can be quickly reactivated on short notice to meet additional needs for processing capacity.

(4) Our ownership is adjustable and subject to annual redetermination.

(5) VESCO volumes represent our 22.9% ownership interest.

(6) Cryo—Cryogenic Processing.

(7) RA—Refrigerated Absorption.

78

Permian Basin Assets

The Permian Basin is characterized by long-lived, multi-horizon oil and gas reserves that have low natural production declines. Natural gas produced in the Permian Basin typically has higher NGL content, commonly referred to in the industry as rich gas. Rich gas makes processing a necessity before natural gas can be transported via interstate pipeline and provides for high NGL recovery and profitable processing margins under the percent of proceeds contracts.

Drilling and workover activity to increase oil and natural gas production in the Permian Basin has increased over the last several years, driven primarily by higher oil and natural gas prices. Workover activity is designed to allow existing wells to produce more oil and natural gas through recompletions, formation stimulation, enhanced artificial lift, enhanced oil recovery and other techniques.

We believe we are well positioned as a gatherer and processor in the Permian Basin. We have broad geographic scope, covering portions of 10 counties and approximately 8,160 square miles in southeast New Mexico and west Texas. Proximity to production and development provide us with a competitive advantage in capturing new supplies of natural gas because of our resulting competitive costs to connect new wells and to process additional natural gas in our existing processing plants. Additionally, because we operate all of our plants in this region, we are often able to redirect natural gas among several of our processing plants, allowing us to optimize processing efficiency and further improve the profitability of our operations.

We actively manage the risks associated with volatility in natural gas and NGL prices through swap transactions, fixed-price forward sales and other hedging techniques. On average, we hedge approximately 60% to 75% of our expected equity gas and NGL production from the Permian Basin, for a reasonable time frame. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Quantitative and Qualitative Disclosures About Market Risk—Commodity Price Risk” for a description of the volumes, prices and resulting cash flows generated by these and other hedging transactions.

Our Permian Basin operations consist of three different sets of assets: (i) west Texas, (ii) the Versado system and (i) the San Angelo Operating Unit (the “SAOU System”).

West Texas Assets. The west Texas facilities consist of the Sand Hills plant and the West Seminole and Puckett gathering systems. The systems consist of approximately 1,300 miles of natural gas gathering pipelines. These gathering systems are low-pressure gathering systems with significant compression assets. The Sand Hills refrigerated cryogenic processing plant has residue gas connections to pipelines owned by affiliates of Enterprise Products Partners, ONEOK and El Paso.

Versado System. The Versado processing plants consist of three plants included in the Versado Gas Processors joint venture: Saunders, Eunice and Monument. Versado Gas Processors is a joint venture that is 63% owned by us and 37% owned by Chevron. These refrigerated cryogenic processing plants have 280 MMcf per day of total processing capacity in aggregate (net to our interest, 176 MMcf per day). The Versado plants have residue gas connections to pipelines owned by affiliates of El Paso, MidAmerican Energy Company and Kinder Morgan Energy Partners, L.P.

SAOU System (described under Targa Resources Partners LP below).

Louisiana Assets

Our Louisiana gathering systems and processing plants are supplied by natural gas produced from the South Louisiana basin onshore and from the shelf, deep shelf and deepwater of the Gulf of Mexico. With the strategic location of our assets in Louisiana, we have access to the Henry Hub, the largest natural gas hub in the United States, and a substantial NGL distribution system with access to markets throughout Louisiana and the southeast United States.

79

Our Louisiana Natural Gas Gathering and Processing assets consist of (i) coastal straddle plants and (ii) the onshore gathering and processing assets of the LOU System. Coastal straddle plants are generally situated on mainline natural gas pipelines and process volumes of natural gas collected from multiple offshore producing areas through a series of offshore gathering systems and pipelines. Our coastal straddle plants, some of which are operated by us, are located along the Louisiana Gulf Coast.

Coastal Louisiana Straddle Plants. Our Coastal Louisiana assets consist of three wholly owned and eight partially owned straddle plants located on the Louisiana Gulf Coast. We also own and operate two offshore gathering systems, the 89-mile Pelican pipeline system, which has capacity of 125 Mmcf per day, and supplies a portion of the natural gas to the Barracuda processing facility and the 120-mile Seahawk pipeline system, which has capacity of 105 Mmcf per day and supplies a portion of the natural gas to the Lowry processing facility. The gathering systems are unregulated pipelines that gather natural gas from the shallow water central Gulf of Mexico shelf. The Seahawk gathering system that aggregates natural gas to supply the Lowry plant also gathers some natural gas from onshore South Louisiana locations. Additionally, we have an interest in the Venice gathering system, an offshore gathering system, regulated as an interstate pipeline by the FERC, which supplies a portion of the natural gas to VESCO.

Our Coastal Louisiana straddle plants process natural gas produced from shallow water central and western Gulf of Mexico natural gas wells and from deep shelf and deepwater Gulf of Mexico production via connections to third-party pipelines or through pipelines owned by us. Our Coastal Louisiana straddle plants have access to markets across the United States through the pipelines on which they are situated. These straddle plants are competitively positioned to receive natural gas produced from the Gulf of Mexico due to their pipeline interconnections and available capacity.

LOU System (described under Targa Resources Partners LP below).

Targa Resources Partners LP

The Partnership’s business consists of three sets of gathering and processing assets: (i) North Texas, (ii) the SAOU System and (iii) the LOU System.

North Texas. North Texas includes the following assets:

• the Chico system, located in the northeast part of the Fort Worth Basin, which consists of:

• approximately 1,900 miles of natural gas gathering pipelines with approximately 1,850 active connections to producing wells and central delivery points;

• a refrigerated cryogenic natural gas processing plant with throughput capacity of approximately 265 MMcf/d (for the year ended December 31, 2006 and the six months ended June 30, 2007, the average daily plant inlet volume was approximately 151 MMcf/d and 149 MMcf/d, respectively); and

• an 11,500 Bbls/d fractionator located at the processing plant that enables the Partnership, based on market conditions, to either fractionate a portion of its raw NGL mix into separate NGL products for sale into local and other markets or deliver raw NGL mix to Mont Belvieu for fractionation primarily through Chevron’s West Texas LPG Pipeline, L.P (“WTLPG”);

• the Shackelford system, located on the western side of the Fort Worth Basin, which consists of:

• approximately 2,100 miles of natural gas gathering pipelines with approximately 800 active connections to producing wells and central delivery points;

• a cryogenic natural gas processing plant with throughput capacity of approximately 13 MMcf/d (for the year ended December 31, 2006 and the six months ended June 30, 2007, the average daily plant inlet volume was approximately 11 MMcf/d and 11 MMcf/d, respectively); and

80

• a 32-mile, 10-inch diameter natural gas pipeline connecting the Shackelford and Chico systems, which we refer to as the “Interconnect Pipeline,” that is used primarily to send natural gas gathered in excess of the Shackelford system’s processing capacity to the Chico plant.

The Shackelford plant delivers gas to Atmos Energy Corporation, or Atmos. The Chico plant can deliver residue gas to Natural Gas Pipeline Company of America, which is owned by Kinder Morgan, Inc. and serves the Midwest, specifically the Chicago market, ET Fuel System, which is owned by Energy Transfer Partners, L.P. and has access to the Waha, Carthage and Katy hubs in Texas, and Atmos.

SAOU System. The Partnership’s Permian Basin assets include the following:

• approximately 1,350 miles of gathering pipelines covering approximately 4,000 square miles in portions of ten counties near San Angelo, Texas, including:

• approximately 850 miles of low-pressure gathering systems, which allow wells that produce at progressively lower field pressures as they age to remain connected to the gathering system and to continue to produce for longer periods than otherwise possible; and

• approximately 500 miles of high pressure gathering pipelines that deliver the natural gas to its processing plants currently operating in the region. The gathering system has 27 compressor stations at several central delivery points to inject low pressure gas into these high pressure pipelines;

• approximately 3,000 active connections to producing wells and/or central delivery points;

• the Mertzon and Sterling processing plants, which are refrigerated cryogenic plants and have aggregate processing capacity of approximately 110 MMcf/d; and

• the Conger cryogenic processing plant with capacity of approximately 25 MMcf/d that is not currently operating, but can be reactivated on short notice to meet additional needs for processing capacity.

The Mertzon processing plant currently delivers residue gas to the Rancho Pipeline owned by Kinder Morgan, and NGLs produced by the plant are delivered to a pipeline owned by DCP Midstream, LLC (“DCP”) that delivers such NGLs to Targa-owned fractionators and the Mont Belvieu hub. The Sterling processing plant has residue gas connections to pipelines owned by affiliates of Atmos, El Paso Natural Gas Company, or El Paso, ONEOK and Enterprise Products/ET Fuel, and NGLs are delivered to the West Texas NGL pipeline, owned by Chevron, which also accesses the Mont Belvieu hub.

LOU System. The Partnership’s Louisiana assets include the following:

• approximately 700 miles of gathering system pipelines, covering approximately 3,800 square miles in southwest Louisiana between Lafayette and Lake Charles;

• the Gillis and Acadia processing plants, which are refrigerated cryogenic plants that have aggregate processing capacity of approximately 260 MMcf/d;

• an integrated fractionation facility at the Gillis plant with processing capacity of approximately 13 MBbls/d; and

• an approximately 60-mile intrastate pipeline system.

The LOU System’s processing plants have direct access to the Lake Charles industrial market through its intrastate pipeline system, providing the ability to deliver natural gas to industrial users and electric utilities in the Lake Charles area. As a result of the location and flexibility of its intrastate pipeline assets and the reliability of its natural gas supplies in the area, the LOU System has a leading market share in the Lake Charles area. It also has access to both interstate natural gas supplies and markets as well as access to the liquid NGL markets of

81

the Louisiana and Texas gulf coast. For example, the Acadia plant also has the ability to deliver high-pressure residue gas to markets throughout the United States by accessing the Trunkline, Transco, Tennessee, Columbia Gulf and GulfSouth pipelines. The industrial customers that burn the Gillis plant residue gas readily burn richer (higher Btu) gas which provides the LOU System with operational and commercial flexibility to process less NGLs from the gas stream if unexpected operating conditions occur or if NGLs are more valuable as natural gas. Such volumes are typically under short term contracts. The above factors mitigate the commodity price risk typically associated with wellhead purchase or keep-whole contracts.

Our Business—NGL Logistics and Marketing Division

In our NGL Logistics and Marketing division, we use our platform of integrated assets to fractionate, store, terminal, transport, distribute and market NGLs typically under fee-based and margin-based arrangements. For NGLs to be used by refineries, petrochemical manufacturers, propane distributors and other industrial end-users, they must be fractionated into their component products and efficiently delivered to various points throughout the U.S. Our NGL logistics and marketing assets are generally connected to and supplied, in part, by our Natural Gas Gathering and Processing assets and are primarily located at Mont Belvieu and Galena Park near Houston, Texas and in Lake Charles, Louisiana with terminals and transportation assets across the United States. In addition, we own or commercially manage assets in a number of other states, including Alabama, Nevada, California, Florida, Mississippi, Tennessee, Kentucky and New Jersey. The geographic diversity of our assets provides us direct access to many NGL customers as well as markets via open-access regulated NGL pipelines owned by third-parties.

Our NGL Logistics and Marketing division consists of three segments: (i) Logistics Assets, (ii) NGL Distribution and Marketing and (iii) Wholesale Marketing. Our Logistics Assets segment includes the assets involved in the fractionation, storage and transportation of NGLs. Our NGL Distribution and Marketing segment markets our own NGL production and also purchases NGL products from third parties for resale. Our Wholesale Marketing segment includes our refinery services business and wholesale propane marketing operations.

Logistics Assets Segment

Fractionation. NGL fractionation facilities separate raw NGL mix into discrete NGL products: ethane, propane, butanes and natural gasoline. Raw NGL mix recovered from our Natural Gas Gathering and Processing division represents the largest source of volumes processed by our NGL fractionators.

The majority of our NGL fractionation facilities process raw NGL mix under fee-based arrangements. These fees are subject to adjustment for changes in certain fractionation expenses, including energy costs. The operating results of our NGL fractionation business are dependent upon the volume of raw NGL mix fractionated and the level of fractionation fees charged.

We believe that sufficient volumes of raw NGL mix will be available for fractionation in commercially viable quantities for the foreseeable future due to increases in natural gas liquids production from the Fort Worth Basin, Fayetteville Shale, Rockies and certain other basins accessed by pipelines to Mont Belvieu, as well as from continued production of NGLs in areas such as the Permian Basin, Mid-Continent, south Louisiana and Shelf and Deepwater Gulf of Mexico. Changes in dew point specifications implemented by individual pipelines and enacted by the FERC across the industry should result in a potential increase in volumes of raw NGL mix available for fractionation because the natural gas will require processing or conditioning to meet pipeline quality specifications. These requirements could help to establish a base volume of raw NGL mix during periods when it might be otherwise uneconomical to process certain sources of natural gas. Furthermore, significant volumes of raw NGL mix are contractually committed to our NGL fractionation facilities.

Although competition for NGL fractionation services is primarily based on the fractionation fee, the ability of an NGL fractionator to obtain raw NGL mix and distribute NGL products is also an important competitive factor. This ability is a function of the existence of the pipeline and storage infrastructure necessary to conduct

82

such operations. The scope and capability of our logistics assets, including our transportation and distribution systems, give us access to both substantial sources of raw NGL mix and a large number of end-use markets.

The following table details our fractionation facilities:

Facility	% Owned	Maximum Gross Capacity (MBls per day)	2006 Net Throughput (MBls per day)
Operated Fractionation Facilities: (1)
Lake Charles Fractionators(2) (Lake Charles, LA)	100.0	55	32.8
Cedar Bayou Fractionators (Mont Belvieu, TX)	88.0	215	131.2
Equity Fractionation Facilities (non-operated):
Gulf Coast Fractionators (Mont Belvieu, TX)	38.8	105	41.5
Partnership Operated Fractionation Facilities:
Gillis Plant Fractionator (Lake Charles, LA)(3)	100.0	13	9.7
Chico Plant Fractionator (Wise, TX)(3)	100.0	11.5	12.0	(4)

(1) Excludes operating data for our Chico and VESCO fractionation facilities.

(2) Includes ownership through our 88% interest in Downstream Energy Ventures Co, LLC.

(3) Included in our Natural Gas Gathering and Processing division.

(4) Chico Plant Fractionator is running at full capacity.

Our fractionation assets include ownership interests in three stand-alone fractionation facilities that are strategically located on the Texas and Louisiana Gulf Coast. We operate two of the facilities, one at Mont Belvieu, Texas, and the other at Lake Charles, Louisiana. During 2006, these facilities fractionated an aggregate average of approximately 227 thousand barrels per day (net to our ownership interest). We also have an equity investment in a third fractionator, the GCF Fractionator, or GCF, located in Mont Belvieu. We are subject to a consent decree with the Federal Trade Commission, issued December 12, 1996, that, among other things, prevents us from participating in commercial decisions regarding rates paid by third parties for fractionation services at GCF. This restriction on our activity at GCF will terminate on December 12, 2016, twenty years after the date the consent order was issued. This consent decree predates our ownership of the assets.

Storage and Terminalling. In general, our storage provides warehousing of raw NGL mix, NGL products and petrochemical products in underground wells to inject and withdraw such products at various times in order to meet demand cycles. Similarly, our terminalling operations are the inbound/outbound logistics and warehousing of raw NGL mix, NGL products and petrochemical products in above-ground storage tanks. Our underground storage and terminalling facilities range in scale from serving a singular market, such as propane, to serving multiple products and markets, such as our Mont Belvieu and Galena Park facilities where we have extensive pipeline connections for mixed NGL supply and delivery of component NGLs. In addition, some of these facilities are connected to marine, rail and truck loading and unloading facilities that provide services and products to our customers. We provide long-and short-term storage and terminalling services and throughput capability to affiliates and third-party domestic customers for a fee.

We own and operate a total of 43 storage wells at our facilities with a net storage capacity of approximately 65 MMBbls, the usage of which may be limited by brine handling capacity, which is utilized to displace NGL from storage. We also have 14 wholly owned terminal facilities in Texas, Kentucky, Mississippi, Tennessee, Louisiana, Florida and New Jersey.

We operate our storage and terminalling facilities based on the needs and requirements of our customers in the NGL, petrochemical, heating and other related industries. We usually experience an increase in demand for

83

storage and terminalling of mixed NGLs during the summer months when gas plants typically reach peak NGL production, refineries have excess NGL products and liquid petroleum gas, or LPG, imports are often highest. Likewise, demand for storage and terminalling at our propane facilities typically peak during the highest demand periods of fall, winter and early spring.

The following tables detail our NGL storage and terminalling assets:

NGL Storage Facilities
Facility	% Owned	County/Parish State	Number of Wells		Gross Permitted Capacity (Mmbbl)
Hackberry Storage (Lake Charles)	100	Cameron, LA	12	(3)	16.3
Mont Belvieu Storage	100	Chambers, TX	20	(4)	65.0
Easton Storage (1)(2)	100	Evangeline, LA	0	(1)	—
Hattiesburg Storage	50	Forrest, MS	3		7.5
VESCO	23	Plaquemines, LA	8		10.0
Versado(2)	63	Lea, NM	0		—

(1) One of the inactive wells expected in commercial service during 2008.

(2) Out of service.

(3) Four of twelve owned wells leased to Citgo under long-term lease; one of twelve currently permitting for hydrocarbon service.

(4) We own 20 wells and operate 6 wells owned by ChevronPhillipsChemical.

Terminal Facilities
	% Owned	County/Parish State	Description	2006 Throughput (million gallons)
Galena Park Terminal	100	Harris, TX	NGL import/export terminal	1,131.3
Calvert City Terminal	100	Marshall, KY	Propane terminal	45.5
Greenville Terminal	100	Washington, MS	Propane terminal	25.4	(1)
Pt. Everglades Terminal	100	Broward, FL	Marine propane terminal	43.8
Tampa Terminal	100	Hillsborough, FL	Marine propane terminal	19.2
Tyler Terminal	100	Smith, TX	Propane terminal	7.6
Abilene Transport	100	Taylor, TX	Raw NGL transport terminal	8.6
Bridgeport Transport	100	Jack, TX	Raw NGL transport terminal	47.9
Gladewater Transport	100	Gregg, TX	Raw NGL transport terminal	20.6
Hammond Transport	100	Tangipahoa, LA	Transport terminal	32.3
Chattanooga Terminal	100	Hamilton, TN	Propane terminal	20.1
Mont Belvieu Terminal	100	Chambers, TX	Transport and storage terminal	3,514.5	(1)
Venice Terminal	23	Plaquemines, LA	Storage terminal	6.8
Hackberry Terminal	100	Cameron, LA	Storage terminal	531.3
Sparta Terminal	100	Sparta, NJ	Propane terminal	8.3
Hattiesburg Terminal	50	Forrest, MS	Propane terminal	170.1

(1) Volumes reflect total import and export across the dock/terminal.

Wholesale Marketing Segment

Transportation and Distribution. Our NGL transportation and distribution infrastructure includes a wide range of assets supporting both third-party customers and the delivery requirements of our marketing and asset management business. We provide fee-based transportation services to refineries and petrochemical companies throughout the Gulf Coast area. Our assets are also deployed to serve our wholesale distribution terminals,

84

fractionation facilities, underground storage facilities, pipeline injection terminals and numerous crude oil refineries and petrochemical facilities. These distribution assets provide a variety of ways to transport and deliver products to our customers. Our transportation assets, as of June 30, 2007, include:

• approximately 900 railcars that we lease and manage;

• approximately 80 transport tractors and 95 tank trailers;

• approximately 530 miles of gas liquids pipelines, primarily in the Gulf Coast area; and

• 21 NGL pressurized barges with more than 320,000 barrels of capacity.

Refinery Services. In our refinery services business, we typically provide NGL balancing services, in which we have contractual arrangements with refiners to purchase and/or market propane and to provide butane supply. We also contract for and use the storage, transportation and distribution assets included in our Logistics Assets segment to assist refinery customers in managing their NGL product demand and production schedules. This includes both feedstocks consumed in refinery processes and the excess NGL produced by those same refining processes. Under typical net-back contracts, we generally retain a portion of the resale price of NGL sold, subject to a fixed minimum fee per gallon on products sold. Under net-back contracts, fees are earned for locating and supplying NGL feedstocks to the refineries based on a percentage of the cost to obtain such supply, subject to a minimum fee per gallon. In 2006, we sold an average of 38,000 barrels of NGL per day through this refinery services business. In 2007, we have extended and expanded our refinery services contracts.

Key factors impacting the results of our refinery services business include production volumes produced, propane and butane prices, as well as our ability to perform receipt, delivery and transportation services in order to meet refinery demand.

Wholesale Propane Marketing. Our wholesale propane marketing operations include the sale of propane and related logistics services to major multi-state retailers, independent retailers and other end-users. Our propane supply primarily originates from both our refinery/gas supply contracts and our other owned or managed logistics and marketing assets. We generally sell propane at a fixed or posted price at the time of delivery and, in some circumstances, we earn margin on a net-back basis. In 2006, we sold an average of approximately 33,000 barrels of propane per day.

Our wholesale propane marketing business is significantly impacted by weather-driven demand, particularly in the winter, the price of propane in the markets we serve and our ability to deliver propane to customers to satisfy peak winter demand.

NGL Distribution and Marketing Segment

In our NGL Distribution and Marketing segment, we market our own NGL production and also purchase component NGL products from other NGL producers and marketers for resale. In 2006, our distribution and marketing services business sold an average of approximately 220,000 barrels per day of NGLs to third parties in North America, not including approximately 11,000 barrels per day sold by Targa and recorded in its gathering and processing business. We generally purchase raw NGL mix from producers at a monthly pricing index less applicable fractionation, transportation and marketing fees and resell these products to petrochemical manufacturers, refineries and other marketing and retail companies. This is primarily a physical settlement business in which we earn margins from purchasing and selling NGL products from producers under contract. We also earn margins by purchasing and reselling NGL products in the spot and forward physical markets. To effectively serve our customers in the NGL Distribution and Marketing segment, we contract for and use many of the assets included in our Logistics Assets segment.

85

Operational Risks and Insurance

We are subject to all risks inherent in the midstream natural gas business. These risks include, but are not limited to, explosions, fires, mechanical failure, terrorist attacks, product spillage, weather, nature and inadequate maintenance of rights-of-way, which could result in damage to or destruction of operating assets and other property, or could result in personal injury, loss of life or pollution of the environment, as well as curtailment or suspension of operations at the affected facility. We maintain general public liability, property, boiler and machinery and business interruption insurance in amounts that we consider to be appropriate for such risks. Such insurance is subject to deductibles that we consider reasonable and not excessive given the current insurance market environment. The costs associated with these insurance coverages have increased significantly during recent periods, and may continue to do so in the future. For example, following Hurricanes Katrina and Rita, insurance premiums, deductibles and co-insurance requirements have increased substantially, and terms generally are less favorable than terms that could be obtained prior to such hurricanes. We believe that recent increases in insurance premiums, deductibles and co-insurance requirements represent the near-term impact of Hurricanes Katrina and Rita. Although we do not anticipate that insurance terms and coverage will return to levels experienced prior to such hurricanes, we do expect that, barring a recurrence of significant hurricane related losses, more favorable insurance terms and coverage will be available over the next several years.

The occurrence of a significant event not fully insured or indemnified against, or the failure of a party to meet its indemnification obligations, could materially and adversely affect our operations and financial condition. While we currently maintain levels and types of insurance that we believe to be prudent under current insurance industry market conditions, our inability to secure these levels and types of insurance in the future could negatively impact our business operations and financial stability, particularly if an uninsured loss were to occur. No assurance can be given that we will be able to maintain these levels of insurance in the future at rates we consider commercially reasonable, particularly in the area of contingent business interruption insurance for our offshore gathering systems and, should the Terrorism Risk Insurance Extension Act of 2005 not be extended beyond December 2007, terrorism insurance.

Significant Customers

For the year ended December 31, 2006, transactions with Chevron and CPC represented approximately 28% and 20% of our consolidated revenues and consolidated product purchases, respectively. No other third party customer accounted for more than 10% of our consolidated revenues during these periods. For the six months ended June 30, 2007, transactions with Chevron and CPC represented approximately 24% and 14% of our consolidated revenues and consolidated product purchases, respectively.

Gas Gathering and Processing Contracts with Chevron

Under gas gathering and processing agreements with us or the Versado and VESCO entities in which we have a 63.0% and 22.9% ownership interest, respectively, Chevron has dedicated, on a life-of-field basis, substantially all of the natural gas it produces from committed areas in New Mexico, Texas and the Gulf of Mexico. Under these contracts, we receive a percentage of the volumes of NGLs and residue gas attributable to the processed natural gas in Texas and New Mexico and a percentage of the volumes of NGLs or a fee depending on processing economics for the Gulf of Mexico. These contracts provide that either party has the right to periodically renegotiate the processing terms. If the parties are unable to agree, then the matter is settled by binding arbitration. These terms were renegotiated effective September 1, 2006 for substantially all of the affected production without the need for arbitration.

Refinery Services and Related Contracts With Chevron

Our master refinery services agreement for Chevron refineries was renegotiated and replaced on September 1, 2006 with liquid product purchase and sale agreements which allow us to purchase propane (and in some cases to purchase and sell butanes) for the Elk Hills, Kettleman Hills, McKittrick and Taft 1C Gas plants,

86

the El Segundo (propane and p/p mix), Maysville (butane only), Pascagoula, Richmond and Salt Lake City refineries; time charter agreements in which we provide transportation for Chevron’s p/p mix and butane produced at the Pascagoula Refinery; and fractionation agreements in which we fractionate Chevron’s raw product and butane at our Mont Belvieu facility. These contracts have one to three year terms. We are well positioned to retain Chevron as a customer based on these contractual positions and customer relationships, our long-standing history of customer service, established relationship with each facility, criticality of the service provided, competitive rate structure, competitive-cost provision of non-traditional services and potentially high costs of replacing the infrastructure assets that we have in place to serve Chevron’s needs.

In addition to our agreements with Chevron, we have agreements with Chevron Phillips Chemical (“CPC”), a separate joint venture affiliate of Chevron, pursuant to which we supply a significant portion of CPC’s NGL feedstock needs for petrochemical plants in the Texas gulf Coast area. Through a related services agreement, we provide storage and logistical services to CPC for feedstocks and products produced from the petrochemical plants. Under provisions of the services contract, we have given CPC notice of termination, which starts a two year termination clock to renegotiate the agreement, for the mutual benefit of both companies. Similarly, we have given notice on the feedstocks agreement, which also starts a two year clock, effective August 2007, to renegotiate this agreement for the mutual benefit of both companies. We are well positioned to retain CPC as a customer based on our long-standing history of customer service, criticality of the service provided, the integrated nature of facilities and the difficulty and high cost associated with replicating our assets.

Competition

We face strong competition in acquiring new natural gas supplies. Competition for natural gas supplies is primarily based on the location of gathering and processing facilities, pricing arrangements, reputation, efficiency, flexibility, reliability and access to end-use markets or liquid marketing hubs. Competitors to our gathering and processing operations include other natural gas gatherers and processors, such as major interstate and intrastate pipeline companies, master limited partnerships and oil and gas producers. Our major competitors for natural gas supplies in our current operating regions, include DEFS, Enterprise Products, Energy Transfer, Enbridge, JL Davis and Southern Union Gas (formerly Sid Richardson). Many of our competitors have greater financial resources than we possess. If we are unable to maintain or increase the throughput on our gathering systems or in our processing plants because of an inability to connect new supplies of gas or attract new customers, then our business and financial results could be materially adversely affected.

We also compete for NGL products to market through our NGL Logistics and Marketing division. Our competitors include major oil and gas producers who market NGL products for their own account and for others. Additionally, we compete with several other NGL marketing companies, including Enterprise Products, TEPPCO, DEFS and BP.

Additionally, we face competition for raw NGL mix supplies at our fractionation facilities. Our competitors include large oil, natural gas and petrochemical companies. The fractionators in which we own an interest in the Mont Belvieu region compete for volumes of raw NGL mix with other fractionators also located at Mont Belvieu. Among the primary competitors are Enterprise Products and ONEOK. In addition, certain producers fractionate raw NGL mix for their own account in captive facilities. Our Mont Belvieu fractionators also compete on a more limited basis with fractionators in Conway, Kansas and a number of decentralized, smaller fractionation facilities in Texas, Louisiana and New Mexico. Our other fractionation facilities compete for raw NGL mix with the fractionators at Mont Belvieu as well as other fractionation facilities located in Louisiana. Our customers who are significant producers of raw NGL mix and NGL products or consumers of NGL products may develop their own fractionation facilities in lieu of using our services.

87

Regulation

Regulation of Our Interstate Natural Gas Pipelines

We are the commercial operator and part-owner (22.9 percent equity interest) of Venice Gathering System, L.L.C. (“VGS”), a natural gas pipeline that originates on the Outer Continental Shelf (“OCS”). VGS is regulated by FERC under the Natural Gas Act of 1938, or NGA, and the Natural Gas Policy Act of 1978, or NGPA. VGS operates under a FERC-approved, open-access tariff that establishes rates and terms and conditions under which the system provides services to its customers. Pursuant to FERC’s jurisdiction, existing pipeline rates and/or terms and conditions of service may be challenged by customer complaint or by FERC and proposed rate changes or changes in the terms and conditions of service may be challenged by protest.

Generally, FERC’s authority extends to:

• Transportation of natural gas;

• rates and charges for natural gas transportation;

• certification and construction of new facilities;

• extension or abandonment of services and facilities;

• maintenance of accounts and records;

• commercial relationships and communications between pipelines and certain affiliates;

• terms and conditions of service and service contracts with customers;

• depreciation and amortization policies; and

• acquisition and disposition of facilities.

VGS holds a certificate of public convenience and necessity issued by FERC pursuant to Section 7 of the NGA permitting the construction, ownership, and operation of its interstate natural gas pipeline facilities and the provision of transportation services. This certificate authorization requires VGS to provide on a non-discriminatory basis open-access services to all customers who qualify under its FERC gas tariff. Under Section 8 of the NGA, FERC has the power to prescribe the accounting treatment of items for regulatory purposes. Thus, the books and records of VGS may be periodically audited by FERC.

The maximum recourse rates that may be charged by VGS for its services are established through FERC’s ratemaking process. Generally, the maximum filed recourse rates for interstate pipelines are based on the cost of service including recovery of and a return on the pipeline’s actual prudent historical cost investment. Key determinants in the ratemaking process are costs of providing service, allowed rate of return and volume throughput and contractual capacity commitment assumptions. The maximum applicable recourse rates and terms and conditions for service are set forth in each pipeline’s FERC approved tariff. Rate design and the allocation of costs also can impact a pipeline’s profitability. Natural gas companies may not charge rates that have been determined to be unjust and unreasonable. VGS is permitted to discount its firm and interruptible rates without further FERC authorization down to the variable cost of performing service, provided they do not “unduly discriminate.”

The design, construction, and operation of our natural gas pipelines are also subject to regulation by the Office of Pipeline Safety of the Department of Transportation, or DOT. The DOT has promulgated regulations governing pipeline wall thickness, design pressures, maximum operating pressures, pipeline patrols and leak surveys, minimum depth requirements, and emergency procedures, as well as other matters intended to ensure adequate protection for the public and to prevent accidents and failures. In Louisiana, the Department of Natural Resources, Pipeline Division implements DOT’s safety rules. In Texas, the Railroad Commission of Texas, or RRC, implements those safety rules. In New Mexico, the New Mexico Public Regulation Commission implements the DOT’s safety rules.

88

Energy Policy Act of 2005. On August 8, 2005, President Bush signed into law the Domenici-Barton Energy Policy Act of 2005, or the 2005 EP Act. The 2005 EP Act is a comprehensive compilation of tax incentives, authorized appropriations for grants and guaranteed loans, and significant changes to the statutory policy that affects all segments of the energy industry. With respect to regulation of natural gas transportation, the 2005 EP Act amends the NGA and the NGPA by increasing the criminal penalties available for violations of each Act. The 2005 EP Act also adds a new section to the NGA, which provides FERC with the power to assess civil penalties of up to $1,000,000 per day for violations of the NGA and increases the FERC’s civil penalty authority under the NGPA from $5,000 per violation per day to $1,000,000 per violation per day. Before enactment of the 2005 EP Act, FERC was only authorized to impose criminal penalties for violations of the NGA and criminal or civil penalties for violations of the NGPA. This new legislation is applicable to FERC-regulated entities, including VGS. EPAct 2005 also amends the NGA to add an anti-market manipulation provision which makes it unlawful for any entity to engage in prohibited behavior in contravention of rules and regulations to be prescribed by FERC. On January 19, 2006, FERC issued Order No. 670, a rule implementing the anti-market manipulation provision of EPAct 2005, and subsequently denied rehearing. The rules make it unlawful to: (1) in connection with the purchase or sale of natural gas subject to the jurisdiction of FERC, or the purchase or sale of transportation services subject to the jurisdiction of FERC, for any entity, directly or indirectly, to use or employ any device, scheme or artifice to defraud; (2) to make any untrue statement of material fact or omit to make any such statement necessary to make the statements made not misleading; or (3) to engage in any act or practice that operates as a fraud or deceit upon any person. The new anti-market manipulation rule does not apply to activities that relate only to intrastate or other non-jurisdictional sales or gathering, but does apply to activities of gas pipelines and storage companies that provide interstate services, as well as otherwise non-jurisdictional entities to the extent the activities are conducted “in connection with” gas sales, purchases or transportation subject to FERC jurisdiction. The anti-market manipulation rule and enhanced civil penalty authority reflect an expansion of FERC’s NGA enforcement authority. Additional proposals and proceedings that might affect the natural gas industry are pending before Congress, FERC and the courts. The natural gas industry historically has been heavily regulated. Accordingly, we cannot assure you that present policies pursued by FERC and Congress will continue.

Affiliate Relationships. Commencing in 2003, FERC issued a series of orders adopting rules for new Standards of Conduct for Transmission Providers (Order No. 2004) which applied to interstate natural gas pipelines and to certain natural gas storage companies which provide storage services in interstate commerce. Order No. 2004 became effective in 2004. Among other matters, Order No. 2004 required interstate pipelines to operate independently from their energy affiliates, prohibited interstate pipelines from providing non-public transportation or shipper information to their energy affiliates, prohibited interstate pipelines from favoring their energy affiliates in providing service, and obligated interstate pipelines to post on their websites a number of items of information concerning the company, including its organizational structure, facilities shared with energy affiliates, discounts given for service and instances in which the company has agreed to waive discretionary terms of its tariff.

Late in 2006, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) vacated and remanded Order No. 2004, as it relates to natural gas transportation providers. The court objected to FERC’s expansion of the prior standards of conduct to include energy affiliates, and vacated the entire rule as it relates to natural gas transportation providers. On January 9, 2007, and as clarified on March 21, 2007, FERC issued an interim rule re-promulgating on an interim basis the standards of conduct that were not challenged before the court, while FERC decides how to respond to the court’s decision on a permanent basis. The interim rule makes the standards of conduct apply to the relationship between natural gas transportation providers and their marketing affiliates, but not to energy affiliates who are not also marketing affiliates. Our only transmission provider, VGS, does not currently engage in any transactions with its market affiliates, and thus the interim rule does not currently impact VGS’ operations.

Several companies requested rehearing and clarification of the interim rule. The March 21, 2007 order on clarification granted some of the requested clarifications and stated that it would address the other requests in its

89

proceeding establishing a permanent rule. FERC has issued a notice of proposed rulemaking, or NOPR, that proposes permanent standards of conduct that FERC states will avoid the aspects of the previous standards of conduct rejected by the court. With respect to natural gas transportation providers, the NOPR proposes (1) that the permanent standards of conduct apply only to the relationship between natural gas transportation providers and their marketing affiliates, and (2) to make permanent the changes adopted in the interim rule permitting risk management employees to be shared by natural gas transportation providers and their marketing affiliates and requiring that tariff waivers be maintained in a written waiver log and available upon request. We have no way to predict with certainty the scope of FERC’s permanent rules on the standards of conduct.

Market Transparency NOPR. On April 19, 2007, FERC issued a notice of proposed rulemaking in which it proposed to require intrastate natural gas pipelines, which may include both gathering and transportation pipelines, to post daily on their Internet websites the volumes flowing on their systems. In addition, FERC proposed to require all buyers and sellers of more than a minimum volume of natural gas to report to FERC on an annual basis the number and total volume of their transactions. FERC has asserted that is has the jurisdiction to issue these regulations with respect to intrastate pipelines and otherwise non-jurisdictional buyers and sellers of gas in order to facilitate market transparency in the interstate natural gas market pursuant to Section 23 of the NGA, which was added by Section 316 of EPAct 2005. Initial comments were submitted on July 11, 2007, and reply comments were submitted on August 23, 2007, by industry participants. FERC has not yet issued a final rule. If adopted as proposed, our intrastate natural gas operations may incur additional costs in order to comply with the posting and reporting requirements of the rules. We cannot predict the ultimate impact of these regulatory changes to our natural gas operations. We do not believe that we would be affected by any such FERC action materially differently than other natural gas companies with whom we compete.

FERC Policy Statement on Income Tax Allowances. In 2005, FERC issued a policy statement in which it stated it will permit a pipeline to include in its cost-of-service a tax allowance to reflect actual or potential tax liability on its public utility income attributable to all partnership or limited liability company interests, if the ultimate owner of the interest has an actual or potential income tax liability on such income. Whether a pipeline’s owners have such actual or potential income tax liability will be determined by FERC on a case-by-case basis. The new policy entails rate risk due to the case-by-case review requirement. FERC’s new tax allowance policy was appealed to the D.C. Circuit. The D.C. Circuit issued an order on May 29, 2007 in which it upheld FERC’s new tax allowance policy. On August 20, 2007, the D.C. Circuit denied a request for rehearing of the May 29, 2007 decision. Petitions for writ of certiorari to the United States Supreme Court regarding the decision must be filed no later than 90 days from the D.C. Circuit’s denial of rehearing.

On December 8, 2006, FERC issued a new order addressing rates on one of the interstate oil pipelines of SFPP, L.P. (SFPP). In the new order, FERC refined its income tax allowance policy, noting that the tax deferral features of a publicly traded partnership may cause some investors to receive, for some indeterminate duration, cash distributions in excess of their taxable income, which FERC characterized as a “tax savings.” FERC stated that it is concerned that this created an opportunity for those investors to earn an additional return, funded by ratepayers. Responding to this concern, FERC chose to adjust the pipeline’s equity rate of return downward based on the percentage by which the publicly traded partnership’s cash flow exceeded taxable income. On February 7, 2007, SFPP asked FERC to reconsider this ruling. The ultimate outcome of this proceeding is not certain and could result in changes to FERC’s treatment of income tax allowances in cost of service, which may cause the rates for Targa NGL Pipeline Company LLC, or Targa NGL, and the recourse rates for VGS to be set at a level that is different, and in some instances lower, than the level otherwise in effect.

FERC Policy Statement on Proxy Groups for Rates of Return Determinations. On July 19, 2007, FERC issued a proposed policy statement regarding the composition of proxy groups for determining the appropriate returns on equity for natural gas and oil pipelines. The proposed policy statement would permit the inclusion of master limited partnerships (MLPs) in the proxy group for purposes of calculating allowed returns on equity under the Discounted Cash Flow (DCF) analysis, a change from its prior view that MLPs had not been shown to be appropriate for such inclusion. FERC proposes to apply the final policy statement to all natural gas rate cases

90

that have not completed the hearing phase as of the date FERC issues the final policy statement. FERC received comments on the proposed policy in September 2007. FERC’s proposed policy statement is subject to change based on comments filed and therefore we cannot predict the scope of the final policy statement and its impact, if any, on VGS’ rates.

Regulation of Our Offshore Gathering Facilities

Our Seahawk and Pelican gathering systems gather gas on the OCS. Section 1(b) of the NGA exempts natural gas gathering facilities from regulation by FERC as a natural gas company under the NGA. We believe that the natural gas pipelines in our Seahawk and Pelican gathering systems meet the traditional tests FERC has used to establish a pipeline’s status as a gatherer not subject to regulation under the NGA as a natural gas company. However, the distinction between FERC-regulated transmission services and federally unregulated gathering services is the subject of substantial, on-going litigation, so the classification and regulation of our gathering facilities are subject to change based on future determinations by FERC, the courts, or Congress.

Seahawk and Pelican are subject to the jurisdiction of the applicable Louisiana regulatory agencies to the extent that those gathering systems traverse state land and/or waters. State regulation of gathering facilities generally includes various safety, environmental, nondiscriminatory take, and common purchaser requirements, and complaint-based rate regulation. Natural gas gathering may receive greater regulatory scrutiny at both the state and federal levels now that FERC has taken a more light-handed approach to regulation of the gathering activities of interstate pipeline transmission companies and a number of such companies have transferred gathering facilities to unregulated affiliates. Our natural gas gathering operations could be adversely affected should they be subject to more stringent application of state or federal regulation of rates and services. Our natural gas gathering operations also may be or become subject to additional safety and operational regulations relating to the design, installation, testing, construction, operation, replacement and management of gathering facilities. Additional rules and legislation pertaining to these matters are considered or adopted from time to time. We cannot predict what effect, if any, such changes might have on our operations, but the industry could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes.

Seahawk and Pelican are also subject to the jurisdiction of the Minerals Management Service, or MMS, since they traverse the OCS pursuant to MMS-issued easements. The MMS has issued a notice of proposed rulemaking to determine whether to revise its regulations to better ensure that pipelines subject to MMS’ jurisdiction provide open and non-discriminatory access to both owner and non-owner shippers as required under section 5(f) of the Outer Continental Shelf Lands Act. No final determination has yet been reached in this proceeding.

Regulation of Our Onshore Gathering Facilities

Our onshore natural gas gathering operations are subject to ratable take and common purchaser statutes in Louisiana, Texas, and New Mexico. The common purchaser statutes generally require our gathering pipelines to purchase or take without undue discrimination as to source of supply or producer. These statutes are designed to prohibit discrimination in favor of one producer over another producer or one source of supply over another. The regulations under these statutes can have the effect of imposing some restrictions on our ability as an owner of gathering facilities to decide with whom we contract to gather natural gas. Our gathering facilities in New Mexico are not subject to rate regulation. Louisiana and Texas have adopted a complaint-based regulation of natural gas gathering activities, which allows natural gas producers and shippers to file complaints with state regulators in an effort to resolve grievances relating to gathering access and rate discrimination. The rates we charge for gathering in Texas and Louisiana are deemed just and reasonable unless challenged in a complaint. We cannot predict whether such a complaint will be filed against us in the future. Failure to comply with state regulations can result in the imposition of administrative, civil and criminal penalties.

During the 2007 legislative session, the Texas State Legislature passed H.B. 3273, or Competition Bill, and H.B. 1920, or LUG Bill. The Competition Bill gives the RRC the ability to use either a cost-of-service method or

91

a market-based method for setting rates for natural gas gathering and intrastate transportation pipelines in formal rate proceedings. It also gives the RRC specific authority to enforce its statutory duty to prevent discrimination in natural gas gathering and transportation, to enforce the requirement that parties participate in an informal complaint process and to punish purchasers, transporters, and gatherers for taking discriminatory actions against shippers and sellers. The Competition Bill also provides producers with the unilateral option to determine whether or not confidentiality provisions are included in a contract to which a producer is a party for the sale, transportation, or gathering of natural gas. The LUG Bill modifies the informal complaint process at the RRC with procedures unique to lost and unaccounted for gas issues. It extends the types of information that can be requested, provides producers with an annual audit right, and provides the RRC with the authority to make determinations and issue orders in specific situations. Both the Competition Bill and the LUG Bill became effective September 1, 2007. We cannot predict what effect, if any, either the Competition Bill or the LUG Bill might have on our operations in Texas.

Regulation of Our Interstate Common Carrier Liquids Pipeline

Targa NGL Pipeline Company LLC, or Targa NGL, a natural gas liquids (“NGL”) pipeline that extends from Lake Charles, Louisiana to Mont Belvieu, Texas, is an interstate common carrier liquids pipeline subject to regulation by FERC under the Interstate Commerce Act, or ICA. The ICA requires that we maintain our tariffs on file with FERC. Those tariffs set forth the rates we charge for providing transportation services on our interstate common carrier pipeline as well as the rules and regulations governing these services. The ICA requires, among other things, that such rates on interstate common carrier pipelines be “just and reasonable” and nondiscriminatory. The ICA permits interested persons to challenge newly proposed or changed rates and authorizes FERC to suspend the effectiveness of such rates for a period of up to seven months and to investigate such rates. If, upon completion of an investigation, FERC finds that the new or changed rate is unlawful, it is authorized to require the carrier to refund the revenues in excess of the prior tariff collected during the pendency of the investigation. FERC may also investigate, upon complaint or on its own motion, rates that are already in effect and may order a carrier to change its rates prospectively. Upon an appropriate showing, a shipper may obtain reparations for damages sustained during the two years prior to the filing of a complaint. FERC’s recent Policy Statement on Income Tax Allowances and Policy Statement on Proxy Groups for Rates of Return Determinations are applicable to determining a just and reasonable cost of service for interstate NGL pipelines as well.

Interstate NGL pipelines may change their rates within prescribed ceiling levels that are tied to an inflation index. Shippers may protest rate increases made within the ceiling levels, but such protests must show that the portion of the rate increase resulting from application of the index is substantially in excess of the pipeline’s increase in costs from the previous year. A pipeline must, as a general rule, utilize the indexing methodology to change its rates. FERC, however, also permits cost-of-service ratemaking, market-based rates and settlement rates as alternatives to the indexing approach in certain specified circumstances.

Regulation of Our Intrastate Liquids and Natural Gas Pipelines

Our intrastate natural gas transportation pipelines are subject to regulation by applicable state regulatory commissions. Proposed and existing rates are subject to state regulation and are subject to challenge by protest and complaint, respectively. Further, the states we operate in require that services be provided on a non-discriminatory basis.

Targa Louisiana Intrastate LLC’s intrastate pipeline receives all of the natural gas it transports within or at the boundary of the State of Louisiana. Because all such gas ultimately is consumed within Louisiana, and since the pipeline’s rates and terms of service are subject to regulation by the Office of Conservation of the Louisiana Department of Natural Resources, the pipeline qualifies as a Hinshaw pipeline under Section 1(c) of the NGA and thus is exempt from most FERC jurisdiction.

Targa Intrastate Pipeline LLC, or Targa Intrastate, owns a Texas intrastate pipeline that transports natural gas from the Shackelford processing plant to an interconnect with a pipeline owned by Atmos—Texas that in

92

turn delivers gas to West Texas Utilities Company’s Paint Creek Power station and is regulated by the DOT. Targa Intrastate is also subject to regulation by the RRC, and has a tariff on file with the RRC.

Texas and Louisiana have adopted complaint-based regulation of intrastate natural gas transportation activities, which allows natural gas producers and shippers to file complaints with state regulators in an effort to resolve grievances relating to pipeline access and rate discrimination. The rates we charge for intrastate transportation are deemed just and reasonable unless challenged in a complaint. We cannot predict whether such a complaint will be filed against us in the future. Failure to comply with state regulations can result in the imposition of administrative, civil and criminal penalties.

As discussed above in the context of regulation of our onshore gathering operations, the Texas Competition Bill and LUG Bill contain provisions applicable to intrastate transportation pipelines. We cannot predict what effect, if any, either the Competition Bill or the LUG Bill might have on our operations in Texas.

Our intrastate NGL pipelines in Louisiana gather raw NGL streams we own from various processing plants in Louisiana to our fractionator in Lake Charles, Louisiana, where the raw NGL streams are fractionated into various products. These pipelines are not subject to FERC regulation or rate regulation by the Louisiana Department of Natural Resources, but are required to comply with DOT safety regulations.

Natural Gas Processing

Our natural gas processing operations are not presently subject to FERC regulation. However, there can be no assurance that our processing operations will continue to be exempt from FERC regulation in the future.

Our processing facilities are affected by the availability, terms and cost of pipeline transportation. As noted above, the price and terms of access to pipeline transportation can be subject to extensive federal and in Texas and Louisiana, if a complaint is filed, state regulation. FERC is continually proposing and implementing new rules and regulations affecting the interstate transportation of natural gas, and to a lesser extent, the interstate transportation of NGLs. These initiatives also may indirectly affect the intrastate transportation of natural gas and NGLs under certain circumstances. We cannot predict the ultimate impact of these regulatory changes to our processing operations.

The ability of our processing facilities and pipelines to deliver natural gas into third party natural gas pipeline facilities is directly impacted by the gas quality specifications required by those pipelines. On June 15, 2006, FERC issued a policy statement on provisions governing gas quality and interchangeability in the tariffs of interstate gas pipeline companies and a separate order declining to set generic prescriptive national standards. FERC strongly encouraged all natural gas pipelines subject to its jurisdiction to adopt, as needed, gas quality and interchangeability standards in their FERC gas tariffs modeled on the interim guidelines issued by a group of industry representatives, headed by the Natural Gas Council (the NGC+ Work Group), or to explain how and why their tariff provisions differ. We do not believe that the adoption of the NGC+ Work Group’s gas quality interim guidelines by a pipeline that either directly or indirectly interconnects with our facilities would materially affect our operations. We have no way to predict, however, whether FERC will approve of gas quality specifications that materially differ from the NGC+ Work Group’s interim guidelines for such an interconnecting pipeline.

Sales of Natural Gas and NGLs

The price at which we buy and sell natural gas and NGLs is currently not subject to federal regulation and, for the most part, is not subject to state regulation. However, with regard to our physical purchases and sales of these energy commodities, and any related hedging activities that we undertake, we are required to observe anti-market manipulation laws and related regulations enforced by FERC and/or the Commodity Futures Trading Commission, or CFTC. Should we violate the anti-market manipulation laws and regulations, we could also be subject to related third party damage claims by, among others, market participants, sellers, royalty owners and taxing authorities.

93

Our sales of natural gas and NGLs are affected by the availability, terms and cost of pipeline transportation. As noted above, the price and terms of access to pipeline transportation can be subject to extensive federal and, if a complaint is filed, state regulation. FERC is continually proposing and implementing new rules and regulations affecting the interstate transportation of natural gas, and to a lesser extent, the interstate transportation of NGLs. These initiatives also may indirectly affect the intrastate transportation of natural gas and NGLs under certain circumstances. We cannot predict the ultimate impact of these regulatory changes to our natural gas and NGL marketing operations, and we do not believe that we would be affected by any such FERC action materially differently than other natural gas and NGL marketers with whom we compete.

Other State and Local Regulation of Our Operations

Our business activities are subject to various state and local laws and regulations, as well as orders of regulatory bodies pursuant thereto, governing a wide variety of matters, including marketing, production, pricing, community right-to-know, protection of the environment, safety and other matters. For additional information regarding the potential impact of federal, state or local regulatory measures on our business, see “Risk Factors—Risks Related to Our Business,” included elsewhere in this offering circular.

Environmental and Other Matters

Our operation of pipelines, plants, and other facilities for gathering, compressing, treating, processing, fractionating, terminalling, storing or transporting natural gas, NGLs and other products is subject to stringent and complex federal, state, and local laws and regulations pertaining to health, safety and the environment. As with the industry generally, compliance with these laws and regulations increases our overall cost of business, including our capital costs to construct, maintain, and upgrade equipment and facilities. These laws and regulations may, among other things, require the acquisition of various permits to conduct regulated activities; require the installation of pollution control equipment or otherwise restrict the way we can handle or dispose of our wastes; limit or prohibit construction activities in sensitive areas such as wetlands, wilderness areas or areas inhabited by endangered or threatened species; and require remedial activities or capital expenditures to mitigate pollution conditions caused by our operations or attributable to former operations. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of removal or remedial obligations, and the issuance of injunctions limiting or prohibiting our activities.

We have implemented programs and policies designed to keep our pipelines, plants, and other facilities in compliance with existing environmental laws and regulations. The clear trend in environmental regulation, however, is to place more restrictions and limitations on activities that may affect the environment, and thus, any changes in environmental laws and regulations that result in more stringent and costly waste handling, storage, transport, disposal, or remediation requirements could have a material adverse effect on our operations and financial position. We may be unable to pass on such increased compliance costs to our customers. Moreover, accidental releases or spills may occur in the course of our operations, and we cannot assure you that we will not incur significant costs and liabilities as a result of such releases or spills, including any third party claims for damage to property or persons. While we believe that we are in substantial compliance with existing environmental laws and regulations and that continued compliance with current requirements would not have a material adverse effect on us, there is no assurance that this trend will continue in the future.

The following is a summary of the more significant existing environmental, health and safety laws and regulations to which our business operations are subject and for which compliance may have a material adverse impact on our capital expenditures, results of operations or financial position.

Hazardous Substances and Waste

The Comprehensive Environmental Response, Compensation, and Liability Act, as amended, referred to as “CERCLA” or the “Superfund” law, and comparable state laws impose liability without regard to fault or the

94

legality of the original conduct, on certain classes of persons who are considered to be responsible for the release of a “hazardous substance” into the environment. These persons include current and prior owners or operators of the site where the release occurred and entities that disposed or arranged for the disposal of the hazardous substances found at the site. Under CERCLA, these “responsible persons” may be subject to joint and several, strict liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources, and for the costs of certain health studies. CERCLA also authorizes the U.S. Environmental Protection Agency, or EPA, and, in some instances, third parties to act in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. It is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of hazardous substances or other pollutants into the environment. We generate materials in the course of our operations that are regulated as “hazardous substances” under CERCLA or similar state statutes and, as a result, may be jointly and severally liable under CERCLA for all or part of the costs required to clean up sites at which these hazardous substances have been released into the environment.

We also generate solid wastes, including hazardous wastes, that are subject to the requirements of the Resource Conservation and Recovery Act, as amended, or RCRA, and comparable state statutes. While RCRA regulates both solid and hazardous wastes, it imposes strict requirements on the generation, storage, treatment, transportation and disposal of hazardous wastes. In the course of our operations we generate petroleum product wastes and ordinary industrial wastes such as paint wastes, waste solvents, and waste compressor oils that are regulated as hazardous wastes. Certain materials generated in the exploration, development, or production of crude oil and natural gas are excluded from RCRA’s hazardous waste regulations. However, it is possible that these wastes, which include wastes currently generated during our operations, will in the future be designated as “hazardous wastes” and therefore be subject to more rigorous and costly disposal requirements. Any such changes in the laws and regulations could have a material adverse effect on our maintenance capital expenditures and operating expenses.

We currently own or lease, and have in the past owned or leased, properties that for many years have been used for midstream natural gas activities. Although we have used operating and disposal practices that were standard in the industry at the time, hydrocarbons or other wastes may have been disposed of or released on or under the properties owned or leased by us or on or under other locations where these hydrocarbons and wastes have been taken for treatment or disposal. In addition, some of these properties have been operated by third parties whose treatment and disposal or release of hydrocarbons or other wastes was not under our control. These properties and the materials disposed or released on them may be subject to CERCLA, RCRA and analogous state laws. Under such laws, we could be required to remove or remediate previously disposed wastes (including wastes disposed of or released by prior owners or operators), to clean up contaminated property (including contaminated groundwater), or to perform remedial activities to prevent future contamination. We are responsible for several remedial projects that have cleanup costs for which we have accrued reserves in the amount of $3.0 million as of June 30, 2007.

Air Emissions

The Clean Air Act, as amended, and comparable state laws and regulations restrict the emission of air pollutants from many sources, including processing plants and compressor stations, and also impose various monitoring and reporting requirements. These laws and regulations may require us to obtain pre-approval for the construction or modification of certain projects or facilities expected to produce or significantly increase air emissions, obtain and strictly comply with stringent air permit requirements, or utilize specific equipment or technologies to control emissions. We are currently reviewing the air emissions monitoring systems at certain of our facilities. We may be required to incur capital expenditures in the next few years for air emissions monitoring or air pollution control equipment as a result of our review or in connection with maintaining or obtaining operating permits and approvals for air emissions. We currently believe, however, that such requirements will not have a material adverse affect on our operations.

95

Our failure to comply with the requirements of the Clean Air Act and comparable state laws and regulations could subject us to monetary penalties, injunctions, restrictions on operations, and potentially criminal enforcement actions. For instance, we have been in discussions with the New Mexico Environment Department, or NMED, to resolve alleged air emissions violations at the Eunice, Monument and Saunders gas processing plants. In May 2007, the NMED provided us with a draft compliance order proposing to resolve certain of these alleged violations, which were identified in the course of an inspection of the Eunice plant conducted by the NMED in August 2005. More recently, however, we have discussed with the NMED an expansion of the proposed compliance order to include the resolution of other alleged violations associated with the operation of flares at the Eunice, Monument and Saunders plants. We may be required to incur capital expenditures to upgrade the flares at the Eunice, Monument and Saunders plants in order to resolve these alleged violations. It is also possible that the NMED may assess a penalty as part of the settlement of these violations, although no such penalty has yet been proposed by the agency.

Global Warming and Climate Control

Recent scientific studies have suggested that emissions of certain gases, commonly referred to as “greenhouse gases” and including carbon dioxide and methane, may be contributing to warming of the Earth’s atmosphere. In response to such studies, the U.S. Congress is actively considering legislation to reduce emissions of greenhouse gases. In addition, at least 17 states, have declined to wait on Congress to develop and implement climate control legislation and have already taken legal measures to reduce emissions of greenhouse gases, primarily through the planned development of greenhouse gas emission inventories and/or regional greenhouse gas cap and trade programs. Also, as a result of the U.S. Supreme Court’s decision on April 2, 2007 in Massachusetts, et al. v. EPA, the EPA may be required to regulate greenhouse gas emissions from mobile sources (e.g., cars and trucks) even if Congress does not adopt new legislation specifically addressing emissions of greenhouse gases. The Court’s holding in Massachusetts that greenhouse gases fall under the federal Clean Air Act’s definition of “air pollutant” may also result in future regulation of greenhouse gas emissions from stationary sources under certain Clean Air Act programs. New legislation or regulatory programs that restrict emissions of greenhouse gases in areas where we conduct business could adversely affect our operations and demand for our services.

Water Discharges

The Federal Water Pollution Control Act of 1972, as amended, or the Clean Water Act, and analogous state laws impose restrictions and controls on the discharge of pollutants into navigable waters. Pursuant to the Clean Water Act and analogous state laws, permits must be obtained to discharge pollutants into state waters or waters of the United States. Any such discharge of pollutants into regulated waters must be performed in accordance with the terms of a permit issued by EPA or the analogous state agency. Spill prevention, control and countermeasure requirements under federal law require appropriate containment berms and similar structures to help prevent the contamination of navigable waters in the event of a hydrocarbon tank spill, rupture or leak. In addition, the Clean Water Act and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities. These permits may require us to monitor and sample the storm water runoff. The Clean Water Act can impose substantial civil and criminal penalties for non-compliance. Any unpermitted release of pollutants, including NGLs or condensates, therefore, could result in penalties, as well as significant remedial obligations, imposed by the Clean Water Act or analogous state laws.

The Oil Pollution Act of 1990, as amended, or OPA, which amends and augments the Clean Water Act, establishes strict liability for owners and operators of facilities that are the site of a release of oil into waters of the United States. OPA and its associated regulations impose a variety of requirements on responsible parties related to the prevention of oil spills and liability for damages resulting from such spills. A “responsible party” under OPA includes owners and operators of vessels, including barges, offshore platforms, and onshore facilities, such as our pipelines and marine terminals. Under OPA, owners and operators of vessels and shore facilities that

96

handle, store, or transport oil are required to develop and implement oil spill response plans, and establish and maintain evidence of financial responsibility sufficient to cover liabilities related to an oil spill for which such parties could be statutorily responsible. We believe that we are in substantial compliance with the Clean Water Act, OPA and analogous state laws.

Endangered Species Act

The federal Endangered Species Act, as amended, or ESA, restricts activities that may affect endangered or threatened species or their habitats. While some of our facilities may be located in areas that are designated as habitat for endangered or threatened species, we believe that we are in substantial compliance with the ESA. However, the designation of previously unidentified endangered or threatened species could cause us to incur additional costs or become subject to operating restrictions or bans in the affected areas.

Pipeline Safety

Our pipelines are subject to regulation by the U.S. Department of Transportation, or the DOT, under the Natural Gas Pipeline Safety Act of 1968, as amended, or NGPSA, pursuant to which the DOT has established requirements relating to the design, installation, testing, construction, operation, replacement and management of pipeline facilities. The NGPSA covers the pipeline transportation and storage of natural gas and other gases, and requires any entity that owns or operates pipeline facilities to comply with the regulations under the NGPSA, to permit access to and allow copying of records and to make certain reports and provide information as required by the Secretary of Transportation. We believe that our pipeline operations are in substantial compliance with existing NGPSA requirements; however, due to the possibility of new or amended laws and regulations or reinterpretation of existing laws and regulations, future compliance with the NGPSA could result in increased costs.

Our pipelines are also subject to regulation by the DOT under the Pipeline Safety Improvement Act of 2002, which was recently reauthorized and amended by the Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006. The DOT, through the Office of Pipeline Safety, has established a series of rules, which require pipeline operators to develop and implement integrity management programs for gas transmission pipelines that, in the event of a failure, could affect “high consequence areas.” “High consequence areas” are currently defined as areas with specified population densities, buildings containing populations of limited mobility, and areas where people gather that are located along the route of a pipeline. Similar rules are also in place for operators of hazardous liquid pipelines. The DOT is required by the recent Pipeline Inspections, Protection, Enforcement, and Safety Act of 2006 to issue new regulations by December 31, 2007 that set forth safety standards and reporting requirements applicable to low stress pipelines transporting hazardous liquids, including NGLs and condensate. These safety standards may include applicable integrity management program requirements.

In addition, states have adopted regulations, similar to existing DOT regulations, for intrastate gathering and transmission lines. New Mexico, Texas and Louisiana have developed regulatory programs that parallel the federal regulatory scheme and are applicable to intrastate pipelines transporting natural gas and NGLs. We currently estimate an annual average cost of $3.4 million for years 2007 through 2009 to perform necessary integrity management program activities on our pipelines required by existing DOT and state regulations. We do not believe that such costs are material to our financial condition or results of operations.

Employee Health and Safety

We are subject to the requirements of the federal Occupational Safety and Health Act, as amended, or OSHA, and comparable state laws that regulate the protection of the health and safety of employees. In addition, OSHA’s hazard communication standard requires that information be maintained about hazardous materials used or produced in our operations and that this information be provided to employees, state and local government authorities and citizens. We believe that our operations are in substantial compliance with OSHA requirements, including general industry standards, record keeping requirements, and monitoring of occupational exposure to regulated substances.

97

Other Laws and Regulations

As a supplier of component parts from raw NGL mixtures, including ethane, propane, normal butane, isobutane, and natural gasoline, to end-users by pipeline, rail, truck, and barge, we are further subject to regulation by federal transportation-related agencies such as the U.S. Surface Transportation Board (the successor federal agency to the Interstate Commerce Commission), the U.S. Department of Transportation, and the U.S. Coast Guard, as well as by analogous state agencies. These regulatory authorities have broad powers over such regulated activities as carrier operations, operational safety and employee fitness, accounting systems, tariff filings of freight rates, and financial reporting. In addition, the potential for releases and spills of these component parts in the course of our deliveries are an inherent risk that could result in potentially significant costs and liabilities. We believe that our transportation-related services are in substantial compliance with applicable laws and regulations.

In the wake of the September 11, 2001 terrorist attacks on the U.S., the Coast Guard has developed a security guidance document for marine terminals and has issued a security circular that defines appropriate countermeasures for protecting them and explains how the Coast Guard plans to verify that operators have taken appropriate action to implement satisfactory security procedures and plans. Using the guidelines provided by the Coast Guard, we have specifically identified certain of our facilities as marine terminals and therefore potential terrorist targets. In compliance with the Coast Guard guidance, we performed vulnerability analyses on such marine terminals. Future analyses of our security measures may result in additional measures and procedures, which measures or procedures have the potential for increasing costs of doing business. Regardless of the steps taken to increase security, however, we cannot provide assurance that our marine terminals will not become the subject of a terrorist attack.

In addition, the Department of Homeland Security Appropriations Act of 2007 requires the Department of Homeland Security, or DHS, to issue regulations establishing risk-based performance standards for the security of chemical and industrial facilities, including oil and gas facilities that are deemed to present “high levels of security risk.” The DHS is currently in the process of adopting regulations that will determine whether some of our facilities or operations will be subject to additional DHS-mandated security requirements. Presently, it is not possible to estimate the costs to comply with any such facility security laws or regulations, but such expenditures could be substantial.

Employees

At June 30, 2007, we had approximately 220 employees at our administrative offices and approximately 660 employees at our operating facilities.

Legal Proceedings

We are a party to various legal proceedings and/or regulatory proceedings and certain claims, suits and complaints arising in the ordinary course of business have been filed or are pending against us. We believe all such matters are without merit or involve amounts, which, if resolved unfavorably, would not have a material effect on our financial position, results of operations, or cash flows except for the items more fully described below.

In May 2002, Apache Corporation filed suit in Texas state court against Versado Gas Processors, LLC (“Versado”) as purchaser and processor of Apache’s gas and Dynegy Midstream Services, Limited Partnership (now known as Targa Midstream Services Limited Partnership, a wholly-owned subsidiary of ours, (“TMSLP”)), as operator, of the Versado assets in New Mexico (“Versado Defendants”) alleging (i) excessive field losses of natural gas from wells owned by the plaintiff, (ii) that the Versado Defendants engaged in certain transactions with affiliates, resulting in the Versado Defendants not receiving fair market value when it sold gas and liquids, and (iii) that the formula for calculating the amount the Versado Defendants received from its buyers of gas and liquids is flawed since it is based on gas price indices that were allegedly manipulated. At trial, the plaintiff’s

98

claim with respect to the alleged “sham” transactions and index manipulation, among others, were severed by the trial court and abated for a future trial, and the jury found in favor of the plaintiff on the lost gas claim, awarding approximately $1.6 million in damages. In May 2004, the Versado Defendants’ motion to set aside this jury verdict was granted by the court and the jury award to the plaintiff was vacated. In May 2007, the parties settled the severed lawsuit referenced above. The plaintiff filed its notice of appeal with the 14^th Court of Appeals in October 2004 and its appellate brief in December 2004.

In September 2006, the 14^th Court of Appeals of Houston reinstated the jury verdict in Apache’s favor on the issue of lost gas and also awarded Apache legal fees and interest, bringing the total award against Versado Defendants to approximately $2.7 million. In October 2006, the Versado Defendants filed a motion for rehearing with the 14^th Court of Appeals. After rehearing, the 14^th Court of Appeals affirmed its decision reinstating the original jury verdict in Apache’s favor. With interest and attorneys fees that verdict stands at approximately $2.8 million.

In January 2007, the Versado Defendants filed their petition for review with the Supreme Court of Texas and in March 2007, Apache filed its conditional petition for review with the Supreme Court of Texas. At the request of the Supreme Court of Texas, the Versado Defendants and Apache filed responses to the opposing party’s petition in June 2007. Pursuant to an additional request from the Supreme Court of Texas, the Versado Defendants and Apache filed briefs on the merits on October 29, 2007. The appeal is currently pending before the Supreme Court of Texas.

As a result of damage caused by Hurricane Rita, TMSLP’s West Cameron 229A platform sank in late September 2005. On November 12, 2005, the submerged wreckage was struck by an integrated tug-barge, the M/T Rebel, owned by K-Sea Transportation (“K-Sea”). As much as 25,000 barrels of No. 6 fuel oil may have entered Gulf of Mexico waters as the barge dragged part of the platform debris approximately three (3) miles from the sunken platform location. After receiving a letter from K-Sea threatening to hold us liable for all damages, TMSLP filed suit in federal district court in Galveston, Texas on November 21, 2005, seeking to hold K-Sea responsible for damage to the platform. In June 2007, the case was transferred to the federal district court in Houston, Texas.

In January 2006, Rios Energy (“Rios”), owner of the oil being transported in the barge, intervened in the existing suit and filed a new suit in the same federal court against both TMSLP and K-Sea alleging their negligence caused the loss of and damage to Rios’ oil. On March 8, 2006, K-Sea filed a counterclaim against TMSLP seeking to recover its alleged damages in excess of $90 million. In order to resolve K-Sea’s concerns over security for its claims, we agreed to provide a guarantee to K-Sea pursuant to which we would satisfy any final, non-appealable judgment or settlement against TMSLP if TMSLP is unable to pay any judgment against it. Discovery is proceeding in the underlying claim, counterclaim and Rios lawsuit. Trial has been set for October 2007. TMSLP intends to contest liability but we can give no assurances regarding the outcome of the initial proceeding, the counterclaim or the Rios lawsuit.

On December 8, 2005, WTG Gas Processing (“WTG”) filed suit in the 333rd District Court of Harris County, Texas against several defendants, including Targa Resources, Inc., and three other Targa entities and private equity funds affiliated with Warburg Pincus LLC, seeking damages from the defendants. The suit alleges that Targa and private equity funds affiliated with Warburg Pincus LLC, along with ConocoPhillips Company (“ConocoPhillips”) and Morgan Stanley, tortiously interfered with (i) a contract WTG claims to have had to purchase certain ConocoPhillips assets, and (ii) prospective business relations of WTG. WTG claims the alleged interference resulted from Targa’s competition to purchase the ConocoPhillips’ assets and its successful acquisition of those assets in 2004. On October 2, 2007, the Court granted defendants’ motions for summary judgment on all of WTG’s claims. It is unknown at this time whether WTG will seek an appeal.

99

MANAGEMENT

The following table sets forth certain information with respect to our executive officers and directors as of October 31, 2007.

Name	Age	Position
Rene R. Joyce	59	Chief Executive Officer and Director
Joe Bob Perkins	47	President
James W. Whalen	65	President-Finance and Administration and Director
Roy E. Johnson	63	Executive Vice President
Michael A. Heim	59	Executive Vice President and Chief Operating Officer
Jeffrey J. McParland	53	Executive Vice President and Chief Financial Officer
Paul W. Chung	47	Executive Vice President, General Counsel and Secretary
Charles R. Crisp	60	Director
Joe B. Foster	73	Director
In Seon Hwang	31	Director
Chansoo Joung	47	Director
Peter R. Kagan	39	Director
Chris Tong	51	Director

Our directors hold office until the earlier of their death, resignation, removal or disqualification or until their successors have been elected and qualified. Officers serve at the discretion of the board of directors. There are no family relationships among any of our directors or executive officers.

Rene R. Joyce has served as a director and Chief Executive Officer of Targa since its formation in February 2004 and of the general partner of the Partnership since October 2006, and was a consultant for the Targa predecessor company during 2003. He is also a member of the supervisory directors of Core Laboratories N.V. Mr. Joyce served as a consultant in the energy industry from 2000 through 2003 providing advice to various energy companies and investors regarding their operations, acquisitions and dispositions. Mr. Joyce served as President of onshore pipeline operations of Coral Energy, LLC, a subsidiary of Shell Oil Company, or Shell, from 1998 through 1999, and President of energy services of Coral Energy Holding, L.P., or Coral, a subsidiary of Shell which was the gas and power marketing joint venture between Shell and Tejas Gas Corporation, or Tejas, during 1999. Mr. Joyce served as President of various operating subsidiaries of Tejas, a natural gas pipeline company, from 1990 until 1998 when Tejas was acquired by Shell.

Joe Bob Perkins has served as President of Targa since February 2004 and of the general partner of the Partnership since October 2006, and was a consultant for the Targa predecessor company during 2003. Mr. Perkins also served as a consultant in the energy industry from 2002 through 2003 and was an active partner in RTM Media (an outdoor advertising firm) during such time period. Mr. Perkins served as President and Chief Operating Officer for the Wholesale Businesses, Wholesale Group, and Power Generation Group of Reliant Resources, Inc. and its parent/predecessor companies, from 1998 to 2002, and as Vice President, Corporate Planning and Development, of Houston Industries from 1996 to 1998. He served as Vice President, Business Development, of Coral from 1995 to 1996 and as Director, Business Development, of Tejas from 1994 to 1995. Prior to 1994, Mr. Perkins held various positions with the consulting firm of McKinsey & Company and with an exploration and production company.

James W. Whalen has served as President-Finance and Administration of Targa since January 2006 and of the general partner of the Partnership since October 2006, and as a director of Targa since May 2004 and of the general partner of the Partnership since February 2007. Since November 2005, Mr. Whalen has served as President-Finance and Administration for various Targa subsidiaries. Between October 2002 and October 2005, Mr. Whalen served as the Senior Vice President and Chief Financial Officer of Parker Drilling Company. Between January 2002 and October 2002, he was the Chief Financial Officer of Diversified Diagnostic Products,

100

Inc. He served as Chief Commercial Officer of Coral from February 1998 through January 2000. Previously, he served as Chief Financial Officer for Tejas from 1992 to 1998. Mr. Whalen is also a director of Equitable Resources, Inc.

Roy E. Johnson has served as Executive Vice President of Targa since April 2004 and of the general partner of the Partnership since October 2006, and was a consultant for the Targa predecessor company during 2003. Mr. Johnson also served as a consultant in the energy industry from 2000 through 2003 providing advice to various energy companies and investors regarding their operations, acquisitions and dispositions. He served as Vice President, Business Development and President of the International Group, of Tejas from 1995 to 2000. In these positions, he was responsible for acquisitions, pipeline expansion and development projects in North and South America. Mr. Johnson served as President of Louisiana Resources Company, a company engaged in intrastate natural gas transmission, from 1992 to 1995. Prior to 1992, Mr. Johnson held various positions with a number of different companies in the upstream and downstream energy industry.

Michael A. Heim has served as Executive Vice President and Chief Operating Officer of Targa since April 2004 and of the general partner of the Partnership since October 2006, and was a consultant for the Targa predecessor company during 2003. Mr. Heim also served as a consultant in the energy industry from 2001 through 2003 providing advice to various energy companies and investors regarding their operations, acquisitions and dispositions. Mr. Heim served as Chief Operating Officer and Executive Vice President of Coastal Field Services, a subsidiary of The Coastal Corp., or Coastal, a diversified energy company, from 1997 to 2001 and President of Coastal States Gas Transmission Company from 1997 to 2001. In these positions, he was responsible for Coastal’s midstream gathering, processing, and marketing businesses. Prior to 1997, he served as an officer of several other Coastal exploration and production, marketing, and midstream subsidiaries.

Jeffrey J. McParland has served as Executive Vice President and Chief Financial Officer of Targa since April 2004 and of the general partner of the Partnership since October 2006, and was a consultant for the Targa predecessor company during 2003. Mr. McParland served as a director of the general partner of the Partnership between October 2006 and February 2007. Mr. McParland served as Treasurer of Targa from April 2004 until May 2007 and of the general partner of the Partnership from October 2006 until May 2007. Mr. McParland served as Secretary of Targa between February 2004 and May 2004, at which time he was elected as Assistant Secretary. Mr. McParland served as Senior Vice President, Finance, Dynegy Inc., a company engaged in power generation, the midstream natural gas business and energy marketing, from 2000 to 2002. In this position, he was responsible for corporate finance and treasury operations activities. He served as Senior Vice President, Chief Financial Officer and Treasurer of PG&E Gas Transmission, a midstream natural gas and regulated natural gas pipeline company, from 1999 to 2000. Prior to 1999, he worked in various engineering and finance positions with companies in the power generation and engineering and construction industries.

Paul W. Chung has served as Executive Vice President, General Counsel and Secretary of Targa since May 2004 and of the general partner of the Partnership since October 2006. Mr. Chung served as Executive Vice President and General Counsel of Coral from 1999 to April 2004; Shell Trading North America Company, a subsidiary of Shell, from 2001 to April 2004; and Coral Energy, LLC from 1999 to 2001. In these positions, he was responsible for all legal and regulatory affairs. He served as Vice President and Assistant General Counsel of Tejas from 1996 to 1999. Prior to 1996, Mr. Chung held a number of legal positions with different companies, including the law firm of Vinson & Elkins L.L.P.

Charles R. Crisp has served as a director of Targa since February 2004. Mr. Crisp was President and Chief Executive Officer of Coral Energy, LLC, a subsidiary of Shell Oil Company from 1999 until his retirement in November 2000, and was President and Chief Operating Officer of Coral from January 1998 through February 1999. Prior to this, Mr. Crisp served as President of the power generation group of Houston Industries and, between 1988 and 1996, as President and Chief Operating Officer of Tejas. Mr. Crisp is also a director of AGL Resources Inc., EOG Resources Inc. and IntercontinentalExchange, Inc.

101

Joe B. Foster has served as a director of Targa since May 2004. Mr. Foster was founder of Newfield Exploration Company and most recently served as the Non-Executive Chairman from January 2000 to September 2004, at which time he retired. He was previously Chief Executive Officer and Chairman of the Board of Newfield from May 1999 to January 2000, and President and Chief Executive Officer from 1989 to January 2000.

In Seon Hwang has served as a director of Targa since January 2006. Mr. Hwang is a principal in the Energy Group of Warburg Pincus LLC, where he has been employed since 2004. Prior to joining Warburg Pincus, Mr. Hwang worked at GSC Partners, a distressed investment firm, from 2002 until 2004, the M&A group at Goldman Sachs from 1999 to 2000, and the Boston Consulting Group from 1997 to 1998. He is also a director of APT Generation, CoalTek, Competitive Power Ventures and Floridian Natural Gas Storage Company. He also serves on the investment committee of Sheridan Production Partners LLC.

Chansoo Joung has served as a Director of Targa since December 2005 and of the general partner of the Partnership since February 2007. Mr. Joung is a Managing Director of Warburg Pincus LLC, where he has been employed since 2005, and became a partner of Warburg Pincus & Co. in 2005. Prior to joining Warburg Pincus, Mr. Joung was head of the Americas Natural Resources Group in the investment banking division of Goldman Sachs. He joined Goldman Sachs in 1987 and served in the Corporate Finance and Mergers and Acquisitions departments and also founded and led the European Energy Group. He is a director of APT Generation, Broad Oak Energy and Floridian Natural Gas Storage Company. He also serves on the investment committee of Sheridan Production Partners LLC.

Peter R. Kagan has served as a director of Targa since February 2004 and of the general partner of the Partnership since February 2007. Mr. Kagan is a Managing Director of Warburg Pincus LLC, where he has been employed since 1997, and became a partner of Warburg Pincus & Co. in 2002. He is also a director of Antero Resources Corporation, Broad Oak Energy, Inc., Fairfield Energy Limited, Laredo Petroleum, MEG Energy Corp. and Universal Space Network, Inc.

Chris Tong has served as a director of Targa since January 2006. Mr. Tong is a Senior Vice President and Chief Financial Officer of Noble Energy, Inc. and has held this position since January 2005. He served as Senior Vice President and Chief Financial Officer for Magnum Hunter Resources, Inc. from August 1997 until December 2004. Prior thereto, he was Senior Vice President of Finance of Tejas Acadian Holding Company and its subsidiaries, including Tejas Gas Corp., Acadian Gas Corporation and Transok, Inc., all of which were wholly-owned subsidiaries of Tejas Gas Corporation. Mr. Tong held these positions from August 1996 until August 1997, and had served in other treasury positions with Tejas since August 1989.

Our board of directors consists of eight persons. Our board has appointed two functioning committees: an audit committee and a compensation committee. Our audit committee consists of the following three directors, Messrs. Joung, Hwang and Tong. Our compensation committee consists of the following three directors, Messrs. Kagan, Crisp and Foster.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following discussion and analysis contains statements regarding our and our executive officers’ future performance targets and goals. These targets and goals are disclosed in the limited context of our compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance.

Overview

Targa Resources Investments Inc. (“Targa Investments”) indirectly owns all of our outstanding equity and has ultimate decision making authority with respect to the compensation of our executive officers identified in

102

the Summary Compensation Table (our “named executive officers’). Under the terms of the Targa Investments stockholders’ agreement, compensatory arrangements with our named executive officers are required to be submitted to a vote of Targa Investments’ stockholder’s unless such arrangements have been approved by the Compensation Committee of Targa Investments (the “TRII Compensation Committee”). As such, the TRII Compensation Committee is responsible for overseeing the development of an executive compensation philosophy, strategy and framework for our named executive officers that is based on Targa Investments’ business priorities.

The following Compensation Discussion and Analysis describes the material elements of compensation for our named executive officers. These elements, and Targa Investment’s decisions with respect to determinations on payments, are not subject to approvals by our board of directors. However, members of our board of directors (the “Targa Board”) and the compensation committee of the Targa Board also constitute the board of directors of Targa Investments (the “Targa Investments Board”) and the TRII Compensation Committee. Awards under the Partnership’s long term incentive plan to our independent directors are made by the board of directors of the Partnership’s general partner (the “General Partner”). Awards of cash-settled performance units to our executive officers are made by the TRII Compensation Committee pursuant to Targa Investments’ long term incentive plan. Our executive compensation program is designed to drive performance and reward contributions in support of our and our affiliates’ business strategies at the corporate, partnership and individual levels.

Compensation Philosophy

The TRII Compensation Committee believes that total compensation of executives should be competitive with the market in which we compete for executive talent—the energy industry and midstream natural gas companies. The TRII Compensation Committee generally focuses on total compensation structures designed to be comparable with market median levels of overall compensation during periods of average performance. Base salaries for each of our named executive officers are set and reviewed annually by the TRII Compensation Committee. The TRII Compensation Committee links a significant portion of each named executive officer’s total compensation to accomplishing results based on our business priorities intended to create short and long term value for shareholders. When our performance meets or exceeds established goals and objectives, our named executive officers should be paid at or more than expected levels. Alternatively, when our performance does not meet critical goals and objectives, cash incentive and equity award payments, if any, should be less than such levels. We also measure our performance against our peer group annually to ensure that cash incentive and/or equity award payments are consistent with our objective of maximizing shareholder value. As a result of this philosophy, we do not have a perquisite program.

The following compensation objectives guide the TRII Compensation Committee in its deliberations about executive compensation matters:

• Provide a competitive total compensation program that enables us to attract and retain key executives;

• Ensure a direct relationship between our strategic and financial performance and the total compensation received by our named executive officers;

• Ensure a balance between short-term and long-term compensation while emphasizing at-risk, or variable, compensation as a valuable means of supporting our strategic goals and aligning the interests of our named executive officers with those of our shareholders; and

• Ensure that our total compensation program supports our business objectives and priorities.

In evaluating compensation levels for each named executive officer, the TRII Compensation Committee reviews publicly available compensation data for executives in our peer group, compensation surveys developed by compensation consultants, and compensation levels for each named executive officer with respect to their roles with the Company and levels of responsibility, accountability and decision-making authority.

103

Role of Senior Management in Establishing Compensation for Named Executive Officers

Typically, our chief executive officer (the “CEO”), president and chief financial officer (“Senior Management”) consult with compensation consultants and review market data to determine relevant compensation levels and compensation program elements. In 2006, Senior Management developed a peer group of companies to be used for evaluating compensation levels for each of our named executive officers. The peer group is used to benchmark named executive officer compensation levels against companies that have executive positions with responsibilities similar in breadth and scope to ours and have businesses that compete with us for executive talent. Based on these consultations and a review of publicly available information, Senior Management submits a proposal to the chairman of the TRII Compensation Committee. The proposal includes a recommendation of base salary, annual bonus and any new long term compensation to be paid or awarded to executive officers and employees. The chairman considers this proposal (which he may request management to modify) and his resulting recommendation is then submitted to the TRII Compensation Committee for consideration.

Our Senior Management has no other role in determining compensation for our executive officers, but our executive officers are delegated the authority and responsibility to determine the compensation for all other employees.

Elements of Compensation for Named Executive Officers

The primary elements of the TRII Compensation Committee’s compensation program are a combination of annual cash and long-term equity-based compensation. For 2006, elements of compensation for our named executive officers were the following: (i) annual base salary; (ii) discretionary annual cash awards; (iii) performance awards under the Targa Investments’ long-term incentive plan; (iv) contributions under our 401(k) and profit sharing plan; and (v) participation in our health and welfare plans on the same basis as all of our other employees.

Base Salary. The base salaries for our named executive officers are set and reviewed annually by the TRII Compensation Committee. The salaries are based on historical salaries paid to our named executive officers for services rendered to us, the extent of their equity ownership in Targa Investments, market data and responsibilities of our named executive officers. Base salaries are intended to provide fixed compensation comparable to market median levels for similarly situated executive officers.

In 2006, base salaries for our named executive officers were comparable to the median of similar positions in the compensation survey data.

Annual Cash Incentives. The discretionary annual cash awards paid to our named executive officers are designed to supplement the annual base salary of our named executive officers so that, on a combined basis, the annual cash compensation for our named executive officers yield competitive cash compensation levels and drive performance in support of our business strategies. It is Targa Investments’ general policy to pay these awards prior to the end of the first quarter of the next fiscal year. The payment of individual cash bonuses to employees, including our named executive officers, are subject to the sole discretion of the TRII Compensation Committee.

Our 2006 Annual Incentive Plan (the “Plan”) was adopted on February 2, 2006 to reward our employees for contributions towards our achievement of financial and operational goals approved by the TRII Compensation Committee and to aid us in retaining and motivating employees. Under the Plan and similar plans expected to be adopted in subsequent years, a discretionary cash bonus pool is expected to be funded annually based on our achievement of certain strategic, financial and operational objectives recommended by our CEO and approved by the TRII Compensation Committee. The Plan is administered by the TRII Compensation Committee, which considers certain recommendations by the CEO. At the end of each year, the CEO recommends to the TRII Compensation Committee the total amount of cash to be allocated to the bonus pool based upon our achievement

104

of financial performance and operational objectives. Upon receipt of the CEO’s recommendation, the TRII Compensation Committee, in its sole discretion, determines the total amount of cash to be allocated to the bonus pool (expressed as a percentage of target bonus). Additionally, the TRII Compensation Committee, in its sole discretion, determines the amount of the cash bonus award to each of our executive officers, including the CEO. The executive officers determine the amount of the cash bonus pool (expressed as a percentage of target bonus) to be allocated to certain of our departments or groups. Funds allocated to our departments or groups will be used to pay cash bonuses to our employees (other than our executive officers) based upon criteria established by our management.

For 2006, 35% of the cash bonus pool was attributable to the achievement of the EBITDA component and 65% of the cash bonus pool was attributable to the achievement of the key strategic and operational objectives. The financial objective for 2006 was based on our achieving certain levels of EBITDA. The strategic and operational objectives were based upon the following eight items: (i) selling North Texas; (ii) executing an initial public offering of a master limited partnership; (iii) repairing the coastal Louisiana plants and reestablishing associated throughput volume performance; (iv) recovering insurance proceeds for hurricane related damage; (v) renegotiating certain of our commercial contracts; (vi) increasing wellhead volumes connected to the Company’s gathering lines; (vii) monitoring and managing operating expenses and general and administrative costs; and (viii) performance of development activities, such as acquisitions, project development and other opportunities involving synergies. The Plan established threshold, target and maximum levels for each group of key employees, including the named executive officers, and established goals that must be attained by us in order to trigger awards under the Plan. Achievement of the financial performance and operational objectives was to result in funding of 50% of the cash bonus pool for the threshold level; 100% for the target level and 200% for the maximum level. The funding of the cash bonus pool and the payment of individual cash bonuses to employees, including our named executive officers, are subject to the sole discretion of the TRII Compensation Committee.

In January 2007, the TRII Compensation Committee approved a cash bonus pool of 192% of the target level for the employee group, including our named executive officers, under the Plan. The TRII Compensation Committee paid near maximum level bonuses under the Plan, even though scorecard performance was not at maximum levels, in recognition of organizational performance in the face of multiple challenges experienced during 2006. Our named executive officers received cash bonuses under the Plan based on our achievement of overall goals in 2006 as follows:

Rene R. Joyce	$	262,000
Jeffrey J. McParland	$	204,400
Joe Bob Perkins	$	238,000
James W. Whalen	$	204,400
Michael A. Heim	$	214,000

In January 2007, the TRII Compensation Committee approved the Targa Investments 2007 Annual Incentive Compensation Plan (the “2007 Plan”), a cash bonus plan. For 2007, the TRII Compensation Committee established the following six key business objectives: (i) involving employees in improving our businesses; (ii) proactively and aggressively investing in our businesses and developing the pipeline of projects and opportunities; (iii) bringing closure to hurricane repair and recovery; (iv) identifying and pursuing new opportunities in the downstream sector; (v) debt reduction and achievement of capital structure goals; and (vi) executing on all fronts (including the financial business plan). As with the Plan, funding of the cash bonus pool and the payment of individual cash bonuses to employees, including our named executive officers, are subject to the sole discretion of the TRII Compensation Committee.

Long-Term Equity Incentives. Our named executive officers and other senior managers own approximately 20% of the fully diluted equity of Targa Investments. This equity was received through a combination of personal investment and equity grants in 2004 and 2005.

105

Retirement Benefits. We offer eligible employees a Section 401(k) tax-qualified, defined contribution plan to enable employees to save for retirement through a tax-advantaged combination of employee and Company contributions and to provide employees the opportunity to directly manage their retirement plan assets through a variety of investment options. Our employees, including our named executive officers, are eligible to participate in our 401(k) plan and may elect to defer up to 30% of their annual compensation on a pre-tax basis and have it contributed to the plan, subject to certain limitations under the Code. In addition, we make the following contributions to the 401(k) Plan for the benefit of our employees, including our named executive officers: (i) 3% of the employees eligible compensation; (ii) an amount equal to the employee’s contributions to the 401(k) Plan up to 5% of the employee’s eligible compensation and (iii) a discretionary amount depending on Targa’s performance. For 2006, the discretionary amount contributed to the 401(k) Plan equaled 2.25% of the employee’s eligible compensation for 2006.

Health and Welfare Benefits. All full-time employees, including our named executive officers, may participate in our health and welfare benefit programs, including medical, health, life insurance, and dental coverage and disability insurance.

Perquisites. We believe that the elements of executive compensation should be tied directly or indirectly to the actual performance of the Company. It is the TRII Compensation Committee’s policy not to pay for perquisites for any of our named executive officers, other than parking subsidies.

The TRII Compensation Committee believes that the elements of its compensation program fit the overall compensation objectives of the TRII Compensation Committee, allowing Targa to provide competitive compensation opportunities to align and drive employee performance in support of Targa Investments’ and our own business strategies and to attract, motivate and retain high quality talent with the skills and competencies required by Targa Investments and us.

Change in Control and Termination Benefits

Bonus Agreements. Messrs. Crisp, Foster, Heim, Joyce, McParland, Perkins and Whalen each entered into a Bonus Agreement, dated October 31, 2005, in connection with a restructuring of the equity ownership in the Company relating to the DMS acquisition (the “Restructuring”). Under these Bonus Agreements, following a change in control (as defined in the Amended and Restated Stockholders’ Agreement of Targa Investments) or a death or disability, our named executive officers are entitled to receive the following lump sum cash bonus amounts: Mr. Crisp-$20,800; Mr. Foster-$21,802; Mr. Heim-$717,537; Mr. Joyce – $717,537; Mr. McParland-$574,028; Mr. Perkins-$717,537; and Mr. Whalen-$21,802.

Bonus Plan. The Targa Resources, Inc. Bonus Plan was adopted on October 31, 2005 in connection with the Restructuring to provide eligible employees, including Messrs. Joyce, McParland, Perkins and Heim, with a lump sum cash bonus payment in case there is a change of control (as defined in the Amended and Restated Stockholders’ Agreement of Targa Investments) or the plan is terminated. The bonus pool will be $2 million if the weighted average sale price with respect to Targa Investments’ preferred stock sold by Warburg Pincus between November 1, 2005 and the change of control is equal to or greater than $100 per share. The bonus pool will be $0 if the weighted average sale price is equal to or less than $72.31 per share. The bonus pool will be a prorated amount between $0 and $2 million if the weighted average sale price is between $72.31 and $100 per share.

Change of Control Executive Officer Severance Program. On July 12, 2006, the TRII Compensation Committee approved an executive officer severance program. This program provides separation benefits to our executive officers who voluntarily terminate their employment or whose employment is terminated in connection with a change of control of Targa. In such event, executive officers will receive a lump sum cash payment, subsidized medical coverage for up to two years and minimal transition assistance. The lump sum cash payment will be paid in an amount equal to (i) two multiplied by fifty percent of the executive officer’s annual base pay in

106

effect on the date immediately preceding the change of control, multiplied by (ii) a fraction, the numerator of which is the number of days during the period beginning on the first day of such fiscal year and ending on the date of such termination, and the denominator of which is three hundred sixty-five.

The following table reflects payments that would have been made to each of the named executive officers in the event there was a change of control or, following a change of control, their employment was terminated, each as of December 31, 2006. For purposes of potential payments under the Bonus Plan, we assume the bonus pool would have been $2 million on December 31, 2006 and that each of the sixteen original eligible employee under the plan received a pro-rata share of this amount. Payments under these plans and agreements are cumulative.

Name	Change in Control Payment under Bonus Plan and Bonus Agreement		Termination following a Change in Control Payment
Rene R. Joyce	$	794,151	$	275,000
Jeffrey J. McParland		650,642		215,000
Joe Bob Perkins		794,151		238,000
James W. Whalen		21,802		250,000
Michael A. Heim		794,151		225,000

Changes for 2007

Termination of change in control and termination benefits. The Bonus Agreements and the Bonus Plan discussed above were terminated and all payments due thereunder were paid in 2007. In addition, in 2007, the Targa Investments Board terminated the executive officer severance program. No payments were made in connection with termination of this program.

Stock Option Exchange. In 2007, options relating to Targa Investments preferred stock held by the employees, including the named executive officers, were exchanged for (i) a grant of 10 shares of Targa Investments common stock for each option and (ii) a right to receive a cash payment in the amount of $27.69 for each option.

Long-term Cash Incentives. In connection with the Partnership’s initial public offering, Targa Investments issued to key employees and the executive officers of the General Partner cash-settled performance unit awards linked to the performance of the Partnership’s common units that will vest in August of 2010, with the amounts vesting under such awards dependent on the Partnership’s performance compared to a peer-group consisting of the Partnership and 12 other publicly traded partnerships. The peer group companies for 2007 are: Energy Transfer Partners, Oneok Partners, Copano Energy, DCP Midstream, Regency Energy Partners, Plains All American Pipeline, MarkWest Energy Partners, Williams Energy Partners, Magellan Midstream, Martin Midstream, Enbridge Energy Partners, Crosstex Energy and Targa Resources Partners LP. These performance unit awards were made pursuant to a plan adopted by Targa Investments and administered by Targa Resources LLC. The TRII Compensation Committee has the ability to modify the peer-group in the event a peer company is no longer determined to be one of the Partnership’s peers. The cash settlement value of each performance unit award will be the value of an equivalent Partnership common unit at the time of vesting plus associated distributions over the vesting period, which may be higher or lower than the Partnership’s common unit price at the time of the award. If the Partnership’s performance equals or exceeds the performance for the median of the group, 100% of the award will vest. If the Partnership ranks tenth in the group, 50% of the award will vest, between tenth and seventh, 50% to 100% will vest, and for a performance ranking lower than tenth, no amounts will vest. In February 2007, our named executive officers, who are also executive officers of the General Partner, received an initial award of performance units as follows: 15,000 performance units to Mr. Joyce, 8,200 performance units to Mr. McParland, 10,800 performance units to Mr. Perkins, 10,800 performance units to Mr. Whalen and 10,000 performance units to Mr. Heim.

Long-term Equity Incentives. The Partnership made equity-based awards in February 2007 in connection with its initial public offering to the General Partners’ nonmanagement and independent directors under the

107

Partnership’s long-term incentive plan. These awards were determined by Targa Investments and approved by the board of directors of the General Partner. Each of these directors received an initial award of 2,000 restricted units, which will settle with the delivery of Partnership common units. The Partnership has made similar grants under its long-term incentive plan to our independent directors. All of these awards are subject to three year vesting, without a performance condition, and vest ratably on each anniversary of the grant. The awards are intended to align the long-term interests of executive officers and directors of the General Partner with those of the Partnership’s unitholders. Initially, our officers and employees will participate in the Targa Investments plan and the independent and non-management directors of the General Partner and the independent directors of Targa Investments will participate in the Partnership’s plan. Over time, our employees may begin to participate in the Partnership’s plan.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the disclosure set forth above under the heading “Compensation Discussion and Analysis” with management and, based on this review and discussion, it has recommended to the Board that the “Compensation Discussion and Analysis” be included in this registration statement on Form S-4.

The information contained in this report shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filings with the Securities and Exchange Commission, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the company specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act.

The Compensation Committee

Peter R. Kagan, Chairman Charles R. Crisp Joe B. Foster

108

EXECUTIVE COMPENSATION

The following Summary Compensation Table sets forth the compensation of our named executive officers for 2006. Additional details regarding the applicable elements of compensation in the Summary Compensation Table are provided in the footnotes following the table.

Summary Compensation Table for 2006
	Year	Salary		Non-Equity Incentive Plan Compensation		All Other Compensation (1)		Total Compensation
Rene R. Joyce Chief Executive Officer	2006	$	266,530	$	262,000	$	25,536	$	562,536
Jeffrey J. McParland Executive Vice President and Chief Financial Officer	2006		210,280		204,400		23,386		442,786
Joe Bob Perkins President	2006		244,030		238,000		23,474		511,474
James W. Whalen President—Finance and Administration	2006		244,030		204,400		17,539		471,939
Michael A. Heim Executive Vice President and Chief Operating Officer	2006		217,791		214,000		23,411		462,411

(1) For 2006 “All Other Compensation” includes the aggregate value of matching, non-matching and discretionary contributions to our 401(k) plan, the dollar value of life insurance coverage and any perquisites valued in the aggregate of $10,000 or more.

Name	401(k) and Profit Sharing Plan		Dollar Value of Life Insurance		Total
Rene R. Joyce	$	22,850	$	686	$	25,536
Jeffrey J. McParland		22,850		536		23,386
Joe Bob Perkins		22,850		624		23,474
James W. Whalen		18,163		624		17,539
Michael A. Heim		22,850		561		23,411

Grants of Plan-Based Awards

The following table and the footnotes thereto provide information regarding grants of plan-based equity and non-equity awards made to the named executive officers during 2006:

Grants of Plan Based Awards for 2006
	Estimated Future Payouts under non-equity incentive plan awards
Name	Threshold		Target		Maximum
Mr. Joyce	$	68,750	$	137,500	$	275,000
Mr. McParland		53,750		107,500		215,000
Mr. Perkins		62,500		125,000		250,000
Mr. Whalen		62,500		125,000		250,000
Mr. Heim		56,250		112,500		225,000

The estimated future payouts in the above table represent the cash bonus pool available for awards to the named executive officers under the Plan.

109

Narrative Disclosure to Summary Compensation Table and Grants of Plan Based Awards table

A discussion of 2006 salaries and bonuses is included in “—Compensation Discussion and Analysis.”

Outstanding Equity Awards at 2006 Fiscal Year-End

Targa Resources Investments Inc. indirectly owns all of our equity interests. The following table and the footnotes related thereto provide information regarding each stock option and other equity-based awards of Targa Resources Investments Inc. outstanding as of December 31, 2006 for each of our named executive officers.

Outstanding Equity Awards at Fiscal Year-End for 2006
	Option Awards							Stock Awards
Name	Number of Securities Underlying Unexercised Options # Exercisable		Number of Securities Underlying Unexercised Options # Unexercisable		Option exercise price		Option expiration date	Number of Shares or Units of Stock That Have Not Vested		Market Value of Shares or Units of Stock That Have Not Vested
Rene R. Joyce			21,772	(1)	$	0.75	10/31/2015	734,199	(5)	$	440,519
			291,376	(1)	$	3.00	10/31/2015	7,166	(6)		4,300
			246,549	(1)	$	15.00	10/31/2015
			3,006	(2)	$	3.00	12/20/2015
			2,559	(2)	$	15.00	12/20/2015
			8,411	(3)	$	72.31	10/31/2015
Jeffrey J. McParland			21,772	(1)	$	0.75	10/31/2015	555,120	(5)	$	333,072
			218,532	(1)	$	3.00	10/31/2015	5,337	(6)		3,202
			184,912	(1)	$	15.00	10/31/2015
			2,254	(2)	$	3.00	12/20/2015
			1,919	(2)	$	15.00	12/20/2015
			6,909	(3)	$	72.31	10/31/2015
Joe Bob Perkins			21,772	(1)	$	0.75	10/31/2015	611,680	(5)	$	367,008
			236,014	(1)	$	3.00	10/31/2015	5,764	(6)		3,458
			199,705	(1)	$	15.00	10/31/2015
			2,435	(2)	$	3.00	12/20/2015
			2,073	(2)	$	15.00	12/20/2015
			8,411	(3)	$	72.31	10/31/2015
James W. Whalen	90,909	(4)	136,364	(4)	$	3.00	11/01/2015	303,418	(7)	$	182,051
	76,923	(4)	115,385	(4)	$	15.00	11/01/2015	3,330	(8)		1,998
	938	(4)	1,406	(4)	$	3.00	12/20/2015
	798	(4)	1,198	(4)	$	15.00	12/20/2015
	1,006	(9)	1,508	(9)	$	72.31	10/3120/15
Michael A. Heim			21,772	(1)	$	0.75	10/31/2015	611,680	(5)	$	367,008
			236,014	(1)	$	3.00	10/31/2015	5,764	(6)		3,458
			199,705	(1)	$	15.00	10/31/2015
			2,435	(2)	$	3.00	12/20/2015
			2,073	(2)	$	15.00	12/20/2015
			8,411	(3)	$	72.31	10/31/2015

(1) Represents options to purchase shares of Targa Investments common stock. These options vest on the following schedule: 70% vest on April 30, 2008, an additional 10% vest on October 31, 2008 and the remaining options vest on October 31, 2009.

(2) Represents options to purchase shares of Targa Investments common stock. These options vest on the following schedule: 70% vest on June 20, 2008, an additional 10% vest on December 20, 2008 and the remaining options vest on December 20, 2009.

110

(3) Represents options to purchase shares of Targa Investments preferred stock. These options vest on the following schedule: 20% as of April 16, 2004 and an additional 20% vest on each anniversary of such date until all options have vested. Each share of preferred stock converts into 10 shares of common stock of Targa Investments plus an additional number of shares equal to the accreted value (purchase price plus unpaid dividends) divided by the IPO price

(4) Represents options to purchase shares of Targa Investments common stock awarded on November 1, 2005. These options vest on the following schedule: 20% vest upon grant and an additional 20% vest on each anniversary of the grant date until all options have vested.

(5) Represents shares of restricted common stock of Targa Investments awarded on October 31, 2005. These shares vest on the following schedule: 70% on April 30, 2008; an additional 10% on October 31, 2008 and the remaining shares on October 31, 2009.

(6) Represents shares of restricted common stock of Targa Investments awarded on December 20, 2005. These shares vest on the following schedule: 70% on June 20, 2008; an additional 10% on December 20, 2008 and the remaining shares on December 20, 2009.

(7) Represents shares of restricted common stock of Targa Investments awarded on October 31, 2005 (2,721 shares) and November 1, 2005 (502,975 shares). These shares vest on the following schedule: 20% vest on the grant date and an additional 20% vest on each anniversary of the grant date until all shares have vested.

(8) Represents shares of restricted common stock of Targa Investments awarded on December 20, 2005. These shares vest on the following schedule: 20% vest on the grant date and an additional 20% vest on each anniversary of the grant date until all shares have vested.

(9) Represents options to purchase shares of Targa Investments preferred stock. These options vest on the following schedule: 20% as of May 7, 2004 and an additional 20% on each anniversary of such date until all options have vested. Each share of restricted preferred stock converts into 10 shares of common stock of Targa Investments plus an additional number of shares equal to the accreted value (purchase price plus unpaid dividends) divided by the IPO price.

Option Exercises and Stock Vested in 2006

The following table provides the amount realized during 2006 by each named executive officer upon the exercise of options and upon the vesting of restricted common stock.

Option Exercises and Stock Vested for 2006
	Stock Awards
Name	# of shares acquired on vesting	Value realized on vesting
Rene R. Joyce
Jeffrey J. McParland
Joe Bob Perkins
James W. Whalen	102,249	$	112,474	(1)
Roy E. Johnson
Michael A. Heim

(1) Value determined by an independent consultant pursuant to a valuation of Targa Investments common stock as of December 31, 2006. On October 31, 2006 and December 20, 2006, 101,139 and 1,110 shares, respectively, vested. The value realized on vesting used a per share price of $1.10.

111

DIRECTOR COMPENSATION

The following table sets forth the compensation earned by our non-employee directors for the year ended December 31, 2006:

Director Compensation for 2006
Name	Fees Earned or paid in cash($)		Stock awards($)			Option awards($)			Total($)
Rene R. Joyce
Charles R. Crisp	$	28,000							$	28,000
Joe B. Foster		28,000								28,000
In Seon Hwang
Chansoo Joung
Peter R. Kagan
Chris Tong		40,000	$	16,835	(1)	$	2,174	(1)		59,009
James W. Whalen

(1) Value determined by an independent consultant pursuant to a FAS 123R valuation of Targa Investments common stock as of January 26, 2006, the date of grant.

Beginning on February 2, 2006, each independent director receives an annual cash retainer of $20,000, the chairman of the Audit Committee receives an additional annual retainer of $8,000 and the chairmen of all other committees receive an additional annual retainer of $2,500. All of our independent directors receive $1,500 for each Board meeting attended and an additional $1,000 for each committee meeting attended (if not at a regularly scheduled board meeting). Payment of independent director fees is generally made twice annually, at the second regularly scheduled meeting of the Board and the final meeting of the Board for the fiscal year. All independent directors are reimbursed for out-of-pocket expenses incurred in attending Board and committees.

Prior to February 2, 2006, our independent directors received an annual cash retainer of $10,000 but did not receive additional compensation for attending Board and committee meetings or for serving as chairmen of any Board committee.

A director who is also an employee receives no additional compensation for services as a director.

Changes for 2007

For 2007, each independent director receives an annual cash retainer of $40,000 and the chairman of the Audit Committee receives an additional annual retainer of $15,000. All of our independent directors receive $1,500 for each committee meeting attended ($750 for committee attendance by phone at a meeting that was not regularly scheduled). No additional fees are paid for attending board meetings. Payment of independent director fees is generally made twice annually, at the second regularly scheduled meeting of the Board and the final meeting of the Board for the fiscal year. All independent directors are reimbursed for out-of-pocket expenses incurred in attending Board and committees.

112

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Relationships with Warburg Pincus

Warburg Pincus beneficially owns approximately 74% of the outstanding voting stock of our parent on a fully diluted basis. Warburg Pincus is able to elect members of our board of directors, appoint new management and approve any action requiring the approval of our stockholders, including amendment of our certificate of incorporation and mergers or sales of substantially all of our assets. The directors elected by Warburg Pincus will be able to make decisions affecting our capital structure, including decisions to issue additional capital stock, implement stock repurchase programs and declare dividends.

Relationships with Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”)

Equity

An affiliate of Merrill Lynch holds a non-voting equity interest in the general partner of Warburg Pincus Private Equity VIII, L.P. and Warburg Pincus Private Equity IX, L.P., the principal shareholders of Targa Investments. Merrill Lynch Ventures L.P. 2001, an affiliate of Merrill Lynch, owns approximately 6.5% of the outstanding voting stock of our parent on a fully diluted basis.

Financial Services

Merrill Lynch was an initial purchaser of the notes, and acted as our financial advisor with respect to our purchase of all the equity interests in DMS. An affiliate of Merrill Lynch is a lender and an agent under our senior secured credit facilities.

Hedging Arrangements

We have entered into various commodity derivative transactions with Merrill Lynch Commodities Inc. (“MLCI”), an affiliate of Merrill Lynch. Under the terms of these various commodity derivative transactions, MLCI has agreed to pay us specified fixed prices in relation to specified notional quantities of natural gas, NGL, and condensate over periods ending in 2010, and we have agreed to pay Merrill Lynch floating prices based on published index prices of such commodities for delivery at specified locations. The following table shows our open commodity derivatives with Merrill Lynch as of December 31, 2006:

Period	Commodity	Instrument Type	Daily Volumes		Average Price			Index
Jan 2007	Natural gas	Basis Swap	20,000	MMBtu		Receive IF-HH minus $0.01, pay GD-HH
Jan 2007—Dec 2007	Natural gas	Swap	26,118	MMBtu	$	7.65	per MMBtu	IF-Waha
Jan 2008—Dec 2008	Natural gas	Swap	25,765	MMBtu		7.23	per MMBtu	IF-Waha
Jan 2009—Dec 2009	Natural gas	Swap	25,474	MMBtu		6.82	per MMBtu	IF-Waha
Jan 2010—Dec 2010	Natural gas	Swap	3,289	MMBtu		7.39	per MMBtu	IF-Waha
Jan 2007—Dec 2007	NGLs	Swap	5,998	barrels		0.82	per gallon	OPIS-MB
Jan 2008—Dec 2008	NGLs	Swap	5,847	barrels		0.79	per gallon	OPIS-MB
Jan 2009—Dec 2009	NGLs	Swap	5,547	barrels		0.76	per gallon	OPIS-MB
Jan 2007—Dec 2007	Condensate	Swap	319	barrels		75.27	per barrel	NY-WTI
Jan 2008—Dec 2008	Condensate	Swap	264	barrels		72.66	per barrel	NY-WTI
Jan 2009—Dec 2009	Condensate	Swap	202	barrels		70.60	per barrel	NY-WTI
Jan 2010—Dec 2010	Condensate	Swap	181	barrels		69.28	per barrel	NY-WTI

At December 31, 2006, the fair value of these open positions is a liability of $2.8 million. During 2006, Merrill Lynch paid us $6.8 million in commodity derivative settlements. There were no commodity derivative settlements with Merrill Lynch prior to 2006.

113

Commercial Relationships

In April 2004, we entered into a base agreement for the purchase and sale of natural gas with Entergy-Koch Trading, LP, pursuant to which Entergy-Koch Trading, LP typically purchases natural gas for fuel at its affiliated cogeneration facility in Lake Charles. On November 1, 2004, MLCI acquired Entergy-Koch, LP and became a successor to this agreement. Pricing terms under the agreement are governed by reference to specified index prices plus a premium.

Other Relationships

On December 16, 2004, we acquired a 40% ownership interest in Bridgeline. During 2005 we had net purchases of natural gas of $11.4 million from Bridgeline. During the period from December 16, 2004 to December 31, 2004, we purchased $1.4 million of natural gas from Bridgeline. These transactions were at market prices consistent with those paid to non-affiliate entities. We sold our interest in Bridgeline in August 2005.

114

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table is based on our records and reports filed with the Commission and sets forth the beneficial ownership of our common stock and equity securities of our subsidiaries that are held by:

• each person who beneficially owns 5% or more of our outstanding common stock (only with respect to our common stock);

• all of the directors of Targa Resources, Inc.;

• each named executive officer of Targa Resources, Inc.; and

• all directors and executive officers of Targa Resources, Inc. as a group.

	Targa Resources, Inc.			Targa Resources Partners LP							Targa Resources Investments Inc.
Name of Beneficial Owner(1)	Common Stock Beneficially Owned	Percentage of Common Stock Beneficially Owned		Common Units Beneficially Owned	Percentage of Common Units Beneficially Owned	Subordinated Units Beneficially Owned(3)	Percentage of Subordinated Units Beneficially Owned		Percentage of Total Common and Subordinated Units Beneficially Owned		Series B Preferred Stock	Restricted Common Stock	Percentage of Series B Preferred Stock Beneficially Owned		Percentage of Restricted Common Stock Beneficially Owned
Targa Resources Investments Inc.	1,000	100	%	—	—	—	—		—		—	—	—		—
Rene R. Joyce	—	—		20,000	*	222,648	1.94	%	*		56,208	825,425	*		11.2	%
Joe Bob Perkins	—	—		7,100	*	190,216	1.65	%	*		47,632	701,554	*		9.5	%
Michael A. Heim	—	—		2,500	*	176,382	1.53	%	*		39,192	701,554	*		9.5	%
Jeffrey J. McParland	—	—		1,500	*	154,478	1.34	%	*		32,856	629,547	*		8.5	%
James W. Whalen	—	—		35,700	*	151,020	1.31	%	*		14,978	536,386	*		7.3	%
Charles R. Crisp	—	—		3,000	*	—	*		*		9,709	95,395	—		—
Joe B. Foster	—	—		2,000	*	—	*		*		28,591	95,395	—		—
In Seon Hwang(2)	—	—		—	*	—	*		*		—	—	—		—
Chansoo Joung(2)	—	—		2,000	*	—	*		*		—	—	—		—
Peter R. Kagan(2)	—	—		2,000	*	—	*		*		—	—	—		—
Chris Tong	—	—		4,400	*	—	*		*		—	72,564	—		—
All directors and executive officers as a group (13 persons)	—	—		80,200	*	1,177,033	10.64	%	4.25	%	241,114	4,681,106	3.8	%	63.3	%

* Less than 1%.

(1) Unless otherwise indicated, the address for all beneficial owners in this table is 1000 Louisiana, Suite 4300, Houston, Texas 77002. The nature of the beneficial ownership for all the equity securities is sole voting and investment power.

(2) Warburg Pincus Private Equity VIII, L.P. (“WP VIII”) and Warburg Pincus Private Equity IX, L.P. (“WP IX”) in the aggregate beneficially own 73.6% of Targa Resources Investments Inc. The general partner of WP VIII is Warburg Pincus Partners, LLC (“WP Partners LLC”) and the general partner of WP IX is Warburg Pincus IX, LLC, of which WP Partners LLC is sole member. Warburg Pincus & Co. (“WP”) is the managing member of WP Partners LLC. WP VIII and WP IX are managed by Warburg Pincus LLC (“WP LLC”). The address of the Warburg Pincus entities is 466 Lexington Avenue, New York, New York 10017. Chansoo Joung and Peter R. Kagan, two of our directors, are each a general partner of WP and a Managing Director and member of WP LLC. In Seon Hwang, one of our directors, is a principal of WP LLC. Charles R. Kaye and Joseph P. Landy are Managing General Partners of WP and Managing Members of WP LLC and may be deemed to control the Warburg Pincus entities. Messrs. Joung, Kagan, Hwang, Kaye and Landy disclaim beneficial ownership of all shares held by the Warburg Pincus entities.

(3) The subordinated units of the Partnership presented as being beneficially owned by our directors and executive officers represent the number of units held indirectly by Targa Resources Investments Inc. that are attributable to such directors and officers based on their ownership of equity interests in Targa Resources Investments Inc. Targa Resources Investments Inc. indirectly holds all 11,528,231 subordinated units of the Partnership.

115

DESCRIPTION OF NEW NOTES

Targa Resources, Inc. and Targa Resources Finance Corporation will issue the new notes, and the old notes were issued, under an Indenture (the “Indenture”) among themselves, the Subsidiary Guarantors and Wells Fargo Bank, National Association, as trustee (the “Trustee”). The terms of the notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the “Trust Indenture Act”). You can find the definitions of certain capitalized terms used in this description under the subheading “Certain Definitions”. In this description, the “Company” refers to Targa Resources, Inc. and not to any of its subsidiaries. The “Co-Issuer” refers to Targa Resources Finance Corporation, a subsidiary of the Company and co-issuer of the notes. The Co-Issuer has no material assets.

If the exchange offer contemplated by this prospectus is consummated, old notes that remain outstanding after the completion of the exchange offer, together with the new notes, will be treated as a single class of securities under the Indenture. Otherwise unqualified references herein to “notes” shall, unless the context requires otherwise, include the old notes and the new notes, and all references to specified percentages in aggregate principal amount of the notes shall be deemed to mean, at any time after the exchange offer is completed, such percentage in aggregate principal amount of the old notes and the new notes then outstanding.

The terms of the new notes will be substantially identical to the terms of the old notes, except that the new notes:

• will have been registered under the Securities Act;

• will not be subject to transfer restrictions applicable to the old notes; and

• will not have the benefit of the registration rights agreement applicable to the old notes.

The following description is only a summary of the material provisions of the notes and the Indenture. We urge you to read the Indenture because it, and not this description, defines your rights as a holder of notes. A copy of the Indenture is available upon request from us as set forth under “Where You Can Find More Information.”

Brief Description of the Notes

Like the old notes, the new notes:

• will be unsecured senior obligations of the Company and the Co-Issuer;

• will rank pari passu in right of payment with all existing and future Senior Indebtedness, including Indebtedness under our Senior Credit Facilities, of the Company and the Co-Issuer;

• will be effectively subordinated to all Secured Indebtedness of the Company or the Co-Issuer to the extent of the value of the collateral securing such Indebtedness, including Indebtedness under the Senior Credit Facilities;

• will be structurally subordinated to all existing and future claims of creditors (including trade creditors) and holders of Preferred Stock of Subsidiaries of the Company and the Co-Issuer that do not guarantee the notes, including any Permitted MLPs and Permitted GPs;

• will rank senior in right of payment to any future Subordinated Indebtedness of the Company and the Co-Issuer; and

• will be guaranteed on a senior unsecured basis by the Subsidiary Guarantors that guarantee the Senior Credit Facilities.

Principal, Maturity and Interest

The Company and the Co-Issuer issued the old notes with a maximum aggregate principal amount of $250.0 million. The Company and the Co-Issuer again may issue additional notes under the Indenture from time

116

to time after this offering (the “Additional Notes”). Any offering of Additional Notes is subject to the covenant described below under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”. Any old notes that remain outstanding after the completion of the exchange offer, any new notes issued in connection with the exchange offer and any Additional Notes subsequently issued under the Indenture will be treated as a single class for all purposes under the Indenture, including waivers, amendments, redemptions and offers to purchase.

Unless the context requires otherwise, references to “notes” include any Additional Notes that are actually issued.

Interest on the new notes will accrue at the rate of 8 ¹/2% per annum and be payable in cash semi-annually in arrears on May 1 and November 1, commencing May 1, 2008. The Company and the Co-Issuer will make each interest payment to the Holders of record of the notes on the immediately preceding April 15 and October 15. Interest on the new notes will accrue from the most recent date to which interest has been paid on the old notes. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The notes will mature on November 1, 2013. The new notes will be issued, and the old notes were issued, in denominations of $2,000 and any integral multiples of $1,000 in excess of $2,000.

Subsidiary Guarantees

Each Subsidiary Guarantor, as a primary obligor and not merely as a surety, jointly and severally, irrevocably and unconditionally guarantees the Company’s and the Co-Issuer’s obligations under the Indenture and the notes on a senior unsecured basis. All the Restricted Subsidiaries (other than the Co-Issuer, NCLB Liquids Inc., Warren Petroleum Company, LLC and Targa Bridgeline LLC) guarantee the notes. Each Subsidiary Guarantee of the notes is a general unsecured obligation of the applicable Subsidiary Guarantor, ranks pari passu in right of payment with all existing and future unsecured Senior Indebtedness of such Subsidiary Guarantor, is effectively subordinated to all Secured Indebtedness of such Subsidiary Guarantor, including such Subsidiary Guarantor’s guarantee of the Senior Credit Facilities, to the extent of the value of the collateral securing such Indebtedness and ranks senior in right of payment to any future Subordinated Indebtedness of such Subsidiary Guarantor. The Subsidiary Guarantee of each Subsidiary Guarantor is structurally subordinated to all existing and future claims of creditors (including trade creditors) and holders of Preferred Stock of Subsidiaries of such Subsidiary Guarantor that do not guarantee the notes, including any Permitted MLPs and Permitted GPs.

Each Subsidiary Guarantee contains a provision intended to limit the Subsidiary Guarantor’s liability thereunder to the maximum amount that it could incur without causing the incurrence of obligations under its Subsidiary Guarantee to be a fraudulent transfer. This provision may not, however, be effective to protect a Subsidiary Guarantee from being voided under fraudulent transfer law or may reduce the Subsidiary Guarantor’s obligation to an amount that effectively makes its Subsidiary Guarantee worthless. See “Risk Factors—Risks Related to the Exchange Offer and the Notes and our Capital Structure—Federal and state statutes may allow courts, under specific circumstances, to void the guarantees and subordinate claims in respect of the guarantees.”

Each Subsidiary Guarantor may consolidate with or merge into or sell all or substantially all its assets to (A) the Company or another Subsidiary Guarantor without limitation or (B) any other Persons upon the terms and conditions set forth in the Indenture. See “Certain Covenants—Merger, Consolidation or Sale of All or Substantially All Assets”.

The Subsidiary Guarantee of a Subsidiary Guarantor will automatically and unconditionally be released and discharged upon:

(1) (a) the sale, disposition or other transfer (including through merger or consolidation) of all of the Capital Stock (or any sale, disposition or other transfer of Capital Stock following which such Subsidiary

117

Guaran tor is no longer a Restricted Subsidiary), or all or substantially all the assets, of such Subsidiary Guarantor (other than a sale, disposition or other transfer to a Restricted Subsidiary) if such sale, disposition or other transfer is made in compliance with the applicable provisions of the Indenture;

(b) such Subsidiary Guarantor becoming a Partially Owned Operating Company;

(c) the designation by the Company of such Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with the provisions of the Indenture set forth under “Certain Covenants—Limitation on Restricted Payments” and the definition of “Unrestricted Subsidiary”;

(d) the release or discharge of such Subsidiary Guarantor from its guarantee of Indebtedness under the Senior Credit Facilities or the guarantee that resulted in the obligation of such Subsidiary Guarantor to guarantee the notes, if such Subsidiary Guarantor would not then otherwise be required to guarantee the notes pursuant to the covenant described under “Certain Covenants—Limitation on Guarantees of Indebtedness by Restricted Subsidiaries” (treating any guarantees of such Subsidiary Guarantor that remain outstanding as incurred at least 30 days prior to such release or discharge); or

(e) the exercise by the Company and the Co-Issuer of their legal defeasance option or their covenant defeasance option, as described under “Legal Defeasance and Covenant Defeasance” or if the Company’s and the Co-Issuer’s obligations under the Indenture are discharged in accordance with the terms of the Indenture; and

(2) in the case of clause (1) (a) above, the release or discharge of such Subsidiary Guarantor from its guarantee, if any, of and all pledges and security, if any, granted in connection with, the Senior Credit Facilities and any other Indebtedness of the Company or any Restricted Subsidiary.

Ranking

Secured Indebtedness versus Notes

Payments of principal of, and premium, if any, and interest on, the notes and the payment of any Subsidiary Guarantee rank pari passu in right of payment with all Senior Indebtedness of the Company, the Co-Issuer or the relevant Subsidiary Guarantor, as the case may be, including the obligations of the Company and such Subsidiary Guarantor under the Senior Credit Facilities. However, the notes and Subsidiary Guarantees are effectively subordinated in right of payment to all of the existing and future Secured Indebtedness of the Company, the Co-Issuer or the relevant Subsidiary Guarantor, as the case may be, to the extent of the value of the assets securing such Indebtedness.

In addition, certain of our Hedging Obligations with respect to natural gas and natural gas liquids constitute Secured Indebtedness. To the extent prices of these commodities increase, the amount of this Secured Indebtedness could increase significantly. We expect to incur additional secured Hedging Obligations as part of our ongoing commodity risk management activities.

Although the Indenture contains limitations on the amount of additional Senior Indebtedness that the Company and its Restricted Subsidiaries may incur and the amount of additional Secured Indebtedness the Company, the Co-Issuer and the Subsidiary Guarantors may incur, under certain circumstances the amount of such Senior Indebtedness and Secured Indebtedness could be substantial.

See “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” and “Certain Covenants—Liens”.

Liabilities of Subsidiaries versus Notes

All of our operations are conducted through our Subsidiaries. Some of our Subsidiaries are not guaranteeing the notes, and Subsidiary Guarantees may be released under certain circumstances, as described under

118

“Subsidiary Guarantees.” In addition, our future Subsidiaries may not be required to guarantee the notes, and Permitted MLPs and Permitted GPs will not be required to guarantee the notes. Claims of creditors of such non-guarantor Subsidiaries, Permitted MLPs and Permitted GPs, including trade creditors and creditors holding indebtedness or guarantees issued by such non-guarantor Subsidiaries, Permitted MLPs and Permitted GPs, and claims of holders of Preferred Stock of such non-guarantor Subsidiaries, Permitted MLPs and Permitted GPs generally will have priority with respect to the assets and earnings of such non-guarantor Subsidiaries, Permitted MLPs and Permitted GPs over the claims of our creditors, including Holders. Accordingly, the notes will be structurally subordinated to claims of creditors (including trade creditors) and holders of Preferred Stock, if any, of such non-guarantor Subsidiaries, Permitted MLPs and Permitted GPs.

Mandatory Redemption; Offer to Purchase; Open Market Purchases

The Company and the Co-Issuer are not required to make any mandatory redemption or sinking fund payments with respect to the notes. However, under certain circumstances, the Company and the Co-Issuer may be required to offer to purchase notes as described under “Repurchase at the Option of Holders”.

The Company and the Co-Issuer may from time to time acquire notes by means other than a redemption, whether by tender offer, in open market purchases, through negotiated transactions or otherwise, in accordance with applicable securities laws.

Optional Redemption

Except as described below, the notes are not redeemable at the Company’s or the Co-Issuer’s option prior to November 1, 2009. From and after November 1, 2009, the Company or the Co-Issuer may redeem the notes, in whole or in part, upon not less than 30 nor more than 60 days’ prior notice at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, and Additional Interest, if any, thereon to the applicable redemption date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on November 1 of each of the years indicated below:

Year	Percentage
2009	104.250	%
2010	102.125	%
2011 and thereafter	100.000	%

Prior to November 1, 2008, the Company or the Co-Issuer may, at its option, redeem up to 35% of the sum of the original aggregate principal amount of notes (and the original principal amount of any Additional Notes) issued under the Indenture at a redemption price equal to 108.500% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon to the redemption date, subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds of one or more Equity Offerings of the Company or any direct or indirect parent of the Company to the extent such net proceeds are contributed to the Company; provided that:

• at least 65% of the sum of the aggregate principal amount of notes originally issued under the Indenture and the original principal amount of any Additional Notes issued under the Indenture remain outstanding immediately after the occurrence of each such redemption; and

• each such redemption occurs within 90 days of the date of closing of each such Equity Offering.

At any time prior to November 1, 2009, the Company or the Co-Issuer may also redeem all or a part of the notes, upon not less than 30 nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest to, the redemption date, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date.

119

Selection and Notice

If the Company is redeeming less than all of the notes at any time, the Trustee will select the notes to be redeemed (a) if the notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which such notes are listed, or (b) if the notes are not so listed, on a pro rata basis to the extent practicable; provided that no notes of $2,000 or less shall be redeemed in part.

Notices of redemption shall be mailed by first-class mail, postage prepaid, at least 30 days but not more than 60 days before the redemption date to each Holder at such Holder’s registered address, except that notices of redemption may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the notes or a satisfaction and discharge of the Indenture. If any note is to be redeemed in part only, any notice of redemption that relates to such note shall state the portion of the principal amount thereof to be redeemed.

A new note in principal amount equal to the unredeemed portion of any outstanding note redeemed in part will be issued in the name of the Holder thereof upon cancellation of the outstanding note. Notes called for redemption become due and payable on the date fixed for redemption. On and after the redemption date, unless the Company or the Co-Issuer defaults in payment of the redemption price, interest shall cease to accrue on notes or portions thereof called for redemption.

Book-Entry, Delivery and Form

Except as set forth below, the new notes will be issued in registered, global form in minimum denominations of $2,000 and integral multiples of $1,000 in excess of $2,000.

One or more Global Notes will be deposited upon issuance with the Trustee as custodian for The Depository Trust Company (“DTC”) and registered in the name of DTC or its nominee, in each case for credit to an account of a direct or indirect participant in DTC as described below.

Except as set forth below, Global Notes may be transferred only to another nominee of DTC or to a successor of DTC or its nominee, in whole and not in part. Except in the limited circumstances described below, beneficial interests in Global Notes may not be exchanged for notes in certificated form and owners of beneficial interests in Global Notes will not be entitled to receive physical delivery of notes in certificated form. See “—Exchange of Global Notes for Certificated Notes”.

Transfers of beneficial interests in Global Notes will be subject to the applicable rules and procedures of DTC and its direct or indirect participants, which may change from time to time.

Depository Procedures

The following description of the operations and procedures of DTC is provided solely as a matter of convenience. These operations and procedures are solely within the control of DTC and are subject to changes by it. We take no responsibility for these operations and procedures and urge investors to contact DTC or its participants directly to discuss these matters.

DTC has advised us that DTC is a limited-purpose trust company organized under the laws of the State of New York, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participating organizations (collectively, the “Participants”) and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the Initial

120

Purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC’s system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the “Indirect Participants”). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants.

DTC has also advised us that, pursuant to procedures established by it:

(1) upon deposit of the Global Notes, DTC will credit the accounts of Participants designated by the Initial Purchasers with portions of the principal amount of the Global Notes; and

(2) ownership of these interests in Global Notes will be shown on, and the transfer of ownership of these interests will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interests in Global Notes).

Investors in Global Notes who are Participants in DTC’s system may hold their interests therein directly through DTC. Investors in Global Notes who are not Participants may hold their interests therein indirectly through organizations that are Participants in DTC. All interests in a Global Note may be subject to the procedures and requirements of DTC. The laws of some states require that certain Persons take physical delivery in definitive form of securities that they own and the ability to transfer beneficial interests in a Global Note to Persons that are subject to those requirements will be limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants, the ability of a Person having beneficial interests in a Global Note to pledge those interests to Persons that do not participate in the DTC system, or otherwise take actions in respect of those interests, may be affected by the lack of a physical certificate evidencing those interests.

Except as described below, owners of an interest in Global Notes will not have notes registered in their names, will not receive physical delivery of definitive notes in registered certificated form (“Certificated Notes”) and will not be considered the registered owners or “Holders” thereof under the Indenture for any purpose.

Payments in respect of the principal of, premium, and interest on a Global Note registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the Company, the Co-Issuer and the Trustee will treat the Persons in whose names the notes, including Global Notes, are registered as the owners of the notes for the purpose of receiving payments and for all other purposes. Consequently, neither the Company, the Co-Issuer, the Trustee nor any agent of the Company, the Co-Issuer or the Trustee has or will have any responsibility or liability for:

(1) any aspect of DTC’s records or any Participant’s or Indirect Participant’s records relating to or payments made on account of beneficial ownership interests in Global Notes or for maintaining, supervising or reviewing any of DTC’s records or any Participant’s or Indirect Participant’s records relating to the beneficial ownership interests in Global Notes; or

(2) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants.

DTC has advised us that its current practice, upon receipt of any payment in respect of securities such as the notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on that payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of notes will be governed by standing instructions and customary

121

practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the Trustee, the Company or the Co-Issuer. Neither the Company, the Co-Issuer nor the Trustee will be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the notes, and the Company, the Co-Issuer and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes.

Transfers between Participants in DTC will be effected in accordance with DTC’s procedures, and will be settled in same-day funds.

DTC has advised us that it will take any action permitted to be taken by a Holder only at the direction of one or more Participants to whose account DTC has credited the interests in the Global Notes and only in respect of the portion of the aggregate principal amount of the notes as to which that Participant or those Participants has or have given the relevant direction. However, if there is an Event of Default under the notes, DTC reserves the right to exchange the Global Notes for notes in certificated form, and to distribute those notes to its Participants.

Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in Global Notes among Participants, it is under no obligation to perform those procedures, and may discontinue or change those procedures at any time. Neither the Company, the Co-Issuer nor the Trustee nor any of their respective agents will have any responsibility for the performance by DTC or its Participants or Indirect Participants of their respective obligations under the rules and procedures governing their operations.

Exchange of Global Notes for Certificated Notes

A Global Note is exchangeable for Certificated Notes if:

(1) DTC (a) notifies the Company and the Co-Issuer that it is unwilling or unable to continue as depositary for the Global Notes or (b) has ceased to be a clearing agency registered under the Exchange Act and, in each case, a successor depositary is not appointed;

(2) the Company and the Co-Issuer, at their option, notify the Trustee in writing that it elects to cause the issuance of Certificated Notes; or

(3) there has occurred and is continuing a Default with respect to the notes.

In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon prior written notice given to the Trustee by or on behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in a Global Note will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures).

Same Day Settlement and Payment

The Company and the Co-Issuer will make payments in respect of the notes represented by Global Notes (including payments of principal, premium, if any, and interest) by wire transfer of immediately available funds to the accounts specified by DTC or its nominee. The Company and the Co-Issuer will make all payments of principal of, and premium, if any, and interest on, Certificated Notes by wire transfer of immediately available funds to the accounts specified by the Holders of the Certificated Notes or, if no account is specified, by mailing a check to each Holder’s registered address. The new notes represented by Global Notes are expected to trade in DTC’s Same-Day Funds Settlement System, and any permitted secondary market trading activity in notes represented by the Global Notes will, therefore, be required by DTC to be settled in immediately available funds.

122

Repurchase at the Option of Holders

Change of Control

If a Change of Control occurs, the Company and the Co-Issuer will make an offer to purchase all of the notes pursuant to the offer described below (the “Change of Control Offer”) at a price in cash (the “Change of Control Payment”) equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of purchase, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date. Within 30 days following any Change of Control, the Company and the Co-Issuer will send notice of such Change of Control Offer by first-class mail, with a copy to the Trustee, to each Holder to the address of such Holder appearing in the security register with a copy to the Trustee, with the following information:

(1) a Change of Control Offer is being made pursuant to the covenant entitled “Change of Control,” and all notes properly tendered pursuant to such Change of Control Offer will be accepted for payment;

(2) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the “Change of Control Payment Date”);

(3) any note not properly tendered will remain outstanding and continue to accrue interest;

(4) unless the Company or the Co-Issuer defaults in the payment of the Change of Control Payment, all notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date;

(5) Holders electing to have any notes purchased pursuant to a Change of Control Offer will be required to surrender the notes, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the notes completed, to the paying agent specified in the notice at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(6) Holders will be entitled to withdraw their tendered notes and their election to require the Company or the Co-Issuer to purchase such notes; provided that the paying agent receives, not later than the close of business on the last day of the offer period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of notes tendered for purchase, and a statement that such Holder is withdrawing its tendered notes and its election to have such notes purchased; and

(7) Holders whose notes are being purchased only in part will be issued another note equal in principal amount to the unpurchased portion of the notes surrendered, which unpurchased portion must be equal to $2,000 or an integral multiple of $1,000 in excess of $2,000.

While the notes are in global form and the Company or the Co-Issuer makes an offer to purchase all of the notes pursuant to the Change of Control Offer, a Holder may exercise its option to elect for the purchase of the notes through the facilities of DTC, subject to its rules and regulations.

The Company and the Co-Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the Company and the Co-Issuer will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in the Indenture by virtue thereof.

On the Change of Control Payment Date, the Company and the Co-Issuer will, to the extent permitted by law,

(1) accept for payment all notes or portions thereof properly tendered pursuant to the Change of Control Offer;

(2) deposit with the paying agent an amount equal to the aggregate Change of Control Payment in respect of all notes or portions thereof so tendered; and

123

(3) deliver, or cause to be delivered, to the Trustee for cancellation the notes so accepted together with an Officers’ Certificate stating that such notes or portions thereof have been tendered to and purchased by the Company and the Co-Issuer.

The paying agent will promptly mail to each Holder the Change of Control Payment for such notes, and the Trustee will promptly authenticate and mail to each Holder another note equal in principal amount to the unpurchased portion of the notes surrendered; provided that each such other note will be in a principal amount of $2,000 or an integral multiple of $1,000 in excess of $2,000. The Company and the Co-Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

The Senior Credit Facilities, and future credit agreements or other agreements to which the Company becomes a party, may provide that certain change of control events with respect to the Company (including a Change of Control) would constitute a default thereunder and prohibit the Company from purchasing any notes as a result of a Change of Control. In the event a Change of Control occurs at a time when the Company is prohibited from purchasing the notes, the Company could seek the consent of its lenders to permit the purchase of the notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain such consent or repay such borrowings, the Company will remain prohibited from purchasing the notes. In such case, the Company’s failure to purchase tendered notes would constitute an Event of Default under the Indenture. If the Company experiences a change of control that triggers a default under the Senior Credit Facilities or cross defaults under other Indebtedness, the Company could seek a waiver of such defaults or seek to refinance the Indebtedness outstanding under the Senior Credit Facilities and such other Indebtedness. In the event the Company does not obtain such a waiver or refinance the Indebtedness outstanding under the Senior Credit Facilities and such other Indebtedness, such defaults could result in amounts outstanding under the Senior Credit Facilities and such other Indebtedness being declared due and payable. Our ability to pay cash to the Holders following the occurrence of a Change of Control may be limited by our then existing financial resources. Therefore, sufficient funds may not be available when necessary to make any required repurchases.

The Company and the Co-Issuer will not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the time and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and the Co-Issuer and purchases all notes validly tendered and not withdrawn under such Change of Control Offer. A Change of Control Offer may be made in advance of a Change of Control, conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.

The Change of Control purchase feature of the notes may in certain circumstances make more difficult or discourage a sale or takeover of the Company and, thus, the removal of incumbent management. The Change of Control purchase feature is a result of negotiations between the Company, the Co-Issuer and the Initial Purchasers. We have no present intention to engage in a transaction involving a Change of Control, although it is possible that we could decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of Indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to incur additional Indebtedness are contained in the covenant described under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”. Such restrictions can be waived with the consent of the holders of a majority in principal amount of the notes then outstanding. Except for the limitations contained in such covenant, however, the Indenture will not contain any covenants or provisions that may afford Holders protection in the event of a highly leveraged transaction.

The definition of “Change of Control” includes a disposition of all or substantially all of the assets of the Company or the Co-Issuer to any Person. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, in

124

certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of “all or substantially all” of the assets of the Company or the Co-Issuer. As a result, it may be unclear as to whether a Change of Control has occurred and whether a Holder may require the Company or the Co-Issuer to make an offer to repurchase the notes as described above.

The provisions under the Indenture relative to the Company’s and the Co-Issuer’s obligation to make an offer to repurchase the notes as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in principal amount of the notes.

Asset Sales

The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, cause, make or suffer to exist an Asset Sale, unless:

(1) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value (as determined in good faith by the Company) of the assets sold or otherwise disposed of; and

(2) except in the case of a Permitted Asset Swap, at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary, as the case may be, is in the form of cash or Cash Equivalents; provided that the amount of

(a) any liabilities (as shown on the Company’s or such Restricted Subsidiary’s most recent balance sheet or in the notes thereto) of the Company or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the notes, that are assumed by the transferee of any such assets (or a third party on behalf of the transferee) and for which the Company or such Restricted Subsidiary has been validly released by all creditors in writing,

(b) any securities, notes or other obligations or assets received by the Company or such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of such Asset Sale and

(c) any Designated Noncash Consideration received by the Company or such Restricted Subsidiary in such Asset Sale having an aggregate fair market value, taken together with all other Designated Noncash Consideration received pursuant to this clause (c) that is at that time outstanding, not to exceed the greater of (x) $100.0 million and (y) 4.0% of Total Assets at the time of the receipt of such Designated Noncash Consideration, with the fair market value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value,

shall be deemed to be cash for purposes of this provision and for no other purpose.

Within 365 days after any of the Company’s or any Restricted Subsidiary’s receipt of the Net Proceeds of any Asset Sale, the Company or such Restricted Subsidiary may, at its option, apply the Net Proceeds from such Asset Sale:

(1) to permanently reduce

(x) Obligations under the Senior Credit Facilities or any other Senior Indebtedness, in each case, of the Company or any Subsidiary Guarantor, and, in the case of Obligations under the Revolving Credit Facility, the Funded Synthetic Letter of Credit Facility or other similar Indebtedness, to correspondingly reduce commitments with respect thereto (other than Obligations owed to the Company or a Restricted Subsidiary); provided that if the Company or any Restricted Subsidiary shall so reduce Obligations under any Senior Indebtedness that is not Secured Indebtedness, the Company or such Subsidiary Guarantor shall, equally and ratably, reduce Obligations under the notes by, at its option, (A) redeeming the notes to the extent they are then redeemable as provided under “—Optional

125

Redemption”, (B) making an offer (in accordance with the procedures set forth below for an Asset Sale Offer) to all Holders to purchase their notes at 100% of the principal amount thereof, plus the amount of accrued and unpaid interest and Additional Interest, if any, on the principal amount of the notes to be repurchased or (C) purchasing notes through open market purchases (to the extent such purchases are at a price equal to or higher than 100% of the principal amount thereof) in a manner that complies with the Indenture and applicable securities law; or

(y) Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor, other than Indebtedness owed to the Company or another Restricted Subsidiary; or

(2) to an investment in (a) any one or more businesses; provided that such investment in any business is in the form of the acquisition of Capital Stock and results in the Company or any Restricted Subsidiary owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (b) properties, (c) capital expenditures and (d) acquisitions of other assets, that in each of (a), (b), (c) and (d) are used or useful in a Similar Business or replace the businesses, properties and assets that are the subject of such Asset Sale.

Any Net Proceeds from any Asset Sale that are not invested or applied in accordance with the preceding paragraph within 365 days from the date of the receipt of such Net Proceeds will be deemed to constitute “Excess Proceeds”; provided that if during such 365-day period the Company or a Restricted Subsidiary enters into a definitive binding agreement committing it to apply such Net Proceeds in accordance with the requirements of clause (2) of the immediately preceding paragraph after such 365th day, such 365-day period will be extended with respect to the amount of Net Proceeds so committed, but such extension will in no event be for a period longer than 180 days until such Net Proceeds are required to be applied in accordance with such agreement (or, if earlier, the date of termination of such agreement). When the aggregate amount of Excess Proceeds exceeds $35.0 million, the Company shall make an offer to all Holders and, if required by the terms of any Senior Indebtedness, to the holders of such Senior Indebtedness (other than with respect to Hedging Obligations) (an “Asset Sale Offer”), to purchase the maximum aggregate principal amount of notes and such Senior Indebtedness that is an integral multiple of $1,000 that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest, and Additional Interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. The Company will commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceed $35.0 million by mailing the notice required pursuant to the terms of the Indenture, with a copy to the Trustee. The Company may satisfy the foregoing obligations with respect to any Net Proceeds from an Asset Sale by making an Asset Sale Offer with respect to such Net Proceeds prior to the expiration of the relevant 365 days (or such longer period provided above) or with respect to Excess Proceeds of $35.0 million or less.

To the extent that the aggregate amount of notes and such Senior Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes, subject to other covenants contained in the Indenture. If the aggregate principal amount of notes or the Senior Indebtedness surrendered by such holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select or cause to be selected the notes and such Senior Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the notes or such Senior Indebtedness tendered. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds related to such Asset Sale Offer shall be reset at zero.

Pending the final application of any Net Proceeds pursuant to this covenant, the Company or the applicable Restricted Subsidiary may apply such Net Proceeds temporarily to reduce Indebtedness outstanding under a revolving credit facility or otherwise invest such Net Proceeds in any manner not prohibited by the Indenture.

The procedures for an Asset Sale Offer will be substantially the same as for a Change of Control Offer. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws

126

and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in the Indenture by virtue thereof.

The Senior Credit Facilities will limit, and future credit agreements or other agreements to which the Company becomes a party may limit or prohibit, the Company from purchasing any notes as a result of an Asset Sale Offer. In the event the Company is required to make an Asset Sale Offer at a time when the Company is prohibited from purchasing the notes, the Company could seek the consent of its lenders to permit the purchase of the notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain such consent or repay such borrowings, the Company will remain prohibited from purchasing the notes. In such case, the Company’s failure to purchase tendered notes would constitute an Event of Default under the Indenture.

The provisions under the Indenture relative to the Company’s obligation to make an offer to repurchase the notes as a result of an Asset Sale may be waived or modified with the written consent of the Holders of a majority in principal amount of the notes.

Transactions Involving MLPs and GPs

The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, cause or make a MLP Asset Transfer or a MLP Equity Transfer, unless:

(1) in the case of a MLP Asset Transfer, after such MLP Asset Transfer and as a result thereof, the Company and its Restricted Subsidiaries shall have received an amount of cash attributable to such MLP Asset Transfer (as a result of (i) the receipt of cash proceeds as all or a portion of the consideration for such MLP Asset Transfer or (ii) the repayment of intercompany indebtedness, owed by a Subsidiary of the Company, transferred or assumed as part of such MLP Asset Transfer) at least equal to 75% of the fair market value (as determined in good faith by the Company based on values that could be obtained in an arms’ length transaction) of (a) the assets and property transferred or (b) in the case of a transfer of any Equity Interests of a Person, such Person at the time of such MLP Asset Transfer (it being understood that, in the case of a transfer of less than all of the Equity Interests of a Person, the value of such Person shall be determined at the time of the first MLP Asset Transfer constituting part of such MLP Asset Transfer (as if all the Equity Interests in such Person shall have been transferred at the time of such first MLP Asset Transfer and the cash requirement set forth in this clause shall be satisfied on that basis in connection with such first MLP Asset Transfer) and there shall be no such additional cash attributable to such MLP Asset Transfer required for any subsequent transfer of Equity Interests of such Person constituting part of the MLP Asset Transfer) (in each case of the foregoing clauses (a) and (b), assuming such assets or Person, as applicable, operate as a going concern), with the balance of the consideration received by the Company and its Restricted Subsidiaries for such MLP Asset Transfer consisting solely of Equity Interests in the applicable MLP; provided, however, that in the event that the fair market value of the assets, property and Person transferred in connection with a MLP Asset Transfer exceed $100.0 million in the aggregate, the Company or such Restricted Subsidiary, as the case may be, shall have received a written opinion from an Independent Financial Advisor to the effect that such MLP Asset Transfer is fair, from a financial standpoint, to the Company and its Restricted Subsidiaries;

(2) in the case of a MLP Equity Transfer (other than a MLP Equity Transfer to the extent it is made to satisfy the proviso to the definition of “Minimum Cash Consideration,” in which case only the requirements of such proviso need be satisfied), the Company or a Restricted Subsidiary receives net proceeds in connection therewith in an amount at least equal to the fair market value of the Equity Interests that are transferred in such MLP Equity Transfer and at least 75% of the consideration for such MLP Equity Transfer received by the Company and its Restricted Subsidiaries is in the form of cash.

127

(3) the Company and the Restricted Subsidiaries are in compliance with the terms of the Indenture and the documentation governing the Senior Credit Facilities, and such MLP Asset Transfer or MLP Equity Transfer, as the case may be, would not result in a breach or violation of, or constitute a default under the Indenture or any of the documentation governing the Senior Credit Facilities; and

(4) such MLP Asset Transfer would not result in the related MLP or any MLP Subsidiary being required to assume the obligations of the Company or such Restricted Subsidiary under the terms of any of the Company’s or such Restricted Subsidiary’s Indebtedness

(any such MLP Asset Transfer or MLP Equity Transfer that complies with clauses (1) through (4) above being referred to as a “Permitted MLP Transfer”). All Equity Interests received by the Company or any Restricted Subsidiary as a result of any Permitted MLP Transfer that is a MLP Asset Transfer shall be held by the Company or such Restricted Subsidiary, as the case may be, until such time as any such Equity Interest is sold, conveyed, transferred or otherwise disposed of pursuant to this covenant.

The Indenture also provides that the Company will not, and will not permit any Restricted Subsidiary or MLP GP to, cause or make a GP Equity Transfer unless:

(1) (x) in the case of a GP Equity Transfer by the Company or a Restricted Subsidiary, the Company or a Restricted Subsidiary receives in connection therewith cash (which may include the repayment in cash of Indebtedness owing to the Company or such Restricted Subsidiary) at substantially the same time of such GP Equity Transfer in an amount at least equal to the greater of (i) $50.0 million (with this clause (i) applicable only in the case of a GP Equity Transfer undertaken in connection with the initial public offering of a MLP GP) and (ii) the fair market value of the Equity Interests subject to such GP Equity Transfer or (y) in the case of a GP Equity Transfer by a MLP GP, the net proceeds received by such MLP GP in such GP Equity Transfer, which shall be at least equal to the fair market value of the Equity Interests subject to such GP Equity Transfer, are used to pay a dividend to the holders of Equity Interests of such MLP GP or to purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests in such MLP GP; provided, however, that the Company or a Restricted Subsidiary shall receive at least a pro rata portion of such dividend or at least a pro rata portion of the payment for such purchase, redemption, defeasance, acquisition or retirement, except that such requirement shall not apply with respect to payments for the purchase, redemption, defeasance or retirement for value of Equity Interests (other than Disqualified Stock) of any MLP GP held by any future, present or former employee, director, manager or consultant of such MLP GP, any of its Subsidiaries or any of its direct or indirect parent companies pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement;

(2) the Company is in compliance with the terms of the Indenture and the documentation governing the Senior Credit Facilities, and such GP Equity Transfer would not result in a breach or violation of, or constitute a default under the Indenture or any of the documentation governing the Senior Credit Facilities;

(3) the related MLP GP’s sole business is to act as the general partner of the applicable Permitted MLP and engage in activities ancillary thereto and such MLP GP owns no assets (other than (i) ownership interests in such Permitted MLP and Capital Stock (other than Disqualified Stock) of the Company, (ii) temporarily holding assets to be transferred or distributed in connection with a Permitted MLP Transfer or Permitted GP Transfer or distributions from a Permitted MLP, (iii) current assets sufficient to satisfy its ordinary course operating expenses, including such expenses after it has become a publicly traded company, and other assets necessary for its existence and operation as a public company and (iv) the reserves referred to in clause (4) below); and

(4) the related GP is required by its partnership agreement to distribute all cash and Cash Equivalents that it receives from time to time to its partners on a pro rata basis, subject to the establishment of such reserves as management of such related GP determines are appropriate for general, administrative and operating expenses in the ordinary course of its business and as are prudent to maintain for the proper conduct of its business or to provide for future distributions, in each case in accordance with the terms of the

128

organizational documents of the related GP; provided that such organizational documents are, in the reasonable judgment of the Company, in a form that is customary for similar entities whose primary function is to serve as general partners of entities operating as master limited partnerships;

(any such GP Equity Transfer that complies with clauses (1) through (4) above being referred to as a “Permitted GP Transfer”). All Equity Interests in the related GP from time to time owned, directly or indirectly, by the Company shall be held by the Company or a Restricted Subsidiary until such time as any such Equity Interest is sold, conveyed, transferred or otherwise disposed of pursuant to this covenant.

For purposes of calculating the fair market value of any assets or property transferred to any Person, any Person and any Equity Interests in a Person with respect to any MLP Asset Transfer, MLP Equity Transfer or Permitted GP Transfer, any Indebtedness that is owed by such Person to the Company or any Restricted Subsidiary shall be disregarded and shall not be reflected in such calculation to reduce the fair market value of such assets or property, Person or Equity Interests in such Person, as the case may be.

Within 365 days after any Permitted MLP Transfer, Permitted GP Transfer or Extraordinary Distribution has occurred, the Company or the applicable Restricted Subsidiary, as the case may be, may, at its option, apply the Net Proceeds from such Permitted MLP Transfer, Permitted GP Transfer or Extraordinary Distribution to permanently reduce:

(1) Indebtedness under the Term Loan Facility and Asset Sale Bridge Facility;

(2) Obligations under other Senior Indebtedness of the Company or any Subsidiary Guarantor and, in the case of Obligations under the Revolving Credit Facility and the Funded Synthetic Letter of Credit Facility, to correspondingly reduce commitments with respect thereto (other than Obligations owed to the Company or a Restricted Subsidiary); provided that if the Company or any Restricted Subsidiary shall so reduce Obligations under any Senior Indebtedness that is not Secured Indebtedness, the Company or such Restricted Subsidiary shall, equally and ratably, reduce Obligations under the notes by, at its option, (A) redeeming the notes to the extent they are redeemable as provided under “—Optional Redemption”, (B) making an offer (in accordance with the procedures set forth below for a MLP Offer) to all Holders to purchase their notes at 100% of the principal amount thereof, plus the amount of accrued and unpaid interest on the principal amount of the notes to be repurchased, or (C) purchasing notes through open market purchases (to the extent such purchases are at a price equal to or higher than 100% of the principal amount thereof) in a manner that complies with the Indenture and applicable securities law; or

(3) Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor, other than Indebtedness owed to the Company or another Restricted Subsidiary.

Notwithstanding the foregoing, the Company or such Restricted Subsidiary may apply up to 50% of the Net Proceeds from any Permitted MLP Transfer (other than the Initial MLP Transfer), any Permitted GP Transfer or any Extraordinary Distribution to make a Permitted MLP Investment; provided that if during such 365-day period, the Company or a Restricted Subsidiary enters into a definitive binding agreement committing it to apply such Net Proceeds to make a Permitted MLP Investment after such 365th day, such 365-day period will be extended with respect to the amount of Net Proceeds so committed (but such extension will in no event be for a period longer than 180 days) until such Net Proceeds are required to be applied in accordance with such agreement (or, if earlier, the date of termination of such agreement).

If any Net Proceeds received are not invested or applied in accordance with the preceding paragraph within 365 days from the date of the receipt of such Net Proceeds (or such longer period provided for in such paragraph), then the Company shall make an offer to all Holders and, if required by the terms of any other Senior Indebtedness, to the holders of such other Senior Indebtedness (other than with respect to Hedging Obligations) (an “MLP Offer”), to purchase the maximum aggregate principal amount of notes and such other Senior Indebtedness that is an integral multiple of $1,000 that may be purchased out of the excess Net Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest,

129

and Additional Interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. The Company will commence a MLP Offer with respect to such Net Proceeds within ten Business Days after the date that excess Net Proceeds exceed $10.0 million by mailing the notice required pursuant to the terms of the Indenture, with a copy to the Trustee.

To the extent that the aggregate amount of notes and such other Senior Indebtedness tendered pursuant to a MLP Offer is less than the excess Net Proceeds from the Permitted MLP Transfer, Permitted GP Transfer or Extraordinary Distribution, the Company may use any remaining excess Net Proceeds for general corporate purposes, subject to other covenants contained in the Indenture. If the aggregate principal amount of notes and the other Senior Indebtedness surrendered by such holders thereof exceeds the amount of such excess Net Proceeds, the Trustee shall select or cause to be selected the notes and such other Senior Indebtedness to be purchased on a pro rata basis based on the principal amount (or accreted value, if applicable) of the notes or such other Senior Indebtedness tendered. Upon completion of any such MLP Offer, the amount of such excess Net Proceeds related to such MLP Offer shall be reset at zero.

Pending the final application of any Net Proceeds pursuant to this covenant, the Company or the applicable Restricted Subsidiary may apply such Net Proceeds temporarily to reduce Indebtedness outstanding under a revolving credit facility or otherwise invest such Net Proceeds in any manner not prohibited by the Indenture.

The procedures for a MLP Offer will be substantially the same as for a Change of Control Offer. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of notes pursuant to a MLP Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in the Indenture by virtue thereof.

The provisions under the Indenture relative to the Company’s obligation to make an offer to repurchase the notes as a result of a Permitted MLP Transfer, Permitted GP Transfer or Extraordinary Distribution may be waived or modified with the written consent of the Holders of a majority in principal amount of the notes.

Certain Covenants

Set forth below are summaries of certain covenants contained in the Indenture.

Limitation on Restricted Payments

The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly:

(1) declare or pay any dividend or make any distribution on account of the Company’s or any Restricted Subsidiary’s Equity Interests, including any dividend or distribution payable in connection with any merger or consolidation other than

(A) dividends or distributions by the Company payable in Equity Interests (other than Disqualified Stock) of the Company or in options, warrants or other rights to purchase such Equity Interests (other than Disqualified Stock) or

(B) dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a Wholly-Owned Subsidiary, the Company or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities;

(2) purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of the Company or any direct or indirect parent of the Company, including in connection with any merger or consolidation;

130

(3) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value in each case, prior to any scheduled repayment, sinking fund payment or maturity, any Subordinated Indebtedness, other than

(x) Indebtedness permitted under clauses (j)(1) and (j)(2) of the covenant described under “—Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” or

(y) the purchase, repurchase or other acquisition of Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition; or

(4) make any Restricted Investment;

(all such payments and other actions set forth in clauses (1) through (4) above being collectively referred to as “Restricted Payments”), unless, at the time of such Restricted Payment:

(a) no Default shall have occurred and be continuing or would occur as a consequence thereof;

(b) immediately after giving effect to such transaction on a pro forma basis, the Company could incur $1.00 of additional Indebtedness under the provisions of the first paragraph of the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”; and

(c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and the Restricted Subsidiaries after October 31, 2005 pursuant to the first paragraph of this covenant or clauses (1), (2) (with respect to the payment of dividends on Refunding Capital Stock pursuant to clause (b) thereof only), (6)(C), (8) and (12) of the next succeeding paragraph (and excluding, for the avoidance of doubt, all other Restricted Payments made pursuant to the next succeeding paragraph), is less than the sum, without duplication, of

(1) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from September 1, 2005 to the end of the Company’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, or, in the case such Consolidated Net Income for such period is a deficit, minus 100% of such deficit; provided that if, at the time of a proposed Restricted Payment under the first paragraph of this covenant, the Consolidated Leverage Ratio of the Company and its Restricted Subsidiaries is less than 3.50: 1.00, for purposes of calculating availability of amounts hereunder for such Restricted Payment only, the reference to 50% in this clause (1) above shall be deemed to be 75%, plus

(2) 100% of the aggregate net cash proceeds and the fair market value, as determined in good faith by the Company, of marketable securities or other property received by the Company after October 31, 2005 (less the amount of such net cash proceeds to the extent such amount has been relied upon to permit the incurrence of Indebtedness, or issuance of Disqualified Stock or Preferred Stock pursuant to clause (u)(ii) of the second paragraph of “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”) from the issue or sale of

(x) Equity Interests of the Company, including Retired Capital Stock (as defined below), but excluding cash proceeds and the fair market value, as determined in good faith by the Company, of marketable securities or other property received from the sale of

(A) Equity Interests to any future, present or former employees, managers, directors or consultants of the Company, any direct or indirect parent company of the Company or any of the Company’s Subsidiaries after October 31, 2005 to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of the next succeeding paragraph and

131

(B) Designated Preferred Stock and to the extent actually contributed to the Company, Equity Interests of the Company’s direct or indirect parent companies (excluding contributions of the proceeds from the sale of Designated Preferred Stock of such companies or contributions to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of the next succeeding paragraph) or

(y) debt securities of the Company that have been converted into or exchanged for such Equity Interests of the Company;

provided that this clause (2) shall not include the proceeds from (a) Refunding Capital Stock (as defined below), (b) Equity Interests of the Company or debt securities of the Company that have been converted into or exchanged for Equity Interests of the Company sold to a Restricted Subsidiary or the Company, as the case may be, (c) Disqualified Stock or debt securities that have been converted into or exchanged for Disqualified Stock or (d) Excluded Contributions, plus

(3) 100% of the aggregate amount of cash and the fair market value, as determined in good faith by the Company, of marketable securities or other property contributed to the capital of the Company after October 31, 2005 (less the amount of such net cash proceeds to the extent such amount has been relied upon to permit the incurrence of Indebtedness or issuance of Disqualified Stock or Preferred Stock pursuant to clause (u)(ii) of the second paragraph of “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”) (other than by a Restricted Subsidiary and other than by any Excluded Contributions), plus

(4) to the extent not already included in Consolidated Net Income, 100% of the aggregate amount received in cash and the fair market value, as determined in good faith by the Company, of marketable securities or other property received after October 31, 2005 by means of

(A) the sale or other disposition (other than to the Company or a Restricted Subsidiary) of Restricted Investments made by the Company or any Restricted Subsidiary and repurchases and redemptions of such Restricted Investments from the Company or any Restricted Subsidiary and repayments of loans or advances that constitute Restricted Investments by the Company or any Restricted Subsidiary or

(B) the sale (other than to the Company or a Restricted Subsidiary) of the Capital Stock of an Unrestricted Subsidiary or a distribution from an Unrestricted Subsidiary (other than in each case to the extent the Investment in such Unrestricted Subsidiary was made by the Company or a Restricted Subsidiary pursuant to clauses (9) or (13) of the next succeeding paragraph or to the extent such Investment constituted a Permitted Investment) or a dividend from an Unrestricted Subsidiary, plus

(5) in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary after October 31, 2005, the fair market value of the Investment in such Unrestricted Subsidiary, as determined by the Company in good faith or if, in the case of an Unrestricted Subsidiary, such fair market value may exceed $100.0 million, in writing by an Independent Financial Advisor, at the time of the redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary, other than an Unrestricted Subsidiary to the extent the Investment in such Unrestricted Subsidiary was made by the Company or a Restricted Subsidiary pursuant to clauses (9) or (13) of the next succeeding paragraph or to the extent such Investment constituted a Permitted Investment.

The foregoing provisions will not prohibit:

(1) the payment of any dividend or distribution within 60 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of the Indenture;

(2) (a) the redemption, repurchase, retirement or other acquisition of any Equity Interests (“Retired Capital Stock”) or Subordinated Indebtedness of the Company or any Equity Interests of any direct or indirect parent company of the Company, in exchange for, or out of the proceeds of the substantially

132

concurrent sale (other than to a Restricted Subsidiary) of, Equity Interests of the Company (in each case, other than any Disqualified Stock) (“Refunding Capital Stock”) and (b) if immediately prior to the retirement of Retired Capital Stock, the declaration and payment of dividends thereon was permitted under clause (6) of this paragraph, the declaration and payment of dividends on the Refunding Capital Stock (other than Refunding Capital Stock the proceeds of which were used to redeem, repurchase, retire or otherwise acquire any Equity Interests of any direct or indirect parent company of the Company) in an aggregate amount per year no greater than the aggregate amount of dividends per annum that was declarable and payable on such Retired Capital Stock immediately prior to such retirement;

(3) the defeasance, redemption, repurchase or other acquisition or retirement of Subordinated Indebtedness of the Company or a Subsidiary Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, new Indebtedness of such Person that is incurred in compliance with the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” so long as

(A) the principal amount of such new Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Subordinated Indebtedness being so defeased, redeemed, repurchased, acquired or retired for value, plus the amount of any reasonable premium required to be paid under the terms of the instrument governing the Subordinated Indebtedness being so defeased, redeemed, repurchased, acquired or retired and any reasonable fees and expenses incurred in connection with the issuance of such new Indebtedness;

(B) such Indebtedness is subordinated to the notes at least to the same extent as such Subordinated Indebtedness so defeased, redeemed, repurchased, acquired or retired;

(C) such Indebtedness has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Subordinated Indebtedness being so defeased, redeemed, repurchased, acquired or retired; and

(D) such Indebtedness has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of the Subordinated Indebtedness being so defeased, redeemed, repurchased, acquired or retired;

(4) a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of Equity Interests (other than Disqualified Stock) of the Company or any of its direct or indirect parent companies held by any future, present or former employee, director, manager or consultant of the Company, any of its Subsidiaries or any of its direct or indirect parent companies pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement; provided that the aggregate Restricted Payments made under this clause (4) do not exceed in any calendar year $10.0 million (with unused amounts in any calendar year being carried over to succeeding calendar years subject to a maximum (without giving effect to the following proviso) of $20.0 million in any calendar year); provided, further, that such amount in any calendar year may be increased by an amount not to exceed

(A) the cash proceeds from the sale of Equity Interests (other than Disqualified Stock) of the Company and, to the extent contributed to the Company, Equity Interests of any of the Company’s direct or indirect parent companies, in each case to members of management, directors, managers or consultants of the Company, any of its Subsidiaries or any of its direct or indirect parent companies that occurs after October 31, 2005, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (c) of the preceding paragraph, plus

(B) the cash proceeds of key man life insurance policies received by the Company and the Restricted Subsidiaries after October 31, 2005, less

(C) the amount of any Restricted Payments previously made pursuant to clauses (A) and (B) of this clause (4);

133

and provided, further, that cancellation of Indebtedness owing to the Company from members of management, directors, managers or consultants of the Company, any of its direct or indirect parent companies or any Restricted Subsidiary in connection with a repurchase of Equity Interests of the Company or any of its direct or indirect parent companies will not be deemed to constitute a Restricted Payment for purposes of this covenant or any other provision of the Indenture;

(5) the declaration and payment of dividends to holders of any class or series of Disqualified Stock of the Company or any Restricted Subsidiary issued in accordance with the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” to the extent such dividends are included in the definition of Fixed Charges;

(6) (A) the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by the Company after October 31, 2005;

(B) the declaration and payment of dividends to a direct or indirect parent company of the Company, the proceeds of which will be used to fund the payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of such parent company issued after October 31, 2005; provided that the amount of dividends paid pursuant to this clause (B) shall not exceed the aggregate amount of cash actually contributed to the Company from the sale of such Designated Preferred Stock; or

(C) the declaration and payment of dividends on Refunding Capital Stock that is Preferred Stock in excess of the dividends declarable and payable thereon pursuant to clause (2) of this paragraph;

provided, however, in the case of each of (A), (B) and (C) of this clause (6), that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock or the declaration of such dividends on Refunding Capital Stock that is Preferred Stock, after giving effect to such issuance or declaration on a pro forma basis, the Company and the Restricted Subsidiaries on a consolidated basis would have had a Fixed Charge Coverage Ratio of at least 2.00 to 1.00;

(7) repurchases of Equity Interests deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;

(8) the declaration and payment of dividends on the Company’s common stock following the first public offering of the Company’s common stock or the common stock of any of its direct or indirect parent companies after October 31, 2005, of up to 6% per annum of the net proceeds received by or contributed to the Company in or from any such public offering, other than public offerings with respect to the Company’s common stock registered on Form S-4 or Form S-8 and other than any public sale constituting an Excluded Contribution;

(9) Restricted Payments that are made with Excluded Contributions;

(10) the declaration and payment of dividends by the Company to, or the making of loans to, its direct parent company in amounts required for the Company’s direct or indirect parent companies to pay

(A) franchise taxes and other fees, taxes and expenses required to maintain their corporate existence;

(B) Federal, state and local income taxes, to the extent such income taxes are attributable to the income of the Company and the Restricted Subsidiaries and, to the extent of the amount actually received from its Unrestricted Subsidiaries, in amounts required to pay such taxes to the extent attributable to the income of such Unrestricted Subsidiaries;

(C) customary salary, bonus and other benefits payable to officers and employees of any direct or indirect parent company of the Company to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Company and the Restricted Subsidiaries;

(D) general corporate overhead expenses of any direct or indirect parent company of the Company to the extent such expenses are attributable to the ownership or operation of the Company and the Restricted Subsidiaries; and

134

(E) reasonable fees and expenses incurred in connection with any unsuccessful debt or equity offering by such direct or indirect parent company of the Company;

(11) any Restricted Payments used to fund the Transactions and the fees and expenses related thereto, including those owed to Affiliates, in each case to the extent permitted by the covenant described under “—Transactions with Affiliates”;

(12) the repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness pursuant to provisions similar to those described under “Repurchase at the Option of Holders—Change of Control”, “—Asset Sales” and “—Transactions Involving MLPs and GPs”; provided that prior to such repurchase, redemption or other acquisition the Company (or a third party to the extent permitted by the Indenture) shall have made a Change of Control Offer, Asset Sale Offer or MLP Offer, as the case may be, with respect to the notes and shall have repurchased all notes validly tendered and not withdrawn in connection with such Change of Control Offer, Asset Sale Offer or MLP Offer;

(13) Investments in Unrestricted Subsidiaries having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (13) that are at the time outstanding, without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash or marketable securities, not to exceed the greater of (x) $100.0 million and (y) 4.0% of Total Assets at the time of such Investment (with the fair market value of each Investment being measured at the time such Investment is made and without giving effect to subsequent changes in value);

(14) distributions or payments of Receivables Fees;

(15) the distribution, as a dividend or otherwise (and the declaration of such dividend), of shares of Capital Stock of, or Indebtedness owed to the Company or a Restricted Subsidiary by, (a) any Person designated as an Unrestricted Subsidiary after October 31, 2005 pursuant to the terms of the Indenture (other than any of the Unrestricted Subsidiaries referred to in clause (1) of the first paragraph of the definition of “Unrestricted Subsidiary” and any successor thereto) or (b) any Permitted MLP or Permitted GP; provided that at the time of such dividend or distribution, with respect to this clause (b) only, and after giving pro forma effect thereto, the Consolidated Leverage Ratio would be less than 2.75:1.0;

(16) Restricted Payments in an amount that, when taken together with all other Restricted Payments made pursuant to this clause (16) does not exceed the sum of (x) 50% of the amount by which the Net Proceeds from the North Texas Asset Sale exceed $700.0 million but are less than or equal to $850.0 million and (y) 25% of the amount by which the Net Proceeds from the North Texas Asset Sale exceed $850.0 million; provided that first $700.0 million of Net Proceeds from the North Texas Asset Sale plus the balance of the Net Proceeds described in subclauses (x) and (y) above shall have been applied in accordance with the covenant described under “Repurchase at the Option of Holders—Asset Sales” and the amount of Indebtedness permitted to be incurred under clause (b) of the second paragraph of the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” shall, as a consequence thereof, have been reduced to the extent provided therein; and

(17) other Restricted Payments taken together with all other Restricted Payments made pursuant to this clause (17), not to exceed $75.0 million;

provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (15), (16) and (17) no Default shall have occurred and be continuing or would occur as a consequence thereof.

As of the time of issuance of the old notes, all of the Company’s Subsidiaries were Restricted Subsidiaries other than Versado Gas Processors L.L.C., Downstream Energy Ventures, Co., L.L.C. and Cedar Bayou Fractionaters, LP. The Company will not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the last sentence of the definition of “Unrestricted Subsidiary”. For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the Company and the

135

Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated will be deemed to be Restricted Payments in an amount determined as set forth in the last sentence of the definition of “Investments”. Such designation will be permitted only if a Restricted Payment in such amount would be permitted at such time, whether pursuant to the first paragraph of this covenant or under clauses (9), (13), or (17), or pursuant to the definition of “Permitted Investments”, and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries will not be subject to any of the restrictive covenants set forth in the Indenture.

Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock

The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, (collectively, “incur” and collectively, an “incurrence”) with respect to any Indebtedness (including Acquired Indebtedness), and the Company will not issue any shares of Disqualified Stock and will not permit any Restricted Subsidiary to issue any shares of Disqualified Stock or Preferred Stock; provided that the Company may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock, and any Restricted Subsidiary may incur Indebtedness (including Acquired Indebtedness), issue shares of Disqualified Stock or issue shares of Preferred Stock, if the Fixed Charge Coverage Ratio on a consolidated basis for the Company’s and its Restricted Subsidiaries’ most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or Preferred Stock is issued would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or Preferred Stock had been issued, as the case may be, and the application of the proceeds therefrom had occurred at the beginning of such four-quarter period; provided that the amount of Indebtedness (including Acquired Indebtedness), Disqualified Stock and Preferred Stock that may be incurred or issued, as applicable pursuant to the foregoing by Restricted Subsidiaries that are not Subsidiary Guarantors shall not exceed $75.0 million at any one time outstanding.

The foregoing limitations will not apply to any of the following items (collectively, “Permitted Debt”):

(a) Indebtedness incurred pursuant to the Revolving Credit Facility by the Company or any Restricted Subsidiary; provided that immediately after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (a) and then outstanding does not exceed $250.0 million less up to $50.0 million in the aggregate of all principal payments with respect to such Indebtedness made pursuant to the second paragraph under “Repurchase at Option of Holders—Asset Sales” or pursuant to the fourth paragraph under “Repurchase at Option of Holders—Transactions Involving MLPs and GPs”;

(b) Indebtedness incurred pursuant to the Term Loan Facility and the Asset Sale Bridge Term Loan Facility by the Company or any Restricted Subsidiary; provided that immediately after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (b) and then outstanding does not exceed $1,950.0 million less the sum of (x) all principal payments with respect to such Indebtedness made pursuant to the second paragraph under “Repurchase at Option of Holders—Asset Sales” with the first $700.0 million of the Net Proceeds from the North Texas Asset Sale and (y) up to $200.0 million in the aggregate of all other principal payments with respect to such Indebtedness made pursuant to the second paragraph under “Repurchase at Option of Holders—Asset Sales” or the fourth paragraph under “Repurchase at Option of Holders—Transactions Involving MLPs and GPs”;

(c) Indebtedness incurred pursuant to the Funded Synthetic Letter of Credit Facility by the Company or any Restricted Subsidiary; provided that immediately after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (c) and then outstanding does not exceed $300.0 million less up to $50.0 million in the aggregate of all principal payments with respect to such Indebtedness made pursuant to the second paragraph under “Repurchase at Option of Holders—Asset Sales” or the fourth paragraph under “Repurchase at Option of Holders—Transactions Involving MLPs and GPs”;

136

(d) additional Indebtedness incurred by the Company or any Restricted Subsidiary under clauses (a), (b) or (c) above; provided that immediately after giving effect to such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (d) and then outstanding does not exceed the sum of $200.0 million less up to $60.0 million in the aggregate of all principal payments with respect to such Indebtedness made pursuant to the second paragraph under “Repurchase at Option of Holders—Asset Sales” or the fourth paragraph under “Repurchase at Option of Holders—Transactions Involving MLPs and GPs”;

(e) the incurrence by the Company, Co-Issuer and any Subsidiary Guarantor of Indebtedness represented by the old notes (including any Subsidiary Guarantees thereof) and the new notes and related exchange guarantees to be issued in exchange for the old notes and the Subsidiary Guarantees pursuant to the Registration Rights Agreement (other than any Additional Notes);

(f) Existing Indebtedness (other than Indebtedness described in clauses (a), (b), (c), (d) and (e));

(g) Indebtedness (including Capitalized Lease Obligations), Disqualified Stock and Preferred Stock incurred by the Company or any of the Restricted Subsidiaries, to finance the development, construction, purchase, lease, repairs, additions or improvement of property (real or personal), equipment or other fixed or capital assets that are used or useful in a Similar Business, whether through the direct purchase of assets or the Capital Stock of any Person owning such assets (including any refinancing or replacement thereof); provided that the aggregate amount of Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this clause (g) does not exceed the greater of (x) $75.0 million and (y) 3.0% of Total Assets at any one time outstanding;

(h) Indebtedness incurred by the Company or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including letters of credit in respect of workers’ compensation claims, or other Indebtedness with respect to reimbursement type obligations regarding workers’ compensation claims; provided that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence;

(i) Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; provided that

(1) such Indebtedness is not reflected on the balance sheet of the Company or any Restricted Subsidiary (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (i)(1)) and

(2) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including monkish proceeds (the fair market value of such noncash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Company and its Restricted Subsidiaries in connection with such disposition;

(j) Indebtedness of

(1) the Company to a Restricted Subsidiary (other than a GP or the general partner of a GP); provided that any such Indebtedness owing to a Restricted Subsidiary that is not a Subsidiary Guarantor is subordinated in right of payment to the notes; provided, further, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary) shall be deemed, in each case, to be an incurrence of such Indebtedness and

(2) Indebtedness of a Restricted Subsidiary to the Company or another Restricted Subsidiary (other than a GP or the general partner of a GP); provided that if a Subsidiary Guarantor incurs such

137

Indebtedness to a Restricted Subsidiary that is not a Subsidiary Guarantor, such Indebtedness is subordinated in right of payment to the Subsidiary Guarantee of such Subsidiary Guarantor; provided, further, that any subsequent issuance or transfer of Capital Stock or any other event that results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary) shall be deemed, in each case, to be an incurrence of such Indebtedness;

(k) shares of Preferred Stock of a Restricted Subsidiary issued to the Company or another Restricted Subsidiary; provided that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of Preferred Stock (except to the Company or another Restricted Subsidiary) shall be deemed in each case to be an issuance of such shares of Preferred Stock;

(l) Hedging Obligations (excluding Hedging Obligations entered into for speculative purposes) for the purpose of limiting: (A) interest rate risk with respect to any Indebtedness that is permitted by the terms of the Indenture to be outstanding, (B) exchange rate risk with respect to any currency exchange or (C) commodity pricing risk with respect to any commodity;

(m) obligations in respect of performance, bid, appeal and surety bonds and completion guarantees and similar obligations provided by the Company or any Restricted Subsidiary in the ordinary course of business;

(n) (x) any guarantee by the Company or a Restricted Subsidiary of Indebtedness or other Obligations of any Restricted Subsidiary, so long as the incurrence of such Indebtedness by such Restricted Subsidiary is permitted under the terms of the Indenture or (y) any guarantee by a Restricted Subsidiary of Indebtedness of the Company permitted to be incurred under the terms of the Indenture; provided that such guarantee is incurred in accordance with the covenant described below under “—Limitation on Guarantees of Indebtedness by Restricted Subsidiaries”;

(o) the incurrence by the Company or any Restricted Subsidiary of Indebtedness, Disqualified Stock or Preferred Stock that serves to extend, replace, refund, refinance, renew or defease any Indebtedness, Disqualified Stock or Preferred Stock incurred as permitted under the first paragraph of this covenant and clauses (e) and (f) above, this clause (o) and clauses (p) and (u)(ii) below or any Indebtedness, Disqualified Stock or Preferred Stock issued to so extend, replace, refund, refinance, renew or defease such Indebtedness, Disqualified Stock or Preferred Stock including additional Indebtedness, Disqualified Stock or Preferred Stock incurred to pay premiums and fees in connection therewith (the “Refinancing Indebtedness”) prior to its respective maturity; provided, however, that such Refinancing Indebtedness:

(1) has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred which is not less than the remaining Weighted Average Life to Maturity of the Indebtedness, Disqualified Stock or Preferred Stock being extended, replaced, refunded, refinanced, renewed or defeased,

(2) to the extent such Refinancing Indebtedness extends, replaces, refunds, refinances, renews or defeases (i) Indebtedness subordinated to the notes or any Subsidiary Guarantee, such Refinancing Indebtedness is subordinated to the notes or such Subsidiary Guarantee at least to the same extent as the Indebtedness being extended, replaced, refunded, refinanced, renewed or defeased or (ii) Disqualified Stock or Preferred Stock, such Refinancing Indebtedness must be Disqualified Stock or Preferred Stock, respectively and

(3) shall not include

(x) Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary that is not a Subsidiary Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of the Company,

(y) Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary that is not a Subsidiary Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary Guarantor or

138

(z) Indebtedness, Disqualified Stock or Preferred Stock of the Company or a Restricted Subsidiary that refinances Indebtedness, Disqualified Stock or Preferred Stock of an Unrestricted Subsidiary;

(p) Indebtedness, Disqualified Stock or Preferred Stock (y) of the Company or any of its Restricted Subsidiaries incurred to finance the acquisition of any Person or assets or (z) of Persons that are acquired by the Company or any Restricted Subsidiary or merged into the Company or a Restricted Subsidiary in accordance with the terms of the Indenture; provided that either

(1) after giving effect to such acquisition or merger, either

(A) the Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first sentence of this covenant; or

(B) the Fixed Charge Coverage Ratio of the Company and its Restricted Subsidiaries on a consolidated basis is greater than immediately prior to such acquisition or merger; or

(2) such Indebtedness, Disqualified Stock or Preferred Stock (a) is not Secured Indebtedness and is Subordinated Indebtedness, (b) is not incurred while a Default exists and no Default shall result therefrom, (c) does not mature (and is not mandatorily redeemable in the case of Disqualified Stock or Preferred Stock) and does not require any payment of principal prior to the final maturity of the notes and (d) in the case of clause (z) above only, is not incurred in contemplation of such acquisition or merger;

(q) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within two Business Days of its incurrence;

(r) Indebtedness of the Company or any Restricted Subsidiary supported by a letter of credit issued pursuant to the Senior Credit Facilities, in a principal amount not in excess of the stated amount of such letter of credit;

(s) Indebtedness, Disqualified Stock or Preferred Stock of a Restricted Subsidiary incurred to finance or assumed in connection with an acquisition which, when aggregated with the principal amount of all other Indebtedness, Disqualified Stock and Preferred Stock incurred under this clause (s) and then outstanding (including any refinancing or replacement thereof), does not exceed $50.0 million (it being understood that any Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this clause (s) shall cease to be deemed incurred or outstanding for purposes of this clause (s) but shall be deemed incurred pursuant to the first paragraph of this covenant from and after the first date on which the Company or such Restricted Subsidiary could have incurred such Indebtedness, Disqualified Stock or Preferred Stock under the first paragraph of this covenant without reliance on this clause (s));

(t) Indebtedness incurred by a Foreign Subsidiary which, when aggregated with the principal amount of all other Indebtedness incurred pursuant to this clause (t) and then outstanding, does not exceed 5.0% of Foreign Subsidiary Total Assets (it being understood that any Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this clause (t) shall cease to be deemed incurred or outstanding for purposes of this clause (t) but shall be deemed incurred pursuant to the first paragraph of this covenant from and after the first date on which the Company or such Restricted Subsidiary could have incurred such Indebtedness, Disqualified Stock or Preferred Stock pursuant to the first paragraph of this covenant without reliance on this clause (t));

(u) Indebtedness, Disqualified Stock and Preferred Stock of the Company or any Restricted Subsidiary not otherwise permitted hereunder in an aggregate principal amount or liquidation preference, which, when aggregated with the principal amount and liquidation preference of all other Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this clause (u) and then outstanding, does not at any one time outstanding exceed the sum of

(i) $125.0 million (it being understood that any Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this clause (u)(i) shall cease to be deemed incurred or outstanding for

139

purposes of this clause (u)(i) but shall be deemed incurred for purposes of the first paragraph of this covenant from and after the first date on which the Company or such Restricted Subsidiary could have incurred such Indebtedness, Disqualified Stock or Preferred Stock pursuant to the first paragraph of this covenant without reliance on this clause (u)(i)); plus

(ii) 200% of the net cash proceeds received by the Company since after October 31, 2005 from the issue or sale of Equity Interests of the Company or cash contributed to the capital of the Company (in each case other than proceeds of Disqualified Stock or sales of Equity Interests to the Company or any of its Subsidiaries) as determined in accordance with clauses (c)(2) and (c)(3) of the first paragraph of the covenant described under “—Limitation on Restricted Payments” to the extent such net cash proceeds or cash have not been applied pursuant to such clauses to make Restricted Payments or to make other investments, payments or exchanges pursuant to the second paragraph of the covenant described under “—Limitation on Restricted Payments” or to make Permitted Investments (other than Permitted Investments specified in clauses (a) and (c) of the definition thereof);

(v) Indebtedness consisting of Indebtedness issued by the Company or any Restricted Subsidiary to current or former officers, directors and employees thereof, their respective estates, spouses or former spouses, in each case to finance the repurchase, retirement or other acquisition or retirement of Equity Interests of the Company or any direct or indirect parent company of the Company to the extent permitted pursuant to clause (4) of the second paragraph under “—Limitation on Restricted Payments”; and

(w) Indebtedness of the Company or a Restricted Subsidiary to a GP or a general partner of a GP, in each case that is a Restricted Subsidiary; provided that the principal amount of such Indebtedness may not exceed the actual cash loaned by such GP or such general partner, as applicable, to the Company or such Restricted Subsidiary (except to the extent that interest accrued thereon is added to the principal amount thereof) and such Indebtedness

(1) is not convertible into, or putable or exchangeable for, any other security other than a security that would satisfy the requirement of this clause (w);

(2) does not mature or become mandatorily redeemable, putable or subject to a purchase offer, pursuant to a sinking fund obligation or otherwise, or become redeemable at the option of the holder thereof, in whole or in part, in each case prior to the date that is 91 days after the notes are no longer outstanding (such 91st day being the “Permitted Date”),

(3) does not require or permit the payment of cash interest or any other payment of cash with respect to such Indebtedness until the Permitted Date; and

(4) is subordinated to the notes on the terms provided for in the Indenture, including a prohibition against enforcing any rights with respect to such Indebtedness prior to the Permitted Date;

provided that any subsequent issuance or transfer of Capital Stock (including a GP Equity Transfer) or any other event which results in any such GP or such general partner, as applicable, ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary) shall be deemed in each case to be an incurrence of such Indebtedness.

For purposes of determining compliance with this covenant, in the event that an item of Indebtedness, Disqualified Stock or Preferred Stock meets the criteria of more than one of the categories of Permitted Debt described in clauses (a) through (v) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company, in its sole discretion, will classify or reclassify or later divide, classify or reclassify such item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) and will only be required to include the amount and type of such Indebtedness, Disqualified Stock or Preferred Stock in one or more of the above clauses; provided that all Indebtedness outstanding under the Senior Credit Facilities on October 31, 2005 will be deemed to have been incurred on such date in reliance on the exception in clauses (a), (b) and (c) of the definition of Permitted Debt.

140

The accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness, Disqualified Stock or Preferred Stock will not be deemed to be an incurrence of Indebtedness, Disqualified Stock or Preferred Stock for purposes of this covenant.

For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency will be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt; provided that if such Indebtedness is incurred to extend, replace, refund, refinance, renew or defease other Indebtedness denominated in a foreign currency, and such extension, replacement, refunding, refinancing, renewal or defeasance would cause the applicable U.S. dollar denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such extension, replacement, refunding, refinancing, renewal or defeasance such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being extended, replaced, refunded, refinanced, renewed or defeased.

The principal amount of any Indebtedness incurred to extend, replace, refund, refinance, renew or defease other Indebtedness, if incurred in a different currency from the Indebtedness being extended, replaced, refunded, refinanced, renewed or defeased, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such extension, replacement, refunding, refinancing, renewal or defeasance.

Liens

The Company will not, and will not permit the Co-Issuer or any of the Subsidiary Guarantors to, directly or indirectly, create, incur, assume or suffer to exist any Lien (except Permitted Liens) that secures obligations under any Indebtedness on any asset or property of the Company or any Subsidiary Guarantor now owned or hereafter acquired, or any income or profits therefrom, or assign or convey any right to receive income therefrom, unless:

(1) in the case of Liens securing Subordinated Indebtedness, the notes or the applicable Subsidiary Guarantee of a Subsidiary Guarantor, as the case may be, are secured by a Lien on such property or assets that is senior in priority to such Liens; and

(2) in all other cases, the notes or the applicable Subsidiary Guarantee of a Subsidiary Guarantor, as the case may be, are equally and ratably secured;

provided that any Lien that is granted to secure the notes under this covenant shall be discharged at the same time as the discharge of the Lien that gave rise to the obligation to so secure the notes.

Merger, Consolidation or Sale of All or Substantially All Assets

The Company may not consolidate or merge with or into or wind up into (whether or not the Company is the surviving entity), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:

(1) the Company is the surviving company or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a Person organized or existing under the laws of the United States of America, any state thereof, the District of Columbia, or any territory thereof (the Company or such Person, as the case may be, being herein called the “Successor Company”);

(2) the Successor Company, if other than the Company, expressly assumes all the obligations of the Company under the Indenture and the notes pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;

141

(3) immediately after such transaction, no Default exists;

(4) immediately after giving pro forma effect to such transaction, as if such transaction had occurred at the beginning of the applicable four-quarter period,

(A) the Successor Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first sentence of the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” or

(B) the Fixed Charge Coverage Ratio for the Successor Company and the Restricted Subsidiaries on a consolidated basis would be greater than such ratio for the Company and the Restricted Subsidiaries immediately prior to such transaction;

(5) each Subsidiary Guarantor, unless it is the other party to the transactions described above, in which case clause (A)(2) of the second succeeding paragraph shall apply, shall have by supplemental indenture confirmed that its Subsidiary Guarantee shall apply to such Person’s obligations under the Indenture and the notes;

(6) the Company shall have delivered to the Trustee an Officers’ Certificate and an opinion of counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with the Indenture; and

(7) if the Successor Company will not be a corporation following any such merger, consolidation, winding up, sole assignment, transfer, lease, conveyance or other disposition, the Company shall have delivered to the Trustee an opinion of counsel to the effect that the Holders will not recognize income, gain or loss for Federal income tax purposes as a result of such transaction and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such transaction had not occurred.

The Successor Company will succeed to, and be substituted for, the Company under the Indenture and the notes. Notwithstanding the foregoing clauses (3) and (4),

(a) any Restricted Subsidiary (other than the Co-Issuer) may consolidate with, merge into or transfer all or part of its properties and assets to the Company and

(b) the Company may merge with an Affiliate of the Company incorporated solely for the purpose of reincorporating the Company in another state of the United States of America or converting into a different form of business entity so long as the amount of Indebtedness of the Company and the Restricted Subsidiaries is not increased thereby.

Subject to certain limitations described in the Indenture governing release of a Subsidiary Guarantee upon the sale, disposition or transfer of a Subsidiary Guarantor, each Subsidiary Guarantor will not, and the Company will not permit any Subsidiary Guarantor to, consolidate or merge with or into or wind up into (whether or not such Subsidiary Guarantor is the surviving entity), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, any Person unless

(A) (1) such Subsidiary Guarantor is the surviving entity or the Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation or other entity organized or existing under the laws of the United States of America, any state thereof, the District of Columbia, or any territory thereof (such Subsidiary Guarantor or such Person, as the case may be, being herein called the “Successor Person”);

(2) the Successor Person, if other than such Subsidiary Guarantor, expressly assumes all the obligations of such Subsidiary Guarantor under the Indenture and such Subsidiary Guarantor’s Subsidiary Guarantee, pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;

142

(3) immediately after such transaction, no Default exists; and

(4) the Company shall have delivered to the Trustee an Officers’ Certificate and an opinion of counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with the Indenture; or

(B) the transaction is made in compliance with the covenant described under “Repurchase at the Option of Holders—Asset Sales” or “Repurchase at the Option of Holders—Transactions Involving MLPs and GPs”, as applicable.

Subject to certain limitations described in the Indenture, the Successor Person will succeed to, and be substituted for, such Subsidiary Guarantor under the Indenture and, such Subsidiary Guarantor’s Subsidiary Guarantee. Notwithstanding the foregoing, any Subsidiary Guarantor may merge into or transfer all or part of its properties and assets to another Subsidiary Guarantor or the Company.

The Co-Issuer may not, and the Company will not permit the Co-Issuer to, consolidate or merge with or into or wind up into (whether or not the Co-Issuer is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to any Person unless:

(1) the Co-Issuer is the surviving entity or the Person formed by or surviving any such consolidation or merger (if other than the Co-Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia, or any territory thereof (the Co-Issuer or such Person, as the case may be, being herein called, the “Successor Co-Issuer”);

(2) the Successor Co-Issuer, if other than the Co-Issuer, expressly assumes all the obligations of the Co-Issuer under the Indenture and the notes pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;

(3) immediately after such transaction, no Default exists; and

(4) the Company shall have delivered to the Trustee an Officers’ Certificate and an opinion of counsel, each stating that such consolidation, merger or transfer and such supplemental indenture, if any, comply with the Indenture.

A Successor Co-Issuer will succeed to, and be substituted for, the Co-Issuer under the Indenture and the notes.

Notwithstanding the foregoing, the Acquisition will be permitted without compliance with this “Merger, Consolidation or Sale of All or Substantially All Assets” covenant.

For purposes of this covenant, the sale, lease, conveyance, assignment, transfer or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company and its Subsidiaries on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.

Although there is a limited body of case law interpreting the phrase “substantially all”, there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve “all or substantially all” of the properties or assets of a Person.

143

Transactions with Affiliates

The Company will not, and will not permit any Restricted Subsidiary to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Company (each of the foregoing, an “Affiliate Transaction”) involving aggregate payments or consideration in excess of $10.0 million, unless

(a) such Affiliate Transaction is on terms that are not materially less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and

(b) the Company delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate payments or consideration in excess of $30.0 million, a Board Resolution adopted by the majority of the members of the Board of Directors of the Company approving such Affiliate Transaction and set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (a) above.

The foregoing provisions will not apply to the following:

(1) Transactions between or among the Company and/or any of the Restricted Subsidiaries;

(2) Restricted Payments permitted by the provisions of the Indenture described above under the covenant “—Limitation on Restricted Payments” and the definition of “Permitted Investments”;

(3) the payment of (x) management, consulting, monitoring and advisory fees and related expenses to the Sponsor not to exceed $7.5 million in the aggregate per calendar year and (y) any termination or other fee payable to the Sponsor upon a change of control or initial public equity offering of the Company or any direct or indirect parent company thereof, which fees, in the case of this clause (y) only, are approved by a majority of the members of the Board of Directors of the Company in good faith;

(4) the payment of reasonable and customary fees paid to, and indemnities provided on behalf of, officers, directors, managers, employees or consultants of the Company, any of its direct or indirect parent companies or any Restricted Subsidiary;

(5) payments by the Company or any Restricted Subsidiary to the Sponsor and the Co-Investor for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including in connection with acquisitions or divestitures, which payments are approved by a majority of the members of the Board of Directors of the Company in good faith;

(6) transactions in which the Company or any Restricted Subsidiary, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or meets the requirements of clause (a) of the preceding paragraph;

(7) payments or loans (or cancellations of loans) to employees or consultants of the Company, any of its direct or indirect parent companies or any Restricted Subsidiary and employment agreements, stock option plans and other compensatory arrangements with such employees or consultants that are, in each case, approved by the Company in good faith, including the special bonus payments described under “Certain Relationships and Related Transactions” in this offering circular;

(8) any agreement, instrument or arrangement as in effect as of October 31, 2005, or any amendment thereto (so long as any such amendment is not disadvantageous to the Holders in any material respect as compared to the applicable agreement as in effect on October 31, 2005 as reasonably determined in good faith by the Company);

(9) the existence of, or the performance by the Company or any of the Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement or its equivalent (including any registration

144

rights agreement or purchase agreement related thereto) to which it is a party as of October 31, 2005 and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Company or any Restricted Subsidiary of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after October 31, 2005 shall only be permitted by this clause (9) to the extent that the terms of any such existing agreement together with all amendments thereto, taken as a whole, or new agreement are not otherwise more disadvantageous to the Holders in any material respect than the terms of the original agreement in effect on October 31, 2005 as reasonably determined in good faith by the Company;

(10) the Transactions and the payment of all fees and expenses related to the Transactions, in each case as disclosed in the Offering Circular;

(11) transactions with customers, clients, suppliers, or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of the Indenture that are fair to the Company and the Restricted Subsidiaries, in the reasonable determination of the Board of Directors or the senior management of the Company, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party;

(12) the issuance of Equity Interests (other than Disqualified Stock) of the Company to any Permitted Holder or to any director, manager, officer, employee or consultant of the Company or any direct or indirect parent company thereof;

(13) sales of accounts receivable, or participations therein, in connection with any Receivables Facility;

(14) investments by the Sponsor and the Co-Investor in securities of the Company or any of its Restricted Subsidiaries so long as (i) the investment is being offered generally to other investors on the same or more favorable terms and (ii) the investment constitutes less than 5.0% of the proposed or outstanding issue amount of such class of securities; and

(15) any Permitted MLP Transfer and any Permitted GP Transfer.

Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

The Company will not, and will not permit any Restricted Subsidiary that is not a Subsidiary Guarantor to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any such Restricted Subsidiary to:

(a) (1) pay dividends or make any other distributions to the Company or any Restricted Subsidiary on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or

(2) pay any Indebtedness owed to the Company or any Restricted Subsidiary;

(b) make loans or advances to the Company or any Restricted Subsidiary; or

(c) sell, lease or transfer any of its properties or assets to the Company or any Restricted Subsidiary, except (in each case) for such encumbrances or restrictions existing under or by reason of:

(1) contractual encumbrances or restrictions in effect on October 31, 2005, including pursuant to the Senior Credit Facilities and the related documentation (including security documents and intercreditor agreements) and Hedging Obligations;

(2) the Indenture and the notes and the Subsidiary Guarantees of the notes issued thereunder;

(3) purchase money obligations for property acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions of the nature discussed in clause (c) above on the property so acquired;

(4) applicable law or any applicable rule, regulation or order;

145

(5) any agreement or other instrument of a Person acquired by the Company or any Restricted Subsidiary in existence at the time of such acquisition (but not created in connection therewith or in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired;

(6) contracts for the sale of assets, including customary restrictions with respect to a Subsidiary pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary;

(7) Secured Indebtedness otherwise permitted to be incurred pursuant to the covenants described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” and “—Liens” that limit the right of the debtor to dispose of the assets securing such Indebtedness;

(8) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;

(9) other Indebtedness, Disqualified Stock or Preferred Stock of Restricted Subsidiaries permitted to be incurred after October 31, 2005 pursuant to the provisions of the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”;

(10) customary provisions in joint venture agreements, asset sale agreements, sale-lease back agreements and other similar agreements;

(11) customary provisions contained in leases and other agreements entered into in the ordinary course of business;

(12) restrictions in connection with any Receivables Facility that are, in the good faith determination of the Company, necessary or advisable to effect such Receivables Facility;

(13) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by such Restricted Subsidiary pending such sale or other disposition;

(14) restrictions or conditions contained in any trading, netting, operating, construction, service, supply, purchase, sale or other agreement to which the Company or any of its Restricted Subsidiaries is a party entered into in the ordinary course of business; provided that such agreement prohibits the encumbrance of solely the property or assets of the Company or such Restricted Subsidiary that are the subject of such agreement, the payment rights arising thereunder and/or the proceeds thereof and does not extend to any other asset or property of the Company or such Restricted Subsidiary or the assets or property of any other Restricted Subsidiary; and

(15) any encumbrances or restrictions of the type referred to in clauses (a), (b) and (c) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (14) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Company, not materially more restrictive with respect to such encumbrance and other restrictions than those prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing; provided, further, that with respect to contracts, instruments or obligations existing on October 31, 2005, any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are not materially more restrictive with respect to such encumbrances and other restrictions than those contained in such contracts, instruments or obligations as in effect on October 31, 2005.

146

Limitation on Guarantees of Indebtedness by Restricted Subsidiaries

The Company will not permit any of its Wholly-Owned Subsidiaries that are Restricted Subsidiaries (and non-Wholly-Owned Subsidiaries if such non-Wholly-Owned Subsidiaries guarantee other capital markets debt securities), other than a Subsidiary Guarantor or a Foreign Subsidiary, to guarantee the payment of any Indebtedness of the Company or any other Subsidiary Guarantor unless:

(1) such Restricted Subsidiary within 30 days executes and delivers a supplemental indenture to the Indenture providing for a Subsidiary Guarantee by such Restricted Subsidiary, except that with respect to a guarantee of Indebtedness of the Company or any Subsidiary Guarantor that is by its express terms subordinated in right of payment to the notes or such Subsidiary Guarantor’s Subsidiary Guarantee, any such guarantee by such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to such Subsidiary Guarantee substantially to the same extent as such Indebtedness is subordinated to the notes;

(2) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee; and

(3) such Restricted Subsidiary shall deliver to the Trustee an opinion of counsel to the effect that:

(a) such Subsidiary Guarantee has been duly executed and authorized; and

(b) such Subsidiary Guarantee constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity;

provided that this covenant shall not be applicable to any guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of such Person becoming a Restricted Subsidiary.

Limitation on Sale and Lease-Back Transactions

The Company will not, and will not permit any Restricted Subsidiary to, enter into any Sale and Lease-Back Transaction with respect to any property unless (i) the Company or such Restricted Subsidiary would be entitled to (A) incur additional Indebtedness in an amount equal to the Attributable Debt with respect to such Sale and Lease-Back Transaction pursuant to the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” and (B) create a Lien on such property securing such Attributable Debt under the definition of “Permitted Liens”; (ii) the consideration received by the Company or any Restricted Subsidiary in connection with such Sale and Lease-Back Transaction is at least equal to the fair market value (as determined in good faith by the Company) of such property; and (iii) the Company applies the proceeds of such transaction in compliance with the covenant described under “Repurchase at the Option of Holders—Asset Sales”.

Limitations on Co-Issuer

The Company will not cease to beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, 100% of the Voting Stock of the Co-Issuer. The Co-Issuer will be designated as a Restricted Subsidiary of the Company at all times and will not own any material assets or other property, other than Indebtedness or other obligations owing to the Co-Issuer by the Company and its Restricted Subsidiaries, or engage in any trade or conduct any business other than treasury, cash management, hedging and cash pooling activities and activities incidental thereto. The Co-Issuer will not incur any material liabilities or obligations other than its obligations pursuant to the notes or the indenture and other Indebtedness permitted to be incurred by the Co-Issuer under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and

147

Preferred Stock” and “—Liens” and liabilities and obligations pursuant to business activities permitted by this covenant. Notwithstanding anything to the contrary herein, the Co-Issuer may be a co-obligor or guarantor with respect to Indebtedness if the Company is an obligor of such Indebtedness and the net proceeds of such Indebtedness are received by the Company or one or more of the Company’s Subsidiary Guarantors.

The Company will not sell or otherwise dispose of any shares of Capital Stock of the Co-Issuer and will not permit the Co-Issuer, directly or indirectly, to sell or otherwise dispose of any shares of its Capital Stock.

Reports and Other Information

Whether or not required by the SEC, so long as any notes are outstanding, the Company will furnish to the Holders of notes or post on the Company Website (and furnish to the Trustee):

(1) within the time period specified in the SEC’s rules and regulations (as in effect on October 31, 2005) for non-accelerated filers with respect to Form 10-K and within 60 days from the end of the applicable fiscal quarter with respect to Form 10-Q, all quarterly and annual financial information that would be required to be contained in a filing by a non-accelerated filer with the SEC on Forms 10-Q and 10-K (or any successor or comparable forms) if the Company were required to file such forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and, with respect to the annual information only, a report on the annual financial statements by the Company’s certified independent accountants; and

(2) within 10 calendar days from any event that triggers the requirement for such filing under the SEC’s rules and regulations, all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports.

Notwithstanding anything to the contrary set forth herein (i) the obligations of the Company with respect to clauses (1) and (2) of the previous paragraph will not extend to (x) any information the provision of which is, in the reasonable judgment of the Company, unduly burdensome to the Company and, in lieu of such information, the Company will furnish information comparable to that included in the Offering Circular or (y) any information for historical periods covered by the financial information in this Offering Circular to the extent such information is not included in this Offering Circular,

(ii) with respect to any quarterly or annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q, 10-K or on Form 8-K with respect to any period, or event occurring, prior to the Company’s second quarter in fiscal year 2006, such information shall be comparable to the corresponding information included in the Offering Circular and (iii) with respect to the furnishing of reports pursuant to clause (2) of the preceding paragraph, prior to the beginning of the Company’s second quarter in fiscal year 2006, such information shall be filed within 15 calendar days from the event that triggers the requirement for such filing under the SEC’s rules and regulations.

Notwithstanding the foregoing, the Company shall not be required to include in any information furnished hereunder a management’s report on internal controls over financial reporting or an auditor’s attestation thereon unless the Company is required under the SEC’s rules and regulations to include such report and attestation in its filings with the SEC.

In addition, whether or not required by the SEC, the Company will (subject to the immediately preceding paragraph) make the information and reports referred to in clauses (1) and (2) of the first paragraph of this covenant available to securities analysts and prospective investors upon request. For purposes of this covenant, the term “Company Website” means the collection of web pages that may be accessed on the World Wide Web using the URL address http://www.targaresources.com or such other address as the Company may from time to time designate in writing to the Trustee.

148

The Company has also agreed that, for so long as any old notes remain outstanding, it will furnish to Holders of old notes and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

In addition, if at any time any direct or indirect parent company of the Company becomes a guarantor of the notes (there being no obligation of such parent to do so), the reports, information and other documents required to be filed and furnished to the Holders pursuant to this covenant may, at the option of the Company, be filed by and be those of such parent rather than the Company; provided that the same is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such parent, on the one hand, and the information relating to the Company and its Restricted Subsidiaries on a standalone basis, on the other hand.

Notwithstanding the foregoing, such requirements shall be deemed satisfied prior to the commencement of the Registered Exchange Offer or the effectiveness of the Shelf Registration Statement by the filing with the SEC of the Exchange Offer Registration Statement and/or Shelf Registration Statement, and any amendments thereto, with such financial information that satisfies Regulation S-X of the Securities Act.

Events of Default and Remedies

The following events constitute Events of Default under the Indenture:

(1) default in payment when due and payable, upon redemption, acceleration or otherwise, of payments of principal of, or premium, if any, on the notes issued under the Indenture;

(2) default for 30 days or more in the payment when due of interest on or with respect to the notes issued under the Indenture;

(3) failure by the Company, the Co-Issuer or any Subsidiary Guarantor for 60 days after receipt of written notice given by the Trustee or the Holders of at least 30% in principal amount of the notes then outstanding and issued under the Indenture to comply with any of its other agreements in the Indenture or the notes;

(4) default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness for money borrowed by the Company, the Co-Issuer or any Restricted Subsidiary or the payment of which is guaranteed by the Company, the Co-Issuer or any Restricted Subsidiary, other than Indebtedness owed to the Company, the Co-Issuer or a Restricted Subsidiary, whether such Indebtedness or guarantee now exists or is created after the issuance of the notes, if both

(A) such default either

(i) results from the failure to pay any principal of such Indebtedness at its stated final maturity (after giving effect to any applicable grace periods) or

(ii) relates to an obligation other than the obligation to pay principal of any such Indebtedness at its stated final maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its stated maturity and

(B) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at stated final maturity (after giving effect to any applicable grace periods), or the maturity of which has been so accelerated, aggregate $50.0 million or more at any one time outstanding;

(5) failure by the Company, the Co-Issuer or any Significant Subsidiary (or any group of Subsidiaries that together would constitute a Significant Subsidiary) to pay final judgments aggregating in excess of $50.0 million, which final judgments remain unpaid, undischarged and unstayed for a period of more than

149

60 days after such judgment becomes final, and in the event such judgment is covered by insurance, an enforcement proceeding has been commenced by any creditor upon such judgment or decree which is not promptly stayed;

(6) certain events of bankruptcy or insolvency with respect to the Company, the Co-Issuer or any Significant Subsidiary (or any group of Subsidiaries that together would constitute a Significant Subsidiary); or

(7) the Subsidiary Guarantee of any Significant Subsidiary (or any group of Subsidiaries that together would constitute a Significant Subsidiary) shall for any reason cease to be in full force and effect or be declared null and void or any responsible officer of any Subsidiary Guarantor that is a Significant Subsidiary (or the responsible officers of any group of Subsidiaries that together would constitute a Significant Subsidiary), as the case may be, denies that it has any further liability under its Subsidiary Guarantee or gives notice to such effect, other than by reason of the termination of the Indenture or the release of any such Subsidiary Guarantee in accordance with the Indenture.

If any Event of Default (other than of a type specified in clause (6) above) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 30% in principal amount of the then outstanding notes issued under the Indenture may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding notes issued under the Indenture to be due and payable immediately.

Upon the effectiveness of such declaration, such principal of and premium, if any, and interest on the notes will be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising under clause (6) of the first paragraph of this section, all outstanding notes will become due and payable without further action or notice. The Indenture provides that the Trustee may withhold from Holders notice of any continuing Default, except a Default relating to the payment of principal of and premium, if any, and interest on the notes if it determines that withholding notice is in their interest. In addition, the Trustee will have no obligation to accelerate the notes if in the best judgment of the Trustee acceleration is not in the best interest of the Holders of such notes.

The Indenture provides that the Holders of a majority in aggregate principal amount of the then outstanding notes issued thereunder by notice to the Trustee may, on behalf of the Holders of all of such notes, waive any existing Default and its consequences under the Indenture, except a continuing Default in the payment of principal of and premium, if any, or interest on any such notes held by a non-consenting Holder. In the event of any Event of Default specified in clause (4) above, such Event of Default and all consequences thereof (excluding any resulting payment default) shall be annulled, waived and rescinded automatically and without any action by the Trustee or the Holders if, within 20 days after such Event of Default arose,

(x) the Indebtedness or guarantee that is the basis for such Event of Default has been discharged,

(y) the holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default or

(z) if the default that is the basis for such Event of Default has been cured.

Except to enforce the right to receive payments of principal of and premium, if any, and interest on the notes when due, no Holder may pursue any remedy with respect to the Indenture or the notes unless:

(1) such Holder has previously given the Trustee notice that an Event of Default is continuing;

(2) Holders of at least 30% in principal amount of the outstanding notes have requested the Trustee to pursue the remedy;

(3) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense;

150

(4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and

(5) Holders of a majority in principal amount of the outstanding notes have not given the Trustee a direction inconsistent with such request within such 60-day period.

The Indenture provides that we are required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and we are required, within five Business Days, upon becoming aware of any Default, to deliver to the Trustee a statement specifying such Default.

No Personal Liability of Directors, Officers, Employees and Stockholders

No director, officer, employee, incorporator or stockholder of the Company, the Co-Issuer or any Subsidiary Guarantor shall have any liability for any obligations of the Company, the Co-Issuer or the Subsidiary Guarantors under the notes, the Subsidiary Guarantees and the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation; provided that the foregoing shall not limit any Subsidiary Guarantor’s obligations under its Subsidiary Guarantee. Each Holder by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. Such waiver may not be effective to waive liabilities under the Federal securities laws and it is the view of the SEC that such a waiver is against public policy.

Legal Defeasance and Covenant Defeasance

Most of the obligations of the Company, the Co-Issuer and the Subsidiary Guarantors under the Indenture will terminate and will be released upon payment in full of all of the notes issued under the Indenture. The Company and the Co-Issuer may, at their option and at any time, elect to have all of their obligations discharged with respect to the notes issued under the Indenture and have each Subsidiary Guarantor’s obligation discharged with respect to its Subsidiary Guarantee (“Legal Defeasance”) and cure all then existing Events of Default except for

(1) the rights of Holders of notes issued under the Indenture to receive payments in respect of the principal of, premium, if any, and interest on the notes when such payments are due solely out of the trust created pursuant to the Indenture,

(2) the Company’s and the Co-Issuer’s obligations with respect to the notes issued under the Indenture concerning issuing temporary notes, registration of such notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust,

(3) the rights, powers, trusts, duties and immunities of the Trustee, and the Company’s and the Co-Issuer’s obligations in connection therewith and

(4) the Legal Defeasance provisions of the Indenture.

In addition, the Company and the Co-Issuer may, at their option and at any time, elect to have their obligations and those of each Subsidiary Guarantor released with respect to certain covenants that are described in the Indenture (“Covenant Defeasance”) and thereafter any omission to comply with such obligations shall not constitute a Default with respect to the notes. In the event a Covenant Defeasance occurs, certain events (not including bankruptcy, receivership, rehabilitation and insolvency events pertaining to the Company or the Co-Issuer) described under “Events of Default and Remedies” will no longer constitute an Event of Default with respect to the notes.

In order to exercise either Legal Defeasance or Covenant Defeasance with respect to the notes issued under the Indenture:

(1) the Company and the Co-Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such

151

amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest due on the notes issued under the Indenture on the stated maturity date or on the redemption date, as the case may be, of such principal, premium, if any, or interest on the notes;

(2) in the case of Legal Defeasance, the Company and the Co-Issuer shall have delivered to the Trustee an opinion of counsel in the United States of America reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions,

(A) the Company and the Co-Issuer have received from, or there has been published by, the United States of America Internal Revenue Service a ruling or

(B) since the original issuance of the notes, there has been a change in the applicable U.S. Federal income tax law,

in either case to the effect that, and based thereon such opinion of counsel in the United States of America shall confirm that, subject to customary assumptions and exclusions, the Holders will not recognize income, gain or loss for U.S. Federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3) in the case of Covenant Defeasance, the Company and the Co-Issuer shall have delivered to the Trustee an opinion of counsel in the United States of America reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders will not recognize income, gain or loss for U.S. Federal income tax purposes as a result of such Covenant Defeasance and will be subject to such tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4) no Default (other than that resulting from borrowing funds to be applied to make such deposit and the granting of Liens in connection therewith) shall have occurred and be continuing on the date of such deposit;

(5) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under any of the Senior Credit Facilities or any other material agreement or instrument (other than the Indenture) to which, the Company, the Co-Issuer or any Subsidiary Guarantor is a party or by which the Company, the Co-Issuer or any Subsidiary Guarantor is bound;

(6) the Company and the Co-Issuer shall have delivered to the Trustee an opinion of counsel in the United States of America to the effect that, as of the date of such opinion and subject to customary assumptions and exclusions, following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally under any applicable U.S. Federal or state law, and that the Trustee has a perfected security interest in such trust funds for the ratable benefit of the Holders;

(7) the Company and the Co-Issuer shall have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by the Company or the Co-Issuer with the intent of defeating, hindering, delaying or defrauding any creditors of the Company, the Co-Issuer or any Subsidiary Guarantor or others; and

(8) the Company and the Co-Issuer shall have delivered to the Trustee an Officers’ Certificate and an opinion of counsel in the United States of America (which opinion of counsel may be subject to customary assumptions and exclusions) each stating that all conditions precedent provided for or relating to the Legal

Defeasance or the Covenant Defeasance, as the case may be, have been complied with.

152

Satisfaction and Discharge

The Indenture will be discharged and will cease to be of further effect as to all notes issued thereunder, when

(a) either (1) all such notes theretofore authenticated and delivered, except lost, stolen or destroyed notes which have been replaced or paid and notes for whose payment money has theretofore been deposited in trust, have been delivered to the Trustee for cancellation; or

(2) all such notes not theretofore delivered to such Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise, will become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company and the Co-Issuer, the Company, the Co-Issuer or any Subsidiary Guarantor has irrevocably deposited or caused to be deposited with such Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest to pay and discharge the entire indebtedness on such notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption, as the case may be;

(b) no Default (other than that resulting from borrowing funds to be applied to make such deposit and the granting of Liens in connection therewith) with respect to the Indenture or the notes issued thereunder shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, the Senior Credit Facilities or any other agreement or instrument to which the Company, the Co-Issuer or any Subsidiary Guarantor is a party or by which the Company or any Subsidiary Guarantor is bound;

(c) the Company and the Co-Issuer have paid or caused to be paid all sums payable by it under the Indenture; and

(d) the Company and the Co-Issuer have delivered irrevocable instructions to the Trustee under the Indenture to apply the deposited money toward the payment of such notes at maturity or the redemption date, as the case may be.

In addition, the Company and the Co-Issuer must deliver an Officers’ Certificate and an opinion of counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

Transfer and Exchange

A Holder may transfer or exchange notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company and the Co-Issuer may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company and the Co-Issuer are not required to transfer or exchange any note selected for redemption. Also, the Company and the Co-Issuer are not required to transfer or exchange any note for a period of 15 days before a selection of notes to be redeemed.

The registered Holder of a note will be treated as the owner of the note for all purposes.

Amendment, Supplement and Waiver

Except as provided in the next two succeeding paragraphs, the Indenture, any related Subsidiary Guarantee and the notes issued thereunder may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the notes then outstanding and issued under the Indenture, including consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes, and any existing Default or compliance with any provision of the Indenture or the notes issued thereunder may be waived with the consent

153

of the Holders of a majority in principal amount of the then outstanding notes issued under the Indenture, other than notes beneficially owned by the Company or its Affiliates (including consents obtained in connection with a purchase of or tender offer or exchange offer for notes).

The Indenture provides that, without the consent of each Holder affected, an amendment or waiver may not, with respect to any notes issued under the Indenture and held by a non-consenting Holder:

(1) reduce the principal amount of notes whose Holders must consent to an amendment, supplement or waiver;

(2) reduce the principal of or change the fixed maturity of any such note or alter or waive the provisions with respect to the redemption of the notes (other than provisions relating to the covenants described above under “Repurchase at the Option of Holders”);

(3) reduce the rate of or change the time for payment of interest on any note;

(4) waive a Default in the payment of principal of or premium, if any, or interest on the notes issued under the Indenture, except a rescission of acceleration of the notes by the Holders of at least a majority in aggregate principal amount of the notes then outstanding and a waiver of the payment default that resulted from such acceleration, or in respect of a covenant or provision contained in the Indenture or any Subsidiary Guarantee that cannot be amended or modified without the consent of all Holders;

(5) make any note payable in money other than that stated in the notes;

(6) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of or premium, if any, or interest on the notes;

(7) make any change in the ranking of the notes that would adversely affect the Holders;

(8) modify the Subsidiary Guarantees of any Significant Subsidiary (or any group of Subsidiaries that together would constitute a Significant Subsidiary) in any manner adverse to the Holders;

(9) make any change in these amendment and waiver provisions; or

(10) impair the right of any Holder to receive payment of principal of, or interest on, such Holder’s notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s notes.

Notwithstanding the foregoing, without the consent of any Holder, the Company, the Co-Issuer any Subsidiary Guarantor (with respect to a Subsidiary Guarantee or the Indenture to which it is a party) and the Trustee may amend or supplement the Indenture, any Subsidiary Guarantee or the notes:

(1) to cure any ambiguity, omission, mistake, defect or inconsistency;

(2) to provide for uncertificated notes in addition to or in place of certificated notes;

(3) to comply with the covenant relating to mergers, consolidations and sales of assets and to provide for the assumption of the Company’s, the Co-Issuer’s or any Subsidiary Guarantor’s obligations to Holders in connection therewith;

(4) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any such Holder;

(5) to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Company or a Subsidiary Guarantor;

(6) to comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act;

(7) to evidence and provide for the acceptance and appointment under the Indenture of a successor Trustee pursuant to the requirements thereof;

154

(8) to provide for the issuance of exchange notes or private exchange notes, which are identical to exchange notes except that they are not freely transferable;

(9) to add a Subsidiary Guarantor or other guarantor under the Indenture;

(10) to conform the text of the Indenture, Subsidiary Guarantees or the notes to any provision of the “Description of the Notes” in the Offering Circular to the extent that such provision in the “Description of the Notes” was intended to be a verbatim recitation of a provision of the Indenture, the Subsidiary Guarantees or the notes; or

(11) to make any amendment to the provisions of the Indenture relating to the transfer and legending of notes; provided that (a) compliance with the Indenture as so amended would not result in notes being transferred in violation of the Securities Act or any applicable securities law and (b) such amendment does not materially and adversely affect the rights of Holders to transfer notes.

The consent of the Holders is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment.

Notices

Notices given by publication will be deemed given on the first date on which publication is made and notices given by first-class mail, postage prepaid, will be deemed given five calendar days after mailing.

Concerning the Trustee

The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company or the Co-Issuer, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest while a default exists it must eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.

The Indenture provides that the Holders of a majority in principal amount of the outstanding notes issued thereunder have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent person in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.

Governing Law

The laws of the State of New York govern the Indenture, the notes and any Subsidiary Guarantee.

Certain Definitions

Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full definition of all such terms, as well as any other capitalized terms used herein for which no definition is provided. For purposes of the Indenture, unless otherwise specifically indicated, (1) the term “consolidated” with respect to any Person refers to such Person consolidated with its Restricted Subsidiaries (other than Partially Owned Operating Subsidiaries and any Subsidiary thereof), and excludes from such consolidation any Unrestricted Subsidiary, Permitted MLP and Permitted GP as if such Unrestricted Subsidiary, Permitted MLP or Permitted GP were not an Affiliate of such Person and (2) the term “including” means “including, without limitation”.

155

“Acquired Indebtedness” means, with respect to any specified Person,

(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person, and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Acquisition” means the acquisition of Equity Interests contemplated by the PIPA.

“Additional Interest” means all liquidated damages then owing pursuant to the Registration Rights Agreement.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

“Applicable Premium” means, with respect to any Note on any redemption date, the greater of:

(1) 1.0% of the principal amount of such Note; or

(2) the excess, if any, of:

(a) the present value at such redemption date of (i) the redemption price of such Note at November 1, 2009 (such redemption price being set forth in the table appearing above under “—Optional Redemption”), plus (ii) all required interest payments due on such Note through November 1, 2009 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over

(b) the principal amount of such Note.

“Asset Sale” means

(1) the sale, conveyance, transfer or other disposition, whether in a single transaction or a series of related transactions, of property or assets (including by way of a Sale and Lease-Back Transaction) of the Company or any Restricted Subsidiary (each referred to in this definition as a “disposition”); and

(2) the issuance or sale of Equity Interests of any Restricted Subsidiary, whether in a single transaction or a series of related transactions, in each case, other than:

(a) a disposition of cash, Cash Equivalents or Investment Grade Securities or obsolete or worn out equipment, vehicles or other similar assets in the ordinary course of business or any disposition of inventory or goods held for sale in the ordinary course of business;

(b) the disposition of all or substantially all of the assets of the Company in a manner permitted pursuant to the provisions described above under “Certain Covenants—Merger, Consolidation or Sale of All or Substantially All Assets” or any disposition that constitutes a Change of Control pursuant to the Indenture;

(c) the making of any Permitted Investment or the making of any Restricted Payment that is not prohibited by the covenant described under “Certain Covenants—Limitation on Restricted Payments”;

(d) any disposition of assets or issuance or sale of Equity Interests of any Restricted Subsidiary in any transaction or series of transactions with an aggregate fair market value of less than $20.0 million;

156

(e) any disposition of property or assets or issuance of securities by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary;

(f) to the extent allowable under Section 1031 of the Internal Revenue Code of 1986, any exchange of like property (excluding any boot thereon) for use in a Similar Business;

(g) the lease, assignment or sub-lease of any real or personal property in the ordinary course of business;

(h) any issuance or sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary;

(i) foreclosures on assets;

(j) sales of accounts receivable, or participations therein, in connection with any Receivables Facility;

(k) the unwinding of any Hedging Obligations; and

(l) a MLP Asset Transfer, MLP Equity Transfer or GP Equity Transfer.

“Asset Sale Bridge Term Loan Facility” means the asset sale credit facility provided under the Credit Agreement, entered into as of October 31, 2005, among the Company, the lenders party thereto in their capacity as lenders and Credit Suisse, as Administrative Agent, including any guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, replacements, renewals, restatements, refundings or refinancings thereof and any indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that extend, replace, refund, refinance, renew or defease any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”).

“Attributable Debt” in respect of a Sale and Lease-Back Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Lease-Back Transaction (including any period for which such lease has been extended); provided, however, that if such Sale and Lease-Back Transaction results in a Capitalized Lease Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the definition of “Capitalized Lease Obligation”.

“Board of Directors” means:

(1) with respect to a corporation, the board of directors of the corporation;

(2) with respect to a partnership, the board of directors of the general partner of the partnership; and

(3) with respect to any other Person, the board or committee of such Person serving a similar function.

“Board Resolution” means with respect to the Company or the Co-Issuer, a duly adopted resolution of the Board of Directors of the Company or the Co-Issuer, as the case maybe, or any respective committee thereof.

“Business Day” means each day that is not a Legal Holiday.

“Capital Stock” means

(1) in the case of a corporation, corporate stock,

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock,

157

(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited), and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“Capitalized Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) in accordance with GAAP.

“Cash Equivalents” means

(1) United States of America dollars,

(2) (a) Canadian dollars; or

(b) in the case of any Foreign Subsidiary that is a Restricted Subsidiary, such local currencies held by it from time to time in the ordinary course of business,

(3) securities issued or directly and fully and unconditionally guaranteed or insured by the government of the United States of America or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and credit obligation of such government with maturities of 24 months or less from the date of acquisition,

(4) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any commercial bank having capital and surplus in excess of $250.0 million,

(5) repurchase obligations for underlying securities of the types described in clauses (3) and (4) entered into with any financial institution meeting the qualifications specified in clause (4) above,

(6) commercial paper rated at least P-1 by Moody’s or at least A-1 by S&P and in each case maturing within 12 months after the date of issuance thereof,

(7) investment funds investing at least 95% of their assets in securities of the types described in clauses (1) through (6) above,

(8) readily marketable direct obligations issued by any state of the United States of America or any political subdivision thereof having one of the two highest rating categories obtainable from either Moody’s or S&P with maturities of 24 months or less from the date of acquisition and

(9) Indebtedness or Preferred Stock issued by Persons with a rating of “A” or higher from S&P or “A2” or higher from Moody’s with maturities of 12 months or less from the date of acquisition.

Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in one or more currencies other than those set forth in clauses (1) and (2) above; provided that such amounts are converted into the currencies set forth in clauses (1) and (2) above as promptly as practicable and in any event within ten Business Days following the receipt of such amounts.

“Change of Control” means the occurrence of any of the following:

(1) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any Person other than a Permitted Holder; or

(2) the Company becomes aware of (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the

158

meaning of Rule 13d-5(b)(1) under the Exchange Act, or any successor provision), other than the Permitted Holders, in a single transaction or in a series of related transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) of 50% or more of the total voting power of the Voting Stock of the Company or any of its direct or indirect parent companies.

“Co-Investor” means Merrill Lynch Ventures L.P. 2001 and its Affiliates.

“Co-Issuer” means Targa Resources Finance Corporation, a Delaware corporation, and its successors.

“Company” has the meaning set forth in the first paragraph under “General”; provided that when used in the context of determining the fair market value of an asset or liability under the Indenture, “Company” shall, unless otherwise expressly stated, be deemed to mean the Board of Directors of the Company when the fair market value of such asset or liability is equal to or in excess of $50.0 million.

“Consolidated Current Liabilities” as of the date of determination means the aggregate amount of liabilities of the Company and its consolidated Restricted Subsidiaries which may properly be classified as current liabilities (including taxes accrued as estimated), on a consolidated basis, after eliminating (1) all intercompany items between the Company and any Restricted Subsidiary and (2) all current maturities of long-term Indebtedness, all as determined in accordance with GAAP consistently applied.

“Consolidated Depreciation and Amortization Expense” means with respect to any Person for any period, the total amount of depreciation and amortization expense, including the amortization of deferred financing fees and other related noncash charges of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.

“Consolidated Interest Expense” means, with respect to any Person for any period, the sum, without duplication, of:

(a) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted in computing Consolidated Net Income (including (i) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (ii) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers’ acceptances including fees in connection with the Funded Synthetic Letter of Credit Facility or similar facility, (iii) noncash interest payments (but excluding any noncash interest expense attributable to the movement in the mark-to-market valuation of Hedging Obligations or other derivative instruments pursuant to GAAP), (iv) the interest component of Capitalized Lease Obligations and (v) net payments, if any, pursuant to interest rate Hedging Obligations with respect to Indebtedness, and excluding (A) Additional Interest, (B) amortization of deferred financing fees, debt issuance costs, commissions, fees and expenses, (C) any expensing of bridge, commitment and other financing fees (other than those described in clause (ii) above), (D) commissions, discounts, yield and other fees and charges (including any interest expense) related to any Receivables Facility) and (E) any redemption premiums paid in connection with the Transactions, plus

(b) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, less

(c) interest income for such period.

For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.

“Consolidated Leverage Ratio”, with respect to any Person as of any date of determination, means the ratio of (x) Consolidated Total Indebtedness of such Person as of the end of the most recent fiscal quarter for which internal

159

financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur to (y) the aggregate amount of EBITDA of such Person for the period of the most recently ended four full consecutive fiscal quarters for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur, in each case with such pro forma adjustments to Consolidated Total Indebtedness and EBITDA as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.

“Consolidated Net Income” means, with respect to any Person for any period, the aggregate of the Net Income, of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided that, without duplication,

(1) any net after-tax extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses (including relating to severance, relocation, one-time compensation charges and the Transactions) shall be excluded,

(2) the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period, whether effected through a cumulative effect adjustment or a retroactive application in each case in accordance with GAAP,

(3) any net after-tax income (loss) from disposed or discontinued operations and any net after-tax gains or losses on disposal of disposed or discontinued operations shall be excluded,

(4) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions or the sale or other disposition of any Capital Stock of any Person other than in the ordinary course of business, as determined in good faith by the Company, shall be excluded,

(5) the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, a Permitted MLP or a Permitted GP, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Company shall be increased by (a) the amount of dividends, distributions or other payments from any Person that is not a Subsidiary, any Unrestricted Subsidiary or any Person that is accounted for by the equity method of accounting (in each case, other than a Permitted MLP or Permitted GP or any Subsidiary thereof) and (b) the amount of any dividends, distributions or other payments from a Permitted MLP or a Permitted GP, in each case only to the extent made out of the operating surplus of such Permitted MLP or such Permitted GP, in each of clauses (a) and (b) above, that are actually paid in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period (subject in the case of dividends, distributions or other payments made to a Restricted Subsidiary to the limitations contained in clause (6) below),

(6) solely for the purpose of determining the amount available for Restricted Payments under clause (c)(1) of the first paragraph of “Certain Covenants—Limitation on Restricted Payments”, the Net Income for such period of any Restricted Subsidiary (other than any Subsidiary Guarantor) shall be excluded if the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination wholly permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived; provided that Consolidated Net Income of the Company will be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) to the Company or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein,

(7) any increase in amortization or depreciation or other noncash charges resulting from the application of purchase accounting in relation to the Transactions or any acquisition that is consummated after October 31, 2005, net of taxes, shall be excluded,

(8) any net after-tax income (loss) from the early extinguishment of Indebtedness or Hedging Obligations or other derivative instruments shall be excluded,

160

(9) any impairment charge or asset write-off, in each case pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP shall be excluded, and

(10) any noncash compensation expense recorded from grants of stock appreciation or similar rights, stock options, restricted stock or other rights to officers, directors or employees shall be excluded.

Notwithstanding the foregoing, for the purpose of the covenant described under “Certain Covenants—Limitation on Restricted Payments” only (other than clause (c)(4) thereof), there shall be excluded from Consolidated Net Income any income arising from any sale or other disposition of Restricted Investments made by the Company and the Restricted Subsidiaries, any repurchases and redemptions of Restricted Investments from the Company and the Restricted Subsidiaries, any repayments of loans and advances that constitute Restricted Investments by the Company or any Restricted Subsidiary, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary, in each case only to the extent such amounts increase the amount of Restricted Payments permitted under such covenant pursuant to clause (c)(4) thereof.

“Consolidated Net Tangible Assets” as of any date of determination, means the total amount of assets (less accumulated depreciation and amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items) which would appear on a consolidated balance sheet of the Company and its consolidated Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, and after giving effect to purchase accounting and after deducting therefrom Consolidated Current Liabilities and, to the extent otherwise included, the amounts of:

(1) minority interests in consolidated Subsidiaries held by Persons other than the Company or a Restricted Subsidiary;

(2) excess of cost over fair value of assets of businesses acquired, as determined in good faith by the Board of Directors;

(3) any revaluation or other write-up in book value of assets subsequent to October 31, 2005 as a result of a change in the method of valuation in accordance with GAAP consistently applied;

(4) unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items;

(5) treasury stock;

(6) cash set apart and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock to the extent such obligation is not reflected in Consolidated Current Liabilities; and

(7) Investments in and assets of Unrestricted Subsidiaries, Permitted MLPs and Permitted GPs.

“Consolidated Total Indebtedness” means, as of any date of determination, an amount equal to the sum of (1) the aggregate amount of all outstanding Indebtedness of the Company and the Restricted Subsidiaries on a consolidated basis consisting of Indebtedness for borrowed money, Obligations in respect of Capitalized Lease Obligations, Attributable Debt in respect of Sale and Lease-Back Transactions and debt obligations evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers’ acceptances (and excluding (x) any undrawn letters of credit and (y) all obligations relating to Receivables Facilities), and (2) the aggregate amount of all outstanding Disqualified Stock of the Company and all Disqualified Stock and Preferred Stock of the Restricted Subsidiaries (excluding items eliminated in consolidation), with the amount of such Disqualified Stock and Preferred Stock, equal to the greater of their respective voluntary or involuntary liquidation preferences and Maximum Fixed Repurchase Prices, in each case determined on a consolidated basis in accordance with GAAP.

For purposes hereof, the “Maximum Fixed Repurchase Price” of any Disqualified Stock or Preferred Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified

161

Stock or Preferred Stock as if such Disqualified Stock or Preferred Stock were purchased on any date on which Consolidated Total Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock or Preferred Stock, such fair market value shall be determined reasonably and in good faith by the Company.

“Contingent Obligations” means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (the “primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of such Person, whether or not contingent,

(1) to purchase any such primary obligation or any property constituting direct or indirect security therefor,

(2) to advance or supply funds

(A) for the purchase or payment of any such primary obligation or

(B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, or

(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Designated Noncash Consideration” means the fair market value of noncash consideration received by the Company or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Noncash Consideration pursuant to an Officers’ Certificate, setting forth the basis of such valuation, executed by an executive vice president and the principal financial officer of the Company, less the amount of cash or Cash Equivalents received in connection with a subsequent sale of such Designated Noncash Consideration.

“Designated Preferred Stock” means Preferred Stock of the Company or any parent company thereof (in each case other than Disqualified Stock) that is issued for cash (other than to a Restricted Subsidiary) and is so designated as Designated Preferred Stock, pursuant to an Officers’ Certificate executed by an executive vice president and the principal financial officer of the Company or the applicable parent company thereof, as the case may be, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (c) of the first paragraph of the “Certain Covenants—Limitation on Restricted Payments” covenant.

“Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable (other than solely for Capital Stock that is not Disqualified Stock), other than as a result of a change of control or asset sale, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, other than as a result of a change of control or asset sale, in whole or in part, in each case prior to the date that is 91 days after the earlier of the maturity date of the notes and the date the notes are no longer outstanding; provided that if such Capital Stock is issued to any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations.

“Domestic Subsidiary” means, with respect to any Person, any Restricted Subsidiary of such Person other than (i) a Foreign Subsidiary or (ii) a Domestic Subsidiary of a Foreign Subsidiary, but, in each case, including any Subsidiary that guarantees or otherwise provides direct credit support for any indebtedness of the Company.

162

“Downstream Business” means that portion of the business of the Company that is primarily engaged in fractionating, storing, terminalling, transporting, distributing and marketing natural gas liquids, including the following principal assets: Houston Area, Louisiana Area, NGL Marketing, and Wholesale Marketing and Commercial Transportation (each term, as defined in the PIPA).

“EBITDA” means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period,

(1) increased by (without duplication):

(a) provision for taxes based on income or profits, plus franchise or similar taxes, of such Person for such period deducted in computing Consolidated Net Income, plus

(b) consolidated Fixed Charges of such Person for such period to the extent the same was deducted in computing Consolidated Net Income, plus

(c) Consolidated Depreciation and Amortization Expense of such Person for such period to the extent such depreciation and amortization were deducted in computing Consolidated Net Income, plus

(d) any expenses or charges related to any Equity Offering, Permitted Investment, acquisition, disposition, recapitalization or the incurrence of Indebtedness permitted to be incurred by the Indenture including a refinancing thereof (whether or not successful) and any amendment or modification to the terms of any such transactions, including such fees, expenses or charges related to the Transactions, including the offering of the notes and the Senior Credit Facilities, in each case, deducted in computing Consolidated Net Income, plus

(e) the amount of any restructuring charge or reserve deducted in such period in computing Consolidated Net Income, including any one-time costs incurred in connection with acquisitions after October 31, 2005, plus

(f) any write offs, write downs or other noncash charges reducing Consolidated Net Income for such period, excluding any such charge that represents an accrual or reserve for a cash expenditure for a future period, plus

(g) the amount of any minority interest expense deducted in calculating Consolidated Net Income, plus

(h) the amount of management, monitoring, consulting and advisory fees and related expenses paid (or any accruals related to such fees or related expenses) during such period to the Sponsor to the extent permitted under “Certain Covenants—Transactions with Affiliates”, plus

(i) the amount of net cost savings projected by the Company in good faith to be realized as a result of specified actions taken during such period (calculated on a pro forma basis as though such cost savings had been realized on the first day of such period), net of the amount of actual benefits realized during such period from such actions; provided that (x) such cost savings are reasonably identifiable and factually supportable, (y) such actions are taken within 36 months after October 31, 2005 and (z) the aggregate amount of cost savings added pursuant to this clause (i) shall not exceed $35.0 million for any four consecutive quarter period (which adjustments may be incremental to pro forma adjustments made pursuant to the second paragraph of the definition of “Fixed Charge Coverage Ratio”), plus

(j) any costs or expenses incurred by the Company or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such costs or expenses are funded with cash proceeds contributed to the capital of the Company or net cash proceeds of issuance of Equity Interests of the Company (other than Disqualified Stock that is Preferred Stock) in each case, solely to the extent that such cash proceeds are excluded from the calculation set forth in clause (c) of the first paragraph under “Certain Covenants—Limitation on Restricted Payments”;

163

(2) decreased by (without duplication) noncash gains increasing Consolidated Net Income of such Person for such period, excluding any gains that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period (other than such cash charges that have been added back to Consolidated Net Income in calculating EBITDA in accordance with this definition); and

(3) decreased or increased, as applicable, by (without duplication):

(a) any net gain or loss resulting in such period from Hedging Obligations and the application of Statement of Financial Accounting Standards #133;

(b) any net gain or loss resulting in such period from currency translation gains or losses related to currency remeasurements of Indebtedness (including any net loss or gain resulting from hedge agreements for currency exchange risk); and

(c) the amount of gain or loss resulting in such period from a sale of receivables and related assets to a Receivables Subsidiary in connection with a Receivables Facility.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.

“Equity Offering” means any underwritten primary public offering of common stock or Preferred Stock of the Company or any of its direct or indirect parent companies (excluding Disqualified Stock), other than

(a) public offerings with respect to the Company’s or any direct or indirect parent company’s common stock or Preferred Stock registered on Form S-4 or Form S-8;

(b) any such offering that constitutes an Excluded Contribution; and

(c) an issuance to any Subsidiary of the Company.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Excluded Contribution” means net cash proceeds, marketable securities or Qualified Proceeds received by the Company from

(a) contributions to its common equity capital, and

(b) the sale (other than to a Subsidiary of the Company or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of the Company) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Company,

in each case designated as Excluded Contributions pursuant to an Officers’ Certificate executed by an executive vice president and the principal financial officer of the Company on the date such capital contributions are made or the date such Equity Interests are sold, as the case may be, which are excluded from the calculation set forth in clause (c) of the first paragraph under “Certain Covenants— Limitation on Restricted Payments”.

“Existing Indebtedness” means Indebtedness of the Company or the Restricted Subsidiaries in existence on October 31, 2005, plus interest accruing thereon.

“Extraordinary Distribution” means any dividends or distributions made by a Permitted MLP or Permitted GP other than any dividends or distributions out of the operating surplus of such Permitted MLP or Permitted GP.

“Fixed Charge Coverage Ratio” means, with respect to any Person for any period, the ratio of EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company or any Restricted Subsidiary incurs, assumes, guarantees redeems, retires or extinguishes any Indebtedness (other

164

than Indebtedness incurred under any revolving credit facility that has been permanently repaid and has not been replaced) or issues or redeems Disqualified Stock or Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to or simultaneously with the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, redemption, retirement or extinguishment of Indebtedness, or such issuance or redemption of Disqualified Stock or Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter period (the “reference period”).

For purposes of making the computation referred to above, Investments, acquisitions, dispositions, mergers, consolidations and disposed operations (as determined in accordance with GAAP) that have been made by the Company or any Restricted Subsidiary during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Calculation Date shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, mergers, consolidations and disposed operations (and the change in any associated fixed charges and the change in EBITDA resulting therefrom) had occurred on the first day of the reference period. If since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Investment, acquisition, disposition, merger, consolidation or disposed operation that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, merger, consolidation or disposed operation had occurred at the beginning of the reference period.

For purposes of this definition, whenever pro forma effect is to be given to a transaction, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Company to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Company may designate.

“Fixed Charges” means, with respect to any Person for any period, the sum of

(a) Consolidated Interest Expense of such Person for such period,

(b) all cash dividend payments (excluding items eliminated in consolidation) on any series of Preferred Stock made during such period, and

(c) all cash dividend payments (excluding items eliminated in consolidation) on any series of Disqualified Stock made during such period.

“Foreign Subsidiary” means, with respect to any Person, any Restricted Subsidiary of such Person that is not organized or existing under the laws of the United States of America, any state thereof, the District of Columbia, or any territory thereof.

“Foreign Subsidiary Total Assets” means the total amount of all assets of Foreign Subsidiaries of the Company and the Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP as shown on the most recent balance sheet of the Company.

165

“Funded Synthetic Letter of Credit Facility” means the funded synthetic letter of credit facility provided under the Credit Agreement, entered into as of October 31, 2005, among the Company, the lenders party thereto in their capacity as lenders thereunder and Credit Suisse, as Administrative Agent, including any guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, replacements, renewals, restatements, refundings or refinancings thereof (provided that any such extensions, replacements, renewals, refundings or refinancings are in the form of a synthetic letter of credit facility, a revolving credit facility or a similar credit facility entered into to support hedging or cash collateral obligations), including any such replacement, refunding or refinancing that increases the amount borrowable thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”).

“GAAP” means generally accepted accounting principles in the United States of America that were in effect on October 31, 2005.

“Government Securities” means securities that are

(a) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or

(b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,

which, in either case, are not callable or redeemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.

“GP” means the Person that is the general partner of a MLP.

“GP Equity Transfer” means the sale, conveyance, transfer or other disposition of any Equity Interest in a MLP GP in connection with, or following, the initial public offering of a MLP GP.

“guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations, and, when used as a verb, shall have a corresponding meaning.

“Hedging Obligations” means, with respect to any Person, the obligations of such Person under currency exchange, interest rate or commodity swap agreements, currency exchange, interest rate or commodity cap agreements and currency exchange, interest rate or commodity collar agreements and other agreements or arrangements, in each case designed to protect such Person against fluctuations in currency exchange, interest rates or commodity prices.

“Holder” means the Person in whose name a Note is registered on the registrar’s books.

“Indebtedness” means, with respect to any Person,

(a) any indebtedness (including principal and premium) of such Person, whether or not contingent

(1) in respect of borrowed money,

166

(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers’ acceptances (or, without double counting, reimbursement agreements in respect thereof),

(3) representing the balance deferred and unpaid of the purchase price of any property (including Capitalized Lease Obligations), except any such balance that constitutes a trade payable or similar obligation to a trade creditor, in each case accrued in the ordinary course of business, or

(4) representing any Hedging Obligations,

if and to the extent that any of the foregoing Indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP,

(b) to the extent not otherwise included, any obligation by such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the obligations of the type referred to in clause (a) of another Person (whether or not such items would appear upon the balance sheet of such obligor or guarantor), other than by endorsement of negotiable instruments for collection in the ordinary course of business,

(c) to the extent not otherwise included, the obligations of the type referred to in clause (a) of another Person secured by a Lien on any asset owned by such Person, whether or not such obligations are assumed by such Person and whether or not such obligations would appear upon the balance sheet of such Person; provided that the amount of such Indebtedness will be the lesser of the fair market value of such asset at such date of determination and the amount of Indebtedness so secured, and

(d) Attributable Debt in respect of Sale and Lease-Back Transactions;

provided, however, that notwithstanding the foregoing, Indebtedness will be deemed not to include (A) Contingent Obligations incurred in the ordinary course of business, (B) Obligations under or in respect of the Receivables Facilities and (C) Obligations of a GP of a Permitted MLP with respect to Indebtedness of such Permitted MLP arising by operation of law due to such GP’s position as a general partner of such Permitted MLP (or corresponding Obligations of any general partner of such GP arising by operation of law due to such entity’s position as a general partner of such GP); provided, however, that such Obligations or Indebtedness are non-recourse to the Company or any of its Restricted Subsidiaries (other than such GP and, if such GP is a limited partnership, the general partner of such GP, provided that (x) the sole business of such general partner of such GP is to act as the general partner of such GP and engage in activities ancillary thereto and (y) and such general partner of such GP owns no assets (other than (i) ownership interests in such GP or in the Permitted MLP of which such GP is the MLP GP or Capital Stock (other than Disqualified Stock) of the Company and Indebtedness owed to such general partner of such GP that is incurred pursuant to clause (w) of the second paragraph of the covenant described under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”, (ii) temporarily holding assets to be transferred or distributed in connection with a Permitted MLP Transfer or a Permitted GP Transfer or distributions from a Permitted MLP or a Permitted GP and (iii) current assets sufficient to satisfy its ordinary course operating expenses)).

“Indenture” means the Senior Indenture, dated as of October 31, 2005, among the Company, the Co-Issuer as issuer, certain of its Subsidiaries, as guarantors and Wells Fargo Bank, National Association, as trustee.

“Independent Financial Advisor” means an accounting, appraisal, investment banking firm or consultant to Persons engaged in Similar Businesses of nationally recognized standing that is, in the good faith judgment of the Company, qualified to perform the task for which it has been engaged and that is independent of the Company and its Affiliates.

“Initial MLP Asset Transfer” means, at the option of the Company:

(1) one or more MLP Asset Transfers of (x) the assets constituting the Downstream Business or (y) all or a portion of the Equity Interests in one or more Persons that hold the Downstream Business; provided that no previous MLP Asset Transfer has occurred (except those described in this clause (1)); or

167

(2) the initial MLP Asset Transfer and any subsequent MLP Asset Transfer to the applicable MLP of property or assets (including any Equity Interests) with respect to which the EBITDA attributable to such property or assets (treating such property or assets as if they were owned by a single Person) for the most recently ended four full fiscal quarters ending at least 45 days prior to the date of the most recent MLP Asset Transfer does not exceed $95.0 million in the aggregate; provided that any such MLP Asset Transfers do not include any of the Downstream Business;

in each case made in connection with an initial public offering of Equity Interests of such MLP (or, in the case of an Initial MLP Asset Transfer comprising more than one MLP Asset Transfers, the first such MLP Asset Transfer made in connection with such an initial public offering).

“Initial Purchasers” means Credit Suisse First Boston LLC, Merrill, Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Banc of America Securities LLC, Lehman Brothers Inc. and Wachovia Capital Markets, LLC.

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P, or an equivalent rating by any other Rating Agency.

“Investment Grade Securities” means:

(1) securities issued or directly and fully guaranteed or insured by the government of the United States of America or any agency or instrumentality thereof (other than Cash Equivalents),

(2) debt securities or debt instruments with a rating of BBB- or higher by S&P or Baa3 or higher by Moody’s or the equivalent of such rating by such rating organization, or, if no rating of S&P or Moody’s then exists, the equivalent of such rating by any other nationally recognized securities rating agency, but excluding any debt securities or instruments constituting loans or advances among the Company and its Subsidiaries,

(3) investments in any fund that invests exclusively in investments of the type described in clauses (1) and (2), which fund may also hold immaterial amounts of cash pending investment and/or distribution and

(4) corresponding instruments in countries other than the United States of America customarily utilized for high quality investments.

“Investments” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (including by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others, but excluding accounts receivable, trade credit, advances to customers, commission, travel and similar advances to officers and employees, in each case made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet (excluding the footnotes) of such Person in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property. For purposes of the definition of “Unrestricted Subsidiary” and the covenant described under “Certain Covenants—Limitation on Restricted Payments”,

(1) “Investments” shall include the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets of a Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to

(x) the Company’s “Investment” in such Subsidiary at the time of such redesignation, less

(y) the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and

168

(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Company.

“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York.

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction; provided that in no event shall an operating lease be deemed to constitute a Lien.

“Minimum Cash Consideration” with respect to the Initial MLP Asset Transfer means 40% of the fair market value of (a) the assets and property transferred or (b) in the case of a transfer of any Equity Interests of a Person, such Person at the time of such Initial MLP Asset Transfer (it being understood that, in the case of a transfer of less than all of the Equity Interests of a Person, the fair market value of such Person shall be determined at the time of the first MLP Asset Transfer constituting part of such Initial MLP Asset Transfer (as if all the Equity Interests in such Person had been transferred at the time of such first MLP Asset Transfer and the Minimum Cash Consideration requirement shall have to be satisfied on that basis in connection with such first MLP Asset Transfer) and there shall be no Minimum Cash Consideration required for any subsequent transfer of Equity Interests of such Person constituting part of the same Initial MLP Asset Transfer) (in each of the foregoing clauses (a) and (b), assuming such assets or Person, as applicable, operate as a going concern); provided that up to 50% of the Minimum Cash Consideration may consist of Equity Interests in the applicable MLP so long as such Equity Interests are converted into or exchanged for, within 365 days of the Initial MLP Asset Transfer, cash equal to at least the fair market value of such Equity Interests on the date of the Initial MLP Asset Transfer. For purposes of this definition, (x) with respect to any assets, property or Person constituting part of the Downstream Business subject to such Initial MLP Asset Transfer, the fair market value thereof shall be determined in good faith by the Company based on values that could be obtained in arms’ length transactions, but in no event shall such fair market value be lower than an amount equal to the product of (a) the EBITDA (calculated, without giving effect to clause (5) of the definition of “Consolidated Net Income”, to include the pro rata share of the EBITDA of any Unrestricted Subsidiary included in such Downstream Business) attributable to such Downstream Business for the four fiscal quarter period most recently ended prior to the date of the Initial MLP Asset Transfer for which internal financial statements are available as of such date (as set forth in a certificate of the chief financial officer of the Company delivered to the Trustee) and (B) 8.5 (provided, however that, if the Company determines that such fair market value is lower than such minimum amount, the fair market value of such assets, property or Person constituting part of the Downstream Business subject to such Initial MLP Asset Transfer shall be determined by an Independent Financial Advisor) and (y) with respect to any other assets, property or Equity Interests of a Person constituting the subject of such Initial MLP Asset Transfer, the fair market value of such assets, property or Person, as applicable, shall be determined by an Independent Financial Advisor.

“MLP” means any master limited partnership.

“MLP Asset Transfer” means the direct or indirect sale, conveyance, transfer or other disposition of property or assets (including any Equity Interests of any Person) by the Company or any Restricted Subsidiary to one or more MLPs or MLP Subsidiaries.

“MLP Equity Transfer” means the sale, conveyance, transfer or other disposition of any Equity Interest in a MLP.

“MLP GP” means a GP that is a general partner of a Permitted MLP.

169

“MLP Subsidiary” means each Subsidiary of a MLP.

“Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating agency business.

“Net Income” means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.

“Net Proceeds” means the aggregate cash proceeds received by the Company or any Restricted Subsidiary in respect of any Asset Sale, Permitted MLP Transfer, Permitted GP Transfer or Extraordinary Distribution, including any cash received upon the sale or other disposition of any Designated Noncash Consideration received in any Asset Sale, net of the direct costs relating to such Asset Sale, Permitted MLP Transfer or Permitted GP Transfer and the sale or disposition of such Designated Noncash Consideration, including legal, accounting and investment banking fees, and brokerage and sales commissions, any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of principal, premium, if any, and interest on Indebtedness required (other than by the second paragraph of “Repurchase at the Option of Holders—Asset Sales” and other than by the fourth paragraph of “Repurchase at the Option of Holders—Transactions Involving MLPs and GPs”) to be paid as a result of such transaction and, in the case of an Asset Sale, Permitted MLP Transfer or Permitted GP Transfer, any deduction of appropriate amounts to be provided by the Company or a Restricted Subsidiary as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Company or a Restricted Subsidiary after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction.

“North Texas Asset Sale” means the Asset Sale by the Company of the North Texas Assets as contemplated and described in the Offering Circular.

“North Texas Assets” means (a) the Chico natural gas processing plant, (b) the Shackelford natural gas processing plant and (c) the associated gathering system connected to both plants, in each case acquired by the Company from Dynegy Midstream Services, Limited Partnership pursuant to the PIPA.

“Obligations” means any principal (including reimbursement obligations with respect to letters of credit whether or not drawn), interest (including, to the extent legally permitted, all interest accrued thereon after the commencement of any insolvency or liquidation proceeding at the rate, including any applicable post-default rate, specified in the applicable agreement), premium (if any), guarantees of payment, fees, indemnifications, reimbursements, expenses, damages and other liabilities payable under the documentation governing any Indebtedness; provided that Obligations with respect to the notes shall not include fees or indemnification in favor of the Trustee and any other third parties other than the Holders.

“Offering Circular” means the Offering Circular dated October 18, 2005 with respect to the offering of the old notes.

“Officer” means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the Company or the Co-Issuer.

“Officers’ Certificate” means a certificate signed on behalf of the Company or the Co-Issuer by two Officers of the Company or the Co-Issuer, as the case may be, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company or the Co-Issuer, as the case may be, that meets the requirements set forth in the Indenture.

“Partially Owned Operating Company” means any Person that (i) is transferred to a MLP or a MLP Subsidiary in connection with a Permitted MLP Transfer and (ii) holds operating assets and as to which the Company or any Restricted Subsidiary continues to own Equity Interests.

170

“Permitted Asset Swap” means the concurrent purchase and sale or exchange of Related Business Assets or a combination of Related Business Assets and cash or Cash Equivalents between the Company or any of its Restricted Subsidiaries and another Person that is not the Company or any of its Restricted Subsidiaries; provided that any cash or Cash Equivalents received must be applied in accordance with the covenant described under “Repurchase at the Option of Holders—Asset Sales”.

“Permitted GP” means any MLP GP as to which a Permitted GP Transfer has occurred, including any successor Person to such MLP GP.

“Permitted Holders” means each of the Sponsor, the Co-Investor and members of management of the Company (or its direct parent) who were holders of Equity Interests of the Company (or any of its direct or indirect parent companies) on October 31, 2005 and any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) of which any of the foregoing are members; provided that, in the case of such group and without giving effect to the existence of such group or any other group, such Sponsor, the Co-Investor and such members of management, collectively, have beneficial ownership of more than 50% of the total voting power of the Voting Stock of the Company or any of its direct or indirect parent companies. Any Person or group whose acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of the Indenture will thereafter, together with its Affiliates, constitute an additional Permitted Holder.

“Permitted Investments” means:

(a) any Investment in the Company or any Restricted Subsidiary (other than a Partially Owned Operating Company);

(b) any Investment in cash and Cash Equivalents or Investment Grade Securities;

(c) (i) any Investment by the Company or any Restricted Subsidiary of the Company in a Person that is engaged in a Similar Business if as a result of such Investment

(1) such Person becomes a Restricted Subsidiary of the Company or

(2) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company and

(ii) any Investment held by such Person;

(d) any Investment in securities or other assets not constituting cash, Cash Equivalents or Investment Grade Securities received in connection with (i) an Asset Sale or Permitted MLP Transfer made pursuant to the provisions of the covenants described under “Repurchase at the Option of Holders—Asset Sales” and “—Transactions Involving MLPs and GPs” or (ii) any other disposition of assets (other than a Permitted MLP Transfer or Permitted GP Transfer) not constituting an Asset Sale;

(e) any Investment existing on October 31, 2005 or made pursuant to legally binding written commitments in existence on October 31, 2005;

(f) loans and advances to, and guarantees of Indebtedness of, employees not in excess of $10.0 million outstanding at any one time, in the aggregate;

(g) any Investment acquired by the Company or any Restricted Subsidiary

(1) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the Person in which such other Investment is made or which is the obligor with respect to such accounts receivable or

(2) as a result of a foreclosure by the Company or any Restricted Subsidiary with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;

171

(h) Hedging Obligations permitted under clause (l) of the covenant described in “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”;

(i) loans and advances to officers, directors and employees for business-related travel expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business or consistent with past practice or to fund such Person’s purchase of Equity Interests of the Company or any direct or any indirect parent company thereof under compensation plans approved by the Board of Directors of the Company in good faith;

(j) Investments the payment for which consists of Equity Interests of the Company or any of its direct or indirect parent companies (exclusive of Disqualified Stock); provided that such Equity Interests will not increase the amount available for Restricted Payments under clause (c) of the first paragraph under the covenant described in “Certain Covenants—Limitation on Restricted Payments”;

(k) guarantees of Indebtedness permitted under the covenant described in “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” and performance guarantees in the ordinary course of business;

(l) any transaction to the extent it constitutes an investment that is permitted and made in accordance with the provisions of the second paragraph of the covenant described under “Certain Covenants—Transactions with Affiliates” (except transactions described in clauses (2), (6) and (11) of such paragraph);

(m) Investments consisting of purchases and acquisitions of inventory, supplies, material or equipment or the licensing or contribution of intellectual property pursuant to joint marketing arrangements with other Persons;

(n) Investments relating to a Receivables Facility; provided that in the case of Receivables Facilities established after October 31, 2005, such Investments are necessary or advisable (in the good faith determination of the Company) to effect such Receivables Facility;

(o) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (o) that are at that time outstanding, not to exceed the greater of (x) $125.0 million and (y) 5.0% of Total Assets at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); and

(p) any Investments in a Permitted MLP or a GP; provided that such Investment results from a Permitted MLP Transfer that is a MLP Asset Transfer or a Permitted GP Transfer.

“Permitted Liens” means, with respect to any Person:

(1) Liens to secure Indebtedness incurred under clauses (a), (b), (c), (d) of the second paragraph of the covenant described under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” and any related Obligations;

(2) pledges or deposits by such Person under workmen’s compensation laws, unemployment insurance laws or similar legislation, or good faith deposits, prepayments or cash pledges to secure bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or U.S. government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case incurred in the ordinary course of business;

(3) Liens imposed by law, such as landlords’, carriers’, warehousemens’, mechanics’, materialmens’, repairmens’, construction contractors’ Liens and other similar Liens, in each case, for sums not yet overdue for a period of more than 30 days or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;

172

(4) Liens for taxes, assessments or other governmental charges or claims not yet overdue for a period more of than 30 days or payable or subject to penalties for nonpayment or which are being contested in good faith by appropriate proceedings diligently conducted if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;

(5) Liens in favor of issuers of performance and surety bonds or bid bonds or with respect to other regulatory requirements or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business;

(6) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties, in each case, which were not incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;

(7) Liens existing on October 31, 2005;

(8) Liens on property or shares of stock of a Person at the time such Person becomes a Subsidiary; provided that such Liens are not created or incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided, further, that such Liens may not extend to any other property owned by the Company or any Restricted Subsidiary;

(9) Liens on property at the time the Company or a Restricted Subsidiary acquired the property, including any acquisition by means of a merger or consolidation with or into the Company or any Restricted Subsidiary; provided that such Liens are not created or incurred in connection with, or in contemplation of, such acquisition; provided, further, that the Liens may not extend to any other property owned by the Company or any Restricted Subsidiary;

(10) Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to the Company or another Restricted Subsidiary permitted to be incurred in accordance with the covenant described under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”;

(11) Liens on specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(12) leases and subleases granted to others in the ordinary course of business which do not materially interfere with the ordinary conduct of the business of the Company or any of the Restricted Subsidiaries and do not secure any Indebtedness;

(13) Liens arising from financing statement filings under the Uniform Commercial Code or similar state laws regarding operating leases entered into by the Company and its Restricted Subsidiaries in the ordinary course of business;

(14) Liens in favor of the Company or any Subsidiary Guarantor;

(15) Liens on inventory or equipment of the Company or any Restricted Subsidiary granted in the ordinary course of business to the Company’s client at which such inventory or equipment is located;

(16) Liens on accounts receivable and related assets incurred in connection with a Receivables Facility;

(17) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancing, refunding, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (7), (8) and (9) and the following clause (18); provided that (x) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property), and (y) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (7), (8), (9) and the following clause (18) at

173

the time the original Lien became a Permitted Lien under the Indenture, and (B) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement;

(18) Liens securing Indebtedness permitted to be incurred pursuant to clauses (g), (l), (s), (t) and (u)(i) of the second paragraph under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”; provided that (i) Liens securing Indebtedness permitted to be incurred pursuant to clause (s) are solely on acquired property or the assets of the acquired entity, as the case may be, and (ii) Liens securing Indebtedness permitted to be incurred pursuant to clause (t) extend only to the assets of Foreign Subsidiaries;

(19) deposits in the ordinary course of business to secure liability to insurance carriers;

(20) Liens securing judgments for the payment of money not constituting an Event of Default under clause (5) under the caption “Events of Default and Remedies”, so long as such Liens are adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired;

(21) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

(22) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business and (iii) in favor of banking institutions arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

(23) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Company or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Company and its Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Company or any of its Restricted Subsidiaries in the ordinary course of business;

(24) other Liens securing obligations incurred in the ordinary course of business which obligations do not exceed $35.0 million at any one time outstanding;

(25) from and after the date that the notes have Investment Grade Ratings from both Rating Agencies, Liens securing Indebtedness in an aggregate principal amount which, together with the aggregate outstanding principal amount of all other Indebtedness secured by Liens pursuant to this clause (25) and pursuant to clauses (1), (8), (9) and (24) above and clause (28) below, does not exceed 15% of Consolidated Net Tangible Assets;

(26) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;

(27) Liens deemed to exist in connection with Investments in repurchase agreements permitted under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”; provided that such Liens do not extend to any assets other than those assets that are the subject of such repurchase agreement; and

(28) Liens incurred in respect of any Indebtedness permitted to be incurred pursuant to the covenant described under “Certain Covenants—Limitation on Incurrence of Indebtedness of Issuance of Disqualified Stock and Preferred Stock”; provided that, at the time of incurrence and after giving pro forma effect thereto, the Secured Debt Ratio would be no greater than 4.00:1.00.

174

“Permitted MLP” means any MLP to which the Company or a Restricted Subsidiary shall have made a Permitted MLP Transfer either directly to such MLP or to a Subsidiary of such MLP, including any successor Person to such MLP.

“Permitted MLP Investment” means an investment in (1) any one or more businesses; provided that such investment in any business is in the form of the acquisition of Capital Stock and results in the Company or any Restricted Subsidiary owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (2) properties, (3) capital expenditures and (4) acquisitions of long lived assets, that in each of (1), (2), (3) and (4), are used or useful in a Similar Business.

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

“PIPA” means the Partnership Interest Purchase Agreement, dated as of August 2, 2005, by and between Dynegy, Inc., Dynegy Holdings Inc., Dynegy Midstream Holdings, Inc. and Dynegy Midstream G.P., Inc., as Sellers, and Targa Resources, Inc., Targa Resources Partners OLP LP, and Targa Midstream GP, LLC, as Buyers, as the same may be amended prior to October 31, 2005.

“Preferred Stock” means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution, or winding up.

“Qualified Proceeds” means assets that are used or useful in, or Capital Stock of any Person engaged in, a Similar Business; provided that the fair market value of any such assets or Capital Stock shall be determined by the Company in good faith.

“Rating Agencies” means Moody’s and S&P or if Moody’s or S&P or both shall not make a rating of the notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for Moody’s or S&P or both, as the case may be.

“Receivables Facility” means one or more receivables financing facilities, as amended, supplemented, modified, extended, replaced, renewed, restated, refunded or refinanced from time to time, the Indebtedness of which is non-recourse (except for standard representations, warranties, covenants and indemnities made in connection with such facilities) to the Company and its Restricted Subsidiaries pursuant to which the Company or any of its Restricted Subsidiaries sells its accounts receivable to either (a) a Person that is not a Restricted Subsidiary or (b) a Receivables Subsidiary that in turn sells its accounts receivable to a Person that is not a Restricted Subsidiary.

“Receivables Fees” means distributions or payments made directly or by means of discounts with respect to any participation interest issued or sold in connection with, and other fees paid to a Person that is not a Restricted Subsidiary in connection with, any Receivables Facility.

“Receivables Subsidiary” means any Subsidiary formed solely for the purpose of engaging, and that engages only, in one or more Receivables Facilities.

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of October 31, 2005, among the Company, the Co-Issuer, the Subsidiary Guarantors and the Initial Purchasers.

“Related Business Assets” means assets (other than cash or Cash Equivalents) used or useful in a Similar Business; provided that any assets received by the Company or a Restricted Subsidiary in exchange for assets transferred by the Company or a Restricted Subsidiary shall not be deemed to be Related Business Assets if they consist of securities of a Person, unless upon receipt of the securities of such Person, such Person would become a Restricted Subsidiary.

175

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Subsidiary” means, at any time, any direct or indirect Subsidiary of the Company (including the Co-Issuer and any Foreign Subsidiary) that is not then (i) an Unrestricted Subsidiary; provided that upon the occurrence of an Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of “Restricted Subsidiary” or (ii) a Permitted MLP, Permitted GP or a Subsidiary of a Permitted MLP or Permitted GP (other than a Partially Owned Operating Company); provided that any such Partially Owned Operating Company will be a Restricted Subsidiary solely for purposes of the covenants described under “Certain Covenants— Limitation on Restricted Payments”, “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” and “—Liens”.

“Revolving Credit Facility” means the revolving credit facility provided under the Credit Agreement, entered into as of October 31, 2005, among the Company, the lenders party thereto in their capacity as lenders thereunder and Credit Suisse, as Administrative Agent, including any guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, replacements, renewals, restatements, refundings or refinancings thereof and any indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that extend, replace, refund, refinance, renew or defease any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” above).

“S&P” means Standard and Poor’s, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business.

“Sale and Lease-Back Transaction” means any arrangement with any Person providing for the leasing by the Company or any Restricted Subsidiary of any real or tangible personal property, which property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person in contemplation of such leasing.

“SEC” means the Securities and Exchange Commission.

“Secured Debt Ratio”, as of any date of determination, means the ratio of (a) Consolidated Total Indebtedness of the Company and the Restricted Subsidiaries that is secured by Liens as of the end of the most recent fiscal quarter for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur to (b) the aggregate amount of EBITDA for the then most recent four fiscal quarters ending with the fiscal quarter referred to in clause (a), in each case with such pro forma adjustments to Consolidated Total Indebtedness and EBITDA as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.

“Secured Indebtedness” means any Indebtedness secured by a Lien.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Senior Credit Facilities” means the Revolving Credit Facility, the Term Loan Facility, the Funded Synthetic Letter of Credit Facility and the Asset Sale Bridge Term Loan Facility.

“Senior Indebtedness” means with respect to any Person:

(1) all Indebtedness of such Person, whether outstanding on October 31, 2005 or thereafter incurred; and

176

(2) all other Obligations of such Person (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person whether or not post-filing interest is allowed in such proceeding) in respect of Indebtedness described in clause (1) above

unless, in the case of clauses (1) and (2), the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness or other Obligations are subordinate in right of payment to the notes or the Subsidiary Guarantee of such Person, as the case may be; provided that Senior Indebtedness shall not include:

(1) any obligation of such Person to the Company or any Subsidiary or to any joint venture in which the Company or any Restricted Subsidiary has an interest;

(2) any liability for Federal, state, local or other taxes owed or owing by such Person;

(3) any accounts payable or other liability to trade creditors in the ordinary course of business (including guarantees thereof as instruments evidencing such liabilities);

(4) any Indebtedness or other Obligation of such Person that is subordinate or junior in any respect to any other Indebtedness or other Obligation of such Person; or

(5) that portion of any Indebtedness that at the time of Incurrence is Incurred in violation of the Indenture.

“Significant Subsidiary” means any Restricted Subsidiary of the Company that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such regulation is in effect on the date hereof.

“Similar Business” means any business conducted by the Company and its Restricted Subsidiaries on October 31, 2005 or any business that is similar, reasonably related, incidental or ancillary thereto.

“Sponsor” means Warburg Pincus LLC and its Affiliates.

“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

“Subordinated Indebtedness” means

(a) with respect to the Company, any Indebtedness of the Company that is by its terms subordinated in right of payment to the notes, and

(b) with respect to any Subsidiary Guarantor, any Indebtedness of such Subsidiary Guarantor that is by its terms subordinated in right of payment to the Subsidiary Guarantee of such Subsidiary Guarantor.

“Subsidiary” means, with respect to any Person,

(1) any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof and

(2) any partnership, joint venture, limited liability company or similar entity of which

(x) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and

177

(y) such Person or any Restricted Subsidiary of such Person is a controlling general partner or otherwise controls such entity.

“Subsidiary Guarantee” means the guarantee by any Subsidiary Guarantor of the Company’s and the Co-Issuer’s Obligations under the Indenture and the notes.

“Subsidiary Guarantor” means each Restricted Subsidiary of the Company that executed the Indenture as a guarantor on October 31, 2005 and each other Restricted Subsidiary of the Company that thereafter guarantees the notes pursuant to the terms of the Indenture.

“Term Loan Facility” means the term loan credit facility provided under the Credit Agreement, entered into as of October 31, 2005, among the Company, the lenders party thereto in their capacity as lenders and Credit Suisse, as Administrative Agent, including any guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, replacements, renewals, restatements, refundings or refinancings thereof and any indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that extend, replace, refund, refinance, renew or defease any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”).

“Total Assets” means the total amount of all assets of the Company and the Restricted Subsidiaries (other than the North Texas Assets), determined on a consolidated basis in accordance with GAAP as shown on the most recent balance sheet of the Company.

“Transactions” means the Acquisition, including the payment of the merger consideration in connection therewith, the investments by the Sponsor, the Co-Investor, members of management and any other co-investors, the issuance of the notes and the execution of, and borrowings on October 31, 2005 under, the Senior Credit Facilities as in effect on October 31, 2005, the pledge and security arrangements in connection with the foregoing, the refinancing of certain Indebtedness in connection with the foregoing and the related transactions described in this offering circular, in particular as described under the section thereof entitled “The Transactions”.

“Treasury Rate” means, as of any redemption date, the yield to maturity as of such redemption date of United States of America Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to November 1, 2009; provided, however, that if the period from the redemption date to November 1, 2009, is less than one year, the weekly average yield on actually traded United States of America Treasury securities adjusted to a constant maturity of one year will be used.

“Trustee” means Wells Fargo Bank, National Association until a successor replaces it and, thereafter, means the successor.

“Unrestricted Subsidiary” means

(1) Versado Gas Processors L.L.C., Downstream Ventures, Co., L.L.C. and Cedar Bayou Fractionaters, LP,

(2) any Subsidiary of the Company that at the time of determination is an Unrestricted Subsidiary (as designated by the Company, as provided below) and

(3) any Subsidiary of an Unrestricted Subsidiary;

provided that no Permitted MLP, Permitted GP, Subsidiary of a Permitted MLP or Permitted GP and no Co-Issuer will be an Unrestricted Subsidiary.

178

The Company may designate any Subsidiary of the Company (including any existing Subsidiary and any newly acquired or newly formed Subsidiary but excluding any of the entities referred to in the proviso of the immediately following paragraph) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on, any property of, the Company or any Subsidiary of the Company (other than any Subsidiary of the Subsidiary to be so designated); provided that

(a) any Unrestricted Subsidiary must be an entity of which shares of the capital stock or other equity interests (including partnership interests) entitled to cast at least a majority of the votes that may be cast by all shares or equity interests having ordinary voting power for the election of directors or other governing body are owned, directly or indirectly, by the Company,

(b) such designation complies with the covenant described under “Certain Covenants— Limitation on Restricted Payments” and

(c) each of

(1) the Subsidiary to be so designated and

(2) its Subsidiaries

has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any Restricted Subsidiary.

The Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that, immediately after giving effect to such designation, no Default shall have occurred and be continuing and either

(1) the Company could incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test described in the first paragraph under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” or

(2) the Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries would be greater than such ratio for the Company and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation.

Any such designation by the Company shall be notified by the Company to the Trustee by promptly filing with the Trustee a copy of any applicable Board Resolution giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing provisions.

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, at any date, the quotient obtained by dividing

(1) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock or Preferred Stock multiplied by the amount of such payment, by

(2) the sum of all such payments.

“Wholly-Owned Subsidiary” of any Person means a Subsidiary of such Person, 100% of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person.

179

FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of certain federal income tax consequences relevant to the exchange of exchange notes for outstanding notes, but does not purport to be a complete analysis for all potential tax effects. The summary is based upon the Internal Revenue Code of 1986, as amended, Treasury Regulations, Internal Revenue Service rulings and pronouncements and judicial decisions now in effect, all of which may be subject to change at any time by legislative, judicial or administrative action. These changes may be applied retroactively in a manner that could adversely affect a holder of exchange notes. The description does not consider the effect of any applicable foreign, state, local or other tax laws or estate or gift tax considerations. Each holder is encouraged to consult, and depend on, his own tax advisor in analyzing the particular tax consequences of exchanging such holder’s outstanding notes for new notes, including the applicability and effect of any federal, state, local and foreign tax laws.

The exchange of exchange notes for outstanding notes will not be a taxable event to a holder for United States federal income tax purposes. Accordingly, a holder will have the same adjusted issue price, adjusted basis and holding period in the exchange notes as it had in the outstanding notes immediately before the exchange.

PLAN OF DISTRIBUTION

Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for outstanding notes where such outstanding notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration date of the exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until                     , 2007, all dealers effecting transactions in the new notes may be required to deliver a prospectus.

We will not receive any proceeds from any sale of the new notes by broker-dealers. New notes received by broker-dealers for their own account pursuant to this exchange offer may be sold from time to time in one or more transaction in the over-the-counter market, in negotiated transactions, through the writing of options on the new notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such new notes. Any broker-dealer that resells new notes that were received by it for its own account pursuant to this exchange offer and any broker or dealer that participates in a distribution of such new notes may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on any such resale of the new notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

For a period of 180 days after the expiration date of the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holders of the outstanding notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the outstanding notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

180

LEGAL MATTERS

The validity of the new notes offered in this exchange offer and the related guarantees will be passed upon for us by Vinson & Elkins L.L.P., Houston, Texas.

EXPERTS

The financial statements of Targa Resources, Inc. as of December 31, 2006 and 2005 and for each of the two years in the period ended December 31, 2006 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

The financial statements of Dynegy Midstream Services, Limited Partnership for the ten month period ended October 31, 2005 and as of December 31, 2004 and 2003 and for each of the two years in the period ended December 31, 2004 included in this Prospectus, have been so incorporated in reliance on the reports (which includes explanatory paragraphs relating to significant transactions with related parties) of PricewaterhouseCoopers LLP, independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

The consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows of Targa Resources, Inc. for the year ended December 31, 2004, appearing in this Prospectus and Registration Statement, and the combined financial statements of the Midstream Operations sold to Targa Resources, Inc. at April 15, 2004 and for the 106-day period ended April 15, 2004, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-4 with respect to the notes being offered by this prospectus. This prospectus does not contain all of the information found in the registration statement. For further information regarding us and the notes offered by this prospectus, please review the full registration statement, including its exhibits. The registration statement, including the exhibits, may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington D.C. 20549. Copies of this material can also be obtained from the public reference section of the SEC at prescribed rates, or accessed at the SEC’s website at www.sec.gov. Please call the SEC at 1-800-SEC-0330 for further information on its public reference room.

Following the completion of the exchange offer, we will file with or furnish to the SEC periodic reports and other information. These reports and other information may be inspected and copied at the public reference facilities maintained by the SEC or obtained from the SEC’s website as provided above. We have agreed that, whether or not we are required to do so under the applicable rules and regulations, for so long as any of the notes remain outstanding we will comply with the reporting requirements of the Exchange Act and will file the applicable reports and information with the SEC, unless the SEC will not accept such filings. If the SEC will not accept these filings, we will post the reports referred to above on our website. Our website is located at www.targaresources.com, and we expect to make our periodic reports and other information filed with or furnished to the SEC available free of charge through our website, as soon as reasonably practicable after those reports and other information are filed with or furnished to the SEC. Information on our website is not a part of this prospectus. You may also request a copy of these filings at no cost, by writing or telephoning us at the following address: Targa Resources, Inc., Attention: Investor Relations, 1000 Louisiana, Suite 4300, Houston, Texas 77002, (713) 584-1000.

181

In addition, for so long as any of the notes remain outstanding, we have agreed to make available to any prospective purchaser of the notes or beneficial owner of the notes, in connection with any sale thereof, the information required by Rule 144A(d)(4) under the Securities Act.

FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, included in this prospectus are forward-looking statements. Forward-looking statements include, without limitation, statements regarding our future financial position, business strategy, future capital and other expenditures, plans and objectives of management for future operations. You can typically identify forward-looking statements by the use of forward-looking words such as “may,” “potential,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “estimate” or similar expressions or variations on such expressions. Each forward-looking statement reflects our current view of future events and is subject to risks, uncertainties and other factors, known and unknown, which could cause our actual results to differ materially from any results expressed or implied by our forward-looking statements. These risks and uncertainties, many of which are beyond our control, include, but are not limited to:

• our ability to access the debt and equity markets, which will depend on general market conditions and the credit ratings for our debt obligations;

• our success in risk management activities, including the use of derivative financial instruments to hedge commodity and interest rate risks;

• the level of creditworthiness of counterparties to transactions;

• the amount of collateral required to be posted from time to time in our transactions;

• changes in laws and regulations, particularly with regard to taxes, safety and protection of the environment or the gathering and processing industry;

• the timing and extent of changes in natural gas, NGL and commodity prices, interest rates and demand for our services;

• weather and other natural phenomena;

• industry changes, including the impact of consolidations and changes in competition;

• our ability to obtain necessary licenses, permits and other approvals;

• our ability to grow through acquisitions or internal growth projects, and the successful integration and future performance of such assets;

• the level and success of natural gas drilling around our assets, and our success in connecting natural gas supplies to our gathering and processing systems;

• general economic, market and business conditions; and

• the risks described under the heading “Risk Factors” in this prospectus.

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate, and, therefore, we cannot assure you that the forward-looking statements included in this prospectus will prove to be accurate. Some of these and other risks and uncertainties that could cause actual results to differ materially from such forward-looking statements are more fully described under the heading Risk Factors in this prospectus. Except as may be required by applicable law, we undertake no obligation to publicly update or advise of any change in any forward-looking statement, whether as a result of new information, future events or otherwise.

Forward-looking statements contained in this prospectus and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

182

INDEX TO FINANCIAL STATEMENTS

TARGA RESOURCES, INC.
Reports of Independent Registered Public Accounting Firms	F-2
Consolidated Balance Sheets as of December 31, 2006 and 2005	F-4
Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004	F-5
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2006, 2005 and 2004	F-6
Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended December 31, 2006, 2005 and 2004	F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004	F-8
Notes to Consolidated Financial Statements	F-9
TARGA RESOURCES, INC. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006	F-53
Consolidated Statements of Operations for the Six Months Ended June 30, 2007 and 2006	F-54
Consolidated Statements of Comprehensive Income (Loss) for the Six Months Ended June 30, 2007 and 2006	F-55
Consolidated Statement of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2007 and December 31, 2006	F-56
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006	F-57
Notes to Unaudited Consolidated Financial Statements	F-58
PREDECESSOR OF TARGA RESOURCES, INC. (CONOCOPHILLIPS COMPANY’S MIDSTREAM OPERATIONS SOLD TO TARGA RESOURCES, INC.)
Report of Independent Registered Public Accounting Firm	F-83
Combined Statements of Operations for the 106-day period from January 1 to April 15, 2004 and the Years Ended December 31, 2003 and 2002	F-84
Combined Balance Sheets at April 15, 2004 and December 31, 2003 and 2002	F-85
Combined Statements of Cash Flows for the 106-day period from January 1 to April 15, 2004 and the Years Ended December 31, 2003 and 2002	F-86
Combined Statement of Parent Company Investments at April 15, 2004 and December 31, 2003 and 2002	F-87
Notes to Combined Financial Statements	F-88
DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP
Report of Independent Registered Public Accounting Firm	F-97
Consolidated Statement of Operations for the Ten Months Ended October 31, 2005	F-98
Consolidated Statement of Cash Flows for the Ten Months Ended October 31, 2005	F-99
Consolidated Statement of Changes in Partners’ Capital for the Ten Months Ended October 31, 2005	F-100
Notes to Consolidated Financial Statements	F-101
Report of Independent Registered Public Accounting Firm	F-112
Consolidated Balance Sheets as of December 31, 2004 and 2003	F-113
Consolidated Statements of Operations for the Years Ended December 31, 2004, 2003 and 2002	F-114
Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002	F-115
Consolidated Statement of Changes in Partners’ Capital for the Years Ended December 31, 2004, 2003 and January 1, 2002	F-116
Notes to Consolidated Financial Statements	F-117

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Targa Resources, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive income (loss), of changes in stockholders’ equity and of cash flows present fairly, in all material respects, the financial position of Targa Resources, Inc. and its subsidiaries (the “Company”) at December 31, 2006 and 2005, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/    PricewaterhouseCoopers LLP

Houston, Texas

March 30, 2007

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Targa Resources, Inc.

We have audited the accompanying consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows of Targa Resources, Inc. (the “Company”) for the year ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Bridgeline Holdings L.P. (“Bridgeline”), a joint venture in which the Company has a total interest of 40%, for the year ended December 31, 2004, have been audited by other auditors whose report has been furnished to us; insofar as our opinion on the consolidated financial statements relates to the amounts included for Bridgeline, it is based solely on their report.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of the operations and the cash flows of Targa Resources, Inc. for the year ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

/S/    ERNST & YOUNG LLP

Houston, Texas

May 20, 2005, except for Notes 8 and 20, as to

which the date is September 29, 2005

F-3

TARGA RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2006			2005
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	142,739		$	41,427
Trade receivables, net of allowances of $781 and $800		528,864			516,879
Inventory		116,956			159,833
Deferred income taxes		—			10,472
Assets from risk management activities		34,255			1,220
Other current assets		36,843			97,744
Total current assets		859,657			827,575
Property, plant, and equipment, at cost		2,651,375			2,474,157
Accumulated depreciation		(186,848	)		(37,554	)
Property, plant, and equipment, net		2,464,527			2,436,603
Unconsolidated investments		40,212			62,337
Deferred income taxes		—			7,038
Long-term assets from risk management activities		15,851			150
Other assets		77,778			62,883
Total assets	$	3,458,025		$	3,396,586
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	271,696		$	367,166
Accrued liabilities		301,540			166,468
Current maturities of debt		712,500			12,500
Liabilities from risk management activities		6,611			29,851
Deferred income taxes		11,383			—
Total current liabilities		1,303,730			575,985
Long-term debt, less current maturities		1,471,875			2,184,375
Long-term liabilities from risk management activities		17,731			62,969
Deferred income taxes		23,950			—
Other long-term obligations		24,941			26,166
Minority interest		101,528			112,714
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock ($0.001 par value, 1,000 shares authorized, 1,000 shares issued and outstanding at December 31, 2006 and 2005)		—			—
Additional paid-in capital		472,423			470,608
Retained earnings (accumulated deficit)		6,164			(17,250	)
Accumulated other comprehensive income (loss)		35,683			(18,981	)
Total stockholders’ equity		514,270			434,377
Total liabilities and stockholders’ equity	$	3,458,025		$	3,396,586

See notes to consolidated financial statements

F-4

TARGA RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31, 2006			Year Ended December 31, 2005			Year Ended December 31, 2004
	(In thousands)
Revenues	$	6,132,881		$	1,829,027		$	602,376
Costs and expenses:
Product purchases		5,440,832			1,631,963			544,918
Operating expenses		224,169			52,090			15,253
Depreciation and amortization		149,687			27,141			10,631
General and administrative		82,351			28,275			11,149
		5,897,039			1,739,469			581,951
Operating income		235,842			89,558			20,425
Other income (expense):
Interest expense, net		(180,189	)		(39,856	)		(6,406	)
Equity in earnings of unconsolidated investments		9,968			(3,776	)		2,370
Gain on sale of investment in Bridgeline Holdings, L.P.		—			18,008			—
Loss on mark-to-market derivative contracts		—			(73,950	)		—
Loss on debt extinguishment		—			(3,375	)		—
Minority interest		(25,998	)		(7,361	)		—
Income (loss) before income taxes		39,623			(20,752	)		16,389
Income tax (expense) benefit:
Current		(34	)		(205	)		—
Deferred		(16,175	)		6,742			(5,227	)
		(16,209	)		6,537			(5,227	)
Net income (loss)		23,414			(14,215	)		11,162
Dividends on redeemable preferred stock		—			(7,167	)		(5,829	)
Net income (loss) to common stock	$	23,414		$	(21,382	)	$	5,333

See notes to consolidated financial statements

F-5

TARGA RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Year Ended December 31, 2006			Year Ended December 31, 2005			Year Ended December 31, 2004
	(In thousands)
Net income (loss)	$	23,414		$	(14,215	)	$	11,162
Other comprehensive income (loss)
Commodity hedging contracts:
Change in fair value		120,283			(40,159	)		1,292
Reclassification adjustment for settled periods		(31,243	)		7,450			1,207
Related income taxes		(35,376	)		12,203			(874	)
Interest rate swaps:
Change in fair value		2,606			(249	)		—
Reclassification adjustment for settled periods		(1,005	)		80			—
Related income taxes		(639	)		63			—
Foreign currency items:
Foreign currency translation adjustment		59			9			—
Related income taxes		(21	)		(3	)		—
Equity in other comprehensive income changes of
Bridgeline Holdings, L.P.		—			149			(149	)
Related income taxes		—			(52	)		52
		54,664			(20,509	)		1,528
Comprehensive income (loss)	$	78,078		$	(34,724	)	$	12,690

See notes to consolidated financial statements

F-6

TARGA RESOURCES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

	Common Stock					Additional Paid-in Capital			Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Total
	Shares		Amount
	(In thousands)
Initial contribution	—		$	—		$	2,078		$	(1,201	)	$	—		$	877
Contributions	—			—			2,550			—			—			2,550
Issuance of redeemable preferred stock	—			—			(3,750	)		—			—			(3,750	)
Issuance of nonvested common stock	1,610			2			14			—			—			16
Amortization of deferred compensation	—			—			485			—			—			485
Other comprehensive income	—			—			—			—			1,528			1,528
Dividends on redeemable preferred stock	—			—			—			(5,829	)		—			(5,829	)
Net income	—			—			—			11,162			—			11,162
Balance, December 31, 2004	1,610			2			1,377			4,132			1,528			7,039
Tax benefit on vesting of common stock	—			—			3,878			—			—			3,878
Amortization of deferred compensation	—			—			497			—			—			497
Dividends on redeemable preferred stock	—			—			—			(7,167	)		—			(7,167	)
Retirement of preferred stock	—			—			148,046			—			—			148,046
Contribution of parent	—			—			315,630			—			—			315,630
Equity reorganization	(1,609	)		(2	)		2			—			—			—
Contribution of noncash compensation	—			—			1,178			—			—			1,178
Other comprehensive loss	—			—			—			—			(20,509	)		(20,509	)
Net loss	—			—			—			(14,215	)		—			(14,215	)
Balance, December 31, 2005	1			—			470,608			(17,250	)		(18,981	)		434,377
Tax expense on vesting of common stock	—			—			7			—			—			7
Distribution to parent	—			—			(969	)		—			—			(969	)
Contribution of noncash compensation	—			—			2,777			—			—			2,777
Other comprehensive income	—			—			—			—			54,664			54,664
Net income	—			—			—			23,414			—			23,414
Balance, December 31, 2006	1		$	—		$	472,423		$	6,164		$	35,683		$	514,270

See notes to consolidated financial statements

F-7

TARGA RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31, 2006			Year Ended December 31, 2005			Year Ended December 31, 2004
	(In thousands)
Cash flows from operating activities
Net income (loss)	$	23,414		$	(14,215	)	$	11,162
Items not affecting cash flows from operating activities:
Depreciation		149,563			27,017			10,537
Deferred income tax expense (benefit)		16,175			(6,742	)		5,227
Amortization of debt issue costs		13,001			6,746			956
Amortization of intangibles		124			124			94
Amortization of discount on senior subordinated second lien notes		—			527			113
Accretion of asset retirement obligations		888			232			40
Noncash compensation		2,777			1,675			485
Inventory valuation adjustment		13,103			—			—
Provision for uncollectible accounts		(860	)		—			—
Equity in earnings of unconsolidated investments		(9,968	)		3,776			(2,370	)
Distributions from unconsolidated investments		2,306			387			—
Minority interest		25,998			7,361			—
Minority interest distributions		(37,184	)		—			—
Gain on sale of investment in Bridgeline Holdings, L.P.		—			(18,008	)		—
Risk management activities		(24,618	)		—			—
Loss on mark-to-market derivative contracts		—			73,950			—
Loss on sale of assets		169			—			—
Other		—			975			(95	)
Changes in operating assets and liabilities:
Accounts receivable and other assets		(2,052	)		(97,135	)		(77,843	)
Inventory		23,407			(16,756	)		(381	)
Accounts payable and other liabilities		37,043			138,941			85,210
Net cash provided by operating activities		233,286			108,855			33,135
Cash flows from investing activities
Purchases of property, plant and equipment		(136,325	)		(21,976	)		(250,187	)
Acquisition of Dynegy Midstream Services, L.P., net of cash acquired		(340	)		(2,403,544	)		—
Proceeds from property insurance		27,221			—			—
Investment in unconsolidated affiliates		(9,102	)		(6,032	)		(101,275	)
Proceeds from sale of investment in Bridgeline Holdings, L.P.		—			117,000			—
Payment of premium on commodity derivative		—			(13,600	)		—
Other		734			(764	)		(1,772	)
Net cash used in investing activities		(117,812	)		(2,328,916	)		(353,234	)
Cash flows from financing activities
Senior secured credit facilities:
Borrowings		—			1,998,000			168,000
Repayments		(12,500	)		(177,125	)		(42,000	)
Proceeds from issuance of senior unsecured notes		—			250,000			—
Proceeds from issuance of term loan		—			—			45,000
Proceeds from issuance of senior subordinated second lien notes		—			—			31,360
Repayment of term loan		—			(45,000	)		—
Repayment of senior subordinated second lien notes		—			(32,000	)		—
Distributions to Targa Resources Investments Inc.		(969	)		315,630			—
Parent contributions (distributions)		—			—			2,550
Proceeds from issuance of redeemable preferred stock		—			—			131,300
Proceeds from issuance of common stock		—			—			16
Costs incurred in connection with financing arrangements		(693	)		(58,884	)		(5,550	)
Net cash provided by (used in) financing activities		(14,162	)		2,250,621			330,676
Net increase in cash and cash equivalents		101,312			30,560			10,577
Cash and cash equivalents, beginning of period		41,427			10,867			290
Cash and cash equivalents, end of period	$	142,739		$	41,427		$	10,867

See notes to consolidated financial statements

F-8

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Organization and Operations of the Company

Organization

Targa Resources, Inc. is a Delaware corporation formed on February 26, 2004. Unless the context requires otherwise, references to “we”, “us”, “our”, “the Company” or “Targa” are intended to mean the consolidated business and operations of Targa Resources, Inc.

On April 16, 2004, the common stock of Pipeco Development Company, Inc. (“Pipeco”) was contributed to Targa in exchange for 37,500 shares of preferred stock. Both Targa and Pipeco were considered “entities under common control” as defined under accounting principles generally accepted in the United States (“GAAP”) and, as such, this transaction was recorded in a manner similar to that required for a pooling of interests, whereby the recorded assets and liabilities of Targa and Pipeco were carried forward to the combined consolidated corporation at their recorded amounts.

Prior to April 16, 2004, certain investors in Targa had previous ownership in Pipeco, a Delaware corporation, formerly known as Targa Resources, Inc. and Warburg Pincus VIII Development Company, Inc. Pipeco was the entity that performed due diligence and other acquisition-specific activities associated with the asset acquisitions from ConocoPhillips Corporation (“ConocoPhillips”).

We commenced initial operations on April 16, 2004, with the purchase from ConocoPhillips of certain midstream natural gas assets located in West Texas and South Louisiana. In these financial statements and notes therein, all references to the “predecessor” are to these assets, presented on a going-concern basis, as if the assets had existed as an entity separate from ConocoPhillips.

On December 16, 2004, we acquired an aggregate 40% equity ownership in Bridgeline Holdings, L.P., and Bridgeline LLC (collectively, “Bridgeline”). We accounted for our investment in Bridgeline using the equity method of accounting. On August 5, 2005, we sold our interest in Bridgeline to Chevron Corporation (“Chevron”) for $117.0 million. We recognized a pre-tax gain of $18.0 million from the sale.

On October 31, 2005, we acquired Dynegy Inc.’s (“Dynegy”) midstream natural gas business for approximately $2,452 million. Under the terms of the agreement, we acquired Dynegy’s ownership interests in Dynegy Midstream Services Limited Partnership (“DMS”), which held Dynegy’s natural gas gathering and processing assets, as well as its natural gas liquids (“NGL”) fractionation, terminalling, storage, transportation, distribution and marketing assets.

Prior to the closing of the DMS acquisition, we engaged in a corporate reorganization pursuant to which we became a second-tier, wholly-owned subsidiary of our newly-formed parent holding company, Targa Resources Investments Inc. (“Targa Investments”). In the reorganization, our stockholders exchanged their shares of Targa common stock, Targa stock options and Targa Series A Convertible Participating Preferred Stock for shares of Targa Investments having the same terms as the Targa stock, and our preferred stock was retired.

Immediately after the reorganization, the only significant asset of Targa Investments was its ownership of 100% of the outstanding capital stock of an intermediate holding company, whose sole asset was its ownership of 100% of our outstanding capital stock, which consisted entirely of common stock. Following the reorganization, and in connection with the closing of the DMS acquisition, Targa Investments exchanged its outstanding common stock and preferred stock for a new series of preferred stock and issued new common stock to our management. In addition, certain investors and members of our management contributed cash to Targa Investments to purchase additional preferred stock in Targa Investments. Approximately $316 million of such cash was contributed to us concurrent with the closing of the DMS acquisition.

F-9

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Operations

Our business operations consist of natural gas gathering and processing, and the fractionating, storing, terminalling, transporting, distributing and marketing of NGLs. Please see Note 15—Segment Information for a description of our segments and segment operations.

Basis of Presentation. The accompanying financial statements and related notes present our consolidated financial position as of December 31, 2006 and 2005, and the results of our operations, cash flows and changes in stockholders’ equity for the years ended December 31, 2006, 2005 and 2004. Certain reclassifications have been made to the prior year balances to conform to the current year presentation.

Note 2—Significant Accounting Policies

Asset Retirement Obligations. We account for asset retirement obligations in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) 143, “Asset Retirement Obligations.” SFAS 143 requires entities to record the fair value of a liability for a legal obligation to retire an asset in the period in which the liability is incurred. A legal obligation is a liability that a party is required to settle as a result of an existing or enacted law, statute, ordinance or contract. When the liability is initially recorded, the entity is required to capitalize the retirement cost of the related long-lived asset. Each period the liability is accreted to its then present value, and the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized.

In March 2005, the FASB issued Financial Interpretation (“FIN”) 47, “Accounting for Conditional Asset Retirement Obligations.” This Interpretation clarifies the definition and treatment of conditional asset retirement obligations as discussed in SFAS 143. A conditional asset retirement obligation is defined as an asset retirement activity in which the timing and/or method of settlement are dependent on future events that may be outside the control of the company. FIN 47 states that a company must record a liability when incurred for conditional asset retirement obligations if the fair value of the obligation is reasonably estimable. This Interpretation is intended to provide more information about long-lived assets, more information about potential future cash outflows for these obligations and more consistent recognition of these liabilities. Our adoption of FIN 47 on December 31, 2005 had no effect on our financial position, results of operations, or cash flows.

The following table reflects the changes in our asset retirement obligations during the periods shown:

(in thousands)	Year Ended December 31, 2006			Year Ended December 31, 2005		Year Ended December 31, 2004
Asset retirement obligations—beginning of period	$	14,104		$	630	$	—
Liabilities incurred		—			12,828		590
Liabilities settled		(6	)		—		—
Change in cash flow estimate
Purchase price adjustment (1)		(3,330	)		—		—
Other		(35	)		414		—
Accretion expense		888			232		40
Asset retirement obligations—end of period	$	11,621		$	14,104	$	630

(1) See Note 3.

F-10

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Cash and Cash Equivalents. Cash and cash equivalents include all cash on hand, demand deposits, and investments with original maturities of three months or less. We consider cash equivalents to include short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Comprehensive Income. Comprehensive income includes net income and other comprehensive income, which includes unrealized gains and losses on derivative instruments that are designated as hedges, our equity interest in the other comprehensive income changes of unconsolidated investments accounted for under the equity method and unrealized foreign exchange gains and losses.

Concentration of Credit Risk. Financial instruments which potentially subject Targa to concentrations of credit risk consist primarily of trade accounts receivable and derivative instruments. Management believes the risk is limited, as our customers represent a broad and diverse group of energy marketers and end users.

We extend credit to customers and other parties in the normal course of business. We have established various procedures to manage our credit exposure, including initial credit approvals, credit limits and terms, letters of credit, and rights of offset. We also use prepayments and guarantees to limit credit risk to ensure that our established credit criteria are met.

Estimated losses on accounts receivable are provided through an allowance for doubtful accounts. In evaluating the level of established reserves, we make judgments regarding each party’s ability to make required payments, economic events and other factors. As the financial condition of any party changes, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required.

Significant Commercial Relationships

For the year ended December 31, 2006, transactions with Chevron and its subsidiaries represented approximately 15% and 19% of our consolidated revenues and consolidated product purchases, respectively. No other counterparty accounted for more than 10% of our consolidated revenues or consolidated product purchases during 2006.

For the year ended December 31, 2005, transactions with Chevron and its subsidiaries represented approximately 10% and 12% of our consolidated revenues and consolidated product purchases, respectively. In addition, approximately 11% of our consolidated revenues were derived from transactions with ConocoPhillips and its subsidiaries. No other counterparty accounted for more than 10% of our consolidated revenues or consolidated product purchases during 2005.

For the year ended December 31, 2004, transactions with ConocoPhillips, Enterprise Products, PPG Industries, and CITGO represented approximately 17%, 16%, 16% and 12%, respectively, of our consolidated revenues and transactions with Newfield Exploration and Cimarex Energy represented approximately 12% and 10%, respectively, of our consolidated product purchases. No other counterparty accounted for more than 10% of our consolidated revenues or consolidated product purchases during 2004.

Consolidation Policy. Our consolidated financial statements include our accounts and those of our majority-owned subsidiaries in which we have a controlling interest, and our proportionate share of assets, liabilities, revenues and expenses of undivided interests in certain gas processing facilities after the elimination of all material intercompany accounts and transactions.

F-11

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We follow the equity method of accounting if our ownership interest is between 20% and 50% and we exercise significant influence over the operating and financial policies of the investee. Our proportionate share of profits and losses from transactions with equity method unconsolidated affiliates are eliminated in consolidation to the extent such amounts are material and remain on our equity method investees’ balance sheet in inventory or similar accounts.

If our ownership interest in an investee does not provide us with either control or significant influence over the investee, we account for the investment using the cost method.

Debt Issue Costs. Costs incurred in connection with the issuance of long-term debt are capitalized and charged to interest expense over the term of the related debt. During the fourth quarter of 2005, $2.7 million of previously unamortized debt issue costs were charged to expense when the related debt was paid off prior to the normal termination of the related borrowing agreements.

Earnings per Share. Upon completion of our equity reorganization in 2005, our capital stock consisted of one thousand shares of common stock, owned by our parent company. As such, earnings per share information would not be meaningful and is not presented herein.

Environmental Liabilities. Liabilities for loss contingencies, including environmental remediation costs, arising from claims, assessments, litigation, fines, and penalties and other sources are charged to expense when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.

Exchanges. Exchanges are movements of NGL products between parties to satisfy timing and logistical needs of the parties. Volumes received and delivered under exchange agreements are recorded as inventory. If the locations of receipt and delivery are in different markets, a price differential may be billed or owed. The price differential is recorded as either accounts receivable or an accrued liability.

Impairment Testing for Unconsolidated Investments. We evaluate equity method investments (which include excess cost amounts attributable to tangible or intangible assets) for impairment whenever events or changes in circumstances indicate that there is a loss in value of the investment which is an other than temporary decline. Examples of such events or changes in circumstances include continuing operating losses of the investee or long-term negative changes in the investee’s industry. In the event that we determine that the loss in value of an investment is other than a temporary decline, we would record a charge to earnings to adjust the carrying value to fair value.

Income Taxes. We follow the guidance in SFAS 109, “Accounting for Income Taxes”, which requires that we use the asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all significant temporary differences.

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax payable and related tax expense together with assessing temporary differences resulting from differing treatment of certain items, such as depreciation, for tax and accounting purposes. These differences can result in deferred tax assets and liabilities, which are included within our consolidated balance sheets.

We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized, we must establish a valuation allowance. We consider all

F-12

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

available evidence, both positive and negative, to determine whether, based on the weight of the evidence, a valuation allowance is needed. Evidence used includes information about our current financial position and our results of operations for the current and preceding years, as well as all currently available information about future years, including our anticipated future performance, the reversal of deferred tax liabilities and tax planning strategies.

We believe future sources of taxable income, reversing temporary differences and other tax planning strategies will be sufficient to realize assets for which no reserve has been established. Any change in the valuation allowance would impact our income tax provision and net income in the period in which such a determination is made.

Intangible Assets. Intangible assets consist of the value of customer and supplier contracts and relationships obtained in the acquisition from ConocoPhillips. These assets are amortized over the estimated useful lives of the related gathering systems on a straight-line basis. Amortization expense was $0.1 million for each of the years ended December 31, 2006, 2005 and 2004.

We review intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. This review consists of comparing the carrying value of the asset with the asset’s expected future undiscounted cash flows. Estimates of expected future cash flows represent management’s best estimate based on reasonable and supportable assumptions. If such a review should indicate that the carrying amount of intangible assets is not recoverable, we reduce the carrying amount of such assets to fair value.

Inventories. Product inventories consist primarily of NGLs. Most product inventories turn over monthly, but some inventory, primarily propane, is held during the year for strategic purposes to meet anticipated heating season requirements of our customers. Product inventories are valued at the lower of cost or market using the average cost method.

Quantities of natural gas over-delivered or under-delivered related to operational balancing agreements are recorded monthly as inventory or as a payable using weighted average prices at the time the imbalance was created. Monthly, gas imbalances receivable are valued at the lower of cost or market, gas imbalances payable are valued at replacement cost. These imbalances are typically settled in the following month with deliveries or receipts of natural gas. Certain contracts require cash settlement of imbalances on a current basis. Under these contracts, imbalance cash-outs are recorded as a sale or purchase of natural gas, as appropriate.

Due to fluctuating commodity prices for natural gas liquids, we occasionally recognize lower of cost or market adjustments when the carrying values of our inventories exceeds their net realizable value. These non-cash adjustments are charged to product purchases within operating costs and expenses in the period they are recognized, with the related cash impact in the subsequent period. For the year ended December 31, 2006 we recognized $13.1 million of lower of cost or market adjustments.

Inventory consisted of the following at the dates indicated:

	December 31,
	2006		2005
	(in thousands)
Natural gas liquids	$	116,568	$	159,366
Natural gas		—		396
Materials and supplies		388		71
	$	116,956	$	159,833

F-13

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Minority Interest. Minority interest represents third-party ownership interests in the net assets of our subsidiaries that are joint ventures. For financial reporting purposes, the assets and liabilities of our majority owned subsidiaries are consolidated with those of our own, with any third party investor’s interest in our consolidated balance amounts shown as minority interest. In the statement of operations, minority interest reflects the allocation of joint venture earnings to third party investors. Distributions to and contributions from minority interests represent cash payments and cash contributions, respectively, from such third-party investors.

Price Risk Management (Hedging). We account for derivative instruments in accordance with SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended. Under SFAS 133, all derivative instruments not qualifying for the normal purchases and sales exception are recorded on the balance sheet at fair value. If a derivative does not qualify as a hedge, or is not designated as a hedge, the unrealized gain or loss on the derivative is recognized currently in earnings. If a derivative qualifies for hedge accounting and is designated as a hedge, the effective portion of the unrealized gain or loss on the derivative is deferred in accumulated other comprehensive income (“OCI”), a component of stockholders’ equity, and reclassed to revenues or interest expense in the period the hedged forecasted transaction is recognized.

The relationship between the hedging instrument and the hedged item must be highly effective in achieving the offset of changes in cash flows attributable to the hedged risk both at the inception of the contract and on an ongoing basis. Hedge accounting is discontinued prospectively when a hedge instrument becomes ineffective. Gains and losses deferred in OCI related to cash flow hedges for which hedge accounting has been discontinued remain unchanged until the related product has been delivered. If it is probable that a hedged forecasted transaction will not occur, deferred gains or losses on the hedging instrument are recognized in other revenues immediately.

We formally document all relationships between hedging instruments and hedged items, as well as our risk management objectives and strategy for undertaking the hedge. This process includes specific identification of the hedging instrument and the hedged item, the nature of the risk being hedged and the manner in which the hedging instrument’s effectiveness will be assessed. At the inception of the hedge and on an ongoing basis, we assess whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. Hedge effectiveness is measured on a quarterly basis. Any ineffective portion of the unrealized gain or loss is recognized in earnings in the current period. See Note 9.

Property, Plant, and Equipment. Property, plant, and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated service lives of our functional asset groups are as follows:

Asset Group	Range of Years
Natural gas gathering systems and processing facilities	15 to 25
Fractionation, terminalling and natural gas liquids storage facilities	25
Transportation equipment and barges	5 to 10
Office and miscellaneous equipment	3 to 7

Expenditures for maintenance and repairs are generally expensed as incurred. However, expenditures for refurbishments that extend the useful lives of assets or prevent environmental contamination are capitalized and depreciated over the remaining useful life of the asset.

Our determination of the useful lives of property, plant and equipment requires us to make various assumptions, including the supply of and demand for hydrocarbons in the markets served by our assets, normal

F-14

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

wear and tear of the facilities, and the extent and frequency of maintenance programs. From time to time, we utilize consultants and other experts to assist us in assessing the remaining lives of the crude oil or natural gas production in the basins we serve.

We may capitalize certain costs directly related to the construction of assets, including internal labor costs, interest and engineering costs. Upon disposition or retirement of property, plant and equipment, any gain or loss is charged to operations.

In accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we evaluate the recoverability of our property, plant and equipment when events or circumstances such as economic obsolescence, the business climate, legal and other factors indicate we may not recover the carrying amount of the assets. We continually monitor our businesses and the market and business environments to identify indicators that may suggest an asset may not be recoverable.

We evaluate an asset for recoverability by comparing the carrying value of the asset with the asset’s expected future undiscounted cash flows. These cash flow estimates require us to make projections and assumptions for many years into the future for pricing, demand, competition, operating cost and other factors. If the carrying amount exceeds the expected future undiscounted cash flows we recognize an impairment loss to write down the carrying amount of the asset to its fair value as determined by quoted market prices in active markets or present value techniques if quotes are unavailable. The determination of the fair value using present value techniques requires us to make projections and assumptions regarding the probability of a range of outcomes and the rates of interest used in the present value calculations. Any changes we make to these projections and assumptions could result in significant revisions to our evaluation of recoverability of our property, plant and equipment and the recognition of an impairment loss in our Consolidated Statements of Operations.

Revenue Recognition. Our primary types of sales and service activities reported as operating revenue include:

• sales of natural gas, NGLs and condensate;

• natural gas processing, from which we generate revenue through the compression, gathering, treating, and processing of natural gas; and

• fractionation, storage, terminalling and transportation of NGLs, from which we generate fee-based revenue.

In general, we recognize revenue when all of the following criteria are met: (1) persuasive evidence of an exchange arrangement exists, if applicable, (2) delivery has occurred or services have been rendered, (3) the price is fixed or determinable and (4) collectibility is reasonably assured.

For processing services, we receive either fees or a percentage of commodities as payment for these services, depending on the type of contract. Under percent-of-proceeds contracts, we are paid for our services by keeping a percentage of the NGLs extracted and the residue gas resulting from processing natural gas. In percent-of-proceeds arrangements, we remit either a percentage of the proceeds received from the sales of residue gas and NGLs or a percentage of the residue gas or NGLs at the tailgate of the plant to the producer. Under the terms of percent-of-proceeds and similar contracts, we may purchase the producer’s share of the processed commodities for resale or deliver the commodities to the producer at the tailgate of the plant. Percent-of-value and percent-of-liquids contracts are variations on this arrangement. Under keep-whole contracts, we keep the NGLs extracted and return the processed natural gas or value of the natural gas to the producer. Natural gas or NGLs that

F-15

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

we receive for services or purchase for resale are in turn sold and recognized in accordance with the criteria outlined above. Under fee-based contracts, we receive a fee based on throughput volumes.

We generally report revenues gross in the combined statements of operations, in accordance with Emerging Issues Task Force (“EITF”) Issue No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent.” Except for fee-based contracts, we act as the principal in these transactions where we receive natural gas or NGLs, take title to the commodities, and incur the risks and rewards of ownership.

Stock-Based Compensation. On January 1, 2006, we adopted SFAS 123R, “Share-Based Payment,” using the modified prospective method, which resulted in the provisions of SFAS 123R being applied to our consolidated financial statements on a going-forward basis beginning in fiscal year 2006. Prior periods have not been adjusted and, therefore, the results for 2006 are not necessarily comparable to the same period in prior years. However, the impact to prior periods was not material. SFAS 123R requires companies to recognize stock-based awards granted to employees as compensation expense on a fair value basis. Under the fair value recognition provisions of SFAS 123R, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the service period, which generally represents the vesting period, and includes an estimate of the awards that will be forfeited. We calculate the fair value of stock options using the Black-Scholes option pricing model, and the fair value of restricted stock is based on intrinsic value.

Use of Estimates. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect our reported financial position and results of operations. We review significant estimates and judgments affecting our consolidated financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Estimates and judgments are based on information available at the time such estimates and judgments are made. Adjustments made with respect to the use of these estimates and judgments often relate to information not previously available. Uncertainties with respect to such estimates and judgments are inherent in the preparation of financial statements. Estimates and judgments are used in, among other things, (1) estimating unbilled revenues and operating and general and administrative costs (2) developing fair value assumptions, including estimates of future cash flows and discount rates, (3) analyzing tangible and intangible assets for possible impairment, (4) estimating the useful lives of our assets and (5) determining amounts to accrue for contingencies, guarantees and indemnifications. Actual results could differ materially from our estimates.

Recent Accounting Pronouncements. We adopted SFAS 154, “Accounting Changes and Error Corrections,” on January 1, 2006. SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections.

On April 1, 2006 we adopted the consensus on EITF 04-13, “Accounting for Purchases and Sales of Inventory With the Same Counterparty.” EITF 04-13 requires that two or more inventory transactions with the same counterparty should be viewed as a single non-monetary transaction, if the transactions were entered into in contemplation of one another. Exchanges of inventory between entities in the same line of business should be accounted for at fair value or recorded at carrying amounts, depending on the classification of such inventory. Our adoption of EITF 04-13 had no effect on our consolidated results of operations, financial position, or cash flows.

In July 2006, the FASB issued Interpretation 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting and disclosure for uncertainty in income taxes recognized in an enterprise’s financial statements. FIN 48 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. This interpretation is effective for fiscal years beginning after December 15, 2006. We continue to

F-16

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

evaluate our tax positions, and based on our current evaluation, anticipate FIN 48 will not have a significant impact on our results of operations or financial position.

In September 2006, the FASB issued SFAS 157 “Fair Value Measurements.” SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in these accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS 157 does not require any new fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We have not yet determined the impact this statement will have on our results of operations or financial position.

In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin 108 (“SAB 108”). Due to diversity in practice among registrants, SAB 108 expresses SEC staff views regarding the process by which misstatements in financial statements are evaluated for purposes of determining whether financial statement restatement is necessary. We began to apply the guidance in SAB 108 on October 1, 2006. SAB 108 had no effect on our results of operations or financial position.

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of No. 115”, which is effective for fiscal years beginning after November 15, 2007, with early adoption permitted. SFAS 159 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. We are currently reviewing this new accounting standard and the impact, if any, it will have on our financial statements.

Note 3—Acquisitions

Acquisition of DMS

On October 31, 2005, we acquired Dynegy’s midstream natural gas business for approximately $2,452 million, including certain acquisition-related costs. Under the terms of the agreement, we acquired Dynegy’s ownership interests in DMS, which held Dynegy’s natural gas gathering and processing assets, and its NGL fractionation, terminalling, storage, transportation, distribution and marketing assets. We acquired DMS to expand our natural gas gathering and processing asset base in Texas, Louisiana and New Mexico, and to gain greater access to marketing and distribution channels for our produced NGL.

We have accounted for the acquisition under the purchase method of accounting in accordance with SFAS 141, “Business Combinations.” We retained a third party to perform certain valuation services in relation to the DMS acquisition. These services included providing a report stating an opinion of the fair value of certain tangible and intangible assets, unconsolidated equity interests, and product inventory. The third party applied standard valuation approaches and methodologies utilizing publicly available economic and pricing data, historical DMS operations and financial data, and assumptions provided by our management. The third party’s analyses, opinions, and conclusions were developed and its report was prepared in conformity with the Uniform Standards of Professional Appraisal Practice.

Certain of the DMS property, plant and equipment sustained damage from the effects of Hurricane Katrina and Hurricane Rita. Our final purchase price allocation reflects our estimate of the damage incurred and the amount we expect to recover from property damage insurance claims.

F-17

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The purchase price and the final allocation to assets and liabilities based on their estimated fair values as of October 31, 2005 are shown below (in thousands):

	Preliminary			Adjustments			Final
Purchase price:
Cash purchase price	$	2,350,000		$	—		$	2,350,000
Cash collateral		90,703			—			90,703
Acquisition-related costs incurred		11,399			340			11,739
Total purchase price	$	2,452,102		$	340		$	2,452,442
Fair value of assets acquired and liabilities assumed:
Current assets, including cash of $33,508	$	605,641		$	(3,726	)	$	601,915
Property, plant and equipment		2,192,659			38,844			2,231,503
Unconsolidated investments		59,303			(38,108	)		21,195
Other assets		3,059			—			3,059
Current liabilities		(279,636	)		—			(279,636	)
Other long-term liabilities		(23,571	)		3,330			(20,241	)
Minority interest		(105,353	)		—			(105,353	)
Total purchase price	$	2,452,102		$	340		$	2,452,442

During the allocation period we recorded the following adjustments to the preliminary purchase price allocation:

• A $0.3 million increase in acquisition-related costs, which consisted mainly of legal and accounting fees;

• A $7.7 million reduction in inventory to reflect the resolution of disputed NGL volumes in storage at a third party facility as of the acquisition closing date. The net reduction to inventory volumes was approximately 0.2 million barrels;

• A $2.9 million increase in current assets to reflect the recognition of inventory sold to Chevron prior to the DMS acquisition, but not invoiced until 2006.

• A $3.3 million reduction of our asset retirement obligation to reflect an adjustment to our original estimate of pipeline abandonment costs;

• A $1.1 million increase in receivables to record a receivable for a contract dispute settled prior to the acquisition closing date; and

• A $38.1 million reduction in the valuation of our investment in unconsolidated subsidiaries to reflect an adjustment to our original estimate of the fair value of our equity investment in Venice Energy Services Company LLC (“VESCO”) as a result of pre-acquisition hurricane damage.

The offset to each of these adjustments was in property, plant, and equipment.

Acquisition of Equity Interest in Bridgeline

In December 2004, we purchased a 40% ownership interest in Bridgeline from Enron North America Corporation (“Enron”) and certain of its affiliates, for $101.3 million, including certain acquisition-related costs. Bridgeline was originally formed by Enron and certain affiliates of Chevron to own and operate certain natural gas pipeline and storage facilities in southern Louisiana.

F-18

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On August 5, 2005, we sold our interest in Bridgeline to Chevron for $117.0 million. We recognized a pre-tax gain of $18.0 million from the sale. We used the proceeds from this sale primarily for debt repayment, including repayment in full of a $45 million term loan related to Bridgeline.

Acquisition of Assets from ConocoPhillips

In April 2004, we purchased various midstream assets located in Texas and Louisiana from ConocoPhillips for $247 million in cash, including certain acquisition-related costs.

The Texas assets consist of an integrated gathering and processing system with low- and high-pressure lines, gathering natural gas from wellhead and central delivery locations in the Permian Basin, covering parts of eight counties from San Angelo to Big Spring. The Louisiana assets consist of an integrated gathering and processing system from Lake Charles to Lafayette, gathering from wells and central delivery facilities.

The final purchase price was allocated to the following assets based on their fair values as of April 16, 2004 (in thousands):

Gathering and processing systems	$	194,493
Processing plants		43,943
Other property and equipment		6,252
Customer and supplier contracts		2,359
	$	247,047

Pro Forma Information (Unaudited)

The following table presents selected unaudited pro forma financial information incorporating the historical (pre-merger) results of the DMS acquisition and the acquisition of assets from ConocoPhillips. Since the DMS acquisition closed on October 31, 2005, our Consolidated Statements of Operations do not include any earnings from DMS prior to November 1, 2005.

The following pro forma information for the year ended December 31, 2005 has been presented as if the DMS acquisition had been completed on January 1, 2005. The pro forma information is based upon data currently available and includes certain estimates and assumptions made by management. As a result, this pro forma information is not necessarily indicative of our financial results had the transactions actually occurred on this date. Likewise, the following unaudited pro forma information is not necessarily indicative of our future financial results.

	(in thousands)
Revenues	$	5,420,027
Product purchases		(4,991,232	)
Depreciation and amortization		(175,533	)
Gain on sale of assets		9,900
Other operating expense		(48,575	)
Operating income		214,587
Interest expense, net		(179,557	)
Other expense		(90,071	)
Income tax benefit		19,037
Net loss	$	(36,004	)

F-19

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 4—Property, Plant, and Equipment

Our property, plant, and equipment and accumulated depreciation were as follows at the dates indicated:

	December 31,
	2006			2005
	(in thousands)
Natural gas gathering systems		1,326,337			1,261,016
Processing and fractionation facilities		831,302			759,768
Terminalling and natural gas liquids storage facilities		208,193			188,398
Transportation assets		149,663			145,435
Other property and equipment		42,013			36,856
Land		50,428			48,636
Construction in progress		43,439			34,048
		2,651,375			2,474,157
Accumulated depreciation		(186,848	)		(37,554	)
	$	2,464,527		$	2,436,603

Note 5—Unconsolidated Investments

At December 31, 2006 and 2005, our unconsolidated investments included a 22.9% ownership interest in Venice Energy Services Company, LLC (“VESCO”), a venture that operates a natural gas liquids processing and extraction facility in the Gulf Coast region and a 38.8% ownership interest in Gulf Coast Fractionators LP (“GCF”), a venture that fractionates natural gas liquids on the Gulf Coast. In August 2005 we sold our interest in Bridgeline.

We acquired these equity method investments in the DMS acquisition. These ventures maintain independent capital structures and have financed their operations either on a non-recourse basis to us or through their ongoing commercial activities.

The following table shows our unconsolidated investments at the dates indicated.

	December 31,
	2006		2005
	(in thousands)
Natural Gas Gathering and Processing
VESCO	$	20,610	$	48,933
Logistics Assets
GCF		19,602		13,404
	$	40,212	$	62,337

The recorded value of our equity investments was reduced approximately $38.1 million during 2006 as a result of a revision to our original purchase price allocation (see Note 3).

Our equity in the net assets of VESCO and GCF exceeded our acquisition date investment account by approximately $20.3 million and $5.2 million, respectively. The difference is being amortized over the estimated remaining life of the net assets on a straight-line basis, and is included as a component of our equity in earnings of unconsolidated investments.

F-20

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table shows our equity earnings, cash contributions and cash distributions with respect to our unconsolidated investments for the periods indicated:

	Year Ended December 31,
	2006		2005			2004
	(in thousands)
Equity in earnings of:
VESCO	$	7,214	$	572		$	—
GCF		2,754		383			—
Bridgeline		—		(4,731	)		2,370
	$	9,968	$	(3,776	)	$	2,370
Contributions to VESCO	$	9,102	$	5,990		$	—
Distributions from GCF	$	2,306	$	387		$	—

Our equity in earnings of VESCO for 2006 and 2005 includes $2.9 million and $1.4 million, respectively, for partially settled business interruption insurance claims. For 2005, our equity in earnings of VESCO and GCF includes only our share of their results for the two months ended December 31, 2005.

The following table shows summarized financial information of our unconsolidated investments for the periods indicated (in thousands):

	Year Ended December 31,
	2006				2005					2004
	GCF		VESCO		GCF		VESCO(1)			Bridgeline(2)
Revenues	$	46,545	$	126,695	$	48,024	$	146,974		$	2,328,209
Cost of sales and operations		40,325		103,602		41,195		149,847			2,328,274
Income (loss) from operations		6,220		23,093		6,829		(151,852	)		(65	)
Net income (loss)		6,622		23,093		6,973		(151,852	)		(556	)

	As of December 31,
	2006				2005
	GCF		VESCO		GCF		VESCO
Current assets	$	12,181	$	47,749	$	8,070	$	39,448
Property, plant and equipment, net		52,258		102,028		55,220		53,144
Other assets		—		328		—		275
Total assets		64,439		150,105		63,290		92,867
Current liabilities		1,206		20,444		729		26,801
Long-term liabilities		—		7,851		—		7,101
Owners’ equity		63,233		121,810		62,561		58,965
Total liabilities and owners’ equity		64,439		150,105		63,290		92,867

(1) VESCO’s results include a $136.0 million non-cash impairment charge related to hurricane damage suffered in August.

(2) We sold our interests in Bridgeline in August 2005. Results of operations information for 2005 is not available.

F-21

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 6—Debt Obligations

Our consolidated debt obligations consisted of the following at the dates indicated:

	December 31,
	2006			2005
	(in thousands)
Senior secured term loan facility, variable rate, due October 2012(1)	$	1,234,375		$	1,246,875
Senior secured asset sale bridge loan facility, variable rate, due October 2007(1)(2)		700,000			700,000
Senior unsecured notes, 8 1/2% fixed rate, due November 2013		250,000			250,000
Senior secured revolving credit facility, variable rate, due October 2011(1)		—			—
Total principal amount		2,184,375			2,196,875
Current maturities		(712,500	)		(12,500	)
Long-term debt	$	1,471,875		$	2,184,375
Irrevocable standby letters of credit outstanding(3)	$	227,571		$	213,556

(1) These facilities became effective with the closing of the DMS acquisition on October 31, 2005. The entire $250 million available under the senior secured revolving credit facility may also be utilized for letters of credit.

(2) See Note 19.

(3) These letters of credit were issued under our $300 million senior secured synthetic letter of credit facility, which terminates in October 2012.

Information Regarding Variable Interest Rates Paid

The following table shows the range of interest rates paid and weighted-average interest rate paid on our significant consolidated variable-rate debt obligations during 2006:

	Range of Interest Rates Paid	Weighted Average Interest Rate Paid
Senior secured term loan facility	6.59% to 7.75%	7.03%
Senior secured asset sale bridge loan facility	6.83% to 7.62%	7.26%

Consolidated Debt Maturity Table

The following table presents the scheduled maturities of principal amounts of our debt obligations for the next five years and in total thereafter (in thousands):

2007	$	712,500
2008		12,500
2009		12,500
2010		12,500
2011		12,500
Thereafter		1,421,875
	$	2,184,375

See also Note 19—Subsequent Events.

F-22

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Description of Debt Obligations

Senior Secured Credit Facility

On October 31, 2005, we entered into a senior secured credit agreement with a syndicate of financial institutions and other institutional lenders. The senior secured credit facility provides senior secured financing of $2,500 million, consisting of:

• a $1,250 million senior secured term loan facility;

• a $700 million senior secured asset sale bridge loan facility;

• a $250 million senior secured revolving credit facility; and

• a $300 million senior secured synthetic letter of credit facility.

The entire amount of the senior secured revolving credit facility is available for letters of credit and includes a limited borrowing capacity for borrowings on same-day notice referred to as swingline loans. The lenders under the senior secured synthetic letter of credit facility pre-funded the entire amount of their respective commitments by depositing such amounts in a designated deposit account that is held by the administrative agent and which is used to support letters of credit.

We may add one or more incremental term loan facilities, and/or one or more incremental synthetic letter of credit facilities and/or increase the commitments under the senior secured revolving credit facility in an aggregate amount for all such increases of up to $400 million, subject to the satisfaction of certain conditions. No commitments for such incremental facilities have been requested by the Company or offered by the lenders and no lender under the senior secured credit facility will be obligated to provide any incremental credit extensions unless it so agrees.

Borrowings under the senior secured credit facilities, other than the senior secured synthetic letter of credit facility, will bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the higher of (1) the prime rate of Credit Suisse and (2) the federal funds rate plus  ¹/2 of 1% or (b) LIBOR as determined by reference to the costs of funds for dollar deposits for the interest period relevant to such borrowing adjusted for certain statutory reserves. At December 31, 2006, the applicable margin for borrowings under the senior secured revolving credit facility is 1.25% with respect to base rate borrowings and 2.25% with respect to LIBOR borrowings. Upon repayment of the senior secured asset sale bridge loan facility, the margin for borrowings under the senior secured revolving credit facility will be 1.00% with respect to base rate borrowings and 2.00% with respect to LIBOR borrowings. The applicable margin for borrowings under the senior secured revolving credit facility may fluctuate based upon the Company’s leverage ratio as defined in the credit agreement.

We are required to pay a facility fee, quarterly in arrears, to the lenders under the senior secured synthetic letter of credit facility equal to (i) 2.25% of the amount on deposit in the designated deposit account (2.00% following repayment of the $700 million senior secured asset sale bridge loan facility) plus (ii) the administrative cost incurred by the deposit account agent for such quarterly period.

In addition to paying interest on outstanding principal under the senior secured credit facilities, we are required to pay a commitment fee equal to 0.50% of the currently unutilized commitments thereunder. The commitment fee rate may fluctuate based upon the Company’s leverage ratios.

F-23

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The senior secured credit agreement requires us to prepay loans outstanding under the senior secured term loan facility and the senior secured asset sale bridge loan facility, subject to certain exceptions, with:

• 50% of our annual excess cash flow (which percentage will be reduced to 25% if our total leverage ratio is no more than 4.00 to 1.00 and to 0% if our total leverage ratio is no more than 3.00 to 1.00 commencing with the fiscal year end December 31, 2006);

• 100% of the net cash proceeds of all non-ordinary course asset sales, transfers, or other dispositions of property, subject to certain exceptions;

• 100% of the net cash proceeds of any incurrence of debt, other than debt permitted under the senior secured credit agreement.

Prepayments, other than voluntary prepayments of outstanding amounts under the senior secured revolving credit facility, will be applied first, to the senior secured asset sale bridge loan facility and second, to the term loan facility (and applied to reduce remaining amortization payments of the term loan facility in chronological order of maturity). We may voluntarily reduce the unutilized portion of the commitments and prepay outstanding loans under the senior secured credit facilities at any time without premium or penalty, other than customary “breakage” costs with respect to LIBOR loans.

We are required to repay the term loan facility in quarterly principal amounts of 0.25% of the original principal amount, with the remaining amount payable October 31, 2012. Principal amounts outstanding under the senior secured asset sale bridge loan facility are due and payable in full on October 31, 2007.

Principal amounts outstanding under the senior secured revolving credit facility are due and payable in full on October 31, 2011.

Principal amounts outstanding under the senior secured synthetic letter of credit facility are due and payable in full on October 31, 2012.

All obligations under the senior secured credit agreement and certain secured hedging arrangements are unconditionally guaranteed, subject to certain exceptions, by each of our existing and future domestic restricted subsidiaries, referred to, collectively, as the guarantors.

All obligations under the senior secured credit facilities and certain secured hedging arrangements, and the guarantees of those obligations, are secured by substantially all of the following assets, subject to certain exceptions:

• a pledge of the capital stock and other equity interests held by us or any guarantor (except that we will not pledge more than 65% of the voting stock and other voting equity interests of any foreign subsidiary); and

• a security interest in, and mortgages on, our and our guarantors’ tangible and intangible assets.

The senior secured credit agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to incur additional indebtedness (including guarantees and hedging obligations) or issue preferred stock; create liens on assets; enter into sale and leaseback transactions; engage in mergers or consolidations; sell assets; pay dividends and make distributions or repurchase capital stock and other equity interests; make investments, loans or advances; make capital expenditures; repay, redeem or repurchase certain indebtedness; make certain acquisitions; engage in certain transactions with affiliates; amend certain debt and other material agreements; change our lines of business; and impose certain restrictions on restricted subsidiaries that are not guarantors, including restrictions on the ability of such subsidiaries that are not guarantors to pay dividends.

F-24

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition, beginning with the quarter ended March 31, 2006, the senior secured credit agreement required us to maintain certain specified maximum total leverage ratios and certain specified minimum interest coverage ratios.

The senior secured credit agreement will permit us to transfer, on one or more occasions:

• assets (including equity interests of a subsidiary or other entity) to one or more MLPs and/or one or more subsidiaries of any MLP; and

• equity interests in an MLP, or, in certain circumstances, the general partner of an MLP.

In each case we are required to comply with certain limitations, including minimum cash consideration requirements.

$250 Million Senior Notes Offering

On October 31, 2005 we completed the private placement under Rule 144A and Regulation S of the Securities Act of 1933 of $250 million in aggregate principal amount of eight year senior unsecured notes (“the Notes”). Proceeds from the Notes plus borrowings under our senior secured credit facility were used to repay pre-existing debt and fund a portion of the DMS acquisition.

The Notes:

• are our unsecured senior obligations;

• rank pari passu in right of payment with all our existing and future senior indebtedness, including indebtedness under our new senior secured credit facility;

• are effectively subordinated to all our secured indebtedness to the extent of the value of the collateral securing such indebtedness, including indebtedness under the senior secured credit facilities;

• are structurally subordinated to all existing and future claims of creditors (including trade creditors) and holders of preferred stock of our subsidiaries that do not guarantee the Notes;

• rank senior in right of payment to any of our future subordinated indebtedness;

• are guaranteed on a senior unsecured basis by the subsidiary guarantors that guarantee the senior secured credit facilities; and

• are subject to registration with the SEC pursuant to a registration rights agreement.

Interest on the Notes accrues at the rate of 8 ¹/2% per annum and is payable in cash semi-annually in arrears on May 1 and November 1, commencing May 1, 2006. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months. Additional interest may accrue on the Notes in certain circumstances pursuant to a registration rights agreement.

On and after November 1, 2009, we may redeem all or part of the Notes at our option, at 104.250% of the principal amount for the twelve-month period beginning November 1, 2009, at 102.125% of the principal amount for the twelve-month period beginning November 1, 2010, and at 100% of the principal amount thereafter. In each case, accrued and unpaid interest is payable to the date of redemption. In addition, before November 1, 2009, we may redeem all or part of the Notes at the make-whole price set forth under the indenture. At any time prior to November 1, 2008, we may redeem up to 35% of the Notes with the net cash proceeds of certain equity offerings at a redemption price equal to 108.500% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon to the redemption date.

F-25

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 7—Stock and Other Compensation Plans

Accounting for Equity Awards

Effective January 1, 2006, we began to account for Targa Investments’ equity awards granted to our employees using the provisions of SFAS 123R. SFAS 123R requires us to recognize compensation expense related to equity awards based on the grant date fair value of the award. The fair value of an award of nonvested common stock is measured at its fair value as if it were vested and issued on the grant date. The fair value of a stock option award is estimated using the Black-Scholes option pricing model. Under SFAS 123R, the fair value of all awards expected to vest is amortized to earnings on a straight-line basis over the requisite service period.

Prior to our adoption of SFAS 123R, we recognized compensation expense related to stock options only if the grant date fair value of the underlying stock was greater than the exercise price of the option. Our recognition of compensation expense in connection with awards of nonvested common stock did not change under SFAS 123R.

We apply SFAS 123R prospectively to new stock option awards and to stock option awards modified, repurchased, or cancelled on or after January 1, 2006. We shall continue to account for the nonvested portion of stock option awards outstanding on January 1, 2006 using the intrinsic value method. Stock-based compensation expense is based on the awards ultimately expected to vest, and has been reduced for estimated forfeitures. The effects of applying SFAS 123R during the year ended December 31, 2006 did not have a material effect on our net income.

For the years ended December 31, 2005 and 2004, on a pro forma basis, the effect on our net income of using the fair value method of SFAS 123 instead of the intrinsic-value method allowed previously was not material.

Stock Options

Under Targa Investments’ 2005 Incentive Compensation Plan (“the Plan”), options to purchase a fixed number of shares of its stock may be granted to our employees, directors and consultants. Generally, options granted under the Plan have a vesting period of four years and remain exercisable for ten years from the date of grant.

The fair value of each option granted since our adoption of SFAS 123R was estimated on the date of grant using the Black-Scholes option pricing model, which incorporates various assumptions including (i) expected term of the options of ten years, (ii) a risk-free interest rate of 4.5%, (iii) expected dividend yield of 0%, and (iv) expected stock price volatility on Targa Investments’ common stock of 23.8%. Our selection of the risk-free interest rate was based on published yields for U.S. government securities with comparable terms. Because Targa Investments is a non-public company, its expected stock price volatility was estimated based upon the historical price volatility of the Dow Jones MidCap Pipelines Index over a period equal to the expected average term of the options granted. The calculated fair value of options granted during the twelve months ended December 31, 2006 is $0.21 per share.

F-26

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table shows stock option activity for periods indicated:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)
Outstanding at beginning of period	—		$	—
Granted	909,002			8.50
Outstanding at December 31, 2004	909,002		$	8.50
Granted	5,148,114			7.65
Converted to options on Series B preferred stock	(949,002	)		8.50
Outstanding at December 31, 2005	5,108,114		$	7.64
Granted	51,672			8.50
Cancelled	(54,474	)		8.50
Outstanding at December 31, 2006	5,105,312		$	7.64	8.85
Exercisable at December 31, 2006	1,120,440		$	7.23	8.85

We recognized $0.1 million, $0.1 million and $0 of compensation expense associated with stock options during the years ended December 31, 2006, 2005 and 2004, respectively. As of December 31, 2006, we expect to incur an additional $0.1 million of expense related to non-vested stock options over a weighted-average period of approximately two years.

Non-vested Common Stock

Under the Plan, Targa Investments can also issue non-vested (i.e., restricted) common stock to our employees, directors and consultants. Except for 73,049 previously awarded shares that were forfeited during 2006, all 6.2 million shares of restricted common stock provided for under the Plan are outstanding as of December 31, 2006.

Restricted stock awards entitle recipients to exchange restricted common shares for unrestricted common shares (at no cost to them) once the defined vesting period expires, subject to certain forfeiture provisions. The restrictions on the non-vested shares generally lapse four years from the date of grant. Compensation expense is recognized on a straight-line basis over the vesting period. The fair value of non-vested stock is measured on the grant date using the estimated market price of Targa Investments common stock on such date.

The following table provides a summary of Targa Investments’ non-vested common stock for the periods indicated:

	Year Ended December 31,
	2006			2005			2004
Outstanding at beginning of period		5,501,132			1,287,805			—
Granted		72,564			6,105,818			1,609,756
Vested		(612,799	)		(1,892,491	)		(321,951	)
Forfeited		(73,049	)		—			—
Outstanding at end of period		4,887,848			5,501,132			1,287,805
Weighted average grant date fair value per share	$	1.16		$	1.16		$	0.62

F-27

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The total fair value of non-vested common shares that vested during the year ended December 31, 2006 was $0.7 million. We recognized $2.7 million, $1.6 million and $0.5 million of compensation expense associated with the vesting of restricted stock during the years ended December 31, 2006, 2005 and 2004, respectively. As of December 31, 2006, we expect to incur an additional $3.3 million of expense related to non-vested shares issued to our employees, over a weighted-average period of approximately the next two years.

Other Compensation Plans

We have a 401(k) plan whereby we match 100% of up to 5% of an employee’s contribution (subject to certain limitations in the plan). We also contribute an amount equal to 3% of each employee’s eligible compensation to the plan as a retirement contribution and may make additional contributions at our sole discretion. All Targa contributions are made 100% in cash. We made contributions to the 401(k) plan totaling $6.0 million, $2.4 million and $0.7 million during 2006, 2005 and 2004, respectively.

Note 8—Stockholders’ Equity

At December 31, 2004, we had outstanding 1,350,500 shares of Series A Convertible Participating Preferred Stock (the “Series A stock”), 1,609,756 shares of common stock, and 949,002 options on common stock. In order for our financial statements to be compliant with Securities and Exchange Commission Regulation S-X, our Series A Stock is required to be classified outside of stockholders’ equity. Our previously issued financial statements reported the Series A Stock as a component of stockholders’ equity.

Prior to the closing of the DMS acquisition, we engaged in a corporate reorganization pursuant to which we became a second-tier, wholly owned subsidiary of our newly-formed parent holding company, Targa Resources Investments Inc. (“Targa Investments”). In the reorganization, our stockholders exchanged their shares of Targa common stock, Targa stock options, and Targa Series A Convertible Participating Preferred Stock for shares of Targa Investments having the same terms as the Targa stock, and our Series A stock was retired.

Immediately after the reorganization, the only significant asset of Targa Investments was its ownership of 100% of the outstanding capital stock of an intermediate holding company, whose sole asset was its ownership of 100% of our outstanding capital stock, which consists of one thousand shares of common stock.

Following the reorganization, and in connection with the closing of the DMS acquisition, Targa Investments issued a new series of preferred stock in exchange for its outstanding common stock and preferred stock and issued new common stock to our management. In addition, certain Targa Investments investors and members of our management purchased additional equity interests in Targa Investments for cash. Approximately $316 million of such cash was contributed to us by Targa Investments concurrent with the closing of the DMS acquisition.

Additionally, outstanding options on our common stock were exchanged for options on Targa Investments’ Series B preferred stock.

Note 9—Derivative Instruments and Hedging Activities

At December 31, 2006, OCI included $58.8 million ($34.8 million, net of tax) of unrealized net gains on commodity hedges, and $1.4 million ($0.8 million, net of tax) of unrealized net gains on interest rate hedges.

At December 31, 2005, OCI included $30.2 million ($18.9 million, net of tax) of unrealized net losses on commodity hedges, and $0.2 million ($0.1 million, net of tax) of unrealized losses on interest rate hedges.

F-28

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During 2006, deferred net gains on commodity hedges of $31.2 million were reclassified from OCI and credited to income as an increase in revenues, and deferred net gains on interest rate hedges of $1.0 million were reclassified from OCI and credited to income as a reduction in interest expense.

During 2005, deferred net losses of $7.5 million were reclassified from OCI and charged to expense as a reduction in revenues, and deferred net losses on interest rate hedges of $0.1 million were reclassified from OCI and charged to expense as an increase in interest expense. Adjustments for hedge ineffectiveness decreased revenues by $0.4 million in 2005.

On August 2, 2005, concurrent with the announcement of the DMS acquisition, we entered into certain swap transactions in respect of incremental natural gas and NGL sales volumes expected to occur during the years 2006 through 2009. We paid a premium of $17 million in order to limit any payment that might otherwise be payable to the counterparty on termination of the swap transactions as a result of a failure to close the DMS acquisition. Upon the closing of the DMS acquisition, the counterparty refunded $3.4 million of the premium. During the period from August 2, 2005 until the DMS acquisition closing date, the swap transactions did not qualify for hedge accounting treatment under SFAS 133. As such, in addition to expensing the $13.6 million net premium paid, we recognized a mark-to-market loss of $60.4 million. The swap transactions were designated as hedges on October 31, 2005.

During the year ended December 31, 2004, deferred net losses on commodity hedges of $1.2 million were reclassified from OCI and charged to expense as a reduction in revenues, and adjustments for hedge ineffectiveness increased revenues by $0.1 million.

As of December 31, 2006, $43.8 million ($25.9 million, net of tax) of deferred net gains on commodity hedges and $1.4 million ($0.9 million, net of tax) of deferred net gains on interest rate hedges recorded in OCI are expected to be reclassified to earnings during the next twelve months.

F-29

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At December 31, 2006, our open derivatives designated as hedges consist of the following:

Natural Gas

Instrument Type	Index	Avg. Price $/MMBtu		MMBtu per Day				Fair Value
				2007	2008	2009	2010
								(in thousands)
Swap	IF-HSC	$	9.08	2,740	—	—	—	$	2,371
Swap	IF-HSC		8.09	—	2,328	—	—		272
Swap	IF-HSC		7.39	—	—	1,966	—		(128	)
				2,740	2,328	1,966	—		2,515
Swap	IF-NGPL MC		8.56	8,152	—	—	—		7,262
Swap	IF-NGPL MC		8.43	—	6,964	—	—		3,444
Swap	IF-NGPL MC		8.02	—	—	6,256	—		1,677
Swap	IF-NGPL MC		7.43	—	—	—	5,685		932
				8,152	6,964	6,256	5,685		13,315
Swap	IF-Waha		7.71	30,118	—	—	—		14,445
Swap	IF-Waha		7.27	—	29,307	—	—		(1,499	)
Swap	IF-Waha		6.86	—	—	28,854	—		(4,729	)
Swap	IF-Waha		7.38	—	—	—	3,809		514
				30,118	29,307	28,854	3,809		8,731
Total Swaps				41,010	38,599	37,076	9,494		24,561
Floor	IF-NGPL MC		6.45	520	—	—	—		200
Floor	IF-NGPL MC		6.55	—	1,000	—	—		342
Floor	IF-NGPL MC		6.55	—	—	850	—		246
				520	1,000	850	—		788
Floor	IF-Waha		6.70	350	—	—	—		137
Floor	IF-Waha		6.85	—	670	—	—		231
Floor	IF-Waha		6.55	—	—	565	—		154
				350	670	565	—		522
Total Floors				870	1,670	1,415	—		1,310
Basis Swap Jan 2007 Rec IF-HH minus $0.01, pay GD-HH, 899,000 MMBtu									7
								$	25,878
NGLs
Instrument Type	Index	Avg. Price $/gal		Barrels per Day				Fair Value
				2007	2008	2009	2010
								(in thousands)
Swap	OPIS-MB	$	0.87	8,414	—	—	—	$	697
Swap	OPIS-MB		0.83	—	8,007	—	—		(1,489	)
Swap	OPIS-MB		0.80	—	—	7,495	—		(3,447	)
Swap	OPIS-MB		0.88	—	—	—	1,759		606
				8,414	8,007	7,495	1,759	$	(3,633	)

F-30

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensate

Instrument Type	Index	Avg. Price $/Bbl		Barrels per day				Fair Value
				2007	2008	2009	2010
								(in thousands)
Swap	NY-WTI	$	72.82	439	—	—	—	$	1,225
Swap	NY-WTI		70.68	—	384	—	—		415
Swap	NY-WTI		69.00	—	—	322	—		183
Swap	NY-WTI		68.10	—	—	—	301		152
Total Swaps				439	384	322	301		1,975
Floor	NY-WTI	$	58.60	25	—	—	—		19
Floor	NY-WTI		60.50	—	55	—	—		83
Floor	NY-WTI		60.00	—	—	50	—		84
Total Floors				25	55	50	—		186
				464	439	372	301	$	2,161

These derivatives have been designated as cash flow hedges of forecasted purchases and sales of commodities expected to be owned by us.

Customer Derivatives

Period	Commodity	Instrument Type	Daily Volumes	Average Price		Index	Fair Value
			(In thousands)				(In thousands)
Purchases
Jan 2007—Dec 2007	Natural gas	Swap	6,382 MMBtu	$	7.94 per MMBtu	NY-HH	$	(3,296	)
Sales
Jan 2007—Dec 2007	Natural gas	Fixed price sale	6,382 MMBtu	$	7.91 per MMBtu	—		3,223
							$	(73	)

These are commodity derivative contracts directly related to short-term fixed price arrangements elected by certain customers in various natural gas purchase and sale agreements. They have been marked to market.

We also have interest rate swaps with a notional amount of $350 million. The interest rate swaps effectively fix our interest rate on $350 million in borrowings under our senior secured term loan facility to a rate of 4.8% plus the applicable LIBOR margin (2.25% at December 31, 2006) through November 2007. At December 31, 2006, the fair value of our interest rate swaps was $1.4 million.

F-31

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following shows the balance sheet classification of the fair value of open commodity and interest rate derivatives at the dates indicated.

	December 31,
	2006			2005
	(in thousands)
Current assets	$	34,255		$	1,220
Noncurrent assets		15,851			150
Current liabilities		(6,611	)		(29,851	)
Noncurrent liabilities		(17,731	)		(62,969	)
	$	25,764		$	(91,450	)

Note 10—Income Taxes

We provide for income taxes using the asset and liability method. Accordingly, deferred taxes are recorded for the differences between the tax and book bases of assets and liabilities that will reverse in future periods.

Our provisions for income taxes for the periods indicated are as follows (in thousands):

	Targa Resources, Inc.
	Year Ended December 31, 2006		Year Ended December 31, 2005			Year Ended December 31, 2004
Current expense	$	34	$	205		$	—
Deferred expense (benefit)		16,175		(6,742	)		5,227
	$	16,209	$	(6,537	)	$	5,227

F-32

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Our deferred income tax assets and liabilities at December 31, 2006 and 2005 consist of differences related to the timing of recognition of certain types of costs as follows:

	December 31,
	2006			2005
	(in thousands)
Deferred tax assets:
Net operating loss	$	182,145		$	33,909
Commodity hedging contracts and other		—			34,193
Asset retirement obligation		484			414
		182,629			68,516
Deferred tax liabilities:
Investments(1)		(168,396	)		(26,910	)
Net property, plant, and equipment		(40,572	)		(24,096	)
Commodity hedging contracts and other		(8,994	)		—
		(217,962	)		(51,006	)
Net deferred tax asset (liability)	$	(35,333	)	$	17,510
Federal	$	(26,784	)	$	16,275
Foreign		199			72
State		(8,748	)		1,163
	$	(35,333	)	$	17,510
Balance sheet classification of deferred tax assets (liabilities):
Current asset	$	—		$	10,472
Long-term asset		—			7,038
Current liability		(11,383	)		—
Long-term liability		(23,950	)		—
	$	(35,333	)	$	17,510

(1) Our deferred tax liability attributable to investments includes outside basis differences in assets and liabilities of our wholly-owned partnerships and our equity method investments.

At December 31, 2006, for federal income tax purposes, we had carryforwards of approximately $453.5 million of regular tax net operating losses (“NOL”). The NOL carryforwards expire between 2023 and 2027.

F-33

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Set forth below is reconciliation between our income tax provision (benefit) computed at the United States statutory rate on income before income taxes and the income tax provision in the accompanying consolidated statements of operations for the periods indicated (in thousands):

	Targa Resources, Inc.
	Years Ended December 31,
	2006			2005			2004
U.S. federal income tax provision at statutory rate	$	13,868		$	(7,263	)	$	5,736
State income taxes		2,743			211			—
Other		(402	)		515			(509	)
Income tax provision	$	16,209		$	(6,537	)	$	5,227

Note 11—Commitments and Contingencies

Certain property and equipment is leased under non-cancelable leases that require fixed monthly rental payments and expire at various dates through 2099. Surface and underground access for gathering, processing, and distribution assets that are located on property not owned by us is obtained through right-of-way agreements, which require annual rental payments and expire at various dates through 2099. Future non-cancelable commitments related to these obligations and our asset retirement obligations are presented below (in millions):

	2007		2008		2009		2010		2011		2012+
Operating leases	$	17.6	$	13.9	$	9.3	$	8.2	$	8.1	$	30.5
Capacity payments		2.6		2.5		2.4		0.8		—		—
Asset retirement obligations		—		—		—		—		—		11.6
	$	20.2	$	16.4	$	11.7	$	9.0	$	8.1	$	42.1

Total expenses related to operating leases and capacity payments were $11.8 million and $2.7 million, respectively, for 2006, $1.9 million and $0.1 million, respectively, for 2005, and $0.3 million and $0.2 million, respectively, for 2004.

Environmental

For environmental matters, we record liabilities when remedial efforts are probable and the costs can be reasonably estimated in accordance with the American Institute of Certified Public Accountants (“AICPA”) Statement of Position 96-1, “Environmental Remediation Liabilities.” Environmental reserves do not reflect management’s assessment of the insurance coverage that may be applicable to the matters at issue. Management has assessed each of the matters based on current information and made a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought and the probability of success.

Prior to our purchase of the Acadia plant site and other assets from ConocoPhillips, the Acadia plant site, located in Louisiana, was identified as having benzene, toluene, ethyl benzene and xylene contamination, collectively (“BTEX”). The BTEX contamination was reported by ConocoPhillips to the Louisiana Department of Environmental Quality (“LDEQ”) who identified ConocoPhillips as a potentially responsible party. ConocoPhillips has begun remediation activities in coordination with the LDEQ, and is negotiating a cooperative

F-34

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

agreement with the LDEQ regarding environmental assessment and remedial activities at the site. Under the terms of our purchase and sales agreement, ConocoPhillips retains the liability for the BTEX remediation and for all third party costs or claims relating to, arising out of, or connected with corrective actions/remediation of the BTEX contamination. As a result, we have not recorded a liability for environmental remediation as it relates to the BTEX contamination.

Prior to our purchase of DMS from Dynegy, the LDEQ issued a Compliance Order charging VESCO (a joint venture in which DMS owns a 22.9% interest) with failure to initiate quarterly leak monitoring of valve emission sources at the Venice Stabilizer Plant (VSP) as part of VESCO’s Title V air permit issued in December 1997. On May 14, 2004 LDEQ issued a Notice of Potential Penalty (NOPP) seeking additional information from VESCO. We have been engaged in discussions with LDEQ about a monetary penalty relating to the alleged violations and whether it is proper for LDEQ to apply its penalty matrix calculations in this proceeding. In March 2007, the LDEQ tentatively agreed that a penalty amount, not exceeding $250,000, would resolve the matter described above as well as resolving two other alleged violations at other Gulf Coast plants. Discussions are continuing with the LDEQ on the form of the settlement and associated consent order.

Our environmental liability at December 31, 2006 and 2005 was $2.3 million and $2.5 million, respectively. Our December 31, 2006 liability consisted of $0.8 million for gathering system leaks and $1.5 million for ground water assessment and remediation.

Litigation Summary

We are a party to various legal proceedings and/or regulatory proceedings and certain claims, suits and complaints arising in the ordinary course of business have been filed or are pending against us. We believe, all such matters are without merit or involve amounts, which, if resolved unfavorably, would not have a material effect on our financial position, results of operations, or cash flows except for the items more fully described below.

In May 2002, Apache Corporation filed suit in Texas state court against Versado Gas Processors LLC (“Versado”) as purchaser and processor of Apache’s gas and Dynegy Midstream Services Limited Partnership (“DMS”) as operator of the Versado assets in New Mexico (“Versado Defendants”) alleging (i) excessive field losses of natural gas from wells owned by the plaintiff, (ii) that the Versado Defendants engaged in certain transactions with affiliates, resulting in Versado Defendants not receiving fair market value when it sold gas and liquids, and (iii) that the formula for calculating the amount the Versado Defendants received from its buyers of gas and liquids is flawed since it is based on gas price indexes that were allegedly manipulated. At trial, the plaintiff’s claim with respect to the alleged “sham” transactions and index manipulation, among others, were severed by the trial court and abated for a future trial, and the jury found in favor of the plaintiff on the lost gas claim, awarding approximately $1.6 million in damages. In May 2004, the Versado Defendants’ motion to set aside this jury verdict was granted by the court and the jury award to the plaintiff was vacated. The plaintiff filed its notice of appeal with the 14th Court of Appeals (“COA”) in October 2004 and its appellate brief in December 2004.

In September 2006, the COA reinstated the jury verdict in Apache’s favor on the issue of lost gas and also awarded Apache legal fees and interest, bringing the total award against Versado Defendants to approximately $2.7 million. In October 2006, the Versado Defendants filed a motion for rehearing with the COA. In October 2006, the COA requested Apache to file a response to the Versado Defendants motion for rehearing and Versado Defendants filed a Reply to that response. After rehearing, the COA affirmed its decision reinstating the original jury verdict in Apache’s favor. With interest and attorneys fees that verdict stands at approximately $2.8 million.

F-35

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In January 2007, the Versado Defendants filed their petition for review with the Supreme Court of Texas and in March 2007, Apache filed its conditional petition for review with the Supreme Court of Texas.

In March 2007, the restraint in the severed lawsuit referenced above was released and the severed case is proceeding. The Versado Defendants have filed a motion for partial summary judgment on the index manipulation claims.

As a result of damage caused by Hurricane Rita, Targa Midstream Services LP’s (“TMSLP”, a wholly owned subsidiary of Targa) West Cameron 229A platform sank in late September 2005. On November 12, 2005, the submerged wreckage was struck by an integrated tug-barge, the M/T Rebel, owned by K-Sea Transportation. As much as 25,000 barrels of No. 6 fuel oil may have entered the Gulf of Mexico waters as the barge dragged part of the platform debris approximately three (3) miles from the sunken platform location. After receiving a letter from K-Sea threatening to hold us liable for all damages, TMSLP filed suit in federal district court in Galveston on November 21, 2005, seeking to hold K-Sea responsible for damage to the platform.

In January 2006, Rios Energy, owner of the oil being transported in the barge intervened in the existing suit and filed a new suit in the same federal court against both TMSLP and K-Sea alleging their negligence caused the loss of and damage to Rios’ oil. On March 8, 2006, K-Sea filed a counterclaim against TMSLP seeking to recover its alleged damages in excess of $90 million. In February 2007, K-Sea filed actions against TMSLP under admiralty law, seeking to secure any judgment K-Sea obtains in an amount equal to 1.5 times K-Sea’s claimed damages, or $135 million. Although TMSLP believes the validity of the actions seeking attachment of its assets were without merit, in order to resolve K-Sea’s concerns over security for its claims, we agreed to provide a guarantee to K-Sea pursuant to which we would satisfy any final, non-appealable judgment or settlement against TMSLP if TMSLP is unable to pay in such an event. Discovery is proceeding in the underlying claim, counterclaim and Rios Energy lawsuit. TMSLP intends to vigorously contest liability herein but can give no assurances regarding the outcome of the initial proceeding, the counterclaim or the Rios Energy lawsuit.

On December 8, 2005, WTG Gas Processing filed suit in the 333rd District Court of Harris County, Texas against several defendants, including Targa Resources, Inc., and three other Targa entities and Warburg Pincus, seeking damages from the defendants. The suit alleges that Targa and Warburg Pincus, along with ConocoPhillips and Morgan Stanley, tortuously interfered with (i) a contract WTG claims to have had to purchase certain ConocoPhillips assets, and (ii) with prospective business relations of WTG. WTG claims the alleged interference resulted from Targa’s competition to purchase the ConocoPhillips’ assets and its successful acquisition of those assets in 2004. Discovery, with the exception of expert discovery on damages, is largely complete. Our motion for summary judgment is scheduled for oral argument on April 10, 2007. Targa intends to vigorously contest liability herein but can give no assurances regarding the outcome of the proceeding.

Note 12—Related-Party Transactions

Relationships with Warburg Pincus

Warburg Pincus beneficially owns approximately 75% of the outstanding voting stock of our parent. Warburg Pincus is able to elect members of our board of directors, appoint new management and approve any action requiring the approval of our stockholders, including amendment of our certificate of incorporation and mergers or sales of substantially all of our assets. The directors elected by Warburg Pincus will be able to make decisions affecting our capital structure, including decisions to issue additional capital stock, implement stock repurchase programs and declare dividends.

F-36

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Relationships with Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”)

Equity

An affiliate of Merrill Lynch holds a non-voting equity interest in the general partner of Warburg Pincus Private Equity VIII, L.P. and Warburg Pincus Private Equity IX, L.P., the principal shareholders of Targa Investments. On October 31, 2005, Merrill Lynch Ventures L.P. 2001, an affiliate of Merrill Lynch, purchased an equity interest in our parent holding company, Targa Investments, for $50 million in cash, which was then contributed to us by Targa Investments in connection with our equity reorganization.

Financial Services

Merrill Lynch was an initial purchaser of the notes, and acted as our financial advisor with respect to our purchase of all the equity interests in DMS. An affiliate of Merrill Lynch is a lender and an agent under our existing senior secured credit facilities.

Hedging Arrangements

We have entered into various commodity derivative transactions with Merrill Lynch Commodities Inc. (“MLCI”), an affiliate of Merrill Lynch. Under the terms of these various commodity derivative transactions, MLCI has agreed to pay us specified fixed prices in relation to specified notional quantities of natural gas, NGL, and condensate over periods ending in 2010, and we have agreed to pay Merrill Lynch floating prices based on published index prices of such commodities for delivery at specified locations. The following table shows our open commodity derivatives with Merrill Lynch as of December 31, 2006:

Period	Commodity	Instrument Type	Daily Volumes	Average Price	Index
Jan 2007	Natural gas	Basis Swap	20,000 MMBtu	Receive IF-HH minus $0.01, pay GD-HH
Jan 2007 – Dec 2007	Natural gas	Swap	26,118 MMBtu	$7.65 per MMBtu	IF-Waha
Jan 2008 – Dec 2008	Natural gas	Swap	25,765 MMBtu	7.23 per MMBtu	IF-Waha
Jan 2009 – Dec 2009	Natural gas	Swap	25,474 MMBtu	6.82 per MMBtu	IF-Waha
Jan 2010 – Dec 2010	Natural gas	Swap	3,289 MMBtu	7.39 per MMBtu	IF-Waha
Jan 2007 – Dec 2007	NGLs	Swap	5,998 barrels	0.82 per gallon	OPIS-MB
Jan 2008 – Dec 2008	NGLs	Swap	5,847 barrels	0.79 per gallon	OPIS-MB
Jan 2009 – Dec 2009	NGLs	Swap	5,547 barrels	0.76 per gallon	OPIS-MB
Jan 2007 – Dec 2007	Condensate	Swap	319 barrels	75.27 per barrel	NY-WTI
Jan 2008 – Dec 2008	Condensate	Swap	264 barrels	72.66 per barrel	NY-WTI
Jan 2009 – Dec 2009	Condensate	Swap	202 barrels	70.60 per barrel	NY-WTI
Jan 2010 – Dec 2010	Condensate	Swap	181 barrels	69.28 per barrel	NY-WTI

At December 31, 2006, the fair value of these open positions is a liability of $2.8 million. During 2006, Merrill Lynch paid us $6.8 million in commodity derivative settlements. There were no commodity derivative settlements with Merrill Lynch prior to 2006.

Commercial Relationships

In April 2004, we entered into a base agreement for the purchase and sale of natural gas with Entergy-Koch Trading, LP, pursuant to which Entergy-Koch Trading, LP typically purchases natural gas for fuel at its affiliated cogeneration facility in Lake Charles. On November 1, 2004, MLCI acquired Entergy-Koch, LP and became a

F-37

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

successor to this agreement. Pricing terms under the agreement are governed by reference to specified index prices plus a premium.

Other Relationships

On December 16, 2004, we acquired a 40% ownership interest in Bridgeline. During 2005 we had net purchases of natural gas of $11.4 million from Bridgeline. During the period from December 16, 2004 to December 31, 2004, we purchased $1.4 million of natural gas from Bridgeline. These transactions were at market prices consistent with those paid to non-affiliate entities. We sold our interest in Bridgeline in August 2005.

Note 13—Fair Value of Financial Instruments

The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS 107, “Disclosures About Fair Value of Financial Instruments.” The estimated fair value amounts have been determined using available market information and valuation methodologies described below. Considerable judgment is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

The carrying values of items comprising current assets and current liabilities approximate fair values due to the short-term maturities of these instruments. Derivative financial instruments included in our financial statements are stated at fair value. The carrying amounts and fair values of our other financial instruments are as follows as of December 31, 2006:

	Carrying Amount		Fair Value
	(In thousands)
Senior secured term loan facility, variable rate	$	1,234,375	$	1,240,547
Senior secured asset sale bridge loan facility, variable rate		700,000		700,000
Senior unsecured notes, 8 1/2% fixed rate		250,000		251,875

The carrying value of the senior secured asset sale bridge loan facility approximates its fair value, as its remaining term is less than one year and its interest rate is based on prevailing market rates. The fair value of the senior secured term loan facility and the senior unsecured notes are based on quoted market prices based on trades of such debt.

Note 14—Supplemental Cash Flow Disclosure

Cash activity related to interest on indebtedness, income taxes and business interruption insurance were:

	Year Ended December 31, 2006		Year Ended December 31, 2005		Year Ended December 31, 2004
	(In thousands)
Cash payments for interest	$	170,928	$	22,266	$	5,086
Cash payments for income taxes	$	59	$	166	$	—
Cash receipts from business interruption insurance	$	14,926	$	—	$	—

F-38

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 15—Segment Information

We categorize the midstream natural gas industry into, and describe our business in, two divisions: (i) Natural Gas Gathering and Processing (also a segment) and (ii) NGL Logistics and Marketing. Our NGL Logistics and Marketing division consists of three segments: (a) Logistics Assets, (b) NGL Distribution and Marketing and (c) Wholesale Marketing.

Our Natural Gas Gathering and Processing segment includes assets used in the gathering of natural gas produced from oil and gas wells and processing this raw natural gas into merchantable natural gas by extracting natural gas liquids and removing impurities. These assets are located in North Texas, Louisiana and the Permian Basin of West Texas and Southeast New Mexico. We are also party to natural gas processing agreements with third party plants.

Our Logistics Assets segment is involved with gathering and storing mixed NGL and fractionating, storing, and transporting of finished NGL. These assets are generally connected to and supplied, in part, by our Natural Gas Gathering and Processing segment and are predominantly located in Mont Belvieu, Texas and West Louisiana.

Our NGL Distribution and Marketing segment markets our own natural gas liquids production and also purchased natural gas liquids products in selected United States markets. We also had the right to purchase or market substantially all of ChevronTexaco’s natural gas liquids pursuant to a Master Natural Gas Liquids Purchase Agreement.

Our Wholesale Marketing segment includes our refinery services business and wholesale propane marketing operations. In our refinery services business, we provide LPG (liquefied petroleum gas) balancing services, purchasing natural gas liquids products from refinery customers and selling natural gas liquids products to various customers. Our wholesale propane marketing operations include the sale of propane and related logistics services to multi-state retailers, independent retailers and other end users. Wholesale Marketing operates principally in the United States, and has a small marketing presence in Canada.

Eliminations and Other includes amounts related to general and administrative expenses not allocated to segment operations, corporate development, interest expense, income tax expense, and the depreciation and cost of equipment used in our headquarters office. Eliminations and Other also includes the elimination of intersegment revenues and expenses.

F-39

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Our reportable segment information is shown in the following tables (in thousands):

	Year Ended December 31, 2006
	Gas Gathering and Processing		Logistics Assets			NGL Distribution and Marketing		Wholesale Marketing		Eliminations and Other			Total
Revenues	$	1,486,081	$	63,813		$	3,315,535	$	1,267,452	$	—		$	6,132,881
Intersegment revenues		1,104,938		114,700			423,234		63,106		(1,705,978	)		—
Revenues		2,591,019		178,513			3,738,769		1,330,558		(1,705,978	)		6,132,881
Product purchases		2,064,436		3			2,496,448		879,945		—			5,440,832
Intersegment product purchases		2,939		(3	)		1,229,673		440,646		(1,673,255	)		—
Product purchases		2,067,375		—			3,726,121		1,320,591		(1,673,255	)		5,440,832
Operating expenses		118,123		103,992			2,044		10		—			224,169
Intersegment operating expenses		617		32,106			—		—		(32,723	)		—
Operating expenses		118,740		136,098			2,044		10		(32,723	)		224,169
Operating margin	$	404,904	$	42,415		$	10,604	$	9,957	$	—		$	467,880
General and administrative	$	40,471	$	14,074		$	9,504	$	17,820	$	482		$	82,351
Equity in earnings of unconsolidated investments	$	7,214	$	2,754		$	—	$	—	$	—		$	9,968
Identifiable assets	$	2,375,589	$	542,718		$	352,900	$	158,015	$	28,803		$	3,458,025
Unconsolidated investments		20,610		19,602			—		—		—			40,212
Capital expenditures		115,261		23,167			—		—		4,474			142,902

	Year Ended December 31, 2005
	Gas Gathering and Processing			Logistics Assets		NGL Distribution and Marketing		Wholesale Marketing		Eliminations and Other			Total
Revenues	$	1,198,228		$	7,374	$	346,193	$	277,232	$	—		$	1,829,027
Intersegment revenues		110,830			17,624		128,470		22,088		(279,012	)		—
Revenues		1,309,058			24,998		474,663		299,320		(279,012	)		1,829,027
Product purchases		1,148,469			—		330,751		152,743		—			1,631,963
Intersegment product purchases		(2,892	)		—		137,791		142,014		(276,913	)		—
Product purchases		1,145,577			—		468,542		294,757		(276,913	)		1,631,963
Operating expenses		35,064			16,870		93		63		—			52,090
Intersegment operating expenses		46			2,053		—		—		(2,099	)		—
Operating expenses		35,110			18,923		93		63		(2,099	)		52,090
Operating margin	$	128,371		$	6,075	$	6,028	$	4,500	$	—		$	144,974
General and administrative	$	16,377		$	2,472	$	1,523	$	2,335	$	5,568		$	28,275
Equity in earnings of unconsolidated investments	$	(4,159	)	$	383	$	—	$	—	$	—		$	(3,776	)
Identifiable assets	$	2,233,051		$	547,370	$	290,521	$	202,546	$	123,098		$	3,396,586
Unconsolidated investments		48,933			13,404		—		—		—			62,337
Capital expenditures		11,605			3,252		—		—		7,119			21,976

F-40

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Year Ended December 31, 2004
	Gas Gathering and Processing		Logistics Assets		NGL Distribution and Marketing		Wholesale Marketing		Eliminations and Other		Total
Revenues	$	602,376	$	—	$	—	$	—	$	—	$	602,376
Intersegment revenues		—		—		—		—		—		—
Revenues		602,376		—		—		—		—		602,376
Product purchases		544,918		—		—		—		—		544,918
Intersegment product purchases		—		—		—		—		—		—
Product purchases		544,918		—		—		—		—		544,918
Operating expenses		15,253		—		—		—		—		15,253
Intersegment operating expenses		—		—		—		—		—		—
Operating expenses		15,253		—		—		—		—		15,253
Operating margin	$	42,205	$	—	$	—	$	—	$	—	$	42,205
General and administrative	$	7,698	$	—	$	—	$	—	$	3,451	$	11,149
Equity in earnings of unconsolidated investments	$	2,370	$	—	$	—	$	—	$	—	$	2,370
Identifiable assets	$	429,085	$	—	$	—	$	—	$	14,128	$	443,213
Unconsolidated investments		103,496		—		—		—		—		103,496
Capital expenditures		2,633		—		—		—		2,866		5,499

The following table is a reconciliation of operating margin to net income for each period presented (in thousands):

	Year Ended December 31, 2006		Year Ended December 31, 2005			Year Ended December 31, 2004
Operating margin	$	467,880	$	144,974		$	42,205
Less:
Depreciation and amortization expense		149,687		27,141			10,631
General and administrative expense		82,351		28,275			11,149
Interest expense, net		180,189		39,856			6,406
Other, net		16,030		70,454			(2,370	)
Income tax expense (benefit)		16,209		(6,537	)		5,227
Net income (loss)	$	23,414	$	(14,215	)	$	11,162

Note 16—Significant Risks and Uncertainties

Nature of Operations in Midstream Energy Industry

We operate in the midstream energy industry, which includes gathering, transporting, processing, fractionating and storing natural gas, NGL and crude oil. As such, our results of operations, cash flows and financial condition may be affected by (i) changes in the commodity prices of these hydrocarbon products and (ii) changes in the relative price levels among these hydrocarbon products. In general, the prices of natural gas,

F-41

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NGL, crude oil and other hydrocarbon products are subject to fluctuations in response to changes in supply, market uncertainty and a variety of additional factors that are beyond our control.

Our profitability could be impacted by a decline in the volume of natural gas, NGL and condensate transported, gathered or processed at our facilities. A material decrease in natural gas or crude oil production or crude oil refining, as a result of depressed commodity prices, a decrease in exploration and development activities or otherwise, could result in a decline in the volume of natural gas, NGL and condensate handled by our facilities. A reduction in demand for NGL products by the petrochemical, refining or heating industries, whether because of (i) general economic conditions, (ii) reduced demand by consumers for the end products made with NGL products, (iii) increased competition from petroleum-based products due to the pricing differences, (iv) adverse weather conditions, (v) government regulations affecting commodity prices and production levels of hydrocarbons or the content of motor gasoline or (vi) other reasons, could also adversely affect our results of operations, cash flows and financial position.

Credit Risk due to Industry Concentrations

A substantial portion of our revenues are derived from companies in the domestic natural gas, NGL and petrochemical industries. This concentration could impact our overall exposure to credit risk since these customers may be impacted by similar economic or other conditions. To help reduce our credit risk, we evaluate our counterparties’ financial condition and, where appropriate, negotiate netting agreements. We generally do not require collateral for our accounts receivable; however, in certain circumstances we will call for prepayment, require automatic debit agreements or obtain collateral to minimize our potential exposure to defaults.

Counterparty Risk with Respect to Financial Instruments

Where we are exposed to credit risk in our financial instrument transactions, we analyze the counterparty’s financial condition prior to entering into an agreement, establish credit and/or margin limits and monitor the appropriateness of these limits on an ongoing basis. Generally, we do not require collateral and we do not anticipate nonperformance by our counterparties.

Casualties and Other Risks

We maintain coverage in various insurance programs, which provide us with property damage, business interruption and other coverages which are customary for the nature and scope of our operations. The financial impact of storm events such as Hurricanes Katrina and Rita has affected many insurance carriers, and may affect their ability to meet their obligation or trigger limitations in certain insurance coverages. At present, there is no indication of any of our insurance carriers being unable or unwilling to meet its coverage obligations.

We believe that we maintain adequate insurance coverage, although insurance will not cover every type of interruption that might occur. As a result of insurance market conditions, premiums and deductibles for certain insurance policies have increased substantially, and in some instances, certain insurance may become unavailable, or available for only reduced amounts of coverage. As a result, we may not be able to renew existing insurance policies or procure other desirable insurance on commercially reasonable terms, if at all.

If we were to incur a significant liability for which we were not fully insured, it could have a material impact on our consolidated financial position and results of operations. In addition, the proceeds of any such insurance may not be paid in a timely manner and may be insufficient if such an event were to occur. Any event that interrupts the revenues generated by our consolidated operations, or which causes us to make significant expenditures not covered by insurance, could reduce our ability to meet our obligations under various agreements with our lenders.

F-42

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 17—Quarterly Financial Data (Unaudited)

The following table shows summary financial data for 2006 and 2005:

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter		Year
	(in thousands)
Year Ended December 31, 2006
Revenues	$	1,499,345		$	1,605,389		$	1,594,549		$	1,433,598	$	6,132,881
Operating income		70,395			96,394			21,247			47,806		235,842
Net income (loss)		12,225			27,684			(18,483	)		1,988		23,414
Year Ended December 31, 2005
Revenues	$	208,253		$	244,739		$	282,204		$	1,093,831	$	1,829,027
Operating income		9,664			9,011			10,473			60,410		89,558
Net income (loss)		1,669			2,109			(39,616	)		21,623		(14,215	)
Preferred dividends		2,084			2,138			2,195			750		7,167
Net income (loss) to common stock		(415	)		(29	)		(41,811	)		20,873		(21,382	)

Note 18—Proposed Disposition of North Texas Assets

At the time we acquired DMS, we planned to market the North Texas assets in an auction style sales process in early 2006, with the expectation that the sales transaction would close by mid 2006. In September 2006, our Board of Directors (the “Board”) determined that the available sales options did not meet the Board’s criteria. As a result, the North Texas assets were reclassified from “held for sale” to “held for use” and we began activities necessary for an initial public offering (“IPO”) of common units representing limited partnership interests in Targa Resources Partners LP (“the Partnership”).

During 2006, we recorded $64.9 million of depreciation expense for the North Texas assets, including $9.1 million of previously deferred depreciation expense for the period from November 2005 to December 2005.

Note 19—Subsequent Events

On February 14, 2007, we completed the IPO and the Partnership borrowed $294.5 million under its newly established credit facility. In return for our contribution of the North Texas assets we received a 2% general partner interest, a 36.6% limited partner interest and cash proceeds of $665.7 million. After closing, we will continue to consolidate the Partnership’s net assets and results due to our continuing control of the Partnership through our general partner interest.

We used the proceeds received from contributing the North Texas assets and cash on hand to retire in full the outstanding balance (including accrued interest) of our $700 million senior secured asset sale bridge loan facility.

Note 20—Consolidating Financial Statements

We are the issuer of the notes discussed in Note 7. The notes are jointly and severally, irrevocably and unconditionally guaranteed by our wholly-owned subsidiaries (referred to as “Guarantor Subsidiaries”).

The following financial information presents condensed consolidating financial statements, which include:

• The parent company only (“Parent”);

F-43

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

• The Guarantor Subsidiaries on a consolidated basis;

• The Non-Guarantor Subsidiaries;

• Elimination entries necessary to consolidate the Parent, the Guarantor Subsidiaries, and the Non-Guarantor Subsidiaries; and

• The Company on a consolidated basis.

Condensed consolidating financial statements are not presented for the predecessor.

F-44

TARGA RESOURCES, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2006

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Intercompany Eliminations			Consolidated
	(in thousands)
ASSETS
Current assets
Cash and cash equivalents	$	—		$	117,661		$	25,078		$	—		$	142,739
Accounts receivable and other current assets		1,694			692,935			22,289			—			716,918
		1,694			810,596			47,367			—			859,657
Property, plant, and equipment, at cost		—			2,088,468			562,907			—			2,651,375
Accumulated depreciation		—			40,081			(226,929	)		—			(186,848	)
Property, plant, and equipment, net		—			2,128,549			335,978			—			2,464,527
Unconsolidated investments		—			40,212						—			40,212
Investment in subsidiaries		2,622,245			—			—			(2,622,245	)		—
Advances to (from) subsidiaries		(14,088	)		(16,263	)		30,351			—			—
Other assets		146,184			(53,605	)		1,050			—			93,629
Total assets	$	2,756,035		$	2,909,489		$	414,746		$	(2,622,245	)	$	3,458,025
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and other liabilities	$	37,000		$	503,952		$	50,278		$	—		$	591,230
Current maturities of debt		712,500			—			—			—			712,500
		749,500			503,952			50,278			—			1,303,730
Long-term liabilities
Long-term debt, net of current maturities		1,471,875			—			—			—			1,471,875
Other long-term obligations		20,390			44,368			1,864			—			66,622
		1,492,265			44,368			1,864			—			1,538,497
Minority interest		—			—			101,528			—			101,528
Stockholders’ equity:
Stockholders’ equity		478,587			2,297,046			261,016			(2,558,062	)		478,587
Accumulated other comprehensive income		35,683			64,123			60			(64,183	)		35,683
		514,270			2,361,169			261,076			(2,622,245	)		514,270
Total liabilities and stockholders’ equity	$	2,756,035		$	2,909,489		$	414,746		$	(2,622,245	)	$	3,458,025

F-45

TARGA RESOURCES, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2005

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Intercompany Eliminations			Consolidated
	(in thousands)
ASSETS
Current assets
Cash and cash equivalents	$	—		$	9,624		$	31,803		$	—		$	41,427
Accounts receivable and other current assets		10,697			747,561			27,890			—			786,148
		10,697			757,185			59,693			—			827,575
Property, plant, and equipment, at cost		—			1,937,063			537,094			—			2,474,157
Accumulated depreciation		—			162,350			(199,904	)		—			(37,554	)
		—			2,099,413			337,190			—			2,436,603
Unconsolidated investments		—			62,337			—			—			62,337
Investment in subsidiaries		2,646,874			—			—			(2,646,874	)		—
Advances to (from) subsidiaries		(58,841	)		30,502			28,339			—			—
Other assets		63,830			5,405			836			—			70,071
Total assets	$	2,662,560		$	2,954,842		$	426,058		$	(2,646,874	)	$	3,396,586
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	30,262		$	486,848		$	38,025		$	—		$	555,135
Current maturities of debt		12,500			—			—			—			12,500
Other current liabilities		133			6,552			1,665			—			8,350
		42,895			493,400			39,690			—			575,985
Long-term liabilities
Long-term debt, net of current maturities		2,184,375			—			—			—			2,184,375
Other long-term liabilities		913			85,367			2,855			—			89,135
		2,185,288			85,367			2,855			—			2,273,510
Minority interest		—			—			112,714			—			112,714
Stockholders’ Equity:
Stockholders equity		453,358			2,406,277			270,798			(2,677,075	)		453,358
Accumulated other comprehensive income		(18,981	)		(30,202	)		1			30,201			(18,981	)
		434,377			2,376,075			270,799			(2,646,874	)		434,377
Total liabilities and stockholders’ equity	$	2,662,560		$	2,954,842		$	426,058		$	(2,646,874	)	$	3,396,586

F-46

TARGA RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Year Ended December 31, 2006

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Intercompany Eliminations			Consolidated
	(in thousands)
Revenues	$	—		$	5,594,397		$	538,484		$	—		$	6,132,881
					—
Operating costs and expenses:					—
Product purchases		—			5,095,299			345,533			—			5,440,832
Operating expenses		—			124,120			100,049			—			224,169
Depreciation and amortization		—			122,142			27,545			—			149,687
General and administrative		161			81,883			307			—			82,351
		161			5,423,444			473,434			—			5,897,039
Operating income (loss)		(161	)		170,953			65,050			—			235,842
Other income (expense):
Interest expense, net		—			(181,417	)		1,228			—			(180,189	)
Equity income of unconsolidated investments		—			9,968			—			—			9,968
Equity in earnings of subsidiaries		39,784			—			—			(39,784	)		—
Minority interest		—			—			(25,998	)		—			(25,998	)
Income (loss) before income taxes		39,623			(496	)		40,280			(39,784	)		39,623
Income tax expense		(16,209	)		—			—			—			(16,209	)
Net income (loss)	$	23,414		$	(496	)	$	40,280		$	(39,784	)	$	23,414

F-47

TARGA RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Year Ended December 31, 2005

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Intercompany Eliminations		Consolidated
	(in thousands)
Revenues	$	—		$	1,725,587		$	103,440		$	—	$	1,829,027
Operating costs and expenses:
Product purchases		—			1,566,612			65,351			—		1,631,963
Operating expenses		—			39,151			12,939			—		52,090
Depreciation and amortization		—			22,662			4,479			—		27,141
General and administrative		—			28,233			42			—		28,275
		—			1,656,658			82,811			—		1,739,469
Operating income		—			68,929			20,629			—		89,558
Other income (expense):
Interest expense, net		—			(39,856	)		—			—		(39,856	)
Other income (expense)		—			(59,375	)		58			—		(59,317	)
Equity in earnings of unconsolidated investments		—			(3,776	)		—			—		(3,776	)
Equity in earnings of subsidiaries		(20,752	)		—			—			20,752		—
Minority interest		—			—			(7,361	)		—		(7,361	)
Income (loss) before income taxes		(20,752	)		(34,078	)		13,326			20,752		(20,752	)
Income tax benefit		6,537			—			—			—		6,537
Net income (loss)		(14,215	)		(34,078	)		13,326			20,752		(14,215	)
Dividends on redeemable preferred stock		(7,167	)		—			—			—		(7,167	)
Net income (loss) to common stock	$	(21,382	)	$	(34,078	)	$	13,326		$	20,752	$	(21,382	)

F-48

TARGA RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Year Ended December 31, 2004

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries	Intercompany Eliminations			Consolidated
	(in thousands)
Revenues	$	—		$	602,376		$  —	$	—		$	602,376
Operating costs and expenses:
Product purchases		—			544,918		—		—			544,918
Operating expenses		—			15,253		—		—			15,253
Depreciation and amortization		—			10,631		—		—			10,631
General and administrative		485			10,664		—		—			11,149
		485			581,466		—		—			581,951
Operating income (loss)		(485	)		20,910		—		—			20,425
Other income (expense):
Interest expense, net		—			(6,406	)	—		—			(6,406	)
Equity in earnings of unconsolidated investment		—			2,370		—		—			2,370
Equity in earnings of subsidiaries		16,874			—		—		(16,874	)		—
Income before income taxes		16,389			16,874		—		(16,874	)		16,389
Income tax expense		(5,227	)		—		—		—			(5,227	)
Net income		11,162			16,874		—		(16,874	)		11,162
Dividends on redeemable preferred stock		(5,829	)		—		—		—			(5,829	)
Net income to common stock	$	5,333		$	16,874		$  —	$	(16,874	)	$	5,333

F-49

TARGA RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Year Ended December 31, 2006

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Intercompany Eliminations			Consolidated
	(in thousands)
Cash flows from operating activities
Net income (loss)	$	23,414		$	(496	)	$	40,280		$	(39,784	)	$	23,414
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion		—			155,919			7,657			—			163,576
Deferred income tax expense		16,141			34			—			—			16,175
Noncash compensation		—			2,777			—			—			2,777
Inventory valuation adjustment		—			13,103			—			—			13,103
Provision for uncollectible accounts		—			(860	)		—			—			(860	)
Equity in earnings of unconsolidated investments		—			(9,968	)		—			—			(9,968	)
Distribution from unconsolidated investments		—			2,306			—			—			2,306
Equity in earnings of subsidiaries		(39,784	)		—			—			39,784			—
Minority interest		—			—			25,998			—			25,998
Minority interest distributions		—			(37,184	)		—			—			(37,184	)
Gain on sale of assets		—			169			—			—			169
Risk management activities		—			(24,618	)		—			—			(24,618	)
Other		—			—			—			—			—
Changes in operating assets and liabilities:
Accounts receivable and other assets		347			1,330			(3,729	)		—			(2,052	)
Inventory		—			22,598			809			—			23,407
Accounts payable and other liabilities		(18,243	)		77,032			(21,746	)		—			37,043
Net cash provided by (used in) operating activities		(18,125	)		202,142			49,269			—			233,286
Cash flows from investing activities
Purchases of property, plant, and equipment		—			(128,132	)		(8,533	)		—			(136,665	)
Proceeds from property insurance		—			27,221			—			—			27,221
Proceeds from sale of unconsolidated investment		—			—			—			—			—
Investment in unconsolidated affiliate		—			(9,102	)		—			—			(9,102	)
Other		—			734			—			—			734
Net cash used in investing activities		—			(109,279	)		(8,533	)		—			(117,812	)
Cash flows from financing activities
Senior secured credit facility:
Borrowings		—			—			—			—			—
Repayments		(12,500	)		—			—			—			(12,500	)
Proceeds from issuance of long-term debt		—			—			—			—			—
Repayment of long-term debt		—			—			—			—			—
Parent contributions (distributions)		—			—			(969	)		—			(969	)
Receipts from (payments to) subsidiaries		31,318			15,174			(46,492	)		—			—
Costs incurred in connection with financing arrangements		(693	)		—			—			—			(693	)
Net cash provided by (used in) financing activities		18,125			15,174			(47,461	)		—			(14,162	)
Net increase (decrease) in cash and cash equivalents		—			108,037			(6,725	)		—			101,312
Cash and cash equivalents, beginning of period		—			9,624			31,803			—			41,427
Cash and cash equivalents, end of period	$	—		$	117,661		$	25,078		$	—		$	142,739

F-50

TARGA RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Year Ended December 31, 2005

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Intercompany Eliminations			Consolidated
	(in thousands)
Cash flows from operating activities
Net income (loss)	$	(14,215	)	$	(34,078	)	$	13,326		$	20,752		$	(14,215	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion		—			29,935			4,479			—			34,414
Deferred income taxes		(6,742	)		—			—			—			(6,742	)
Earnings (loss) from unconsolidated investments		—			4,163			—			—			4,163
Equity in earnings (losses) of subsidiaries		20,752			—			—			(20,752	)		—
Other		—			58,824			7,361			—			66,185
Changes in operating assets and liabilities:
Accounts receivable and other assets		—			(98,805	)		1,670			—			(97,135	)
Inventory		—			(17,412	)		656			—			(16,756	)
Accounts payable and other liabilities		205			141,872			(3,136	)		—			138,941
Net cash provided by (used in) operating activities		—			84,499			24,356			—			108,855
Cash flows from investing activities
Purchases of property and equipment		—			(18,918	)		(3,058	)		—			(21,976	)
Acquisition of DMS, net of cash acquired		(2,437,102	)		26,426			—			7,132			(2,403,544	)
Proceeds from sale of unconsolidated investment		—			117,000			—			—			117,000
Investment in unconsolidated affiliate		—			(6,032	)		—			—			(6,032	)
Other		—			(14,365	)		1			—			(14,364	)
Net cash used in investing activities		(2,437,102	)		104,111			(3,057	)		7,132			(2,328,916	)
Cash flows from financing activities
Senior secured credit facility:
Borrowings		1,950,000			48,000			—			—			1,998,000
Repayments		(3,125	)		(174,000	)		—			—			(177,125	)
Proceeds from issuance of long-term debt		250,000			—			—			—			250,000
Repayment of long-term debt		—			(77,000	)		—			—			(77,000	)
Parent contributions (distributions)		315,630			—			—			—			315,630
Receipts from (payments to) subsidiaries		(16,519	)		13,147			3,372			—			—
Costs incurred in connection with financing arrangements		(58,884	)		—			—			—			(58,884	)
Net cash provided by financing activities		2,437,102			(189,853	)		3,372			—			2,250,621
Net increase in cash and cash equivalents		—			(1,243	)		24,671			7,132			30,560
Cash and cash equivalents, beginning of year		—			10,867			7,132			(7,132	)		10,867
Cash and cash equivalents, end of year	$	—		$	9,624		$	31,803		$	—		$	41,427

F-51

TARGA RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Year Ended December 31, 2004

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries	Intercompany Eliminations			Consolidated
	(in thousands)
Cash flows from operating activities
Net income	$	11,162		$	16,874		$  —	$	(16,874	)	$	11,162
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, amortization and accretion		—			11,740		—		—			11,740
Deferred income tax expense		5,227			—		—		—			5,227
Noncash compensation		485										485
Equity in earnings (losses) of unconsolidated investments		—			(2,370	)	—		—			(2,370	)
Equity in (earnings) losses of subsidiaries		(16,874	)		—		—		16,874			—
Hedge ineffectiveness adjustment		—			(95	)	—		—			(95	)
Changes in operating assets and liabilities:
Accounts receivable and other assets		—			(77,843	)	—		—			(77,843	)
Inventory		—			(381	)	—		—			(381	)
Accounts payable and other liabilities		—			85,210		—		—			85,210
Net cash provided by operating activities		—			33,135		—		—			33,135
Cash flows from investing activities
Purchases of property and equipment		—			(250,187	)	—		—			(250,187	)
Investment in unconsolidated subsidiaries		—			(101,275	)	—		—			(101,275	)
Other		—			(1,772	)	—		—			(1,772	)
Net cash used in investing activities		—			(353,234	)	—		—			(353,234	)
Cash flows from financing activities
Senior secured credit facility:
Borrowings		—			168,000		—		—			168,000
Repayments		—			(42,000	)	—		—			(42,000	)
Proceeds from issuance of senior subordinated second lien notes		—			31,360		—		—			31,360
Proceeds from issuance of term loan		—			45,000		—		—			45,000
Parent contributions (distributions), net		2,550			—		—		—			2,550
Receipts from (payments to) subsidiaries		(133,866	)		133,866		—		—			—
Proceeds from the issuance of redeemable preferred stock		131,300			—		—		—			131,300
Proceeds from issuance of common stock		16			—		—		—			16
Costs incurred in connection with financing arrangements		—			(5,550	)	—		—			(5,550	)
Net cash provided by financing activities		—			330,676		—		—			330,676
Net increase in cash and cash equivalents		—			10,577		—		—			10,577
Cash and cash equivalents, beginning of year		—			290		—		—			290
Cash and cash equivalents, end of year	$	—		$	10,867		$  —	$	—		$	10,867

F-52

TARGA RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

	June 30, 2007			December 31, 2006
	(in thousands) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	180,075		$	142,739
Trade receivables, net of allowances of $419 and $781		542,675			528,864
Inventory		82,257			116,956
Deferred income taxes		6,867			—
Assets from risk management activities		14,673			34,255
Other current assets		40,055			36,843
Total current assets		866,602			859,657
Property, plant and equipment, at cost		2,717,093			2,651,375
Accumulated depreciation		(259,747	)		(186,848	)
Property, plant and equipment, net		2,457,346			2,464,527
Unconsolidated investments		45,094			40,212
Long-term assets from risk management activities		5,449			15,851
Other assets		62,051			77,778
Total assets	$	3,436,542		$	3,458,025
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	253,358		$	271,696
Accrued liabilities		330,081			301,540
Current maturities of debt		12,500			712,500
Liabilities from risk management activities		32,380			6,611
Deferred income taxes		—			11,383
Total current liabilities		628,319			1,303,730
Long-term debt, less current maturities		1,760,125			1,471,875
Long-term liabilities from risk management activities		54,277			17,731
Deferred income taxes		5,824			23,950
Other long-term obligations		30,930			24,941
Minority interest		103,061			101,528
Non-controlling interest in Targa Resources Partners LP		373,692			—
Commitments and contingencies (Note 9)
Stockholder’s equity:
Common stock ($0.001 par value, 1,000 shares authorized, 1,000 shares issued and outstanding at June 30, 2007 and December 31, 2006)		—			—
Additional paid-in capital		473,952			472,423
Retained earnings		29,204			6,164
Accumulated other comprehensive income		(22,842	)		35,683
Total stockholder’s equity		480,314			514,270
Total liabilities and stockholder’s equity	$	3,436,542		$	3,458,025

See notes to unaudited consolidated financial statements

F-53

TARGA RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Six Months Ended June 30,
	2007			2006
	(in thousands) (unaudited)
Revenues	$	3,059,780		$	3,104,734
Costs and expenses:
Product purchases		2,708,586			2,752,196
Operating expenses		120,311			102,405
Depreciation and amortization		73,166			42,155
General and administrative		42,390			41,340
Loss (gain) on sale of assets		(131	)		(151	)
		2,944,322			2,937,945
Operating income		115,458			166,789
Other income (expense):
Interest expense, net		(78,003	)		(88,328	)
Equity in earnings of unconsolidated investments		5,647			3,968
Minority interest		(12,818	)		(15,593	)
Non-controlling interest in Targa Resources Partners LP		(4,048	)		—
Income before income taxes		26,236			66,836
Income tax (expense) benefit:
Current		(693	)		—
Deferred		(2,503	)		(26,927	)
Net income	$	23,040		$	39,909

See notes to unaudited consolidated financial statements

F-54

TARGA RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Six Months Ended June 30,
	2007			2006
	(in thousands) (unaudited)
Net income	$	23,040		$	39,909
Other comprehensive income (loss)
Commodity hedging contracts:
Non-controlling partners’ share of other comprehensive income of Targa Resources Partners LP		4,762			—
Change in fair value		(88,075	)		59,911
Reclassification adjustment for settled periods		(14,023	)		(15,177	)
Related income taxes		38,477			(16,774	)
Interest rate swaps:
Change in fair value		521			3,880
Reclassification adjustment for settled periods		(1,048	)		8
Related income taxes		237			(1,458	)
Foreign currency items:
Foreign currency translation adjustment		1,001			43
Related income taxes		(377	)		(17	)
		(58,525	)		30,416
Comprehensive income (loss)	$	(35,485	)	$	70,325

See notes to unaudited consolidated financial statements

F-55

TARGA RESOURCES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY

	Common Stock		Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
	Shares	Amount
	(in thousands) (unaudited)
Balance, December 31, 2006	1	—	$	472,423		$	6,164	$	35,683		$	514,270
Distribution to parent	—	—		(63	)		—		—			(63	)
Contribution of noncash compensation	—	—		1,050			—		—			1,050
Tax benefit on vesting of common stock	—	—		542			—		—			542
Other comprehensive loss	—	—		—			—		(58,525	)		(58,525	)
Net income	—	—		—			23,040		—			23,040
Balance, June 30, 2007	1	—	$	473,952		$	29,204	$	(22,842	)	$	480,314

See notes to unaudited consolidated financial statements

F-56

TARGA RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2007			2006
	(in thousands) (unaudited)
Cash flows from operating activities
Net income	$	23,040		$	39,909
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		73,104			42,093
Deferred income tax expense		2,503			26,927
Amortization of debt issue costs		9,011			6,476
Amortization of intangibles		62			62
Accretion of asset retirement obligations		494			422
Noncash compensation		1,127			1,474
Equity in earnings of unconsolidated investments		(5,647	)		(3,968	)
Distributions from unconsolidated investments		2,325			2,034
Minority interest		12,818			15,593
Minority interest distributions		(11,285	)		(23,679	)
Non-controlling interest in Targa Resources Partners LP		4,048			—
Distributions to non-controlling interest in Targa Resources Partners LP		(3,263	)		—
Risk management activities		(10,325	)		(13,531	)
Gain on sale of assets		(131	)		(151	)
Changes in operating assets and liabilities
Accounts receivable and other assets		(15,595	)		(40,849	)
Inventory		34,699			59,608
Accounts payable and other liabilities		17,327			64,256
Net cash provided by operating activities		134,312			176,676
Cash flows from investing activities
Purchases of property, plant and equipment		(68,405	)		(73,539	)
Proceeds from property insurance		12,454			—
Investment in unconsolidated affiliate		(4,647	)		(6,023	)
Other		1,987			413
Net cash used in investing activities		(58,611	)		(79,149	)
Cash flows from financing activities
Senior secured credit facilities
Borrowings		342,500			—
Repayments		(754,250	)		(6,250	)
Proceeds from investment of non-controlling interest in Targa Resources Partners LP		377,593			—
Distribution to Targa Resources Investments Inc.		(63	)		—
Costs incurred in connection with financing arrangements		(4,145	)		(648	)
Net cash used in financing activities		(38,365	)		(6,898	)
Net increase in cash and cash equivalents		37,336			90,629
Cash and cash equivalents, beginning of period		142,739			41,427
Cash and cash equivalents, end of period	$	180,075		$	132,056

See notes to unaudited consolidated financial statements

F-57

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Basis of Presentation

Targa Resources, Inc. (the “Company”, “we”, “our”, “us”) is a Delaware corporation formed on February 26, 2004. Our business operations consist of gathering and processing natural gas, and fractionating, storing, terminalling, transporting, distributing and marketing NGLs.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The unaudited consolidated financial statements for the six month periods ended June 30, 2007 and 2006 include all adjustments, both normal and recurring, which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. All significant intercompany balances and transactions have been eliminated in consolidation. The financial results for the six months ended June 30, 2007 are not necessarily the results that may be expected for the full year ended December 31, 2007 due to seasonality of portions of our business, timing of maintenance activities and the impact of the resumption of operations at certain of our facilities that sustained damage during 2005. These unaudited consolidated financial statements and other information included in the quarterly report should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report for the year ended December 31, 2006.

We currently own approximately 38.6% of Targa Resources Partners LP (“TRP LP”), including the interests of the general partner, which is wholly owned by us. TRP LP is consolidated within our Gas Gathering and Processing segment in accordance with Emerging Issues Task Force (“EITF”) Issue No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights.”

The non-controlling interest in TRP LP on our June 30, 2007 consolidated balance sheet represents the initial investment by the partners other than Targa Resources, Inc., plus those partners’ share of the net income, less those partners’ share of distributions of TRP LP since its initial public offering on February 14, 2007. Non-controlling interest in net income of TRP LP on our consolidated statements of operations represents those partners’ share of the net income of TRP LP.

Note 2—Accounting Policies and Related Matters

Consolidation. Our consolidated financial statements include our accounts and those of our majority-owned subsidiaries in which we have a controlling interest, and our proportionate share of assets, liabilities, revenues and expenses of undivided interests in certain gas processing facilities after the elimination of all material intercompany accounts and transactions. We also consolidate other entities and ventures in which we possess a controlling financial interest.

We follow the equity method of accounting if our ownership interest is between 20% and 50% and we exercise significant influence over the operating and financial policies of the investee. Our proportionate share of profits and losses from transactions with equity method unconsolidated affiliates are eliminated in consolidation to the extent such amounts are material and remain on our equity method investees’ balance sheet in inventory or similar accounts.

If our ownership interest in an investee does not provide us with either control or significant influence over the investee, we account for the investment using the cost method.

F-58

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Income Taxes. We follow the guidance in SFAS 109, “Accounting for Income Taxes”, which requires that we use the asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all significant temporary differences.

As part of the process of preparing our consolidated financial statements, we estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax payable and related tax expense together with assessing temporary differences resulting from differing treatment of certain items, such as depreciation, for tax and accounting purposes. These differences can result in deferred tax assets and liabilities, which are included within our consolidated balance sheets.

We assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized, we must establish a valuation allowance. We consider all available evidence, both positive and negative, to determine whether, based on the weight of the evidence, a valuation allowance is needed. Evidence used includes information about our current financial position and our results of operations for the current and preceding years, as well as all currently available information about future years, including our anticipated future performance, the reversal of deferred tax liabilities and tax planning strategies.

We believe future sources of taxable income, reversing temporary differences and other tax planning strategies will be sufficient to realize assets for which no reserve has been established. Any change in a valuation allowance would impact our income tax provision and net income in the period in which such a determination is made.

We adopted the provisions of FASB Interpretation (“FIN”) 48, “Accounting for Uncertainty in Income Taxes” on January 1, 2007. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Based on our evaluation, we have determined that there are no significant uncertain tax positions requiring recognition in our financial statements at June 30, 2007. There are no unrecognized tax benefits that, if recognized, would affect the effective rate, and there are no unrecognized tax benefits that are reasonably expected to increase or decrease in the next twelve months.

We file numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and many state jurisdictions, and are open to federal and state income tax examinations for years 2003 and later. Presently, no federal or state income tax examinations are underway, and none have been announced. No potential interest or penalties were recognized at June 30, 2007.

Recent Accounting Pronouncements. In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) 157 “Fair Value Measurements”. SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS 157 does not require any new fair value measurements. However, for some entities, the application of SFAS 157 will change current practice. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We have not yet determined the impact this statement will have on our results of operations or financial position.

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of No. 115,” which is effective for fiscal years beginning after November 15, 2007, with early adoption permitted. SFAS 159 expands opportunities to use fair value measurements in financial

F-59

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. We are currently reviewing this new accounting standard and the impact, if any, it will have on our financial statements.

Note 3—Initial Public Offering of TRP LP Units and Related Matters

On February 14, 2007 the initial public offering (“IPO”) of 19,320,000 common units representing limited partner interests in TRP LP was completed. Concurrently with the IPO, TRP LP entered into a five year, $500 million revolving credit facility and borrowed $294.5 million under this newly established facility (see Note 7). TRP LP used the proceeds from this borrowing, together with $377.6 million of net proceeds from the IPO to pay offering expenses and debt issue costs and to retire $665.7 million of affiliate debt owed to us. We applied this amount along with cash on hand to retire in full the outstanding balance (including accrued interest) of our $700 million senior secured asset sale bridge loan facility.

In return for our contribution of our North Texas assets to TRP LP in connection with the IPO, we received a 2% general partner interest, including incentive distribution rights, and a 36.6% limited partner interest in TRP LP. Our limited partner interest is represented by 11,528,231 subordinated units. These units are subordinated for a period of time to the common units with respect to distribution rights.

We continue to consolidate TRP LP’s assets, liabilities and results of operations due to our control of TRP LP through our general partner interest.

Cash Distributions. In accordance with TRP LP’s partnership agreement, TRP LP must distribute all of its available cash, as defined in the partnership agreement, within 45 days following the end of each calendar quarter. Distributions will generally be made 98% to the common and subordinated unitholders and 2% to the general partner, subject to the payment of incentive distributions to the extent that certain target levels of cash distributions are achieved.

Under the quarterly incentive distribution provisions, generally TRP LP’s general partner is entitled to 13% of amounts distributed in excess of $0.3881 per unit, 23% of the amounts distributed in excess of $0.4219 per unit and 48% of amounts it distributed in excess of $0.50625 per unit. No incentive distributions were earned by us through our general partner interest for the period from February 14, 2007 through June 30, 2007. To the extent there is sufficient available cash, the holders of common units are entitled to receive the minimum quarterly distribution of $0.3375 per unit, plus arrearages, prior to any distribution of available cash to the holders of subordinated units. Subordinated units will not accrue any arrearages with respect to distributions for any quarter.

Due to the timing of TRP LP’s IPO, a pro-rated distribution for the first quarter of 2007 of $0.16875 per unit (approximately $5.3 million) was approved by the Board of Directors of TRP LP’s general partner on April 23, 2007 and paid on May 15, 2007 to unitholders of record as of the close of business on May 3, 2007.

Note 4—Share-Based Compensation

We account for share-based compensation in accordance with SFAS 123R, “Share-Based Payment,” which was adopted January 1, 2006, utilizing the modified prospective transition method.

Stock Option Plans

Under its 2005 Incentive Compensation Plan (“the Plan”), our parent, Targa Resources Investments Inc. (“Targa Investments”) granted stock options to certain of our employees and directors. The options were granted

F-60

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

at or above the fair market value of Targa Investments’ common stock on the date of grant, and generally have vesting terms of four years.

The fair value of each option grant was estimated on the date of grant using a Black-Scholes option pricing model. During the six months ended June 30, 2007 and 2006, there were 82,791 and 51,672 stock options granted by Targa Investments. The fair value of options granted during the six months ended June 30, 2007 ranged from $0.00 to $0.33, with a weighted-average fair value of $0.18. The fair value of options granted during the six months ended June 30, 2006 ranged from $0.01 to $0.38, with a weighted-average fair value of $0.21.

Our unaudited consolidated statements of operations reflect share-based compensation cost related to stock options of $30,000 for the six months ended June 30, 2007, and $48,000 for the six months ended June 30, 2006, respectively.

As of June 30, 2007, there was $81,000 of total unamortized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 1.28 years. The total recognition period for the remaining unrecognized compensation cost is approximately 2.4 years.

Non-Vested Common Stock

Targa Investments also issued non-vested (i.e., restricted) common stock to certain of our employees and directors. Restricted stock awards entitle recipients to exchange restricted common shares for unrestricted shares once the defined vesting period expires, subject to certain forfeiture provisions. The restrictions on the non-vested shares generally lapse four years from the date of grant. Compensation cost equal to the estimated grant date fair value of non-vested stock is recognized on a straight-line basis over the vesting period.

During the six months ended June 30, 2007 and 2006, there were 73,049 and 72,564 shares of non-vested common stock granted by Targa Investments, respectively. The estimated fair values of non-vested stock granted during the six months ended June 30, 2007 and 2006 was $1.10 and $1.16 per share, respectively.

Our unaudited consolidated statements of operations reflect share-based compensation cost related to stock options of $1.0 million for the six months ended June 30, 2007, and $1.4 million for the six months ended June 30, 2006, respectively.

As of June 30, 2007, there was $2.3 million of total unamortized compensation cost related to non-vested stock, which is expected to be recognized over a weighted-average period of 1.26 years. The total recognition period for the remaining unrecognized compensation cost is approximately 2.4 years.

Non-Employee Director Grants and Incentive Plan related to TRP LP Common Units

In connection with TRP LP’s IPO in February 2007, Targa Investments adopted a long-term incentive plan (“LTIP”) for employees, consultants and directors who perform services for Targa Investments or its affiliates. The LTIP provides for the grant of cash-settled performance units which are linked to the performance of TRP LP’s common units and may include distribution equivalent rights (“DERs”). The LTIP is administered by the compensation committee of the board of directors of Targa Investments. Subject to applicable vesting criteria, a DER entitles the grantee to a cash payment equal to cash distributions paid on an outstanding common unit.

On February 21, 2007, Targa Investments granted 304,600 performance units under the LTIP. Each vested performance unit will entitle the grantee to a cash payment equal to the then value of a TRP LP common unit, including DERs. Vesting of performance units is based on the total return per common unit of TRP LP through the end of the performance period, August 1, 2010 relative to the total return of a defined peer group.

F-61

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Because the performance units require cash settlement, they have been accounted for as liability awards under SFAS 123R. Accordingly, the measurement date for the performance units is the date of settlement, subject to remeasurement at each reporting date until settlement. The percentage of the fair value that is accrued as compensation cost at the end of each reporting period is equal to the percentage of the requisite service that has been rendered at that date. Changes in fair value that occur after the end of the requisite service period are compensation cost of the period in which the changes occur.

The fair value of a performance unit is the sum of: (i) the closing price of a TRP LP common unit on the reporting date; (ii) the fair value of an at-the-money call option on a performance unit with a grant date equal to the reporting date and an expiration date equal to the last day of the performance period; and (iii) estimated DERs. The fair value of the call option was estimated with a Black-Scholes option pricing model using a risk-free rate of 4.89%, volatility of 19% and a dividend yield of zero.

At June 30, 2007, the aggregate fair value of performance units expected to vest was $12.4 million. For the six months ended June 30, 2007, we recognized compensation expense of $1.3 million related to the performance units. The total recognition period for the remaining unrecognized compensation cost is approximately three years.

Targa Resources GP LLC, the general partner of TRP LP, also made equity-based awards of 16,000 restricted common units of TRP LP (2,000 restricted common units in TRP LP to each of TRP LP’s and Targa Investments’ non-management directors) under the Targa Resources Partners Long-Term Incentive Plan. The awards will settle with the delivery of common units and are subject to three-year vesting, without a performance condition, and will vest ratably on each anniversary of the grant date. During the six months ended June 30, 2007, we recognized compensation expense of $77,000 related to these awards. We estimate that the remaining fair value of $259,000 will be recognized in expense over the next 32 months.

Note 5—Inventory

Our inventory values consisted of the following at the dates indicated:

(in thousands)	June 30, 2007		December 31, 2006
Natural gas and natural gas liquids	$	81,672	$	116,568
Materials and supplies		585		388
	$	82,257	$	116,956

Due to fluctuating commodity prices for natural gas liquids, we occasionally recognize lower of cost or market adjustments when the carrying values of our inventories exceed their net realizable value. These non-cash adjustments are charged to product purchases within operating costs and expenses in the period they are recognized, with the related cash impact in the subsequent period. For the six month periods ended June 30, 2007 and 2006, we recognized $0.1 million and $0.6 million, respectively, for lower of cost or market adjustments.

In the course of resolving outstanding inventory volume and customer imbalance variances, we recorded an inventory write-down of $4.9 million during the second quarter of 2007 to adjust our NGL inventory.

Note 6—Unconsolidated Investments

At June 30, 2007, our investments included a 22.8929% ownership interest in Venice Energy Services Company, LLC (“VESCO”), a venture that operates a natural gas liquids processing and extraction facility in the

F-62

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Gulf Coast region, and a 38.75% ownership interest in Gulf Coast Fractionators (“GCF”), a venture that fractionates natural gas liquids on the Gulf Coast. The following table shows our unconsolidated investments at the dates indicated:

(in thousands)	June 30, 2007		December 31, 2006
Natural Gas Gathering and Processing
VESCO	$	25,670	$	20,610
Logistics Assets
GCF		19,424		19,602
	$	45,094	$	40,212

The following table shows our equity earnings, cash contributions and cash distributions with respect to our unconsolidated investments for the periods indicated:

(in thousands)	Six Months Ended June 30,
	2007		2006
Equity in earnings of:
VESCO	$	3,500	$	2,254
GCF		2,147		1,714
	$	5,647	$	3,968
Cash contributions
VESCO	$	4,647	$	6,023
Cash distributions
GCF	$	2,325	$	2,034

Our equity in earnings of VESCO includes partially settled business interruption insurance claims of $2.2 million and $3.1 million for the three and six months ended June 30, 2007; and $0.6 million and $1.8 million for the three and six months ended June 30, 2006.

The following table shows summarized financial information of our unconsolidated investments for the periods indicated:

(in thousands)	Six Months Ended June 30,
	2007				2006
	GCF		VESCO(1)		GCF		VESCO(1)
Revenues	$	24,791	$	72,950	$	23,258	$	49,178
Cost of sales and operations		20,064		69,699		19,893		35,682
Income from operations		4,727		3,251		3,365		4,494
Net income		4,979		3,251		3,585		4,494

(1) Our equity earnings in VESCO reflects a disproportionate allocation of depreciation expense, which is based on the cost basis of assets contributed by each of the members.

F-63

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands)	As of June 30,				As of December 31,
	2007				2006
	GCF		VESCO		GCF		VESCO
Current assets	$	12,714	$	65,297	$	12,181	$	47,749
Property, plant and equipment, net		51,494		111,140		52,258		102,028
Other assets		—		328		—		328
Total assets		64,208		176,765		64,439		150,105
Current liabilities		1,996		23,064		1,206		20,444
Long-term liabilities		—		8,340		—		7,851
Owners’ equity		62,212		145,361		63,233		121,810
Total liabilities and owners’ equity		64,208		176,765		64,439		150,105

Note 7—Debt Obligations

Our consolidated debt obligations consisted of the following at the dates indicated

(in thousands)	June 30, 2007			December 31, 2006
Long-term debt:
Senior secured term loan facility, variable rate, due October 2012	$	1,228,125		$	1,234,375
Senior secured asset sale bridge loan facility, variable rate (1)		—			700,000
Senior unsecured notes, 8 1/2% fixed rate, due November 2013		250,000			250,000
Senior secured revolving credit facility, variable rate, due October 2011 (2)		—			—
Senior secured revolving credit facility of the Partnership, variable rate, due February 2012		294,500			—
Subtotal debt		1,772,625			2,184,375
Current maturities of debt		(12,500	)		(712,500	)
Long-term debt	$	1,760,125		$	1,471,875
Irrevocable standby letters of credit:
Letters of credit outstanding under synthetic letter of credit facility (3)	$	233,690		$	227,571
Letters of credit outstanding under senior secured revolving credit facility of the Partnership		—			—
	$	233,690		$	227,571

(1) The entire amount was repaid in February 2007 concurrent with the closing of the Partnership’s IPO.

(2) The entire $250 million available under the senior secured revolving credit facility may also be utilized for letters of credit.

(3) The $300 million senior secured synthetic letter of credit facility terminates in October 2012. At June 30, 2007 we had $66.3 million available under this facility.

F-64

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Information regarding variable interest rates paid. The following table shows the range of interest rates paid and weighted-average interest rate paid on our consolidated variable-rate debt obligations during the six months ended June 30, 2007.

	Range of interest rates paid		Weighted average interest rate paid
Senior secured term loan facility	7.4% to 7.6	%	7.4	%
Senior secured asset sale bridge loan facility	7.6% to 7.6	%	7.6	%
Senior secured revolving credit facility of the Partnership	6.6% to 6.9	%	6.8	%

Senior Secured Revolving Credit Facility of TRP LP. On February 14, 2007 TRP LP entered into a credit agreement which provides for a $500 million five year revolving credit facility with a syndicate of financial institutions. The revolving credit facility bears interest, at TRP LP’s option, at the higher of the lender’s prime rate or the federal funds rate plus 0.5%, plus an applicable margin ranging from 0% to 1.25% dependent on TRP LP’s total leverage ratio, or LIBOR plus an applicable margin ranging from 1.0% to 2.25% dependent on TRP LP’s total leverage ratio. The credit agreement restricts the ability of TRP LP to make distributions of available cash to unitholders if it is in default or an event of default exists (as defined in the credit agreement). The credit agreement requires TRP LP to maintain a leverage ratio (the ratio of consolidated indebtedness to consolidated EBITDA, as defined in the credit agreement) of no more than 5.75 to 1.00, as of June 30, 2007, subject to certain adjustments. The credit agreement also requires TRP LP to maintain a leverage ratio of no more than 5.00 to 1.00 on the last day of any fiscal quarter ending on or after September 30, 2007. The credit agreement also requires TRP LP to maintain an interest coverage ratio (the ratio of its consolidated EBITDA to consolidated interest expense, as defined in its credit agreement) of no less than 2.25 to 1.00 determined as of the last day of each quarter for the four-fiscal quarter period ending on the date of determination.

In addition, TRP LP’s credit agreement contains various covenants that may limit, among other things, its ability to:

• incur indebtedness;

• grant liens; and

• engage in transactions with affiliates.

As of June 30, 2007, TRP LP had approximately $205.5 million available under its credit agreement, after giving effect to borrowings of $342.5 million and a repayment of $48.0 million.

The assets owned by TRP LP no longer serve as security for the indebtedness of Targa Resources, Inc. In connection with the IPO, the collateral interest in the North Texas assets that we contributed to TRP LP was released from our senior secured term loan facility. TRP LP’s senior secured revolving credit facility is secured by substantially all of the assets held by the partnership.

Note 8—Derivative Instruments and Hedging Activities

At June 30, 2007, accumulated other comprehensive income (“OCI”) included unrealized net losses of $38.5 million ($24.1 million, net of tax) on our open commodity hedges; and unrealized net gains of $0.9 million ($0.6 million, net of tax) on our open interest rate swaps.

At December 31, 2006, OCI included $58.8 million ($34.8 million, net of tax) of unrealized net gains on our open commodity hedges; and unrealized net gains of $1.4 million ($0.9 million, net of tax) on our open interest rate swaps.

F-65

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During the six months ended June 30, 2007, deferred gains on commodity hedges of $14.0 million were reclassified from OCI to revenues; and deferred gains on interest rate swaps of $1.0 million were reclassified from OCI to interest expense.

During the six months ended June 30, 2006, deferred gains on commodity hedges of $15.2 million were reclassified from OCI to revenues; and deferred losses on interest rate swaps of $8,000 were reclassified from OCI to interest expense.

During the next twelve months ending June 30, 2008, based on quoted forward commodity prices and interest rates as of June 30, 2007 we expect to reclassify $19.3 million ($12.1 million, net of tax) of net deferred losses associated with open commodity derivative contracts designated as hedges and $0.9 million ($0.6 million, net of tax) of deferred net gains on interest rate swaps from OCI to revenues and interest expense, respectively. The amounts ultimately reclassified will vary due to the actual realized value upon settlement.

F-66

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The fair value of our derivative instruments, depending on the type of instrument, was determined by the use of present value methods or standard option valuation models with assumptions about commodity prices based on those observed in underlying markets. At June 30, 2007 our open derivatives designated as hedges of forecasted sales of commodities expected to be owned by us consisted of the following:

Natural Gas

Instrument Type	Index	Avg. Price $/MMBtu		MMBtu per day						(in thousands) Fair Value
				2007	2008	2009	2010	2011	2012
Swap	IF-HSC	$	9.08	2,740	—	—	—	—	—	$	925
Swap	IF-HSC		8.09	—	2,328	—	—	—	—		(34	)
Swap	IF-HSC		7.39	—	—	1,966	—	—	—		(595	)
				2,740	2,328	1,966	—	—	—		296
Swap	IF-NGPL MC		8.56	8,152	—	—	—				2,975
Swap	IF-NGPL MC		8.43	—	6,964	—	—				2,644
Swap	IF-NGPL MC		8.02	—	—	6,256	—				340
Swap	IF-NGPL MC		7.43	—	—	—	5,685				(713	)
Swap	IF-NGPL MC		7.34	—	—	—	—	2,750			(181	)
Swap	IF-NGPL MC		7.18	—	—	—	—	—	2,750		(90	)
				8,152	6,964	6,256	5,685	2,750	2,750		4,975
Swap	IF-Waha		7.71	30,118	—	—	—	—	—		4,533
Swap	IF-Waha		7.27	—	29,307	—	—	—	—		(5,898	)
Swap	IF-Waha		6.86	—	—	28,854	—	—	—		(11,644	)
Swap	IF-Waha		7.39	—	—	—	15,009	—	—		(2,524	)
Swap	IF-Waha		7.36	—	—	—	—	8,750	—		(780	)
Swap	IF-Waha		7.18	—	—	—	—	—	8,750		(527	)
				30,118	29,307	28,854	15,009	8,750	8,750		(16,840	)
Total Swaps				41,010	38,599	37,076	20,694	11,500	11,500		(11,569	)
Floor	IF-NGPL MC		6.45	520	—	—	—	—	—		56
Floor	IF-NGPL MC		6.55	—	1,000	—	—	—	—		258
Floor	IF-NGPL MC		6.55	—	—	850	—	—	—		186
				520	1,000	850	—	—	—		500
Floor	IF-Waha		6.70	350	—	—	—	—	—		37
Floor	IF-Waha		6.85	—	670	—	—	—	—		168
Floor	IF-Waha		6.55	—	—	565	—	—	—		113
				350	670	565	—	—	—		318
Total Floors				870	1,670	1,415	—	—	—		818
										$	(10,751	)

F-67

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NGL

Instrument Type	Index	Avg. Price $/gal		Barrels per day						(in thousands) Fair Value
				2007	2008	2009	2010	2011	2012
Swap	OPIS-MB	$	0.88	9,414	—	—	—	—	—	$	(13,196	)
Swap	OPIS-MB		0.83	—	8,756	—	—	—	—		(23,124	)
Swap	OPIS-MB		0.80	—	—	8,094	—	—	—		(15,250	)
Swap	OPIS-MB		0.84	—	—	—	6,047	—	—		(4,204	)
Swap	OPIS-MB		0.87	—	—	—	—	3,050	—		(464	)
Swap	OPIS-MB		0.87	—	—	—	—	—	2,050		169
				9,414	8,756	8,094	6,047	3,050	2,050	$	(56,069	)

Condensate

Instrument Type	Index	Avg. Price $/Bbl		Barrels per day						(in thousands) Fair Value
				2007	2008	2009	2010	2011	2012
Swap	NY-WTI	$	72.82	439	—	—	—	—	—	$	127
Swap	NY-WTI		70.68	—	384	—	—	—	—		(223	)
Swap	NY-WTI		69.00	—	—	322	—	—	—		(356	)
Swap	NY-WTI		68.10	—	—	—	301	—	—		(274	)
Total Swaps				439	384	322	301	—	—		(726	)
Floor	NY-WTI	$	58.60	25	—	—	—	—	—		2
Floor	NY-WTI		60.50	—	55	—	—	—	—		48
Floor	NY-WTI		60.00	—	—	50	—	—	—		56
Total Floors				25	55	50	—	—	—		106
				464	439	372	301	—	—	$	(620	)

These contracts may expose us to the risk of financial loss in certain circumstances. Our hedging arrangements provide us with protection on the hedged volumes if prices decline below the prices at which these hedges are set. If prices rise above the prices at which we have hedged, we will receive less revenue on the hedged volumes than we would receive in the absence of hedges.

The following table shows commodity derivative contracts directly related to short-term fixed price arrangements elected by certain customers in various natural gas purchase and sale agreements. They have been marked to market.

Period	Commodity	Instrument Type					Index	(in thousands) Fair Value
			Daily Volume		Average Price
Purchases
Jul – Dec ‘07	Natural gas	Swap	11,159	MMBtu	6.12	per MMBtu	NY-HH	$	90
Sales
Jul – Dec ‘07	Natural gas	Fixed price sale	11,159	MMBtu	6.12	per MMBtu	—		(90	)
								$	—

We also have interest rate swaps with a notional amount of $350 million. The interest rate swaps effectively fix our interest rate on $350 million in borrowings under our senior secured term loan facility to a rate of 4.8%

F-68

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

plus the applicable LIBOR margin (2.00% at June 30, 2007) through November 2007. At June 30, 2007, the fair value of our interest rate swaps was $0.9 million.

Note 9—Commitments and Contingencies

Environmental

For environmental matters, we record liabilities when remedial efforts are probable and the costs can be reasonably estimated in accordance with the American Institute of Certified Public Accountants (“AICPA”) Statement of Position No. 96-1, “Environmental Remediation Liabilities” (“SOP 96-1”). Environmental reserves do not reflect management’s assessment of the insurance coverage that may be applicable to the matters at issue. Management has assessed each of the matters based on current information and made a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought and the probability of success.

In August 2005, prior to Targa’s acquisition of Versado Gas Processors, LLC (“Versado”), the State of New Mexico’s Environment Department (“NMED”) inspected Versado’s Eunice Gas Processing Plant and its books and records. Targa Midstream Services Limited Partnership (“TMS”) is the operator of Versado. In May 2007, the NMED sent Versado a draft compliance order relating to the 2005 inspection. In that draft order, the NMED alleged that Versado violated certain emissions standards and permit, monitoring and recordkeeping requirements. TMS responded to the NMED’s allegations in June 2007. The NMED disposed of certain alleged violations but requested additional information on certain other alleged violations. TMS is in the process of preparing further supplemental responses to the NMED’s inquiries. At this time, we can not estimate the effect, if any, that this matter will have on our results of operations.

Our environmental liability at June 30, 2007 was $3.0 million, consisting of $1.2 million for gathering system leaks and $1.8 million for ground water assessment and remediation.

Litigation

We are a party to various legal proceedings and/or regulatory proceedings and certain claims, suits and complaints arising in the ordinary course of business have been filed or are pending against us. We believe all such matters are without merit or involve amounts, which, if resolved unfavorably, would not have a material effect on our financial position, results of operations, or cash flows except for the items more fully described below.

In May 2002, Apache Corporation filed suit in Texas state court against Versado Gas Processors, LLC (“Versado”) as purchaser and processor of Apache’s gas and Dynegy Midstream Services, Limited Partnership (now known as Targa Midstream Services Limited Partnership, a wholly-owned subsidiary of ours, (“TMSLP”)), as operator, of the Versado assets in New Mexico (“Versado Defendants”) alleging (i) excessive field losses of natural gas from wells owned by the plaintiff, (ii) that the Versado Defendants engaged in certain transactions with affiliates, resulting in the Versado Defendants not receiving fair market value when it sold gas and liquids, and (iii) that the formula for calculating the amount the Versado Defendants received from its buyers of gas and liquids is flawed since it is based on gas price indices that were allegedly manipulated. At trial, the plaintiff’s claim with respect to the alleged “sham” transactions and index manipulation, among others, were severed by the trial court and abated for a future trial, and the jury found in favor of the plaintiff on the lost gas claim, awarding approximately $1.6 million in damages. In May 2004, the Versado Defendants’ motion to set aside this jury verdict was granted by the court and the jury award to the plaintiff was vacated. The plaintiff filed its notice of appeal with the 14^th Court of Appeals in October 2004 and its appellate brief in December 2004.

F-69

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In September 2006, the 14^th Court of Appeals of Houston reinstated the jury verdict in Apache’s favor on the issue of lost gas and also awarded Apache legal fees and interest, bringing the total award against Versado Defendants to approximately $2.7 million. In October 2006, the Versado Defendants filed a motion for rehearing with the 14^th Court of Appeals. After rehearing, the 14^th Court of Appeals affirmed its decision reinstating the original jury verdict in Apache’s favor. With interest and attorneys fees that verdict stands at approximately $2.8 million. In January 2007, the Versado Defendants filed their petition for review with the Supreme Court of Texas and in March 2007, Apache filed its conditional petition for review with the Supreme Court of Texas. At the request of the Supreme Court of Texas, the Versado Defendants and Apache filed responses to the opposing party’s petition in June 2007.

In May 2007, the parties settled the severed lawsuit referenced above.

As a result of damage caused by Hurricane Rita, TMSLP’s West Cameron 229A platform sank in late September 2005. On November 12, 2005, the submerged wreckage was struck by an integrated tug-barge, the M/T Rebel, owned by K-Sea Transportation (“K-Sea”). As much as 25,000 barrels of No. 6 fuel oil may have entered Gulf of Mexico waters as the barge dragged part of the platform debris approximately three (3) miles from the sunken platform location. After receiving a letter from K-Sea threatening to hold us liable for all damages, TMSLP filed suit in federal district court in Galveston, Texas on November 21, 2005, seeking to hold K-Sea responsible for damage to the platform.

In January 2006, Rios Energy (“Rios”), owner of the oil being transported in the barge, intervened in the existing suit and filed a new suit in the same federal court against both TMSLP and K-Sea alleging their negligence caused the loss of and damage to Rios’ oil. On March 8, 2006, K-Sea filed a counterclaim against TMSLP seeking to recover its alleged damages in excess of $90 million. In order to resolve K-Sea’s concerns over security for its claims, we agreed to provide a guarantee to K-Sea pursuant to which we would satisfy any final, non-appealable judgment or settlement against TMSLP if TMSLP is unable to pay any judgment against it. Discovery is proceeding in the underlying claim, counterclaim and Rios lawsuit. In June 2007, the case was transferred to the federal district court in Houston, Texas. Trial has been set for October 2007. TMSLP intends to contest liability but we can give no assurances regarding the outcome of the initial proceeding, the counterclaim or the Rios lawsuit.

On December 8, 2005, WTG Gas Processing (“WTG”) filed suit in the 333rd District Court of Harris County, Texas against several defendants, including Targa Resources, Inc., and three other Targa entities and private equity funds affiliated with Warburg Pincus LLC, seeking damages from the defendants. The suit alleges that Targa and private equity funds affiliated with Warburg Pincus LLC, along with ConocoPhillips Company (“ConocoPhillips”) and Morgan Stanley, tortiously interfered with (i) a contract WTG claims to have had to purchase certain ConocoPhillips assets, and (ii) prospective business relations of WTG. WTG claims the alleged interference resulted from Targa’s competition to purchase the ConocoPhillips’ assets and its successful acquisition of those assets in 2004. Discovery is proceeding. A hearing on our motion for summary judgment was held on April 10, 2007. Targa intends to contest liability but can give no assurances regarding the outcome of the proceeding. See also Note 13—Subsequent Events.

Contractual Obligations

With the exception of the debt incurred by the TRP LP in connection with its IPO, there have been no significant changes in our consolidated schedule of maturities of long-term debt since those reported in our Annual Report for the year ended December 31, 2006. See Note 7 for additional information regarding the debt obligations of TRP LP.

F-70

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Casualty or Other Risks

We maintain coverage in various insurance programs providing us with property damage, business interruption and other coverage which are customary for the nature and scope of our operations.

We believe that we have adequate insurance coverage, although insurance will not cover every type of interruption that might occur. As a result of insurance market conditions, premiums and deductibles for certain insurance policies have increased substantially, and in some instances, certain insurance may become unavailable, or available for only reduced amounts of coverage. As a result, we may not be able to renew existing insurance policies or procure other desirable insurance on commercially reasonable terms, if at all.

If we were to incur a significant liability for which we were not fully insured, it could have a material impact on our consolidated financial position and results of operations. In addition, the proceeds of any such insurance may not be paid in a timely manner and may be insufficient if such an event were to occur. Any event that interrupts the revenues generated by us, or which caused us to make significant expenditures not covered by insurance, could reduce our ability to meet our financial obligations.

Note 10—Income Taxes

During the six months ended June 30, 2007, we recorded income tax expense of $3.2 million, compared to income tax expense of $26.9 million for the comparable period during 2006. Income tax expense decreased by $8.3 million during the six months ended June 30, 2007 as a result of Texas House Bill 3928, effective June 15, 2007, which required us to recognize changes in deferred tax assets related to a computational change of the temporary credit related to the Texas Margin Tax.

Note 11—Related Party Transactions

Hedging Arrangements

An affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) is an equity investor in Targa Investments. We have entered into various commodity derivative transactions with Merrill Lynch Commodities Inc. (“MLCI”), an affiliate of Merrill Lynch. Under the terms of these various commodity derivative transactions, MLCI has agreed to pay us specified fixed prices in relation to specified notional quantities of natural gas, NGL, and condensate over periods ending in 2010, and we have agreed to pay MLCI floating prices based on published index prices of such commodities for delivery at specified locations. The following table shows our open commodity derivatives with MLCI as of June 30, 2007:

Period	Commodity	Instrument Type	Daily Volume		Average Price			Index
Jul – Dec 2007	Natural gas	Swap	26,118	MMBtu	$	7.65	per MMBtu	IF-Waha
Jan – Dec 2008	Natural gas	Swap	25,765	MMBtu		7.23	per MMBtu	IF-Waha
Jan – Dec 2009	Natural gas	Swap	25,474	MMBtu		6.82	per MMBtu	IF-Waha
Jan – Dec 2010	Natural gas	Swap	3,289	MMBtu		7.39	per MMBtu	IF-Waha
Jul – Dec 2007	NGLs	Swap	6,498	Bbl		34.88	per Bbl	OPIS-MB
Jan – Dec 2008	NGLs	Swap	6,222	Bbl		33.22	per Bbl	OPIS-MB
Jan – Dec 2009	NGLs	Swap	5,847	Bbl		32.06	per Bbl	OPIS-MB
Jul – Dec 2007	Condensate	Swap	319	Bbl		75.27	per Bbl	NY-WTI
Jan – Dec 2008	Condensate	Swap	264	Bbl		72.66	per Bbl	NY-WTI
Jan – Dec 2009	Condensate	Swap	202	Bbl		70.60	per Bbl	NY-WTI
Jan – Dec 2010	Condensate	Swap	181	Bbl		69.28	per Bbl	NY-WTI

F-71

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During the six months ended June 30, 2007, we paid MLCI $1.5 million to settle payments due under hedge transactions.

Commodity Transactions

During the six months ended June 30, 2007, we completed natural gas and NGL purchases and sales transactions of $66.6 million and $29.3 million, respectively, with MLCI. These transactions were at market prices consistent with similar transactions with nonaffiliated entities.

Note 12—Segment Information

We conduct our business operations through two divisions and report our results of operations under four segments:

• our Natural Gas Gathering and Processing division, which is a single segment consisting of our natural gas gathering and processing facilities, as well as certain fractionation capability integrated within those facilities; and

• our NGL Logistics and Marketing division, which consists of three segments: (1) Logistics Assets, (ii) NGL Distribution and Marketing, and (iii) Wholesale Marketing.

Our Natural Gas Gathering and Processing segment, which includes TRP LP, consists of the gathering of natural gas produced from oil and gas wells and processing this raw natural gas into merchantable natural gas by extracting natural gas liquids and removing impurities. These assets are located in North Texas, Louisiana and the Permian Basin of West Texas and Southeast New Mexico. We are also party to natural gas processing agreements with third party plants.

Our Logistics Assets segment is involved with gathering and storing mixed NGLs, and fractionating, storing, and transporting finished NGLs. These assets are generally connected to and supplied, in part, by our Natural Gas Gathering and Processing segment and are predominantly located in Mont Belvieu, Texas and West Louisiana.

Our NGL Distribution and Marketing segment markets our own NGL production and purchased NGL products in selected United States markets.

Our Wholesale Marketing segment includes our refinery services business and wholesale propane marketing operations. In our refinery services business, we provide LPG (liquefied petroleum gas) balancing services, purchase NGL products from refinery customers and sell NGL products to various customers. Our wholesale propane marketing operations include the sale of propane and related logistics services to multi-state retailers, independent retailers and other end users. Our Wholesale Marketing segment operates principally in the United States, and has a small marketing presence in Canada.

Eliminations and Other includes amounts related to general and administrative expenses not allocated to segment operations, corporate development, interest expense, income tax expense, and the depreciation and cost of equipment used in our corporate office. Eliminations and Other also includes the elimination of intersegment revenues and expenses.

We review performance based on the non-generally accepted accounting principle (“non-GAAP”) financial measure of operating margin. We view our operating margin as an important performance measure of the core

F-72

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

profitability of our operations. We review our operating margin monthly for consistency and trend analysis. We believe that investors benefit from having access to the same financial measures that our management uses. The GAAP measure most directly comparable to total segment operating margin is operating income. Our non-GAAP financial measure of total segment operating margin should not be considered an alternative to GAAP operating income in evaluating our operating results.

With respect to our Natural Gas Gathering and Processing division, we define operating margin as total operating revenues, which consist of natural gas and NGL sales plus service fee revenues, less product purchases, which consist primarily of producer payments and other natural gas purchases less operating expense. Natural gas and NGL sales revenue includes settlement gains and losses on commodity hedges.

With respect to our NGL Logistics and Marketing division, we define operating margin as total revenue, which consists primarily of service fee revenues and NGL sales, less cost of sales, which consists primarily of NGL purchases and changes in inventory valuation. Within this division, our management analyzes segment operating margin for each of the three segments per unit of NGL handled or sold as an indicator of operational and commercial performance.

We consolidate the financial statements of TRP LP with those of our own. As a result, our consolidated operating margin amounts include the operating margin amounts of TRP LP on a 100% basis. Our reportable segment information is shown in the following tables (in thousands):

Six months ended June 30, 2007

	Gas Gathering and Processing		Logistics Assets		NGL Distribution and Marketing			Wholesale Marketing		Eliminations and Other			Total
Revenues	$	749,833	$	36,910	$	1,728,091		$	544,946	$	—		$	3,059,780
Intersegment revenues		603,340		55,802		203,806			13,909		(876,857	)		—
Revenues		1,353,173		92,712		1,931,897			558,855		(876,857	)		3,059,780
Product purchases		1,107,322		—		1,265,994			335,270		—			2,708,586
Intersegment product purchases		8		—		647,019			214,837		(861,864	)		—
Product purchases		1,107,330		—		1,913,013			550,107		(861,864	)		2,708,586
Operating expenses		57,513		61,558		1,236			4		—			120,311
Intersegment operating expenses		140		14,876		(23	)		—		(14,993	)		—
Operating expenses		57,653		76,434		1,213			4		(14,993	)		120,311
Operating margin	$	188,190	$	16,278	$	17,671		$	8,744	$	—		$	230,883
General and administrative	$	21,799	$	8,376	$	4,398		$	7,794	$	23		$	42,390
Equity in earnings of unconsolidated investments	$	3,500	$	2,147	$	—		$	—	$	—		$	5,647
Unconsolidated investments	$	25,670	$	19,424	$	—		$	—	$	—		$	45,094
Capital expenditures	$	43,774	$	22,824	$	—		$	—	$	1,182		$	67,780

F-73

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Six months ended June 30, 2006

	Gas Gathering and Processing		Logistics Assets			NGL Distribution and Marketing		Wholesale Marketing		Eliminations and Other			Total
Revenues	$	790,490	$	30,133		$	1,600,865	$	683,246	$	—		$	3,104,734
Intersegment revenues		507,088		56,151			215,849		35,776		(814,864	)		—
Revenues		1,297,578		86,284			1,816,714		719,022		(814,864	)		3,104,734
Product purchases		1,031,221		2			1,228,901		492,072		—			2,752,196
Intersegment product purchases		1,972		(2	)		579,089		218,385		(799,444	)		—
Product purchases		1,033,193		—			1,807,990		710,457		(799,444	)		2,752,196
Operating expenses		54,030		47,656			712		7		—			102,405
Intersegment operating expenses		454		14,966			—		—		(15,420	)		—
Operating expenses		54,484		62,622			712		7		(15,420	)		102,405
Operating margin	$	209,901	$	23,662		$	8,012	$	8,558	$	—		$	250,133
General and administrative	$	17,921	$	6,622		$	6,556	$	8,253	$	1,988		$	41,340
Equity in earnings of unconsolidated investments	$	2,254	$	1,714		$	—	$	—	$	—		$	3,968
Unconsolidated investments	$	56,182	$	12,732		$	—	$	—	$	—		$	68,914
Capital expenditures	$	67,199	$	5,523		$	—	$	—	$	—		$	72,722

A reconciliation of our measurement of total segment operating margin to net income follows:

(in thousands)	Six Months Ended June 30,
	2007			2006
				(restated)
Operating margin	$	230,883		$	250,133
Adjustments to reconcile operating margin to net income:
Depreciation and amortization		(73,166	)		(42,155	)
Gain (loss) on sale of assets		131			151
General and administrative		(42,390	)		(41,340	)
Interest expense, net		(78,003	)		(88,328	)
Equity in earnings of unconsolidated investments		5,647			3,968
Minority interest		(12,818	)		(15,593	)
Non-controlling interest of net income of consolidated subsidiary		(4,048	)		—
Income tax (expense) / benefit		(3,196	)		(26,927	)
Net income	$	23,040		$	39,909

Note 13—Subsequent Events

TRP LP

On August 14, 2007, the general partner of TRP LP distributed available cash of $0.3375 per unit (approximately $10.6 million), for the quarter ended June 30, 2007. On October 23, 2007, the general partner of TRP LP approved a quarterly distribution of available cash of $0.3375 per unit (approximately $15.3 million), for

F-74

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

the quarter ended September 30, 2007, payable on November 14, 2007 to unitholders of record as of the close of business on November 4, 2007.

On October 24, 2007, TRP LP completed an offering of 13,500,000 common units representing limited partnership interests at $26.87 per common unit (before expenses). Concurrently with the offering, TRP LP entered into a commitment increase supplement (the “supplement”) to its existing five-year $500 million revolving credit facility. The supplement increased the aggregate commitments under the revolving credit facility by $250 million to an aggregate $750 million.

TRP LP used the net proceeds from the offering, borrowings of $378.8 million under its revolving credit facility and the issuance to us of 275,511 TRP LP general partner units to acquire our ownership interests in the San Angelo Operating Unit system located in the Permian Basin of west Texas and the Louisiana Operating Unit located in southwest Louisiana. We used $687.2 million of the cash consideration to repay outstanding principal on our senior secured term loan facility.

We continue to consolidate TRP LP’s assets, liabilities and results of operations due to our control of TRP LP through our general partner interest.

On October 24, 2007, TRP LP also amended its credit agreement. The amendment increased by $250 million the maximum amount of increases to the aggregate commitments that may be requested by TRP LP. The amendment allows TRP LP to request commitments under the credit agreement, as supplemented and amended, up to $1 billion.

Litigation

On October 2, 2007 the 333^rd District Court of Harris County, Texas granted the defendants’ motion for summary judgment in the WTG suit. It is unknown at this time whether plaintiff will seek an appeal.

Pledge of Capital Stock

On August 9, 2007, Targa Investments borrowed $450 million under a newly arranged credit agreement. In connection with the agreement, Targa Resources Investments Sub Inc., its wholly owned subsidiary, pledged its 100% ownership of our capital stock as collateral for amounts due under the agreement. Under the terms of the agreement, interest on the loan may be paid in cash or added to the principal amount of the loan. Except under certain circumstances, Targa Investments is not required to repay any amount outstanding under the agreement until February 9, 2015.

Environmental Matters

We have been in discussions with the New Mexico Environment Department, or NMED, to resolve alleged air emissions violations at the Eunice, Monument and Saunders gas processing plants. In May 2007, the NMED provided us with a draft compliance order proposing to resolve certain of these alleged violations, which were identified in the course of an inspection of the Eunice plant conducted by the NMED in August 2005. More recently, however, we have discussed with the NMED an expansion of the proposed compliance order to include the resolution of other alleged violations associated with the operation of flares at the Eunice, Monument and Saunders plants. We may be required to incur capital expenditures to upgrade the flares at the Eunice, Monument and Saunders plants in order to resolve these alleged violations. It is also possible that the NMED may assess a penalty as part of the settlement of these violations, although no such penalty has yet been proposed by the agency.

F-75

TARGA RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 14—Condensed Consolidating Financial Statements

We are the issuer of the $250,000,000 in aggregate principal amount of 8 ¹/2% Senior Notes due 2013 referred to in Note 7 of our Annual Report for the year ended December 31, 2006. The notes are jointly and severally, irrevocably and unconditionally guaranteed by our wholly-owned subsidiaries (referred to as “Guarantor Subsidiaries”).

The following financial information presents condensed consolidating financial statements, which include:

• Targa Resources, Inc. only (“Parent”);

• The Guarantor Subsidiaries on a consolidated basis;

• Non-wholly-owned and foreign subsidiaries (referred to as “Non-Guarantor Subsidiaries”);

• Elimination entries necessary to consolidate the Parent, the Guarantor Subsidiaries, and the Non-Guarantor Subsidiaries; and

• The Company on a consolidated basis.

F-76

Prior period amounts have been restated to reflect as Guarantor Subsidiaries only those subsidiaries that guarantee our notes as of June 30, 2007. In connection with TRP LP’s IPO, the guarantee of indebtedness of the assets contributed to the TRP LP from us was terminated, the collateral interest was released, and the TRP LP and its consolidated subsidiaries are no longer Guarantor Subsidiaries.

TARGA RESOURCES, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

June 30, 2007

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Intercompany Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	—		$	142,510		$	37,565		$	—		$	180,075
Accounts receivable and other current assets		7,897			645,351			33,279			—			686,527
		7,897			787,861			70,844			—			866,602
Property, plant and equipment, at cost		—			1,001,747			1,715,346			—			2,717,093
Accumulated depreciation		—			74,228			(333,975	)		—			(259,747	)
Property, plant and equipment, net		—			1,075,975			1,381,371			—			2,457,346
Unconsolidated investments		—			45,094			—			—			45,094
Investment in subsidiaries		1,645,057			—			—			(1,645,057	)		—
Advances to (from) subsidiaries		180,084			(261,282	)		81,198			—			—
Other assets		137,478			(79,350	)		9,372			—			67,500
Total assets	$	1,970,516		$	1,568,298		$	1,542,785		$	(1,645,057	)	$	3,436,542
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities
Accounts payable and other liabilities	$	9,042		$	510,753		$	96,024		$	—		$	615,819
Current maturities of debt		12,500			—			—			—			12,500
		21,542			510,753			96,024			—			628,319
Long-term liabilities
Long-term debt, net of current maturities		1,465,625			—			294,500			—			1,760,125
Other long-term obligations		3,035			68,682			19,314			—			91,031
		1,468,660			68,682			313,814			—			1,851,156
Minority interest		—			—			—			103,061			103,061
Non controlling interest in TRP LP		—			—			—			373,692			373,692
Stockholder’s equity:
Stockholder’s equity		503,156			1,024,366			1,139,642			(2,164,008	)		503,156
Accumulated other comprehensive income		(22,842	)		(35,503	)		(6,695	)		42,198			(22,842	)
		480,314			988,863			1,132,947			(2,121,810	)		480,314
Total liabilities and stockholder’s equity	$	1,970,516		$	1,568,298		$	1,542,785		$	(1,645,057	)	$	3,436,542

F-77

TARGA RESOURCES, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2006

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Intercompany Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	—		$	117,661		$	25,078		$	—		$	142,739
Accounts receivable and other current assets		1,694			674,950			40,274			—			716,918
		1,694			792,611			65,352			—			859,657
Property, plant, and equipment, at cost		—			959,258			1,692,117			—			2,651,375
Accumulated depreciation		—			105,183			(292,031	)		—			(186,848	)
Property, plant, and equipment, net		—			1,064,441			1,400,086			—			2,464,527
Unconsolidated investments		—			40,212			—			—			40,212
Investment in subsidiaries		2,622,245			—			—			(2,622,245	)		—
Advances to (from) subsidiaries		(14,088	)		(16,263	)		30,351			—			—
Other assets		146,184			(69,146	)		16,591			—			93,629
Total assets	$	2,756,035		$	1,811,855		$	1,512,380		$	(2,622,245	)	$	3,458,025
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities
Accounts payable and other liabilities	$	37,000		$	472,735		$	81,495		$	—		$	591,230
Current maturities of debt		712,500			—			—			—			712,500
		749,500			472,735			81,495			—			1,303,730
Long-term liabilities
Long-term debt, net of current maturities		1,471,875			—			—			—			1,471,875
Other long-term obligations		20,390			39,744			6,488			—			66,622
		1,492,265			39,744			6,488			—			1,538,497
Minority interest		—			—			101,528			—			101,528
Stockholder’s equity:
Stockholder’s equity		478,587			1,265,521			1,292,541			(2,558,062	)		478,587
Accumulated other comprehensive income		35,683			33,855			30,328			(64,183	)		35,683
		514,270			1,299,376			1,322,869			(2,622,245	)		514,270
Total liabilities and stockholder’s equity	$	2,756,035		$	1,811,855		$	1,512,380		$	(2,622,245	)	$	3,458,025

F-78

TARGA RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Six Months Ended June 30, 2007

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:	$	—		$	2,586,024		$	473,756		$	—		$	3,059,780
Operating costs and expenses:
Product purchases		—			2,392,424			316,162			—			2,708,586
Operating expenses		—			59,046			61,265			—			120,311
Depreciation and amortization		—			31,198			41,968			—			73,166
General and administrative and other		32			38,307			3,920			—			42,259
		32			2,520,975			423,315			—			2,944,322
Operating income		(32	)		65,049			50,441			—			115,458
Other income (expense):
Interest expense, net		(4,472	)		(56,324	)		(17,207	)		—			(78,003	)
Equity in earnings of unconsolidated investments		—			5,647			—			—			5,647
Equity in earnings of subsidiaries		30,483			—			—			(30,483	)		—
Minority interest		—			—			—			(16,866	)		(16,866	)
Income before income taxes		25,979			14,372			33,234			(47,349	)		26,236
Income tax expense		(2,939	)		—			(257	)		—			(3,196	)
Net income (loss)	$	23,040		$	14,372		$	32,977		$	(47,349	)	$	23,040

F-79

TARGA RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Six Months Ended June 30, 2006

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:	$	—		$	2,645,028		$	459,706		$	—		$	3,104,734
Operating costs and expenses:
Product purchases		—			2,448,647			303,549			—			2,752,196
Operating expenses		—			44,784			57,621			—			102,405
Depreciation and amortization		—			1,405			40,750			—			42,155
General and administrative and other		103			37,814			3,272			—			41,189
		103			2,532,650			405,192			—			2,937,945
Operating income		(103	)		112,378			54,514			—			166,789
Other income (expense):
Interest expense, net		—			(88,932	)		604			—			(88,328	)
Equity in earnings of unconsolidated investments		—			3,968			—			—			3,968
Equity in earnings of subsidiaries		66,939			—			—			(66,939	)		—
Minority interest		—			—			—			(15,593	)		(15,593	)
Income before income taxes		66,836			27,414			55,118			(82,532	)		66,836
Income tax benefit / (expense)		(26,927	)		1,454			(1,454	)		—			(26,927	)
Net income (loss)	$	39,909		$	28,868		$	53,664		$	(82,532	)	$	39,909

F-80

TARGA RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2007

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Intercompany Eliminations			Consolidated
Cash flows from operating activities
Net income	$	23,040		$	14,372		$	32,977		$	(47,349	)	$	23,040
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation, amortization and accretion		8,705			31,530			42,436			—			82,671
Deferred income taxes		2,503			—			—			—			2,503
Equity in earnings of unconsolidated investments		—			(5,647	)		—			—			(5,647	)
Equity in earnings of subsidiaries		(30,483	)		—			—			30,483			—
Other		1,050			(8,255	)		(14,347	)		16,866			(4,686	)
Changes in operating assets and liabilities:
Accounts receivable and other assets		(479	)		(12,059	)		(3,057	)		—			(15,595	)
Inventory		—			33,751			948			—			34,699
Accounts payable and other liabilities		(16,575	)		23,724			10,178			—			17,327
Net cash provided by (used in) operating activities		(12,239	)		77,416			69,135			—			134,312
Cash flows from investing activities
Purchases of property and equipment		—			(45,176	)		(23,229	)		—			(68,405	)
Other		—			9,788			6			—			9,794
Net cash used in investing activities		—			(35,388	)		(23,223	)		—			(58,611	)
Cash flows from financing activities
Senior secured credit facilities:
Borrowings		—			—			342,500			—			342,500
Repayments		(706,250	)		—			(48,000	)		—			(754,250	)
Non-controlling investment in Targa Resources Partners LP		—			—			377,593			—			377,593
Other		(63	)		—			(4,145	)		—			(4,208	)
Receipts from (payments to) subsidiaries		718,552			(17,179	)		(701,373	)		—			—
Net cash provided by (used in) financing activities		12,239			(17,179	)		(33,425	)		—			(38,365	)
Net increase in cash and cash equivalents		—			24,849			12,487			—			37,336
Cash and cash equivalents, beginning of year		—			117,661			25,078			—			142,739
Cash and cash equivalents, end of year	$	—		$	142,510		$	37,565		$	—		$	180,075

F-81

TARGA RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2006

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Intercompany Eliminations			Consolidated
Cash flows from operating activities
Net income (loss)	$	39,909		$	28,868		$	38,071		$	(66,939	)	$	39,909
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, amortization and accretion		—			5,661			43,392			—			49,053
Deferred income taxes		26,927			—			—			—			26,927
Equity in earnings of unconsolidated investments		—			(1,934	)		—			—			(1,934	)
Equity in earnings of subsidiaries		(66,939	)		—			—			66,939			—
Other		—			(21,733	)		1,439			—			(20,294	)
Changes in operating assets and liabilities:
Accounts receivable and other assets		—			(46,496	)		5,647			—			(40,849	)
Inventory		—			58,549			1,059			—			59,608
Accounts payable and other liabilities		103			70,406			(6,253	)		—			64,256
Net cash provided by operating activities		—			93,321			83,355			—			176,676
Cash flows from investing activities
Purchases of property and equipment		—			(52,010	)		(21,529	)		—			(73,539	)
Acquisition of DMS, net of cash acquired		—			(5,674	)		64			—			(5,610	)
Net cash used in investing activities		—			(57,684	)		(21,465	)		—			(79,149	)
Cash flows from financing activities
Senior secured credit facility:
Repayments		(6,250	)		—			—			—			(6,250	)
Receipts from (payments to) subsidiaries		6,898			40,714			(47,612	)		—			—
Costs incurred in connection with financing arrangements		(648	)		27,884			(27,884	)		—			(648	)
Net cash provided by (used in) financing activities		—			68,598			(75,496	)		—			(6,898	)
Net increase in cash and cash equivalents		—			104,235			(13,606	)		—			90,629
Cash and cash equivalents, beginning of year		—			9,624			31,803			—			41,427
Cash and cash equivalents, end of year	$	—		$	113,859		$	18,197		$	—		$	132,056

F-82

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors of ConocoPhillips

We have audited the accompanying combined balance sheets of the Midstream Operations sold to Targa Resources, Inc. (the “Midstream Operations”) as of April 15, 2004, December 31, 2003 and 2002, and the related combined statements of operations, parent company investment, and cash flows for the 106-day period ended April 15, 2004, and years ended December 31, 2003 and 2002. These financial statements are the responsibility of ConocoPhillips’ management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Midstream Operations’ internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Midstream Operations’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of the Midstream Operations sold to Targa Resources, Inc. at April 15, 2004, December 31, 2003 and 2002, and the combined results of its operations and its cash flows for the 106-day period ended April 15, 2004, and the years ended December 31, 2003 and 2002, in conformity with U.S. generally accepted accounting principles.

/s/    ERNST & YOUNG LLP

Houston, Texas

July 29, 2005

F-83

CONOCOPHILLIPS COMPANY’S

MIDSTREAM OPERATIONS SOLD TO TARGA RESOURCES, INC.

COMBINED STATEMENTS OF OPERATIONS

	Thousands of Dollars
	106-Day Period Ended April 15, 2004		Years Ended December 31,
			2003		2002
Revenues
Sales and other operating revenues	$	232,769	$	724,667	$	541,195
Total revenues		232,769		724,667		541,195
Costs and Expenses
Purchased products		212,306		665,357		479,682
Operating expenses		7,850		23,223		24,319
Selling, general and administrative expenses		757		3,289		3,281
Depreciation and amortization		3,833		12,866		9,791
Taxes other than income taxes		1,407		4,325		4,775
Other		—		4		52
Total Costs and Expenses		226,153		709,064		521,900
Income before income taxes		6,616		15,603		19,295
Provision for income taxes		2,567		6,062		7,475
Net Income	$	4,049	$	9,541	$	11,820

See Notes to Combined Financial Statements.

F-84

CONOCOPHILLIPS COMPANY’S

MIDSTREAM OPERATIONS SOLD TO TARGA RESOURCES, INC.

COMBINED BALANCE SHEETS

	Thousands of Dollars
	At April 15, 2004		At December 31,
			2003		2002
Assets
Cash and cash equivalents	$	—	$	—	$	—
Accounts receivable		20,985		44,718		14,398
Materials and supplies inventories		1,332		1,332		1,339
Prepaid expenses and other current assets		493		1,924		969
Total Current Assets		22,810		47,974		16,706
Net properties, plants and equipment		266,011		268,816		296,583
Total Assets	$	288,821	$	316,790	$	313,289
Liabilities
Accounts payable	$	27,477	$	48,756	$	47,260
Accrued income and other taxes		711		942		50
Other accruals and current liabilities		991		881		1,618
Total Current Liabilities		29,179		50,579		48,928
Accrued environmental costs		827		345		364
Deferred income taxes		87,954		88,602		94,443
Total Liabilities		117,960		139,526		143,735
Parent Company Investment
Parent company investment		170,861		177,264		169,554
Total	$	288,821	$	316,790	$	313,289

See Notes to Combined Financial Statements.

F-85

CONOCOPHILLIPS COMPANY’S

MIDSTREAM OPERATIONS SOLD TO TARGA RESOURCES, INC.

COMBINED STATEMENTS OF CASH FLOWS

	Thousands of Dollars
	106-Day Period Ended April 15, 2004			Years Ended December 31,
				2003			2002
Cash Flows From Operating Activities
Net income	$	4,049		$	9,541		$	11,820
Adjustments to reconcile net income to net cash provided by operating activities
Non-working capital adjustments
Depreciation and amortization		3,833			12,866			9,791
Deferred taxes		(648	)		880			1,366
Other		482			(19	)		364
Working capital adjustments
Decrease (increase) in accounts receivable		23,733			(30,320	)		4,238
Decrease in inventories		—			7			128
Decrease (increase) in prepaid expenses and other current assets		1,431			(955	)		917
Increase (decrease) in accounts payable		(21,279	)		1,496			13,834
Increase (decrease) in taxes and other accruals		(121	)		155			996
Net Cash Provided by Operating Activities		11,480			(6,349	)		43,454
Cash Flows From Investing Activities
Capital expenditures		(1,176	)		(2,413	)		(11,407	)
Net Cash Used in Investing Activities		(1,176	)		(2,413	)		(11,407	)
Cash Flows From Financing Activities
Net cash changes in parent company investment		(10,304	)		8,762			(32,047	)
Net Cash Used in Financing Activities		(10,304	)		8,762			(32,047	)
Net Change in Cash and Cash Equivalents		—			—			—
Cash and cash equivalents at beginning of year/period		—			—			—
Cash and Cash Equivalents at End of Year/Period	$	—		$	—		$	—

See Notes to Combined Financial Statements.

F-86

CONOCOPHILLIPS COMPANY’S

MIDSTREAM OPERATIONS SOLD TO TARGA RESOURCES, INC.

COMBINED STATEMENT OF PARENT COMPANY INVESTMENT

	Thousands of Dollars
Parent company investment at December 31, 2001	$	122,420
Net income		11,820
Net change in parent company advances		35,314
Parent company investment at December 31, 2002		169,554
Net income		9,541
Net change in distributions to parent company		(1,831	)
Parent company investment at December 31, 2003		177,264
Net income		4,049
Net change in distributions to parent company		(10,452	)
Parent company investment at April 15, 2004	$	170,861

See Notes to Combined Financial Statements.

F-87

CONOCOPHILLIPS COMPANY’S

MIDSTREAM OPERATIONS SOLD TO TARGA RESOURCES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

Note 1—Accounting Policies

• Basis of Financial Statements—These combined financial statements represent certain natural gas liquids operations of ConocoPhillips Company (the parent company) located in South Louisiana and the Permian Basin in West Texas (hereinafter collectively referred to as the Midstream Operations), which ConocoPhillips Company sold to Targa Resources, Inc., effective April 1, 2004. These operations are integrated gathering and processing systems that purchase raw natural gas from producers, which is gathered through pipeline gathering systems. The gathered natural gas is then processed to extract natural gas liquids from the raw gas stream and the remaining “residue” gas is marketed to electrical utilities, industrial users, and gas marketing companies. Most of the natural gas liquids are fractionated—separated into individual components like ethane, butane and propane—and marketed as chemical feedstock, fuel, or blendstock. These are sold to third parties, as well as to ConocoPhillips Company.

These financial statements are presented on a going-concern basis, as if these assets had existed as an entity separate from ConocoPhillips Company during the periods presented. These assets were not a separate legal entity during the periods presented. References to the Midstream Operations are to “ConocoPhillips Company, with respect to the midstream operations that it sold to Targa.” During the periods presented, ConocoPhillips Company charged the Midstream Operations a portion of its corporate support costs, including engineering, legal, treasury, planning, environmental, tax, auditing, information technology, and other corporate services, based on usage, actual costs or other allocation methods considered reasonable by ConocoPhillips Company management. Accordingly, expenses included in these financial statements may not be indicative of the level of expenses which might have been incurred had the Midstream Operations been operating as a separate stand-alone company.

ConocoPhillips Company is a wholly owned subsidiary of ConocoPhillips, a company incorporated in the state of Delaware on November 16, 2001, in connection with, and in anticipation of, the merger between Conoco Inc. (Conoco) and Phillips Petroleum Company (Phillips). The merger between Conoco and Phillips (the merger) was consummated on August 30, 2002, and Conoco and Phillips each became wholly owned subsidiaries of ConocoPhillips. For accounting purposes, Phillips was designated as the acquirer of Conoco and ConocoPhillips was treated as the successor of Phillips. Subsequent to the merger, Phillips was renamed ConocoPhillips Company. Before the merger, the Midstream Operations were owned by Conoco. As a result of the merger and the subsequent allocation of the purchase price to specific assets and liabilities, the recorded book value of the Midstream Operations was re-measured to fair value as of August 30, 2002.

• Revenue Recognition—Revenues associated with sales of natural gas, natural gas liquids, and other items are recorded when title passes to the customer, which is when the risk of ownership passes to the purchaser and physical delivery of goods occurs, which is generally at the tailgate of the processing plant. Midstream Operations uses commodity derivative instruments, such as swaps and futures, in various markets to effectively convert fixed-price contracts to a floating price. See Note 1—Accounting Policies—Derivative Instruments, for additional information on the accounting for, and reporting of, commodity derivatives contracts.

• Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities. Actual results could differ from the estimates and assumptions used.

• Parent Company Investment—The parent company investment included in the balance sheet represents the net balances resulting from various transactions between the Midstream Operations and

F-88

CONOCOPHILLIPS COMPANY’S

MIDSTREAM OPERATIONS SOLD TO TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

ConocoPhillips Company. There were no terms of settlement or interest charges associated with the account balance. The balance included the Midstream Operations’ participation in ConocoPhillips Company’s central cash management program. The Midstream Operations’ cash receipts were remitted to, and its cash disbursements were funded by, ConocoPhillips Company. Other transactions included product purchases from, and sales to, the parent company; the Midstream Operations’ share of the current portion of ConocoPhillips Company’s consolidated income tax liability; and other administrative and support expenses incurred by ConocoPhillips Company and allocated or charged to the Midstream Operations.

• Inventories—Materials and supplies are valued at average cost.

• Derivative Instruments—All derivative instruments are recorded on the balance sheet at fair value in either prepaid expenses and other current assets or other accruals and current liabilities. Recognition of the gain or loss that results from recording and adjusting a derivative to fair value depends on the purpose for issuing or holding the derivative. Gains and losses from derivatives that are not accounted for as hedges under Statement of Financial Accounting Standard (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” are recognized immediately in earnings. In the combined statement of operations, gains and losses from derivatives are recorded in sales and other operating revenues.

• Properties, Plants and Equipment—Properties, plants and equipment are recorded at cost except when re-measured to fair-value in a merger.

• Depreciation and Amortization—Depreciation and amortization is determined by the group-straight-line method over a 20-year to 22-year useful life. Prior to August 30, 2002, properties, plants and equipment were depreciated over a 25-year useful life.

• Impairment of Properties, Plants and Equipment—Properties, plants and equipment used in operations are assessed for impairment whenever changes in facts and circumstances indicate a possible significant deterioration in the future cash flows expected to be generated by an asset group. If, upon review, the sum of the undiscounted pretax cash flows is less than the carrying value of the asset group, the carrying value is written down to estimated fair value through additional amortization or depreciation provisions and reported as Property Impairments in the periods in which the determination of impairment is made. Individual assets are grouped for impairment purposes at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. The fair value of impaired assets is determined based on quoted market prices in active markets, if available, or upon the present values of expected future cash flows using discount rates commensurate with the risks involved in the asset group. Long-lived assets committed by management for disposal within one year are accounted for at the lower of amortized cost or fair value, less cost to sell. In assessing impairment and applying the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” management considered the Midstream Operations as a going concern and separate reporting entity. Therefore, considerations related to ConocoPhillips Company’s intentions to dispose of these operations are not reflected in these statements. However, as described in Note 3, ConocoPhillips Company incurred an impairment charge on its investment in the Midstream Operations.

The expected future cash flows used for impairment reviews and related net realizable value calculations are based on production volumes, prices and costs, considering all available evidence at the date of the review.

F-89

CONOCOPHILLIPS COMPANY’S

MIDSTREAM OPERATIONS SOLD TO TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

• Maintenance and Repairs—The costs of maintenance and repairs, which are not significant improvements, are expensed when incurred.

• Environmental Costs—Environmental expenditures are expensed or capitalized as appropriate, depending upon their future economic benefit. Expenditures that relate to an existing condition caused by past operations and that do not have future economic benefit are expensed. Liabilities for these expenditures are recorded on an undiscounted basis (unless acquired in a purchase business acquisition such as the merger) when environmental assessments or cleanups are probable and the costs can be reasonably estimated. Since the Midstream Operations were acquired by ConocoPhillips Company in the merger of Conoco and Phillips, the majority of its environmental liabilities are recorded on a discounted basis. Recoveries of environmental remediation costs from other parties, such as state reimbursement funds, are recorded as assets when their receipt is probable.

• Income Taxes—The Midstream Operations’ results of operations are included in the consolidated U.S. federal and state income tax returns of ConocoPhillips. Deferred taxes are provided on all temporary differences between the financial-reporting basis and the tax basis of the Midstream Operations’ assets and liabilities. Income tax expense or benefit represents Midstream Operations, on a separate-return basis, using the same principles and elections used in ConocoPhillips’ consolidated return. Any resulting current tax liability or refund is settled with the parent company on a current basis.

Note 2—Related-Party Transactions

Significant transactions with related parties were:

	Thousands of Dollars
	106-Day Period Ended April 15, 2004		Years Ended December 31,
			2003		2002
Sales and other operating revenues(a)	$	112,706	$	557,977	$	322,264
Purchased products(b)		23,667		100,409		20,252
Selling, general and administrative expenses(c)		752		3,196		3,242

(a) The Midstream Operations sold natural gas and natural gas liquids to ConocoPhillips Company for re-marketing to third parties, at prices that approximate market.

(b) The Midstream Operations purchased natural gas feedstocks for its processing plants from ConocoPhillips Company, at prices that approximate market.

(c) ConocoPhillips Company charged the Midstream Operations a portion of its corporate support costs, including engineering, legal, treasury, planning, environmental, tax, auditing, information technology, research and development, and other corporate services, based on usage, actual costs, or other allocation methods considered reasonable by ConocoPhillips Company’s management.

Inventory profit-or-loss-elimination amounts at April 15, 2004, and December 31, 2003 and 2002, on purchases from, and sales to, related parties were not material.

F-90

CONOCOPHILLIPS COMPANY’S

MIDSTREAM OPERATIONS SOLD TO TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 3—Properties, Plants and Equipment

The Midstream Operations’ investment in properties, plants and equipment, with accumulated depreciation and amortization, at balance-sheet date was:

	Thousands of Dollars
	At April 15, 2004			At December 31,
				2003			2002
Processing plants	$	107,308		$	106,869		$	106,203
Pipelines		178,208			178,347			194,430
Gross properties, plants and equipment		285,516			285,216			300,633
Accumulated depreciation and amortization		(19,505	)		(16,400	)		(4,050	)
Net properties, plants and equipment	$	266,011		$	268,816		$	296,583

Properties, plants and equipment consist primarily of processing plant and pipeline assets, which are depreciated on estimated useful lives of 20 to 22 years. At the end of August 2002, in conjunction with the merger, the Midstream Operations’ properties, plants and equipment were re-measured to fair value. As part of this, the useful lives of the plants changed from 25 years to 20 years for Louisiana and to 22 years for the plants in West Texas. At December 31, 2002, properties, plants and equipment included $17,300,000 for certain pipeline assets in West Texas that the U.S. Federal Trade Commission required ConocoPhillips Company to sell as a condition of the merger. These pipelines were transferred to the parent company in 2003 as part of a sales transaction. Because these assets were an integrated part of the operating units sold to Targa, that transaction has been reflected in these financial statements.

In 2004, ConocoPhillips Company incurred a $24,141,000 impairment to write down to net realizable value the properties, plants and equipment planned to be sold to Targa Resources, Inc.

Note 4—Accrued Environmental Costs and Asset Retirement Obligations

Midstream Operations had environmental costs of $1,055,207, $428,694, and $415,521 accrued at April 15, 2004; December 31, 2003; and December 31, 2002, respectively. Of the total accrued at April 15, 2004, and December 31, 2003 and 2002, $227,988, $83,851 and $51,829, respectively, were classified as short-term on the combined balance sheet. Based on analyses of available information and previous experience with respect to remediation sites, it is reasonably possible that the costs associated with these sites could exceed current accruals by amounts that may not be material but that could range up to $3,000,000, in aggregate.

Because the Midstream Operations were acquired by ConocoPhillips Company in the merger of Conoco and Phillips, the majority of its environmental liabilities are recorded on a discounted basis. Expected expenditures for acquired environmental obligations are discounted using a 5 percent discount factor, resulting in an accrued balance for acquired environmental liabilities of $380,205 at April 15, 2004. The expected future undiscounted payments related to the portion of the accrued environmental costs that have been discounted are: $69,000 in 2004, $50,000 in 2005, $30,000 in 2006, $10,000 in 2007, $10,000 in 2008, $10,000 in 2009, and $294,000 for all future years after 2009.

Effective January 1, 2003, Midstream Operations adopted SFAS No. 143, “Accounting for Asset Retirement Obligations,” which applies to legal obligations associated with the retirement and removal of long-lived assets. SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the

F-91

CONOCOPHILLIPS COMPANY’S

MIDSTREAM OPERATIONS SOLD TO TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

period when it is incurred (typically when the asset is installed at the production location). When the liability is initially recorded, an entity capitalizes the cost by increasing the carrying amount of the related properties, plants and equipment. Over time, the liability is increased for the change in its present value, and the initial capitalized cost in properties, plants and equipment is depreciated over the useful life of the related asset.

Midstream Operations facilities, such as plants and office buildings, are not presently subject to any legal requirements to remove these facilities and so are not within the scope of SFAS No. 143. Consequently, application of this new accounting standard did not result in an increase in net properties, plants and equipment or impact net income.

Note 5—Contingencies

In the case of all known contingencies, the Midstream Operations accrue an undiscounted liability when the loss is probable and the amount is reasonably estimable. These liabilities are not reduced for potential insurance recoveries. If applicable, undiscounted receivables are accrued for probable insurance or other third-party recoveries. Based on information available at the time of the preparation of these financial statements, the management of ConocoPhillips Company believed that it was remote that future costs related to known contingent liability exposures would exceed accruals by an amount that would have a material adverse impact on the financial statements of the Midstream Operations.

As facts concerning contingencies become known, the Midstream Operations reassesses its position, both with respect to accrued liabilities and other potential exposures. Estimates that are particularly sensitive to future change include contingent liabilities recorded for environmental remediation and legal matters. Estimated future environmental remediation costs are subject to change due to such factors as the unknown magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of liability in proportion to other responsible parties. Estimated future costs related to legal matters are subject to change as events evolve, and as additional information becomes available during the administrative and litigation process.

Environmental—The Midstream Operations are subject to federal, state and local environmental laws and regulations. These may result in obligations to remove or mitigate the effects on the environment of the placement, storage, disposal or release of certain chemical, mineral and petroleum substances at various sites.

Other Legal Proceedings—The Midstream Operations are a party to a number of other legal proceedings pending in various courts or agencies for which, in some instances, no provision has been made.

Note 6—Financial Instruments and Derivative Contracts

Derivative Instruments

Commodity Derivative Contracts—Midstream Operations operates in the U.S. natural gas and natural gas liquids markets and are exposed to fluctuations in the prices for these commodities. These fluctuations can affect revenues, as well as the cost of operating, investing, and financing activities. Generally, the Midstream Operations’ policy is to remain exposed to market prices of commodity purchases and sales. Consistent with this policy, Midstream Operations uses commodity derivative instruments, with the assistance of ConocoPhillips Company’s Commercial organization, to convert fixed-price sales contracts, which are often requested by natural gas consumers, to a floating market price.

SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (Statement No. 133 or SFAS No. 133), requires companies to recognize all derivative instruments as either assets or

F-92

CONOCOPHILLIPS COMPANY’S

MIDSTREAM OPERATIONS SOLD TO TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

liabilities on the balance sheet at fair value. Assets and liabilities resulting from derivative contracts open at each balance sheet date appear as prepaid expenses and other current assets or other accruals and current liabilities on the combined balance sheet.

The accounting for changes in fair value (i.e., gains or losses) of a derivative instrument depends on whether it meets the qualifications for, and has been designated as, a SFAS No. 133 hedge, and the type of hedge. At April 15, 2004, ConocoPhillips Company was not using SFAS No. 133 hedge accounting for commodity derivative contracts. All gains and losses, realized or unrealized, from the Midstream Operations’ swaps and futures have been recognized in the combined statement of operations.

SFAS No. 133 also requires purchase and sales contracts for commodities that are readily convertible to cash (e.g., natural gas) to be recorded on the combined balance sheet as derivatives unless the contracts are for quantities expected to be used or sold over a reasonable period in the normal course of business (the normal purchases and normal sales exception), among other requirements, and ConocoPhillips Company has documented its intent to apply this exception. If the exception had not been applied, both the purchase or sales contract and the derivative contract mitigating the resulting risk will be recorded on the combined balance sheet at fair value in accordance with the preceding paragraphs.

Fair Values of Financial Instruments

The Midstream Operations used the following methods and assumptions to estimate the fair value of its financial instruments:

• Accounts receivable. The carrying amount reported on the combined balance sheet approximates fair value.

• Futures. Fair values are based on quoted market prices obtained form the New York Mercantile Exchange, the International Petroleum Exchange of London Limited, or other traded exchanges.

• Swaps. Fair value is estimated based on forward market prices and approximates the net gains and losses that would have been realized if the contracts had been closed out at balance-sheet date. When forward market prices are not available, they are estimated using the forward prices of a similar commodity with adjustments for differences in quality or location.

The Midstream Operations’ financial instruments at balance sheet date were:

	Thousands of Dollars
	Carrying Amount						Fair Value
	At April 15, 2004		At December 31,				At April 15, 2004		At December 31,
			2003		2002				2003		2002
Financial assets
Commodity derivatives	$	452	$	1,193	$	811	$	452	$	1,193	$	811
Financial liabilities
Commodity derivatives		763		797		1,566		763		797		1,566

Note 7—Financial Instruments and Credit Risk

The Midstream Operations’ financial instruments that were exposed to concentrations of credit risk consisted primarily of third-party trade receivables, which reflected a broad customer base, and over-the-counter derivative contracts, such as swaps, in which the credit risk derived from the counterparty to the transaction.

F-93

CONOCOPHILLIPS COMPANY’S

MIDSTREAM OPERATIONS SOLD TO TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

ConocoPhillips Company’s management closely monitored these exposures against predetermined credit limits, including the continual exposure adjustments that resulted from market movements. Individual counterparty exposure was managed within these limits, and included the use of cash-call margins when appropriate, thereby reducing the risk of significant non-performance. The Midstream Operations also used futures contracts, but futures have a negligible credit risk because they are traded on the New York Mercantile Exchange.

Note 8—Employee Benefit Plans

The employees of the Midstream Operations were included in the various employee benefit plans of ConocoPhillips Company. These plans included retirement and savings plans, and employee and retiree medical, dental and life insurance plans, and other such benefits. For the purpose of these separate financial statements, the Midstream Operations were considered as if participating in multi-employer benefit plans. Its share of allocated parent company employee benefit plan expenses was $1,047,000, $3,047,000, and $2,386,000 for the periods ended April 15, 2004; December 31, 2003; and December 31, 2002, respectively.

Note 9—Taxes

Taxes charged (credited) to income were:

	Thousands of Dollars
	106-Day Period Ended April 15, 2004			Years Ended December 31,
				2003		2002
Taxes Other Than Income Taxes
Property	$	691		$	3,014	$	3,805
Payroll		182			611		589
Franchise		479			480		303
Other		55			220		78
	$	1,407		$	4,325	$	4,775
Income Taxes
Federal
Current	$	2,733		$	4,392	$	5,202
Deferred		(553	)		746		1,164
State and local
Current		482			790		907
Deferred		(95	)		134		202
	$	2,567		$	6,062	$	7,475

F-94

CONOCOPHILLIPS COMPANY’S

MIDSTREAM OPERATIONS SOLD TO TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Major components of deferred tax liabilities and assets were:

	Thousands of Dollars
	At April 15, 2004		At December 31,
			2003		2002
Deferred Tax Liabilities
Properties, plants and equipment	$	93,022	$	93,236	$	99,787
Derivatives		—		139		—
Total deferred tax liabilities		93,022		93,375		99,787
Deferred Tax Assets
Deferred state income tax		4,590		4,623		4,935
Derivatives		109		—		264
Accrued environmental costs		369		150		145
Total deferred tax assets		5,068		4,773		5,344
Net deferred tax liabilities	$	87,954	$	88,602	$	94,443

The purchase price allocation for the merger resulted in deferred tax liabilities of $42,444,000 related to the step up in value of properties, plants and equipment and the establishment of environmental liabilities at August 30, 2002.

The amounts of U.S. income before income taxes, with a reconciliation of tax at the federal statutory rate with the provision for income taxes, were:

	Thousands of Dollars						Percent of Pretax Income
	106-Day Period Ended April 15, 2004		Years Ended December 31,				106-Day Period Ended April 15, 2004	Years Ended December 31,
			2003		2002			2003	2002
United States income before income taxes	$	6,616	$	15,603	$	19,295	100.0	100.0	100.0
Federal statutory income tax	$	2,316		5,461		6,754	35.0	35.0	35.0
State income tax		251		601		721	3.8	3.9	3.7
	$	2,567	$	6,062	$	7,475	38.8	38.9	38.7

F-95

CONOCOPHILLIPS COMPANY’S

MIDSTREAM OPERATIONS SOLD TO TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 10—Cash Flow Information

	Thousands of Dollars
	106-Day Period Ended April 15, 2004		Years Ended December 31,
			2003			2002
Non-Cash Investing and Financing Activities
Distribution of non-cash assets to parent company	$	148	$	10,593	*	$	—
Contribution of non-cash assets by parent company		—		—			304
Revaluation of assets in conjunction with the merger of Conoco and Phillips		—		—			67,057	**
Cash Payments
Income taxes***		3,215		5,182			6,109

* Net of deferred taxes of $6,721,000.

** Net of deferred taxes of $42,444,000.

*** Amount paid to parent company for income taxes.

F-96

Report of Independent Registered Public Accounting Firm

To the Partners of

Dynegy Midstream Services, Limited Partnership:

In our opinion, the accompanying consolidated statements of operations, of changes in partners’ capital, and of cash flows present fairly, in all material respects, the results of operations and cash flows of Dynegy Midstream Services, Limited Partnership and its subsidiaries for the ten months ended October 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 8 to the Consolidated Financial Statements, the Partnership has engaged in significant transactions with Dynegy Inc. and its subsidiaries and ChevronTexaco Corporation and its affiliates, related parties.

/s/    PricewaterhouseCoopers LLP

Houston, Texas

October 30, 2007

F-97

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

CONSOLIDATED STATEMENT OF OPERATIONS

(in millions)

	Ten Months Ended October 31, 2005
Revenues from third parties	$	2,080
Revenues from affiliates		1,508
Total revenues		3,588
Cost of sales, exclusive of depreciation shown separately below		3,317
Depreciation expense		64
Gain on sale of assets, net		(10	)
General and administrative expenses		50
Operating income		167
Losses from unconsolidated investments		(20	)
Other income, net		16
Minority interest expense		(24	)
Net income	$	139
Comprehensive income	$	139

See notes to consolidated financial statements.

F-98

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

	Ten Months Ended October 31, 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	139
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		62
Accretion expense		1
Impairment charge		65
Losses from unconsolidated investments, net of cash distributions		26
Risk-management activities		(1	)
Gain on sale of assets, net		(10	)
Income attributable to minority interest holders		24
Changes in working capital:
Accounts receivable, net		(132	)
Inventory		(77	)
Prepayments and other assets		35
Accounts payable and accrued liabilities		124
Changes in non-current liabilities		(8	)
Non-cash settlement of transactions with Dynegy (See Notes 1 and 8)		(150	)
Net cash provided by operating activities		98
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(45	)
Proceeds from asset sales, net		11
Net cash used in investing activities		(34	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners, net		(45	)
Distributions to minority interest holders		(25	)
Net cash used in financing activities		(70	)
Net decrease in cash and cash equivalents		(6	)
Cash and cash equivalents, beginning of period		17
Cash and cash equivalents, end of period	$	11

See notes to consolidated financial statements.

F-99

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS’ CAPITAL

(in millions)

	Limited Partner			General Partner			Total
Partners’ Capital, December 31, 2004	$	1,252		$	44		$	1,296
Net income		134			5			139
Cash distributions to Dynegy		(44	)		(2	)		(46	)
Settlement of transactions with Dynegy (See Notes 1 and 8)		(145	)		(5	)		(150	)
Partners’ Capital, October 31, 2005	$	1,197		$	42		$	1,239

See notes to consolidated financial statements.

F-100

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Nature of Business and Basis of Presentation

Nature of Business. Dynegy Midstream Services, Limited Partnership (“DMS”, “we”, “us”, “our”) is owned by Dynegy Midstream G.P., Inc. and Dynegy Midstream Holdings, Inc., which are each indirect, wholly owned subsidiaries of Dynegy, Inc. (“Dynegy”). Our business operations consist of natural gas gathering and processing, fractionating, storing, terminalling, transporting, distributing and marketing of natural gas liquids.

Basis of Presentation. Effective November 1, 2005, DMS was acquired by Targa Resources, Inc. (“Targa”). The accompanying financial statements were prepared for the purpose of complying with Rule 3-05 of Regulation S-X of the Securities and Exchange Commission and have been included in the Registration Statement on Form S-4 of Targa.

Throughout the period covered by these financial statements, Dynegy has provided cash management services to us through a centralized treasury system whereby excess cash from most of its subsidiaries, held in separate subsidiary bank accounts, is swept to a centralized account managed by Dynegy treasury services. Our cash distributions to Dynegy are deemed to have occurred through the general and limited partner in accordance with our partnership agreement, and are reflected as an adjustment to partners’ capital.

We routinely conduct business with other subsidiaries of Dynegy that are not a part of this consolidated group. Such transactions primarily result from sales and purchases of natural gas and natural gas liquids. These transactions with Dynegy are not settled in cash. Instead, they are settled through adjustments to our partners’ capital and are not included in our operating cash flows.

Also, our consolidated financial statements include costs allocated to us by Dynegy for centralized general and administrative services performed by Dynegy on our behalf, as well as depreciation of assets utilized by such centralized Dynegy general and administrative functions. These transactions with Dynegy are not settled in cash. Instead, they are settled through adjustments to our partners’ capital and are not included in our operating cash flows.

As a result, operating cash flows, as reported, are not necessarily indicative of the operating cash flows that would have resulted if we had been operated as a separate entity. Were such transactions conducted with third parties and/or settled in cash, the effect on our consolidated financial statements, particularly on our operating cash flows, could be significant. Please see Note 8—Related Party Transactions for further information.

Note 2—Accounting Policies

Our accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”). Our most significant accounting policies are described below. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect our reported financial position and results of operations. We review significant estimates and judgments affecting our consolidated financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Estimates and judgments are based on information available at the time such estimates and judgments are made. Adjustments made with respect to the use of these estimates and judgments often relate to information not previously available. Uncertainties with respect to such estimates and judgments are inherent in the preparation of financial statements. Estimates and judgments are used in, among other things, (1) developing fair value assumptions, including estimates of future cash flows and discount rates, (2) analyzing tangible and intangible assets for possible impairment, (3) estimating the useful lives of our assets and (4) determining amounts to accrue for contingencies, guarantees and indemnifications. Actual results could differ materially from our estimates.

F-101

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Principles of Consolidation. The accompanying consolidated financial statements include our accounts and the accounts of our majority-owned or controlled subsidiaries and our proportionate share of assets, liabilities, revenues and expenses of undivided interests in certain gas processing facilities. Intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents. Cash and cash equivalents consist of all demand deposits and funds invested in highly liquid short-term investments with original maturities of three months or less.

Allowance for Doubtful Accounts. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We review our doubtful accounts regularly. Past due balances over 60 days, and over a specified amount, are reviewed individually for collectibility. Account balances are charged off against the allowance when we feel it is probable the receivable will not be collected. We review collectibility and establish or adjust our allowance as necessary, primarily utilizing methodologies involving historical levels of write-offs. The specific identification method is also used in certain circumstances. We do not have any off-balance sheet credit exposure related to our customers.

Investment in Unconsolidated Affiliates. Investments in affiliates over which we exercise significant influence, generally occurring in ownership interests of 20% to 50%, and also occurring in lesser ownership percentages due to voting rights or other factors, are accounted for using the equity method. Our share of net income (loss) from these affiliates is reflected in the consolidated statement of operations as earnings (losses) from unconsolidated investments. Any excess of our investment in affiliates, as compared to our share of the underlying equity that is not recognized as goodwill, is amortized over the estimated economic service lives of the underlying assets. All investments in unconsolidated affiliates are periodically assessed for other-than-temporary declines in value, with write-downs recognized in earnings (losses) from unconsolidated investments in the consolidated statement of operations, if applicable.

Inventory. Our inventory consists primarily of natural gas and natural gas liquids valued at the lower of weighted average cost or at market

Property, Plant and Equipment. Property, plant and equipment, which consists principally of gas gathering, processing, fractionation, terminalling and storage facilities and natural gas transportation lines is recorded at historical cost. Expenditures for major replacements, renewals and major maintenance are capitalized. We consider major maintenance to be expenditures incurred on a cyclical basis to maintain and prolong the efficient operation of our assets. Expenditures for repairs and minor renewals to maintain assets in operating condition are expensed. Depreciation is provided using the straight-line method over the estimated economic service lives of the assets, ranging from 3 to 25 years. Composite depreciation rates (which we refer to as composite rates) are applied to functional groups of assets having similar economic characteristics. The estimated economic service lives of our functional asset groups are as follows:

Asset Group	Range of Years
Natural gas gathering systems and processing facilities	15 to 25
Fractionation, terminalling and natural gas liquids storage facilities	15 to 25
Transportation equipment and barges	5 to 10
Office and miscellaneous equipment	3 to 7

Gains and losses are not recognized for retirements of property, plant and equipment subject to composite rates until the asset group subject to the composite rate is retired. Gains and losses on sales of individual assets

F-102

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

are reflected in gain (loss) on sale of assets, net in the consolidated statement of operations. We assess the carrying value of our property, plant and equipment in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). If an impairment has occurred, the amount of the impairment loss recognized would be determined by estimating the related discounted cash flows of the assets and recording a loss if the resulting estimated fair value is less than the book value. For assets identified as held for sale, the book value is compared to comparable market prices, or the estimated fair value if comparable market prices are not readily available, to determine if an impairment loss is required.

Goodwill and Other Intangible Assets. Goodwill represents, at the time of an acquisition, the amount of purchase price paid in excess of the fair value of net assets acquired. We follow the guidance set forth in SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), when assessing the carrying value of our goodwill. Accordingly, we evaluate our goodwill for impairment on an annual basis and when events warrant an assessment. Our evaluation is based, in part, on our estimate of future cash flows. The estimation of fair value is highly subjective, inherently imprecise and can change materially from period to period based on, among other things, an assessment of market conditions, projected cash flows and discount rate. We perform our annual impairment test in the fourth quarter after our annual budgetary process, and we may record impairment charges in future periods as a result of such test. We have $4 million of goodwill attributable to our Marketing Assets segment and $11 million of goodwill attributable to our Gas Gathering and Processing segment. During the ten months ended October 31, 2005, there was no change in our $15 million carrying amount of goodwill.

Income Taxes. As a partnership, we are not subject to federal income tax. We are subject to income taxes in the states of Texas and Tennessee through certain of our subsidiaries. However, historically, any state income tax on the partnership has been immaterial. The taxable income or loss resulting from our operations will ultimately be included in the federal and state income tax returns of the partners.

Revenue Recognition. Our segments consist largely of the ownership and operation of physical assets that we use in various natural gas processing operations and natural gas liquids fractionation, storage and terminalling and delivery operations. The business of these segments includes natural gas gathering and processing, separation of natural gas liquids into their component parts from a commingled stream of light liquid hydrocarbons and the transportation and delivery of natural gas liquids through gas liquids pipelines, transport tractors and tank trailers, our LPG barge fleet and railcars that we manage pursuant to a services agreement with ChevronTexaco Corporation and its affiliates (“ChevronTexaco”). End sales from these businesses result in physical delivery of natural gas residue and natural gas liquids to our wholesale and industrial customers. We recognize revenue from these transactions when the product or service is delivered to a customer. We also provide natural gas liquids storage and terminalling services for a fee.

Minority Interest. Minority interest includes third-party investments in entities that we consolidate, but do not wholly own. The net results attributed to minority interest holders in consolidated entities are included in minority interest expense in the consolidated statements of operations.

Accounting Principles Not Yet Adopted

SFAS No. 153. In December 2004, the FASB issued SFAS No. 153, “ Exchanges of Nonmonetary Assets—An Amendment of APB Opinion No. 29.” The guidance in APB Opinion No. 29, “ Accounting for Nonmonetary Transactions” , is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. SFAS No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of

F-103

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Early application is permitted and companies must apply the standard prospectively. The adoption of this standard did not have a material effect on our results of operations, financial position or cash flows.

SFAS No. 154. In May 2005, the Financial Accounting Standards Board issued SFAS No. 154, “ Accounting Changes and Error Corrections—A Replacement of APB Opinion No. 20 and SFAS No. 3”. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of SFAS No. 154 are effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The adoption of this standard did not have a material effect on our results of operations, financial position or cash flows.

EITF Issue 05-6. In June 2005, the EITF reached consensus on Issue No. 05-6, “Determining the Amortization Period for Leasehold Improvements”. EITF Issue 05-6 provides guidance on determining the amortization period for leasehold improvements acquired in a business combination or acquired subsequent to lease inception. The guidance in EITF Issue 05-6 will be applied prospectively and is effective for periods beginning after June 29, 2005. The adoption of this standard did not have a material effect on our results of operations, financial position or cash flows.

FIN 48. In June 2006 the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We adopted the provisions of FIN 48 on January 1, 2007. Based on our evaluation, we have determined that there are no significant uncertain tax positions requiring recognition in our financial statements at June 30, 2007. There are no unrecognized tax benefits that, if recognized, would affect the effective rate, and there are no unrecognized tax benefits that are reasonably expected to increase or decrease in the next twelve months.

SFAS No. 157. In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS 157 does not require any new fair value measurements. However, for some entities, the application of SFAS 157 will change current practice. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We have not yet determined the impact this statement will have on our results of operations or financial position.

SFAS No. 159. In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115,” which is effective for fiscal years beginning after November 15, 2007, with early adoption permitted. SFAS 159 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. We are currently reviewing this new accounting standard and the impact, if any, it will have on our financial statements.

F-104

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 3—Hurricanes Katrina and Rita

Certain of our Louisiana and Texas assets sustained damage during 2005 from two Gulf Coast Hurricanes—Katrina and Rita. The estimated cost of damages to our facilities is expected to approximate $101 million, which includes anticipated replacement, repair, and cleanup costs based upon current estimates. Of this estimated loss, $25 million is included in losses from unconsolidated investments in the Consolidated Statement of Operations for the ten months ended October 31, 2005. An additional $65 million loss is included in Other income, net. Insurance recoveries related to the hurricane damages estimated to be $81 million were also included in Other income, net .

The table below summarizes the following information for our operated facilities where we sustained property damage: our ownership percentage, the actual or estimated date when the facility resumed or will resume full operation and our share of the estimated repair costs (for which we have filed or will file property damage insurance claims).

Facility	% Owned	Actual or Estimated Date for Full Facility Resumption	(in millions) Est. Cost of Repairs
Venice	22.9	4th Qtr. 2006	$	36.1
Yscloskey	23.8	Early 2nd Qtr 2006		13.3
Hattiesburg	50.0	Sept 2005		0.2
Pelican Offshore Pipeline and Platform	100.0	Jan 2006		24.7
Stingray	100.0	Mar 2006		11.7
Barracuda	100.0	Feb 2006		10.8
Lake Charles Frac/Hackberry Storage	100.0	Oct 2005		1.4
Seahawk Offshore Pipeline	100.0	Oct 2005		0.9
Lowry	100.0	Oct 2005		0.3
Mt. Belvieu/Galena Park	100.0	Oct 2005		0.5

The following table contains similar information for non-operated facilities affected by the hurricanes, where the impact on us for business interruption claims for non-operated facilities is anticipated to be more significant than for property damage claims.

Facility	% Owned	Plant Operator	Actual or Estimated Date for Full Facility Resumption
Toca	9.4	Enterprise	Dec 2005
Calumet	37.2	Enterprise	Oct 2005
Terrebone	11.4	Enterprise	Oct 2005
Bluewater	21.8	ExxonMobil	Oct 2005
Iowa	9.9	Duke	Oct 2005
Sea Robin	0.8	Hess	Early 2nd Qtr 2006
Gulf Coast Fractionator	38.8	ConocoPhillips	Oct 2005

The total estimated cost of repairs associated with the non-operated facilities is $1.3 million, with Toca accounting for $1.0 million of the total. We are filing business interruption claims for the facilities included in the tables above and for other operated assets where there was no significant property damage (such as the Cedar Bayou Fractionator). We will also file contingent business interruption claims resulting from the hurricane damage to third-party facilities including the Pascagoula and Alliance Refineries, and the Grand Cheniere Plant (which BP p.l.c. has decided not to repair) and offshore production facilities. The most significant business interruption impact was from Hurricane Katrina, resulting in material losses in Louisiana at the Venice Complex, the Yscloskey Plant, the Toca Plant, and other plants. In addition to negatively impacted direct plant profits, the associated business interruption losses also affected liquids marketing profits, wholesale/transportation profits and caused us to incur additional expenses to meet commercial obligations under existing contracts.

F-105

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We believe we have adequate insurance coverage to cover the facility repair costs and to offset the majority of the associated lost profits as a result of the hurricanes. The property damage insurance coverage has a $1 million (100%) per onshore occurrence deductible and a $250,000 per offshore occurrence deductible associated with each respective hurricane claim. These deductibles will reduce our ultimate property damage insurance recoveries by approximately $1.5 million.

With the exception of the Venice Complex, where funds are paid from a joint account with a cash call mechanism where we contribute our ownership share, we are currently funding the cost of repair for the facilities we operate and expect to be reimbursed by our partners for their share of costs under the normal joint interest billing process. We expect to be reimbursed under our property insurance coverage for our portion of repair costs. For the non-operated facilities, we are funding our share through joint interest billings from the facility operator and expect to be reimbursed by our insurance coverage.

Note 4—Dispositions

Sale of Land. On September 9, 2005, we sold a tract of land at our Port Everglades, Florida terminal for approximately $11 million in cash. As a result, we recognized a gain of approximately $10 million in the third quarter of 2005 in our Marketing Assets segment. The gain is included in Gain on sale of assets, net in our consolidated statements of operations.

Note 5—Risk Management Activities

Our operations are impacted by several factors, some of which may not be mitigated by risk management methods. These risks include, but are not limited to, commodity price, weather patterns, counterparty credit risks, changes in competition, operational risks, environmental risks and changes in regulations.

Market Risk. We define market risk as changes to our earnings and cash flows resulting from changes in market conditions, including changes in commodity prices, as well as the impact of volatility and market liquidity on such prices. We manage market risk through diversification, controlling position sizes and executing hedging strategies. Our hedging activity for the ten months ended October 31, 2005 was immaterial.

Note 6—Asset Retirement Obligations

We follow SFAS No. 143, “Asset Retirement Obligations” (“SFAS No. 143”) to account for our legal obligations (including those obligations conditioned upon events that may not be within our control) to retire tangible, long-lived assets. Under the provisions of SFAS No. 143, we are required to record the obligations as liabilities on our balance sheet at a discount when incurred. The fair value of the remediation and pipeline abandonment costs estimated to be required upon retirement or abandonment of our assets was included in the asset retirement obligation (“ARO”) and was recorded upon adoption of SFAS No. 143. Changes are recognized when obligations are incurred or settled and when the fair value of the obligation changes due to revisions in estimates and passage of time. Significant judgment is involved in estimating future cash flows associated with such obligations, as well as the ultimate timing of the cash flows. If our estimates of the amount or timing of the cash flow change, the change may have a material impact on our results of operations.

In addition to these ARO’s, we also have potential retirement obligations for dismantlement of a fractionation facility and natural gas liquids storage facilities. Our current intent is to maintain these facilities in a manner such that they will be operated indefinitely. As such, we cannot estimate potential retirement obligations associated with these assets at this time. Liabilities will be recorded in accordance with SFAS No. 143 at the time we are able to estimate the obligations.

F-106

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Our ARO’s relate to activities such as closure and post-closure costs, environmental testing, remediation, monitoring and land and equipment lease obligations. A summary, in millions, of changes is as follows:

Balance at December 31, 2004	$	10
Obligations incurred		—
Obligations settled		—
Revision in estimates (included in cost of sales)		1
Accretion expense (included in cost of sales)		1
Balance at October 31, 2005	$	12

Note 7—Unconsolidated Investments

Our unconsolidated investments consist primarily of investments in affiliates that we do not control, but where we have significant influence over operations. Our principal equity method investments consist of entities that operate natural gas liquids assets. We entered into these ventures principally to share risk and leverage existing commercial relationships. These ventures maintain independent capital structures and have financed their operations either on a non-recourse basis to us or through their ongoing commercial activities.

At October 31, 2005, our investments included a 22.9% ownership interest in Venice Energy Services Company, L.L.C. (“VESCO”), a venture that operates a natural gas liquids processing, extraction, fractionation and storage facility in the Gulf Coast region. We also hold a 38.75% ownership interest in Gulf Coast Fractionators LP (“GCF”), a venture that fractionates natural gas liquids on the Gulf Coast.

The following table shows our unconsolidated investments as of October 31, 2005 (in millions):

Natural Gas Gathering and Processing
VESCO	$	29
Logistics Assets
GCF		23
	$	52

The following table shows our equity earnings and cash distributions with respect to our unconsolidated investments for the ten months ended October 31, 2005 (in millions):

Equity earnings of:
VESCO	$	(22	)
GCF		2
	$	(20	)
Cash distributions:
VESCO	$	3
GCF		3

VESCO’s facilities were significantly damaged by Hurricane Katrina during August 2005. Our equity earnings from VESCO includes approximately $25 million in losses, not including insurance recoveries, related to our share of damages. We expect to make significant capital contributions to VESCO to fund our share of expenditures to repair and rebuild certain damaged facilities operated by VESCO.

F-107

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table shows summarized financial results of our unconsolidated investments for the ten months ended October 31, 2005 (in millions):

	Ten Months Ended October 31, 2005
	GCF		VESCO
Revenues	$	39	$	147
Cost of sales and operations		33		158
Income from operations	$	6	$	(11	)
Net income (loss)	$	6	$	(147	)
	As of October 31, 2005
	GCF		VESCO
Current assets	$	8	$	22
Property, plant and equipment, net		56		48
Other assets		—		1
Total assets	$	64	$	71
Current liabilities	$	1	$	29
Long-term liabilities		—		7
Owners’ equity		63		35
Total liabilities and owners’ equity	$	64	$	71

Note 8—Related Party Transactions

Transactions with Affiliates

Sales to and Purchases from Dynegy. We routinely conduct business with other subsidiaries of Dynegy that are not a part of this consolidated group. Transactions with other subsidiaries of Dynegy result primarily from purchases and sales of natural gas and natural gas liquids. Unlike purchase and sales transactions with third parties that settle in cash, settlement of these sales and purchases occurs through adjustment to partners’ capital.

Allocation of Dynegy Costs. Our consolidated financial statements include costs allocated to us, by Dynegy, for centralized general and administrative services performed by Dynegy on our behalf, as well as depreciation of assets utilized by such centralized Dynegy general and administrative functions. The costs are allocated to us based on our proportionate share of Dynegy assets, revenues and employees. All of the allocations are based on assumptions that we believe are reasonable; however, these allocations are not necessarily indicative of the costs and expenses that would have resulted if we had been operated as a separate entity. These allocations are not settled in cash. Settlement of these allocations occurs through adjustment to partners’ capital.

F-108

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the sales to Dynegy, purchases from Dynegy, and allocations of costs from Dynegy, settled through adjustment to partners’ capital and not included in our operating cash flows for the ten months ended October 31, 2005. We believe these transactions are executed on terms that are fair and reasonable.

	(in millions)
Aggregate sales to other subsidiaries of Dynegy	$	338
Aggregate purchases from other subsidiaries of Dynegy		(166	)
Allocations of general and administrative expenses from Dynegy		(22	)
Total transactions with Dynegy settled through adjustments to partners’ capital	$	150

Dynegy Centralized Cash Management. Dynegy operates a cash management system whereby excess cash from most of its various subsidiaries, held in separate bank accounts, is swept to a centralized account managed by Dynegy treasury services. Cash distributions are deemed to have occurred through the general and limited partner in accordance with our partnership agreement, and are reflected as an adjustment to partners’ capital. Net distributions of cash to Dynegy were $46 million during the ten months ended October 31, 2005.

Sales to and Purchases from ChevronTexaco. All of our reportable segments conduct business with ChevronTexaco, the largest shareholder of Dynegy. Sales to ChevronTexaco represented approximately 33% of consolidated total revenues during the ten months ended October 31, 2005. Transactions with ChevronTexaco, result primarily from purchases and sales of natural gas and natural gas liquids. Settlement of these sales and purchases normally occurs through payment of cash. At October 31, 2005, there were receivables from ChevronTexaco of $14 million and payables to ChevronTexaco of $101 million.

Sales to and Purchases from Equity Investees. We conduct business with entities in which we have equity investments. Transactions with entities in which we have equity investments, result primarily from purchases and sales of natural gas and natural gas liquids. Settlement of these sales and purchases occurs through payment of cash. At October 31, 2005, there were net receivables from entities in which we have equity investments of $2 million.

The following table summarizes the sales to and purchases from ChevronTexaco and entities in which we have equity investments for the ten months ended October 31, 2005. We believe these transactions are executed on terms that are fair and reasonable.

	(in millions)
Aggregate sales to ChevronTexaco	$	1,169
Aggregate purchases from ChevronTexaco		(1,031	)
Aggregate sales to equity investees		—
Aggregate purchases from equity investees		(135	)

Note 9—Commitments and Contingencies and Summary of Material Legal Proceedings

Environmental Litigation. We are party to legal proceedings arising in the ordinary course of business. In management’s opinion, the disposition of these ordinary course matters will not materially adversely affect our financial condition, results of operations or cash flows. We record reserves for estimated losses from contingencies when information available indicates that a loss is probable and the amount of the loss is reasonably estimable under SFAS No. 5. For environmental matters, we record liabilities when remedial efforts are probable and the costs can be reasonably estimated in accordance with SOP 96-1 “Environmental Remediation Liabilities”. Environmental reserves do not reflect management’s assessment of the insurance

F-109

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

coverage that may be applicable to the matters at issue. Management has assessed each of the matters based on current information and made a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought and the probability of success. We have established environmental liabilities of $2 million at October 31, 2005, primarily related to remediation of ground water contamination. We cannot make any assurances that the amount of reserves or potential insurance coverage will be sufficient to cover the cash obligations we might incur as a result of litigation or regulatory proceedings, payment of which could be material.

Apache Litigation. In May 2002, Apache Corporation filed suit in Texas state court against Versado Gas Processors, LLC (“Versado”) as purchaser and processor of Apache’s gas and Dynegy Midstream Services, Limited Partnership (now known as Targa Midstream Services Limited Partnership, a wholly-owned subsidiary of ours (“TMSLP”)), as operator, of the Versado assets in New Mexico (“Versado Defendants”) alleging (i) excessive field losses of natural gas from wells owned by the plaintiff, (ii) that the Versado Defendants engaged in certain transactions with affiliates, resulting in the Versado Defendants not receiving fair market value when it sold gas and liquids, and (iii) that the formula for calculating the amount the Versado Defendants received from its buyers of gas and liquids is flawed since it is based on gas price indices that were allegedly manipulated. At trial, the plaintiff’s claim with respect to the alleged “sham” transactions and index manipulation, among others, were severed by the trial court and abated for a future trial, and the jury found in favor of the plaintiff on the lost gas claim, awarding approximately $1.6 million in damages. In May 2004, the Versado Defendants’ motion to set aside this jury verdict was granted by the court and the jury award to the plaintiff was vacated. The plaintiff filed its notice of appeal with the 14^th Court of Appeals in October 2004 and its appellate brief in December 2004.

See Note 11—Subsequent Events.

Firm Capacity Payments. We have entered into firm capacity payments related to storage and transportation of natural gas liquids. Such arrangements are routinely used in the physical movement and storage of natural gas liquids consistent with our business strategy. The total of such obligations at October 31, 2005 are as follows: 2005-$1.4 million; 2006-$1.9 million; 2007-$0.7 million; 2008-$0.4 million; 2009-$0.3 million and beyond-$2.5 million.

Other Minimum Commitments. Minimum commitments in connection with site leases for plants at October 31, 2005, were as follows: 2005- $0.1 million; 2006-$0.4 million; 2007-$0.4 million; 2008-$0.4 million; 2009-$0.5 million and beyond-$5.6 million. Rental payments made under the terms of these arrangements totaled $0.8 million during the first ten months of 2005.

Guarantees. We routinely enter into contractual agreements that contain various representations, warranties, indemnifications and guarantees. Examples of such agreements include, but are not limited to, service agreements, equipment purchase agreements, engineering and technical service agreements, and procurement and construction contracts. Some agreements contain indemnities that cover the other party’s negligence or limit the other party’s liability with respect to third-party claims, in which event we will effectively be indemnifying the other party. Virtually all such agreements contain representations or warranties that are covered by indemnifications against the losses incurred by the other parties in the event such representations and warranties are false. While there is always the possibility of a loss related to such representations, warranties, indemnifications and guarantees in our contractual agreements, and such loss could be significant, management is unable to estimate any range of loss and considers the probability of loss to be remote.

We have also entered into various indemnifications regarding environmental, tax, employee and other representations when completing our past asset sales. We carry reserves for existing environmental, tax and

F-110

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

employee liabilities, when they have been identified. We have incurred no other expense relating to these indemnities. Management considers the probability of loss to be remote. There is always the possibility of a loss related to such indemnifications, of which the maximum potential exposure to the Company cannot be reasonably estimated.

Note 10—Regulatory Issues

We are subject to regulation by various federal, state, local and foreign agencies, in the normal course of business. Compliance with these regulations requires general and administrative, capital and operating expenditures including those related to monitoring, pollution control equipment and permitting at various operating facilities and abandonment and remediation obligations. We cannot predict the outcome of regulatory developments or the effects that they might have on our business.

Note 11—Subsequent Events

Sale of DMS. Effective November 1, 2005, DMS was acquired by Targa for approximately $2,452 million. The acquisition was accounted for as a purchase by Targa and the results of DMS have been included in the consolidated results of Targa beginning November 1, 2005.

Stock-Based Compensation and Pension Plans. Upon completion of our sale to Targa, our employees’ eligibility to participate in the Dynegy stock-based compensation and pension and other incentive programs terminated.

Apache Litigation. In September 2006, the 14^th Court of Appeals of Houston reinstated the jury verdict in Apache’s favor on the issue of lost gas and also awarded Apache legal fees and interest, bringing the total award against the Versado Defendants to approximately $2.7 million. In October 2006, the Versado Defendants filed a motion for rehearing with the 14^th Court of Appeals. After rehearing, the 14^th Court of Appeals affirmed its decision reinstating the original jury verdict in Apache’s favor. With interest and attorneys fees that verdict stands at approximately $2.8 million. In January 2007, the Versado Defendants filed their petition for review with the Supreme Court of Texas and in March 2007, Apache filed its conditional petition for review with the Supreme Court of Texas. At the request of the Supreme Court of Texas, the Versado Defendants and Apache filed responses to the opposing party’s petition in June 2007.

In May 2007, the parties settled the severed lawsuit referenced in Note 9 above.

Guarantee of Debt Held by Targa. Although we have not historically incurred debt obligations, a significant portion of our assets were pledged as collateral for debt issued by Dynegy, and we have guaranteed debt issued by Dynegy. Upon completion of our sale to Targa, our obligation as guarantors of debt issued by Dynegy were terminated and all liens and mortgages on our assets pledged as collateral for such debt were released.

Further, upon completion of our sale to Targa and Targa’s debt offering, we became guarantors of Targa’s obligations under its senior secured credit facilities and senior notes.

F-111

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners of

Dynegy Midstream Services, Limited Partnership:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, changes in partners’ capital, and cash flows present fairly, in all material respects, the financial position of Dynegy Midstream Services, Limited Partnership and its subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards as established by the Auditing Standards Board (United States) and in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed on Note 8 to the Consolidated Financial Statements, the Company has entered into significant transactions with Dynegy Inc. and its subsidiaries and ChevronTexaco Corporation and its affiliates, related parties.

/s/    PricewaterhouseCoopers LLP

Houston, Texas

May 6, 2005, except for Note 14, as to which the date is September 20, 2005

F-112

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(in millions)

	December 31, 2004			December 31, 2003
ASSETS (Collateral for Parent Company Debt—See Note 8)
Current Assets
Cash and cash equivalents	$	17		$	20
Accounts receivable, net of allowance for doubtful accounts of $2 and $4, respectively		284			247
Accounts receivable, affiliates		11			20
Inventory		58			42
Prepayments		42			49
Total Current Assets		412			378
Property, Plant and Equipment		1,771			1,763
Accumulated depreciation		(694	)		(618	)
Property, Plant and Equipment, Net		1,077			1,145
Other Assets
Unconsolidated investments		78			82
Goodwill		15			15
Other long-term assets		3			3
Total Assets (Collateral for Parent Company Debt—See Note 8)	$	1,585		$	1,623
LIABILITIES AND PARTNERS’ CAPITAL
Current Liabilities
Accounts payable	$	57		$	57
Accounts payable, affiliates		23			21
Accrued liabilities		76			87
Total Current Liabilities		156			165
Other long-term liabilities		27			29
Total Liabilities		183			194
Minority Interest		106			107
Commitments and Contingencies (See Note 9)
Partners’ Capital
Limited partner interest		1,252			1,277
General partner interest		44			45
Total Partners’ Capital		1,296			1,322
Total Liabilities and Partners’ Capital	$	1,585		$	1,623

See notes to consolidated financial statements.

F-113

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions)

	Year Ended December 31,
	2004			2003			2002
Revenues from third parties	$	2,245		$	2,033		$	1,788
Revenues from affiliates		1,506			1,215			938
Total revenues		3,751			3,248			2,726
Cost of sales, exclusive of depreciation shown separately below		(3,414	)		(2,986	)		(2,532	)
Depreciation expense		(91	)		(87	)		(86	)
Impairment charge		(5	)		—			—
Severance and restructuring reductions (charges)		(2	)		1			(17	)
Gain (loss) on sale of assets, net		69			23			(1	)
General and administrative expenses		(47	)		(56	)		(36	)
Operating income		261			143			54
Earnings (losses) from unconsolidated investments		10			(2	)		16
Other expense, net		—			—			(10	)
Minority interest expense		(22	)		(17	)		(8	)
Net income	$	249		$	124		$	52
Comprehensive income	$	249		$	124		$	52
Allocation of net income to:
Limited partner interest in net income	$	241		$	120		$	50
General partner interest in net income	$	8		$	4		$	2

See notes to consolidated financial statements.

F-114

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	Year Ended December 31,
	2004			2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	249		$	124		$	52
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation expense		91			87			86
Impairment charge		5			—			—
Losses (earnings) from unconsolidated investments, net of cash distributions		1			16			2
Risk-management activities		—			1			—
Loss (gain) on sale of assets, net		(69	)		(23	)		1
Income attributable to minority interest holders		22			17			8
Changes in working capital:
Accounts receivable, net		(28	)		(3	)		(41	)
Inventory		(16	)		7			7
Prepayments and other assets		7			(35	)		(1	)
Accounts payable and accrued liabilities		(9	)		(59	)		(28	)
Changes in non-current assets		—			—			1
Changes in non-current liabilities		(2	)		(6	)		3
Non-cash settlement of transactions with Dynegy (See Notes 1 and 8)		(125	)		(81	)		139
Net cash provided by operating activities		126			45			229
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(59	)		(56	)		(109	)
Return of investment from unconsolidated investments		3			4			2
Proceeds from asset sales, net		100			35			—
Net cash provided by (used in) investing activities		44			(17	)		(107	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners, net		(150	)		(8	)		(105	)
Distribution to minority interest holders		(23	)		(19	)		(5	)
Net cash used in financing activities		(173	)		(27	)		(110	)
Net increase (decrease) in cash and cash equivalents		(3	)		1			12
Cash and cash equivalents, beginning of period		20			19			7
Cash and cash equivalents, end of period	$	17		$	20		$	19
NON-CASH TRANSACTIONS:
Contribution of Delta Gathering System to unconsolidated investment (See Note 7)	$	—		$	—		$	(17	)
Distribution of WTLPS, LLC (“WTLPS”) to Dynegy (See Note 8)	$	—		$	—		$	(45	)
Settlement of transactions with parent company (See Notes 1 and 8)	$	(125	)	$	(81	)	$	139

See notes to consolidated financial statements.

F-115

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS’ CAPITAL

(in millions)

	Limited Partner Capital			General Partner Capital			Total
January 1, 2002	$	1,203		$	43		$	1,246
Net income		50			2			52
Cash distributions to Dynegy		(101	)		(4	)		(105	)
Settlement of transactions with Dynegy (See Notes 1 and 8)		134			5			139
Distribution of WTLPS to Dynegy		(43	)		(2	)		(45	)
December 31, 2002	$	1,243		$	44		$	1,287
Net income		120			4			124
Cash distributions to Dynegy		(8	)		—			(8	)
Settlement of transactions with Dynegy (See Notes 1 and 8)		(78	)		(3	)		(81	)
December 31, 2003	$	1,277		$	45		$	1,322
Net income		241			8			249
Cash distributions to Dynegy		(145	)		(5	)		(150	)
Settlement of transactions with Dynegy (See Notes 1 and 8)		(121	)		(4	)		(125	)
December 31, 2004	$	1,252		$	44		$	1,296

See notes to consolidated financial statements.

F-116

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Organization and Operations of the Company

Organization. Dynegy Midstream Services, Limited Partnership is owned by Dynegy Midstream G.P., Inc. and DMS LP, Inc., which are each indirect, wholly owned subsidiaries of Dynegy Holdings Inc. (“DHI”). DHI is an indirect, wholly owned subsidiary of Dynegy Inc. (Dynegy Inc. and its subsidiaries are hereafter collectively referred to as “Dynegy”). Dynegy Midstream Services, Limited Partnership was originally formed in 1996 under the name of WPC-NGC, Limited Partnership. In 1996, subsequent to formation, WPC-NGC, Limited Partnership changed its name to Warren Petroleum, Limited Partnership. In 1998, Warren Petroleum, Limited Partnership changed its name to Dynegy Midstream Services, Limited Partnership (WPC-NGC, Limited Partnership, Warren Petroleum, Limited Partnership and Dynegy Midstream Services, Limited Partnership are hereafter collectively referred to, together with its subsidiaries, as “us”, “our”, “we” or “DMS”).

Dynegy Midstream G.P., Inc., a Delaware corporation, became the general partner of DMS as WPC GP, Inc. In 1996, subsequent to the formation of DMS, WPC GP, Inc. changed its name to Warren Petroleum G.P., Inc. In 1998, Warren Petroleum G.P., Inc. changed its name to Dynegy Midstream G.P., Inc. (WPC GP, Inc., Warren Petroleum G.P., Inc. and Dynegy Midstream G. P., Inc. are hereafter collectively referred to as “DMS GP”). For all years presented hereto, DMS GP owns 3.3874% of DMS.

DMS LP, Inc., a Delaware corporation, became a limited partner of DMS as WPC LP, Inc. In 1998, WPC LP, Inc. changed its name to DMS LP, Inc. (WPC LP, Inc. and DMS LP, Inc. are hereafter collectively referred to as “DMS LP”). For all years presented hereto, DMS LP owns 96.6126% of DMS.

The dissolution of DMS will occur on July 8, 2026, or earlier, depending on certain events as defined in our partnership agreement. All distributions and gains and losses, resulting from liquidation or otherwise, shall be made to our partners based upon their respective capital accounts as defined in our partnership agreement, except where otherwise required by the Internal Revenue Code.

Operations. Our business operations consist of natural gas gathering and processing, fractionating, storing, terminalling, transporting, distributing and marketing of natural gas liquids. Please see Note 13—Segment Information for a description of our segments and segment operations.

Parent Company Debt. A significant portion of our assets are pledged as collateral for debt held by subsidiaries of Dynegy, principally DHI, that are not part of DMS. In addition, we and substantially all of our wholly-owned subsidiaries guarantee this debt. Please see Note 8—Related Party Transactions for further information.

Settlement of Transactions with Dynegy. Dynegy operates a cash management system whereby excess cash from most of its subsidiaries, held in separate subsidiary bank accounts, is swept up to a centralized account managed by Dynegy treasury services. Our cash distributions to Dynegy are deemed to have occurred through the general and limited partner in accordance with our partnership agreement, and are reflected as an adjustment to the partners’ capital.

We routinely conduct business with other subsidiaries of Dynegy that are not a part of this consolidated group. Such transactions primarily result from sales and purchases of natural gas and natural gas liquids. These transactions with Dynegy are not settled in cash. Instead, they are settled through adjustments to our partners’ capital and are not included in our operating cash flows.

Also, our consolidated financial statements include costs allocated to us by Dynegy for centralized general and administrative services performed by Dynegy on our behalf, as well as depreciation of assets utilized by such

F-117

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

centralized Dynegy general and administrative functions. These transactions with Dynegy are not settled in cash. Instead, they are settled through adjustments to our partners’ capital and are not included in our operating cash flows.

As a result, operating cash flows as reported are not necessarily indicative of the operating cash flows that would have resulted if we had been operated as a separate entity. Were such transactions conducted with third parties and/or settled in cash, the effect on our consolidated financial statements, particularly on our operating cash flows, could be significant. Please see Note 8—Related Party Transactions for further information.

Note 2—Accounting Policies

Our accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”). Our most significant accounting policies are described below. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect our reported financial position and results of operations. We review significant estimates and judgments affecting our consolidated financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Estimates and judgments are based on information available at the time such estimates and judgments are made. Adjustments made with respect to the use of these estimates and judgments often relate to information not previously available. Uncertainties with respect to such estimates and judgments are inherent in the preparation of financial statements. Estimates and judgments are used in, among other things, (1) developing fair value assumptions, including estimates of future cash flows and discount rates, (2) analyzing tangible and intangible assets for possible impairment, (3) estimating the useful lives of our assets and (4) determining amounts to accrue for contingencies, guarantees and indemnifications. Actual results could differ materially from our estimates.

Principles of Consolidation. The accompanying consolidated financial statements include our accounts and the accounts of our majority-owned or controlled subsidiaries and our proportionate share of assets, liabilities, revenues and expenses of undivided interests in certain gas processing facilities. Intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents. Cash and cash equivalents consist of all demand deposits and funds invested in highly liquid short-term investments with original maturities of three months or less.

Allowance for Doubtful Accounts. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We review our doubtful accounts regularly. Past due balances over 60 days, and over a specified amount, are reviewed individually for collectibility. Account balances are charged off against the allowance when we feel it is probable the receivable will not be collected. We review collectibility and establish or adjust our allowance as necessary, primarily utilizing methodologies involving historical levels of write-offs. The specific identification method is also used in certain circumstances. We do not have any off-balance sheet credit exposure related to our customers.

Investment in Unconsolidated Affiliates. Investments in affiliates over which we exercise significant influence, generally occurring in ownership interests of 20% to 50%, and also occurring in lesser ownership percentages due to voting rights or other factors, are accounted for using the equity method. Our share of net income (loss) from these affiliates is reflected in the consolidated statements of operations as earnings (losses) from unconsolidated investments. Any excess of our investment in affiliates, as compared to our share of the underlying equity that is not recognized as goodwill, is amortized over the estimated economic service lives of

F-118

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

the underlying assets. All investments in unconsolidated affiliates are periodically assessed for other-than-temporary declines in value, with write-downs recognized in earnings (losses) from unconsolidated investments in the consolidated statements of operations if applicable.

Concentration of Credit Risk. We sell our energy products and services to customers in the gas distribution industry and to entities engaged in industrial and petrochemical businesses. These industry concentrations have the potential to impact our overall exposure to credit risk, either positively or negatively, because the customer base may be similarly affected by changes in economic, industry, weather or other conditions. Dynegy’s Credit Department, based on guidelines approved by its Board of Directors, establishes our counterparty credit limits. Our industry typically operates under negotiated credit lines for physical delivery and financial contracts. Our credit risk system provides current credit exposure to counterparties on a daily basis.

Inventory. Our inventory consists primarily of natural gas and natural gas liquids valued at the lower of weighted average cost or at market. Inventory adjustments of $7 million and $11 million were recorded during the years ended December 31, 2004 and 2003, respectively, due to the differential between the weighted average price of the natural gas liquids inventory and natural gas liquids market prices at December 31, 2004 and 2003.

Property, Plant and Equipment. Property, plant and equipment, which consists principally of gas gathering, processing, fractionation, terminalling and storage facilities and natural gas transportation lines is recorded at historical cost. Expenditures for major replacements, renewals and major maintenance are capitalized. We consider major maintenance to be expenditures incurred on a cyclical basis to maintain and prolong the efficient operation of our assets. Expenditures for repairs and minor renewals to maintain assets in operating condition are expensed. Depreciation is provided using the straight-line method over the estimated economic service lives of the assets, ranging from 3 to 25 years. Composite depreciation rates (which we refer to as composite rates) are applied to functional groups of assets having similar economic characteristics. The estimated economic service lives of our functional asset groups are as follows:

Asset Group	Range of Years
Natural gas gathering systems and processing facilities	15 to 25
Fractionation, terminalling and natural gas liquids storage facilities	15 to 25
Transportation equipment and barges	5 to 10
Office and miscellaneous equipment	3 to 7

Gains and losses are not recognized for retirements of property, plant and equipment subject to composite rates until the asset group subject to the composite rate is retired. Gains and losses on sales of individual assets are reflected in gain (loss) on sale of assets, net in the consolidated statements of operations. We assess the carrying value of our property, plant and equipment in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). If an impairment has occurred, the amount of the impairment loss recognized would be determined by estimating the related discounted cash flows of the assets and recording a loss if the resulting estimated fair value is less than the book value. For assets identified as held for sale, the book value is compared to comparable market prices, or the estimated fair value if comparable market prices are not readily available, to determine if an impairment loss is required. Please see Note 4—Restructuring and Impairment Charges.

Asset Retirement Obligations. We adopted SFAS No. 143, “Asset Retirement Obligations” (“SFAS No. 143”), effective January 1, 2003. Under the provisions of SFAS No. 143, we are required to record legal obligations to retire tangible, long-lived assets on our balance sheets as liabilities, which are recorded at a discount when the liability is incurred. Significant judgment is involved in estimating future cash flows

F-119

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

associated with such obligations, as well as the ultimate timing of the cash flows. If our estimates on the amount or timing of the cash flow change, the change may have a material impact on our results of operations.

As part of adopting SFAS No. 143, existing environmental liabilities in the amount of $9 million were reversed in the first quarter 2003. The fair value of the remediation costs estimated to be incurred upon retirement of the respective assets is included in the asset retirement obligation (“ARO”) and was recorded upon adoption of SFAS No. 143. Since the previously accrued liabilities equaled the fair value of the future retirement obligations, the adoption of SFAS No. 143 did not have an impact on our consolidated financial statements. In addition to these ARO’s, we also have potential retirement obligations for dismantlement of a fractionation facility and natural gas liquids storage facilities. Our current intent is to maintain these facilities in a manner such that they will be operated indefinitely. As such, we cannot estimate any potential retirement obligations associated with these assets. Liabilities will be recorded in accordance with SFAS No. 143 at the time we are able to estimate any new AROs.

Our AROs relate to activities such as closure and post-closure costs, environmental testing, remediation, monitoring and land and equipment lease obligations. Annual amortization of the assets associated with the AROs was $0.2 million and $0.6 million in 2004 and 2003, respectively. A summary of changes in our AROs by reportable segment is as follows:

	Gas Gathering and Processing		Marketing Assets		Total
	(in millions)
Balance at January 1, 2003	$	8	$	1	$	9
Accretion expense		1		—		1
Balance at December 31, 2003		9		1		10
Accretion expense		1		—		1
Other (1)		—		—		—
Balance at December 31, 2004	$	10	$	1	$	11

(1) During 2004, AROs totaling less than $1 million were removed following our sales of Sherman and our interest in Indian Basin. There were no additional AROs recorded or settled, nor were there any revisions to estimated cash flows associated with existing AROs, during 2004 or 2003.

The following pro forma financial information has been prepared to give effect to the adoption of SFAS No. 143 for the year ended December 31, 2002 as if it had been adopted January 1, 2002 (in millions):

Net income, as reported	$	52
Pro forma adjustments to reflect retroactive adoption of SFAS No. 143		(1	)
Pro forma net income	$	51

Contingencies, Commitments, Guarantees and Indemnifications. We are involved in lawsuits, claims, proceedings, joint venture audits and tax-related audits in the normal course of our operations. In accordance with SFAS No. 5, “Accounting for Contingencies” (“SFAS No. 5”) we record a loss contingency for these matters when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We review our loss contingencies on an ongoing basis to ensure that we have appropriate reserves recorded on the consolidated balance sheets. These reserves are based on estimates and judgments made by management with respect to the likely outcome of these matters, including any applicable insurance coverage for litigation matters, and are adjusted as circumstances warrant. Our estimates and judgment could change based on

F-120

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

new information, changes in laws or regulations, changes in management’s plans or intentions, the outcome of legal proceedings, settlements or other factors. If different estimates and judgments were applied with respect to these matters, it is likely that reserves would be recorded for different amounts. Actual results could vary materially from these estimates and judgments.

Liabilities for environmental contingencies are recorded when environmental assessment indicates that remedial efforts are probable and the costs can be reasonably estimated. Measurement of liabilities is based, in part, on relevant past experience, currently enacted laws and regulations, existing technology, site-specific costs and cost-sharing arrangements. Recognition of any joint and several liability is based upon our best estimate of our final pro rata share of such liability. These assumptions involve the judgments and estimates of management and any changes in assumptions could lead to increases or decreases in our ultimate liability, with any such changes recognized immediately in earnings.

We follow the guidance of Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN No. 45”) for disclosures and accounting of various guarantees and indemnifications entered into during the course of business. When a guarantee or indemnification subject to FIN No. 45 is entered into, an estimated fair value of the underlying guarantee or indemnification is recorded. Some guarantees and indemnifications could have significant financial impact under certain circumstances, however management also considers the probability of such circumstances occurring when estimating the fair value. Actual results may materially differ from the estimated fair value of such guarantees and indemnifications.

Goodwill and Other Intangible Assets. Goodwill represents, at the time of an acquisition, the amount of purchase price paid in excess of the fair value of net assets acquired. We follow the guidance set forth in SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), when assessing the carrying value of our goodwill. Accordingly, we evaluate our goodwill for impairment on an annual basis and when events warrant an assessment. Our evaluation is based, in part, on our estimate of future cash flows. The estimation of fair value is highly subjective, inherently imprecise and can change materially from period to period based on, among other things, an assessment of market conditions, projected cash flows and discount rate. We currently perform our annual impairment test in the fourth quarter after our annual budgetary process, and we may record impairment charges in future periods as a result of such test. We have $4 million of goodwill attributable to our Marketing Assets segment and $11 million of goodwill attributable to our Gas Gathering and Processing segment. During 2004, 2003 and 2002, there were no changes in our $15 million carrying amount of goodwill.

Income Taxes. As a limited partnership we are not subject to federal income tax. We are subject to income taxes in the states of Texas and Tennessee through certain of our subsidiaries. However, historically, any state income tax on the partnership has been immaterial. The taxable income or loss resulting from our operations will ultimately be included in the federal and state income tax returns of the general and limited partners. Individual partners will have different investment bases depending upon the timing and price of their investment in the partnership. Further, each partner’s tax accounting, which is partially dependent upon their tax position, may differ from the accounting followed in the consolidated financial statements. Accordingly, there could be significant differences between each individual partner’s tax basis and their share of the net assets reported in the consolidated financial statements.

Revenue Recognition. Our segments consist largely of the ownership and operation of physical assets that we use in various natural gas processing operations and natural gas liquids fractionation, storage and terminalling and delivery operations. The business of these segments includes natural gas gathering and processing, separation of natural gas liquids into their component parts from a commingled stream of light liquid hydrocarbons and the

F-121

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

transportation and delivery of natural gas liquids through gas liquids pipelines, transport tractors and tank trailers, our LPG barge fleet and railcars that we manage pursuant to a services agreement with ChevronTexaco Corporation and its affiliates (“ChevronTexaco”). End sales from these businesses result in physical delivery of natural gas residue and natural gas liquids to our wholesale and industrial customers. We recognize revenue from these transactions when the product or service is delivered to a customer. We also provide natural gas liquids storage and terminalling services for a fee.

Employee Stock Options. In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure” (“SFAS No. 148”). SFAS No. 148 amends SFAS No. 123, “Accounting for Stock- Based Compensation” (“SFAS No. 123”) and provides alternative methods of transition (prospective, modified prospective or retroactive) for entities that voluntarily change to the fair value-based method of accounting for stock-based employee compensation in a fiscal year beginning before December 16, 2003. SFAS No. 148 requires prominent disclosure about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation. We transitioned to a fair value- based method of accounting for stock-based compensation in the first quarter 2003 and are using the prospective method of transition as described under SFAS No. 148.

Dynegy has granted stock options for Dynegy stock to certain of our employees. Under the prospective method of transition, all Dynegy stock options granted by Dynegy to our employees after January 1, 2003 are accounted for on a fair value basis. Dynegy options granted by Dynegy to our employees prior to January 1, 2003 continue to be accounted for using the intrinsic value method. Accordingly, for such options granted prior to January 1, 2003, compensation expense is not reflected for employee stock options unless they were granted at an exercise price lower than market value on the grant date. Dynegy has granted in-the-money options in the past and we continue to recognize compensation expense over the applicable vesting periods. No in-the-money stock options have been granted since 1999.

Had compensation cost for all stock options granted prior to 2003 been determined on a fair value basis consistent with SFAS No. 123, our net income would have approximated the following pro forma amounts for the years ended December 31, 2004, 2003 and 2002, respectively.

	Years Ended December 31,
	2004			2003			2002
	(in millions)
Net income as reported	$	249		$	124		$	52
Add: Stock-based employee compensation expense included in reported net income		1			—			—
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards		(2	)		(6	)		(3	)
Pro forma net income	$	248		$	118		$	49

Minority Interest. Minority interest on the consolidated balance sheets includes third-party investments in entities that we consolidate, but do not wholly own. The net results attributed to minority interest holders in consolidated entities are included in minority interest expense in the consolidated statements of operations.

Accounting Principles Newly Adopted

FIN No. 46R. In January 2003, the FASB issued FIN No. 46, “Consolidation of Variable Interest Entities—An Interpretation of ARB No. 51” (“FIN No. 46”) In December 2003, the FASB issued the updated and final

F-122

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

interpretation FIN No. 46(R). FIN No. 46(R) requires that an equity investor in a variable interest entity have significant equity at risk (generally a minimum of 10%, which is an increase from the 3% required under previous guidance) and hold a controlling interest (evidenced by voting rights), and absorb a majority of the entity’s expected losses or receive a majority of the entity’s expected returns, or both. If the equity investor is unable to evidence these characteristics, the entity that retains these ownership characteristics will be required to consolidate the variable interest entity as the primary beneficiary. FIN No. 46(R) was applicable immediately to variable interest entities created or obtained after January 31, 2003. We were also required to adopt the remaining provisions of FIN No. 46(R) on March 31, 2004. These provisions require that we review the structure of all legal entities in which we have an investment and other legal entities with whom we transact to determine whether such entities are variable interest entities (“VIE”), as defined by FIN No. 46(R). With respect to each of the VIEs we identify, we must assess whether we are the “primary beneficiary,” as defined by FIN No. 46(R). FIN 46(R) was effective on December 31, 2003 and did not identify any VIEs and, therefore, the adoption did not have an impact on our consolidated financial statements.

Accounting Principles Not Yet Adopted

SFAS No. 123(R). In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment” (“SFAS No. 123(R)”), which revises SFAS No. 123. SFAS No. 123(R) is effective January 1, 2006 for all calendar year-end companies. SFAS No. 123(R) requires companies to expense the fair value of employee stock options and other forms of stock-based compensation. This expense will be recognized over the period during which an employee is required to provide services in exchange for the award. We expect to adopt the provisions of SFAS No. 123(R) on January 1, 2006. SFAS 123(R) describes several transition methods, and we expect to apply the modified prospective method of adoption. Under this method, compensation expense is recognized for the remaining portion of outstanding, unvested awards. The fair value for these awards is calculated on the grant date in accordance with SFAS 123 for either recognition in our statement of operations or through our pro forma disclosures.

As noted in “Employee Stock Options” above, we transitioned to a fair value based method of accounting for stock-based compensation in the first quarter 2003. Our expense relating to share-based compensation consists of awards by Dynegy to certain of our employees, in the form Dynegy stock options and Dynegy restricted stock. For stock options, we determine the fair value of each stock option at the grant date using a Black-Scholes model. For restricted stock awards, we consider the fair value to be the closing price of the stock on the grant date. We recognize the fair value of our share based payments over the vesting periods of the awards, which is typically a three-year service period.

Prior to the issuance of SFAS No. 123(R), we adopted the prospective method for expensing the fair value of stock options and restricted stock awards granted after January 1, 2003, and as such we do not expect the guidance under SFAS 123(R) to have a material impact on our consolidated statement of operations.

FIN No. 47. In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (“FIN No. 47”), which is an interpretation of SFAS No. 143. FIN No. 47 clarifies the term “conditional asset retirement obligation,” which refers to legal obligations for which companies must perform asset retirement activity for which the timing and/or method of settlement are conditional upon future events that may or may not be within the control of the entity. However, the obligation to perform the asset retirement is unconditional, despite the uncertainty that exists surrounding the timing and method of settlement. Uncertainty about the timing and method of settlement for a conditional ARO should be considered in estimating the ARO when sufficient information exists. FIN No. 47 clarifies when sufficient information exists to

F-123

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

reasonably estimate the fair value of an ARO. FIN No. 47 is effective no later than the first fiscal year ending after December 15, 2005, and early adoption is encouraged.

As noted in “Asset Retirement Obligations” above, we currently record AROs for our Gas Gathering and Processing and Marketing Assets segments. These AROs involve significant judgment regarding future cash flows and the ultimate timing of these cash flows, some of which include the probability of future events occurring such as the timing and method of settlement. As such, we are in the process of evaluating the impact of FIN No. 47. We expect to adopt the provisions of FIN No. 47 on January 1, 2006.

Note 3—Dispositions

Sherman. In November 2004, we sold our Sherman natural gas processing facility located in Sherman, Texas, for approximately $35 million, and we recognized a gain on the sale of approximately $16 million. This gain is included in gain (loss) on sale of assets, net on our consolidated statements of operations.

Indian Basin. In April 2004, we sold our 16% interest in the Indian Basin Gas Processing Plant, located in Eddie County, New Mexico, for approximately $48 million, and we recognized a gain on the sale of approximately $36 million. This gain is included in gain (loss) on sale of assets, net on our consolidated statements of operations.

Hackberry LNG Project. In April 2003, we sold our proposed LNG terminal and gasification project in Hackberry, Louisiana. At closing, we received an initial payment of $20 million and recognized a gain of approximately $9 million. We retained the right to receive additional contingent payments based upon project development milestones. In October 2003, we received a $15 million payment associated with the completion of a project milestone and recognized a gain of $15 million. In March 2004, we sold our remaining financial interest in this project, including rights to receive future contingent payments under the 2003 agreement, for $17 million and recognized a gain of $17 million on the sale. These gains are included in gain (loss) on sale of assets, net on our consolidated statements of operations.

Note 4—Severance, Restructuring and Impairment Charges

In 2004, as a result of our testing of certain of our assets for impairment based on identification of triggering events as defined by SFAS No. 144, we recorded an impairment of $5 million for our Puckett gas treatment plant and gathering system due to rapidly depleting reserves associated with that facility. This impairment is included in impairment and other charges on our consolidated statements of operations. We concluded that no impairment was necessary for any other facilities as estimated undiscounted cash flows exceeded facility book values.

In 2003, we recorded a $12 million charge related to the impairment of our investment in Gulf Coast Fractionators (GCF). This impairment is included in earnings (losses) from unconsolidated investments on our consolidated statements of operations. Please see Note 7—Unconsolidated Investments.

In 2002, Dynegy recorded restructuring, severance and impairment charges relating to various aspects of its operations and we were allocated $17 million of such charges. In 2003, Dynegy reduced portions of the severance and restructuring charges and we were allocated $1 million of the benefit from the reduction. In 2004, Dynegy recorded additional severance and restructuring charges and we were allocated $2 million of such charges. The allocations of these charges and reductions, for all periods presented, are included in severance and restructuring reductions (charges) on the consolidated statements of operations.

F-124

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 5—Risk Management Activities and Financial Instruments

Our operations are impacted by several factors, some of which may not be mitigated by risk management methods. These risks include, but are not limited to, commodity price, weather patterns, counterparty credit risks, changes in competition, operational risks, environmental risks and changes in regulations.

We define market risk as changes to our earnings and cash flow resulting from changes in market conditions, including changes in commodity prices, as well as the impact of volatility and market liquidity on such prices. We manage market risk through diversification, controlling position sizes and executing hedging strategies.

Accounting for Derivative Instruments and Hedging Activities

We follow the accounting and disclosure requirements of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (SFAS No. 133). Under SFAS No. 133, all derivative instruments are recognized in the balance sheet at their fair values and changes in fair value are recognized immediately in earnings, unless such instruments qualify, and are designated, as hedges of future cash flows, fair values or net investments in foreign operations or qualify, and are designated, as normal purchases and sales.

Cash Flow Hedges. Under these derivatives, the effective portion of changes in fair value is recorded as a component of accumulated other comprehensive income until the related hedged items impact earnings. Any ineffective portion of a cash flow hedge is reported immediately as a component of other income and expense, net in the consolidated statements of operations. We have previously entered into financial derivative instruments that qualify as cash flow hedges. Instruments are entered into for purposes of hedging future fuel requirements and sales commitments and locking in future margin. There were no outstanding cash flow hedges at December 31, 2004 or 2003.

During the years ended December 31, 2004, 2003 and 2002, there was no material ineffectiveness from changes in fair value of hedge positions and no amounts were excluded from the assessment of hedge effectiveness related to the hedge of future cash flows. During the years ended December 31, 2004, 2003 and 2002, we did not record any charges related to the reclassification of earnings in connection with forecasted transactions that were no longer considered probable of occurring.

Fair Value of Financial Instruments. The carrying values of current financial assets and liabilities approximate fair values due to the short-term maturities of these instruments.

Note 6—Property, Plant and Equipment

A summary of our property, plant and equipment is as follows:

	December 31,
	2004			2003
	(in millions)
Natural gas gathering systems	$	115		$	98
Processing facilities		1,058			1,067
Fractionation facilities		247			249
Terminalling and natural gas liquids storage facilities		301			308
Liquids marketing assets		21			12
Barges		29			29
		1,771			1,763
Accumulated depreciation		(694	)		(618	)
	$	1,077		$	1,145

F-125

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 7—Unconsolidated Investments

Our unconsolidated investments consist primarily of investments in affiliates that we do not control, but where we have significant influence over operations. Our principal equity method investments consist of entities that operate natural gas liquids assets. We entered into these ventures principally to share risk and leverage existing commercial relationships. These ventures maintain independent capital structures and have financed their operations either on a non-recourse basis to us or through their ongoing commercial activities. We hold investments in joint ventures in which ChevronTexaco or its affiliates are investors. Please see Note 8—Related Party Transactions.

At December 31, 2004, our investments included a 22.9% ownership interest in Venice Energy Services Company, L.L.C. (“VESCO”), a venture that operates a natural gas liquids processing, extraction, fractionation and storage facility in the Gulf Coast region as well as a 38.75% ownership interest in GCF, a venture that fractionates natural gas liquids on the Gulf Coast.

As part of our initial capital contribution in VESCO, we agreed to construct and contribute to VESCO an expansion of the Delta Gathering System (“DGS”), a condensate, separation and dehydration facility located immediately upstream of the Venice Gas Processing Plant. The DGS expansion was completed in 1997, at a cost of $17 million, and was transferred to VESCO in 2002.

Investments in unconsolidated affiliates totaled $78 million and $82 million at December 31, 2004 and 2003, respectively. Cash received from our equity investments during 2004, 2003 and 2002 totaled $15 million, $16 million and $17 million, respectively, of which $3 million, $4 million and $2 million, respectively, represented a return of original investment in our unconsolidated affiliates. Our investment balances include unamortized purchase price differences of $7 million and $8 million at December 31, 2004 and 2003, respectively. The unamortized purchase price differences represent the excess of our purchase price over our share of the investee’s book value at the time of acquisition.

During 2003, we determined that the fair value of our equity interest in GCF, based on bid prices received for a possible sale of the investment, was lower than the book value. As such, we recorded an impairment charge in 2003 totaling $12 million. This charge is included in earnings (losses) from unconsolidated investments on our consolidated statements of operations.

Note 8—Related Party Transactions

Transactions with Affiliates

Sales to and Purchases from Dynegy. We routinely conduct business with other subsidiaries of Dynegy that are not a part of this consolidated group. Transactions with other subsidiaries of Dynegy result primarily from purchases and sales of natural gas and natural gas liquids. Unlike purchase and sales transactions with third parties that settle in cash, settlement of these sales and purchases occurs through adjustment to partners’ capital.

Allocation of Dynegy Costs. Our consolidated financial statements include costs allocated to us, by Dynegy, for centralized general and administrative services performed by Dynegy on our behalf, as well as depreciation of assets utilized by such centralized Dynegy general and administrative functions. The costs are allocated to us based on our proportionate share of Dynegy assets, revenues and employees. All of the allocations are based on assumptions that we believe are reasonable; however, these allocations are not necessarily indicative of the costs and expenses that would have resulted if we had been operated as a separate entity. These allocations are not settled in cash. Settlement of these allocations occurs through adjustment to partners’ capital.

F-126

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the sales to Dynegy, purchases from Dynegy, and allocations of costs from Dynegy, settled through adjustment to partners’ capital and not included in our operating cash flows. We believe these transactions are executed on terms that are fair and reasonable.

	Years Ended December 31,
	2004			2003			2002
	(in millions)
Aggregate sales to other subsidiaries of Dynegy	$	301		$	253		$	192
Aggregate purchases from other subsidiaries of Dynegy		(150	)		(146	)		(288	)
Allocations of general and administrative expenses from Dynegy		(24	)		(27	)		(26	)
Allocations of severance charges from Dynegy (See Note 4)		(2	)		1			(17	)
Total transactions with Dynegy settled through adjustments to partners’ capital	$	125		$	81		$	(139	)

Dynegy Centralized Cash Management. Dynegy operates a cash management system whereby excess cash from most of its various subsidiaries, held in separate bank accounts, is swept to a centralized account managed by Dynegy treasury services. Cash distributions are deemed to have occurred through the general and limited partner in accordance with our partnership agreement, and are reflected as an adjustment to the partners’ capital. Net distributions of cash to Dynegy were $150 million, $8 million and $105 million during the years ending December 31, 2004, 2003 and 2002, respectively.

Sales to and Purchases from ChevronTexaco. All of our reportable segments conduct business with ChevronTexaco, the largest shareholder of Dynegy. Sales to ChevronTexaco represented approximately 32%, 30% and 27% of consolidated total revenues during the years ending December 31, 2004, 2003 and 2002, respectively. Transactions with ChevronTexaco, result primarily from purchases and sales of natural gas and natural gas liquids. Settlement of these sales and purchases normally occurs through payment of cash. At December 31, 2004 and 2003, there were receivables from ChevronTexaco of $10 million and $19 million, respectively. At December 31, 2004 and 2003, there were payables to ChevronTexaco of $20 million and $21 million, respectively.

In 2002, in partial satisfaction of certain Dynegy obligations to ChevronTexaco, we transferred our 39.2% ownership interest in WTLPS, valued at $45 million, to Dynegy, who transferred it to ChevronTexaco, the largest interest owner of WTLPS and operator of the pipeline. This non-cash transaction was accounted for as a distribution to our partners.

Sales to and Purchases from Equity Investments. We conduct business with entities in which we have equity investments. Transactions with entities in which we have equity investments, result primarily from purchases and sales of natural gas and natural gas liquids. Settlement of these sales and purchases occurs through payment of cash. At December 31, 2004 and 2003, there were receivables from entities in which we have equity investments of $1 million and $1 million, respectively. At December 31, 2004 and 2003, there were payables to entities in which we have equity investments of $3 million and $0, respectively.

The following table summarizes the sales to and purchases from ChevronTexaco and entities in which we have equity investments. We believe these transactions are executed on terms that are fair and reasonable.

F-127

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Years Ended December 31,
	2004			2003			2002
	(in millions)
Aggregate sales to ChevronTexaco	$	1,206		$	963		$	745
Aggregate purchases from ChevronTexaco		(1,134	)		(842	)		(566	)
Aggregate sales to equity investments		—			—			1
Aggregate purchases from equity investments		(175	)		(180	)		(155	)

Earnings from Equity Investments. We hold a 22.9% ownership interest in VESCO, in which ChevronTexaco or its affiliates are also investors. VESCO holds a pipeline gathering system, a processing plant, a fractionator and an underground natural gas liquids storage facility in Louisiana. During the years ended December 31, 2004, 2003 and 2002, our portion of the net income from VESCO was approximately $8 million, $6 million and $6 million, respectively.

Collateral for Dynegy Debt. A significant portion of our assets are pledged as collateral for debt held by subsidiaries of Dynegy, principally DHI, that are not part of DMS. In addition, we and substantially all of our wholly-owned subsidiaries guarantee this debt. The maximum amount of parent company debt which can be collateralized by our assets is limited to 15% of DHI’s net tangible assets at the time of any new Dynegy secured debt issuance. The last such issuance of Dynegy secured debt was May 28, 2004, and the maximum debt collateralized by our assets has since been limited to $1,212 million. At December 31, 2004 and 2003, such parent company debt consists of the following:

	December 31, 2004				December 31, 2003
	DMS Assets Pledged as Collateral		Carrying Value of Debt at Dynegy		DMS Assets Pledged as Collateral		Carrying Value of Debt at Dynegy
	(in millions)
Term Loan, floating rate due through 2010	$	498	$	597	$	—	$	—
Second Priority Senior Secured Notes, floating rate due 2008		32		225		32		225
Second Priority Senior Secured Notes, 9.875% due 2010		165		625		165		625
Second Priority Senior Secured Notes, 10.125% due 2013		280		900		280		900
ABG Gas Supply Credit Agreement		—		—		185		185
Generation Facility Debt, due 2007		152		182		184		184
Outstanding Letters of Credit		79		94		188		188
		1,206				1,034
Unamortized premium on debt, net		6				12
Total long-term debt collateralized by DMS assets	$	1,212			$	1,046

DHI Term Loan and Credit Facility. Effective May 28, 2004, DHI entered into a $1.3 billion credit facility consisting of:

• a $700 million secured revolving credit facility that matures on May 28, 2007; and

• a $600 million secured amortizing term loan that matures on May 28, 2010.

The revolving credit facility provides funding for general corporate purposes and is also available for the issuance of letters of credit. No borrowing are outstanding under the revolving credit facility during any of the periods presented. Borrowings under the revolving credit facility bear interest, at DHI’s option, at (i) a base rate

F-128

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

plus 3.00% per annum or (ii) LIBOR plus 4.00% per annum. A letter of credit fee is payable on the undrawn amount of each letter of credit outstanding at a percentage per annum equal to 4.00% of such undrawn amount. We also incur additional fees for issuing letters of credit. An unused commitment fee of 0.50% is payable on the unused portion of the revolving credit facility.

Of the $600 million in proceeds from the term loan drawn at closing, a portion was used by Dynegy to post cash collateral in lieu of letters of credit, while approximately $19 million was used to pay fees and expenses incurred in connection with the new facility. These fees have been capitalized and are being amortized over the terms of the credit facility. In August 2004, $154 million of the proceeds from the $600 million term loan were used to pre-pay all outstanding indebtedness and other amounts owed in connection with other Dynegy debt. The remaining proceeds, subject to specified restrictions in the credit facility, are available for general Dynegy purposes. Borrowings under the term loan bear interest, at DHI’s option, at (i) a base rate plus 3.00% per annum or (ii) LIBOR plus 4.00% per annum.

The credit facility provides for no amortization of principal prior to the maturity dates except (i) upon the occurrence of a mandatory prepayment event as defined in the credit facility and (ii) term loan amortization of 1% per annum.

The credit facility generally prohibits DHI and its subsidiaries, subject to specified exceptions, from incurring additional debt. Notwithstanding this restriction, DHI may issue, to the extent permitted by the more restrictive covenants in the indenture governing the DHI second priority senior secured notes, (i) up to $700 million of additional second lien or junior secured debt or unsecured debt, provided such additional debt matures at least six months after the term loan, and (ii) permitted refinancing indebtedness.

The credit facility generally prohibits DHI and its subsidiaries from pre-paying, redeeming or repurchasing its outstanding debt or preferred stock. Notwithstanding this restriction, DHI may pre-pay, repurchase or redeem its remaining 2005 and 2006 senior notes and the Generation facility debt. DHI also may pre-pay, repurchase or redeem its other senior unsecured notes and its second priority senior secured notes, subject to specified conditions.

DHI is prohibited from (i) permitting its Secured Debt/EBITDA Ratio (as defined in the credit facility) on and after September 30, 2004 to exceed specified ratios; (ii) permitting liquidity to be less than $200 million for a period of more than ten consecutive business days; or (iii) making capital expenditures during each four fiscal quarter period in excess of a designated amount, subject to specified exceptions.

The terms and conditions of the credit facility are described in more detail in the definitive agreements governing the credit facility, which are filed and/or incorporated by reference as exhibits to the Dynegy Inc. second quarter 2004 Form 10-Q.

DHI Second Priority Senior Secured Notes. In August 2003, DHI issued $1.45 billion in second priority senior secured notes, comprised of: (i) $225 million in floating rate notes due 2008 which accrue interest at a rate of LIBOR plus 650 basis points (reset on a quarterly basis); (ii) $525 million in 9.875% notes due 2010 with a yield to maturity of 10.0%; and (iii) $700 million in 10.125% notes due 2013 with a yield to maturity of 10.25%.

In October 2003, DHI consummated a follow-on offering of $300 million aggregate principal amount of additional second priority senior secured notes, comprised of: (i) $100 million of 9.875% second priority senior secured notes due 2010 issued at a premium to par of 104.25% with a yield to maturity of approximately 9.0%; and (ii) $200 million of 10.125% second priority senior secured notes due 2013 issued at a premium to par of

F-129

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

105.25% with a yield to maturity of approximately 9.3%. Each of these series of additional notes are treated as a single class with the corresponding series of DHI second priority senior secured notes that were originally issued in August 2003.

Each of DHI’s existing and future wholly owned domestic subsidiaries that guarantee DHI’s obligations under its credit facility also guarantee the obligations under the notes on a senior secured basis. In addition, Dynegy and its other subsidiaries that guarantee DHI’s existing credit facility also guarantee the obligations under the notes on a senior secured basis. The notes and guarantees are senior obligations secured by a second-priority lien on, subject to certain exceptions and permitted liens, all of DHI’s and its guarantors’ existing and future property and assets that secure DHI’s obligations under its credit facility.

The indenture governing the notes contains restrictive covenants that limit the ability of DHI and its subsidiaries that guarantee the notes to, among other things: (1) redeem, repurchase or pay dividends or distributions on capital stock; (2) make investments or restricted payments; (3) incur or guarantee additional indebtedness; (4) create certain liens; (5) engage in sale and leaseback transactions; (6) consolidate, merge or transfer all or substantially all of its assets; or (7) engage in certain transactions with affiliates.

Generation Facility Debt. Dynegy previously entered into a lease arrangement in for the purpose of constructing a generation facility located in Kentucky. As originally constituted, this arrangement required variable-rate interest only payments that include an option to purchase the related assets at maturity of the facility for a balloon payment equal to the principal balance on the financing. Upfront fees with Dynegy’s generation facility lease arrangement are capitalized and amortized over the term of the arrangement. The generation lease arrangement expires in 2007 and bears interest at LIBOR plus 1.5% to 2.5%.

ABG Gas Supply Agreement. In April 2001, ABG Gas Supply entered into a credit agreement in order to provide specific project financing. Advances under the agreement allowed ABG Gas Supply to purchase natural gas contracts with the underlying physical gas supply to be sold to Dynegy under an existing natural gas purchase and sale agreement. The credit agreement requires ABG Gas Supply to repay the advances in monthly installments commencing February 2002 from funds received from Dynegy under the natural gas purchase and sale agreement. The advances bear interest at a LIBOR rate plus a margin as defined in the agreement (2.415% at December 31, 2003). All advances were repaid in full in August 2004.

Note 9—Commitments and Contingencies

Summary of Material Legal Proceedings

Environmental Litigation. We are party to legal proceedings arising in the ordinary course of business. In management’s opinion, the disposition of these ordinary course matters will not materially adversely affect our financial condition, results of operations or cash flows. We record reserves for estimated losses from contingencies when information available indicates that a loss is probable and the amount of the loss is reasonably estimable under SFAS No. 5. For environmental matters, we record liabilities when remedial efforts are probable and the costs can be reasonably estimated in accordance with SOP 96-1 “Environmental Remediation Liabilities”. Environmental reserves do not reflect management’s assessment of the insurance coverage that may be applicable to the matters at issue. Management has assessed each of the matters based on current information and made a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought and the probability of success. We have established environmental liabilities of $2 million and $3 million at December 31, 2004 and 2003, respectively, primarily related to remediation of ground water contamination. We cannot make any assurances that the amount of any reserves or

F-130

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

potential insurance coverage will be sufficient to cover the cash obligations we might incur as a result of litigation or regulatory proceedings, payment of which could be material.

Apache Litigation. In 2002, Apache Corporation filed suit in state court against our subsidiary, Versado, as purchaser and processor of Apache’s gas, and DMS, as operator of the Versado assets in New Mexico, seeking more than $9 million in damages. The plaintiff’s petition, as amended, alleges (i) excessive field losses of natural gas from wells owned by the plaintiff, (ii) that Versado engaged in “sham” transactions with affiliates, resulting in Versado not receiving fair market value when it sells gas and liquids, and (iii) that the formula for calculating the amount Versado receives from its buyers of gas and liquids is flawed since it is based on gas price indexes that these same affiliates are alleged to have manipulated by providing false price information to the index publisher. At trial, the plaintiff’s claim with respect to the alleged “sham” transactions and index manipulation, among others, were severed by the court and abated for a future trial, and the jury found in favor of the plaintiff on the remaining lost gas claim, awarding approximately $1.6 million in damages. In 2004, our motion to set aside this judgment was granted by the court, the jury’s award to the plaintiff was vacated, and in response, the plaintiff filed notice of appeal and their appellate brief with the court. The parties attended mediation in February 2005, subsequent to year end, but did not reach a settlement. Settlement discussions continue outside of mediation. Barring settlement, we expect to file our response to the plaintiff’s appellate briefs in 2005. We do not believe that any liability we might incur as a result of this litigation would have a material adverse effect on our financial condition, results of operations or cash flows.

Maxus Litigation. In 2002, we were found liable for failing to deliver processable gas to a processing plant in Oklahoma owned by Midland Energy, formerly known as Maxus Exploration Co. (“Maxus”). The judgment was appealed, but in 2003 was upheld in part, and after exhausting all further options, we paid a $6.9 million final settlement in 2004.

Other Commitments and Contingencies.

In conducting our operations, we have routinely entered into long-term commodity purchase and sale commitments, as well as agreements that commit future cash flow to the lease or acquisition of assets used in our businesses. These commitments have been typically associated with commodity supply arrangements, capital projects, reservation charges associated with firm transmission, transportation, equipment and plant sites.

Firm Capacity Payments. We have entered into firm capacity payments related to storage and transportation of natural gas liquids. Such arrangements are routinely used in the physical movement and storage of natural gas liquids consistent with our business strategy. The total of such obligations at December 31, 2004 are as follows: 2005-$1.2 million; 2006-$0.3 million; 2007-$0.3 million; 2008-$0.3 million; 2009-$.3 million and beyond-$2.7 million.

Other Minimum Commitments. Minimum commitments in connection with site leases for plants at December 31, 2004, were as follows: 2005- $0.4 million; 2006-$0.4 million; 2007-$0.4 million; 2008-$0.4 million; 2009-$0.4 million and beyond-$5.4 million. Rental payments made under the terms of these arrangements totaled $0.9 million in 2004, $0.3 million in 2003 and $0.3 million in 2002.

Guarantees. We routinely enter into contractual agreements that contain various representations, warranties, indemnifications and guarantees. Examples of such agreements include, but are not limited to, service agreements, equipment purchase agreements, engineering and technical service agreements, and procurement and construction contracts. Some agreements contain indemnities that cover the other party’s negligence or limit the other party’s liability with respect to third-party claims, in which event we will effectively be indemnifying the

F-131

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

other party. Virtually all such agreements contain representations or warranties that are covered by indemnifications against the losses incurred by the other parties in the event such representations and warranties are false. While there is always the possibility of a loss related to such representations, warranties, indemnifications and guarantees in our contractual agreements, and such loss could be significant, management is unable to estimate any range of loss and considers the probability of loss to be remote.

We have also entered into various indemnifications regarding environmental, tax, employee and other representations when completing our Sherman, Hackberry and Indian Basin asset sales. We carry reserves for existing environmental, tax and employee liabilities, when such are identified, and have incurred no other expense relating to these indemnities. Management considers the probability of loss to be remote. There is always the possibility of a loss related to such indemnifications, of which the maximum potential exposure to the Company cannot be reasonably estimated.

Note 10—Regulatory Issues

We are subject to regulation by various federal, state, local and foreign agencies, in the normal course of business. Compliance with these regulations requires general and administrative, capital and operating expenditures including those related to monitoring, pollution control equipment and permitting at various operating facilities and remediation obligations. We cannot predict the outcome of regulatory developments or the effects that they might have on our business.

Note 11—Stock-Based Compensation

Restricted Stock. During the first quarter 2004, Dynegy awarded an aggregate 76,814 shares of restricted stock to our employees, of which 76,424 shares were outstanding, but not vested, at December 31, 2004. The closing stock price of Dynegy’s Class A common stock was $4.48 on the date of grants. These unvested restricted shares vest on the third anniversary from the date of grant. The share awards were awarded pursuant to the terms of the Dynegy 2000 and 2001 Non-Executive Plans, which are described in “Stock Options” below.

Stock Options. Dynegy has six stock option plans in which our employees participate, all of which contain authorized shares of Dynegy’s Class A common stock. Each option granted is exercisable at an option price, which ranges from $1.47 per share to $47.19 per share for options currently outstanding. A brief description of each plan is provided below:

• NGC Plan. Created early in Dynegy’s history and revised prior to Dynegy becoming a publicly traded company in 1996, this plan contains 13,651,802 authorized shares, has a 10-year term, and expires in May 2006. All option grants are vested.

• Employee Equity Plan. This plan expired in May 2002 and is the only plan in which Dynegy granted options below the fair market value of Class A common stock on the date of grant. This plan contains 20,358,802 authorized shares, and grants from this plan vest on the fifth anniversary from the date of the grant. All option grants are vested.

• Dynegy 1999 Long-Term Incentive Plan (“LTIP”). This annual compensation plan contains 6,900,000 authorized shares, has a 10-year term and expires in 2009. All option grants are vested.

• Dynegy 2000 LTIP. This annual compensation plan, created for all employees upon the merger of Illinova and Dynegy, contains 10,000,000 authorized shares, has a 10-year term and expires in February 2010. Grants from this plan vest in equal annual installments over a three-year period.

F-132

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

• Dynegy 2001 Non-Executive LTIP. This plan is a broad-based plan and contains 10,000,000 authorized shares, has a ten-year term and expires in September 2011. Grants from this plan vest in equal annual installments over a three-year period.

• Dynegy 2002 LTIP. This annual compensation plan contains 10,000,000 authorized shares, has a 10-year term and expires in May 2012. Grants from this plan vest in equal annual installments over a three-year period.

All of Dynegy’s option plans cease vesting for employees who are terminated for cause. For voluntary and involuntary termination, disability, retirement or death, continued vesting and/or an extended period in which to exercise vested options may apply, dependent upon the terms of the grant agreement in which a specific grant was awarded. Options awarded to Dynegy’s executive officers and others who participate in Dynegy’s Executive Severance Pay Plan vest immediately upon the occurrence of a change in control in accordance with the terms of the Second Supplemental Amendment to the Executive Severance Pay Plan.

Compensation expense related to options granted and restricted stock awarded totaled $1 million or less for each of the years ended December 31, 2004, 2003 and 2002. We recognize compensation expense ratably over the vesting period of the respective awards. Total options outstanding and exercisable for 2004, 2003 and 2002 were as follows:

	Year Ended December 31,
	2004				2003				2002
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
	(options in thousands)
Outstanding at beginning of period	2,578		$	18.12	648		$	23.17	728		$	22.91
Granted	165			4.48	378			1.77	—			—
Exercised	(25	)		3.69	—			—	(24	)		6.08
Transferred in	119			20.01	1,984			19.66	22			23.78
Cancelled, expired or transferred out	(895	)		17.76	(432	)		18.47	(78	)		26.19
Outstanding at end of period	1,942			17.43	2,578			18.12	648			23.17
Exercisable at end of period	1,597			20.53	1,930			18.92	361			21.09
Weighted average fair value of options granted during the period at market				4.48				1.77				—

F-133

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During the three-year period ended December 31, 2004, Dynegy granted no options at an exercise price less than the market price on the date of grant. Options outstanding as of December 31, 2004 are summarized below:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Options Outstanding at December 31, 2004	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Number of Options Exercisable at December 31, 2004	Weighted Average Exercise Price
	(options in thousands)
$1.47-$1.77	293	7.8	$	1.75	113	$	1.71
$4.10-$4.48	266	6.2	$	4.40	102	$	4.26
$9.31-$10.51	236	3.8	$	10.06	236	$	10.06
$13.04-$16.62	449	4.2	$	15.74	448	$	15.74
$23.38-$23.85	428	6.5	$	23.73	428	$	23.73
$29.91-$36.56	12	5.5	$	35.60	12	$	35.60
$39.99-$47.19	258	6.1	$	47.12	258	$	47.12
	1,942				1,597

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model, with the following weighted-average assumptions used for grants in 2004, 2003 and 2002: dividends per year of zero for 2004 and 2003 and $0.15 for 2002; expected volatility of 87.5%, 89.6%, and 74.3%, respectively; a risk-free interest rate of 4.1%, 3.9%, and 4.2%, respectively; and an expected option life of 10 years for all periods.

Note 12—Employee Compensation, Savings and Pension Plans

Short-Term Incentive Plan. Our employees participate in a Dynegy maintained discretionary incentive compensation plan to provide employees with rewards for the achievement of corporate goals and individual, professional accomplishments. Specific awards are at the discretion of the Compensation and Human Resources Committee of the Board of Directors of Dynegy.

401(k) Savings Plan. Our employees participated in the Dynegy Inc. 401(k) Savings Plan, which meets the requirements of Section 401(k) of the Internal Revenue Code and is a defined contribution plans subject to the provisions of ERISA. This plan and the related trust fund are established and maintained for the exclusive benefit of participating employees in the United States. All employees of designated Dynegy subsidiaries are eligible to participate in the plan. Employee pre-tax contributions to the plan are matched 100%, up to a maximum of 5% of base pay, subject to IRS limitations. Vesting in our contributions is based on years of service at 25% per full year of service. We may also make annual discretionary contributions to employee accounts, subject to our performance. Matching and discretionary contributions, if any, are allocated in the form of units in the Dynegy common stock fund. In connection with these annual discretionary contributions to employee accounts, we recognized $1 million of aggregate costs during each of the years ended December 31, 2004, 2003 and 2002.

Pension and Other Post-Retirement Benefits. All of our employees participate in Dynegy-sponsored defined benefit pension plans and post-retirement benefit plans. The costs of such plans are shared by Dynegy and its employees. Plan assets of funded plans and plan obligations have not been allocated to us. Our share of pension and other post-retirement benefits expense for the plans was $4 million, $3 million and $1 million in 2004, 2003 and 2002, respectively.

F-134

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition, some of our employees participated in a DMS defined benefit pension plan, which is a traditional career average or final average pay formula plan. We use a December 31 measurement date for this plan. The following tables contain information about the obligations and funded status of this plan:

	December 31,
	2004			2003
	(in millions)
Projected benefit obligation, beginning of the year	$	13.0		$	11.8
Service cost		0.3			0.3
Interest cost		0.8			0.7
Actuarial (gain) loss		0.9			0.5
Benefits paid		(0.3	)		(0.3	)
Projected benefit obligation, end of the year	$	14.7		$	13.0
Fair value of plan assets, beginning of the year	$	9.8		$	8.4
Actual return on plan assets		0.9			1.7
Benefits paid		(0.3	)		(0.3	)
Fair value of plan assets, end of the year	$	10.4		$	9.8
Funded status	$	(4.3	)	$	(3.2	)
Unrecognized actuarial (gain) loss		0.4			(0.5	)
Net amount recognized	$	(3.9	)	$	(3.7	)

Assets in this plan are managed in a master trust arrangement with other Dynegy plans. Amounts recognized in our consolidated balance sheets consist of an accrued benefit liability of $3.9 million and $3.7 million at December 31, 2004 and 2003, respectively.

The accumulated benefit obligation for the defined benefit pension plan was $12.5 million and $11.4 million at December 31, 2004 and 2003, respectively.

The components of net periodic benefit cost were:

	2004			2003			2002
	(in millions)
Service cost benefits earned during period	$	0.3		$	0.3		$	0.2
Interest cost on projected benefit obligation		0.8			0.7			0.7
Expected return on plan assets		(0.9	)		(1.0	)		(0.9	)
Recognized net actuarial loss		—			—			(0.3	)
Total net periodic benefit cost	$	0.2		$	—		$	(0.3	)

The following weighted average assumptions were used to determine benefit obligations:

	December 31,
	2004		2003
Discount rate	5.75	%	6.00	%
Rate of compensation increase	4.50	%	4.50	%

F-135

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following weighted average assumptions were used to determine net periodic benefit cost:

	Year Ended December 31,
	2004		2003		2002
Discount rate	6.00	%	6.50	%	7.50	%
Expected return on plan assets	8.75	%	9.00	%	9.00	%
Rate of compensation increase	4.50	%	4.50	%	4.50	%

Our expected long-term rate of return on plan assets for the year ended December 31, 2005 will be 8.25%. This figure begins with a blend of asset class-level returns developed under a theoretical global capital asset pricing model methodology conducted by an outside consultant. In development of this figure, the historical relationships between equities and fixed income are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long-term. Current market factors such as inflation and interest rates are also incorporated in the assumptions. The figure also incorporates an upward adjustment reflecting the plan’s use of active management and favorable past experience.

We employ a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. The intent of this strategy is to minimize plan expenses by outperforming plan liabilities over the long run. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The investment portfolio contains a diversified blend of equity and fixed income investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks as well as growth, value, and small and large capitalization. Other assets such as real estate and private equity may be used judiciously to enhance long-term returns while improving portfolio diversification.

Derivatives may be used to gain market exposure in an efficient and timely manner; however, derivatives may not be used to leverage the portfolio beyond the market value of the underlying investment. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, periodic asset/liability studies, and annual liability measurement.

Our pension plan weighted-average asset allocations by asset category were as follows:

	December 31,
	2004		2003
Equity securities	72	%	64	%
Debt securities	28	%	28	%
Real estate	—		5	%
Other	—		3	%
Total	100	%	100	%

Equity securities did not include any of Dynegy’s common at December 31, 2004 or 2003.

F-136

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In 2005, we do not expect to make any contributions to our pension plan. Our expected benefit payments for future services for our pension benefits are as follows (in millions):

	Pension Benefits
2005	$	0.4
2006		0.5
2007		0.5
2008		0.5
2009		0.5
2010-2014		4.0

Note 13—Segment Information

We comprise substantially all of the natural gas liquids segment of Dynegy. On a stand-alone basis, our business segments consist of Gas Gathering and Processing, Marketing Assets, Distribution and Marketing Services and Wholesale Marketing. We identify our reportable segments based upon their operating activity.

Our Gas Gathering and Processing segment includes assets used in the gathering of natural gas produced from oil and gas wells and processing this raw natural gas into merchantable natural gas by extracting natural gas liquids and removing impurities. These assets are located in North Texas, Louisiana and the Permian Basin of West Texas and Southeast New Mexico. We are also party to natural gas processing agreements with third-party plants.

Our Marketing Assets segment is involved with the fractionating, storing, and transporting of natural gas liquids. These assets are generally connected to and supplied, in part, by our Gas Gathering and Processing segment and are located in Mont Belvieu, Texas and West Louisiana.

Our Distribution and Marketing Services segment markets our own natural gas liquids production and also purchased natural gas liquids products. We also have the right to purchase or market substantially all of ChevronTexaco’s natural gas liquids pursuant to a Master Natural Gas Liquids Purchase Agreement that extends through August 31, 2006.

Our Wholesale Marketing segment includes our refinery services business and wholesale propane marketing operations. In our refinery services business, we provide LPG balancing services, purchasing natural gas liquids products from refinery customers and selling natural gas liquids products to various customers. Our wholesale propane marketing operations include the sale of propane and related logistics services to multi-state retailers, independent retailers and other end users.

F-137

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Reportable segment information, including intercompany transactions within this consolidated group, for the years ended December 31, 2004, 2003 and 2002, is presented below.

Segment Data for the Year Ended December 31, 2004

(in millions)

	Gas Gathering and Processing			Marketing Assets			Distribution and Marketing Services			Wholesale Marketing			Other and Eliminations			Total
Revenues	$	485		$	64		$	2,142		$	1,060		$	—		$	3,751
Intersegment revenues		592			104			398			82			(1,176	)		—
Total revenues		1,077			168			2,540			1,142			(1,176	)		3,751
Depreciation expense		(59	)		(30	)		(1	)		(1	)		—			(91	)
Impairment and other charges		(7	)		—			—			—			—			(7	)
Operating income		192			31			26			12			—			261
Earnings from unconsolidated investments		7			3			—			—			—			10
Other items, net		(19	)		(2	)		(1	)		—			—			(22	)
Net income																$	249
Identifiable assets	$	750		$	469		$	228		$	138		$	—		$	1,585
Unconsolidated investments	$	55		$	23		$	—		$	—		$	—		$	78
Capital expenditures	$	(52	)	$	(6	)	$	(1	)	$	—		$	—		$	(59	)

Segment Data for the Year Ended December 31, 2003

(in millions)

	Gas Gathering and Processing			Marketing Assets			Distribution and Marketing Services			Wholesale Marketing			Other and Eliminations			Total
Revenues	$	399		$	62		$	1,827		$	960		$	—		$	3,248
Intersegment revenues		479			90			332			59			(960	)		—
Total revenues		878			152			2,159			1,019			(960	)		3,248
Depreciation expense		(55	)		(29	)		(2	)		(1	)		—			(87	)
Impairment and other charges		1			—			—			—			—			1
Operating income		93			25			13			12			—			143
Earnings (losses) from unconsolidated investments		2			(4	)		—			—			—			(2	)
Other items, net		(17	)		(1	)		1			—			—			(17	)
Net income																$	124
Identifiable assets	$	797		$	504		$	197		$	125		$	—		$	1,623
Unconsolidated investments	$	59		$	23		$	—		$	—		$	—		$	82
Capital expenditures	$	(46	)	$	(8	)	$	(2	)	$	—		$	—		$	(56	)

F-138

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Segment Data for the Year Ended December 31, 2002

(in millions)

	Gas Gathering and Processing			Marketing Assets			Distribution and Marketing Services			Wholesale Marketing			Other and Eliminations			Total
Revenues	$	262		$	50		$	1,642		$	772		$	—		$	2,726
Intersegment revenues		385			94			275			72			(826	)		—
Total revenues		647			144			1,917			844			(826	)		2,726
Depreciation expense		(56	)		(28	)		(1	)		(1	)		—			(86	)
Impairment and other charges		(9	)		(5	)		(2	)		(1	)		—			(17	)
Operating income		14			14			19			7			—			54
Earnings from unconsolidated investments		7			9			—			—			—			16
Other items, net		(13	)		(5	)		—			—			—			(18	)
Net income																$	52
Identifiable assets	$	843		$	526		$	174		$	112		$	—		$	1,655
Unconsolidated investments	$	67		$	35		$	—		$	—		$	—		$	102
Capital expenditures	$	(66	)	$	(40	)	$	(3	)	$	—		$	—		$	(109	)

Note 14—Subsequent Events

Sale of DMS LP. On July 1, 2005, our limited partner, DMS LP, sold its entire interest in DMS to DMT Holdings, Inc. (“DMTHI”), a Dynegy owned affiliate, for $2.415 billion, which approximated the fair market value of the limited partner interest. In a series of transactions, DMTHI contributed its entire limited partner interest in DMS to one of its wholly-owned subsidiaries, Dynegy Midstream Holdings, Inc.

Sale of DMS. On August 2, 2005, Dynegy and our partners entered into an agreement to sell the entire partnership interests in DMS to Targa Resources, Inc. and two of its subsidiaries (collectively referred to as “Targa”). Dynegy expects to receive approximately $2.475 billion in cash proceeds from the sale, which include the base purchase price and DMS’ cash collateral. The base purchase price of $2.35 billion in cash will be paid by Targa at closing, subject to certain purchase price adjustments. In addition, cash collateral of DMS outstanding on the closing date, as defined in the purchase agreement, will be paid by Targa within 60 days of closing. The parties have made representations, warranties and covenants in the purchase agreement and the completion of the transaction is conditioned upon the expiration or termination of the Hart-Scott-Rodino waiting period and fulfillment of other closing conditions as set forth in the purchase agreement, including the lack of a material adverse effect. Dynegy expects its sale to Targa to close in the fourth quarter of 2005.

Hurricane Katrina. On August 29, 2005, Hurricane Katrina struck the Gulf Coast region of the United States, causing widespread damage. The hurricane damaged certain of our facilities, including the Yscloskey gas processing plant in which we have a proportionally consolidated 26% interest, the Toca gas processing plant in which we have a proportionally consolidated 9% interest, and the VESCO complex, in which we have a 23% equity interest and accounted for using the equity method. Dynegy carries, for the benefit of DMS, property damage insurance which we believe contains customary deductibles, limits and sub-limits for companies in our industry.

Additionally, our financial condition, results of operations and cash flows may be adversely affected by hurricane damage to our facilities, suppliers and customers. In addition to the loss of revenues at the facilities

F-139

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

which were damaged, the loss of NGL supplies to our Marketing and Distribution segment and our Wholesale Marketing segment may impact the profitability of those segments, as incremental costs of supply and distribution may reduce margins. We are in the process of evaluating the impact to our financial condition, results of operations and cash flows. Our share of operating income from the Yscloskey and Toca gas processing plants was $8 million, or 3% of our consolidated operating income, for the year ended December 31, 2004. Equity earnings from VESCO were $7 million for the year ended December 31, 2004. Dynegy carries business interruption insurance for the benefit of DMS covering lost profits and other costs and losses triggered by specified circumstances or events, including hurricanes, with limits which we believe are customary for companies in our industry. These policies provide that we may make claims for covered interruption of business following the expiration of the deductible periods of 30 days for onshore interruptions and 45 days for offshore interruptions. We are currently evaluating the damage to our facilities and business interruption losses. The amount of insured and uninsured losses and the timing of the reimbursement of losses has not yet been determined.

Sale of Land. On September 9, 2005, we sold a tract of land at our Port Everglades, Florida terminal for approximately $11 million in cash. As a result, we expect to recognize a gain of approximately $10 million in the third quarter of 2005 in our Marketing Assets segment. The gain will be included in gain on sale of assets, net in our consolidated statements of operations.

Guarantee of Debt Held by Targa. Although we have not historically incurred debt obligations, a significant portion of our assets are pledged as collateral for debt issued by Dynegy, and we have guaranteed debt issued by Dynegy. Upon completion of the sale of DMS to Targa, our obligation as guarantors of debt issued by Dynegy will be terminated and all liens and mortgages on our assets pledged as collateral for such debt will be released. Please see Note 8—Related Party Transactions for further information.

Further, upon completion of our sale to Targa and Targa’s debt offering, Dynegy Midstream Services, Limited Partnership (the “Parent”) and substantially all of the Parent’s wholly-owned subsidiaries will become guarantors of Targa’s obligations under its senior secured credit facilities and senior notes (as presented in Section—Description of the Notes of the offering circular for Targa senior notes due 2013; the “Offering Circular”). These guarantees will be on a full and unconditional, joint and several bases. The following condensed consolidating financial statements are presented on the equity method, reflecting Targa’s anticipated guarantor structure, and shown including investments in subsidiaries, recorded at cost and adjusted for the Parent’s ownership share of the subsidiaries’ cumulative results of operations, capital contributions and distributions and other equity changes. The guarantor structure presented within the Offering Circular is preliminary and subject to change based upon closing of related financing transactions and consummation of the DMS acquisition. Were the guarantor structure to subsequently change, the following condensed consolidating financial statements would also change accordingly.

F-140

The following historical condensed consolidating financial statements reflect the anticipated guarantor structure under Targa as of September 20, 2005:

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2004

(in millions)

	Parent Guarantor			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations			Total
ASSETS
Current Assets
Cash and cash equivalents	$	—		$	—		$	17		$	—		$	17
Accounts receivable		23			255			17			—			295
Inventory		—			58			—			—			58
Prepayments		4			38			—			—			42
Total Current Assets		27			351			34			—			412
Property, Plant and Equipment		1,138			115			518			—			1,771
Accumulated depreciation		(480	)		(40	)		(174	)		—			(694	)
Property, Plant and Equipment, Net		658			75			344			—			1,077
Other Assets
Unconsolidated equity investments		78			—			—			—			78
Net investment in consolidated subsidiaries		603			9			—			(612	)		—
Goodwill		15			—			—			—			15
Other long-term assets		3			—			1			(1	)		3
Total Assets	$	1,384		$	435		$	379		$	(613	)	$	1,585
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	17		$	58		$	5		$	—		$	80
Accrued liabilities		46			3			27			—			76
Total Current Liabilities		63			61			32			—			156
Other long-term liabilities		25			1			2			(1	)		27
Total Liabilities		88			62			34			(1	)		183
Minority Interest		—			—			106			—			106
Equity		1,296			373			239			(612	)		1,296
Total Liabilities and Equity	$	1,384		$	435		$	379		$	(613	)	$	1,585

F-141

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2003

(in millions)

	Parent Guarantor			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations			Total
ASSETS
Current Assets
Cash and cash equivalents	$	—		$	—		$	20		$	—		$	20
Accounts receivable		22			231			14			—			267
Inventory		—			42			—			—			42
Prepayments		8			41			—			—			49
Total Current Assets		30			314			34			—			378
Property, Plant and Equipment		1,157			107			499			—			1,763
Accumulated depreciation		(433	)		(35	)		(150	)		—			(618	)
Property, Plant and Equipment, Net		724			72			349			—			1,145
Other Assets
Unconsolidated equity investments		82			—			—			—			82
Net investment in consolidated subsidiaries		564			9			—			(573	)		—
Goodwill		15			—			—			—			15
Other long-term assets		3			1			—			(1	)		3
Total Assets	$	1,418		$	396		$	383		$	(574	)	$	1,623
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	8		$	64		$	6		$	—		$	78
Accrued liabilities		61			5			21			—			87
Total Current Liabilities		69			69			27			—			165
Other long-term liabilities		27			1			2			(1	)		29
Total Liabilities		96			70			29			(1	)		194
Minority Interest		—			—			107			—			107
Equity		1,322			326			247			(573	)		1,322
Total Liabilities and Equity	$	1,418		$	396		$	383		$	(574	)	$	1,623

F-142

CONDENSED CONSOLIDATING INCOME STATEMENT

For the Year Ended December 31, 2004

(in millions)

	Parent Guarantor			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations			Total
Revenues from third parties	$	80		$	2,124		$	41		$	—		$	2,245
Revenues from affiliates		872			1,573			360			(1,299	)		1,506
Total revenues		952			3,697			401			(1,299	)		3,751
Cost of sales, exclusive of depreciation shown separately below		(770	)		(3,634	)		(309	)		1,299			(3,414	)
Depreciation expense		(57	)		(5	)		(29	)		—			(91	)
Impairment charge		(5	)		—			—			—			(5	)
Severance and restructuring reductions (charges)		(1	)		—			(1	)		—			(2	)
Gain (loss) on sale of assets, net		70			(1	)		—			—			69
General and administrative expenses		(26	)		(21	)		—			—			(47	)
Operating income		163			36			62			—			261
Earnings (losses) from unconsolidated investments		10			—			—			—			10
Other expense, net		—			—			—			—			—
Minority interest expense		—			—			(22	)		—			(22	)
Net income before equity in earnings of consolidated subsidiaries		173			36			40			—			249
Equity in earnings of consolidated subsidiaries		76			—			—			(76	)		—
Net income	$	249		$	36		$	40		$	(76	)	$	249

CONDENSED CONSOLIDATING INCOME STATEMENT

For the Year Ended December 31, 2003

(in millions)

	Parent Guarantor			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations			Total
Revenues from third parties	$	65		$	1,930		$	38		$	—		$	2,033
Revenues from affiliates		720			1,257			312			(1,074	)		1,215
Total revenues		785			3,187			350			(1,074	)		3,248
Cost of sales, exclusive of depreciation shown separately below		(647	)		(3,136	)		(277	)		1,074			(2,986	)
Depreciation expense		(56	)		(8	)		(23	)		—			(87	)
Impairment charge		—			—			—			—			—
Severance and restructuring reductions (charges)		1			—			—			—			1
Gain (loss) on sale of assets, net		23			—			—			—			23
General and administrative expenses		(34	)		(22	)		—			—			(56	)
Operating income		72			21			50			—			143
Earnings (losses) from unconsolidated investments		(2	)		—			—			—			(2	)
Other expense, net		1			1			(2	)		—			—
Minority interest expense		—			—			(17	)		—			(17	)
Net income before equity in earnings of consolidated subsidiaries		71			22			31			—			124
Equity in earnings of consolidated subsidiaries		53			—			—			(53	)		—
Net income	$	124		$	22		$	31		$	(53	)	$	124

F-143

CONDENSED CONSOLIDATING INCOME STATEMENT

For the Year Ended December 31, 2002

(in millions)

	Parent Guarantor			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations			Total
Revenues from third parties	$	27		$	1,725		$	36		$	—		$	1,788
Revenues from affiliates		572			1,047			225			(906	)		938
Total revenues		599			2,772			261			(906	)		2,726
Cost of sales, exclusive of depreciation shown separately below		(507	)		(2,721	)		(210	)		906			(2,532	)
Depreciation expense		(57	)		(7	)		(22	)		—			(86	)
Impairment charge		—			—			—			—			—
Severance and restructuring reductions (charges)		(13	)		(4	)		—			—			(17	)
Gain (loss) on sale of assets, net		(1	)		—			—			—			(1	)
General and administrative expenses		(21	)		(15	)		—			—			(36	)
Operating income		—			25			29			—			54
Earnings (losses) from unconsolidated investments		16			—			—			—			16
Other expense, net		(10	)		—			—			—			(10	)
Minority interest expense		—			—			(8	)		—			(8	)
Net income before equity in earnings of consolidated subsidiaries		6			25			21			—			52
Equity in earnings of consolidated subsidiaries		46			—			—			(46	)		—
Net income	$	52		$	25		$	21		$	(46	)	$	52

F-144

CONDENSED CONSOLIDATING CASH FLOWS

For the Year Ended December 31, 2004

(in millions)

	Parent Guarantor			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations		Total
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	173		$	36		$	40		$	—	$	249
Adjustments to reconcile net income to net cash flows from operating activities		(141	)		(27	)		45			—		(123	)
Net cash provided by operating activities		32			9			85			—		126
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(26	)		(9	)		(24	)		—		(59	)
Return of investment from unconsolidated investments		3			—			—			—		3
Proceeds from asset sales, net		100			—			—			—		100
Net cash provided by (used in) investing activities		77			(9	)		(24	)		—		44
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners, net		(150	)		—			—			—		(150	)
Distributions (contributions) between affiliates		41			—			(41	)		—		—
Distribution to minority interest holders		—			—			(23	)		—		(23	)
Net cash used in financing activities		(109	)		—			(64	)		—		(173	)
Net decrease in cash and cash equivalents		—			—			(3	)		—		(3	)
Cash and cash equivalents, beginning of period		—			—			20			—		20
Cash and cash equivalents, end of period	$	—		$	—		$	17		$	—	$	17

CONDENSED CONSOLIDATING CASH FLOWS

For the Year Ended December 31, 2003

(in millions)

	Parent Guarantor			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations		Total
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	71		$	22		$	31		$	—	$	124
Adjustments to reconcile net income to net cash flows from operating activities		(111	)		(18	)		50			—		(79	)
Net cash provided by (used in) operating activities		(40	)		4			81			—		45
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(26	)		(4	)		(26	)		—		(56	)
Return of investment from unconsolidated investments		4			—			—			—		4
Proceeds from asset sales, net		35			—			—			—		35
Net cash provided by (used in) investing activities		13			(4	)		(26	)		—		(17	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners, net		(8	)		—			—			—		(8	)
Distributions (contributions) between affiliates		34			—			(34	)		—		—
Distribution to minority interest holders		1			—			(20	)		—		(19	)
Net cash provided by (used in) financing activities		27			—			(54	)		—		(27	)
Net increase (decrease) in cash and cash equivalents		—			—			1			—		1
Cash and cash equivalents, beginning of period		—			—			19			—		19
Cash and cash equivalents, end of period	$	—		$	—		$	20		$	—	$	20

F-145

CONDENSED CONSOLIDATING CASH FLOWS

For the Year Ended December 31, 2002

(in millions)

	Parent Guarantor			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations		Total
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	6		$	25		$	21		$	—	$	52
Adjustments to reconcile net income to net cash flows from operating activities		167			(19	)		29			—		177
Net cash provided by operating activities		173			6			50			—		229
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(84	)		(6	)		(19	)		—		(109	)
Return of investment from unconsolidated investments		2			—			—			—		2
Proceeds from asset sales, net		—			—			—			—		—
Net cash used in investing activities		(82	)		(6	)		(19	)		—		(107	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners, net		(105	)		—			—			—		(105	)
Distributions (contributions) between affiliates		14			—			(14	)		—		—
Distribution to minority interest holders		—			—			(5	)		—		(5	)
Net cash used in financing activities		(91	)		—			(19	)		—		(110	)
Net increase (decrease) in cash and cash equivalents		—			—			12			—		12
Cash and cash equivalents, beginning of period		—			—			7			—		7
Cash and cash equivalents, end of period	$	—		$	—		$	19		$	—	$	19

F-146

ANNEX A

LETTER OF TRANSMITTAL

TO TENDER

OUTSTANDING 8 ¹/2% SENIOR NOTES DUE 2013

OF

TARGA RESOURCES, INC.

AND

TARGA RESOURCES FINANCE CORPORATION

PURSUANT TO THE EXCHANGE OFFER AND PROSPECTUS

DATED                     , 2007

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,

NEW YORK CITY TIME, ON                      , 2007 (THE “EXPIRATION DATE”),

UNLESS THE EXCHANGE OFFER IS EXTENDED BY THE ISSUERS.

The Exchange Agent for the Exchange Offer is:

[Name]

[Address]

[Attention: ]

If you wish to exchange currently outstanding 8 ¹/2% Senior Notes due 2013 (the “outstanding notes”) for an equal aggregate principal amount at maturity of new 8 ¹/2% Senior Notes due 2013 pursuant to the exchange offer, you must validly tender (and not withdraw) outstanding notes to the exchange agent prior to the expiration date.

The undersigned hereby acknowledges receipt of the Prospectus, dated                     , 2007 (the “Prospectus”), of Targa Resources, Inc. and Targa Resources Finance Corporation (the “Issuers”), and this Letter of Transmittal (the “Letter of Transmittal”), which together describe the Issuers’ offer (the “Exchange Offer”) to exchange their 8 ¹/2% Senior Notes due 2013 (the “New Notes”) that have been registered under the Securities Act of 1933, as amended (the “Securities Act”), for a like principal amount of their issued and outstanding 8 ¹/2% Senior Notes due 2013 (the “Outstanding Notes”). Capitalized terms used but not defined herein have the respective meaning given to them in the Prospectus.

The Issuers reserve the right, at any time or from time to time, to extend the Exchange Offer at their discretion, in which event the term “Expiration Date” shall mean the latest date to which the Exchange Offer is extended. The Issuers shall notify the Exchange Agent and each registered holder of the Outstanding Notes of any extension by oral or written notice prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date.

This Letter of Transmittal is to be used by holders of the Outstanding Notes. Tender of Outstanding Notes is to be made according to the Automated Tender Offer Program (“ATOP”) of The Depository Trust Company (“DTC”) pursuant to the procedures set forth in the Prospectus under the caption “The Exchange Offer—Procedures for Tendering.” DTC participants that are accepting the Exchange Offer must transmit their acceptance to DTC, which will verify the acceptance and execute a book-entry delivery to the Exchange Agent’s DTC account. DTC will then send a computer-generated message known as an “agent’s message” to the Exchange Agent for its acceptance. For you to validly tender your Outstanding Notes in the Exchange Offer, the Exchange Agent must receive, prior to the Expiration Date, an agent’s message under the ATOP procedures confirming that:

• DTC has received your instructions to tender your Outstanding Notes; and

• You agree to be bound by the terms of this Letter of Transmittal.

BY USING THE ATOP PROCEDURES TO TENDER OUTSTANDING NOTES, YOU WILL NOT BE REQUIRED TO DELIVER THIS LETTER OF TRANSMITTAL TO THE EXCHANGE AGENT. HOWEVER, YOU WILL BE BOUND BY ITS TERMS, AND YOU WILL BE DEEMED TO HAVE MADE THE ACKNOWLEDGMENTS AND THE REPRESENTATIONS AND WARRANTIES IT CONTAINS, JUST AS IF YOU HAD SIGNED IT.

A-1

SIGNATURES MUST BE PROVIDED

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.

Ladies and Gentlemen:

1. By tendering Outstanding Notes in the Exchange Offer, you acknowledge receipt of the Prospectus and this Letter of Transmittal.

2. By tendering Outstanding Notes in the Exchange Offer, you represent and warrant that you have full authority to tender the Outstanding Notes described above and will, upon request, execute and deliver any additional documents deemed by the Issuers to be necessary or desirable to complete the tender of Outstanding Notes.

3. You understand that the tender of the Outstanding Notes pursuant to all of the procedures set forth in the Prospectus will constitute an agreement between the undersigned and the Issuers as to the terms and conditions set forth in the Prospectus.

4. By tendering Outstanding Notes in the Exchange Offer, you acknowledge that the Exchange Offer is being made in reliance upon interpretations contained in no-action letters issued to third parties by the staff of the Securities and Exchange Commission (the “SEC”), including Exxon Capital Holdings Corp., SEC No-Action Letter (available April 13, 1989), Morgan Stanley & Co. Inc., SEC No-Action Letter (available June 5, 1991) and Shearman & Sterling, SEC No-Action Letter (available July 2, 1993), that the New Notes issued in exchange for the Outstanding Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof without compliance with the registration and prospectus delivery provisions of the Securities Act (other than a broker-dealer who purchased Outstanding Notes exchanged for such New Notes directly from the Issuers to resell pursuant to Rule 144A or any other available exemption under the Securities Act of 1933, as amended (the “Securities Act”) and any such holder that is an “affiliate” of the Issuers within the meaning of Rule 405 under the Securities Act), provided that such New Notes are acquired in the ordinary course of such holders’ business and such holders are not participating in, and have no arrangement with any other person to participate in, the distribution of such New Notes.

5. By tendering Outstanding Notes in the Exchange Offer, you hereby represent and warrant that:

(a) any New Notes will be acquired in the ordinary course of your business;

(b) you have no arrangement or understanding with any person to participate in the distribution of the New Notes;

(c) you are not our “affiliate,” as defined in Rule 405 of the Securities Act, or if you are our “affiliate,” as defined in Rule 405 of the Securities Act, you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable;

(d) if you are not a broker-dealer, you are not engaged in and do not intend to engage in the distribution of the New Notes; and

(e) if you are a broker-dealer, you will receive New Notes for your own account in exchange for Outstanding Notes that you acquired as a result of market-making activities or other trading activities and you will comply with the applicable provisions of the Securities Act including, but not limited to, delivery of a prospectus in connection with any resale of such New Notes; see “Plan of Distribution” in the prospectus.

6. You may, if you are unable to make all of the representations and warranties contained in Item 5 above and as otherwise permitted in the Registration Rights Agreement (as defined below), elect to have your Outstanding Notes registered in the shelf registration statement described in the Registration Rights Agreement, dated as of October 31, 2005 (the “Registration Rights Agreement”), by and among the Issuers, the Subsidiary Guarantors (as defined therein) and the Initial Purchasers (as defined therein). Such election may be made by

A-2

notifying the Issuers in writing at 1000 Louisiana, Suite 4300, Houston, Texas 77002, Attention: Investor Relations. By making such election, you agree, as a holder of Outstanding Notes participating in a shelf registration, to indemnify and hold harmless the Issuers, each of the directors of the Issuers, each of the officers of the Issuers who signs such shelf registration statement, each person who controls the Issuers within the meaning of either the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and each other holder of Outstanding Notes, from and against any and all losses, claims, damages or liabilities caused by any untrue statement or alleged untrue statement of a material fact contained in any shelf registration statement or prospectus, or in any supplement thereto or amendment thereof, or caused by the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; but only with respect to information relating to you furnished in writing by you or on your behalf expressly for use in a shelf registration statement, a prospectus or any amendments or supplements thereto. Any such indemnification shall be governed by the terms and subject to the conditions set forth in the Registration Rights Agreement, including, without limitation, the provisions regarding notice, retention of counsel, contribution and payment of expenses set forth therein. The above summary of the indemnification provision of the Registration Rights Agreement is not intended to be exhaustive and is qualified in its entirety by the Registration Rights Agreement.

7. If you are a broker-dealer that will receive New Notes for your own account in exchange for Outstanding Notes that were acquired as a result of market-making activities or other trading activities, you acknowledge by tendering Outstanding Notes in the Exchange Offer, that you will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, you will not be deemed to admit that you are an “underwriter” within the meaning of the Securities Act. If you are a broker-dealer and Outstanding Notes held for your own account were not acquired as a result of market-making or other trading activities, such Outstanding Notes cannot be exchanged pursuant to the Exchange Offer.

8. Any of your obligations hereunder shall be binding upon your successors, assigns, executors, administrators, trustees in bankruptcy and legal and personal representatives.

INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER

1. Book-Entry Confirmations.

Any confirmation of a book-entry transfer of Outstanding Notes to the Exchange Agent’s account at DTC (a “Book-Entry Confirmation”), as well as any Agent’s Message and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein prior to 5:00 P.M., New York City time, on the Expiration Date.

2. Partial Tenders.

Tenders of Outstanding Notes will be accepted only in integral multiples of $1,000. The entire principal amount of Outstanding Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise communicated to the Exchange Agent. If the entire principal amount of all Outstanding Notes is not tendered, then Outstanding Notes for the principal amount of Outstanding Notes not tendered and New Notes issued in exchange for any Outstanding Notes accepted will be delivered to the holder via the facilities of DTC promptly after the Outstanding Notes are accepted for exchange.

3. Validity of Tenders.

All questions as to the validity, form, eligibility (including time of receipt), acceptance, and withdrawal of tendered Outstanding Notes will be determined by the Issuers, in their sole discretion, which determination will be final and binding. The Issuers reserve the absolute right to reject any or all tenders not in proper form or the

A-3

acceptance for exchange of which may, in the opinion of counsel for the Issuers, be unlawful. The Issuers also reserve the absolute right to waive any of the conditions of the Exchange Offer or any defect or irregularity in the tender of any Outstanding Notes. The Issuers’ interpretation of the terms and conditions of the Exchange Offer (including the instructions on the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Outstanding Notes must be cured within such time as the Issuers shall determine. Although the Issuers intend to notify holders of defects or irregularities with respect to tenders of Outstanding Notes, neither the Issuers, the Exchange Agent, nor any other person shall be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give such notification. Tenders of Outstanding Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Outstanding Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date.

4. Waiver of Conditions.

The Issuers reserve the absolute right to waive, in whole or part, up to the expiration of the Exchange Offer, any of the conditions to the Exchange Offer set forth in the Prospectus or in this Letter of Transmittal.

5. No Conditional Tender.

No alternative, conditional, irregular or contingent tender of Outstanding Notes will be accepted.

6. Request for Assistance or Additional Copies.

Requests for assistance or for additional copies of the Prospectus or this Letter of Transmittal may be directed to the Exchange Agent at the address or telephone number set forth on the cover page of this Letter of Transmittal. Holders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer.

7. Withdrawal.

Tenders may be withdrawn only pursuant to the limited withdrawal rights set forth in the Prospectus under the caption “Exchange Offer—Withdrawal of Tenders.”

8. No Guarantee of Late Delivery.

There is no procedure for guarantee of late delivery in the Exchange Offer.

IMPORTANT: BY USING THE ATOP PROCEDURES TO TENDER OUTSTANDING NOTES, YOU WILL NOT BE REQUIRED TO DELIVER THIS LETTER OF TRANSMITTAL TO THE EXCHANGE AGENT. YOU WILL, HOWEVER, BE BOUND BY ITS TERMS, AND YOU WILL BE DEEMED TO HAVE MADE THE ACKNOWLEDGMENTS AND THE REPRESENTATIONS AND WARRANTIES IT CONTAINS, JUST AS IF YOU HAD SIGNED IT.

¨ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

Name:

Address:

A-4

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers

Section 145 of the General Corporation Law of the State of Delaware (the “DGCL”) authorizes a corporation, under certain circumstances, to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that the person is or was an officer or director of such corporation, or is or was serving at the request of that corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation. With respect to any criminal action or proceeding, such indemnification is available if he had no reasonable cause to believe his conduct was unlawful.

Article VI of the registrant’s Amended and Restated Bylaws (the “Bylaws”) provides that each person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she or a person of whom he or she is the legal representative, is or was or has agreed to become a director or officer of the registrant or is or was serving or has agreed to serve at the request of the registrant as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving or having agreed to serve as a director or officer, shall be indemnified and held harmless by the registrant to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, (but, in the case of any such amendment, only to the extent that such amendment permits the registrant to provide broader indemnification rights than said law permitted the registrant to provide prior to such amendment) against all expense, liability and loss reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to serve in the capacity which initially entitled such person to indemnity hereunder and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that the registrant shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the board of directors of the registrant. Article VI of the Bylaws expressly provides that it is not the exclusive method of indemnification.

Section 145 of the DGCL also empowers a corporation to purchase and maintain insurance on behalf of any person who is or was an officer or director of such corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by him in any such capacity, or arising out of such person’s status as such, whether or not such corporation would have the power to indemnify such person against such liability under the provisions of Section 145.

Article VI of the Bylaws also provide that the registrant may maintain insurance, at the registrant’s expense, to protect the registrant and any person who is or was serving as an officer or director of the registrant or is or was serving at the request of the registrant as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss asserted against such person and incurred by any such person in any such capacity, or arising out of such person’s status as such, whether or not the registrant would have the power to indemnify such person against such expense, liability or loss under the DGCL.

II-1

Section 102(b)(7) of the DGCL provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director (a) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the DGCL (relating to liability for unauthorized acquisitions or redemptions of, or dividends on, capital stock) or (d) for any transaction from which the director derived improper personal benefit. Article Eighth of the registrant’s Amended and Restated Certificate of Incorporation contains such a provision.

Targa Resources Investments Inc., the indirect holder of all of our common stock, entered into Indemnification Agreements (each, an “Indemnification Agreement”) with each director and officer of the registrant (each, an “Indemnitee”). Each Indemnification Agreement provides that Targa Resources Investments Inc. will indemnify and hold harmless each Indemnitee for Expenses (as defined in the Indemnification Agreement) to the fullest extent permitted or authorized by law, including the DGCL, in effect on the date of the agreement or as it may be amended to provide more advantageous rights to the Indemnitee. If such indemnification is unavailable as a result of a court decision and if Targa Resources Investments Inc. and the Indemnitee are jointly liable in the proceeding, Targa Resources Investments Inc. will contribute funds to the Indemnitee for his Expenses in proportion to relative benefit and fault of Targa Resources Investments Inc. and Indemnitee in the transaction giving rise to the proceeding.

Each Indemnification Agreement also provides that Targa Resources Investments Inc. will indemnify the Indemnitee for monetary damages for actions taken as a director or officer of Targa Resources Investments Inc., or for serving at the registrant’s request as a director or officer or another position at another corporation or enterprise, as the case may be but only if (i) the Indemnitee acted in good faith and, in the case of conduct in his official capacity, in a manner he reasonably believed to be in the best interests of Targa Resources Investments Inc. and, in all other cases, not opposed to the best interests of Targa Resources Investments Inc. and (ii) in the case of a criminal proceeding, the Indemnitee must have had no reasonable cause to believe that his conduct was unlawful. The Indemnification Agreements also provide that Targa Resources Investments Inc. must advance payment of certain Expenses to the Indemnitee, including fees of counsel, subject to receipt of an undertaking from the Indemnitee to return such advance if it is it is ultimately determined that the Indemnitee is not entitled to indemnification.

II-2

Item 21. Exhibits and Financial Statement Schedules

3.1*		Amended and Restated Certificate of Incorporation of Targa Resources, Inc.
3.2*		Amended and Restated Bylaws of Targa Resources, Inc.
3.3*		Certificate of Incorporation of Targa Resources Finance Corporation
3.4*		Certificate of Amendment of the Certificate of Incorporation of Targa Resources Finance Corporation
3.5*		Bylaws of Targa Resources Finance Corporation
4.1†		Certificate of Common Stock of Targa Resources, Inc.
4.2†		Certificate of Common Stock of Targa Resources Finance Corporation
4.3*	—	Indenture dated October 31, 2005 among Targa Resources, Inc., Targa Resources Finance Corporation, the Guarantors named therein and Wells Fargo Bank, National Association
4.4*	—	Registration Rights Agreement, dated as of October 31, 2005, among Targa Resources, Inc., Targa Resources Finance Corporation, the Guarantors named therein and the Initial Purchasers named therein
5.1*	—	Opinion of Vinson & Elkins L.L.P. as to the legality of the securities being registered
10.1*		Credit Agreement dated October 31, 2005 between Targa Resources Inc., the Lenders named therein and Credit Suisse, as Administrative Agent, Swing Line Lender, Revolving L/C Issuer and Synthetic L/C Issuer
12.1*	—	Statement of Ratio of Earnings to Fixed Charges
21.1*		Subsidiaries of Targa Resources, Inc.
23.1*	—	Consent of PricewaterhouseCoopers LLP
23.2*	—	Consent of Ernst & Young LLP
23.3	—	Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1)
24.1	—	Powers of Attorney (included on the signature page)
25.1*	—	Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of the trustee under the Senior Indenture
99.1		Form of Letter of Transmittal (included as Annex A to the prospectus)
99.2†		Form of Letter to Registered Holders and DTC Participants Regarding the Offer to Exchange
99.3†		Form of Letter to Beneficial Holders Regarding the Offer to Exchange

* Filed herewith.

† To be filed by amendment.

II-3

Item 22. Undertakings

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of any Registrant, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by any Registrant of expenses incurred or paid by a director, officer or controlling person of such Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, such Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

Each registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(a) to include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

(b) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(c) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(5) That, for the purpose of determining liability of the registrants under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, in a primary offering of securities of the undersigned registrants pursuant to this registration statement, regardless of the underwriting method used to sell the

II-4

securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrants will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(a) any preliminary prospectus or prospectus of the undersigned registrants relating to the offering required to be filed pursuant to Rule 424;

(b) any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrants or used or referred to by the undersigned registrants;

(c) the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrants or their securities provided by or on behalf of the undersigned registrants; and

(d) any other communication that is an offer in the offering made by the undersigned registrants to the purchaser.

(6) That, for purposes of determining any liability under the Securities Act of 1933, each filing of a registrant annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(7) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

(8) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on October 31, 2007.

TARGA RESOURCES, INC.
By:	/S/    RENE R. JOYCE
Name:	Rene R. Joyce
Title:	Chief Executive Officer

Each person whose signature appears below appoints Rene R. Joyce and Jeffrey J. McParland, and each of them, either of whom may act without the joinder of the other, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or would do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them of their or his substitute and substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated below.

/S/    RENE R. JOYCE         Rene R. Joyce	Chief Executive Officer and Director (Principal Executive Officer)	October 31, 2007
/S/    JEFFREY J. MCPARLAND         Jeffrey J. McParland	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	October 31, 2007
/S/    JOHN ROBERT SPARGER         John Robert Sparger	Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)	October 31, 2007
/S/    CHARLES R. CRISP         Charles R. Crisp	Director	October 31, 2007
/S/    JOE B. FOSTER         Joe B. Foster	Director	October 31, 2007
/S/    IN SEON HWANG         In Seon Hwang	Director	October 31, 2007
/S/    CHANSOO JOUNG         Chansoo Joung	Director	October 31, 2007
/S/    PETER R. KAGAN         Peter R. Kagan	Director	October 31, 2007
/S/    CHRIS TONG         Chris Tong	Director	October 31, 2007
/S/    JAMES W. WHALEN         James W. Whalen	Director	October 31, 2007

II-6

SIGNATURES

Pursuant to the requirements of the Securities Act, each Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on October 31, 2007.

TARGA RESOURCES FINANCE CORPORATION
TARGA RESOURCES LLC
TARGA RESOURCES II LLC
TARGA RESOURCES HOLDINGS GP LLC
TARGA RESOURCES HOLDINGS LP
By:	Targa Resources Holdings GP LLC, its general partner
TARGA GAS MARKETING LLC
TARGA MIDSTREAM GP LLC

TARGA MIDSTREAM SERVICES LIMITED PARTNERSHIP
By:	Targa Midstream GP LLC, its general partner
TARGA REGULATED HOLDINGS LLC
TARGA NGL PIPELINE COMPANY LLC
TARGA LIQUIDS MARKETING AND TRADE
By:	Targa Midstream Services Limited Partnership, its managing general partner
By:	Targa Midstream GP LLC, its general partner
TARGA LIQUIDS GP LLC
MIDSTREAM BARGE COMPANY LLC
TARGA OPI LLC
TARGA ENERGY PIPELINE COMPANY LLC

II-7

TARGA GP INC.
TARGA LP INC.
TARGA VERSADO GP LLC
TARGA VERSADO LP
By:	Targa Versado GP LLC, its general partner
TARGA STRADDLE GP LLC
TARGA STRADDLE LP
By:	Targa Straddle GP LLC, its general partner
TARGA PERMIAN GP LLC
TARGA PERMIAN LP
By:	Targa Permian GP LLC, its general partner

TARGA DOWNSTREAM GP LLC
TARGA DOWNSTREAM LP
By:	Targa Downstream GP LLC, its general partner
TARGA LSNG GP LLC
TARGA LSNG LP
By:	Targa LSNG GP LLC, its general partner
By:	/s/    RENE R. JOYCE
Name:	Rene R. Joyce
Title:	Chief Executive Officer

II-8

Each person whose signature appears below appoints Rene R. Joyce and Jeffrey J. McParland, and each of them, either of whom may act without the joinder of the other, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or would do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them of their or his substitute and substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated below.

TARGA RESOURCES FINANCE CORPORATION

/s/    RENE R. JOYCE Rene R. Joyce	Chief Executive Officer (Principal Executive Officer)	October 31, 2007
/s/    JEFFREY J. MCPARLAND Jeffrey J. McParland	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	October 31, 2007
/s/    JOHN ROBERT SPARGER John Robert Sparger	Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)	October 31, 2007
/s/    RENE R. JOYCE Rene R. Joyce	Director	October 31, 2007
/S/    JEFFREY J. MCPARLAND Jeffrey J. McParland	Director	October 31, 2007

TARGA RESOURCES LLC

TARGA RESOURCES II LLC

TARGA RESOURCES HOLDINGS GP LLC

TARGA RESOURCES HOLDINGS LP
By:	Targa Resources Holdings GP LLC, its general partner
TARGA GAS MARKETING LLC
TARGA MIDSTREAM GP LLC
TARGA MIDSTREAM SERVICES LIMITED PARTNERSHIP
By:	Targa Midstream GP LLC, its general partner
TARGA REGULATED HOLDINGS LLC
By:	Targa Midstream Services Limited Partnership, its sole member
TARGA NGL PIPELINE COMPANY LLC
By:	Targa Regulated Holdings LLC, its sole member

II-9

TARGA LIQUIDS MARKETING AND TRADE
By:	Targa Midstream Services Limited Partnership, its managing general partner
	By: Targa Midstream GP LLC, its general partner
TARGA LIQUIDS GP LLC
By:	Targa Midstream Services Limited Partnership, its sole member
MIDSTREAM BARGE COMPANY LLC
TARGA OPI LLC
By:	Targa Regulated Holdings LLC, its sole member
TARGA ENERGY PIPELINE COMPANY LLC
By:	Targa Midstream Services Limited Partnership, its sole member
TARGA VERSADO GP LLC
TARGA VERSADO LP
By: Targa Versado GP LLC, its general partner
TARGA STRADDLE GP LLC
TARGA STRADDLE LP
By: Targa Straddle GP LLC, its general partner
TARGA PERMIAN GP LLC
TARGA PERMIAN LP
By: Targa Permian GP LLC, its general partner
TARGA DOWNSTREAM GP LLC
TARGA DOWNSTREAM LP
By: Targa Downstream GP LLC, its general partner
TARGA LSNG GP LLC
TARGA LSNG LP
By: Targa LSNG GP LLC, its general partner

/S/    RENE R. JOYCE Rene R. Joyce	Chief Executive Officer (Principal Executive Officer)	October 31 , 2007
/S/    JEFFREY J. MCPARLAND Jeffrey J. McParland	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	October 31 , 2007
/S/    JOHN ROBERT SPARGER John Robert Sparger	Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)	October 31 , 2007
/S/    RENE R. JOYCE Rene R. Joyce	Manager	October 31 , 2007
/S/    JEFFREY J. MCPARLAND Jeffrey J. McParland	Manager	October 31 , 2007

II-10

TARGA GP INC.

TARGA LP INC.

/S/    RENE R. JOYCE Rene R. Joyce	Chief Executive Officer (Principal Executive Officer)	October 31 , 2007
/S/    JEFFREY J. MCPARLAND Jeffrey J. McParland	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	October 31 , 2007
/S/    JOHN ROBERT SPARGER John Robert Sparger	Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)	October 31 , 2007
/S/    RENE R. JOYCE Rene R. Joyce	Director	October 31 , 2007
/S/    JEFFREY J. MCPARLAND Jeffrey J. McParland	Director	October 31 , 2007

II-11

INDEX TO EXHIBITS

3.1*		Amended and Restated Certificate of Incorporation of Targa Resources, Inc.
3.2*		Amended and Restated Bylaws of Targa Resources, Inc.
3.3*		Certificate of Incorporation of Targa Resources Finance Corporation
3.4*		Certificate of Amendment of the Certificate of Incorporation of Targa Resources Finance Corporation
3.5*		Bylaws of Targa Resources Finance Corporation
4.1†		Certificate of Common Stock of Targa Resources, Inc.
4.2†		Certificate of Common Stock of Targa Resources Finance Corporation
4.3*	—	Indenture dated October 31, 2005 among Targa Resources, Inc., Targa Resources Finance Corporation, the Guarantors named therein and Wells Fargo Bank, National Association
4.4*	—	Registration Rights Agreement, dated as of October 31, 2005, among Targa Resources, Inc., Targa Resources Finance Corporation, the Guarantors named therein and the Initial Purchasers named therein
5.1*	—	Opinion of Vinson & Elkins L.L.P. as to the legality of the securities being registered
10.1*		Credit Agreement dated October 31, 2005 between Targa Resources Inc., the Lenders named therein and Credit Suisse, as Administrative Agent, Swing Line Lender, Revolving L/C Issuer and Synthetic L/C Issuer
12.1*	—	Statement of Ratio of Earnings to Fixed Charges
21.1*		Subsidiaries of Targa Resources, Inc.
23.1*	—	Consent of PricewaterhouseCoopers LLP
23.2*	—	Consent of Ernst & Young LLP
23.3	—	Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1)
24.1	—	Powers of Attorney (included on the signature page)
25.1*	—	Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of the trustee under the Senior Indenture
99.1		Form of Letter of Transmittal (included as Annex A to the prospectus)
99.2†		Form of Letter to Registered Holders and DTC Participants Regarding the Offer to Exchange
99.3†		Form of Letter to Beneficial Holders Regarding the Offer to Exchange

* Filed herewith.

† To be filed by amendment.

EX-3.1

Exhibit 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

TARGA RESOURCES, INC.

(a Delaware corporation)

(Pursuant to Sections 242 and 245 of the

General Corporation Law of the State of Delaware)

TARGA RESOURCES, INC. (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware (the “DGCL”), hereby certifies as follows:

1. The present name of the Corporation is “Targa Resources, Inc.”

2. The Corporation’s original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on February 26, 2004 pursuant to the DGCL.

3. This Amended and Restated Certificate of Incorporation was duly adopted in accordance with Sections 242 and 245 of the DGCL.

4. The text of the Certificate of Incorporation of the Corporation is hereby restated in its entirety to read as follows:

FIRST. The name of the corporation is Targa Resources, Inc. (the “Corporation”).

SECOND. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801. The name of its registered agent at such address is The Corporation Trust Company.

THIRD.

(a) The purpose of the Corporation is to engage in any lawful business or other activity for which a corporation may be organized under the General Corporation Law of the State of Delaware (the “DGCL”).

(b) In furtherance of the foregoing purposes, the Corporation shall have and may exercise all of the rights, powers and privileges granted by the DGCL. In addition, it may do everything necessary, suitable and proper for the accomplishment of any of its corporate purposes.

FOURTH. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 1,000 shares of common stock, with each share having a par value of $.001.

(a) Each holder of record of common stock of the Corporation shall be entitled to one vote for each share of common stock held by that holder, except that in the election of directors each holder shall be entitled to vote all shares of common stock held by that holder for each nominee for director to be elected and for whose election the holder has a right to vote, without cumulating those votes. Cumulative voting shall not be permitted in the election of directors or otherwise.

(b) Unless otherwise ordered by a court of competent jurisdiction, at all meetings of stockholders a majority in voting power of the outstanding shares of a voting group entitled to vote at such meeting, represented in person or by proxy, shall constitute a quorum of that voting group.

FIFTH. The Corporation shall have perpetual existence.

SIXTH. Elections of directors need not be by written ballot unless the bylaws of the Corporation so provide.

SEVENTH. The Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the bylaws of the Corporation.

EIGHTH. The personal liability of each director of the Corporation for monetary damages for breach of fiduciary duties as a director shall be eliminated and limited to the full extent permitted by the laws of the State of Delaware, including without limitation as permitted by the provisions of Section 102(b)(7) of the DGCL and any successor provision, as amended from time to time. No amendment of this Amended and Restated Certificate of Incorporation or repeal of any of its provisions shall limit or eliminate the benefits provided to directors under this provision with respect to any act or omission that occurred prior to that amendment or repeal.

NINTH. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

TENTH.

(a) The number of directors of the Corporation shall be fixed and may be altered from time to time as provided in the bylaws of the Corporation. If the number of directors is decreased by resolution of the Board of Directors of the Corporation pursuant to the bylaws, in no case shall the decrease shorten the term of any incumbent director.

(b) A director shall hold office until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement or removal from office. Any newly created directorship resulting from an increase in the number of directors and any other vacancy on the Board of Directors of the Corporation, however caused, may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director elected by one or more directors to fill a newly created directorship or other vacancy shall hold office until the next succeeding annual meeting of stockholders and until his or her successor shall have been elected and qualified subject, however, to prior death, resignation, retirement or removal from office.

2

(c) Advance notice of nominations for the election of directors, other than nominations by the Board of Directors of the Corporation or a committee thereof, shall be given to the Corporation in the manner provided from time to time in the bylaws.

ELEVENTH. The Corporation hereby elects not to be subject to the provisions of Section 203 of the DGCL.

TWELFTH. Holders of the outstanding shares of a class or series shall not be entitled to vote separately as a class or series with respect to any matter, including proposed amendments to this Amended and Restated Certificate of Incorporation (except as expressly provided in this Amended and Restated Certificate of Incorporation) or to the extent required by the DGCL or applicable law. In furtherance of the foregoing, the number of authorized shares of common stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote irrespective of Section 242(b)(2) of the DGCL and without a separate class vote of the common stock.

The undersigned, being the duly elected Chief Executive Officer of the Corporation, for the purpose of amending and restating the Certificate of Incorporation of the Corporation, does make this Certificate, hereby declaring and certifying that this is the act and deed of the Corporation and the facts stated in this Certificate are true, and accordingly has hereunto executed this Amended and Restated Certificate of Incorporation as a duly authorized officer of the Corporation this 1st day of March, 2006.

/s/ Rene R. Joyce

Rene R. Joyce

Chief Executive Officer

3

EX-3.2

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

OF

TARGA RESOURCES, INC.

A Delaware Corporation

Date of Adoption:

October 30, 2005

AMENDED AND RESTATED BYLAWS

OF

TARGA RESOURCES, INC.

Article I

Offices

Section 1. Registered Office. The registered office of the Corporation required by the General Corporation Law of the State of Delaware (the “Delaware General Corporation Law”) to be maintained in the State of Delaware, shall be the registered office named in the original Certificate of Incorporation of the Corporation, or such other office as may be designated from time to time by the Board of Directors in the manner provided by law. Should the Corporation maintain a principal office within the State of Delaware such registered office need not be identical to such principal office of the Corporation.

Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

Article II

Stockholders

Section 1. Place of Meetings. All meetings of the stockholders shall be held at the principal office of the Corporation, or at such other place within or without the State of Delaware as shall be specified or fixed in the notices or waivers of notice thereof.

Section 2. Quorum; Adjournment of Meetings. Unless otherwise required by law or provided in the Certificate of Incorporation or these bylaws, the holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at any meeting of stockholders for the transaction of business and the act of a majority of such stock so represented at any meeting of stockholders at which a quorum is present shall constitute the act of the meeting of stockholders. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

Notwithstanding the other provisions of the Certificate of Incorporation or these bylaws, the chairman of the meeting or the holders of a majority of the issued and outstanding stock, present in person or represented by proxy, at any meeting of stockholders, whether or not a quorum is present, shall have the power to adjourn such meeting from time to time, without any notice other than announcement at the meeting of the time and place of the holding of the adjourned meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at such meeting. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally called.

-2-

Section 3. Annual Meetings. An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, within or without the State of Delaware, on such date, and at such time as the Board of Directors shall fix and set forth in the notice of the meeting, which date shall be within thirteen (13) months subsequent to the later of the date of incorporation of the Corporation or the last annual meeting of stockholders.

Section 4. Special Meetings. Unless otherwise provided in the Certificate of Incorporation, special meetings of the stockholders for any purpose or purposes may be called at any time by the Chairman of the Board (if any), by the President or by a majority of the Board of Directors.

Section 5. Record Date. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors of the Corporation may fix, in advance, a date as the record date for any such determination of stockholders, which date shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.

If the Board of Directors does not fix a record date for any meeting of the stockholders, the record date for determining stockholders entitled to notice of or to vote at such meeting shall be at the close of business on the day next preceding the day on which notice is given, or, if in accordance with Article VIII, Section 3 of these bylaws notice is waived, at the close of business on the day next preceding the day on which the meeting is held. If, in accordance with Section 12 of this Article II, corporate action without a meeting of stockholders is to be taken, the record date for determining stockholders entitled to express consent to such corporate action in writing, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 6. Notice of Meetings. Written notice of the place, date and hour of all meetings, and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be given by or at the direction of the Chairman of the Board (if any) or the President, the Secretary or the other person(s) calling the meeting to each stockholder entitled to vote thereat not less than ten (10) nor more than sixty (60) days before the date of the meeting. Such notice may be delivered personally, by mail or by electronic transmission pursuant to Section 232 of the Delaware General Corporation Law. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. If electronically transmitted, notice is given as provided in Section 232 of the Delaware General Corporation Law.

-3-

Section 7. Stock List. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in the name of such stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting at the Corporation’s principal place of business. The stock list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

Section 8. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to a corporate action in writing without a meeting may authorize another person or persons to act for him by proxy. Proxies for use at any meeting of stockholders shall be filed with the Secretary, or such other officer as the Board of Directors may from time to time determine by resolution, before or at the time of the meeting. All proxies shall be received and taken charge of and all ballots shall be received and canvassed by the secretary of the meeting who shall decide all questions touching upon the qualification of voters, the validity of the proxies, and the acceptance or rejection of votes, unless an inspector or inspectors shall have been appointed by the chairman of the meeting, in which event such inspector or inspectors shall decide all such questions.

No proxy shall be valid after three (3) years from its date, unless the proxy provides for a longer period. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power.

Should a proxy designate two or more persons to act as proxies, unless such instrument shall provide the contrary, a majority of such persons present at any meeting at which their powers thereunder are to be exercised shall have and may exercise all the powers of voting or giving consents thereby conferred, or if only one be present, then such powers may be exercised by that one; or, if an even number attend and a majority do not agree on any particular issue, each proxy so attending shall be entitled to exercise such powers in respect of the same portion of the shares as he is of the proxies representing such shares.

Section 9. Voting; Elections; Inspectors. Unless otherwise required by law or provided in the Certificate of Incorporation, each stockholder shall have one vote for each share of stock entitled to vote which is registered in his name on the record date for the meeting. Shares registered in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the bylaw (or comparable instrument) of such corporation may prescribe, or in the absence of such provision, as the board of directors (or comparable body) of such corporation may determine. Shares registered in the name of a deceased person may be voted by his executor or administrator, either in person or by proxy.

All voting, except as required by the Certificate of Incorporation or where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefor by stockholders holding a majority of the issued and outstanding stock present in person or by proxy at any meeting a stock vote shall be taken. Every stock vote shall be taken by written ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. Except as otherwise provided in the Certificate of Incorporation, all elections of directors shall be by ballot.

-4-

At any meeting at which a vote is taken by ballots, the chairman of the meeting may appoint one or more inspectors, each of whom shall subscribe an oath or affirmation to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of his ability. Such inspector shall receive the ballots, count the votes and make and sign a certificate of the result thereof. The chairman of the meeting may appoint any person to serve as inspector, except no candidate for the office of director shall be appointed as an inspector.

Unless otherwise provided in the Certificate of Incorporation, cumulative voting for the election of directors shall be prohibited.

Section 10. Conduct of Meetings. The meetings of the stockholders shall be presided over by the Chairman of the Board (if any), or if he is not present, by the President, or if neither the Chairman of the Board (if any) nor the President is present, by a chairman elected at the meeting. The Secretary of the Corporation, if present, shall act as secretary of such meetings, or if he is not present, an Assistant Secretary shall so act; if neither the Secretary nor an Assistant Secretary is present, then a secretary shall be appointed by the chairman of the meeting. The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him in order. Unless the chairman of the meeting of stockholders shall otherwise determine, the order of business shall be as follows:

(a) Calling of meeting to order.

(b) Election of a chairman and the appointment of a secretary if necessary.

(c) Presentation of proof of the due calling of the meeting.

(d) Presentation and examination of proxies and determination of a quorum.

(e) Reading and settlement of the minutes of the previous meeting.

(f) Reports of officers and committees.

(g) The election of directors if an annual meeting, or a meeting called for that purpose.

(h) Unfinished business.

(i) New business.

(j) Adjournment.

Section 11. Treasury Stock. The Corporation shall not vote, directly or indirectly, shares of its own stock owned by it and such shares shall not be counted for quorum purposes.

Section 12. Action Without Meeting. Unless otherwise provided in the Certificate of Incorporation, any action permitted or required by law, the Certificate of Incorporation or these bylaws to be taken at a meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote

-5-

thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than a unanimous written consent shall be given by the Secretary to those stockholders who have not consented in writing.

Article III

Board of Directors

Section 1. Power; Number; Term of Office. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, and subject to the restrictions imposed by law or the Certificate of Incorporation, they may exercise all the powers of the Corporation.

The number of directors which shall constitute the whole Board of Directors, shall be determined from time to time by resolution of the Board of Directors (provided that no decrease in the number of directors which would have the effect of shortening the term of an incumbent director may be made by the Board of Directors). Each director shall hold office for the term for which he is elected, and until his successor shall have been elected and qualified or until his earlier death, resignation or removal.

Unless otherwise provided in the Certificate of Incorporation, directors need not be stockholders or residents of the State of Delaware.

Section 2. Quorum. Unless otherwise provided in the Certificate of Incorporation or these bylaws, a majority of the total number of directors shall constitute a quorum for the transaction of business at a meeting of the Board of Directors and the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 3. Place of Meetings; Order of Business. The directors may hold their meetings and may have an office and keep the books of the Corporation, except as otherwise provided by law, in such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine by resolution. At all meetings of the Board of Directors business shall be transacted in such order as shall from time to time be determined by the Chairman of the Board (if any), or in his absence by the President, or by resolution of the Board of Directors.

Section 4. First Meeting. Each newly elected Board of Directors may hold its first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after and at the same place as the annual meeting of the stockholders. Notice of such meeting shall not be required. At the first meeting of the Board of Directors in each year at which a quorum shall be present, held next after the annual meeting of stockholders, the Board of Directors shall proceed to the election of the officers of the Corporation.

Section 5. Regular Meetings. Regular meetings of the Board of Directors shall be held at such times and places as shall be designated from time to time by resolution of the Board of Directors. Notice of such regular meetings shall not be required.

Section 6. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board (if any), the President or, on the written request of any two

-6-

directors, by the Secretary, in each case on at least twenty-four (24) hours personal, written, telegraphic, cable, wireless or electronic notice to each director. Such notice, or any waiver thereof pursuant to Article VIII, Section 3 hereof, need not state the purpose or purposes of such meeting, except as may otherwise be required by law or provided for in the Certificate of Incorporation or these bylaws.

Section 7. Removal. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; provided that, unless the Certificate of Incorporation otherwise provides, if the Board of Directors is classified, then the stockholders may effect such removal only for cause; and provided further that, if the Certificate of Incorporation expressly grants to stockholders the right to cumulate votes for the election of directors and if less than the entire board is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors, or, if there be classes of directors, at an election of the class of directors of which such director is a part.

Section 8. Vacancies; Increases in the Number of Directors. Unless otherwise provided in the Certificate of Incorporation, newly created directorships resulting from any increase in the authorized number of directors and any other vacancy on the Board of Directors may be filled by a majority of the directors then in office, although less than a quorum, or a sole remaining director; and any director so chosen shall hold office until the next annual election and until his successor shall be duly elected and shall qualify, unless sooner displaced.

If the directors of the Corporation are divided into classes, any directors elected to fill vacancies or newly created directorships shall hold office until the next election of the class for which such directors shall have been chosen, and until their successors shall be duly elected and shall qualify.

Section 9. Compensation. Unless otherwise restricted by the Certificate of Incorporation, the Board of Directors shall have the authority to fix the compensation of directors.

Section 10. Action Without a Meeting; Telephone Conference Meeting. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors, or any committee designated by the Board of Directors, may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Such consent shall have the same force and effect as a unanimous vote at a meeting, and may be stated as such in any document or instrument filed with the Secretary of State of Delaware.

Unless otherwise restricted by the Certificate of Incorporation, subject to the requirement for notice of meetings, members of the Board of Directors, or members of any committee designated by the Board of Directors, may participate in a meeting of such Board of Directors or committee, as the case may be, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

-7-

Section 11. Approval or Ratification of Acts or Contracts by Stockholders. The Board of Directors in its discretion may submit any act or contract for approval or ratification at any annual meeting of the stockholders, or at any special meeting of the stockholders called for the purpose of considering any such act or contract, and any act or contract that shall be approved or be ratified by the vote of the stockholders holding a majority of the issued and outstanding shares of stock of the Corporation entitled to vote and present in person or by proxy at such meeting (provided that a quorum is present), shall be as valid and as binding upon the Corporation and upon all the stockholders as if it has been approved or ratified by every stockholder of the Corporation. In addition, any such act or contract may be approved or ratified by the written consent of stockholders holding a majority of the issued and outstanding shares of capital stock of the Corporation entitled to vote and such consent shall be as valid and as binding upon the Corporation and upon all the stockholders as if it had been approved or ratified by every stockholder of the Corporation.

Article IV

Committees

Section 1. Designation; Powers. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, including, if they shall so determine, an executive committee, each such committee to consist of one or more of the directors of the Corporation. Any such designated committee shall have and may exercise such of the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation as may be provided in such resolution, except that no such committee shall have the power or authority of the Board of Directors in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution of the Corporation, or amending, altering or repealing the bylaws or adopting new bylaws for the Corporation and, unless such resolution or the Certificate of Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Any such designated committee may authorize the seal of the Corporation to be affixed to all papers which may require it. In addition to the above such committee or committees shall have such other powers and limitations of authority as may be determined from time to time by resolution adopted by the Board of Directors.

Section 2. Procedure; Meetings; Quorum. Any committee designated pursuant to Section 1 of this Article IV shall choose its own chairman, shall keep regular minutes of its proceedings and report the same to the Board of Directors when requested, shall fix its own rules or procedures, and shall meet at such times and at such place or places as may be provided by such rules, or by resolution of such committee or resolution of the Board of Directors. At every meeting of any such committee, the presence of a majority of all the members thereof shall constitute a quorum and the affirmative vote of a majority of the members present shall be necessary for the adoption by it of any resolution.

Section 3. Substitution of Members. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting,

-8-

whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.

Article V

Officers

Section 1. Number, Titles and Term of Office. The officers of the Corporation shall be a Chief Executive Officer, a President, one or more Vice Presidents (any one or more of whom may be designated Executive Vice President or Senior Vice President), a Treasurer, a Secretary and, if the Board of Directors so elects, a Chairman of the Board and such other officers as the Board of Directors may from time to time elect or appoint. Each officer shall hold office until his successor shall be duly elected and shall qualify or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Any number of offices may be held by the same person, unless the Certificate of Incorporation provides otherwise. Except for the Chairman of the Board, if any, no officer need be a director.

Section 2. Salaries. The salaries or other compensation of the officers and agents of the Corporation shall be fixed from time to time by the Board of Directors.

Section 3. Removal. Any officer or agent elected or appointed by the Board of Directors may be removed, either with or without cause, by the vote of a majority of the whole Board of Directors at a special meeting called for the purpose, or at any regular meeting of the Board of Directors, provided the notice for such meeting shall specify that the matter of any such proposed removal will be considered at the meeting but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights.

Section 4. Vacancies. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors.

Section 5. Powers and Duties of the Chairman of the Board. The Chairman of the Board (if such office is created by the Board) shall have all powers and shall perform all duties incident to the office of Chairman of the Board. The Chairman shall preside at all meetings of the Board of Directors or of the stockholders of the Corporation. In the Chairman’s absence, such duties shall be attended to by the Chief Executive Officer. The Chairman shall formulate and submit to the Board of Directors or the executive committee (if any) matters of general policy of the Corporation and shall have such other powers and perform such other duties as usually appertain to the office or as may be prescribed by the Board of Directors or the executive committee. The Chairman of the Board may hold such other offices as the Board of Directors may determine.

Section 6. Powers and Duties of the Chief Executive Officer. The Chief Executive Officer shall be the chief executive officer of the Corporation and, subject to the control of the Board of Directors, shall in general manage, supervise, and control the properties, business, and affairs of the Corporation with all such powers as may be reasonably incident to such responsibilities. Unless the Board of Directors otherwise determines, the Chief Executive Officer shall have the authority to agree upon and execute all leases, contracts, evidences of indebtedness, and other obligations in the name of the Corporation. In the absence of the Chairman of the Board, the Chief Executive Officer shall preside at all meetings of the stockholders and (should

-9-

he be a director) of the Board of Directors. He may also preside at any such meeting attended by the Chairman of the Board if he is so designated by the Chairman. He shall have the power to appoint and remove subordinate officers, agents, and employees, except those elected or appointed by the Board of Directors. The Chief Executive Officer shall keep the Board of Directors and the executive committee (if any) fully informed and shall consult them concerning the business of the Corporation. He shall perform all other duties normally incident to the office of Chief Executive Officer and such other duties, and shall have such other powers, as may be prescribed by the stockholders, the Board of Directors or the executive committee (if any) from time to time.

Section 7. Powers and Duties of the President. The President shall be the chief operating officer of the Corporation and, subject to the control of the Chief Executive Officer and the Board of Directors, shall in general manage, supervise and control the properties, business and day-to-day affairs of the Corporation with all such powers as may be reasonably incident to such responsibilities. In the absence of the Chief Executive Officer, or in the event of his inability or refusal to act, the President shall perform the duties and exercise the powers of the Chief Executive Officer. In the absence of the Chairman of the Board and the Chief Executive Officer, the President shall preside at all meetings of the stockholders and (should he be a director) of the Board of Directors. He may also preside at any such meeting attended by the Chairman of the Board if he is so designated by the Chairman. He shall have the power to appoint and remove subordinate officers, agents and employees, except those elected or appointed by the Board of Directors. Unless the Board of Directors otherwise determines, the President shall have the authority to agree upon and execute all leases, contracts, evidences of indebtedness, and other obligations in the name of the Corporation. The President shall keep the Board of Directors, the executive committee (if any), and the Chief Executive Officer fully informed and shall consult them concerning the business of the Corporation. He shall vote, or give a proxy to any other officer of the Corporation to vote all shares of stock of any other corporation standing in the name of the Corporation and shall exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation; provided that the Board of Directors may from time to time, by resolution, confer like powers upon any other person or persons. In general the President shall have all powers and shall perform all other duties normally incident to the office of President and such other duties, and shall have such other powers, as may be prescribed by these by-laws, the Board of Directors, or the executive committee (if any) from time to time. In the discretion of the Board of Directors, the President may also serve as chief executive officer of the Corporation.

Section 8. Vice Presidents. In the absence of the President, or in the event of his inability or refusal to act, a Vice President designated by the Board of Directors shall perform the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. In the absence of a designation by the Board of Directors of a Vice President to perform the duties of the President, or in the event of his absence or inability or refusal to act, the Vice President who is present and who is senior in terms of time as a Vice President of the Corporation shall so act. The Vice Presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

Section 9. Treasurer. The Treasurer shall have responsibility for the custody and control of all the funds and securities of the Corporation, and he shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Board of Directors. He shall perform all acts incident to the position of Treasurer, subject to the control of the chief executive officer and the Board of Directors; and he shall, if required by the Board of Directors, give such bond for the faithful discharge of his duties in such form as the Board of Directors may require.

-10-

Section 10. Assistant Treasurers. Each Assistant Treasurer shall have the usual powers and duties pertaining to his office, together with such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the chief executive officer or the Board of Directors. The Assistant Treasurers shall exercise the powers of the Treasurer during that officer’s absence or inability or refusal to act.

Section 11. Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors, committees of directors and the stockholders, in books provided for that purpose; he shall attend to the giving and serving of all notices; he may in the name of the Corporation affix the seal of the Corporation to all contracts of the Corporation and attest the affixation of the seal of the Corporation thereto; he may sign with the other appointed officers all certificates for shares of capital stock of the Corporation; he shall have charge of the certificate books, transfer books and stock ledgers, and such other books and papers as the Board of Directors may direct, all of which shall at all reasonable times be open to inspection of any director upon application at the office of the Corporation during business hours; he shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Board of Directors; and he shall in general perform all acts incident to the office of Secretary, subject to the control of the chief executive officer and the Board of Directors.

Section 12. Assistant Secretaries. Each Assistant Secretary shall have the usual powers and duties pertaining to his office, together with such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the chief executive officer or the Board of Directors. The Assistant Secretaries shall exercise the powers of the Secretary during that officer’s absence or inability or refusal to act.

Section 13. Action with Respect to Securities of Other Corporations. Unless otherwise directed by the Board of Directors, the chief executive officer shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of security holders of or with respect to any action of security holders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation.

Article VI

Indemnification of Directors,

Officers, Employees and Agents

Section 1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she or a person of whom he or she is the legal representative, is or was or has agreed to become a director or officer of the Corporation or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving or having agreed to serve as a director or officer, shall be indemnified and held

-11-

harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended, (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) against all expense, liability and loss (including without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to serve in the capacity which initially entitled such person to indemnity hereunder and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the board of directors of the Corporation. The right to indemnification conferred in this Article VI shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a current, former or proposed director or officer in his or her capacity as a director or officer or proposed director or officer (and not in any other capacity in which service was or is or has been agreed to be rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnified person, to repay all amounts so advanced if it shall ultimately be determined that such indemnified person is not entitled to be indemnified under this Section 1.

Section 2. Indemnification of Employees and Agents. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation, individually or as a group, with the same scope and effect as the indemnification of directors and officers provided for in this Article VI.

Section 3. Right of Claimant to Bring Suit. If a written claim received by the Corporation from or on behalf of an indemnified party under this Article VI is not paid in full by the Corporation within ninety days after such receipt, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

Section 4. Nonexclusivity of Rights. The right to indemnification and the advancement and payment of expenses conferred in this Article VI shall not be exclusive of any other right

-12-

which any person may have or hereafter acquire under any law (common or statutory), provision of the Certificate of Incorporation of the Corporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

Section 5. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any person who is or was serving as a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss asserted against such person and incurred by any such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.

Section 6. Savings Clause. If this Article VI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify and hold harmless each director and officer of the Corporation, as to costs, charges and expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative to the full extent permitted by any applicable portion of this Article VI that shall not have been invalidated and to the fullest extent permitted by applicable law.

Section 7. Amendment, Modification or Repeal. Any amendment, modification or repeal of this Article VI by the Board of Directors or the stockholders of the Corporation shall not adversely affect any right of or protection afforded to a director, officer, employee or agent of the Corporation existing at the time of such amendment, modification or repeal.

Article VII

Capital Stock

Section 1. Certificates of Stock. The certificates for shares of the capital stock of the Corporation shall be in such form, not inconsistent with that required by law and the Certificate of Incorporation, as shall be approved by the Board of Directors. The Chairman of the Board (if any), President or a Vice President shall cause to be issued to each stockholder one or more certificates, under the seal of the Corporation or a facsimile thereof if the Board of Directors shall have provided for such seal, and signed by the Chairman of the Board (if any), President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer certifying the number of shares (and, if the stock of the Corporation shall be divided into classes or series, the class and series of such shares) owned by such stockholder in the Corporation; provided, however, that any of or all the signatures on the certificate may be facsimile. The stock record books and the blank stock certificate books shall be kept by the Secretary, or at the office of such transfer agent or transfer agents as the Board of Directors may from time to time by resolution determine. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature or signatures shall have been placed upon any such certificate or certificates shall have ceased to be such officer, transfer agent or registrar before such certificate is issued by the Corporation, such certificate may nevertheless be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The stock certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued and shall exhibit the holder’s name and number of shares.

-13-

Section 2. Transfer of Shares. The shares of stock of the Corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives upon surrender and cancellation of certificates for a like number of shares. Upon surrender to the Corporation or a transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

Section 3. Ownership of Shares. The Corporation shall be entitled to treat the holder of record of any share or shares of capital stock of the Corporation as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.

Section 4. Regulations Regarding Certificates. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration or the replacement of certificates for shares of capital stock of the Corporation.

Section 5. Lost or Destroyed Certificates. The Board of Directors may determine the conditions upon which a new certificate of stock may be issued in place of a certificate which is alleged to have been lost, stolen or destroyed; and may, in their discretion, require the owner of such certificate or his legal representative to give bond, with sufficient surety, to indemnify the Corporation and each transfer agent and registrar against any and all losses or claims which may arise by reason of the issue of a new certificate in the place of the one so lost, stolen or destroyed.

Article VIII

Miscellaneous Provisions

Section 1. Fiscal Year. The fiscal year of the Corporation shall be such as established from time to time by the Board of Directors.

Section 2. Corporate Seal. The Board of Directors may provide a suitable seal, containing the name of the Corporation. The Secretary shall have charge of the seal (if any). If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by the Assistant Secretary or Assistant Treasurer.

Section 3. Notice and Waiver of Notice. Except as otherwise provided in these bylaws, whenever any notice is required to be given by law, the Certificate of Incorporation or under the provisions of these bylaws, said notice shall be deemed to be sufficient if given (i) by telecopy, telegraphic, cable, wireless or electronic transmission or (ii) by deposit of the same in a post office box postage prepaid in a sealed prepaid wrapper addressed to the person entitled thereto at his post office address, as it appears on the records of the Corporation, and such notice shall be deemed to have been given on the day of such transmission or mailing, as the case may be.

Whenever notice is required to be given by law, the Certificate of Incorporation or under any of the provisions of these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice.

-14-

Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or the bylaws.

Section 4. Resignations. Any director, member of a committee or officer may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the chief executive officer or Secretary. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation.

Section 5. Facsimile Signatures. In addition to the provisions for the use of facsimile signatures elsewhere specifically authorized in these bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors.

Section 6. Reliance upon Books, Reports and Records. Each director and each member of any committee designated by the Board of Directors shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or reports made to the Corporation by any of its officers, or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any such committee, or in relying in good faith upon other records of the Corporation.

Article IX

Amendments

If provided in the Certificate of Incorporation of the Corporation, the Board of Directors shall have the power to adopt, amend and repeal from time to time bylaws of the Corporation, subject to the right of the stockholders entitled to vote with respect thereto to amend or repeal such bylaws as adopted or amended by the Board of Directors.

-15-

EX-3.3

Exhibit 3.3

CERTIFICATE OF INCORPORATION

OF

TARGA RESOURCES FINANCE CORPORATION

FIRST: The name of the corporation is Targa Resources Finance Corporation.

SECOND: The address of its registered office in the State of Delaware is 2711 Centerville Road, Suite 400, in the City of Wilmington, County of New Castle 19808. The name of its registered agent at such address is Corporation Service Company.

THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

FOURTH: The total number of shares of all classes of stock which the corporation shall have authority to issue is one thousand (1,000) shares of common stock of the par value of $0.01 per share.

FIFTH: The name of the incorporator is James R. Patin and his mailing address is 1000 Louisiana, Suite 4700, Houston, Texas 77002.

SIXTH: The name and mailing address of the directors, who shall serve until the first annual meeting of stockholders or until their successors are elected and qualified, are as follows:

Name	Address
Rene R. Joyce	1000 Louisiana, Suite 4700 Houston, Texas 77002
Jeffrey J. McParland	1000 Louisiana, Suite 4700 Houston, Texas 77002

The number of directors of the corporation shall be as specified in, or determined in the manner provided in, the bylaws. Election of directors need not be by written ballot.

SEVENTH: In furtherance of, and not in limitation of, the powers conferred by statute, the Board of Directors is expressly authorized to adopt, amend or repeal the bylaws of the corporation.

EIGHTH: Whenever a compromise or arrangement is proposed between the corporation and its creditors or any class of them and/or between the corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the

stockholders or class of stockholders of the corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the corporation, as the case may be, and also on the corporation.

NINTH: No director of the corporation shall be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit.

TENTH: The corporation shall have the right, subject to any express provisions or restrictions contained in the certificate of incorporation or bylaws of the corporation, from time to time, to amend the certificate of incorporation or any provision thereof in any manner now or hereafter provided by law, and all rights and powers of any kind conferred upon a director or stockholder of the corporation by the certificate of incorporation or any amendment thereof are subject to such right of the corporation.

I, the undersigned, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring that this is my act and deed and that the facts herein stated are true, and accordingly have hereunto set my hand this 17th day of October, 2005.

/s/ James R. Patin

James R. Patin

Incorporator

2

EX-3.4

Exhibit 3.4

CERTIFICATE OF AMENDMENT

OF THE

CERTIFICATE OF INCORPORATION

OF

TARGA RESOURCES FINANCE CORPORATION

(Pursuant to Section 242 of the General Corporation Law of the State of Delaware)

Targa Resources Finance Corporation, a corporation organized and existing under the law of the State of Delaware (the “Company”), DOES HEREBY CERTIFY:

FIRST: That the Board of Directors of the Company duly adopted resolutions proposing and declaring advisable the following amendment to the Certificate of Incorporation of the Company in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware (the “Delaware Code”):

Article SECOND of the Certificate of Incorporation is hereby replaced in its entirety by the following:

“SECOND: The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.”

SECOND: That the foregoing amendment to the Certificate of Incorporation was duly adopted and approved by the written consent of the sole stockholder of all of the shares of capital stock entitled to vote thereon in accordance with the provisions of Section 228(a) and 242 of the Delaware Code.

THIRD: That the foregoing amendment was duly adopted in accordance with the requirements of Section 242 of the Delaware Code.

IN WITNESS WHEREOF, Targa Resources Finance Corporation has caused this certificate to be executed by the undersigned this 3rd day of February, 2006.

TARGA RESOURCES FINANCE CORPORATION
By:	/s/ Rene R. Joyce
Name:	Rene R. Joyce
Title:	Chief Executive Officer

EX-3.5

Exhibit 3.5

BYLAWS

OF

TARGA RESOURCES FINANCE CORPORATION

A Delaware Corporation

Date of Adoption:

October 17, 2005

TARGA RESOURCES FINANCE CORPORATION

BYLAWS

Table of Contents

		Page
ARTICLE I OFFICES
Section 1.01	Registered Office	1
Section 1.02	Other Offices	1
ARTICLE II STOCKHOLDERS
Section 2.01	Place of Meetings	1
Section 2.02	Quorum; Adjournment of Meetings	1
Section 2.03	Annual Meetings	2
Section 2.04	Special Meetings	2
Section 2.05	Record Date	2
Section 2.06	Notice of Meetings	3
Section 2.07	Stock List	3
Section 2.08	Proxies	3
Section 2.09	Voting; Elections; Inspectors	3
Section 2.10	Order of Business	4
Section 2.11	Treasury Stock	4
Section 2.12	Action Without Meeting	4
ARTICLE III BOARD OF DIRECTORS
Section 3.01	Power; Number; Term of Office	5
Section 3.02	Quorum	5
Section 3.03	Place of Meetings; Order of Business	5
Section 3.04	First Meeting	5
Section 3.05	Regular Meetings	5
Section 3.06	Special Meetings	5
Section 3.07	Removal	6
Section 3.08	Vacancies; Increases in the Number of Directors	6
Section 3.09	Compensation	6
Section 3.10	Action Without a Meeting; Telephone Conference Meeting	6
Section 3.11	Approval or Ratification of Acts or Contracts by Stockholders	7

ARTICLE IV COMMITTEES
Section 4.01	Designation; Powers	7
Section 4.02	Procedure; Meetings; Quorum	7
Section 4.03	Substitution of Members	8
ARTICLE V OFFICERS
Section 5.01	Number, Titles and Term of Office	8
Section 5.02	Salaries	8
Section 5.03	Removal	8
Section 5.04	Vacancies	8
Section 5.05	Powers and Duties of the Chief Executive Officer	8
Section 5.06	Powers and Duties of the Chairman of the Board	9
Section 5.07	Powers and Duties of the President	9
Section 5.08	Vice Presidents	9
Section 5.09	Treasurer	9
Section 5.10	Assistant Treasurers	9
Section 5.11	Secretary	9
Section 5.12	Assistant Secretaries	10
Section 5.13	Action with Respect to Securities of Other Corporations	10
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Section 6.01	Right to Indemnification	10
Section 6.02	Indemnification of Employees and Agents	11
Section 6.03	Right of Claimant to Bring Suit	11
Section 6.04	Nonexclusivity of Rights	11
Section 6.05	Insurance	11
Section 6.06	Savings Clause	12
Section 6.07	Definitions	12
ARTICLE VII CAPITAL STOCK
Section 7.01	Certificates of Stock	13
Section 7.02	Transfer of Shares	13
Section 7.03	Ownership of Shares	13
Section 7.04	Regulations Regarding Certificates	13
Section 7.05	Lost or Destroyed Certificates	13
ARTICLE VIII MISCELLANEOUS PROVISIONS
Section 8.01	Fiscal Year	13
Section 8.02	Notice and Waiver of Notice	13
Section 8.03	Resignations	14
Section 8.04	Facsimile Signatures	14
Section 8.05	Reliance upon Books, Reports and Records	14
ARTICLE IX AMENDMENTS

ii

BYLAWS

OF

TARGA RESOURCES FINANCE CORPORATION

ARTICLE I

OFFICES

Section 1.01 Registered Office. The registered office of the Corporation required by the General Corporation Law of the State of Delaware to be maintained in the State of Delaware, shall be the registered office named in the original Certificate of Incorporation of the Corporation, or such other office as may be designated from time to time by the Board of Directors in the manner provided by law. Should the Corporation maintain a principal office within the State of Delaware such registered office need not be identical to such principal office of the Corporation.

Section 1.02 Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

STOCKHOLDERS

Section 2.01 Place of Meetings. All meetings of the stockholders shall be held at the principal office of the Corporation, or at such other place within or without the State of Delaware as shall be specified or fixed in the notices or waivers of notice thereof.

Section 2.02 Quorum; Adjournment of Meetings. Unless otherwise required by law or provided in the Certificate of Incorporation or these bylaws, the holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at any meeting of stockholders for the transaction of business and the act of a majority of such stock so represented at any meeting of stockholders at which a quorum is present shall constitute the act of the meeting of stockholders. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

Notwithstanding the other provisions of the Certificate of Incorporation or these bylaws, the chairman of the meeting or the holders of a majority of the issued and outstanding stock, present in person or represented by proxy, at any meeting of stockholders, whether or not a quorum is present, shall have the power to adjourn such meeting from time to time, without any notice other than announcement at the meeting of the time and place of the holding of the adjourned meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned

meeting shall be given to each stockholder of record entitled to vote at such meeting. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally called.

Section 2.03 Annual Meetings. An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, within or without the State of Delaware, on such date, and at such time as the Board of Directors shall fix and set forth in the notice of the meeting, which date shall be within thirteen (13) months subsequent to the later of the date of incorporation or the last annual meeting of stockholders.

Section 2.04 Special Meetings. Unless otherwise provided in the Certificate of Incorporation, special meetings of the stockholders for any purpose or purposes may be called at any time by the Chairman of the Board (if any), by the President or by a majority of the Board of Directors, or by a majority of the executive committee (if any), and shall be called by the Chairman of the Board (if any), by the President or the Secretary upon the written request therefore, stating the purpose or purposes of the meeting, delivered to such officer, signed by the holder(s) of at least ten percent (10%) of the issued and outstanding stock entitled to vote at such meeting.

Section 2.05 Record Date. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors of the Corporation may fix, in advance, a date as the record date for any such determination of stockholders, which date shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.

If the Board of Directors does not fix a record date for any meeting of the stockholders, the record date for determining stockholders entitled to notice of or to vote at such meeting shall be at the close of business on the day next preceding the day on which notice is given, or, if in accordance with Article VIII, Section 3 of these bylaws notice is waived, at the close of business on the day next preceding the day on which the meeting is held. If, in accordance with Section 12 of this Article II, corporate action without a meeting of stockholders is to be taken, the record date for determining stockholders entitled to express consent to such corporate action in writing, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

- 2 -

Section 2.06 Notice of Meetings. Written notice of the place, date and hour of all meetings, and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be given by or at the direction of the Chairman of the Board (if any) or the President, the Secretary or the other person(s) calling the meeting to each stockholder entitled to vote thereat not less than ten (10) nor more than sixty (60) days before the date of the meeting. Such notice may be delivered personally by mail or by electronic transmission in the manner provided in Section 232 of the Delaware General Corporation Law. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation.

Section 2.07 Stock List. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in the name of such stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The stock list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

Section 2.08 Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to a corporate action in writing without a meeting may authorize another person or persons to act for him by proxy. Proxies for use at any meeting of stockholders shall be filed with the Secretary, or such other officer as the Board of Directors may from time to time determine by resolution, before or at the time of the meeting. All proxies shall be received and taken charge of and all ballots shall be received and canvassed by the secretary of the meeting who shall decide all questions touching upon the qualification of voters, the validity of the proxies, and the acceptance or rejection of votes, unless an inspector or inspectors shall have been appointed by the chairman of the meeting, in which event such inspector or inspectors shall decide all such questions.

No proxy shall be valid after three (3) years from its date, unless the proxy provides for a longer period. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power.

Should a proxy designate two or more persons to act as proxies, unless such instrument shall provide the contrary, a majority of such persons present at any meeting at which their powers thereunder are to be exercised shall have and may exercise all the powers of voting or giving consents thereby conferred, or if only one be present, then such powers may be exercised by that one; or, if an even number attend and a majority do not agree on any particular issue, each proxy so attending shall be entitled to exercise such powers in respect of the same portion of the shares as he is of the proxies representing such shares.

Section 2.09 Voting; Elections; Inspectors. Unless otherwise required by law or provided in the Certificate of Incorporation, each stockholder shall have one vote for each share of stock entitled to vote which is registered in his name on the record date for the meeting. Shares registered in the name of another corporation, domestic or foreign, may be voted by such

- 3 -

officer, agent or proxy as the bylaw (or comparable instrument) of such corporation may prescribe, or in the absence of such provision, as the Board of Directors (or comparable body) of such corporation may determine. Shares registered in the name of a deceased person may be voted by his executor or administrator, either in person or by proxy.

All voting, except as required by the Certificate of Incorporation or where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefor by stockholders holding a majority of the issued and outstanding stock present in person or by proxy at any meeting a stock vote shall be taken. Every stock vote shall be taken by written ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. All elections of directors shall be by ballot, unless otherwise provided in the Certificate of Incorporation.

At any meeting at which a vote is taken by ballots, the chairman of the meeting may appoint one or more inspectors, each of whom shall subscribe an oath or affirmation to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of his ability. Such inspector shall receive the ballots, count the votes and make and sign a certificate of the result thereof. The chairman of the meeting may appoint any person to serve as inspector, except no candidate for the office of director shall be appointed as an inspector.

Unless otherwise provided in the Certificate of Incorporation, cumulative voting for the election of directors shall be prohibited.

Section 2.10 Order of Business. At each meeting of the stockholders, one of the following persons, in the order in which they are listed (and in the absence of the first, the next, and so on), shall serve as chairman of the meeting: president, chairman of the board, vice presidents (in the order of their seniority if more than one), and secretary. The order of business at each such meeting shall be as determined by the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations, and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment of procedures for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the corporation, restrictions on entry to such meeting after the time prescribed for the commencement thereof, and the opening and closing of the voting polls.

Section 2.11 Treasury Stock. The Corporation shall not vote, directly or indirectly, shares of its own stock owned by it and such shares shall not be counted for quorum purposes.

Section 2.12 Action Without Meeting. Unless otherwise provided in the Certificate of Incorporation, any action permitted or required by law, the Certificate of Incorporation or these bylaws to be taken at a meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than a unanimous written consent shall be given by the Secretary to those stockholders who have not consented in writing.

- 4 -

ARTICLE III

BOARD OF DIRECTORS

Section 3.01 Power; Number; Term of Office. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, and subject to the restrictions imposed by law or the Certificate of Incorporation, they may exercise all the powers of the Corporation.

The number of directors which shall constitute the whole Board of Directors, shall be determined from time to time by resolution of the Board of Directors (provided that no decrease in the number of directors which would have the effect of shortening the term of an incumbent director may be made by the Board of Directors). If the Board of Directors makes no such determination, the number of directors shall be the number set forth in the Certificate of Incorporation. Each director shall hold office for the term for which he is elected, and until his successor shall have been elected and qualified or until his earlier death, resignation or removal.

Unless otherwise provided in the Certificate of Incorporation, directors need not be stockholders nor residents of the State of Delaware.

Section 3.02 Quorum. Unless otherwise provided in the Certificate of Incorporation, a majority of the total number of directors shall constitute a quorum for the transaction of business of the Board of Directors and the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 3.03 Place of Meetings; Order of Business. The directors may hold their meetings and may have an office and keep the books of the Corporation, except as otherwise provided by law, in such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine by resolution. At all meetings of the Board of Directors business shall be transacted in such order as shall from time to time be determined by the Chairman of the Board (if any), or in his absence by the President, or by resolution of the Board of Directors.

Section 3.04 First Meeting. Each newly elected Board of Directors may hold its first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after and at the same place as the annual meeting of the stockholders. Notice of such meeting shall not be required. At the first meeting of the Board of Directors in each year at which a quorum shall be present, held next after the annual meeting of stockholders, the Board of Directors shall proceed to the election of the officers of the Corporation.

Section 3.05 Regular Meetings. Regular meetings of the Board of Directors shall be held at such times and places as shall be designated from time to time by resolution of the Board of Directors. Notice of such regular meetings shall not be required.

Section 3.06 Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board (if any), the President or, on the written request of any two directors, by the Secretary, in each case on at least twenty-four (24) hours personal, written, telegraphic, cable, telephonic or e-mail notice to each director. Such notice, or any waiver

- 5 -

thereof pursuant to Article VIII, Section 3 hereof, need not state the purpose or purposes of such meeting, except as may otherwise be required by law or provided for in the Certificate of Incorporation or these bylaws.

Section 3.07 Removal. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; provided that, unless the Certificate of Incorporation otherwise provides, if the Board of Directors is classified, then the stockholders may effect such removal only for cause; and provided further that, if the Certificate of Incorporation expressly grants to stockholders the right to cumulate votes for the election of directors and if less than the entire board is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors, or, if there be classes of directors, at an election of the class of directors of which such director is a part.

Section 3.08 Vacancies; Increases in the Number of Directors. Unless otherwise provided in the Certificate of Incorporation, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or a sole remaining director; and any director so chosen shall hold office until the next annual election and until his successor shall be duly elected and shall qualify, unless sooner displaced.

If the directors of the Corporation are divided into classes, any directors elected to fill vacancies or newly created directorships shall hold office until the next election of the class for which such directors shall have been chosen, and until their successors shall be duly elected and shall qualify.

Section 3.09 Compensation. Unless otherwise restricted by the Certificate of Incorporation, the Board of Directors shall have the authority to fix the compensation of directors.

Section 3.10 Action Without a Meeting; Telephone Conference Meeting. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors, or any committee designated by the Board of Directors, may be taken without a meeting if all members of the Board of Directors or committee, as the case may be consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such consent shall have the same force and effect as a unanimous vote at a meeting, and may be stated as such in any document or instrument filed with the Secretary of State of Delaware.

Unless otherwise restricted by the Certificate of Incorporation, subject to the requirement for notice of meetings, members of the Board of Directors, or members of any committee designated by the Board of Directors, may participate in a meeting of such Board of Directors or committee, as the case may be, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting, except where

- 6 -

a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

Section 3.11 Approval or Ratification of Acts or Contracts by Stockholders. The Board of Directors in its discretion may submit any act or contract for approval or ratification at any annual meeting of the stockholders, or at any special meeting of the stockholders called for the purpose of considering any such act or contract, and any act or contract that shall be approved or be ratified by the vote of the stockholders holding a majority of the issued and outstanding shares of stock of the Corporation entitled to vote and present in person or by proxy at such meeting (provided that a quorum is present), shall be as valid and as binding upon the Corporation and upon all the stockholders as if it has been approved or ratified by every stockholder of the Corporation. In addition, any such act or contract may be approved or ratified by the written consent of stockholders holding a majority of the issued and outstanding shares of capital stock of the Corporation entitled to vote and such consent shall be as valid and as binding upon the Corporation and upon all the stockholders as if it had been approved or ratified by every stockholder of the Corporation.

ARTICLE IV

COMMITTEES

Section 4.01 Designation; Powers. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, including, if they shall so determine, an executive committee, each such committee to consist of one or more of the directors of the Corporation. Any such designated committee shall have and may exercise such of the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation as may be provided in such resolution, except that no such committee shall have the power or authority of the Board of Directors in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution of the Corporation, or amending, altering or repealing the bylaws or adopting new bylaws for the Corporation and, unless such resolution or the Certificate of Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Any such designated committee may authorize the seal of the Corporation to be affixed to all papers which may require it. In addition to the above such committee or committees shall have such other powers and limitations of authority as may be determined from time to time by resolution adopted by the Board of Directors.

Section 4.02 Procedure; Meetings; Quorum. Any committee designated pursuant to Section 1 of this Article shall choose its own chairman, shall keep regular minutes of its proceedings and report the same to the Board of Directors when requested, shall fix its own rules or procedures, and shall meet at such times and at such place or places as may be provided by such rules, or by resolution of such committee or resolution of the Board of Directors. At every meeting of any such committee, the presence of a majority of all the members thereof shall constitute a quorum and the affirmative vote of a majority of the members present shall be necessary for the adoption by it of any resolution.

- 7 -

Section 4.03 Substitution of Members. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.

ARTICLE V

OFFICERS

Section 5.01 Number, Titles and Term of Office. The officers of the Corporation shall be a Chief Executive Officer, a President, one or more Vice Presidents (any one or more of whom may be designated Executive Vice President or Senior Vice President), a Treasurer, a Secretary and, if the Board of Directors so elects, a Chairman of the Board and such other officers as the Board of Directors may from time to time elect or appoint. Each officer shall hold office until his successor shall be duly elected and shall qualify or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Any number of offices may be held by the same person, unless the Certificate of Incorporation provides otherwise. Except for the Chairman of the Board, if any, no officer need be a director.

Section 5.02 Salaries. The salaries or other compensation of the officers and agents of the Corporation shall be fixed from time to time by the Board of Directors.

Section 5.03 Removal. Any officer or agent elected or appointed by the Board of Directors may be removed, either with or without cause, by the vote of a majority of the whole Board of Directors at a special meeting called for the purpose, or at any regular meeting of the Board of Directors, provided the notice for such meeting shall specify that the matter of any such proposed removal will be considered at the meeting but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights.

Section 5.04 Vacancies. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors.

Section 5.05 Powers and Duties of the Chief Executive Officer. The President shall be the chief executive officer of the Corporation unless the Board of Directors designates the Chairman of the Board as chief executive officer. Subject to the control of the Board of Directors and the executive committee (if any), the chief executive officer shall have general executive charge, management and control of the properties, business and operations of the Corporation with all such powers as may be reasonably incident to such responsibilities; he may agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation and may sign all certificates for shares of capital stock of the

- 8 -

Corporation; and shall have such other powers and duties as designated in accordance with these bylaws and as from time to time may be assigned to him by the Board of Directors.

Section 5.06 Powers and Duties of the Chairman of the Board. If elected, the Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors; and he shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Board of Directors.

Section 5.07 Powers and Duties of the President. Unless the Board of Directors otherwise determines, the President shall have the authority to agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation; and, unless the Board of Directors otherwise determines, he shall, in the absence of the Chairman of the Board or if there be no Chairman of the Board, preside at all meetings of the stockholders and (should he be a director) of the Board of Directors; and he shall have such other powers and duties as designated in accordance with these bylaws and as from time to time may be assigned to him by the Board of Directors.

Section 5.08 Vice Presidents. In the absence of the President, or in the event of his inability or refusal to act, a Vice President designated by the Board of Directors shall perform the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. In the absence of a designation by the Board of Directors of a Vice President to perform the duties of the President, or in the event of his absence or inability or refusal to act, the Vice President who is present and who is senior in terms of time as a Vice President of the Corporation shall so act. The Vice Presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

Section 5.09 Treasurer. The Treasurer shall have responsibility for the custody and control of all the funds and securities of the Corporation, and he shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Board of Directors. He shall perform all acts incident to the position of Treasurer, subject to the control of the chief executive officer and the Board of Directors; and he shall, if required by the Board of Directors, give such bond for the faithful discharge of his duties in such form as the Board of Directors may require.

Section 5.10 Assistant Treasurers. Each Assistant Treasurer shall have the usual powers and duties pertaining to his office, together with such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the chief executive officer or the Board of Directors. The Assistant Treasurers shall exercise the powers of the Treasurer during that officer’s absence or inability or refusal to act.

Section 5.11 Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors, committees of directors and the stockholders, in books provided for that purpose; he shall attend to the giving and serving of all notices; he may in the name of the Corporation affix the seal of the Corporation to all contracts of the Corporation and attest the affixation of the seal of the Corporation thereto; he may sign with the other appointed officers all certificates for shares of capital stock of the Corporation; he shall have charge of the certificate books, transfer books and stock ledgers, and such other books and papers as the Board of

- 9 -

Directors may direct, all of which shall at all reasonable times be open to inspection of any director upon application at the office of the Corporation during business hours; he shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Board of Directors; and he shall in general perform all acts incident to the office of Secretary, subject to the control of the chief executive officer and the Board of Directors.

Section 5.12 Assistant Secretaries. Each Assistant Secretary shall have the usual powers and duties pertaining to his office, together with such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the chief executive officer or the Board of Directors. The Assistant Secretaries shall exercise the powers of the Secretary during that officer’s absence or inability or refusal to act.

Section 5.13 Action with Respect to Securities of Other Corporations. Unless otherwise directed by the Board of Directors, the chief executive officer shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of security holders of or with respect to any action of security holders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS,

OFFICERS, EMPLOYEES AND AGENTS

Section 6.01 Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she or a person of whom he or she is the legal representative, is or was or has agreed to become a director or officer of the Corporation or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving or having agreed to serve as a director or officer, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended, (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) against all expense, liability and loss (including without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to serve in the capacity which initially entitled such person to indemnity hereunder and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the board of directors of the Corporation. The right to indemnification conferred

- 10 -

in this Article VI shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a current, former or proposed director or officer in his or her capacity as a director or officer or proposed director or officer (and not in any other capacity in which service was or is or has been agreed to be rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnified person, to repay all amounts so advanced if it shall ultimately be determined that such indemnified person is not entitled to be indemnified under this Section or otherwise.

Section 6.02 Indemnification of Employees and Agents. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation, individually or as a group, with the same scope and effect as the indemnification of directors and officers provided for in this Article.

Section 6.03 Right of Claimant to Bring Suit. If a written claim received by the Corporation from or on behalf of an indemnified party under this Article VI is not paid in full by the Corporation within ninety days after such receipt, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

Section 6.04 Nonexclusivity of Rights. The right to indemnification and the advancement and payment of expenses conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any law (common or statutory), provision of the Certificate of Incorporation of the Corporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

Section 6.05 Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any person who is or was serving as a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.

- 11 -

Section 6.06 Savings Clause. If this Article VI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify and hold harmless each director and officer of the Corporation, as to costs, charges and expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative to the full extent permitted by any applicable portion of this Article VI that shall not have been invalidated and to the fullest extent permitted by applicable law.

Section 6.07 Definitions. For purposes of this Article, reference to the “Corporation” shall include, in addition to the Corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger prior to (or, in the case of an entity specifically designated in a resolution of the Board of Directors, after) the adoption hereof and which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

ARTICLE VII

CAPITAL STOCK

Section 7.01 Certificates of Stock. The certificates for shares of the capital stock of the Corporation shall be in such form, not inconsistent with that required by law and the Certificate of Incorporation, as shall be approved by the Board of Directors. The Chairman of the Board (if any), President or a Vice President shall cause to be issued to each stockholder one or more certificates, under the seal of the Corporation or a facsimile thereof if the Board of Directors shall have provided for such seal, and signed by the Chairman of the Board (if any), President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer certifying the number of shares (and, if the stock of the Corporation shall be divided into classes or series, the class and series of such shares) owned by such stockholder in the Corporation; provided, however, that any of or all the signatures on the certificate may be facsimile. The stock record books and the blank stock certificate books shall be kept by the Secretary, or at the office of such transfer agent or transfer agents as the Board of Directors may from time to time by resolution determine. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature or signatures shall have been placed upon any such certificate or certificates shall have ceased to be such officer, transfer agent or registrar before such certificate is issued by the Corporation, such certificate may nevertheless be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The stock certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued and shall exhibit the holder’s name and number of shares.

- 12 -

Section 7.02 Transfer of Shares. The shares of stock of the Corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives upon surrender and cancellation of certificates for a like number of shares. Upon surrender to the Corporation or a transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

Section 7.03 Ownership of Shares. The Corporation shall be entitled to treat the holder of record of any share or shares of capital stock of the Corporation as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.

Section 7.04 Regulations Regarding Certificates. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration or the replacement of certificates for shares of capital stock of the Corporation.

Section 7.05 Lost or Destroyed Certificates. The Board of Directors may determine the conditions upon which a new certificate of stock may be issued in place of a certificate which is alleged to have been lost, stolen or destroyed; and may, in their discretion, require the owner of such certificate or his legal representative to give bond, with sufficient surety, to indemnify the Corporation and each transfer agent and registrar against any and all losses or claims which may arise by reason of the issue of a new certificate in the place of the one so lost, stolen or destroyed.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

Section 8.01 Fiscal Year. The fiscal year of the Corporation shall be such as established from time to time by the Board of Directors.

Section 8.02 Notice and Waiver of Notice. Whenever any notice is required to be given by law, the Certificate of Incorporation or under the provisions of these bylaws, said notice shall be deemed to be sufficient if given (i) by telegraphic, cable or wireless transmission or (ii) by deposit of the same in a post office box in a sealed prepaid wrapper addressed to the person entitled thereto at his post office address, as it appears on the records of the Corporation, and such notice shall be deemed to have been given on the day of such transmission or mailing, as the case may be.

Whenever notice is required to be given by law, the Certificate of Incorporation or under any of the provisions of these bylaws, a written waiver thereof, signed by the person entitled to notice or waiver by electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the

- 13 -

express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or the bylaws.

Section 8.03 Resignations. Any director, member of a committee or officer may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the chief executive officer or Secretary. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation.

Section 8.04 Facsimile Signatures. In addition to the provisions for the use of facsimile signatures elsewhere specifically authorized in these bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors.

Section 8.05 Reliance upon Books, Reports and Records. Each director and each member of any committee designated by the Board of Directors shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or reports made to the Corporation by any of its officers, or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any such committee, or in relying in good faith upon other records of the Corporation.

ARTICLE IX

AMENDMENTS

If provided in the Certificate of Incorporation of the Corporation, the Board of Directors shall have the power to adopt, amend and repeal from time to time bylaws of the Corporation, subject to the right of the stockholders entitled to vote with respect thereto to amend or repeal such bylaws as adopted or amended by the Board of Directors.

- 14 -

EX-4.3

Exhibit 4.3

EXECUTION COPY

TARGA RESOURCES, INC.

TARGA RESOURCES FINANCE CORPORATION

the SUBSIDIARY GUARANTORS named in Schedule I hereto

and

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee

INDENTURE

Dated as of October 31, 2005

$250,000,000

8 ¹/2 Senior Notes Due 2013

Reconciliation and tie between Trust Indenture Act

of 1939 and Indenture, dated as of October 31, 2005*

Trust Indenture Act Section	Indenture Section
§ 310 (a)(1)	608
(a)(2)	608
(a)(3)	N.A.
(a)(4)	N.A.
(b)	605, 609
(c)	N.A.
§ 311 (a)	605
(b)	605
(c)	N.A.
§ 312 (a)	701
(b)	702
(c)	702
§ 313 (a)	703
(a)(4)	703
(b)(1)	N.A.
(b)(2)	703
(c)(1)	702, 703
(c)(2)	703
(d)	N.A.
§ 314 (a)(1)	1009
(a)(4)	103
(b)	N.A.
(c)(1)	103
(c)(2)	103
(c)(3)	N.A.
(d)	N.A.
(e)	103
(f)	1009
§ 315 (a)	601
(b)	602
(c)	601
(d)	601
(e)	506
§ 316 (a) (last sentence)	102(“Outstanding”)
(a)(1)(A)	507, 512
(a)(1)(B)	513
(a)(2)	N.A.
(b)	508
(c)	105
§ 317 (a)(1)	503
(a)(2)	504
(b)	1003
§ 318 (a)	115

N.A. means Not Applicable.

* This reconciliation and tie shall not, for any purpose, be deemed to be a part of this Indenture.

Table of Contents*

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

		Page
SECTION 101.	Rules of Construction and Incorporation by Reference of Trust Indenture Act	2
SECTION 102.	Definitions	3
SECTION 103.	Compliance Certificates and Opinions	42
SECTION 104.	Form of Documents Delivered to Trustee	43
SECTION 105.	Acts of Holders	43
SECTION 106.	Notices, Etc., to Trustee, Company, the Co-Issuer, any Subsidiary Guarantor and Agent	45
SECTION 107.	Notice to Holders; Waiver	45
SECTION 108.	Effect of Headings and Table of Contents	46
SECTION 109.	Successors and Assigns	46
SECTION 110.	Separability Clause	46
SECTION 111.	Benefits of Indenture	46
SECTION 112.	Governing Law	46
SECTION 113.	Legal Holidays	47
SECTION 114.	No Personal Liability of Directors, Officers, Employees and Stockholders	47
SECTION 115.	Trust Indenture Act Controls	47
SECTION 116.	Counterparts	47
ARTICLE TWO
NOTE FORMS
SECTION 201.	Form and Dating	48
SECTION 202.	Execution, Authentication, Delivery and Dating	48
ARTICLE THREE
THE NOTES
SECTION 301.	Title and Terms	50
SECTION 302.	Denominations	51
SECTION 303.	Temporary Notes	51

* This table of contents shall not, for any purpose, be deemed to be a part of this Indenture.

i

SECTION 304.	Note Registrar; Paying Agent; Registration of Transfer and Exchange	51
SECTION 305.	Mutilated, Destroyed, Lost and Stolen Notes	52
SECTION 306.	Payment of Interest; Interest Rights Preserved	53
SECTION 307.	Persons Deemed Owners	54
SECTION 308.	Cancellation	54
SECTION 309.	Computation of Interest	55
SECTION 310.	Transfer and Exchange	55
SECTION 311.	CUSIP Numbers	55
SECTION 312.	Issuance of Additional Notes	55
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401.	Satisfaction and Discharge of Indenture	56
SECTION 402.	Application of Trust Money	57
ARTICLE FIVE
REMEDIES
SECTION 501.	Events of Default	59
SECTION 502.	Acceleration of Maturity; Rescission and Annulment	61
SECTION 503.	Collection of Indebtedness and Suits for Enforcement by Trustee	62
SECTION 504.	Trustee May File Proofs of Claim	62
SECTION 505.	Trustee May Enforce Claims Without Possession of Notes	63
SECTION 506.	Application of Money Collected	63
SECTION 507.	Limitation on Suits	64
SECTION 508.	Unconditional Right of Holders to Receive Principal, Premium and Interest	64
SECTION 509.	Restoration of Rights and Remedies	65
SECTION 510.	Rights and Remedies Cumulative	65
SECTION 511.	Delay or Omission Not Waiver	65
SECTION 512.	Control by Holders	65
SECTION 513.	Waiver of Default	66
SECTION 514.	Waiver of Stay or Extension Laws	66
ARTICLE SIX
THE TRUSTEE
SECTION 601.	Duties of the Trustee	67
SECTION 602.	Notice of Defaults	68
SECTION 603.	Certain Rights of Trustee	68
SECTION 604.	Trustee Not Responsible for Recitals or Issuance of Notes	69
SECTION 605.	May Hold Notes	70

ii

SECTION 606.	Money Held in Trust	70
SECTION 607.	Compensation and Reimbursement	70
SECTION 608.	Corporate Trustee Required; Eligibility	71
SECTION 609.	Resignation and Removal; Appointment of Successor	71
SECTION 610.	Acceptance of Appointment by Successor	72
SECTION 611.	Merger, Conversion, Consolidation or Succession to Business	73
SECTION 612.	Appointment of Authenticating Agent	73
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701.	Holder Lists	75
SECTION 702.	Disclosure of Names and Addresses of Holders	75
SECTION 703.	Reports by Trustee	75
ARTICLE EIGHT
MERGER, CONSOLIDATION OR SALE OF ALL OR SUBSTANTIALLY ALL ASSETS
SECTION 801.	Company May Consolidate, Etc., Only on Certain Terms	76
SECTION 802.	Subsidiary Guarantors May Consolidate, Etc., Only on Certain Terms	77
SECTION 803.	Co-Issuer May Consolidate, Etc., Only on Certain Terms	78
SECTION 804.	Successor Substituted	78
SECTION 805.	The Acquisition Permitted	79
SECTION 806.	Assets of Subsidiary Apply to Company	79
ARTICLE NINE
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 901.	Amendments or Supplements Without Consent of Holders	80
SECTION 902.	Amendments or Supplements With Consent of Holders	81
SECTION 903.	Execution of Amendments, Supplements or Waivers	82
SECTION 904.	Effect of Amendments, Supplements or Waivers	83
SECTION 905.	Compliance with Trust Indenture Act	83
SECTION 906.	Reference in Notes to Supplemental Indentures	83
SECTION 907.	Notice of Supplemental Indentures	83
ARTICLE TEN
COVENANTS
SECTION 1001.	Payment of Principal, Premium, if any, and Interest	84
SECTION 1002.	Maintenance of Office or Agency	84
SECTION 1003.	Paying Agent to Hold Money in Trust	84
SECTION 1004.	Corporate Existence	86

iii

SECTION 1005.	Payment of Taxes and Other Claims	86
SECTION 1006.	Reserved	86
SECTION 1007.	Reserved	86
SECTION 1008.	Statement by Officers as to Default	86
SECTION 1009.	Reports and Other Information	87
SECTION 1010.	Limitation on Restricted Payments	89
SECTION 1011.	Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock	97
SECTION 1012.	Liens	105
SECTION 1013.	Limitations on Transactions with Affiliates	105
SECTION 1014.	Limitations on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries	107
SECTION 1015.	Limitation on Subsidiary Guarantees of Indebtedness by Restricted Subsidiaries	109
SECTION 1016.	Limitation on Sale and Lease-Back Transactions	110
SECTION 1017.	Change of Control	110
SECTION 1018.	Asset Sales	112
SECTION 1019.	Transactions Involving MLPs and GPs	116
SECTION 1020.	Additional Interest Notice	122
SECTION 1021.	Limitations on Co-Issuer	122
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101.	Right of Redemption	123
SECTION 1102.	Applicability of Article	123
SECTION 1103.	Election to Redeem; Notice to Trustee	124
SECTION 1104.	Selection by Trustee of Notes to Be Redeemed	124
SECTION 1105.	Notice of Redemption	124
SECTION 1106.	Effect of Notice of Redemption	125
SECTION 1107.	Deposit of Redemption Price	126
SECTION 1108.	Notes Payable on Redemption Date	126
SECTION 1109.	Notes Redeemed in Part	126
ARTICLE TWELVE
GUARANTEES
SECTION 1201.	Subsidiary Guarantees	127
SECTION 1202.	Severability	128
SECTION 1203.	Reserved	129
SECTION 1204.	Limitation of Subsidiary Guarantors’ Liability	129
SECTION 1205.	Contribution	129
SECTION 1206.	Subrogation	129
SECTION 1207.	Reinstatement	129
SECTION 1208.	Release of a Subsidiary Guarantor	130

iv

SECTION 1209.	Benefits Acknowledged	131
ARTICLE THIRTEEN
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301.	Company’s and Co-Issuer’s Option to Effect Legal Defeasance or Covenant Defeasance	132
SECTION 1302.	Legal Defeasance and Discharge	132
SECTION 1303.	Covenant Defeasance	132
SECTION 1304.	Conditions to Legal Defeasance or Covenant Defeasance	133
SECTION 1305.	Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions	135
SECTION 1306.	Reinstatement	135
SECTION 1307.	Repayment to Company and Co-Issuer	136

APPENDIX & EXHIBITS

Rule 144A / Regulation S Appendix

EXHIBIT 1 to Rule 144A / Regulation S Appendix – Form of Initial Note

EXHIBIT 2 to Rule 144A / Regulation S Appendix – Form of Transferee

Letter of Representation

EXHIBIT 3 to Rule 144A/Regulation S Appendix – Form of Non-U.S. Beneficial Ownership Certification by Euroclear or Clearstream Luxembourg

EXHIBIT A – Form of Exchange Note or Private Exchange Note

EXHIBIT B – Form of Supplemental Indenture

EXHIBIT C – Form of Subordination Provisions

v

INDENTURE dated as of October 31, 2005 (this “Indenture”), among Targa Resources, Inc., a Delaware corporation (the “Company”), Targa Resources Finance Corporation, a Delaware corporation (the “Co-Issuer”), and certain of the Company’s direct and indirect Domestic Subsidiaries (as defined below), each named in Schedule I hereto (each, a “Subsidiary Guarantor” and collectively, the “Subsidiary Guarantors”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee (the “Trustee”).

RECITALS

The Company and the Co-Issuer have duly authorized the creation of an issue of (i) 8 ¹/2% Senior Notes Due 2013 issued on the date hereof (the “Initial Notes”) and (ii) if and when issued as required by the Registration Rights Agreement dated the date hereof, among the Company, the Co-Issuer, the Subsidiary Guarantors and the Purchasers (as defined therein) (the “Registration Rights Agreement”), 8 ¹/2% Senior Exchange Notes Due 2013 issued in an Exchange Offer in exchange for any Initial Notes (the “Exchange Notes”, and collectively with the Initial Notes, the “Notes”), of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company, the Co-Issuer and the Subsidiary Guarantors have duly authorized the execution and delivery of this Indenture.

The Subsidiary Guarantors have each duly authorized their Subsidiary Guarantee of the Initial Notes and, if and when issued, the Exchange Notes, and to provide therefor the Subsidiary Guarantors have each duly authorized the execution and delivery of this Indenture.

All things necessary have been done to make the Notes, when executed by the Company and the Co-Issuer and authenticated and delivered hereunder and duly issued by the Company and the Co-Issuer, the valid and legally binding obligations of the Company and the Co-Issuer and to make this Indenture a valid and legally binding agreement of the Company and the Co-Issuer, in accordance with their and its terms.

All things necessary have been done to make the Subsidiary Guarantees, upon execution and delivery of this Indenture, the valid obligations of each Subsidiary Guarantor and to make this Indenture a valid and legally binding agreement of each Subsidiary Guarantor, in accordance with their and its terms.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and ratable benefit of all Holders, as follows:

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS

OF GENERAL APPLICATION

SECTION 101. Rules of Construction and Incorporation by Reference of Trust Indenture Act. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(1) the terms defined in this Article have the meanings assigned to them in this Article, and words in the singular include the plural and words in the plural include the singular;

(2) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP (as herein defined);

(3) the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;

(4) all references to Articles, Sections, Exhibits and Appendices shall be construed to refer to Articles and Sections of, and Exhibits and Appendices to, this Indenture;

(5) “or” is not exclusive;

(6) “including” means including without limitation;

(7) all references to the date the Notes were originally issued shall refer to the Issue Date; and

(8) all references, in any context, to any interest or other amount payable on or with respect to the Notes shall be deemed to include any Additional Interest (as herein defined) pursuant to the Registration Rights Agreement.

This Indenture is subject to the mandatory provisions of the TIA (as herein defined), which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings:

(1) “Commission” means the SEC;

(2) “indenture securities” means the Notes and the Subsidiary Guarantees;

(3) “indenture security holder” means a Holder;

(4) “indenture to be qualified” means this Indenture;

2

(5) “indenture trustee” or “institutional trustee” means the Trustee; and

(6) “obligor” on the indenture securities means the Company, the Co-Issuer, each Subsidiary Guarantor and any other obligor on the indenture securities.

All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

SECTION 102. Definitions.

“Acquired Indebtedness” means, with respect to any specified Person,

(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person, and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Acquisition” means the acquisition of Equity Interests contemplated by the PIPA.

“Act”, when used with respect to any Holder, has the meaning specified in Section 105 of this Indenture.

“Additional Interest” means all liquidated damages then owing pursuant to the Registration Rights Agreement.

“Additional Interest Notice” has the meaning specified in Section 1020 of this Indenture.

“Additional Notes” means any Notes issued by the Company and the Co-Issuer pursuant to Section 312.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

“Affiliate Transaction” has the meaning specified in Section 1013 of this Indenture.

3

“Applicable Premium” means, with respect to any Note on any Redemption Date, the greater of:

(1) 1.0% of the principal amount of such Note; or

(2) the excess, if any, of:

(a) the present value at such Redemption Date of (i) the redemption price of such Note at November 1, 2009 (such redemption price being set forth in the table appearing in Section 1101(b)), plus (ii) all required interest payments due on the Note through November 1, 2009 (excluding accrued but unpaid interest to the Redemption Date), computed using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points; over

(b) the principal amount of such Note.

“Asset Sale” means

(1) the sale, conveyance, transfer or other disposition, whether in a single transaction or a series of related transactions, of property or assets (including by way of a Sale and Lease-Back Transaction) of the Company or any Restricted Subsidiary (each referred to in this definition as a “disposition”); and

(2) the issuance or sale of Equity Interests of any Restricted Subsidiary, whether in a single transaction or a series of related transactions,

in each case, other than:

(a) a disposition of cash, Cash Equivalents or Investment Grade Securities or obsolete or worn out equipment, vehicles or other similar assets in the ordinary course of business or any disposition of inventory or goods held for sale in the ordinary course of business;

(b) the disposition of all or substantially all of the assets of the Company in a manner permitted pursuant to the provisions described under Section 801 of this Indenture or any disposition that constitutes a Change of Control pursuant to this Indenture;

(c) the making of any Permitted Investment or the making of any Restricted Payment that is not prohibited by Section 1010 of this Indenture;

(d) any disposition of assets or issuance or sale of Equity Interests of any Restricted Subsidiary in any transaction or series of transactions with an aggregate fair market value of less than $20.0 million;

(e) any disposition of property or assets or issuance of securities by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary;

4

(f) to the extent allowable under Section 1031 of the Code, any exchange of like property (excluding any boot thereon) for use in a Similar Business;

(g) the lease, assignment or sub-lease of any real or personal property in the ordinary course of business;

(h) any issuance or sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary;

(i) foreclosures on assets;

(j) sales of accounts receivable, or participations therein, in connection with any Receivables Facility;

(k) the unwinding of any Hedging Obligations; and

(l) a MLP Asset Transfer, MLP Equity Transfer or GP Equity Transfer.

“Asset Sale Bridge Term Loan Facility” means the asset sale credit facility provided under the Credit Agreement, dated as of the Issue Date, among the Company, the lenders party thereto in their capacity as lenders and Credit Suisse, as Administrative Agent, including any guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, replacements, renewals, restatements, refundings or refinancings thereof and any indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that extend, replace, refund, refinance, renew or defease any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under Section 1011 of this Indenture).

“Asset Sale Offer” has the meaning specified in Section 1018 of this Indenture.

“Attributable Debt” in respect of a Sale and Lease-Back Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Lease-Back Transaction (including any period for which such lease has been extended); provided, however, that if such Sale and Lease-Back Transaction results in a Capitalized Lease Obligation, the amount of Indebtedness represented thereby shall be determined in accordance with the definition of “Capitalized Lease Obligation”.

“Bankruptcy Law” means Title 11, United States Bankruptcy Code of 1978, as amended, or any similar United States federal or state or foreign law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law.

5

“Board of Directors” means:

(1) with respect to a corporation, the board of directors of the corporation;

(2) with respect to a partnership, the board of directors of the general partner of the partnership; and

(3) with respect to any other Person, the board or committee of such Person serving a similar function.

“Board Resolution” means, with respect to the Company or the Co-Issuer, a duly adopted resolution of the Board of Directors of the Company or the Co-Issuer, as the case may be, or any respective committee thereof.

“Business Day” means each day that is not a Legal Holiday.

“Capital Stock” means

(1) in the case of a corporation, corporate stock,

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock,

(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited), and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“Capitalized Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) in accordance with GAAP.

“Cash Equivalents” means

(1) United States of America dollars,

(2)(a) Canadian dollars; or

(b) in the case of any Foreign Subsidiary that is a Restricted Subsidiary, such local currencies held by it from time to time in the ordinary course of business,

6

(3) securities issued or directly and fully and unconditionally guaranteed or insured by the government of the United States of America or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and credit obligation of such government with maturities of 24 months or less from the date of acquisition,

(4) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any commercial bank having capital and surplus in excess of $250.0 million,

(5) repurchase obligations for underlying securities of the types described in clauses (3) and (4) entered into with any financial institution meeting the qualifications specified in clause (4) above,

(6) commercial paper rated at least P-1 by Moody’s or at least A-1 by S&P and in each case maturing within 12 months after the date of issuance thereof,

(7) investment funds investing at least 95% of their assets in securities of the types described in clauses (1) through (6) above,

(8) readily marketable direct obligations issued by any state of the United States of America or any political subdivision thereof having one of the two highest rating categories obtainable from either Moody’s or S&P with maturities of 24 months or less from the date of acquisition and

(9) Indebtedness or Preferred Stock issued by Persons with a rating of “A” or higher from S&P or “A2” or higher from Moody’s with maturities of 12 months or less from the date of acquisition.

Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in one or more currencies other than those set forth in clauses (1) and (2) above; provided that such amounts are converted into the currencies set forth in clauses (1) and (2) above as promptly as practicable and in any event within ten Business Days following the receipt of such amounts.

“Change of Control” means the occurrence of any of the following:

(1) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any Person other than a Permitted Holder; or

(2) the Company becomes aware of (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor

7

provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act, or any successor provision), other than the Permitted Holders, in a single transaction or in a series of related transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) of 50% or more of the total voting power of the Voting Stock of the Company or any of its direct or indirect parent companies.

“Change of Control Offer” has the meaning specified in Section 1017 of this Indenture.

“Change of Control Payment” has the meaning specified in Section 1017 of this Indenture.

“Change of Control Payment Date” has the meaning specified in Section 1017 of this Indenture.

“Code” means the Internal Revenue Code of 1986, as amended.

“Co-Investor” means Merrill Lynch Ventures L.P. 2001 and its Affiliates.

“Co-Issuer” means Targa Resources Finance Corporation, a Delaware corporation, and its successors.

“Common Stock” means, with respect to any Person, any and all shares, interest, participations and other equivalents (however designated, whether voting or non-voting) of such Person’s common equity interests, whether now outstanding or issued after the date of this Indenture, and includes all series or classes of such common equity interests.

“Company” means the Person named as the “Company” in the first paragraph of this Indenture, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter, “Company” shall mean such successor Person; provided that when used in the context of determining the fair market value of an asset or liability under this Indenture, “Company” shall, unless otherwise expressly stated, be deemed to mean the Board of Directors of the Company when the fair market value of such asset or liability is equal to or in excess of $50.0 million.

“Company Request” or “Company Order” means a written request or order signed in the name of the Company and the Co-Issuer, in each case by two Officers or one Officer and either an Assistant Treasurer or an Assistant Secretary of the Company or the Co-Issuer, as the case may be, and delivered to the Trustee.

“Consolidated”, “Consolidated” or “on a consolidated basis” means, with respect to any Person, such Person consolidated with its Restricted Subsidiaries (other than Partially Owned Operating Subsidiaries and any Subsidiary thereof) and excludes from such consolidation any Unrestricted Subsidiary, Permitted MLP and Permitted GP as if such Unrestricted Subsidiary, Permitted MLP or Permitted GP were not an Affiliate of such Person.

8

“Consolidated Current Liabilities” as of the date of determination means the aggregate amount of liabilities of the Company and its consolidated Restricted Subsidiaries which may properly be classified as current liabilities (including taxes accrued as estimated), on a consolidated basis, after eliminating (1) all intercompany items between the Company and any Restricted Subsidiary and (2) all current maturities of long-term Indebtedness, all as determined in accordance with GAAP consistently applied.

“Consolidated Depreciation and Amortization Expense” means with respect to any Person for any period, the total amount of depreciation and amortization expense, including the amortization of deferred financing fees and other related noncash charges of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.

“Consolidated Interest Expense” means, with respect to any Person for any period, the sum, without duplication, of:

(a) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted in computing Consolidated Net Income (including (i) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (ii) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers’ acceptances, including fees in connection with the Funded Synthetic Letter of Credit Facility or similar facility, (iii) noncash interest payments (but excluding any noncash interest expense attributable to the movement in the mark-to-market valuation of Hedging Obligations or other derivative instruments pursuant to GAAP), (iv) the interest component of Capitalized Lease Obligations and (v) net payments, if any, pursuant to interest rate Hedging Obligations with respect to Indebtedness, and excluding (A) Additional Interest, (B) amortization of deferred financing fees, debt issuance costs, commissions, fees and expenses, (C) any expensing of bridge, commitment and other financing fees (other than those described in clause (ii) above), (D) commissions, discounts, yield and other fees and charges (including any interest expense) related to any Receivables Facility and (E) any redemption premiums paid in connection with the Transactions), plus

(b) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, less

(c) interest income for such period.

For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.

9

“Consolidated Leverage Ratio”, with respect to any Person as of any date of determination, means the ratio of (x) Consolidated Total Indebtedness of such Person as of the end of the most recent fiscal quarter for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur to (y) the aggregate amount of EBITDA of such Person for the period of the most recently ended four full consecutive fiscal quarters for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur, in each case with such pro forma adjustments to Consolidated Total Indebtedness and EBITDA as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.

“Consolidated Net Income” means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided that, without duplication,

(1) any net after-tax extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses (including relating to severance, relocation, one-time compensation charges and the Transactions) shall be excluded,

(2) the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period, whether effected through a cumulative effect adjustment or a retroactive application in each case in accordance with GAAP,

(3) any net after-tax income (loss) from disposed or discontinued operations and any net after-tax gains or losses on disposal of disposed or discontinued operations shall be excluded,

(4) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions or the sale or other disposition of any Capital Stock of any Person other than in the ordinary course of business, as determined in good faith by the Company, shall be excluded,

(5) the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, a Permitted MLP or a Permitted GP, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Company shall be increased by (a) the amount of dividends, distributions or other payments from any Person that is not a Subsidiary, any Unrestricted Subsidiary or any Person that is accounted for by the equity method of accounting (in each case, other than a Permitted MLP or Permitted GP or any Subsidiary thereof) and (b) the amount of any dividends, distributions or other payments from a Permitted MLP or a Permitted GP, in each case only to the extent made out of the operating surplus of such Permitted MLP or such Permitted GP, in each of clauses (a) and (b) above, that are actually paid

10

in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period (subject in the case of dividends, distributions or other payments made to a Restricted Subsidiary to the limitations contained in clause (6) below),

(6) solely for the purpose of determining the amount available for Restricted Payments under clause (C)(1) of Section 1010(a) of this Indenture, the Net Income for such period of any Restricted Subsidiary (other than any Subsidiary Guarantor) shall be excluded if the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination wholly permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived; provided that Consolidated Net Income of the Company shall be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) to the Company or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein,

(7) any increase in amortization or depreciation or other noncash charges resulting from the application of purchase accounting in relation to the Transactions or any acquisition that is consummated after the Issue Date, net of taxes, shall be excluded,

(8) any net after-tax income (loss) from the early extinguishment of Indebtedness or Hedging Obligations or other derivative instruments shall be excluded,

(9) any impairment charge or asset write-off, in each case pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP shall be excluded and

(10) any noncash compensation expense recorded from grants of stock appreciation or similar rights, stock options, restricted stock or other rights to officers, directors or employees shall be excluded.

Notwithstanding the foregoing, for the purpose of Section 1010(a) of this Indenture only (other than clause (C)(4) thereof), there shall be excluded from Consolidated Net Income any income arising from any sale or other disposition of Restricted Investments made by the Company and the Restricted Subsidiaries, any repurchases and redemptions of Restricted Investments from the Company and the Restricted Subsidiaries, any repayments of loans and advances that constitute Restricted Investments by the Company or any Restricted Subsidiary, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary,

11

in each case only to the extent such amounts increase the amount of Restricted Payments permitted under Section 1010(a) of this Indenture pursuant to clause (C)(4) thereof.

“Consolidated Net Tangible Assets” as of any date of determination, means the total amount of assets (less accumulated depreciation and amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items) which would appear on a consolidated balance sheet of the Company and its consolidated Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, and after giving effect to purchase accounting and after deducting therefrom Consolidated Current Liabilities and, to the extent otherwise included, the amounts of:

(1) minority interests in consolidated Subsidiaries held by Persons other than the Company or a Restricted Subsidiary;

(2) excess of cost over fair value of assets of businesses acquired, as determined in good faith by the Board of Directors;

(3) any revaluation or other write-up in book value of assets subsequent to the Issue Date as a result of a change in the method of valuation in accordance with GAAP consistently applied;

(4) unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items;

(5) treasury stock;

(6) cash set apart and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock to the extent such obligation is not reflected in Consolidated Current Liabilities; and

(7) Investments in and assets of Unrestricted Subsidiaries, Permitted MLPs, Permitted GPs or any Subsidiary thereof.

“Consolidated Total Indebtedness” means, as of any date of determination, an amount equal to the sum of (1) the aggregate amount of all outstanding Indebtedness of the Company and the Restricted Subsidiaries on a consolidated basis consisting of Indebtedness for borrowed money, Obligations in respect of Capitalized Lease Obligations, Attributable Debt in respect of Sale and Lease-Back Transactions and debt obligations evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers’ acceptances (and excluding (x) any undrawn letters of credit and (y) all obligations relating to Receivables Facilities), and (2) the aggregate amount of all outstanding Disqualified Stock of the Company and all Disqualified Stock and Preferred Stock of the Restricted Subsidiaries (excluding items eliminated in consolidation), with the amount of such Disqualified Stock and Preferred Stock, equal to the greater of their respective voluntary or involuntary liquidation preferences and Maximum Fixed Repurchase Prices, in each case determined on a consolidated basis in accordance with GAAP.

12

For purposes hereof, the “Maximum Fixed Repurchase Price” of any Disqualified Stock or Preferred Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock or Preferred Stock as if such Disqualified Stock or Preferred Stock were purchased on any date on which Consolidated Total Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock or Preferred Stock, such fair market value shall be determined reasonably and in good faith by the Company.

“Contingent Obligations” means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (the “primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of such Person, whether or not contingent,

(1) to purchase any such primary obligation or any property constituting direct or indirect security therefor,

(2) to advance or supply funds

(A) for the purchase or payment of any such primary obligation or

(B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, or

(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.

“Corporate Trust Office” means the principal corporate trust office of the Trustee, at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this Indenture is located at 213 Court Street, Suite 703, Middletown, CT 06457, except that with respect to presentation of the Notes for payment or for registration of transfer or exchange, such term shall mean the office or agency of the Trustee at which, at any particular time, its corporate agency business shall be conducted.

“Covenant Defeasance” has the meaning specified in Section 1303 of this Indenture.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

13

“Defaulted Interest” has the meaning specified in Section 306(b) of this Indenture.

“Depository” means The Depository Trust Company, its nominees and their respective successors.

“Designated Noncash Consideration” means the fair market value of noncash consideration received by the Company or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Noncash Consideration pursuant to an Officers’ Certificate, setting forth the basis of such valuation, executed by an executive vice president and the principal financial officer of the Company, less the amount of cash or Cash Equivalents received in connection with a subsequent sale of such Designated Noncash Consideration.

“Designated Preferred Stock” means Preferred Stock of the Company or any parent company thereof (in each case other than Disqualified Stock) that is issued for cash (other than to a Restricted Subsidiary) and is so designated as Designated Preferred Stock pursuant to an Officers’ Certificate executed by an executive vice president and the principal financial officer of the Company or the applicable parent company thereof, as the case may be, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (C) of Section 1010(a) of this Indenture.

“Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable (other than solely for Capital Stock that is not Disqualified Stock), other than as a result of a change of control or asset sale, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, other than as a result of a change of control or asset sale, in whole or in part, in each case prior to the date that is 91 days after the earlier of the maturity date of the Notes and the date the Notes are no longer Outstanding; provided that if such Capital Stock is issued to any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations.

“Domestic Subsidiary” means, with respect to any Person, any Restricted Subsidiary of such Person other than (i) a Foreign Subsidiary or (ii) a Domestic Subsidiary of a Foreign Subsidiary, but, in each case, including any Subsidiary that guarantees or otherwise provides direct credit support for any indebtedness of the Company.

“Downstream Business” means that portion of the business of the Company that is primarily engaged in fractionating, storing, terminalling, transporting, distributing and marketing natural gas liquids, including the following principal assets:

14

Houston Area, Louisiana Area, NGL Marketing, and Wholesale Marketing and Commercial Transportation (each term, as defined in the PIPA).

“EBITDA” means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period,

(1) increased by (without duplication):

(a) provision for taxes based on income or profits, plus franchise or similar taxes, of such Person for such period deducted in computing Consolidated Net Income, plus

(b) consolidated Fixed Charges of such Person for such period to the extent the same was deducted in computing Consolidated Net Income, plus

(c) Consolidated Depreciation and Amortization Expense of such Person for such period to the extent such depreciation and amortization were deducted in computing Consolidated Net Income, plus

(d) any expenses or charges related to any Equity Offering, Permitted Investment, acquisition, disposition, recapitalization or the incurrence of Indebtedness permitted to be incurred by this Indenture including a refinancing thereof (whether or not successful) and any amendment or modification to the terms of any such transactions, including such fees, expenses or charges related to the Transactions, including the offering of the Notes and the Senior Credit Facilities, in each case, deducted in computing Consolidated Net Income, plus

(e) the amount of any restructuring charge or reserve deducted in such period in computing Consolidated Net Income, including any one-time costs incurred in connection with acquisitions after the Issue Date, plus

(f) any write offs, write downs or other noncash charges reducing Consolidated Net Income for such period, excluding any such charge that represents an accrual or reserve for a cash expenditure for a future period, plus

(g) the amount of any minority interest expense deducted in calculating Consolidated Net Income, plus

(h) the amount of management, monitoring, consulting and advisory fees and related expenses paid (or any accruals related to such fees or related expenses) during such period to the Sponsor to the extent permitted under Section 1013 of this Indenture, plus

(i) the amount of net cost savings projected by the Company in good faith to be realized as a result of specified actions taken during such period (calculated on a pro forma basis as though such cost savings had been realized on the first day of such period), net of the amount of actual benefits realized during such period from such actions; provided that (x) such cost savings are reasonably

15

identifiable and factually supportable, (y) such actions are taken within 36 months after the Issue Date and (z) the aggregate amount of cost savings added pursuant to this clause (i) shall not exceed $35.0 million for any four consecutive quarter period (which adjustments may be incremental to pro forma adjustments made pursuant to the second paragraph of the definition of “Fixed Charge Coverage Ratio”), plus

(j) any costs or expenses incurred by the Company or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholders agreement, to the extent that such costs or expenses are funded with cash proceeds contributed to the capital of the Company or net cash proceeds of issuance of Equity Interests of the Company (other than Disqualified Stock that is Preferred Stock) in each case, solely to the extent that such cash proceeds are excluded from the calculation set forth in clause (C) of Section 1010(a) of this Indenture;

(2) decreased by (without duplication) noncash gains increasing Consolidated Net Income of such Person for such period, excluding any gains that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period (other than such cash charges that have been added back to Consolidated Net Income in calculating EBITDA in accordance with this definition); and

(3) decreased or increased, as applicable, by (without duplication):

(a) any net gain or loss resulting in such period from Hedging Obligations and the application of Statement of Financial Accounting Standards #133;

(b) any net gain or loss resulting in such period from currency translation gains or losses related to currency remeasurements of Indebtedness (including any net loss or gain resulting from hedge agreements for currency exchange risk); and

(c) the amount of gain or loss resulting in such period from a sale of receivables and related assets to a Receivables Subsidiary in connection with a Receivables Facility.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.

“Equity Offering” means any underwritten primary public offering of Common Stock or Preferred Stock of the Company or any of its direct or indirect parent companies (excluding Disqualified Stock), other than

16

(a) public offerings with respect to the Company’s or any direct or indirect parent company’s Common Stock or Preferred Stock registered on Form S-4 or Form S-8;

(b) any such offering that constitutes an Excluded Contribution; and

(c) an issuance to any Subsidiary of the Company.

“Event of Default” has the meaning specified in Section 501 of this Indenture.

“Excess Proceeds” has the meaning specified in Section 1018 of this Indenture.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Exchange Notes” has the meaning specified in the first recital of this Indenture.

“Exchange Offer” means the Exchange Offer as defined in the Registration Rights Agreement.

“Exchange Offer Registration Statement” means the Exchange Offer Registration Statement as defined in the Registration Rights Agreement.

“Excluded Contribution” means net cash proceeds, marketable securities or Qualified Proceeds received by the Company from

(a) contributions to its common equity capital, and

(b) the sale (other than to a Subsidiary of the Company or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of the Company) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Company,

in each case designated as Excluded Contributions pursuant to an Officers’ Certificate executed by an executive vice president and the principal financial officer of the Company on the date such capital contributions are made or the date such Equity Interests are sold, as the case may be, which are excluded from the calculation set forth in clause (C) of Section 1010(a) of this Indenture.

“Existing Indebtedness” means Indebtedness of the Company or the Restricted Subsidiaries in existence on the Issue Date, plus interest accruing thereon.

“Extraordinary Distribution” means any dividends or distributions made by a Permitted MLP or Permitted GP other than any dividends or distributions made out of the operating surplus of such Permitted MLP or Permitted GP.

17

“Fixed Charge Coverage Ratio” means, with respect to any Person for any period, the ratio of EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company or any Restricted Subsidiary incurs, assumes, guarantees, redeems, retires or extinguishes any Indebtedness (other than Indebtedness incurred under any revolving credit facility that has been permanently repaid and has not been replaced) or issues or redeems Disqualified Stock or Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to or simultaneously with the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, redemption, retirement or extinguishment of Indebtedness, or such issuance or redemption of Disqualified Stock or Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter period (the “reference period”).

For purposes of making the computation referred to above, Investments, acquisitions, dispositions, mergers, consolidations and disposed operations (as determined in accordance with GAAP) that have been made by the Company or any Restricted Subsidiary during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Calculation Date shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, mergers, consolidations and disposed operations (and the change in any associated fixed charges and the change in EBITDA resulting therefrom) had occurred on the first day of the reference period. If since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Investment, acquisition, disposition, merger, consolidation or disposed operation that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, merger, consolidation or disposed operation had occurred at the beginning of the reference period.

For purposes of this definition, whenever pro forma effect is to be given to a transaction, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Company to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Company may designate.

18

“Fixed Charges” means, with respect to any Person for any period, the sum of

(a) Consolidated Interest Expense of such Person for such period,

(b) all cash dividend payments (excluding items eliminated in consolidation) on any series of Preferred Stock made during such period, and

(c) all cash dividend payments (excluding items eliminated in consolidation) on any series of Disqualified Stock made during such period.

“Foreign Subsidiary” means, with respect to any Person, any Restricted Subsidiary of such Person that is not organized or existing under the laws of the United States of America, any state thereof, the District of Columbia, or any territory thereof.

“Foreign Subsidiary Total Assets” means the total amount of all assets of Foreign Subsidiaries of the Company and the Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP as shown on the most recent balance sheet of the Company.

“Funded Synthetic Letter of Credit Facility” means the funded synthetic letter of credit facility provided under the Credit Agreement, dated as of the Issue Date, among the Company, the lenders party thereto in their capacity as lenders thereunder and Credit Suisse, as Administrative Agent, including any guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, replacements, renewals, restatements, refundings or refinancings thereof (provided that any such extensions, replacements, renewals, refundings or refinancings are in the form of a synthetic letter of credit facility, a revolving credit facility or a similar credit facility entered into to support hedging or cash collateral obligations), including any such replacement, refunding or refinancing that increases the amount borrowable thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under Section 1011).

“GAAP” means generally accepted accounting principles in the United States of America that are in effect on the Issue Date.

“Government Securities” means securities that are

(a) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or

(b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,

19

which, in either case, are not callable or redeemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.

“GP” means the Person that is the general partner of a MLP.

“GP Equity Transfer” means the sale, conveyance, transfer or other disposition of any Equity Interest in a MLP GP in connection with, or following, the initial public offering of a MLP GP.

“guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations, and, when used as a verb, shall have a corresponding meaning.

“Hedging Obligations” means, with respect to any Person, the obligations of such Person under currency exchange, interest rate or commodity swap agreements, currency exchange, interest rate or commodity cap agreements and currency exchange, interest rate or commodity collar agreements and other agreements or arrangements, in each case designed to protect such Person against fluctuations in currency exchange, interest rates or commodity prices.

“Holder” means the Person in whose name a Note is registered on the books of the Note Registrar.

“incur” has the meaning specified in Section 1011 of this Indenture.

“incurrence” has the meaning specified in Section 1011 of this Indenture.

“Indebtedness” means, with respect to any Person,

(a) any indebtedness (including principal and premium) of such Person, whether or not contingent

(1) in respect of borrowed money,

(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers’ acceptances (or, without double counting, reimbursement agreements in respect thereof),

20

(3) representing the balance deferred and unpaid of the purchase price of any property (including Capitalized Lease Obligations), except any such balance that constitutes a trade payable or similar obligation to a trade creditor, in each case accrued in the ordinary course of business, or

(4) representing any Hedging Obligations,

if and to the extent that any of the foregoing Indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP,

(b) to the extent not otherwise included, any obligation by such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the obligations of the type referred to in clause (a) of another Person (whether or not such items would appear upon the balance sheet of such obligor or guarantor), other than by endorsement of negotiable instruments for collection in the ordinary course of business,

(c) to the extent not otherwise included, the obligations of the type referred to in clause (a) of another Person secured by a Lien on any asset owned by such Person, whether or not such obligations are assumed by such Person and whether or not such obligations would appear upon the balance sheet of such Person; provided that the amount of such Indebtedness shall be the lesser of the fair market value of such asset at the date of determination and the amount of Indebtedness so secured, and

(d) Attributable Debt in respect of Sale and Lease-Back Transactions;

provided, however, that notwithstanding the foregoing, Indebtedness shall be deemed not to include (A) Contingent Obligations incurred in the ordinary course of business, (B) Obligations under or in respect of the Receivables Facilities and (C) Obligations of a GP of a Permitted MLP with respect to Indebtedness of such Permitted MLP arising by operation of law due to such GP’s position as a general partner of such Permitted MLP (or corresponding Obligations of any general partner of such GP arising by operation of law due to such entity’s position as a general partner of such GP); provided, however, that such Obligations or Indebtedness are non-recourse to the Company or any of its Restricted Subsidiaries (other than such GP and, if such GP is a limited partnership, the general partner of such GP, provided that (x) the sole business of such general partner of such GP is to act as the general partner of such GP and engage in activities ancillary thereto and (y) and such general partner of such GP owns no assets (other than (i) ownership interests in such GP or in the Permitted MLP of which such GP is the MLP GP or Capital Stock (other than Disqualified Stock) of the Company and Indebtedness owed to such general partner of such GP that is incurred pursuant to Section 1011(b)(24), (ii) temporarily holding assets to be transferred or distributed in connection with a Permitted MLP Transfer or a Permitted GP Transfer or distributions from a Permitted MLP or a Permitted GP and (iii) current assets sufficient to satisfy its ordinary course operating expenses)).

21

“Indenture” means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this Indenture and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be part of and govern this instrument and any such supplemental indenture, respectively.

“Independent Financial Advisor” means an accounting, appraisal, investment banking firm or consultant to Persons engaged in Similar Businesses of nationally recognized standing that is, in the good faith judgment of the Company, qualified to perform the task for which it has been engaged and that is independent of the Company and its Affiliates.

“Initial MLP Asset Transfer” means, at the option of the Company:

(1) one or more MLP Asset Transfers of (x) the assets constituting the Downstream Business or (y) all or a portion of the Equity Interests in one or more Persons that hold the Downstream Business; provided that no previous MLP Asset Transfer has occurred (except those described in this clause (1)); or

(2) the initial MLP Asset Transfer and any subsequent MLP Asset Transfer to the applicable MLP of property or assets (including any Equity Interests) with respect to which the EBITDA attributable to such property or assets (treating such property or assets as if they were owned by a single Person) for the most recently ended four full fiscal quarters ending at least 45 days prior to the date of the most recent MLP Asset Transfer does not exceed $95.0 million in the aggregate; provided that any such MLP Asset Transfers do not include any of the Downstream Business;

in each case made in connection with an initial public offering of Equity Interests of such MLP (or, in the case of an Initial MLP Asset Transfer comprising more than one MLP Asset Transfers, the first such MLP Asset Transfer is made in connection with such an initial public offering).

“Initial Notes” has the meaning stated in the first recital of this Indenture.

“Initial Purchasers” means (1) with respect to the Initial Notes issued on the Issue Date, Credit Suisse First Boston LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Banc of America Securities LLC, Lehman Brothers Inc. and Wachovia Capital Markets, LLC, and (2) with respect to each issuance of Additional Notes, the Persons purchasing such Additional Notes under the related Purchase Agreement.

“Interest Payment Date” means the Stated Maturity of an installment of interest on the Notes.

22

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P, or an equivalent rating by any other Rating Agency.

“Investment Grade Securities” means:

(1) securities issued or directly and fully guaranteed or insured by the government of the United States of America or any agency or instrumentality thereof (other than Cash Equivalents),

(2) debt securities or debt instruments with a rating of BBB- or higher by S&P or Baa3 or higher by Moody’s or the equivalent of such rating by such rating organization, or, if no rating of S&P or Moody’s then exists, the equivalent of such rating by any other nationally recognized securities rating agency, but excluding any debt securities or instruments constituting loans or advances among the Company and its Subsidiaries,

(3) investments in any fund that invests exclusively in investments of the type described in clauses (1) and (2), which fund may also hold immaterial amounts of cash pending investment and/or distribution and

(4) corresponding instruments in countries other than the United States of America customarily utilized for high quality investments.

“Investments” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (including by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others, but excluding accounts receivable, trade credit, advances to customers, commission, travel and similar advances to officers and employees, in each case made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet (excluding the footnotes) of such Person in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property. For purposes of the definition of “Unrestricted Subsidiary” and Section 1010 of this Indenture,

(1) “Investments” shall include the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets of a Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to

(x) the Company’s “Investment” in such Subsidiary at the time of such redesignation, less

23

(y) the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and

(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Company.

“Issue Date” means October 31, 2005.

“Legal Defeasance” has the meaning specified in Section 1302 of this Indenture.

“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York.

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction; provided that in no event shall an operating lease be deemed to constitute a Lien.

“Maturity”, when used with respect to any Note, means the date on which the principal of such Note or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, notice of redemption or otherwise.

“Minimum Cash Consideration” with respect to the Initial MLP Asset Transfer means 40% of the fair market value of (a) the assets and property transferred or (b) in the case of a transfer of any Equity Interests of a Person, such Person at the time of such Initial MLP Asset Transfer (it being understood that, in the case of a transfer of less than all of the Equity Interests of a Person, the fair market value of such Person shall be determined at the time of the first MLP Asset Transfer constituting part of such Initial MLP Asset Transfer (as if all the Equity Interests in such Person had been transferred at the time of such first MLP Asset Transfer and the Minimum Cash Consideration requirement shall have to be satisfied on that basis in connection with such first MLP Asset Transfer) and there shall be no Minimum Cash Consideration required for any subsequent transfer of Equity Interests of such Person constituting part of the same Initial MLP Asset Transfer) (in each of the foregoing clauses (a) and (b), assuming such assets or Person, as applicable, operate as a going concern); provided that up to 50% of the Minimum Cash Consideration may consist of Equity Interests in the applicable MLP so long as such Equity Interests are converted into or exchanged for, within 365 days of the Initial MLP Asset Transfer, cash equal to at least the fair market value of such Equity Interests on the date of the Initial MLP Asset Transfer. For purposes of this definition,

24

(x) with respect to any assets, property or Person constituting part of the Downstream Business subject to such Initial MLP Asset Transfer, the fair market value thereof shall be determined in good faith by the Company based on values that could be obtained in arms’ length transactions, but in no event shall such fair market value be lower than an amount equal to the product of (a) the EBITDA (calculated, without giving effect to clause (5) of the definition of “Consolidated Net Income”, to include the pro rata share of the EBITDA of any Unrestricted Subsidiary included in such Downstream Business) attributable to such Downstream Business for the four fiscal quarter period most recently ended prior to the date of the Initial MLP Asset Transfer for which internal financial statements are available as of such date (as set forth in a certificate of the chief financial officer of the Company delivered to the Trustee) and (b) 8.5 (provided, however, that, if the Company determines that such fair market value is lower than such minimum amount, the fair market value of such assets, property or Person constituting part of the Downstream Business subject to such Initial MLP Asset Transfer shall be determined by an Independent Financial Advisor) and (y) with respect to any other assets, property or Equity Interests of a Person constituting the subject of such Initial MLP Asset Transfer, the fair market value of such assets, property or Person, as applicable, shall be determined by an Independent Financial Advisor.

“MLP” means any master limited partnership.

“MLP Asset Transfer” means the direct or indirect sale, conveyance, transfer or other disposition of property or assets (including any Equity Interests of any Person) by the Company or any Restricted Subsidiary to one or more MLPs or MLP Subsidiaries.

“MLP Equity Transfer” means the sale, conveyance, transfer or other disposition of any Equity Interest in a MLP.

“MLP GP” means a GP that is a general partner of a Permitted MLP.

“MLP Offer” has the meaning specified in Section 1019 of this Indenture.

“MLP Subsidiary” means each Subsidiary of a MLP.

“Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating agency business.

“Net Income” means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.

“Net Proceeds” means the aggregate cash proceeds received by the Company or any Restricted Subsidiary in respect of any Asset Sale, Permitted MLP Transfer, Permitted GP Transfer or Extraordinary Distribution, including any cash received upon the sale or other disposition of any Designated Noncash Consideration received in any Asset Sale, net of the direct costs relating to such Asset Sale, Permitted MLP Transfer, Permitted GP Transfer or Extraordinary Distribution and the sale or

25

disposition of such Designated Noncash Consideration, including legal, accounting and investment banking fees, and brokerage and sales commissions, any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of principal, premium, if any, and interest on Indebtedness required (other than by Section 1018(b) and Section 1019(d) of this Indenture) to be paid as a result of such transaction and, in the case of an Asset Sale, Permitted MLP Transfer or Permitted GP Transfer, any deduction of appropriate amounts to be provided by the Company or a Restricted Subsidiary as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Company after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction.

“North Texas Asset Sale” means the Asset Sale by the Company of the North Texas Assets as contemplated and described in the Offering Circular.

“North Texas Assets” means (a) the Chico natural gas processing plant, (b) the Shackelford natural gas processing plant and (c) the associated gathering system connected to both plants, in each case acquired by the Company from Dynegy Midstream Services, Limited Partnership pursuant to the PIPA.

“Note Register” and “Note Registrar” have the respective meanings specified in Section 304.

“Notes” has the meaning stated in the first recital of this Indenture and more particularly means any Notes authenticated and delivered under this Indenture. The Initial Notes and any Additional Notes shall be treated as a single class for all purposes of this Indenture, including waivers, amendments, redemptions and offers to purchase, and unless the context otherwise requires, all references to the Notes shall include the Initial Notes, any Additional Notes and the Exchange Notes issued in exchange for the Initial Notes and any Additional Notes.

“Obligations” means any principal (including reimbursement obligations with respect to letters of credit whether or not drawn), interest (including, to the extent legally permitted, all interest accrued thereon after the commencement of any insolvency or liquidation proceeding at the rate, including any applicable post-default rate, specified in the applicable agreement), premium (if any), guarantees of payment, fees, indemnifications, reimbursements, expenses, damages and other liabilities payable under the documentation governing any Indebtedness; provided that Obligations with respect to the Notes shall not include fees or indemnification in favor of the Trustee and any other third parties other than the Holders.

“Offering Circular” means the Offering Circular dated October 18, 2005 with respect to the offering of the Notes.

26

“Officer” means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the Company or the Co-Issuer.

“Officers’ Certificate” means a certificate signed on behalf of the Company or the Co-Issuer, by two Officers of the Company or the Co-Issuer, as the case may be, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company or the Co-Issuer, as the case may be, that meets the requirements set forth in this Indenture.

“Opinion of Counsel” means a written opinion from legal counsel. The counsel may be an employee of or counsel to the Company.

“Outstanding”, when used with respect to Notes, means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except:

(1) Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;

(2) Notes, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Notes; provided that, if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made;

(3) Notes, except to the extent provided in Sections 1302 and 1303, with respect to which the Company and the Co-Issuer have effected Legal Defeasance or Covenant Defeasance as provided in Article Thirteen; and

(4) Notes which have been paid pursuant to Section 305 or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a Protected Purchaser in whose hands the Notes are valid obligations of the Company and the Co-Issuer;

provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Notes have given any request, demand, authorization, direction, consent, notice or waiver hereunder, and for the purpose of making the calculations required by TIA Section 313, Notes owned by the Company, the Co-Issuer or any other obligor upon the Notes or any Affiliate of the Company, the Co-Issuer or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded.

27

“Partially Owned Operating Company” means any Person that (i) is transferred to a MLP or a MLP Subsidiary in connection with a Permitted MLP Transfer and (ii) holds operating assets and as to which the Company or any Restricted Subsidiary continues to own Equity Interests.

“Paying Agent” means any Person (including the Company acting as Paying Agent) authorized by the Company and the Co-Issuer to pay the principal of (and premium, if any) or interest on any Notes on behalf of the Company and the Co-Issuer.

“Permitted Asset Swap” means the concurrent purchase and sale or exchange of Related Business Assets or a combination of Related Business Assets and cash or Cash Equivalents between the Company or any of its Restricted Subsidiaries and another Person that is not the Company or any of its Restricted Subsidiaries; provided that any cash or Cash Equivalents received must be applied in accordance with Section 1018 of this Indenture.

“Permitted GP” means any MLP GP as to which a Permitted GP Transfer has occurred, including any successor Person to such MLP GP.

“Permitted GP Transfer” has the meaning specified in Section 1019 of this Indenture.

“Permitted Holders” means each of the Sponsor, the Co-Investor and members of management of the Company (or its direct parent) who are holders of Equity Interests of the Company (or any of its direct or indirect parent companies) on the Issue Date and any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) of which any of the foregoing are members; provided that, in the case of such group and without giving effect to the existence of such group or any other group, the Sponsor, the Co-Investor and such members of management, collectively, have beneficial ownership of more than 50% of the total voting power of the Voting Stock of the Company or any of its direct or indirect parent companies. Any Person or group whose acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of this Indenture shall thereafter, together with its Affiliates, constitute an additional Permitted Holder.

“Permitted Investments” means:

(a) any Investment in the Company or any Restricted Subsidiary (other than a Partially Owned Operating Company);

(b) any Investment in cash and Cash Equivalents or Investment Grade Securities;

28

(c)(i) any Investment by the Company or any Restricted Subsidiary of the Company in a Person that is engaged in a Similar Business if as a result of such Investment

(1) such Person becomes a Restricted Subsidiary of the Company or

(2) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company and

(ii) any Investment held by such Person;

(d) any Investment in securities or other assets not constituting cash, Cash Equivalents or Investment Grade Securities received in connection with (i) an Asset Sale or Permitted MLP Transfer made pursuant to the provisions of Section 1018 or Section 1019 of this Indenture or (ii) any other disposition of assets (other than a Permitted MLP Transfer or Permitted GP Transfer) not constituting an Asset Sale;

(e) any Investment existing on the Issue Date or made pursuant to legally binding written commitments in existence on the Issue Date;

(f) loans and advances to, and guarantees of Indebtedness of, employees not in excess of $10.0 million outstanding at any one time, in the aggregate;

(g) any Investment acquired by the Company or any Restricted Subsidiary

(1) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the Person in which such other Investment is made or which is the obligor with respect to such accounts receivable or

(2) as a result of a foreclosure by the Company or any Restricted Subsidiary with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;

(h) Hedging Obligations permitted under clause (13) of Section 1011(b) of this Indenture;

(i) loans and advances to officers, directors and employees for business-related travel expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business or consistent with past

29

practice or to fund such Person’s purchase of Equity Interests of the Company or any direct or any indirect parent company thereof under compensation plans approved by the Board of Directors of the Company in good faith;

(j) Investments the payment for which consists of Equity Interests of the Company, or any of its direct or indirect parent companies (exclusive of Disqualified Stock); provided that such Equity Interests shall not increase the amount available for Restricted Payments under clause (C) of Section 1010(a) of this Indenture;

(k) guarantees of Indebtedness permitted under Section 1011 of this Indenture and performance guarantees in the ordinary course of business;

(l) any transaction to the extent it constitutes an investment that is permitted and made in accordance with the provisions of Section 1013(b) of this Indenture (except transactions described in clauses (2), (6) and (11) therein);

(m) Investments consisting of purchases and acquisitions of inventory, supplies, material or equipment or the licensing or contribution of intellectual property pursuant to joint marketing arrangements with other Persons;

(n) Investments relating to a Receivables Facility; provided that in the case of Receivables Facilities established after the Issue Date, such Investments are necessary or advisable (in the good faith determination of the Company) to effect such Receivables Facility;

(o) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (o) that are at that time outstanding not to exceed the greater of (x) $125.0 million and (y) 5.0% of Total Assets at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); and

(p) any Investments in a Permitted MLP or a GP; provided that such Investment results from a Permitted MLP Transfer that is a MLP Asset Transfer or a Permitted GP Transfer.

“Permitted Liens” means, with respect to any Person:

(1) Liens to secure Indebtedness incurred under clauses (1), (2), (3) or (4) of Section 1011(b) of this Indenture (and any related Obligations);

(2) pledges or deposits by such Person under workmen’s compensation laws, unemployment insurance laws or similar legislation, or good faith deposits, prepayments or cash pledges to secure bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or U.S. government bonds to secure surety or appeal bonds to

30

which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case incurred in the ordinary course of business;

(3) Liens imposed by law, such as landlords’, carriers’, warehousemens’, mechanics’, materialmens’, repairmens’ and construction contractors’ Liens and other similar Liens, in each case, for sums not yet overdue for a period of more than 30 days or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review, if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;

(4) Liens for taxes, assessments or other governmental charges or claims not yet overdue for a period of more than 30 days or payable or subject to penalties for nonpayment or which are being contested in good faith by appropriate proceedings diligently conducted if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;

(5) Liens in favor of issuers of performance and surety bonds or bid bonds or with respect to other regulatory requirements or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business;

(6) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties, in each case, which were not incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;

(7) Liens existing on the Issue Date;

(8) Liens on property or shares of stock of a Person at the time such Person becomes a Subsidiary; provided that such Liens are not created or incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided, further, that such Liens may not extend to any other property owned by the Company or any Restricted Subsidiary;

(9) Liens on property at the time the Company or a Restricted Subsidiary acquired the property, including any acquisition by means of a merger or consolidation with or into the Company or any Restricted Subsidiary; provided that such Liens are not created or incurred in connection with, or in contemplation of, such acquisition; provided, further, that the Liens may not extend to any other property owned by the Company or any Restricted Subsidiary;

31

(10) Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to the Company or another Restricted Subsidiary permitted to be incurred in accordance with Section 1011 of this Indenture;

(11) Liens on specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(12) leases and subleases granted to others in the ordinary course of business which do not materially interfere with the ordinary conduct of the business of the Company or any of the Restricted Subsidiaries and do not secure any Indebtedness;

(13) Liens arising from financing statement filings under the Uniform Commercial Code or similar state laws regarding operating leases entered into by the Company and its Restricted Subsidiaries in the ordinary course of business;

(14) Liens in favor of the Company or any Subsidiary Guarantor;

(15) Liens on inventory or equipment of the Company or any Restricted Subsidiary granted in the ordinary course of business to the Company’s client at which such inventory or equipment is located;

(16) Liens on accounts receivable and related assets incurred in connection with a Receivables Facility;

(17) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancing, refunding, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (7), (8) and (9) and the following clause (18); provided that (x) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property), and (y) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (7), (8), (9) and the following clause (18) at the time the original Lien became a Permitted Lien under this Indenture, and (B) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement;

(18) Liens securing Indebtedness permitted to be incurred pursuant to clauses (7), (13), (20), (21) and (22)(i) of Section 1011(b) of this Indenture; provided that (i) Liens securing Indebtedness permitted to be incurred pursuant to clause (20) thereof are solely on acquired property or the assets of the acquired entity, as the case may be and (ii) Liens securing Indebtedness permitted to be incurred pursuant to clause (21) extend only to the assets of Foreign Subsidiaries;

32

(19) deposits in the ordinary course of business to secure liability to insurance carriers;

(20) Liens securing judgments for the payment of money not constituting an Event of Default under clause (5) under Section 501 of this Indenture, so long as such Liens are adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired;

(21) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

(22) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business and (iii) in favor of banking institutions arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

(23) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Company or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Company and its Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Company or any of its Restricted Subsidiaries in the ordinary course of business;

(24) other Liens securing obligations incurred in the ordinary course of business which obligations do not exceed $35.0 million at any one time outstanding;

(25) from and after the date that the Notes have Investment Grade Ratings from both Rating Agencies, Liens securing Indebtedness in an aggregate principal amount which, together with the aggregate outstanding principal amount of all other Indebtedness secured by Liens pursuant to this clause (25) and pursuant to clauses (1), (8), (9) and (24) above and clause (28) below, does not exceed 15% of Consolidated Net Tangible Assets;

(26) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;

(27) Liens deemed to exist in connection with Investments in repurchase agreements permitted under Section 1011; provided that such Liens do not extend to any assets other than those assets that are the subject of such repurchase agreement; and

33

(28) Liens incurred to secure Obligations in respect of any Indebtedness permitted to be incurred pursuant to Section 1011 of this Indenture; provided that, at the time of incurrence and after giving pro forma effect thereto, the Secured Debt Ratio would be no greater than 4.00:1.00.

“Permitted MLP” means any MLP to which the Company or a Restricted Subsidiary shall have made a Permitted MLP Transfer either directly to such MLP or to a Subsidiary of such MLP, including any successor Person to such MLP.

“Permitted MLP Investment” means an investment in (1) any one or more businesses; provided that such investment in any business is in the form of the acquisition of Capital Stock and results in the Company or any Restricted Subsidiary owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (2) properties, (3) capital expenditures and (4) acquisitions of long lived assets, that in each of (1), (2), (3) and (4), are used or useful in a Similar Business.

“Permitted MLP Transfer” has the meaning specified in Section 1019 of this Indenture.

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

“PIPA” means the Partnership Interest Purchase Agreement, dated as of August 2, 2005, and as amended as of October 31, 2005 prior to the consummation of the Transactions, by and between Dynegy, Inc., Dynegy Holdings Inc., Dynegy Midstream Holdings, Inc. and Dynegy Midstream G.P., Inc., as Sellers, and Targa Resources, Inc., Targa Resources Partners OLP LP, and Targa Midstream GP, LLC, as Buyers.

“Predecessor Note” of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 305 in exchange for a mutilated Note or in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note.

“Preferred Stock” means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution, or winding up.

“Protected Purchaser” has the meaning specified in Section 305 of this Indenture.

34

“Qualified Proceeds” means assets that are used or useful in, or Capital Stock of any Person engaged in, a Similar Business; provided that the fair market value of any such assets or Capital Stock shall be determined by the Company in good faith.

“Rating Agencies” means Moody’s and S&P or if Moody’s or S&P or both shall not make a rating of the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for Moody’s or S&P or both, as the case may be.

“Receivables Facility” means one or more receivables financing facilities, as amended, supplemented, modified, extended, replaced, renewed, restated, refunded or refinanced from time to time, the Indebtedness of which is non-recourse (except for standard representations, warranties, covenants and indemnities made in connection with such facilities) to the Company and its Restricted Subsidiaries pursuant to which the Company or any of its Restricted Subsidiaries sells its accounts receivable to either (a) a Person that is not a Restricted Subsidiary or (b) a Receivables Subsidiary that in turn sells its accounts receivable to a Person that is not a Restricted Subsidiary.

“Receivables Fees” means distributions or payments made directly or by means of discounts with respect to any participation interest issued or sold in connection with, and other fees paid to a Person that is not a Restricted Subsidiary in connection with, any Receivables Facility.

“Receivables Subsidiary” means any Subsidiary formed solely for the purpose of engaging, and that engages only, in one or more Receivables Facilities.

“Redemption Date”, when used with respect to any Note to be redeemed, in whole or in part, means the date fixed for such redemption by or pursuant to this Indenture.

“Redemption Price”, when used with respect to any Note to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.

“Refinancing Indebtedness” has the meaning specified in Section 1011 of this Indenture.

“Refunding Capital Stock” has the meaning specified in Section 1010 of this Indenture.

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the Issue Date, among the Company, the Co-Issuer, the Subsidiary Guarantors and the Initial Purchasers and, with respect to any Additional Notes, one or more registration rights agreements among the Company, the Co-Issuer, the Subsidiary Guarantors and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act.

35

“Regular Record Date” has the meaning specified in Section 301 of this Indenture.

“Related Business Assets” means assets (other than cash or Cash Equivalents) used or useful in a Similar Business; provided that any assets received by the Company or a Restricted Subsidiary in exchange for assets transferred by the Company or a Restricted Subsidiary shall not be deemed to be Related Business Assets if they consist of securities of a Person, unless upon receipt of the securities of such Person, such Person would become a Restricted Subsidiary.

“Responsible Officer”, when used with respect to the Trustee, means any vice president, any assistant treasurer, any trust officer or assistant trust officer, or any other officer of the Trustee customarily performing functions similar to those performed by any of the above-designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Payments” has the meaning specified in Section 1010 of this Indenture.

“Restricted Subsidiary” means, at any time, any direct or indirect Subsidiary of the Company (including the Co-Issuer and any Foreign Subsidiary) that is not then (i) an Unrestricted Subsidiary; provided that upon the occurrence of an Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of “Restricted Subsidiary” or (ii) a Permitted MLP, Permitted GP or a Subsidiary of a Permitted MLP or Permitted GP (other than a Partially Owned Operating Company); provided that any such Partially Owned Operating Company will be a Restricted Subsidiary solely for purposes of the covenants described under Section 1010, Section 1011 and Section 1012 of this Indenture.

“Retired Capital Stock” has the meaning specified in Section 1010 of this Indenture.

“Revolving Credit Facility” means the revolving credit facility provided under the Credit Agreement, dated as of the Issue Date, among the Company, the lenders party thereto in their capacity as lenders thereunder and Credit Suisse, as Administrative Agent, including any guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, replacements, renewals, restatements, refundings or refinancings thereof and any indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that extend, replace, refund, refinance, renew or defease any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under Section 1011 of this Indenture).

36

“S&P” means Standard and Poor’s, a division of the McGraw-Hill Companies, Inc., and any successor to its rating agency business.

“Sale and Lease-Back Transaction” means any arrangement with any Person providing for the leasing by the Company or any Restricted Subsidiary of any real or tangible personal property, which property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person in contemplation of such leasing.

“SEC” means the Securities and Exchange Commission.

“Secured Debt Ratio”, as of any date of determination, means the ratio of (a) Consolidated Total Indebtedness of the Company and the Restricted Subsidiaries that is secured by Liens as of the end of the most recent fiscal quarter for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur to (b) the aggregate amount of EBITDA of the Company and the Restricted Subsidiaries for the then most recent four fiscal quarters ending with the fiscal quarter referred to in clause (a), in each case with such pro forma adjustments to Consolidated Total Indebtedness and EBITDA as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.

“Secured Indebtedness” means any Indebtedness secured by a Lien.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Senior Credit Facilities” means the Revolving Credit Facility, the Term Loan Facility, the Funded Synthetic Letter of Credit Facility and the Asset Sale Bridge Term Loan Facility.

“Senior Indebtedness” means with respect to any Person:

(1) all Indebtedness of such Person, whether outstanding on the Issue Date or thereafter incurred; and

(2) all other Obligations of such Person (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person whether or not post-filing interest is allowed in such proceeding) in respect of Indebtedness described in clause (1) above

unless, in the case of clauses (1) and (2), the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness or other Obligations are subordinate in right of payment to the Notes or the Subsidiary Guarantee of such Person, as the case may be; provided that Senior Indebtedness shall not include:

(1) any obligation of such Person to the Company or any Subsidiary or to any joint venture in which the Company or any Restricted Subsidiary has an interest;

37

(2) any liability for Federal, state, local or other taxes owed or owing by such Person;

(3) any accounts payable or other liability to trade creditors in the ordinary course of business (including guarantees thereof as instruments evidencing such liabilities);

(4) any Indebtedness or other Obligation of such Person that is subordinate or junior in any respect to any other Indebtedness or other Obligation of such Person; or

(5) that portion of any Indebtedness that at the time of Incurrence is Incurred in violation of this Indenture.

“Shelf Registration Statement” means the shelf registration statement as defined in the Registration Rights Agreement.

“Significant Subsidiary” means any Restricted Subsidiary of the Company that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such regulation is in effect on the date hereof.

“Similar Business” means any business conducted by the Company and its Restricted Subsidiaries on the Issue Date or any business that is similar, reasonably related, incidental or ancillary thereto.

“Special Record Date” for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 306.

“Sponsor” means Warburg Pincus LLC and its Affiliates.

“Stated Maturity”, when used with respect to any Note or any installment of principal thereof or interest thereon, means the date specified in such Note as the fixed date on which the principal of such Note or such installment of principal or interest is due and payable.

“Subordinated Indebtedness” means:

(a) with respect to the Company or the Co-Issuer, any Indebtedness of the Company or the Co-Issuer, as the case may be, that is by its terms subordinated in right of payment to the Notes, and

38

(b) with respect to any Subsidiary Guarantor, any Indebtedness of such Subsidiary Guarantor that is by its terms subordinated in right of payment to the Subsidiary Guarantee of such Subsidiary Guarantor.

“Subsidiary” means, with respect to any Person,

(1) any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof and

(2) any partnership, joint venture, limited liability company or similar entity of which

(x) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and

(y) such Person or any Restricted Subsidiary of such Person is a controlling general partner or otherwise controls such entity.

“Subsidiary Guarantee” means the guarantee by any Subsidiary Guarantor of the Company’s and the Co-Issuer’s Obligations under this Indenture and the Notes.

“Subsidiary Guarantor” means each Restricted Subsidiary of the Company that executes this Indenture as a guarantor on the Issue Date and each other Restricted Subsidiary of the Company that thereafter guarantees the Notes pursuant to the terms of this Indenture.

“Successor Company” has the meaning specified in Section 801 of this Indenture.

“Successor Person” has the meaning specified in Section 802 of this Indenture.

“Term Loan Facility” means the term loan credit facility provided under the Credit Agreement, dated as of the Issue Date, among the Company, the lenders party thereto in their capacity as lenders and Credit Suisse, as Administrative Agent, including any guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, replacements, renewals, restatements, refundings or refinancings thereof and any indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or

39

investors that extend, replace, refund, refinance, renew or defease any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under Section 1011 of this Indenture).

“Total Assets” means the total amount of all assets of the Company and the Restricted Subsidiaries (other than the North Texas Assets), determined on a consolidated basis in accordance with GAAP as shown on the most recent balance sheet of the Company.

“Transactions” means the Acquisition, including the payment of the merger consideration in connection therewith, the investments by the Sponsor, the Co-Investor, members of management and any other co-investors, the issuance of the Notes and the execution of, and borrowings on the Issue Date under, the Senior Credit Facilities as in effect on the Issue Date, the pledge and security arrangements in connection with the foregoing, the refinancing of certain Indebtedness in connection with the foregoing and the related transactions described in the Offering Circular, in particular as described under the section thereof entitled “The Transactions”.

“Treasury Rate” means, as of any Redemption Date, the yield to maturity as of such Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to November 1, 2009; provided, however, that if the period from the Redemption Date to November 1, 2009, is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

“Trust Indenture Act” or “TIA” means the Trust Indenture Act of 1939 as in force at the date as of which this Indenture was executed, except as provided in Section 905.

“Trustee” means Wells Fargo Bank, National Association until a successor replaces it and, thereafter, means the successor.

“Uniform Commercial Code” means the New York Uniform Commercial Code as in effect from time to time.

“Unrestricted Subsidiary” means:

(1) Versado Gas Processors L.L.C., Downstream Ventures, Co., L.L.C. and Cedar Bayou Fractionaters, LP,

40

(2) any Subsidiary of the Company that at the time of determination is an Unrestricted Subsidiary (as designated by the Company, as provided below) and

(3) any Subsidiary of an Unrestricted Subsidiary;

provided that no Permitted MLP, Permitted GP, Subsidiary of a Permitted MLP or Permitted GP and no Co-Issuer will be an Unrestricted Subsidiary.

The Company may designate any Subsidiary of the Company (including any existing Subsidiary and any newly acquired or newly formed Subsidiary but excluding any of the entities referred to in the proviso of the immediately following paragraph) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on, any property of, the Company or any Subsidiary of the Company (other than any Subsidiary of the Subsidiary to be so designated); provided that

(a) any Unrestricted Subsidiary must be an entity of which shares of the capital stock or other equity interests (including partnership interests) entitled to cast at least a majority of the votes that may be cast by all shares or equity interests having ordinary voting power for the election of directors or other governing body are owned, directly or indirectly, by the Company,

(b) such designation complies with Section 1010 of this Indenture and

(c) each of

(1) the Subsidiary to be so designated and

(2) its Subsidiaries

has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any Restricted Subsidiary.

The Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that, immediately after giving effect to such designation, no Default shall have occurred and be continuing and either

(1) the Company could incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test described in Section 1011(a) of this Indenture or

(2) the Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries would be greater than such ratio for the Company and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation.

41

Any such designation by the Company shall be notified by the Company to the Trustee by promptly filing with the Trustee a copy of any applicable Board Resolution giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing provisions.

“U.S. Person” means a U.S. Person as defined in Rule 902(k) promulgated under the Securities Act.

“Vice President”, when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title “vice president”.

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, at any date, the quotient obtained by dividing

(1) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock or Preferred Stock multiplied by the amount of such payment, by

(2) the sum of all such payments.

“Wholly-Owned Subsidiary” of any Person means a Subsidiary of such Person, 100% of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person.

SECTION 103. Compliance Certificates and Opinions. Upon any application or request by the Company and the Co-Issuer to the Trustee to take or refrain from taking any action under this Indenture, the Company and the Co-Issuer shall furnish to the Trustee an Officers’ Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and, other than in connection with the authentication of the Initial Notes, an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.

Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than pursuant to Section 1008(a) of this Indenture or Section 314(a)(4) of the TIA) shall include:

(1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;

42

(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(3) a statement that, in the opinion of each such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

SECTION 104. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate or opinion of an officer of the Company or the Co-Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company or the Co-Issuer stating that the information with respect to such factual matters is in the possession of the Company or the Co-Issuer, as the case may be, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

SECTION 105. Acts of Holders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company and the Co-Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein

43

sometimes referred to as the “Act” of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee, the Company and the Co-Issuer, if made in the manner provided in this Section.

The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient.

The principal amount and serial numbers of Notes held by any Person, and the date of holding the same, shall be proved by the Note Register.

If the Company and the Co-Issuer shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company and the Co-Issuer may, at their option, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company and the Co-Issuer shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Notes shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date. Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, the Company, the Co-Issuer or any Subsidiary Guarantor in reliance thereon, whether or not notation of such action is made upon such Note.

Without limiting the foregoing, a Holder entitled to take any action hereunder with regard to any particular Note may do so with regard to all or any part of the principal amount of such Note or by one or more duly appointed agents, each of

44

which may do so pursuant to such appointment with regard to all or any part of such principal amount. Any notice given or action taken by a Holder or its agents with regard to different parts of such principal amount pursuant to this paragraph shall have the same effect as if given or taken by separate Holders of each such different part.

Without limiting the generality of the foregoing, a Holder, including the Depository that is the Holder of a Global Note, may make, give or take, by a proxy or proxies duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders, and the Depository that is the Holder of a Global Note may provide its proxy or proxies to the beneficial owners of interests in any such Global Note through such depositary’s standing instructions and customary practices.

The Company and the Co-Issuer may fix a record date for the purpose of determining the Persons who are beneficial owners of interests in any Global Note held by the Depository entitled under the procedures of such depositary to make, give or take, by a proxy or proxies duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders.

SECTION 106. Notices, Etc., to Trustee, the Co-Issuer, Company, any Subsidiary Guarantor and Agent. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,

(1) the Trustee by any Holder or by the Company, the Co-Issuer or any Subsidiary Guarantor shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing (which may be via facsimile) to or with the Trustee at Wells Fargo Bank, National Association, 213 Court Street, Suite 703, Middletown, CT 06457, Attn: Joseph P. O’Donnell, or

(2) the Company, the Co-Issuer or any Subsidiary Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or delivered in writing and mailed, first-class postage prepaid, or delivered by recognized overnight courier, to the Company, the Co-Issuer or such Subsidiary Guarantor addressed to it at Targa Resources, Inc., 1000 Louisiana Street, Suite 4700, Houston, Texas 77002, Attention: General Counsel, or at any other address previously furnished in writing to the Trustee by the Company, the Co-Issuer or such Subsidiary Guarantor.

SECTION 107. Notice to Holders; Waiver. Where this Indenture provides for notice of any event to Holders by the Company, the Co-Issuer or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Note Register, within the time prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to

45

mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Notices given by publication shall be deemed given on the first date on which publication is made and notices given by first class mail, postage prepaid, shall be deemed given five calendar days after mailing.

In case by reason of the suspension of or irregularities in regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event to Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice for every purpose hereunder.

Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

SECTION 108. Effect of Headings and Table of Contents. The Article and Section headings herein, the Table of Contents and the reconciliation and tie between the TIA and this Indenture are for convenience of reference only, are not intended to be considered a part hereof and shall in no way affect the construction of, or modify or restrict, any of the terms or provisions hereof.

SECTION 109. Successors and Assigns. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Co-Issuer in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. All agreements of each Subsidiary Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 1208 hereof.

SECTION 110. Separability Clause. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any Note Registrar and their successors hereunder and the Holders any benefit or any legal or equitable right, remedy or claim under this Indenture.

SECTION 112. Governing Law. This Indenture, the Notes and any Subsidiary Guarantee shall be governed by and construed in accordance with the laws of the State of New York. This Indenture is subject to the provisions of the Trust Indenture Act that are required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions.

46

SECTION 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity or Maturity of any Note shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Notes) payment of principal (or premium, if any) or interest need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date, or at the Stated Maturity or Maturity; provided that no interest shall accrue for purposes of such payment for the period from and after such Interest Payment Date, Redemption Date, Stated Maturity or Maturity, as the case may be.

SECTION 114. No Personal Liability of Directors, Officers, Employees and Stockholders. No director, officer, employee, incorporator or stockholder of the Company, the Co-Issuer or any Subsidiary Guarantor shall have any liability for any obligations of the Company, the Co-Issuer or the Subsidiary Guarantors under the Notes, the Subsidiary Guarantees and this Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation to the extent permitted by applicable law; provided that the foregoing shall not limit any Subsidiary Guarantor’s obligations under its Subsidiary Guarantee and any of the Company’s or the Co-Issuer’s obligations under the Notes. Each Holder by accepting a Note and the related Subsidiary Guarantee waives and releases all such liability to the extent permitted by applicable law. The waiver and release are part of the consideration for issuance of the Notes and the Subsidiary Guarantees.

SECTION 115. Trust Indenture Act Controls. Upon qualification of this Indenture under the TIA, if any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the provision required by the TIA shall control. If any provision of this Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be.

SECTION 116. Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be original; but such counterparts shall together constitute but one and the same instrument. One signed copy is enough to prove this Indenture.

47

ARTICLE TWO

NOTE FORMS

SECTION 201. Form and Dating. Provisions relating to the Initial Notes, the Private Exchange Notes and the Exchange Notes are set forth in the Rule 144A / Regulation S Appendix attached hereto (the “Appendix”), which is hereby incorporated in, and expressly made part of, this Indenture. The Initial Notes and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit 1 to the Appendix, which is hereby incorporated in, and expressly made a part of, this Indenture. The Exchange Notes, the Private Exchange Notes and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company and the Co-Issuer are subject, if any, or usage (provided that any such notation, legend or endorsement is in a form reasonably acceptable to the Company and the Co-Issuer). Each Note shall be dated the date of its authentication. The terms of the Note set forth in the Appendix and Exhibit A are part of the terms of this Indenture.

SECTION 202. Execution, Authentication, Delivery and Dating. The Notes shall be executed on behalf of the Company and the Co-Issuer by an Officer of each of the Company and the Co-Issuer, respectively. The signatures of such Officers on the Notes may be manual or facsimile signature of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Notes.

Notes bearing the manual or facsimile signature of an individual who was at any time a proper officer of the Company or the Co-Issuer, as the case may be, shall bind the Company or the Co-Issuer, as the case may be, notwithstanding that such individual ceased to hold such office prior to the authentication and delivery of such Notes or did not hold such office at the date of such Notes.

At any time and from time to time after the execution and delivery of this Indenture, the Company and the Co-Issuer may deliver Notes executed by the Company and the Co-Issuer to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Notes, and the Trustee in accordance with such Company Order shall authenticate and deliver such Notes.

On the Issue Date, the Company and the Co-Issuer shall deliver the Initial Notes in the aggregate principal amount of $250,000,000 executed by the Company and the Co-Issuer to the Trustee for authentication, together with a Company Order directing the Trustee to authenticate the Notes and certifying that all conditions precedent to the issuance of Notes contained herein have been fully complied with, and the Trustee in accordance with such Company Order shall authenticate and deliver such Initial Notes. At any time and from time to time after the Issue Date, the Company and the Co-Issuer may deliver Additional Notes executed by the Company and the Co-Issuer to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Additional Notes, directing the Trustee to authenticate the Additional Notes and

48

certifying that the issuance of such Additional Notes is in compliance with Article Ten hereof and that all other conditions precedent to the issuance of Notes contained herein have been fully complied with, and the Trustee in accordance with such Company Order shall authenticate and deliver such Additional Notes.

Upon receipt of a Company Order, the Trustee shall authenticate for original issue Exchange Notes in an aggregate principal amount not to exceed $250,000,000; provided that such Exchange Notes shall be issuable only upon the valid surrender for cancellation of Initial Notes and any Additional Notes of a like aggregate principal amount in accordance with an Exchange Offer pursuant to the Registration Rights Agreement and a Company Order for the authentication and delivery of such Exchange Notes and certifying that all conditions precedent to the issuance of such Exchange Notes are complied with. In each case, the Trustee shall receive a Company Order and an Opinion of Counsel of the Company and the Co-Issuer that it may reasonably require in connection with such authentication of Notes. Such Company Order shall specify the amount of Notes to be authenticated and the date on which the original issue of Notes is to be authenticated.

Each Note shall be dated the date of its authentication.

No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for in Exhibit 1 to the Appendix, duly executed by the Trustee by manual signature of an authorized officer, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture.

In case the Company, the Co-Issuer or any Subsidiary Guarantor, pursuant to Article Eight of this Indenture, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company, the Co-Issuer or such Subsidiary Guarantor shall have been merged, or the Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed a supplemental indenture hereto with the Trustee pursuant to Article Eight of this Indenture, any of the Notes authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Notes executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Notes surrendered for such exchange and of like principal amount; and the Trustee, upon Company Request of the successor Person, shall authenticate and deliver Notes as specified in such request for the purpose of such exchange. If Notes shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section in exchange or substitution for or upon registration of transfer of any Notes, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Notes at the time outstanding for Notes authenticated and delivered in such new name.

49

ARTICLE THREE

THE NOTES

SECTION 301. Title and Terms. The aggregate principal amount of Notes which may be authenticated and issued under this Indenture is not limited; provided, however, that any Additional Notes issued under this Indenture rank pari passu with the Initial Notes, are issued in accordance with Sections 202 and 1011 hereof, form a single class with the Initial Notes and shall have the same terms as to status, redemption or otherwise as the Initial Notes. Any Additional Notes shall be issued pursuant to a supplemental indenture to this Indenture.

The Notes shall be known and designated as the “8 ¹/2% Senior Notes Due 2013” of the Company and the Co-Issuer. The Stated Maturity of the Notes shall be November 1, 2013, and the Notes shall bear interest at the rate set forth below from October 31, 2005, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, payable on May 1, 2006 and semi-annually thereafter on May 1 and November 1 in each year and at said Stated Maturity, until the principal thereof is paid or duly provided for and to the Person in whose name the Note (or any predecessor Note) is registered at the close of business on the April 15 and October 15 immediately preceding such Interest Payment Date (each, a “Regular Record Date”).

The principal of (and premium, if any), interest and Additional Interest, if any, on the Notes shall be payable at the office or agency of the Company and the Co-Issuer maintained for such purpose in the City of Houston, State of Texas or, at the option of the Company and the Co-Issuer, payment of interest may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the Note Register; provided that all payments of principal, premium, if any, and interest and Additional Interest, if any, with respect to Notes represented by one or more permanent global Notes registered in the name of or held by the Depository or its nominee shall be made by wire transfer of immediately available funds to the accounts specified by the Holder or Holders thereof.

Holders shall have the right to require the Company or the Co-Issuer to purchase their Notes, in whole or in part, in the event of a Change of Control pursuant to Section 1017. The Notes shall be subject to repurchase pursuant to an offer to purchase as provided in Section 1018 and Section 1019.

The Notes shall be redeemable as provided in Article Eleven of this Indenture and Paragraph 5 of the Notes.

The due and punctual payment of principal of, premium, if any, and interest on the Notes payable by the Company and the Co-Issuer is irrevocably unconditionally guaranteed, to the extent set forth herein, by each of the Subsidiary Guarantors.

50

SECTION 302. Denominations. The Notes shall be issuable only in registered form without coupons and only in denominations of $2,000 and any integral multiple of $1,000 in excess thereof.

SECTION 303. Temporary Notes. Pending the preparation of definitive Notes, the Company and the Co-Issuer may execute, and upon receipt of a Company Order the Trustee shall authenticate and deliver, temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Notes may determine, as conclusively evidenced by their execution of such Notes.

If temporary Notes are issued, the Company and the Co-Issuer shall cause definitive Notes to be prepared without unreasonable delay. Subject to the provisions set forth in the Rule 144A/Regulation S Appendix, after the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Company and the Co-Issuer designated for such purpose pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Company and the Co-Issuer shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Notes.

SECTION 304. Note Registrar; Paying Agent; Registration of Transfer and Exchange. The Company and the Co-Issuer shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes referred to as the “Note Register”) in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Note Register shall be in written form or any other form capable of being converted into written form within a reasonable time. At all reasonable times, the Note Register shall be open to inspection by the Trustee. The Trustee is hereby initially appointed as note registrar (the “Note Registrar”) for the purpose of registering Notes and transfers of Notes as herein provided. The Trustee is hereby initially appointed to act as the Paying Agent and to act as Custodian with respect to the Global Notes.

Upon surrender for registration of transfer of any Note at the office or agency of the Company designated pursuant to Section 1002, the Company and the Co-Issuer shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denomination or denominations of a like aggregate principal amount.

At the option of the Holder, Notes may be exchanged for other Notes of any authorized denomination and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so

51

surrendered for exchange, the Company and the Co-Issuer shall execute, and the Trustee shall authenticate and deliver, the Notes which the Holder making the exchange is entitled to receive; provided that no exchange of Notes for Exchange Notes shall occur until an Exchange Offer Registration Statement shall have been declared effective by the SEC, the Trustee shall have received an Officers’ Certificate confirming that the Exchange Offer Registration Statement has been declared effective by the SEC and the Initial Notes to be exchanged for the Exchange Notes shall be cancelled by the Trustee.

All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Company and the Co-Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange.

Every Note presented or surrendered for registration of transfer or for exchange shall (if so required by the Company, the Co-Issuer or the Note Registrar) be duly endorsed, or be accompanied by written instruments of transfer, in form satisfactory to the Company, the Co-Issuer and the Note Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing.

No service charge shall be made for any registration of transfer or exchange or redemption of Notes, but the Company and the Co-Issuer may require payment of a sum sufficient to cover any taxes, fees or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Sections 202, 303, 906, 1017, 1018, 1019 or 1108 not involving any transfer.

SECTION 305. Mutilated, Destroyed, Lost and Stolen Notes. If (1) any mutilated Note is surrendered to the Trustee, or (2) the Company, the Co-Issuer and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and there is delivered to the Company, the Co-Issuer and the Trustee such security or indemnity as may be required to protect the Company, the Co-Issuer, the Trustee, any agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced, then, in the absence of notice to the Company, the Co-Issuer or the Trustee that such Note has been acquired by a Protected Purchaser (as defined in Section 8-303 of the Uniform Commercial Code) (a “Protected Purchaser”), the Company and the Co-Issuer shall execute and upon Company Order the Trustee shall authenticate and deliver, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount, bearing a number not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company and the Co-Issuer in their discretion may, instead of issuing a new Note, pay such Note.

Upon the issuance of any new Note under this Section, the Company and the Co-Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) in replacing a Note.

52

Every new Note issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, the Co-Issuer and each Subsidiary Guarantor, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.

The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

SECTION 306. Payment of Interest; Interest Rights Preserved. (a) Interest on any Note which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company and the Co-Issuer maintained for such purpose pursuant to Section 1002; provided that, subject to Section 301 hereof, each installment of interest may at the Company’s or the Co-Issuer’s option be paid by (1) mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 307, to the address of such Person as it appears in the Note Register or (2) transfer to an account located in the United States maintained by the payee.

(b) Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date shall forthwith cease to be payable to the Holder on the Regular Record Date by virtue of having been such Holder, and such defaulted interest and (to the extent lawful) interest on such defaulted interest at the rate borne by the Notes (such defaulted interest and interest thereon herein collectively called “Defaulted Interest”) may be paid by the Company or the Co-Issuer at its election, in each case as provided in clause (1) or (2) below:

(1) The Company or the Co-Issuer may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company and the Co-Issuer shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company or the Co-Issuer shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment

53

of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company and the Co-Issuer of such Special Record Date, and in the name and at the expense of the Company and the Co-Issuer, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be given in the manner provided for in Section 107, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so given, such Defaulted Interest shall be paid to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2).

(2) The Company or the Co-Issuer may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company and the Co-Issuer to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.

(c) Subject to the foregoing provisions of this Section, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note.

SECTION 307. Persons Deemed Owners. Prior to the due presentment of a Note for registration of transfer, the Company, the Co-Issuer, any Subsidiary Guarantor, the Trustee and any agent of the Company, the Co-Issuer or the Trustee may treat the Person in whose name such Note is registered as the owner of such Note for the purpose of receiving payment of principal of (and premium, if any) and (subject to Sections 304 and 306) interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Company, the Co-Issuer, the Trustee or any agent of the Company, the Co-Issuer or the Trustee shall be affected by notice to the contrary.

SECTION 308. Cancellation. All Notes surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company and the Co-Issuer may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Company or the Co-Issuer may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Notes previously authenticated hereunder which the Company and the Co-Issuer have not issued and sold, and all Notes so delivered shall be promptly cancelled by the Trustee. If the Company or the Co-Issuer shall so acquire any of the Notes, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Notes

54

unless and until the same are surrendered to the Trustee for cancellation. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Notes held by the Trustee shall be disposed of by the Trustee in accordance with its customary procedures (subject to the record retention requirements of the Exchange Act). Certification of the destruction of all cancelled Notes shall be delivered to the Company and the Co-Issuer by the Trustee.

SECTION 309. Computation of Interest. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months.

SECTION 310. Transfer and Exchange. The Notes shall be issued in registered form and shall be transferable only upon the surrender of a Note for registration of transfer. When a Note is presented to the Note Registrar or a co-registrar with a request to register a transfer, the Note Registrar shall register the transfer as requested if the requirements of this Indenture and Section 8-401(a) of the Uniform Commercial Code are met. When Notes are presented to the Note Registrar or a co-registrar with a request to exchange them for an equal principal amount of Notes of other denominations, the Note Registrar shall make the exchange as requested if the same requirements are met.

SECTION 311. CUSIP Numbers. The Company and the Co-Issuer in issuing the Notes may use “CUSIP” numbers, ISINs and “Common Code” numbers (in each case, if then generally in use) in addition to serial numbers, and, if so, the Trustee shall use such “CUSIP” numbers, ISINs and “Common Code” numbers in addition to serial numbers in notices of redemption, repurchase or other notices to Holders as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such “CUSIP” numbers, ISINs and “Common Code” numbers either as printed on the Notes or as contained in any notice of a redemption or repurchase and that reliance may be placed only on the serial or other identification numbers printed on the Notes, and any such redemption or repurchase shall not be affected by any defect in or omission of such numbers. The Company and the Co-Issuer shall promptly notify the Trustee in writing of any change in the “CUSIP” numbers, ISINs and “Common Code” numbers applicable to the Notes.

SECTION 312. Issuance of Additional Notes. The Company and the Co-Issuer may, subject to Section 1011 of this Indenture, issue additional Notes having identical terms and conditions to the Initial Notes issued on the Issue Date, other than with respect to the date of issuance and issue price (the “Additional Notes”); provided, however, that no Additional Notes may be issued at a price that would cause such Additional Notes to have “original issue discount” within the meaning of Section 1273 of the Code. The Initial Notes issued on the Issue Date and any Additional Notes subsequently issued shall be treated as a single class for all purposes under this Indenture. Exchange Notes issued in exchange for Initial Notes issued on the Issue Date and Exchange Notes issued for any Additional Notes subsequently issued shall be treated as a single class for all purposes under this Indenture.

55

ARTICLE FOUR

SATISFACTION AND DISCHARGE

SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request and at the Company’s and the Co-Issuer’s expense cease to be of further effect as to all Notes issued hereunder (except as set forth in the last paragraph of this Section and as to surviving rights of registration of transfer or exchange of Notes expressly provided for herein or pursuant hereto) and the Trustee, at the expense of the Company and the Co-Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture when:

(1) either,

(A) all such Notes theretofore authenticated and delivered (other than (i) Notes which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 305 and (ii) Notes for whose payment money has theretofore been deposited in trust with the Trustee or any Paying Agent or segregated and held in trust by the Company and the Co-Issuer and thereafter repaid to the Company and the Co-Issuer or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or

(B) all such Notes not theretofore delivered to the Trustee for cancellation,

(i) have become due and payable by reason of the making of a notice of redemption pursuant to Section 1105 or otherwise, or

(ii) shall become due and payable at their Stated Maturity within one year, or

(iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company and the Co-Issuer,

and the Company, the Co-Issuer, or any Subsidiary Guarantor, in the case of (i), (ii) or (iii) of this clause (B), has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as shall be sufficient without consideration of any reinvestment of interest to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption, as the case may be;

56

(2) no Default (other than that resulting from borrowing funds to be applied to make such deposit and the granting of Liens in connection therewith) with respect to this Indenture or the Notes issued hereunder shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit shall not result in a breach or violation of, or constitute a default under, the Senior Credit Facilities or any other material agreement or instrument (other than this Indenture) to which the Company, the Co-Issuer or any Subsidiary Guarantor is a party or by which the Company, the Co-Issuer or any Subsidiary Guarantor is bound;

(3) the Company and the Co-Issuer have paid or caused to be paid all sums payable by it under this Indenture;

(4) the Company and the Co-Issuer have delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of such Notes at Maturity or the Redemption Date, as the case may be; and

(5) the Company and the Co-Issuer have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent herein to the satisfaction and discharge of this Indenture have been satisfied.

Notwithstanding the satisfaction and discharge of this Indenture, if money or Government Securities shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive such satisfaction and discharge. In addition, nothing in this Section 401 shall be deemed to discharge the obligations of the Company and the Co-Issuer to the Trustee under Section 607 and the obligations of the Company and the Co-Issuer to any Authenticating Agent under Section 612 that, by their terms, survive the satisfaction and discharge of this Indenture.

SECTION 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money or Government Securities deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company or the Co-Issuer acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium and Additional Interest, if any) and interest for whose payment such money or Government Securities has been deposited with the Trustee, but such money or Government Securities need not be segregated from other funds except to the extent required by law.

If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 401 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining,

57

restraining or otherwise prohibiting such application, the Company’s, the Co-Issuer’s and any Subsidiary Guarantor’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 401 until such time as the Trustee or Paying Agent is permitted to apply all such money or Government Securities in accordance with Section 401; provided that if the Company or the Co-Issuer has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Company or the Co-Issuer, as the case may be, shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent.

58

ARTICLE FIVE

REMEDIES

SECTION 501. Events of Default. “Event of Default”, wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(1) default in payment when due and payable, upon redemption, acceleration or otherwise, of principal of, or premium, if any, on the Notes issued under this Indenture;

(2) default for 30 days or more in the payment when due of interest on or with respect to the Notes issued under this Indenture;

(3) failure by the Company, the Co-Issuer or any Subsidiary Guarantor for 60 days after receipt of written notice given by the Trustee or the Holders of at least 30% in principal amount of the then Outstanding Notes issued under this Indenture to comply with any of its other agreements contained in this Indenture or the Notes;

(4) default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness for money borrowed by the Company, the Co-Issuer or any Restricted Subsidiary or the payment of which is guaranteed by the Company, the Co-Issuer or any Restricted Subsidiary, other than Indebtedness owed to the Company, the Co-Issuer or a Restricted Subsidiary, whether such Indebtedness or guarantee now exists or is created after the issuance of the Notes, if both

(A) such default either

(i) results from the failure to pay any principal of such Indebtedness at its stated final maturity (after giving effect to any applicable grace periods) or

(ii) relates to an obligation other than the obligation to pay principal of any such Indebtedness at its stated final maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its stated maturity and

(B) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at stated final maturity (after giving effect to any applicable grace periods), or the maturity of which has been so accelerated, aggregate $50.0 million or more at any one time outstanding;

59

(5) failure by the Company, the Co-Issuer or any Significant Subsidiary (or any group of Subsidiaries that together would constitute a Significant Subsidiary) to pay final judgments aggregating in excess of $50.0 million, which final judgments remain unpaid, undischarged and unstayed for a period of more than 60 days after such judgment becomes final, and in the event such judgment is covered by insurance, an enforcement proceeding has been commenced by any creditor upon such judgment or decree which is not promptly stayed;

(6) any of the following events with respect to the Company, the Co-Issuer or any Significant Subsidiary:

(A) the Company, the Co-Issuer or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law

(i) commences a voluntary case;

(ii) consents to the entry of an order for relief against it in an involuntary case;

(iii) consents to the appointment of a custodian of it or for any substantial part of its property;

(iv) takes any comparable action under any foreign laws relating to insolvency; or

(B) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(i) is for relief against the Company, the Co-Issuer or any Significant Subsidiary in an involuntary case;

(ii) appoints a custodian of the Company, the Co-Issuer or any Significant Subsidiary or for any substantial part of its property; or

(iii) orders the winding up or liquidation of the Company, the Co-Issuer or any Significant Subsidiary;

and, solely with respect to clause (B), the order or decree remains unstayed and in effect for 60 days;

provided, that for the purposes of this clause (6), a Significant Subsidiary shall include any group of Subsidiaries that together would constitute a Significant Subsidiary; or

(7) the Subsidiary Guarantee of any Significant Subsidiary (or any group of Subsidiaries that together would constitute a Significant Subsidiary)

60

shall for any reason cease to be in full force and effect or be declared null and void or any responsible officer of any Subsidiary Guarantor that is a Significant Subsidiary (or the responsible officers of any group of Subsidiaries that together would constitute a Significant Subsidiary), as the case may be, denies that it has any further liability under its Subsidiary Guarantee or gives notice to such effect, other than by reason of the termination of this Indenture or the release of any such Subsidiary Guarantee in accordance with this Indenture.

SECTION 502. Acceleration of Maturity; Rescission and Annulment. (a) If any Event of Default (other than an Event of Default specified in Section 501(6)) occurs and is continuing under this Indenture, the Trustee or the Holders of at least 30% in principal amount of the Outstanding Notes issued under this Indenture may declare the principal, premium, if any, interest and any other monetary Obligations on all the Outstanding Notes issued under this Indenture to be due and payable immediately by a notice in writing to the Company and the Co-Issuer (and to the Trustee if given by the Holders).

(b) Upon the effectiveness of such declaration, such principal of and premium, if any, and interest on the Notes shall be due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in Section 501(6) occurs and is continuing, then the principal amount of all Outstanding Notes shall ipso facto become and be immediately due and payable without any notice, declaration or other act on the part of the Trustee or any Holder.

(c) At any time after a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article, the Holders of a majority in aggregate principal amount of the Outstanding Notes, by written notice to the Company, the Co-Issuer and the Trustee, may rescind and annul such declaration and its consequences if:

(1) the Company or the Co-Issuer has paid or deposited with the Trustee a sum sufficient to pay:

(A) all overdue interest on all Outstanding Notes,

(B) all unpaid principal of (and premium, if any, on) any Outstanding Notes which has become due otherwise than by such declaration of acceleration, and interest on such unpaid principal at the rate borne by the Notes,

(C) to the extent that payment of such interest is lawful, interest on overdue interest at the rate borne by the Notes, and

(D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and

61

(2) Events of Default, other than the non-payment of amounts of principal of (or premium, if any, on) or interest on Notes which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513.

No such rescission shall affect any subsequent default or impair any right consequent thereon.

(d) Notwithstanding the preceding paragraph, in the event of any Event of Default specified in Section 501(4) above, such Event of Default and all consequences thereof (excluding any resulting payment default) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders, if within 20 days after such Event of Default arose,

(1) the Indebtedness or guarantee that is the basis for such Event of Default has been discharged, or

(2) the holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default, or

(3) if the default that is the basis for such Event of Default has been cured.

SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. If an Event of Default specified in Section 501(1) or (2) occurs and is continuing, the Trustee, in its own name as trustee of an express trust, may institute a judicial proceeding for the collection of the sums due hereunder pursuant to this Article 5 and unpaid, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. The Trustee may prosecute such proceeding to judgment or final decree and may enforce the same against the Company, the Co-Issuer, any Subsidiary Guarantor or any other obligor upon the Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company, the Co-Issuer, any Subsidiary Guarantor or any other obligor upon the Notes, wherever situated.

If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders under this Indenture and the Subsidiary Guarantees by the judicial proceedings discussed above as the Trustee shall deem necessary to protect and enforce any such rights, including seeking recourse against any Subsidiary Guarantor.

SECTION 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company, the Co-Issuer or any other obligor including any Subsidiary Guarantor, upon the Notes or the property of the Company, the Co-Issuer or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Notes shall then be due

62

and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company and the Co-Issuer for the payment of overdue principal, premium, if any, or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise,

(1) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and

(2) to collect, receive and distribute any moneys or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

SECTION 505. Trustee May Enforce Claims Without Possession of Notes. All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders in respect of which such judgment has been recovered.

SECTION 506. Application of Money Collected. Any money or property collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

FIRST: To the payment of all amounts due the Trustee under Section 607;

63

SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal (and premium, if any) and interest, respectively; and

THIRD: The balance, if any, to the Company and the Co-Issuer or as a court of competent jurisdiction may direct in writing; provided that all sums due and owing to the Holders and the Trustee have been paid in full as required by this Indenture.

The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 506.

SECTION 507. Limitation on Suits. Subject to Section 508, no Holder of any Notes shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

(1) such Holder has previously given the Trustee notice that an Event of Default is continuing;

(2) Holders of at least 30% in principal amount of the Outstanding Notes have requested the Trustee to pursue the remedy;

(3) such Holders have offered the Trustee reasonable security or indemnity reasonably satisfactory to it against any loss, liability or expense;

(4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and

(5) Holders of a majority in principal amount of the Outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period,

it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture or the Subsidiary Guarantees to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture or the Subsidiary Guarantees, except in the manner herein provided and for the equal and ratable benefit of all the Holders (it being further understood that the Trustee does not have an affirmative duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders).

SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment, as provided herein (including, if applicable, Article Eleven) and in such Note of the

64

principal of (and premium, if any) and (subject to Section 306) interest on such Note on the respective Stated Maturities expressed in such Note (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment on or after such respective dates, and such rights shall not be impaired without the consent of such Holder.

SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or the Subsidiary Guarantees and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Co-Issuer, any Subsidiary Guarantor, any other obligor of the Notes, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.

SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of Section 305, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

SECTION 512. Control by Holders. The Holders of not less than a majority in principal amount of the Outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided that:

(1) such direction shall not be in conflict with any rule of law or with this Indenture,

(2) subject to Section 315 of the Trust Indenture Act, the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and

65

(3) the Trustee need not take any action which might involve it in personal liability or be unduly prejudicial to the Holders not consenting.

SECTION 513. Waiver of Default. Subject to Sections 508 and 902, the Holders of not less than a majority in principal amount of the Outstanding Notes may on behalf of the Holders of all such Notes waive any Default hereunder and its consequences, except a continuing Default or Event of Default (1) in respect of the payment of interest on, premium, if any, or the principal of any such Note held by a non-consenting Holder, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Note affected.

Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

SECTION 514. Waiver of Stay or Extension Laws. Each of the Company, the Co-Issuer, the Subsidiary Guarantors and any other obligor on the Notes covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force that would prohibit or forgive the Company, the Co-Issuer or a Subsidiary Guarantor from paying any portion of the principal of, and premium, if any, and interest on the Notes.

66

ARTICLE SIX

THE TRUSTEE

SECTION 601. Duties of the Trustee. (a) Except during the continuance of an Event of Default,

(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2) in the absence of bad faith or willful misconduct on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions specifically required by any provision hereof to be provided to it, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture, but not to verify the contents thereof.

(b) If an Event of Default has occurred and is continuing of which a Responsible Officer of the Trustee has actual knowledge or of which written notice of such Event of Default shall have been given to the Trustee by the Company, the Co-Issuer, any other obligor of the Notes or by any Holder, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such Person’s own affairs.

(c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that

(1) this paragraph (c) shall not be construed to limit the effect of paragraph (a) of this Section;

(2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;

(3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in aggregate principal amount of the Outstanding Notes relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and

(4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance

67

of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.

SECTION 602. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall transmit, in the manner and to the extent provided in TIA Section 313(c), notice of such Default or Event of Default within 90 days after it occurs unless such Default or Event of Default shall have been cured or waived. Except in the case of a Default or Event of Default in the payment of the principal of (or premium, if any, on) or interest on any Note, the Trustee shall be protected in withholding such notice if it determines that the withholding of such notice is in the interest of the Holders. In addition, the Trustee shall have no obligation to accelerate the Notes if in the best judgment of the Trustee acceleration is not in the best interest of the Holders of such Notes.

SECTION 603. Certain Rights of Trustee. Subject to the provisions of TIA Sections 315(a) through 315(d):

(1) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document (whether in original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper party or parties;

(2) any request or direction of the Company or the Co-Issuer mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors of either the Company or the Co-Issuer may be sufficiently evidenced by a Board Resolution of the applicable Board of Directors;

(3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers’ Certificate and an Opinion of Counsel;

(4) the Trustee may consult with counsel of its own selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice or opinion of such counsel;

68

(5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity satisfactory to it against the costs, expenses, losses and liabilities which might be incurred by it in compliance with such request or direction;

(6) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company and the Co-Issuer, personally or by agent or attorney at the expense of the Company and shall incur no liability of any kind by reason of such inquiry or investigation;

(7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;

(8) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; provided, however, that the Trustee’s conduct does not constitute willful misconduct or negligence;

(9) the rights, privileges, protections, immunities and benefits given to the Trustee, including its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder; and

(10) in no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

SECTION 604. Trustee Not Responsible for Recitals or Issuance of Notes. The recitals contained herein and in the Notes, except for the Trustee’s certificates of authentication, shall be taken as the statements of the Company and the Co-Issuer, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Notes and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility on Form T-1 supplied to the Company

69

and the Co-Issuer are true and accurate, subject to the qualifications set forth therein. The Trustee shall not be accountable for the use or application by the Company and the Co-Issuer of Notes or the proceeds thereof.

SECTION 605. May Hold Notes. The Trustee, any Paying Agent, any Note Registrar or any other agent of the Company, of the Co-Issuer or of the Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company and the Co-Issuer with the same rights it would have if it were not the Trustee, Paying Agent, Note Registrar or such other agent; provided, however, that, if it acquires any conflicting interest, it must eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.

SECTION 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company and the Co-Issuer.

SECTION 607. Compensation and Reimbursement. The Company, the Co-Issuer and the Subsidiary Guarantors, jointly and severally, agree:

(1) to pay to the Trustee from time to time such compensation as shall be agreed in writing between the Company and the Co-Issuer and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

(2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as shall be determined to have been caused by its own negligence or willful misconduct; and

(3) to indemnify the Trustee and any predecessor Trustee for, and to hold it harmless against, any and all loss, liability, claim, damage or expense, including taxes (other than the taxes based on the income of the Trustee) incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim regardless of whether the claim is asserted by the Company, the Co-Issuer, a Subsidiary Guarantor, a Holder or any other Person or liability in connection with the exercise or performance of any of its powers or duties hereunder.

The obligations of the Company and the Co-Issuer under this Section to compensate the Trustee, to pay or reimburse the Trustee for expenses, disbursements and

70

advances and to indemnify and hold harmless the Trustee shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture and resignation or removal of the Trustee. As security for the performance of such obligations of the Company and the Co-Issuer, the Trustee shall have a claim prior to the Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any) or interest on particular Notes.

When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(6), the expenses (including the reasonable charges and expenses of its counsel) of and the compensation for such services are intended to constitute expenses of administration under any applicable Bankruptcy Law.

The provisions of this Section shall survive the termination of this Indenture and resignation or removal of the Trustee.

SECTION 608. Corporate Trustee Required; Eligibility. There shall be at all times a Trustee hereunder which shall be eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined capital and surplus of at least $50,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of Federal, State, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

SECTION 609. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 610.

(b) The Trustee may resign at any time by giving written notice thereof to the Company and the Co-Issuer. Upon receiving such notice of resignation, the Company and the Co-Issuer shall promptly appoint a successor trustee by written instrument executed by authority of the Board of Directors of each of the Company and the Co-Issuer, copies of which shall be delivered to the resigning Trustee and a copy to the successor Trustee. If the instrument of acceptance by a successor Trustee required by Section 610 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition, at the expense of the Company and the Co-Issuer, any court of competent jurisdiction for the appointment of a successor Trustee.

(c) The Trustee may be removed at any time by Act of the Holders of not less than a majority in principal amount of the Outstanding Notes, delivered to the Trustee and to the Company and the Co-Issuer. If the instrument of acceptance by a successor Trustee required by Section 610 shall not have been delivered to the Trustee

71

within 30 days after the giving of such notice of resignation, the resigning Trustee may petition, at the expense of the Company and the Co-Issuer, any court of competent jurisdiction for the appointment of a successor Trustee.

(d) The Trustee shall comply with TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company or the Co-Issuer are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met.

(e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company and the Co-Issuer, by a Board Resolution of the Board of Directors of each of the Company and the Co-Issuer, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Notes delivered to the Company and the Co-Issuer and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company and the Co-Issuer. If no successor Trustee shall have been so appointed by the Company and the Co-Issuer or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee.

(f) The Company and the Co-Issuer shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to the Holders in the manner provided for in Section 107. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office.

SECTION 610. Acceptance of Appointment by Successor. (a) Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company, the Co-Issuer and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company, the Co-Issuer or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company and the Co-Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts.

72

(b) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.

SECTION 611. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided that such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes. In case at that time any of the Notes shall not have been authenticated, any successor Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor Trustee. In all such cases such certificates shall have the full force and effect which this Indenture provides for the certificate of authentication of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Notes in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.

SECTION 612. Appointment of Authenticating Agent. At any time when any of the Notes remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents with respect to the Notes which shall be authorized to act on behalf of the Trustee to authenticate Notes and the Trustee shall give written notice of such appointment to all Holders of Notes with respect to which such Authenticating Agent shall serve, in the manner provided for in Section 107. Notes so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Any such appointment shall be evidenced by an instrument in writing signed by a Responsible Officer of the Trustee, and a copy of such instrument shall be promptly furnished to the Company and the Co-Issuer. Wherever reference is made in this Indenture to the authentication and delivery of Notes by the Trustee or the Trustee’s certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and the Co-Issuer and shall at all times be a corporation organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set

73

forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect specified in this Section.

Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent; provided that such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.

An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company and the Co-Issuer. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company and the Co-Issuer. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and the Co-Issuer and shall give written notice of such appointment to all Holders of Notes, in the manner provided for in Section 107. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.

The Company and the Co-Issuer each agrees to pay to each Authenticating Agent from time to time such compensation for its services under this Section as shall be agreed in writing between the Company, the Co-Issuer and such Authenticating Agent.

If an appointment is made pursuant to this Section, the Notes may have endorsed thereon, in addition to the Trustee’s certificate of authentication, an alternate certificate of authentication in the following form:

This is one of the Notes designated therein referred to in the within-mentioned Indenture.

WELLS FARGO BANK, NATIONAL ASSOCIATION     as Trustee
By:
	as Authenticating Agent
By:
	as Authorized Officer

74

ARTICLE SEVEN

HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY

SECTION 701. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with Trust Indenture Act Section 312(a). If the Trustee is not the Note Registrar, the Company or the Co-Issuer shall furnish to the Trustee at least two Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company and the Co-Issuer shall otherwise comply with Trust Indenture Act Section 312(a).

SECTION 702. Disclosure of Names and Addresses of Holders. Every Holder, by receiving and holding Notes, agrees with the Company, the Co-Issuer and the Trustee that none of the Company, the Co-Issuer or the Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b).

SECTION 703. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first May 15 after the Issue Date, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders (with a copy to the Company at the address specified in Section 106), in the manner and to the extent provided in TIA Section 313(c), a brief report dated as of such May 15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b). The Trustee shall also transmit by mail all reports as required by the TIA Section 313(c).

75

ARTICLE EIGHT

MERGER, CONSOLIDATION OR SALE

OF ALL OR SUBSTANTIALLY ALL ASSETS

SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. (a) The Company may not consolidate or merge with or into or wind up into (whether or not the Company is the surviving entity), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:

(1) the Company is the surviving company or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a Person organized or existing under the laws of the United States of America, any state thereof, the District of Columbia, or any territory thereof (the Company or such Person, as the case may be, being herein called the “Successor Company”);

(2) the Successor Company, if other than the Company, expressly assumes all the obligations of the Company under this Indenture and the Notes pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;

(3) immediately after such transaction, no Default exists;

(4) immediately after giving pro forma effect to such transaction, as if such transaction had occurred at the beginning of the applicable four-quarter period,

(A) the Successor Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 1011(a) of this Indenture or

(B) the Fixed Charge Coverage Ratio for the Successor Company and the Restricted Subsidiaries on a consolidated basis would be greater than such ratio for the Company and the Restricted Subsidiaries immediately prior to such transaction;

(5) each Subsidiary Guarantor, unless it is the other party to the transactions described above, in which case Section 802(A)(2) shall apply, shall have by supplemental indenture confirmed that its Subsidiary Guarantee shall apply to such Person’s obligations under this Indenture and the Notes;

(6) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with this Indenture; and

76

(7) if the Successor Company will not be a corporation following any such merger, consolidation, winding up, sole assignment, transfer, lease, conveyance or other disposition, the Company shall have delivered to the Trustee an opinion of counsel to the effect that the Holders will not recognize income, gain or loss for Federal income tax purposes as a result of such transaction and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such transaction had not occurred.

(b) Notwithstanding clauses (a)(3) and (a)(4) above,

(1) any Restricted Subsidiary (other than the Co-Issuer) may consolidate with, merge into or transfer all or part of its properties and assets to the Company and

(2) the Company may merge with an Affiliate of the Company incorporated solely for the purpose of reincorporating the Company in another State of the United States of America or converting into a different form of business entity so long as the amount of Indebtedness of the Company and the Restricted Subsidiaries is not increased thereby.

SECTION 802. Subsidiary Guarantors May Consolidate, Etc., Only on Certain Terms. Subject to Section 1208, each Subsidiary Guarantor shall not, and the Company shall not permit any Subsidiary Guarantor to, consolidate or merge with or into or wind up into (whether or not such Subsidiary Guarantor is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, any Person unless

(A) (1) such Subsidiary Guarantor is the surviving entity or the Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation or other entity organized or existing under the laws of the United States of America, any state thereof, the District of Columbia, or any territory thereof (such Subsidiary Guarantor or such Person, as the case may be, being herein called the “Successor Person”);

(2) the Successor Person, if other than such Subsidiary Guarantor, expressly assumes all the obligations of such Subsidiary Guarantor under this Indenture and such Subsidiary Guarantor’s Subsidiary Guarantee, pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;

(3) immediately after such transaction, no Default exists; and

(4) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with this Indenture; or

77

(B) the transaction is made in compliance with Section 1018 or Section 1019, as applicable, of this Indenture.

Notwithstanding the foregoing, any Subsidiary Guarantor may merge into or transfer all or part of its properties and assets to another Subsidiary Guarantor or the Company.

SECTION 803. Co-Issuer May Consolidate, Etc., Only on Certain Terms. The Co-Issuer shall not, and the Company shall not permit the Co-Issuer to, consolidate or merge with or into or wind up into (whether or not the Co-Issuer is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to any Person unless:

(1) the Co-Issuer is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Co-Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized and existing under the laws of the United States of America, any state thereof, the District of Columbia, or any territory thereof (the Co-Issuer or such Person, as the case may be, being herein called the “Successor Co-Issuer”);

(2) the Successor Co-Issuer, if other than the Co-Issuer, expressly assumes all the obligations of the Co-Issuer under this Indenture and the Notes, pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;

(3) immediately after such transaction, no Default exists; and

(4) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with this Indenture.

SECTION 804. Successor Substituted. Subject to Section 1208 hereof (with respect to any Subsidiary Guarantor only), upon any consolidation or merger, or any sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the assets of the Company, the Co-Issuer or any Subsidiary Guarantor in accordance with Sections 801, 802 and 803 hereof, as applicable, the Successor Person formed by such consolidation or into which the Company, the Co-Issuer or such Subsidiary Guarantor, as the case may be, is merged or the successor Person to which such sale, assignment, conveyance, transfer, lease or disposition is made, shall succeed to, and be substituted for, and may exercise every right and power of, the Company, the Co-Issuer or such Subsidiary Guarantor, as the case may be, under this Indenture or the Subsidiary Guarantees, as the case may be, with the same effect as if such Successor Person had

78

been named as the Company, the Co-Issuer or such Subsidiary Guarantor, as the case may be, herein or the Subsidiary Guarantees, as the case may be; provided that the predecessor Company, the Co-Issuer or any Subsidiary Guarantor shall not be relieved from the obligation to pay the principal of and interest and Additional Interest, if any, on the Notes except in the case of a sale, assignment, transfer, conveyance or other disposition of all of the assets of the Company, the Co-Issuer or such Subsidiary Guarantor, as the case may be, that meets the requirements of Sections 801, 802 and 803 hereof, as applicable.

SECTION 805. The Acquisition Permitted. Notwithstanding the foregoing, the Acquisition shall be permitted without compliance with this Article Eight.

SECTION 806. Assets of Subsidiary Apply to Company. For purposes of this Article Eight, the sale, lease, conveyance, assignment, transfer or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, which properties and assets, if held by the Company, instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company and its Subsidiaries on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.

79

ARTICLE NINE

AMENDMENT, SUPPLEMENT AND WAIVER

SECTION 901. Amendments or Supplements Without Consent of Holders. Notwithstanding Section 902 hereof, without the consent of any Holder, the Company, the Co-Issuer, any Subsidiary Guarantor (with respect to a Subsidiary Guarantee or this Indenture to which it is a party), and the Trustee, at any time and from time to time, may amend or supplement this Indenture, any Subsidiary Guarantee or the Notes, in form satisfactory to the Trustee, for any of the following purposes:

(1) to cure any ambiguity, omission, mistake, defect or inconsistency;

(2) to provide for uncertificated Notes in addition to or in place of certificated Notes;

(3) to comply with Article Eight hereof and to provide for the assumption of the Company’s, the Co-Issuer’s or any Subsidiary Guarantor’s obligations to Holders in connection therewith;

(4) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights of any such Holder under this Indenture;

(5) to add covenants for the benefit of the Holders or to surrender any right or power conferred in this Indenture upon the Company or any Subsidiary Guarantor;

(6) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act;

(7) to evidence and provide for the acceptance and appointment under this Indenture of a successor Trustee pursuant to the requirements of Sections 609 and 610 hereof;

(8) to provide for the issuance of Exchange Notes or private exchange notes, which are identical to Exchange Notes except that they are not freely transferable;

(9) to add a Subsidiary Guarantor or any other guarantor under this Indenture;

(10) to conform the text of this Indenture, Subsidiary Guarantees or the Notes to any provision of the “Description of the Notes” section of the Offering Circular to the extent that such provision in the “Description of the Notes” was intended to be a verbatim recitation of a provision of this Indenture, the Subsidiary Guarantees or the Notes; or

80

(11) to make any amendment to the provisions of this Indenture relating to the transfer and legending of Notes; provided that (A) compliance with this Indenture as so amended would not result in Notes being transferred in violation of the Securities Act or any applicable securities law and (B) such amendment does not materially and adversely affect the rights of Holders to transfer Notes.

Upon the request of the Company and the Co-Issuer accompanied by a Board Resolution of the Board of Directors of each of the Company and the Co-Issuer authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 603 hereof, the Trustee shall join with the Company, the Co-Issuer and the Subsidiary Guarantors in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Notwithstanding the foregoing, no Opinion of Counsel shall be required in connection with the addition of a Subsidiary Guarantor under this Indenture upon execution and delivery by such Subsidiary Guarantor and the Trustee of a supplemental indenture to this Indenture, the form of which is attached as Exhibit B hereto, and delivery of an Officer’s Certificate.

SECTION 902. Amendments or Supplements With Consent of Holders. With the written consent of the Holders of not less than a majority in principal amount of the Outstanding Notes, delivered to the Company, the Co-Issuer and the Trustee, the Company, the Co-Issuer, any Subsidiary Guarantor (with respect to any Subsidiary Guarantee or this Indenture to which it is a party) and the Trustee may (a) amend or supplement this Indenture, any Subsidiary Guarantee or the Notes (including consents obtained in connection with a purchase of, or tender offer or Exchange Offer for, the Notes) and (b) waive any existing Default or Event of Default or compliance with any provision of this Indenture or the Notes (including consents obtained in connection with a purchase of, or tender offer or Exchange Offer, for Notes). Notwithstanding the foregoing sentence, no such amendment, supplement or waiver shall, without the consent of each Holder of the Outstanding Notes affected thereby:

(1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver,

(2) reduce the principal of or change the Maturity of any such Note or alter or waive the provisions with respect to the redemption of the Notes (other than Sections 1017, 1018 and 1019),

(3) reduce the rate of or change the time for payment of interest on any Note,

81

(4) waive a Default in the payment of principal of or premium, if any, or interest on the Notes issued under this Indenture, except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Outstanding Notes and a waiver of the payment default that resulted from such acceleration, or in respect of a covenant or provision contained in this Indenture or any Subsidiary Guarantee that cannot be amended or modified without the consent of all Holders,

(5) make any Note payable in money other than that stated in the Notes,

(6) make any change in the provisions of Section 508 or Section 513 of this Indenture,

(7) make any change in the ranking of this Indenture and the Notes that would adversely affect the Holders,

(8) modify the Subsidiary Guarantee of any Significant Subsidiary (or any group of Subsidiaries that together would constitute a Significant Subsidiary) in any manner adverse to the Holders,

(9) make any change in these amendment and waiver provisions, or

(10) impair the right of any Holder to receive payment of principal of, or interest on, such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes.

The consent of the Holders is not necessary under this Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment.

SECTION 903. Execution of Amendments, Supplements or Waivers. The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. Neither the Company nor the Co-Issuer may sign an amendment, supplement or waiver until its Board of Directors approves it. In executing any amendment, supplement or waiver, the Trustee shall be entitled to receive and (subject to Section 601 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 103 hereof, an Officers’ Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture and that such amendment, supplement or waiver is the legal, valid and binding obligation of the Company, the Co-Issuer and any Subsidiary Guarantors party thereto, enforceable against them in accordance with its terms, subject to customary exceptions, and complies with the provisions hereof (including Section 905). Notwithstanding the foregoing, no Opinion of Counsel will be required for the Trustee to execute any amendment or supplement adding a new Subsidiary Guarantor under this Indenture.

82

SECTION 904. Effect of Amendments, Supplements or Waivers. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such amendment, supplement or waiver shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

SECTION 905. Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental indenture that complies with the Trust Indenture Act as then in effect.

SECTION 906. Reference in Notes to Supplemental Indentures. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company and the Co-Issuer shall so determine, new Notes so modified as to conform, in the opinion of the Trustee, the Company and the Co-Issuer, to any such supplemental indenture may be prepared and executed by the Company and the Co-Issuer and authenticated and delivered by the Trustee in exchange for Outstanding Notes.

SECTION 907. Notice of Supplemental Indentures. Promptly after the execution by the Company, the Co-Issuer, any Subsidiary Guarantor and the Trustee of any supplemental indenture pursuant to the provisions of Section 902, the Company and the Co-Issuer shall give notice thereof to the Holders, in the manner provided for in Section 107, setting forth in general terms the substance of such supplemental indenture.

83

ARTICLE TEN

COVENANTS

SECTION 1001. Payment of Principal, Premium, if any, and Interest. The Company and the Co-Issuer shall, jointly and severally, pay or cause to be paid the principal of, premium, if any, Additional Interest, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, Additional Interest, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary, holds as of noon Eastern Time on the due date money deposited by the Company or the Co-Issuer in immediately available funds and designated for and sufficient to pay all principal, premium, if any, interest and Additional Interest to be paid in cash, if any, then due.

The Company and the Co-Issuer shall, jointly and severally, pay interest on overdue principal at the rate equal to the then applicable interest rate on the Notes, and it shall pay interest on overdue installments of interest at the same rate, in any case to the extent lawful.

SECTION 1002. Maintenance of Office or Agency. The Company and the Co-Issuer shall maintain, an office or agency where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company and the Co-Issuer in respect of the Notes and this Indenture may be served. The Corporate Trust Office of the Trustee shall be such office or agency of the Company and the Co-Issuer, unless the Company and the Co-Issuer shall designate and maintain some other office or agency for one or more of such purposes. The Company and the Co-Issuer shall give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company and the Co-Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company and the Co-Issuer hereby appoint the Trustee as its agent to receive all such presentations, surrenders, notices and demands.

The Company and the Co-Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation. The Company and the Co-Issuer shall give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency.

SECTION 1003. Paying Agent to Hold Money in Trust. If the Company or the Co-Issuer shall at any time act as their own Paying Agent, it shall, on or before each due date of the principal of (or premium, if any) or interest on any of the Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient

84

to pay the principal of (or premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and shall promptly notify the Trustee of its action or failure so to act.

Whenever the Company and the Co-Issuer shall have one or more Paying Agents for the Notes, it shall, on or before each due date of the principal of (or premium, if any) or interest on any Notes, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company and the Co-Issuer shall promptly notify the Trustee of such action or any failure so to act.

The Company and the Co-Issuer shall cause each Paying Agent (other than the Trustee) to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent shall:

(1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

(2) give the Trustee notice of any Default by the Company or the Co-Issuer (or any other obligor upon the Notes) in the making of any payment of principal (and premium, if any) or interest; and

(3) at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.

The Company and the Co-Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company, the Co-Issuer or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company, the Co-Issuer or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums.

Subject to applicable laws relating to abandoned property, any money deposited with the Trustee or any Paying Agent, or then held by the Company or the Co-Issuer, in trust for the payment of the principal of (or premium, if any) or interest on any Note and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company or the Co-Issuer on Company Request, or (if then held by the Company or the Co-Issuer) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company or the Co-Issuer for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company or the Co-Issuer as trustee thereof, shall thereupon cease.

85

SECTION 1004. Corporate Existence. Subject to Article Eight, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence and that of each Restricted Subsidiary and the corporate rights (charter and statutory) and franchises of the Company and each Restricted Subsidiary; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries as a whole.

SECTION 1005. Payment of Taxes and Other Claims. The Company and the Co-Issuer shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company, the Co-Issuer or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary and (2) all lawful claims for labor, materials and supplies, which, if unpaid, might by law become a lien upon the property of the Company, the Co-Issuer or any Subsidiary; provided, however, that the Company and the Co-Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate reserves, if necessary (in the good faith judgment of management of the Company) are being maintained in accordance with GAAP.

SECTION 1006. Reserved.

SECTION 1007. Reserved.

SECTION 1008. Statement by Officers as to Default. (a) The Company shall deliver to the Trustee within 120 days after the end of each fiscal year, an Officers’ Certificate stating that a review of the activities of the Company and its Restricted Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether it has kept, observed, performed and fulfilled, and has caused each of its Restricted Subsidiaries to keep, observe, perform and fulfill its obligations under this Indenture and further stating, as to each such Officer signing such certificate, that, to the best of his or her knowledge, the Company during such preceding fiscal year has kept, observed, performed and fulfilled, and has caused each of its Restricted Subsidiaries to keep, observe, perform and fulfill each and every such covenant contained in this Indenture and no Default occurred during such year and at the date of such certificate there is no Default which has occurred and is continuing or, if such signers do know of such Default that is continuing, the certificate shall describe its status, with particularity and what action each is taking or proposes to take with respect thereto and that, to the best of his or her knowledge, no event has occurred and remains by reason of which payments on the account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event. The Officers’ Certificate shall also notify the Trustee should the Company or the Co-Issuer

86

elect to change the manner in which it fixes its fiscal year-end. For purposes of this Section 1008(a), such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture.

(b) (1) When any Default has occurred and is continuing under this Indenture, or (2) if the trustee for or the holder of any other evidence of Indebtedness of the Company or any Restricted Subsidiary gives any notice or takes any other action with respect to a claimed Default (other than with respect to Indebtedness in the principal amount of less than $50,000,000), the Company and the Co-Issuer shall deliver to the Trustee by registered or certified mail or facsimile transmission an Officers’ Certificate specifying such event, notice or other action within five Business Days of its occurrence (with respect to clause (1)) or such notice or other action (with respect to clause (2)).

SECTION 1009. Reports and Other Information. Whether or not required by the SEC, so long as any Notes are outstanding, the Company shall furnish to the Holders or post on the Company Website (and furnish to the Trustee):

(a) within the time period specified in the SEC’s rules and regulations (as in effect on the Issue Date) for non-accelerated filers with respect to Form 10-K and within 60 days from the end of the applicable fiscal quarter with respect to Form 10-Q, all quarterly and annual financial information that would be required to be contained in a filing by a non-accelerated filer with the SEC on Forms 10-Q and 10-K (or any successor or comparable forms) if the Company were required to file such forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report on the annual financial statements by the Company’s certified independent accountants; and

(b) within 10 calendar days from any event after the Issue Date that triggers the requirement for such filing under the SEC’s rules and regulations, all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports.

Notwithstanding anything to the contrary set forth herein (i) the obligations of the Company with respect to clauses (a) and (b) of the previous paragraph shall not extend to (x) any information the provision of which is, in the reasonable judgment of the Company, unduly burdensome to the Company and, in lieu of such information, the Company shall furnish information comparable to that included in the Offering Circular or (y) any information for historical periods covered by the financial information in the Offering Circular to the extent such information is not included in the Offering Circular, (ii) with respect to any quarterly or annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q, 10-K or on Form 8-K with respect to any period, or event occurring, prior to the Company’s second quarter in fiscal year 2006, such information shall be comparable to the corresponding information included in the Offering Circular and (iii) with respect to the furnishing of reports pursuant to clause (b) of the preceding paragraph prior to the beginning of the Company’s second quarter in fiscal year 2006, such information shall be filed within 15 calendar days from the event that triggers the requirement for such filing under the SEC’s rules and regulations.

87

Notwithstanding the foregoing, the Company shall not be required to include in any information furnished hereunder a management’s report on internal controls over financial reporting or an auditor’s attestation thereon unless the Company is required under the SEC’s rules and regulations to include such report and attestation in its filings with the SEC.

In addition, whether or not required by the SEC, the Company shall (subject to the immediately preceding paragraph) make the information and reports referred to in clauses (a) and (b) of this Section 1009 available to securities analysts and prospective investors upon request. For purposes of this Section 1009, the term “Company Website” means the collection of web pages that may be accessed on the World Wide Web using the URL address http://www.targaresources.com or such other address as the Company may from time to time designate in writing to the Trustee.

The Company has also agreed that, for so long as any Notes remain outstanding, it shall furnish to Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

(c) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates).

(d) In addition, if at any time any direct or indirect parent company of the Company becomes a guarantor of the Notes (there being no obligation of such parent to do so), the reports, information and other documents required to be filed and furnished to the Holders pursuant to this Section 1009 may, at the option of the Company, be filed by and be those of such parent rather than the Company; provided that the same is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such parent, on the one hand, and the information relating to the Company and its Restricted Subsidiaries on a standalone basis, on the other hand.

(e) Notwithstanding the foregoing, the requirements of this Section 1019 shall be deemed satisfied prior to the commencement of the Registered Exchange Offer or the effectiveness of the Shelf Registration Statement by the filing with the SEC of the Exchange Offer Registration Statement and/or Shelf Registration Statement, and any amendments thereto within the time periods specified in the Registration Rights Agreement, with such financial information that satisfies Regulation S-X of the Securities Act.

88

SECTION 1010. Limitation on Restricted Payments. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly:

(1) declare or pay any dividend or make any distribution on account of the Company’s or any Restricted Subsidiary’s Equity Interests, including any dividend or distribution payable in connection with any merger or consolidation other than

(A) dividends or distributions by the Company payable in Equity Interests (other than Disqualified Stock) of the Company or in options, warrants or other rights to purchase such Equity Interests (other than Disqualified Stock), or

(B) dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a Wholly-Owned Subsidiary, the Company or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities;

(2) purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of the Company or any direct or indirect parent of the Company, including in connection with any merger or consolidation;

(3) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value in each case, prior to any scheduled repayment, sinking fund payment or maturity, any Subordinated Indebtedness, other than

(x) Indebtedness permitted under clauses (10), (11) and (24) of Section 1011(b) of this Indenture or

(y) the purchase, repurchase or other acquisition of Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition; or

(4) make any Restricted Investment;

(all such payments and other actions set forth in clauses (1) through (4) above being collectively referred to as “Restricted Payments”), unless, at the time of such Restricted Payment:

(A) no Default shall have occurred and be continuing or would occur as a consequence thereof;

(B) immediately after giving effect to such transaction on a pro forma basis, the Company could incur $1.00 of additional Indebtedness under the provisions of Section 1011(a) of this Indenture; and

89

(C) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and the Restricted Subsidiaries after the Issue Date pursuant to this Section 1010(a) or clauses (1), (2) (with respect to the payment of dividends on Refunding Capital Stock pursuant to clause (B) thereof only), (6)(C), (8) and (12) of Section 1010(b) (and excluding, for the avoidance of doubt, all other Restricted Payments made pursuant to Section 1010(b)), is less than the sum, without duplication, of

(1) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from September 1, 2005 to the end of the Company’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, or, in the case such Consolidated Net Income for such period is a deficit, minus 100% of such deficit; provided that if, at the time of a proposed Restricted Payment under this Section 1010(a), the Consolidated Leverage Ratio of the Company and its Restricted Subsidiaries is less than 3.50 to 1.00, for purposes of calculating availability of amounts hereunder for such Restricted Payment only, the reference to 50% in this clause (1) above shall be deemed to be 75%, plus

(2) 100% of the aggregate net cash proceeds and the fair market value, as determined in good faith by the Company, of marketable securities or other property received by the Company after the Issue Date (less the amount of such net cash proceeds to the extent such amount has been relied upon to permit the incurrence of Indebtedness, or issuance of Disqualified Stock or Preferred Stock pursuant to clause (22)(ii) of Section 1011(b) of this Indenture) from the issue or sale of

(x) Equity Interests of the Company, including Retired Capital Stock (as defined below), but excluding cash proceeds and the fair market value, as determined in good faith by the Company, of marketable securities or other property received from the sale of

(A) Equity Interests to any future, present or former employees, managers, directors or consultants of the Company, any direct or indirect parent company of the Company or any of the Company’s Subsidiaries after the Issue Date to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of Section 1010(b) and

(B) Designated Preferred Stock

and to the extent actually contributed to the Company, Equity Interests of the Company’s direct or indirect parent companies (excluding contributions of the proceeds from the sale of Designated Preferred Stock of such companies or contributions to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of Section 1010(b)) or

90

(y) debt securities of the Company that have been converted into or exchanged for such Equity Interests of the Company;

provided that this clause (2) shall not include the proceeds from (a) Refunding Capital Stock (as defined below), (b) Equity Interests of the Company or debt securities of the Company that have been converted into or exchanged for Equity Interests of the Company sold to a Restricted Subsidiary or the Company, as the case may be, (c) Disqualified Stock or debt securities that have been converted into or exchanged for Disqualified Stock or (d) Excluded Contributions, plus

(3) 100% of the aggregate amount of cash and the fair market value, as determined in good faith by the Company, of marketable securities or other property contributed to the capital of the Company after the Issue Date (less the amount of such net cash proceeds to the extent such amount has been relied upon to permit the incurrence of Indebtedness or issuance of Disqualified Stock or Preferred Stock pursuant to clause (22)(ii) of Section 1011(b) of this Indenture) (other than by a Restricted Subsidiary and other than by any Excluded Contributions), plus

(4) to the extent not already included in Consolidated Net Income, 100% of the aggregate amount received in cash and the fair market value, as determined in good faith by the Company, of marketable securities or other property received after the Issue Date by means of

(A) the sale or other disposition (other than to the Company or a Restricted Subsidiary) of Restricted Investments made by the Company or any Restricted Subsidiary and repurchases and redemptions of such Restricted Investments from the Company or any Restricted Subsidiary and repayments of loans or advances that constitute Restricted Investments by the Company or any Restricted Subsidiary or

(B) the sale (other than to the Company or a Restricted Subsidiary) of the Capital Stock of an Unrestricted Subsidiary or a distribution from an Unrestricted Subsidiary (other than, in each case, to the extent the Investment in such Unrestricted Subsidiary was made by the Company or a Restricted Subsidiary pursuant to clauses (9) or (13) of Section 1010(b) or to the extent such Investment constituted a Permitted Investment) or a dividend from an Unrestricted Subsidiary (other than an Extraordinary Distribution), plus

91

(5) in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary after the Issue Date, the fair market value of the Investment in such Unrestricted Subsidiary, as determined by the Company in good faith or if, in the case of an Unrestricted Subsidiary, such fair market value may exceed $100.0 million, in writing by an Independent Financial Advisor, at the time of the redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary, other than an Unrestricted Subsidiary to the extent the Investment in such Unrestricted Subsidiary was made by the Company or a Restricted Subsidiary pursuant to clauses (9) or (13) of Section 1010(b) or to the extent such Investment constituted a Permitted Investment.

(b) The foregoing provisions shall not prohibit:

(1) the payment of any dividend or distribution within 60 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of this Indenture;

(2) (A) the redemption, repurchase, retirement or other acquisition of any Equity Interests (“Retired Capital Stock”) or Subordinated Indebtedness of the Company or any Equity Interests of any direct or indirect parent company of the Company, in exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary) of, Equity Interests of the Company (in each case, other than any Disqualified Stock) (“Refunding Capital Stock”) and (B) if immediately prior to the retirement of Retired Capital Stock, the declaration and payment of dividends thereon was permitted under clause (6) of this Section 1010(b), the declaration and payment of dividends on the Refunding Capital Stock (other than Refunding Capital Stock the proceeds of which were used to redeem, repurchase, retire or otherwise acquire any Equity Interests of any direct or indirect parent company of the Company) in an aggregate amount per year no greater than the aggregate amount of dividends per annum that was declarable and payable on such Retired Capital Stock immediately prior to such retirement;

(3) the defeasance, redemption, repurchase or other acquisition or retirement of Subordinated Indebtedness of the Company or a Subsidiary Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, new Indebtedness of such Person that is incurred in compliance with Section 1011 of this Indenture so long as

(A) the principal amount of such new Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Subordinated Indebtedness being so defeased, redeemed, repurchased, acquired or retired for value, plus the amount of any reasonable premium required to be paid under the terms of the instrument governing the Subordinated Indebtedness being so defeased, redeemed, repurchased, acquired or retired and any reasonable fees and expenses incurred in connection with the issuance of such new Indebtedness,

92

(B) such Indebtedness is subordinated to the Notes at least to the same extent as the Subordinated Indebtedness so defeased, redeemed, repurchased, acquired or retired,

(C) such Indebtedness has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Subordinated Indebtedness being so defeased, redeemed, repurchased, acquired or retired and

(D) such Indebtedness has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of the Subordinated Indebtedness being so defeased, redeemed, repurchased, acquired or retired;

(4) a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of Equity Interests (other than Disqualified Stock) of the Company or any of its direct or indirect parent companies held by any future, present or former employee, director, manager or consultant of the Company, any of its Subsidiaries or any of its direct or indirect parent companies pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement; provided that the aggregate Restricted Payments made under this clause (4) do not exceed in any calendar year $10.0 million (with unused amounts in any calendar year being carried over to succeeding calendar years subject to a maximum (without giving effect to the following proviso) of $20.0 million in any calendar year); provided, further, that such amount in any calendar year may be increased by an amount not to exceed

(A) the cash proceeds from the sale of Equity Interests (other than Disqualified Stock) of the Company and, to the extent contributed to the Company, Equity Interests of any of the Company’s direct or indirect parent companies, in each case to members of management, directors, managers or consultants of the Company, any of its Subsidiaries or any of its direct or indirect parent companies that occurs after the Issue Date, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (C) of Section 1010(a), plus

(B) the cash proceeds of key man life insurance policies received by the Company and the Restricted Subsidiaries after the Issue Date, less

(C) the amount of any Restricted Payments previously made pursuant to clauses (A) and (B) of this clause (4);

93

and provided, further, that cancellation of Indebtedness owing to the Company from members of management, directors, managers or consultants of the Company, any of its direct or indirect parent companies or any Restricted Subsidiary in connection with a repurchase of Equity Interests of the Company or any of its direct or indirect parent companies shall not be deemed to constitute a Restricted Payment for purposes of this Section 1010(b) or any other provision of this Indenture;

(5) the declaration and payment of dividends to holders of any class or series of Disqualified Stock of the Company or any Restricted Subsidiary issued in accordance with Section 1011 of this Indenture to the extent such dividends are included in the definition of Fixed Charges;

(6) (A) the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by the Company after the Issue Date;

(B) the declaration and payment of dividends to a direct or indirect parent company of the Company, the proceeds of which shall be used to fund the payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of such parent company issued after the Issue Date; provided that the amount of dividends paid pursuant to this clause (B) shall not exceed the aggregate amount of cash actually contributed to the Company from the sale of such Designated Preferred Stock; or

(C) the declaration and payment of dividends on Refunding Capital Stock that is Preferred Stock in excess of the dividends declarable and payable thereon pursuant to clause (2) of this Section 1010(b);

provided, however, in the case of each of (A), (B) and (C) of this clause (6), that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock or the declaration of such dividends on Refunding Capital Stock that is Preferred Stock, after giving effect to such issuance or declaration on a pro forma basis, the Company and the Restricted Subsidiaries on a consolidated basis would have had a Fixed Charge Coverage Ratio of at least 2.00 to 1.00;

(7) repurchases of Equity Interests deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;

(8) the declaration and payment of dividends on the Company’s Common Stock following the first public offering of the Company’s Common Stock or the Common Stock of any of its direct or indirect parent companies after the Issue Date, of up to 6% per annum of the net proceeds received by or contributed to the Company in or from any such public offering, other than public

94

offerings with respect to the Company’s Common Stock registered on Form S-4 or Form S-8 and other than any public sale constituting an Excluded Contribution;

(9) Restricted Payments that are made with Excluded Contributions;

(10) the declaration and payment of dividends by the Company to, or the making of loans to, its direct parent company in amounts required for the Company’s direct or indirect parent companies to pay

(A) franchise taxes and other fees, taxes and expenses required to maintain their corporate existence,

(B) Federal, state and local income taxes, to the extent such income taxes are attributable to the income of the Company and the Restricted Subsidiaries and, to the extent of the amount actually received from its Unrestricted Subsidiaries, in amounts required to pay such taxes to the extent attributable to the income of such Unrestricted Subsidiaries,

(C) customary salary, bonus and other benefits payable to officers and employees of any direct or indirect parent company of the Company to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Company and the Restricted Subsidiaries,

(D) general corporate overhead expenses of any direct or indirect parent company of the Company to the extent such expenses are attributable to the ownership or operation of the Company and the Restricted Subsidiaries, and

(E) reasonable fees and expenses incurred in connection with any unsuccessful debt or equity offering by such direct or indirect parent company of the Company;

(11) any Restricted Payments used to fund the Transactions and the fees and expenses related thereto, including those owed to Affiliates, in each case to the extent permitted by Section 1013 of this Indenture;

(12) the repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness pursuant to provisions similar to those described under Section 1017, Section 1018 and Section 1019 of this Indenture; provided that prior to such repurchase, redemption or other acquisition, the Company (or a third party to the extent permitted by this Indenture) shall have made a Change of Control Offer, Asset Sale Offer or MLP Offer, as the case may be, with respect to the Notes and shall have repurchased all Notes validly tendered and not withdrawn in connection with such Change of Control Offer, Asset Sale Offer or MLP Offer;

95

(13) Investments in Unrestricted Subsidiaries, having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (13) that are at the time outstanding, without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash or marketable securities, not to exceed the greater of (x) $100.0 million and (y) 4.0% of Total Assets at the time of such Investment (with the fair market value of each Investment being measured at the time such Investment is made and without giving effect to subsequent changes in value);

(14) distributions or payments of Receivables Fees;

(15) the distribution, as a dividend or otherwise (and the declaration of such dividend), of shares of Capital Stock of, or Indebtedness owed to the Company or a Restricted Subsidiary by, (a) any Person designated as an Unrestricted Subsidiary after the Issue Date pursuant to the terms of this Indenture (other than any of the Unrestricted Subsidiaries referred to in clause (1) of the first paragraph of the definition of “Unrestricted Subsidiary” and any successor thereto) or (b) any Permitted MLP or Permitted GP; provided that at the time of such dividend or distribution, with respect to this clause (b) only, and after giving pro forma effect thereto, the Consolidated Leverage Ratio would be less than 2.75:1.00;

(16) Restricted Payments in an amount that, when taken together with all other Restricted Payments made pursuant to this clause (16) does not exceed the sum of (x) 50% of the amount by which the Net Proceeds from the North Texas Asset Sale exceed $700.0 million but are less than or equal to $850.0 million and (y) 25% of the amount by which the Net Proceeds from the North Texas Asset Sale exceed $850.0 million; provided that first $700.0 million of Net Proceeds from the North Texas Asset Sale plus the balance of the Net Proceeds described in subclauses (x) and (y) above shall have been applied in accordance with the covenant described under Section 1018 and the amount of Indebtedness permitted to be incurred under clause (2) of Section 1011(b) shall, as a consequence thereof, have been reduced to the extent provided therein; and

(17) other Restricted Payments in an amount that, when taken together with all other Restricted Payments made pursuant to this clause (17), does not exceed $75.0 million;

provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (15), (16) and (17) of this Section 1010(b), no Default shall have occurred and be continuing or would occur as a consequence thereof.

(c) As of the time of issuance of the Notes, all of the Company’s Subsidiaries shall be Restricted Subsidiaries other than Versado Gas Processors L.L.C., Downstream Energy Ventures, Co., L.L.C. and Cedar Bayou Fractionators, LP. The Company shall not permit any Unrestricted Subsidiary to become a Restricted Subsidiary

96

except pursuant to the penultimate paragraph of the definition of “Unrestricted Subsidiary”. For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the Company and the Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated shall be deemed to be Restricted Payments in an amount determined as set forth in the last sentence of the definition of “Investments”. Such designation shall be permitted only if a Restricted Payment in such amount would be permitted at such time, whether pursuant to Section 1010(a) or under clauses (9), (13) or (17) of Section 1010(b), or pursuant to the definition of “Permitted Investments”, and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries shall not be subject to any of the restrictive covenants set forth in this Indenture.

SECTION 1011. Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, (collectively, “incur” and collectively, an “incurrence”) with respect to any Indebtedness (including Acquired Indebtedness), and the Company shall not issue any shares of Disqualified Stock and shall not permit any Restricted Subsidiary to issue any shares of Disqualified Stock or Preferred Stock; provided that the Company may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock, and any Restricted Subsidiary may incur Indebtedness (including Acquired Indebtedness), issue shares of Disqualified Stock or issue shares of Preferred Stock, if the Fixed Charge Coverage Ratio on a consolidated basis for the Company’s and its Restricted Subsidiaries’ most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or Preferred Stock is issued would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or Preferred Stock had been issued, as the case may be, and the application of the proceeds therefrom had occurred at the beginning of such four-quarter period; provided that the amount of Indebtedness (including Acquired Indebtedness), Disqualified Stock and Preferred Stock that may be incurred or issued, as applicable, pursuant to the foregoing by Restricted Subsidiaries that are not Subsidiary Guarantors shall not exceed $75.0 million at any one time outstanding.

(b) The foregoing limitations shall not apply to any of the following items (collectively, “Permitted Debt”):

(1) Indebtedness incurred pursuant to the Revolving Credit Facility by the Company or any Restricted Subsidiary; provided that immediately after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (1) and then outstanding does not exceed $250.0 million less up to $50.0 million in the aggregate of all principal payments with respect to such Indebtedness made pursuant to Section 1018(b) or pursuant to Section 1019(d);

97

(2) Indebtedness incurred pursuant to the Term Loan Facility and the Asset Sale Bridge Term Loan Facility by the Company or any Restricted Subsidiary; provided that immediately after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (2) and then outstanding does not exceed $1,950.0 million less the sum of (x) all principal payments with respect to such Indebtedness made pursuant to Section 1018(b) with the first $700.0 million of the Net Proceeds from the North Texas Asset Sale and (y) up to $200.0 million in the aggregate of all other principal payments with respect to such Indebtedness made pursuant to Section 1018(b) or Section 1019(d);

(3) Indebtedness incurred pursuant to the Funded Synthetic Letter of Credit Facility by the Company or any Restricted Subsidiary; provided that immediately after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (3) and then outstanding does not exceed $300.0 million less up to $50.0 million in the aggregate of all principal payments with respect to such Indebtedness made pursuant to Section 1018(b) or Section 1019(d);

(4) additional Indebtedness incurred by the Company or any Restricted Subsidiary under clauses (1), (2) or (3) above of this Section 1011(b); provided that immediately after giving effect to such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (4) and then outstanding does not exceed $200.0 million less up to $60.0 million in the aggregate of all principal payments with respect to such Indebtedness made pursuant to Section 1018(b) or Section 1019(d);

(5) the incurrence by the Company, the Co-Issuer and any Subsidiary Guarantor of Indebtedness represented by the Notes issued on the Issue Date (including any Subsidiary Guarantees thereof) and the Exchange Notes and related exchange guarantees to be issued in exchange for the Notes and the Subsidiary Guarantees pursuant to the Registration Rights Agreement (other than any Additional Notes);

(6) Existing Indebtedness (other than Indebtedness described in clauses (1), (2), (3), (4) and (5) of this Section 1011(b));

(7) Indebtedness (including Capitalized Lease Obligations), Disqualified Stock and Preferred Stock incurred by the Company or any of the Restricted Subsidiaries, to finance the development, construction, purchase, lease, repairs, additions or improvement of property (real or personal), equipment or other fixed or capital assets that are used or useful in a Similar Business, whether through the direct purchase of assets or the Capital Stock of any Person owning such assets (including any refinancing or replacement thereof); provided that the aggregate amount of Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this clause (7) does not, at any one time outstanding, exceed the greater of (x) $75.0 million and (y) 3.0% of Total Assets;

98

(8) Indebtedness incurred by the Company or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including letters of credit in respect of workers’ compensation claims, or other Indebtedness with respect to reimbursement type obligations regarding workers’ compensation claims; provided that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence;

(9) Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; provided that

(A) such Indebtedness is not reflected on the balance sheet of the Company or any Restricted Subsidiary (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet shall not be deemed to be reflected on such balance sheet for purposes of this clause (9)(A)) and

(B) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including noncash proceeds (the fair market value of such noncash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Company and its Restricted Subsidiaries in connection with such disposition;

(10) Indebtedness of the Company to a Restricted Subsidiary (other than a GP or the general partner of a GP); provided that any such Indebtedness owing to a Restricted Subsidiary that is not a Subsidiary Guarantor is subordinated in right of payment to the Notes; provided, further, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary) shall be deemed, in each case, to be an incurrence of such Indebtedness;

(11) Indebtedness of a Restricted Subsidiary to the Company or another Restricted Subsidiary (other than a GP or the general partner of a GP); provided that if a Subsidiary Guarantor incurs such Indebtedness to a Restricted Subsidiary that is not a Subsidiary Guarantor, such Indebtedness is subordinated in right of payment to the Subsidiary Guarantee of such Subsidiary Guarantor; provided, further, that any subsequent issuance or transfer of Capital Stock or any other event that results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary) shall be deemed, in each case, to be an incurrence of such Indebtedness;

99

(12) shares of Preferred Stock of a Restricted Subsidiary issued to the Company or another Restricted Subsidiary; provided that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of Preferred Stock (except to the Company or another Restricted Subsidiary) shall be deemed, in each case, to be an issuance of such shares of Preferred Stock;

(13) Hedging Obligations (excluding Hedging Obligations entered into for speculative purposes) for the purpose of limiting: (A) interest rate risk with respect to any Indebtedness that is permitted by the terms of this Indenture to be outstanding, (B) exchange rate risk with respect to any currency exchange or (C) commodity pricing risk with respect to any commodity;

(14) obligations in respect of performance, bid, appeal and surety bonds and completion guarantees and similar obligations provided by the Company or any Restricted Subsidiary in the ordinary course of business;

(15) (x) any guarantee by the Company or a Restricted Subsidiary of Indebtedness or other Obligations of any Restricted Subsidiary (other than a GP or the general partner of a GP), so long as the incurrence of such Indebtedness by such Restricted Subsidiary is permitted under the terms of this Indenture or (y) any guarantee by a Restricted Subsidiary of Indebtedness of the Company permitted to be incurred under the terms of this Indenture; provided that such guarantee is incurred in accordance with Section 1015 of this Indenture;

(16) the incurrence by the Company or any Restricted Subsidiary of Indebtedness, Disqualified Stock or Preferred Stock that serves to extend, replace, refund, refinance, renew or defease any Indebtedness, Disqualified Stock or Preferred Stock incurred as permitted under Section 1011(a) and clauses (5) and (6) above, this clause (16) and clauses (17) and (22)(ii) below of this Section 1011(b) or any Indebtedness, Disqualified Stock or Preferred Stock issued to so extend, replace, refund, refinance, renew or defease such Indebtedness, Disqualified Stock or Preferred Stock including additional Indebtedness, Disqualified Stock or Preferred Stock incurred to pay premiums and fees in connection therewith (the “Refinancing Indebtedness”) prior to its respective maturity; provided, however, that such Refinancing Indebtedness:

(A) has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred which is not less than the remaining Weighted Average Life to Maturity of the Indebtedness, Disqualified Stock or Preferred Stock being extended, replaced, refunded, refinanced, renewed or defeased,

100

(B) to the extent such Refinancing Indebtedness extends, replaces, refunds, refinances, renews or defeases (i) Indebtedness subordinated to the Notes or any Subsidiary Guarantee, such Refinancing Indebtedness is subordinated to the Notes or such Subsidiary Guarantee at least to the same extent as the Indebtedness being extended, replaced, refunded, refinanced, renewed or defeased or (ii) Disqualified Stock or Preferred Stock, such Refinancing Indebtedness must be Disqualified Stock or Preferred Stock, respectively and

(C) shall not include

(x) Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary that is not a Subsidiary Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of the Company,

(y) Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary that is not a Subsidiary Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary Guarantor or

(z) Indebtedness, Disqualified Stock or Preferred Stock of the Company or a Restricted Subsidiary that refinances Indebtedness, Disqualified Stock or Preferred Stock of an Unrestricted Subsidiary;

(17) Indebtedness, Disqualified Stock or Preferred Stock (x) of the Company or any of its Restricted Subsidiaries incurred to finance the acquisition of any Person or assets or (y) of Persons that are acquired by the Company or any Restricted Subsidiary or merged into the Company or a Restricted Subsidiary in accordance with the terms of this Indenture; provided that either

(A) after giving effect to such acquisition or merger, either

(i) the Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 1011(a); or

(ii) the Fixed Charge Coverage Ratio of the Company and its Restricted Subsidiaries on a consolidated basis is greater than immediately prior to such acquisition or merger; or

(B) such Indebtedness, Disqualified Stock or Preferred Stock (i) is not Secured Indebtedness and is Subordinated Indebtedness, (ii) is not incurred while a Default exists and no Default shall result therefrom, (iii) does not mature (and is not mandatorily redeemable in the case of Disqualified Stock or Preferred Stock) and does not require any payment of principal prior to the final maturity of the Notes and (iv) in the case of sub-clause (y) above only, is not incurred in contemplation of such acquisition or merger;

101

(18) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within two Business Days of its incurrence;

(19) Indebtedness of the Company or any Restricted Subsidiary supported by a letter of credit issued pursuant to the Senior Credit Facilities, in a principal amount not in excess of the stated amount of such letter of credit;

(20) Indebtedness, Disqualified Stock or Preferred Stock of a Restricted Subsidiary incurred to finance or assumed in connection with an acquisition which, when aggregated with the principal amount of all other Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this clause (20) and then outstanding (including any refinancing or replacement thereof), does not exceed $50.0 million (it being understood that any Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this clause (20) shall cease to be deemed incurred or outstanding for purposes of this clause (20) but shall be deemed incurred pursuant to Section 1011(a) from and after the first date on which the Company or such Restricted Subsidiary could have incurred such Indebtedness, Disqualified Stock or Preferred Stock pursuant to Section 1011(a) without reliance on this clause (20));

(21) Indebtedness incurred by a Foreign Subsidiary which, when aggregated with the principal amount of all other Indebtedness incurred pursuant to this clause (21) and then outstanding, does not exceed 5.0% of Foreign Subsidiary Total Assets (it being understood that any Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this clause (21) shall cease to be deemed incurred or outstanding for purposes of this clause (21) but shall be deemed incurred pursuant to Section 1011(a) from and after the first date on which the Company or such Restricted Subsidiary could have incurred such Indebtedness, Disqualified Stock or Preferred Stock pursuant to Section 1011(a) without reliance on this clause (21));

(22) Indebtedness, Disqualified Stock and Preferred Stock of the Company or any Restricted Subsidiary not otherwise permitted hereunder in an aggregate principal amount or liquidation preference, which, when aggregated with the principal amount and liquidation preference of all other Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this clause (22) and then outstanding, does not at any one time outstanding exceed the sum of

(i) $125.0 million (it being understood that any Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this clause (22)(i) shall cease to be deemed incurred or outstanding for purposes of this clause (22)(i) but shall be deemed incurred pursuant to

102

Section 1011(a) from and after the first date on which the Company or such Restricted Subsidiary could have incurred such Indebtedness, Disqualified Stock or Preferred Stock pursuant to Section 1011(a) without reliance on this clause (22)(i)); plus

(ii) 200% of the net cash proceeds received by the Company since after the Issue Date from the issue or sale of Equity Interests of the Company or cash contributed to the capital of the Company (in each case, other than proceeds of Disqualified Stock or sales of Equity Interests to the Company or any of its Subsidiaries) as determined in accordance with clauses (C)(2) and (C)(3) of Section 1010(a) of this Indenture to the extent such net cash proceeds or cash have not been applied pursuant to such clauses to make Restricted Payments or to make other investments, payments or exchanges pursuant to Section 1010(b) of this Indenture or to make Permitted Investments (other than Permitted Investments specified in clauses (a) and (c) of the definition thereof); and

(23) Indebtedness consisting of Indebtedness issued by the Company or any Restricted Subsidiary to current or former officers, directors and employees thereof, their respective estates, spouses or former spouses, in each case to finance the repurchase, retirement or other acquisition or retirement or redemption of Equity Interests of the Company or any direct or indirect parent company of the Company to the extent described in clause (4) of Section 1010(b) of this Indenture;

(24) Indebtedness of the Company or a Restricted Subsidiary to a GP or a general partner of a GP, in each case that is a Restricted Subsidiary; provided that the principal amount of such Indebtedness may not exceed the actual cash loaned by such GP or such general partner, as applicable, to the Company or such Restricted Subsidiary (except to the extent that interest accrued thereon is added to the principal amount thereof) and such Indebtedness

(A) is not convertible into, or putable or exchangeable for, any other security other than a security that would satisfy the requirements of this clause (24);

(B) does not mature or become mandatorily redeemable, putable or subject to a purchase offer, pursuant to a sinking fund obligation or otherwise, or become redeemable at the option of the holder thereof, in whole or in part, in each case prior to the date that is 91 days after the Notes are no longer outstanding (such 91st day being the “Permitted Date”);

(C) does not require or permit the payment of cash interest or any other payment of cash with respect to such Indebtedness until the Permitted Date; and

103

(D) is subordinated to the Notes on the terms set forth in Exhibit C to this Indenture;

provided that any subsequent issuance or transfer of Capital Stock (including a GP Equity Transfer) or any other event which results in any such GP or such general partner, as applicable, ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary) shall be deemed in each case to be an incurrence of such Indebtedness.

(c) For purposes of determining compliance with this Section 1011, in the event that an item of Indebtedness, Disqualified Stock or Preferred Stock meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (23) of Section 1011(b) or is entitled to be incurred pursuant to Section 1011(a), the Company, in its sole discretion, shall classify or reclassify, or later divide, classify or reclassify, such item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) and shall only be required to include the amount and type of such Indebtedness, Disqualified Stock or Preferred Stock in one or more of the above clauses; provided that all Indebtedness outstanding under the Senior Credit Facilities on the Issue Date shall be deemed to have been incurred on such date in reliance on the exception in clauses (1), (2) and (3) of this Section 1011(b).

(d) The accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness, Disqualified Stock or Preferred Stock shall not be deemed to be an incurrence of Indebtedness, Disqualified Stock or Preferred Stock for purposes of this Section 1011.

(e) For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt; provided that if such Indebtedness is incurred to extend, replace, refund, refinance, renew or defease other Indebtedness denominated in a foreign currency, and such extension, replacement, refunding, refinancing, renewal or defeasance would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such extension, replacement, refunding, refinancing, renewal or defeasance, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being extended, replaced, refunded, refinanced, renewed or defeased.

(f) The principal amount of any Indebtedness incurred to extend, replace, refund, refinance, renew or defease other Indebtedness, if incurred in a different currency from the Indebtedness being extended, replaced, refunded, refinanced, renewed or defeased, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such extension, replacement, refunding, refinancing, renewal or defeasance.

104

SECTION 1012. Liens. The Company shall not, and shall not permit the Co-Issuer or any of the Subsidiary Guarantors to, directly or indirectly, create, incur, assume or suffer to exist any Lien (except Permitted Liens) that secures obligations under any Indebtedness on any asset or property of the Company or any Subsidiary Guarantor now owned or hereafter acquired, or any income or profits therefrom, or assign or convey any right to receive income therefrom, unless:

(1) in the case of Liens securing Subordinated Indebtedness, the Notes or the applicable Subsidiary Guarantee of a Subsidiary Guarantor, as the case may be, are secured by a Lien on such property or assets that is senior in priority to such Liens; and

(2) in all other cases, the Notes or the applicable Subsidiary Guarantee of a Subsidiary Guarantor, as the case may be, are equally and ratably secured;

provided that any Lien that is granted to secure the Notes under this Section 1012 shall be discharged at the same time as the discharge of the Lien (other than through the exercise of remedies with respect thereto) that gave rise to the obligation to so secure the Notes.

SECTION 1013. Limitations on Transactions with Affiliates. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Company (each of the foregoing, an “Affiliate Transaction”) involving aggregate payments or consideration in excess of $10.0 million, unless

(1) such Affiliate Transaction is on terms that are not materially less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and

(2) the Company delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate payments or consideration in excess of $30.0 million, a Board Resolution adopted by the majority of the members of the Board of Directors of the Company approving such Affiliate Transaction and set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (1) above.

(b) The foregoing provisions shall not apply to the following:

(1) Transactions between or among the Company or any of the Restricted Subsidiaries;

(2) Restricted Payments permitted by Section 1010 of this Indenture and the definition of “Permitted Investments”;

105

(3) the payment of (x) management, consulting, monitoring and advisory fees and related expenses to the Sponsor not to exceed $7.5 million in the aggregate per calendar year and (y) any termination or other fee payable to the Sponsor upon a change of control or initial public equity offering of the Company or any direct or indirect parent company thereof, which fees, in the case of this clause (y) only, are approved by a majority of the members of the Board of Directors of the Company in good faith;

(4) the payment of reasonable and customary fees paid to, and indemnities provided on behalf of, officers, directors, managers, employees or consultants of the Company, any of its direct or indirect parent companies or any Restricted Subsidiary;

(5) payments by the Company or any Restricted Subsidiary to the Sponsor and the Co-Investor for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including in connection with acquisitions or divestitures, which payments are approved by a majority of the members of the Board of Directors of the Company in good faith;

(6) transactions in which the Company or any Restricted Subsidiary, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or meets the requirements of clause (1) of Section 1013(a);

(7) payments or loans (or cancellations of loans) to employees or consultants of the Company, any of its direct or indirect parent companies or any Restricted Subsidiary and employment agreements, stock option plans and other compensatory arrangements with such employees or consultants that are, in each case, approved by the Company in good faith, including the special bonus payments described under “Certain Relationships and Related Transactions” in the Offering Circular;

(8) any agreement, instrument or arrangement as in effect as of the Issue Date, or any amendment thereto (so long as any such amendment is not disadvantageous to the Holders in any material respect as compared to the applicable agreement as in effect on the Issue Date as reasonably determined in good faith by the Company);

(9) the existence of, or the performance by the Company or any of the Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement or its equivalent (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Company or any Restricted Subsidiary of obligations under any future amendment to any such existing agreement or

106

under any similar agreement entered into after the Issue Date shall only be permitted by this clause (9) to the extent that the terms of any such existing agreement together with all amendments thereto, taken as a whole, or new agreement are not otherwise more disadvantageous to the Holders in any material respect than the terms of the original agreement in effect on the Issue Date as reasonably determined in good faith by the Company;

(10) the Transactions and the payment of all fees and expenses related to the Transactions, in each case as disclosed in the Offering Circular;

(11) transactions with customers, clients, suppliers, or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture that are fair to the Company and the Restricted Subsidiaries, in the reasonable determination of the Board of Directors or the senior management of the Company, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party;

(12) the issuance of Equity Interests (other than Disqualified Stock) of the Company to any Permitted Holder or to any director, manager, officer, employee or consultant of the Company or any direct or indirect parent company thereof;

(13) sales of accounts receivable, or participations therein, in connection with any Receivables Facility;

(14) investments by the Sponsor and the Co-Investor in securities of the Company or any of its Restricted Subsidiaries so long as (i) the investment is being offered generally to other investors on the same or more favorable terms and (ii) the investment constitutes less than 5.0% of the proposed or outstanding issue amount of such class of securities; and

(15) any Permitted MLP Transfer and any Permitted GP Transfer.

SECTION 1014. Limitations on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. The Company shall not, and shall not permit any Restricted Subsidiary that is not a Subsidiary Guarantor to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any such Restricted Subsidiary to:

(a) (1) pay dividends or make any other distributions to the Company or any Restricted Subsidiary on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits or

(2) pay any Indebtedness owed to the Company or any Restricted Subsidiary;

107

(b) make loans or advances to the Company or any Restricted Subsidiary; or

(c) sell, lease or transfer any of its properties or assets to the Company or any Restricted Subsidiary,

except (in each case) for such encumbrances or restrictions existing under or by reason of:

(1) contractual encumbrances or restrictions in effect on the Issue Date, including pursuant to the Senior Credit Facilities and the related documentation (including security documents and intercreditor agreements) and Hedging Obligations;

(2) this Indenture and the Notes and the Subsidiary Guarantees of the Notes issued hereunder;

(3) purchase money obligations for property acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions of the nature discussed in clause (c) above on the property so acquired;

(4) applicable law or any applicable rule, regulation or order;

(5) any agreement or other instrument of a Person acquired by the Company or any Restricted Subsidiary in existence at the time of such acquisition (but not created in connection therewith or in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired;

(6) contracts for the sale of assets, including customary restrictions with respect to a Subsidiary pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary;

(7) Secured Indebtedness otherwise permitted to be incurred pursuant to Sections 1011 and 1012 of this Indenture that limit the right of the debtor to dispose of the assets securing such Indebtedness;

(8) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;

(9) other Indebtedness, Disqualified Stock or Preferred Stock of Restricted Subsidiaries permitted to be incurred after the Issue Date pursuant to Section 1011 of this Indenture;

(10) customary provisions in joint venture agreements and other similar agreements;

108

(11) customary provisions contained in leases and other agreements entered into in the ordinary course of business;

(12) restrictions created in connection with any Receivables Facility that are, in the good faith determination of the Company, necessary or advisable to effect such Receivables Facility;

(13) restrictions or conditions contained in any trading, netting, operating, construction, service, supply, purchase, sale or other agreement to which the Company or any of its Restricted Subsidiaries is a party entered into in the ordinary course of business; provided that such agreement prohibits the encumbrance of solely the property or assets of the Company or such Restricted Subsidiary that are the subject of such agreement, the payment rights arising thereunder and/or the proceeds thereof and does not extend to any other asset or property of the Company or such Restricted Subsidiary or the assets or property of any other Restricted Subsidiary; and

(14) any encumbrances or restrictions of the type referred to in clauses (a), (b) and (c) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (13) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Company, not materially more restrictive with respect to such encumbrance and other restrictions than those prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing; provided, further, that with respect to contracts, instruments or obligations existing on the Issue Date, any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are not materially more restrictive with respect to such encumbrances and other restrictions than those contained in such contracts, instruments or obligations as in effect on the Issue Date.

SECTION 1015. Limitation on Subsidiary Guarantees of Indebtedness by Restricted Subsidiaries. The Company shall not permit any of its Wholly-Owned Subsidiaries that are Restricted Subsidiaries (and non-Wholly-Owned Subsidiaries if such non-Wholly-Owned Subsidiaries guarantee other capital markets debt securities), other than a Subsidiary Guarantor or a Foreign Subsidiary, to guarantee the payment of any Indebtedness of the Company or any other Subsidiary Guarantor unless:

(1) such Restricted Subsidiary within 30 days executes and delivers a supplemental indenture to this Indenture providing for a Subsidiary Guarantee by such Restricted Subsidiary, except that with respect to a guarantee of Indebtedness of the Company or any Subsidiary Guarantor if such Indebtedness is by its express terms subordinated in right of payment to the Notes or such Subsidiary Guarantor’s Subsidiary Guarantee, any such guarantee by such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to such Subsidiary Guarantee substantially to the same extent as such Indebtedness is subordinated to the Notes;

109

(2) such Restricted Subsidiary waives and shall not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee; and

(3) such Restricted Subsidiary shall deliver to the Trustee an Opinion of Counsel to the effect that:

(a) such Subsidiary Guarantee has been duly executed and authorized; and

(b) such Subsidiary Guarantee constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity;

provided that this Section 1015 shall not be applicable to any guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary.

SECTION 1016. Limitation on Sale and Lease-Back Transactions. The Company shall not, and shall not permit any Restricted Subsidiary to, enter into any Sale and Lease-Back Transaction with respect to any property unless:

(1) the Company or such Restricted Subsidiary would be entitled to (A) incur additional Indebtedness in an amount equal to the Attributable Debt with respect to such Sale and Lease-Back Transaction pursuant to Section 1011 of this Indenture and (B) create a Lien on such property securing such Attributable Debt without equally and ratably securing the Notes pursuant to Section 1012 of this Indenture;

(2) the consideration received by the Company or any Restricted Subsidiary in connection with such Sale and Lease-Back Transaction is at least equal to the fair market value (as determined in good faith by the Company) of such property; and

(3) the Company applies the proceeds of such transaction in compliance with Section 1018 of this Indenture.

SECTION 1017. Change of Control. (a) If a Change of Control occurs, the Company and the Co-Issuer shall make an offer to purchase all of the Notes pursuant to the offer described below (the “Change of Control Offer”) at a price in cash (the

110

“Change of Control Payment”) equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, and Additional Interest, if any, to the date of purchase, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant Interest Payment Date. Within 30 days following any Change of Control, the Company and the Co-Issuer shall send notice of such Change of Control Offer by first class mail, with a copy to the Trustee, to each Holder to the address of such Holder appearing in the security register with a copy to the Trustee, with the following information:

(1) a Change of Control Offer is being made pursuant to this Section 1017, and all Notes properly tendered pursuant to such Change of Control Offer shall be accepted for payment;

(2) the purchase price and the purchase date, which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the “Change of Control Payment Date”);

(3) any Note not properly tendered shall remain outstanding and continue to accrue interest;

(4) unless the Company or the Co-Issuer defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest on the Change of Control Payment Date;

(5) Holders electing to have any Notes purchased pursuant to a Change of Control Offer shall be required to surrender the Notes, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Notes completed, to the paying agent specified in the notice at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(6) Holders shall be entitled to withdraw their tendered Notes and their election to require the Company or the Co-Issuer to purchase such Notes; provided that the paying agent receives, not later than the close of business on the last day of the offer period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes tendered for purchase, and a statement that such Holder is withdrawing its tendered Notes and its election to have such Notes purchased; and

(7) Holders whose Notes are being purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (which unpurchased portion must be equal to $2,000 or an integral multiple of $1,000 in excess of $2,000); provided that no Notes of less than $2,000 shall be redeemed in part.

(b) While the Notes are in global form and the Company or the Co-Issuer makes an offer to purchase all of the Notes pursuant to the Change of Control Offer, a Holder may exercise its option to elect for the purchase of the Notes through the facilities of DTC, subject to its rules and regulations.

111

(c) The Company and the Co-Issuer shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Company and the Co-Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof.

(d) On the Change of Control Payment Date, the Company and the Co-Issuer shall, to the extent permitted by law,

(1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer,

(2) deposit with the Paying Agent an amount equal to the aggregate Change of Control Payment in respect of all Notes or portions thereof so tendered, and

(3) deliver, or cause to be delivered, to the Trustee for cancellation the Notes so accepted together with an Officers’ Certificate stating that such Notes or portions thereof have been tendered to and purchased by the Company and the Co-Issuer.

(e) The Paying Agent shall promptly mail to each Holder the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail to each Holder a new Note equal in principal amount to the unpurchased portion of the Notes surrendered, if any; provided that no Notes of $2,000 or less shall be redeemed in part and each such new Note shall be in a principal amount of $2,000 or an integral multiple of $1,000 in excess of $2,000. The Company and the Co-Issuer shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

(f) The Company and the Co-Issuer shall not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the time and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and the Co-Issuer and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. A Change of Control Offer may be made in advance of a Change of Control, conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.

SECTION 1018. Asset Sales. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, cause, make or suffer to exist an Asset Sale, unless:

(1) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value (as determined in good faith by the Company) of the assets sold or otherwise disposed of; and

112

(2) except in the case of a Permitted Asset Swap, at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary, as the case may be, is in the form of cash or Cash Equivalents; provided that the amount of

(A) any liabilities (as shown on the Company’s or such Restricted Subsidiary’s most recent balance sheet or in the notes thereto) of the Company or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the Notes, that are assumed by the transferee of any such assets (or a third party on behalf of the transferee) and for which the Company or such Restricted Subsidiary has been validly released by all creditors in writing,

(B) any securities, notes or other obligations or assets received by the Company or such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of such Asset Sale and

(C) any Designated Noncash Consideration received by the Company or such Restricted Subsidiary in such Asset Sale having an aggregate fair market value, taken together with all other Designated Noncash Consideration received pursuant to this clause (C) that is at that time outstanding, not to exceed the greater of (x) $100.0 million and (y) 4.0% of Total Assets at the time of the receipt of such Designated Noncash Consideration, with the fair market value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value,

shall be deemed to be cash for purposes of this provision and for no other purpose.

(b) Within 365 days after any of the Company’s or any Restricted Subsidiary’s receipt of the Net Proceeds of any Asset Sale, the Company or such Restricted Subsidiary may, at its option, apply the Net Proceeds from such Asset Sale:

(1) to permanently reduce

(x) Obligations under the Senior Credit Facilities or any other Senior Indebtedness, in each case, of the Company or any Subsidiary Guarantor, and, in the case of Obligations under the Revolving Credit Facility, the Funded Synthetic Letter of Credit Facility or other similar Indebtedness, to correspondingly

113

permanently reduce commitments with respect thereto (other than Obligations owed to the Company or a Restricted Subsidiary); provided that if the Company or any Restricted Subsidiary shall so reduce Obligations under any Senior Indebtedness that is not Secured Indebtedness, the Company or such Subsidiary Guarantor shall, equally and ratably, reduce Obligations under the Notes by, at its option, (A) redeeming Notes to the extent the Notes are then redeemable as provided by the terms of the Notes, (B) making an offer (in accordance with the procedures set forth in this Section 1018) to all Holders to purchase their Notes at 100% of the principal amount thereof, plus the amount of accrued and unpaid interest and Additional Interest, if any, on the principal amount of Notes to be repurchased or (C) purchasing Notes through open market purchases (to the extent such purchases are at a price equal to or higher than 100% of the principal amount thereof) in a manner that complies with this Indenture and applicable securities law; or

(y) Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor, other than Indebtedness owed to the Company or another Restricted Subsidiary; or

(2) to an investment in (A) any one or more businesses; provided that such investment in any business is in the form of the acquisition of Capital Stock and results in the Company or any Restricted Subsidiary owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (B) properties, (C) capital expenditures and (D) acquisitions of other assets, that in each of (A), (B), (C) and (D), are used or useful in a Similar Business or replace the businesses, properties and assets that are the subject of such Asset Sale;

provided that, notwithstanding the foregoing, if the North Texas Asset Sale is consummated, then within 30 days of the receipt of the Net Proceeds from the North Texas Asset Sale, the Company or the applicable Restricted Subsidiary, as the case may be, shall apply the Net Proceeds therefrom as follows:

(A) the first $700.0 million of the Net Proceeds from the North Texas Asset Sale shall be applied to repay Indebtedness outstanding under the Asset Sale Bridge Loan Facility and/or the Term Loan Facility;

(B) 50% of the amount by which the Net Proceeds from the North Texas Asset Sale exceed $700.0 million but are less than or equal to $850.0 million shall be applied to repay Indebtedness outstanding under the Asset Sale Bridge Loan Facility and/or the Term Loan Facility;

(C) 25% of the amount by which the Net Proceeds from the North Texas Asset Sale exceed $850.0 million shall be applied to repay Indebtedness outstanding under the Asset Sale Bridge Loan Facility and/or the Term Loan Facility; and

114

(D) any remaining net proceeds may be used by the Company for general corporate purposes, subject to the other covenants in this Indenture.

(c) Any Net Proceeds from any Asset Sale (other than the North Texas Asset Sale) that are not invested or applied in accordance with the preceding paragraph within 365 days from the date of the receipt of such Net Proceeds shall be deemed to constitute “Excess Proceeds”; provided that if during such 365-day period the Company or a Restricted Subsidiary enters into a definitive binding agreement committing it to apply such Net Proceeds in accordance with the requirements of clause (2) of Section 1018(b) after such 365th day, such 365-day period shall be extended with respect to the amount of Net Proceeds so committed, but such extension shall in no event be for a period longer than 180 days, until such Net Proceeds are required to be applied in accordance with such agreement (or, if earlier, the date of termination of such agreement). When the aggregate amount of Excess Proceeds exceeds $35.0 million, the Company shall make an offer to all Holders and, if required by the terms of any Senior Indebtedness, to the holders of such Senior Indebtedness (other than with respect to Hedging Obligations) (an “Asset Sale Offer”), to purchase the maximum aggregate principal amount of Notes and such Senior Indebtedness that is an integral multiple of $1,000 that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in this Indenture. The Company shall commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceed $35.0 million by mailing the notice required pursuant to the terms of this Indenture, with a copy to the Trustee. The Company may satisfy the foregoing obligations with respect to any Net Proceeds from an Asset Sale (other than a North Texas Asset Sale) by making an Asset Sale Offer with respect to such Net Proceeds prior to the expiration of the relevant 365 days (or such longer period provided above) or with respect to Excess Proceeds of $35.0 million or less. To the extent that the aggregate amount of Notes and such Senior Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes, subject to the other covenants contained in this Indenture. Subject to Section 1018(f), if the aggregate principal amount of Notes or the Senior Indebtedness surrendered by such holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select or cause to be selected the Notes and such Senior Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Senior Indebtedness tendered. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds related to such Asset Sale Offer shall be reset at zero.

(d) Pending the final application of any Net Proceeds pursuant to this Section 1018, the Company or the applicable Restricted Subsidiary may apply such Net

115

Proceeds temporarily to reduce Indebtedness outstanding under a revolving credit facility or otherwise invest such Net Proceeds in any manner not prohibited by this Indenture.

(e) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof.

(f) If the Company is repurchasing less than all of the Notes at any time, the Trustee shall select the Notes to be repurchased (a) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which such Notes are listed or (b) if such Notes are not so listed, on a pro rata basis to the extent practicable; provided that no Notes of $2,000 or less shall be repurchased in part.

(g) Notices of repurchase shall be mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days before the date of repurchase to each Holder at such Holder’s registered address, except that notices of repurchase may be mailed more than 60 days prior to a date of repurchase if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture. If any Note is to be repurchased in part only, any notice of repurchase that relates to such Note shall state the portion of the principal amount thereof to be repurchased.

(h) A new Note in principal amount equal to the unrepurchased portion of any Note repurchased in part shall be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for repurchase become due and payable on the date fixed for repurchase. On and after the date of repurchase, unless the Company defaults in the repurchase payment, interest shall cease to accrue on the Note or portions thereof called for repurchase.

SECTION 1019. Transactions Involving MLPs and GPs. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, cause or make a MLP Asset Transfer or a MLP Equity Transfer, unless:

(1) in the case of the Initial MLP Asset Transfer, after such MLP Asset Transfer and as a result thereof, the Company and its Restricted Subsidiaries shall have received an amount of cash attributable to such Initial MLP Asset Transfer (as a result of (i) the receipt of cash proceeds as all or a portion of the consideration for such Initial MLP Asset Transfer or (ii) the repayment of intercompany indebtedness, owed by a Subsidiary of the Company, transferred or assumed as part of such Initial MLP Asset Transfer) at least equal to the Minimum Cash Consideration, with the balance of the consideration received by the Company and its Restricted Subsidiaries for such Initial MLP Asset Transfer consisting solely of Equity Interests in the applicable MLP;

116

(2) in the case of a MLP Asset Transfer (other than the Initial MLP Asset Transfer), after such MLP Asset Transfer and as a result thereof, the Company and its Restricted Subsidiaries shall have received an amount of cash attributable to such MLP Asset Transfer (as a result of (i) the receipt of cash proceeds as all or a portion of the consideration for such MLP Asset Transfer or (ii) the repayment of intercompany indebtedness, owed by a Subsidiary of the Company, transferred or assumed as part of such MLP Asset Transfer) at least equal to 75% of the fair market value (as determined in good faith by the Company based on values that could be obtained in an arms’ length transaction) of (a) the assets and property transferred or (b) in the case of a transfer of any Equity Interests of a Person, such Person at the time of such MLP Asset Transfer (it being understood that, in the case of a transfer of less than all of the Equity Interests of a Person, the value of such Person shall be determined at the time of the first MLP Asset Transfer constituting part of such MLP Asset Transfer (as if all the Equity Interests in such Person had been transferred at the time of such first MLP Asset Transfer and the cash requirement set forth in this clause shall need to be satisfied on that basis in connection with such first MLP Asset Transfer) and there shall be no such additional cash attributable to such MLP Asset Transfer required for any subsequent transfer of Equity Interests of such Person constituting part of the MLP Asset Transfer) (in each case of the foregoing clauses (a) and (b), assuming such assets or Person, as applicable, operate as a going concern), with the balance of the consideration received by the Company and its Restricted Subsidiaries for such MLP Asset Transfer consisting solely of Equity Interests in the applicable MLP; provided, however, that in the event that the fair market value of the assets, property and Person transferred in connection with a MLP Asset Transfer exceed $100.0 million in the aggregate, the Company or such Restricted Subsidiary, as the case may be, shall have received a written opinion from an Independent Financial Advisor to the effect that such MLP Asset Transfer is fair, from a financial standpoint, to the Company and its Restricted Subsidiaries;

(3) in the case of a MLP Equity Transfer (other than a MLP Equity Transfer to the extent it is made to satisfy the proviso to the definition of “Minimum Cash Consideration,” in which case only the requirements of such proviso need be satisfied), the Company or a Restricted Subsidiary receives net proceeds in connection therewith in an amount at least equal to the fair market value of the Equity Interests that are transferred in such MLP Equity Transfer and at least 75% of the consideration for such MLP Equity Transfer received by the Company and its Restricted Subsidiaries is in the form of cash.

(4) the Company and the Restricted Subsidiaries are in compliance with the terms of this Indenture and the documentation governing the Senior Credit Facilities, and such MLP Asset Transfer or MLP Equity Transfer, as the case may be, would not result in a breach or violation of, or constitute a default under this Indenture or any of the documentation governing the Senior Credit Facilities; and

117

(5) such MLP Asset Transfer would not result in the related MLP or any MLP Subsidiary being required to assume the obligations of the Company or such Restricted Subsidiary under the terms of any of the Company’s or such Restricted Subsidiary’s Indebtedness

(any such MLP Asset Transfer or MLP Equity Transfer that complies with clauses (1) through (5) above being referred to as a “Permitted MLP Transfer”). All Equity Interests received by the Company or any Restricted Subsidiary as a result of any Permitted MLP Transfer that is a MLP Asset Transfer shall be held by the Company or such Restricted Subsidiary, as the case may be, until such time as any such Equity Interest is sold, conveyed, transferred or otherwise disposed of pursuant to this covenant.

(b) In addition, the Company shall not, and shall not permit any Restricted Subsidiary or MLP GP to, cause or make a GP Equity Transfer unless:

(1) (x) in the case of a GP Equity Transfer by the Company or a Restricted Subsidiary, the Company or a Restricted Subsidiary receives in connection therewith cash (which may include the repayment in cash of Indebtedness owing to the Company or such Restricted Subsidiary) at substantially the same time of such GP Equity Transfer in an amount at least equal to the greater of (i) $50.0 million (with this clause (i) applicable only in the case of a GP Equity Transfer undertaken in connection with the initial public offering of a MLP GP) and (ii) the fair market value of the Equity Interests subject to such GP Equity Transfer or (y) in the case of a GP Equity Transfer by a MLP GP, the net proceeds received by such MLP GP in such GP Equity Transfer, which shall be at least equal to the fair market value of the Equity Interests subject to such GP Equity Transfer, are used to pay a dividend to the holders of Equity Interests of such MLP GP or to purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests in such MLP GP; provided, however, that the Company or a Restricted Subsidiary shall receive at least a pro rata portion of such dividend or at least a pro rata portion of the payment for such purchase, redemption, defeasance, acquisition or retirement, except that such requirement shall not apply with respect to payments for the purchase, redemption, defeasance or retirement for value of Equity Interests (other than Disqualified Stock) of any MLP GP held by any future, present or former employee, director, manager or consultant of such MLP GP, any of its Subsidiaries or any of its direct or indirect parent companies pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement;

(2) the Company is in compliance with the terms of this Indenture and the documentation governing the Senior Credit Facilities, and such GP Equity Transfer would not result in a breach or violation of, or constitute a default under this Indenture or any of the documentation governing the Senior Credit Facilities;

118

(3) the related MLP GP’s sole business is to act as the general partner of the applicable Permitted MLP and engage in activities ancillary thereto and such MLP GP owns no assets (other than (i) ownership interests in such Permitted MLP and Capital Stock (other than Disqualified Stock) of the Company, (ii) temporarily holding assets to be transferred or distributed in connection with a Permitted MLP Transfer or Permitted GP Transfer or distributions from a Permitted MLP, (iii) current assets sufficient to satisfy its ordinary course operating expenses, including such expenses after it has become a publicly traded company, and other assets necessary for its existence and operation as a public company and (iv) the reserves referred to in clause (4) below); and

(4) the related GP is required by its partnership agreement to distribute all cash and Cash Equivalents that it receives from time to time to its partners on a pro rata basis, subject to the establishment of such reserves as management of such related GP determines are appropriate for general, administrative and operating expenses in the ordinary course of its business and as are prudent to maintain for the proper conduct of its business or to provide for future distributions, in each case in accordance with the terms of the organizational documents of the related GP; provided that such organizational documents are, in the reasonable judgment of the Company, in a form that is customary for similar entities whose primary function is to serve as general partners of entities operating as master limited partnerships;

(any such GP Equity Transfer that complies with clauses (1) through (4) above being referred to as a “Permitted GP Transfer”). All Equity Interests in the related GP from time to time owned, directly or indirectly, by the Company shall be held by the Company or a Restricted Subsidiary until such time as any such Equity Interest is sold, conveyed, transferred or otherwise disposed of pursuant to this Section 1019(b).

(c) For purposes of calculating the fair market value of any assets or property transferred to any Person, any Person and any Equity Interests in a Person with respect to any MLP Asset Transfer, MLP Equity Transfer or Permitted GP Transfer, any Indebtedness that is owed by such Person to the Company or any Restricted Subsidiary shall be disregarded and shall not be reflected in such calculation to reduce the fair market value of such assets or property, Person or Equity Interests in such Person, as the case may be.

(d) Within 365 days after any Permitted MLP Transfer, Permitted GP Transfer or Extraordinary Distribution has occurred, the Company or the applicable Restricted Subsidiary, as the case shall be, may, at its option, apply the Net Proceeds from such Permitted MLP Transfer, Permitted GP Transfer or Extraordinary Distribution to permanently reduce:

(1) Indebtedness under the Term Loan Facility and Asset Sale Bridge Facility;

119

(2) Obligations under other Senior Indebtedness of the Company or any Subsidiary Guarantor and, in the case of Obligations under the Revolving Credit Facility and the Funded Synthetic Letter of Credit Facility, to correspondingly permanently reduce commitments with respect thereto (other than Obligations owed to the Company or a Restricted Subsidiary); provided that if the Company or any Restricted Subsidiary shall so reduce Obligations under any Senior Indebtedness that is not Secured Indebtedness, the Company or such Restricted Subsidiary shall, equally and ratably, reduce Obligations under the Notes by, at its option, (A) redeeming the Notes to the extent they are redeemable as provided by the terms of the Notes, (B) making an offer (in accordance with the procedures set forth below for a MLP Offer) to all Holders to purchase their Notes at 100% of the principal amount thereof, plus the amount of accrued and unpaid interest and Additional Interest, if any, on the principal amount of the Notes to be repurchased, or (C) purchasing Notes through open market purchases (to the extent such purchases are at a price equal to or higher than 100% of the principal amount thereof) in a manner that complies with this Indenture and applicable securities law; or

(3) Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor, other than Indebtedness owed to the Company or another Restricted Subsidiary.

(e) Notwithstanding clause (d) above, the Company or such Restricted Subsidiary may apply up to 50% of the Net Proceeds from any Permitted MLP Transfer (other than the Initial MLP Transfer), any Permitted GP Transfer or any Extraordinary Distribution to make a Permitted MLP Investment; provided that if during such 365-day period, the Company or a Restricted Subsidiary enters into a definitive binding agreement committing it to apply such Net Proceeds to make a Permitted MLP Investment after such 365th day, such 365-day period shall be extended with respect to the amount of Net Proceeds so committed (but such extension shall in no event be for a period longer than 180 days) until such Net Proceeds are required to be applied in accordance with such agreement (or, if earlier, the date of termination of such agreement).

(f) If any Net Proceeds received are not invested or applied in accordance with the preceding paragraph within 365 days from the date of the receipt of such Net Proceeds (or such longer period provided for in such paragraph), then the Company shall make an offer to all Holders and, if required by the terms of any other Senior Indebtedness, to the holders of such other Senior Indebtedness (other than with respect to Hedging Obligations) (an “MLP Offer”), to purchase the maximum aggregate principal amount of Notes and such other Senior Indebtedness that is an integral multiple of $1,000 that may be purchased out of the excess Net Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest, and Additional Interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in this Indenture. The Company shall commence a MLP Offer with respect to such Net Proceeds within ten Business Days after the date that excess Net Proceeds exceed $10.0 million by mailing the notice required pursuant to the terms of this Indenture, with a copy to the Trustee. To the extent that the

120

aggregate amount of Notes and such other Senior Indebtedness tendered pursuant to a MLP Offer is less than the excess Net Proceeds from the Permitted MLP Transfer, Permitted GP Transfer or Extraordinary Distribution, the Company may use any remaining excess Net Proceeds for general corporate purposes, subject to other covenants contained in this Indenture. Subject to Section 1019(f), if the aggregate principal amount of Notes and the other Senior Indebtedness surrendered by such holders thereof exceeds the amount of such excess Net Proceeds, the Trustee shall select or cause to be selected the Notes and such other Senior Indebtedness to be purchased on a pro rata basis based on the principal amount (or accreted value, if applicable) of the Notes or such other Senior Indebtedness tendered. Upon completion of any such MLP Offer, the amount of such excess Net Proceeds related to such MLP Offer shall be reset at zero.

(g) Pending the final application of any Net Proceeds pursuant to this Section 1019, the Company or the applicable Restricted Subsidiary may apply such Net Proceeds temporarily to reduce Indebtedness outstanding under a revolving credit facility or otherwise invest such Net Proceeds in any manner not prohibited by this Indenture.

(h) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of Notes pursuant to a MLP Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof.

(i) If the Company is repurchasing less than all of the Notes at any time, the Trustee shall select the Notes to be repurchased (a) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which such Notes are listed, or (b) if the Notes are not so listed, on a pro rata basis to the extent practicable; provided that no Notes of $2,000 or less shall be repurchased in part.

(j) Notices of repurchase shall be mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days before the date of repurchase to each Holder at such Holder’s registered address, except that notices of repurchase may be mailed more than 60 days prior to a date of repurchase if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture. If any Note is to be repurchased in part only, any notice of repurchase that relates to such Note shall state the portion of the principal amount thereof to be repurchased.

(k) A new Note in principal amount equal to the unrepurchased portion of any Note repurchased in part shall be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for repurchase become due and payable on the date fixed for repurchase. On and after the date of repurchase, unless the Company defaults in the payment of the repurchase price, interest shall cease to accrue on the Note or portions thereof called for repurchase.

121

SECTION 1020. Additional Interest Notice. In the event that the Company and the Co-Issuer are required to pay Additional Interest to Holders pursuant to the Registration Rights Agreement, the Company and the Co-Issuer shall provide written notice (an “Additional Interest Notice”) to the Trustee of their obligation to pay Additional Interest no later than fifteen days prior to the proposed payment date for the Additional Interest, and the Additional Interest Notice shall set forth the amount of Additional Interest to be paid by the Company or the Co-Issuer on such payment date. The Trustee shall not at any time be under any duty or responsibility to any Holder to determine the Additional Interest, or with respect to the nature, extent, or calculation of the amount of Additional Interest owed, or with respect to the method employed in such calculation of the Additional Interest.

SECTION 1021. Limitations on Co-Issuer. (a) The Company shall not cease to beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, 100% of the Voting Stock of the Co-Issuer. The Co-Issuer shall be designated as a Restricted Subsidiary of the Company at all times and shall not own any material assets or other property, other than Indebtedness or other obligations owing to the Co-Issuer by the Company and its Restricted Subsidiaries, or engage in any trade or conduct any business other than treasury, cash management, hedging and cash pooling activities and activities incidental thereto. The Co-Issuer shall not incur any material liabilities or obligations other than its obligations pursuant to the Notes or this Indenture and other Indebtedness permitted to be incurred by the Co-Issuer under Section 1011 and Section 1012 and liabilities and obligations pursuant to business activities permitted by this Section 1021. Notwithstanding anything to the contrary herein, the Co-Issuer may be a co-obligor or guarantor with respect to Indebtedness if the Company is an obligor of such Indebtedness and the net proceeds of such Indebtedness are received by the Company or one or more of the Company’s Subsidiary Guarantors.

(b) The Company shall not sell or otherwise dispose of any shares of Capital Stock of the Co-Issuer and shall not permit the Co-Issuer, directly or indirectly, to sell or otherwise dispose of any shares of its Capital Stock.

122

ARTICLE ELEVEN

REDEMPTION OF NOTES

SECTION 1101. Right of Redemption. (a) At any time prior to November 1, 2009, the Company or the Co-Issuer may redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to the Redemption Date, subject to the rights of Holders on the relevant Record Date to receive interest due on the relevant Interest Payment Date.

(b) From and after November 1, 2009, the Company or the Co-Issuer may redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days’ prior notice at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, and Additional Interest, if any, thereon to the applicable Redemption Date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant Interest Payment Date, if redeemed during the twelve-month period beginning on November 1 of each of the years indicated below:

Year	Percentage
2009	104.250	%
2010	102.125	%
2011 and thereafter	100.000	%

(c) Prior to November 1, 2008, the Company may, at its option, redeem up to 35% of the sum of the original aggregate principal amount of Notes (and the original principal amount of any Additional Notes) issued under this Indenture at a redemption price equal to 108.500% of the aggregate principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, thereon to the applicable Redemption Date, subject to the right of Holders on the relevant record date to receive interest due on the relevant Interest Payment Date, with the net cash proceeds of one or more Equity Offerings of the Company or any direct or indirect parent of the Company to the extent such net cash proceeds are contributed to the Company; provided that at least 65% of the sum of the aggregate principal amount of Notes originally issued under this Indenture and the original principal amount of any Additional Notes issued under this Indenture after the Issue Date remains Outstanding immediately after the occurrence of each such redemption; provided, further, that each such redemption occurs within 90 days of the date of closing of each such Equity Offering.

SECTION 1102. Applicability of Article. Redemption of Notes at the election of the Company, the Co-Issuer or otherwise, as permitted or required by any provision of this Indenture or the Notes, shall be made in accordance with such provision and this Article.

123

SECTION 1103. Election to Redeem; Notice to Trustee. The election of the Company or the Co-Issuer to redeem any Notes pursuant to Section 1101 above shall be evidenced by a Board Resolution of the Board of Directors of the Company and/or the Co-Issuer, as the case may be. If the Company or the Co-Issuer elects to redeem Notes pursuant to Section 1101 hereof, it shall furnish to the Trustee, at least five Business Days before notice of redemption is required to be mailed or caused to be mailed to Holders pursuant to Section 1105 hereof, an Officers’ Certificate setting forth (i) the paragraph or subparagraph of such Note and/or Section of this Indenture pursuant to which the redemption shall occur, (ii) the Redemption Date, (iii) the principal amount of the Notes to be redeemed and (iv) the Redemption Price.

SECTION 1104. Selection by Trustee of Notes to Be Redeemed. (a) If the Company or the Co-Issuer is redeeming less than all of the Notes at any time, the Trustee shall select the Notes to be redeemed (a) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which such Notes are listed or (b) if such Notes are not so listed, on a pro rata basis to the extent practicable; provided that no Notes of $2,000 or less shall be redeemed in part.

(b) If any Note is to be redeemed in part only, any notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed.

(c) A new Note in principal amount equal to the unredeemed portion of any Note redeemed in part shall be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due and payable on the date fixed for redemption. On and after the Redemption Date, unless the Company or the Co-Issuer defaults in the redemption payment, interest shall cease to accrue on the Note or portions thereof called for redemption.

SECTION 1105. Notice of Redemption. Notices of redemption shall be mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days before the Redemption Date to each Holder at such Holder’s registered address, except that notices of redemption may be mailed more than 60 days prior to a Redemption Date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture.

All notices of redemption shall state:

(1) the Redemption Date,

(2) the Redemption Price and the amount of accrued interest to the Redemption Date payable as provided in Section 1107, if any,

(3) if less than all Outstanding Notes are to be redeemed, the identification (and, in the case of a partial redemption, the principal amounts) of the particular Notes to be redeemed,

124

(4) in case any Note is to be redeemed in part only, the notice which relates to such Note shall state that on and after the Redemption Date, upon surrender of such Note, the Holder shall receive, without charge, a new Note or Notes of authorized denominations for the principal amount thereof remaining unredeemed,

(5) that on the Redemption Date the Redemption Price (and accrued interest, if any, to the Redemption Date payable as provided in Section 1107) shall become due and payable upon each such Note, or the portion thereof, to be redeemed, and that interest thereon shall cease to accrue on and after said date,

(6) the place or places where such Notes are to be surrendered for payment of the Redemption Price and accrued interest, if any,

(7) the name and address of the Paying Agent,

(8) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price,

(9) that, unless the Company or the Co-Issuer defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date;

(10) the “CUSIP” number, ISIN or “Common Code” number and that no representation is made as to the accuracy or correctness of the “CUSIP” number, ISIN or “Common Code” number, if any, listed in such notice or printed on the Notes, and

(11) the paragraph of the Notes or Section of this Indenture pursuant to which the Notes are to be redeemed.

At the Company’s or the Co-Issuer’s request, the Trustee shall give the notice of redemption in the Company’s and the Co-Issuer’s name and at the Company’s and the Co-Issuer’s expense; provided that the Company and the Co-Issuer shall have delivered to the Trustee, at least five Business Days before notice of redemption is required to be mailed or caused to be mailed to Holders pursuant to this Section 1105 (unless a shorter notice shall be agreed to by the Trustee), an Officers’ Certificate from each of the Company and the Co-Issuer requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in Section 1103.

SECTION 1106. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 1105 hereof, Notes called for redemption become irrevocably due and payable on the Redemption Date at the Redemption Price. The notice, if mailed in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption in whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. Subject to Section 1107 hereof, on and after the Redemption Date, interest ceases to accrue on Notes or portions of Notes called for redemption.

125

SECTION 1107. Deposit of Redemption Price. Prior to 10:00 a.m. (Eastern Time) on any Redemption Date, the Company or the Co-Issuer shall deposit with the Trustee or with a Paying Agent (or, if the Company or the Co-Issuer is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and accrued interest and Additional Interest, if any, on, all the Notes that are to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company or the Co-Issuer, as the case may be, any money deposited with the Trustee or the Paying Agent by the Company or the Co-Issuer, as the case may be, in excess of the amounts necessary to pay the redemption price of, and accrued and unpaid interest and Additional Interest, if any, on, all Notes to be redeemed or purchased.

SECTION 1108. Notes Payable on Redemption Date. (a) Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified (together with accrued interest and Additional Interest, if any, to the Redemption Date), and from and after such date (unless the Company or the Co-Issuer shall default in the payment of the Redemption Price and accrued interest) such Notes shall cease to bear interest. Upon surrender of any such Note for redemption in accordance with said notice, such Note shall be paid by the Company or the Co-Issuer at the Redemption Price, together with accrued interest and Additional Interest, if any, to the Redemption Date and such Notes shall be canceled by the Trustee; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Notes, or one or more Predecessor Notes, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 306.

(b) If any Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Notes.

SECTION 1109. Notes Redeemed in Part. Any Note which is to be redeemed only in part (pursuant to the provisions of this Article) shall be surrendered at the office or agency of the Company and the Co-Issuer maintained for such purpose pursuant to Section 1002 (with, if the Company and the Co-Issuer or the Trustee so require, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Co-Issuer and the Trustee duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing), and the Company and the Co-Issuer shall execute, and the Trustee shall authenticate and deliver to the Holder of such Note without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Note so surrendered; provided that no Note of $2,000 or less will be redeemed in part.

126

ARTICLE TWELVE

GUARANTEES

SECTION 1201. Subsidiary Guarantees. From and after the consummation of the Acquisition, each Subsidiary Guarantor hereby jointly and severally, irrevocably and unconditionally irrevocably guarantees, as primary obligor and not merely as surety, the Notes and obligations of the Company and the Co-Issuer hereunder and thereunder, and guarantees to each Holder of a Note authenticated and delivered by the Trustee, and to the Trustee for itself and on behalf of such Holder, that: (1) the principal of (and premium, if any) and interest on, or Additional Interest in respect of, the Notes shall be paid in full when due, whether at Stated Maturity, by acceleration or otherwise (including the amount that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Law), together with interest on the overdue principal, if any, and interest on any overdue interest, to the extent lawful, and all other obligations of the Company and the Co-Issuer to the Holders or the Trustee hereunder or thereunder shall be paid in full or performed, all in accordance with the terms hereof and thereof; and (2) in case of any extension of time of payment or renewal of any Notes or of any such other obligations, the same shall be paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise, subject, however, in the case of clauses (1) and (2) above, to the limitation set forth in Section 1204 hereof.

(a) Each Subsidiary Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, any release of any other Subsidiary Guarantor, the recovery of any judgment against the Company or the Co-Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Subsidiary Guarantor.

(b) Each Subsidiary Guarantor hereby waives (to the extent permitted by law) the benefits of diligence, presentment, demand for payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company or the Co-Issuer, any right to require a proceeding first against the Company, the Co-Issuer or any other Person, protest, notice and all demands whatsoever and covenants that the Subsidiary Guarantee of such Subsidiary Guarantor shall not be discharged as to any Note except by complete performance of the obligations contained in such Note, this Indenture and such Subsidiary Guarantee. Each Subsidiary Guarantor acknowledges that the Subsidiary Guarantee is a guarantee of payment, performance and compliance when due and not of collection. Each of the Subsidiary Guarantors hereby agrees that, in the event of a default in payment of principal (or premium, if any) or interest on such Note, whether at its Stated Maturity, by acceleration, purchase or otherwise, legal proceedings may be instituted by the Trustee on behalf of, or by, the Holder of such Note, subject to the terms and conditions set forth in this Indenture, directly against each of the Subsidiary

127

Guarantors to enforce such Subsidiary Guarantor’s Subsidiary Guarantee without first proceeding against the Company, the Co-Issuer or any other Subsidiary Guarantor. Each Subsidiary Guarantor agrees that if, after the occurrence and during the continuance of an Event of Default, the Trustee or any of the Holders are prevented by applicable law from exercising their respective rights to accelerate the Maturity of the Notes, to collect interest on the Notes, or to enforce or exercise any other right or remedy with respect to the Notes, such Subsidiary Guarantor shall pay to the Trustee for the account of the Holder, upon demand therefor, the amount that would otherwise have been due and payable had such rights and remedies been permitted to be exercised by the Trustee or any of the Holders.

(c) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Co-Issuer or any Subsidiary Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to either the Company, the Co-Issuer or any Subsidiary Guarantor, any amount paid by any of them to the Trustee or such Holder, the Subsidiary Guarantee of each of the Subsidiary Guarantors, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Subsidiary Guarantor further agrees that, as between each Subsidiary Guarantor, on the one hand, and the Holders and the Trustee on the other hand, (1) subject to this Article Twelve, the Maturity of the obligations guaranteed hereby may be accelerated as provided in Article Five hereof for the purposes of the Subsidiary Guarantee of such Subsidiary Guarantor notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any acceleration of such obligation as provided in Article Five hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by each Subsidiary Guarantor for the purpose of the Subsidiary Guarantee of such Subsidiary Guarantor. The Subsidiary Guarantors shall have the right to seek contribution from any non-paying Subsidiary Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantees.

(d) Each Subsidiary Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company or the Co-Issuer for liquidation, reorganization, should the Company or the Co-Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Company’s or the Co-Issuer’s assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes, whether as a “voidable preference”, “fraudulent transfer” or otherwise, all as though such payment or performance had not been made. In the event that any payment or any part thereof, is rescinded, reduced, restored or returned, the Notes shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

SECTION 1202. Severability. In case any provision of any Subsidiary Guarantee shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby to the extent permitted by applicable law.

128

SECTION 1203. Reserved.

SECTION 1204. Limitation of Subsidiary Guarantors’ Liability. Each Subsidiary Guarantor, and by its acceptance of Notes, each Holder hereby confirms that it is the intention of all such parties that the Subsidiary Guarantee of such Subsidiary Guarantor not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Subsidiary Guarantee or the provisions of its local law relating to fraudulent transfer or conveyance. To effectuate the foregoing intention, the Trustee, the Holders and each such Subsidiary Guarantor hereby irrevocably agree that the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Subsidiary Guarantor that are relevant under such laws and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under this Article Twelve, result in the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under applicable law.

SECTION 1205. Contribution. Each Subsidiary Guarantor that makes a payment under its Subsidiary Guarantee shall be entitled upon payment in full of all guaranteed obligations under this Indenture to a contribution from each other Subsidiary Guarantor in an amount equal to such other Subsidiary Guarantor’s pro rata portion of such payment based on the respective net assets of all the Subsidiary Guarantors at the time of such payment determined in accordance with GAAP.

SECTION 1206. Subrogation. Each Subsidiary Guarantor shall be subrogated to all rights of Holders against the Company or the Co-Issuer in respect of any amounts paid by any Subsidiary Guarantor pursuant to the provisions of Section 1201; provided, however, that, if a Default or Event of Default has occurred and is continuing, no Subsidiary Guarantor shall be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Company or the Co-Issuer under this Indenture or the Notes shall have been paid in full.

SECTION 1207. Reinstatement. Each Subsidiary Guarantor hereby agrees (and each Person who becomes a Subsidiary Guarantor shall agree) that the Subsidiary Guarantee provided for in Section 1201 shall continue to be effective or be reinstated, as the case may be, if at any time, payment, or any part thereof, of any obligations or interest thereon is rescinded or must otherwise be restored by a Holder to the Company or the Co-Issuer upon the bankruptcy or insolvency of the Company, the Co-Issuer or any Subsidiary Guarantor.

129

SECTION 1208. Release of a Subsidiary Guarantor. The Subsidiary Guarantee of a Subsidiary Guarantor shall automatically and unconditionally be released and discharged, and no further action by such Subsidiary Guarantor, the Company, the Co-Issuer or the Trustee is required for the release of such Subsidiary Guarantor’s Subsidiary Guarantee, upon:

(1) (A) the sale, disposition or other transfer (including through merger or consolidation) of all of the Capital Stock (or any sale, disposition or other transfer of Capital Stock following which such Subsidiary Guarantor is no longer a Restricted Subsidiary), or all or substantially all the assets, of such Subsidiary Guarantor (other than a sale, disposition or other transfer to a Restricted Subsidiary) if such sale, disposition or other transfer is made in compliance with the applicable provisions of this Indenture;

(B) such Subsidiary Guarantor becoming a Partially Owned Operating Company or, following a Permitted MLP Transfer, a MLP Subsidiary of the MLP that was subject to such MLP Transfer;

(C) the designation by the Company of such Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with Section 1010 of this Indenture and the definition of “Unrestricted Subsidiary”;

(D) the release or discharge of such Subsidiary Guarantor from its guarantee of Indebtedness under the Senior Credit Facilities or the guarantee that resulted in the obligation of such Subsidiary Guarantor to guarantee the Notes, in each case, if such Subsidiary Guarantor would not then otherwise be required to guarantee the Notes pursuant to Section 1015 of this Indenture (treating any guarantees of such Subsidiary Guarantor that remain outstanding as incurred at least 30 days prior to such release), except, in each case, a release or discharge by, or as a result of, payment under such Subsidiary Guarantee or payment in full of the Indebtedness under the Senior Credit Facilities; or

(E) exercise by the Company and the Co-Issuer of their Legal Defeasance option of the Notes under Section 1302 of this Indenture or their Covenant Defeasance option of the Notes under Section 1303 of this Indenture or if the Company’s and the Co-Issuer’s obligations under this Indenture are discharged in accordance with Section 401 of this Indenture; and

(2) in the case of clause (1)(A) above, the release or discharge of such Subsidiary Guarantor from its guarantee, if any, of and all pledges and security, if any, granted in connection with, the Senior Credit Facilities and any other Indebtedness of the Company or any Restricted Subsidiary.

130

SECTION 1209. Benefits Acknowledged. Each Subsidiary Guarantor acknowledges that it shall receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and from its guarantee and waivers pursuant to its Subsidiary Guarantees under this Article Twelve.

131

ARTICLE THIRTEEN

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

SECTION 1301. Company’s and Co-Issuer’s Option to Effect Legal Defeasance or Covenant Defeasance. The Company and the Co-Issuer may, at their option, and at any time, elect to have either Section 1302 or Section 1303 be applied to all Outstanding Notes upon compliance with the conditions set forth below in this Article Thirteen.

SECTION 1302. Legal Defeasance and Discharge. Upon the Company’s and the Co-Issuer’s exercise under Section 1301 of the option applicable to this Section 1302, each of the Company, the Co-Issuer and the Subsidiary Guarantors shall be deemed to have been discharged from its respective obligations with respect to all Outstanding Notes on the date the conditions set forth in Section 1304 are satisfied (hereinafter, “Legal Defeasance”). For this purpose, such Legal Defeasance means that each of the Company, the Co-Issuer and the Subsidiary Guarantors shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Notes, which shall thereafter be deemed to be “Outstanding” only for the purposes of Section 1305 and the other Sections of this Indenture referred to in (1) and (2) below, and to have satisfied all its other obligations under such Notes and this Indenture insofar as such Notes and their related Subsidiary Guarantees are concerned (and the Trustee, at the expense of the Company and the Co-Issuer, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder:

(1) the rights of Holders of Outstanding Notes to receive payments in respect of the principal of (and premium, if any, on) and interest on such Notes when such payments are due solely out of the trust created pursuant to this Indenture (as described in Section 1304),

(2) the Company’s and the Co-Issuer’s obligations with respect to such Notes under Sections 303, 304, 305, 1002 and 1003,

(3) the rights, powers, trusts, duties and immunities of the Trustee hereunder, and the obligations of each of the Company, the Co-Issuer and the Subsidiary Guarantors in connection therewith and

(4) this Article Thirteen.

Subject to compliance with this Article Thirteen, the Company and the Co-Issuer may exercise their option under this Section 1302 notwithstanding the prior exercise of their option under Section 1303 with respect to the Notes.

SECTION 1303. Covenant Defeasance. Upon the Company’s and the Co-Issuer’s exercise under Section 1301 of the option applicable to this Section 1303, each of the Company, the Co-Issuer and the Subsidiary Guarantors shall be released from

132

its respective obligations under any covenant contained in Sections 801, 802, 803 and in Sections 1005, 1006, 1007, 1009 through and including 1019 and 1021 with respect to the Outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, “Covenant Defeasance”), and the Notes shall thereafter be deemed not to be “Outstanding” for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed “Outstanding” for all other purposes hereunder. For this purpose, such Covenant Defeasance means that, with respect to the Outstanding Notes, the Company, the Co-Issuer or any Subsidiary Guarantor, as applicable, may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Sections 501(3), 501(4), 501(5) and 501(7) and, with respect to only any Significant Subsidiary and not the Company or the Co-Issuer, Section 501(6), but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby.

SECTION 1304. Conditions to Legal Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 1302 or Section 1303 to the Outstanding Notes:

(1) the Company and the Co-Issuer shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 608 who shall agree to comply with the provisions of this Article Thirteen applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to the benefit of the Holders of such Notes; (A) cash in U.S. dollars, or (B) non-callable Government Securities, or (C) a combination thereof, in such amounts as shall be sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, the principal of (and premium, if any) and interest due on the Outstanding Notes on the Stated Maturity (or Redemption Date, if applicable) of such principal (and premium, if any) or, interest due on the Notes; provided that the Trustee shall have been irrevocably instructed to apply such cash or the proceeds of such Government Securities to said payments with respect to the Notes; before such a deposit, the Company and the Co-Issuer may give to the Trustee, in accordance with Section 1103 hereof, a notice of its election to redeem all of the Outstanding Notes at a future date in accordance with Article Eleven hereof, which notice shall be irrevocable; such irrevocable redemption notice, if given, shall be given effect in applying the foregoing;

(2) in the case of Legal Defeasance, the Company and the Co-Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions,

133

(A) the Company and the Co-Issuer have received from, or there has been published by, the United States Internal Revenue Service a ruling, or

(B) since the issuance of the Notes, there has been a change in the applicable U.S. Federal income tax law,

in either case to the effect that, and based thereon such Opinion of Counsel in the United States shall confirm that, subject to customary assumptions and exclusions, the Holders shall not recognize income, gain or loss for U.S. Federal income tax purposes as a result of such Legal Defeasance and shall be subject to U.S. Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3) in the case of Covenant Defeasance, the Company and the Co-Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders shall not recognize income, gain or loss for U.S. Federal income tax purposes as a result of such Covenant Defeasance and shall be subject to such tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4) no Default (other than that resulting from borrowing funds to be applied to make such deposit and the granting of Liens in connection therewith) shall have occurred and be continuing on the date of such deposit;

(5) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under any of the Senior Credit Facilities, or any other material agreement or instrument (other than this Indenture) to which, the Company, the Co-Issuer or any Subsidiary Guarantor is a party or by which the Company, the Co-Issuer or any Subsidiary Guarantor is bound;

(6) the Company and the Co-Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States of America to the effect that, as of the date of such opinion and subject to customary assumptions and exclusions following the deposit, the trust funds shall not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally under any applicable U.S. Federal or state law, and that the Trustee has a perfected security interest in such trust funds for the ratable benefit of the Holders;

(7) the Company and the Co-Issuer shall have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by the Company or the Co-Issuer with the intent of defeating, hindering, delaying or defrauding any creditors of the Company, the Co-Issuer or any Subsidiary Guarantor or others; and

134

(8) the Company and the Co-Issuer shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel in the United States of America (which Opinion of Counsel may be subject to customary assumptions and exclusions) each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with.

SECTION 1305. Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions. All cash and Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 1305, the “Qualifying Trustee”) pursuant to Section 1304 in respect of the Outstanding Notes shall be held in trust and applied by the Qualifying Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company or a Subsidiary acting as its own Paying Agent) as the Qualifying Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money or Government Securities need not be segregated from other funds except to the extent required by law.

The Company and the Co-Issuer shall pay and indemnify the Qualifying Trustee against any tax, fee or other charge imposed on or assessed against the Government Securities deposited pursuant to Section 1304 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Notes.

Anything in this Article Thirteen to the contrary notwithstanding, the Qualifying Trustee shall deliver or pay to the Company and the Co-Issuer from time to time upon Company Request any money or Government Securities held by it as provided in Section 1304 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Qualifying Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance, as applicable, in accordance with this Article.

SECTION 1306. Reinstatement. If the Trustee or any Paying Agent is unable to apply any money or Government Securities in accordance with Section 1305 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company’s, the Co-Issuer’s and each Subsidiary Guarantor’s obligations under this Indenture and the Outstanding Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 1302 or 1303, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money or Government Securities in accordance with Section 1305; provided, however, that if the Company or the Co-Issuer makes any payment of principal of (or premium, if any) or interest on any Note following

135

the reinstatement of its obligations, the Company or the Co-Issuer, as the case may be, shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent.

SECTION 1307. Repayment to Company and Co-Issuer. Subject to applicable laws relating to abandoned property, any money deposited with the Trustee or any Paying Agent, or then held by the Company or the Co-Issuer, in trust for the payment of the principal of, premium and Additional Interest, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium and Additional Interest, if any, or interest has become due and payable shall be paid to the Company or the Co-Issuer on either of their request or (if then held by the Company or the Co-Issuer) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Company or the Co-Issuer for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company or the Co-Issuer as trustee thereof, shall thereupon cease.

136

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written.

TARGA RESOURCES, INC.
By:	/s/ Jeffrey J. McParland
	Name: Jeffrey J. McParland
	Title:   Executive Vice President,             Chief Financial Officer and Treasurer
TARGA RESOURCES FINANCE CORPORATION
By:	/s/ Jeffrey J. McParland
	Name: Jeffrey J. McParland
	Title:   Executive Vice President,             Chief Financial Officer and Treasurer

137

Targa Louisiana Field Services LLC Targa Louisiana Intrastate LLC Targa Resources LLC Targa Resources II LLC Targa Resources Holdings GP LLC Targa Resources Holdings LP Targa Resources Texas GP, LLC Targa Texas Field Services LP Targa Midstream GP, LLC Dynegy Midstream Services, Limited Partnership Dynegy Energy Pipeline, L.L.C. Dynegy Intrastate Pipeline, L.L.C. Dynegy Liquids G.P., L.L.C. Dynegy Liquids Marketing and Trade Dynegy NGL Pipeline Company, LLC Dynegy OPI, LLC Dynegy Regulated Holdings LLC Midstream Barge Company L.L.C.
By:	/s/ Jeffrey J. McParland
	Name:	Jeffrey J. McParland
	Title:	Executive Vice President, Chief Financial Officer and Treasurer

138

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
By:	/s/ Joseph P. O’Donnell
	Name:	Joseph P. O’Donnell
	Title:	Vice President

139

SCHEDULE I

Subsidiary Guarantors

1. Dynegy Midstream Services, Limited Partnership, a Delaware limited partnership

2. Dynegy Energy Pipeline, L.L.C., a Delaware limited liability company

3. Dynegy Intrastate Pipeline, L.L.C., a Delaware limited liability company

4. Dynegy Liquids G.P., L.L.C., a Delaware limited liability company

5. Dynegy Liquids Marketing and Trade, a Delaware partnership

6. Dynegy NGL Pipeline Company, LLC, a Delaware limited liability company

7. Dynegy OPI, LLC, a Delaware limited liability company

8. Dynegy Regulated Holdings LLC, a Delaware limited liability company

9. Midstream Barge Company L.L.C., a Delaware limited liability company

10. Targa Louisiana Field Services LLC, a Delaware limited liability company

11. Targa Louisiana Intrastate LLC, a Delaware limited liability company

12. Targa Midstream GP, LLC, a Delaware limited liability company

13. Targa Resources LLC, a Delaware limited liability company

14. Targa Resources II LLC, a Delaware limited liability company

15. Targa Resources Holdings GP, LLC, a Delaware limited liability company

16. Targa Resources Holdings LP, a Delaware limited liability company

17. Targa Resources Texas GP, LLC, a Delaware limited liability company

18. Targa Texas Field Services LP, a Delaware limited partnership

140

Rule 144A / Regulation S Appendix

PROVISIONS RELATING TO INITIAL NOTES,

PRIVATE EXCHANGE NOTES

AND EXCHANGE NOTES

1. Definitions

1.1 Definitions.

For the purposes of this Appendix the following terms shall have the meanings indicated below:

“Applicable Procedures” means, with respect to any transfer or transaction involving a Temporary Regulation S Global Note or beneficial interest therein, the rules and procedures of the Depository for such a Temporary Regulation S Global Note, to the extent applicable to such transaction and as in effect from time to time.

“Certificated Note” means a certificated Initial Note or Exchange Note or Private Exchange Note (other than a Global Note) bearing, if required, the appropriate restricted notes legend set forth in Section 2.3(e) of this Appendix.

“Depository” means The Depository Trust Company, its nominees and their respective successors.

“Distribution Compliance Period”, with respect to any Notes, means the period of 40 consecutive days beginning on and including the later of (i) the day on which such Notes are first offered to Persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S and (ii) the issue date with respect to such Notes.

“Exchange Notes” means (1) the 8 ¹/2% Senior Notes Due 2013 issued pursuant to the Indenture in connection with a Registered Exchange Offer pursuant to a Registration Rights Agreement and (2) Additional Notes, if any, issued pursuant to a registration statement filed with the SEC under the Securities Act.

“Initial Notes” means (1) $250,000,000 aggregate principal amount of 8 ¹/2% Senior Notes Due 2013 issued on the Issue Date and (2) Additional Notes, if any, issued in a transaction exempt from the registration requirements of the Securities Act.

“Initial Purchasers” means (1) with respect to the Initial Notes issued on the Issue Date, Credit Suisse First Boston LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs & Co., Banc of America Securities LLC, Lehman Brothers Inc. and Wachovia Capital Markets, LLC and (2) with respect to each issuance of Additional Notes, the Persons purchasing such Additional Notes under the related Purchase Agreement.

“Notes” means the Initial Notes, any Additional Notes, the Exchange Notes and the Private Exchange Notes, treated as a single class.

“Notes Custodian” means the custodian with respect to a Global Note (as appointed by the Depository), or any successor Person thereto and shall initially be the Trustee.

“Private Exchange” means the offer by the Company and the Co-Issuer, pursuant to a Registration Rights Agreement, to the Initial Purchasers to issue and deliver to each Initial Purchaser, in exchange for the Initial Notes held by the Initial Purchaser as part of its initial distribution, a like aggregate principal amount of Private Exchange Notes.

“Private Exchange Notes” means any 8 ¹/2% Senior Notes Due 2013 issued in connection with a Private Exchange.

“Purchase Agreement” means (1) with respect to the Initial Notes issued on the Issue Date, the Purchase Agreement dated October 18, 2005, among the Company, the Co-Issuer, the Subsidiary Guarantors and the Initial Purchasers, and (2) with respect to each issuance of Additional Notes, the purchase agreement or underwriting agreement among the Company, the Co-Issuer, the Subsidiary Guarantors and the Persons purchasing such Additional Notes.

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“Registered Exchange Offer” means the offer by the Company and the Co-Issuer, pursuant to a Registration Rights Agreement, to certain Holders of Initial Notes, to issue and deliver to such Holders, in exchange for the Initial Notes, a like aggregate principal amount of Exchange Notes registered under the Securities Act.

“Registration Rights Agreement” means (1) with respect to the Initial Notes issued on the Issue Date, the Exchange and Registration Rights Agreement dated October 31, 2005, among the Company, the Co-Issuer, the Subsidiary Guarantors and the Initial Purchasers and (2) with respect to each issuance of Additional Notes issued in a transaction exempt from the registration requirements of the Securities Act, the registration rights agreement, if any, among the Company, the Co-Issuer and the Persons purchasing such Additional Notes under the related Purchase Agreement.

“Rule 144A Notes” means all Notes offered and sold to QIBs in reliance on Rule 144A.

“Securities Act” means the Securities Act of 1933, as amended.

“Shelf Registration Statement” means the registration statement issued by the Company and the Co-Issuer in connection with the offer and sale of Initial Notes or Private Exchange Notes pursuant to a Registration Rights Agreement.

“Transfer Restricted Notes” means Notes that bear or are required to bear the legend relating to restrictions on transfer relating to the Securities Act set forth in Section 2.3(e) hereto.

2

1.2 Other Definitions.

Term	Defined in Section:
“Agent Members”	2.1	(b)
“Global Notes”	2.1	(a)
“Permanent Regulation S Global Note”	2.1	(a)
“Regulation S”	2.1	(a)
“Regulation S Global Note”	2.1	(a)
“Rule 144A”	2.1	(a)
“Rule 144A Global Note”	2.1	(a)
“Temporary Regulation S Global Note”	2.1	(a)

1.3 Capitalized terms used in this Appendix, but not defined, have the meanings ascribed to such terms in the Indenture to which this Appendix is attached.

2. The Notes.

2.1(a) Form and Dating. The Initial Notes shall be offered and sold by the Company and the Co-Issuer pursuant to a Purchase Agreement. The Initial Notes shall be resold initially only to (i) QIBs in reliance on Rule 144A under the Securities Act (“Rule 144A”) and (ii) Persons other than U.S. Persons (as defined in Regulation S) in reliance on Regulation S under the Securities Act (“Regulation S”). Initial Notes may thereafter be transferred to, among others, QIBs and purchasers in reliance on Regulation S, subject to the restrictions on transfer set forth herein. Initial Notes initially resold pursuant to Rule 144A shall be issued initially in the form of one or more permanent global Notes in definitive, fully registered form (collectively, the “Rule 144A Global Note”); and Initial Notes initially resold pursuant to Regulation S shall be issued initially in the form of one or more temporary global notes in fully registered form (collectively, the “Temporary Regulation S Global Note”), in each case without interest coupons and with the global notes legend and the applicable restricted notes legend set forth in Exhibit 1 hereto, which shall be deposited on behalf of the purchasers of the Initial Notes represented thereby with the Notes Custodian and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and the Co-Issuer and authenticated by the Trustee as provided in this Indenture. Except as set forth in this Section 2.1(a), beneficial ownership interests in the Temporary Regulation S Global Note shall be held only through the Euroclear System (“Euroclear”) and Clearstream Banking, S.A. (“Clearstream”) (as indirect participants in the Depository) and shall not be exchangeable for interests in the Rule 144A Global Note, a permanent Regulation S global note in fully registered form (the “Permanent Regulation S Global Note”, and together with the Temporary Regulation S Global Note, the “Regulation S Global Note”) or any other Note prior to the expiration of the Distribution Compliance Period and then, after the expiration of the Distribution Compliance Period, may be exchanged for interests in a Rule 144A Global Note or the Permanent Regulation S Global Note only upon certification in the form attached hereto as Exhibit 3 or otherwise

3

in a form reasonably satisfactory to the Trustee that beneficial ownership interests in such Temporary Regulation S Global Note are owned either by non-U.S. persons or U.S. persons who purchased such interests in a transaction that is exempt from the registration requirements under the Securities Act.

Prior to the expiration of the Distribution Compliance Period, beneficial interests in Temporary Regulation S Global Notes may be exchanged for interests in Rule 144A Global Notes if (1) such exchange occurs in connection with a transfer of Notes in compliance with Rule 144A and (2) the transferor of the beneficial interest in the Temporary Regulation S Global Note first delivers to the Trustee a written certificate (in a form substantially similar to that attached hereto as Exhibit 2) to the effect that the beneficial interest in the Temporary Regulation S Global Note is being transferred (a) to a Person who the transferor reasonably believes to be a QIB that is purchasing for its own account or the account of a QIB in a transaction meeting the requirements of Rule 144A, and (b) in accordance with all applicable securities laws of the States of the United States and other jurisdictions.

Beneficial interests in a Rule 144A Global Note may be transferred to a Person who takes delivery in the form of an interest in a Regulation S Global Note, whether before or after the expiration of the Distribution Compliance Period, only if the transferor first delivers to the Trustee a written certificate (in a form substantially similar to that attached hereto as Exhibit 2) to the effect that such transfer is being made in accordance with Rule 903 or 904 of Regulation S or Rule 144 (if applicable).

The Rule 144A Global Note, the Temporary Regulation S Global Note and the Permanent Regulation S Global Note are collectively referred to herein as “Global Notes”. The aggregate principal amount of the Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided.

(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global Note deposited with or on behalf of the Depository.

The Company and the Co-Issuer shall execute and the Trustee shall, in accordance with this Section 2.1(b), authenticate and deliver initially one or more Global Notes that (a) shall be registered in the name of the Depository or the nominee of the Depository and (b) shall be delivered by the Trustee to the Depository or pursuant to the Depository’s instructions or held by the Trustee as custodian for the Depository.

Members of, or participants in, the Depository (“Agent Members”) shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository or by the Trustee as the custodian of the Depository or under such Global Note, and the Company, the Co-Issuer, the Trustee and any agent of the Company, the Co-Issuer or the Trustee shall be entitled to treat the Depository as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Co-Issuer, the Trustee or any agent of the Company, the Co-Issuer or the Trustee from giving effect to any written

4

certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Note.

(c) Certificated Notes. Except as provided in this Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in Global Notes shall not be entitled to receive physical delivery of Certificated Notes.

2.2 Authentication. The Trustee shall upon receipt of a Company Order specified in Section 202 of the Indenture authenticate and deliver: (1) on the Issue Date, an aggregate principal amount of $250,000,000 8 ¹/2% Senior Notes Due 2013, (2) any Additional Notes for an original issue in an aggregate principal amount specified in the written order of the Company pursuant to Section 202 of the Indenture and (3) Exchange Notes or Private Exchange Notes for issue only in a Registered Exchange Offer or a Private Exchange, respectively, pursuant to a Registration Rights Agreement, for a like principal amount of Initial Notes, in each case upon a Company Order signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of each of the Company and the Co-Issuer. Such Company Order shall specify the amount of the Notes to be authenticated and the date on which the original issue of Notes is to be authenticated and, in the case of any issuance of Additional Notes pursuant to Section 312 of the Indenture, shall certify that such issuance is in compliance with Section 1011 of the Indenture.

2.3 Transfer and Exchange.

(a) Transfer and Exchange of Certificated Notes. When Certificated Notes are presented to the Note Registrar with a request:

(x) to register the transfer of such Certificated Notes; or

(y) to exchange such Certificated Notes for an equal principal amount of Certificated Notes of other authorized denominations,

the Note Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Certificated Notes surrendered for transfer or exchange:

(i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Note Registrar, duly executed by the Holder thereof or its attorney duly authorized in writing; and

(ii) if such Certificated Notes are required to bear a restricted notes legend, they are being transferred or exchanged pursuant to an effective registration statement under the Securities Act, pursuant to Section 2.3(b) or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable:

5

(A) if such Certificated Notes are being delivered to the Note Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect; or

(B) if such Certificated Notes are being transferred to the Company, a certification to that effect; or

(C) if such Certificated Notes are being transferred (x) pursuant to an exemption from registration in accordance with Rule 144A, Regulation S or Rule 144 under the Securities Act; or (y) in reliance upon another exemption from the requirements of the Securities Act: (i) a certification to that effect (in the form set forth on the reverse of the Note) and (ii) if the Company so requests, an Opinion of Counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(e)(i).

(b) Restrictions on Transfer of a Certificated Note for a Beneficial Interest in a Global Note. A Certificated Note may not be exchanged for a beneficial interest in a Rule 144A Global Note or a Permanent Regulation S Global Note except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Certificated Note, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with:

(i) certification, in a form substantially similar to that attached hereto as Exhibit 2, that such Certificated Note is either (A) being transferred to a QIB in accordance with Rule 144A or (B) being transferred after expiration of the Distribution Compliance Period by a Person who initially purchased such Note in reliance on Regulation S to a buyer who elects to hold its interest in such Note in the form of a beneficial interest in the Permanent Regulation S Global Note; and

(ii) written instructions directing the Trustee to make, or to direct the Notes Custodian to make, an adjustment on its books and records with respect to such Rule 144A Global Note (in the case of a transfer pursuant to clause (b)(i)(A)) or Permanent Regulation S Global Note (in the case of a transfer pursuant to clause (b)(i)(B)) to reflect an increase in the aggregate principal amount of the Notes represented by the Rule 144A Global Note or Permanent Regulation S Global Note, as applicable, such instructions to contain information regarding the Depository account to be credited with such increase,

then the Trustee shall cancel such Certificated Note and cause, or direct the Notes Custodian to cause, in accordance with the standing instructions and procedures existing between the Depository and the Notes Custodian, the aggregate principal amount of Notes represented by the Rule 144A Global Note or Permanent Regulation S Global Note, as applicable, to be increased by the aggregate principal amount of the Certificated Note to be exchanged and shall credit or cause to be credited to the account of the Person

6

specified in such instructions a beneficial interest in the Rule 144A Global Note or Permanent Regulation S Global Note, as applicable, equal to the principal amount of the Certificated Note so canceled. If no Rule 144A Global Notes or Permanent Regulation S Global Notes, as applicable, are then outstanding, the Company and the Co-Issuer shall issue and the Trustee shall authenticate, upon receipt of a Company Order, a new Rule 144A Global Note or Permanent Regulation S Global Note, as applicable, in the appropriate principal amount.

(c) Transfer and Exchange of Global Notes.

(i) The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Note shall deliver to the Note Registrar a written order given in accordance with the Depository’s procedures containing information regarding the participant account of the Depository to be credited with a beneficial interest in the Global Note. The Note Registrar shall, in accordance with such instructions instruct the Depository to credit to the account of the Person specified in such instructions a beneficial interest in the Global Note and to debit the account of the Person making the transfer the beneficial interest in the Global Note being transferred.

(ii) If the proposed transfer is a transfer of a beneficial interest in one Global Note to a beneficial interest in another Global Note, the Note Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Note to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Note Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of the Global Note from which such interest is being transferred.

(iii) Notwithstanding any other provisions of this Appendix (other than the provisions set forth in Section 2.4), a Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository.

(iv) In the event that Global Note is exchanged for Certificated Notes to Section 2.4 of this Appendix, prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Notes, such Notes may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Notes (as set forth in Exhibit 2, hereto)

7

intended to ensure that such transfers comply with Rule 144A, Regulation S or another applicable exemption under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company and the Co-Issuer.

(d) Restrictions on Transfer of Temporary Regulation S Global Notes. During the Distribution Compliance Period, beneficial ownership interests in Temporary Regulation S Global Notes may only be sold, pledged or transferred in accordance with the Applicable Procedures and only (i) to the Company or the Co-Issuer, (ii) in an offshore transaction in accordance with Regulation S (other than a transaction resulting in an exchange for an interest in a Permanent Regulation S Global Note), (iii) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any State of the United States.

(e) Legend.

(i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each Note certificate evidencing the Global Notes (and all Notes issued in exchange therefor or in substitution thereof), in the case of Notes offered otherwise than in reliance on Regulation S shall bear a legend in substantially the following form:

THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY AND THE CO-ISSUER THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO THE COMPANY, (II) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO EXEMPTION

8

FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

Each certificate evidencing a Note offered in reliance on Regulation S shall, in addition to the foregoing, bear a legend in substantially the following form:

THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLY EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE TRANSFERRED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.

Each Certificated Note shall also bear the following additional legend:

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE NOTE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

(ii) Upon any sale or transfer of a Transfer Restricted Note (including any Transfer Restricted Note represented by a Global Note) pursuant to Rule 144 under the Securities Act, the Note Registrar shall permit the transferee thereof to exchange such Transfer Restricted Note for a certificated Note that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Note, if the transferor thereof certifies in writing to the Note Registrar that such sale or transfer was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Note).

9

(iii) After a transfer of any Initial Notes or Private Exchange Notes pursuant to and during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Notes or Private Exchange Notes, as the case may be, all requirements pertaining to legends on such Initial Note or such Private Exchange Note shall cease to apply, the requirements requiring any such Initial Note or such Private Exchange Note issued to certain Holders be issued in global form shall cease to apply, and a certificated Initial Note or Private Exchange Note or an Initial Note or Private Exchange Note in global form, in each case without restrictive transfer legends, shall be available to the transferee of the Holder of such Initial Notes or Private Exchange Notes upon exchange of such transferring Holder’s certificated Initial Note or Private Exchange Note or directions to transfer such Holder’s interest in the Global Note, as applicable.

(iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Notes, all requirements pertaining to such Initial Notes that Initial Notes issued to certain Holders be issued in global form shall still apply with respect to Holders of such Initial Notes that do not exchange their Initial Notes, and Exchange Notes in certificated or global form, in each case without the restricted notes legend set forth in Exhibit 1 hereto shall be available to Holders that exchange such Initial Notes in such Registered Exchange Offer.

(v) Upon the consummation of a Private Exchange with respect to the Initial Notes, all requirements pertaining to such Initial Notes that Initial Notes issued to certain Holders be issued in global form shall still apply with respect to Holders of such Initial Notes that do not exchange their Initial Notes, and Private Exchange Notes in global form with the global notes legend and the applicable restricted notes legend set forth in Exhibit 1 hereto shall be available to Holders that exchange such Initial Notes in such Private Exchange.

(f) Cancellation or Adjustment of Global Note. At such time as all beneficial interests in a Global Note have been exchanged for Certificated Notes, redeemed, purchased or canceled, such Global Note shall be returned to the Depository for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for certificated Notes, redeemed, purchased or canceled, the principal amount of Notes represented by such Global Note shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Notes Custodian for such Global Note) with respect to such Global Note, by the Trustee or the Notes Custodian, to reflect such reduction.

10

(g) No Obligation of the Trustee.

(i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in the Depository or other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders under the Notes shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners.

(ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depository participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

2.4 Certificated Notes.

(a) A Global Note deposited with the Depository or with the Trustee as Notes Custodian for the Depository pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of Certificated Notes in an aggregate principal amount equal to the principal amount of such Global Note, in exchange for such Global Note, only if such transfer complies with Section 2.3 hereof and (i) the Depository notifies the Company that it is unwilling or unable to continue as depository for such Global Note and the Depository fails to appoint a successor depository or if at any time such depository ceases to be a “clearing agency” registered under the Exchange Act, in either case, and a successor depository is not appointed by the Company within 90 days of such notice, or (ii) a Default has occurred and is continuing or (iii) the Company and the Co-Issuer, in their sole discretion, notify the Trustee in writing that it elects to cause the issuance of Certificated Notes under this Indenture (although Temporary Regulation S Global Notes at the Company’s and the Co-Issuer’s election pursuant to this clause may not be exchanged for Certificated Notes prior to (a) the expiration of the Distribution Compliance Period and (b) the receipt of any certificates required under the provisions of Regulation S).

11

(b) Any Global Note that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depository to the Trustee located at its principal corporate trust office to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate principal amount of Certificated Notes of authorized denominations. Any portion of a Global Note transferred pursuant to this Section 2.4 shall be executed, authenticated and delivered only in denominations of $2,000 principal amount and any integral multiple of $1,000 in excess thereof and registered in such names as the Depository shall direct. Any Certificated Note delivered in exchange for an interest in the Transfer Restricted Note shall, except as otherwise provided by Section 2.3(e) hereof, bear the applicable restricted notes legend and certificated notes legend set forth in Exhibit 1 hereto.

(c) Subject to the provisions of Section 2.4(b) hereof, the registered Holder of a Global Note shall be entitled to grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

(d) In the event of the occurrence of one of the events specified in Section 2.4(a) hereof, the Company and the Co-Issuer shall promptly make available to the Trustee a reasonable supply of Certificated Notes in definitive, fully registered form without interest coupons. In the event that such Certificated Notes are not issued, the Company and the Co-Issuer expressly acknowledge, with respect to the right of any Holder to pursue a remedy pursuant to this Indenture, including pursuant to Section 507, the right of any beneficial owner of Notes to pursue such remedy with respect to the portion of the Global Note that represents such beneficial owner’s Notes as if such Certificated Notes had been issued.

12

EXHIBIT 1

to Rule 144A / Regulation S Appendix

[FORM OF FACE OF INITIAL NOTE]

[Global Notes Legend]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY, THE CO-ISSUER OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

[[FOR REGULATION S GLOBAL NOTE ONLY] UNTIL 40 DAYS AFTER THE LATER OF COMMENCEMENT OR COMPLETION OF THE OFFERING, AN OFFER OR SALE OF SECURITIES WITHIN THE UNITED STATES BY A DEALER (AS DEFINED IN THE SECURITIES ACT) MAY VIOLATE THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IF SUCH OFFER OR SALE IS MADE OTHERWISE THAN IN ACCORDANCE WITH RULE 144A THEREUNDER.]

[Restricted Notes Legend for Notes offered otherwise

than in Reliance on Regulation S]

THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY AND THE CO-ISSUER THAT (A) THIS NOTE MAY BE OFFERED,

RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO THE COMPANY OR THE CO-ISSUER, (II) WITHIN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

[Restricted Notes Legend for Notes Offered in Reliance on Regulation S]

THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLY EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE TRANSFERRED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.

[Temporary Regulation S Global Note Legend]

EXCEPT AS SET FORTH BELOW, BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL NOTE WILL NOT BE EXCHANGEABLE FOR INTERESTS IN THE PERMANENT REGULATION S GLOBAL NOTE OR ANY OTHER NOTE REPRESENTING AN INTEREST IN THE NOTES REPRESENTED HEREBY WHICH DO NOT CONTAIN A LEGEND CONTAINING RESTRICTIONS ON TRANSFER, UNTIL THE EXPIRATION OF THE “40-DAY DISTRIBUTION COMPLIANCE PERIOD” (WITHIN THE MEANING OF RULE 903(b)(2) OF REGULATION S UNDER THE SECURITIES ACT) AND THEN ONLY UPON CERTIFICATION IN FORM REASONABLY SATISFACTORY TO THE TRUSTEE THAT SUCH BENEFICIAL INTERESTS ARE OWNED EITHER BY NON-U.S. PERSONS OR U.S. PERSONS WHO PURCHASED SUCH INTERESTS IN A TRANSACTION THAT DID NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT. DURING SUCH 40-DAY DISTRIBUTION COMPLIANCE PERIOD, BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL NOTE MAY ONLY BE SOLD, PLEDGED OR TRANSFERRED (I) TO THE COMPANY OR THE CO-ISSUER, (II) OUTSIDE

2

THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (III) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (III) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. HOLDERS OF INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL NOTE WILL NOTIFY ANY PURCHASER OF THIS NOTE OF THE RESALE RESTRICTIONS REFERRED TO ABOVE, IF THEN APPLICABLE.

AFTER THE EXPIRATION OF THE DISTRIBUTION COMPLIANCE PERIOD BENEFICIAL INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL NOTE MAY BE EXCHANGED FOR INTERESTS IN A RULE 144A GLOBAL NOTE ONLY IF (1) SUCH EXCHANGE OCCURS IN CONNECTION WITH A TRANSFER OF THE NOTES IN COMPLIANCE WITH RULE 144A AND (2) THE TRANSFEROR OF THE REGULATION S GLOBAL NOTE FIRST DELIVERS TO THE TRUSTEE A WRITTEN CERTIFICATE (IN THE FORM ATTACHED TO THIS CERTIFICATE) TO THE EFFECT THAT THE REGULATION S GLOBAL NOTE IS BEING TRANSFERRED (A) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES TO BE A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, (B) TO A PERSON WHO IS PURCHASING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, AND (C) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.

BENEFICIAL INTERESTS IN A RULE 144A GLOBAL NOTE MAY BE TRANSFERRED TO A PERSON WHO TAKES DELIVERY IN THE FORM OF AN INTEREST IN THE REGULATION S GLOBAL NOTE, WHETHER BEFORE OR AFTER THE EXPIRATION OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD, ONLY IF THE TRANSFEROR FIRST DELIVERS TO THE TRUSTEE A WRITTEN CERTIFICATE (IN THE FORM ATTACHED TO THIS CERTIFICATE) TO THE EFFECT THAT SUCH TRANSFER IS BEING MADE IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S OR RULE 144 (IF AVAILABLE).

[Certificated Notes Legend]

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE NOTE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

3

No.             $        

8 ¹/2% Senior Notes Due 2013

Targa Resources, Inc., a Delaware corporation, and Targa Resources Finance Corporation, a Delaware corporation, jointly and severally promise to pay to                     , or registered assigns, the principal sum of                      Dollars on November 1, 2013.

Interest Payment Dates: May 1 and November 1.

Record Dates: April 15 and October 15.

Additional provisions of this Note are set forth on the other side of this Note.

Dated:

4

IN WITNESS WHEREOF, the Company and the Co-Issuer have caused this instrument to be duly executed.

Dated:

TARGA RESOURCES, INC.
By
	Name:
	Title:
TARGA RESOURCES FINANCE CORPORATION
By
	Name:
	Title:

TRUSTEE’S CERTIFICATE OF     AUTHENTICATION
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee certifies that this is one of the Notes referred to in the Indenture.
By
	Authorized Signatory

5

[FORM OF REVERSE SIDE OF INITIAL NOTE]

8 ¹/2% Senior Note Due 2013

Capitalized terms used herein but not defined herein shall have the meanings given to such terms in the Indenture.

1. Principal and Interest.

Targa Resources, Inc. (the “Company”) and Targa Resources Finance Corporation (the “Co-Issuer”) shall, jointly and severally, pay the principal of this Note on November 1, 2013.

The Company and the Co-Issuer jointly and severally promise to pay interest and Additional Interest, if any, on the principal amount of this Note on each Interest Payment Date, as set forth below, at the rate of 8 ¹/2% per annum (subject to adjustment as provided below).

Interest, and Additional Interest, if any, shall be payable semi-annually (to the Holders of the Notes at the close of business on April 15 or October 15 immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing May 1, 2006.

The Holder of this Note is entitled to the benefits of the Registration Rights Agreement, dated October 31, 2005, among the Company, the Co-Issuer, the Subsidiary Guarantors and the Initial Purchasers named therein (the “Registration Rights Agreement”), including with respect to Additional Interest.

Interest, including Additional Interest, if any, on this Note shall accrue from the most recent date to which interest has been paid on this Note or the Note surrendered in exchange herefor or, if no interest has been paid, from October 31, 2005; provided that, if there is no existing Default in the payment of interest and if this Note is authenticated between a Regular Record Date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date. Interest shall be computed on the basis of a 360-day year of twelve 30-day months.

The Company and the Co-Issuer shall, jointly and severally, pay interest and Additional Interest if any, on overdue principal and premium, if any, and interest on overdue installments of interest, to the extent lawful, at a rate per annum equal to the rate of interest applicable to the Notes.

2. Method of Payment.

The Company and the Co-Issuer shall pay interest (except defaulted interest) on the principal amount of the Notes on each May 1 and November 1 to the Persons who are Holders (as reflected in the Note Register at the close of business on April 15 and October 15 immediately preceding the Interest Payment Date), in each case, even if the Note is transferred or exchanged after such Regular Record Date, except as

6

provided in Section 306(b) with respect to Defaulted Interest; provided that, with respect to the payment of principal, the Company and the Co-Issuer shall make payment to the Holder that surrenders this Note to any Paying Agent on or after November 1, 2013.

The Company and the Co-Issuer shall pay principal (premium, if any) and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company and the Co-Issuer may pay principal (premium, if any) and interest by their check payable in such money. The Company and the Co-Issuer may pay interest on the Notes either (a) by mailing a check for such interest to a Holder’s registered address (as reflected in the Note Register) or (b) by wire transfer to an account located in the United States maintained by the payee. If a payment date is a date other than a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period.

3. Paying Agent and Note Registrar.

Initially, Wells Fargo Bank, National Association (the “Trustee”) shall act as Paying Agent and Note Registrar. The Company or the Co-Issuer may change any Paying Agent or Note Registrar upon written notice thereto and without notice to the Holders. The Company, the Co-Issuer, any Subsidiary or any Affiliate of any of them may act as Paying Agent, Note Registrar or co-registrar.

4. Indenture.

The Company and the Co-Issuer issued the Notes under an Indenture dated as of October 31, 2005 (the “Indenture”), among the Company, the Co-Issuer, the Subsidiary Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture shall control.

The Notes are unsecured senior obligations of the Company and the Co-Issuer. The Indenture does not limit the aggregate principal amount of the Notes. Subject to the conditions set forth in the Indenture, the Company and the Co-Issuer may issue Additional Notes.

5. Redemption.

At any time prior to November 1, 2009, the Company and the Co-Issuer may redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to the Redemption Date, subject to the rights of Holders on the relevant record date to receive interest due on the relevant Interest Payment Date.

7

On and after November 1, 2009, the Company and the Co-Issuer may redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days’ prior notice to each Holder at the Redemption Prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders on the relevant record date to receive interest due on the relevant Interest Payment Date, if redeemed during the twelve-month period beginning on November 1 of each of the years indicated below:

Year	Percentage
2009	104.250	%
2010	102.125	%
2011 and thereafter	100.000	%

In addition, prior to November 1, 2008, the Company may, at its option, redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price equal to 108.500% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders on the relevant record date to receive interest due on the relevant Interest Payment Date, with the net cash proceeds of one or more Equity Offerings of the Company or any direct or indirect parent of the Company to the extent such net cash proceeds are contributed to the Company; provided that at least 65% of the sum of the aggregate principal amount of Notes originally issued under the Indenture and the original principal amount of any Additional Notes issued under the Indenture after the Issue Date remains Outstanding immediately after the occurrence of each such redemption; provided, further, that each such redemption occurs within 90 days of the date of closing of each such Equity Offering.

6. Repurchase upon a Change of Control, Asset Sales, Permitted MLP Transfers, Permitted GP Transfers and Extraordinary Distributions.

Upon the occurrence of (a) a Change of Control, the Holders shall have the right to require that the Company and the Co-Issuer purchase such Holder’s outstanding Notes, in whole or in part, at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, (b) Asset Sales, the Company may be obligated to make offers to purchase Notes and Senior Indebtedness of the Company with a portion of the Net Proceeds of such Asset Sales at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase and (c) a Permitted MLP Transfer, Permitted GP Transfer or Extraordinary Distribution, the Company may be obligated to make offers to purchase Notes and Senior Indebtedness of the Company with a portion of the Net Proceeds of any such Permitted MLP Transfer, Permitted GP Transfer or Extraordinary Distribution, as the case may be, at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase.

8

7. Denominations; Transfer; Exchange.

The Notes are in registered form without coupons in denominations of $2,000 principal amount and integral multiples of $1,000. A Holder may transfer or exchange Notes in accordance with the Indenture. The Note Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company and the Co-Issuer may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Note Registrar need not register the transfer or exchange of a Note or portion of a Note selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or any Note or portion of a Note for a period of 15 days before a selection of Notes to be redeemed or 15 days before an Interest Payment Date.

8. Persons Deemed Owners.

A registered Holder may be treated as the owner of a Note for all purposes.

9. Unclaimed Money.

Subject to any laws relating to abandoned property, if money for the payment of principal (premium, if any) or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money back to the Company or the Co-Issuer on Company Request or (if then held by the Company or the Co-Issuer) shall be discharged from such trust. After that, Holders entitled to the money must look to the Company or the Co-Issuer for payment and all liability of the Trustee and such Paying Agent with respect to such money, and all liability of the Company or the Co-Issuer as trustee thereof, shall cease.

10. Discharge and Defeasance Prior to Redemption or Maturity.

Subject to satisfaction of conditions set forth in the Indenture, the Company and the Co-Issuer at any time may terminate some or all of their obligations under the Notes and the Indenture if the Company and the Co-Issuer irrevocably deposits with the Trustee cash or Government Securities or a combination thereof sufficient for the payment of the then outstanding principal of and interest on the Notes to Redemption or Stated Maturity, as the case may be.

11. Amendment; Supplement; Waiver.

Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Outstanding Notes, including consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes, and any existing Default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in aggregate principal amount of the Outstanding Notes. Without notice to or the consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, omission, mistake, defect or inconsistency and make any change that does not adversely affect the legal rights of any Holder.

9

12. Restrictive Covenants.

The Indenture contains certain covenants, including covenants with respect to the following matters: (i) Restricted Payments; (ii) incurrence of Indebtedness and issuance of Disqualified Stock and Preferred Stock; (iii) Liens; (iv) transactions with Affiliates; (v) dividend and other payment restrictions affecting Restricted Subsidiaries; (vi) guarantees of Indebtedness by Restricted Subsidiaries; (vii) activities of the Co-Issuer; (viii) merger, consolidation or sale of all or substantially all assets; (ix) purchase of Notes upon a Change in Control; (x) sale and lease-back transactions; (xi) disposition of proceeds of Asset Sales; and (xii) disposition of proceeds of Permitted MLP Transfers, Permitted GP Transfers and Extraordinary Distributions. Within 120 days (or the successor time period then in effect under the rules and regulations of the Exchange Act) after the end of each fiscal year, the Company must report to the Trustee on compliance with such limitations.

13. Successor Persons.

When a successor Person or other entity assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor Person shall be released from those obligations, subject to certain exceptions.

14. Remedies for Events of Default.

If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee or the Holders of at least 30% in principal amount of the Outstanding Notes may declare all Outstanding Notes to be immediately due and payable. If an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company, the Co-Issuer or any Significant Subsidiary occurs and is continuing, the Notes automatically become immediately due and payable. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee shall be under no obligation to exercise any rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Subject to certain restrictions, the Holders of a majority in principal amount of the Outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder of a Note or that would involve the Trustee in personal liability.

10

15. Subsidiary Guarantees.

The Company’s and the Co-Issuer’s obligations under the Notes are fully, irrevocably and unconditionally guaranteed on an unsecured senior basis, to the extent set forth in the Indenture, by each of the Subsidiary Guarantors.

16. Trustee Dealings with Company and the Co-Issuer.

The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may make loans to, accept deposits from, perform services for, and otherwise deal with, the Company, the Co-Issuer and any of their Affiliates as if it were not the Trustee.

17. Authentication.

This Note shall not be valid until the Trustee signs the certificate of authentication on the other side of this Note.

18. Abbreviations.

Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).

19. CUSIP Numbers.

Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company and the Co-Issuer have caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and that reliance may be placed only on the serial or other identification numbers placed thereon.

20. Holders’ Compliance with the Registration Rights Agreement.

Each Holder of a Note, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including the obligations of the Holders with respect to a registration and the indemnification of the Company and the Co-Issuer to the extent provided therein.

21. Governing Law.

THIS SECURITY AND THE INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

11

The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to Targa Resources, Inc., 1000 Louisiana Street, Suite 4700, Houston, Texas 77002, Attention: General Counsel.

12

EXHIBIT 2

to Rule 144A / Regulation S Appendix

ASSIGNMENT/TRANSFER FORM

To assign and transfer this Note, fill in the form below:

I or we assign and transfer this Note to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint                             agent to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:                     Your Signature:                                

Sign exactly as your name appears on the other side of this Note.

In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Notes and the last date, if any, on which such Notes were owned by the Company, the Co-Issuer or any Affiliate of the Company and the Co-Issuer, the undersigned confirms that such Notes are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

to the Company or the Co-Issuer; or

(1) pursuant to an effective registration statement under the Securities Act of 1933, as amended; or

(2) inside the United States to a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or

(3) outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933, as amended; or

(4) pursuant to the exemption from registration provided by Rule 144 under the Securities Act of 1933, as amended.

Unless one of the boxes is checked, the Trustee shall refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4) is checked, the Trustee shall be entitled to require, prior to registering any such transfer of the Notes, such legal opinions, certifications and other information as the Company and the Co-Issuer have reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended, such as the exemption provided by Rule 144 under such Act.

Signature

Signature Guarantee:

Signature must be guaranteed Signature

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

2

TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company and the Co-Issuer as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:
	Notice: To be executed by an executive officer

3

[TO BE ATTACHED TO GLOBAL NOTES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE

The following increases or decreases in this Global Note have been made:

Date of Exchange Amount of decrease in
Principal amount of this
Global Note Amount of increase in
Principal amount of this
Global Note Principal amount of this
Global Note following such
decrease or increase) Signature of authorized
officer of Trustee or Notes
Custodian

4

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company pursuant to Section 1017, 1018 or 1019 of the Indenture, check the box:

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 1017, 1018 or 1019 of the Indenture, state the amount in principal amount: $

Dated:	_________________	Your Signature:
			(Sign exactly as your name appears on the other side of this Note.)

Signature Guarantee:

(Signature must be guaranteed)

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

5

EXHIBIT 3

to Rule 144A / Regulation S Appendix

FORM OF NON-U.S. BENEFICIAL OWNERSHIP

CERTIFICATION BY EUROCLEAR OR CLEARSTREAM LUXEMBOURG

[Date]                        

Wells Fargo Bank, N.A.

Re: 8 ¹/2% Senior Notes due 2013 (the “Notes”) of Targa Resources,

Inc. (the “Company”) and Targa Resources Finance Corporation

(the “Co-Issuer”)

Reference is hereby made to the Senior Indenture, dated as of October 31, 2005 (as amended and supplemented from time to time, the “Indenture”), among the Company, the Co-Issuer, the Subsidiary Guarantors named therein and Wells Fargo Bank, N.A., as Trustee. Capitalized terms used but not defined herein shall have the meanings given them in the Indenture.

This is to certify with respect to $             principal amount of the Notes that, except as set forth below, we have received in writing, by tested telex or by electronic transmission, from member organizations appearing in our records as persons being entitled to a portion of such principal amount (our “Member Organizations”) certifications with respect to such portion, that such portion is beneficially owned by (a) non-U.S. person(s) or (b) U.S. person(s) who purchased the portion beneficially owned by such U.S. person(s) in transactions that did not require registration under the Securities Act of 1933, as amended (the “Act”). As used in this paragraph the term “U.S. person” has the meaning given to it by Regulation S under the Act.

We further certify:

(i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the Regulation S Temporary Global Note excepted in such certifications; and

(ii) that as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon as the date hereof.

We understand that this certification is required in connection with certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorize you or the Company and the Co-Issuer to produce this certification to any interested party in such proceedings.

Dated:                     , 20       

Yours faithfully, [Euroclear or Clearstream Luxembourg]
	By

2

EXHIBIT A

[FORM OF FACE OF EXCHANGE NOTE

OR PRIVATE EXCHANGE NOTE] */**/

*/ [If the Note is to be issued in global form add the Global Notes Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1 captioned “[TO BE ATTACHED TO GLOBAL NOTES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE.”

**/ [If the Note is a Private Exchange Note issued in a Private Exchange to an Initial Purchaser holding an unsold portion of its initial allotment, add the Restricted Notes Legend from Exhibit 1 to Appendix A and replace the Assignment Form included in this Exhibit A with the Assignment Form included in such Exhibit 1.]

No.             $             

8 ¹/2% Senior Notes Due 2013

Targa Resources, Inc., a Delaware corporation, and Targa Resources Financial Corporation, a Delaware corporation, jointly and severally promise to pay to                 , or registered assigns, the principal sum of                  Dollars on November 1, 2013.

Interest Payment Dates: May 1 and November 1.

Record Dates: April 15 and October 15.

Additional provisions of this Note are set forth on the other side of this Note.

Dated:

TARGA RESOURCES, INC.
By
	Name:
	Title:
TARGA RESOURCES FINANCE CORPORATION
By
	Name:
	Title:

TRUSTEE’S CERTIFICATE OF     AUTHENTICATION
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
certifies that this is one of the Notes referred to in the Indenture.
By
	Authorized Signatory

2

[FORM OF REVERSE SIDE OF EXCHANGE NOTE

OR PRIVATE EXCHANGE NOTE]

8 ¹/2% Senior Note Due 2013

Capitalized terms used herein but not defined herein shall have the meanings given to such terms in the Indenture.

1. Principal and Interest.

Targa Resources, Inc. (the “Company”) and Targa Resources Finance Corporation (the “Co-Issuer”) shall, jointly and severally, pay the principal of this Note on November 1, 2013.

The Company and the Co-Issuer jointly and severally promise to pay interest and Additional Interest, if any, on the principal amount of this Note on each Interest Payment Date, as set forth below, at the rate of 8 ¹/2% per annum (subject to adjustment as provided below).

Interest, and Additional Interest, if any, shall be payable semi-annually (to the Holders of the Notes at the close of business on April 15 or October 15 immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing May 1, 2006.

The Holder of this Note is entitled to the benefits of the Exchange and Registration Rights Agreement, dated October 31, 2005, among the Company, the Co-Issuer, the Subsidiary Guarantors and the Initial Purchasers named therein (the “Registration Rights Agreement”), including with respect to Additional Interest.¹

Interest, including Additional Interest, if any, on this Note shall accrue from the most recent date to which interest has been paid on this Note or the Note surrendered in exchange herefor or, if no interest has been paid, from October 31, 2005; provided that, if there is no existing Default in the payment of interest and if this Note is authenticated between a Regular Record Date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date. Interest shall be computed on the basis of a 360-day year of twelve 30-day months.

The Company and the Co-Issuer shall, jointly and severally, pay interest and Additional Interest if any, on overdue principal and premium, if any, and interest on overdue installments of interest, to the extent lawful, at a rate per annum equal to the rate of interest applicable to the Notes.

¹ Insert if at the date of issuance of the Exchange Note or Private Exchange Note (as the case may be) any Registration Default has occurred with respect to the related Initial Notes during the interest period in which such date of issuance occurs.

3

2. Method of Payment.

The Company and the Co-Issuer shall pay interest (except defaulted interest) on the principal amount of the Notes on each May 1 and November 1 to the Persons who are Holders (as reflected in the Note Register at the close of business on April 15 and October 15 immediately preceding the Interest Payment Date), in each case, even if the Note is transferred or exchanged after such Regular Record Date, except as provided in Section 306(b) with respect to Defaulted Interest; provided that, with respect to the payment of principal, the Company shall make payment to the Holder that surrenders this Note to any Paying Agent on or after November 1, 2013.

The Company shall pay principal (premium, if any) and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company and the Co-Issuer may pay principal (premium, if any) and interest by their check payable in such money. The Company may pay interest on the Notes either (a) by mailing a check for such interest to a Holder’s registered address (as reflected in the Note Register) or (b) by wire transfer to an account located in the United States maintained by the payee. If a payment date is a date other than a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period.

3. Paying Agent and Note Registrar.

Initially, Wells Fargo Bank, National Association (the “Trustee”) shall act as Paying Agent and Note Registrar. The Company may change any Paying Agent or Note Registrar upon written notice thereto and without notice to the Holders. The Company, any Subsidiary or any Affiliate of any of them may act as Paying Agent, Note Registrar or co-registrar.

4. Indenture.

The Company and the Co-Issuer issued the Notes under a Senior Indenture dated as of October 31, 2005 (the “Indenture”), among the Company, the Co-Issuer, the Subsidiary Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture shall control.

The Notes are unsecured senior obligations of the Company and the Co-Issuer. The Indenture does not limit the aggregate principal amount of the Notes. Subject to the conditions set forth in the Indenture, the Company and the Co-Issuer may issue Additional Notes.

4

5. Redemption.

At any time prior to November 1, 2009, the Company and the Co-Issuer may redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to the Redemption Date, subject to the rights of Holders on the relevant record date to receive interest due on the relevant Interest Payment Date.

On and after November 1, 2009, the Company and the Co-Issuer may redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days’ prior notice to each Holder at the Redemption Prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders on the relevant record date to receive interest due on the relevant Interest Payment Date, if redeemed during the twelve-month period beginning on November 1 of each of the years indicated below:

Year	Percentage
2009	104.250	%
2010	102.125	%
2011 and thereafter	100.000	%

In addition, prior to November 1, 2008, the Company may, at its option, redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price equal to 108.500% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders on the relevant record date to receive interest due on the relevant Interest Payment Date, with the net cash proceeds of one or more Equity Offerings of the Company or any direct or indirect parent of the Company to the extent such net cash proceeds are contributed to the Company; provided that at least 65% of the sum of the aggregate principal amount of Notes originally issued under the Indenture and the original principal amount of any Additional Notes issued under the Indenture after the Issue Date remains Outstanding immediately after the occurrence of each such redemption; provided, further, that each such redemption occurs within 90 days of the date of closing of each such Equity Offering.

6. Repurchase upon a Change of Control, Asset Sales, Permitted MLP Transfers, Permitted GP Transfers and Extraordinary Distributions.

Upon the occurrence of (a) a Change of Control, the Holders shall have the right to require that the Company and the Co-Issuer purchase such Holder’s outstanding Notes, in whole or in part, at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, (b) Asset Sales, the Company may be obligated to make offers to

5

purchase Notes and Senior Indebtedness of the Company with a portion of the Net Proceeds of such Asset Sales at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase and (c) Permitted MLP Transfer, Permitted GP Transfer or Extraordinary Distribution, the Company may be obligated to make offers to purchase Notes and Senior Indebtedness of the Company with a portion of the Net Proceeds of any such Permitted MLP Transfer, Permitted GP Transfer or Extraordinary Distribution, as the case may be, at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase.

7. Denominations; Transfer; Exchange.

The Notes are in registered form without coupons in denominations of $2,000 principal amount and integral multiples of $1,000. A Holder may transfer or exchange Notes in accordance with the Indenture. The Note Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company and the Co-Issuer may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Note Registrar need not register the transfer or exchange of a Note or portion of a Note selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or any Note or portion of a Note for a period of 15 days before a selection of Notes to be redeemed or 15 days before an Interest Payment Date.

8. Persons Deemed Owners.

A registered Holder may be treated as the owner of a Note for all purposes.

9. Unclaimed Money.

Subject to any laws relating to abandoned property, if money for the payment of principal (premium, if any) or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money back to the Company at its request or (if then held by the Company) shall be discharged from such trust. After that, Holders entitled to the money must look to the Company for payment and all liability of the Trustee and such Paying Agent with respect to such money, and all liability of the Company as trustee thereof, shall cease.

10. Discharge and Defeasance Prior to Redemption or Maturity.

Subject to satisfaction of conditions set forth in the Indenture, the Company and the Co-Issuer at any time may terminate some or all of their obligations under the Notes and the Indenture if the Company and the Co-Issuer irrevocably deposits with the Trustee cash or Government Securities or a combination thereof sufficient for the payment of the then outstanding principal of and interest on the Notes to Redemption or Stated Maturity, as the case may be.

6

11. Amendment; Supplement; Waiver.

Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Outstanding Notes, including consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes, and any existing Default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in aggregate principal amount of the Outstanding Notes. Without notice to or the consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, omission, mistake, defect or inconsistency and make any change that does not adversely affect the legal rights of any Holder.

12. Restrictive Covenants.

The Indenture contains certain covenants, including covenants with respect to the following matters: (i) Restricted Payments; (ii) incurrence of Indebtedness and issuance of Disqualified Stock and Preferred Stock; (iii) Liens; (iv) transactions with Affiliates; (v) dividend and other payment restrictions affecting Restricted Subsidiaries; (vi) guarantees of Indebtedness by Restricted Subsidiaries; (vii) activities of the Co-Issuer; (viii) merger, consolidation or sale of all or substantially all assets; (ix) purchase of Notes upon a Change in Control; (x) sale and lease-back transactions; (xi) disposition of proceeds of Asset Sales; and (xii) disposition of proceeds of Permitted MLP Transfers, Permitted GP Transfers and Extraordinary Distributions. Within 120 days (or the successor time period then in effect under the rules and regulations of the Exchange Act) after the end of each fiscal year, the Company must report to the Trustee on compliance with such limitations.

13. Successor Persons.

When a successor Person or other entity assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor Person shall be released from those obligations, subject to certain exceptions.

14. Remedies for Events of Default.

If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee or the Holders of at least 30% in principal amount of the Outstanding Notes may declare all Outstanding Notes to be immediately due and payable. If an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company, the Co-Issuer or any Significant Subsidiary occurs and is continuing, the Notes automatically become immediately due and payable. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee shall be under no obligation to exercise any rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Subject to certain restrictions, the Holders of a majority in principal amount of the Outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of

7

exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder of a Note or that would involve the Trustee in personal liability.

15. Subsidiary Guarantees.

The Company’s obligations under the Notes are fully, irrevocably and unconditionally guaranteed on an unsecured senior basis, to the extent set forth in the Indenture, by each of the Subsidiary Guarantors.

16. Trustee Dealings with Company.

The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may make loans to, accept deposits from, perform services for, and otherwise deal with, the Company and its Affiliates as if it were not the Trustee.

17. Authentication.

This Note shall not be valid until the Trustee signs the certificate of authentication on the other side of this Note.

18. Abbreviations.

Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).

19. CUSIP Numbers.

Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company and the Co-Issuer have caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

20. Holders’ Compliance with the Registration Rights Agreement.

Each Holder of a Note, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including the obligations of the Holders with respect to a registration and the indemnification of the Company and the Co-Issuer to the extent provided therein.

8

21. Governing Law.

THIS SECURITY AND THE INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to Targa Resources, Inc., 1000 Louisiana Street, Suite 4700, Houston, Texas 77002, Attention: General Counsel.

9

ASSIGNMENT/TRANSFER FORM

To assign and transfer this Note, fill in the form below:

I or we assign and transfer this Note to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint                      agent to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:                          Your Signature:                             

Sign exactly as your name appears on the other side of this Note.

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company pursuant to Section 1017, 1018 or 1019 of the Indenture, check the box:

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 1017, 1018 or 1019 of the Indenture, state the amount in principal amount: $

Dated:________________		Your Signature:
			(Sign exactly as your name appears on the other side of this Note.)
Signature Guarantee:
	(Signature must be guaranteed)

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

EXHIBIT B

FORM OF SUPPLEMENTAL INDENTURE

TO BE DELIVERED BY SUBSEQUENT GUARANTORS

SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of                     , 200__, among                                  (the “Guaranteeing Subsidiary”), a subsidiary of Targa Resources, Inc. (or its permitted successor), a Delaware corporation (the “Company”), Targa Resources Finance Corporation, a Delaware corporation (the “Co-Issuer”), the other Subsidiary Guarantors (as defined in the Indenture referred to herein) and Wells Fargo Bank, National Association, as trustee under the Indenture referred to below (the “Trustee”).

W I T N E S S E T H

WHEREAS, the Company and the Co-Issuer have heretofore executed and delivered to the Trustee a senior unsecured indenture (the “Indenture”), dated as of October 31, 2005 providing for the issuance of 8 ¹/2% Senior Notes Due 2013 (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company’s and the Co-Issuer’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the “Subsidiary Guarantee”); and

WHEREAS, pursuant to Section 901 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

2. AGREEMENT TO SUBSIDIARY GUARANTEE. The Guaranteeing Subsidiary hereby agrees to provide an unconditional Subsidiary Guarantee on the terms and subject to the conditions set forth in the Note Subsidiary Guarantee and in the Indenture including but not limited to Article 12 thereof.

3. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company, the Co-Issuer or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation; provided that the foregoing shall not limit any of the Company’s or the Co-Issuer’s obligations under the Notes. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release

are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy.

4. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

5. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

6. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.

7. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary, the Co-Issuer and the Company.

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.

Dated:                     , 20      

[GUARANTEEING SUBSIDIARY]
By:
	Name:
	Title:
TARGA RESOURCES, INC.
By:
	Name:
	Title:
TARGA RESOURCES FINANCE CORPORATION
By:
	Name:
	Title:
[Existing Subsidiary Guarantors]
By:
	Name:
	Title:
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
By:
	Authorized Signatory

EXHIBIT C

FORM OF SUBORDINATION PROVISIONS

Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Indenture.

SECTION 1.1. Subordination. Each GP or general partner of a GP, in each case that is a Restricted Subsidiary (each, a “Subordinated Creditor”), hereby agrees that all Indebtedness (the “Subordinated Obligations”) owed by the Company or any Restricted Subsidiary (each, a “Borrower”) to such Subordinated Creditor is hereby expressly subordinated, to the extent and in the manner set forth in this Exhibit C, to the prior payment in full in cash of all Obligations of such Borrower in respect of the Notes or the applicable Subsidiary Guarantee (the “Senior Obligations”) in accordance with the terms of such Notes and the Indenture.

SECTION 1.2. Dissolution or Insolvency. Upon any distribution of the assets of any Borrower or upon any dissolution, winding up, liquidation or reorganization of any Borrower, whether in bankruptcy, insolvency, reorganization, arrangement or receivership proceedings or otherwise, or upon any assignment for the benefit of creditors or any other marshaling of the assets and liabilities of any Borrower, or otherwise:

(a) the Holders shall first be entitled to receive payment in full in cash of the Senior Obligations of such Borrower in accordance with the terms of such Senior Obligations before any Subordinated Creditor shall be entitled to receive any payment on account of the Subordinated Obligations of such Borrower, whether as principal, interest or otherwise; and

(b) any payment by, or distribution of the assets of, such Borrower of any kind or character, whether in cash, property or securities, to which any Subordinated Creditor would be entitled except for the terms set forth in this Exhibit C shall be paid or delivered by the Person making such payment or distribution (whether a trustee in bankruptcy, a receiver, custodian or liquidating trustee or otherwise) directly to the Trustee to the extent necessary to make payment in full in cash of all Senior Obligations of such Borrower remaining unpaid, after giving effect to any concurrent payment or distribution to the Holders in respect of the Senior Obligations, to be held and applied by the Trustee as provided in the Indenture.

SECTION 1.3. Payment of Subordinated Obligations Prohibited. (a) No cash payment (whether directly, by exercise of any right of set-off or otherwise) in respect of any Subordinated Obligation of any Borrower, whether as principal, interest or otherwise, shall be permitted at any time prior to the Permitted Date.

(b) No payment of any Subordinated Obligation that is prohibited by paragraph (a) above shall be received or accepted by or on behalf of any Subordinated Creditor.

SECTION 1.4. Certain Payments Held in Trust. In the event that any payment by, or distribution of the assets of, any Borrower of any kind or character, whether in cash, property or securities, and whether directly, by exercise of any right of set-off or otherwise, shall be received by or on behalf of any Subordinated Creditor at a time when such payment is prohibited by Section 1.3, such payment or distribution shall be held in trust for the benefit of, and shall be paid over to, the Trustee to the extent necessary to make payment in full in cash of all Senior Obligations of such Borrower remaining unpaid, after giving effect to any concurrent payment or distribution to the Holders in respect of such Senior Obligations, to be held and applied by the Trustee as provided in the Indenture.

SECTION 1.5. Subrogation. Subject to the prior indefeasible payment in full in cash of the Senior Obligations of a Borrower, the applicable Subordinated Creditors of such Borrower shall be subrogated to the rights of the Holders to receive payments or distributions in cash, property or securities of such Borrower applicable to such Senior Obligations until all amounts owing on the Subordinated Obligations of such Borrower shall be paid in full, and as between and among a Borrower, its creditors (other than its Holders) and the applicable Subordinated Creditors of such Borrower, no such payment or distribution made to the Trustee by virtue of the terms set forth in this Exhibit C that otherwise would have been made to the Subordinated Creditors of such Borrower shall be deemed to be a payment by such Borrower on account of its Subordinated Obligations, it being understood that the terms of this Exhibit C are intended solely for the purpose of defining the relative rights of the Subordinated Creditors, on the one hand, and the Holders, on the other hand.

SECTION 1.6. No Waiver. No right of any Holder to enforce the terms set forth in this Exhibit C shall at any time or in any way be prejudiced or impaired by any act or failure to act on the part of any of the Trustee, the Holders, or any Borrower, or by any noncompliance by any Borrower with the terms, provisions and covenants contained herein, and the Holders are hereby expressly authorized to extend, renew, increase, decrease, modify or amend the terms of the Senior Obligations or any security therefor, and to release, sell or exchange any such security and otherwise deal freely with the Borrowers, all without notice to or consent of any Subordinated Creditor and without affecting the liabilities and obligations of the parties hereto.

SECTION 1.7. Acceleration and Remedies; Bankruptcy Filings. Each Subordinated Creditor agrees that, prior to the Permitted Date, (a) it will not exercise any remedies or take any action or proceeding to enforce any Subordinated Obligation, (b) it will not file, or join with any other creditors of any Borrower in filing, any petition commencing any bankruptcy, insolvency, reorganization, arrangement or receivership proceeding or any assignment for the benefit of creditors against or in respect of any Borrower or any other marshaling of the assets and liabilities of any Borrower, or (c) to the fullest extent permitted under applicable law, it will not cause any Borrower to file any such petition, commence any such proceeding or make any such assignment.

SECTION 1.8. Transfer of Subordinated Obligations. Each Subordinated Creditor agrees that it will not sell, assign, transfer or otherwise dispose of all or any part of the Subordinated Obligations owed to it unless the Person to whom such sale, assignment, transfer or disposition is made (i) is a Subordinated Creditor hereunder or (ii) shall acknowledge in writing (delivered to the Trustee) that it shall be bound by the terms of this Exhibit C, including the terms of this Section 1.8, as though named herein as a Subordinated Creditor.

SECTION 1.9. Conflict of Subordinated Obligations. If any Subordinated Creditor subordinates the Subordinated Obligations to other Indebtedness or liabilities owed by a Borrower on terms that require that payments or distributions be held in trust or turned over to the creditors of such Subordinated Creditor entitled to the benefits of such subordination or any trustee or representative thereof, and such subordination is in conflict with Sections 1.2(b), 1.4 or 1.5 hereof, then such payment or distribution shall be held in trust for, and paid or delivered to, the Trustee or such creditors or their trustee or representatives as their interest may appear or as a court a competent jurisdiction may direct.

EX-4.4

Exhibit 4.4

$250,000,000

TARGA RESOURCES, INC. AND

TARGA RESOURCES FINANCE CORPORATION

8 ¹/2% Senior Notes due 2013

REGISTRATION RIGHTS AGREEMENT

October 31, 2005

Credit Suisse First Boston LLC

Merrill Lynch, Pierce, Fenner & Smith Incorporated

Goldman, Sachs & Co.,

As Representatives of the Several Purchasers,

      c/o Credit Suisse First Boston LLC,

                    Eleven Madison Avenue,

                        New York, N.Y. 10010-3629

Dear Sirs:

Targa Resources Inc., a Delaware corporation (the “Issuer”), and Targa Resources Finance Corporation, a Delaware corporation (the “Co-Issuer”), propose to issue and sell to the several initial purchasers named in Schedule A hereto (collectively, the “Purchasers”), upon the terms set forth in a purchase agreement dated October 18, 2005 (the “Purchase Agreement”), $250,000,000 aggregate principal amount of their Senior Notes due 2013 (the “Initial Securities”) to be unconditionally guaranteed (the “Guarantees”) by each of the subsidiaries of the Issuer named in Schedule B hereto (the “Guarantors” and together with the Issuer and the Co-Issuer, the “Company”). The Initial Securities will be issued pursuant to an Indenture, dated as of October 31, 2005, (the “Indenture”) among the Issuer, the Co-Issuer, the Guarantors and Wells Fargo Bank, National Association (the “Trustee”). As an inducement to the Purchasers, the Company agrees with the Purchasers, for the benefit of the holders of the Initial Securities (including, without limitation, the Purchasers), the Exchange Securities (as defined below) and the Private Exchange Securities (as defined below) (collectively the “Holders”), as follows:

1. Registered Exchange Offer. The Company shall, at its own cost, prepare and file with the Securities and Exchange Commission (the “Commission”), within two years after the Issue Date (as defined below), a registration statement (the “Exchange Offer Registration Statement”) on an appropriate form under the Securities Act of 1933, as amended (the “Securities Act”), with respect to a proposed offer (the “Registered Exchange Offer”) to the Holders of Transfer Restricted Securities (as defined in Section 6 hereof), who are not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of debt securities (the “Exchange Securities”) of the Issuer and Co-Issuer issued under the Indenture and identical in all material respects to the applicable series of Initial Securities surrendered by such Holder (except for the transfer restrictions relating to the Initial Securities and the provisions relating to the matters described in Section 6 hereof) that would be registered under the Securities Act. The Company shall use its commercially reasonable efforts to (i) cause such Exchange Offer Registration Statement to be declared effective under the Securities Act within 870 days after the Issue Date, (ii) as soon as practicable after the effectiveness of the Exchange Offer Registration Statement, offer the Exchange Notes in exchange for surrender of the Notes and (iii) keep the Exchange Offer Registration Statement open for not less than 20 business days (or longer, if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the Holders (such period being called the “Exchange Offer Registration Period”).

If the Company effects the Registered Exchange Offer, the Company (i) will be entitled to close the Registered Exchange Offer 20 business days after the commencement thereof (provided that the Company has accepted all the Initial Securities theretofore validly tendered in accordance with the terms of the Registered Exchange Offer) and (ii) will use its commercially reasonable efforts to consummate the Registered Exchange Offer not later than 910 days (or if the 910^th  day is not a business day, the first business day thereafter) after the date of original issue of the Initial Securities (the “Issue Date”) (such 910^th day, or the first business day thereafter, the “Consummation Deadline”).

The Company may, in its discretion, accept tenders of Initial Securities for Exchange Securities after the date that the Company consummates the Registered Exchange Offer with respect to Initial Securities tendered as of the date of initial consummation and, for purposes of Section 6(a)(ii), the Registered Exchange Offer shall be deemed to have been consummated notwithstanding any such extension of the tender period.

Following the declaration of the effectiveness of the applicable Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer for the applicable series of the Initial Securities, it being the objective of such Registered Exchange Offer to enable each Holder of Transfer Restricted Securities electing to exchange the Initial Securities of such series for Exchange Securities of the same series (assuming that such Holder is not an affiliate of the Company within the meaning of the Securities Act, acquires the Exchange Securities in the ordinary course of such Holder’s business and has no arrangements or understanding with any person to participate in the distribution of the Exchange Securities and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company’s obligations under each Registered Exchange Offer and each Private Exchange shall be subject to the conditions that (i) such Registered Exchange Offer or Private Exchange, as the case may be, does not violate applicable law or any applicable interpretation of the staff of the Commission; (ii) no action or proceeding shall have been instituted or threatened in any court or by any governmental agency which might materially impair the ability of the Issuer to proceed with such Registered Exchange Offer or Private Exchange, and no material adverse development shall have occurred in any existing action or proceeding with respect to the Company; and (iii) all governmental approvals that the Company deems necessary for the consummation of such Registered Exchange Offer or Private Exchange shall have been obtained.

The Company acknowledges that, pursuant to current interpretations by the Commission’s staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder which is a broker or dealer registered under the Exchange Act of 1934, as amended (the “Exchange Act”) (a “broker-dealer”) electing to exchange Initial Securities, acquired for its own account as a result of market making activities or other trading activities, for Exchange Securities (an “Exchanging Dealer”), is required to deliver a prospectus containing the information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in the “Exchange Offer Procedures” section and the “Purpose of the Exchange Offer” section, and (c) Annex C hereto in the “Plan of Distribution” section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell Private Exchange Securities (as defined below) acquired in exchange for Initial Securities constituting any portion of an unsold allotment is required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale.

The Company shall use its commercially reasonable efforts to keep each Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein, in order to

2

permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided, however, that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be the lesser of 180 days (or such shorter period during which such person is required by applicable law to deliver such prospectus) and the date on which all Exchanging Dealers and the Initial Purchasers have sold all Exchange Securities held by them (unless such period is extended pursuant to Section 3(j) below) and (ii) the Company shall make such prospectus and any amendment or supplement thereto, available to any broker-dealer or other person with similar prospectus delivery requirements for use in connection with any resale of any series of Exchange Securities for a period of not less than 90 days after the effective date of the Exchange Offer Registration Statement relating to such series (or such shorter period during which such persons are required by applicable law to deliver such prospectus).

If, upon consummation of each Registered Exchange Offer, any Initial Purchaser holds Initial Securities acquired by it as part of its initial distribution, the Company, simultaneously with the delivery of the Exchange Securities pursuant to the Registered Exchange Offer, shall issue and deliver to such Initial Purchaser upon the written request of such Initial Purchaser, in exchange (the “Private Exchange”) for the Initial Securities held by such Initial Purchaser, a like principal amount of debt securities of the Company issued under the Indenture and identical in all material respects (including the existence of restrictions on transfer under the Securities Act and the securities laws of the several states of the United States, but excluding provisions relating to the matters described in Section 6 hereof) to the Initial Securities (the “Private Exchange Securities”). The Initial Securities, the Exchange Securities and the Private Exchange Securities are herein collectively called the “Securities”.

In connection with each Registered Exchange Offer, the Company shall:

(a) mail to each Holder a copy of the prospectus forming part of the applicable Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;

(b) keep the applicable Registered Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date notice thereof is mailed to the Holders;

(c) utilize the services of a depositary for the applicable Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York, which may be the Trustee or an affiliate of the Trustee;

(d) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last business day on which the applicable Registered Exchange Offer shall remain open; and

(e) otherwise comply with all applicable laws.

As soon as practicable after the close of the applicable Registered Exchange Offer or the applicable Private Exchange, as the case may be, the Company shall:

(x) accept for exchange all the Initial Securities validly tendered and not withdrawn pursuant to such Registered Exchange Offer and such Private Exchange;

(y) deliver to the Trustee for cancellation all the Initial Securities so accepted for exchange; and

3

(z) cause the Trustee to authenticate and deliver promptly to each Holder of the Initial Securities, Exchange Securities or Private Exchange Securities of each series, as the case may be, equal in principal amount to the Initial Securities of such series of such Holder so accepted for exchange.

The Indenture will provide that the Exchange Securities will not be subject to the transfer restrictions set forth in the Indenture and that all the Securities issued pursuant to such Indenture will vote and consent together on all matters as one class and that none of the Securities will have the right to vote or consent as a class separate from one another on any matter.

Interest on each Exchange Security and Private Exchange Security issued pursuant to each Registered Exchange Offer and in each Private Exchange will accrue from the last interest payment date on which interest was paid on the Initial Securities surrendered in exchange therefor or, if no interest has been paid on the Initial Securities, from the Issue Date.

Each Holder participating in each Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the applicable Registered Exchange Offer that: (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities, (iii) such Holder is not an “affiliate,” as defined in Rule 405 of the Securities Act, of the Company or if it is an “affiliate”, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Securities and (v) if such Holder is a broker-dealer, that it will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities and that it will comply with the applicable provisions of the Securities Act (including, but not limited to delivery of a prospectus in connection with any resale of such Exchange Securities).

Upon consummation of the Registered Exchange Offer in accordance with this Section 2 with respect to each series of the Initial Securities, the provisions of this Agreement shall continue to apply solely with respect to Transfer Restricted Securities of such series that are Private Exchange Securities, as to which Section 2 is applicable and Exchange Securities of such series held by Participating Broker-Dealers, and the Company shall have no further obligation to register any other Securities of such series pursuant hereto.

2. Shelf Registration. If, (i) because of any change in law or in applicable interpretations of the staff of the Commission, the Company is not permitted to effect a Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) for any other reason a Registered Exchange Offer is not consummated within 910 days of the Issue Date, (iii) any Initial Purchaser shall notify the Company following consummation of the applicable Registered Exchange Offer that the Initial Securities (or the Private Exchange Securities) held by it are not eligible to be exchanged for Exchange Securities in such Registered Exchange Offer or (iv) any Holder (other than an Exchanging Dealer) notifies the Company within 30 days after the consummation of the applicable Registered Exchange Offer that it is prohibited by law or Commission policy from participating in such Registered Exchange Offer or, in the case of any Holder (other than an Exchanging Dealer) that participates in such Registered Exchange Offer, such Holder may not resell the Exchange Securities acquired by it in such Registered Exchange Offer to the public without delivering a prospectus and so notifies the Company within 30 days after such Holder first becomes aware of such restrictions, the Company shall take the following actions:

(a) The Company shall, at its cost, promptly file with the Commission under the Securities Act a registration statement (the “Shelf Registration Statement” and, together with the applicable Exchange Offer Registration Statement, a “Registration Statement”) on an appropriate

4

form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities of each series by the Holders thereof from time to time in accordance with the methods of distribution set forth in the applicable Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the “Shelf Registration”);

(b) (A) in the cause of clause (i) above, the Company shall use its commercially reasonable efforts to, no later than 870 days after the Issue Date (or if the 870^th day is not a business day, the first business day thereafter) (such 870^th day, or the first business day thereafter, as the case may be, being an “Effectiveness Deadline”), cause to be declared effective under the Securities Act the Shelf Registration Statement on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities of each series by the Holders thereof from time to time in accordance with the methods of distribution set forth in the applicable Shelf Registration Statement and the Shelf Registration and (B) in the case of clauses (ii), (iii) and (iv) above, use its commercially reasonable efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act on or prior to the 90^th day (or if the 90^th day is not a business day, the first business day thereafter) after the date on which the Shelf Registration Statement is required to be filed; provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder.

(c) The Company shall use its commercially reasonable efforts to keep each Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, for a period of two years (or for such longer period if extended pursuant to Section 3(j) below) from the Issue Date or such shorter period that will terminate when all the Securities covered by such Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no longer restricted securities (as defined in Rule 144 under the Securities Act, or any successor rule thereof). The Company shall be deemed not to have used its commercially reasonable efforts to keep each Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is required by applicable law or is taken pursuant to Section 3(j) hereof.

(d) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause each Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of such Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

Notwithstanding any other provisions of this Agreement to the contrary, at any time, the Company may delay the filing of any Shelf Registration Statement or delay or suspend the effectiveness thereof, for a reasonable period of time, but not in excess of 60 consecutive days with no more than three such delays in filing or delays or suspension of effectiveness during any calendar year (each, a “Shelf Suspension Period”), if the Company determines reasonably and in good faith that the filing of any such Shelf Registration Statement or the continuing effectiveness thereof would require the disclosure of non-public material information that, in the reasonable judgment of the Board of Directors of the Company, would be detrimental to the Company if so disclosed or would otherwise materially adversely affect a financing, acquisition, disposition, merger or other material transaction or such action is required by applicable law.

5

3. Registration Procedures. In connection with any Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply:

(a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission to the extent reasonably practicable, a copy of the applicable Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in such Registered Exchange Offer or such Shelf Registration Statement, the Company shall use its commercially reasonable efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the “Exchange Offer Procedures” section and the “Purpose of the Exchange Offer” section and in Annex C hereto in the “Plan of Distribution” section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the applicable Exchange Offer Registration Statement; (iv) include within the prospectus contained in the applicable Exchange Offer Registration Statement a section entitled “Plan of Distribution,” reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential “underwriter” status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Securities received by such broker-dealer in the Registered Exchange Offer (a “Participating Broker-Dealer”), whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchasers based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of the Commission; and (v) in the case of a Shelf Registration Statement, include the names of the Holders, who propose to sell Securities pursuant to such Shelf Registration Statement, as selling security holders.

(b) The Company shall give written notice to the Initial Purchasers, the Holders of the Securities and any Participating Broker-Dealer from whom the Company has received prior written notice that it will be a Participating Broker-Dealer in the applicable Registered Exchange Offer (which notice pursuant to clauses (ii) through (v) below shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made):

(i) when the applicable Registration Statement or any amendment thereto has been filed with the Commission and when the applicable Registration Statement or any post-effective amendment thereto has become effective;

(ii) of any request by the Commission for amendments or supplements to the applicable Registration Statement or the prospectus included therein or for additional information;

(iii) of the issuance by the Commission of any stop order suspending the effectiveness of the applicable Registration Statement or the initiation of any proceedings for that purpose;

(iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

6

(v) of the happening of any event that requires the Company to make changes in the applicable Registration Statement or the prospectus in order that the applicable Registration Statement or the prospectus do not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading.

(c) The Company shall use its commercially reasonable efforts to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of each Registration Statement.

(d) The Company shall furnish to each Holder of Securities included within the coverage of each Shelf Registration, without charge, if the Holder so requests in writing, at least one copy of the applicable Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference).

(e) The Company shall deliver to each Exchanging Dealer, upon its request, and each Initial Purchaser, and to any other Holder who so requests, without charge, at least one copy of the applicable Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if any Initial Purchaser or any such Holder requests, all exhibits thereto (including those incorporated by reference).

(f) The Company shall, during each Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the applicable Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the applicable Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the prospectus, or any amendment or supplement thereto, included in the applicable Shelf Registration Statement.

(g) The Company shall deliver to each Initial Purchaser, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following each Registered Exchange Offer, without charge, as many copies of the final prospectus included in the applicable Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by any Initial Purchaser, if necessary, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the applicable Registered Exchange Offer in connection with the offering and sale of the Exchange Securities covered by the prospectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement.

(h) Prior to any public offering of the Securities, pursuant to any Registration Statement, the Company shall register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or “blue sky” laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject.

7

(i) The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to such Registration Statement.

(j) Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 3(b) above during the period for which the Company is required to maintain an effective Registration Statement, the Company shall promptly prepare and file a post-effective amendment to each Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Securities or purchasers of Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial Purchasers, the Holders of the Securities and any such Participating Broker-Dealers shall suspend use of such prospectus, and the period of effectiveness of the applicable Shelf Registration Statement provided for in Section 2(b) above and the applicable Exchange Offer Registration Statement provided for in Section 1 above shall each be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer shall have received such amended or supplemented prospectus pursuant to this Section 3(j).

(k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, and provide the applicable trustee with printed certificates for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company.

(l) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to each Registered Exchange Offer or each Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company’s first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period.

(m) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”), in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture.

(n) The Company may require each Holder of Securities to be sold pursuant to any Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement including requiring the Holder to properly complete and execute any selling security holder notices and questionnaires, and any amendments or supplements thereto, that it may reasonably deem necessary or appropriate, and the Company may exclude from such registration the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request.

8

(o) The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as Holders of 20% in principal amount of the Securities registered under the Shelf Registration (such Holders being “Significant Holders”) shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration.

(p) In the case of any underwritten offering pursuant to Shelf Registration, the Company shall (i) make reasonably available for inspection by the Holders of the Securities, any underwriter participating in any disposition pursuant to the applicable Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of the Securities or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company’s officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any such underwriter, attorney, accountant or agent in connection with the applicable Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 4 hereof.

(q) In the case of any underwritten offering pursuant to Shelf Registration, the Company, if requested by any Significant Holders of Securities covered thereby, shall cause (i) its counsel to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Holders and the Managing Underwriters (as defined below), if any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement (it being agreed that the matters to be covered by such opinion shall include, without limitation, the due incorporation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(o) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the applicable Securities; the absence of material legal or governmental proceedings involving the Company and its subsidiaries; the absence of governmental approvals required to be obtained in connection with the applicable Shelf Registration Statement, the offering and sale of the applicable Securities, or any agreement of the type referred to in Section 3(o) hereof; the compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act, respectively; and, as of the date of the opinion and as of the effective date of the applicable Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from any documents incorporated by reference therein of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act); (ii) its officers to execute and deliver all customary documents and certificates and updates thereof requested by any underwriters of the applicable Securities and (iii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Shelf Registration Statement to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in

9

comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72.

(r) In the case of the Registered Exchange Offer, if requested by any Initial Purchaser or any known Participating Broker-Dealer, the Company shall cause (i) its counsel to deliver to such Initial Purchaser or such Participating Broker-Dealer a signed opinion in the form set forth in Sections 6(f) and 6(g) of the Purchase Agreement with such changes as are customary in connection with the preparation of a Registration Statement and (ii) its independent public accountants to deliver to such Initial Purchaser or such Participating Broker-Dealer a comfort letter, in customary form, meeting the requirements as to the substance thereof as set forth in Sections 6(a) and (j) of the Purchase Agreement, with appropriate date changes.

(s) If a Registered Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Initial Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, the Company shall mark, or cause to be marked, on the Initial Securities so exchanged that such Initial Securities are being canceled in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be; in no event shall the Initial Securities be marked as paid or otherwise satisfied.

(t) The Company will use its commercially reasonable efforts to (a) if the Initial Securities have been rated prior to the initial sale of such Initial Securities, confirm such ratings will apply to the Securities covered by a Registration Statement, or (b) if the Initial Securities were not previously rated, cause the Securities covered by a Registration Statement to be rated with the appropriate rating agencies, if so requested by Holders of a majority in aggregate principal amount of Securities covered by such Registration Statement, or by the Managing Underwriters, if any.

(u) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or “assist in the distribution” (within the meaning of the Conduct Rules (the “Rules”) of the National Association of Securities Dealers, Inc. (“NASD”)) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company will assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a “qualified independent underwriter” (as defined in Rule 2720) to participate in the preparation of the Registration Statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 5 hereof and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules.

(v) The Company shall use its commercially reasonable efforts to take all other steps necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby.

4. Registration Expenses. The Company shall bear all fees and expenses incurred in connection with the performance of its obligations under Sections 1 through 4 hereof (including the reasonable fees and expenses, if any, of Cravath, Swaine & Moore LLP, counsel for the Initial Purchasers, incurred in connection with the Registered Exchange Offer), whether or not the applicable Exchange Offer Registration Statement or a Shelf Registration is filed or becomes effective, and, in the event of a Shelf Registration, shall bear or reimburse the Holders of the Securities covered thereby for the reasonable fees and

10

disbursements of one firm of counsel designated by the Holders of a majority in principal amount of the Initial Securities covered thereby to act as counsel for the Holders of the Initial Securities in connection therewith.

5. Indemnification. (a) The Company agrees to indemnify and hold harmless each Holder of the Securities, any Participating Broker-Dealer and each person, if any, who controls such Holder or such Participating Broker-Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Participating Broker-Dealer and such controlling persons are referred to collectively as the “Indemnified Parties”) from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder, and furnished to the Company by or on behalf of such Holder, specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to a Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder or Participating Broker-Dealer from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered by such Holder or Participating Broker-Dealer under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder or Participating Broker-Dealer results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final prospectus if the Company had previously furnished copies thereof to such Holder or Participating Broker-Dealer; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. The Company shall also indemnify underwriters, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders.

(b) Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the

11

limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling persons.

(c) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party in writing of the commencement thereof; but the failure to notify the indemnifying party shall not relieve the indemnifying party from any liability that it may have under subsection (a) or (b) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the contrary; (ii) the indemnifying party has failed within a reasonable time to retain counsel reasonably satisfactory to the indemnified party; (iii) the indemnified party shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the indemnifying party; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood and agreed that the indemnifying party shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all indemnified parties, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm for any Initial Purchaser, its affiliates, directors and officers and any control persons of such Initial Purchaser shall be designated in writing by CSFB and any such separate firm for the Company, and any control persons of the Company shall be designated in writing by the Company. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

(d) If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the exchange of the Securities, pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in

12

clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or such Holder or such other indemnified party on the other hand, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 5(d), the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company.

(e) The agreements contained in this Section 5 shall survive the sale of the Securities pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party.

6. Additional Interest Under Certain Circumstances. (a) Additional interest (the “Additional Interest”) with respect to the Initial Securities of a given series shall be assessed as follows if any of the following events occur in respect of such series (each such event in clauses (i) through (iii) below a “Registration Default”):

(i) if the Company fails to file an Exchange Offer Registration Statement with the Commission on or prior to the second anniversary after the Issue Date;

(ii) if the Exchange Offer Registration Statement is not declared effective by the Commission on or prior to the 870^th day (or if the 870^th day is not a business day, the first business day thereafter) after the Issue Date or, if obligated to file a Shelf Registration Statement pursuant to paragraph 2(b)(A) of Section 2, a Shelf Registration Statement is not declared effective by the Commission on or prior to the 910^th day after the Issue Date;

(iii) the Registered Exchange Offer has not been consummated on or prior to the 40^th day (or if the 40^th day is not a business day, the first business day thereafter) after the Exchange Offer Registration Statement is declared effective;

(iv) if obligated to file the Shelf Registration Statement pursuant to subsection (b)(B) of Section 2, the Company fails to file the Shelf Registration Statement with the Commission on or prior to the 60^th day (or if the 60^th day is not a business day, the first business day thereafter) (the “Shelf Filing Date”) after the date on which the obligation to file a Shelf Registration Statement arises;

(v) if obligated to file a Shelf Registration Statement pursuant to paragraph 2(b)(B) of Section 2, the Shelf Registration Statement is not declared effective on or prior to the 90^th day (or if the 90^th day is not a business day, the first business day thereafter) after the Shelf Filing Date; or

13

(vi) any Registration Statement required by this agreement has been declared effective and (A) such Registration Statement thereafter ceases to be effective; or (B) such Registration Statement or the related prospectus ceases to be usable in connection with resales of Transfer Restricted Securities during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (2) it shall be necessary to amend such Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder.

Except during any Shelf Suspension Period referred to in Section 2, Additional Interest shall accrue on the Initial Securities of the relevant series over and above the interest set forth in the title of the Securities of that series from and including the date on which any such Registration Default shall occur, at a rate of 0.25% per annum for the first 90-day period immediately following the occurrence of such Registration Default, and such rate will increase by an additional 0.25% per annum with respect to each subsequent 90-day period until all Registration Defaults in respect of that series have been cured, up to a maximum Additional Interest rate of 1.0% per annum.

(b) A Registration Default referred to in Section 6(a)(vi) hereof shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material events with respect to the Company that would need to be described in such Shelf Registration Statement or the related prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events. Upon the cure of all Registration Defaults in respect of a given series of Securities, additional interest shall cease to accrue in respect of that series of Initial Securities.

(c) Any amounts of Additional Interest due pursuant to Section 6(a) above will be payable in cash on the regular interest payment dates with respect to the Initial Securities. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the Initial Securities of the relevant series, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360.

(d) “Transfer Restricted Securities” means each Security of a given series until (i) the date on which such Transfer Restricted Security has been exchanged by a person other than a broker-dealer for a freely transferable Exchange Security of the same series in the Registered Exchange Offer with respect to such series, (ii) following the exchange by a broker-dealer in the Registered Exchange Offer with respect to such series of an Initial Security for an Exchange Security, the date on which such Exchange Security is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement with respect to such series, (iii) the date on which such Initial Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Initial Securities is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.

14

(e) Notwithstanding any other provisions of this Section 6, the Company shall not be obligated to pay Additional Interest provided in Section 6(a)(ii) during a Shelf Suspension Period permitted by Section 2 hereof.

7. Rules 144 and 144A. The Company shall use its commercially reasonable efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Initial Securities, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any Holder of Initial Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Initial Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Initial Securities identified to the Company by the Initial Purchasers upon request. Upon the request of any Holder of Initial Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act.

8. Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering (“Managing Underwriters”) will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities to be included in such offering.

No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person’s Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.

9. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the Holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consents.

(b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery:

(1) if to a Holder of the Securities, at the most current address given by such Holder to the Company.

(2) if to the Initial Purchasers:

Credit Suisse First Boston LLC

Eleven Madison Avenue

New York, NY 10010-3629

Fax No.: (212) 325-4296

Attention: Transactions Advisory Group

with a copy to:

Cravath, Swaine & Moore LLP

825 Eighth Avenue

15

Worldwide Plaza

New York, NY 10019-7475

Fax No.: (212) 474-3700

Attention: George A. Stephanakis

(3) if to the Company, at its address as follows:

Targa Resources, Inc.

Targa Resources Finance Corporation

1000 Louisiana Street, Suite 4700

Houston, Texas 77002

Fax No.: (713) 584-1110

Attention: General Counsel

with a copy to:

Cleary Gottlieb Steen & Hamilton LLP

One Liberty Plaza

New York, NY 10006

Fax No.: (212) 225-3999

Attention: Jorge U. Juantorena

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient’s facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery.

(c) No Inconsistent Agreements. The Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof.

(d) Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns.

(e) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

(h) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

(i) Securities Held by the Company. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates

16

solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

(j) Submission to Jurisdiction; Waiver of Immunities. Each of the parties hereto hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. To the extent that any such party may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, it hereby irrevocably waives such immunity in respect of this Agreement, to the fullest extent permitted by law.

17

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Initial Purchasers and the Issuer and the Guarantors in accordance with its terms.

Very truly yours,
TARGA RESOURCES, INC.
	By	/s/ Jeffrey J. McParland
		Name:	Jeffrey J. McParland
		Title:	Executive Vice President, Chief Financial Officer and Treasurer
TARGA RESOURCES FINANCE CORPORATION
	By	/s/ Jeffrey J. McParland
		Name:	Jeffrey J. McParland
		Title:	Executive Vice President, Chief Financial Officer and Treasurer
TARGA TEXAS FIELD SERVICES LP
	By	TARGA RESOURCES TEXAS GP LLC, its general partner
		/s/ Jeffrey J. McParland
		Name:	Jeffrey J. McParland
		Title:	Executive Vice President, Chief Financial Officer and Treasurer
TARGA RESOURCES HOLDINGS LP
	By	TARGA RESOURCES HOLDINGS GP, its general partner
		/s/ Jeffrey J. McParland
		Name:	Jeffrey J. McParland
		Title:	Executive Vice President, Chief Financial Officer and Treasurer

18

TARGA LOUISIANA FIELD SERVICES LLC TARGA LOUISIANA INTRASTATE LLC TARGA RESOURCES LLC TARGA RESOURCES II LLC TARGA RESOURCES HOLDINGS GP LLC TARGA RESOURCES TEXAS GP LLC TARGA MIDSTREAM GP LLC
By	/s/ Jeffrey J. McParland
	Name:	Jeffrey J. McParland
	Title:	Executive Vice President, Chief Financial Officer and Treasurer

19

The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written.
	Acting on behalf of themselves and as the Representatives of the several Purchasers.
	BY CREDIT SUISSE FIRST BOSTON LLC,
		By	/s/ Ed York
			Name: Ed York
			Title:   Managing Director
	BY MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
		By	/s/ Robert A. Pacha
			Name: Robert A. Pacha
			Title:   Managing Director
	BY GOLDMAN, SACHS & CO.,
		By	/s/ Goldman, Sachs & Co.
			(Goldman, Sachs & Co.)

20

ANNEX A

Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Initial Securities where such Initial Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”

ANNEX B

Each broker-dealer that receives Exchange Securities for its own account in exchange for Initial Securities, where such Initial Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See “Plan of Distribution.”

ANNEX C

PLAN OF DISTRIBUTION

Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Initial Securities where such Initial Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until                     , 200[•], all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus.⁽¹⁾

The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

⁽¹⁾ In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Exchange Offer prospectus.

ANNEX D

¨ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

Name:

Address:

If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

SCHEDULE A

List of Initial Purchasers

Credit Suisse First Boston LLC

Merrill Lynch, Pierce, Fenner & Smith Incorporated

Goldman, Sachs & Co.

Banc of America Securities LLC

Lehman Brothers Inc.

Wachovia Capital Markets, LLC

SCHEDULE B

List of Subsidiary Guarantors

Targa Subsidiary Guarantors

Targa Louisiana Field Services LLC

Targa Louisiana Intrastate LLC

Targa Resources LLC

Targa Resources II LLC

Targa Resources Holdings GP LLC

Targa Resources Holdings LP

Targa Resources Texas GP LLC

Targa Texas Field Services LP

Targa Midstream GP LLC

DMS Subsidiary Guarantors

Dynegy Energy Pipeline, L.L.C.

Dynegy Intrastate Pipeline, L.L.C.

Dynegy Liquids G.P., L.L.C.

Dynegy Liquids Marketing and Trade

Dynegy NGL Pipeline Company, LLC

Dynegy OPI, LLC

Dynegy Regulated Holdings LLC

Midstream Barge Company L.L.C.

EXHIBIT I

[TO BE SIGNED BY THE DMS SUBSIDIARY GUARANTORS]

Counterpart to the Purchase Agreement

Upon consummation of the Acquisition, the undersigned hereby agrees to assume and be bound by all of the obligations of a Guarantor under the terms of the Registration Rights Agreement dated October 31, 2005, among Targa Resources, Inc., a Delaware corporation, Targa Resources Finance Corporation, a Delaware corporation, and the Purchasers. For the avoidance of doubt, such obligations shall include, but not be limited to, the obligations enumerated in Section 5(a) of the Registration Rights Agreement. The undersigned hereby also agrees that all references to the “Company” and “Guarantor” in the Registration Rights Agreement shall include the undersigned and the undersigned shall be bound by all provisions of the Registration Rights Agreement containing such references. Capitalized terms used, but not defined, in this Counterpart to the Registration Rights Agreement shall have meanings assigned to them in the Registration Rights Agreement.

Dated: October 31, 2005

DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP
By:	TARGA MIDSTREAM GP LLC, its general partner
	Name:	Jeffrey J. McParland
	Title:	Executive Vice President, Chief Financial Officer and Treasurer
DYNEGY ENERGY PIPELINE, L.L.C. DYNEGY INTRASTATE PIPELINE, L.L.C. DYNEGY LIQUIDS G.P., L.L.C. DYNEGY LIQUIDS MARKETING AND TRADE DYNEGY NGL PIPELINE COMPANY, LLC DYNEGY OPI, LLC DYNEGY REGULATED HOLDINGS LLC MIDSTREAM BARGE COMPANY L.L.C.
By:
	Name:	Jeffrey J. McParland
	Title:	Executive Vice President, Chief Financial Officer and Treasurer

EX-5.1

Exhibit 5.1

October 31, 2007

Targa Resources, Inc.

1000 Louisiana, Suite 4300

Houston, Texas 77002

Ladies and Gentlemen:

We have acted as counsel for Targa Resources, Inc., a Delaware corporation (the “Company”), and its subsidiaries with respect to the preparation of the Registration Statement on Form S-4 (the “Registration Statement”) filed with the Securities and Exchange Commission (the “Commission”) in connection with the registration by the Company under the Securities Act of 1933, as amended (the “Securities Act”), of (i) the offer and exchange by the Company (the “Exchange Offer”) of $250,000,000 aggregate principal amount of its 8 ¹/2% Senior Notes due 2013 (the “Initial Notes”), for a new series of notes bearing substantially identical terms and in like principal amount (the “Exchange Notes”) and (ii) the guarantees (the “Guarantees”) by each of the subsidiaries of the Company listed in the Registration Statement as guarantors (the “Guarantors”) of the Initial Notes and the Exchange Notes. The Initial Notes and the Exchange Notes are collectively referred to herein as the “Notes.” The Initial Notes were issued, and the Exchange Notes will be issued, under an Indenture dated as of October 31, 2005 among the Company, the Guarantors and Wells Fargo Bank, National Association, as Trustee (the “Indenture”). The Exchange Offer will be conducted on such terms and conditions as are set forth in the prospectus contained in the Registration Statement to which this opinion is an exhibit.

We have examined originals or copies, certified or otherwise identified to our satisfaction, of (i) the Registration Statement, (ii) the Indenture (including the Guarantees contained therein), (iii) the certificates of incorporation, certificates of limited partnership, certificates of formation, operating agreements, bylaws or other organizational documents of the Company and the Guarantors and (iii) such other certificates, statutes and other instruments and documents as we considered appropriate for purposes of the opinions hereafter expressed. In connection with this opinion, we have assumed that the Registration Statement, and any amendments thereto (including post-effective amendments), will have become effective and the Exchange Notes will be issued and sold in compliance with applicable federal and state securities laws and in the manner described in the Registration Statement.

Based on the foregoing, we are of the opinion that when the Exchange Notes have been duly executed, authenticated, issued and delivered in accordance with the provisions of the Indenture, (i) such Exchange Notes will be legally issued and will constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms, and (ii) the Guarantees of the Guarantors remain valid and binding obligations of such subsidiaries, enforceable against each such Guarantor, in accordance with their terms, except in each case as such enforcement is subject to any applicable bankruptcy, insolvency, reorganization or other law relating to or affecting creditors’ rights generally and general principles of equity.

We express no opinions concerning (a) the validity or enforceability of any provisions contained in the Indenture that purport to waive or not give effect to rights to notices, defenses, subrogation or other rights or benefits that cannot be effectively waived under applicable law; or (b) the enforceability of indemnification provisions to the extent they purport to relate to liabilities resulting from or based upon negligence or any violation of federal or state securities or blue sky laws.

The opinions expressed herein are limited exclusively to the federal laws of the United States of America, the laws of the State of New York, the laws of the State of Delaware, the laws of the State of Texas, and we are expressing no opinion as to the effect of the laws of any other jurisdiction, domestic or foreign.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our firm name in the prospectus forming a part of the Registration Statement under the caption “Legal Matters.” By giving such consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission issued thereunder.

Very truly yours,

/s/ Vinson & Elkins L.L.P.

EX-10.1

Exhibit 10.1

EXECUTION COPY

CREDIT AGREEMENT

Dated as of October 31, 2005

among

TARGA RESOURCES, INC.,

as Borrower,

THE LENDERS NAMED HEREIN,

and

CREDIT SUISSE,

as Administrative Agent, Swing Line Lender,

Revolving L/C Issuer and Synthetic L/C Issuer

CREDIT SUISSE, and

MERRILL LYNCH, PIERCE,

FENNER & SMITH INCORPORATED,

as Joint Lead Arrangers,

and

CREDIT SUISSE,

MERRILL LYNCH, PIERCE,

FENNER & SMITH INCORPORATED, and

GOLDMAN SACHS CREDIT PARTNERS L.P.,

as Joint Bookrunners

and

MERRILL LYNCH CAPITAL CORPORATION,

as Syndication Agent

and

BANK OF AMERICA, N.A.

LEHMAN COMMERCIAL PAPER INC., and

WACHOVIA BANK, N.A.

as Co-Documentation Agents

TABLE OF CONTENTS

ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
		Page
SECTION 1.01.	Defined Terms	2
SECTION 1.02.	Other Interpretive Provisions	57
SECTION 1.03.	Accounting Terms	58
SECTION 1.04.	Rounding	58
SECTION 1.05.	References to Agreements, Laws, Etc.	58
SECTION 1.06.	Times of Day	58
SECTION 1.07.	Timing of Payment or Performance	58
ARTICLE II
THE COMMITMENTS AND CREDIT EXTENSIONS
SECTION 2.01.	The Loans	59
SECTION 2.02.	Borrowings, Conversions and Continuations of Loans	60
SECTION 2.03.	Letters of Credit	62
SECTION 2.04.	Swing Line Loans	73
SECTION 2.05.	Prepayments	76
SECTION 2.06.	Termination or Reduction of Commitments	81
SECTION 2.07.	Repayment of Loans	81
SECTION 2.08.	Interest	81
SECTION 2.09.	Fees	83
SECTION 2.10.	Computation of Interest and Fees	84
SECTION 2.11.	Evidence of Indebtedness	84
SECTION 2.12.	Payments Generally	85
SECTION 2.13.	Sharing of Payments	87
SECTION 2.14.	Incremental Credit Extensions	88
ARTICLE III
TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY
SECTION 3.01.	Taxes	91
SECTION 3.02.	Illegality	93
SECTION 3.03.	Inability to Determine Rates	94
SECTION 3.04.	Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Rate Loans	94
SECTION 3.05.	Funding Losses	96
SECTION 3.06.	Matters Applicable to All Requests for Compensation	97
SECTION 3.07.	Replacement of Lenders under Certain Circumstances	98
SECTION 3.08.	Survival	99

ARTICLE IV
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
SECTION 4.01.	Conditions of Initial Credit Extension	99
SECTION 4.02.	Conditions to All Credit Extensions	103
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01.	Existence, Qualification and Power; Compliance with Laws	104
SECTION 5.02.	Authorization; No Contravention	104
SECTION 5.03.	Governmental Authorization; Other Consents	104
SECTION 5.04.	Binding Effect	105
SECTION 5.05.	Financial Statements; No Material Adverse Effect	105
SECTION 5.06.	Litigation	106
SECTION 5.07.	No Default	106
SECTION 5.08.	Ownership of Property; Liens	106
SECTION 5.09.	Environmental Matters	107
SECTION 5.10.	Taxes	108
SECTION 5.11.	ERISA Compliance	108
SECTION 5.12.	Subsidiaries; Equity Interests	108
SECTION 5.13.	Margin Regulations; Investment Company Act; Public Utility Holding Company Act	109
SECTION 5.14.	Disclosure	109
SECTION 5.15.	Intellectual Property; Licenses, Etc.	109
SECTION 5.16.	Solvency	110
SECTION 5.17.	Labor Matters	110
SECTION 5.18.	Insurance	110
ARTICLE VI
AFFIRMATIVE COVENANTS
SECTION 6.01.	Financial Statements	110
SECTION 6.02.	Certificates; Other Information	112
SECTION 6.03.	Notices	113
SECTION 6.04.	Payment of Obligations	114
SECTION 6.05.	Preservation of Existence, Etc.	114
SECTION 6.06.	Maintenance of Properties	114
SECTION 6.07.	Maintenance of Insurance	114
SECTION 6.08.	Compliance with Laws	115
SECTION 6.09.	Books and Records	115
SECTION 6.10.	Inspection Rights	115
SECTION 6.11.	Covenant to Guarantee Obligations and Give Security	115

ii

SECTION 6.12.	Compliance with Environmental Laws	117
SECTION 6.13.	Further Assurances and Post-Closing Conditions	117
SECTION 6.14.	Maintenance of Ratings	118
SECTION 6.15.	Interest Rate Protection	118
SECTION 6.16.	Maintenance of Corporate Separateness	118
SECTION 6.17.	Information Regarding Collateral	118
SECTION 6.18.	Designation of Subsidiaries	118
ARTICLE VII
NEGATIVE COVENANTS
SECTION 7.01.	Liens	120
SECTION 7.02.	Investments	123
SECTION 7.03.	Indebtedness	127
SECTION 7.04.	Fundamental Changes	131
SECTION 7.05.	Dispositions	133
SECTION 7.06.	Restricted Payments	135
SECTION 7.07.	Change in Nature of Business	137
SECTION 7.08.	Transactions with Affiliates	137
SECTION 7.09.	Burdensome Agreements	138
SECTION 7.10.	Use of Proceeds	139
SECTION 7.11.	Financial Covenants	139
SECTION 7.12.	Accounting Changes	140
SECTION 7.13.	Prepayments, Etc. of Indebtedness	140
SECTION 7.14.	Equity Interests of the Borrower and Restricted Subsidiaries	141
SECTION 7.15.	Capital Expenditures	141
SECTION 7.16.	Amendment of Other Indebtedness and Agreements	142
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01.	Events of Default	142
SECTION 8.02.	Remedies Upon Event of Default	144
SECTION 8.03.	Exclusion of Immaterial Subsidiaries	145
SECTION 8.04.	Application of Funds	145
SECTION 8.05.	Borrower’s Right to Cure	147
ARTICLE IX
ADMINISTRATIVE AGENT AND OTHER AGENTS
SECTION 9.01.	Appointment and Authorization of Agents	147
SECTION 9.02.	Delegation of Duties	148
SECTION 9.03.	Liability of Agents	149

iii

SECTION 9.04.	Reliance by Agents	149
SECTION 9.05.	Notice of Default	149
SECTION 9.06.	Credit Decision; Disclosure of Information by Agents	150
SECTION 9.07.	Indemnification of Agents	150
SECTION 9.08.	Agents in their Individual Capacities	151
SECTION 9.09.	Successor Agents	151
SECTION 9.10.	Administrative Agent May File Proofs of Claim	152
SECTION 9.11.	Collateral and Guaranty Matters	153
SECTION 9.12.	Other Agents; Arrangers and Managers	154
SECTION 9.13.	Appointment of Supplemental Agents	154
ARTICLE X
MISCELLANEOUS
SECTION 10.01.	Amendments, Etc.	155
SECTION 10.02.	Notices and Other Communications; Facsimile Copies	157
SECTION 10.03.	No Waiver; Cumulative Remedies	159
SECTION 10.04.	Attorney Costs, Expenses and Taxes	159
SECTION 10.05.	Indemnification by the Borrower	159
SECTION 10.06.	Payments Set Aside	160
SECTION 10.07.	Successors and Assigns	161
SECTION 10.08.	Confidentiality	165
SECTION 10.09.	Setoff	166
SECTION 10.10.	Interest Rate Limitation	167
SECTION 10.11.	Counterparts	167
SECTION 10.12.	Integration	167
SECTION 10.13.	Survival of Representations and Warranties	167
SECTION 10.14.	Severability	168
SECTION 10.15.	Tax Forms	168
SECTION 10.16.	Governing Law	170
SECTION 10.17.	Waiver of Right to Trial by Jury	170
SECTION 10.18.	Binding Effect	171
SECTION 10.19.	Lender Action	171
SECTION 10.20.	USA PATRIOT Act	171

iv

SCHEDULES

I	Subsidiary Guarantors
1.01A	[reserved]
1.01B	Certain Security Interests and Subsidiary Guarantees
1.01C	Unrestricted Subsidiaries
1.01D	Material Financeable Leases
1.01E	Material Pipelines
1.01F	Material Fee Owned Properties
1.01G	Excluded Subsidiary
1.01H	Foreign Subsidiary
1.01I	Certain Permitted Hedging Parties
2.01	Commitments
5.08(a)	Real Property
5.08(d)	Real Property Proceedings
5.08(e)	Rights of First Refusal, Options, Etc.
5.09	Environmental Matters
5.10	Taxes
5.11	ERISA Compliance
5.12	Subsidiaries and Other Equity Investments
5.18	Insurance
7.01(b)	Existing Liens
7.02(f)	Existing Investments
7.03(b)	Existing Indebtedness
7.08	Transactions with Affiliates
7.09	Existing Restrictions
10.02	Administrative Agent’s Office, Certain Addresses for Notices

EXHIBITS

Form of
A	Committed Loan Notice
B	Swing Line Loan Notice
C-1	Term Note
C-2	Bridge Note
C-3	Revolving Credit Note
C-4	Synthetic L/C Note
D	Compliance Certificate
E	Assignment and Assumption
F	Guarantee Agreement
G	Security Agreement
H	Mortgage
I	[reserved]
J-1	Opinion Matters — Counsel to Loan Parties — Cleary Gottlieb Steen & Hamilton LLP

v

J-2	Opinion Matters — Counsel to Loan Parties — Vinson & Elkins LLP
J-3	Opinion Matters — Counsel to Loan Parties — Morris, James, Hitchens & Williams LLP
K	Intercreditor Agreement
L	Subordination Terms for Debt to GP

vi

CREDIT AGREEMENT

This CREDIT AGREEMENT is entered into as of October 31, 2005, among TARGA RESOURCES, INC., a Delaware corporation, each lender from time to time party hereto and CREDIT SUISSE, as Administrative Agent, Swing Line Lender, a Revolving L/C Issuer and the Synthetic L/C Issuer.

PRELIMINARY STATEMENTS

Pursuant to the PIPA (as this and other capitalized terms used in these preliminary statements are defined in Section 1.01 below), Targa Resources Holdings LP shall acquire all of the outstanding limited partnership interests of DMS and Targa Midstream shall acquire all of the outstanding general partnership interests of DMS (the “Acquisition”).

The Borrower has requested that, simultaneously with the consummation of the Acquisition, the Lenders extend credit to the Borrower in the form of (i) Term Loans in an initial aggregate principal amount of $1,250,000,000, (ii) Bridge Loans in an initial aggregate principal amount of $700,000,000, (iii) a Revolving Credit Facility in an initial aggregate principal amount of $250,000,000 and (iv) a Synthetic L/C Facility in an initial aggregate principal amount of $300,000,000. The Revolving Credit Facility may include one or more Swing Line Loans and one or more Revolving Letters of Credit from time to time.

The proceeds of the Term Loans and the Bridge Loans, together with the proceeds of the issuance of the Senior Unsecured Notes and the Equity Contribution, will be used to finance the repayment of certain existing Indebtedness of the Borrower and its Subsidiaries and pay the Acquisition Consideration and the Transaction Expenses. The proceeds of any Revolving Credit Loans made on the Closing Date will be used only to fund any portion of the Acquisition Consideration resulting from any working capital adjustment thereto up to $50,000,000 and to fund the replacement of, and Letters of Credit to replace, cash collateral arrangements of DMS. The proceeds of Revolving Credit Loans made after the Closing Date will be used for working capital and other general corporate purposes of the Borrower and its Subsidiaries, including the financing of Permitted Acquisitions. Swing Line Loans will be used for general corporate purposes of the Borrower and its Subsidiaries, and Letters of Credit will be used solely to support payment obligations incurred in the ordinary course of business by the Borrower and its Subsidiaries.

The applicable Lenders have indicated their willingness to extend credit hereunder, and the L/C Issuers have indicated their willingness to issue Letters of Credit, in each case, on the terms and subject to the conditions set forth herein.

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I

Definitions and Accounting Terms

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:

“Acquired EBITDA” means, with respect to any Acquired Entity or Business for any period, the amount for such period of Consolidated EBITDA of such Acquired Entity or Business (determined as if references to the Borrower and the Restricted Subsidiaries in the definition of “Consolidated EBITDA” were references to such Acquired Entity or Business and its Subsidiaries), all as determined on a consolidated basis for such Acquired Entity or Business.

“Acquired Entity or Business” has the meaning set forth in the definition of “Consolidated EBITDA”.

“Acquired Non-Guarantor” means any Person any Equity Interests in which are owned, directly or indirectly, by an Acquired Entity or Business resulting from a Permitted Acquisition (provided that such Equity Interests in such Person are so owned at the time of such Permitted Acquisition), if such Person is not required to become a Subsidiary Guarantor pursuant to the Collateral and Guarantee Requirement after giving effect to such Permitted Acquisition; provided that such Person shall cease to be an Acquired Non-Guarantor if and when such Acquired Non-Guarantor is required to become, and becomes, a Subsidiary Guarantor.

“Acquisition” has the meaning set forth in the preliminary statements to this Agreement.

“Acquisition Consideration” means the total funds required to consummate the Acquisition.

“Additional Lender” has the meaning set forth in Section 2.14(a).

“Administrative Agent” means Credit Suisse, acting through one or more of its branches or Affiliates, in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

“Administrative Agent’s Office” means the Administrative Agent’s address and account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify the Borrower and the Lenders.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. “Control” means the possession,

2

directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Agent-Related Persons” means, with respect to any Agent, such Agent, together with its Affiliates, and the officers, directors, employees, agents, advisors and attorneys-in-fact of such Agent and its Affiliates.

“Agents” means, collectively, the Administrative Agent, the Collateral Agent, the Syndication Agent and the Supplemental Agents (if any).

“Aggregate Commitments” means the Commitments of all the Lenders.

“Agreement” means this Credit Agreement.

“Applicable Rate” means a percentage per annum equal to:

(a) with respect to Term Loans, (i) for Eurodollar Rate Loans, 2.25% (or, commencing on the first Business Day immediately following the payment in full of all Obligations relating to the Bridge Loans, 2.00%) and (ii) for Base Rate Loans, 1.25% (or, commencing on the first Business Day immediately following the payment in full of all Obligations relating to the Bridge Loans, 1.00%);

(b) with respect to Bridge Loans, (i) for Eurodollar Rate Loans, 2.25% and (ii) for Base Rate Loans, 1.25%; and

(c) with respect to Revolving Credit Loans, unused Revolving Credit Commitments and Revolving Letter of Credit fees, (i) until delivery of financial statements for the first full fiscal quarter commencing on or after the Closing Date pursuant to Section 6.01, (A) for Eurodollar Rate Loans, 2.25%, (B) for Base Rate Loans, 1.25%, (C) for Revolving Letter of Credit fees, 2.25% and (D) for commitment fees, 0.50% and (ii) thereafter, the following percentages per annum, based upon the Total Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(b):

Applicable Rate
Pricing Level	Total Leverage Ratio	Eurodollar Rate and Revolving Letter of Credit Fees		Base Rate		Commitment Fee Rate
1	>5.5	2.25	%	1.25	%	0.50	%
2	>4.5 - < 5.5	2.00	%	1.00	%	0.375	%
3	< 4.5	1.75	%	0.75	%	0.375	%

Any increase or decrease in the Applicable Rate resulting from a change in the Total Leverage Ratio shall become effective as of the first Business Day immediately following

3

the date a Compliance Certificate is delivered pursuant to Section 6.02(b); provided that at the option of the Administrative Agent or the Required Lenders, the highest Pricing Level (i.e., the Pricing Level that produces the highest Applicable Rate) shall apply (x) as of the first Business Day after the date on which a Compliance Certificate was required to have been delivered but was not delivered, and shall continue to so apply to and including the date on which such Compliance Certificate is so delivered (and thereafter the Pricing Level otherwise determined in accordance with this definition shall apply) and (y) as of the first Business Day after an Event of Default under Section 8.01(a) shall have occurred and be continuing, and shall continue to so apply to but excluding the date on which such Event of Default is cured or waived (and thereafter the Pricing Level otherwise determined in accordance with this definition shall apply).

“Appropriate Lender” means, at any time, (a) with respect to Loans of any Class, the Lenders of such Class, (b) with respect to Letters of Credit, (i) the relevant L/C Issuers and (ii) (x) with respect to any Revolving Letters of Credit issued pursuant to Section 2.03(a), the Revolving Credit Lenders and (y) with respect to any Synthetic L/C Letters of Credit issued pursuant to Section 2.03(a), the Synthetic L/C Lenders and (c) with respect to the Swing Line Facility, (i) the Swing Line Lender and (ii) if any Swing Line Loans are outstanding pursuant to Section 2.04(a), the Revolving Credit Lenders.

“Approved Fund” means any Fund that is administered, advised or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers, advises or manages a Lender.

“Arrangers” means Credit Suisse, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Goldman Sachs Credit Partners L.P., each in its capacity as a Joint Bookrunner and, in the case of Credit Suisse and Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Joint Lead Arranger under this Agreement.

“Asset Disposition Event” means the Disposition by the Borrower or any Restricted Subsidiary of any asset (other than any Disposition of any asset permitted by Section 7.05(a), (b), (c), (d) (to the extent constituting a Disposition by the Borrower or any Restricted Subsidiary to a Loan Party), (e), (f), (g), (h) or (i), or any Permitted MLP Transfer, Permitted GP Transfer or North Texas Asset Sale) or any Casualty Event.

“Assignees” has the meaning set forth in Section 10.07(b).

“Assignment and Assumption” means an Assignment and Assumption substantially in the form of Exhibit E.

“Attorney Costs” means and includes all reasonable fees, expenses and disbursements of any law firm or other external legal counsel.

“Attributable Indebtedness” means, on any date, in respect of any Capitalized Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.

4

“Audited Financial Statements” means (a) (i)the audited consolidated balance sheets of DMS and its Subsidiaries as of each of December 31, 2004 and 2003 and (ii) the Borrower and its Subsidiaries as of December 31, 2004, and (b) the related audited consolidated statements of income, stockholders’ equity and cash flows for (i) DMS and its Subsidiaries for the fiscal years ended December 31, 2004, 2003 and 2002, respectively and (ii) the Borrower and its Subsidiaries for the eight and one-half month period ended December 31, 2004.

“Auto-Renewal Letter of Credit” has the meaning set forth in Section 2.03(b)(iii).

“Back-to-Back Swap Contracts” means, in connection with an MLP Asset Transfer, back-to-back agreements with the applicable MLP or Subsidiary thereof providing for the effective transfer of any portion of the hedges provided under a Swap Contract maintained by the Borrower or a Restricted Subsidiary related to any assets that are the subject of an MLP Asset Transfer; provided that the Borrower’s or such Restricted Subsidiary’s interests in any such Back-to-Back Swap Contracts are pledged as Collateral (and any Restricted Subsidiary holding interests in a Back-to-Back Swap Contract becomes a Subsidiary Guarantor, if it is not then a Subsidiary Guarantor).

“Base Rate” means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the Prime Rate in effect on such day. If the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Base Rate shall be determined without regard to clause (a) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Rate, as the case may be.

“Base Rate Loan” means a Loan that bears interest based on the Base Rate.

“Borrower” means Targa Resources, Inc., a Delaware corporation.

“Borrowing” means a Revolving Credit Borrowing, a Swing Line Borrowing, a Term Borrowing, a Bridge Borrowing or a Synthetic L/C Borrowing, as the context may require.

“Bridge Borrowing” means a borrowing consisting of simultaneous Bridge Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Bridge Lenders pursuant to Section 2.01.

“Bridge Commitment” means, as to each Bridge Lender, its obligation to make a Bridge Loan to the Borrower pursuant to Section 2.01(b) in an aggregate principal amount not to exceed the amount set forth opposite such Lender’s name on

5

Schedule 2.01 under the caption “Bridge Commitment” or in the Assignment and Assumption pursuant to which such Bridge Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement. The initial aggregate amount of the Bridge Commitments is $700,000,000.

“Bridge Lender” means, at any time, any Lender that has a Bridge Commitment or a Bridge Loan at such time.

“Bridge Loan” means a Loan made pursuant to Section 2.01(b).

“Bridge Note” means a promissory note of the Borrower payable to any Bridge Lender or its registered assigns, in substantially the form of Exhibit C-2 hereto, evidencing the aggregate Indebtedness of the Borrower to such Bridge Lender in respect of the Bridge Loans of such Bridge Lender.

“Business Day” means (a) any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, New York City and (b) if such day relates to any interest rate settings as to a Eurodollar Rate Loan, any fundings, disbursements, settlements and payments in respect of any such Eurodollar Rate Loan, or any other dealings to be carried out pursuant to this Agreement in respect of any such Eurodollar Rate Loan, means any such day on which dealings in deposits in Dollars are conducted by and between banks in the London interbank eurodollar market.

“Capital Expenditures” means, for any period, the aggregate of (a) all expenditures (whether paid in cash or accrued as liabilities) by the Borrower and the Restricted Subsidiaries during such period that, in conformity with GAAP, are or are required to be included as additions during such period to property, plant or equipment reflected in the consolidated balance sheet of the Borrower and the Restricted Subsidiaries and (b) the value of all assets under Capitalized Leases incurred by the Borrower and the Restricted Subsidiaries during such period; provided that the term “Capital Expenditures” shall not include (i) expenditures made in connection with the replacement, substitution, restoration or repair of assets to the extent financed with (x) insurance proceeds paid on account of the loss of or damage to the assets being replaced, restored or repaired or (y) awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced, (ii) the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time, (iii) the purchase of plant, property or equipment or software to the extent financed with the proceeds of Dispositions that are not required to be applied to prepay Bridge Loans or Term Loans pursuant to Section 2.05(b), (iv) expenditures that constitute any part of Consolidated Lease Expense, (v) expenditures that are accounted for as capital expenditures by the Borrower or any Restricted Subsidiary and that actually are paid for by, or for which the Borrower or a Restricted Subsidiary receives reimbursement in cash (or through the contribution of commodities or other current assets or through rate and/or fee discounts) from a Person other than the Borrower or any Restricted Subsidiary and for

6

which neither the Borrower nor any Restricted Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such Person or any other Person (whether before, during or after such period), (vi) the book value of any asset owned by the Borrower or any Restricted Subsidiary prior to or during such period to the extent that such book value is included as a capital expenditure during such period as a result of such Person reusing or beginning to reuse such asset during such period without a corresponding expenditure actually having been made in such period, provided that (x) any expenditure necessary in order to permit such asset to be reused shall be included as a Capital Expenditure during the period in which such expenditure actually is made and (y) such book value shall have been included in Capital Expenditures when such asset was originally acquired, or (vii) expenditures that constitute Permitted Acquisitions. The Capital Expenditures of the Borrower and the Restricted Subsidiaries for any period shall include their pro rata share of the Capital Expenditures of the Existing JVs for such period (determined in accordance with the preceding sentence as though references to the Borrower and the Restricted Subsidiaries refer to each Existing JV and its consolidated subsidiaries).

“Capitalized Leases” means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases; provided that for all purposes hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted for as a liability in accordance with GAAP.

“Cash Collateral” has the meaning set forth in Section 2.03(f).

“Cash Collateral Account” means a blocked account at Credit Suisse (or another commercial bank selected in compliance with Section 9.09) in the name of the Administrative Agent and under the sole dominion and control of the Administrative Agent, and otherwise established in a manner satisfactory to the Administrative Agent.

“Cash Collateralize” has the meaning set forth in Section 2.03(f).

“Cash Equivalents” means any of the following types of Investments, to the extent owned by the Borrower or any Restricted Subsidiary:

(a) Dollars,

(b) (i) Canadian dollars; or (ii) in the case of any Foreign Subsidiary that is a Restricted Subsidiary, such local currencies held by it from time to time in the ordinary course of business,

(c) securities issued or directly and fully and unconditionally guaranteed or insured by the government of the United States of America or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and credit obligation of such government with maturities of 24 months or less from the date of acquisition,

(d) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances

7

with maturities not exceeding one year and overnight bank deposits, in each case with or of any commercial bank having capital and surplus in excess of $250,000,000,

(e) repurchase obligations for underlying securities of the types described in clauses (c) and (d) entered into with any financial institution meeting the qualifications specified in clause (d) above,

(f) commercial paper rated at least P-1 by Moody’s or at least A-1 by S&P and in each case maturing within 12 months after the date of issuance thereof,

(g) investment funds investing at least 95% of their assets in securities of the types described in clauses (a) through (f) above,

(h) readily marketable direct obligations issued by any state of the United States of America or any political subdivision thereof having one of the two highest rating categories obtainable from either Moody’s or S&P with maturities of 24 months or less from the date of acquisition and

(i) Indebtedness or Preferred Stock issued by Persons with a rating of “A” or higher from S&P or “A2” or higher from Moody’s with maturities of 12 months or less from the date of acquisition.

Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in one or more currencies other than those set forth in clauses (a) and (b) above; provided that such amounts are converted into the currencies set forth in clauses (a) and (b) above as promptly as practicable and in any event within ten Business Days following the receipt of such amounts.

“Cash Management Obligations” means obligations owed by the Borrower or any Restricted Subsidiary to any Lender or any Affiliate of a Lender in respect of any overdraft and related liabilities arising from treasury, depository and cash management services or any automated clearing house transfers of funds.

“Casualty Event” means any event that gives rise to the receipt by the Borrower or any Restricted Subsidiary of any insurance proceeds or condemnation awards in respect of any equipment, fixed assets or real property (including any improvements thereon).

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980.

“Change of Control” means the earlier to occur of (a) the Permitted Holders ceasing to have the power, directly or indirectly, to vote or direct the voting of a majority of the Voting Stock of the Borrower; provided that the occurrence of the foregoing event shall not be deemed a Change of Control if,

8

(i) any time prior to the consummation of a Qualifying IPO, and for any reason whatsoever, (A) the Permitted Holders otherwise have the right, directly or indirectly, to designate (and do so designate) a majority of the board of directors of the Borrower or (B) the Permitted Holders own, directly or indirectly, of record and beneficially an amount of Voting Stock of the Borrower that is more than fifty percent (50%) of the amount of Voting Stock of the Borrower owned, directly or indirectly, by the Permitted Holders of record and beneficially as of the Closing Date (determined by taking into account any stock splits, stock dividends or other events subsequent to the Closing Date that changed the amount of Voting Stock, but not the percentage of Voting Stock, held by the Permitted Holders) and such ownership by the Permitted Holders represents the largest single block of Voting Stock of the Borrower held by any Person or related group for purposes of Section 13(d) of the Exchange Act, or

(ii) at any time after the consummation of a Qualifying IPO, and for any reason whatsoever, (A) no “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such person and its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), excluding the Permitted Holders, shall become the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under such Act), directly or indirectly, of more than the greater of (x) thirty-five percent (35%) of outstanding Voting Stock of the Borrower and (y) the percentage of the then outstanding Voting Stock of the Borrower owned, directly or indirectly, beneficially by the Permitted Holders, and (B) during each period of twelve (12) consecutive months, a majority of the board of directors of the Borrower shall consist of the Continuing Directors; or

(b) any “Change of Control” (or any comparable term) in any document pertaining to the Senior Unsecured Notes or any Permitted Refinancing thereof.

“Class” (a) when used with respect to Lenders, refers to whether such Lenders are Revolving Credit Lenders, Term Lenders, Bridge Lenders or Synthetic L/C Lenders, (b) when used with respect to Commitments, refers to whether such Commitments are Revolving Credit Commitments, Term Commitments, Bridge Commitments or Synthetic L/C Commitments and (c) when used with respect to Loans or a Borrowing, refers to whether such Loans, or the Loans comprising such Borrowing, are Revolving Credit Loans, Term Loans, Bridge Loans or Synthetic L/C Loans.

“Closing Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 4.01.

“Closing Date Projections” has the meaning set forth in Section 4.01(g).

“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time, and rules and regulations related thereto.

9

“Collateral” means all the “Collateral” as defined in any Collateral Document and shall include the Material Fee Owned Properties and the Material Financeable Leases.

“Collateral Agent” means Credit Suisse, acting through one or more of its branches or Affiliates, in its capacity as collateral agent under any of the Loan Documents, or any successor collateral agent.

“Collateral and Guarantee Requirement” means, at any time, the requirement that:

(a) the Collateral Agent shall have received each Collateral Document required to be delivered on the Closing Date pursuant to Section 4.01(a)(iii) or pursuant to Section 6.11 at the time set forth therein, duly executed by each Loan Party thereto;

(b) all Obligations shall have been unconditionally guaranteed (the “Subsidiary Guarantees”) pursuant to the Subsidiary Guaranty by each Restricted Subsidiary that is a Domestic Subsidiary and not an Excluded Subsidiary (each, a “Subsidiary Guarantor”);

(c) all guarantees issued or to be issued in respect of the Senior Unsecured Notes or any Permitted Refinancing thereof shall provide for their automatic release upon a release of the corresponding Subsidiary Guarantee;

(d) the Obligations shall have been secured by a first-priority security interest in (i) all Equity Interests of each Subsidiary directly owned by any Loan Party, but excluding any Equity Interests in joint ventures existing on the Closing Date to the extent such a pledge would violate the Organization Documents thereof; and (ii) all Equity Interests in any MLP or GP owned directly by any Loan Party provided that pledges of voting Equity Interests of each Foreign Subsidiary shall be limited to 65% of the issued and outstanding voting Equity Interests of such Foreign Subsidiary at any time;

(e) except to the extent otherwise permitted hereunder or under any Collateral Document, the Obligations shall have been secured by a first-priority security interest in, and mortgages on, substantially all tangible and intangible assets of the Borrower and each Subsidiary Guarantor (including cash, deposit accounts and securities accounts, accounts receivable, inventory, equipment, investment property, contract rights, intellectual property, other general intangibles, owned and leased real property, commercial tort claims, letter of credit rights, intercompany notes and proceeds of the foregoing, but excluding any interests in joint ventures existing on the Closing Date to the extent such a pledge would violate the Organization Documents thereof and subject to the other exclusions expressly set forth in the Security Agreement) to the extent security interests in such assets (other than real property) can be created under the Uniform Commercial Code; provided, however, that security interests in real property shall be limited to the Material Fee Owned Properties, the Material Financeable Leases and the Material Pipelines, subject to the further limitation set forth in clause (h) below;

10

(f) the Collateral Agent shall have received (i) the results of a search of the Uniform Commercial Code filings made with respect to the Loan Parties in the states of formation of such Persons and in which the chief executive office of each such Person is located, together with copies of the financing statements disclosed by such search and (ii) the results of equivalent searches made in each other jurisdiction reasonably requested by the Administrative Agent or the Collateral Agent, in each case accompanied by evidence reasonably satisfactory to the Administrative Agent and the Collateral Agent that the Liens indicated in any such financing statement (or similar document) or otherwise disclosed in such searches would be permitted under Section 7.01 or have been released;

(g) none of the Collateral shall be subject to any Liens other than Liens permitted by Section 7.01; and

(h) the Collateral Agent shall have received:

(i) as of the Closing Date, (w) counterparts of a Mortgage or Collateral Assignment, as applicable, with respect to each Material Fee Owned Property and those Material Financeable Leases designated as “Tier 1” properties in Schedule 1.01D and each Material Pipeline identified in Schedule 1.01E, in each case, duly executed and delivered by the record owner or lessee, as applicable, of such property, (x) a policy or policies of title insurance issued by a nationally recognized title insurance company insuring the Lien of each such Mortgage (other than with respect to properties designated as “Tier 2” properties on Schedule 1.01D or 1.01F or the Material Pipelines) as a valid Lien on the property described therein, free of any other Liens except as expressly permitted by Section 7.01, together with such endorsements, coinsurance and reinsurance as the Administrative Agent may reasonably request (each, a “Title Policy”), (y) an opinion from each of Vinson & Elkins, LLP, Texas counsel to the Loan Parties, Lemle & Kelleher, Louisiana counsel to the Loan Parties, and Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., Florida counsel to the Loan Parties, with respect to the enforceability and perfection of such Mortgages and any related fixture filings, in each case in form and substance reasonably satisfactory to the Administrative Agent, and (z) such existing surveys, existing abstracts, existing appraisals, title information and other documents as the Administrative Agent may reasonably request with respect to any such mortgaged property;

(ii) on or after the Closing Date, but no later than 90 days after the Closing Date, (x) counterparts of a Mortgage or Collateral Assignment, as applicable, with respect to each Material Financeable Lease that is designated as a “Tier 2” property on Schedule 1.01D, in each case, duly executed and delivered by the record owner or lessee, as applicable, of such property, (y) a Title Policy in respect of each such Mortgage and each Mortgage delivered as of the Closing Date pursuant to clause (i) above with respect to Material Fee Owned Property

11

designated as “Tier 2” properties on Schedule 1.01F and (z) such existing surveys, existing abstracts, existing appraisals and other documents as the Administrative Agent may reasonably request with respect to any such mortgaged property;

(iii) in the case of any Material Fee Owned Property, Material Financeable Lease or Material Pipeline owned by an entity that becomes a Subsidiary Guarantor after the Closing Date, within thirty (30) days after such entity becomes a Subsidiary Guarantor, (w) counterparts of a Mortgage or Collateral Assignment, as applicable, with respect to such Material Fee Owned Property, Material Financeable Lease or Material Pipeline, duly executed and delivered by the record owner or lessee, as applicable, of such property, (x) a Title Policy in respect of each such Mortgage other than with respect to Material Pipelines, (y) an opinion or opinions of local counsel for the Loan Parties in states in which such real properties are located with respect to the enforceability and perfection of such Mortgages and any related fixture filings, in each case in form and substance reasonably satisfactory to the Administrative Agent, and (z) such existing surveys, existing abstracts, existing appraisals and other documents as the Administrative Agent may reasonably request with respect to any such mortgaged property; and

(iv) in the case of any Material Fee Owned Property, Material Financeable Lease or Material Pipeline acquired by a Loan Party after the Closing Date (or that becomes a Material Fee Owned Property or Material Pipeline of a Loan Party after the Closing Date), within thirty (30) days after such acquisition (or after becoming a Material Fee Owned Property or a Material Pipeline, as applicable), (w) counterparts of a Mortgage or Collateral Assignment, as applicable, with respect to such Material Fee Owned Property, Material Financeable Lease or Material Pipeline, duly executed and delivered by the record owner or lessee, as applicable, of such property, (x) a Title Policy in respect of each such Mortgage, other than with respect to Material Pipelines, (y) an opinion or opinions of local counsel for the Loan Parties in states in which such real properties are located with respect to the enforceability and perfection of such Mortgages and any related fixture filings, in each case in form and substance reasonably satisfactory to the Administrative Agent, and (z) such existing surveys, existing abstracts, existing appraisals and other documents as the Administrative Agent may reasonably request with respect to any such mortgaged property.

The foregoing definition shall not require the creation or perfection of pledges of or security interests in, or the obtaining of title insurance or surveys with respect to, particular assets if and for so long as, in the reasonable judgment of the Administrative Agent (after consultation with the Borrower), the cost of creating or perfecting such pledges or security interests in such assets or obtaining title insurance or surveys in respect of such assets is unreasonable in relation to the benefits to be obtained by the Lenders therefrom; it being understood that no surveys (other than existing surveys) shall be obtained or delivered with respect to the Material Fee Owned Property, Material Financeable Leases or Material Pipelines set forth on Schedules 1.01D, 1.01F and 1.01E and no title insurance shall be provided in respect of any Material Pipelines. The Administrative Agent may grant extensions of time for the perfection of security

12

interests in or the obtaining of title insurance with respect to particular assets (including extensions beyond the Closing Date for the perfection of security interests in the assets of the Loan Parties on such date) where it reasonably determines, in consultation with the Borrower, that perfection cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required by this Agreement or the Collateral Documents.

Notwithstanding the foregoing provisions of this definition or anything in this Agreement or any other Loan Document to the contrary, (a) the Borrower shall not be required to take any action with respect to the creation or perfection of security interests in any Material Financeable Lease other than to use its commercially reasonable efforts (subject to the immediately preceding paragraph and without any obligation to make any payment or provide any concession to any landlord in order to obtain any required consent) to create or perfect such security interests, such efforts not to extend beyond the date such security interests would otherwise be deliverable, and (b) Liens required to be granted from time to time pursuant to the Collateral and Guarantee Requirement shall be subject to exceptions and limitations set forth in the Collateral Documents as in effect on the Closing Date and, to the extent appropriate in the applicable jurisdiction, as agreed between the Administrative Agent and the Borrower.

“Collateral Assignment” means a Collateral Assignment, substantially in the form of Exhibit I.

“Collateral Documents” means, collectively, the Security Agreement, the Mortgages, each of the mortgages, collateral assignments, Security Agreement Supplements, security agreements, pledge agreements or other similar agreements delivered to the Administrative Agent and the Lenders pursuant to Section 6.11 or Section 6.13, the Subsidiary Guaranty and each of the other agreements, instruments or documents that creates or purports to create a Lien or Guarantee in favor of an Agent for the benefit of the Secured Parties.

“Commitment” means a Term Commitment, a Bridge Commitment, a Revolving Credit Commitment or a Synthetic L/C Commitment, as the context may require.

“Committed Loan Notice” means a notice of (a) a Term Borrowing, (b) a Bridge Borrowing, (c) a Revolving Credit Borrowing, (d) a Synthetic L/C Borrowing, (e) a conversion of Loans from one Type to the other, or (f) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A.

“Compensation Period” has the meaning set forth in Section 2.12(c)(ii).

“Compliance Certificate” means a certificate substantially in the form of Exhibit D.

13

“Consolidated EBITDA” means, for any period, the Consolidated Net Income for such period, plus:

(a) without duplication and to the extent already deducted (and not added back) in arriving at such Consolidated Net Income, the sum of the following amounts for such period:

(i) total interest expense and, to the extent not reflected in such total interest expense, increased by any payments made in respect of hedging arrangements or other derivative instruments, in each case, entered into for the purpose of hedging interest rate risk, and decreased by any payments received in respect of such hedging arrangements or such other derivative instruments, and increased by the costs of surety bonds in connection with financing activities,

(ii) provision for taxes based on income, profits or capital of the Borrower and the Restricted Subsidiaries, including state, franchise and similar taxes based on income, profits or capital and foreign withholding taxes paid or accrued during such period,

(iii) depreciation and amortization,

(iv) Non-Cash Charges,

(v) extraordinary losses and unusual or non-recurring charges (including any fees and expenses incurred during such period, or any amortization thereof for such period, in connection with any acquisition, investment, asset disposition, issuance or repayment of debt, issuance of equity securities, refinancing transaction or amendment or other modification of any debt instrument (in each case, including any such transaction consummated prior to the Closing Date and any such transaction undertaken but not completed) and any charges or non-recurring merger costs incurred during such period as a result of any such transaction and any premiums or other expenses paid in connection with the hedging arrangements related to the Transaction that are incurred on or prior to the Closing Date), severance, relocation costs and curtailments or modifications to pension and post-retirement employee benefit plans,

(vi) restructuring charges or reserves (including restructuring costs related to acquisitions and to closure/consolidation of facilities),

(vii) any deductions attributable to minority interests,

(viii) in the case of any period that includes a period ending prior to or during the fiscal year ending December 31, 2006, Transaction Expenses,

(ix) the amount of management, monitoring, consulting and advisory fees and related expenses paid to the Sponsor,

(x) any costs or expenses incurred by the Borrower or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such costs or expenses

14

are funded with cash proceeds contributed to the capital of the Borrower or net cash proceeds of an issuance of Equity Interests of the Borrower (other than Disqualified Equity Interests),

(xi) the amount of net cost savings projected by the Borrower in good faith to be realized as a result of specified actions taken during such period (calculated on a pro forma basis as though such cost savings had been realized on the first day of such period), net of the amount of actual benefits realized during such period from such actions, provided that (A) such cost savings are reasonably identifiable and factually supportable, (B) such actions are taken within 36 months after the Closing Date, (C) no cost savings shall be added pursuant to this clause (x) to the extent duplicative of any expenses or charges relating to such cost savings that are included in clause (vi) above with respect to such period and (D) the aggregate amount of cost savings added pursuant to this clause (x) shall not exceed $35,000,000 for any period consisting of four consecutive quarters,

(xii) any net after-tax loss from the early extinguishment of Indebtedness or hedging obligations or other derivative instruments, and

(xiii) all losses from investments recorded using the equity method, less

(b) without duplication and to the extent included in arriving at such Consolidated Net Income, the sum of the following amounts for such period:

(i) extraordinary gains and unusual or non-recurring gains,

(ii) non-cash gains (excluding any non-cash gain to the extent it represents the reversal of an accrual or reserve for a potential cash item that reduced Consolidated EBITDA in any prior period),

(iii) gains on asset sales (other than asset sales in the ordinary course of business),

(iv) any net after-tax income from the early extinguishment of Indebtedness or hedging arrangements or other derivative instruments, and

(v) all gains from investments recorded using the equity method,

in each case, as determined on a consolidated basis for the Borrower and the Restricted Subsidiaries in accordance with GAAP; and less

(c) the amount of all Restricted Payments paid during such period pursuant to clause (h) of Section 7.06, to the extent such Restricted Payments were made in respect of any payment made or to be made by any Holding Company in respect of any obligation or liability that, if incurred directly by and paid directly by the Borrower, would have decreased Consolidated EBITDA (whether during such period or during the period that such obligation or liability accrued or was incurred);

15

provided that, to the extent included in Consolidated Net Income,

(i) there shall be excluded in determining Consolidated EBITDA currency translation gains and losses related to currency remeasurements of Indebtedness (including the net loss or gain resulting from Swap Contracts for currency exchange risk),

(ii) there shall be excluded in determining Consolidated EBITDA for any period any adjustments resulting from the application of Statement of Financial Accounting Standards No. 133,

(iii) there shall be excluded in determining Consolidated EBITDA any gains or losses in respect of the receipt or payment, as applicable, of any Swap Termination Value in connection with any transaction permitted by Section 7.05, and

(iv) for the purposes of the definition of “Permitted Acquisition” and for purposes of determining the Total Leverage Ratio, (A) there shall be included in determining Consolidated EBITDA for any period, without duplication, (1) the Acquired EBITDA of any Person, property, business or asset acquired by the Borrower or any Restricted Subsidiary during such period (but not the Acquired EBITDA of any related Person, property, business or assets to the extent not so acquired), to the extent not subsequently sold, transferred or otherwise disposed by the Borrower or such Restricted Subsidiary (each such Person, property, business or asset acquired and not subsequently so disposed of, an “Acquired Entity or Business”), based on the actual Acquired EBITDA of such Acquired Entity or Business for such period (including the portion thereof occurring prior to such acquisition) and (2) an adjustment in respect of each Acquired Entity or Business equal to the amount of the Pro Forma Adjustment with respect to such Acquired Entity or Business for such period (including the portion thereof occurring prior to such acquisition) as specified in a certificate executed by a Responsible Officer and delivered to the Lenders and the Administrative Agent and (B) there shall be excluded in determining Consolidated EBITDA for any period the Disposed EBITDA of any Person, property, business or asset sold, transferred or otherwise disposed of or closed by the Borrower or any Restricted Subsidiary (including pursuant to an MLP Asset Transfer or the designation of an Unrestricted Subsidiary) during such period (each such Person, property, business or asset so sold or disposed of, a “Sold Entity or Business”), based on the actual Disposed EBITDA of such Sold Entity or Business for such period (including the portion thereof occurring prior to such sale, transfer or disposition).

“Consolidated Interest Expense” means, for any period, the sum of (i) the cash interest expense (including that attributable to Capitalized Leases), net of cash interest income, of the Borrower and the Restricted Subsidiaries (plus the Borrower’s and the Restricted Subsidiaries’ pro rata share of the cash interest expense (including that attributable to Capitalized Leases), net of cash interest income, of the Existing JVs (other than with respect to any Existing JV for any fiscal quarter during which an Existing JV

16

Default in respect of such Existing JV shall have occurred and be continuing at the end of such fiscal quarter)), determined on a consolidated basis in accordance with GAAP, with respect to all outstanding Indebtedness of the Borrower and the Restricted Subsidiaries (plus the Borrower’s and the Restricted Subsidiaries’ pro rata share of all outstanding Indebtedness of the Existing JVs (other than with respect to any Existing JV for any fiscal quarter during which an Existing JV Default in respect of such Existing JV shall have occurred and be continuing at the end of such fiscal quarter)), including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, net costs under Swap Contracts designed to hedge against interest rates and fees payable under the Revolving Credit Facility and the Synthetic L/C Facility (including fees in respect of outstanding Letters of Credit) and (ii) any cash payments made during such period in respect of obligations referred to in clause (b) below relating to Funded Debt that were amortized or accrued in a previous period (other than any such obligations resulting from the discounting of Indebtedness in connection with the application of purchase accounting in connection with the Transaction or any Permitted Acquisition), but excluding, however:

(a) amortization of deferred financing costs,

(b) the accretion or accrual of discounted liabilities and any other amounts of non-cash interest during such period, and

(c) all non-recurring cash interest expense consisting of liquidated damages for failure to timely comply with registration rights obligations and financing fees, all as calculated on a consolidated basis in accordance with GAAP;

provided that for purposes of the definition of “Permitted Acquisition”, there shall be included in determining Consolidated Interest Expense for any period the cash interest expense (or income) of any Acquired Entity or Business acquired during such period, based on the cash interest expense (or income) of such Acquired Entity or Business for such period (including the portion thereof occurring prior to such acquisition) assuming any Indebtedness incurred or repaid in connection with any such acquisition had been incurred or prepaid on the first day of such period. Notwithstanding anything to the contrary contained herein, for purposes of determining Consolidated Interest Expense for any period ending prior to the first anniversary of the Closing Date, Consolidated Interest Expense shall be an amount equal to actual Consolidated Interest Expense from the Closing Date through the date of determination multiplied by a fraction the numerator of which is 365 and the denominator of which is the number of days from the Closing Date through the date of determination.

“Consolidated Lease Expense” means, for any period, all rental expenses of the Borrower and the Restricted Subsidiaries during such period under operating leases for real or personal property (including in connection with sale-leaseback transactions permitted by Section 7.05(f)) other than (a) obligations under vehicle leases entered into in the ordinary course of business, (b) all such rental expenses associated with assets acquired pursuant to a Permitted Acquisition to the extent such rental expenses relate to operating leases in effect at the time of (and immediately prior to) such acquisition and

17

related to periods prior to such acquisition, (c) real estate taxes, insurance costs and common area maintenance charges and net of sublease income, and (d) all obligations under Capitalized Leases, all as determined on a consolidated basis in accordance with GAAP.

“Consolidated Net Income” means, for any period, the net income (loss) of the Borrower and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, excluding, without duplication:

(a) extraordinary items for such period,

(b) the cumulative effect of a change in accounting principles during such period to the extent included in Consolidated Net Income,

(c) any income (loss) for such period attributable to the early extinguishment of Indebtedness, and

(d) accruals and reserves that are established within twelve months after the Closing Date that are so required to be established as a result of the Transaction in accordance with GAAP.

There shall be excluded from Consolidated Net Income for any period the purchase accounting effects of adjustments to property and equipment, software and other intangible assets and deferred revenue in component amounts required or permitted by GAAP and related authoritative pronouncements (including the effects of such adjustments pushed down to the Borrower and the Restricted Subsidiaries), as a result of the Transaction, any acquisition consummated prior to the Closing Date, any Permitted Acquisitions, or the amortization or write-off of any amounts thereof. There also shall be excluded from Consolidated Net Income for any period any net income (loss) of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, an Acquired Non-Guarantor, a Permitted MLP or a Permitted GP, or that is accounted for by the equity method of accounting; provided that Consolidated Net Income shall be increased by (A) the amount of dividends, distributions or other payments from any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, an Acquired Non-Guarantor, or a Person that is accounted for by the equity method of accounting (in each case, other than a Permitted MLP or Permitted GP or any Subsidiary thereof) and (B) the amount of any dividends, distributions or other payments from a Permitted MLP or a Permitted GP, in each case only to the extent made out of the operating surplus of such Permitted MLP or such Permitted GP, in each of clauses (A) and (B) above, that are actually paid in cash (or to the extent promptly converted into cash) to the Borrower or a Restricted Subsidiary thereof in respect of such period; provided further that for purposes of calculating Consolidated EBITDA in connection with determining the Total Leverage Ratio and the Interest Coverage Ratio and for purposes of Section 4.01(l), the Borrower’s and the Restricted Subsidiaries’ pro rata share of any net income (loss) for such period (calculated in the manner set forth above) of the Existing JVs retained by such Existing JVs shall be included in Consolidated Net Income (other than with respect to any Existing JV for any period (or for purposes of determining the Interest Coverage Ratio,

18

any fiscal quarter) during which an Existing JV Default in respect of such Existing JV shall have occurred and be continuing at the end of such period (or such fiscal quarter)).

“Consolidated Total Debt” means, as of any date of determination, (a) the aggregate principal amount of Indebtedness of the Borrower and the Restricted Subsidiaries (and the Borrower’s and the Restricted Subsidiaries’ pro rata share of the Indebtedness of the Existing JVs (other than with respect to any Existing JV that is the subject of an Existing JV Default, which Existing JV Default shall have occurred and be continuing on the date of determination)) outstanding on such date, determined on a consolidated basis in accordance with GAAP (but excluding the effects of any discounting of Indebtedness resulting from the application of purchase accounting in connection with the Transaction or any Permitted Acquisition), consisting of Indebtedness for borrowed money, obligations in respect of Capitalized Leases and debt obligations evidenced by promissory notes or similar instruments, minus (b) the aggregate amount of cash and Cash Equivalents (in each case, free and clear of all Liens, other than nonconsensual Liens permitted by Section 7.01 and Liens permitted by Section 7.01(s) and clauses (i) and (ii) of Section 7.01(u)) in excess of $10,000,000 included in the consolidated balance sheet of the Borrower and the Restricted Subsidiaries as of such date. Without limitation on the foregoing, Consolidated Total Debt shall not include (i) all Revolving Letters of Credit, except to the extent of Unreimbursed Amounts thereunder, (ii) Indebtedness of Unrestricted Subsidiaries, (iii) the Synthetic L/C Facility, except to the extent of Unreimbursed Amounts thereunder (including outstanding Synthetic L/C Loans) and (iv) Obligations under any Swap Contracts.

“Consolidated Working Capital” means, at any date, the excess of (a) the sum of all amounts (other than cash and Cash Equivalents) that would, in conformity with GAAP, be set forth opposite the caption “total current assets” (or any like caption) on a consolidated balance sheet of the Borrower and the Restricted Subsidiaries at such date, but excluding any assets arising from the application of Statement of Financial Accounting Standards No. 133 over (b) the sum of all amounts that would, in conformity with GAAP, be set forth opposite the caption “total current liabilities” (or any like caption) on a consolidated balance sheet of the Borrower and the Restricted Subsidiaries on such date, including deferred revenue but excluding, without duplication, (i) the current portion of any Funded Debt, (ii) all Indebtedness consisting of Loans and L/C Obligations to the extent otherwise included therein, (iii) the current portion of interest (iv) the current portion of current and deferred income taxes and (v) and any liabilities arising from the application of Statement of Financial Accounting Standards No. 133.

“Continuing Directors” means the directors of the Borrower on the Closing Date, as elected or appointed after giving effect to the Acquisition and the other transactions contemplated hereby, and each other director, if, in each case, such other director’s nomination for election to the board of directors of the Borrower is recommended by a majority of the then Continuing Directors or such other director receives the vote of the Permitted Holders in his or her election by the stockholders of the Borrower.

19

“Contract Consideration” has the meaning set forth in the definition of “Excess Cash Flow”.

“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“Control” has the meaning set forth in the definition of “Affiliate.”

“Credit Extension” means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.

“Credit Increase” has the meaning set forth in Section 2.14(a).

“Credit-Linked Deposit” means, in respect of each Synthetic L/C Lender, the cash deposit made by such Lender pursuant to Section 2.03(k)(i), as such amount may be (a) reduced from time to time pursuant to Section 2.06 or (b) reduced or increased from time to time pursuant to Section 2.03(c)(viii) or pursuant to assignments by or to such Lender pursuant to Section 10.07. The initial amount of each Synthetic L/C Lender’s Credit-Linked Deposit shall be equal to the amount of its Synthetic L/C Commitment on the Closing Date.

“Credit-Linked Deposit Account” means the operating and/or investment account of, and established by, the Administrative Agent under its exclusive dominion and control that shall be used for the purposes set forth in Sections 2.03(c)(viii) and 2.03(k).

“Credit-Linked Deposit Cost Amount” means, for any Interest Period with respect to the Credit-Linked Deposits, an amount (expressed in basis points) reasonably determined by the Administrative Agent in good faith to represent the Administrative Agent’s administrative cost for investing the Credit-Linked Deposits and maintaining the Credit-Linked Deposit Account for such Interest Period, which amount shall not exceed 12.5 basis points for such Interest Period.

“Cumulative Excess Cash Flow” has the meaning set forth in Section 7.06(i).

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

20

“Default Rate” means an interest rate equal to (a) in the case of interest accruing on the principal of any Loan, the rate otherwise applicable to such Loan pursuant to Section 2.08 plus 2.00% per annum and (b) in all other cases, a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when determined by reference to the Prime Rate and over a year of 360 days at all other times) equal to the rate that would be applicable to a Revolving Credit Base Rate Loan plus 2.00% per annum.

“Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Term Loans, Bridge Loans, Revolving Credit Loans, participations in Revolving L/C Obligations or participations in Swing Line Loans required to be funded by it hereunder within one (1) Business Day of the date required to be funded by it hereunder, unless the subject of a good faith dispute or subsequently cured, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one (1) Business Day of the date when due, unless the subject of a good faith dispute or subsequently cured, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.

“Disposed EBITDA” means, with respect to any Sold Entity or Business for any period, the amount for such period of Consolidated EBITDA of such Sold Entity or Business (determined as if references to the Borrower and the Restricted Subsidiaries in the definition of “Consolidated EBITDA” were references to such Sold Entity or Business and its Subsidiaries), all as determined on a consolidated basis for such Sold Entity or Business.

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction and any sale of Equity Interests) of any asset by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith; provided that “Disposition” or “Dispose” shall not be deemed to include any issuance by the Borrower of any of its Equity Interests to another Person.

“Disqualified Equity Interests” means any Equity Interest which, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments and all outstanding Letters of Credit), (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is ninety-one (91) days after the Maturity Date of the Term Loans (regardless of whether any Term Loans are outstanding).

21

“DMS” means Dynegy Midstream Services, Limited Partnership, a Delaware limited partnership and, following the Acquisition, a wholly owned indirect subsidiary of the Borrower.

“DMS Entities” has the meaning set forth in the definition of “DMS Material Adverse Change”.

“DMS Material Adverse Change” means any change, effect, event, occurrence or circumstance (or series of related changes, effects, events, occurrences or circumstances) on the operations, assets or financial condition of DMS and its Subsidiaries (collectively, the “DMS Entities”), which, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the DMS Entities, taken as a whole, but excluding any such effect to the extent caused by, resulting from or arising out of (i) any changes in prices for commodities, goods or services, or the availability or costs of hedges, (ii) without limiting clause (i) above, any set of facts, circumstance, occurrence or condition that is generally applicable to the businesses or industries or markets in which the DMS Entities participate, operate or conduct business or to the United States or global economic conditions or securities or financial markets, but only if the impact of such facts, circumstances, occurrences or conditions on the DMS Entities is not materially disproportionate to the impact on the midstream industry generally, or (iii) any set of facts, circumstance, occurrence or condition that is reflected in the disclosure schedules to the PIPA as of August 2, 2005, or (iv) the execution or announcement of the PIPA.

“Dollar” and “$” mean lawful money of the United States.

“Downstream Business” means that portion of the business of the Borrower and its Subsidiaries that is primarily engaged in fractionating, storing, terminalling, transporting, distributing and marketing natural gas liquids, including the following principal assets: Houston Area, Louisiana Area, NGL Marketing, and Wholesale Marketing and Commercial Transportation Agreement (each term, as defined in the PIPA).

“Domestic Subsidiary” means any Subsidiary that is organized under the Laws of the United States, any state thereof or the District of Columbia.

“Eligible Assignee” means any Assignee permitted by and consented to in accordance with Section 10.07(b).

“Environmental Laws” means any and all Laws relating to pollution, the protection of the environment, natural resources, or, to the extent relating to exposure to Hazardous Materials, human health or to the release of any materials into the environment, including those related to hazardous materials, substances and wastes, air emissions or discharges to waste or public systems.

“Environmental Liability” means any liability (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Subsidiaries directly or

22

indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

“Equity Contribution” means the contribution by the Equity Investors of an aggregate amount of cash of not less than $315,000,000 to Targa Resources Investments, Inc. and the subsequent contribution of not less than $315,000,000 to the Borrower.

“Equity Interests” means, with respect to any Person, all of the shares, interests, rights, participations or other equivalents (however designated) of capital stock of (or other ownership or profit interests or units in) such Person and all of the warrants, options or other rights for the purchase, acquisition or exchange from such Person of any of the foregoing (including through convertible securities).

“Equity Investors” means the Sponsor, Merrill Lynch and the Management Stockholders.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that is under common control with any Loan Party within the meaning of Section 414 of the Code or Section 4001 of ERISA.

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Loan Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Loan Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Loan Party or any ERISA Affiliate.

23

“Eurodollar Rate” means, for any Interest Period with respect to the Credit-Linked Deposits or any Eurodollar Rate Loan, an interest rate per annum equal to the product of:

(a) the rate per annum for deposits in Dollars for a period equal to such Interest Period determined by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the commencement of such Interest Period by reference to the British Bankers’ Association Interest Settlement Rates for deposits in Dollars (as set forth by any service selected by the Administrative Agent that has been nominated by the British Bankers’ Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the “Eurodollar Rate” shall be the interest rate per annum determined by the Administrative Agent to be the average of the rates per annum at which deposits in Dollars are offered for such relevant Interest Period to major banks in the London interbank market in London, England by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the beginning of such Interest Period; and

(b) Statutory Reserves.

“Eurodollar Rate Loan” means a Loan that bears interest at a rate based on the Eurodollar Rate.

“Event of Default” has the meaning set forth in Section 8.01.

“Excess Cash Flow” means, for any period, an amount equal to the excess of:

(a) the sum, without duplication, of:

(i) Consolidated Net Income for such period (adjusted to exclude gains or losses attributable to Asset Disposition Events, MLP Asset Transfers, MLP Equity Transfers, GP Equity Transfers, MLP Extraordinary Distributions or North Texas Asset Sales),

(ii) an amount equal to the amount of all depreciation, amortization and non-cash charges to the extent deducted in arriving at such Consolidated Net Income,

(iii) decreases in Consolidated Working Capital and long-term account receivables for such period (other than any such decreases arising from acquisitions by the Borrower and the Restricted Subsidiaries completed during such period), and

(iv) the amount of tax expense deducted in determining Consolidated Net Income in such period to the extent exceeding the amount of cash taxes paid in such period; over

24

(b) the sum, without duplication, of:

(i) an amount equal to the amount of all non-cash credits included in arriving at such Consolidated Net Income and cash charges included in clauses (a) through (d) of the definition of “Consolidated Net Income”,

(ii) without duplication of amounts deducted pursuant to clause (ix) below in prior fiscal years, the amount of Capital Expenditures made in cash during such period, except to the extent that such Capital Expenditures were financed with the proceeds of Indebtedness of the Borrower or the Restricted Subsidiaries,

(iii) the aggregate amount of all principal payments of Indebtedness of the Borrower and the Restricted Subsidiaries (including the principal component of payments in respect of Capitalized Leases but excluding (A) all prepayments of Loans and (B) any prepayments made under any revolving credit facility to the extent there is not an equivalent permanent reduction in commitments thereunder) made during such period, except to the extent financed with the proceeds of other Indebtedness of the Borrower or the Restricted Subsidiaries,

(iv) increases in Consolidated Working Capital and long-term account receivables for such period (other than any such increases arising from acquisitions by the Borrower and the Restricted Subsidiaries completed during such period),

(v) cash payments by the Borrower and the Restricted Subsidiaries during such period in respect of long-term liabilities of the Borrower and the Restricted Subsidiaries other than Indebtedness, except to the extent financed with the proceeds of Indebtedness of the Borrower or the Restricted Subsidiaries,

(vi) the amount of Restricted Payments paid during such period pursuant to clause (h) of Section 7.06 to the extent such Restricted Payments were financed with internally generated cash flow of the Borrower and the Restricted Subsidiaries,

(vii) without duplication of amounts deducted pursuant to clause (x) below in prior fiscal years, the amount of Investments and acquisitions made in cash during such period pursuant to clauses (c) (other than any such Investments thereunder in the Borrower or a Restricted Subsidiary), (i), (s) and (t) of Section 7.02 to the extent that such Investments and acquisitions were financed with internally generated cash flow of the Borrower and the Restricted Subsidiaries,

(viii) the aggregate amount of expenditures actually made by the Borrower and the Restricted Subsidiaries in cash during such period (including expenditures for the payment of financing fees) to the extent that such expenditures are not expensed during such period or any previous period,

(ix) the aggregate amount of any premium, make-whole or penalty payments actually paid in cash by the Borrower and the Restricted Subsidiaries during such period that are required to be made in connection with any prepayment of Indebtedness,

25

(x) without duplication of amounts deducted from Excess Cash Flow in prior periods, the aggregate consideration required to be paid in cash by the Borrower or any of the Restricted Subsidiaries pursuant to binding contracts (the “Contract Consideration”) entered into prior to or during such period relating to Permitted Acquisitions or Capital Expenditures to be consummated or made during the period of four consecutive fiscal quarters of the Borrower following the end of such period, provided that to the extent the aggregate amount of internally generated cash actually utilized to finance such Permitted Acquisitions or Capital Expenditures during such period of four consecutive fiscal quarters is less than the Contract Consideration, the amount of such shortfall shall be added to the calculation of Excess Cash Flow at the end of such period of four consecutive fiscal quarters, and

(xi) the amount of cash taxes paid in such period to the extent they exceed the amount of tax expense deducted in determining Consolidated Net Income for such period.

“Exchange Act” means the Securities Exchange Act of 1934.

“Excluded Subsidiary” means (a) any Restricted Subsidiary that is not a wholly owned Restricted Subsidiary, (b) each Restricted Subsidiary listed on Schedule 1.01G hereto, (c) any Restricted Subsidiary that is prohibited by applicable Law from guaranteeing the Obligations, (d) any Restricted Subsidiary that is a Domestic Subsidiary and is a Subsidiary of a Foreign Subsidiary, and (e) any other Restricted Subsidiary with respect to which, in the reasonable judgment of the Administrative Agent (confirmed in writing by notice to the Borrower), the cost or other consequences (including any adverse tax consequences) of providing a Subsidiary Guarantee shall be excessive in view of the benefits to be obtained by the Lenders or any other Secured Party therefrom.

“Existing Credit Agreement” means the Amended and Restated Credit Agreement dated as of December 16, 2004, among Targa Resources Partners OLP LP (a Subsidiary of the Borrower), the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent.

“Existing JV” means each of Versado Gas Processors, L.L.C., a Delaware limited liability company, Downstream Energy Ventures Co., L.L.C., a Delaware limited liability company and Cedar Bayou Fractionators, LP, a Delaware limited partnership; provided, however, that in the event any such entity becomes a wholly owned Subsidiary of the Borrower, such entity shall cease to be an Existing JV.

“Existing JV Default” means, with respect to any Existing JV, either of the following (a) such Existing JV institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer is appointed without the application or consent of such Person and the

26

appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding; or (b) such Existing JV becomes unable or admits in writing its inability or fails generally to pay its debts as they become due.

“Facility” means the Term Loans, the Bridge Loans, the Revolving Credit Facility or the Synthetic L/C Facility, as the context may require.

“Federal Funds Rate” means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“Foreign Lender” has the meaning set forth in Section 10.15(a)(i).

“Foreign Subsidiary” means any direct or indirect Restricted Subsidiary of the Borrower which is not a Domestic Subsidiary.

“FRB” means the Board of Governors of the Federal Reserve System of the United States.

“Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course.

“Funded Debt” means all Indebtedness of the Borrower and the Restricted Subsidiaries for borrowed money that matures more than one year from the date of its creation or matures within one year from such date that is renewable or extendable, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including Indebtedness in respect of the Loans.

“GAAP” means generally accepted accounting principles in the United States of America, as in effect from time to time.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

27

“GP” means, in respect of any MLP, the Person that is the general partner of such MLP.

“GP Equity Transfer” means the Disposition of any Equity Interest in an MLP GP in connection with, or following, the initial public offering of a MLP GP.

“Granting Lender” has the meaning set forth in Section 10.07(g).

“Guarantee” means, as to any Person, without duplication, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other monetary obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other monetary obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance of such Indebtedness or other monetary obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other monetary obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other monetary obligation of any other Person, whether or not such Indebtedness or other monetary obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness or other monetary obligation to obtain any such Lien); provided that the term “Guarantee” shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or customary and reasonable indemnity obligations in effect on the Closing Date or entered into in connection with any acquisition or disposition of assets permitted under this Agreement (other than such obligations with respect to Indebtedness). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

“Hazardous Materials” means all explosive or radioactive materials, substances or wastes and all hazardous or toxic substances, wastes or pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other materials, substances or wastes of any nature regulated pursuant to any Environmental Law.

“Hedging Party” means, in each case in its capacity as a party to a Swap Contract, (i) any Person that is a Lender or an Affiliate of a Lender, (ii) any Person listed

28

on Schedule 1.01I hereto and any of such Person’s Affiliates and (iii) any other Person with the consent of the Administrative Agent, such consent not be unreasonably withheld or delayed.

“Holding Company” means, at any time, any company that at such time (a) owns (directly or indirectly through one or more other Holding Companies satisfying the requirements of this definition) a majority of the Voting Stock of the Borrower, (b) does not own any other material assets (other than cash, Cash Equivalents and Investments in other Holding Companies) and (c) does not engage in any business or activity other than serving as a direct or indirect holding company controlling the Borrower and activities incidental thereto.

“Honor Date” has the meaning set forth in Section 2.03(c)(i).

“Incremental Amendment” has the meaning set forth in Section 2.14(a).

“Incremental Facility Closing Date” has the meaning set forth in Section 2.14(a).

“Incremental Facility Reduction Amount” means, at any time, the cumulative amount (not to exceed $200,000,000) of increases that the Borrower shall have elected pursuant to Section 2.14(b), which have the effect of reducing the amount of Credit Increases permitted by Section 2.14 and increasing the amount of Indebtedness permitted by clause (q) of Section 7.03.

“Incremental Term Loans” has the meaning set forth in Section 2.14(a).

“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

(b) the maximum amount (after giving effect to any prior drawings or reductions which may have been reimbursed) of all letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds, performance bonds and similar instruments issued or created by or for the account of such Person;

(c) net obligations of such Person under any Swap Contract, including any Back-to-Back Swap Contract;

(d) all obligations of such Person to pay the deferred purchase price of property or services (other than (i) trade accounts payable in the ordinary course of business and (ii) any earn-out obligation until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP);

29

(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements and mortgage, industrial revenue bond, industrial development bond and similar financings), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

(f) all Attributable Indebtedness;

(g) all obligations of such Person in respect of Disqualified Equity Interests; and

(h) all Guarantees of such Person in respect of any of the foregoing.

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, except to the extent such Person’s liability for such Indebtedness is otherwise limited and only to the extent such Indebtedness would be included in the calculation of Consolidated Total Debt. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of Indebtedness of any Person for purposes of clause (e) shall be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness and (ii) if and to the extent such Indebtedness is limited in recourse to the property encumbered, the fair market value of the property encumbered thereby as determined by such Person in good faith.

Notwithstanding the foregoing, Indebtedness will be deemed not to include Indebtedness Obligations of a GP of a Permitted MLP with respect to Indebtedness of the applicable Permitted MLP arising by operation of law due to such GP’s position as a general partner of such Permitted MLP (or corresponding Indebtedness Obligations of any general partner of such GP arising by operation of law due to such entity’s position as a general partner of such GP); provided, however, that such Indebtedness Obligations or Indebtedness are non-recourse to the Borrower or any of its Restricted Subsidiaries (other than such GP and, if such GP is a limited partnership, the general partner of such GP, provided that (x) the sole business of such general partner of such GP is to act as the general partner of such GP and engage in activities ancillary thereto and (y) such general partner of such GP owns no assets (other than (i) ownership interests in such GP or in the Permitted MLP of which such GP is the MLP GP or Equity Interests (other than Disqualified Equity Interests) of the Borrower and Indebtedness owed to such general partner of such GP that is incurred pursuant to clause (p) of Section 7.03, (ii) temporarily holding assets to be transferred or distributed in connection with a Permitted MLP Transfer or a Permitted GP Transfer or distributions from a Permitted MLP or a Permitted GP and (iii) current assets sufficient to satisfy its ordinary course operating expenses).

“Indebtedness Obligations” means obligations in respect of any principal (including reimbursement obligations with respect to letters of credit whether or not

30

drawn), interest (including, to the extent legally permitted, all interest accrued thereon after the commencement of any insolvency or liquidation proceeding at the rate, including any applicable post-default rate, specified in the applicable agreement), premium (if any), guarantees of payment, fees, indemnifications, reimbursements, expenses, damages and other liabilities payable under the documentation governing any Indebtedness.

“Indemnified Liabilities” has the meaning set forth in Section 10.05.

“Indemnitees” has the meaning set forth in Section 10.05.

“Independent Financial Advisor” means an accounting, appraisal, investment banking firm or consultant to Persons engaged in Similar Businesses of nationally recognized standing that is, in the good faith judgment of the Borrower, qualified to perform the task for which it has been engaged and that is independent of the Borrower and its Affiliates.

“Information” has the meaning set forth in Section 10.08.

“Initial MLP Asset Transfer” means, at the option of the Borrower, either:

(a) one or more MLP Asset Transfers of (x) the assets constituting the Downstream Business or (y) all or a portion of the Equity Interests in one or more Persons that hold the Downstream Business; provided that no previous MLP Asset Transfer has occurred (except those described in this clause (a)); or

(b) the initial MLP Asset Transfer and any subsequent MLP Asset Transfer to the applicable MLP of property or assets (including any Equity Interests) with respect to which the Consolidated EBITDA attributable to such property or assets (treating such property or assets as if they were owned by a single Person) for the most recently ended four full fiscal quarters ending at least 45 days prior to the date of the most recent MLP Asset Transfer does not exceed $95,000,000 in the aggregate; provided that any such MLP Asset Transfers do not include any of the Downstream Business;

in each case made in connection with an initial public offering of Equity Interests of such MLP (or, in the case of an Initial MLP Asset Transfer comprising more than one MLP Asset Transfers, the first such MLP Asset Transfer made in connection with such an initial public offering).

“Intercreditor Agreement” means the Intercreditor Agreement, substantially in the form attached as Exhibit K, among the Borrower, the Collateral Agent and any Hedging Party that is party to any Secured Hedge Agreement.

“Interest Coverage Ratio” means, with respect to the Borrower and the Restricted Subsidiaries on a consolidated basis, for any Test Period, the ratio of (a) Consolidated EBITDA for such Test Period to (b) Consolidated Interest Expense for such Test Period.

31

“Interest Payment Date” means, (a) as to any Loan other than a Base Rate Loan or a Synthetic L/C Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date of the Facility under which such Loan was made; provided that if any Interest Period for a Eurodollar Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; (b) as to any Base Rate Loan (including a Swing Line Loan), the last Business Day of each March, June, September and December and the Maturity Date of the Facility under which such Loan was made; and (c) as to any Credit-Linked Deposit and any Synthetic L/C Loan, the last day of each Interest Period therefor or the date of any prepayment thereof.

“Interest Period” means, (a) as to each Eurodollar Rate Loan other than a Synthetic L/C Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date one, two, three or six months thereafter, or if available to each Lender participating in the Borrowing that includes such Eurodollar Rate Loan, nine or twelve months thereafter, as selected by the Borrower in its Committed Loan Notice and (b) as to the Credit-Linked Deposits and any Synthetic L/C Loan, the period commencing on the Closing Date or on the last day of the preceding Interest Period and ending on the next succeeding day thereafter that is the last Business Day of March, June, September or December; provided that:

(a) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

(b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

(c) no Interest Period shall extend beyond the Maturity Date of the Facility under which such Loan or Credit-Linked Deposit was made.

“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or debt or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person or (c) the purchase or other acquisition (in one transaction or a series of transactions) of all or substantially all of the property and assets or business of another Person or assets constituting a business unit, line of business or division of such Person. For purposes of covenant

32

compliance, the amount of any Investment shall be the amount actually invested (which, in the case of an Investment made with non-cash assets, shall be the fair value thereof at the time such Investment is made), without adjustment for subsequent increases or decreases in the value of such Investment.

“IP Rights” has the meaning set forth in Section 5.15.

“IRS” means the United States Internal Revenue Service.

“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

“L/C Borrowing” means a Revolving L/C Borrowing or a Synthetic L/C Borrowing.

“L/C Credit Extension” a Revolving L/C Credit Extension or a Synthetic L/C Credit Extension.

“L/C Issuer” means a Revolving L/C Issuer or a Synthetic L/C Issuer.

“L/C Obligations” means the Revolving L/C Obligations or the Synthetic L/C Obligations.

“Lender” means (a) the Persons listed on Schedule 2.01 (other than any such Person that has ceased to be a party hereto pursuant to an Assignment and Assumption) and (b) any Person that has become a party hereto pursuant to an Assignment and Assumption. Unless the context clearly indicates otherwise, the term “Lenders” shall include the Swing Line Lender and each L/C Issuer.

“Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.

“Letter of Credit” means any letter of credit issued hereunder. A Letter of Credit may be a commercial letter of credit or a standby letter of credit.

“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the relevant L/C Issuer.

“Letter of Credit Expiration Date” means the Revolving Letter of Credit Expiration Date or the Synthetic L/C Letter of Credit Expiration Date.

33

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“Loan” means an extension of credit by a Lender to the Borrower under Article 2 in the form of a Term Loan, Bridge Loan, Revolving Credit Loan, Synthetic L/C Loan or a Swing Line Loan.

“Loan Documents” means, collectively, (i) this Agreement, (ii) the Notes, (iii) the Subsidiary Guaranty, (iv) the Collateral Documents, (v) each Letter of Credit Application and (vi) the Intercreditor Agreement.

“Loan Parties” means, collectively, the Borrower and each Subsidiary Guarantor.

“Management Stockholders” means the members of management of the Borrower or its Subsidiaries who are investors in the Borrower or any Holding Company.

“Master Agreement” has the meaning set forth in the definition of “Swap Contract”.

“Material Adverse Effect” means (a) a material adverse effect on the business, operations, assets, liabilities (actual or contingent) or financial condition of the Borrower and its Subsidiaries, taken as a whole, (b) a material adverse effect on the ability of the Borrower or the Loan Parties (taken as a whole) to perform their respective payment obligations under any Loan Document to which the Borrower or any of the other Loan Parties is a party or (c) a material adverse effect on the rights and remedies of the Lenders under any Loan Document.

“Material Fee Owned Property” means any real property owned in fee by the Borrower or any Restricted Subsidiary (i) listed on Schedule 1.01F or (ii) with respect to real property acquired after the date hereof, with a book value at the date of (and after giving effect to) such acquisition in excess of $10,000,000; provided that, if any real property owned in fee by a Loan Party does not constitute a Material Fee Owned Property but the Administrative Agent reasonably determines that such real property is material (as a result of expansion thereof or capital improvements thereto) and notifies the Borrower of such determination, then such real property shall become a Material Fee Owned Property unless the Borrower certifies to the Administrative Agent that the book value thereof is less than $10,000,000.

“Material Financeable Leases” means (i) the leases listed on Schedule 1.01D and (ii) with respect to any lease of real property entered into after the date hereof, any lease with respect to real property, other than office space, leased by the Borrower or a Restricted Subsidiary, in each case requiring aggregate annual rental payments in excess of $2,500,000.

34

“Material Pipelines” means (i) the pipelines and gathering systems described on Schedule 1.01E and (ii) any pipelines and gathering systems acquired after the date hereof, with a book value at the date of (and after giving effect to) such acquisition in excess of $10,000,000; provided that, if any pipelines or gathering systems owned by a Loan Party do not constitute a Material Pipeline but the Administrative Agent reasonably determines that such pipelines or gathering systems are material (as a result of expansion thereof or capital improvements thereto) and notifies the Borrower of such determination, then such pipelines or gathering systems shall become a Material Pipeline unless the Borrower certifies to the Administrative Agent that the book value thereof is less than $10,000,000.

“Maturity Date” means (a) with respect to the Revolving Credit Facility, October 31, 2011, (b) with respect to the Term Loans and the Synthetic L/C Facility, October 31, 2012 and (c) with respect to the Bridge Loans, October 31, 2007.

“Maximum Rate” has the meaning set forth in Section 10.10.

“Merrill Lynch” means Merrill Lynch Ventures L.P. 2001 and its Affiliates, but not including, however, any portfolio companies of any of the foregoing.

“Minimum Cash Consideration” with respect to the Initial MLP Asset Transfer means 40% of the fair market value of (a) the assets and property transferred or (b) in the case of a transfer of any Equity Interests of a Person, such Person at the time of such Initial MLP Asset Transfer (it being understood that, in the case of a transfer of less than all of the Equity Interests of a Person, the fair market value of such Person shall be determined at the time of the first MLP Asset Transfer constituting part of such Initial MLP Asset Transfer (as if all the Equity Interests in such Person had been transferred at the time of such first MLP Asset Transfer and the Minimum Cash Consideration requirement shall have to be satisfied on that basis in connection with such first MLP Asset Transfer) and there shall be no Minimum Cash Consideration required for any subsequent transfer of Equity Interests of such Person constituting part of the same Initial MLP Asset Transfer) (in each of the foregoing clauses (a) and (b), assuming such assets or Person, as applicable, operate as a going concern); provided that up to 50% of the Minimum Cash Consideration may consist of Equity Interests in the applicable MLP so long as such Equity Interests are converted into or exchanged for, within 365 days of the Initial MLP Asset Transfer, cash equal to at least the fair market value of such Equity Interests on the date of the Initial MLP Asset Transfer. For purposes of this definition, (x) with respect to any assets, property or Person constituting part of the Downstream Business subject to such Initial MLP Asset Transfer, the fair market value thereof shall be determined in good faith by the Borrower based on values that could be obtained in arms’ length transactions, but in no event shall such fair market value be lower than an amount equal to the product of (a) the Consolidated EBITDA (calculated, without giving effect to the last sentence of the definition “Consolidated Net Income”, to include the pro rata share of the Consolidated EBITDA of any Unrestricted Subsidiary included in such

35

Downstream Business and determined as if references to the Borrower and its Restricted Subsidiaries in the definition of “Consolidated EBITDA” were references to such Downstream Business) attributable to such Downstream Business for the four fiscal quarter period most recently ended prior to the date of the Initial MLP Asset Transfer for which internal financial statements are available as of such date (as set forth in a certificate of the chief financial officer of the Borrower delivered to the Administrative Agent) and (B) 8.5 (provided, however that, if the Borrower determines that such fair market value is lower than such minimum amount, the fair market value of such assets, property or Person constituting part of the Downstream Business subject to such Initial MLP Asset Transfer shall be determined by an Independent Financial Advisor) and (y) with respect to any other assets, property or Equity Interests of a Person constituting the subject of such Initial MLP Asset Transfer, the fair market value of such assets, property or Person, as applicable, shall be determined by an Independent Financial Advisor. For purposes of calculating the fair market value of any assets or property transferred to any Person, any Person and any Equity Interests in a Person with respect to any MLP Asset Transfer, MLP Equity Transfer or Permitted GP Transfer, any Indebtedness that is owed by such Person to the Borrower or any Restricted Subsidiary shall be disregarded and shall not be reflected in such calculation to reduce the fair market value of such assets or property, Person or Equity Interests in such Person, as the case may be.

“MLP” means any master limited partnership.

“MLP Asset Transfer” means the Disposition of property or assets (including any Equity Interests of any Person) by the Borrower or any Restricted Subsidiary to one or more MLPs or MLP Subsidiaries.

“MLP Equity Transfer” means the Disposition of any Equity Interest in an MLP.

“MLP Extraordinary Distribution” means any dividends or distributions made by a Permitted MLP or Permitted GP other than any dividends or distributions out of the operating surplus of such Permitted MLP or Permitted GP.

“MLP GP” means a GP that is a general partner of a Permitted MLP.

“MLP Subsidiary” means a Subsidiary of an MLP.

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

“Mortgage” means, collectively, the deeds of trust, trust deeds, hypothecs and mortgages made by the Loan Parties in favor or for the benefit of the Collateral Agent on behalf of the Secured Parties substantially in the form of Exhibit H (with such changes as may be customary to account for local Law matters), and any other mortgages executed and delivered pursuant to Section 6.11.

36

“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

“Net Cash Proceeds” means:

(a) with respect to the Disposition of any asset by the Borrower or any Restricted Subsidiary, any Permitted MLP Transfer, any Permitted GP Transfer, any MLP Extraordinary Distribution or any Casualty Event, the excess, if any, of (i) the sum of cash and Cash Equivalents received in connection with such Disposition, Permitted MLP Transfer, Permitted GP Transfer, MLP Extraordinary Distribution or Casualty Event (including (x) any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received and, with respect to any Casualty Event, any insurance proceeds or condemnation awards in respect of such Casualty Event actually received by or paid to or for the account of the Borrower or any Restricted Subsidiary and (y) in the case of any Permitted MLP Transfer or Permitted GP Transfer, cash received pursuant to the repayment of Indebtedness owing to the Borrower or a Restricted Subsidiary and any other cash received that serves to qualify such transaction as a Permitted MLP Transfer or Permitted GP Transfer) over (ii) the sum of (A) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness that is secured by the asset subject to such Disposition or Casualty Event and that is required to be repaid (and is timely repaid) in connection with such Disposition or Casualty Event (other than Indebtedness under the Loan Documents), (B) the out-of-pocket expenses (including attorneys’ fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses and brokerage, consultant and other customary fees) actually incurred by the Borrower or such Restricted Subsidiary in connection with such Disposition or Casualty Event, (C) taxes paid or reasonably estimated to be actually payable in connection therewith, (D) any reserve for adjustment in respect of (x) the sale price of such asset or assets established in accordance with GAAP and (y) any liabilities associated with such asset or assets and retained by the Borrower or any Restricted Subsidiary after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental, health or safety matters or against any indemnification obligations associated with such transaction and it being understood that “Net Cash Proceeds” shall include any cash or Cash Equivalents (i) received upon the Disposition of any non-cash consideration received by the Borrower or any Restricted Subsidiary in any such Disposition and (ii) upon the reversal (without the satisfaction of any applicable liabilities in cash in a corresponding amount) of any reserve described in clause (D) above or, if such liabilities have not been satisfied in cash and such reserve is not reversed within three hundred sixty-five (365) days after such Disposition or Casualty Event, the amount of such reserve and (E) in respect of any North Texas Asset Sale, any amount due to the sellers under the PIPA under

37

Schedule 5.8 to the PIPA; provided that solely for purposes of determining the Net Cash Proceeds of an Asset Disposition Event (x) no net cash proceeds calculated in accordance with the foregoing realized in a single transaction or series of related transactions shall constitute Net Cash Proceeds unless such net cash proceeds shall exceed $10,000,000 and (y) no such net cash proceeds meeting the requirements of sub-clause (x) shall constitute Net Cash Proceeds under this clause (a) until the aggregate amount of all such net cash proceeds shall exceed $25,000,000; and

(b) with respect to the incurrence or issuance of any Indebtedness by the Borrower or any Restricted Subsidiary, the excess, if any, of (i) the sum of the cash received in connection with such incurrence or issuance over (ii) the investment banking fees, underwriting discounts, commissions, costs and other out-of-pocket expenses and other customary expenses, incurred by the Borrower or such Restricted Subsidiary in connection with such incurrence or issuance.

“Non-Cash Charges” means (a) losses on asset sales, disposals or abandonments, in each case other than in the ordinary course of business, (b) any impairment charge or asset write-off related to intangible assets, long-lived assets, and investments in debt and equity securities pursuant to GAAP, (c) all losses from investments recorded using the equity method, (d) stock-based awards compensation expense, and (e) other non-cash charges (provided that if any non-cash charges referred to in this clause (e) represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period); provided that write-downs and write-offs of receivables shall not be “Non-Cash Charges”.

“Non-Consenting Lenders” has the meaning set forth in Section 3.07(d).

“Nonrenewal Notice Date” has the meaning set forth in Section 2.03(b)(iii).

“North Texas Assets” means the business or assets of the Borrower and its Subsidiaries that utilize or comprise the following principal assets: Chico Gas Processing Plant, Shackelford Gas Processing Plant, and a common gas gathering system connected to both such plants.

“North Texas Asset Sale” means any Disposition of all or any portion of any of the North Texas Assets.

“Note” means a Term Note, Bridge Note, a Revolving Credit Note or a Synthetic L/C Note, as the context may require.

“Notice of Intent to Cure” has the meaning set forth in Section 6.02(b).

“Not Otherwise Applied” means, with reference to any amount of Net Cash Proceeds of any transaction or event or of Excess Cash Flow, that such amount

38

(a) was not applied to prepay the Loans pursuant to Section 2.05(a), (b) was not required to be applied to prepay the Loans pursuant to Section 2.05(b), and (c) was not previously applied in determining the permissibility of a transaction under the Loan Documents where such permissibility was (or may have been) contingent on receipt of such amount or utilization of such amount for a specified purpose. The Borrower shall promptly notify the Administrative Agent of any application of such amount as contemplated by (b) above.

“Obligations” means all (a) advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party and its Subsidiaries arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or Subsidiary of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding, (b) obligations of any Loan Party and its Subsidiaries arising under any Secured Hedge Agreement and (c) Cash Management Obligations. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents (and of their Subsidiaries to the extent they have obligations under the Loan Documents) include (i) the obligation (including guarantee obligations) to pay principal, interest, Letter of Credit commissions, reimbursement obligations, charges, expenses, fees, Attorney Costs, indemnities and other amounts payable by any Loan Party or its Subsidiaries under any Loan Document and (ii) the obligation of any Loan Party or any of its Subsidiaries to reimburse any amount in respect of any of the foregoing that any Lender, in its sole discretion, may elect to pay or advance on behalf of such Loan Party or such Subsidiary.

“Offering Circular” means the Offering Circular with respect to the Senior Unsecured Notes, dated October 18, 2005.

“Organization Documents” means, (a) with respect to any corporation, its certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, its certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, its partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

“Other Taxes” has the meaning set forth in Section 3.01(b).

“Outstanding Amount” means (a) with respect to the Term Loans, Bridge Loans, Revolving Credit Loans, Synthetic L/C Loans and Swing Line Loans on any date, the aggregate principal amount thereof after giving effect to any borrowings and prepayments or repayments of Term Loans, Bridge Loans, Revolving Credit Loans

39

(including any refinancing of outstanding Unreimbursed Amounts under Revolving Letters of Credit or Revolving L/C Credit Extensions as a Revolving Credit Borrowing), Synthetic L/C Loans and Swing Line Loans, as the case may be, occurring on such date; and (b) with respect to any L/C Obligations on any date, the aggregate principal amount thereof on such date after giving effect to any related L/C Credit Extension occurring on such date and any other changes thereto as of such date, including as a result of any reimbursements of outstanding Unreimbursed Amounts under any related Letters of Credit (including any refinancing of outstanding Unreimbursed Amounts under related Letters of Credit or related L/C Credit Extensions as a Revolving Credit Borrowing or Synthetic L/C Borrowing, as the case may be) or any reductions in the maximum amount available for drawing under related Letters of Credit taking effect on such date.

“Partially Owned Operating Company” means any Person that (i) is transferred to an MLP or an MLP Subsidiary in connection with a Permitted MLP Transfer and (ii) holds operating assets and as to which the Borrower or any Restricted Subsidiary continues to own Equity Interests.

“Participant” has the meaning set forth in Section 10.07(e).

“PBGC” means the Pension Benefit Guaranty Corporation.

“Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Loan Party or any ERISA Affiliate or to which any Loan Party or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five (5) plan years.

“Perfection Certificate” means a certificate in the form specified in the Security Agreement or any other form approved by the Administrative Agent and the Collateral Agent.

“Permitted Acquisition” has the meaning set forth in Section 7.02(i).

“Permitted Date” has the meaning set forth in Section 7.03(p).

“Permitted Equity Issuance” means any sale or issuance of any Qualified Equity Interests of the Borrower.

“Permitted GP” means any MLP GP as to which a Permitted GP Transfer has occurred, including any successor Person to such MLP GP.

“Permitted GP Transfer” means any GP Equity Transfer; provided that:

(a) (1) in the case of a GP Equity Transfer by the Borrower or a Restricted Subsidiary, the Borrower or a Restricted Subsidiary receives in connection therewith cash (which may include the repayment in cash of Indebtedness owing

40

to the Borrower or such Restricted Subsidiary) at substantially the same time of such GP Equity Transfer in an amount at least equal to the greater of (i) $50,000,000 (with this clause (i) applicable only in the case of a GP Equity Transfer undertaken in connection with the initial public offering of a MLP GP) and (ii) the fair market value of the Equity Interests subject to such GP Equity Transfer or (2) in the case of a GP Equity Transfer by an MLP GP, the Net Cash Proceeds received by such MLP GP in such GP Equity Transfer, which shall be at least equal to the fair market value of the Equity Interests subject to such GP Equity Transfer, are used to pay a dividend to the holders of Equity Interests of such MLP GP or to purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests in such MLP GP; provided, however, that the Borrower or a Restricted Subsidiary shall receive at least a pro rata portion of such dividend or at least a pro rata portion of the payment for such purchase, redemption, defeasance, acquisition or retirement, except that such requirement shall not apply with respect to payments for the purchase, redemption, defeasance or retirement for value of Equity Interests (other than Disqualified Equity Interests) of any MLP GP held by any future, present or former employee, director, manager or consultant of such MLP GP, any of its Subsidiaries or any of its direct or indirect parent companies pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement;

(b) at the time of and after giving effect to such GP Equity Transfer, the Borrower is in compliance with the terms of the Loan Documents and the Senior Unsecured Notes Documentation, and such GP Equity Transfer would not result in a breach or violation of, or constitute a default under the Loan Documents or the Senior Unsecured Notes Documentation;

(c) the related MLP GP’s sole business is to act as the general partner of the applicable Permitted MLP and engage in activities ancillary thereto and such MLP GP owns no assets (other than (i) ownership interests in such Permitted MLP and Equity Interests (other than Disqualified Equity Interests) of the Borrower, (ii) temporarily holding assets to be transferred or distributed in connection with a Permitted MLP Transfer or Permitted GP Transfer or distributions from a Permitted MLP, (iii) current assets sufficient to satisfy its ordinary course operating expenses, including such expenses after it has become a publicly traded company, and other assets necessary for its existence and operation as a public company and (iv) the reserves referred to in clause (d) below); and

(d) the related GP is required by its partnership agreement to distribute all cash and Cash Equivalents that it receives from time to time to its partners on a pro rata basis, subject to the establishment of such reserves as management of such related GP determines are appropriate for general, administrative and operating expenses in the ordinary course of its business and as are prudent to maintain for the proper conduct of its business or to provide for future distributions, in each case in accordance with the terms of the organizational documents of the related GP; provided that such organizational documents are, in

41

the reasonable judgment of the Borrower, in a form that is customary for similar entities whose primary function is to serve as general partners of entities operating as master limited partnerships.

For purposes of calculating the fair market value of any assets or property transferred to any Person, any Person and any Equity Interests in a Person with respect to any MLP Asset Transfer, MLP Equity Transfer or Permitted GP Transfer, any Indebtedness that is owed by such Person to the Borrower or any Restricted Subsidiary shall be disregarded and shall not be reflected in such calculation to reduce the fair market value of such assets or property, Person or Equity Interests in such Person, as the case may be.

“Permitted Holders” means the Equity Investors, provided, however, that for purposes of determining the percentage of Voting Stock of the Borrower that the Permitted Holders have the power to vote or direct the voting of, or own, within the meaning of the definition of “Change of Control”, if the portion of such Voting Stock allocable to the Management Stockholders in the aggregate at any time exceeds fifteen percent (15%) of the total amount of the outstanding Voting Stock of the Borrower at such time, the Permitted Holders shall be deemed not to own or to have the power to vote or direct the voting of the amount of such excess for purposes of the definition of “Change of Control” and any calculations specified therein.

“Permitted MLP” means any MLP to which the Borrower or a Restricted Subsidiary shall have made a Permitted MLP Transfer either directly to such MLP or to a Subsidiary of such MLP, including any successor Person to such MLP.

“Permitted MLP Transfer” means any MLP Asset Transfer or MLP Equity Transfer; provided that

(a) in the case of the Initial MLP Asset Transfer, after such MLP Asset Transfer and as a result thereof, the Borrower and its Restricted Subsidiaries shall have received an amount of cash attributable to such Initial MLP Asset Transfer (as a result of (i) the receipt of cash proceeds as all or a portion of the consideration for such Initial MLP Asset Transfer or (ii) the repayment of intercompany indebtedness, owed by a Subsidiary of the Borrower, transferred or assumed as part of such Initial MLP Asset Transfer) at least equal to the Minimum Cash Consideration, with the balance of the consideration received by the Borrower and its Restricted Subsidiaries for such Initial MLP Asset Transfer consisting solely of Equity Interests in the applicable MLP (and all such Equity Interests, other than those held by a Restricted Subsidiary that is the GP of such MLP, shall be received by or immediately transferred to a Loan Party);

(b) in the case of an MLP Asset Transfer (other than the Initial MLP Asset Transfer), after such MLP Asset Transfer and as a result thereof, the Borrower and its Restricted Subsidiaries shall have received an amount of cash attributable to such MLP Asset Transfer (as a result of (i) the receipt of cash proceeds as all or a portion of the consideration for such MLP Asset Transfer or (ii) the repayment

42

of intercompany indebtedness, owed by a Subsidiary of the Borrower, transferred or assumed as part of such MLP Asset Transfer) at least equal to 75% of the fair market value (as determined in good faith by the Borrower based on values that could be obtained in an arms’ length transaction) of (A) the assets and property transferred or (B) in the case of a transfer of any Equity Interests of a Person, such Person at the time of such MLP Asset Transfer (it being understood that, in the case of a transfer of less than all of the Equity Interests of a Person, the value of such Person shall be determined at the time of the first MLP Asset Transfer constituting part of such MLP Asset Transfer (as if all the Equity Interests in such Person shall have been transferred at the time of such first MLP Asset Transfer and the cash requirement set forth in this clause shall be satisfied on that basis in connection with such first MLP Asset Transfer) and there shall be no such additional cash attributable to such MLP Asset Transfer required for any subsequent transfer of Equity Interests of such Person constituting part of the MLP Asset Transfer) (in each case of the foregoing clauses (A) and (B), determined assuming such assets or Person, as applicable, operate as a going concern), with the balance of the consideration received by the Borrower and its Restricted Subsidiaries for such MLP Asset Transfer consisting solely of Equity Interests in the applicable MLP (and all such Equity Interests, other than those held by a Restricted Subsidiary that is the GP of such MLP, shall be received by or immediately transferred to a Loan Party); provided, however, that in the event that the fair market value of the assets, property and Person transferred in connection with a MLP Asset Transfer exceed $100,000,000 in the aggregate, the Borrower or such Restricted Subsidiary, as the case may be, shall have received a written opinion from an Independent Financial Advisor to the effect that such MLP Asset Transfer is fair, from a financial standpoint, to the Borrower and its Restricted Subsidiaries;

(c) in the case of a MLP Equity Transfer (other than a MLP Equity Transfer to the extent it is made to satisfy the proviso to the definition of “Minimum Cash Consideration,” in which case only the requirements of such proviso need be satisfied), the Borrower or a Restricted Subsidiary receives net proceeds in connection therewith in an amount at least equal to the fair market value of the Equity Interests that are transferred in such MLP Equity Transfer and at least 75% of the consideration for such MLP Equity Transfer received by the Borrower and its Restricted Subsidiaries is in the form of cash (and any other consideration received is either received by or immediately transferred to a Loan Party);

(d) at the time of and after giving effect to such MLP Asset Transfer or MLP Equity Transfer, the Borrower and the Restricted Subsidiaries are in compliance with the terms of the Loan Documents and the Senior Unsecured Notes Documentation, and such MLP Asset Transfer or MLP Equity Transfer, as the case may be, would not result in a breach or violation of, or constitute a default under the Loan Documents or the Senior Unsecured Notes Documentation; and

43

(e) such MLP Asset Transfer would not result in the related MLP or any MLP Subsidiary being required to assume the obligations of the Borrower or any Restricted Subsidiary under the terms of any of the Borrower’s or such Restricted Subsidiary’s Indebtedness.

For purposes of calculating the fair market value of any assets or property transferred to any Person, any Person and any Equity Interests in a Person with respect to any MLP Asset Transfer, MLP Equity Transfer or Permitted GP Transfer, any Indebtedness that is owed by such Person to the Borrower or any Restricted Subsidiary shall be disregarded and shall not be reflected in such calculation to reduce the fair market value of such assets or property, Person or Equity Interests in such Person, as the case may be.

“Permitted Refinancing” means, with respect to any Person, any modification, refinancing, refunding, renewal or extension of any Indebtedness of such Person; provided that (a) the principal amount (or accreted value, if applicable) thereof does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so modified, refinanced, refunded, renewed or extended except by an amount equal to unpaid accrued interest and premium thereon plus other reasonable amounts paid, and fees and expenses reasonably incurred, in connection with such modification, refinancing, refunding, renewal or extension and by an amount equal to any existing commitments unutilized thereunder, (b) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to Section 7.03(e), such modification, refinancing, refunding, renewal or extension has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being modified, refinanced, refunded, renewed or extended, (c) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to Section 7.03(e), at the time thereof and after giving effect thereto, no Event of Default shall have occurred and be continuing, and (d) if such Indebtedness being modified, refinanced, refunded, renewed or extended is Indebtedness permitted pursuant to Section 7.03(b), 7.03(o), 7.03(q) or 7.03(r), (i) to the extent such Indebtedness being modified, refinanced, refunded, renewed or extended is subordinated in right of payment to the Obligations, such modification, refinancing, refunding, renewal or extension is subordinated in right of payment to the Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being modified, refinanced, refunded, renewed or extended, (ii) the terms and conditions (including, if applicable, as to collateral but excluding as to subordination, interest rate and redemption premium) of any such modified, refinanced, refunded, renewed or extended Indebtedness, taken as a whole, are not materially less favorable to the Loan Parties or the Lenders than the terms and conditions of the Indebtedness being modified, refinanced, refunded, renewed or extended; provided that a certificate of a Responsible Officer delivered to the Administrative Agent at least five Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement shall be conclusive evidence that such terms and conditions satisfy

44

the foregoing requirement unless the Administrative Agent notifies the Borrower within such five Business Day period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees) and (iii) such modification, refinancing, refunding, renewal or extension is incurred by the Person who is the obligor of the Indebtedness being modified, refinanced, refunded, renewed or extended.

“Permitted Reinvestment” means an investment in (a) one or more Permitted Acquisitions, (b) properties, (c) Capital Expenditures and (d) acquisitions of long lived assets, that in each of (a), (b), (c) and (d), are used or useful in a Similar Business.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“PIPA” means the Partnership Interest Purchase Agreement, dated as of August 2, 2005, by and between Dynegy, Inc., Dynegy Holdings Inc., Dynegy Midstream Holdings, Inc. and Dynegy Midstream G.P., Inc., as Sellers, and the Borrower, Targa Resources Holdings LP, and Targa Midstream, as Buyers.

“Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by any Loan Party or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

“Pledged Debt” has the meaning set forth in the Security Agreement.

“Pledged Equity” has the meaning set forth in the Security Agreement.

“Post-Acquisition Period” means, with respect to any Permitted Acquisition, the period beginning on the date such Permitted Acquisition is consummated and ending on the last day of the sixth full consecutive fiscal quarter immediately following the date on which such Permitted Acquisition is consummated.

“Prime Rate” means the rate of interest per annum determined from time to time by Credit Suisse as its prime rate in effect at its principal office in New York City and notified to the Borrower.

“Pro Forma Adjustment” means, for any Test Period that includes all or any part of a fiscal quarter included in any Post-Acquisition Period, with respect to the Acquired EBITDA of the applicable Acquired Entity or Business or the Consolidated EBITDA of the Borrower, the pro forma increase or decrease in such Acquired EBITDA or such Consolidated EBITDA, as the case may be, projected by the Borrower in good faith as a result of (a) actions taken during such Post-Acquisition Period for the purposes of realizing reasonably identifiable and factually supportable cost savings or (b) any additional costs incurred during such Post-Acquisition Period, in each case in connection with the combination of the operations of such Acquired Entity or Business with the operations of the Borrower and the Restricted Subsidiaries; provided that, so long as such actions are taken during such Post-Acquisition Period or such costs are incurred during

45

such Post-Acquisition Period, as applicable, it may be assumed, for purposes of projecting such pro forma increase or decrease to such Acquired EBITDA or such Consolidated EBITDA, as the case may be, that such cost savings will be realizable during the entirety of such Test Period, or such additional costs, as applicable, will be incurred during the entirety of such Test Period; provided further that any such pro forma increase or decrease to such Acquired EBITDA or such Consolidated EBITDA, as the case may be, shall be without duplication for cost savings or additional costs already included in such Acquired EBITDA or such Consolidated EBITDA, as the case may be, for such Test Period.

“Pro Forma Balance Sheet” has the meaning set forth in Section 5.05(a)(ii).

“Pro Forma Basis”, “Pro Forma Compliance” and “Pro Forma Effect” mean, with respect to compliance with any test or covenant hereunder, that (A) to the extent applicable, the Pro Forma Adjustment shall have been made and (B) all Specified Transactions and the following transactions in connection therewith shall be deemed to have occurred as of the first day of the applicable period of measurement in such test or covenant: (a) income statement items (whether positive or negative) attributable to the property or Person subject to such Specified Transaction, (i) in the case of (x) a Disposition of all or substantially all of the Equity Interests in any Subsidiary of the Borrower or of any division, product line, or facility used for operations of the Borrower or any of its Subsidiaries or (y) any Permitted MLP Transfer or Permitted GP Transfer, shall be excluded, and (ii) in the case of a Permitted Acquisition or Investment described in the definition of “Specified Transaction”, shall be included, (b) any retirement of Indebtedness, and (c) any Indebtedness incurred or assumed by the Borrower or any of the Restricted Subsidiaries in connection therewith and if such Indebtedness has a floating or formula rate, shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination; provided that, without limiting the application of the Pro Forma Adjustment pursuant to (A) above, the foregoing pro forma adjustments may be applied to any such test or covenant solely to the extent that such adjustments are consistent with the definition of “Consolidated EBITDA” and give effect to events (including operating expense reductions) that are (i) (x) directly attributable to such transaction, (y) expected to have a continuing impact on the Borrower and the Restricted Subsidiaries and (z) factually supportable or (ii) otherwise consistent with the definition of “Pro Forma Adjustment”.

“Pro Forma Financial Statements” has the meaning set forth in Section 5.05(a)(ii).

“Pro Rata Share” means, with respect to each Lender at any time a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Commitments of such Lender under the applicable Facility or Facilities at such time and the denominator of which is the amount of the Aggregate Commitments under the applicable Facility or Facilities at such time; provided that if such Commitments have been terminated, then the Pro Rata Share of each Lender shall

46

be determined based on the Pro Rata Share of such Lender immediately prior to such termination and after giving effect to any subsequent assignments made pursuant to the terms hereof.

“Projections” has the meaning set forth in Section 6.01(c).

“Qualified Equity Interests” means any Equity Interests that are not Disqualified Equity Interests.

“Qualifying IPO” means the issuance by the Borrower or any Holding Company of its common Equity Interests in an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8) pursuant to an effective registration statement filed with the SEC in accordance with the Securities Act (whether alone or in connection with a secondary public offering).

“Refinanced Bridge Loans” has the meaning set forth in Section 10.01.

“Refinanced Term Loans” has the meaning set forth in Section 10.01.

“Register” has the meaning set forth in Section 10.07(d).

“Replacement Bridge Loans” has the meaning set forth in Section 10.01.

“Replacement Term Loans” has the meaning set forth in Section 10.01.

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA or the regulations issued thereunder with respect to a Pension Plan, other than events for which the thirty (30) day notice period has been waived.

“Request for Credit Extension” means (a) with respect to a Borrowing, conversion or continuation of Term Loans, Bridge Loans, Revolving Credit Loans or Synthetic L/C Loans, a Committed Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.

“Required Lenders” means, as of any date of determination (subject to the Intercreditor Agreement with respect to those matters as to which Hedging Parties are entitled to vote thereunder), Lenders having more than 50% of the sum of the (a) Total Outstandings (with the aggregate principal amount of each Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for purposes of this definition), (b) aggregate unused Term Commitments, (c) aggregate unused Bridge Commitments, (d) aggregate unused Revolving Credit Commitments and (e) aggregate Unused Synthetic L/C Commitments; provided that the unused Term Commitment, unused Bridge Commitment, unused Revolving Credit Commitment and Unused Synthetic L/C Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.

47

“Responsible Officer” means the chief executive officer, president, vice president, chief financial officer, treasurer or assistant treasurer or other similar officer of a Loan Party and, as to any document delivered on the Closing Date, any secretary or assistant secretary of a Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interest of the Borrower or any Restricted Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such Equity Interest, or on account of any return of capital to the Borrower’s or any Restricted Subsidiary’s stockholders, partners or members (or the equivalent Persons thereof).

“Restricted Subsidiary” means any Subsidiary of the Borrower other than (i) an Unrestricted Subsidiary or (ii) a Permitted MLP, Permitted GP or a Subsidiary of a Permitted MLP or Permitted GP (other than a Partially Owned Operating Company); provided that any such Partially Owned Operating Company will be a Restricted Subsidiary solely for purposes of Sections 7.01, 7.02, 7.03, 7.04, 7.05, 7.06 and 7.07.

“Revolving Commitment Increase” has the meaning set forth in Section 2.14(a).

“Revolving Commitment Increase Lender” has the meaning set forth in Section 2.14(a).

“Revolving Credit Borrowing” means a borrowing consisting of simultaneous Revolving Credit Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Revolving Credit Lenders pursuant to Section 2.01(c).

“Revolving Credit Commitment” means, as to each Revolving Credit Lender, its obligation to (a) make Revolving Credit Loans to the Borrower pursuant to Section 2.01(c), (b) purchase participations in Revolving L/C Obligations and (c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 under the caption “Revolving Credit Commitment” or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement. The aggregate Revolving Credit Commitments of all Revolving Credit Lenders shall be $250,000,000 on the Closing Date, as such amount may be adjusted from time to time in accordance with the terms of this Agreement.

48

“Revolving Credit Exposure” means, as to each Revolving Credit Lender, the sum of the outstanding principal amount of such Revolving Credit Lender’s Revolving Credit Loans and its Pro Rata Share of the Revolving L/C Obligations and Swing Line Obligations at such time.

“Revolving Credit Facility” means, at any time, the aggregate principal amount of the Revolving Credit Lenders’ Revolving Credit Commitments at such time (or, if the Revolving Credit Commitments have terminated, the total Revolving Credit Exposure at such time).

“Revolving Credit Lender” means, at any time, any Lender that has a Revolving Credit Commitment or Revolving Credit Exposure at such time.

“Revolving Credit Loans” has the meaning set forth in Section 2.01(c).

“Revolving Credit Note” means a promissory note of the Borrower payable to any Revolving Credit Lender or its registered assigns, in substantially the form of Exhibit C-3 hereto, evidencing the aggregate Indebtedness of the Borrower to such Revolving Credit Lender resulting from the Revolving Credit Loans made by such Revolving Credit Lender.

“Revolving L/C Advance” means, with respect to each Revolving Credit Lender, such Lender’s funding of its participation in any Revolving L/C Borrowing in accordance with its Pro Rata Share.

“Revolving L/C Borrowing” means an extension of credit resulting from a drawing under any Revolving Letter of Credit which has not been reimbursed on the applicable Honor Date or refinanced as a Revolving Credit Borrowing.

“Revolving L/C Credit Extension” means, with respect to any Revolving Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the renewal or increase of the amount thereof.

“Revolving L/C Issuer” means Credit Suisse and any other Lender that becomes a Revolving L/C Issuer in accordance with Section 2.03(j) or 10.07(i), in each case, in its capacity as an issuer of Revolving Letters of Credit hereunder, or any successor issuer of Revolving Letters of Credit hereunder.

“Revolving L/C Obligations” means, as at any date of determination, the aggregate maximum amount then available to be drawn under all outstanding Revolving Letters of Credit (whether or not such maximum amount is then in effect under any such Revolving Letter of Credit if such maximum amount increases periodically pursuant to the terms of such Revolving Letter of Credit) plus the aggregate of all Unreimbursed Amounts in respect of Revolving Letters of Credit, including all Revolving L/C Borrowings.

“Revolving Letter of Credit” means a Letter of Credit issued under the Revolving Credit Facility.

49

“Revolving Letter of Credit Expiration Date” means the day that is five (5) Business Days prior to the scheduled Maturity Date then in effect for the Revolving Credit Facility (or, if such day is not a Business Day, the next preceding Business Day).

“Rollover Amount” has the meaning set forth in Section 7.15(b).

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor thereto.

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

“Secured Hedge Agreement” means any Swap Contract that (i) is permitted under Article 7 and (ii) is entered into by and between any Loan Party and any Hedging Party; provided that such Swap Contract shall not constitute a Secured Hedge Agreement unless the relevant Hedging Party is subject to the Intercreditor Agreement.

“Secured Parties” means, collectively, the Administrative Agent, the Collateral Agent, the Lenders, any Hedging Party that is a party to a Secured Hedge Agreement, any Supplemental Agents and each co-agent or sub-agent appointed by the Administrative Agent or Collateral Agent from time to time pursuant to Section 9.01(c).

“Securities Act” means the Securities Act of 1933.

“Security Agreement” means, collectively, the Security Agreement executed by the Loan Parties, substantially in the form of Exhibit G, together with each other security agreement supplement executed and delivered pursuant to Section 6.11.

“Security Agreement Supplement” has the meaning set forth in the Security Agreement.

“Senior Unsecured Notes” means the Borrower’s senior unsecured notes due 2013 in the initial aggregate principal amount of $250,000,000.

“Senior Unsecured Notes Documentation” means (a) the Senior Unsecured Notes and all documents executed and delivered with respect to the Senior Unsecured Notes, including the Senior Unsecured Notes Indenture and (b) in case of any Permitted Refinancing of any Senior Unsecured Notes, all instruments and documents executed and delivered with respect to such Permitted Refinancing.

“Senior Unsecured Notes Indenture” means the indenture for the Senior Unsecured Notes, dated as of October 31, 2005.

“Similar Business” means any business conducted by the Borrower and any of its Restricted Subsidiaries on the Closing Date or any business that is similar, reasonably related, incidental or ancillary thereto, including, for the avoidance of doubt, the gathering, processing, storing, transportation and marketing of oil, natural gas, natural gas liquids and related products.

50

“Sold Entity or Business” has the meaning set forth in the definition of “Consolidated EBITDA”.

“Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“SPC” has the meaning set forth in Section 10.07(g).

“Specified Transaction” means, with respect to any period, any Investment, Disposition (including a Permitted MLP Transfer or Permitted GP Transfer), incurrence or repayment of Indebtedness, Restricted Payment, Subsidiary designation, Incremental Term Loan, Revolving Commitment Increase or Synthetic L/C Commitment Increase that by the terms of this Agreement requires “Pro Forma Compliance” with a test or covenant hereunder or requires such test or covenant to be calculated on a “Pro Forma Basis”.

“Sponsor” means Warburg Pincus LLC and its Affiliates, but not including, however, any portfolio companies of any of the foregoing.

“Statutory Reserves” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the FRB and any other banking authority, domestic or foreign, to which the Administrative Agent or any Lender (including any branch, Affiliate, or other fronting office making or holding a Loan) is subject for Eurocurrency Liabilities (as defined in Regulation D of the FRB). Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities as defined in Regulation D of the FRB) and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or

51

other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower. For purposes of all representations, warranties and covenants set forth herein and in the other Loan Documents, as of the Closing Date each Person that is to become a Subsidiary as a result of the Acquisition shall be deemed to be a Subsidiary of the Borrower.

“Subsidiary Guarantees” has the meaning set forth in the definition of “Collateral and Guarantee Requirement”.

“Subsidiary Guarantor” has the meaning set forth in the definition of “Collateral and Guarantee Requirement”.

“Subsidiary Guaranty” means, collectively, (a) the Subsidiary Guarantees made by the Subsidiary Guarantors, substantially in the form of Exhibit F and (b) each other guaranty and guaranty supplement delivered pursuant to Section 6.11.

“Successor Company” has the meaning set forth in Section 7.04(d).

“Supplemental Agent” has the meaning set forth in Section 9.13 and “Supplemental Agents” shall have the corresponding meaning.

“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement relating to transactions of the type described in clause (a) above (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts (other than a Back-to-Back Swap Contract), (a) for any date on or after the date such Swap Contracts have been closed out and

52

termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).

“Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.04.

“Swing Line Facility” means the revolving credit facility made available by the Swing Line Lender pursuant to Section 2.04.

“Swing Line Lender” means Credit Suisse, in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.

“Swing Line Loan” has the meaning set forth in Section 2.04(a).

“Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing, shall be substantially in the form of Exhibit B.

“Swing Line Obligations” means, as at any date of determination, the aggregate principal amount of all Swing Line Loans outstanding.

“Swing Line Sublimit” means an amount equal to the lesser of (a) $30,000,000 and (b) the aggregate principal amount of the Revolving Credit Commitments. The Swing Line Sublimit is part of, and not in addition to, the Revolving Credit Commitments.

“Syndication Agent” means Merrill Lynch Capital Corporation, as Syndication Agent under this Agreement.

“Synthetic L/C Borrowing” means an extension of credit resulting from a drawing under any Synthetic L/C Letter of Credit which has not been reimbursed on the applicable Honor Date and which amount is funded by reducing the Credit-Linked Deposits by a like amount, consisting of simultaneous Synthetic L/C Loans having the same Interest Period made by each of the Synthetic L/C Lenders pursuant to Section 2.01(d).

“Synthetic L/C Commitment” means, as to each Synthetic L/C Lender, its obligation initially to fund its Credit-Linked Deposit in an aggregate amount set forth opposite such Lender’s name on Schedule 2.01 under the caption “Synthetic L/C Commitment” and after the Closing Date to (a) make Synthetic L/C Loans to the Borrower pursuant to Section 2.01(d) and (b) purchase participations in Synthetic L/C Obligations in respect of Synthetic L/C Letters of Credit, in an aggregate principal amount at any one time outstanding not to exceed the amount of its Credit-Linked Deposit, as such amount may be adjusted from time to time in accordance with this Agreement. The aggregate Synthetic L/C Commitments of all Synthetic L/C Lenders shall be $300,000,000 on the Closing Date, as such amount may be adjusted from time to time in accordance with the terms of this Agreement.

53

“Synthetic L/C Commitment Increase” has the meaning set forth in Section 2.14(a).

“Synthetic L/C Credit Extension” means, with respect to any Synthetic L/C Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the renewal or increase of the amount thereof.

“Synthetic L/C Exposure” means, as to each Synthetic L/C Lender, its Pro Rata Share of the Synthetic L/C Obligations at such time.

“Synthetic L/C Facility” means, at any time, the aggregate amount of the Synthetic L/C Lenders’ Synthetic L/C Commitments at such time.

“Synthetic L/C Issuer” means Credit Suisse and any other Lender that becomes a Synthetic L/C Issuer in accordance with Section 10.07(i), in each case, in its capacity as an issuer of Synthetic L/C Letters of Credit hereunder, or any successor issuer of Synthetic L/C Letters of Credit hereunder.

“Synthetic L/C Lender” means, at any time, any Lender that has a Synthetic L/C Commitment or an outstanding Synthetic L/C Loan at such time.

“Synthetic L/C Letter of Credit” means a Letter of Credit issued under the Synthetic L/C Facility.

“Synthetic L/C Letter of Credit Expiration Date” means the day that is five (5) Business Days prior to the scheduled Maturity Date then in effect for the Synthetic L/C Facility (or, if such day is not a Business Day, the next preceding Business Day).

“Synthetic L/C Loans” means the loans deemed made by the Synthetic L/C Lenders to the Borrower pursuant to Section 2.03(c)(viii) to reimburse drawings under a Synthetic L/C Letter of Credit, which loans are funded by reducing the Credit-Linked Deposits by a like amount.

“Synthetic L/C Note” means a promissory note of the Borrower payable to any Synthetic L/C Lender or its registered assigns, in substantially the form of Exhibit C-4 hereto, evidencing the aggregate Indebtedness of the Borrower to such Synthetic L/C Lender resulting from the Synthetic L/C Loans made by such Synthetic L/C Lender.

“Synthetic L/C Obligations” means, as at any date of determination, the aggregate maximum amount then available to be drawn under all outstanding Synthetic L/C Letters of Credit (whether or not such maximum amount is then in effect under any such Synthetic L/C Letter of Credit if such maximum amount increases periodically pursuant to the terms of such Synthetic L/C Letter of Credit) plus the aggregate of all Unreimbursed Amounts in respect of Synthetic L/C Letters of Credit, including all Synthetic L/C Borrowings.

54

“Targa Midstream” means Targa Midstream GP, LLC, a Delaware limited liability company and a wholly owned Subsidiary of the Borrower.

“Targa Resources Holdings LP” means Targa Resources Holdings LP, a Delaware limited partnership and a wholly owned Subsidiary of the Borrower.

“Targa Resources Investments, Inc.” means Targa Resources Investments, Inc., a Delaware corporation that indirectly owns 100% of the Equity Interests of the Borrower.

“Taxes” has the meaning set forth in Section 3.01(a).

“Term Borrowing” means a borrowing consisting of simultaneous Term Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Term Lenders pursuant to Section 2.01.

“Term Commitment” means, as to each Term Lender, its obligation to make a Term Loan to the Borrower pursuant to Section 2.01(a) in an aggregate principal amount not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 under the caption “Term Commitment” or in the Assignment and Assumption pursuant to which such Term Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement. The initial aggregate amount of the Term Commitments is $1,250,000,000.

“Term Lender” means, at any time, any Lender that has a Term Commitment or a Term Loan at such time.

“Term Loan” means a Loan made pursuant to Section 2.01(a).

“Term Note” means a promissory note of the Borrower payable to any Term Lender or its registered assigns, in substantially the form of Exhibit C-1 hereto, evidencing the aggregate Indebtedness of the Borrower to such Term Lender resulting from the Term Loans made by such Term Lender.

“Test Period” means, for any determination under this Agreement, a period of four consecutive fiscal quarters of the Borrower.

“Title Policy” has the meaning set forth in clause (h) of the definition of “Collateral and Guarantee Requirement”.

“Threshold Amount” means $40,000,000.

“Total Leverage Ratio” means, with respect to any Test Period, the ratio of (a) Consolidated Total Debt as of the last day of such Test Period to (b) Consolidated EBITDA for such Test Period, determined on a Pro Forma Basis if any Specified Transaction occurred during such Test Period.

55

“Total Outstandings” means the aggregate Outstanding Amount of all Loans and all L/C Obligations.

“Transaction” means, collectively, (a) the Equity Contribution, (b) the Acquisition, (c) the issuance of the Senior Unsecured Notes, (d) the execution and delivery of the Loan Documents and the funding of the Term Loans, the Bridge Loans, the Revolving Credit Loans and the Credit-Linked Deposit Account and the issuance of any Letters of Credit on the Closing Date, (e) the consummation of any other transactions in connection with the foregoing, and (f) the payment of the fees and expenses (including the Transaction Expenses) incurred in connection with any of the foregoing.

“Transaction Documents” means the PIPA and all other material documents, instruments and certificates contemplated by the PIPA.

“Transaction Expenses” means any fees or expenses incurred or paid by the Borrower or any Restricted Subsidiary in connection with the Transaction, this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby.

“Type” means, with respect to a Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.

“Unaudited Financial Statements” has the meaning set forth in Section 4.01(f).

“Uniform Commercial Code” means the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.

“United States” and “U.S.” mean the United States of America.

“Unreimbursed Amount” has the meaning set forth in Section 2.03(c)(i).

“Unrestricted Subsidiary” means (i) each Existing JV and each other Subsidiary of the Borrower listed on Schedule 1.01C, (ii) any Subsidiary of the Borrower designated by the board of directors of the Borrower as an Unrestricted Subsidiary pursuant to Section 6.18 (or that becomes an Unrestricted Subsidiary pursuant to Section 6.18(b)) subsequent to the date hereof and (iii) any Subsidiary of an Unrestricted Subsidiary; provided that no Permitted MLP, Permitted GP or a Subsidiary of a Permitted MLP or Permitted GP will be an Unrestricted Subsidiary.

“Unused Synthetic L/C Commitments” means, at any time, the aggregate amount of the Synthetic L/C Commitments at such time, less the Outstanding Amount of the Synthetic L/C Obligations at such time.

56

“USA PATRIOT Act” has the meaning set forth in Section 10.20.

“Voting Stock” of any Person means Equity Interests of any class or classes having ordinary voting power for the election of directors or the equivalent governing body of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (ii) the then outstanding principal amount of such Indebtedness.

“wholly owned” means, with respect to a Subsidiary of a Person, a Subsidiary of such Person all of the outstanding Equity Interests of which (other than (x) director’s qualifying shares and (y) shares issued to foreign nationals to the extent required by applicable Law) are owned by such Person and/or by one or more wholly owned Subsidiaries of such Person.

SECTION 1.02. Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

(b) (i) The words “herein,” “hereto,” “hereof” and “hereunder” and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof.

(ii) Article, Section, Exhibit and Schedule references are to the Loan Document in which such reference appears.

(iii) The term “including” is by way of example and not limitation.

(iv) The term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form.

(c) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”; and the word “through” means “to and including”.

(d) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

57

(e) The words “asset” and “property” shall be construed as having the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

(f) Any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions on such assignments set forth herein).

SECTION 1.03. Accounting Terms. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein; provided, however, that if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the Closing Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

SECTION 1.04. Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement (or required to be satisfied in order for a specific action to be permitted under this Agreement) shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

SECTION 1.05. References to Agreements, Laws, Etc. Unless otherwise expressly provided herein, (a) references to Organization Documents, agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are permitted by any Loan Document; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.

SECTION 1.06. Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

SECTION 1.07. Timing of Payment or Performance. When the payment of any obligation or the performance of any covenant, duty or obligation is stated to be

58

due or performance required on a day which is not a Business Day, the date of such payment (other than as expressly provided herein, including as described in the definition of “Interest Period”) or performance shall extend to the immediately succeeding Business Day.

ARTICLE II

The Commitments and Credit Extensions

SECTION 2.01. The Loans. (a) The Term Borrowings. Subject to the terms and conditions set forth herein, each Term Lender severally agrees to make to the Borrower a single loan denominated in Dollars in an aggregate principal amount equal to such Term Lender’s Term Commitment on the Closing Date. Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed. Term Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.

(b) The Bridge Borrowings. Subject to the terms and conditions set forth herein, each Bridge Lender severally agrees to make to the Borrower a single loan denominated in Dollars in an aggregate principal amount equal to such Bridge Lender’s Bridge Commitment on the Closing Date. Amounts borrowed under this Section 2.01(b) and repaid or prepaid may not be reborrowed. Bridge Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.

(c) The Revolving Credit Borrowings. Subject to the terms and conditions set forth herein each Revolving Credit Lender severally agrees to make loans denominated in Dollars to the Borrower as elected by the Borrower pursuant to Section 2.02 (each such loan, a “Revolving Credit Loan”) from time to time, on any Business Day until the Maturity Date in respect of the Revolving Credit Facility, in an aggregate principal amount not to exceed at any time outstanding the amount of such Lender’s Revolving Credit Commitment; provided that after giving effect to any Revolving Credit Borrowing, (i) the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus such Lender’s Pro Rata Share of the Outstanding Amount of all Revolving L/C Obligations, plus such Lender’s Pro Rata Share of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Revolving Credit Commitment and (ii) the aggregate principal amount of Revolving Credit Loans made on the Closing Date shall not exceed $50,000,000. Within the limits of each Lender’s Revolving Credit Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01(c), prepay under Section 2.05, and reborrow under this Section 2.01(c). Revolving Credit Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.

(d) The Credit-Linked Deposits. Subject to the terms and conditions set forth herein, each Synthetic L/C Lender severally agrees to remit to the Administrative Agent on the Closing Date an amount in Dollars equal to such Lender’s Synthetic L/C Commitment as its Credit-Linked Deposit. The Administrative Agent shall deposit all such amounts received by it into the Credit-Linked Deposit Account promptly upon receipt thereof. Each Synthetic L/C Lender irrevocably and unconditionally agrees that

59

its Credit-Linked Deposit shall be available (i) to pay to the Synthetic L/C Issuer such Lender’s Pro Rata Share of any Unreimbursed Amount in respect of any Synthetic L/C Letter of Credit that is not reimbursed by the Borrower and (ii) to fund such Lender’s Synthetic L/C Loans, in each case, pursuant to Section 2.03(c). Synthetic L/C Loans may be prepaid without reducing the Synthetic L/C Commitments; provided, however, that Synthetic L/C Loans may not be reborrowed as such.

(e) No Person (other than the Administrative Agent) shall have the right to make any withdrawal from the Credit-Linked Deposit Account or to exercise any other right or power with respect thereto. Each Synthetic L/C Lender agrees that its right, title and interest in and to the Credit-Linked Deposit Account shall be limited to the right to require its Credit-Linked Deposit to be applied as provided in Section 2.03(c) and that it will have no right to require the return of its Credit-Linked Deposit other than as expressly provided in Section 2.06. Each Synthetic L/C Lender hereby acknowledges that (i) its Credit-Linked Deposit constitutes payment for its participations in Synthetic L/C Letters of Credit issued, deemed issued or to be issued hereunder, (ii) its Credit-Linked Deposit and any investments made therewith shall secure its obligations to the Synthetic L/C Issuer hereunder (each Synthetic L/C Lender hereby granting to the Administrative Agent, for the benefit of the Synthetic L/C Issuer, a security interest in its Credit-Linked Deposit and agreeing that the Administrative Agent, as holder of the Credit-Linked Deposits and any investments made therewith, will be acting as collateral agent for the Synthetic L/C Issuer) and (iii) the Synthetic L/C Issuer will be issuing, amending, renewing and extending Synthetic L/C Letters of Credit in reliance on the availability of such Lender’s Credit-Linked Deposit to discharge such Lender’s obligations in connection with any Unreimbursed Amount in respect thereof in accordance with Section 2.03(c). The funding of the Credit-Linked Deposits and the agreements with respect thereto set forth in this Agreement constitute arrangements among the Administrative Agent, the Synthetic L/C Issuer and the Synthetic L/C Lenders with respect to the funding obligations of such Lenders under this Agreement, and the Credit-Linked Deposits do not constitute assets of, or loans or extensions of credit to, any Loan Party. Without limiting the generality of the foregoing, each party hereto acknowledges and agrees that the Credit-Linked Deposits are and at all times will continue to be property of the Synthetic L/C Lenders, and that no amount on deposit at any time in the Credit-Linked Deposit Account shall be the property of any Loan Party, constitute “Collateral” under the Loan Documents or otherwise be available in any manner to satisfy any Obligations of any Loan Party under the Loan Documents.

SECTION 2.02. Borrowings, Conversions and Continuations of Loans. (a) Each Term Borrowing, each Bridge Borrowing, each Revolving Credit Borrowing (other than Swing Line Borrowings with respect to which this Section 2.02 shall not apply), each Synthetic L/C Borrowing, each conversion of Term Loans, Bridge Loans or Revolving Credit Loans from one Type to the other, and each continuation of Eurodollar Rate Loans shall be made upon the Borrower’s irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 12:30 p.m. (i) three (3) Business Days prior to the requested date of any Borrowing or continuation of Eurodollar Rate Loans or any

60

conversion of Base Rate Loans to Eurodollar Rate Loans, and (ii) one (1) Business Day before the requested date of any Borrowing of Base Rate Loans; provided that any such notice with respect to any Term Borrowing, Bridge Borrowing or Revolving Credit Borrowing to be made on the Closing Date may be given later if given not later than 12 noon (or such later time as agreed to by the Administrative Agent). on the Closing Date (but any such notice requesting a Borrowing of Eurodollar Rate Loans must request an Interest Period of one month’s duration). Each telephonic notice by the Borrower pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Each Borrowing of, conversion to or continuation of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Except as provided in Sections 2.03(c) and 2.04(c), each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof. Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Term Borrowing, a Bridge Borrowing, a Synthetic L/C Borrowing or a Revolving Credit Borrowing, a conversion of Term Loans, Bridge Loans or Revolving Credit Loans from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be borrowed, converted or continued, (iv) the Type of Loans to be borrowed or to which existing Term Loans, Bridge Loans or Revolving Credit Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify a Type of Loan in a Committed Loan Notice or fails to give a timely notice requesting a conversion or continuation, then the applicable Term Loans, Bridge Loans or Revolving Credit Loans shall be made as, or converted to, Base Rate Loans (unless the Loan being continued is a Eurodollar Rate Loan, in which case it shall be continued as a Eurodollar Rate Loan with an Interest Period of one month) and any Synthetic L/C Loans shall be made as Eurodollar Rate Loans with an Interest Period corresponding to the Interest Period applicable to the Credit-Linked Deposits. Any such automatic conversion to Base Rate Loans or continuation as Eurodollar Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans. If the Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar Rate Loans (other than in the case of a Synthetic L/C Loan) in any such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one (1) month.

(b) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Pro Rata Share of the applicable Class of Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans or continuation described in Section 2.02(a). In the case of each Borrowing, each Appropriate Lender shall make the amount of its Loan available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 1:00 p.m. on the Business Day specified in the applicable Committed Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit

61

Extension, Section 4.01), the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower; provided that if, on the date the Committed Loan Notice with respect to such Borrowing is given by the Borrower, there are L/C Borrowings outstanding, then the proceeds of such Borrowing shall be applied, first, to the payment in full of any such L/C Borrowings, second, to the payment in full of any such Swing Line Loans, and second, to the Borrower as provided above.

(c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan unless the Borrower pays the amount due, if any, under Section 3.05 in connection therewith. During the existence of an Event of Default, the Administrative Agent or the Required Lenders may require that no Loans (other than Synthetic L/C Loans) may be converted to or continued as Eurodollar Rate Loans.

(d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate. The determination of the Eurodollar Rate by the Administrative Agent shall be conclusive in the absence of manifest error. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in the Prime Rate used in determining the Base Rate promptly following the public announcement of such change.

(e) After giving effect to all Term Borrowings, all Bridge Borrowings, all Revolving Credit Borrowings, all conversions of Term Loans, Bridge Loans or Revolving Credit Loans from one Type to the other, and all continuations of Term Loans, Bridge Loans or Revolving Credit Loans as the same Type, there shall not be more than twenty (20) Interest Periods in effect (excluding those in effect for the Credit-Linked Deposits and Synthetic L/C Borrowings).

(f) The failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the date of any Borrowing.

SECTION 2.03. Letters of Credit. (a) The Letter of Credit Commitments. (i) Subject to the terms and conditions set forth herein, (A)(1) each Revolving L/C Issuer agrees, in reliance upon the agreements of the other Revolving Credit Lenders set forth in this Section 2.03, (x) from time to time on any Business Day during the period from the Closing Date until the Revolving Letter of Credit Expiration Date, to issue Revolving Letters of Credit for the account of the Borrower (provided, that any Revolving Letter of Credit may be for the benefit of any Restricted Subsidiary of the Borrower) and to amend or renew Revolving Letters of Credit previously issued by it, in accordance with Section 2.03(b), and (y) to honor drafts under the Revolving Letters of Credit and (2) the

62

Revolving Credit Lenders severally agree to participate in Revolving Letters of Credit issued pursuant to this Section 2.03 and (B)(1) each Synthetic L/C Issuer agrees, in reliance upon the agreements of the other Synthetic L/C Lenders set forth in this Section 2.03, (x) from time to time on any Business Day during the period from the Closing Date until the Synthetic L/C Letter of Credit Expiration Date, to issue Synthetic L/C Letters of Credit for the account of the Borrower (provided, that any Synthetic L/C Letter of Credit may be for the benefit of any Restricted Subsidiary of the Borrower) and to amend or renew Synthetic L/C Letters of Credit previously issued by it, in accordance with Section 2.03(b), and (y) to honor drafts under the Synthetic L/C Letters of Credit and (2) the Synthetic L/C Lenders severally agree to participate in Synthetic L/C Letters of Credit issued pursuant to this Section 2.03; provided that no L/C Issuer shall be obligated to make any L/C Credit Extension with respect to any Letter of Credit, and no Lender shall be obligated to participate in any Letter of Credit if as of the date of such L/C Credit Extension, (I) the Revolving Credit Exposure or Synthetic L/C Exposure, as the case may be, of any Lender would exceed such Lender’s Revolving Credit Commitment or Synthetic L/C Commitment, as the case may be, or (II) in the case of the Synthetic L/C Letters of Credit, the Synthetic L/C Exposure would exceed the sum of such Lender’s Credit-Linked Deposit and its Pro Rata Share of the outstanding Synthetic L/C Loans. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed. If the Borrower shall fail to specify whether any requested Letter of Credit is to be a Revolving Letter of Credit or a Synthetic L/C Letter of Credit, then the requested Letter of Credit shall be deemed to be a Synthetic L/C Letter of Credit unless the issuance thereof would not be permitted by the foregoing provisions of this paragraph, in which case it shall be deemed to be a Revolving Letter of Credit. Notwithstanding any such specification or deemed specification, the Borrower may request in writing that a Letter of Credit issued under the Revolving Credit Facility or the Synthetic L/C Facility be deemed to be issued under the other Facility (and such redesignation shall become effective on the date of receipt by the Administrative Agent of such written request which shall be a Business Day) provided that at the time of the Administrative Agent’s receipt of such request the issuance of such a Letter of Credit would be permitted under such Facility by the foregoing provisions of this paragraph.

(ii) An L/C Issuer shall be under no obligation to issue any Letter of Credit if:

(A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such L/C Issuer from issuing such Letter of Credit, or any Law applicable to such L/C Issuer or any directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such L/C Issuer shall prohibit, or direct that such L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such L/C Issuer is not otherwise

63

compensated hereunder) not in effect on the Closing Date, or shall impose upon such L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date (for which such L/C Issuer is not otherwise compensated hereunder);

(B) subject to Section 2.03(b)(iii), the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last renewal, unless the Required Lenders have approved such expiry date;

(C) the expiry date of such requested Letter of Credit would occur after the Revolving Letter of Credit Expiration Date or Synthetic L/C Letter of Credit Expiration Date, as applicable, unless all the Revolving Credit Lenders or Synthetic L/C Lenders, as applicable, have approved such expiry date;

(D) the issuance of such Letter of Credit would violate any Laws binding upon such L/C Issuer; or

(E) such Letter of Credit is in an initial amount less than $100,000.

(iii) An L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) such L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

(b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Renewal Letters of Credit. (i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to an L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower. Such Letter of Credit Application must be received by the relevant L/C Issuer and the Administrative Agent not later than 12:30 p.m. at least two (2) Business Days prior to the proposed issuance date or date of amendment, as the case may be; or, in each case, such later date and time as the relevant L/C Issuer may agree in a particular instance in its sole discretion. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the relevant L/C Issuer: (a) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (b) the amount thereof; (c) the expiry date thereof; (d) the name and address of the beneficiary thereof; (e) the documents to be presented by such beneficiary in case of any drawing thereunder; (f) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (g) such other matters as the relevant L/C Issuer may reasonably request. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the relevant L/C Issuer (1) the Letter of Credit

64

to be amended; (2) the proposed date of amendment thereof (which shall be a Business Day); (3) the nature of the proposed amendment; and (4) such other matters as the relevant L/C Issuer may reasonably request.

(ii) Promptly after receipt of any Letter of Credit Application, the relevant L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, such L/C Issuer will provide the Administrative Agent with a copy thereof. Upon receipt by the relevant L/C Issuer of confirmation from the Administrative Agent that the requested issuance or amendment is permitted in accordance with the terms hereof, then, subject to the terms and conditions hereof, such L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be. Immediately upon the issuance of (x) each Revolving Letter of Credit, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, acquire from the relevant L/C Issuer a risk participation in such Revolving Letter of Credit in an amount equal to the product of such Revolving Credit Lender’s Pro Rata Share times the amount of such Revolving Letter of Credit and (y) each Synthetic L/C Letter of Credit, each Synthetic L/C Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, acquire from the relevant L/C Issuer a risk participation in such Synthetic L/C Letter of Credit in an amount equal to the product of such Synthetic L/C Lender’s Pro Rata Share times the amount of such Synthetic L/C Letter of Credit.

(iii) If the Borrower so requests in any applicable Letter of Credit Application, the relevant L/C Issuer shall agree to issue a Letter of Credit that has automatic renewal provisions (each, an “Auto-Renewal Letter of Credit”); provided that any such Auto-Renewal Letter of Credit must permit the relevant L/C Issuer to prevent any such renewal at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Nonrenewal Notice Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the relevant L/C Issuer, the Borrower shall not be required to make a specific request to the relevant L/C Issuer for any such renewal. Once an Auto-Renewal Letter of Credit has been issued, the applicable Lenders shall be deemed to have authorized (but may not require) the relevant L/C Issuer to permit the renewal of such Letter of Credit at any time to an expiry date not later than the applicable Letter of Credit Expiration Date; provided that the relevant L/C Issuer shall not permit any such renewal if (A) the relevant L/C Issuer has determined that it would have no obligation at such time to issue such Letter of Credit in its renewed form under the terms hereof (by reason of the provisions of Section 2.03(a)(ii) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is five (5) Business Days before the Nonrenewal Notice Date from the Administrative Agent, any Revolving Credit Lender or Synthetic L/C Lender, as applicable, or the Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied.

65

(iv) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the relevant L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.

(c) Drawings and Reimbursements; Funding of Participations. (i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the relevant L/C Issuer shall notify promptly the Borrower and the Administrative Agent thereof. Not later than 11:00 a.m. on the Business Day immediately following the date of any payment by an L/C Issuer under a Letter of Credit (each such date, an “Honor Date”), the Borrower shall reimburse such L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing. If the Borrower fails to so reimburse such L/C Issuer by such time, the Administrative Agent shall promptly notify each Appropriate Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Appropriate Lender’s Pro Rata Share thereof. In such event, (x) in the case of an Unreimbursed Amount under a Revolving Letter of Credit, the Borrower shall be deemed to have requested a Revolving Credit Borrowing of Base Rate Loans and (y) in the case of an Unreimbursed Amount under a Synthetic L/C Letter of Credit, the Borrower shall be deemed to have requested a Synthetic L/C Borrowing of Eurodollar Rate Loans as described in clause (ix) below, in each case to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Eurodollar Rate Loans or Base Rate Loans, but subject to the amount of the unutilized portion of the Revolving Credit Commitments of the Revolving Credit Lenders or the unutilized portion of the Synthetic L/C Commitments of the Synthetic L/C Lenders, as applicable, and subject, in each case, to the conditions set forth in Section 4.02 (other than the delivery of a Committed Loan Notice). Any notice given by an L/C Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

(ii) Each Revolving Credit Lender (including any such Lender acting as an L/C Issuer) shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Administrative Agent for the account of the relevant Revolving L/C Issuer at the Administrative Agent’s Office for payments in an amount equal to its Pro Rata Share of any Unreimbursed Amount in respect of a Revolving Letter of Credit not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Revolving Credit Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the relevant Revolving L/C Issuer.

66

(iii) With respect to any Unreimbursed Amount in respect of a Revolving Letter of Credit that is not fully refinanced by a Revolving Credit Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the relevant Revolving L/C Issuer a Revolving L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which Revolving L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Revolving Credit Lender’s payment to the Administrative Agent for the account of the relevant Revolving L/C Issuer pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such Revolving L/C Borrowing and shall constitute a Revolving L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03.

(iv) Until each Revolving Credit Lender funds its Revolving Credit Loan or Revolving L/C Advance pursuant to this Section 2.03(c) to reimburse the relevant Revolving L/C Issuer for any amount drawn under any Revolving Letter of Credit, interest in respect of such Lender’s Pro Rata Share of such amount shall be solely for the account of the relevant Revolving L/C Issuer.

(v) Each Revolving Credit Lender’s obligation to make Revolving Credit Loans or Revolving L/C Advances to reimburse a Revolving L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the relevant Revolving L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided that each Revolving Credit Lender’s obligation to make Revolving Credit Loans pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 4.02 (other than delivery by the Borrower of a Committed Loan Notice ). No such making of a Revolving L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the relevant Revolving L/C Issuer for the amount of any payment made by such Revolving L/C Issuer under any Revolving Letter of Credit, together with interest as provided herein.

(vi) If any Revolving Credit Lender fails to make available to the Administrative Agent for the account of the relevant Revolving L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), such Revolving L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to such Revolving L/C Issuer at a rate per annum equal to the Federal Funds Rate from time to time in effect. A certificate of the relevant Revolving L/C Issuer submitted to any Revolving Credit Lender (through the Administrative Agent) with respect to any amounts owing under this Section 2.03(c)(vi) shall be conclusive absent manifest error.

67

(vii) If, at any time after a Revolving L/C Issuer has made a payment under any Revolving Letter of Credit and has received from any Revolving Credit Lender such Lender’s Revolving L/C Advance in respect of such payment in accordance with Section 2.03(c), the Administrative Agent receives for the account of such Revolving L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Lender its Pro Rata Share thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s Revolving L/C Advance was outstanding) in the same funds as those received by the Administrative Agent.

(viii) If the Synthetic L/C Issuer shall not have received from the Borrower the payment required to be made by Section 2.03(c)(i) with respect to any Synthetic L/C Letter of Credit within the time specified in such Section, the Synthetic L/C Issuer will promptly notify the Administrative Agent of the Unreimbursed Amount and the Administrative Agent will promptly notify each Synthetic L/C Lender of such Unreimbursed Amount and its Pro Rata Share thereof. Each Synthetic L/C Lender hereby authorizes the Administrative Agent to reimburse the Synthetic L/C Issuer solely from such Lender’s Pro Rata Share of the Credit-Linked Deposits on deposit with the Administrative Agent in the Credit-Linked Deposit Account (it being understood that such amount shall be deemed to constitute a Synthetic L/C Loan (which shall initially be a Eurodollar Rate Loan as set forth in clause (ix) below) of such Lender and such payment shall have reduced the Credit-Linked Deposits in a like amount) (it being further understood that if the conditions precedent to borrowing set forth in Section 4.02 have not been met, then such amount shall not constitute a Synthetic L/C Loan and shall not relieve the Borrower of its obligation to reimburse such Unreimbursed Amount), and the Administrative Agent will promptly pay to the Synthetic L/C Issuer such amounts. Notwithstanding anything herein to the contrary, the funding obligation of each Synthetic L/C Lender in respect of its participation in Synthetic L/C Letters of Credit shall be satisfied in full upon the funding of its Credit-Linked Deposit. Any amounts received by the Administrative Agent thereafter pursuant to Section 2.03(c) in respect of an Unreimbursed Amount under a Synthetic L/C Letter of Credit will be promptly remitted by the Administrative Agent to the Credit-Linked Deposit Account (it being understood that, thereafter, such amounts will be available to reimburse the Synthetic L/C Issuer in accordance with the preceding sentence of this paragraph).

(ix) On each date on which the Administrative Agent charges the Credit-Linked Deposit Account to reimburse an Unreimbursed Amount in respect of a Synthetic L/C Letter of Credit as provided in Section 2.03(c)(viii), if such amount is deemed to be a Synthetic L/C Loan, the Borrower shall have the right either to

68

reimburse such amount or to allow such amount to remain outstanding as a Synthetic L/C Loan with Interest Periods coincident with the applicable Interest Periods for the Credit-Linked Deposits and the Eurodollar Rate therefor shall be the same as the applicable Eurodollar Rate for the Credit-Linked Deposits.

(x) If any payment received by the Administrative Agent for the account of an L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by such L/C Issuer in its discretion), (1) in the case of a Revolving Letter of Credit, each Revolving Lender shall pay to the Administrative Agent for the account of such Revolving L/C Issuer its Pro Rata Share thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect and (2) in the case of a Synthetic L/C Letter of Credit, each Synthetic L/C Lender hereby authorizes the Administrative Agent to reimburse such Synthetic L/C Issuer solely from such Lender’s Pro Rata Share of the Credit-Linked Deposits on deposit with the Administrative Agent in the Credit-Linked Deposit Account, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Eurodollar Rate for Term Loans.

(d) Obligations Absolute. The obligation of the Borrower to reimburse the relevant L/C Issuer for each drawing under each Letter of Credit issued by it and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

(i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other agreement or instrument relating thereto;

(ii) the existence of any claim, counterclaim, setoff, defense or other right that any Loan Party may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the relevant L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

(iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

(iv) any payment by the relevant L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the relevant L/C Issuer

69

under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law;

(v) any exchange, release or nonperfection of any Collateral securing, or any release or amendment or waiver of or consent to departure from the Subsidiary Guaranty or any other guarantee of, all or any of the Obligations of any Loan Party in respect of such Letter of Credit; or

(vi) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Loan Party;

provided that the foregoing shall not excuse any L/C Issuer from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are waived by the Borrower to the extent permitted by applicable Law) suffered by the Borrower that are caused by such L/C Issuer’s gross negligence or willful misconduct.

(e) Role of L/C Issuers. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the relevant L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the L/C Issuers, any Agent, any Agent-Related Person nor any of the respective correspondents, participants or assignees of any L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Letter of Credit Application. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the L/C Issuers, any Agent, any Agent-Related Person, nor any of the respective correspondents, participants or assignees of any L/C Issuer, shall be liable or responsible for any of the matters described in clauses (i) through (vi) of Section 2.03(d); provided that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against an L/C Issuer, and such L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by such L/C Issuer’s willful misconduct or gross negligence or such L/C Issuer’s willful or grossly negligent failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly

70

complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, each L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and no L/C Issuer shall be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

(f) Cash Collateral. (i) If a Revolving L/C Issuer has honored any full or partial drawing request under any Revolving Letter of Credit and such drawing has resulted in a Revolving L/C Borrowing and the conditions set forth in Section 4.02 to a Revolving Credit Borrowing cannot then be met, (ii) if, as of the Revolving Letter of Credit Expiration Date, any Revolving Letter of Credit may for any reason remain outstanding and partially or wholly undrawn, (iii) if any Event of Default occurs and is continuing and the Administrative Agent or the Required Lenders, as applicable, require the Borrower to Cash Collateralize the Revolving L/C Obligations pursuant to Section 8.02(c) or (iv) an Event of Default set forth under Section 8.01(f) occurs and is continuing, then the Borrower shall Cash Collateralize the then Outstanding Amount of all Revolving L/C Obligations (in an amount equal to such Outstanding Amount determined as of the date of such Revolving L/C Borrowing or the Revolving Letter of Credit Expiration Date, as the case may be), and shall do so not later than 2:00 p.m., on (x) in the case of the immediately preceding clauses (i) through (iii), (1) the Business Day that the Borrower receives notice thereof, if such notice is received on such day prior to 12:00 noon, or (2) if clause (1) above does not apply, the Business Day immediately following the day that the Borrower receives such notice and (y) in the case of the immediately preceding clause (iv), the Business Day on which an Event of Default set forth under Section 8.01(f) occurs or, if such day is not a Business Day, the Business Day immediately succeeding such day. For purposes hereof, “Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the relevant Revolving L/C Issuer and the Revolving Credit Lenders, as collateral for the Revolving L/C Obligations, cash or deposit account balances (“Cash Collateral”) pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the relevant Revolving L/C Issuer (which documents are hereby consented to by the Revolving Credit Lenders). Derivatives of such term have corresponding meanings. The Borrower hereby grants to the Administrative Agent, for the benefit of the L/C Issuers and the Revolving Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash Collateral shall be maintained in blocked accounts at the Administrative Agent and may be invested in readily available Cash Equivalents. If at any time the Administrative Agent determines that any funds held as Cash Collateral are subject to any right or claim of any Person other than the Administrative Agent (on behalf of the Secured Parties) or that the total amount of such funds is less than the aggregate Outstanding Amount of all Revolving L/C Obligations, the Borrower will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited and held in the deposit accounts at the Administrative Agent as aforesaid, an amount equal to the excess of (a) such aggregate Outstanding Amount over (b) the total amount of funds, if any, then held as Cash

71

Collateral that the Administrative Agent reasonably determines to be free and clear of any such right and claim. Upon the drawing of any Revolving Letter of Credit for which funds are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under applicable Law, to reimburse the relevant L/C Issuer. To the extent the amount of any Cash Collateral exceeds the then Outstanding Amount of such Revolving L/C Obligations and so long as no Event of Default has occurred and is continuing, the excess shall be refunded to the Borrower.

(g) Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for the account of each Revolving Credit Lender in accordance with its Pro Rata Share a letter of credit fee for each Revolving Letter of Credit issued pursuant to this Agreement equal to the Applicable Rate times the daily maximum amount then available to be drawn under such Revolving Letter of Credit (whether or not such maximum amount is then in effect under such Revolving Letter of Credit if such maximum amount increases periodically pursuant to the terms of such Revolving Letter of Credit). Such letter of credit fees shall be computed on a quarterly basis in arrears. Such letter of credit fees shall be due and payable in Dollars on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the issuance of such Revolving Letter of Credit, on the Revolving Letter of Credit Expiration Date and thereafter on demand. If there is any change in the Applicable Rate during any quarter, the daily maximum amount of each Revolving Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.

(h) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuers. The Borrower shall pay directly to each L/C Issuer for its own account a fronting fee with respect to each Letter of Credit issued by it equal to 0.125% per annum of the daily maximum amount then available to be drawn under such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit if such maximum amount increases periodically pursuant to the terms of such Letter of Credit). Such fronting fees shall be computed on a quarterly basis in arrears. Such fronting fees shall be due and payable on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the applicable Letter of Credit Expiration Date and thereafter on demand. In addition, the Borrower shall pay directly to each L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such L/C Issuer relating to letters of credit as from time to time in effect. Such customary fees and standard costs and charges are due and payable within ten (10) Business Days of demand and are nonrefundable.

(i) Conflict with Letter of Credit Application. Notwithstanding anything else to the contrary in any Letter of Credit Application, in the event of any conflict between the terms hereof and the terms of any Letter of Credit Application, the terms hereof shall control.

72

(j) Addition of a Revolving L/C Issuer. A Revolving Credit Lender may become an additional Revolving L/C Issuer hereunder pursuant to a written agreement among the Borrower, the Administrative Agent and such Revolving Credit Lender. The Administrative Agent shall notify the Revolving Credit Lenders of any such additional Revolving L/C Issuer.

(k) Credit-Linked Deposit Account. (i) Each of the Administrative Agent, the Synthetic L/C Issuer and each Synthetic L/C Lender hereby acknowledges and agrees that (x) each Synthetic L/C Lender is funding its Credit-Linked Deposit to the Administrative Agent for application in the manner contemplated by Section 2.03(c)(viii) and (y) the Administrative Agent may invest the Credit-Linked Deposits in such investments as may be determined from time to time by the Administrative Agent. The Administrative Agent hereby agrees to pay to each Synthetic L/C Lender, on each Interest Payment Date for the Credit-Linked Deposits, interest (computed on the basis of the actual number of days elapsed over a year of 360 days) on the amount of such Synthetic L/C Lender’s Pro Rata Share of the aggregate amount of the Credit-Linked Deposits during such Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period less the Credit-Linked Deposit Cost Amount. With respect to any Interest Period during which a Synthetic L/C Loan is deemed made, the Administrative Agent shall determine the amount of interest payable by the Borrower on such Synthetic L/C Loan for the portion of such Interest Period during which such Synthetic L/C Loan is outstanding pursuant to Section 2.03(c)(i) and the amount of interest payable by the Administrative Agent on the Credit-Linked Deposits during such Interest Period pursuant to the applicable provisions of this Agreement, and such determination shall be conclusive absent manifest error.

(ii) The Borrower shall have no right, title or interest in or to the Credit-Linked Deposit Account or the Credit-Linked Deposits and no obligations with respect thereto other than as expressly provided in this Agreement. Without limiting the foregoing, the obligation to return the Credit-Linked Deposits to the Synthetic L/C Lenders is solely an obligation of the Administrative Agent, and the Borrower shall have no liability or obligation in respect of the principal amount of the Credit-Linked Deposits.

SECTION 2.04. Swing Line Loans. (a) The Swing Line. Subject to the terms and conditions set forth herein, the Swing Line Lender agrees to make loans (each such loan, a “Swing Line Loan”) to the Borrower from time to time on any Business Day (other than the Closing Date) until the Maturity Date for the Revolving Credit Facility in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Pro Rata Share of the Outstanding Amount of Revolving Credit Loans and Revolving L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lender’s Revolving Credit Commitment; provided that, after giving effect to any Swing Line Loan, the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus such Lender’s Pro Rata Share of the Outstanding Amount of all Revolving L/C Obligations, plus such Lender’s Pro Rata Share of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s

73

Revolving Credit Commitment then in effect; provided further that, the Borrower shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.04, prepay under Section 2.05, and reborrow under this Section 2.04. Each Swing Line Loan shall be a Base Rate Loan. Immediately upon the making of a Swing Line Loan, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender’s Pro Rata Share times the amount of such Swing Line Loan.

(b) Borrowing Procedures. Each Swing Line Borrowing shall be made upon the Borrower’s irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000, and (ii) the requested borrowing date, which shall be a Business Day. Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof. Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent (including at the request of any Revolving Credit Lender) prior to 2:00 p.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the proviso to the first sentence of Section 2.04(a), or (B) that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 3:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrower.

(c) Refinancing of Swing Line Loans. (i) The Swing Line Lender at any time in its sole and absolute discretion may request, on behalf of the Borrower (which hereby irrevocably authorizes the Swing Line Lender to so request on its behalf), that each Revolving Credit Lender make a Base Rate Loan in an amount equal to such Lender’s Pro Rata Share of the amount of Swing Line Loans then outstanding. Such request shall be made in writing (which written request shall be deemed to be a Committed Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to the unutilized portion of the aggregate Revolving Credit Commitments and the conditions set forth in Section 4.02. The Swing Line Lender shall furnish the Borrower with a copy of the applicable Committed Loan Notice promptly after delivering such notice to the Administrative Agent. Each Revolving Credit Lender shall make an amount equal to its Pro Rata Share

74

of the amount specified in such Committed Loan Notice available to the Administrative Agent in immediately available funds for the account of the Swing Line Lender at the Administrative Agent’s Office not later than 1:00 p.m. on the day specified in such Committed Loan Notice, whereupon, subject to Section 2.04(c)(ii), each Revolving Credit Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the Swing Line Lender.

(ii) If for any reason any Swing Line Loan cannot be refinanced by such a Revolving Credit Borrowing in accordance with Section 2.04(c)(i), the request for Base Rate Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Revolving Credit Lenders fund its risk participation in the relevant Swing Line Loan and each Revolving Credit Lender’s payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.04(c)(i) shall be deemed payment in respect of such participation.

(iii) If any Revolving Credit Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the Federal Funds Rate from time to time in effect. A certificate of the Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.

(iv) Each Revolving Credit Lender’s obligation to make Revolving Credit Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided that each Revolving Credit Lender’s obligation to make Revolving Credit Loans pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.02. No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest as provided herein.

(d) Repayment of Participations. (i) At any time after any Revolving Credit Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Lender its Pro Rata Share of such payment

75

(appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s risk participation was funded) in the same funds as those received by the Swing Line Lender.

(ii) If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Revolving Credit Lender shall pay to the Swing Line Lender its Pro Rata Share thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Rate. The Administrative Agent will make such demand upon the request of the Swing Line Lender.

(e) Interest for Account of Swing Line Lender. The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans. Until each Revolving Credit Lender funds its Base Rate Loan or risk participation pursuant to this Section 2.04 to refinance such Lender’s Pro Rata Share of any Swing Line Loan, interest in respect of such Pro Rata Share shall be solely for the account of the Swing Line Lender.

(f) Payments Directly to Swing Line Lender. The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.

SECTION 2.05. Prepayments. (a) Optional. (i) Subject to paragraph (iv) below, the Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Term Loans, Bridge Loans, Revolving Credit Loans and Synthetic L/C Loans in whole or in part without premium, penalty or fee (but subject to Section 3.05); provided that (1) such notice must be received by the Administrative Agent not later than 12:30 p.m. (A) three (3) Business Days prior to any date of prepayment of Eurodollar Rate Loans and (B) on the date of prepayment of Base Rate Loans; (2) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof; and (3) any prepayment of Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment and the Class(es) and Type(s) of Loans to be prepaid. The Administrative Agent will promptly notify each Appropriate Lender of its receipt of each such notice, and of the amount of such Lender’s Pro Rata Share of such prepayment. The Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Each prepayment of the Loans pursuant to this Section 2.05(a) shall be paid to the Appropriate Lenders in accordance with their respective Pro Rata Shares.

(ii) The Borrower may, upon notice to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily

76

prepay Swing Line Loans in whole or in part without premium or penalty or fee (but subject to Section 3.05); provided that (1) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the date of the prepayment, and (2) any such prepayment shall be in a minimum principal amount of $100,000 or a whole multiple of $100,000 in excess thereof or, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment. The Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.

(iii) Notwithstanding anything to the contrary contained in this Agreement, the Borrower may rescind any notice of prepayment under Section 2.05(a)(i) or 2.05(a)(ii) if such prepayment would have resulted from a refinancing of all of the Facilities, which refinancing shall not be consummated or shall otherwise be delayed.

(iv) The Borrower may not voluntarily prepay any Term Loans unless and until the Outstanding Amount of all Bridge Loans has been paid in full.

(v) Voluntary prepayments of Term Loans shall be applied to the remaining scheduled installments of principal thereof pursuant to Section 2.07(a) in a manner determined at the discretion of the Borrower and specified in the notice of prepayment.

(vi) Voluntary prepayments of Synthetic L/C Loans made other than in connection with a corresponding reduction of the Synthetic L/C Commitments shall be made to the Administrative Agent, which shall promptly remit the same to the Credit-Linked Deposit Account.

(b) Mandatory. (i) Within five (5) Business Days after financial statements have been delivered pursuant to Section 6.01(a) and the related Compliance Certificate has been delivered pursuant to Section 6.02(b), the Borrower shall cause prepayments to be made (in compliance with Section 2.05(b)(vi) below) in an amount equal to the excess, if any, of (A) 50% (or 25% if the Total Leverage Ratio as of the last day of the fiscal year covered by such financial statements was no more than 4.00:1) of Excess Cash Flow, if any, for the fiscal year covered by such financial statements (commencing with the fiscal year ended December 31, 2006) minus (B) the sum of (1) all voluntary prepayments of Bridge Loans and Term Loans during such fiscal year and (2) all voluntary prepayments of Revolving Credit Loans during such fiscal year to the extent the Revolving Credit Commitments are permanently reduced by the amount of such payments, in the case of each of the immediately preceding clauses (1) and (2), to the extent such prepayments are not funded with the proceeds of Indebtedness; provided that no prepayment shall be required under this Section 2.05(b)(i) if the Total Leverage Ratio as of the last day of the fiscal year covered by such financial statements was no more than 3.00:1.

77

(ii) (A) If the Borrower or any Restricted Subsidiary realizes or receives any Net Cash Proceeds in respect of any Asset Disposition Event, then on or prior to the date which is ten (10) Business Days after the date of the realization or receipt of such Net Cash Proceeds the Borrower shall cause prepayment to be made (in compliance with Section 2.05(b)(vi) below) in an amount equal to 100% of all such Net Cash Proceeds realized or received; provided that no such prepayment shall be required pursuant to this Section 2.05(b)(ii)(A) with respect to such portion of such Net Cash Proceeds that the Borrower shall have, on or prior to such date, given written notice to the Administrative Agent of its intent to reinvest in accordance with Section 2.05(b)(ii)(B) (which notice may only be provided if no Event of Default has occurred and is then continuing).

(B) With respect to any Net Cash Proceeds realized or received with respect to any Asset Disposition Event, at the option of the Borrower, the Borrower may apply all or any portion of such Net Cash Proceeds to make a Permitted Reinvestment within (x) twelve (12) months following receipt of such Net Cash Proceeds or (y) if the Borrower enters into a legally binding commitment to reinvest such Net Cash Proceeds within twelve (12) months following receipt thereof, within one hundred eighty (180) days (or one year in the case of a Casualty Event) of the date of such legally binding commitment; provided that (I) so long as an Event of Default shall have occurred and be continuing, the Borrower shall not be permitted to make any such Permitted Reinvestments (other than pursuant to a legally binding commitment that the Borrower entered into at a time when no Event of Default is continuing) and (II) if any Net Cash Proceeds are no longer intended to be or cannot be so reinvested at any time after delivery of a notice of reinvestment election, an amount equal to any such Net Cash Proceeds shall be applied within five (5) Business Days after the Borrower reasonably determines that such Net Cash Proceeds are no longer intended to be or cannot be so reinvested to make prepayments as set forth in Section 2.05(b)(vi) below; provided further that any prepayment under this Section 2.05(b)(ii) shall be made prior to the expiration of any period allowed under the Senior Unsecured Notes Documentation for a Permitted Reinvestment of Net Cash Proceeds after which an offer to purchase the Senior Unsecured Notes or any Indebtedness incurred pursuant to any Permitted Refinancing thereof would be required under the Senior Unsecured Notes Documentation.

(iii) If the Borrower or any Restricted Subsidiary receives any Net Cash Proceeds in respect of the incurrence or issuance of any Indebtedness not expressly permitted to be incurred or issued pursuant to Section 7.03, then on or prior to the date which is five (5) Business Days after the receipt of such Net Cash Proceeds the Borrower shall cause prepayments to be made (in compliance with Section 2.05(b)(vi) below) in an amount equal to 100% of all Net Cash Proceeds received therefrom.

78

(iv) (A) On or prior to the date which is ten (10) Business Days after the date of the realization or receipt of Net Cash Proceeds by the Borrower or any Restricted Subsidiary from any Permitted MLP Transfer, any Permitted GP Transfer or any MLP Extraordinary Distribution, the Borrower shall cause prepayments to be made (in compliance with Section 2.05(b)(vi) below) in an amount equal to 100% of all Net Cash Proceeds so realized or received; provided that, except in the case of the Initial MLP Asset Transfer, no such prepayment shall be required pursuant to this Section 2.05(b)(iv)(A) with respect to such portion of such Net Cash Proceeds (not to exceed 50% of such Net Cash Proceeds) that the Borrower shall have, on or prior to such date, given written notice to the Administrative Agent of its intent to reinvest in accordance with Section 2.05(b)(iv)(B) (which notice may only be provided if no Event of Default has occurred and is then continuing);

(B) With respect to up to 50% of any Net Cash Proceeds realized or received with respect to any Permitted MLP Transfer (other than the Initial MLP Asset Transfer), any Permitted GP Transfer or any MLP Extraordinary Distribution, at the option of the Borrower, the Borrower may apply all or any portion of such Net Cash Proceeds to make a Permitted Reinvestment within (x) twelve (12) months after such Permitted MLP Transfer, Permitted GP Transfer or MLP Extraordinary Distribution or (y) if during such twelve (12) month-period, the Borrower or a Restricted Subsidiary enters into a legally binding agreement committing it to apply such Net Cash Proceeds to make a Permitted Reinvestment after such twelve (12) month-period, such twelve (12) month-period will be extended with respect to the amount of Net Cash Proceeds so committed (but such extension will in no event be for a period longer than 180 days); provided that (1) so long as an Event of Default shall have occurred and be continuing, the Borrower shall not be permitted to make any such Permitted Reinvestment (other than pursuant to a legally binding commitment that the Borrower entered into at a time when no Event of Default is continuing) and (2) if any Net Cash Proceeds are no longer intended to be or cannot be so reinvested at any time after delivery of a notice of reinvestment election, an amount equal to any such Net Cash Proceeds shall be applied within five (5) Business Days after the Borrower reasonably determines that such Net Cash Proceeds are no longer intended to be or cannot be so reinvested to make prepayments as set forth in Section 2.05(b)(iv) below; provided further that any prepayment under this Section 2.05(b)(iv) shall be made prior to the expiration of any period allowed under the Senior Unsecured Notes Documentation for a Permitted Reinvestment of Net Cash Proceeds after which an offer to purchase the Senior Unsecured Notes or any Indebtedness incurred pursuant to any Permitted Refinancing thereof would be required under the Senior Unsecured Notes Documentation.

(v) On or prior to the date which is ten (10) Business Days after the date of the realization or receipt of Net Cash Proceeds by the Borrower or any

79

Subsidiary of the Borrower from any North Texas Asset Sale, the Borrower shall cause prepayments to be made (in compliance with Section 2.05(b)(vi) below) in an amount equal to the sum of (x) 100% of the first $700,000,000 of all such Net Cash Proceeds received, (y) 50% of all such Net Cash Proceeds received to the extent such Net Cash Proceeds exceed $700,000,000 but do not exceed $850,000,000 and (z) 25% of all such Net Cash Proceeds received in excess of $850,000,000.

(vi) Each prepayment required pursuant to any of paragraphs (i) through (v) of this Section 2.05(b) shall be applied (A) first, to prepay the outstanding principal amount of any Bridge Loans, (B) second, to prepay the outstanding principal amount of any Term Loans and (C) third, in the case of any prepayment required by paragraph (iv), to cash collateralize the Synthetic L/C Obligations; provided that, if an Event of Default has occurred and is continuing at the time that any such prepayment is required to be made, such prepayment shall be applied first, to prepay the outstanding principal amount of Bridge Loans, Term Loans, Synthetic L/C Loans and Revolving Credit Loans ratably in accordance with the total outstanding principal amount thereof and second, to cash collateralize the Synthetic L/C Obligations. Each prepayment of Term Loans pursuant to this Section 2.05(b) shall be applied in direct order of maturity to repayments thereof required pursuant to Section 2.07(a); and each such prepayment shall be paid to the Lenders in accordance with their respective Pro Rata Shares.

(vii) The Borrower shall notify the Administrative Agent in writing of any mandatory prepayment required to be made pursuant to paragraphs (i) through (v) of this Section 2.05(b) at least three (3) Business Days prior to the date of such prepayment. Each such notice shall specify the date of such prepayment, provide a reasonably detailed calculation of the amount of such prepayment, identify (in accordance with paragraph (vi) above) the Borrowing or Borrowings (or, in the case of a prepayment required by paragraph (iv) above, if applicable, any other Indebtedness referred to in clause (C) of paragraph (vi) above) to be prepaid and, in the case of a Permitted MLP Transfer or a Permitted GP Transfer, provide a reasonably detailed description thereof and basis for determining the qualification of such transaction as a Permitted MLP Transfer or Permitted GP Transfer, as applicable. The Administrative Agent will promptly notify each Appropriate Lender of the contents of the Borrower’s prepayment notice and of such Appropriate Lender’s Pro Rata Share of the prepayment.

(viii) Notwithstanding any of the other provisions of this Section 2.05(b), so long as no Event of Default shall have occurred and be continuing, if any prepayment of Eurodollar Rate Loans is required to be made under this Section 2.05(b), other than on the last day of the Interest Period therefor, the Borrower may, in its sole discretion, deposit the amount of any such prepayment otherwise required to be made thereunder into a Cash Collateral Account until the last day of such Interest Period, at which time the Administrative Agent shall be authorized (without any further action by or notice to or from the Borrower or any

80

other Loan Party) to apply such amount to the prepayment of such Loans in accordance with this Section 2.05(b). Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent shall also be authorized (without any further action by or notice to or from the Borrower or any other Loan Party) to apply such amount to the prepayment of the outstanding Loans in accordance with this Section 2.05(b).

(c) Interest, Funding Losses, Etc. All prepayments under this Section 2.05 shall be accompanied by all accrued interest thereon, together with, in the case of any such prepayment of a Eurodollar Rate Loan (other than a Synthetic L/C Loan to the extent such prepayment is applied to increase the Credit-Linked Deposits) on a date other than the last day of an Interest Period therefor, any amounts owing in respect of such Eurodollar Rate Loan pursuant to Section 3.05.

SECTION 2.06. Termination or Reduction of Commitments. (a) Optional. The Borrower may, upon written notice to the Administrative Agent, terminate the unused Commitments of any Class, or from time to time permanently reduce the unused Commitments of any Class; provided that (i) any such notice shall be received by the Administrative Agent three (3) Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $1,000,000 or any whole multiple of $500,000 in excess thereof and (iii) if, after giving effect to any reduction of the Commitments, the Swing Line Sublimit exceeds the amount of the Revolving Credit Facility, such sublimit shall be automatically reduced by the amount of such excess. The amount of any such Commitment reduction shall not be applied to the Swing Line Sublimit unless otherwise specified by the Borrower. Notwithstanding the foregoing, the Borrower may rescind or postpone any notice of termination of the Commitments if such termination would have resulted from a refinancing of all of the Facilities, which refinancing shall not be consummated or otherwise shall be delayed.

(b) Mandatory. (i) The Term Commitment of each Term Lender shall be automatically and permanently reduced to $0 upon the making of such Term Lender’s Term Loans pursuant to Section 2.01(a). The Bridge Commitment of each Bridge Lender shall be automatically and permanently reduced to $0 upon the making of such Bridge Lender’s Bridge Loans pursuant to Section 2.01(b). The Revolving Credit Commitments and the Synthetic L/C Commitments shall terminate on the applicable Maturity Date for each such Facility.

(ii) If any cash collateral is required to be provided pursuant to Section 2.05(b)(vi) to secure the Synthetic L/C Obligations, then, if and to the extent that such cash collateral is applied to pay any principal of an Unreimbursed Amount (including any Synthetic L/C Borrowing), the Synthetic L/C Commitments shall be automatically and permanently reduced by the same amount. The Borrower may, at its option, direct that any such cash collateral be so applied.

81

(c) Application of Commitment Reductions; Payment of Fees. The Administrative Agent will promptly notify the Lenders of any termination or reduction of unused portions of the Swing Line Sublimit or the unused Commitments of any Class under this Section 2.06. Upon any reduction of unused Commitments of any Class, the Commitment of each Lender of such Class shall be reduced by such Lender’s Pro Rata Share of the amount by which such Commitments are reduced (other than the termination of the Commitment of any Lender as provided in Section 3.07) and, in the case of a termination or reduction of the Unused Synthetic L/C Commitments, the Administrative Agent shall return to the Synthetic L/C Lenders, from the Credit-Linked Deposit Account in accordance with their respective Synthetic L/C Pro Rata Shares, an amount equal to the amount by which the Credit-Linked Deposits exceed at such time (i) the aggregate amount of Synthetic L/C Commitments remaining (after giving effect to such reduction) minus (ii) the aggregate amount of Synthetic L/C Loans outstanding at such time. All commitment fees accrued until the effective date of any termination of the Revolving Credit Commitments shall be paid on the effective date of such termination.

SECTION 2.07. Repayment of Loans. (a) Term Loans. The Borrower shall repay to the Administrative Agent for the ratable account of the Term Lenders (i) on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, an aggregate amount equal to 0.25% of the aggregate principal amount of all Term Loans outstanding on the Closing Date (which payments shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.05) and (ii) on the Maturity Date for the Term Loans, the aggregate principal amount of all Term Loans outstanding on such date.

(b) Bridge Loans. The Borrower shall repay to the Administrative Agent for the ratable account of the Bridge Lenders on the Maturity Date for the Bridge Loans, the aggregate principal amount of all Bridge Loans outstanding on such date.

(c) Synthetic L/C Loans. The Borrower shall repay to the Administrative Agent for the ratable account of the Synthetic L/C Lenders on the Maturity Date for the Synthetic L/C Loans, the aggregate principal amount of all Synthetic L/C Loans outstanding on such date.

(d) Revolving Credit Loans. The Borrower shall repay to the Administrative Agent for the ratable account of the Revolving Credit Lenders on the Maturity Date for the Revolving Credit Facility the aggregate principal amount of all Revolving Credit Loans outstanding on such date.

(e) Swing Line Loans. The Borrower shall repay each Swing Line Loan on the Maturity Date for the Revolving Credit Facility.

SECTION 2.08. Interest. (a) Subject to the provisions of Section 2.08(b), (i) each Eurodollar Rate Loan (other than a Synthetic L/C Loan) shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to

82

the Eurodollar Rate for such Interest Period plus the Applicable Rate; (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate; (iii) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate for Revolving Credit Loans and (iv) each Synthetic L/C Loan shall bear interest on the outstanding principal amount thereof for each Interest Period (or portion thereof) (which Interest Period shall be coincident with the applicable Interest Period for the Credit-Linked Deposits) at a rate per annum equal to the Eurodollar Rate for the Credit-Linked Deposits plus the Applicable Rate for Eurodollar Rate Term Loans.

(b) The Borrower shall pay interest on past due amounts hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

(c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

SECTION 2.09. Fees. In addition to certain fees described in Sections 2.03(g) and (h):

(a) Commitment Fee. The Borrower shall pay to the Administrative Agent for the account of each Revolving Credit Lender in accordance with its Pro Rata Share, a commitment fee equal to the Applicable Rate with respect to commitment fees times the actual daily amount by which the aggregate Revolving Credit Commitment exceeds the sum of (A) the Outstanding Amount of Revolving Credit Loans and (B) the Outstanding Amount of Revolving L/C Obligations; provided that any commitment fee accrued with respect to any of the Revolving Credit Commitments of a Defaulting Lender during the period prior to the time such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Borrower so long as such Lender shall be a Defaulting Lender except to the extent that such commitment fee shall otherwise have been due and payable by the Borrower prior to such time; and provided further that no commitment fee shall accrue on any of the Revolving Credit Commitments of a Defaulting Lender so long as such Lender shall be a Defaulting Lender. The commitment fee shall accrue at all times from the Closing Date until the Maturity Date for the Revolving Credit Facility, including at any time during which one or more of the conditions in Article 4 is not met, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Maturity Date for the Revolving Credit Facility. The commitment fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Rate during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.

83

(b) Facility Fee. The Borrower shall pay to the Administrative Agent for the account of each Synthetic L/C Lender in accordance with its Pro Rata Share of the amounts on deposit in the Credit-Linked Deposit Account, a facility fee equal to the sum of (A) the Applicable Rate with respect to Eurodollar Rate Term Loans and (B) the Credit-Linked Deposit Cost Amount for such period. The facility fee shall accrue at all times from the date hereof until the Maturity Date for the Synthetic L/C Facility, including at any time during which one or more of the conditions in Article 4 is not met, and shall be due and payable on each Interest Payment Date with respect to Credit-Linked Deposits, and on any date on which any Credit-Linked Deposit is terminated and the funds therein returned to such Lenders.

(c) Other Fees. The Borrower shall pay to the Agents such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever (except as expressly agreed between the Borrower and the applicable Agent).

SECTION 2.10. Computation of Interest and Fees. All computations of interest for Base Rate Loans when the Base Rate is determined by reference to the Prime Rate shall be made on the basis of a year of three hundred sixty-five (365) days and actual days elapsed. All other computations of fees and interest shall be made on the basis of a three hundred sixty (360) day year and actual days elapsed. Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid; provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12(a), bear interest for one (1) day. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

SECTION 2.11. Evidence of Indebtedness. (a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and evidenced by one or more entries in the Register maintained by the Administrative Agent, acting solely for purposes of Treasury Regulation Section 5f.103-1(c), as agent for the Borrower, in each case in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be prima facie evidence absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note payable to such Lender, which shall evidence such Lender’s Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.

84

(b) In addition to the accounts and records referred to in Section 2.11(a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records and, in the case of the Administrative Agent, entries in the Register, evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

(c) Entries made in good faith by the Administrative Agent in the Register pursuant to Sections 2.11(a) and (b), and by each Lender in its account or accounts pursuant to Sections 2.11(a) and (b), shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement and the other Loan Documents, absent manifest error; provided that the failure of the Administrative Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement and the other Loan Documents.

SECTION 2.12. Payments Generally. (a) All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.

(b) If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be; provided that, if such extension would cause payment of interest on or principal of Eurodollar Rate Loans to be made in the next succeeding calendar month, such payment shall be made on the immediately preceding Business Day.

(c) Unless the Borrower or any Lender has notified the Administrative Agent, prior to the date any payment is required to be made by it to the Administrative Agent hereunder, that the Borrower or such Lender, as the case may be, will not make such payment, the Administrative Agent may assume that the Borrower or such Lender, as the case may be, has timely made such payment and may (but shall not be so required

85

to), in reliance thereon, make available a corresponding amount to the Person entitled thereto. If and to the extent that such payment was not in fact made to the Administrative Agent in immediately available funds, then:

(i) if the Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Administrative Agent the portion of such assumed payment that was made available to such Lender in immediately available funds, together with interest thereon in respect of each day from and including the date such amount was made available by the Administrative Agent to such Lender to the date such amount is repaid to the Administrative Agent in immediately available funds at the Federal Funds Rate from time to time in effect; and

(ii) if any Lender failed to make such payment, such Lender shall forthwith on demand pay to the Administrative Agent the amount thereof in immediately available funds, together with interest thereon for the period from the date such amount was made available by the Administrative Agent to the Borrower to the date such amount is recovered by the Administrative Agent (the “Compensation Period”) at a rate per annum equal to the Federal Funds Rate from time to time in effect. When such Lender makes payment to the Administrative Agent (together with all accrued interest thereon), then such payment amount (excluding the amount of any interest which may have accrued and been paid in respect of such late payment) shall constitute such Lender’s Loan included in the applicable Borrowing. If such Lender does not pay such amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent may make a demand therefor upon the Borrower, and the Borrower shall pay such amount to the Administrative Agent, together with interest thereon for the Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment or to prejudice any rights which the Administrative Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder.

A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this Section 2.12(c) shall be conclusive, absent manifest error.

(d) If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article 2, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article 4 are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

(e) The obligations of the Lenders hereunder to make Loans, to fund the Credit-Linked Deposits and to fund participations in Letters of Credit and Swing Line

86

Loans are several and not joint. The failure of any Lender to make any Loan, to fund a Credit-Linked Deposit or to fund any such participation on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan, to fund its Credit-Linked Deposit or purchase its participation.

(f) Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan or Credit-Linked Deposit in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan or Credit-Linked Deposit in any particular place or manner.

(g) Whenever any payment received by the Administrative Agent under this Agreement or any of the other Loan Documents is insufficient to pay in full all amounts due and payable to the Administrative Agent and the Lenders under or in respect of this Agreement and the other Loan Documents on any date, such payment shall be distributed by the Administrative Agent and applied by the Administrative Agent and the Lenders in the order of priority set forth in Section 8.04. If the Administrative Agent receives funds for application to the Obligations of the Loan Parties under or in respect of the Loan Documents under circumstances for which the Loan Documents do not specify the manner in which such funds are to be applied, the Administrative Agent may, but shall not be obligated to, elect to distribute such funds to each of the Lenders in accordance with such Lender’s Pro Rata Share of the sum of (a) the Outstanding Amount of all Loans outstanding at such time and (b) the Outstanding Amount of all L/C Obligations outstanding at such time, in repayment or prepayment of such of the outstanding Loans or other Obligations then owing to such Lender.

SECTION 2.13. Sharing of Payments. If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Loans made by it, or the participations in L/C Obligations and Swing Line Loans held by it, any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them and/or such subparticipations in the participations in L/C Obligations or Swing Line Loans held by them, as the case may be, as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Loans or such participations, as the case may be, pro rata with each of them; provided that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by the purchasing Lender in its discretion), such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender’s ratable share (according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered, without further interest thereon. The Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent

87

permitted by applicable Law, exercise all its rights of payment (including the right of setoff, but subject to Section 10.09) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 2.13 and will in each case notify the Lenders following any such purchases or repayments. Each Lender that purchases a participation pursuant to this Section 2.13 shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased.

SECTION 2.14. Incremental Credit Extensions. (a) The Borrower may at any time or from time to time after the Closing Date, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly deliver a copy to each of the Lenders), request (a) one or more additional tranches of term loans (the “Incremental Term Loans”), (b) one or more increases in the amount of the Revolving Credit Commitments (each such increase, a “Revolving Commitment Increase”) or (c) one or more increases in the amount of the Synthetic L/C Commitments (each such increase, a “Synthetic L/C Commitment Increase” and, together with any Incremental Term Loans or Revolving Commitment Increase, referred to herein as a “Credit Increase”), provided that (i) both at the time of any such request and upon the effectiveness of any Incremental Amendment referred to below, no Default or Event of Default shall exist and at the time that any such Incremental Term Loan is made (and after giving effect thereto) no Default or Event of Default shall exist and (ii) the Borrower shall be in compliance with each of the covenants set forth in Section 7.11 determined on a Pro Forma Basis as of the date of such Credit Increase and the last day of the most recent Test Period, in each case, as if such Credit Increase had been outstanding on the last day of such fiscal quarter of the Borrower for testing compliance therewith. Each Credit Increase shall be in an aggregate principal amount that is not less than $50,000,000 (provided that such amount may be less than $50,000,000 if such amount represents all remaining availability under the limit set forth in the next sentence). Notwithstanding anything to the contrary herein, the aggregate amount of the Credit Increases shall not exceed the excess of $400,000,000 minus the Incremental Facility Reduction Amount. The Incremental Term Loans (a) shall rank pari passu in right of payment and of security with the Revolving Credit Loans, the Term Loans, the Bridge Loans and the Synthetic L/C Loans, (b) shall not mature earlier than the Maturity Date with respect to the Term Loans and shall have a Weighted Average Life to Maturity that is no shorter than the Weighted Average Life to Maturity of the Term Loans, (c) except as set forth above, shall be treated substantially the same as the Term Loans (in each case, including with respect to mandatory and voluntary prepayments), (d) if the initial yield on such Incremental Term Loans (as determined by the Administrative Agent to be equal to the sum of (i) the margin above the Eurodollar Rate on such Incremental Term Loans and (ii) if such Incremental Term Loans are initially made at a discount or the Lenders making the same receive a fee directly or indirectly from the Borrower or any Subsidiary for doing so (the amount of such discount or fee, expressed as a percentage of the Incremental Term Loans, being referred to herein as “OID”), the amount of such OID divided by the lesser of (A) the

88

average life to maturity of such Incremental Term Loans and (B) four) exceeds by more than 75 basis points (the amount of such excess above 75 basis points being referred to herein as the “Yield Differential”) the Applicable Rate then in effect for Eurodollar Term Loans, then the Applicable Rate then in effect for Term Loans, Bridge Loans and Synthetic L/C Loans shall automatically be increased by the Yield Differential, effective upon the making of the Incremental Term Loans and (e) except as provided in clauses (b) and (d) above, the terms and conditions applicable to Incremental Term Loans shall not be materially different from those of the Term Loans. Each notice from the Borrower pursuant to this Section shall set forth the requested amount and proposed terms of the relevant Credit Increases. Incremental Term Loans may be made, and Revolving Commitment Increases and Synthetic L/C Commitment Increases may be provided, by any existing Lender (and each existing Term Lender will have the right to make a portion of any Incremental Term Loan, each existing Revolving Credit Lender will have the right to provide a portion of any Revolving Commitment Increase and each existing Synthetic L/C Lender will have the right to provide a portion of any Synthetic L/C Commitment Increase, in each case on terms permitted in this Section 2.14 and otherwise on terms reasonably acceptable to the Administrative Agent) or by any other bank or other financial institution (any such other bank or other financial institution being called an “Additional Lender”), provided that the Administrative Agent and, in the case of a Revolving Commitment Increase, each Revolving L/C Issuer shall have consented (not to be unreasonably withheld) to such Lender’s or Additional Lender’s making such Incremental Term Loans or providing such Revolving Commitment Increases or Synthetic L/C Commitment Increases, if such consent would be required under Section 10.07(b) for an assignment of Loans or Revolving Credit Commitments or Synthetic L/C Commitments, as applicable, to such Lender or Additional Lender. Commitments in respect of Credit Increases shall become Commitments (or in the case of (x) a Revolving Commitment Increase to be provided by an existing Revolving Credit Lender, an increase in such Lender’s applicable Revolving Credit Commitment or (y) a Synthetic L/C Commitment Increase to be provided by an existing Synthetic L/C Lender, an increase in such Lender’s applicable Synthetic L/C Commitment) under this Agreement pursuant to an amendment (an “Incremental Amendment”) to this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, each Lender agreeing to provide such Commitment, if any, each Additional Lender, if any, and the Administrative Agent. The Incremental Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower to effect the provisions of this Section. The effectiveness of any Incremental Amendment shall be subject to the satisfaction on the date thereof (each, an “Incremental Facility Closing Date”) of each of the conditions set forth in Section 4.02 (it being understood that all references to “the date of such Credit Extension” or similar language in such Section 4.02 shall be deemed to refer to the effective date of such Incremental Amendment) and such other conditions as the parties thereto shall agree. The Borrower will use the proceeds of the Incremental Term Loans and Revolving Commitment Increases and Letters of Credit issued pursuant to the Revolving Commitment Increases and Synthetic L/C Commitment Increases for any purpose not prohibited by this Agreement. No Lender shall be obligated to provide any

89

Credit Increases, unless it so agrees. Upon each increase in the Revolving Credit Commitments pursuant to this Section, each Revolving Credit Lender immediately prior to such increase will automatically and without further act be deemed to have assigned to each Lender providing a portion of the Revolving Commitment Increase (each a “Revolving Commitment Increase Lender”) in respect of such increase, and each such Revolving Commitment Increase Lender will automatically and without further act be deemed to have assumed, a portion of such Revolving Credit Lender’s participations hereunder in outstanding Revolving Letters of Credit and Swing Line Loans such that, after giving effect to each such deemed assignment and assumption of participations, the percentage of the aggregate outstanding (i) participations hereunder in Revolving Letters of Credit and (ii) participations hereunder in Swing Line Loans held by each Revolving Credit Lender (including each such Revolving Commitment Increase Lender) will equal the percentage of the aggregate Revolving Credit Commitments of all Revolving Credit Lenders represented by such Revolving Credit Lender’s Revolving Credit Commitment and (b) if, on the date of such increase, there are any Revolving Credit Loans outstanding, such Revolving Credit Loans shall on or prior to the effectiveness of such Revolving Commitment Increase be prepaid from the proceeds of additional Revolving Credit Loans made hereunder (reflecting such increase in Revolving Credit Commitments), which prepayment shall be accompanied by accrued interest on the Revolving Credit Loans being prepaid and any costs incurred by any Lender in accordance with Section 3.05. Each of the parties hereto hereby agrees that the Administrative Agent may take any and all actions as may be reasonably necessary to ensure that, after giving effect to any Synthetic L/C Commitment Increase pursuant to this Section 2.14, the outstanding Synthetic L/C Loans, if any, are held by the Synthetic L/C Lenders in accordance with their new Pro Rata Shares. This may be accomplished at the discretion of the Administrative Agent by taking any action comparable to the actions described in the second preceding sentence. The Administrative Agent and the Lenders hereby agree that the minimum borrowing, pro rata borrowing and pro rata payment requirements contained elsewhere in this Agreement shall not apply to the transactions effected pursuant to the immediately preceding sentence.

(b) At any time that the aggregate amount of Credit Increases does not yet exceed the excess of $400,000,000 minus the Incremental Facility Reduction Amount, the Borrower may elect, by written notice to the Administrative Agent specifying the amount of such increase, to increase the Incremental Facility Reduction Amount; provided that the Incremental Facility Reduction Amount may not exceed $200,000,000 and may not be increased by an amount in excess of the amount of Credit Increases that would be permitted at the time. The Administrative Agent shall notify the Lenders of any such increase.

(c) This Section 2.14 shall supersede any provisions in Section 2.13 or 10.01 to the contrary.

90

ARTICLE III

Taxes, Increased Costs Protection and Illegality

SECTION 3.01. Taxes. (a) Except as provided in this Section 3.01, any and all payments by the Borrower (the term Borrower under Article 3 being deemed to include any Restricted Subsidiary for whose account a Letter of Credit is issued) to or for the account of any Agent or any Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities (including additions to tax, penalties and interest) with respect thereto, excluding, in the case of each Agent and each Lender, taxes imposed on or measured by its net income or overall gross income (including branch profits), and franchise (and similar) taxes imposed on it in lieu of net income taxes, by the jurisdiction (or any political subdivision thereof) under the Laws of which such Agent or such Lender, as the case may be, is organized or maintains a Lending Office, and all liabilities (including additions to tax, penalties and interest) with respect thereto (all such non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and liabilities being hereinafter referred to as “Taxes”). If the Borrower shall be required by any Laws to deduct any Taxes or Other Taxes from or in respect of any sum payable under any Loan Document to any Agent or any Lender, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.01), each of such Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Laws, and (iv) within thirty (30) days after the date of such payment (or, if receipts or evidence are not available within thirty (30) days, as soon as possible thereafter), the Borrower shall furnish to such Agent or Lender (as the case may be) the original or a certified copy of a receipt evidencing payment thereof to the extent such a receipt is issued therefor, or other written proof of payment thereof that is reasonably satisfactory to the Administrative Agent. If the Borrower fails to pay any Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to any Agent or any Lender the required receipts or other required documentary evidence, the Borrower shall indemnify such Agent and such Lender for any incremental taxes, interest or penalties that may become payable by such Agent or such Lender arising out of such failure.

(b) In addition, the Borrower agrees to pay any and all present or future stamp, court or documentary taxes and any other excise, property, intangible or mortgage recording taxes or charges or similar levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as “Other Taxes”).

(c) The Borrower agrees to indemnify each Agent and each Lender for (i) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 3.01)

91

paid by such Agent and such Lender and (ii) any liability (including additions to tax, penalties, interest and expenses) arising therefrom or with respect thereto, in each case whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority; provided such Agent or Lender, as the case may be, provides the Borrower with a written statement thereof setting forth in reasonable detail the basis and calculation of such amounts. Payment under this Section 3.01(c) shall be made within thirty (30) days after the date such Lender or such Agent makes a demand therefor.

(d) The Borrower shall not be required pursuant to this Section 3.01 to pay any additional amount to, or to indemnify, any Lender or Agent, as the case may be, to the extent that such Lender or such Agent becomes subject to Taxes subsequent to the Closing Date (or, if later, the date such Lender or Agent becomes a party to this Agreement) as a result of a change in the place of organization of such Lender or Agent or a change in the Lending Office of such Lender, except to the extent that any such change is requested or required in writing by the Borrower (and provided that nothing in this clause (d) shall be construed as relieving the Borrower from any obligation to make such payments or indemnification in the event of a change in Lending Office or place of organization that precedes a change in Law to the extent such Taxes result from a change in Law).

(e) Notwithstanding anything else herein to the contrary, if a Lender or an Agent is subject to withholding tax imposed by the United States or any jurisdiction in the United States at a rate in excess of zero percent at the time such Lender or such Agent, as the case may be, first becomes a party to this Agreement, such withholding tax at a rate imposed at such time shall be considered excluded from Taxes unless and until such Lender or Agent, as the case may be, provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such forms; provided that, if at the date of the Assignment and Acceptance pursuant to which a Lender becomes a party to this Agreement, the Lender assignor was entitled to payments under clause (a) of this Section 3.01 in respect of withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) withholding tax, if any, applicable with respect to the Lender assignee on such date.

(f) If any Lender or Agent determines, in its reasonable discretion, that it has received a refund in respect of any Taxes or Other Taxes as to which indemnification or additional amounts have been paid to it by the Borrower pursuant to this Section 3.01, it shall promptly remit such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 3.01 with respect to the Taxes or Other Taxes giving rise to such refund plus any interest included in such refund by the relevant taxing authority attributable thereto) to the Borrower, net of all out-of-pocket expenses of the Lender or Agent, as the case may be and without interest (other than any interest paid by the relevant taxing authority with respect to such refund); provided that the Borrower, upon the request of the Lender

92

or Agent, as the case may be, agrees promptly to return such refund to such party in the event such party is required to repay such refund to the relevant taxing authority. Such Lender or Agent, as the case may be, shall, at the Borrower’s request, provide the Borrower with a copy of any notice of assessment or other evidence of the requirement to repay such refund received from the relevant taxing authority (provided that such Lender or Agent may delete any information therein that such Lender or Agent deems confidential). Nothing herein contained shall interfere with the right of a Lender or Agent to arrange its tax affairs in whatever manner it thinks fit nor oblige any Lender or Agent to claim any tax refund or to make available its tax returns or disclose any information relating to its tax affairs or any computations in respect thereof or require any Lender or Agent to do anything that would prejudice its ability to benefit from any other refunds, credits, reliefs, remissions or repayments to which it may be entitled.

(g) Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 3.01(a), (c) or (h) with respect to such Lender it will, if requested by the Borrower, use commercially reasonable efforts (subject to such Lender’s overall internal policies of general application and legal and regulatory restrictions) to designate another Lending Office for any Loan or Letter of Credit affected by such event; provided that such efforts are made on terms that, in the reasonable judgment of such Lender, cause such Lender and its Lending Office(s) to suffer no material economic, legal or regulatory disadvantage, and provided further that nothing in this Section 3.01(g) shall affect or postpone any of the Obligations of the Borrower or the rights of such Lender pursuant to Section 3.01(a), (c) or (h).

(h) Any and all payments by or on account of any obligation of the Administrative Agent pursuant to Section 2.03(k)(i) hereunder shall be made free and clear of and without deduction for any Taxes or Other Taxes; provided that if the Administrative Agent shall be required to deduct any Taxes or Other Taxes from such payments, then (i) the Administrative Agent shall so notify the Borrower and advise it of the additional amount required to be paid so that the sum payable by the Administrative Agent pursuant to Section 2.03(k)(i) after making all required deductions (including deductions applicable to additional sums payable under this Section) to the Synthetic L/C Lenders is an amount from the Administrative Agent equal to the sum they would have received from the Administrative Agent had no deductions been made, (ii) the Borrower shall pay such additional amount to the Administrative Agent, (iii) the Administrative Agent shall make all required deductions, (iv) the Administrative Agent shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law and (v) the Borrower shall indemnify, within ten (10) days after written demand therefor, the Administrative Agent for the full amount of any deductions paid by the Administrative Agent with respect to any payments made on account of any obligations of the Administrative Agent pursuant to Section 2.03(k)(i).

SECTION 3.02. Illegality. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans, or to determine or charge interest rates based upon the Eurodollar Rate, then, on

93

notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or promptly, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted and all amounts due, if any, in connection with such prepayment or conversion under Section 3.05. Each Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender.

SECTION 3.03. Inability to Determine Rates. If the Required Lenders determine that for any reason adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan or the Credit-Linked Deposits, or that the Eurodollar Rate for any Interest Period with respect to a proposed Eurodollar Rate Loan or the Credit-Linked Deposits does not adequately and fairly reflect the cost to such Lenders of funding such Loan or Credit-Linked Deposits, or that Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and the Interest Period of such Eurodollar Rate Loan or the Credit-Linked Deposits, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein and the Credit-Linked Deposits shall be invested so as to earn a return equal to the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

SECTION 3.04. Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Rate Loans. (a) If any Lender or the Administrative Agent determines that as a result of the introduction of or any change in or in the interpretation of any Law, in each case after the date hereof, or such Lender’s or the Administrative Agent’s compliance therewith, there shall be any increase in the cost to such Lender or the Administrative Agent of agreeing to make or making, funding or maintaining Eurodollar Rate Loans, maintaining any Credit-Linked Deposit or issuing or participating in Letters of Credit, as the case may be, or a reduction in the amount received or receivable by such Lender or the Administrative Agent in connection with any of the foregoing (excluding for purposes of this Section 3.04(a) any such increased costs or reduction in amount resulting from (i) Taxes or Other Taxes (as to which Section 3.01

94

shall govern), (ii) changes in the basis of taxation of overall net income or overall gross income (including branch profits), and franchise (and similar) taxes imposed in lieu of net income taxes, by the United States or any foreign jurisdiction or any political subdivision of either thereof under the Laws of which such Lender is organized or maintains a Lending Office, (iii) reserve requirements contemplated by Section 3.04(c) and (iv) any reserve requirement which is reflected in the Credit-Linked Deposit Cost Amount), then from time to time within fifteen (15) days after demand by such Lender or the Administrative Agent, as the case may be, setting forth in reasonable detail such increased costs (with a copy of such demand to the Administrative Agent given in accordance with Section 3.06 if the demand is made by a Lender), the Borrower shall pay to such Lender or the Administrative Agent, as the case may be, such additional amounts as will compensate such Lender or the Administrative Agent, as the case may be, for such increased cost or reduction.

(b) If any Lender or the Administrative Agent determines that the introduction of any Law regarding capital adequacy or any change therein or in the interpretation thereof, in each case after the date hereof, or compliance by such Lender or the Administrative Agent (or its Lending Office) therewith, has the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender or the Administrative Agent as a consequence of such Lender’s or the Administrative Agent’s obligations hereunder (taking into consideration its policies with respect to capital adequacy and such Lender’s or the Administrative Agent’s desired return on capital), then from time to time upon demand of such Lender or the Administrative Agent setting forth in reasonable detail the charge and the calculation of such reduced rate of return (with a copy of such demand to the Administrative Agent given in accordance with Section 3.06 if the demand is made by a Lender), the Borrower shall pay to such Lender or the Administrative Agent, as the case may be, such additional amounts as will compensate such Lender or the Administrative Agent, as the case may be, for such reduction within fifteen (15) days after receipt of such demand.

(c) The Borrower shall pay to each Lender or the Administrative Agent, as applicable, (i) as long as such Lender or the Administrative Agent, as applicable, shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurodollar funds or deposits, additional interest on the unpaid principal amount of each Eurodollar Rate Loan or Credit-Linked Deposit equal to the actual costs of such reserves allocated to such Loan or Credit-Linked Deposit by such Lender or the Administrative Agent, as applicable, (as determined by such Lender or the Administrative Agent, as applicable, in good faith, which determination shall be conclusive in the absence of manifest error), and (ii) as long as such Lender or the Administrative Agent, as applicable, shall be required to comply with any reserve ratio requirement or analogous requirement of any other central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of the Eurodollar Rate Loans or Credit-Linked Deposit, such additional costs (expressed as a percentage per annum and rounded upwards, if necessary, to the nearest five decimal places) equal to the actual costs allocated to such Commitment or Loan or Credit-Linked Deposit by such Lender or the Administrative Agent, as applicable, (as

95

determined by such Lender or the Administrative Agent, as applicable, in good faith, which determination shall be conclusive absent manifest error) which in each case shall be due and payable on each date on which interest is payable on such Loan or Credit-Linked Deposit, provided the Borrower shall have received at least fifteen (15) days’ prior notice (with a copy to the Administrative Agent if the demand is made by a Lender) of such additional interest or cost from such Lender or the Administrative Agent, as applicable. If a Lender or the Administrative Agent, as applicable, fails to give notice fifteen (15) days prior to the relevant Interest Payment Date, such additional interest or cost shall be due and payable fifteen (15) days from receipt of such notice.

(d) Subject to Section 3.06(b), failure or delay on the part of any Lender or the Administrative Agent, as applicable, to demand compensation pursuant to this Section 3.04 shall not constitute a waiver of such Lender’s or the Administrative Agent’s, as applicable, right to demand such compensation.

(e) If any Lender or the Administrative Agent, as applicable, requests compensation under this Section 3.04, then such Lender or the Administrative Agent, as applicable, will, if requested by the Borrower, use commercially reasonable efforts to designate another Lending Office for any Loan, Deposit-Linked Account or Letter of Credit affected by such event; provided that such efforts are made on terms that, in the reasonable judgment of such Lender or the Administrative Agent, as applicable, cause such Lender or the Administrative Agent, as applicable, and its Lending Office(s) to suffer no material economic, legal or regulatory disadvantage, and provided further that nothing in this Section 3.04(e) shall affect or postpone any of the Obligations of the Borrower or the rights of such Lender or the Administrative Agent, as applicable, pursuant to Section 3.04(a), (b), (c) or (d).

SECTION 3.05. Funding Losses. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

(a) any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan, whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise; or

(b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower,

including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained.

For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each

96

Eurodollar Rate Loan made by it at the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded. In addition, the Borrower shall indemnify the Administrative Agent against any loss or expense comparable to the losses or expenses covered by the preceding sentences of this Section 3.05 that the Administrative Agent may sustain or incur as a consequence of any withdrawal from the Credit-Linked Deposit Account pursuant to the terms of this Agreement prior to the end of the then-applicable Interest Period for the Credit-Linked Deposits.

SECTION 3.06. Matters Applicable to All Requests for Compensation. (a) Any Agent or any Lender claiming compensation under this Article 3 shall deliver a certificate to the Borrower setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, such Agent or such Lender may use any reasonable averaging and attribution methods.

(b) With respect to any Lender’s or Agent’s claim for compensation under Section 3.01, 3.02, 3.03 or 3.04, the Borrower shall not be required to compensate such Lender for any amount incurred more than one hundred eighty (180) days prior to the date that such Lender or Agent notifies the Borrower of the event that gives rise to such claim; provided that, if the circumstance giving rise to such claim is retroactive, then such 180-day period referred to above shall be extended to include the period of retroactive effect thereof. If any Lender requests compensation by the Borrower under Section 3.04, the Borrower may, by notice to such Lender (with a copy to the Administrative Agent), suspend the obligation of such Lender to make or continue from one Interest Period to another Eurodollar Rate Loans, or to convert Base Rate Loans into Eurodollar Rate Loans, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of Section 3.06(c) shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested.

(c) If the obligation of any Lender to make or continue from one Interest Period to another any Eurodollar Rate Loan, or to convert Base Rate Loans into Eurodollar Rate Loans shall be suspended pursuant to Section 3.06(b) hereof, such Lender’s Eurodollar Rate Loans shall be automatically converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for such Eurodollar Rate Loans (or, in the case of an immediate conversion required by Section 3.02, on such earlier date as required by Law) and, unless and until such Lender gives notice as provided below that the circumstances specified in Section 3.01, 3.02, 3.03 or 3.04 hereof that gave rise to such conversion no longer exist:

(i) to the extent that such Lender’s Eurodollar Rate Loans have been so converted, all payments and prepayments of principal that would otherwise be applied to such Lender’s Eurodollar Rate Loans shall be applied instead to its Base Rate Loans; and

97

(ii) all Loans that would otherwise be made or continued from one Interest Period to another by such Lender as Eurodollar Rate Loans shall be made or continued instead as Base Rate Loans, and all Base Rate Loans of such Lender that would otherwise be converted into Eurodollar Rate Loans shall remain as Base Rate Loans.

(d) If any Lender gives notice to the Borrower (with a copy to the Administrative Agent) that the circumstances specified in Section 3.01, 3.02, 3.03 or 3.04 hereof that gave rise to the conversion of such Lender’s Eurodollar Rate Loans pursuant to this Section 3.06 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurodollar Rate Loans made by other Lenders are outstanding, such Lender’s Base Rate Loans shall be automatically converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurodollar Rate Loans, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Eurodollar Rate Loans and by such Lender are held pro rata (as to principal amounts, interest rate basis, and Interest Periods) in accordance with their respective Commitments.

SECTION 3.07. Replacement of Lenders under Certain Circumstances. (a) If at any time (i) the Borrower becomes obligated to pay to any Lender additional amounts or indemnity payments described in Section 3.01 or 3.04 as a result of any condition described in such Sections or any Lender ceases to make Eurodollar Rate Loans as a result of any condition described in Section 3.02 or Section 3.04, (ii) any Lender becomes a Defaulting Lender or (iii) any Lender becomes a Non-Consenting Lender, then the Borrower may, on ten (10) Business Days’ prior written notice to the Administrative Agent and such Lender, replace such Lender by causing such Lender to (and such Lender shall be obligated to) assign pursuant to Section 10.07(b) (with the assignment fee to be paid by the Borrower in such instance) all of its rights and obligations under this Agreement to one or more Eligible Assignees; provided that neither the Administrative Agent nor any Lender shall have any obligation to the Borrower to find a replacement Lender or other such Person; and provided further that (A) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments and (B) in the case of any such assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable Eligible Assignees shall have agreed to the applicable departure, waiver or amendment of the Loan Documents.

(b) Any Lender being replaced pursuant to Section 3.07(a) above shall (i) execute and deliver an Assignment and Assumption with respect to such Lender’s Commitment and outstanding Loans, Credit-Linked Deposits and participations in L/C Obligations and Swing Line Loans, and (ii) deliver any Notes evidencing such Loans to the Borrower or Administrative Agent. Pursuant to such Assignment and Assumption, (A) the assignee Lender shall acquire all or a portion, as the case may be, of the assigning Lender’s Commitment and outstanding Loans and participations in L/C Obligations and Swing Line Loans, (B) all obligations of the Borrower owing to the assigning Lender relating to the Loans and participations so assigned shall be paid in

98

full by the assignee Lender to such assigning Lender concurrently with such assignment and assumption and (C) upon such payment and, if so requested by the assignee Lender, delivery to the assignee Lender of the appropriate Note or Notes executed by the Borrower, the assignee Lender shall become a Lender hereunder and the assigning Lender shall cease to constitute a Lender hereunder with respect to such assigned Loans, Commitments and participations, except with respect to indemnification provisions under this Agreement, which shall survive as to such assigning Lender.

(c) Notwithstanding anything to the contrary contained above, any Lender that acts as an L/C Issuer may not be replaced hereunder at any time that it has any Letter of Credit outstanding hereunder unless arrangements reasonably satisfactory to such L/C Issuer (including the furnishing of a back-up standby letter of credit in form and substance, and issued by an issuer reasonably satisfactory to such L/C Issuer or the depositing of cash collateral into a cash collateral account in amounts and pursuant to arrangements reasonably satisfactory to such L/C Issuer) have been made with respect to each such outstanding Letter of Credit and the Lender that acts as the Administrative Agent may not be replaced hereunder except in accordance with the terms of Section 9.09.

(d) In the event that (i) the Borrower or the Administrative Agent has requested that the Lenders consent to a departure or waiver of any provisions of the Loan Documents or agree to any amendment thereto, (ii) the consent, waiver or amendment in question requires the agreement of all affected Lenders in accordance with the terms of Section 10.01 or all the Lenders with respect to a certain Class of the Loans and (iii) the Required Lenders have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed a “Non-Consenting Lender.”

SECTION 3.08. Survival. All of the Borrower’s obligations under this Article 3 shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder.

ARTICLE IV

Conditions Precedent to Credit Extensions

SECTION 4.01. Conditions of Initial Credit Extension. The obligation of each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent:

(a) The Administrative Agent’s receipt of the following, each of which shall be originals or facsimiles (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each in form and substance reasonably satisfactory to the Administrative Agent and its legal counsel:

(i) executed counterparts of this Agreement and each Subsidiary Guaranty;

99

(ii) a Note executed by the Borrower in favor of each Lender that has requested a Note at least two (2) Business Days in advance of the Closing Date;

(iii) each Collateral Document set forth on Schedule 1.01B duly executed by each Loan Party thereto, together with:

(A) certificates, if any, representing the Pledged Equity referred to therein accompanied by undated stock powers executed in blank and instruments evidencing the Pledged Debt indorsed in blank,

(B) evidence that all other actions, including delivery of legal opinions, recordings and filings that the Administrative Agent may deem reasonably necessary to satisfy the Collateral and Guarantee Requirement shall have been taken, completed or otherwise provided for in a manner reasonably satisfactory to the Administrative Agent;

(iv) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may reasonably require evidencing the authorization of the Transaction by each Loan Party and the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party on the Closing Date;

(v) an opinion from Cleary Gottlieb Steen & Hamilton LLP, New York counsel to the Loan Parties substantially in the form of Exhibit J-1;

(vi) an opinion from Vinson & Elkins LLP, Texas counsel to the Loan Parties substantially in the form of Exhibit J-2;

(vii) an opinion from Morris, James, Hitchens & Williams LLP, Delaware counsel to the Loan Parties organized in Delaware substantially in the form of Exhibit J-3;

(viii) a certificate signed by a Responsible Officer of the Borrower certifying that there has been no DMS Material Adverse Change since December 31, 2004;

(ix) a certificate attesting to the Solvency of the Loan Parties (taken as a whole) after giving effect to the Transaction, from the Chief Financial Officer of the Borrower;

(x) evidence that all insurance (including title insurance) required to be maintained pursuant to the Loan Documents has been obtained and is in effect and that the Collateral Agent has been named as additional loss payee under each

100

insurance policy with respect to such insurance as to which the Collateral Agent shall have requested to be so named, it being understood that no title insurance is required for any of the Material Pipelines;

(xi) certified copies of the PIPA, duly executed by the parties thereto, together with all material agreements, instruments and other documents delivered in connection therewith as the Administrative Agent shall reasonably request, each including certification by a Responsible Officer of the Borrower that the PIPA has not been terminated as of the Closing Date and that no provision of the PIPA or any such other material agreements, instruments or documents has been waived, amended, supplemented or otherwise modified in a manner adverse to the Lenders in any material respect except any such waiver, amendment, supplement or other modification consented to in writing by the Administrative Agent; and

(xii) a Committed Loan Notice or Letter of Credit Application, as applicable, relating to the initial Credit Extension.

(b) All fees and expenses required to be paid hereunder and invoiced before the Closing Date shall have been paid in full in cash.

(c) The Transaction, including the Acquisition, shall be consummated simultaneously with the initial Credit Extension in all material respects; the PIPA and all material related documentation shall be reasonably satisfactory to the Administrative Agent and no provision thereof shall have been waived, amended, supplemented or otherwise modified in a manner adverse to the Lenders in any material respect without the consent of the Administrative Agent; the Administrative Agent shall be satisfied with the capitalization, structure and equity ownership of the Borrower after giving effect to the Transaction; and the Equity Contribution shall have been made and shall be not less than 17.0% of the pro forma total consolidated capitalization of the Borrower on the Closing Date (valuing the Borrower on a standalone basis prior to the consummation of the Acquisition at $135,900,000 and excluding (i) all Revolving Letters of Credit, except to the extent of Unreimbursed Amounts thereunder, (ii) Indebtedness of Unrestricted Subsidiaries (other than the Borrower’s and the Restricted Subsidiaries’ pro rata share of the Indebtedness of the Existing JVs), (iii) the Synthetic Letter of Credit Facility, except to the extent of Unreimbursed Amounts thereunder and (iv) Obligations under hedging arrangements permitted hereunder).

(d) Prior to or simultaneously with the initial Credit Extensions, the Borrower shall have received at least $250,000,000 in gross cash proceeds from the issuance of the Senior Unsecured Notes.

(e) Prior to or simultaneously with the initial Credit Extensions, the Borrower shall have terminated the Existing Credit Agreement and taken all other necessary actions such that, after giving effect to the Transaction, (i) the Borrower and its Subsidiaries shall have outstanding no Indebtedness or preferred Equity Interests other than (A) the Loans and L/C Obligations, (B) the Senior Unsecured Notes, and (C) Indebtedness permitted by clauses (b), (f), (i), (j), (l), (m), (n), (s) and (t) of

101

Section 7.03 and (ii) the Borrower shall have outstanding no Equity Interests (or securities convertible into or exchangeable for Equity Interests or rights or options to acquire Equity Interests) other than common stock owned by Targa Resources Investments, Inc. with terms and conditions reasonably acceptable to the Administrative Agent to the extent material to the interests of the Lenders. The Administrative Agent shall have received a pay-off letter reasonably satisfactory to it in respect of the repayment of the Existing Credit Agreement, confirming that all Liens upon any of the property of the Loan Parties constituting Collateral arising under the Existing Credit Agreement, if any, will be terminated concurrently with such payment and all letters of credit issued or guaranteed as part of such Indebtedness shall have been cash collateralized or supported by a Letter of Credit.

(f) The Administrative Agent and the Lenders shall have received (i) the Audited Financial Statements and the audit report for such financial statements (which shall not be subject to any qualification), (ii) to the extent available, the related unaudited consolidating financial statements and (iii) unaudited consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of each of (x) DMS and its Subsidiaries and (y) the Borrower and its Subsidiaries, (A) in each case, for each subsequent year-to-date period ending on the last day of the most recently completed fiscal quarter ended at least forty-five (45) days before the Closing Date and (B) in the case of DMS, for the comparable 2004 period (collectively, the “Unaudited Financial Statements”), which financial statements described in clauses (i), (ii) and (iii) shall be prepared in accordance with GAAP and, in the case of the statements described in clause (iii) above, shall have been reviewed by the independent accountants for the Borrower and DMS, respectively, as provided in the procedures specified by the Public Company Accounting Oversight Board as described in AU722.

(g) The Agent and the Lenders shall have received the Pro Forma Financial Statements and projections in customary form of the Borrower and its Subsidiaries for the fiscal years 2005 through 2012 and for the eight fiscal quarters beginning with the third quarter of 2005 and through the second quarter of 2007 (the “Closing Date Projections”).

(h) The Lenders shall have received, to the extent requested, all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act.

(i) The Collateral Agent shall have received a reasonably satisfactory Perfection Certificate with respect to the Loan Parties dated the Closing Date and duly executed by a Responsible Officer of the Borrower, together with all attachments contemplated thereby.

(j) The Intercreditor Agreement shall have been duly executed and delivered by each party thereto, and shall be in full force and effect.

102

(k) The Administrative Agent shall have received a certificate, signed by a Responsible Officer the Borrower and dated the Closing Date, stating that the conditions precedent set forth in Section 4.02 have been complied with.

(l) The Administrative Agent shall be satisfied that the Borrower’s ratio of Consolidated Total Debt (excluding Revolving Credit Loans borrowed to fund any portion of the Acquisition Consideration resulting from any working capital adjustment thereto not to exceed $50,000,000) on the Closing Date to pro forma Consolidated EBITDA for the most recent trailing four-fiscal quarter period ending June 30, 2005 to give pro forma effect to the Transaction as if it had occurred at the beginning of such four-fiscal quarter period) shall be no more than 6.50 to 1.0 (it being understood that pro forma Consolidated EBITDA for the four-fiscal quarter period ended June 30, 2005 shall be deemed to be $347,000,000).

SECTION 4.02. Conditions to All Credit Extensions. The obligation of each Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Loans to the other Type, or a continuation of Eurodollar Rate Loans) is subject to the following conditions precedent:

(a) The representations and warranties of the Borrower and each other Loan Party contained in Article 5 or any other Loan Document (except, in the case of the initial Credit Extensions, the representations contained in Sections 5.01 (clauses (a) and (b) only), 5.03, 5.05, 5.06, 5.07, 5.08, 5.09, 5.10, 5.11, 5.12, 5.14, 5.15, 5.16 and 5.17, in each case with respect to DMS and its Subsidiaries only) shall be true and correct (or, in the case of representations and warranties not qualified as to materiality, true and correct in all material respects) on and as of the date of such Credit Extension; provided that, to the extent that such representations and warranties specifically refer to an earlier date, they shall be true and correct (or, in the case of representations and warranties not qualified as to materiality, true and correct in all material respects) as of such earlier date.

(b) No Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds therefrom.

(c) The Administrative Agent and, if applicable, the relevant L/C Issuers or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.

Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Loans to the other Type or a continuation of Eurodollar Rate Loans) submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension.

103

ARTICLE V

Representations and Warranties

The Borrower represents and warrants to the Agents and the Lenders that:

SECTION 5.01. Existence, Qualification and Power; Compliance with Laws. Each Loan Party and each of its Subsidiaries (a) is a Person duly organized or formed, validly existing and, if applicable, in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, (c) is duly qualified and, if applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, (d) is in compliance with all Laws, orders, writs, injunctions and orders and (e) has all requisite governmental licenses, authorizations, consents and approvals to operate its business as currently conducted; except in each case referred to in clause (c), (d) or (e), and, with respect to the DMS Entities that are not Loan Parties, in each case referred to in clause (a) or (b), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.02. Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is a party, and the consummation of the Transaction, are within such Loan Party’s corporate or other powers, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person’s Organization Documents, (b) conflict with or result in any breach or contravention of, or the creation of any Lien under (other than as permitted by Section 7.01), or require any payment to be made under (i) any Contractual Obligation (other than the Loan Documents) to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any material Law; except with respect to any conflict, breach or contravention or payment (but not creation of Liens) referred to in clause (b)(i), to the extent that such conflict, breach, contravention or payment could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.03. Governmental Authorization; Other Consents. No material approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with (a) the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, or for the consummation of the Transaction, (b) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (c) the perfection or maintenance of the Liens created under the Collateral Documents (including the priority thereof) or (d) the exercise by the Administrative Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for

104

(i) filings necessary to perfect and maintain the perfection of the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties, (ii) the approvals, consents, exemptions, authorizations, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect and (iii) those approvals, consents, exemptions, authorizations or other actions, notices or filings, the failure of which to obtain or make could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.04. Binding Effect. This Agreement and each other Loan Document has been duly executed and delivered by each Loan Party that is party thereto. This Agreement and each other Loan Document constitutes, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, except as such enforceability may be limited by Debtor Relief Laws and by general principles of equity.

SECTION 5.05. Financial Statements; No Material Adverse Effect. (a) (i) The Audited Financial Statements and the Unaudited Financial Statements fairly present in all material respects the financial condition of DMS and its Subsidiaries and the Borrower and its Subsidiaries, as applicable, as of the dates thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein. During the period from December 31, 2004 to and including the Closing Date, except as disclosed in the PIPA or the Offering Circular, there has been (i) no sale, transfer or other disposition by DMS or any of its Subsidiaries or the Borrower or any of its Subsidiaries of any material part of the business or property of DMS or any of its Subsidiaries, taken as a whole, or the Borrower or any of its Subsidiaries, taken as a whole, respectively and (ii) no purchase or other acquisition by DMS or any of its Subsidiaries or the Borrower or any of its Subsidiaries of any business or property (including any Equity Interests of any other Person) material in relation to the consolidated financial condition of DMS and its Subsidiaries or the Borrower and its Subsidiaries, respectively, in each case, which is not reflected in the foregoing financial statements or in the notes thereto or has not otherwise been disclosed in writing to the Lenders prior to the Closing Date.

(ii) The unaudited pro forma condensed combined balance sheet of the Borrower and its Subsidiaries as at June 30, 2005 (including the notes thereto) (the “Pro Forma Balance Sheet”) and the unaudited pro forma condensed combined statements of income of the Borrower and its Subsidiaries for (x) the most recent fiscal year, (y) the six-month period ended June 30, 2005 and (z) the 12-month period ending on June 30, 2005 (together with the Pro Forma Balance Sheet, the “Pro Forma Financial Statements”), copies of which have heretofore been furnished to each Lender, have been prepared giving effect (as if such events had occurred on such date or at the beginning of such periods, as the case may be) to the Transaction. The Pro Forma Financial Statements have been prepared in good faith, based on assumptions believed by the Borrower to be reasonable as of the date of delivery thereof, and present fairly in all material respects on a pro forma basis and in accordance with GAAP the estimated financial position of the Borrower and its Subsidiaries as at June 30, 2005 and their estimated results of

105

operations for the periods covered thereby, assuming that the events specified in the preceding sentence had actually occurred at such date or at the beginning of the periods covered thereby, except that the pro forma income statement referred to in clause (x) need not take into account the historical operations of the Borrower for the period from January 1, 2004 through April 15, 2004.

(b) Since the Closing Date, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

(c) The Closing Date Projections, copies of which have been furnished to the Administrative Agent prior to the Closing Date in a form reasonably satisfactory to it, have been prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed to be reasonable at the time of preparation of such forecasts, it being understood that actual results may vary from such forecasts and that such variations may be material.

(d) As of the Closing Date, neither the Borrower nor any Subsidiary has any Indebtedness or other obligations or liabilities, direct or contingent (other than (i) as disclosed in the Offering Circular, (ii) obligations arising under this Agreement and (iii) liabilities incurred in the ordinary course of business) that, either individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect.

SECTION 5.06. Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower, threatened in writing or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues (i) that either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect (except as disclosed in the Offering Circular) or (ii) involving any of the Loan Documents or the Transaction.

SECTION 5.07. No Default. Neither the Borrower nor any Subsidiary is in default under or with respect to, or a party to, any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

SECTION 5.08. Ownership of Property; Liens. (a) As of the date of this Agreement, Schedules 1.01D, 1.01E, 1.01F and 5.08(a) set forth the address or a description of the location of each Material Fee Owned Property, each other parcel of real property (other than pipelines and gathering systems and other than immaterial real property including, but not limited to, compressor sites, pump stations and meter sites) owned by any Loan Party, each Material Pipeline and each property that is the subject of a Material Financeable Lease, together with a list of the lessors with respect to all such Material Financeable Leases. All material pipelines and gathering systems owned by the Loan Parties as of the Closing Date are described in the Offering Circular.

106

(b) Each Loan Party and each of its Subsidiaries has marketable title (or in the case of Material Fee Owned Property, good and marketable title) in fee simple to, or valid leasehold interests in, or easements or other limited property interests in, all real property necessary in the ordinary conduct of its business, free and clear of all Liens except for Liens permitted by Section 7.01 and except where the failure to have such title could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(c) Each Loan Party and each of its Subsidiaries has complied with all obligations under the Material Financeable Leases and, to its knowledge, all other leases to which it is a party, except where the failure to comply would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and all Material Financeable Leases and, to its knowledge, all other leases to which it is a party are in full force and effect, except leases in respect of which the failure to be in full force and effect would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Each Loan Party and each of its Subsidiaries enjoys peaceful and undisturbed possession under all Material Financeable Leases and, to its knowledge, all other leases to which it is a party, other than leases in respect of which the failure to enjoy peaceful and undisturbed possession would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(d) Other than as disclosed on Schedule 5.08(d), as of the Closing Date, none of the Borrower or any Subsidiary has received any notice of, nor has any knowledge of, any pending or contemplated condemnation proceeding affecting all or any material portion of any Material Fee Owned Property or any sale or disposition thereof in lieu of condemnation.

(e) To the Borrower’s knowledge, other than as disclosed in any Title Policy as of the Closing Date and on Schedule 5.08(e), and other than in the ordinary course of business relating to easements, rights of way and similar rights relating to Material Pipelines, none of the Borrower or any Subsidiary is obligated under any right of first refusal, option or other contractual right to sell, assign or otherwise dispose of any Material Fee Owned Property, Material Pipeline or any interest therein.

SECTION 5.09. Environmental Matters. Except to the extent specifically disclosed in the Offering Circular or in Schedule 5.09, and except with respect to any matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries:

(a) has failed to comply with any Environmental Law or to obtain, maintain or comply with any Environmental Permit;

(b) has received notice of any claim with respect to any Environmental Liability or has otherwise become subject to any Environmental Liability;

(c) currently leases, owns or operates, or formerly owned, leased or operated, any property or facility on or from which Hazardous Materials have

107

been released or disposed of in a manner and in quantities or concentrations requiring response or investigation under any Environmental Law; or

(d) has assumed from any Person, contractually or by operation of Law, any Environmental Liability of such Person.

SECTION 5.10. Taxes. Except as set forth in Schedule 5.10 and except as could not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, the Borrower and its Subsidiaries have filed all Federal and state and other tax returns and reports required to be filed, and have paid all Federal and state and other taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those (a) which are not overdue by more than thirty (30) days or (b) which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP.

SECTION 5.11. ERISA Compliance. (a) Except as set forth in Schedule 5.11 or as could not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each Plan is in compliance in with the applicable provisions of ERISA, the Code and other Federal or state Laws.

(b) (i) No ERISA Event has occurred during the five year period prior to the date on which this representation is made or deemed made with respect to any Pension Plan; (ii) no Pension Plan has an “accumulated funding deficiency” (as defined in Section 412 of the Code), whether or not waived; (iii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA, except, with respect to each of the foregoing clauses of this Section 5.11(b), as could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

SECTION 5.12. Subsidiaries; Equity Interests. As of the Closing Date, neither the Borrower nor any other Loan Party has any Subsidiaries other than those specifically disclosed in Schedule 5.12, and all of the outstanding Equity Interests in material Subsidiaries have been validly issued, are, in the case of Equity Interests issued by corporations, fully paid and nonassessable and all Equity Interests owned by the Borrower or any other Loan Party are owned free and clear of all Liens except (i) those created under the Collateral Documents and (ii) any nonconsensual Lien that is permitted under Section 7.01. As of the Closing Date, Schedule 5.12 (a) sets forth the name and jurisdiction of each Subsidiary, (b) sets forth the ownership interest of the Borrower and any other Subsidiary in each Subsidiary, including the percentage of such ownership and (c) identifies each Subsidiary that is a Subsidiary the Equity Interests of which are required to be pledged on the Closing Date pursuant to the Collateral and Guarantee Requirement.

108

SECTION 5.13. Margin Regulations; Investment Company Act; Public Utility Holding Company Act. (a) The Borrower is not engaged nor will it engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Borrowings or drawings under any Letter of Credit will be used for any purpose that violates Regulation U.

(b) None of the Borrower, any Person Controlling the Borrower, or any Subsidiary (i) is a “holding company,” or a “subsidiary company” of a “holding company,” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company,” within the meaning of the Public Utility Holding Company Act of 1935, or (ii) is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

SECTION 5.14. Disclosure. No report, financial statement, certificate or other written information furnished by or on behalf of any Loan Party to any Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or any other Loan Document (as modified or supplemented by other information so furnished) when taken as a whole contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not materially misleading; provided that, with respect to projected financial information and pro forma financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time of preparation; it being understood that such projections may vary from actual results and that such variances may be material.

SECTION 5.15. Intellectual Property; Licenses, Etc. Each of the Loan Parties and their Subsidiaries own, license or possess the right to use, all of the trademarks, service marks, trade names, domain names, copyrights, patents, patent rights, licenses, technology, software, know-how database rights, design rights and other intellectual property rights (collectively, “IP Rights”) that are reasonably necessary for the operation of their respective businesses as currently conducted, and, without conflict with the rights of any Person, except to the extent such conflicts, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. No IP Rights, advertising, product, process, method, substance, part or other material used by any Loan Party or any Subsidiary in the operation of their respective businesses as currently conducted infringes upon any rights held by any Person except for such infringements, individually or in the aggregate, which could not reasonably be expected to have a Material Adverse Effect. No claim or litigation regarding any of the IP Rights, is pending or, to the knowledge of the Borrower, threatened against any Loan Party or Subsidiary, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

109

SECTION 5.16. Solvency. On the Closing Date after giving effect to the Transaction, the Loan Parties, on a consolidated basis, are Solvent.

SECTION 5.17. Labor Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against any of the Borrower or its Subsidiaries pending or, to the knowledge of the Borrower, threatened; (b) hours worked by and payment made based on hours worked to employees of each of the Borrower or its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Laws dealing with wage and hour matters; and (c) all payments due from any of the Borrower or its Subsidiaries on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant party.

SECTION 5.18. Insurance. Schedule 5.18 sets forth a true, complete and correct description of all insurance maintained by or on behalf of the Loan Parties and the Subsidiaries as of the Closing Date. As of the Closing Date, all such insurance is in full force and effect and all premiums due in respect of such insurance have been duly paid. The Borrower believes that the insurance maintained by or on behalf of the Borrower and the Subsidiaries is adequate and in accordance with normal industry practice.

ARTICLE VI

Affirmative Covenants

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder which is accrued and payable shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02 and 6.03) cause each Restricted Subsidiary to:

SECTION 6.01. Financial Statements. Deliver to the Administrative Agent for prompt further distribution to each Lender:

(a) as soon as available, but in any event within ninety (90) days after the end of each fiscal year of the Borrower beginning with the 2005 fiscal year, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income or operations, stockholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year (other than, in respect of the Borrower and its Subsidiaries, such figures for the period from January 1, 2004 through April 15, 2004), all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of PricewaterhouseCoopers LLP or any other independent registered public accounting firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit;

110

(b) as soon as available, but in any event within forty-five (45) days after the end of each of the first three (3) fiscal quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related (i) consolidated statements of income or operations for such fiscal quarter and for the portion of the fiscal year then ended and (ii) consolidated statements of cash flows for the portion of the fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year (other than, in respect of the Borrower and its Subsidiaries, such figures for the period from January 1, 2004 through April 15, 2004), all in reasonable detail and certified by a Responsible Officer of the Borrower as fairly presenting in all material respects the financial condition, results of operations, stockholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

(c) as soon as available, and in any event no later than ninety (90) days after the end of each fiscal year of the Borrower, a detailed consolidated budget for the following fiscal year (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the following fiscal year, the related consolidated statements of projected cash flow and projected income and a summary of the material underlying assumptions applicable thereto), and, as soon as available, significant revisions, if any, of such budget and projections with respect to such fiscal year (collectively, the “Projections”), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections are based on reasonable assumptions, which assumptions were believed to be reasonable at the time of preparation of such Projections, it being understood that actual results may vary from such Projections and that such variances may be material; and

(d) simultaneously with the delivery of each set of consolidated financial statements referred to in Sections 6.01(a) and 6.01(b) above, the related consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such consolidated financial statements.

Notwithstanding the foregoing, the obligations in paragraphs (a) and (b) of this Section 6.01 may be satisfied with respect to financial information of the Borrower and the Subsidiaries by furnishing (A) the applicable financial statements of any Holding Company (so long as the Borrower is a consolidated subsidiary of such Holding Company) or (B) the Borrower’s or any such Holding Company’s, as applicable, Form 10-K or 10-Q, as applicable, filed with the SEC; provided that, with respect to each of clauses (A) and (B), (i) to the extent such information relates to a Holding Company, such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such Holding Company, on the one hand, and the information relating to the Borrower and the Restricted Subsidiaries on a standalone basis, on the other hand and (ii) to the extent such information is in lieu of

111

information required to be provided under Section 6.01(a), such materials are accompanied by a report and opinion of PricewaterhouseCoopers LLP or any other independent registered public accounting firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit.

SECTION 6.02. Certificates; Other Information. Deliver to the Administrative Agent for prompt further distribution to each Lender:

(a) no later than five (5) days after the delivery of the financial statements referred to in Section 6.01(a), a certificate of its independent registered public accounting firm certifying such financial statements and stating that in making the examination necessary therefor no knowledge was obtained of any Event of Default under Section 7.11 or, if any such Event of Default shall exist, stating the nature and status of such event;

(b) no later than five (5) days after the delivery of the financial statements referred to in Section 6.01(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower and, if such Compliance Certificate demonstrates an Event of Default of any covenant under Section 7.11, any of the Equity Investors may deliver, together with such Compliance Certificate, notice of their intent to cure (a “Notice of Intent to Cure”) such Event of Default pursuant to Section 8.05; provided that the delivery of a Notice of Intent to Cure shall in no way affect or alter the occurrence, existence or continuation of any such Event of Default or the rights, benefits, powers and remedies of the Administrative Agent and the Lenders under any Loan Document;

(c) promptly after the same are publicly available, copies of all annual, regular, periodic and special reports and registration statements which the Borrower files with the SEC or with any Governmental Authority that may be substituted therefor (other than amendments to any registration statement (to the extent such registration statement, in the form it became effective, is delivered), exhibits to any registration statement and, if applicable, any registration statement on Form S-8) and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;

(d) promptly after the furnishing thereof, copies of any material requests or material notices received by any Loan Party (other than in the ordinary course of business) or material statements or material reports furnished to any holder of debt securities of any Loan Party or of any of its Subsidiaries pursuant to the terms of any Senior Unsecured Notes Documentation and not otherwise required to be furnished to the Lenders pursuant to any other clause of this Section 6.02;

(e) together with the delivery of each Compliance Certificate delivered in connection with the delivery of the financial statements referred to in Section 6.01(a), (i) a report setting forth the information required by the Perfection Certificate or confirming that there has been no change in such information that would require any

112

action in order to fully comply with the Collateral and Guarantee Requirement at any time, (ii) a description of each event, condition or circumstance during the fiscal year covered by such Compliance Certificate requiring a mandatory prepayment under Section 2.05(b), (iii) a statement indicating whether any Material Fee Owned Property was acquired or Material Financeable Lease was entered into during such fiscal year, and, if so identifying it, and (iv) a list of each Subsidiary that identifies each Subsidiary as a Restricted Subsidiary (and, as applicable, an Excluded Subsidiary or a Partially Owned Operating Company), an Unrestricted Subsidiary, a Permitted MLP (or a subsidiary thereof) or a Permitted GP (or a subsidiary thereof) as of the date of delivery of such Compliance Certificate;

(f) promptly after the request by any Lender, all documentation and other information that such Lender reasonably requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act; and

(g) promptly, such additional information regarding the business, legal, financial or corporate affairs of any Loan Party or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender through the Administrative Agent may from time to time reasonably request.

Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower’s behalf on IntraLinks/IntraAgency or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) upon written request by the Administrative Agent, the Borrower shall deliver paper copies of such documents to the Administrative Agent for further distribution to each Lender until a written request to cease delivering paper copies is given by the Administrative Agent and (ii) the Borrower shall notify (which may be by facsimile or electronic mail) the Administrative Agent of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(b) to the Administrative Agent. Each Lender shall be solely responsible for timely accessing posted documents or requesting delivery of paper copies of such documents from the Administrative Agent and maintaining its copies of such documents.

SECTION 6.03. Notices. Promptly after obtaining knowledge thereof, notify the Administrative Agent:

(a) of the occurrence of any Default; and

113

(b) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including a Material Adverse Effect arising out of or resulting from (i) breach or non-performance of, or any default or event of default under, a Contractual Obligation of any Loan Party or any Subsidiary, (ii) any dispute, litigation, investigation, proceeding or suspension between any Loan Party or any Subsidiary and any Governmental Authority, (iii) the commencement of, or any material development in, any litigation or proceeding affecting any Loan Party or any Subsidiary, including pursuant to any applicable Environmental Laws or in respect of IP Rights or the assertion or occurrence of any noncompliance by any Loan Party or as any of its Subsidiaries with, or liability under, any Environmental Law or Environmental Permit, or (iv) the occurrence of any ERISA Event.

Each notice pursuant to this Section shall be accompanied by a written statement of a Responsible Officer of the Borrower (x) that such notice is being delivered pursuant to Section 6.03(a) or (b) (as applicable) and (y) setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.

SECTION 6.04. Payment of Obligations. Pay, discharge or otherwise satisfy as the same shall become due and payable, all its obligations and liabilities in respect of taxes, assessments and governmental charges or levies imposed upon the Borrower or such Restricted Subsidiary or upon its or such Restricted Subsidiary’s income or profits or in respect of its or such Restricted Subsidiary’s property except, in each case, to the extent the failure to pay or discharge the same could not reasonably be expected to have a Material Adverse Effect.

SECTION 6.05. Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence under the Laws of the jurisdiction of its organization and (b) take all reasonable action to maintain all rights, privileges (including its good standing), permits, licenses and franchises necessary or desirable in the normal conduct of its business, except (i) to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect or (ii) in the case of clauses (a) and (b), pursuant to a transaction permitted by Section 7.04 or 7.05.

SECTION 6.06. Maintenance of Properties. Except if the failure to do so could not reasonably be expected to have a Material Adverse Effect, (a) maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order, repair and condition, ordinary wear and tear excepted and casualty or condemnation excepted, and (b) make all necessary renewals, replacements, modifications, improvements, upgrades, extensions and additions thereof or thereto in accordance with prudent industry practice.

SECTION 6.07. Maintenance of Insurance. Maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons

114

engaged in the same or similar businesses as the Borrower and the Restricted Subsidiaries) as are customarily carried under similar circumstances by such other Persons.

SECTION 6.08. Compliance with Laws. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except if the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

SECTION 6.09. Books and Records. Maintain proper books of record and account, in which entries that are full, true and correct in all material respects and are in conformity with GAAP consistently applied shall be made of all material financial transactions and matters involving the assets and business of the Borrower or such Restricted Subsidiary, as the case may be.

SECTION 6.10. Inspection Rights. Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent registered public accountants, all at the reasonable expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided that, excluding any such visits and inspections during the continuation of an Event of Default, only the Administrative Agent on behalf of the Lenders may exercise rights of the Administrative Agent and the Lenders under this Section 6.10 and the Administrative Agent shall not exercise such rights more often than two (2) times during any calendar year absent the existence of an Event of Default and only one (1) such time shall be at the Borrower’s expense; provided further that when an Event of Default exists, the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and upon reasonable advance notice. The Administrative Agent and the Lenders shall give the Borrower the opportunity to participate in any discussions with the Borrower’s independent public accountants.

SECTION 6.11. Covenant to Guarantee Obligations and Give Security. At the Borrower’s expense, take all action necessary or reasonably requested by the Administrative Agent or Collateral Agent to ensure that the Collateral and Guarantee Requirement continues to be satisfied, including:

(a) upon the formation or acquisition of any new direct or indirect Domestic Subsidiary (in each case, other than an Unrestricted Subsidiary or an Excluded Subsidiary) by any Loan Party or the designation in accordance with Section 6.18 of any existing direct or indirect Domestic Subsidiary as a Restricted Subsidiary:

(i) within thirty (30) days after such formation, acquisition or designation or such longer period as the Administrative Agent may agree in its discretion:

(A) cause each such Restricted Subsidiary that is required to become a Subsidiary Guarantor under the Collateral and Guarantee Requirement to furnish to the Administrative Agent a description of its Material Fee Owned Properties and Material Financeable Leases, in detail reasonably satisfactory to the Administrative Agent;

115

(B) cause each such Restricted Subsidiary that is required to become a Subsidiary Guarantor pursuant to the Collateral and Guarantee Requirement to duly execute and deliver to the Administrative Agent or the Collateral Agent (as appropriate) Mortgages, Security Agreement Supplements and other security agreements and documents (including, with respect to Mortgages, the documents listed in Clause (h)(iii) of the Collateral and Guarantee Requirement), as reasonably requested by and in form and substance reasonably satisfactory to the Administrative Agent and Collateral Agent (consistent with the Mortgages, Security Agreement and other security agreements in effect on the Closing Date), in each case granting Liens, pledging Equity Interests, granting mortgages and taking any and all other actions as required by the Collateral and Guarantee Requirement;

(C) (x) cause each such Restricted Subsidiary that is required to become a Subsidiary Guarantor pursuant to the Collateral and Guarantee Requirement to deliver any and all certificates representing Equity Interests (to the extent certificated) that are required to be pledged pursuant to the Collateral and Guarantee Requirement (including Equity Interests in any MLP), accompanied by undated stock powers or other appropriate instruments of transfer executed in blank and instruments evidencing the intercompany Indebtedness held by such Restricted Subsidiary and required to be pledged pursuant to the Collateral Documents, indorsed in blank to the Collateral Agent and (y) cause each Loan Party to deliver any and all certificates representing the outstanding Equity Interests (to the extent certificated) of such Restricted Subsidiary that are required to be pledged by it pursuant to the Collateral and Guarantee Requirement, accompanied by undated stock powers or other appropriate instruments of transfer executed in blank and instruments evidencing the intercompany Indebtedness issued by such Restricted Subsidiary and required to be pledged by it in accordance with the Collateral Documents, indorsed in blank to the Collateral Agent;

(D) take and cause such Restricted Subsidiary and each other Loan Party to take whatever action (including the recording of Mortgages, the filing of Uniform Commercial Code financing statements and delivery of stock and membership interest certificates) may be necessary in the reasonable opinion of the Administrative Agent or the Collateral Agent to

116

vest in the Collateral Agent valid Liens required by the Collateral and Guarantee Requirement or any of the Collateral Documents, enforceable against all third parties in accordance with their terms, except as such enforceability may be limited by Debtor Relief Laws and by general principles of equity,

(ii) within thirty (30) days after the request therefor by the Administrative Agent or the Collateral Agent, deliver to the Administrative Agent and the Collateral Agent a signed copy of an opinion, addressed to the Administrative Agent, the Collateral Agent and the other Secured Parties, of counsel for the Loan Parties reasonably acceptable to the Administrative Agent and the Collateral Agent as to such matters set forth in this Section 6.11(a) as the Administrative Agent or the Collateral Agent may reasonably request;

(b) as promptly as practicable, however, in any case no later than 90 days after the Closing Date, deliver to the Collateral Agent counterparts to Mortgages or Collateral Assignments (as applicable), Title Policies and other documents in respect of Material Fee Owned Property and Material Financeable Leases designated as “Tier 2” properties on Schedules 1.01D and 1.01F in accordance with and as required by clause (h)(ii) of the Collateral and Guarantee Requirement; and

(c) in the case of an acquisition of any Material Fee Owned Property, Material Pipeline or Material Financeable Lease (including the renewal of any Material Financeable Lease) by any Loan Party, and such Material Fee Owned Property, Material Pipeline or Material Financeable Lease is not already subject to a perfected Lien pursuant to the Collateral and Guarantee Requirement, the Borrower shall not later than thirty (30) days after such acquisition (or the date such property becomes a Material Fee Owned Property or a Material Pipeline), deliver to the Collateral Agent counterparts to Mortgages or Collateral Assignments (as applicable), Title Policies (other than with respect to any Material Pipeline) and other documents in respect of such Material Fee Owned Property, Material Pipelines and Material Financeable Leases in accordance with and as required by clause (h)(iv) of the Collateral and Guarantee Requirement.

SECTION 6.12. Compliance with Environmental Laws. Except, in each case, to the extent that the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, comply, and take all reasonable actions to cause all lessees and other Persons operating or occupying its properties to comply with all applicable Environmental Laws and Environmental Permits; obtain and renew all Environmental Permits necessary for its operations and properties; and, in each case to the extent required by applicable Environmental Laws, conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all applicable Environmental Laws.

SECTION 6.13. Further Assurances. Promptly upon reasonable request by the Administrative Agent or the Collateral Agent (i) correct any material defect or error that may be discovered in the execution, acknowledgment, filing or recordation of

117

any Collateral Document or other document or instrument relating to any Collateral, and (ii) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as the Administrative Agent or the Collateral Agent may reasonably request from time to time in order to carry out more effectively the purposes of the Collateral Documents.

SECTION 6.14. Maintenance of Ratings. Use commercially reasonable efforts to cause the Facilities provided for herein to be continuously rated by S&P and Moody’s.

SECTION 6.15. Interest Rate Protection. No later than the 90th day after the Closing Date, enter into, and for a minimum of two years thereafter maintain, Swap Contracts reasonably acceptable to the Administrative Agent that result in at least 40% of the aggregate principal amount of Consolidated Total Debt (other than the Bridge Loans) being effectively subject to a fixed or maximum interest rate reasonably acceptable to the Administrative Agent.

SECTION 6.16. Maintenance of Corporate Separateness. Satisfy customary corporate or limited liability company formalities, including the maintenance of corporate and business records.

SECTION 6.17. Information Regarding Collateral. Furnish to the Administrative Agent and Collateral Agent prompt written notice of any change (i) in any Loan Party’s legal name, (ii) in the jurisdiction of organization or formation of any Loan Party, (iii) in any Loan Party’s identity or corporate structure or (iv) in any Loan Party’s Federal Taxpayer Identification Number. The Borrower agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral. The Borrower also agrees promptly to notify the Administrative Agent and Collateral Agent if any material portion of the Collateral is damaged or destroyed.

SECTION 6.18. Designation of Subsidiaries. (a) The board of directors of the Borrower may at any time designate any Restricted Subsidiary as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) immediately before and after such designation, no Default shall have occurred and be continuing, (ii) immediately after giving effect to such designation, the Borrower and the Restricted Subsidiaries shall be in compliance, on a Pro Forma Basis, with the covenants set forth in Sections 7.02, 7.06, and 7.11 (and, as a condition precedent to the effectiveness of any such designation, the Borrower shall deliver to the Administrative Agent a certificate setting forth in reasonable detail the calculations demonstrating such compliance), (iii) no Subsidiary may be designated as an Unrestricted Subsidiary if it is a “Restricted Subsidiary” for the purpose of the Senior Unsecured Notes or any Permitted Refinancing thereof, (iv) no Restricted Subsidiary may be designated as an Unrestricted Subsidiary if it was previously designated an Unrestricted Subsidiary, (v) no Subsidiary of an Unrestricted Subsidiary may be designated as a Restricted Subsidiary, (vi) no

118

Subsidiary that owns any Equity Interests in or Indebtedness of, or owns or holds any Lien on, any property of the Borrower or any Restricted Subsidiary (other than any Subsidiary of the Subsidiary to be so designated) or any Equity Interests in or Indebtedness of any Permitted MLP, Permitted GP or Partially Owned Operating Company, may be designated an Unrestricted Subsidiary, (vii) each Subsidiary to be so designated as an Unrestricted Subsidiary and its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Borrower or any Restricted Subsidiary and (viii) no primary operating Subsidiary of the Borrower may be designated as an Unrestricted Subsidiary. The designation of any Subsidiary as an Unrestricted Subsidiary shall constitute an Investment by the Borrower and the Restricted Subsidiaries therein at the date of designation in an amount equal to the net book value of their investments therein at the time of such designation; provided that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Borrower shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to (x) the Borrower’s “Investment” in such Subsidiary at the time of such redesignation, less (y) the portion (proportionate to the Borrower’s equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation. The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute the incurrence at the time of designation of any Indebtedness or Liens of such Subsidiary existing at such time.

(b) Any Person that becomes an Acquired Non-Guarantor as a result of a Permitted Acquisition and that is a Subsidiary shall become an Unrestricted Subsidiary upon consummation of such Permitted Acquisition. Any Person that becomes an Acquired Non-Guarantor as a result of a Permitted Acquisition and that is not a Subsidiary, but becomes a Subsidiary at a later date, shall become an Unrestricted Subsidiary at the time it becomes a Subsidiary (unless, at the time it becomes a Subsidiary, it would be required to become a Subsidiary Guarantor if it were a Restricted Subsidiary). Notwithstanding the foregoing, a Subsidiary shall not be required to become a Restricted Subsidiary if it is the Subsidiary of an Unrestricted Subsidiary. The second sentence of paragraph (a) above shall not apply to Subsidiaries that become Unrestricted Subsidiaries pursuant to this paragraph (b). If any Subsidiary becomes an Unrestricted Subsidiary pursuant to this paragraph (b) and is thereafter designated as a Restricted Subsidiary pursuant to paragraph (a) above, such Subsidiary shall continue to be an Acquired Non-Guarantor unless and until it becomes a Subsidiary Guarantor.

SECTION 6.19. Permitted MLP Transfer; Permitted GP Transfer. (a) All Equity Interests (other than those held by a Restricted Subsidiary that is the GP of such MLP) received by the Borrower or any Restricted Subsidiary as a result of any Permitted MLP Transfer that is a MLP Asset Transfer shall be held by a Loan Party until such time as any such Equity Interest is Disposed of pursuant to a Permitted MLP Transfer.

119

(b) All Equity Interests in a GP from time to time owned, directly or indirectly, by the Borrower shall be held by a Loan Party until such time as any such Equity Interest is Disposed of pursuant to a Permitted GP Transfer.

ARTICLE VII

Negative Covenants

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder which is accrued and payable shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall not, nor shall they permit any of its Restricted Subsidiaries to, directly or indirectly:

SECTION 7.01. Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:

(a) Liens created pursuant to any Loan Document;

(b) Liens existing on the date hereof that are listed on Schedule 7.01(b) or, in the case of Liens on the assets of the DMS Entities, Liens existing on the date hereof that are permitted by the PIPA (and that are not required to be released in order to satisfy any condition to closing thereunder, determined without regard to any waiver of any such condition that is not approved in writing by the Administrative Agent) and, in each case, any modifications, replacements, renewals or extensions thereof; provided that (i) the Lien does not extend to any additional property other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien or financed by Indebtedness permitted under Section 7.03, and (B) proceeds and products thereof, and (ii) the renewal, extension or refinancing of the obligations secured or benefited by such Liens is permitted by Section 7.03;

(c) Liens for taxes, assessments or governmental charges which are not overdue for a period of more than thirty (30) days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

(d) Liens of landlords, carriers, warehousemen, mechanics, materialmen, repairmen, construction contractors or other like Liens arising in the ordinary course of business which secure amounts not overdue for a period of more than thirty (30) days or if more than thirty (30) days overdue, are unfiled and no other action has been taken to enforce such Lien or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP; provided that such Liens (i) do not secure Indebtedness, (ii) arise by operation of law or contract and (iii) in the case of Liens arising by contract, do not preclude Liens securing the Obligations;

120

(e) (i) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, (ii) pledges and deposits in the ordinary course of business securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Borrower or any Restricted Subsidiary and (iii) Liens on proceeds of insurance policies securing Indebtedness permitted under Section 7.03(m)(i);

(f) deposits, prepayments or cash pledges to secure the performance of bids, trade contracts, governmental contracts and leases (other than Indebtedness for borrowed money), statutory obligations, surety, stay, customs and appeal bonds, performance bonds and other obligations of a like nature (including those to secure health, safety and environmental obligations) incurred in the ordinary course of business;

(g) easements, rights-of-way, restrictions, encroachments, protrusions and other similar encumbrances and minor title defects affecting real property (including those disclosed in Schedule B-II of each title insurance policy or signed title insurance commitment delivered to and accepted by the Administrative Agent on the Closing Date), which, in the aggregate, do not in any case interfere with the ordinary conduct of the business of the Borrower and the Restricted Subsidiaries;

(h) Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(h);

(i) Liens securing Indebtedness permitted under Section 7.03(e); provided that (i) such Liens attach concurrently with or within two hundred seventy (270) days after the acquisition, repair, replacement, construction or improvement (as applicable) of the property subject to such Liens, (ii) such Liens do not at any time encumber any property (except for accessions to such property) other than the property financed by such Indebtedness and the proceeds and the products thereof and (iii) with respect to Capitalized Leases, such Liens do not at any time extend to or cover any assets (except for accessions to such assets) other than the assets subject to such Capitalized Leases; provided that individual financings of equipment provided by one lender may be cross collateralized to other financings of equipment provided by such lender;

(j) leases, licenses, subleases, sublicenses, easements, rights of way or similar rights or encumbrances granted to others in the ordinary course of business which do not (i) interfere in any material respect with the business of the Borrower and the Restricted Subsidiaries, or (ii) secure any Indebtedness;

(k) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

121

(l) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) attaching to commodity trading accounts or other commodities brokerage accounts incurred in the ordinary course of business; (iii) in favor of a banking institution arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry; or (iv) in connection with Cash Management Obligations and other obligations in respect of netting services, overdraft protections and similar arrangements, in each case in connection with deposit accounts in the ordinary course of business and that are limited to Liens customary in such arrangements;

(m) Liens (i) on cash advances in favor of the seller of any property to be acquired in an Investment permitted pursuant to Sections 7.02(f), (i), (s) and (t) to be applied against the purchase price for such Investment, and (ii) consisting of an agreement to Dispose of any property in a Disposition permitted under Section 7.05, in each case, solely to the extent such Investment or Disposition, as the case may be, would have been permitted on the date of the creation of such Lien;

(n) Liens on property of any Foreign Subsidiary, which Liens secure Indebtedness of the applicable Foreign Subsidiary permitted under Section 7.03; provided that such Liens do not at any time encumber any property other than the property of such Foreign Subsidiary;

(o) Liens in favor of the Borrower or a Restricted Subsidiary securing Indebtedness permitted under Section 7.03(d); provided, that any such Lien on any Collateral shall be junior to the Liens on the Collateral securing the Obligations;

(p) Liens existing on property at the time of its acquisition or existing on the property of any Person at the time such Person becomes a Restricted Subsidiary (other than by designation as a Restricted Subsidiary pursuant to Section 6.18), in each case after the Closing Date (other than Liens on the Equity Interests or assets of any Person acquired pursuant to the Acquisition and other than Liens on the Equity Interests of any Person that becomes a Restricted Subsidiary); provided that (i) such Lien was not created in contemplation of such acquisition or such Person becoming a Restricted Subsidiary, (ii) such Lien does not extend to or cover any other assets or property (other than the proceeds or products thereof and other than after-acquired property subjected to a Lien securing Indebtedness and other obligations incurred prior to such time and which Indebtedness and other obligations are permitted hereunder that require, pursuant to their terms at such time, a pledge of after-acquired property, it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition), and (iii) Indebtedness secured thereby is permitted under Section 7.03(e);

(q) any interest or title of a lessor under leases entered into by the Borrower or any of the Restricted Subsidiaries in the ordinary course of business;

122

(r) Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods entered into by the Borrower or any of the Restricted Subsidiaries in the ordinary course of business permitted by this Agreement;

(s) Liens deemed to exist in connection with Investments in repurchase agreements under Section 7.02; provided that such Liens do not extend to any assets other than those assets that are the subject of such repurchase agreement;

(t) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;

(u) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Borrower or any Restricted Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower and the Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers and suppliers of the Borrower or any Restricted Subsidiary in the ordinary course of business;

(v) Liens solely on any cash earnest money deposits made by the Borrower or any of the Restricted Subsidiaries in connection with any letter of intent, purchase agreement or similar agreement permitted hereunder;

(w) ground leases in respect of real property on which facilities owned or leased by the Borrower or any of its Subsidiaries are located;

(x) Liens on inventory or equipment of the Borrower or any Restricted Subsidiary granted in the ordinary course of business to the Borrower’s customers and suppliers at which such inventory or equipment is located and that do not secure Indebtedness;

(y) other Liens securing obligations incurred in the ordinary course of business which obligations do not exceed $30,000,000 at any one time outstanding.

SECTION 7.02. Investments. Make or hold any Investments, except:

(a) Investments by the Borrower or a Restricted Subsidiary in assets that were Cash Equivalents when such Investment was made;

(b) loans or advances to officers, directors and employees of the Borrower and the Restricted Subsidiaries (i) for reasonable and customary business-related travel, entertainment, relocation and analogous ordinary business purposes, (ii) to fund the purchase of Equity Interests in the Borrower or any Holding Company under compensation plans approved by the Board of Directors of the Borrower in good faith (provided that the proceeds of such loans or advances are promptly reinvested in Equity Interests of the Borrower) and (iii) for purposes not described in the foregoing clauses (i) or (ii), in an aggregate principal amount outstanding not to exceed $10,000,000;

123

(c) Investments (i) by the Borrower or any Restricted Subsidiary in any Loan Party, (ii) by any Restricted Subsidiary that is not a Loan Party in any other such Restricted Subsidiary that is also not a Loan Party and (iii) by any Loan Party in any Restricted Subsidiary that is not a Loan Party; provided that the aggregate amount of Investments pursuant to this clause (iii) shall not exceed $50,000,000 (net of any return representing a return of capital in respect of any such Investment);

(d) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors and other credits to suppliers in the ordinary course of business;

(e) Investments consisting of Liens, Indebtedness, fundamental changes, Dispositions and Restricted Payments permitted under Sections 7.01, 7.03, 7.04, 7.05 and 7.06, respectively;

(f) Investments (i) existing or contemplated on the date hereof and set forth on Schedule 7.02(f) and (ii) Investments existing on the date hereof by the Borrower or any Restricted Subsidiary in the Equity Interests of any Restricted Subsidiary and any modification, renewal or extension thereof; provided that the amount of the original Investment is not increased except as otherwise permitted by this Section 7.02;

(g) Investments in Swap Contracts permitted under Section 7.03;

(h) promissory notes and other noncash consideration received in connection with Dispositions permitted by Section 7.05;

(i) the purchase or other acquisition of property and assets or businesses of any Person or of assets constituting a business unit, a line of business or division of such Person, or Equity Interests in a Person that, upon the consummation thereof, will be a wholly owned Restricted Subsidiary of the Borrower (including as a result of a merger or consolidation); provided that, with respect to each purchase or other acquisition made pursuant to this Section 7.02(i) (each, a “Permitted Acquisition”):

(A) subject to clause (B) below, a majority of all property, assets and businesses acquired in such purchase or other acquisition shall constitute Collateral and each applicable Loan Party and any such newly created or acquired Subsidiary (and, to the extent required under the Collateral and Guarantee Requirement, the Subsidiaries of such created or acquired Subsidiary) shall be a Subsidiary Guarantor and shall have complied with the requirements of Section 6.11, within the times specified therein;

124

(B) the Acquired EBITDA of the Acquired Entity or Business being acquired pursuant to such acquisition (excluding the portion thereof attributable to the net income (loss) of any Person that will not be a Subsidiary Guarantor after giving effect to such acquisition and determined assuming that no dividends, distributions or other payments were made by any such Person to any other Person that would be a Subsidiary Guarantor) shall constitute at least 66.67% of the Acquired EBITDA of such Acquired Entity or Business (including the net income (loss) of Persons that will not be Subsidiary Guarantors after giving effect to such acquisition and determined assuming that each such Person paid dividends ratably with respect to its Equity Interests in an amount equal to its net income), in each case for the most recent period of four consecutive fiscal quarters ended prior to the date of such acquisition for which financial statements are available;

(C) the acquired property, assets, business or Person is in a Similar Business;

(D) (1) immediately before and immediately after giving Pro Forma Effect to any such purchase or other acquisition, no Default shall have occurred and be continuing and (2) immediately after giving effect to such purchase or other acquisition, the Borrower and the Restricted Subsidiaries shall be in Pro Forma Compliance with all of the covenants set forth in Section 7.11, such compliance to be determined on the basis of the financial information most recently delivered to the Administrative Agent and the Lenders pursuant to Section 6.01(a) or (b) as though such purchase or other acquisition had been consummated as of the first day of the fiscal period covered thereby and evidenced by a certificate from a Responsible Officer of the Borrower demonstrating such compliance calculation in reasonable detail; and

(E) the Borrower shall have delivered to the Administrative Agent, on behalf of the Lenders, no later than five (5) Business Days after the date on which any such purchase or other acquisition is consummated, a certificate of a Responsible Officer, in form and substance reasonably satisfactory to the Administrative Agent, certifying that all of the requirements set forth in this clause (i) have been satisfied or will be satisfied on or prior to the consummation of such purchase or other acquisition;

(j) the Transaction;

(k) Investments in the ordinary course of business consisting of Uniform Commercial Code Article 3 endorsements for collection or deposit and Uniform Commercial Code Article 4 customary trade arrangements with customers consistent with past practices;

125

(l) Investments (including debt obligations and Equity Interests) received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, or other disputes with, customers and suppliers arising in the ordinary course of business or upon the foreclosure with respect to any secured Investment or other transfer of title with respect to any secured Investment;

(m) loans and advances to any Holding Company in lieu of, and not in excess of the amount of (after giving effect to any other loans, advances or Restricted Payments in respect thereof), to the extent treated as Restricted Payments and permitted to be made to such Holding Company in accordance with Section 7.06(i);

(n) advances of payroll payments to employees in the ordinary course of business;

(o) Investments to the extent that payment for such Investments is made solely with Equity Interests (other than Disqualified Equity Interests) of the Borrower after a Qualifying IPO of the Borrower;

(p) Investments of a Restricted Subsidiary engaged in a Similar Business acquired after the Closing Date or of a corporation merged into the Borrower or merged or consolidated with a Restricted Subsidiary in accordance with Section 7.04 after the Closing Date to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation;

(q) Investments consisting of Equity Interests in MLPs and GPs received in connection with a Permitted MLP Transfer or Permitted GP Transfer made pursuant to Section 7.05;

(r) Guarantees by the Borrower or any Restricted Subsidiary of leases (other than Capitalized Leases) or of other obligations (including contracts) that do not constitute Indebtedness, in each case entered into in the ordinary course of business;

(s) so long as, immediately after giving effect to any such Investment, no Default has occurred and is continuing and the Borrower and the Restricted Subsidiaries will be in Pro Forma Compliance with the covenants set forth in Section 7.11, Investments in Similar Businesses that do not exceed (together with the amount of Capital Expenditures made pursuant to Section 7.15(e) and required to be treated as Investments hereunder) $100,000,000 in the aggregate at any one time, net of any return representing a return of capital in respect of any such Investment and valued at the time of making thereof; provided that additional Investments in excess of such limitation may be made in reliance upon this clause to the extent treated as Restricted Payments and allowed under clause (i) of Section 7.06 at the time;

(t) so long as, immediately after giving effect to any such Investment, no Default has occurred and is continuing and the Borrower and the Restricted Subsidiaries will be in Pro Forma Compliance with the covenants set forth in Section 7.11, other

126

Investments that do not exceed $100,000,000 in the aggregate at any one time, net of any return representing return of capital in respect of any such Investment and valued at the time of the making thereof; provided that additional Investments in excess of such limitation may be made in reliance upon this clause to the extent treated as Restricted Payments and allowed under clause (i) of Section 7.06 at the time; and

(u) any Investment owned by a Person at the time such Person is acquired and becomes a Restricted Subsidiary pursuant to a Permitted Acquisition; provided that (i) such Investment was not made in connection with or in contemplation of such Permitted Acquisition and (ii) any incremental Investments shall not be permitted by this clause (u).

SECTION 7.03. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except:

(a) Indebtedness of the Borrower and any of its Restricted Subsidiaries under the Loan Documents;

(b) Indebtedness outstanding on the date hereof and listed on Schedule 7.03(b) and any Permitted Refinancing thereof;

(c) Guarantees by the Borrower and the Restricted Subsidiaries in respect of Indebtedness of the Borrower or any Restricted Subsidiary to the extent such Guarantees are Investments permitted by Section 7.02; provided that (i) no Guarantee by any Restricted Subsidiary of any Senior Unsecured Note shall be permitted unless such Restricted Subsidiary shall have also provided a Guarantee of the Obligations substantially on the terms set forth in the Subsidiary Guaranty, (ii) if the Indebtedness being Guaranteed is subordinated to the Obligations, such Guarantee shall be subordinated to the Guarantee of the Obligations on terms at least as favorable to the Lenders as those contained in the subordination of such Indebtedness and (iii) this clause (c) shall not permit a Restricted Subsidiary that is not a Subsidiary Guarantor to Guarantee Indebtedness of any Loan Party;

(d) Indebtedness of the Borrower or any Restricted Subsidiary owing to the Borrower or any other Restricted Subsidiary (other than a GP or the general partner of a GP) to the extent constituting an Investment permitted by Section 7.02; provided that all such Indebtedness of any Loan Party owed to any Person that is not a Loan Party shall be subject to the subordination terms set forth in Section 5.03 of the Security Agreement;

(e) (i) Attributable Indebtedness and other Indebtedness (including Capitalized Leases) financing the acquisition, construction, repair, replacement or improvement of fixed or capital assets; provided that such Indebtedness is incurred concurrently with or within two hundred seventy (270) days after the applicable acquisition, construction, repair, replacement or improvement, (ii) Attributable Indebtedness arising out of sale-leaseback transactions permitted by Section 7.05(f) and (iii) any Permitted Refinancing of any Indebtedness set forth in the immediately preceding clauses (i) and (ii);

127

(f) Indebtedness in respect of Swap Contracts designed to hedge against interest rates, foreign exchange rates or commodities pricing risks incurred in the ordinary course of business and not for speculative purposes and Back-to-Back Swap Contracts; provided, in the case of any Back-to-Back Swap Contracts (i) any Loan Party’s interests in such Back-to-Back Swap Contract are subject to a perfected Lien in favor of the Collateral Agent in accordance with the Collateral and Guarantee Requirement and (ii) such Back-to-Back Swap Contract includes no less credit protection, if any, for the benefit of such Loan Party (including pledges of collateral and letters of credit) than would be afforded to a third-party counterparty in an arm’s-length hedging arrangement with the related MLP or subsidiary thereof;

(g) Indebtedness of the Borrower and the Restricted Subsidiaries assumed in connection with any Permitted Acquisition; provided that such Indebtedness is not incurred in contemplation of such Permitted Acquisition and (ii) any Permitted Refinancing of the foregoing; provided, in each case that such Indebtedness and all Indebtedness resulting from any Permitted Refinancing thereof (w) is unsecured, (x) both immediately prior and after giving effect thereto, (1) no Default shall exist or result therefrom and (2) the Borrower and the Restricted Subsidiaries will be in Pro Forma Compliance with the covenants set forth in Section 7.11, (y) matures after, and does not require any scheduled amortization or other scheduled payments of principal prior to, the Maturity Date of the Term Loans (it being understood that such Indebtedness may have mandatory prepayment, repurchase or redemptions provisions satisfying the requirement of clause (z) hereof) and (z) has terms and conditions (other than interest rate and redemption premiums), taken as a whole, that are not materially less favorable to the Borrower than the terms and conditions of the Senior Unsecured Notes as of the Closing Date; provided that a certificate of a Responsible Officer delivered to the Administrative Agent at least five Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless the Administrative Agent notifies the Borrower within such five Business Day period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees);

(h) Indebtedness representing deferred compensation to employees of the Borrower and the Restricted Subsidiaries incurred in the ordinary course of business;

(i) Indebtedness consisting of promissory notes issued by any Loan Party to current or former officers, directors and employees, their respective estates, spouses or former spouses to finance the purchase or redemption of Equity Interests of the Borrower permitted by clause (f) of Section 7.06;

128

(j) customary indemnification obligations or customary obligations in respect of purchase price or other similar adjustments, in each case incurred by the Borrower or any Restricted Subsidiary in connection with the Disposition of any assets permitted hereby, or any Investment permitted hereby or any Permitted Acquisition, but excluding Guarantees of Indebtedness; provided that (i) such obligations are not required to be reflected on the balance sheet of the Borrower or any Restricted Subsidiary (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (j)(i)) and (ii) the maximum liability in respect of all such obligations incurred in connection with any Disposition shall at no time exceed the gross proceeds including noncash proceeds (the fair market value of such noncash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Borrower and the Restricted Subsidiaries in connection with such Disposition;

(k) Indebtedness consisting of obligations of the Borrower or the Restricted Subsidiaries under deferred compensation to employees of the Borrower and the Restricted Subsidiaries incurred by such Person in connection with the Transaction and Permitted Acquisitions or any other Investment expressly permitted hereunder;

(l) Cash Management Obligations and other Indebtedness in respect of netting services, overdraft protections and similar arrangements, in each case in connection with deposit accounts in the ordinary course of business and discharged within two Business Days of its incurrence;

(m) Indebtedness consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;

(n) obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees and similar obligations provided by the Borrower or any of the Restricted Subsidiaries, in each case in the ordinary course of business;

(o) Indebtedness in respect of the Senior Unsecured Notes and any Permitted Refinancing thereof;

(p) Indebtedness of a Loan Party to a GP or a general partner of a GP, in each case that is a Restricted Subsidiary; provided that the principal amount of such Indebtedness may not exceed the actual cash loaned by such GP or such general partner, as applicable, to such Loan Party or such Restricted Subsidiary (except to the extent that interest accrued thereon is added to the principal amount thereof) and such Indebtedness:

(1) is not convertible into, or putable or exchangeable for, any other security other than a security that would satisfy the requirement of this clause (p);

129

(2) does not mature or become mandatorily redeemable, putable or subject to a purchase offer, pursuant to a sinking fund obligation or otherwise, or become redeemable at the option of the holder thereof, in whole or in part, in each case prior to the date that is 91 days after the Term Loan Maturity Date (such 91st day being the “Permitted Date”);

(3) does not require or permit the payment of cash interest or any other payment of cash with respect to such Indebtedness until the Permitted Date; and

(4) is subject to the subordination terms set forth in Exhibit L, including a prohibition against enforcing any rights with respect to such Indebtedness prior to the Permitted Date;

provided, that upon any subsequent issuance or transfer of Equity Interests (including a GP Equity Transfer) or any other event which results in any such GP or such general partner, as applicable, ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Indebtedness (except to another Loan Party), then such Indebtedness shall cease to be permitted by this clause;

(q) unsecured Indebtedness of the Borrower for money borrowed; provided that (i) the aggregate principal amount of Indebtedness permitted by this clause (q) at any time outstanding shall not exceed $100,000,000 (plus the Incremental Facility Reduction Amount) (ii) both immediately prior and after giving effect to incurring any such Indebtedness, (1) no Default shall exist or result therefrom and (2) the Borrower and the Restricted Subsidiaries will be in Pro Forma Compliance with the covenants set forth in Section 7.11, (iii) such Indebtedness does not mature prior to the date 180 days after the Maturity Date of the Term Loans, and does not require any scheduled amortization or other scheduled payments of principal prior to the Maturity Date of the Term Loans (it being understood that such Indebtedness may have mandatory prepayment, repurchase or redemptions provisions satisfying the requirement of clause (iv) hereof) and (iv) such Indebtedness has terms and conditions (other than interest rate and redemption premiums), taken as a whole, that are not materially less favorable to the Borrower than the terms and conditions of the Senior Unsecured Notes as of the Closing Date; provided that a certificate of a Responsible Officer delivered to the Administrative Agent at least five Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless the Administrative Agent notifies the Borrower within such five Business Day period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees);

(r) unsecured subordinated Indebtedness of the Borrower for money borrowed; provided that (i) the aggregate principal amount of Indebtedness permitted by this clause (r) at any time outstanding shall not exceed $250,000,000 (ii) both immediately prior and after giving effect to incurring any such Indebtedness, (1) no

130

Default shall exist or result therefrom and (2) the Borrower and the Restricted Subsidiaries will be in Pro Forma Compliance with the covenants set forth in Section 7.11, (iii) such Indebtedness does not mature prior to the date 180 days after the Maturity Date of the Term Loans, and does not require any scheduled amortization or other scheduled payments of principal prior to the Maturity Date of the Term Loans (it being understood that such Indebtedness may have mandatory prepayment, repurchase or redemptions provisions satisfying the requirement of clause (iv) hereof), (iv) such Indebtedness has terms and conditions (other than interest rate and redemption premiums), taken as a whole, that are not materially less favorable to the Borrower than the terms and conditions of the Senior Unsecured Notes as of the Closing Date and (v) such Indebtedness (and any Guarantees thereof) are subordinated to the Obligations (and any refinancing thereof) on terms that are in the reasonable opinion of the Administrative Agent no less favorable to the Lenders than subordination terms customary for subordinated debt securities issued in the capital markets; provided that a certificate of a Responsible Officer delivered to the Administrative Agent at least five Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness (including the subordination provisions) or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless the Administrative Agent notifies the Borrower within such five Business Day period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees);

(s) unsecured Indebtedness in an aggregate principal amount not to exceed $25,000,000 at any time outstanding; and

(t) all premiums (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (s) above.

SECTION 7.04. Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that:

(a) any Restricted Subsidiary may merge with (i) the Borrower (including a merger, the purpose of which is to (x) reorganize the Borrower into a new jurisdiction or (y) convert the Borrower into a limited liability company or a limited partnership); provided that (1) the Borrower shall be the continuing or surviving Person and (2) such merger does not result in the Borrower ceasing to be organized under the Laws of the United States, any state thereof or the District of Columbia, or (ii) any one or more other Restricted Subsidiaries; provided that when any Restricted Subsidiary that is a Loan Party is merging with another Restricted Subsidiary, a Loan Party shall be the continuing or surviving Person;

131

(b) (i) any Restricted Subsidiary that is not a Loan Party may merge or consolidate with or into any other Restricted Subsidiary that is not a Loan Party and (ii) any Restricted Subsidiary may liquidate or dissolve or change its legal form if the Borrower determines in good faith that such action is in the best interests of the Borrower and its Subsidiaries and is not materially disadvantageous to the Lenders;

(c) any Restricted Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Restricted Subsidiary; provided that if the transferor in such a transaction is a Subsidiary Guarantor, then (i) the transferee must either be the Borrower or a Subsidiary Guarantor or (ii) to the extent constituting an Investment, such Investment must be a permitted Investment in or Indebtedness of a Restricted Subsidiary which is not a Loan Party in accordance with Sections 7.02 and 7.03, respectively;

(d) so long as no Default exists or would result therefrom, the Borrower may merge with any other Person; provided that (i) the Borrower shall be the continuing or surviving Person or (ii) if the Person formed by or surviving any such merger or consolidation is not the Borrower (any such Person, the “Successor Company”), (A) the Successor Company shall be an entity organized or existing under the laws of the United States, any state thereof, the District of Columbia or any territory thereof, (B) the Successor Company shall expressly assume all the obligations of the Borrower under this Agreement and the other Loan Documents to which the Borrower is a party pursuant to a supplement hereto or thereto in form reasonably satisfactory to the Administrative Agent, (C) each Subsidiary Guarantor, unless it is the other party to such merger or consolidation, shall have by a supplement to the Subsidiary Guaranty confirmed that its Subsidiary Guarantee shall apply to the Successor Company’s obligations under this Agreement, (D) each Subsidiary Guarantor, unless it is the other party to such merger or consolidation, shall have by a supplement to the Security Agreement confirmed that its obligations thereunder shall apply to the Successor Company’s obligations under this Agreement, (E) each mortgagor of a Mortgaged Property, unless it is the other party to such merger or consolidation, shall have by an amendment to or restatement of the applicable Mortgage confirmed that its obligations thereunder shall apply to the Successor Company’s obligations under this Agreement, (F) the Borrower shall have delivered to the Administrative Agent an officer’s certificate and an opinion of counsel, each stating that such merger or consolidation and such supplement to this Agreement or any Collateral Document comply with this Agreement, and (G) such merger or consolidation is treated as an Investment and is permitted under Section 7.02; and provided, further, that if the foregoing are satisfied, the Successor Company will succeed to, and be substituted for, the Borrower under this Agreement;

(e) so long as no Default exists or would result therefrom, any Restricted Subsidiary may merge with any other Person in order to effect an Investment permitted pursuant to Section 7.02; provided that the continuing or surviving Person shall be a Restricted Subsidiary, which together with each of its Restricted Subsidiaries, shall have complied with the requirements of Section 6.11;

132

(f) the Borrower and the Restricted Subsidiaries may consummate the Acquisition; and

(g) so long as no Default exists or would result therefrom, a merger, dissolution, liquidation, consolidation or Disposition, the purpose and effect of which is to consummate a Disposition permitted pursuant to Section 7.05.

SECTION 7.05. Dispositions. Make any Disposition, except:

(a) Dispositions in the ordinary course of business of obsolete or worn out property, whether now owned or hereafter acquired, and Dispositions in the ordinary course of business of property no longer used or useful in the conduct of the business of the Borrower and the Restricted Subsidiaries;

(b) Dispositions of inventory and immaterial assets in the ordinary course of business;

(c) Dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such Disposition are promptly applied to the purchase price of such replacement property;

(d) Dispositions of property to the Borrower or to a Restricted Subsidiary; provided that if the transferor of such property is a Subsidiary Guarantor or the Borrower, either (i) the transferee thereof must either be the Borrower or a Subsidiary Guarantor, (ii) such transaction is treated as an Investment and is permitted under Section 7.02 or (iii) such transaction complies with clause (b) of Section 7.08;

(e) Restricted Payments permitted by Section 7.06 and Liens permitted by Section 7.01;

(f) Dispositions of property acquired by the Borrower or any Restricted Subsidiary after the Closing Date pursuant to sale-leaseback transactions; provided that the applicable sale-leaseback transaction (i) occurs within two hundred seventy (270) days after the acquisition or construction (as applicable) of such property and (ii) is made for cash consideration not less than the cost of acquisition or construction of such property;

(g) Dispositions of Cash Equivalents;

(h) Dispositions of accounts receivable in connection with the collection or compromise thereof in the ordinary course of business;

(i) leases, subleases, licenses or sublicenses (including the provision of software under an open source license), easements, rights of way or similar rights or encumbrances in each case in the ordinary course of business and which do not materially interfere with the business of the Borrower and the Restricted Subsidiaries;

133

(j) transfers of property that has suffered a Casualty Event (constituting a total loss or constructive total loss of such property) upon receipt of the Net Cash Proceeds of such Casualty Event;

(k) Dispositions of property not otherwise permitted under this Section 7.05; provided that (i) at the time of such Disposition (other than any such Disposition made pursuant to a legally binding commitment entered into at a time when no Default exists), no Default shall exist or would result from such Disposition, (ii) the aggregate book value of all property Disposed of in reliance on this clause (k) shall not exceed $50,000,000, (iii) with respect to any Disposition or series of related Dispositions pursuant to this clause (k) for a purchase price in excess of $10,000,000, the Borrower or a Restricted Subsidiary shall receive not less than 75% of such consideration in the form of cash or Cash Equivalents (in each case, free and clear of all Liens at the time received, other than nonconsensual Liens permitted by Section 7.01 and Liens permitted by Section 7.01(s) and clauses (i) and (ii) of Section 7.01(u)), and (iv) no Disposition of less than all of the Equity Interests of any Subsidiary shall be permitted under this clause (k); provided, however, that for the purposes of clause (iii), (A) any liabilities (as shown on the Borrower’s or such Restricted Subsidiary’s most recent balance sheet provided hereunder or in the footnotes thereto) of the Borrower or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the payment in cash of the Obligations, that are assumed by the transferee with respect to the applicable Disposition and for which the Borrower and all of the Restricted Subsidiaries shall have been validly released by all applicable creditors in writing and (B) any securities received by the Borrower or such Restricted Subsidiary from such transferee that are converted by the Borrower or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of the applicable Disposition, shall, in the case of (A) and (B), be deemed to be cash consideration;

(l) Dispositions of Investments in joint ventures to the extent required by, or made pursuant to customary buy/sell arrangements between, the joint venture parties set forth in joint venture arrangements and similar binding arrangements;

(m) any North Texas Asset Sale; provided that 100% of the consideration received in such Disposition is in the form of cash or Cash Equivalents (in each case, free and clear of all Liens at the time received); and

(n) Permitted MLP Transfers and Permitted GP Transfers;

provided that (i) any Disposition of any property pursuant to this Section 7.05 (except pursuant to Sections 7.05(e) and except for Dispositions from a Loan Party to another Loan Party), shall be for no less than the fair market value of such property at the time of such Disposition and (ii) no North Texas Asset Sale, MLP Asset Transfer, MLP Equity Transfer or GP Equity Transfer (other than North Texas Asset Sales, MLP Equity Transfers and GP Equity Transfers made to a Loan Party) shall be permitted except pursuant to clause (m) or (n) above (as applicable). To the extent any Collateral is Disposed of as expressly permitted by this Section 7.05 to any Person other than the Borrower or any Restricted Subsidiary, such Collateral shall be sold free and clear of the

134

Liens created by the Loan Documents, and the Administrative Agent or the Collateral Agent, as applicable, shall be authorized to take any actions deemed appropriate in order to effect the foregoing.

SECTION 7.06. Restricted Payments. Declare or make, directly or indirectly, any Restricted Payment, except:

(a) each Restricted Subsidiary may make Restricted Payments to the Borrower and to other Restricted Subsidiaries (and, in the case of a Restricted Payment by a non-wholly owned Restricted Subsidiary, to the Borrower and any other Restricted Subsidiary and to each other owner of Equity Interests of such Restricted Subsidiary based on their relative ownership interests of the relevant class of Equity Interests);

(b) the Borrower and each Restricted Subsidiary may declare and make dividend payments or other distributions payable solely in the Equity Interests (other than Disqualified Equity Interests not otherwise permitted by Section 7.03) of such Person;

(c) Restricted Payments made on the Closing Date in connection with the Transaction;

(d) to the extent constituting Restricted Payments, the Borrower and the Restricted Subsidiaries may enter into and consummate transactions expressly permitted by any provision of Section 7.04 or 7.08 other than Section 7.08(f);

(e) repurchases of Equity Interests in the Borrower or any Restricted Subsidiary deemed to occur upon exercise of stock options or warrants to the extent that such Equity Interests represent a portion of the exercise price of such options or warrants;

(f) the Borrower may pay (or make Restricted Payments to allow any Holding Company to pay) for the repurchase, retirement or other acquisition or retirement for value of Equity Interests of the Borrower or of any such Holding Company held by any future, present or former employee or director of the Borrower or any direct or indirect parent of the Borrower or any of its Subsidiaries pursuant to any employee or director equity plan, employee or director stock option plan or any other employee or director benefit plan or any agreement (including any stock subscription or shareholder agreement) with any employee or director of the Borrower or any of its Subsidiaries; provided that the aggregate Restricted Payments made under this clause (f) do not exceed in any calendar year $5,000,000 (with unused amounts in any calendar year being carried over to succeeding calendar years subject to a maximum (without giving effect to the following proviso) of $10,000,000 in any calendar year); provided, further, that such amount in any calendar year may be increased by an amount not to exceed (i) the cash proceeds received by the Borrower during such year from Permitted Equity Issuances (other than Permitted Equity Issuances made pursuant to Section 8.05) of the Borrower and, to the extent contributed in cash to the Borrower, from issuances of Equity Interests of any Holding Company, in each case to members of management,

135

directors, managers or consultants of the Borrower, any of its Subsidiaries or any Holding Company that occurs after the Closing Date, in each case to the extent Not Otherwise Applied, plus (ii) the cash proceeds of key man life insurance policies received by the Borrower and the Restricted Subsidiaries during such year, less (iii) the amount of any Restricted Payments previously made pursuant to subclauses (i) and (ii) of this clause (f); and provided, further, that cancellation of Indebtedness owing to the Borrower from members of management, directors, managers or consultants of the Borrower, any Holding Company or any Restricted Subsidiary in connection with a repurchase of Equity Interests of the Borrower or any Holding Company will not be deemed to constitute a Restricted Payment for purposes of this Section 7.06 or any other provision of this Agreement;

(g) so long as no Default shall have occurred and be continuing or would result therefrom, Restricted Payments in an aggregate amount equal to the excess Net Cash Proceeds from any North Texas Asset Sale remaining after the application of such Net Cash Proceeds in compliance with Section 2.05(b)(iv) that are Not Otherwise Applied; provided that such Restricted Payments are made within 270 days after the date of consummation of such North Texas Asset Sale;

(h) the Borrower and its Restricted Subsidiaries may make Restricted Payments to the Borrower’s direct Holding Company for the Borrower’s direct or indirect Holding Companies to pay:

(i) franchise taxes and other fees, taxes and expenses required to maintain their corporate existence;

(ii) Federal, state and local income taxes, to the extent such income taxes are attributable to the income of the Borrower and the Restricted Subsidiaries and, to the extent of the amount actually received from the Unrestricted Subsidiaries, in amounts required to pay such taxes to the extent attributable to the income of such Unrestricted Subsidiaries;

(iii) customary salary, bonus and other benefits payable to officers and employees of any Holding Company;

(iv) general corporate overhead expenses of any Holding Company of the Borrower to the extent such expenses are attributable to the ownership or operation of the Borrower and the Restricted Subsidiaries; and

(v) reasonable fees and expenses incurred in connection with any unsuccessful debt or equity offering by such Holding Company;

(i) in addition to the foregoing Restricted Payments and so long as no Default shall have occurred and be continuing or would result therefrom, the Borrower may make additional Restricted Payments, in an aggregate amount (together with the aggregate amount of (1) prepayments, redemptions, purchases, defeasances and other payments made pursuant to clause (f) of Section 7.13, (2) loans and advances to any Holding Company made pursuant to Section 7.02(m) in lieu of Restricted Payments

136

permitted by this clause (i) and (3) Investments made pursuant to clauses (s) and (t) of Section 7.02 and Capital Expenditures made pursuant to Section 7.15(e), in each case to the extent required to be treated as Restricted Payments hereunder) not to exceed (i) $50,000,000 plus either (A) 25% of the amount of Cumulative Excess Cash Flow that is Not Otherwise Applied if the Total Leverage Ratio as of the last day of the immediately preceding Test Period (after giving Pro Forma Effect to such additional Restricted Payments) is 5.00:1 or less but more than 3.00:1 or (B) 50% of the amount of Cumulative Excess Cash Flow that is Not Otherwise Applied if the Total Leverage Ratio as of the last day of the immediately preceding Test Period (after giving Pro Forma Effect to such additional Restricted Payments) is less than 3.00:1. For the purpose of this Agreement, “Cumulative Excess Cash Flow” means the sum of Excess Cash Flow (but not less than zero in any period) for the fiscal year ending on December 31, 2006 and Excess Cash Flow for each succeeding and completed fiscal year (in each case reduced by the amount that is to be subtracted pursuant to clause (B) of Section 2.05(b)(i) for purposes of calculating the amount of any prepayment required to be made thereunder, whether or not such prepayment is made and regardless of whether such reduction results in a negative number which reduces Cumulative Excess Cash Flow), in each case Not Otherwise Applied.

SECTION 7.07. Change in Nature of Business. Engage in any material line of business other than a Similar Business.

SECTION 7.08. Transactions with Affiliates. Enter into any transaction of any kind with any Affiliate of the Borrower, whether or not in the ordinary course of business, other than (a) transactions between or among Loan Parties not involving any other Affiliate (b) on terms substantially as favorable to the Borrower or such Restricted Subsidiary as would be obtainable by the Borrower or such Restricted Subsidiary at the time in a comparable arm’s-length transaction with a Person other than an Affiliate, (c) the Transaction and the payment of fees and expenses related to the Transaction, (d) if at the time thereof and after giving effect thereto no Default has occurred and is continuing the payment of (x) management, consulting, monitoring and advisory fees and related expenses to the Sponsor not to exceed $7,500,000 in the aggregate per calendar year and (y) any termination or other fee payable to the Sponsor upon a change of control or initial public equity offering of the Borrower or any Holding Company thereof, which fees, in the case of this clause (y) only, are approved by a majority of the members of the Board of Directors of the Borrower in good faith, (e) Restricted Payments permitted under Section 7.06, (f) payments or loans (or cancellations of loans) to employees or consultants of the Borrower, any of its Holding Companies or any Restricted Subsidiary and employment agreements, stock option plans and other compensatory arrangements with such employees or consultants that are, in each case, approved by the Borrower in good faith, including the special bonus payments described under “Certain Relationships and Related Transactions” in the Offering Circular, (g) payments by the Borrower and the Restricted Subsidiaries to each other pursuant to the tax sharing agreements among the Borrower and the Restricted Subsidiaries on customary terms to the extent attributable to the ownership or operation of the Borrower and the Restricted Subsidiaries, (h) the payment of reasonable and customary fees paid to, and indemnities provided on behalf of, officers, directors, managers, employees or consultants of the Borrower, any of its Holding

137

Companies or any Restricted Subsidiary, (i) transactions pursuant to agreements, instruments or arrangements in existence on the Closing Date and set forth on Schedule 7.08 or any amendment thereto to the extent such an amendment is not adverse to the Lenders in any material respect, (j) customary payments by the Borrower and any Restricted Subsidiaries to the Sponsor made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities (including in connection with acquisitions or divestitures), which payments are approved by the majority of the members of the board of directors or a majority of the disinterested members of the board of directors of the Borrower, in good faith, (k) the issuance of Equity Interests (other than Disqualified Equity Interests) of the Borrower to any Permitted Holder or to any director, manager, officer, employee or consultant of the Borrower or any Holding Company, (l) investments by the Sponsor in securities of the Borrower so long as (i) the investment is being offered generally to other investors on the same or more favorable terms and (ii) the investment constitutes less than 5.0% of the proposed or outstanding issue amount of such class of securities, (m) any Permitted MLP Transfer and any Permitted GP Transfer and (n) transactions with customers, clients, suppliers, or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Agreement that are fair to the Borrower and the Restricted Subsidiaries, in the reasonable determination of the Board of Directors or the senior management of the Borrower, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party.

SECTION 7.09. Burdensome Agreements. Enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that limits the ability of (a) any Restricted Subsidiary of the Borrower that is not a Subsidiary Guarantor or any Existing JV to make Restricted Payments to the Borrower or any Subsidiary Guarantor or (b) any Loan Party to create, incur, assume or suffer to exist Liens on property of such Person for the benefit of the Secured Parties to secure the Obligations; provided that the foregoing clauses (a) and (b) shall not apply to Contractual Obligations which (i) (x) exist on the date hereof and (to the extent not otherwise permitted by this Section 7.09) are listed on Schedule 7.09 hereto and (y) to the extent Contractual Obligations permitted by clause (x) are set forth in an agreement evidencing Indebtedness, are set forth in any agreement evidencing any permitted renewal, extension or refinancing of such Indebtedness so long as such renewal, extension or refinancing does not expand the scope of such Contractual Obligation, (ii) are binding on a Restricted Subsidiary at the time such Restricted Subsidiary first becomes a Restricted Subsidiary of the Borrower, so long as such Contractual Obligations were not entered into solely in contemplation of such Person becoming a Restricted Subsidiary of the Borrower; provided further that this clause (ii) shall not apply to Contractual Obligations that are binding on a Person that is or becomes a Restricted Subsidiary as of the Closing Date or that becomes a Restricted Subsidiary pursuant to Section 6.18, (iii) are set forth in an agreement governing Indebtedness permitted by Section 7.03 and that has been incurred by a Restricted Subsidiary of the Borrower that is not a Loan Party, provided that (x) such restrictions apply only to such Restricted Subsidiary (and its Subsidiaries, if any) and (y) limitations described in clause (a) above shall not be permitted by this clause (iii) unless each of the Subsidiaries to which such limitations apply is an Acquired Non-Guarantor, (iv) are customary provisions in joint venture agreements and other similar

138

agreements applicable to joint ventures permitted under Section 7.02 and applicable solely to such joint venture entered into in the ordinary course of business, (v) are customary restrictions in leases, subleases, licenses or asset sale agreements otherwise permitted hereby (or in easements, rights of way or similar rights or encumbrances, in each case granted to the Borrower or a Restricted Subsidiary by a third party in respect of real property owned by such third party) so long as such restrictions relate only to the assets (or the Borrower’s or Restricted Subsidiary’s rights under such easement, right of way or similar right or encumbrance, as applicable) subject thereto, (vi) comprise restrictions imposed by any agreement relating to secured Indebtedness permitted pursuant to Section 7.03(e) to the extent that such restrictions apply only to the property or assets securing such Indebtedness, (vii) are customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or any Restricted Subsidiary, (viii) are customary provisions restricting assignment of any agreement entered into in the ordinary course of business, and (ix) are restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business.

SECTION 7.10. Use of Proceeds. Use the proceeds of any Credit Extension, whether directly or indirectly, in a manner inconsistent with the uses set forth in the preliminary statements to this Agreement. No part of the proceeds of any Loan and no Letter of Credit will be used, whether directly or indirectly, for any purpose that would entail a violation of any of the Regulations of the FRB, including Regulations T, U and X.

SECTION 7.11. Financial Covenants. (a) Total Leverage Ratio. Permit the Total Leverage Ratio as of the last day of any Test Period (beginning with the Test Period ending on March 31, 2006) to be greater than the ratio set forth below opposite the last day of such Test Period:

Fiscal Year	March 31	June 30	September 30	December 31
2006	8.00:1	8.00:1	8.00:1	8.00:1
2007	8.00:1	8.00:1	8.00:1	8.00:1
2008	7.50:1	7.50:1	7.50:1	7.50:1
2009	7.50:1	7.50:1	7.50:1	7.50:1
2010	7.50:1	7.50:1	7.50:1	7.50:1
2011	7.00:1	7.00:1	7.00:1	7.00:1
2012	7.00:1	7.00:1	7.00:1	—

(b) Interest Coverage Ratio. Permit the Interest Coverage Ratio for any Test Period (beginning with the Test Period ending on March 31, 2006) to be less than the ratio set forth below opposite the last day of such Test Period:

Fiscal Year	March 31	June 30	September 30	December 31
2006	1.25:1	1.25:1	1.25:1	1.25:1
2007	1.25:1	1.25:1	1.25:1	1.25:1
2008	1.25:1	1.25:1	1.25:1	1.25:1
2009	1.50:1	1.50:1	1.50:1	1.50:1
2010	1.50:1	1.50:1	1.50:1	1.50:1
2011	1.50:1	1.50:1	1.50:1	1.50:1
2012	1.50:1	1.50:1	1.50:1	—

139

SECTION 7.12. Accounting Changes. Make any change in the Borrower’s fiscal year; provided, however, that the Borrower may, upon written notice to the Administrative Agent, change its fiscal year to any other fiscal year reasonably acceptable to the Administrative Agent, in which case, the Borrower and the Administrative Agent will, and are hereby authorized by the Lenders to, make any adjustments to this Agreement that are necessary to reflect such change in fiscal year.

SECTION 7.13. Prepayments, Etc. of Indebtedness. Make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Indebtedness, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Indebtedness or pay in cash any amount in respect of any Indebtedness or preferred Equity Interests that may at the obligor’s option be paid in kind or in other securities, except:

(a) payment of Indebtedness created under the Loan Documents;

(b) payment of Indebtedness in connection with the Transaction;

(c) payment of regularly scheduled interest and principal payments as and when due in respect of any Indebtedness;

(d) refinancings of Indebtedness to the extent permitted by Section 7.03;

(e) payment of secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness so long as such sale is permitted by Section 7.05;

(f) payment of Indebtedness otherwise prohibited to the extent treated as a Restricted Payment and allowed under clause (i) of Section 7.06 at the time; and

(g) redemptions of up to 35% of the Senior Unsecured Notes pursuant to and in accordance with the provisions of the Senior Unsecured Notes Indenture that contemplate and allow redemptions with the Net Cash Proceeds of an “Equity Offering” (as defined in the Senior Unsecured Notes Indenture); provided that such redemptions shall not be permitted unless such “Equity Offering” is made as a bona fide public offering.

140

SECTION 7.14. Equity Interests of the Borrower and Restricted Subsidiaries. Permit (a) any Restricted Subsidiary to be a non-wholly owned Subsidiary, except (i) as a result of or in connection with a Permitted MLP Transfer or Permitted GP Transfer, (ii) any Subsidiary that is an Acquired Non-Guarantor and was not a wholly owned subsidiary when acquired or (iii) any Subsidiary resulting from an Investment permitted under clause (s) or (t) of Section 7.02, (b) any Subsidiary Guarantor to issue Equity Interests to any Person other than a Loan Party or (c) any Restricted Subsidiary that is not a Loan Party to issue Equity Interests to any Person other than the Borrower or a Restricted Subsidiary.

SECTION 7.15. Capital Expenditures.

(a) Make any Capital Expenditure except for Capital Expenditures not exceeding, in the aggregate for the Borrower and the Restricted Subsidiaries during each fiscal year set forth below, the amount set forth opposite such fiscal year:

Fiscal Year	Amount
2005	$	125,000,000
2006	$	125,000,000
2007	$	125,000,000
2008	$	100,000,000
2009	$	100,000,000
2010	$	100,000,000
2011	$	100,000,000
2012	$	100,000,000

(b) Notwithstanding anything to the contrary contained in paragraph (a) above, to the extent that the aggregate amount of Capital Expenditures made by the Borrower and the Restricted Subsidiaries in any fiscal year pursuant to Section 7.15(a) is less than the maximum amount of Capital Expenditures permitted by Section 7.15(a) with respect to such fiscal year, the amount of such difference (the “Rollover Amount”) may be carried forward and used to make Capital Expenditures in the two succeeding fiscal years; provided that Capital Expenditures in any fiscal year shall be counted against the base amount set forth in Section 7.15(a) with respect to such fiscal year prior to being counted against any Rollover Amount available with respect to such fiscal year.

(c) Upon the consummation of any Permitted Acquisition, the base amount of Capital Expenditures set forth in Section 7.15(a) shall be increased by an amount equal to the average annual amount of Capital Expenditures attributable to the Acquired Entity or Business during the two years preceding such Permitted Acquisition, effective for the fiscal year during which such Permitted Acquisition is made (but in a pro rated amount representing the portion of such year remaining) and each subsequent fiscal year.

(d) In the event that the Borrower reasonably determines that, due to the occurrence of unanticipated events beyond its control, it is necessary during any fiscal

141

year to make Capital Expenditures in excess of those otherwise permitted, the Borrower may make such Capital Expenditures; provided that (i) the amount of all such Capital Expenditures made during any fiscal year in reliance on this paragraph shall not exceed $25,000,000; (ii) the base amount of Capital Expenditure permitted by Section 7.15(a) during the next succeeding fiscal year shall be reduced by the amount of Capital Expenditures made in reliance on this paragraph and (iii) the Borrower shall notify the Administrative Agent, in a certificate signed by a Responsible Officer, of the need for such Capital Expenditures promptly after determining the need therefor, providing a reasonably detailed explanation of the events requiring such Capital Expenditures and the anticipated amount thereof.

(e) Capital Expenditures may be made during any fiscal year in excess of those otherwise permitted by this Section to the extent (i) treated as an Investment under clause (s) of Section 7.02 and permitted thereunder at the time or (ii) treated as a Restricted Payment under clause (i) of Section 7.06 and permitted thereunder at the time.

SECTION 7.16. Amendment of Other Indebtedness. Permit any waiver, supplement, modification, amendment, termination or release of any Senior Unsecured Notes Documentation or any indenture, instrument or agreement pursuant to which any Indebtedness is outstanding that was incurred in reliance upon clause (g), (q) or (r) of Section 7.03, if the effect of any such waiver, supplement, modification, amendment, termination or release would materially increase the obligations of the Borrower or any Subsidiary or confer additional material rights on the holder of the applicable Indebtedness in a manner adverse to the interests of the Borrower, any of the Subsidiaries or the Secured Parties.

ARTICLE VIII

Events Of Default and Remedies

SECTION 8.01. Events of Default. Any of the following shall constitute an Event of Default:

(a) Non-Payment. The Borrower or any other Loan Party fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within five (5) Business Days after the same becomes due, any interest on any Loan or any other amount payable hereunder or with respect to any other Loan Document; or

(b) Specific Covenants. The Borrower fails to perform or observe any term, covenant or agreement contained in any of Sections 6.03(a) or 6.05(a) (solely with respect to the Borrower) or Article 7; provided that any Event of Default under Section 7.11 is subject to cure as contemplated by Section 8.05; or

(c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in Section 8.01(a) or (b) above) contained in

142

any Loan Document on its part to be performed or observed and such failure continues for thirty (30) days after notice thereof by the Administrative Agent to the Borrower; or

(d) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document required to be delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or

(e) Cross-Default. Any Loan Party or any Restricted Subsidiary (A) fails to make any payment beyond the applicable grace period with respect thereto, if any (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness (other than Indebtedness hereunder) having an aggregate principal amount of not less than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity; provided that this clause (e)(B) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness, if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness; or

(f) Insolvency Proceedings, Etc. Any Loan Party or any of the Restricted Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding; or

(g) Inability to Pay Debts; Attachment. (i) Any Loan Party or any Restricted Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts in excess of the Threshold Amount as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of the Loan Parties, taken as a whole, and is not released, vacated or fully bonded within sixty (60) days after its issue or levy; or

143

(h) Judgments. There is entered against any Loan Party or any Restricted Subsidiary, or any combination thereof, one or more final judgments or orders for the payment of money in an aggregate amount exceeding the Threshold Amount (to the extent not covered by independent third-party insurance, as to which the insurer has been notified of such judgment or order and has not denied coverage) and such judgments or orders shall not have been satisfied, vacated, discharged or stayed or bonded pending an appeal for a period of sixty (60) consecutive days, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of any Loan Party or any Restricted Subsidiary to enforce any such judgment; or

(i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of any Loan Party under Title IV of ERISA in an aggregate amount which could reasonably be expected to result in a Material Adverse Effect, or (ii) any Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount which could reasonably be expected to result in a Material Adverse Effect; or

(j) Invalidity of Loan Documents. Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder (including as a result of a transaction permitted under Section 7.04 or 7.05) or as a result of acts or omissions by the Administrative Agent or any Lender or the satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party contests in writing the validity or enforceability of any provision of any Loan Document; or any Loan Party denies in writing that it has any or further liability or obligation under any Loan Document (other than as a result of repayment in full of the Obligations and termination of the Aggregate Commitments), or purports in writing to revoke or rescind any Loan Document; or

(k) Change of Control. There occurs any Change of Control; or

(l) Collateral Documents. Any Collateral Document after delivery thereof pursuant to Section 4.01 or 6.11 shall for any reason (other than pursuant to the terms thereof including as a result of a transaction permitted under Section 7.04 or 7.05) cease to create a valid and perfected first-priority lien (or other security purported to be created on the applicable Collateral) on and security interest in any material portion of the Collateral purported to be covered thereby, subject to Liens permitted under Section 7.01, except to the extent that any such loss of perfection or priority results from the failure of the Administrative Agent or the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Documents or to file Uniform Commercial Code continuation statements and except as to Collateral consisting of real property to the extent that such losses are covered by a lender’s title insurance policy and such insurer has not denied coverage.

SECTION 8.02. Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent or Collateral Agent (as applicable) may and, at the request of the Required Lenders, shall take any or all of the following actions:

(a) declare the commitment of each Lender to make Loans and any obligation of the L/C Issuers to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;

144

(b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower;

(c) require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof); and

(d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable Law;

provided that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of the L/C Issuers to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent, the Collateral Agent or any Lender.

SECTION 8.03. Exclusion of Immaterial Subsidiaries. Solely for the purpose of determining whether a Default has occurred under clause (f) or (g) of Section 8.01, any reference in any such clause to any Restricted Subsidiary or Loan Party shall be deemed not to include any Restricted Subsidiary affected by any event or circumstances referred to in any such clause that did not, as of the last day of the most recently completed fiscal quarter of the Borrower, have assets with a value in excess of 5% of the consolidated total assets of the Borrower and the Restricted Subsidiaries and did not, as of the four quarter period ending on the last day of such fiscal quarter, have revenues exceeding 5% of the total revenues of the Borrower and the Restricted Subsidiaries (it being agreed that all Restricted Subsidiaries affected by any event or circumstance referred to in any such clause shall be considered together, as a single consolidated Restricted Subsidiary, for purposes of determining whether the condition specified above is satisfied).

SECTION 8.04. Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent and the Collateral Agent in the following order:

First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (other than principal and interest, but including Attorney Costs payable under Section 10.04 and amounts payable under Article 3) payable to the Administrative Agent and the Collateral Agent in their capacities as such;

145

Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest and other amounts referred to in clauses Third, Fourth, and Fifth below) payable to the Secured Parties (including Attorney Costs payable under Section 10.05 and amounts payable under Article 3), ratably among them in proportion to the amounts described in this clause Second payable to them;

Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and L/C Borrowings, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;

Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans and L/C Borrowings, the termination value under Secured Hedge Agreements and the Cash Management Obligations, ratably among the Secured Parties in proportion to the respective amounts described in this clause Fourth held by them;

Fifth, to the Administrative Agent for the account of the L/C Issuers, to Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit;

Sixth, to the payment of all other Obligations of the Loan Parties that are due and payable to the Administrative Agent and the other Secured Parties on such date, ratably based upon the respective aggregate amounts of all such Obligations owing to the Administrative Agent and the other Secured Parties on such date; and

Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law.

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above and, if no Obligations remain outstanding, to the Borrower.

146

SECTION 8.05. Borrower’s Right to Cure. (a) Notwithstanding anything to the contrary contained in Section 8.01, in the event of any Event of Default under any covenant set forth in Section 7.11 and until the expiration of the tenth (10th) day after the date on which financial statements are required to be delivered with respect to the applicable fiscal quarter hereunder, the Borrower may engage in a Permitted Equity Issuance to any of the Equity Investors (or to any Holding Company if funded by an issuance of Equity Interests of a Holding Company to any of the Equity Investors) and apply the amount of the Net Cash Proceeds thereof to increase Consolidated EBITDA with respect to such applicable quarter; provided that such Net Cash Proceeds (i) are actually received by the Borrower no later than ten (10) days after the date on which financial statements are required to be delivered with respect to such fiscal quarter hereunder, (ii) are Not Otherwise Applied and (iii) do not exceed the aggregate amount necessary to cure such Event of Default under Section 7.11 for any applicable period. The parties hereby acknowledge that this Section 8.05(a) may not be relied on for purposes of calculating any financial ratios other than as applicable to Section 7.11 and shall not result in any adjustment to any amounts other than the amount of the Consolidated EBITDA referred to in the immediately preceding sentence.

(b) In each period of four fiscal quarters, there shall be at least two (2) consecutive fiscal quarters in which no cure set forth in Section 8.05(a) is made.

ARTICLE IX

Administrative Agent and Other Agents

SECTION 9.01. Appointment and Authorization of Agents. (a) Each Lender hereby irrevocably appoints, designates and authorizes each of the Administrative Agent and Collateral Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, neither the Administrative Agent nor the Collateral Agent shall have any duties or responsibilities, except those expressly set forth herein, nor shall any Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in the other Loan Documents with reference to any Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. References in this Article to the Administrative Agent shall apply, mutatis mutandis, to the Collateral Agent, whether or not so expressed.

(b) Each L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and each such

147

L/C Issuer shall have all of the benefits and immunities (i) provided to the Agents in this Article 9 with respect to any acts taken or omissions suffered by such L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and the applications and agreements for letters of credit pertaining to such Letters of Credit as fully as if the term “Agent” as used in this Article 9 and in the definition of “Agent-Related Person” included such L/C Issuer with respect to such acts or omissions, and (ii) as additionally provided herein with respect to such L/C Issuer.

(c) Each of the Lenders (in its capacities as a Lender, Swing Line Lender (if applicable), L/C Issuer (if applicable) and a potential Hedging Party) hereby irrevocably appoints and authorizes the Collateral Agent to act as the agent of (and to hold any security interest created by the Collateral Documents for and on behalf of or on trust for) such Lender for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Collateral Agent (and any co-agents, sub-agents and attorneys-in-fact appointed by the Administrative Agent or the Collateral Agent pursuant to Section 9.02 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents, or for exercising any rights and remedies thereunder at the direction of the Administrative Agent), shall be entitled to the benefits of all provisions of this Article 9 (including, Section 9.07, as though such co-agents, sub-agents and attorneys-in-fact were the Collateral Agent) as if set forth in full herein with respect thereto. Without limiting the generality of the foregoing, the Lenders hereby expressly authorize the Agents to execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto (including the Intercreditor Agreement), as contemplated by and in accordance with the provisions of this Agreement and the Collateral Documents and acknowledge and agree that any such action by any Agent shall bind the Lenders.

(d) The Administrative Agent shall also act as the deposit account agent for the Synthetic L/C Issuer and the Synthetic L/C Lenders, and each of the Synthetic L/C Lenders (in its capacities as a Lender and Synthetic L/C Issuer (if applicable)) hereby irrevocably appoints and authorizes the Administrative Agent to act as the agent of and to take such actions on its behalf and to exercise such powers and discretion as are reasonably incidental thereto.

SECTION 9.02. Delegation of Duties. The Agents may execute any of its duties under this Agreement or any other Loan Document (including for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents or of exercising any rights and remedies thereunder) by or through agents, employees or attorneys-in-fact including for the purpose of any Borrowings, such sub-agents as shall be deemed necessary by the Agents and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agent or sub-agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct (as determined in the final judgment of a court of competent jurisdiction).

148

SECTION 9.03. Liability of Agents. No Agent or Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct, as determined by the final judgment of a court of competent jurisdiction, in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by any Loan Party or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by any Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or the perfection or priority of any Lien or security interest created or purported to be created under the Collateral Documents, or for any failure of any Loan Party or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent or Agent-Related Person shall be under any obligation to any Lender or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party or any Affiliate thereof.

SECTION 9.04. Reliance by Agents. (a) Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, electronic mail message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Loan Party), independent accountants and other experts selected by such Agent. Each Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders (or such greater number of Lenders as may be expressly required hereby in any instance) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders.

(b) For purposes of determining compliance with the conditions specified in Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

SECTION 9.05. Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default, except with

149

respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default and stating that such notice is a “notice of default”. The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to any Event of Default as may be directed by the Required Lenders in accordance with Article 8; provided that unless and until the Administrative Agent has received any such direction, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as it shall deem advisable or in the best interest of the Lenders.

SECTION 9.06. Credit Decision; Disclosure of Information by Agents. Each Lender acknowledges that no Agent or Agent-Related Person has made any representation or warranty to it, and that no act by any Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Loan Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent or Agent-Related Person to any Lender as to any matter, including whether Agents or Agent-Related Persons have disclosed material information in their possession. Each Lender represents to each Agent that it has, independently and without reliance upon any Agent or Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their respective Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower and the other Loan Parties hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent or Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and the other Loan Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by any Agent herein, such Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Loan Parties or any of their respective Affiliates which may come into the possession of any Agent or Agent-Related Person.

SECTION 9.07. Indemnification of Agents. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent and Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the obligation of any Loan Party to do so), pro rata, and hold harmless each Agent and Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided that no Lender shall be liable for the payment to any Agent or Agent-Related Person of any portion of such Indemnified

150

Liabilities resulting from such Agent’s or Agent-Related Person’s own gross negligence or willful misconduct, as determined by the final judgment of a court of competent jurisdiction; provided that no action taken in accordance with the directions of the Required Lenders (or such other number or percentage of the Lenders as shall be required by the Loan Documents) shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section 9.07. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Liabilities, this Section 9.07 applies whether any such investigation, litigation or proceeding is brought by any Lender or any other Person. Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent or Collateral Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by such Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that such Agent is not reimbursed for such expenses by or on behalf of the Borrower. The undertaking in this Section 9.07 shall survive termination of the Aggregate Commitments, the payment of all other Obligations and the resignation of such Agent.

SECTION 9.08. Agents in their Individual Capacities. Credit Suisse and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire Equity Interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Loan Parties and their respective Affiliates as though Credit Suisse were not an Agent or an L/C Issuer hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Credit Suisse or its Affiliates may receive information regarding any Loan Party or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that the Administrative Agent and Collateral Agent shall be under no obligation to provide such information to them. With respect to its Loans, Credit Suisse shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not an Agent or an L/C Issuer, and the terms “Lender” and “Lenders” include Credit Suisse in its individual capacity.

SECTION 9.09. Successor Agents. The Administrative Agent or Collateral Agent may resign as such Agent upon thirty (30) days’ notice to the Lenders and the Borrower. If an Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall be consented to by the Borrower at all times other than during the existence of an Event of Default under Section 8.01(f) or (g) (which consent of the Borrower shall not be unreasonably withheld or delayed). If no successor agent is appointed prior to the effective date of the resignation of an Agent, such Agent may appoint, after consulting with the Lenders and the Borrower, a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent hereunder, the Person acting as such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term “Administrative Agent” or “Collateral Agent” (as applicable) shall mean such

151

successor agent and/or supplemental agent, as the case may be, and the retiring Agent’s appointment, powers and duties as such Agent shall be terminated. After the retiring Agent’s resignation hereunder as an Agent, the provisions of this Article 9 and Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent. If no successor agent has accepted appointment as an Agent by the date which is thirty (30) days following the retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of such Agent under the applicable Loan Documents until such time, if any, as the Required Lenders appoint a successor agent as provided for above. Upon the acceptance of any appointment as an Agent hereunder by a successor and upon the execution and filing or recording of such financing statements, or amendments thereto, and such amendments or supplements to the Mortgages, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to (a) continue the perfection of the Liens granted or purported to be granted by the Collateral Documents or (b) otherwise ensure that the Collateral and Guarantee Requirement is satisfied, the applicable Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. After the retiring Agent’s resignation hereunder as such Agent, the provisions of this Article 9 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as such Agent.

SECTION 9.10. Administrative Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.03(g) and (h), 2.09 and 10.04) allowed in such judicial proceeding; and

(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent

152

shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agents and their respective agents and counsel, and any other amounts due the Administrative Agent under Sections 2.09 and 10.04.

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

SECTION 9.11. Collateral and Guaranty Matters. The Lenders irrevocably agree that:

(a) any Lien on any property granted to or held by the Administrative Agent or the Collateral Agent under any Loan Document shall be automatically released (i) upon termination of the Aggregate Commitments and payment in full of all Obligations (other than (x) obligations under Secured Hedge Agreements not yet due and payable, (y) Cash Management Obligations not yet due and payable and (z) contingent indemnification obligations not yet accrued and payable) and the expiration or termination of all Letters of Credit, (ii) at the time the property subject to such Lien is transferred or to be transferred as part of or in connection with any transfer permitted hereunder or under any other Loan Document to any Person other than the Borrower or any of its Restricted Subsidiaries, (iii) subject to Section 10.01, if the release of such Lien is approved, authorized or ratified in writing by the Required Lenders, or (iv) if the property subject to such Lien is owned by a Subsidiary Guarantor, upon release of such Subsidiary Guarantor from its obligations under its Subsidiary Guaranty pursuant to clause (c) below;

(b) the Administrative Agent or the Collateral Agent may release or subordinate any Lien on any property granted to or held by the Administrative Agent or the Collateral Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 7.01(i); and

(c) any Subsidiary Guarantor shall be automatically released from its obligations under the Subsidiary Guaranty if such Person ceases to be a Restricted Subsidiary as a result of (i) such Subsidiary Guarantor becoming a Partially Owned Operating Company, a Permitted MLP or a Permitted GP or a Subsidiary of any of the foregoing (ii) any other transaction or designation permitted hereunder; provided that no such release shall occur if such Subsidiary Guarantor continues to be a guarantor in respect of the Senior Unsecured Notes or any Permitted Refinancing thereof.

Upon request by the Collateral Agent at any time, the Required Lenders will confirm in writing the Collateral Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty pursuant to this Section 9.11. In each case as specified in this Section 9.11, the Administrative Agent or the Collateral Agent

153

will (and each Lender irrevocably authorizes such Agent to), at the Borrower’s expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release or subordination of such item of Collateral from the assignment and security interest granted under the Collateral Documents, or to evidence the release of such Subsidiary Guarantor from its obligations under the Subsidiary Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.11.

SECTION 9.12. Other Agents; Arrangers and Managers. None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a “syndication agent”, “joint bookrunner” or “arranger” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders or other Persons so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

SECTION 9.13. Appointment of Supplemental Agents. (a) It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any Law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case the Administrative Agent or Collateral Agent deems that by reason of any present or future Law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, the Administrative Agent or Collateral Agent is hereby authorized to appoint an additional individual or institution selected by it in its sole discretion as a separate trustee, co-trustee, administrative agent, collateral agent, administrative or collateral sub-agent or administrative or collateral co-agent (any such additional individual or institution being referred to herein individually as a “Supplemental Agent” and collectively as “Supplemental Agents”).

(b) In the event that the Administrative Agent or Collateral Agent appoints a Supplemental Agent with respect to any Collateral, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to the Administrative Agent or Collateral Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Agent to the extent, and only to the extent, necessary to enable such Supplemental Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by such Supplemental Agent shall run to and be enforceable by either the Administrative Agent or Collateral Agent or such Supplemental Agent, and (ii) the provisions of this Article 9 and of Sections 10.04 and 10.05 that refer to the Administrative Agent or Collateral Agent shall inure to the

154

benefit of such Supplemental Agent and all references therein to the Administrative Agent or Collateral Agent shall be deemed to be references to the Administrative Agent, Collateral Agent and/or such Supplemental Agent, as the context may require.

(c) Should any instrument in writing from the Borrower, or any other Loan Party be required by any Supplemental Agent so appointed by the Administrative Agent or Collateral Agent for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, the Borrower shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by the Administrative Agent or Collateral Agent. In case any Supplemental Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Agent, to the extent permitted by Law, shall vest in and be exercised by the Administrative Agent or Collateral Agent, as applicable, until the appointment of a new Supplemental Agent.

SECTION 9.14. Intercreditor Agreement. The Collateral Agent is authorized to enter into the Intercreditor Agreement, and the parties hereto acknowledge that the Intercreditor Agreement is binding upon them.

ARTICLE X

Miscellaneous

SECTION 10.01. Amendments, Etc. Except as otherwise set forth in this Agreement (including pursuant to an Incremental Amendment), and subject to the Intercreditor Agreement with respect to those matters as to which Hedging Parties are entitled to vote thereunder, no amendment or waiver of any provision of this Agreement or any other Loan Document (other than the Intercreditor Agreement), and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that, no such amendment, waiver or consent shall:

(a) extend or increase the Commitment of any Lender without the written consent of such Lender (it being understood that a waiver of any condition precedent set forth in Section 4.02 or the waiver of any Default, mandatory prepayment or mandatory reduction of the Commitments shall not constitute an extension or increase of any Commitment of any Lender);

(b) postpone any date scheduled for, or reduce the amount of, any payment of principal, interest or fees under Sections 2.07, 2.08 or 2.09 without the written consent of each Lender directly affected thereby, it being understood that the waiver of (or amendment to the terms of) any mandatory prepayment of Loans of any Class shall not constitute a postponement of any date scheduled for the payment of principal or interest;

155

(c) reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (iii) of the second proviso to this Section 10.01) any fees (including fees set forth in Section 2.03(g) and (h)) or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby, it being understood that any change to the definition of “Total Leverage Ratio” or in the component definitions thereof shall not constitute a reduction in the rate; provided that, only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest at the Default Rate;

(d) change any provision of this Section 10.01, the definition of “Required Lenders” or “Pro Rata Share” or Section 2.06(c), 8.04 or 2.13 without the written consent of each Lender affected thereby;

(e) other than in a transaction permitted under Section 7.05, release all or substantially all of the Collateral in any transaction or series of related transactions, without the written consent of each Lender; or

(f) other than in connection with a transaction permitted under Section 7.04 or 7.05, release all or substantially all of the aggregate value of the Subsidiary Guarantees, without the written consent of each Lender;

and provided further that (i) no amendment, waiver or consent shall, unless in writing and signed by each Revolving L/C Issuer or Synthetic L/C Issuer, as the case may be, in addition to the Lenders required above, affect the rights or duties of a Revolving L/C Issuer or Synthetic L/C Issuer, as the case may be, under this Agreement or any Letter of Credit Application relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent or Collateral Agent, as the case may be, in addition to the Lenders required above, affect the rights or duties of, or any fees or other amounts payable to, the Administrative Agent or Collateral Agent under this Agreement or any other Loan Document; (iv) Section 10.07(g) may not be amended, waived or otherwise modified without the consent of each Granting Lender all or any part of whose Loans are being funded by an SPC at the time of such amendment, waiver or other modification; and (v) the consent of Lenders holding more than 50% of any Class of Commitments or Loans shall be required with respect to any amendment that by its terms adversely affects the rights of such Class in respect of payments hereunder in a manner different than such amendment affects other Classes. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender (it being understood that any Commitments or Loans held or deemed held by any Defaulting Lender shall be excluded for a vote of the Lenders hereunder requiring any consent of the Lenders).

156

No amendment or waiver of any provision of the Intercreditor Agreement shall be effective unless consented to in writing by the Required Lenders, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent and the Borrower (a) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Term Loans, Bridge Loans, the Revolving Credit Loans and the Synthetic L/C Loans and the accrued interest and fees in respect thereof and (b) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders.

In addition, notwithstanding the foregoing, this Agreement may be amended with the written consent of the Administrative Agent, the Borrower and the Lenders providing the relevant Replacement Term Loans or Replacement Bridge Loans (as defined below) to permit the refinancing of all outstanding Term Loans (“Refinanced Term Loans”) or Bridge Loans (“Refinanced Bridge Loans”) with a replacement term loan tranche (“Replacement Term Loans”) or bridge loan tranche (“Replacement Bridge Loans”), respectively, hereunder; provided that (a) the aggregate principal amount of such Replacement Term Loans or Replacement Bridge Loans shall not exceed the aggregate principal amount of such Refinanced Term Loans or Refinanced Bridge Loans, respectively, (b) the Applicable Rate for such Replacement Term Loans or Replacement Bridge Loans shall not be higher than the Applicable Rate for such Refinanced Term Loans or Refinanced Bridge Loans, respectively, (c) the Weighted Average Life to Maturity of such Replacement Term Loans shall not be shorter than the Weighted Average Life to Maturity of such Refinanced Term Loans at the time of such refinancing (except to the extent of nominal amortization for periods where amortization has been eliminated as a result of prepayment of the applicable Loans), (d) the Maturity Date of such Replacement Bridge Loans shall be the same as the Maturity Date for the Refinanced Bridge Loans and such Replacement Bridge Loans shall not be subject to amortization prior to the Maturity Date for such Replacement Bridge Loans and (e) all other terms applicable to such Replacement Term Loans or Replacement Bridge Loans shall be substantially identical to, or less favorable to the Lenders providing such Replacement Term Loans or Replacement Bridge Loans than those applicable to such Refinanced Term Loans or Refinanced Bridge Loans, respectively, except to the extent necessary to provide for covenants and other terms applicable to any period after the latest final maturity of the Loans in effect immediately prior to such refinancing.

SECTION 10.02. Notices and Other Communications; Facsimile Copies. (a) General. Unless otherwise expressly provided herein, all notices and other communications provided for hereunder or under any other Loan Document shall be in writing (including by facsimile transmission). All such written notices shall be mailed, faxed or delivered to the applicable address, facsimile number or electronic mail address,

157

and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

(i) if to the Borrower, the Administrative Agent, the Collateral Agent, an L/C Issuer or the Swing Line Lender, to the address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 10.02 or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the other parties; and

(ii) if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the Borrower, the Administrative Agent, the Collateral Agent, the L/C Issuers and the Swing Line Lender.

All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on behalf of the relevant party hereto; (B) if delivered by mail, four (4) Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of Section 10.02(c)), when delivered; provided that notices and other communications to the Administrative Agent, the L/C Issuers and the Swing Line Lender pursuant to Article 2 shall not be effective until actually received by such Person. In no event shall a voice mail message be effective as a notice, communication or confirmation hereunder.

(b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually signed originals and shall be binding on all Loan Parties, the Agents and the Lenders.

(c) Reliance by Agents and Lenders. The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices and Swing Line Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify each Agent and Agent-Related Person and each Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower in the absence of gross negligence or willful misconduct. All telephonic notices to the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

158

SECTION 10.03. No Waiver; Cumulative Remedies. No failure by any Lender or the Administrative Agent or Collateral Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law.

SECTION 10.04. Attorney Costs, Expenses and Taxes. The Borrower agrees (a) if the Closing Date occurs, to pay or reimburse each of the Agents, and the Arrangers for all reasonable out-of-pocket costs and expenses incurred in connection with the preparation, negotiation, syndication and execution of this Agreement and the other Loan Documents, and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all Attorney Costs of Cravath, Swaine & Moore LLP, and (b) to pay or reimburse each of the Agents, the Arrangers and each Lender for all out-of-pocket costs and expenses incurred in connection with the enforcement of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any legal proceeding, including any proceeding under any Debtor Relief Law, and including all Attorney Costs of counsel to the Administrative Agent or Collateral Agent). The foregoing costs and expenses shall include all reasonable search, filing, recording and title insurance charges and fees and taxes related thereto, and other (reasonable, in the case of Section 10.04(a)) out-of-pocket expenses incurred by any Agent. The agreements in this Section 10.04 shall survive the termination of the Aggregate Commitments and repayment of all other Obligations. All amounts due under this Section 10.04 shall be paid within ten (10) Business Days of receipt by the Borrower of an invoice relating thereto setting forth such expenses in reasonable detail. If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it hereunder or under any Loan Document, such amount may be paid on behalf of such Loan Party by the Administrative Agent in its sole discretion.

SECTION 10.05. Indemnification by the Borrower. Whether or not the transactions contemplated hereby are consummated, the Borrower shall indemnify and hold harmless each Agent, each Agent-Related Person, each Lender and their respective Affiliates, directors, officers, employees, counsel, agents, trustees, investment advisors and attorneys-in-fact (collectively the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby

159

(including the syndication of the Facilities), (b) any Commitment, Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by an L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), or (c) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by the Borrower, any Subsidiary or any other Loan Party, or any Environmental Liability related in any way to the Borrower, any Subsidiary or any other Loan Party, or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”), in all cases, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements are determined in the final, non-appealable judgment of a court of competent jurisdiction to have resulted primarily from the gross negligence or willful misconduct of such Indemnitee. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement, nor shall any Indemnitee or any Loan Party have any liability for any special, punitive, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date). In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 10.05 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, stockholders or creditors or an Indemnitee or any other Person, whether or not any Indemnitee is otherwise a party thereto and whether or not any of the transactions contemplated hereunder or under any of the other Loan Documents is consummated. All amounts due under this Section 10.05 shall be paid within ten (10) Business Days after demand therefor; provided, however, that such Indemnitee shall promptly refund such amount to the extent that there is a final, non-appealable judgment of a court of competent jurisdiction that such Indemnitee was not entitled to indemnification or contribution rights with respect to such payment pursuant to the express terms of this Section 10.05. The agreements in this Section 10.05 shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

SECTION 10.06. Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to any Agent or any Lender, or any Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to

160

the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by any Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.

SECTION 10.07. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee, (ii) by way of participation in accordance with the provisions of Section 10.07(e), (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.07(h) or (iv) to an SPC in accordance with the provisions of Section 10.07(g) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 10.07(e) and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees (“Assignees”) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment (which, in the case of an assignment of any portion of a Synthetic L/C Commitment, must include an assignment of an equal portion of such Lender’s interest in its Credit-Linked Deposit, the Synthetic L/C Loans and participations in Synthetic L/C Obligations) and the Loans (including for purposes of this Section 10.07(b), participations in L/C Obligations and in Swing Line Loans) at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:

(A) the Borrower, provided that no consent of the Borrower shall be required for (1) an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default under Section 8.01(a), (f) or (g) has occurred and is continuing, any Assignee or (2) an assignment of any Term Loans, Bridge Loans, Synthetic L/C Loans or Synthetic L/C Commitments so long as notice of such assignment is provided to the Borrower;

(B) the Administrative Agent; provided that no consent of the Administrative Agent shall be required for an assignment of all or any portion of a Term Loan, Bridge Loan or Synthetic L/C Facility (i) to a Lender, an Affiliate of a Lender or an Approved Fund;

161

(C) in the case of any assignment of any of the Revolving Credit Facility, each Revolving L/C Issuer at the time of such assignment; and

(D) in the case of any assignment of any of the Revolving Credit Facility, the Swing Line Lender.

(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall be in an integral multiple of $1,000,000 unless each of the Borrower and the Administrative Agent otherwise consents, provided that (1) no such consent of the Borrower shall be required if an Event of Default under Section 8.01(a), (f) or (g) has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its Affiliates or Approved Funds, if any;

(B) the parties to each assignment shall (1) electronically execute and deliver to the Administrative Agent an Assignment and Assumption via an electronic settlement system acceptable to the Administrative Agent (which initially shall be ClearPar, LLC) or (2) manually execute and deliver to the Administrative Agent an Assignment and Assumption, together with, in the case of this clause (2), a processing and recordation fee of $3,500; provided that only one such fee shall be payable in the case of contemporaneous assignments by or to related Funds; and

(C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and applicable tax forms.

This paragraph (b) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate Facilities on a non-pro rata basis.

(c) Subject to acceptance and recording thereof by the Administrative Agent pursuant to Section 10.07(d), from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05,

162

10.04 and 10.05 with respect to facts and circumstances occurring prior to the effective date of such assignment). Upon request, and the surrender by the assigning Lender of its Note, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this clause (c) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.07(e).

(d) The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and related interest amounts) of the Loans, L/C Obligations (specifying the Unreimbursed Amounts), L/C Borrowings and amounts due under Section 2.03, owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, absent manifest error, and the Borrower, the Agents and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, any Agent and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(e) Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Agents and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or the other Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that directly affects such Participant. Subject to Section 10.07(f), the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.07(c) but shall not be entitled to recover greater amounts under such Sections than the selling Lender would be entitled to recover. To the extent permitted by applicable Law, each Participant also shall be entitled to the benefits of Section 10.09 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.13 as though it were a Lender.

163

(f) A Participant shall not be entitled to receive any greater payment under Section 3.01, 3.04 or 3.05 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 10.15 as though it were a Lender.

(g) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower (an “SPC”) the option to provide all or any part of any Loan that such Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Loan, and (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. Each party hereto hereby agrees that (i) neither the grant to any SPC nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise increase or change the obligations of the Borrower under this Agreement (including its obligations under Section 3.01, 3.04 or 3.05), (ii) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender shall for all purposes, including the approval of any amendment, waiver or other modification of any provision of any Loan Document, remain the lender of record hereunder. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Notwithstanding anything to the contrary contained herein, any SPC may (i) with notice to, but without prior consent of the Borrower and the Administrative Agent and with the payment of a processing fee of $3,500, assign all or any portion of its right to receive payment with respect to any Loan to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or Guarantee or credit or liquidity enhancement to such SPC.

(h) Notwithstanding anything to the contrary contained herein, (1) any Lender may in accordance with applicable Law create a security interest in all or any portion of its rights under this Agreement (including the Loans owing to it and the Note, if any, held by it) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank and (2) any Lender that is a Fund may create a security interest in all or any portion of its rights under this Agreement (including the Loans owing to it and the Note, if any, held by it) to the trustee for holders of obligations owed, or securities issued, by such Fund as security for such obligations or securities; provided that unless and until such pledgee actually becomes a Lender in compliance with the other provisions of this Section 10.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such pledgee shall not be entitled to exercise any of the rights of a

164

Lender under the Loan Documents even though such pledgee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.

(i) Notwithstanding anything to the contrary contained herein, any L/C Issuer or the Swing Line Lender may, upon thirty (30) days’ notice to the Borrower and the Lenders, resign as an L/C Issuer or the Swing Line Lender, respectively; provided that on or prior to the expiration of such 30-day period with respect to such resignation, the relevant L/C Issuer (if it is the only remaining L/C Issuer of the applicable Class) or the Swing Line Lender shall have identified a successor L/C Issuer or Swing Line Lender reasonably acceptable to the Borrower willing to accept its appointment as successor L/C Issuer or Swing Line Lender, as applicable. In the event of any such resignation of an L/C Issuer or the Swing Line Lender, the Borrower shall be entitled to appoint from among the Lenders willing to accept such appointment a successor L/C Issuer or Swing Line Lender hereunder; provided that no failure by the Borrower to appoint any such successor shall affect the resignation of the relevant L/C Issuer or the Swing Line Lender, as the case may be, except as expressly provided above. If an L/C Issuer resigns as an L/C Issuer, it shall retain all the rights and obligations of an L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as an L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)). If the Swing Line Lender resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c).

(j) In the case of any assignment pursuant to paragraph (b) above by a Synthetic L/C Lender, the Credit-Linked Deposit of the assignor Synthetic L/C Lender shall not be released, but shall instead be purchased by the relevant assignee and continue to be held for application (to the extent not already applied) in accordance with this Agreement to satisfy such assignee’s obligations in respect of the Synthetic L/C Exposure.

SECTION 10.08. Confidentiality. Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information, except that Information may be disclosed (a) to its Affiliates and its and its Affiliates’ directors, officers, employees, trustees, investment advisors and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent requested by any Governmental Authority; (c) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement or the Intercreditor Agreement; (e) subject to an agreement containing provisions substantially the same as those of this Section 10.08 (or as may otherwise be reasonably acceptable to the Borrower), to any pledgee referred to in Section 10.07(g), counterparty to a Swap Contract, Eligible Assignee of or Participant in, or any prospective Eligible Assignee of

165

or Participant in, any of its rights or obligations under this Agreement; (f) with the written consent of the Borrower; (g) to the extent such Information becomes publicly available other than as a result of a breach of this Section 10.08; (h) to any Governmental Authority or examiner (including the National Association of Insurance Commissioners or any other similar organization) regulating any Lender; or (i) to any rating agency when required by it (it being understood that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Information relating to the Loan Parties received by it from such Lender). In addition, the Agents and the Lenders may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry, and service providers to the Agents and the Lenders in connection with the administration and management of this Agreement, the other Loan Documents, the Commitments, and the Credit Extensions. For the purposes of this Section 10.08, “Information” means all information received from any Loan Party relating to any Loan Party or its business, other than any such information that is publicly available to any Agent or any Lender prior to disclosure by any Loan Party other than as a result of a breach of this Section 10.08; provided that, in the case of information received from a Loan Party after the date hereof, such information is clearly identified at the time of delivery as confidential or is delivered pursuant to Section 6.01, 6.02 or 6.03 hereof.

SECTION 10.09. Setoff. In addition to any rights and remedies of the Lenders provided by Law, upon the occurrence and during the continuance of any Event of Default, each Lender and its Affiliates is authorized at any time and from time to time, without prior notice to the Borrower or any other Loan Party, any such notice being waived by the Borrower (on its own behalf and on behalf of each Loan Party and its Subsidiaries) to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other Indebtedness at any time owing by, such Lender and its Affiliates to or for the credit or the account of the respective Loan Parties and their Subsidiaries against any and all Obligations owing to such Lender and its Affiliates hereunder or under any other Loan Document, now or hereafter existing, irrespective of whether or not such Agent or such Lender or Affiliate shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or Indebtedness. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set off and application made by such Lender; provided, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of the Administrative Agent and each Lender under this Section 10.09 are in addition to other rights and remedies (including other rights of setoff) that the Administrative Agent and such Lender may have. Notwithstanding anything herein or in any other Loan Document to the contrary, in no event shall the assets of any Foreign Subsidiary constitute collateral security for payment of the Obligations of the Borrower or any Domestic Subsidiary, it being understood that (a) the Equity Interests of any Foreign Subsidiary do not constitute such an asset and (b) the provisions hereof shall not limit, reduce or otherwise diminish in any respect the Borrower’s obligations to make any mandatory prepayment pursuant to Section 2.05(b)(ii).

166

SECTION 10.10. Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If any Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by an Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

SECTION 10.11. Counterparts. This Agreement and each other Loan Document may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by telecopier of an executed counterpart of a signature page to this Agreement and each other Loan Document shall be effective as delivery of an original executed counterpart of this Agreement and such other Loan Document. The Agents may also require that any such documents and signatures delivered by telecopier be confirmed by a manually signed original thereof; provided that the failure to request or deliver the same shall not limit the effectiveness of any document or signature delivered by telecopier.

SECTION 10.12. Integration. This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Agents or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each of the Loan Documents was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.

SECTION 10.13. Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by each Agent and each Lender, regardless of any investigation made by any Agent or any Lender or on their behalf and notwithstanding that any Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

167

SECTION 10.14. Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 10.15. Tax Forms. (a) (i) Each Lender and Agent that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code (each, a “Foreign Lender”) shall deliver to the Borrower and the Administrative Agent, on or prior to the date which is ten (10) Business Days after the Closing Date (or upon accepting an assignment of an interest herein), two duly signed, properly completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Foreign Lender and entitling it to an exemption from, or reduction of, United States withholding tax on all payments to be made to such Foreign Lender by the Borrower or any other Loan Party pursuant to this Agreement or any other Loan Document) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Foreign Lender by the Borrower or any other Loan Party pursuant to this Agreement or any other Loan Document) or such other evidence reasonably satisfactory to the Borrower and the Administrative Agent that such Foreign Lender is entitled to an exemption from, or reduction of, United States withholding tax, including any exemption pursuant to Section 871(h) or 881(c) of the Code, and in the case of a Foreign Lender claiming such an exemption under Section 881(c) of the Code, a certificate that establishes in writing to the Borrower and the Administrative Agent that such Foreign Lender is not (i) a “bank” as defined in Section 881(c)(3)(A) of the Code, (ii) a 10-percent stockholder within the meaning of Section 871(h)(3)(B) of the Code, or (iii) a controlled foreign corporation related to the Borrower within the meaning of Section 864(d) of the Code. Thereafter and from time to time, each such Foreign Lender shall (A) promptly submit to the Borrower and the Administrative Agent such additional duly completed and signed copies of one or more of such forms or certificates (or such successor forms or certificates as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States Laws and regulations to avoid, or such evidence as is reasonably satisfactory to the Borrower and the Administrative Agent of any available exemption from, or reduction of, United States withholding taxes in respect of all payments to be made to such Foreign Lender by the Borrower or other Loan Party pursuant to this Agreement, or any other Loan Document, in each case, (1) on or before the date that any such form, certificate or other evidence expires or becomes obsolete, (2) after the occurrence of any event requiring a change in the most recent form, certificate or evidence previously delivered by it to the Borrower and the Administrative Agent and (3) from time to time thereafter if reasonably requested by the Borrower or the Administrative Agent, and (B) promptly notify the Borrower and the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

(ii) Each Foreign Lender, to the extent it does not act or ceases to act for its own account with respect to any portion of any sums paid or payable to such Foreign Lender under any of the Loan Documents (for example, in the case of a

168

typical participation by such Foreign Lender), shall deliver to the Borrower and the Administrative Agent on the date when such Foreign Lender ceases to act for its own account with respect to any portion of any such sums paid or payable, and at such other times as may be necessary in the determination of the Borrower or the Administrative Agent (in either case, in the reasonable exercise of its discretion), (A) two duly signed completed copies of the forms or statements required to be provided by such Foreign Lender as set forth above, to establish the portion of any such sums paid or payable with respect to which such Foreign Lender acts for its own account that is not subject to United States withholding tax, and (B) two duly signed completed copies of IRS Form W-8IMY (or any successor thereto), together with any information such Foreign Lender chooses to transmit with such form, and any other certificate or statement of exemption required under the Code, to establish that such Foreign Lender is not acting for its own account with respect to a portion of any such sums payable to such Foreign Lender.

(iii) The Borrower shall not be required to pay any additional amount or any indemnity payment under Section 3.01 to (A) any Foreign Lender if such Foreign Lender shall have failed to satisfy the foregoing provisions of this Section 10.15(a), or (B) any U.S. Lender if such U.S. Lender shall have failed to satisfy the provisions of Section 10.15(b); provided that (i) if such Lender shall have satisfied the requirement of this or Section 10.15(b), as applicable, on the date such Lender became a Lender or ceased to act for its own account with respect to any payment under any of the Loan Documents, nothing in this Section 10.15(a) or Section 10.15(b) shall relieve the Borrower of its obligation to pay any amounts pursuant to Section 3.01 in the event that, as a result of any change in any applicable Law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender or other Person for the account of which such Lender receives any sums payable under any of the Loan Documents is not subject to withholding or is subject to withholding at a reduced rate and (ii) nothing in this Section 10.15(a) shall relieve the Borrower of its obligation to pay any amounts pursuant to Section 3.01 in the event that the requirements of 10.15(a)(ii) have not been satisfied if the Borrower is entitled, under applicable Law, to rely on any applicable forms and statements required to be provided under this Section 10.15 by the Foreign Lender that does not act or has ceased to act for its own account under any of the Loan Documents, including in the case of a typical participation.

(iv) The Administrative Agent may deduct and withhold any taxes required by any Laws to be deducted and withheld from any payment under any of the Loan Documents.

(b) Each Lender and Agent that is a “United States person” within the meaning of Section 7701(a)(30) of the Code (each, a “U.S. Lender”) shall deliver to the Administrative Agent and the Borrower two duly signed, properly completed copies of

169

IRS Form W-9 on or prior to the Closing Date (or on or prior to the date it becomes a party to this Agreement), certifying that such U.S. Lender is entitled to an exemption from United States backup withholding tax, or any successor form. If such U.S. Lender fails to deliver such forms, then the Administrative Agent may withhold from any payment to such U.S. Lender an amount equivalent to the applicable backup withholding tax imposed by the Code.

SECTION 10.16. GOVERNING LAW. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

(b) ANY LEGAL ACTION OR PROCEEDING ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER, EACH AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW THE BORROWER, EACH AGENT AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO.

SECTION 10.17. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 10.17 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

170

SECTION 10.18. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent shall have been notified by each Lender, Swing Line Lender and L/C Issuer that each such Lender, Swing Line Lender and L/C Issuer has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, each Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders except as permitted by Section 7.04.

SECTION 10.19. Lender Action. Each Lender agrees that it shall not take or institute any actions or proceedings, judicial or otherwise, for any right or remedy against any Loan Party or any other obligor under any of the Loan Documents or the Secured Hedge Agreements (including the exercise of any right of setoff, rights on account of any banker’s lien or similar claim or other rights of self-help), or institute any actions or proceedings, or otherwise commence any remedial procedures, with respect to any Collateral or any other property of any such Loan Party, without the prior written consent of the Administrative Agent. The provisions of this Section 10.19 are for the sole benefit of the Lenders and shall not afford any right to, or constitute a defense available to, any Loan Party.

SECTION 10.20. USA PATRIOT Act. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “USA PATRIOT Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the USA PATRIOT Act.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

171

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

TARGA RESOURCES, INC.,
By	/s/ Jeffrey J. McParland
	Name: Jeffrey J. McParland
	Title:   Executive Vice President, Chief Financial             Officer and Treasurer

CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as Administrative Agent, Revolving L/C Issuer, Synthetic L/C Issuer and Lender
By	/s/ James Moran
	Name: James Moran
	Title:   Managing Director
By	/s/ Gregory S. Richards
	Name: Gregory S. Richards
	Title:   Associate

MERRILL LYNCH CAPITAL CORPORATION, as Lender
By	/s/ Carol J.E. Feeley
	Name: Carol J.E. Feeley
	Title:   Vice President

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Joint Lead Arranger and Syndication Agent
By	/s/ Carol J.E. Feeley
	Name: Carol J.E. Feeley
	Title:   Director

GOLDMAN SACHS CREDIT PARTNERS L.P.
By	/s/ Walter A. Jackson
	Name: Walter A. Jackson
	Title:   Authorized Signatory

EX-12.1

Exhibit 12.1

Earnings to Fixed Charges

(Amounts in thousands of dollars)	Targa Resources, Inc.															Predecessor
	Six Months Ended June 30, 2007			Six Months Ended June 30, 2006			Year Ended December 31, 2006			Year Ended December 31, 2005			Year Ended December 31, 2004			106-Day Period Ended April 15, 2004		Year Ended December 31, 2003		Year Ended December 31, 2002
Income (loss) before taxes	$	26,236		$	66,836		$	39,623		$	(20,752	)	$	16,389		$	15,603	$	19,295	$	19,295
Equity in (earnings) losses of unconsolidated investments		(5,647	)		(3,968	)		(9,968	)		3,776			(2,370	)		—		—		—
Minority interest of subsidiaries that have incurred fixed charges		4,048			—			—			—			—
Fixed charges		80,512			90,423			184,588			40,525			6,506			—		—		—
Distributed income of equity investees		2,325			2,034			2,306			387			—			—		—		—
Capitalized interest		(542	)		(128	)		(466	)		(35	)		—			—		—		—
Amortization of capitalized interest		16			14			27			1			—			—		—		—
	$	106,948		$	155,211		$	216,110		$	23,902		$	20,525		$	15,603	$	19,295	$	19,295
Fixed charges:
Interest expense	$	78,003		$	88,328		$	180,189		$	39,856		$	6,406		$	—	$	—	$	—
Capitalized interest		542			128			466			35			—			—		—		—
Interest within rental expenses		1,967			1,967			3,933			634			100			—		—		—
	$	80,512		$	90,423		$	184,588		$	40,525		$	6,506		$	—	$	—	$	—
Ratio of earnings to fixed charges (1)		1.3x			1.7x			1.2x			0.6x			3.2x			N/A		N/A		N/A

(1) Not applicable to the predecessor because the predecessor has not historically incurred debt obligations.

EX-21.1

Exhibit 21.1

Targa Resources, Inc. Subsidiary List

Entity Name	Jurisdiction of Formation
Cedar Bayou Fractionators, L.P.	Delaware
Downstream Energy Ventures Co., L.L.C.	Delaware
Gulf Coast Fractionators	Texas
Midstream Barge Company LLC	Delaware
Targa Bridgeline LLC	Delaware
Targa Canada Liquids Inc.	British Columbia
Targa Downstream GP LLC	Delaware
Targa Downstream LP	Delaware
Targa Energy Pipeline Company LLC	Delaware
Targa Gas Marketing LLC	Delaware
Targa GP Inc.	Delaware
Targa Intrastate Pipeline LLC	Delaware
Targa Liquids GP LLC	Delaware
Targa Liquids Marketing and Trade	Delaware
Targa Louisiana Field Services LLC	Delaware
Targa Louisiana Intrastate LLC	Delaware
Targa LP Inc.	Delaware
Targa LSNG GP LLC	Delaware
Targa LSNG LP	Delaware
Targa Midstream GP LLC	Delaware
Targa Midstream Services Limited Partnership	Delaware
Targa NGL Pipeline Company LLC	Delaware
Targa North Texas GP LLC	Delaware
Targa North Texas LP	Delaware

1

Entity Name	Jurisdiction of Formation
Targa OPI LLC	Delaware
Targa Permian GP LLC	Delaware
Targa Permian LP	Delaware
Targa Regulated Holdings LLC	Delaware
Targa Resources Employee Relief Organization	Texas
Targa Resources Finance Corporation	Delaware
Targa Resources GP LLC	Delaware
Targa Resources Holdings GP LLC	Delaware
Targa Resources Holdings LP	Delaware
Targa Resources II LLC	Delaware
Targa Resources Investments Sub Inc.	Delaware
Targa Resources LLC	Delaware
Targa Resources Operating GP LLC	Delaware
Targa Resources Operating LP	Delaware
Targa Resources Partners LP	Delaware
Targa Resources Texas GP LLC	Delaware
Targa Straddle GP LLC	Delaware
Targa Straddle LP	Delaware
Targa Texas Field Services LP	Delaware
Targa Versado GP LLC	Delaware
Targa Versado LP	Delaware
Venice Energy Services Company, L.L.C.	Delaware
Venice Gathering System, L.L.C.	Delaware
Versado Gas Processors, L.L.C.	Delaware
Warren Petroleum Company LLC	Delaware

2

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Registration Statement on Form S-4 of Targa Resources, Inc. of our reports dated October 30, 2007 and May 6, 2005, except for Note 14, as to which the date is September 20, 2005, relating to the financial statements of Dynegy Midstream Services, Limited Partnership and our report dated March 30, 2007 relating to the financial statements of Targa Resources, Inc. which appear in such Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.

PricewaterhouseCoopers LLP

Houston, Texas

October 31, 2007

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” and to the use of the following reports, in the Registration Statement (Form S-4) and related Prospectus of Targa Resources, Inc. and Targa Resources Finance Corporation for the registration of $250,000,000 of 8 ¹/2% Senior Notes due 2013:

(1) Our report dated May 20, 2005, except for Notes 8 and 20, as to which the date is September 29, 2005 relating to the financial statements of Targa Resources, Inc.,

(2) Our report dated July 29, 2005 relating to the financial statements of the Midstream Operations sold to Targa Resources, Inc.

/s/ Ernst & Young LLP

Houston, Texas

October 30, 2007

EX-25.1

Exhibit 25.1

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM T-1

STATEMENT OF ELIGIBILITY

UNDER THE TRUST INDENTURE ACT OF 1939 OF A

CORPORATION DESIGNATED TO ACT AS TRUSTEE

¨ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b) (2)

WELLS FARGO BANK, NATIONAL ASSOCIATION

(Exact name of trustee as specified in its charter)

A National Banking Association	94-1347393
(Jurisdiction of incorporation or organization if not a U.S. national bank)	(I.R.S. Employer Identification No.)
101 North Phillips Avenue Sioux Falls, South Dakota	57104
(Address of principal executive offices)	(Zip code)

Wells Fargo & Company

Law Department, Trust Section

MAC N9305-175

Sixth Street and Marquette Avenue, 17^th Floor

Minneapolis, Minnesota 55479

(612) 667-4608

(Name, address and telephone number of agent for service)

Targa Resources, Inc.

Targa Resources Finance Corporation¹

(Exact name of obligor as specified in its charter)

Delaware	74-3117058
Delaware	20-3673840
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1000 Louisiana, Suite 4300 Houston, Texas	77002
(Address of principal executive offices)	(Zip code)

8  ¹/2 Senior Notes due 2013

(Title of the indenture securities)

¹ See Table 1 – List of additional Obligors

Table 1

The address for each Subsidiary Guarantor listed below is 1000 Louisiana, Suite 4300, Houston, TX 77002.

	Subsidiary Guarantor	State of Incorporation	Federal EIN
1.	Targa Resources LLC	Delaware	14-1904332
2.	Targa Resources II LLC	Delaware	75-3150812
3.	Targa Resources Holdings GP LLC	Delaware	83-0391111
4.	Targa Resources Holdings LP	Delaware	73-1699939
5.	Targa Gas Marketing LLC	Delaware	11-3762680
6.	Targa Midstream GP LLC	Delaware	20-3726668
7.	Targa Midstream Services Limited Partnership	Delaware	76-0507891
8.	Targa Regulated Holdings LLC	Delaware	76-0467636
9.	Targa NGL Pipeline Company LLC	Delaware	73-1175068
10.	Targa Liquids Marketing and Trade	Delaware	N/A
11.	Targa Liquids GP LLC	Delaware	N/A
12.	Midstream Barge Company LLC	Delaware	94-3253383
13.	Targa OPI LLC	Delaware	76-0467637
14.	Targa Energy Pipeline Company LLC	Delaware	N/A
15.	Targa GP Inc.	Delaware	20-4036018
16.	Targa LP Inc.	Delaware	20-4036097
17.	Targa Versado GP LLC	Delaware	N/A
18.	Targa Versado LP	Delaware	20-4036235
19.	Targa Straddle GP LLC	Delaware	N/A
20.	Targa Staddle LP	Delaware	20-4036286
21.	Targa Permian GP LLC	Delaware	N/A
22.	Targa Permian LP	Delaware	20-4036350
23.	Targa Downstream GP LLC	Delaware	N/A
24.	Targa Downstream LP	Delaware	20-4036406
25.	Targa LSNG GP LLC	Delaware	N/A
26.	Targa LSNG LP	Delaware	68-0625252

Item 1. General Information. Furnish the following information as to the trustee:

(a) Name and address of each examining or supervising authority to which it is subject.

Comptroller of the Currency

Treasury Department

Washington, D.C.

Federal Deposit Insurance Corporation

Washington, D.C.

Federal Reserve Bank of San Francisco

San Francisco, California 94120

(b) Whether it is authorized to exercise corporate trust powers.

The trustee is authorized to exercise corporate trust powers.

Item 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation.

None with respect to the trustee.

No responses are included for Items 3-14 of this Form T-1 because the obligor is not in default as provided under Item 13.

Item 15. Foreign Trustee. Not applicable.

Item 16. List of Exhibits. List below all exhibits filed as a part of this Statement of Eligibility.

Exhibit 1.	A copy of the Articles of Association of the trustee now in effect.*
Exhibit 2.	A copy of the Comptroller of the Currency Certificate of Corporate Existence and Fiduciary Powers for Wells Fargo Bank, National Association, dated February 4, 2004.**
Exhibit 3.	See Exhibit 2
Exhibit 4.	Copy of By-laws of the trustee as now in effect.***
Exhibit 5.	Not applicable.
Exhibit 6.	The consent of the trustee required by Section 321(b) of the Act.
Exhibit 7.	A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority.
Exhibit 8.	Not applicable.
Exhibit 9.	Not applicable.

* Incorporated by reference to the exhibit of the same number to the trustee’s Form T-1 filed as exhibit 25 to the Form S-4 dated December 30, 2005 of file number 333-130784-06.

** Incorporated by reference to the exhibit of the same number to the trustee’s Form T-1 filed as exhibit 25 to the Form T-3 dated March 3, 2004 of file number 022-28721.

*** Incorporated by reference to the exhibit of the same number to the trustee’s Form T-1 filed as exhibit 25 to the Form S-4 dated May 26, 2005 of file number 333-125274.

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wells Fargo Bank, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Minneapolis and State of Minnesota on the 25^th day of October 2007.

WELLS FARGO BANK, NATIONAL ASSOCIATION

/s/ Joseph P. O’Donnell

Joseph P. O’Donnell

Vice President

EXHIBIT 6

October 25, 2007

Securities and Exchange Commission

Washington, D.C. 20549

Gentlemen:

In accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, the undersigned hereby consents that reports of examination of the undersigned made by Federal, State, Territorial, or District authorities authorized to make such examination may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor.

Very truly yours,

WELLS FARGO BANK, NATIONAL ASSOCIATION

/s/ Joseph P. O’Donnell

Joseph P. O’Donnell

Vice President

EXHIBIT 7

Consolidated Report of Condition of

Wells Fargo Bank National Association

of 101 North Phillips Avenue, Sioux Falls, SD 57104

And Foreign and Domestic Subsidiaries,

at the close of business June 30, 2007, filed in accordance with 12 U.S.C. §161 for National Banks.

		Dollar Amounts In Millions
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin		$	13,030
Interest-bearing balances			1,428
Securities:
Held-to-maturity securities			0
Available-for-sale securities			65,310
Federal funds sold and securities purchased under agreements to resell:
Federal funds sold in domestic offices			6,864
Securities purchased under agreements to resell			1,160
Loans and lease financing receivables:
Loans and leases held for sale			21,153
Loans and leases, net of unearned income	263,595
LESS: Allowance for loan and lease losses	2,526
Loans and leases, net of unearned income and allowance			261,069
Trading Assets			4,809
Premises and fixed assets (including capitalized leases)			4,197
Other real estate owned			754
Investments in unconsolidated subsidiaries and associated companies			402
Intangible assets
Goodwill			9,231
Other intangible assets			19,954
Other assets			19,363
Total assets		$	428,724
LIABILITIES
Deposits:
In domestic offices		$	263,665
Noninterest-bearing	70,876
Interest-bearing	192,789
In foreign offices, Edge and Agreement subsidiaries, and IBFs			48,659
Noninterest-bearing	6
Interest-bearing	48,653
Federal funds purchased and securities sold under agreements to repurchase:
Federal funds purchased in domestic offices			10,136
Securities sold under agreements to repurchase			6,375

	Dollar Amounts In Millions
Trading liabilities		2,695
Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases)		27,804
Subordinated notes and debentures		10,140
Other liabilities		20,533
Total liabilities	$	390,007
Minority interest in consolidated subsidiaries		62
EQUITY CAPITAL
Perpetual preferred stock and related surplus		0
Common stock		520
Surplus (exclude all surplus related to preferred stock)		24,751
Retained earnings		13,469
Accumulated other comprehensive income		(85	)
Other equity capital components		0
Total equity capital		38,655
Total liabilities, minority interest, and equity capital	$	428,724

I, Howard I. Atkins, EVP & CFO of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief.

Howard I. Atkins

EVP & CFO

We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct.

Michael Loughlin John Stumpf Dave Hoyt Directors