Exhibit 10.11




 




FIRST AMENDMENT


TO


ASSET PURCHASE AND SALE AGREEMENT




 




This First Amendment to Asset

Purchase and Sale Agreement (this “Amendment”), dated March 19, 2003, is by and

between Carbon Energy Corporation (USA), formerly known as Bonneville Fuels Corporation,

a Colorado corporation (“Seller”), and Fasken Acquisitions 02, Ltd., a Texas

limited partnership (“Buyer”).




 




Recitals:




 




A.                                   Buyer and

Seller are parties to that certain Asset Purchase and Sale Agreement (the

“Agreement”), dated January 15, 2003. 

Terms defined in the Agreement shall have the same meaning herein unless

otherwise provided.




 




B.                                     Buyer and

Seller wish to amend the Agreement in accordance with the provisions of this

Amendment.




 




Agreement:




 




NOW, THEREFORE, in

consideration of the premises and mutual promises herein made, and in

consideration of the representations, warranties and covenants herein

contained, the parties agree as follows:




 




1.                                       Closing Date.  Under Section 9.1 of the Agreement, the

Closing Date has been extended to March 24, 2003, and the Preliminary

Settlement Statement to be delivered by Seller under Section 9.1(b) will be

furnished by the end of the day on Wednesday, March 20, 2003 (two business days

prior to the Closing Date).




 




2.                                       Assignment.  The Assignment to be delivered under Section

9.1(a) of the Agreement shall be in the form attached hereto as Exhibit 1.  The Assignment and Exhibit A-2 thereto do

not set forth specific Net Revenue Interests or Working Interests for all of

the Assets transferred by Seller to Buyer. 

The parties hereto acknowledge and agree that Seller’s special warranty

under the Assignment shall apply to the Net Revenue Interests and the Working

Interests set forth in Exhibit A-2 to the Agreement (as amended hereby) as if

all of such Working Interests and Net Revenue Interests were set forth in

Exhibit A-2 to the Assignment, subject to the terms and conditions of the

Agreement as amended by this Amendment.




 




3.                                       Revisions of

Exhibits/Deletion of North Bagley Prospect.  Certain errors have been discovered on the Exhibits and Schedules

to the Agreement.  In addition, the

parties have agreed to delete the TP A State #2 Well, North Bagley Prospect,

Eddy County, New Mexico, from the sale provided for under the Agreement. The

parties hereby acknowledged and agree that the Exhibits and Schedules to the

Agreement are replaced by those attached hereto as Exhibit 2.




 





























 




4.                                       Title Defects.  Buyer has furnished Seller Title Defect

Notices by letters dated February 28 and March 3, 2003, with Schedules 1 and 2

attached thereto (“Buyer’s Notices”). 

The parties hereby acknowledge and agree that each of the matters

covered by Buyer’s Notices has been cured or is waived by Buyer except for the

following matters:




 




a.               Lake Shore

#10-5 Well.  Seller and

Fasken Land and Minerals Ltd. and Fasken Oil and Ranch, Ltd. (collectively, the

“Fasken Entities”) are parties to that certain Participation Agreement dated

February 8, 2001, as amended April 10, 2001, and as further amended September

20, 2001 (the “Fasken Participation Agreement).  As of the date hereof, the Lakeshore Federal S.C.#10-5 Well,

being 3rd Test Well to be drilled under the Fasken Participation

Agreement (the “Lake Shore #10-5 Well”) has not been drilled.  If the Lake Shore #10-5 Well is commenced on

or before the first anniversary of the Closing Date and such well is drilled

and completed with due diligence and dispatch, to the objective formation and

depth in accordance with the terms and provisions of the Fasken Participation

Agreement, then the Buyer shall be entitled to a Purchase Price Adjustment in

the amount of $39,866 (the “Closing Adjustment”) being the amount by which the

Title Defect Amount claimed exceeds the $100,000 Title Defect Deductible.  For purposes of this section 4.a., (1) the

Lake Shore # 10-5 Well shall be deemed to have been “commenced” only if a drill

rig is on location capable of drilling such Well to the objective formation and

depth and actual drilling has commenced by spudding such Well; and (2)

“completed” means that the Lake Shore #10-5 Well is completed either as a dry

hole or as a producer of oil and/or gas by setting production casing.  Seller agrees to escrow the Closing

Adjustment with Welborn Sullivan Meck & Tooley, P.C. under the Escrow Agreement

attached hereto as Exhibit 3, such Escrow Agreement to be entered into at

Closing.  Subject to clause c., below,

Buyer and Seller agree that the Escrow Agent shall cause the Closing Adjustment

to be paid in accordance with the following provisions and each agrees to

provide appropriate instructions to Escrow Agent accordingly under the terms of

the Escrow Agreement:




 




i.                  If the Lake

Shore #10-5 Well is commenced on or before the first anniversary of the Closing

Date and such well is drilled and completed with due diligence and dispatch, to

the objective formation and depth in accordance with the terms and provisions

of the Fasken Participation Agreement, then the Closing Adjustment shall be

paid to Buyer;




 




ii.               If the Lake Shore #10-5 Well is not commenced

as provided in clause i, above, on or before the first anniversary of the

Closing Date and drilled and completed with due diligence and dispatch to the

objective formation and depth in accordance with the terms and provisions of

the Fasken Participation Agreement, then the Closing Adjustment shall be paid

to Seller; and




 




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iii.            If Buyer is rendered unable, wholly or in part, by

force majeure to commence the drilling of the Lakeshore #10-5 Well or to drill

with due diligence and dispatch to the objective formation and depth in

accordance with the terms and provisions of the Fasken Participation Agreement,

then the obligations to commence and drill such well, so far as they are

affected by the force majeure, shall be suspended during, but no longer than,

the continuance of the force majeure. 

The term “force majeure” as here employed shall mean an act of God,

strike, lockout, or other industrial disturbance, act of the public enemy, war,

blockade, public right, lightning, fire, storm, flood or other act of nature,

explosion, governmental action, governmental delay, restraint or inaction,

unavailability of equipment, and any other cause, whether of the kind

specifically enumerated above or otherwise, which is not reasonably within the

control of Buyer.  Buyer shall use all

reasonable diligence to remove the force majeure situation as quickly as

practicable.




 




b.              Unrecorded

Overriding Royalty Burdens.  Seller

acquired a portion of the Assets from The Louisiana Land & Exploration

Company et. al. (collectively, “Inexco”), pursuant to an Assignment, Bill of

Sale and Conveyance dated July 28, 1989 (the “Inexco Assignment”).  Under the terms of the Inexco Assignment,

Seller assumed Inexco’s obligation to pay certain unrecorded overriding royalty

burdens (the “Inexco Burdens”).  UPON

CLOSING, SELLER SHALL TO THE FULLEST EXTENT PERMITTED BY LAW, RELEASE, DEFEND,

INDEMNIFY AND HOLD HARMLESS BUYER, ITS AFFILIATES AND THEIR RESPECTIVE

DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND OTHER REPRESENTATIVES FROM AND AGAINST

ALL LOSSES ARISING FROM OR RELATING TO THE INEXCO BURDENS.  This indemnity is subject to the terms and

conditions of Article 13 of the Agreement, as amended by this Amendment, and to

the following additional terms and conditions:




 




i.                  For purposes of

this indemnity, the term “Losses” shall include, but not be limited to, Losses

relating to the incorrect payment of the Inexco Burdens and Losses relating to

a reduction in the Net Revenue Interest specified in Exhibit A-2 of the

Agreement, provided however, if the Inexco Burdens have been accounted for in

the Net Revenue Interest reflected on Exhibit A-2 to the Agreement, then this

indemnity shall not apply unless such Burdens have been improperly paid.




 




ii.               In the event the Loss is attributable to a

lesser Net Revenue Interest being delivered to Buyer than the Net Revenue

Interest specified in Exhibit A-2 to the Agreement, the amount of such Loss

shall be calculated by multiplying the portion of the Purchase Price allocated

to the property which has a deficient Net Revenue Interest by a fraction, the

numerator of which is the reduction in the Net Revenue Interest




 




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and

the denominator of which is the Net Revenue Interest specified for the property

which has a deficiency in the interest (the “Deficient Interest Loss”).  Subject to clauses iii and iv, below, any

amounts due Buyer from Seller as the result of a Deficient Interest Loss shall

be paid to Buyer by Seller within thirty (30) days after receipt of notice of

such Loss and Buyer shall have no further liability or obligation with respect

to such Loss.




 




iii.            Notwithstanding the foregoing, Seller may contest

and defend with reasonable diligence and dispatch against any Loss asserted

with respect to the Inexco Burdens in accordance with the terms and conditions

of Article 13 of the Agreement.  So long

as Seller continues in a diligent manner to contest and defend against any such

Loss, payment of the Deficient Interest Loss shall not be due, and the amount

of the Deficient Interest Loss shall be adjusted to the extent Seller is

successful in its contest and defense.




 




iv.           Seller shall not be obligated to indemnify Buyer for

any Loss relating to the Inexco Burdens unless Buyer has delivered a written

notice to Seller of such Loss prior to the third anniversary of the Closing

Date.  Any Loss relating to the Inexco

Burdens for which Seller does not receive written notice before the end of such

three  (3) year period shall be deemed

to be an Assumed Liability.




 




v.              The parties

acknowledge and agree that Buyer’s indemnity rights hereunder are in lieu of

and not in addition to any other rights Buyer may have with respect to Losses

attributable to the Inexco Burdens, including the special warranty under the

Assignment, Conveyance and Bill of Sale to be delivered at Closing, which

special warranty shall not apply to the Inexco Burdens assumed by Seller under

the Inexco Assignment.




 




vi.           This indemnity is subject to the provisions of

clause c., below.




 




c.                  The Closing

Adjustment in clause a., above, is adjusted for the full amount of the Title

Defect Deductible under the Agreement. 

The parties agree that Seller is entitled to realize the full benefit of

the $100,000 Title Defect Deductible regardless of whether such benefit inures

under clause a., clause b., or a combination thereof, and the following shall

apply:




 




i.                  If Seller

indemnifies Buyer against Losses with respect to the matters covered under

clause b., prior to disbursement of the Closing Adjustment under the Escrow Agreement

attached hereto as Exhibit 3, Seller’s indemnity obligation shall only apply to

the extent such Losses exceed $100,000, provided that Seller shall pay the

amount




 




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saved

(up to $100,000) to Buyer at such time as Buyer is entitled to receive the

Closing Adjustment under the Escrow Agreement.




 




ii.               If Seller is entitled to receive the Closing

Adjustment under the Escrow Agreement prior to such time as Seller indemnifies

Buyer against Losses under clause b., then Seller’s indemnity obligation under

clause b. shall only apply to the extent such Losses exceed $100,000.




 




IN WITNESS

WHEREOF, this Agreement has been signed by or on behalf of each of the parties

as of the day first above written.




 




	

   


  	

  SELLER:


  
	

   


  	

   


  
	

   


  	

  CARBON ENERGY

  CORPORATION (USA)


  f/k/a Bonneville Fuels Corporation


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

  By:


  	

   


  
	

   


  	

   


  	

  Name and

  Title:


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

  BUYER:


  
	

   


  	

   


  
	

   


  	

  FASKEN ACQUISITIONS 02, LTD.,


  
	

   


  	

  a

  Texas limited partnership


  
	

   


  	

  By: 

  Fasken Management, LLC, its General Partner


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

  By:


  	

   


  
	

   


  	

   


  	

  Benjamin L.

  Blake, Vice President


  





 




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