Gas Sales Agr. B/t Kn Marketing And Enermart Trust

EXHIBIT 10.11


GAS SALES AGREEMENT
(Irrigation)


between


K N MARKETING, L.P.

as "Seller"

and


ENERMART TRUST

as "Buyer"


Dated: March 1, 1996


State of TEXAS


I N D E X


ARTICLE TITLE PAGE


I Definitions 1
II Quantity 2
III Delivery Points 3
IV Price and Taxes 3
V Term 4
VI Notices 4
VII Measuring Equipment and Testing 5
VIII Measurement Specifications 5
IX Quality 5
X Delivery Pressure 6
XI Billing, Payment and Audit 6
XII Notification of Curtailment 7
XIII Possession and Responsibility for Gas 7
XIV Title 8
XV Force Majeure 8
XVI Financial Responsibility 9
XVII Governmental Regulations 10
XVIII Entire Agreement 11
XIX Confidentiality 11
XX Successors and Assigns 12
XXI Maintenance of Facilities 12
XXII Indemnification 13
XXIII Third Party Transportation 13
XXIV Headings 13
XXV Waiver 13
XXVI Amendments 14
XXVII Remedies Upon Material Default 14
XXVIII Miscellaneous 15
Signatures 15
Exhibit "A" - Exemption Certificate A-1


GAS SALES AGREEMENT
(Irrigation)


THIS AGREEMENT, dated and effective this 1st day of March, 1996, (the "Effective Date") by and between K N MARKETING, L.P., a Texas Limited Partnership, hereinafter called "Seller", and ENERMART TRUST, a Pennsylvania Business Trust, hereinafter called "Buyer";


W I T N E S S E T H


WHEREAS, Seller is the owner of a supply of firm natural gas from which Seller will have available for sale certain volumes of natural gas; and


WHEREAS, Seller has made certain transportation arrangements with pipeline companies which operate natural gas transmission systems ("Transporter(s)") ; and


WHEREAS, Buyer desires to purchase volumes of firm natural gas to use as fuel gas for its irrigation customers in accordance with the terms and conditions of this Agreement; and


NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Parties agree as follows:


ARTICLE I
DEFINITIONS


Section 1. "Buyer" means the Party who is purchasing and receiving gas volumes under this Agreement.


Section 2. "Seller" means the Party who is selling gas volumes under this Agreement.


Section 3. "Party" or "Parties" means Buyer and/or Seller hereunder, acting by and through duly authorized representatives.


Section 4. "Day" means the period of twenty-four consecutive hours commencing at 7:00 a.m. Central Time (CT) on one calendar day and ending at 7:00 a.m. CT on the following calendar day. The reference date for any day should be the calendar date upon which such twenty-four (24) hour period began.


Section 5. "Month" means the period commencing at 7:00 a.m. CT on the first day of a calendar month and ending at 7:00 a.m. CT on the first day of the following calendar month.


Section 6. "Mcf" means the quantity of gas occupying a volume of one thousand (1000) cubic feet at a temperature of sixty (60) degrees Fahrenheit and an absolute pressure of fourteen and sixty-five hundredths pounds per square inch (14.65 psia).


Section 7. "Btu" means the amount of heat required to raise the temperature of one avoirdupois pound of pure water from fifty-eight and five tenths degrees (58.5 degrees) Fahrenheit to fifty-nine and five tenths (59.5 degrees) Fahrenheit at a constant pressure of fourteen and sixty-five hundredths (14.65) pounds per square inch absolute ("psia").


Section 8. "MMBtu" means one million (1,000,000) Btu.


Section 9. "Operating Agreement" means the agreement between Energas Company, and Westar Transmission Company dated December 1, 1996, covering measurement equipment and testing, measurement specifications, pressures, quality, maintenance of facilities, and other operational matters.


ARTICLE II
QUANTITY
Section 1.


A. During the period March 1, 1996 through December 31, 1998, Seller will sell and deliver and Buyer will purchase and receive all of Buyer's requirements from Seller hereunder to serve all of Buyer's irrigation fuel gas markets existing as of December 31, 1995.


B. Beginning January 1, 1999 and continuing through the remaining term of this Agreement, Buyer shall have the option to either (i) purchase from Seller all or any portion of Buyer's irrigation fuel gas requirements, or (ii) transport any such portion of Buyer's irrigation fuel gas requirements not purchased from Seller hereunder, under either one of those certain Gas Service Agreements between EnerMart Trust and KN Westex Gas Services Company dated January 1, 1996 or between EnerMart Trust and Westar Transmission Company dated January 1, 1996.


Section 2. It is expressly understood and agreed that all gas sold to Buyer is to be used by Buyer solely for Buyer's


2


irrigation fuel gas markets, and any other use of the gas ("Other Use Gas") by Buyer will constitute a material breach of this Agreement, in which case, without limiting any other remedies available to Seller, Seller may immediately cease delivering Other Use Gas to Buyer at the Delivery Point(s).


ARTICLE III
DELIVERY POINT(S)


Section 1. The delivery of gas hereunder shall be subject to the Operating Agreement and shall be at the outlet flange of Transporter(s) facilities at all points of interconnection between Transporter(s) facilities and Buyer where Buyer receives irrigation fuel gas from Seller as of December 31, 1995, or subsequently at any other mutually agreeable point(s) to be agreed to in writing by the Parties ("Delivery Point(s)").


ARTICLE IV
PRICE AND TAXES


Section 1. For the period beginning March 1, 1996 through February 28, 1997, the price of each Mcf of gas purchased and sold hereunder, delivered to Buyer at the Delivery Point(s), shall be $2.117.


Section 2. At least ninety (90) days prior to each of the periods of (i) March 1, 1997 through February 28, 1998, and (ii) March 1, 1998 through December 31, 1998, the Parties shall meet and negotiate in good faith to establish a price on an MMBtu basis for gas purchased and sold hereunder, taking into consideration the type and level of services provided by Seller and the prevailing market conditions. Such mutually agreed to price shall be effective on the applicable March 1.


Section 3. Beginning January 1, 1999, and for the remaining term of this Agreement, the price payable by Buyer to Seller may be renegotiated for all or any portion of Buyer's irrigation fuel gas requirements. Any portion of Buyer's irrigation fuel gas requirements not purchased from Seller hereunder will be transported under either one of those certain Gas Service Agreements between the EnerMart Trust and KN Westex


3


Gas Services Company dated January 1, 1996 or Westar Transmission Company.


Section 4. In addition to the price to be paid for gas delivered hereunder, Buyer agrees to reimburse Seller for gross receipts taxes, sales taxes, and other similar taxes, which are lawfully imposed on Seller because of the sale or delivery of gas to Buyer hereunder or the gas itself. Statements for such tax reimbursement shall be rendered and paid as provided in accordance with the billing and payment provisions of this Agreement. All taxes levied on such gas after delivery and lawfully imposed on Buyer shall be paid by Buyer. If Buyer claims an exemption from state sales taxes or desires to pay any applicable sales taxes directly to the taxing authority, Buyer will execute the "Exemption Certificate" attached hereto as Exhibit "A" or such other evidence of exemption as may be required by Seller. Applicable rulings or orders of governmental representatives in charge of the administration of any law or ordinance increasing, decreasing, or creating any tax shall be binding and conclusive upon Buyer and Seller until such time as the invalidity thereof has been finally established by the decision of a court of competent jurisdiction. Buyer shall be entitled to reimbursement from Seller to the extent of any payments made by it to Seller for taxes pursuant to this Article which may subsequently be refunded to Seller by the taxing authority. Buyer shall not be obligated to reimburse Seller for any ad valorem taxes on properties or for taxes which are based upon or measured by the natural gasoline or other liquefied hydrocarbon content extracted from the gas before delivery to Buyer.


ARTICLE V
TERM


Section 1. This Agreement, regardless of when executed, is effective as of the Effective Date, and shall continue thereafter, unless earlier terminated pursuant to the provisions in other Sections of this Agreement, for a term ending on December 31, 2001.


4


ARTICLE VI
NOTICES


Section 1. Any notice or statement (other than notices to be given under the Price and Taxes Article of this Agreement which shall be by certified mail, return receipt requested) to be given hereunder, unless otherwise specified herein, shall be in writing and shall be deemed delivered as of the postmarked date when deposited in the United States mail, postage prepaid, and addressed to the respective Party at the following addresses or at such other addresses as a Party may designate to the other in writing:


SELLER:


Notices: K N Marketing, L.P.
333 Clay Street, Suite 2000
Houston, TX 77002
Attention: Gas Sales & T&E
Administration


Wire Transfer: K N Marketing, L.P.
Norwest Banks Colorado, N.A.
Denver, Co
ABA# 102 000 076
A/C# 101-0918-554


BUYER:


Notices: ENERMART TRUST
P.O. Box 650205
Dallas, TX 75265-0205
Attn: Intrastate Gas Supply


Statements: ENERMART TRUST
P.O. Box 650205
Dallas, TX 75265-0205
Attn: Intrastate Gas Supply


ARTICLE VII
MEASURING EQUIPMENT AND TESTING


Section 1. Measuring equipment and testing shall be governed by the Operating Agreement.


5


ARTICLE VIII
...