EXHIBIT 10.5
MASTER ALLIANCE AGREEMENT
This Master Alliance Agreement ("Alliance Agreement") is entered into
effective as of the first day of September, 1996 (the "Effective Date"), between
Chevron U.S.A. Production Company, a division of Chevron U.S.A. Inc. ("Chevron
Production"), Chevron Products Company, a division of Chevron U.S.A. Inc.
("Chevron Products"), Chevron Chemical Company ("CCC"), Chevron Pipe Line
Company ("CPL"), and Chevron Overseas Petroleum Inc. ("COPI") (collectively "the
Chevron Entities") and NGC Corporation ("NGC"), Natural Gas Clearinghouse ("NGC
Gas"), NGC Liquids Marketing, Inc., ("NGC Liquids"), NGC Oil Trading and
Transportation, Inc. ("NGC Oil"), NGC Energy Resources Ltd. Partnership ("NGC
Energy"), Trident NGL, Inc. ("Trident") ▇▇▇▇▇▇ Petroleum Company, Limited
Partnership ("▇▇▇▇▇▇"), and Electric Clearinghouse ("NGC Electric")
(collectively the "NGC Entities");
Whereas, CUSA and NGC have merged Chevron Production's midstream assets
(▇▇▇▇▇▇ Petroleum Company and the Natural Gas Business Unit of Chevron
Production) with assets of NGC to accomplish the parties desire to enhance and
grow the value of those assets; and
Whereas, the Chevron Entities have entered or may enter into long term
commercial arrangements with NGC Entities, under which a substantial volume of
natural gas, natural gas liquids, electricity, and possibly other energy
products (not including, however, refined petroleum products) will be sold and
certain energy-related services will be provided (such products and services
hereafter referred to as "Energy Products or Services"); and
Whereas, the parties intend that the NGC Entities and the Chevron
Entities will provide Energy Products and Services to each other under
commercially reasonable, mutually beneficial, and market-based terms and
conditions; and
Whereas, the parties intend that in administering, interpreting, and
performing such contracts for the provision of Energy Products or Services, the
parties will (a) recognize the contributions made by each party to the overall
value of the transaction in question, and share the benefits thereof in a manner
appropriately reflecting such contributions and the terms and conditions of such
contracts, and (b) act with due regard for the interests of the other party; and
Whereas, the Chevron Entities and the NGC Entities desire to establish a
long term, cooperative business relationship whereby all of the separate
contractual relations between them are maintained and administered on a mutually
beneficial basis, with due regard given to increasing efficiency, improving
products and services, expediting the resolution of disputes, and providing
other mutual benefits to all affected Entities;
Now, therefore, the parties agree as follows:
A. DEFINITIONS
1. The term "Alliance" means the commercial relationship existing
between the Chevron Entities and the NGC Entities, as embodied in this Alliance
Agreement and each of the Covered Contracts.
2. The term "Chevron Entity" means any of the Chevron Entities named
above or any other Subsidiary of Chevron Corporation which may enter into a
Covered Contract with an NGC Entity and ratify this Alliance Agreement.
3. The term "Covered Contract" means any contract in existence during
the term of this Alliance Agreement between a Chevron Entity and an NGC Entity.
4. The term "Entity" means one of the parties hereto.
5. The term "NGC Entity" means any of the NGC Entities named above or
any other Subsidiary of NGC Corporation which may enter into a Covered Contract
with a Chevron Entity and ratify this Alliance Agreement.
6. The term "Subsidiary" means any company in which Chevron Corporation
or NGC owns, directly or indirectly, one hundred percent of the shares entitled
to vote at a general election of directors, or, in the case of a general or
limited partnership, one hundred percent of the partnership interest.
7. The term "Effective Date" means September 1, 1996.
B. EXECUTION OF CONTRACTS AND GENERAL INTENT
1. Existing Contracts. All Contracts entered into between Chevron
Entities and NGC Entities prior to or as of the Effective Date of this Alliance
Agreement shall be Covered Contracts subject hereto.
2. Future Contracts. Whenever any Chevron Entity requires, during the
term of this Alliance Agreement, Energy Products or Services which can be
supplied by an NGC Entity, it is the intent of this Alliance Agreement that the
Chevron Entity will contact the appropriate NGC Entity to determine whether the
NGC Entity is willing and able to supply the Energy Products or Services on a
cost-effective basis. If so, and if the Entities involved are able to negotiate
a mutually agreeable contract for the provision of the Energy Products or
Services, the resulting contract shall become a Covered Contract and shall be
subject to the principles and procedures outlined herein. Whenever any NGC
Entity requires Energy Products or Services which can be supplied by a Chevron
Entity, it is the intent of this Alliance Agreement that the NGC Entity will
contact the appropriate Chevron Entity and the same procedure will be followed.
Failure to follow the foregoing procedures in any particular case shall not be
deemed to be a breach of this Alliance Agreement, but shall be taken into
consideration by the parties in determining, for
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purposes of Section G hereof whether the Alliance is producing the mutual
benefits intended by the parties and should be extended beyond its primary term.
3. Intent of Parties. Both parties acknowledge that the purpose and
intent of this Alliance Agreement is to efficiently manage and optimize the
economic benefits of the Covered Contracts to the Chevron Entities and the NGC
Entities, to ensure that the Covered Contracts remain mutually beneficial, to
facilitate new business between Chevron Entities and NGC Entities with respect
to Energy Products or Services, to minimize disputes arising from the Covered
Contracts, and to resolve quickly and efficiently any disputes which may arise
thereunder. By entering into this Alliance Agreement, the parties also expect
that they will improve their financial results by reducing downtime and
unproductive activities, while maximizing cooperation.
C. ALLIANCE IMPROVEMENT TEAM AND PROCEDURES.
1. Appointment of Alliance Representatives. In each case where a Chevron
Entity and an NGC Entity are parties to a Covered Contract, each Entity shall
appoint at least one Alliance Representative to serve on an Alliance Improvement
Team (the "Entity-level AIT") which will perform the duties outlined below with
respect to the Covered Contract(s) between those Entities. In those cases where
the nature of the contractual relationship between the Chevron Entity and the
NGC Entity requires broader representation, each Entity may appoint more than
one Alliance Representative to serve on the Entity Level AIT. In addition, the
Entities involved may establish separate AITs (local AITs) between individual
business units or major facilities of the two Entities in order to better
facilitate management of the contractual relationship(s) between them.
2. Role of Alliance Improvement Teams. The duties of the AITs will be to:
2.1. administer the Alliance relationship(s) between the Entities,
including recommending to the appropriate Entities any amendments,
extensions, and other modifications to the Covered Contract(s) as the AITs
may deem appropriate.
2.2. establish and periodically review standards of performance for the
contractual relationship(s), as deemed appropriate by the AIT to optimize
the mutual benefits flowing from the Alliance;
2.3. determine appropriate measurements for the quality improvement
processes of the two Entities, insofar as they pertain to the Alliance
relationship, and oversee efforts for long-range process improvement
efforts between the two Entities with respect to the Covered Contract(s);
2.4. conduct regular planning, problem solving and performance review
meetings at such periodic intervals as shall be mutually agreed;
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2.5. review all significant equipment, design, and process changes
affecting the contractual relationship(s) between the two Entities;
2.6. determine and develop strategies with respect to future business
relationships between the Entities involved;
2.7. share with AITs from other Entities any best practices or other
process improvements which might be applicable to other Covered Contracts;
and
2.8. endeavor to resolve any disputes concerning the contractual
relationship(s) between the two Entities as provided in Section E hereof to
the extent such disputes are not resolved in accordance with the terms and
conditions of the Covered Contracts by the individuals responsible for the
day-to-day administration of the Covered Contracts.
3. Sharing of Information and Development Plans. Except as constrained by
business, policy, or legal considerations, Chevron Entities and NGC Entities
which are parties to Covered Contracts will share their knowledge of activities
and trends in their lines of business, and of their specific development or
expansion plans which may relate to the provision of Energy Products or Services
by one to the other. All such information shall be kept strictly confidential
and shall not be used by the receiving party except in furtherance of the mutual
objectives outlined in this Alliance Agreement.
6. Significant Performance Problems. If an unexcused failure by either
party to a Covered Contract to perform such party's obligations results in a
Material Event, as defined below, a representative of the defaulting party at no
lower than the vice-president level of management shall, upon request, provide a
briefing to and conduct direct discussions with, a representative of the non-
defaulting party at a similar management level for the purposes of evaluating
the cause of the failure, assuring that any deficient processes that contributed
to the failure are promptly addressed, ensuring that the defaulting party fully
understands the consequences of the failure to the non-defaulting party, and
committing to take appropriate steps to avoid such failures in the future. Any
unexcused failure to deliver Energy Products or Services in accordance with an
obligation in a Covered Contract which results in a shutdown or forced cutback
of a refinery unit ,chemical processing unit, or other energy consuming
facility, the involuntary shutting in of gas production, or an inability to
perform contractual obligations with third parties will be deemed to be a
Material Event for purposes of this Agreement. Nothing in this Section is
intended to relieve either party to a Covered Contract from liability for
monetary damages payable in accordance with the Covered Contract or to supersede
any other remedy that may be available under the Covered Contract, nor is
anything in this Section intended as a definition of "material breach" or
similar event for purposes of any Covered Contract.
D. CORPORATE GUARANTEES.
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1. Chevron Guarantee. In consideration of the NGC Entities' entering
into Covered Contracts with the Chevron Entities, Chevron U.S.A. Inc. hereby
unconditionally guarantees the performance of each Covered Contract by Chevron
Production, Chevron Products and any other division or subsidiary of Chevron
U.S.A. Inc. which may enter into a Covered Contract with an NGC Entity. For the
same consideration, Chevron Chemical Company, Chevron Pipe Line Company, and
Chevron Overseas Petroleum Inc. each hereby unconditionally guarantees the
performance of each Covered Contract by any of their respective divisions or
subsidiaries which may enter into a Covered Contract with an NGC Entity.
2. NGC Guarantee. In consideration of the Chevron Entities' entering
into Covered Contracts with the NGC Entities, NGC Corporation hereby
unconditionally guarantees the performance of each Covered Contract by each NGC
Entity which enters into a Covered Contract with a Chevron Entity.
3. Savings Clause. The foregoing corporate guarantees shall remain in
full force and effect for the life of each Covered Contract. Termination of
this Master Alliance Agreement shall not relieve any guarantor of its guarantee
obligations hereunder.
E. DISPUTE RESOLUTION.
1. General Procedure. Chevron Entities and NGC Entities which are
parties to a Covered Contract shall utilize the procedure set forth in this
Section E to resolve in good faith any dispute, controversy or claim related to
the Covered Contract, including any dispute over the performance, breach,
termination, interpretation, or validity of the Covered Contract. Nothing
herein is intended to limit any the parties to any Covered Contract from
resolving informally between them any controversy, claim or dispute that may
arise, and thus avoiding the necessity of presenting such matter to an AIT.
2. Submission To AIT. Any Chevron Entity or NGC Entity may request that
any dispute, controversy or claim arising under a Covered Contract be submitted
to the appropriate AIT, in accordance with such procedures as the AIT may
establish and with such explanation or documentation as the parties deem
appropriate to aid the AIT in its consideration of the issues presented. The
date the matter is first considered by the AIT as an agenda item at a regular or
special meeting of the AIT shall be referred to as the "Submission Date". The
AIT shall attempt in good faith, through the process of discussion and
negotiation, to resolve within forty-five days after the Submission Date any
dispute, controversy or claim presented to it. In those cases where affected
Entities have established local AITs between individual business units or
facilities, any dispute should first be submitted to the local AIT, but if the
dispute is not promptly resolved by the local AIT it will then be submitted to
the appropriate Entity-level AIT for resolution. The references in this Section
to "Submission Date" shall be deemed to refer to the date the issue is submitted
to the Entity-level AIT, not the earlier date when the issue was considered by a
local AIT. With respect to those Covered Contracts which contain periodic price
renegotiation provisions and a special procedure for resolving any disagreements
arising from those renegotiations, it is recognized that submission to an
Entity-level AIT may create undue delays
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and the parties may elect to proceed directly from informal negotiations at the
local AIT level to the special dispute resolution procedure in the Covered
Contract.
3. Mediation. If an Entity-level AIT cannot resolve any dispute,
controversy or claim submitted to it within forty-five days after the Submission
Date, the parties shall attempt in good faith to settle the matter by submitting
the dispute, controversy or claim to mediation within sixty days after the
Submission Date using any mediator upon which they mutually agree. If the
parties are unable to mutually agree upon a mediator within seventy five days
after the Submission Date, the case shall be referred to the Houston office of
Judicial Arbitration and Mediation Services, Inc. ("JAMS") for mediation. The
cost of the mediator will be split equally between the parties unless they agree
otherwise. As indicated in Section E.3., above, it is recognized that disputes
arising from price renegotiation provisions in the Covered Contracts may be
resolved in accordance with those provisions without first being submitted to
mediation.
4. BINDING ARBITRATION
4.1 All Disputes Arbitration. All disputes between the parties arising
under any Covered Contract and not resolved through negotiation or mediation
shall be submitted to arbitration in accordance with this Section E.4. or, if
one exists, the similar arbitration provision of the applicable Covered
Contract, and the parties hereby expressly waive all rights to have any such
disputes heard before a court of law, except the right to enforce an arbitration
award as described in Section E.4.5. Arbitration shall be governed by the
Federal Arbitration Act, 9 U.S.C. (S) 1, et seq., and not by the arbitration
acts, statutes or rules of any other jurisdiction. In the event of a conflict
between the terms of this Section E.4. and the terms of an express arbitration
provision in any individual Covered Contract, the arbitration provision in the
individual Covered Contract shall control as to any disputes arising under that
contract.
4.2 Procedure. In the event the parties are unable to resolve a dispute
arising under any Covered Contract after exercising good faith efforts to do so,
either party may require that the matter be resolved through binding arbitration
by submitting a written notice to the other. The notice shall name the noticing
party's arbitrator and shall contain a statement of the issue(s) presented for
arbitration. Within fifteen days after receipt of a notice of arbitration, the
other party shall name its arbitrator by written notice and may designate any
additional issue(s) for arbitration. The two named arbitrators shall select the
third arbitrator within fifteen days after the date on which the second
arbitrator was named. Should the two arbitrators fail to agree on the selection
of the third arbitrator, either party shall be entitled to request the Senior
Judge of the United States District Court of the Southern District of Texas to
select the third arbitrator. All arbitrators shall be qualified by education or
experience within the energy industry to decide the issues presented for
arbitration. No arbitrator shall be a current or former director, officer or
employee of either party, or its affiliates; an attorney (or member of a law
firm) who has rendered legal services to either party, or its affiliates, within
the preceding three years; or an owner of any of the common stock of either
party or its affiliates.
4.3 Arbitration Hearings. The three arbitrators shall commence the
arbitration hearing within twenty-five days following the appointment of the
third arbitrator. The proceeding shall
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be held at a mutually acceptable site in Houston, Texas. If the parties are
unable to agree on a site, the arbitrators shall select a site. The arbitrators
shall have the authority to establish rules and procedures governing the
arbitration hearing. Each party shall have the opportunity to present its
evidence at the hearing. The arbitrators may call for the submission of pre-
hearing statements of position and legal authority, but no post-hearing briefs
shall be submitted. After the presentation of the evidence has concluded, each
party shall submit to the arbitration panel a final offer of its proposed
resolution of the dispute. The arbitration panel shall not have the authority to
award punitive or exemplary damages or any type of damages expressly waived in
the applicable Covered Contract, nor shall the arbitration panel have any
authority to terminate a Covered Contract unless that issue is made subject to
arbitration under the express terms of the Covered Contract. The arbitrators'
decision must be rendered within thirty days following the conclusion of the
hearing or submission of evidence, but no later than 90 days after appointment
of the third arbitrator. All evidence submitted in an arbitration proceeding,
transcripts of such proceedings, and all documents submitted by the parties in
an arbitration proceeding shall be deemed confidential information subject to
Section F below.
4.4 Arbitration Decision. The decision of the arbitrators or a majority
of them, shall be in writing and shall be final and binding upon the parties as
to the issue submitted. Each party shall bear the expense and cost of own
attorneys and witnesses, its own arbitrator and one-half of the expense and cost
of the third arbitrator.
4.5 Enforcement of Award. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. The prevailing
party shall be entitled to reasonable attorneys' fees in any court proceeding
necessary to enforce or collect any award or judgment rendered by the
arbitrators.
F. CONFIDENTIALITY
Each Party agrees that it will maintain the terms of this Alliance
Agreement in strictest confidence and that it will not cause or permit
disclosure of those terms to any third party without the express written consent
of the other Parties hereto; provided, however, that such third party
restriction does not apply to affiliated companies. Disclosures otherwise
prohibited by this Section may be made by any Party () to the extent necessary
for such Party to enforce its rights hereunder against another Party, () to the
extent a Party is contractually or legally bound to disclose financial
information to a third party such as a royalty owner or partner, or () to the
extent to which a Party hereto is required to disclose all or part of this
Agreement by a statute or by a court, agency, or other governmental body
exercising jurisdiction over the subject matter hereof, by order, by regulation
or by other compulsory process (including, but not limited to, deposition,
subpoena, interrogatory, or request for production of documents).
G. TERM
This Alliance Agreement shall be effective for a primary term of ten years,
commencing on the Effective Date, and year to year thereafter until and unless
terminated by either party at
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the end of the primary term, or at the end of any annual period after the
primary term, by giving the other party not less than one hundred and eighty
days' prior written notice of termination.
H. LAWS AND REGULATIONS; EFFECT OF THIS AGREEMENT
1. This Alliance Agreement is subject to, and the parties shall comply
with, all applicable laws and regulations.
2. Notwithstanding the parties' intent to create a mutually beneficial
commercial relationship pursuant to this Alliance Agreement, nothing herein is
intended or shall be construed as preventing either party or their Subsidiaries
from entering into agreements with any third party for the sale, purchase or
provision of any product or service. In addition, it is understood and agreed
that the Alliance is a contractual relationship which the parties intend to
administer and improve in accordance with the provisions of this Alliance
Agreement. The Alliance is not a partnership, joint venture or any other type
of legal entity. All Energy Products or Services provided by one Entity to
another shall be provided by the first Entity as an independent contractor,
retaining complete and exclusive control and direction over such Entity's
personnel and operations, consistent with the business needs of the parties. No
employee or subcontractor of one Entity shall be, in any sense, an employee or
agent of, or have any authority to represent or bind, any other Entity in any
way.
I. ASSIGNMENTS PROHIBITED
This Alliance Agreement may not be assigned by any party without the prior
written consent of the other parties.
WHEREFORE, the parties have caused this Alliance Agreement to be executed
by their authorized representatives as of the date written above.
[Signatures on next page]
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SIGNATURE PAGES TO MASTER ALLIANCE AGREEMENT
between
Chevron U.S.A. Production Company, Chevron Products Company, Chevron Chemical
Company, Chevron Pipe Line Company, Chevron Overseas Petroleum Inc., NGC
Corporation, Natural Gas Clearinghouse, NGC Liquids Marketing, Inc., NGC Oil
Trading and Transportation, Inc., NGC Energy Resources Ltd. Partnership, Trident
NGL, Inc., ▇▇▇▇▇▇ Petroleum Company, Limited Partnership, and Electric
Clearinghouse
CHEVRON U.S.A. PRODUCTION COMPANY, CHEVRON OVERSEAS PETROLEUM INC.
A DIVISION OF CHEVRON U.S.A. INC.
By ------------------------------- By --------------------------------
Title ---------------------------- Title -----------------------------
CHEVRON PRODUCTS COMPANY, NGC CORPORATION
A DIVISION OF CHEVRON U.S.A. INC.
By: ------------------------------- By --------------------------------
Title: ---------------------------- Title -----------------------------
CHEVRON CHEMICAL COMPANY NATURAL GAS CLEARINGHOUSE
By: ------------------------------- By --------------------------------
Title: ---------------------------- Title -----------------------------
CHEVRON PIPE LINE COMPANY ELECTRIC CLEARINGHOUSE
By: ------------------------------- By --------------------------------
Title: ---------------------------- Title: ----------------------------
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▇▇▇▇▇▇ PETROLEUM COMPANY, LIMITED PARTNERSHIP
By: -------------------------------
Title: ----------------------------
NGC LIQUIDS MARKETING, INC.
By: -------------------------------
Title: ----------------------------
NGC OIL TRADING AND TRANSPORTATION, INC.
By: -------------------------------
Title: ----------------------------
NGC ENERGY RESOURCES LTD. PARTNERSHIP
By: -------------------------------
Title: ----------------------------
TRIDENT NGL, INC.
By: -------------------------------
Title: ----------------------------
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